10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________

FORM 10-Q

_______________________________

(Mark One)

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

For the quarterly period ended September 30, 2020

or

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

For the transition period from _________ to __________

Commission File Number 001-36570

___________________________

ZOSANO PHARMA CORPORATION

(Exact name of registrant as specified in its charter)

____________________________

Delaware	45-4488360
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

34790 Ardentech Court

Fremont, CA 94555

(Address of principal executive offices) (Zip Code)

(510) 745-1200

(Registrant’s telephone number, including area code)

___________________________________

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.0001 par value	ZSAN	The Nasdaq Stock Market

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  x    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  x    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes  ☐   No  x

As of November 10, 2020, the registrant had a total of 102,066,218 shares of its common stock, $0.0001 par value per share, outstanding.

Zosano Pharma Corporation

Quarterly Report on Form 10-Q

INDEX

		Page
PART I. FINANCIAL INFORMATION		2
Item 1.	Financial Statements	2
	Condensed Balance Sheets	2
	Condensed Statements of Operations and Comprehensive Loss	3
	Condensed Statements of Changes in Stockholders' Equity	4
	Condensed Statements of Cash Flows	6
	Notes to Condensed Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	33
PART II. OTHER INFORMATION		35
Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	76
Item 3.	Defaults Upon Senior Securities	76
Item 4.	Mine Safety Disclosures	76
Item 5.	Other Information	76
Item 6.	Exhibits	77
SIGNATURES		78

1

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

ZOSANO PHARMA CORPORATION

CONDENSED BALANCE SHEETS

(in thousands, except par value and share amounts)

	September 30, 2020		December 31, 2019
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	43,554	$	6,316
Prepaid expenses and other current assets	615		497
Total current assets	44,169		6,813
Restricted cash	455		455
Property and equipment, net	30,621		24,636
Operating lease right-of-use assets	5,204		5,763
Other long-term assets	3		3
Total assets	$	80,452	$	37,670
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,972	$	4,356
Accrued compensation	1,982		2,015
Build-to-suit obligation, current portion	4,293		4,554
Operating lease liabilities, current portion	1,332		1,140
Paycheck Protection Program loan, current portion	201		—
Other accrued liabilities	3,394		4,172
Total current liabilities	13,174		16,237
Build-to-suit obligation, long-term portion, net of debt issuance costs and discount	5,447		6,095
Operating lease liabilities, long-term portion	5,058		5,931
Paycheck Protection Program loan, long-term portion	1,416		—
Other liabilities	113		15
Total liabilities	25,208		28,278
Commitments and contingencies (note 8)
Stockholders’ equity:
Preferred stock, $0.0001 par value; 5,000,000 shares authorized; none issued and outstanding as of September 30, 2020 and December 31, 2019	—		—
Common stock, $0.0001 par value; 250,000,000 shares authorized; 102,066,218 and 23,503,214 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively	10		2
Additional paid-in capital	379,326		308,211
Accumulated deficit	(324,092)		(298,821)
Total stockholders’ equity	55,244		9,392
Total liabilities and stockholders’ equity	$	80,452	$	37,670

The accompanying notes are an integral part of these condensed financial statements.

2

ZOSANO PHARMA CORPORATION

CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except share and per share amounts)

(unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Revenue	$	—	$	—	$	—	$	—
Operating expenses:
Research and development	5,824		6,486		16,270		19,742
General and administrative	2,704		3,071		8,552		8,709
Total operating expenses	8,528		9,557		24,822		28,451
Loss from operations	(8,528)		(9,557)		(24,822)		(28,451)
Other income (expense):
Interest income	2		41		17		203
Interest expense	(165)		(281)		(561)		(357)
Other income (expense), net	4		(66)		95		(44)
Loss before provision for income taxes	(8,687)		(9,863)		(25,271)		(28,649)
Provision for income taxes	—		—		—		—
Net loss	$	(8,687)	$	(9,863)	$	(25,271)	$	(28,649)
Unrealized gain on marketable securities, net of tax	—		—		—		5
Comprehensive loss	$	(8,687)	$	(9,863)	$	(25,271)	$	(28,644)
Net loss per common share – basic and diluted	$	(0.11)	$	(0.55)	$	(0.45)	$	(1.84)
Weighted-average shares used in computing net loss per common share – basic and diluted	77,883,158		17,832,092		56,437,417		15,579,387

The accompanying notes are an integral part of these condensed financial statements.

3

ZOSANO PHARMA CORPORATION

CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands, except share amounts)

(unaudited)

	Common Stock			Additional Paid-In Capital		Accumulated   Deficit		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’   Equity
	Shares	Amount
Balance at January 1, 2020	23,503,214	$	2	$	308,211	$	(298,821)	$	—	$	9,392
Issuance of common stock and Series E warrants in connection with registered direct offering, net	11,903,506	1		10,210		—		—		10,211
Issuance of common stock, Series C and Series D pre-funded warrants, in connection with public offering, net	11,992,307	2		8,262		—		—		8,264
Issuance of common stock upon exercise of Series D pre-funded warrants	2,161,539	—		—		—		—		—
Issuance of common stock upon exercise of Series C warrants	2,649,723	—		1,722		—		—		1,722
Issuance of common stock in connection with at-the-market offering, net	2,151,346	—		2,706		—		—		2,706
Stock-based compensation	—	—		364		—		—		364
Net loss	—	—		—		(8,689)		—		(8,689)
Balance at March 31, 2020	54,361,635	$	5	$	331,475	$	(307,510)	$	—	$	23,970
Issuance of common stock in connection with at-the-market offering, net	1,550,231	1		1,160		—		—		1,161
Issuance of common stock upon exercise of Series C warrants	1,333,385	—		867		—		—		867
Stock-based compensation	—	—		361		—		—		361
Net loss	—	—		—		(7,895)		—		(7,895)
Balance at June 30, 2020	57,245,251	$	6	$	333,863	$	(315,405)	$	—	$	18,464
Issuance of common stock in connection with public offering, net	15,937,130	1		20,386		—		—		20,387
Issuance of common stock in connection with at-the-market offering, net	11,686,795	1		12,365		—		—		12,366
Issuance of common stock upon exercise of Series C warrants	10,003,038	1		6,501		—		—		6,502
Issuance of common stock upon exercise of Series E warrants	7,194,004	1		5,772		—		—		5,773
Stock-based compensation	—	—		439		—		—		439
Net loss	—	—		—		(8,687)		—		(8,687)
Balance at September 30, 2020	102,066,218	$	10	$	379,326	$	(324,092)	$	—	$	55,244

The accompanying notes are an integral part of these condensed financial statements.

4

ZOSANO PHARMA CORPORATION

CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY, continued

(in thousands, except share amounts)

(unaudited)

	Common Stock			Additional Paid-In Capital		Accumulated   Deficit		Accumulated Other  Comprehensive Income (Loss)		Total Stockholders’   Equity
	Shares	Amount
Balance at January 1, 2019	11,973,039	$	1	$	279,946	$	(261,232)	$	(5)	$	18,710
Stock-based compensation	—	—		361		—		—		361
Unrealized gain on marketable securities	—	—		—		—		6		6
Net loss	—	—		—		(9,426)		—		(9,426)
Balance at March 31, 2019	11,973,039	$	1	$	280,307	$	(270,658)	$	1	$	9,651
Issuance of common stock in connection with public offering	5,750,000	1		18,330		—		—		18,331
Stock-based compensation	—	—		386		—		—		386
Unrealized loss on marketable securities	—	—		—		—		(1)		(1)
Net loss	—	—		—		(9,360)		—		(9,360)
Balance at June 30, 2019	17,723,039	$	2	$	299,023	$	(280,018)	$	—	$	19,007
Issuance of common stock in connection with at-the-market offering	507,764	—		812		—		—		812
Stock-based compensation	—	—		423		—		—		423
Net loss	—	—		—		(9,863)		—		(9,863)
Balance at September 30, 2019	18,230,803	$	2	$	300,258	$	(289,881)	$	—	$	10,379

The accompanying notes are an integral part of these condensed financial statements.

5

ZOSANO PHARMA CORPORATION

CONDENSED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Nine Months Ended September 30,
	2020		2019
Cash flows from operating activities:
Net loss	$	(25,271)	$	(28,649)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation	1,164		1,170
Change in operating lease right-of-use assets	712		619
Depreciation and amortization	993		518
Effective interest on financing obligations	207		208
Other	—		61
Change in operating assets and liabilities:
Prepaid expenses and other assets	(179)		(554)
Accounts payable	(1,915)		1,086
Accrued compensation and other accrued liabilities	(312)		(1,108)
Operating lease liabilities	(835)		(701)
Net cash used in operating activities	(25,436)		(27,350)
Cash flows from investing activities:
Proceeds from maturities of marketable securities	—		17,400
Purchases of marketable securities	—		(3,476)
Purchases of property and equipment	(7,711)		(10,939)
Net cash (used in) provided by investing activities	(7,711)		2,985
Cash flows from financing activities:
Proceeds from public offering of securities, net of commissions and offering costs	20,728		18,331
Proceeds from issuance of securities in connection with at-the-market offering program, net of commissions and offering costs	16,266		919
Proceeds from registered direct offering of securities, net of commissions and offering costs	10,135		—
Proceeds from exercise of Series C warrants	9,091		—
Proceeds from public offering of securities and exercise of pre-funded Series D warrants, net of commissions and offering costs	8,264		—
Proceeds from exercise of Series E warrants	5,773		—
Proceeds from Paycheck Protection Program loan	1,610		—
Proceeds from build-to-suit obligation, net of issuance costs	—		4,550
Principal payments on financing obligations	(1,482)		(2,083)
Net cash provided by financing activities	70,385		21,717
Net increase (decrease) in cash, cash equivalents and restricted cash	37,238		(2,648)
Cash, cash equivalents and restricted cash at beginning of period	6,771		9,595
Cash, cash equivalents and restricted cash at end of period	$	44,009	$	6,947
Supplemental cash flow information:
Cash paid for interest	$	738	$	580
Cash paid for taxes	$	12	$	1
Non-cash investing and financing activities:
Acquisition of property and equipment under accounts payable and other accrued liabilities	$	3,237	$	3,571
Capitalized effective interest	$	353	$	410
Unpaid offering costs	$	425	$	107
Asset retirement obligation	$	97	$	—
Right-of-use assets acquired under finance lease obligations	$	—	$	22

The accompanying notes are an integral part of these condensed financial statements.

6

Zosano Pharma Corporation

Notes to Condensed Financial Statements

(unaudited)

1.    Organization and Basis of Presentation

The Company

Zosano Pharma Corporation (the “Company”) is a clinical-stage biopharmaceutical company focused on providing rapid systemic administration of therapeutics and other bioactive molecules to patients using its proprietary transdermal microneedle system ("System").

The Company filed a 505(b)(2) New Drug Application (“NDA”) for Qtrypta™ (M207) (“Qtrypta”) with the U.S. Food and Drug Administration (“FDA”) on December 20, 2019, and on October 20, 2020, the Company received a Complete Response Letter (“CRL”) from FDA for the NDA. The CRL cited inconsistent zolmitriptan exposure levels observed across clinical pharmacology studies, which had been previously identified in the FDA’s discipline review letter received by the Company in September. Specifically, the CRL noted differences in zolmitriptan exposures observed between subjects receiving different lots of Qtrypta in the Company’s trials and inadequate pharmacokinetic bridging between the lots that made interpretation of some safety data unclear. The CRL referenced unexpected high plasma concentrations of zolmitriptan observed in five study subjects enrolled in the Company’s pharmacokinetic studies. The FDA recommended that the Company conduct a repeat bioequivalence study between three of the lots used during development. The NDA included data on a total of 774 subjects across 5 trials who were administered or dosed with Qtrypta. The CRL noted that additional product quality validation data, which were planned to be submitted following approval, if received, were required to be submitted with the application. In addition, the CRL mentioned that due to U.S. Government and/or Agency-wide restrictions on travel, inspections of the Company’s contract manufacturing facilities were not able to be conducted but would be required before the application may be approved.

The Company does not anticipate realizing product revenues until FDA approves the NDA and the Company begins commercializing Qtrypta, which events may never occur.

Basis of Presentation

The accompanying condensed financial statements have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information, the instructions to Form 10-Q and Regulation S-X. They do not include all the information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal and recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020, or any other subsequent period. These financial statements should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2019, included in the Company’s annual report on Form 10-K and filed with the United States Securities and Exchange Commission (“SEC”) on March 13, 2020.

Use of Estimates

The preparation of the accompanying condensed financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the condensed financial statements, and the reported amounts of expenses during the periods reported. Actual results could differ from those estimates.

Liquidity and Substantial Doubt in Going Concern

Since inception, the Company has incurred recurring operating losses and negative cash flows from operating activities, and as of September 30, 2020, had an accumulated deficit of $324.1 million. As of September 30, 2020, the Company had $43.6 million in cash and cash equivalents. Presently, the Company does not have sufficient cash and cash equivalents to enable it to fund its anticipated level of operations and meet its obligations as they become due within twelve months following the date of issuance of this Quarterly Report on Form 10-Q. The aforementioned factors raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the issuance of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The Company filed a shelf registration statement on Form S-3 with the SEC, which was declared effective by the SEC on April 16, 2020. This shelf registration statement provides the Company with the ability to issue common stock and other securities as described in the registration statement from time to time up to an aggregate amount of $74.5 million.

7

On August 31, 2020, the Company entered into an underwriting agreement with BTIG, LLC (“BTIG”) pursuant to which the Company issued and sold 15,937,130 shares of its common stock to BTIG at a price of $1.304 per share. The offering closed on September 3, 2020. The Company received net proceeds of approximately $20.4 million after deducting estimated expenses payable by the Company in connection with the offering. The shares were sold pursuant to the Company’s effective shelf registration statement, the base prospectus filed as part of such registration statement and the prospectus supplement dated August 31, 2020.

On June 8, 2020, the Company entered into a sales agreement with BTIG, as sales agent, to establish an at-the-market offering program (“2020 ATM”), under which the Company is permitted to offer and sell, from time to time, shares of common stock having a maximum aggregate offering price of up to $20.0 million. The Company is required to pay BTIG a commission of 3% of the gross proceeds from the sale of shares and also agreed to provide BTIG with customary indemnification rights. During the quarter ended September 30, 2020, the Company issued and sold 11,686,795 shares of its common stock at an average price of $1.09 per share under the 2020 ATM program with aggregate net proceeds of approximately $12.4 million after BTIG's commission and estimated offering expenses of approximately $360,000. During the nine months ended September 30, 2020, the Company issued and sold 13,237,026 shares of its common stock at an average price of $1.07 per share under the 2020 ATM program with aggregate net proceeds of approximately $13.5 million after BTIG's commission and estimated offering expenses of approximately $660,000. The shares were sold pursuant to the Company’s effective shelf registration statement, the base prospectus filed as part of such registration statement and the prospectus supplement dated June 8, 2020.

On May 27, 2020, the Company entered into the First Amendment to Lease Documents (the “Trinity Amendment”) with Trinity Funding 1, LLC (“Trinity”), which, among other things, extended the term of each lease schedule from a 36-month term to a 42-month term by providing for an interest-only period from May 2020 through October 2020. Principal payments recommenced on November 1, 2020. Additionally, the Trinity Amendment removed all end-of-term options other than the option to purchase the equipment at 12% of equipment cost at the end of each 42-month-term.

On April 21, 2020, the Company executed a promissory note (the “PPP Note”) evidencing an unsecured loan in the amount of $1.6 million under the Paycheck Protection Program (the “PPP Loan”). The Paycheck Protection Program (“PPP”) was established under the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) and is administered by the U.S. Small Business Administration (“SBA”). Under the terms of the CARES Act, PPP loan recipients can apply for and be granted forgiveness for all or a portion of loans granted under the PPP. Such forgiveness will be determined, subject to limitations, based on the use of loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and the maintenance of the Company's payroll levels. The Company applied for forgiveness of the $1.6 million loan amount and accrued interest on October 4, 2020, however, no assurance is provided that the Company will obtain forgiveness of the PPP Loan in whole or in part.

On March 4, 2020, the Company entered into a securities purchase agreement with certain institutional investors for the issuance and sale in a registered direct offering (the “March 2020 Offering”) of (i) 11,903,506 shares of the Company's common stock and (ii) Series E Warrants to purchase up to a total of 11,903,506 shares of common stock at an offering price of $0.9275 per share and accompanying warrant. The Series E Warrants have an exercise price of $0.8025 per share, are immediately exercisable and will expire five years from the date of issuance. The aggregate net proceeds from the offering were approximately $10.2 million, after deducting the placement agent fees and other offering expenses. During the quarter ended September 30, 2020, Series E Warrants to purchase 7,194,004 shares of common stock were exercised at an exercise price of $0.8025 per share for aggregate proceeds of approximately $5.8 million.

On February 14, 2020, the Company closed an underwritten offering (the “February 2020 Offering”) for the issuance and sale of (i) 10,146,154 Class A Units, each consisting of one share of common stock and one Series C Warrant to purchase one share of common stock, at a public offering price of $0.65 per Class A Unit, and (ii) 2,161,539 Class B Units, each consisting of one Series D Pre-Funded Warrant to purchase one share of common stock and one Series C Warrant to purchase one share of common stock, at a public offering price of $0.6499 per Class B Unit. The Series C Warrants have an exercise price of $0.65 per share, are immediately exercisable and will expire five years from the date of issuance. The Series D Pre-Funded Warrants had an exercise price of $0.0001 per share and were fully exercised in connection with the closing of the offering. The Company granted the underwriter a 30-day option to purchase up to an additional 1,846,153 shares of common stock and/or additional Series C Warrants to purchase up to 1,846,153 shares of common stock. The underwriter fully exercised its option to purchase the shares and the Series C Warrants. The aggregate net proceeds from the offering were $8.3 million after deducting underwriting commissions and other offering expenses. During the quarter ended September 30, 2020, Series C Warrants to purchase 10,003,038 shares of common stock were exercised at an exercise price of $0.65 per share for aggregate proceeds of approximately $6.5 million. During the nine months ended September 30, 2020, Series C Warrants to purchase 13,986,146 shares of common stock were exercised at an exercise price of $0.65 per share for aggregate proceeds of approximately $9.1 million.

8

On August 19, 2019, the Company entered into a sales agreement with BTIG, LLC, as sales agent (“BTIG”), to establish an at-the-market offering program ("2019 ATM"), under which the Company was permitted to offer and sell, from time to time, shares of common stock having a maximum aggregate offering price of up to $15.0 million. The Company was required to pay BTIG a commission of 3% of the gross proceeds from the sale of shares and also agreed to provide BTIG with customary indemnification rights. During the quarter ended March 31, 2020, the Company issued and sold 2,151,346 shares of its common stock at an average price of $1.30 per share under the 2019 ATM program. The aggregate net proceeds were approximately $2.7 million after BTIG's commission of $84,000 and other offering expenses. On March 4, 2020, the Company delivered notice of termination of the sales agreement to BTIG. The Company did not incur any penalties as a result of its termination of the sales agreement.

The Company plans to raise additional funding through equity or debt financings, licensing or collaboration agreements, or strategic alliances with pharmaceutical partners, or any combination of the above. However, there are no assurances that additional funding will be obtained and that the Company will succeed in its future operations. The Company’s inability to obtain required funding in the near future or its inability to obtain funding on favorable terms will have a material adverse effect on its operations and strategic development plan for future growth. If the Company cannot successfully raise additional capital and implement its strategic development plan, its liquidity, financial condition and business prospects will be materially and adversely affected, and it may have to cease operations.

The Company will continue to evaluate its timelines, strategic needs, and working capital requirements. There can be no assurance that if the Company attempts to raise additional capital, it will be successful in doing so on terms acceptable to the Company, or at all. Further, there can be no assurance that it will be able to gain access and/or be able to execute on securing new sources of funding, new development opportunities, successfully obtain regulatory approvals for and commercialize new products, achieve significant product revenues from its products (if approved), or achieve or sustain profitability in the future.

COVID-19 Pandemic

On March 11, 2020, the World Health Organization designated COVID-19 as a global pandemic. Due to the COVID-19 pandemic, there has been uncertainty in the global financial markets and economic conditions. The Company is closely monitoring the impact of the COVID-19 pandemic on its business, including how it will impact its employees, clinical trials and third-party service providers who perform critical services for the Company's business. In addition, the impact of the COVID-19 pandemic on the global financial markets and economic conditions could impact the Company's ability to raise capital through an equity financing, debt financing, a license or collaboration or a combination of such sources of capital, and as a result, its ability to continue as a going concern. The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company's business, results of operations and financial condition will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain or treat it. As of the date of issuance of this Quarterly Report on Form 10-Q, management is not aware of any specific event or circumstances that would require an update to its estimates or a revision of the carrying value of its assets or liabilities. These estimates may change, as new events occur, and additional information is obtained.

On March 27, 2020, the CARES Act was signed into law. The CARES Act includes provisions relating to refundable payroll tax credits, deferment of the employer portion of certain payroll taxes, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. The Company analyzed the provisions of the CARES Act and determined there was no significant impact on the Company's provision for income taxes for the three and nine months ended September 30, 2020.

2.    Summary of Significant Accounting Policies

Significant Accounting Policies

The Company’s significant accounting policies are included in Note 2. Summary of Significant Accounting Policies to the financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

Cash, Cash Equivalents and Restricted Cash

The Company considers all highly liquid investments with an original maturity of 90 days or less to be cash equivalents.

As of September 30, 2020, and December 31, 2019, the Company had restricted cash of approximately $0.5 million primarily consisting of deposits of $0.3 million to secure its building lease until the end of the lease term and a deposit of approximately $0.1 million to a utility provider.

9

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the balance sheets and as presented as cash, cash equivalents and restricted cash in the statements of cash flows:

	September 30, 2020		September 30, 2019
	(unaudited; in thousands)
Cash and cash equivalents	$	43,554	$	6,492
Restricted cash	455		455
Total	$	44,009	$	6,947

Marketable Securities

Marketable securities generally consist of debt securities with original maturities greater than 90 days and remaining maturities of less than one year. Marketable securities with an original maturity greater than one year, if any, would be considered long-term investments. All of the Company's investments are classified as available-for-sale and carried at fair value based upon quoted market price. The change in unrealized gains and losses related to fixed maturity debt securities is reported as a separate component of comprehensive loss in the statements of operations and comprehensive loss and as a separate component of stockholders' equity on the balance sheets. Interest income includes interest, dividends, amortization and accretion of purchase premiums and discounts and realized gains and losses on sales of securities, if any. The cost of securities sold is based on the specific-identification method.

The Company monitors its investment portfolio for potential impairment on a quarterly basis. If the carrying amount of an investment in available-for-sale debt securities exceeds its fair value and the decline in value is determined to be other-than-temporary, an allowance is recorded in the amount that the carrying amount of the security exceeds its fair value and a loss is recognized in operating results for the amount of such decline. If the carrying amount of an investment in marketable securities, other than available-for-sale debt securities, exceeds its fair value and the decline in value is determined to be other-than-temporary, the carrying amount of the security is reduced to fair value and a loss is recognized in operating results for the amount of such decline. In order to determine whether a decline in value is other-than-temporary, the Company evaluates, among other factors, the cause of the impairment, including the creditworthiness of the security issuers, the number of securities in an unrealized loss position, the severity and duration of the unrealized losses, and its intent and ability to hold the security to maturity or expected recovery.

Fair Value of Financial Instruments

The Company records its financial assets and liabilities at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting guidance establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value as follows:

•Level 1: Inputs which include quoted prices in active markets for identical assets and liabilities.

•Level 2: Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

•Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The carrying values of certain assets and liabilities of the Company, such as cash and cash equivalents and accounts payable approximate fair value due to their relatively short maturities. The carrying value of the Company’s short-term financial obligations approximates their fair value as the terms of the borrowing are consistent with current market rates and the duration to maturity is short. The carrying value of the Company's long-term financial obligations approximates fair value because interest rates approximate market rates that the Company could obtain for debt with similar terms and maturities.

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Net Loss Per Common Share

Basic net loss per common share is calculated by dividing the net loss by the weighted-average number of common shares outstanding during the period, without consideration for potentially dilutive securities. Diluted net loss per common share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common shares and potentially dilutive securities outstanding for the period determined using the treasury-stock and if-converted methods. For purposes of the diluted net loss per share calculation, common stock warrants, stock options and restricted stock units (“RSUs”) are considered to be potential dilutive securities but are excluded from the calculation of diluted net loss per share because their effect would be anti-dilutive and therefore, basic and diluted net loss per share were the same for all periods presented.

The following outstanding common stock equivalents were excluded from the computations of diluted net loss per common share for the periods presented as the effect of including such securities would be antidilutive:

	September 30, 2020	September 30, 2019
	(unaudited)
Warrants to purchase common stock	5,148,108	274,524
Options to purchase common stock	2,673,444	1,865,978
RSUs	342,317	—
Total	8,163,869	2,140,502

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In November 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-18 Collaborative Arrangements (Topic 808), Clarifying the Interaction between Topic 808 and Topic 606, which (1) clarifies that certain transactions between collaborative arrangement participants should be accounted for under ASC Topic 606, Revenue from Contracts with Customers (Topic 606), when the collaborative arrangement participant is a customer in the context of a unit of account, (2) adds unit-of-account guidance in Topic 808 to align with Topic 606 when an entity is assessing whether the collaborative arrangement, or a part of the arrangement, is within the scope of Topic 606, (3) precludes presenting transactions together with revenue when those transactions involve collaborative arrangement participants that are not directly related to third parties and are not customers. The Company adopted ASU 2018-18 in the third quarter of 2020. The adoption of ASU 2018-18 did not have a material impact on the Company's condensed financial statements.

The FASB issued ASU 2019-05, Financial Instruments - Credit Losses, Targeted Transition Relief in May 2019, ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments — Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments in April 2019, and ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses in November 2018. This new guidance is intended to present credit losses on available-for-sale debt securities as an allowance rather than as a write-down. Entities are required to apply the standards' provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The Company adopted ASU 2019-05, ASU 2019-04 and ASU 2018-19 effective January 1, 2020. The adoption of this guidance did not have an impact on the Company's financial statements.

In August 2018, the FASB issued ASU 2018-15, Intangible - Goodwill and Other - Internal-Use Software (Subtopic 350-40), which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The Company adopted ASU 2018-15, Subtopic 350-40 effective January 1, 2020 on a prospective basis. The adoption of this guidance did not have a material impact on the Company's financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820). The new guidance modifies the disclosure requirements on fair value measurements. The Company adopted Topic 820 effective January 1, 2020 on a modified retrospective basis. The adoption of this guidance did not have a material impact on the Company's financial statement disclosures.

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Recent Accounting Pronouncements Not Yet Adopted

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This new guidance simplifies the accounting for income taxes by removing certain exceptions to general principles, clarifying requirements and including amendments to improve consistent application of the guidance. The guidance specifically removes the exception to the incremental approach for intra period tax allocation when there is a loss from continuing operations and income or a gain from other items, such as discontinued operations or other comprehensive income. The guidance also requires an entity to recognize a franchise tax that is partially based on income as an income-based tax and to account for any other amounts incurred as a non-income based tax. The guidance is effective for the Company beginning January 1, 2021 using a prospective approach. Early adoption is permitted. The Company is evaluating the effect of implementation on its financial statements and disclosures.

3.    Master Services Agreement with Eversana

On August 6, 2020, the Company entered into a master services agreement (the “Eversana Agreement”) with Eversana Life Science Services, LLC (“Eversana”) for the commercialization of Qtrypta in the United States, if approved by the FDA. Under the terms of the Eversana Agreement, Eversana and the Company will cooperate to conduct activities over the term of the Eversana Agreement. The Company maintains ownership of the Qtrypta NDA as well as all legal, regulatory and manufacturing responsibilities for Qtrypta. Eversana receives an exclusive right to conduct agreed commercialization activities and will utilize its internal sales organization along with its other commercial capabilities for market access, marketing, distribution and patient support services for Qtrypta. Eversana will receive reimbursement of certain commercialization costs pursuant to a commercialization budget estimated at approximately $250.0 million and a low double digit to mid-teen percentage of product profits when Company net sales of Qtrypta surpass certain costs incurred by the parties pursuant to the commercialization budget.

The term of the Eversana Agreement is five years following the date, if any, that the FDA approves the NDA. Upon expiration or termination of the Eversana Agreement, the Company will retain all profits from product sales consummated after expiration or termination and assume all future corresponding commercialization responsibilities. The Company may terminate the Eversana Agreement if Eversana fails to provide pre-commercial or commercial plans and budgets by specified dates, if the Company decides to discontinue development or commercialization efforts for Qtrypta in the United States (subject to a termination payment if such termination occurs within a specified time period), or upon a change of control of the Company. Either party may terminate the Eversana Agreement if FDA approval is not received by July 31, 2021, if net profits are not realized within a specified time period following commercial launch, for material breach of the Eversana Agreement by the other party that is not cured within a defined time period, for insolvency of the other party, if Qtrypta is subject to a safety recall in the United States or if Qtrypta is not commercially launched within a specified time period after FDA approval of the NDA (other than by reason of the terminating party’s failure to perform its obligations under the Eversana Agreement).

In addition, under the Eversana Agreement, following FDA approval of the NDA, Eversana has agreed to provide a revolving credit facility of up to $5.0 million (the “Credit Facility”) to the Company pursuant to a loan agreement to be entered into between Eversana and the Company on a subsequent date. The loan will bear interest at an annual rate equal to 10.0%, to be paid monthly, and the Company will be able to prepay any amounts borrowed under the Credit Facility at any time without penalty or premium. The Credit Facility will be secured by substantially all of the Company’s assets, subject to prior liens and security interests.

The Company is accounting for the Eversana Agreement as a collaborative arrangement. As of September 30, 2020, no material accruals, expenses, payments, or revenues were recorded by the Company in connection with the Eversana Agreement.

4.    Cash Equivalents and Investments in Marketable Securities

The following table summarizes the Company's cash equivalents and investments in marketable securities measured at fair value on a recurring basis as of September 30, 2020:

			Fair Value Measurements
	Total		Quoted prices in active market Level 1		Significant other observable inputs Level 2		Significant unobservable inputs Level 3
	(unaudited; in thousands)
Money market funds classified as cash equivalents	$	38,417	$	38,417	$	—	$	—

The Company did not hold any cash equivalents and investments in marketable securities as of December 31, 2019.

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5.    Balance Sheet Components

The following table summarizes the Company’s prepaid expenses and other current assets for each of the periods presented:

	September 30, 2020		December 31, 2019
	(unaudited; in thousands)		(in thousands)
Prepaid insurance	$	289	$	49
Prepaid services	144		316
Prepaid software, subscriptions and deferred implementation costs	133		61
Deferred offering costs	48		65
Other	1		6
Total	$	615	$	497

The following table summarizes the Company’s property and equipment for each of the periods presented:

	September 30, 2020		December 31, 2019
	(unaudited; in thousands)		(in thousands)
Leasehold improvements	$	24,212	$	16,932
Manufacturing equipment	14,532		12,173
Laboratory and office equipment	1,617		1,585
Right-of-use laboratory and office equipment	25		25
Computer equipment and software	138		138
Right-of-use computer equipment and software	29		29
Construction-in-progress	17,885		20,602
Property and equipment at cost	58,438		51,484
Less: accumulated depreciation property and equipment	(27,778)		(26,821)
Less: accumulated amortization right-of-use assets	(39)		(27)
Total	$	30,621	$	24,636

As of September 30, 2020, construction-in-progress included $14.3 million of an asset relating to the build-to-suit arrangement for construction of the Company's commercial coating and primary packaging system, of which capitalized construction period interest was $2.2 million (See Note 7. Debt Financing).

The following table summarizes the Company's depreciation and amortization expense for each of the periods presented:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(unaudited; in thousands)				(unaudited; in thousands)
Depreciation and amortization expense	$	476	$	157	$	993	$	518

The following table summarizes the Company’s other accrued liabilities for each of the periods presented:

	September 30, 2020		December 31, 2019
	(unaudited; in thousands)		(in thousands)
Construction-in-progress obligations	$	2,962	$	3,422
Professional service fees	239		206
Pre-clinical and clinical studies	16		43
Contract manufacturing	13		250
Accrued taxes	—		27
Other	164		224
Total	$	3,394	$	4,172

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6.    Leases

Operating Leases

The Company has a non-cancelable operating lease for office, research and development, and manufacturing facilities in Fremont, California through August 31, 2024, with an option to further extend the lease for an additional 60 months subject to certain terms and conditions. The operating lease right-of-use asset and associated lease liability do not consider the option to extend the term after August 31, 2024, as the Company is not reasonably certain of exercising the extension option. The Company entered into a three year, non-cancelable lease for telephone equipment in January 2018. Per the terms of the agreements, the Company does not have any residual value guarantees, restrictions or covenants. In calculating the present value of the lease payments, the Company utilized its incremental borrowing rate, as the rates implicit in the leases were not readily determinable. The Company estimates its incremental borrowing rate based on qualitative factors including company specific credit offers, lease term, general economics and the interest rate environment. The Company accounts for lease and non-lease components separately. The building lease includes non-lease components (i.e. common area maintenance) which are charged and paid separately from rent based on actual costs incurred and therefore are not included in the right-of-use asset and lease liability but reflected in operating expense in the period incurred.

As of September 30, 2020, the Company had operating leases for manufacturing space at two of its contract manufacturing organizations ("CMOs"). The operating leases are embedded in agreements with these CMOs that include lease and non-lease components. The Company accounts for lease and non-lease components separately and determined the lease and non-lease components of the agreements based upon estimates of relative standalone prices and a residual estimation approach for components that are highly variable or uncertain and where standalone prices were not readily available or estimable. These agreements have initial terms and options to extend that are dependent upon FDA approval of the Company's NDA for Qtrypta. Both agreements have cancellation clauses if the FDA does not approve the NDA for Qtrypta. As the Company does not currently have an intention to cancel the agreements prior to an FDA approval decision, the Company has recorded right-of-use assets and lease liabilities at the present value of the amount in each CMO agreement that was identified as an embedded operating lease. The lease term does not extend past the estimated date of an FDA approval decision, as it is not reasonably certain that the Company would not exercise the cancellation options in the event that Qtrypta was not approved. Per the terms of the agreements, the Company does not have any residual value guarantees, restrictions or covenants. In calculating the present value of the lease payments, the Company utilized its incremental borrowing rate, as the rates implicit in the leases were not readily determinable. The Company estimates its incremental borrowing rate based on qualitative factors including company specific credit offers, lease term, general economics and the interest rate environment. Prior to September 30, 2020, any embedded leases within these agreements were not considered long-term and were not separately disclosed as lease commitments, but included as commitments to CMOs in the commitments and contingencies footnote of the financial statements. The establishment of the embedded leases resulted in $153,000 of right-of-use assets and associated lease liabilities and was reflected as a non-cash operating activity in the statement of cash flows as of September 30, 2020.

Finance Leases

The Company leases certain equipment under non-cancelable agreements which expire between 2021 and 2022.

The following table summarizes the components of lease costs for each of the periods presented:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(unaudited; in thousands)				(unaudited; in thousands)
Operating lease costs	$	422	$	422	$	1,266	$	1,250
Finance lease costs:
Amortization of finance lease right-of-use assets	4		4		12		23
Interest on finance lease obligations	2		3		6		15
Total	$	428	$	429	$	1,284	$	1,288

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The following table summarizes cash payments for leases for each of the periods presented:

	Nine Months Ended September 30,
	2020		2019
	(unaudited; in thousands)
Operating cash flows from operating leases - cash paid for operating leases	$	1,388	$	1,332
Operating cash flows from finance leases - cash paid for interest	$	6	$	9
Financing cash flows from finance leases - cash paid for principal	$	12	$	10

The following table summarizes the lease terms and discount rates for the Company's leases as of September 30, 2020:

	Operating leases		Finance leases
	(unaudited)
Weighted-average remaining lease term (in years)	3.96		1.22
Weighted average discount rate	11	%	26	%

The following table summarizes the maturities of the Company's lease liabilities for each year ending December 31, as of September 30, 2020:

	Operating leases		Finance leases
	(unaudited; in thousands)
Remainder of 2020	$	490	$	7
2021	1,981		14
2022	2,045		3
2023	2,017		—
2024	1,372		—
Total undiscounted cash flows	7,905		24
Less: amount representing interest	(1,515)		(4)
Present value of lease liabilities	$	6,390	$	20
Current portion	$	1,332	$	14
Long-term portion	5,058		6
Total	$	6,390	$	20

7.    Debt Financing

Build-to-Suit Obligation with Trinity

In September 2018, the Company entered into a build-to-suit arrangement with Trinity Capital Fund III, L.P. (the “Agreement”) in order to obtain financing for the third-party construction of the Company's commercial coating and primary packaging system (the “Equipment”). Under the Agreement, Trinity (as successor in interest to Trinity Capital Fund III, L.P.) made available to the Company $14.0 million for equipment costs and associated soft costs (“Total Cost”), with an initial drawdown of $5.0 million and additional drawdowns in increments of not less than $0.5 million. Under the Agreement, each individual drawdown represents a separate financing arrangement with its own term and stated interest rate. Each drawdown is non-cancelable, with no prepayment options. In consideration of the financing arrangement, as collateral, the Company granted Trinity a first-priority lien and security interest in substantially all of the Company's assets. On May 27, 2020, the Company entered into the Trinity Amendment.

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The Trinity Amendment, among other things, extended each individual drawdown term from 36 months to 42 months by providing for an interest-only period from May 2020 through October 2020. Principal payments recommenced November 1, 2020. Additionally, the Trinity Amendment removed all end-of-term options other than the option to purchase the equipment at 12% of the Total Cost, which is equal to the drawdown amount (“Purchase Option Fee”), which the Company intends to exercise at the end of each 42-month-term. The transfer of title from Trinity to the Company will occur at the end of the final 42-month-term, provided that the purchase option was executed, and the Purchase Option Fee was paid in full at the end of each 42-month-term. The security interest will terminate on the earlier to occur of (i) the date that falls six (6) months after the delivery and installation of the Equipment or (ii) payment in full of all amounts owed. The Company accounted for the Trinity Amendment as a debt modification under ASC 470-50, as the amended terms were not substantially different from the terms of the Agreement.

The Company determined that it controls the Equipment during the construction period due to its involvement in and its obligations related to the construction of the Equipment. Accordingly, construction costs incurred were recorded as construction-in-progress, a component of property and equipment on the balance sheet, and the Trinity financing obligation was recorded as a build-to-suit obligation on the balance sheet. As of September 30, 2020, the Company had an aggregate commercial coating and primary packaging system construction-in-progress balance of $14.3 million that included $2.2 million of interest related to its build-to-suit obligation.

In connection with the build-to-suit arrangement, the Company issued common stock warrants (“Trinity Warrants”) for a total of 75,000 shares of common stock at an exercise price of $3.5928 per share. The Trinity Warrants will expire on September 25, 2025. Proceeds allocated to the Trinity Warrants based on their relative fair value approximated $243,000 and were recorded as a discount to the initial $5.0 million drawdown under the Trinity financing arrangement and are being amortized as interest over the term of the September 2018 drawdown.

The Trinity build-to-suit arrangement requires compliance with various affirmative and restrictive covenants in regard to making certain investments and other restricted payments, engaging in mergers or consolidations, and the sale or transfer of certain assets. Failure to comply with any of these covenants, or pay principal, interest or other amounts when due, would constitute an event of default under the applicable agreement. The Company was in compliance with its covenants with respect to the Trinity build-to-suit arrangement as of September 30, 2020.

The following table summarizes the debt obligations as of September 30, 2020 including the amended effective interest rate and maturity dates pursuant to the terms of the Trinity Amendment:

Drawdown Date	Drawdown Amount		Principal Balance		Purchase Option Fee		Discount on Purchase Option Fee		Unamortized Discounts and Issuance Costs		Monthly Payment		Monthly Payment (interest only period)		Stated Interest Rate		Amended Effective Interest Rate		Maturity Date
			(unaudited; in thousands)
09/25/18	$	5,000	$	2,378	$	600	$	(28)	$	(170)	$	160	$	20	9.43	%	24.38	%	04/01/22
12/11/18	2,800		1,566		336		(22)		(73)		90		13		9.68	%	18.25	%	07/01/22
06/06/19	2,300		1,654		276		(31)		(100)		74		14		9.93	%	18.08	%	01/01/23
09/13/19	2,300		1,831		276		(38)		(126)		74		16		9.93	%	18.04	%	04/01/23
11/27/19	1,600		1,354		192		(31)		(104)		52		12		9.93	%	18.16	%	06/01/23
Total	$	14,000	$	8,783	$	1,680	$	(150)	$	(573)	$	450	$	75

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The following table summarizes the Company's build-to-suit obligation as of September 30, 2020 (unaudited; in thousands):

Build-to-suit obligation principal amount	$	8,783
Build-to-suit obligation Purchase Option Fees at present value	1,530
Less: unamortized Purchase Option Fees	(441)
unamortized fair value of free-standing warrants	(46)
unamortized debt discount	(81)
unamortized debt issuance costs	(5)
Build-to-suit obligation, net of debt issuance costs and discount	$	9,740
Build-to-suit obligation, current portion	$	4,293
Build-to-suit obligation, long-term portion, net of debt issuance costs and discount	5,447
Build-to-suit obligation, net of debt issuance costs and discount	$	9,740

The following table summarizes the future minimum payments on the Company’s build-to-suit obligation for each year ending December 31, including payment of principal, interest and Purchase Option Fees as of September 30, 2020:

	Principal		Interest		Purchase Option Fee
	(unaudited; in thousands)
Remainder of 2020	$	753	$	222	$	—
2021	4,779		618		—
2022	2,979		189		936
2023	272		8		744
Total	$	8,783	$	1,037	$	1,680

The following table summarizes interest incurred on the Company's build-to-suit obligation for each of the periods presented:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(unaudited; in thousands)				(unaudited; in thousands)
Build-to-suit obligation, cash interest expense	$	225	$	210	$	705	$	556
Build-to-suit obligation, effective interest expense	147		159		560		545
Less: build-to-suit obligation, interest capitalized	(217)		(109)		(746)		(841)
Build-to-suit obligation interest expense	$	155	$	260	$	519	$	260

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PPP Loan

On April 21, 2020, the Company executed a PPP Note evidencing a PPP Loan in the amount of $1.6 million. The PPP was established under the CARES Act and is administered by the Small Business Association ("SBA"). The Loan was made through Silicon Valley Bank (the “Lender”).

The PPP Loan has a two-year term and bears interest at a rate of 1.0% per annum. Under the terms of the CARES Act, PPP loan recipients can apply for and be granted forgiveness for all or a portion of the loan granted under the PPP. Such forgiveness will be determined, subject to limitations, based on the use of loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and the maintenance of the Company's payroll levels. The Company applied for forgiveness of the entire $1.6 million loan amount and accrued interest on October 4, 2020, utilizing the 24-week covered period allowed by the SBA. The Company submitted its forgiveness application utilizing eligible expenses incurred during a 19-week period from April 22, 2020 through September 1, 2020. The lender reviewed the application and submitted it to the SBA on October 7, 2020 from which time, the SBA has 90 days to review and make a decision on the forgiveness of the loan. No assurance is provided that forgiveness for any portion of the PPP Loan or accrued interest will be obtained.

The Paycheck Protection Flexibility Act of 2020, P.L. 116-142, extended the deferral period for loan payments to either (1) the date that the SBA remits the borrower’s loan forgiveness amount to the lender or (2) if the borrower does not apply for loan forgiveness, ten months after the end of the borrower’s loan forgiveness covered period. The Lender has modified the Company’s first payment from November 21, 2020 to September 21, 2021 and if the loan is fully forgiven, the Company is not responsible for any payments. If only a portion of the loan is forgiven, or if the forgiveness application is denied, any remaining balance due on the loan must be repaid by the Company on or before April 21, 2022, the maturity date of the loan. Interest accrues during the time between the disbursement of the loan and SBA remittance of the forgiveness amount. The Company is responsible for paying the accrued interest on any amount of the loan that is not forgiven.

The PPP Note contains customary events of default relating to, among other things, payment defaults, providing materially false and misleading representation to the SBA or Lender or breaching the terms of the PPP Note. The occurrence of an event of default may result in the immediate repayment of all amounts outstanding, collection of all amounts owing from the Company or filing suit and obtaining judgment against the Company.

8.    Commitments and Contingencies

Equipment Purchase Commitments

The Company has a remaining commitment of $4.0 million, of which $2.8 million was recorded as a current liability as of September 30, 2020, with an equipment manufacturer for the construction and purchase of a commercial coating and primary packaging system for the production of its product candidate, Qtrypta. The terms of the purchase commitment are contingent upon performance of certain milestones. The Company anticipates that the obligation will be paid within the next 9 months.

Contract Manufacturing Organizations

The Company has a technology transfer agreement and a manufacturing and supply agreement with a CMO to provide services related to the manufacture and commercialization of Qtrypta. During the term of the agreement, the CMO will provide services related to processing, packaging, labeling and storing Qtrypta, in addition to other services such as stability testing, quality control and assurance, and waste disposal.

The agreements call for annual fees of $2.0 million in 2020 escalating to $14.0 million in 2024, to be paid in equal monthly installments. Beginning in 2020, the annual fee includes the production of a defined number of units with an option to purchase additional units at a defined price. The agreement contains negotiated representations and warranties, indemnification, limitations of liability, and other provisions. The initial term of the manufacturing and supply agreement continues until the seventh anniversary of the date on which the Company receives New Drug Application approval of Qtrypta in the United States. As of September 30, 2020, the Company had recorded a right-of-use asset and associated lease liabilities at the present value of the amount of the manufacturing and supply agreement identified as an embedded operating lease (See Note 6. Leases).

The Company may terminate the agreements upon denial of regulatory approvals or if regulatory approvals are withdrawn under certain circumstances. The Company may also elect to terminate the contracts for convenience, which would result in cancellation fees in the amount of 50% of the annual fee due in the year that the contract is terminated, and costs to remove the Company's equipment and restore the CMO's facility. The Company or the CMO may terminate the agreement for the other’s uncured material breach, uncured force majeure or bankruptcy or insolvency-related events.

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The Company has non-cancelable commitments with this CMO for the construction of manufacturing space and technology transfer fees totaling $3.9 million, of which $0.5 million was a current liability on the balance sheet as of September 30, 2020.

On July 31, 2020, the Company entered into an amendment to a Business Understanding Agreement dated September 13, 2018 with a CMO (the “Amended Agreement”). Pursuant to the Amended Agreement, this CMO agreed to provide services related to the manufacture and assembly of a component (the “Product”) of Qtrypta. Under the Amended Agreement, the parties expressed their mutual intent to enter into a commercial supply agreement (“Supply Agreement”) addressing certain of the terms set forth in the Amended Agreement. The Amended Agreement provides that if the Company does not enter into a Supply Agreement with this CMO or ceases to purchase the Product from this CMO prior to reaching a minimum commitment level, then the Company would be required to pay the CMO up to $2.5 million; however, no such payment will be required in the event of this CMO’s material breach. The Company may be required to pay an additional payment of up to $4.6 million if the Company ceases to purchase the Product from this CMO and a Supply Agreement is not entered into, except that no such payment will be required in the event of this CMO’s material breach or if the FDA does not approve Qtrypta. As of September 30, 2020, the Company had recorded a right-of-use asset and associated lease liabilities at the present value of the amount of the agreement identified as an embedded operating lease (See Note 6. Leases).

The Company has a manufacturing and supply agreement through September 2023 with a supplier for a component part that includes an inactivity fee of up to $85,000 annually.

Indemnifications

In the normal course of business, the Company enters into contracts and agreements that contain a variety of representations and warranties and provide for general indemnifications. The Company’s exposure under these agreements is unknown because it involves claims that may be made against the Company in the future but have not yet been made. To date, the Company has not paid any claims or been required to defend any action related to its indemnification obligations. However, the Company may record charges in the future as a result of these indemnification obligations. The Company also has indemnification obligations to its officers and directors for specified events or occurrences, subject to some limits, while they are serving at the Company’s request in such capacities. There have been no claims to date and the Company has director and officer insurance that may enable the Company to recover a portion of any amounts paid for future potential claims. The Company believes the fair value of these indemnification agreements is minimal. Accordingly, the Company has not recorded any liabilities for these agreements as of September 30, 2020.

Legal Proceedings

On October 29, 2020 and November 6, 2020, two stockholders filed alleged class action lawsuits against the Company and certain of its current and former executive officers in the United States District Court for the Northern District of California: Carr v. Zosano Pharma Corporation, et al., Case No. 3:20-cv-07625, and Becerra v. Zosano Pharma Corporation, et al., Case No. 3:20-cv-07850. The complaints were filed purportedly on behalf of all persons who purchased or otherwise acquired the Company’s securities between February 13, 2017 and September 30, 2020. The complaints allege that the Company and certain of its current and former executive officers made false and/or misleading statements and failed to disclose material adverse facts about the Company’s business, operations and prospects in violation of Sections 10(b) (and Rule 10b-5 promulgated thereunder) and 20(a) of the Securities Exchange Act of 1934, as amended. The plaintiffs seek damages, interest, costs, attorneys’ fees and other unspecified relief. The Company believes the cases are without merit and it intends to vigorously defend itself against the claims. Given the uncertainty of litigation and the preliminary stage of the cases, the Company cannot predict the outcome of or estimate the possible loss or range of loss that may result from these actions.

The Company, from time to time, may be involved in other lawsuits and legal proceedings, which arise, in the ordinary course of business. Such matters are subject to many uncertainties and outcomes and are not predictable with assurance. The Company accrues for contingencies when it believes that a loss is probable and that it can reasonably estimate the amount of any such loss. To the extent that there is a reasonable possibility that a loss exceeding amounts already recognized may be incurred and the amount of such additional loss would be material, the Company will either disclose the estimated additional loss or state that such an estimate cannot be made.

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9.    Common Stock Warrants

The following table summarizes the Company’s common stock warrants issued and outstanding as of the periods presented:

	Warrants Outstanding as of December 31, 2019	Issued	Exercised	Expired	Warrants Outstanding as of September 30, 2020	Exercise Price		Expiration Date
		(unaudited)
Series E - March 2020	—	11,903,506	(7,194,004)	—	4,709,502	$	0.8025	03/06/25
Series D - February 2020	—	2,161,539	(2,161,539)	—	—
Series C - February 2020	—	14,153,846	(13,986,146)	—	167,700	$	0.65	02/14/25
Trinity - September 2018	75,000	—	—	—	75,000	$	3.5928	09/25/25
Series B - August 2016	195,906	—	—	—	195,906	$	31.00	08/19/21
Amendment to Hercules Term Loan - June 2015	2,035	—	—	(2,035)	—
Hercules Term Loan - June 2014	1,583	—	—	(1,583)	—
Total	274,524	28,218,891	(23,341,689)	(3,618)	5,148,108

The Company evaluated the Series E and Series C common stock warrants under ASC 480, Distinguishing Liabilities from Equity, and ASC 815, Derivatives and Hedging, and determined permanent equity treatment was appropriate for these freestanding financial instruments. The March 2020 Offering and the February 2020 Offering did not include any embedded features that would require bifurcation. Each Series E and Series C common stock warrant grants the holder the right to purchase one share of common stock, subject to proportional adjustments in the event of stock splits, combinations or similar events. The Series E and Series C common stock warrants do not have any dividend or liquidation preferences or participation rights. Subject to certain conditions, the warrants are exercisable on a cashless basis, and subject to certain beneficial ownership limitations, any unexercised Series E or Series C common stock warrants will be automatically exercised via cashless exercise on the expiration date pursuant to the terms of the respective warrant agreements.

10.    Stock-Based Compensation

During the second quarter of 2020, the Company granted RSUs to its employees and Board of Directors. Upon vesting, each RSU converts into one share of the Company’s common stock. The value of an RSU award is based on the Company’s closing stock price on the date of grant. The RSUs granted to employees vest annually over four years and are subject to the employee’s continuing service to the Company. The RSUs granted to members of the Board of Directors vest fully after one year and are subject to the director's continuing service to the Company. Stock-based compensation expense is recognized straight-line over the vesting term.

The following table summarizes activity under the Amended and Restated 2014 Equity and Incentive Plan (“2014 Plan”), the 2012 Stock Incentive Plan (“2012 Plan”) and inducement grants issued to new employees outside of the 2014 Plan in accordance with Nasdaq Listing Rule 5635(c)(4) for the nine months ended September 30, 2020 (unaudited):

	Number of Shares Subject to Outstanding Stock Options	Weighted-Average Exercise Price per Share		Number of RSUs outstanding	Weighted-Average grant date fair value
Outstanding at January 1, 2020	2,260,307	$	4.29	—	$	—
Granted	775,625	$	0.99	343,442	$	0.84
Canceled/forfeited/expired	(362,488)	$	3.81	(1,125)	$	0.84
Outstanding at September 30, 2020	2,673,444	$	3.40	342,317	$	0.84

On January 1, 2020, the shares of common stock authorized for issuance under the 2014 Plan were increased by 822,612 shares pursuant to the automatic annual increase provisions of the 2014 Plan. As of September 30, 2020, 28,182 shares of common stock were available for issuance under the 2014 Plan.

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The following table summarizes the Company's stock compensation expense for each of the periods presented:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(unaudited; in thousands)				(unaudited; in thousands)
Research and development	$	177	$	206	$	507	$	549
General and administrative	262		217		657		621
Total	$	439	$	423	$	1,164	$	1,170

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Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with our financial statements and accompanying notes included in this Quarterly Report on Form 10-Q and the financial statements and accompanying notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, filed with the Securities and Exchange Commission (the “SEC”), on March 13, 2020. This discussion contains “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Such forward looking statements involve risks and uncertainties. We use words such as “may,” “continue,” “goal,” “would,” “could,” “might,” “project,” “anticipate,” “intend,” “forecast,” “designated,” “approximate,” “will,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “predict,” “potential,” “believe,” “should” or negatives of these words and similar expressions and references to future periods to identify forward-looking statements. Although we believe the expectations reflected in these forward-looking statements are reasonable, such statements are inherently subject to risk and we can give no assurances that our expectations will prove to be correct. These statements appearing throughout this Quarterly Report on Form 10-Q are statements regarding our intent, belief, or current expectations, primarily regarding our operations. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this Quarterly Report on Form 10-Q. As a result of many factors, such as those set forth under “Risk Factors” under Item 1A of Part II below, and elsewhere in this Quarterly Report on Form 10-Q, our actual results may differ materially from those anticipated in these forward-looking statements. We undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this report or to reflect actual outcomes.

Overview

Zosano Pharma Corporation is a clinical-stage biopharmaceutical company focused on providing rapid systemic administration of therapeutics and other bioactive molecules to patients using our proprietary transdermal microneedle system (the “System”). Our System is designed to facilitate rapid drug absorption into the bloodstream, which can result in an improved pharmacokinetic profile compared to original dosage forms. The System consists of a 3cm2 to 6cm2 array of titanium microneedles approximately 200-350 microns in length, coated with a hydrophilic formulation of drug, mounted on an adhesive patch. The patch is applied with a hand-held applicator that presses the microneedles into the skin to a uniform depth in each application, close to the capillary bed, allowing for dissolution and absorption of the drug, but not deep enough to contact the nerve endings in the skin. The microneedles penetrate the stratum corneum to allow the drug to be absorbed into the microcapillary system of the skin. We are focused on developing products for indications in which we believe rapid onset, ease of use and stability may offer significant therapeutic and practical advantages, and on developing products where rapid administration of approved drugs with established safety and efficacy profiles provides an increased benefit to patients, in markets where patients remain underserved by existing therapies. We anticipate that many of our current and future development programs may enable us to utilize a regulatory pathway that would streamline clinical development and accelerate the path towards potential commercialization.

Our development efforts are currently focused on our product candidate, Qtrypta™ (M207) (“Qtrypta”). Qtrypta is our proprietary formulation of zolmitriptan delivered utilizing our System. Zolmitriptan is one of a class of serotonin receptor agonists known as triptans and is used as an acute treatment for migraine. Migraine is a debilitating neurological disease, symptoms of which include moderate to severe headache pain, nausea and vomiting, and abnormal sensitivity to light and sound. Qtrypta was developed with the intent of providing faster onset of efficacy and sustained freedom from migraine symptoms. Qtrypta is designed for rapid absorption of zolmitriptan into the bloodstream without dependence on the gastrointestinal tract.

We filed a 505(b)(2) New Drug Application (“NDA”) for Qtrypta with the U.S. Food and Drug Administration (“FDA”) on December 20, 2019, and on October 20, 2020, we received a Complete Response Letter (“CRL”) from FDA for the NDA. The CRL cited inconsistent zolmitriptan exposure levels observed across clinical pharmacology studies, which had been previously identified in the FDA’s discipline review letter that we received in September. Specifically, the CRL noted differences in zolmitriptan exposures observed between subjects receiving different lots of Qtrypta in our clinical trials and inadequate pharmacokinetic bridging between the lots that made interpretation of some safety data unclear. The CRL referenced unexpected high plasma concentrations of zolmitriptan observed in five study subjects enrolled in our pharmacokinetic studies. The FDA recommended that we conduct a repeat bioequivalence study between three of the lots used during development. The NDA included data on a total of 774 subjects across 5 trials who were administered or dosed with Qtrypta. The CRL noted that additional product quality validation data, which were planned to be submitted following approval, if received, were required to be submitted with the application. In addition, the CRL mentioned that due to U.S. Government and/or Agency-wide restrictions on travel, inspections of our contract manufacturing facilities were not able to be conducted but would be required before the application may be approved. We plan to request a Type A meeting with the FDA to discuss strategies to address the FDA’s comments.

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We do not anticipate realizing product revenues until FDA approves the NDA and we begin commercializing Qtrypta, which events may never occur.

If approved, we plan to use contract manufacturers for the commercial production of Qtrypta. These contract manufacturers include companies that will produce the various components that comprise our patch, our applicator, as well as the final packaging of the finished product. If approved, our contract manufacturers will be required to produce commercial supply of Qtrypta in accordance with the FDA’s current Good Manufacturing Practice (“cGMP”) regulations. These companies are located in the United States and have expertise and experience in contract manufacturing.

We have no product sales to date, and we will not have product sales unless and until we receive approval from the FDA, or equivalent foreign regulatory bodies, to market and sell our product candidates. Accordingly, our success depends not only on the development, but also on our ability to finance the development of each of our product candidates. We will require substantial additional funding to complete development and seek regulatory approval for these products.

On August 6, 2020, we entered into a master services agreement (the “Eversana Agreement”) with Eversana Life Science Services, LLC (“Eversana”) for the commercialization of Qtrypta in the United States, if approved by the FDA. Under the terms of the Eversana Agreement, we will cooperate with Eversana to conduct activities over the term of the Eversana Agreement. We maintain ownership of the Qtrypta NDA as well as all legal, regulatory and manufacturing responsibilities for Qtrypta. Eversana receives an exclusive right to conduct agreed commercialization activities and will utilize its internal sales organization along with its other commercial capabilities for market access, marketing, distribution and patient support services for Qtrypta. Eversana will receive reimbursement of certain commercialization costs pursuant to a commercialization budget estimated at approximately $250.0 million and a low double digit to mid-teen percentage of product profits when our net sales for Qtrypta surpass certain costs incurred by the parties pursuant to the commercialization budget.

The term of the Eversana Agreement is five years following the date, if any, that the FDA approves the NDA. Upon expiration or termination of the Eversana Agreement, we will retain all profits from product sales consummated after expiration or termination and assume all future corresponding commercialization responsibilities. We may terminate the Eversana Agreement if Eversana fails to provide pre-commercial or commercial plans and budgets by specified dates, if we decide to discontinue development or commercialization efforts for Qtrypta in the United States (subject to a termination payment if such termination occurs within a specified time period), or upon a change of control. Either party may terminate the Eversana Agreement if FDA approval is not received by July 31, 2021, if net profits are not realized within a specified time period following commercial launch, for material breach of the Eversana Agreement by the other party that is not cured within a defined time period, for insolvency of the other party, if Qtrypta is subject to a safety recall in the United States or if Qtrypta is not commercially launched within a specified time period after FDA approval of the NDA (other than by reason of the terminating party’s failure to perform its obligations under the Eversana Agreement).

We currently have no internal sales, marketing or distribution capabilities and we plan to rely on Eversana and other third parties for the commercialization of Qtrypta, if approved.

On June 13, 2020, we announced that new post-hoc efficacy analyses of Qtrypta would be presented as a virtual oral presentation on the 2020 American Headache Society’s Virtual Annual Scientific Meeting Platform. Six different measurements of pain reduction from the exploratory efficacy results in the long-term safety study (“LTSS”) were examined and compared to the positive clinical results observed in the Phase 2/3 Zotrip study. Across all six efficacy measurements, which included pain freedom and pain relief at 2 hours, clinical activity observed in the LTSS during the one-year trial period treating approximately 6,000 migraine episodes was consistent with the positive pivotal study results.

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Parameter	ZOTRIP (Single Dose)				Open-Label
	Placebo		M207 3.8 mg		Long-Term
	(n = 77)		(n = 82)		M207 3.8 mg
					(5,617 migraine episodes*)
Pain Freedom at 2 hours	14	%	42	%	44	%
Pain Relief at 2 hours	57	%	81	%	81	%
Sustained Pain Freedom 2-24 hour	10	%	32	%	38	%
Sustained Pain Freedom 2-48 hour	9	%	27	%	35	%
Sustained Pain Relief 2-24 hour	38	%	68	%	70	%
Sustained Pain Relief 2-48 hour	33	%	63	%	65	%

* For sustained endpoints, data from all time points 2-24 (48) hours had to be present

Similar to the pivotal study, the most common adverse events observed in the LTSS were redness and swelling at the application site, of which more than 95% were classified as mild. 80% of these site reactions were generally resolved within 48 hours. Subjects treated with Qtrypta reported less triptan-like neurological side effects than are typically found with the class, with less than 2% of subjects in the LTSS reporting effects such as dizziness and paresthesia.

In October 2019, we announced that we had begun enrolling subjects in our Acute Treatment of Cluster Headache placebo- controlled Phase 2/3 clinical trial, which will evaluate the efficacy of C213 for the acute treatment of cluster headache. Like Qtrypta for the potential acute treatment of migraine, C213 for the potential acute treatment of cluster headache consists of our investigational proprietary formulation of zolmitriptan delivered utilizing our System. Due to the novel coronavirus (“COVID-19”) pandemic, new enrollment into the clinical trial was temporarily suspended between March 2020 to June 2020. Subject enrollment resumed in July 2020, however, at a rate slower than originally anticipated. In November 2020, we decided to end enrollment of new subjects into the clinical trial as of December 31, 2020 to conserve resources. We plan to continue to evaluate subjects enrolled prior to December 31, 2020.

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 condensed financial statements, which have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”). 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 results of operations during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates under different assumptions or conditions.

We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012. Emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards, and, therefore, will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

There have been no changes to our critical accounting policies which are included in Note 2. Summary of Significant Accounting Policies to the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on March 13, 2020, except as described in Note 2. Summary of Significant Accounting Policies to our condensed financial statements included in this Quarterly Report on Form 10-Q.

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Financial Operations Overview

General

As of September 30, 2020, we had an accumulated deficit of approximately $324.1 million. We have incurred significant losses and expect to incur significant and increasing losses in the foreseeable future as we advance our Qtrypta product candidate into later stages of development and, if approved, commercialization. We cannot assure you that we will receive additional capital or collaboration revenue in the future, as a result of any partnership that we might pursue.

We expect our costs for research and development and pre-commercialization expenses related to our Qtrypta product candidate to increase as we continue to advance this program towards regulatory approval and, if approved, commercialization. Because of the numerous risks and uncertainties associated with our technology and drug development, we cannot forecast with any degree of certainty the timing or amount of expenses incurred or when, or if, we will be able to achieve profitability.

We will require additional capital to undertake our research and development activities, planned pre-commercialization activities and to meet our operating requirements during the twelve months from the filing of this Quarterly Report on Form 10-Q. We intend to obtain additional capital resources through equity offerings, debt financings, license or collaboration agreements, or through any combination of such sources of capital. However, if such financing is not available at adequate levels or on acceptable terms, we could be required to further reduce our operating expenses and suspend, delay or reduce the scope of our Qtrypta development program, out-license intellectual property rights to our transdermal delivery technology, or a combination of the above, which may have a material adverse effect on our business, results of operations, financial condition and/or our ability to fund our scheduled obligations on a timely basis or at all.

Impact of COVID-19

In March 2020, the COVID-19 pandemic resulted in authorities implementing numerous measures to contain the virus, including shelter-in-place orders, travel restrictions and quarantines. There is significant uncertainty regarding the extent and duration of the impact that the COVID-19 pandemic will have on our business. We are closely monitoring the impact of the COVID-19 pandemic on our business, and while we are unable to predict the full impact that the COVID-19 pandemic will have on our results of operations, liquidity and cash flows due to numerous uncertainties, our compliance with these measures has impacted our operations. The full extent to which the COVID-19 pandemic impacts our business, results of operations and financial condition cannot be predicted at this time and the impact of the COVID-19 pandemic may persist for an extended period of time or become more pronounced.

Presently, we do not have sufficient cash and cash equivalents to enable us to fund our anticipated level of operations and meet our obligations which raises a substantial doubt about our ability to continue as a going concern. We currently believe that obtaining additional capital resources through an equity offering, a debt financing, a license or collaboration agreement, or through a combination of such sources of capital may be impacted by the economic uncertainty and financial market conditions caused by the COVID-19 pandemic.

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Research and Development Expenses

Research and development expenses represent costs incurred to seek regulatory approval, for pre-commercialization efforts for our primary product candidate, Qtrypta, and to conduct clinical trials and pre-clinical studies to further our research and development efforts. We recognize all research and development expenses as they are incurred.

Research and development expenses consist of:

•production costs which include, but are not limited to, employee-related expenses, including salaries, benefits and stock-based compensation expense, drug formulation and clinical trials;

•expenses related to the purchase of active pharmaceutical ingredients and raw materials for the production of our System, including fees paid to contract manufacturing organizations;

•fees paid to contract research organizations (“CROs”), clinical consultants, clinical trial sites and vendors, including institutional review boards (“IRBs”), in conjunction with implementing and monitoring our clinical trials and acquiring and evaluating clinical trial data, including all related fees, such as for investigator grants, subject screening fees, laboratory work and statistical compilation and analysis;

•fees paid to conduct clinical studies, drug formulation and cost of consumables used in nonclinical and clinical trials;

•other consulting fees paid to third parties; and

•allocation of certain shared costs, such as facilities-related costs.

For the three and nine months ended September 30, 2020, our research and development efforts and resources focused primarily on advancing the development of Qtrypta. We expect our manufacturing-related research and development expenses to continue to increase as a result of our Qtrypta pre-commercialization efforts. We are actively seeking opportunities to evaluate collaborations with strategic partners to further the clinical and commercial development of our other product candidates. We cannot forecast with any degree of certainty if Qtrypta or any of our other product candidates, if any, will be subject to future collaborations or how such arrangements would affect our development plans or capital requirements. As a result of these uncertainties, we are unable to determine the duration and completion costs of our research and development projects or when and to what extent we will generate revenue from the commercialization and sale of any of our product candidates.

The process of conducting the necessary clinical trials to obtain regulatory approval is costly and time consuming. We consider the active management and development of our clinical pipeline to be crucial to our long-term success. The actual probability of success for each product candidate and clinical program may be affected by a variety of factors, including, but not limited to: the quality of the product candidate, early clinical data, investment in the program, competition, manufacturing capability and commercial viability. In situations in which third parties have control over the clinical development of a product candidate, the estimated completion dates are largely under the control of such third parties and not under our control. Additionally, a future collaborative partner may only be interested in applying our technology in the development and advancement of their own product candidates.

General and Administrative Expenses

General and administrative expenses consist principally of personnel-related costs, professional fees for legal, consulting, audit and tax services, and other general operating expenses not otherwise included in research and development. As a public company, we expect to invest significant resources to comply with evolving laws, regulations and standards, including the implementation of effective internal controls over financial reporting and compliance with the Sarbanes-Oxley Act. We expect that our general and administrative expenses will increase as we move towards commercialization of our product candidate, Qtrypta, if approved.

Other Income and Expense

Interest income. Interest income consists primarily of interest and amortization of purchase premiums and accretion of purchase discounts related to our investments in marketable securities.

Interest expense. Interest expense consists primarily of interest costs and associated amortization of debt discounts and issuance costs, if any, related to debt financing and an equity line of credit.

Other income (expense), net. Other income (expense), net consists of miscellaneous income and expenses that are not included in other categories of the statement of operations.

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Results of Operations

Comparison of the three months ended September 30, 2020 and 2019

	Three Months Ended September 30,				Change
	2020		2019		Amount		%
	(unaudited; in thousands)
Research and development	$	5,824	$	6,486	$	(662)	(10)	%
General and administrative	$	2,704	$	3,071	$	(367)	(12)	%
Other income (expense):
Interest income	$	2	$	41	$	(39)	(95)	%
Interest expense	$	(165)	$	(281)	$	116	(41)	%
Other income (expense), net	$	4	$	(66)	$	70	(106)	%

Research and development expenses

Research and development expenses decreased approximately $0.7 million, or 10%, for the three months ended September 30, 2020, as compared to the same period in 2019. The $0.7 million decrease was primarily attributable to lower clinical trial costs of $0.8 million mainly due to the completion of the LTSS, a decrease of $0.2 million in compensation costs due to lower headcount and a $0.3 million decrease in travel and general business expenses due to COVID-19. These decreases were partially offset by an increase of $0.3 million associated with the scale up and technology transfer to our contract manufacturers and an increase in depreciation expense of $0.3 million related to assets placed into service at our contract manufacturers.

General and administrative expenses

General and administrative expenses decreased approximately $0.4 million or 12% for the three months ended September 30, 2020, as compared to the same period in 2019. The $0.4 million decrease was primarily attributable to a $0.4 million decrease in professional services costs related to strategic and pre-commercial activities and a $0.2 million decrease in compensation costs related to lower headcount. These decreases were partially offset by a $0.2 million increase in legal and professional services costs related to corporate and intellectual property matters and audit fees.

Other income and expense

The decrease in interest income was primarily attributable to lower interest rates in 2020, as compared to the same period in in 2019.

Interest expense decreased approximately $0.1 million, or 41%, for the three months ended September 30, 2020, as compared to the same period in 2019. The decrease was primarily attributable to lower interest expense on the Trinity financing arrangement.

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Comparison of the nine months ended September 30, 2020 and 2019

	Nine Months Ended September 30,				Change
	2020		2019		Amount		%
	(unaudited; in thousands)
Research and development	$	16,270	$	19,742	$	(3,472)	(18)	%
General and administrative	$	8,552	$	8,709	$	(157)	(2)	%
Other income (expense):
Interest income	$	17	$	203	$	(186)	(92)	%
Interest expense	$	(561)	$	(357)	$	(204)	57	%
Other income (expense), net	$	95	$	(44)	$	139	(316)	%

Research and development expenses

Research and development expenses decreased approximately $3.5 million, or 18%, for the nine months ended September 30, 2020, as compared to the same period in 2019. The $3.5 million decrease was primarily attributable to lower clinical trial costs of $3.0 million mainly due to the completion of the LTSS, a decrease of $0.7 million in compensation costs due to lower headcount and a $0.3 million decrease in travel and general business expenses due to COVID-19. These decreases were partially offset by an increase in depreciation expense of $0.5 million related to assets placed into service at our contract manufacturers.

General and administrative expenses

General and administrative expenses decreased by $0.2 million, or 2%, for the nine months ended September 30, 2020, as compared to the same period in 2019. The $0.2 million decrease was primarily attributable to a decrease of $0.4 million in compensation costs due to lower headcount and a $0.3 million decrease in professional service costs related to strategic and pre-commercial activities and a $0.1 million decrease in travel and entertainment expenses due to reduced travel resulting from COVID-19. These decreases were partially offset by an approximately $0.6 million increase in legal and professional services costs related to corporate and intellectual property matters and audit fees.

Other income and expense

Interest income decreased approximately $0.2 million, or 92%, for the nine months ended September 30, 2020, as compared to the same period in 2019. The $0.2 million decrease was primarily attributable to lower interest rates and investments in marketable securities for the nine months ended September 30, 2020 as compared to the same period in 2019.

Interest expense increased approximately $0.2 million, or 57%, for the nine months ended September 30, 2020 as compared to the same period in 2019. The increase was primarily attributable to higher interest expense on the Trinity financing arrangement resulting from a higher liability balance for the nine months ended September 30, 2020 as compared to the same period in 2019.

Income Taxes

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the ‘‘CARES Act’’) was signed into law. The CARES Act includes provisions relating to refundable payroll tax credits, deferment of the employer portion of certain payroll taxes, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. We analyzed the provisions of the CARES Act and determined there was no significant impact on our provision for income taxes for the three and nine months ended September 30, 2020.

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Liquidity and Capital Resources

As of September 30, 2020, we had an accumulated deficit of $324.1 million and $25.4 million of negative cash flows from operating activities for the nine months ended September 30, 2020. As of September 30, 2020, we had approximately $43.6 million in cash and cash equivalents. Presently, we do not have sufficient cash and cash equivalents to enable us to fund our anticipated level of operations and meet our obligations as they become due during the twelve months following the date of issuance of this Quarterly Report on Form 10-Q, and we will need to obtain additional capital resources through an equity offering, a debt financing, a license or collaboration agreement, or through a combination of such sources of capital. The aforementioned factors raise substantial doubt about our ability to continue as a going concern.

We filed a shelf registration statement on Form S-3 with the SEC, which was declared effective by the SEC on April 16, 2020. This shelf registration statement provides us with the ability to issue common stock and other securities as described in the registration statement from time to time up to an aggregate amount of $74.5 million.

On August 31, 2020, we entered into an underwriting agreement with BTIG, LLC (“BTIG”) pursuant to which we issued and sold 15,937,130 shares of our common stock to BTIG at a price of $1.304 per share. The offering closed on September 3, 2020. We received net proceeds of approximately $20.4 million after deducting estimated expenses payable by us in connection with the offering. The shares were sold pursuant to our effective shelf registration statement, the base prospectus filed as part of such registration statement and the prospectus supplement dated August 31, 2020.

On June 8, 2020, we entered into a sales agreement with BTIG, as sales agent, to establish an at-the-market offering program (“2020 ATM”), under which we are permitted to offer and sell, from time to time, shares of common stock having a maximum aggregate offering price of up to $20.0 million. We are required to pay BTIG a commission of 3% of the gross proceeds from the sale of shares and also agreed to provide BTIG with customary indemnification rights. During the quarter ended September 30, 2020, we issued and sold 11,686,795 shares of our common stock at an average price of $1.09 per share under the 2020 ATM program with aggregate net proceeds of approximately $12.4 million after BTIG's commission and estimated offering expenses of approximately $360,000. During the nine months ended September 30, 2020, we issued and sold 13,237,026 shares of our common stock at an average price of $1.07 per share under the 2020 ATM program with aggregate net proceeds of approximately $13.5 million after BTIG's commission and estimated offering expenses of approximately $660,000. The shares were sold pursuant to our effective shelf registration statement, the base prospectus filed as part of such registration statement and the prospectus supplement dated June 8, 2020.

On May 27, 2020, we entered into the First Amendment to Lease Documents (the “Trinity Amendment”) with Trinity Funding 1, LLC (“Trinity”), which, among other things, extended the term of each lease schedule from a 36-month term to a 42-month term by providing for an interest-only period from May 2020 through October 2020. Principal payments recommenced November 1, 2020. Additionally, the Trinity Amendment removed all end-of-term options other than the option to purchase the equipment at 12% of equipment cost at the end of each 42-month-term.

On April 21, 2020, we executed a promissory note (the “PPP Note”) evidencing an unsecured loan in the amount of $1.6 million under the Paycheck Protection Program (the “PPP Loan”). The Paycheck Protection Program (“PPP”) was established under the CARES Act and is administered by the U.S. Small Business Administration (“SBA”). Under the terms of the CARES Act, PPP loan recipients can apply for and be granted forgiveness for all or a portion of loans granted under the PPP. Such forgiveness will be determined, subject to limitations, based on the use of loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and the maintenance of our payroll levels. We applied for forgiveness of the $1.6 million loan amount and accrued interest on October 4, 2020, however, no assurance is provided that we will obtain forgiveness of the PPP Loan in whole or in part.

On March 4, 2020, we entered into a securities purchase agreement with certain institutional investors for the issuance and sale in a registered direct offering of (i) 11,903,506 shares of our common stock and (ii) Series E Warrants to purchase up to a total of 11,903,506 shares of common stock at an offering price of $0.9275 per share and accompanying warrant. The Series E Warrants have an exercise price of $0.8025 per share, are immediately exercisable and will expire five years from the date of issuance. The aggregate net proceeds from the offering were approximately $10.2 million after deducting the placement agent fees and other offering expenses. During the quarter ended September 30, 2020, Series E Warrants to purchase 7,194,004 shares of common stock were exercised at an exercise price of $0.8025 per share for aggregate proceeds of approximately $5.8 million.

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On February 14, 2020, we closed an underwritten offering for the issuance and sale of (i) 10,146,154 Class A Units, each consisting of one share of common stock and one Series C Warrant to purchase one share of common stock, at a public offering price of $0.65 per Class A Unit, and (ii) 2,161,539 Class B Units, each consisting of one Series D Pre-Funded Warrant to purchase one share of common stock and one Series C Warrant to purchase one share of common stock, at a public offering price of $0.6499 per Class B Unit. The Series C Warrants have an exercise price of $0.65 per share, are immediately exercisable and will expire five years from the date of issuance. The Series D Pre-Funded Warrants had an exercise price of $0.0001 per share and were fully exercised in connection with the closing of the offering. We granted the underwriter a 30-day option to purchase up to an additional 1,846,153 shares of common stock and/or additional Series C Warrants to purchase up to 1,846,153 shares of common stock. The underwriter fully exercised its option to purchase the additional shares and Series C Warrants. The aggregate net proceeds from the offering were $8.3 million after deducting underwriting commissions and offering expenses. During the quarter ended September 30, 2020, Series C Warrants to purchase 10,003,038 shares of common stock were exercised at an exercise price of $0.65 per share for aggregate proceeds of approximately $6.5 million. During the nine months ended September 30, 2020, Series C Warrants to purchase 13,986,146 shares of common stock were exercised at an exercise price of $0.65 per share for aggregate proceeds of approximately $9.1 million.

On August 19, 2019, we entered into a sales agreement with BTIG, LLC, as sales agent (“BTIG”), to establish an at-the-market offering program ("2019 ATM"), under which we were permitted to offer and sell, from time to time, shares of common stock having a maximum aggregate offering price of up to $15.0 million. We were required to pay BTIG a commission of 3% of the gross proceeds from the sale of shares and also agreed to provide BTIG with customary indemnification rights. During the quarter ended March 31, 2020, we issued and sold 2,151,346 shares of our common stock at an average price of $1.30 per share under the 2019 ATM program. The aggregate net proceeds were approximately $2.7 million after BTIG's commission of $84,000 and other offering expenses. On March 4, 2020, we delivered notice of termination of the sales agreement to BTIG. We did not incur any penalties as a result of its termination of the sales agreement.

Our ability to complete the sale of equity securities and access the market as a source of liquidity is dependent on investor demand, market conditions and other factors. Therefore, we can provide no assurance that any such offering will be on terms favorable to us or our stockholders, or that such offering will be successful at all. Our inability to obtain required funding in the near future or our inability to obtain funding on favorable terms will have a material adverse effect on our operations and strategic development plan for future growth. If we cannot successfully raise additional capital and implement our strategic development plan, our liquidity, financial condition and business prospects will be materially and adversely affected, and we may have to cease operations.

We expect to incur additional losses in the future and will require additional financing to develop our Qtrypta product candidate, conduct pre-commercialization manufacturing activities and fund our operations. Failure to raise capital as and when needed could have a negative impact on our financial condition and our ability to pursue our business strategies. We anticipate that we will need to raise substantial additional capital, the requirements of which will depend on many factors, including:

•the economic and global financial market uncertainty resulting from the COVID-19 pandemic;

•the scope, progress, expansion and costs of manufacturing our product candidates;

•the timing of and costs involved in obtaining regulatory approvals;

•the scope, progress, expansion, costs and results of our clinical trials;

•the type, number, costs and results of the product candidate development programs which we are pursuing or may choose to pursue in the future;

•our ability to establish and maintain development partnering arrangements;

•the timing, receipt and amount of contingent, royalty and other payments from any of our future development partners;

•the emergence of competing technologies and other adverse market developments;

•the costs of maintaining, expanding and protecting our intellectual property portfolio, including potential litigation costs and liabilities;

•the resources we devote to marketing and, if approved, commercializing our product candidates; and

•the costs associated with being a public company.

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The COVID-19 pandemic has caused volatility in the global financial markets and threatened a slowdown in the global economy, which may adversely affect our ability to raise additional capital on attractive terms or at all. A recession, depression or other sustained adverse market event resulting from the spread of COVID-19 may also limit our ability to obtain financing for our operations.

If we are unable to raise additional funds when needed, we may be required to suspend, delay, reduce or terminate our development programs and clinical trials. We may also be required to sell or license our technologies, clinical product candidates, or programs, if any, which we would prefer to develop and commercialize ourselves.

Cash Flows

The following table summarizes our cash flows for the periods presented:

	Nine Months Ended September 30,
	2020		2019
	(unaudited; in thousands)
Net cash provided by (used in):
Operating activities	$	(25,436)	$	(27,350)
Investing activities	(7,711)		2,985
Financing activities	70,385		21,717
Net increase (decrease) in cash and cash equivalents and restricted cash	$	37,238	$	(2,648)

Operating Activities

Net cash used in operating activities was approximately $25.4 million and $27.4 million for the nine months ended September 30, 2020 and 2019, respectively. Net cash used during the first nine months of 2020 and 2019 was primarily used for technology transfer and development costs in conjunction with services performed by our contract manufacturers, clinical trial costs and other research and development and administrative expenses incurred in the course of our continuing operations.

Investing Activities

Net cash used in investing activities was approximately $7.7 million for the nine months ended September 30, 2020 and net cash provided by investing activities was approximately $3.0 million for the nine months ended September 30, 2019. Net cash used in investing activities during the first nine months of 2020 was the result of property and equipment purchases to support our pre-commercialization activities. Net cash provided by investing activities during the first nine months of 2019 was primarily the result of $13.9 million of net proceeds from maturities of marketable securities, offset by $10.9 million of property and equipment purchases to support our pre-commercialization activities.

Financing Activities:

Net cash provided by financing activities was approximately $70.4 million for the nine months ended September 30, 2020 and net cash provided by financing activities was approximately $21.7 million for the nine months ended September 30, 2019. Net cash provided by financing activities for the first nine months of 2020 was primarily due to $29.0 million of net proceeds from public underwritten offerings, $16.3 million of net proceeds from ATM offerings, $14.9 million from the exercise of warrants, $10.1 million of net proceeds from a registered direct offering, and $1.6 million of proceeds from a PPP loan offset by $1.5 million in principal payments on our build-to-suit obligation with Trinity. Net cash provided by financing activities for the first nine months of 2019 was primarily due to $18.3 million of net proceeds from a registered public offering, $0.9 million of net proceeds from ATM offerings and $4.6 million of net proceeds from Trinity, offset by $2.1 million in principal payments on our build-to-suit obligation with Trinity.

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Contractual Obligations and Commitments

The following table summarizes our contractual obligations as of September 30, 2020:

	Payments due by period
	Total		Less than one year		1 - 3 years		3 - 5 years		More than 5 years
	(unaudited; in thousands)
Operating lease obligations (1)	$	7,905	$	1,968	$	4,051	$	1,886	$	—
Finance lease obligations	24		17		7		—		—
Build-to-suit obligations (2)	11,500		5,022		6,478		—		—
Paycheck Protection Program loan obligation (3)	1,617		201		1,416		—		—
Equipment purchase commitments (4)	3,989		3,989		—		—		—
Contract manufacturing commitments (5)	4,134		2,050		2,084		—		—
Total	$	29,169	$	13,247	$	14,036	$	1,886	$	—

(1) Operating leases

Our operating lease obligations primarily consist of a lease with BMR-34790 Ardentech Court LP, an affiliate of BMR Holdings, for our office, research and development, and manufacturing facilities in Fremont, California. In addition to the minimum rental commitments, our leases may require us to pay additional amounts for taxes, insurance, maintenance and other operating expenses. See Note 6. Leases of the Notes to Condensed Financial Statements included in this Quarterly Report on Form 10-Q for additional information.

(2) Build-to-suit obligation

The build-to-suit obligation consists of principal and interest payments and purchase option fees related to our build-to-suit obligation with Trinity. See Note 7. Debt Financing of the Notes to Condensed Financial Statements included in this Quarterly Report on Form 10-Q for additional information.

(3) Paycheck Protection Program loan obligation

The Paycheck Protection Program loan obligation consists of principal and interest payments under the PPP Note. See Note 7. Debt Financing of the Notes to Condensed Financial Statements included in this Quarterly Report on Form 10-Q for additional information.

(4) Equipment purchase commitments

Equipment purchase commitments primarily relate to a purchase commitment with a manufacturer to build a commercial coating and primary packaging system for the production of our product candidate, Qtrypta™ (M207). The terms of the purchase commitment is generally contingent upon performance of certain milestones. See Note 8. Commitments and Contingencies of the Notes to Condensed Financial Statements included in this Quarterly Report on Form 10-Q for additional information.

(5) Contract manufacturing commitments

Our contract manufacturing commitments consist of non-cancelable commitments with our contract manufacturing organizations primarily for the construction of dedicated manufacturing space and technology transfer fees. In addition to the non-cancelable commitments we have potential commitments with our contract manufacturers as detailed below.

We have a manufacturing and supply agreement with a CMO to provide services related to the manufacture and commercialization of Qtrypta. The agreement calls for annual fees of $2.0 million in 2020 escalating to $14.0 million in 2024, to be paid in equal monthly installments. The initial term of the manufacturing and supply agreement continues until the seventh anniversary of the date on which we receive New Drug Application approval of Qtrypta in the United States. We may terminate the agreement upon denial of regulatory approvals or if regulatory approvals are withdrawn under certain circumstances. We may also elect to terminate the contract for convenience, which would result in cancellation fees in the amount of 50% of the annual fee due in the year that the contract is terminated, and costs to remove the our equipment and restore the CMO's facility. We or the CMO may terminate the agreement for the other’s uncured material breach, uncured force majeure or bankruptcy or insolvency-related events.

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On July 31, 2020, we entered into an amendment to a Business Understanding Agreement dated September 13, 2018 with a CMO (the “Amended Agreement”). Pursuant to the Amended Agreement, this CMO agreed to provide services related to the manufacture and assembly of a component (the “Product”) of Qtrypta. Under the Amended Agreement, the parties expressed their mutual intent to enter into a commercial supply agreement (“Supply Agreement”) addressing certain of the terms set forth in the Amended Agreement. The Amended Agreement provides that if we do not enter into a Supply Agreement with this CMO or cease to purchase the Product from this CMO prior to reaching a minimum commitment level, then we would be required to pay the CMO up to $2.5 million; however, no such payment will be required in the event of this CMO’s material breach. We may be required to pay an additional payment of up to $4.6 million if we cease to purchase the Product from this CMO and a Supply Agreement is not entered into, except that no such payment will be required in the event of this CMO’s material breach or if the U.S. Food and Drug Administration does not approve Qtrypta.

See Note 8. Commitments and Contingencies of the Notes to Condensed Financial Statements included in this Quarterly Report on Form 10-Q for additional information.

Recent Accounting Pronouncements

See Note 2. Summary of Significant Accounting Policies to the accompanying condensed financial statements for Recent Accounting Pronouncements.

Off-Balance Sheet Arrangements

We currently have no off-balance sheet arrangements, such as structured finance, special purpose entities or variable interest entities.

Item 3.    Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risks in the ordinary course of our business. We may invest in marketable securities that have market risk where a change in prevailing interest rates may cause the principal amount of the marketable securities to fluctuate. Financial instruments which potentially subject us to concentrations of credit risk consist principally of cash and cash equivalents, as well as investments in marketable securities. We had cash and cash equivalents of $43.6 million as of September 30, 2020, which consisted of bank deposits and money market funds. We had no investments in marketable securities at fair value as of September 30, 2020. The primary objectives of our investment activities are to ensure liquidity and to preserve principal while at the same time maximizing the income we receive from our marketable securities without significantly increasing risk. Additionally, we have established guidelines regarding approved investments and maturities of investments, which are designed to maintain safety and liquidity.

Our cash and cash equivalents are held for working capital purposes. Cash balances are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to regulatory limits, and we are exposed to credit risk when our cash balances exceed FDIC insurance limits. Our total cash and cash equivalent balances exceed the maximum amounts insured by the FDIC.

Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of United States interest rates. We hold interest-earning instruments, which carry a degree of interest rate risk. To date, fluctuations in interest income and expense have not been significant. However, fluctuations in market interest rates in the future could have a material impact on our financial condition and results of operations.

Item 4.    Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2020. The term “disclosure controls and procedures,” as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Securities Act of 1933, as amended, is accumulated and communicated to the company's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosures.

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Based on the evaluation of our disclosure controls and procedures as of September 30, 2020, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures are designed to, and are effective to, provide assurance at a reasonable level that the information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities and Exchange Act of 1934, as amended) during the quarter ended September 30, 2020, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1.    Legal Proceedings

On October 29, 2020 and November 6, 2020, two stockholders filed alleged class action lawsuits against us and certain of our current and former executive officers in the United States District Court for the Northern District of California: Carr v. Zosano Pharma Corporation, et al., Case No. 3:20-cv-07625, and Becerra v. Zosano Pharma Corporation, et al., Case No. 3:20-cv-07850. The complaints were filed purportedly on behalf of all persons who purchased or otherwise acquired our securities between February 13, 2017 and September 30, 2020. The complaints allege that we and certain of our current and former executive officers made false and/or misleading statements and failed to disclose material adverse facts about our business, operations and prospects in violation of Sections 10(b) (and Rule 10b-5 promulgated thereunder) and 20(a) of the Securities Exchange Act of 1934, as amended. The plaintiffs seek damages, interest, costs, attorneys’ fees and other unspecified relief. We believe the cases are without merit and we intend to vigorously defend against the claims.

From time to time, we may be involved in other lawsuits and legal proceedings, which arise, in the ordinary course of business. Lawsuits and legal proceedings are subject to inherent uncertainties and an adverse result in any lawsuit or legal proceeding may materially adversely affect our business, financial condition and results of operations. In addition, even if not meritorious, these matters could result in the expenditure of significant financial resources and diversion of management efforts.

Item 1A.    Risk Factors

Investing in our common stock involves a high degree of risk. You should carefully consider the following risks and uncertainties, as well as general economic and business risks, and all of the other information contained in our Annual Report on Form 10-K for the year ended December 31, 2019 and other documents that we file with the U.S. Securities and Exchange Commission (the “SEC”). Any of the following risks could have a material adverse effect on our business, operating results, financial condition and prospects and cause the trading price of our common stock to decline, which would cause you to lose all or part of your investment. Any of the following risks and uncertainties are, and will be, exacerbated by COVID-19 pandemic and any worsening of the global business and economic environment as a result. You should also refer to the other information contained in this Quarterly Report on Form 10-Q, including our condensed financial statements and the related notes thereto.

Below is a summary of some of the principal risks we face.

•We will need substantial additional funding to fund our operations, and we may not be able to continue as a going concern if we are unable to do so. We could also be forced to delay, reduce or terminate our product development, other operations or commercialization effort.

•We have a history of operating losses. We expect to continue to incur losses over the next several years and may never become profitable.

•We have generated only limited revenues and will need additional capital to develop and commercialize our product candidates, which may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our technologies or lead product candidates.

•Our build-to-suit arrangement with Trinity Funding 1, LLC (“Trinity”), the successor to Trinity Capital Fund III, L.P., imposes restrictions on our business, and if we default on our obligations, Trinity would have a right to request payment in full of the build-to-suit obligation.

•We have limited operating history and capabilities.

•The development and commercialization of our product candidates are subject to many risks. If we do not successfully develop, receive approval for, and commercialize our product candidates, our business will be adversely affected.

•The long-term safety study (“LTSS”) for Qtrypta is an important step in the development of Qtrypta. If the results from the study do not establish the safety of Qtrypta to the United States Food and Drug Administration’s (“FDA”) satisfaction, the regulatory approval process could be delayed or failed, and our business could be adversely affected.

•If the FDA does not conclude that our product candidates satisfy the requirements for the 505(b)(2) regulatory approval pathway, or if the requirements for approval of our product candidates under Section 505(b)(2) are not as we expect, the approval pathway for our product candidates will likely take significantly longer, cost significantly more and encounter significantly greater complications and risks than anticipated, and in any case may not be successful.

•Clinical trials are very expensive, time-consuming and difficult to design and implement.

•The COVID-19 pandemic could adversely impact our business, including our clinical trials.

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•The results of our clinical trials may not support the intended use of Qtrypta or any other product candidates we may develop.

•We use customized equipment to coat and package our transdermal microneedle system; any production or equipment performance failures could negatively impact the clinical trials of our product candidates that we may develop or sales of our product candidate(s), if approved.

•We have no experience selling, marketing or distributing approved product candidates and have no internal capabilities to do so, and will rely on Eversana and other third parties for the commercialization of Qtrypta, and we and they may not be able to effectively market, sell and distribute Qtrypta, if approved.

•We rely on third parties to conduct our clinical trials and those third parties may not perform satisfactorily, including failing to comply with applicable regulatory requirements or to meet deadlines for the completion of such trials.

•If we fail to comply with our obligations to our licensor in our intellectual property license, we could lose license rights that are important to our business.

•Our failure to obtain and maintain patent protection for our technology and our product candidates could permit our competitors to develop and commercialize technology and products similar or identical to ours, and our ability to successfully commercialize our technology and product candidates may be adversely affected.

•If we are unable to maintain listing of our securities on the Nasdaq Capital Market or another reputable stock exchange, it may be more difficult for our stockholders to sell their securities.

•The trading price of our common stock has been volatile with substantial price fluctuations on heavy volume, which could result in substantial losses for purchasers of our common stock and existing stockholders.

RISKS RELATED TO OUR FINANCIAL POSITION AND NEED FOR ADDITIONAL CAPITAL

We will need substantial additional funding to fund our operations, and we may not be able to continue as a going concern if we are unable to do so. We could also be forced to delay, reduce or terminate our product development, other operations or commercialization effort.

Developing and commercializing biopharmaceutical products, including launching new products into the marketplace and conducting preclinical studies and clinical trials, is an expensive and highly uncertain process that takes years to complete. As of September 30, 2020, we had an accumulated deficit of $324.1 million and approximately $43.6 million in cash and cash equivalents as well as negative cash flows from operating activities. We do not have sufficient cash and cash equivalents to fund our anticipated level of operations as they become due during the twelve months following the date of issuance of this Quarterly Report on Form 10-Q. The aforementioned factors raise substantial doubt about our ability to continue as a going concern.

There is no assurance that additional funds will be obtained for our ongoing operations or that we will succeed in our future operations. Specifically, the COVID-19 pandemic has caused volatility in the global financial markets and threatened a slowdown in the global economy, which may adversely affect our ability to raise additional capital on attractive terms or at all. A recession, depression or other sustained adverse market event resulting from the spread of COVID-19 may also limit our ability to obtain financing for our operations. In addition, our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019 include an explanatory paragraph regarding our ability to continue as a going concern which may discourage some third parties from contracting with us and some investors from purchasing our stock or providing alternative capital financing, which could adversely affect our business, financial condition, results of operations and prospects.

We have a history of operating losses. We expect to continue to incur losses over the next several years and may never become profitable.

Since inception, we have incurred significant operating losses. For the nine months ended September 30, 2020, we incurred a net loss of $25.3 million. As of September 30, 2020, we had an accumulated deficit of $324.1 million. We expect to continue to incur additional significant operating losses and capital expenditures and anticipate that our expenses will increase substantially in the foreseeable future as we continue the development of our product candidate, Qtrypta, or any other product candidates that we develop. These expenditures will be incurred for manufacturing, development, clinical trials, regulatory compliance and infrastructure. Even if we succeed in developing, obtaining regulatory approval for and commercializing Qtrypta or any other product candidates that we develop, because of the numerous risks and uncertainties associated with our commercialization efforts, we are unable to predict that we will ever be able to manufacture, distribute and sell any of our products profitably, and we may never generate revenue that is significant enough to achieve or maintain profitability. Even if we do achieve profitability, we may not be able to sustain or increase profitability on an ongoing basis.

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We have generated only limited revenues and will need additional capital to develop and commercialize our product candidates, which may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our technologies or lead product candidates.

Since inception, we have generated no revenues from product sales. We are not approved to make and have not made any commercial sales of products. We expect that our product development activities will require additional significant operating and capital expenditures resulting in negative cash flow for the foreseeable future.

We expect to finance our cash needs through a combination of equity offerings, debt financing and license and collaboration agreements. In addition, we may seek additional capital due to favorable market conditions or strategic considerations, even if we believe we have sufficient funds for our current or future operating plans.

However, adequate and additional funding may not be available to us on acceptable terms or at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends on our common stock.

If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may be required to relinquish valuable rights to our research programs or product candidates or grant licenses on terms that may not be favorable to us.

If we are unable to raise additional funds through equity or debt financings or other arrangements with third parties when needed, we may be required to delay, limit, reduce or terminate our development or future commercialization efforts or partner with third parties to develop and market product candidates that we would otherwise prefer to develop and market ourselves. The amount and timing of our future financing requirements will depend on many factors, including:

•the scope, progress, expansion, and costs of manufacturing our product candidates;

•the scope, progress, expansion, costs, and results of our clinical trials;

•the timing of, and costs involved in, obtaining regulatory approvals;

•the type, number, costs, and results of the product candidate development programs which we are pursuing or may choose to pursue in the future;

•our ability to establish and maintain development partnering arrangements;

•the timing, receipt and amount of contingent, royalty, and other payments from any of our future development partners;

•the emergence of competing technologies and other adverse market developments;

•the costs of maintaining, expanding, and protecting our intellectual property portfolio, including potential litigation costs and liabilities;

•the resources we devote to marketing, and if approved, commercializing our product candidates, including expenses we are obligated to incur under our commercialization agreement with Eversana for Qtrypta, if approved; and

•the costs associated with being a public company.

Our build-to-suit arrangement with Trinity imposes restrictions on our business, and if we default on our obligations, Trinity would have a right to request payment in full of the build-to-suit obligation.

We agreed to covenants in connection with the Trinity build-to-suit arrangement that may limit our ability to take some actions without the consent of Trinity, as applicable. In particular, without Trinity’s consent under the terms of the build-to-suit arrangement, we are restricted in our ability to:

•create liens on our property;

•sell, transfer, or otherwise dispose of all or substantially all of our assets;

•transfer, dispose or relocate financed equipment;

•acquire or merge with another entity; and

•engage in a transaction that would constitute 50% or more in change in control.

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Our indebtedness to Trinity may prevent us from engaging in activities that could be beneficial to our business and our stockholders unless we repay the outstanding obligation, which may not be desirable or possible.

We have pledged substantially all of our assets, including our intellectual property, to secure our obligations to Trinity. If we default on our obligations prior to repaying this indebtedness and are unable to obtain a waiver for such default, Trinity would have a right to accelerate our payments under the build-to-suit arrangement, as applicable, and possibly foreclose on the collateral, which would potentially include our intellectual property. Any such action on the part of Trinity would significantly harm our business and our ability to operate.

We have limited operating history and capabilities.

Although our business was formed in 2006, we have had limited operations since that time. We do not currently have the ability to perform the sales, marketing and manufacturing functions at the Fremont, California site, necessary for the production and sale of Qtrypta or any other product candidate on a commercial scale. The successful commercialization of Qtrypta or any other product candidate will require us to perform a variety of functions, including:

•continuing to conduct clinical development of our product candidates;

•obtaining required regulatory approvals;

•formulating and manufacturing product; and

•conducting sales and marketing activities.

Our operations continue to be focused on pre-commercialization efforts for Qtrypta, developing and securing our proprietary technology and undertaking preclinical and clinical trials of our product candidates.

We expect our financial condition and operating results to continue to fluctuate from quarter to quarter and year to year due to a variety of factors, many of which are beyond our control. We are currently transitioning from a research and development focused company to a company capable of undertaking commercial activities. We may encounter unforeseen expenses, difficulties, complications and delays and may not be successful in such a transition.

Interim, “topline” and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.

From time to time, we may publicly disclose preliminary or topline data from our preclinical studies and clinical trials, which is based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change following a more comprehensive review of the data related to the particular study or trial. We also make assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data. As a result, the topline or preliminary results that we report may differ from future results of the same studies, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated. Topline data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. As a result, topline data should be viewed with caution until the final data are available.

From time to time, we may also disclose interim data from our preclinical studies and clinical trials. Interim data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available. Adverse differences between preliminary or interim data and final data could significantly harm our business prospects. Further, disclosure of interim data by us or by our competitors could result in volatility in the price of our common stock.

Further, others, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular program, the approvability or commercialization of the particular product candidate or product and our company in general. In addition, the information we choose to publicly disclose regarding a particular study or clinical trial is based on what is typically extensive information, and you or others may not agree with what we determine is material or otherwise appropriate information to include in our disclosure.

If the interim, topline, or preliminary data that we report differ from actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for, and commercialize, our product candidates may be harmed, which could harm our business, operating results, prospects or financial condition.

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We face risks related to the Paycheck Protection Program loan, which could adversely affect our future cash flows and financial condition.

On April 21, 2020, we entered into a note (the “PPP Note”) with Silicon Valley Bank pursuant to the Paycheck Protection Program (“PPP”), which provides for a loan in the amount of $1.6 million (the “PPP Loan”). The PPP, established as part of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), provides for loans to qualifying businesses and is administered by the U.S. Small Business Administration (“SBA”). The PPP Note is subject to the terms and conditions applicable to loans administered by the SBA under the CARES Act, which are subject to revisions and changes by Congress, the Treasury Department and SBA. The term of the PPP Loan is two years. The annual interest rate on the PPP Loan is 1.0% and principal and interest payments are deferred until September 21, 2020. Under the terms of the CARES Act, PPP loan recipients can apply for and be granted forgiveness for all or a portion of loans granted under the PPP. Such forgiveness will be determined, subject to limitations, based on the use of loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and the maintenance of our payroll levels. No assurance is provided that we will obtain forgiveness of the PPP Loan in whole or in part. If forgiveness is not granted, the PPP Loan, in whole or in part, will need to be repaid by us, which could have an adverse effect on our future cash flows and financial condition. Additionally, the Treasury Department and SBA continue to develop and issue new and updated regulations and guidance regarding the PPP loan process, including regarding required borrower certifications and requirements for forgiveness of loans made under the PPP. We continue to track the regulations and guidance as they are released and assess and re-assess various aspects of its application as necessary. However, given the potential for additional legislation, regulation or guidance, and based on our projected ability to use the loan proceeds for qualifying expenses, we cannot give any assurance that the PPP Loan will be forgivable in whole or in part. Finally, we may be subject to CARES Act-specific lookbacks and audits conducted by the Treasury, SBA or other federal agencies, including oversight bodies created under the CARES Act. These bodies have the ability to coordinate investigations and audits and refer matters to the Department of Justice for civil or criminal enforcement and other actions.

RISKS RELATED TO THE DEVELOPMENT AND COMMERCIALIZATION OF OUR PRODUCT CANDIDATES

The development and commercialization of our product candidates are subject to many risks. If we do not successfully develop, receive approval for, and commercialize our product candidates, our business will be adversely affected.

To date, we have devoted all of our research, development and clinical efforts and financial resources toward the development of Qtrypta, our proprietary formulation of zolmitriptan for the acute treatment of migraine headaches. In December 2019, we submitted a 505(b)(2) New Drug Application (“NDA”) to the FDA seeking approval for Qtrypta. On September 29, 2020, we received a Discipline Review Letter (“DRL”) from the FDA in response to the application. The DRL described two concerns with respect to the clinical pharmacology section of the NDA. First, the FDA raised questions regarding unexpected high plasma concentrations of zolmitriptan observed in five study subjects from two pharmacokinetic studies, and how the data from these subjects affect the overall clinical pharmacology section of the application. Second, the FDA raised questions regarding differences in zolmitriptan exposures observed between subjects receiving different lots of Qtrypta in our clinical trials.

On October 20, 2020, we received a complete response letter (“CRL”) from the FDA in response to the Qtrypta NDA. The CRL stated that FDA determined it could not approve the NDA in its present form and provided recommendations to address the remaining approvability issues in an NDA resubmission. The approvability issues are related to clinical pharmacology and product quality. The CRL cited inconsistent zolmitriptan exposure levels observed across clinical pharmacology studies, which had been previously identified in the DRL. Specifically, the CRL noted differences in zolmitriptan exposures observed between subjects receiving different lots of Qtrypta in our clinical trials and inadequate pharmacokinetic bridging between the lots that made interpretation of some safety data unclear. The CRL referenced unexpected high plasma concentrations of zolmitriptan observed in five study subjects enrolled in our pharmacokinetic studies. The FDA recommended that we conduct a repeat bioequivalence study between three of the lots used during development to address these issues.

The CRL further noted that additional product quality validation data, which were planned to be submitted following approval, if received, were required to be submitted with the application. In addition, the CRL mentioned that due to U.S. Government and/or FDA-wide restrictions on travel, inspections of our contract manufacturing facilities were not able to be conducted, but that such inspections would be required before the application may be approved. There is no guarantee that we will be able to adequately address the issues raised to FDA’s satisfaction.

In addition to the above factors, the development and commercialization of Qtrypta and any product candidates we may develop and commercialize in the future is subject to many risks including:

•we may be unable to obtain additional funding to develop our product candidates;

•we may experience delays in regulatory review and approval of our product candidates in clinical development;

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

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

•the FDA may not find the data from preclinical studies and clinical trials sufficient to demonstrate that clinical and other benefits outweigh its safety risks;

•the FDA may disagree with our interpretation of data from our preclinical studies and clinical trials or may require that we conduct additional studies or trials;

•we will be required to undertake additional clinical trials of Qtrypta before we receive approval of the NDA;

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

•we may be unable to obtain and maintain regulatory approval of our product candidates in the United States and foreign jurisdictions;

•potential side effects of our product candidates could delay or prevent commercialization, limit the indications for any approved product candidate, require the establishment of a risk evaluation and mitigation strategy (“REMS”), or cause an approved product candidate to be taken off the market;

•the FDA may identify deficiencies in our manufacturing processes or facilities or those of our contract manufacturing organizations (“CMOs”);

•the FDA may change its approval policies or adopt new regulations;

•we will depend on third-party manufacturers to supply or manufacture our products;

•we depend on contract research organizations to conduct our clinical trials;

•we may experience delays in the commencement of, enrollment of patients in and timing of our clinical trials;

•we may not be able to demonstrate that our product candidates are safe and effective treatments for their intended indications to the satisfaction of the FDA or other similar regulatory bodies;

•we may be unable to establish or maintain collaborations, licensing or other arrangements;

•the market may not accept our product candidates, if approved;

•we may be unable to establish and maintain an effective sales and marketing infrastructure;

•we will depend on Eversana or another third party to commercialize Qtrypta, if approved;

•we may experience competition from existing products or new products that may emerge; and

•we and our licensors may be unable to successfully obtain, maintain, defend and enforce intellectual property rights important to protect our product candidates.

Moreover, principal investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and receive compensation in connection with such services. Under certain circumstances, we may be required to report some of these relationships to regulatory authorities, which may conclude that a financial relationship between us and a principal investigator has created a conflict of interest or otherwise affected interpretation of a study. This could result in a delay in approval, or rejection, of our marketing applications. If any of these risks materializes, we could experience significant delays or an inability to successfully commercialize our product candidates, which would have a material adverse effect on our business, financial condition and results of operations.

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The LTSS for Qtrypta is an important step in the development of Qtrypta. If the results from the study do not establish the safety of Qtrypta to the FDA's satisfaction, the regulatory approval process could be delayed or failed, and our business could be adversely affected.

In February 2019, we announced the completion of the final phase of our LTSS where more than 50 evaluable subjects were treated for a year, and in September 2019, we announced the presentation of final results from the LTSS at the 19th Congress of the International Headache Society in Dublin, Ireland. The results of the LTSS will need to support the safety of Qtrypta for the acute treatment of migraine. If the results do not provide sufficient evidence for the FDA to determine the safety of Qtrypta, we could be required to conduct additional clinical or preclinical studies or we may be required to delay, limit, reduce or terminate our development of Qtrypta. Also, even though we have discussed our development strategy with the FDA on our Qtrypta program and received feedback from the FDA about the size and the length of the safety study, the FDA may require us to provide more data than we currently anticipate before approving Qtrypta, if ever, which would further delay the regulatory approval process and require additional clinical or preclinical work; for example, in the CRL, the FDA recommended that we conduct a repeat bioequivalence study between three of the lots used during development.

If the FDA does not conclude that our product candidates satisfy the requirements for the 505(b)(2) regulatory approval pathway, or if the requirements for approval of our product candidates under Section 505(b)(2) are not as we expect, the approval pathway for our product candidates will likely take significantly longer, cost significantly more and encounter significantly greater complications and risks than anticipated, and in any case may not be successful.

We intend to seek FDA approval through the 505(b)(2) regulatory pathway for our product candidates described in this Quarterly Report on Form 10-Q. The Drug Price Competition and Patent Term Restoration Act of 1984, also known as the Hatch-Waxman Act, added Section 505(b)(2) to the Federal Food, Drug and Cosmetics Act (“FDCA”). Section 505(b)(2) permits the filing of a NDA where at least some of the information required for approval comes from studies that were not conducted by or for the applicant.

If the FDA does not allow us or any partner with which we collaborate to pursue the 505(b)(2) regulatory pathway for our product candidates, we or they may need to conduct additional clinical trials, provide additional data and information and meet additional standards for regulatory approval. If this were to occur, we or they will need to successfully complete additional Phase 2 and/or Phase 3 clinical trials and submit to the FDA for approval one or more NDAs in order to obtain FDA approval to market our product candidates. The time and financial resources required to obtain FDA approval for our product candidates would likely substantially increase. The conduct of later-stage clinical trials and the submission of a successful NDA is a complicated process. To date, we have conducted only one Phase 2/3 clinical trial and one LTSS of Qtrypta. In addition, we have limited experience in preparing and submitting regulatory filings, and other than the NDA for Qtrypta, we have not previously submitted an NDA for any product candidate. Consequently, the completion of our clinical trials for Qtrypta for the potential treatment of migraine may not lead to a successful NDA submission. As discussed above, we received a CRL from the FDA in response to the Qtrypta NDA. In addition, we may be unable to successfully and efficiently execute and complete necessary clinical trials in a way that leads to an NDA submission for any other product candidate we may develop in the future.

Moreover, the inability to pursue the 505(b)(2) regulatory pathway could result in new competitive products reaching the market faster than our product candidates, which could materially adversely impact our competitive position and prospects. Even if we are allowed to pursue the 505(b)(2) regulatory pathway for our product candidates, we cannot assure you that we will receive the requisite approvals for commercialization of such product candidates.

In addition, our competitors may file petitions with the FDA in an attempt to persuade the FDA that our product candidates, or the clinical studies that support their approval, contain deficiencies. Such actions by our competitors could delay or even prevent the FDA from approving any NDA that we submit under Section 505(b)(2).

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Clinical trials are very expensive, time-consuming and difficult to design and implement.

Human clinical trials are very expensive, time-consuming and difficult to design and implement, in part because they are subject to rigorous regulatory requirements, and their outcome is inherently uncertain. Furthermore, failure of a product candidate can occur at any stage of the trials, and we could encounter problems that cause us to abandon or repeat clinical trials.

Further, we may experience delays in our ongoing clinical trials and we do not know whether planned clinical trials will begin on time, need to be redesigned, enroll patients on time or be completed on schedule, if at all. The commencement and completion of clinical trials may be delayed by several factors, including:

•changes in government regulation, administrative action or changes in FDA policy with respect to clinical trials that change the requirements for approval;

•delays in obtaining authorization from regulators and required IRB approval at each site to commence a trial;

•imposition of a clinical hold for safety reasons or following an inspection of our clinical trial operations or trial sites by the FDA or other regulatory authority;

•delays in reaching agreement on acceptable terms with prospective CROs and clinical trial sites, or failure by such CROs or trial sites to carry out the clinical trial at each site in accordance with the terms of our agreements with them;

•difficulties or delays in having patients complete participation in a trial or return for post-treatment follow-up;

•clinical sites electing to end their participation in one of our clinical trials, which would likely have detrimental effect on subject enrollment;

•time required to add new clinical sites;

•delays by our contract manufacturers to produce and deliver sufficient supply of clinical trial materials;

•unforeseen safety issues;

•determination of dosing issues;

•lack of effectiveness during clinical trials;

•slower than expected rates of patient recruitment and enrollment;

•inability to raise or delays in raising funding necessary to initiate or continue a trial;

•inability to monitor patients adequately during or after treatment; and

•inability or unwillingness of medical investigators to follow our clinical protocols.

Disruptions caused by the COVID-19 pandemic may increase the likelihood that we encounter such difficulties or delays in initiating, enrolling, conducting or completing our planned and ongoing clinical trials. For example, as a result of the COVID-19 pandemic, we temporarily suspended new enrollment into our Phase 2/3 clinical trial evaluating C213 for the acute treatment of cluster headache between March 2020 to June 2020. Subject enrollment resumed in July 2020, however, at a rate slower than originally anticipated. In November 2020, we decided to end enrollment of new subjects into the clinical trial as of December 31, 2020.

In addition, we, the FDA, or other regulatory authorities and ethics committees with jurisdiction over our studies may terminate or suspend our clinical trials at any time if it appears that we are exposing participants to unacceptable health risks or if the FDA or other authorities find deficiencies in our regulatory submissions or the conduct of these trials. Therefore, we cannot predict with any certainty the schedule for existing or future clinical trials. Any such unexpected expenses or delays in our clinical trials could increase our need for additional capital, which may not be available on favorable terms or at all.

If we are required to conduct additional clinical trials or other testing of our product candidates beyond those that we currently contemplate, if we are unable to successfully complete clinical trials of our product candidates or other testing, if the results of these clinical trials or tests are not positive or are only modestly positive and/or if there are safety concerns, we may:

•be delayed in obtaining marketing approval for our product candidates;

•not obtain marketing approval at all;

•obtain approval for indications or patient populations that are not as broad as intended or desired;

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•obtain approval with labeling that includes significant use or distribution restrictions or safety warnings;

•be subject to additional post-marketing testing requirements; or

•have our product candidates removed from the market after obtaining marketing approval.

Our development costs will also increase if we experience delays in testing or in obtaining marketing approvals. We do not know whether any of our preclinical studies or clinical trials will begin as planned, will need to be restructured or will be completed on schedule, or at all. Significant preclinical study or clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize our product candidates or allow our competitors to bring a product candidate to market before we do, and thereby impair our ability to successfully commercialize our product candidates.

The COVID-19 pandemic could adversely impact our business, including our clinical trials.

In December 2019, a novel strain of coronavirus, COVID-19, was reported to have surfaced in Wuhan, China. Since then, the COVID-19 coronavirus has spread to multiple countries, including the United States, where we have planned or ongoing preclinical studies and clinical trials. On March 11, 2020, the World Health Organization declared the outbreak of COVID-19 as a global pandemic. The pandemic and government measures taken in response have also had a significant impact, both direct and indirect, on businesses and commerce, as worker shortages have occurred, supply chains have been disrupted, facilities have been closed and production has been suspended, and demand for certain goods and services, such as medical services and supplies, has spiked, while demand for other goods and services, such as travel, has fallen. In response to the spread of COVID-19, we have limited the number of employees at our principal executive office to essential employees only, primarily research and development employees working in laboratories, with our administrative employees continuing their work outside of our office. We have also limited the number of staff in any given research and development laboratory. These precautionary measures may disrupt and adversely affect our business and operations. We also temporarily suspended enrollment in our Phase 2/3 clinical trial evaluating C213 for the acute treatment of cluster headache between March 2020 to June 2020. Subject enrollment resumed in July 2020, however, at a rate slower than originally anticipated. In November 2020, we decided to end enrollment of new subjects into the clinical trial as of December 31, 2020. If COVID-19 continues to spread in the United States and elsewhere, we may experience additional disruptions that could severely impact our business, preclinical studies and clinical trials, including:

•delays in receiving approval from local regulatory authorities to initiate our planned clinical trials;

•delays or difficulties in enrolling subjects in our clinical trials;

•delays or difficulties in clinical site initiation, including difficulties in recruiting clinical site investigators and clinical site staff;

•delays in clinical sites receiving the supplies and materials needed to conduct our clinical trials, including interruption in global shipping that may affect the transport of clinical trial materials;

•changes in local regulations as part of a response to the COVID-19 pandemic which may require us to change the ways in which our clinical trials are conducted, which may result in unexpected costs, or to discontinue the clinical trials altogether;

•diversion of healthcare resources away from the conduct of clinical trials, including the diversion of hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trials;

•interruption of key clinical trial activities, such as clinical trial site monitoring, due to limitations on travel imposed or recommended by federal or state governments, employers and others, or interruption of clinical trial subject visits and study procedures, the occurrence of which could affect the integrity of clinical trial data;

•risk that participants enrolled in our clinical trials will acquire COVID-19 while the clinical trial is ongoing, which could impact the results of the clinical trial, including by increasing the number of observed adverse events;

•interruptions or delays in preclinical studies due to restricted or limited operations at research and development laboratory facilities;

•delays in necessary interactions with local regulators, ethics committees and other important agencies and contractors due to limitations in employee resources or forced furlough of government employees;

•limitations in employee resources that would otherwise be focused on the conduct of our clinical trials, including because of sickness of employees or their families or the desire of employees to avoid contact with large groups of people; and

•refusal of the FDA to accept data from clinical trials in affected geographies.

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The COVID-19 pandemic continues to rapidly evolve. The extent to which the pandemic impacts our business, preclinical studies and clinical trials will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the pandemic, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions and the effectiveness of actions taken in the United States and other countries to contain and treat the disease.

The results of our clinical trials may not support the intended use of Qtrypta or any other product candidates we may develop.

We cannot be certain that the results from any completed clinical trial or any future clinical trial, if completed as planned, will support the intended use of our products. Success in preclinical testing and early clinical trials does not ensure that later clinical trials will be successful, and we cannot be sure that the results of later clinical trials will replicate the results of prior clinical trials and preclinical testing. The clinical trial process may fail to demonstrate that our product candidates are safe and effective in humans for its intended uses. This failure would cause us to abandon a product candidate and may delay development of other product candidates. Any delay in, or termination of, our clinical trials will delay the submission of an NDA with the FDA and, ultimately, our ability to commercialize our product candidates and generate revenues. In addition, our clinical trials to date have involved small subject populations. Because of the small sample sizes, the results of these clinical trials may not be indicative of future results.

Clinical failure can occur at any stage of clinical development. Because the results of earlier clinical trials are not necessarily predictive of future results, any product candidate we advance through clinical trials may not have favorable results in later clinical trials or receive regulatory approval.

Clinical failure can occur at any stage of clinical development. Clinical trials may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical or preclinical trials. In addition, data obtained from trials are susceptible to varying interpretations, and regulators may not interpret our data as favorably as we do, which may delay, limit or prevent regulatory approval. Success in preclinical testing, early clinical trials and even later stage clinical trials, such as our phase 2/3 ZOTRIP trial, does not ensure that later clinical trials will generate the same results or otherwise provide adequate data to demonstrate the efficacy and safety of a product candidate. Frequently, product candidates that have shown promising results in early clinical trials have subsequently suffered significant setbacks in later clinical trials. In addition, the design of a clinical trial can determine whether its results will support approval of a product and flaws in the design of a clinical trial may not become apparent until the clinical trial is well advanced or completed. While members of our management team have experience in designing clinical trials, we have limited experience in designing clinical trials and we may be unable to design and execute a clinical trial to support regulatory approval. Further, clinical trials of potential products often reveal that it is not practical or feasible to continue development efforts. If our product candidates are found to be unsafe or lack efficacy, we will not be able to obtain regulatory approval for them and our business would be harmed.

We may in the future conduct clinical trials for product candidates in sites around the world, and government regulators, including the FDA in the United States, may choose to not accept data from trials conducted in such locations.

We have conducted, and may in the future choose to conduct, one or more of our clinical trials outside the United States.

There is no guarantee that data from these clinical trials will be accepted by regulators or considered sufficient for approving our product candidates for commercial sale. In the case of the United States, although the FDA may accept data from clinical trials conducted outside the United States, acceptance of this data is subject to certain conditions imposed by the FDA. For example, the clinical trial must be conducted in accordance with good clinical practices (“GCP”) requirements and conducted such that the FDA is able to validate the data from the study through an onsite inspection if deemed necessary. In addition, while these clinical trials are subject to the applicable local laws, FDA acceptance of the data will be dependent upon its determination that the trials also complied with all applicable U.S. laws and regulations. There can be no assurance the FDA will accept data from trials conducted outside of the United States. If the FDA does not accept the data from our clinical trials, it would likely result in the need for additional clinical trials, which would be both costly and time-consuming and likely to delay or permanently halt our development of a product candidate. Similar regulations and risks apply to other jurisdictions as well.

In addition, the conduct of clinical trials outside the United States could have a significant negative impact on us. Risks inherent in conducting international clinical trials include:

•foreign regulatory requirements that could restrict or limit our ability to conduct our clinical trials;

•administrative burdens of conducting clinical trials under multiple foreign regulatory schema;

•foreign exchange fluctuations; and

•diminished protection of intellectual property in some countries.

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We will not be able to sell our products if we do not obtain required United States regulatory approvals.

We cannot assure you that we will receive the approvals necessary to commercialize Qtrypta or any product candidate we acquire or develop in the future. We will need FDA approval to commercialize our product candidates in the United States. In order to obtain FDA approval of any product candidate, we expect that we will have to submit to the FDA an NDA demonstrating that the product candidate is safe for humans and effective for its intended indication and indicated use. This demonstration requires significant research and animal tests, which are referred to as preclinical studies, as well as human tests, which are referred to as clinical trials. Satisfaction of the FDA’s regulatory requirements typically takes many years, depends upon the type, complexity and novelty of the product candidate and requires substantial resources for research, development and testing. We cannot predict whether our product candidates will ultimately be considered safe for humans and effective for indicated uses by the FDA. The FDA has substantial discretion in the drug approval process and may require us to conduct additional preclinical and clinical testing or to perform post-marketing studies. The approval process may also be delayed by changes in government regulation, future legislation or administrative action or changes in FDA policy that occur prior to or during its regulatory review. Delays in obtaining regulatory approvals may:

•delay commercialization of, and our ability to derive product revenues from, our products;

•impose costly procedures on us; and

•diminish any competitive advantages that we may otherwise enjoy.

We may never obtain regulatory approval for any of our product candidates. Failure to obtain approval of any of our product candidates will severely undermine our business by leaving us without a saleable product, and therefore without any source of revenues, unless other products can be developed. There is no guarantee that we will ever be able to develop or acquire another product.

Even if Qtrypta or any other product candidates we develop in the future receive regulatory approval, our business is subject to extensive regulatory requirements which include ongoing and continued regulatory review, which may result in significant expense and limit our ability to commercialize our products.

The manufacturing processes, post-approval clinical data, labeling, advertising and promotional activities for our product candidates will be subject to continual requirements of and review by the FDA and other regulatory authorities. These requirements include submissions of safety and other post-marketing information and reports, registration and listing requirements, current good manufacturing practice (“cGMP”) requirements relating to quality control, quality assurance and corresponding maintenance of records and documents, requirements regarding the distribution of samples to physicians and recordkeeping. The regulatory approvals for our product candidates, if any, may be subject to limitations on the indicated uses for which the products may be marketed or to the conditions of approval or contain requirements for costly post-marketing testing and surveillance to monitor the safety or efficacy of the product candidate.

The FDA has the authority to require a REMS as part of an NDA or after approval, which may impose further requirements or restrictions on the distribution or use of an approved drug, such as limiting prescribing authorization to certain physicians or medical centers that have undergone specialized training, limiting treatment to subjects who meet certain safe-use criteria or requiring patient testing, monitoring and/or enrollment in a registry.

We may also be subject, directly or indirectly through our customers and partners, to various fraud and abuse laws, including, without limitation, the U.S. Anti-Kickback Statute, U.S. False Claims Act, and similar state laws, which impact, among other things, our proposed sales, marketing, and scientific/educational grant programs. If we participate in the U.S. Medicaid Drug Rebate Program, the Federal Supply Schedule of the U.S. Department of Veterans Affairs, or other government drug programs, we will be subject to complex laws and regulations regarding reporting and payment obligations. All of these activities are also potentially subject to U.S. federal and state consumer protection and unfair competition laws and similar requirements in other countries.

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With respect to sales and marketing activities by us or any future partner, advertising and promotional materials must comply with FDA rules in addition to other applicable federal, state and local laws in the United States and similar legal requirements in other countries. In addition, our product labeling, advertising and promotion would be subject to regulatory requirements and continuing regulatory review. The FDA strictly regulates the promotional claims that may be made about prescription products. In particular, a product may not be promoted for uses that are not approved by the FDA as reflected in the product’s approved labeling. If we receive marketing approval for our products, physicians may nevertheless legally prescribe our products 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 and government fines. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant sanctions, including revocation of its marketing approval. The federal government has levied large civil and criminal fines against companies for alleged improper promotion and has enjoined several companies from engaging in off-label promotion. The FDA has also requested that companies enter into consent decrees of permanent injunctions under which specified promotional conduct is changed or curtailed.

In addition, later discovery of previously unknown problems with our product candidates, manufacturing processes, or failure to comply with regulatory requirements, may yield various results, including:

•restrictions on the labeling or marketing of a product;

•restrictions on product distribution or use;

•requirements to conduct post-marketing clinical trials;

•warning or untitled letters;

•withdrawal of the products from the market;

•refusal to approve pending applications or supplements to approved applications that we submit;

•recall of products;

•fines, restitution or disgorgement of profits or revenue;

•suspension or withdrawal of marketing approvals;

•refusal to permit the import or export of our products;

•product seizure; or

•injunctions or the imposition of civil or criminal penalties.

The occurrence of any event or penalty described above may inhibit our ability to commercialize our products and generate revenue. Adverse regulatory action, whether pre- or post-approval, can also potentially lead to product liability claims and increase our product liability exposure.

Disruptions at the FDA and other government agencies caused by funding shortages or global health concerns could hinder their ability to hire, retain or deploy key leadership and other personnel, or otherwise prevent new or modified products from being developed, approved or commercialized in a timely manner or at all, 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, statutory, regulatory, and policy changes, the FDA’s ability to hire and retain key personnel and accept the payment of user fees, and other events that may otherwise affect the FDA’s ability to perform routine functions. Average review times at the FDA have fluctuated in recent years as a result. In addition, government funding of other government agencies 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, or modifications to approved drugs, to be reviewed and/or approved by necessary government agencies, which would adversely affect our business. For example, over the last several years, including for 35 days beginning on December 22, 2018, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA employees and stop critical activities.

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Separately, in response to the COVID-19 pandemic, on March 10, 2020, the FDA announced its intention to postpone most inspections of foreign manufacturing facilities, and on March 18, 2020, the FDA temporarily postponed routine surveillance inspections of domestic manufacturing facilities. Subsequently, on July 10, 2020, the FDA announced its intention to resume certain on-site inspections of domestic manufacturing facilities subject to a risk-based prioritization system. The FDA intends to use this risk-based assessment system to identify the categories of regulatory activity that can occur within a given geographic area, ranging from mission critical inspections to resumption of all regulatory activities. Regulatory authorities outside the United States may adopt similar restrictions or other policy measures in response to the COVID-19 pandemic. If a prolonged government shutdown occurs, or if global health concerns continue to prevent the FDA or other regulatory authorities from conducting their regular inspections, reviews, or other regulatory activities, it could significantly impact the ability of the FDA or other regulatory authorities to timely review and process our regulatory submissions, which could have a material adverse effect on our business.

We or any of our current or future partners may choose not to continue developing a product or product candidate at any time during development or commercialize it after approval, which would reduce or eliminate our potential return on investment for that product or product candidate.

We currently do not have any products approved for sale and currently are focusing our clinical development efforts solely on Qtrypta.

At any time, we or any partners with whom we currently collaborate or collaborate with in the future may decide to discontinue the development of a marketed product or product candidate or not to continue commercializing a marketed product or a product candidate for a variety of reasons, including the appearance of new technologies that make our product obsolete, the position of our partner in the market, competition from another product, or changes in or failure to comply with applicable regulatory requirements. If we or our partners terminate a program in which we have invested significant resources, we will not receive any return on our investment, and we will have lost the opportunity to allocate those resources to potentially more productive uses. If one of our future partners terminates a development program or ceases to market an approved or commercial product, we will not receive any future milestone payments or royalties relating to that program or product under a partnership agreement with that party.

Our long-term growth will be limited unless we successfully develop a pipeline of additional product candidates.

Our long-term growth will be limited unless we successfully develop a pipeline of additional product candidates. We do not have internal new drug discovery capabilities, and our primary focus is on developing improved transdermal drug delivery systems by reformulating drugs previously approved by the FDA using our proprietary technologies.

If we are unable to expand our product candidate pipeline and obtain regulatory approval for our product candidate on the timelines we anticipate, we will not be able to execute our business strategy effectively and our ability to substantially grow our revenues will be limited, which would harm our long-term business, results of operations, financial condition and prospects.

Our product candidates may cause adverse effects or have other properties that could delay or prevent their regulatory approval or limit the scope of any approved label or market acceptance, or result in significant negative consequences following market approval, if any.

Qtrypta and any other product candidates we develop in the future may have undesirable side effects or have characteristics that are unexpected. These could be attributed to the active ingredient or class of drug or to our unique formulation of our product candidates, or other potentially harmful characteristics. Such characteristics could cause us, our IRBs, clinical trial sites, the FDA or other regulatory authorities to interrupt, delay or halt clinical trials, including the imposition of clinical holds, and could result in a more restrictive label or delay, denial or withdrawal of regulatory approval, which may harm our business, financial condition and prospects significantly.

In addition, if a product candidate receives marketing approval, and we or others later identify serious adverse events or undesirable side effects caused by such product, a number of potentially significant negative consequences could result, including:

•regulatory authorities may require the addition of labeling statements, specific warnings, a contraindication or field alerts to physicians and pharmacies;

•we may be required to change the way the product is administered, conduct additional clinical trials or change the labeling of the product;

•we may be required to implement REMS, which could result in substantial cost increases and have a negative impact on our ability to commercialize the product;

•we may be required to limit the patients who can receive the product;

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•we may be subject to limitations on how we promote the product;

•sales of the product may decrease significantly;

•regulatory authorities may require us to take our approved product off the market;

•we may be subject to litigation or product liability claims; and

•our reputation may suffer.

Any of these events could prevent us from achieving or maintaining market acceptance of the affected product or could substantially increase commercialization costs and expenses, which in turn could delay or prevent us from generating significant revenues from the sale of our product.

We may encounter manufacturing risks or failures that could impede or delay supply for our clinical trials of our product candidates.

While we previously manufactured Qtrypta internally, we have entered into agreements with third-party CMOs related to the development, manufacture, and supply of Qtrypta. Any failure or delay in our internal manufacturing operations or those of our CMOs, or the technology transfer process in connection with our plan to transition to rely on such CMOs for manufacture and supply, could delay the development or regulatory approval of Qtrypta. We and our CMOs may encounter difficulties involving, among other things, material supplies, production yields, regulatory compliance, quality control and quality assurance, and shortages of qualified personnel. The manufacturing facilities in which Qtrypta, or our other product candidates, are made could be adversely affected by equipment failures, labor shortages, natural disasters, power failures and numerous other factors. We may incur other charges and expenses for products that fail to meet specifications, undertake costly remediation efforts or seek more costly manufacturing alternatives. Regulatory approval of Qtrypta or our other product candidates could be impeded, delayed, limited or denied if the FDA does not continue to authorize the manufacturing processes and facilities in which such product candidates are made.

Difficulties in relevant manufacturing processes and facilities implicated could result in supply shortfalls of Qtrypta, if approved, or any other product candidates, and could delay our preclinical studies, clinical trials and regulatory submissions with respect thereto. In addition, supplies of Qtrypta (or our other product candidates) that have been produced and are stored for later use, may degrade, become contaminated or suffer other quality defects (including in connection with any shipment thereof), which may cause the affected drug product to no longer be suitable for its intended use in clinical trials or other development activities. If the defective drug product cannot be replaced in a timely fashion, we may incur significant delays in our development programs that could adversely affect the value of such product candidate.

We have only manufactured our proposed product candidates for our clinical trials and we have no experience manufacturing on a commercial scale.

We have limited experience manufacturing our product candidate, Qtrypta, and other product candidates, and to date have only manufactured our product candidates for our clinical trials. If Qtrypta is approved, we will need to scale up our own capabilities or those of our CMOs to support the production of commercial level quantities of our product candidate, which may require expensive process improvements.

While we intend to rely on CMOs to support commercial scale manufacture of Qtrypta and have entered into agreements regarding the same, we may nevertheless not be able to successfully produce, develop and market Qtrypta or our other product candidates, or we may be delayed in doing so. Significant scale up of manufacturing may also require process improvements as well as additional technologies and validation studies, which are costly, may not be successful and which the FDA must review and authorize. If we or our CMOs are unable to establish a new manufacturing facility or expand existing manufacturing facilities, purchase equipment, hire adequate personnel to support our manufacturing efforts, or comply with cGMPs, or implement necessary process improvements, we may be unable to produce commercial materials or meet demand, if any should develop, for Qtrypta or our other product candidates. Any such failure would have a material adverse effect on our business, financial condition and results of operations.

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Reliance on CMOs also entails risks to which we would not be subject if we manufactured the product candidates ourselves, including reliance on the third party for regulatory compliance and quality control and assurance, volume production, the possibility of breach of the manufacturing agreement by the third party because of factors beyond our control (including a failure to synthesize and manufacture our product candidate in accordance with our product specifications) and the possibility of termination or nonrenewal of the agreement by the third party at a time that is costly or damaging to us. In addition, the FDA and other regulatory authorities require that our product candidates be manufactured according to cGMP and similar foreign standards. Any failure by our CMOs to comply with cGMP or failure to scale up manufacturing processes, including any failure to deliver sufficient quantities of our product candidates in a timely manner, could lead to a delay in, or failure to obtain, regulatory approvals of our product candidates, or a recall or withdrawal of approval in the future. CMOs may not be able to manufacture our product candidates at a cost or in quantities or in a timely manner necessary to develop and commercialize it. If our CMOs are unable to successfully scale up the manufacture of our product candidates in sufficient quality and quantity and at commercially reasonable prices, and we are unable to find one or more replacement manufacturers capable of production at a substantially equivalent cost in substantially equivalent volumes and quality, and we are unable to successfully transfer the processes on a timely basis, the development of that product candidate and regulatory approval or commercial launch for any resulting products may be delayed, or there may be a shortage in supply, either of which could significantly harm our business, financial condition, operating results and prospects. Our reliance on CMOs will further expose us to the possibility that they, or third parties with access to their facilities, will have access to and may misappropriate our trade secrets or other proprietary information.

Even if we receive regulatory approval for any product candidate, we still may not be able to successfully commercialize it and the revenue that we generate from its sales, if any, may be limited.

If approved for marketing, the commercial success of Qtrypta or any product candidates we develop in the future will depend upon their acceptance by the medical community, including physicians, patients and health care payers. The degree of market acceptance of any product candidate will depend on a number of factors, including:

•demonstration of clinical safety and efficacy of our products generally;

•relative convenience and ease of administration;

•prevalence and severity of any adverse effects;

•willingness of physicians to prescribe our product and of the target patient population to try new therapies and routes of administration;

•efficacy and safety of our products compared to competing products;

•introduction of any new products, including generics, that may in the future become available to treat indications for which our products may be approved;

•new procedures or methods of treatment that may reduce the incidences of any of the indications in which our products may show utility;

•pricing and cost-effectiveness;

•effectiveness of our or any future collaborators’ sales and marketing strategies;

•limitations or warnings contained in FDA-approved labeling; and

•our ability to obtain and maintain sufficient third-party coverage or adequate reimbursement from government health care programs, including Medicare and Medicaid, private health insurers and other third-party payers.

If our product candidates are approved but do not achieve an adequate level of acceptance by physicians, health care payers and patients, we may not generate sufficient revenue and we may not be able to achieve or sustain profitability. Our efforts to educate the medical community and third-party payers on the benefits of our product candidates may require significant resources and may never be successful.

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Even if we obtain regulatory approvals, the timing or scope of any approvals may prohibit or reduce our ability to commercialize our product candidates successfully. For example, if the approval process takes too long, we may miss market opportunities and give other companies the ability to develop competing products or establish market dominance. Any regulatory approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render our product candidates not commercially viable. For example, regulatory authorities may approve our product candidates for fewer or more limited indications than we request, may not approve the price we intend to charge for our product candidates, may grant approval contingent on the performance of costly post-marketing clinical trials, or may approve our product candidates with a label that does not include the labeling claims necessary or desirable for the successful commercialization of that indication. Further, the FDA may place conditions on approvals including potential requirements or risk management plans and the requirement for a REMS to assure the safe use of the drug or a black-box warning (which is a warning required by the FDA that appears on the package insert for or in literature describing certain prescription drugs, signifying that medical studies indicate that the drug carries a significant risk of serious adverse effects). If the FDA concludes a REMS is needed, the sponsor of the NDA must submit a proposed REMS; the FDA will not approve the NDA without an approved REMS, if required. A REMS could include medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. A black-box warning will limit how we are able to market and advertise any product that is approved. Any of these limitations on approval or marketing could restrict the commercial promotion, distribution, prescription or dispensing of our product candidates. Moreover, approvals may be withdrawn for non-compliance with regulatory standards or if problems occur following the initial marketing of a product candidate. Any of the foregoing scenarios could materially harm the commercial success of our product candidates.

We may expend our limited resources to pursue a particular product candidate and fail to capitalize on a product candidate that may be more profitable or for which there is a greater likelihood of success.

Because we have limited financial and managerial resources, we have decided to focus on developing our product candidate Qtrypta for treatment of migraine. As a result, we may forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial product candidates or profitable market opportunities. Our spending on current and future research and development programs and product candidate for specific indications may not yield any commercially viable products. If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate.

RISKS RELATED TO OUR DEPENDENCE ON THIRD PARTIES

We use customized equipment to coat and package our transdermal microneedle system; any production or equipment performance failures could negatively impact the clinical trials of our product candidates that we may develop or sales of our product candidate(s), if approved.

We presently use customized equipment to coat and package our transdermal microneedle system. We also rely on third parties to manufacture our equipment. If we experience equipment malfunctions and we do not have adequate inventory of spare parts or qualified personnel to repair the equipment, we may encounter delays in the manufacture of our transdermal microneedle system and may not have sufficient inventory to meet the demands of our clinical development programs of any product candidates and if approved, our customers’ demands for Qtrypta or our future approved product candidate(s), if any, each of which could adversely affect our business, financial condition and results of operations.

We currently depend primarily on third-party suppliers for manufacture of our product candidates. If these manufacturers fail to provide us or our collaborators with adequate supplies of materials for clinical trials or commercial product or fail to comply with the requirements of regulatory authorities, we may be unable to develop or commercialize Qtrypta or any other product candidates we may develop.

We have contracted with CMOs to produce, in collaboration with us, Qtrypta, for commercial use, if approved, in the United States. We have not entered into any agreements with any alternate suppliers for Qtrypta product or API. Even if we were able to enter into other long-term agreements for manufacture of commercial supply on reasonable terms, we may face delays or increased costs in our supply chain that could jeopardize the commercialization of Qtrypta. Additionally, if Qtrypta is approved for commercial sale in jurisdictions outside the United States or any other product candidate is approved by the FDA or other regulatory agencies for commercial sale, we will need to contract with a third party to manufacture such products.

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Our dependence on single source suppliers with respect to our supply chain for Qtrypta exposes us to certain risks, including the following:

•our supplier may cease or reduce production or deliveries, raise prices or renegotiate terms;

•we may be unable to locate a suitable replacement on acceptable terms or on a timely basis, if at all;

•delays caused by supply issues may harm our reputation; and

•our ability to progress our business could be materially and adversely impacted if our single-source supplier upon which we rely were to experience a significant business challenge, disruption or failure due to issues such as financial difficulties or bankruptcy, issues relating to regulatory or quality compliance, or other legal or reputational issues.

Even though we have agreements with CMOs to supply materials for Qtrypta, and even if we enter into other long-term agreements with other CMOs, the FDA may not approve the facilities of such CMOs, the CMOs may not perform as agreed or the CMOs may terminate their agreements with us. If any of the foregoing circumstances occur, we may need to find alternative manufacturing facilities, which would significantly impact our ability to develop, maintain or obtain, as applicable, regulatory approval for or market Qtrypta or any other product candidate. In the event that we seek such alternative sources, we may not be able to enter into replacement arrangements without delays or additional expenditures. We cannot estimate these delays or costs with certainty but, if they were to occur, they could cause a delay in our development and commercialization efforts.

The manufacturer(s) of Qtrypta are obliged to operate in accordance with FDA-mandated cGMPs, and we have limited control over the ability of CMOs to maintain adequate quality control, quality assurance and qualified personnel to ensure compliance to cGMPs. In addition, the facilities used by our CMOs to manufacture Qtrypta must be authorized by the FDA and will be subject to inspections that will be conducted prior to any grant or regulatory approval by the FDA. If any of our CMOs are unable to successfully manufacture material that conform to our specifications and the FDA’s strict regulatory requirements, and pass regulatory inspections, they will not be able to secure or maintain authorization to manufacture any of our approved products. Additionally, a failure by any of our CMOs to establish and follow cGMPs or to document their adherence to such practices may negatively impact our commercialization or lead to significant delays in the launch and commercialization of any other products that we may have in the future. Failure by our CMOs or us to comply with application regulations could result in sanctions being imposed on us, including fines, injunctions, civil penalties, failure of the government to grant pre-market approval of drugs, delays, suspensions or withdrawal of approvals, seizures or recalls of product, operating restrictions, and criminal prosecutions.

The manufacturer of pharmaceutical products requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls. Manufacturers of pharmaceutical products often encounter difficulties in production. These problems include difficulties with production costs and yields, quality control, including stability of the product, quality assurance testing, shortages of qualified personnel, as well as compliance with strictly-enforced federal, state and foreign regulations. We cannot assure you that any issues relating to the manufacture of Qtrypta will not occur in the future. Additionally, our CMOs may experience manufacturing difficulties due to resource constraints or as a result of labor disputes. If our CMOs were to encounter difficulties, or otherwise fail to comply with their contractual obligations, our ability to commercialize Qtrypta in the United States would be jeopardized. Any delay or interruption in our ability to meet commercial demand for Qtrypta will result in the loss of potential revenue and could adversely affect our ability to gain market acceptance for these products.

Failures or difficulties faced at any level of our supply chain could materially adversely affect our business and delay or impede commercialization of Qtrypta and could have a material adverse effect on our business, results of operations, financial conditions and prospects.

We rely on CMOs for various components of our transdermal microneedle system, and our business could be harmed if those third parties fail to provide us with sufficient quantities of those components at acceptable quality levels and prices or fail to maintain or achieve satisfactory regulatory compliance.

We rely on CMOs for various components of our transdermal microneedle system, including active pharmaceutical ingredients (“API”) raw materials used in manufacturing, and capital equipment. Reliance on third-party manufacturers entails additional risks, including reliance on the third party for regulatory compliance and quality assurance. In addition, CMOs may not be able to comply with cGMP, or similar regulatory requirements outside the United States. Our reliance on these third parties reduces our control over these activities but does not relieve us of our responsibility to ensure compliance with all required legal, regulatory and scientific standards. The failure of our third-party manufacturers, to comply with applicable regulations could result in sanctions being imposed on us, including fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of products, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of our product candidate or any other product candidates that we may develop.

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There can be no assurance that our supply of these various components will not be limited, interrupted, or of satisfactory quality or continue to be available at acceptable prices. Additionally, we do not have any control over the process or timing of the acquisition or manufacture of materials by our manufacturers and cannot ensure that they will deliver to us the components we order on time, or at all. Any failure or refusal to supply the components for Qtrypta or any other product candidates that we may develop could delay, prevent or impair our clinical development or commercialization efforts. If our CMOs were to fail to fill our purchase orders, the development or commercialization of the affected product candidate could be delayed, which could have an adverse effect on our business. Any change in our manufacturers could be costly because the commercial terms of any new arrangement could be less favorable, the lead time needed to establish a new relationship can be lengthy, and because the expenses relating to the transfer of necessary technology and processes could be significant. It may take several years to establish an alternative source of supply for our product candidate and to have any such new source approved by the FDA, the European Medicines Agency, or EMA, or any other relevant regulatory authorities.

We rely on third parties to conduct our clinical trials and those third parties may not perform satisfactorily, including failing to comply with applicable regulatory requirements or to meet deadlines for the completion of such trials.

We rely on a third party contract research organizations to manage our clinical trials. In addition, we rely on other third parties, such as clinical data management organizations, medical institutions and clinical investigators, to conduct those clinical trials. While we have agreements governing their activities, we will have limited influence over their actual performance, and we will control only certain aspects of their activities. 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. Further, agreements with such third parties might terminate for a variety of reasons, including a failure to perform by the third parties. If there is any dispute or disruption in our relationship with our CROs or if we need to enter into alternative arrangements, that would delay our product development activities.

There is a limited number of third-party service providers that specialize or have the expertise required to achieve our business objectives. In particular, there would be a significant increase in clinical trial expenses, including adopting a new electronic data capture platform or other technology platforms, the need to enter into new contracts and costs associated with the transfer of data, as well as an increased risk of the loss of data. Identifying, qualifying and managing performance of third-party service providers can be difficult, time-consuming and may cause delays in our development programs. These investigators and CROs will not be our employees and we will not be able to control, other than by contract, the amount of resources, including time, which they devote to our product candidates and clinical trials. Our reliance on these third parties for research and development activities will reduce our control over these activities but will not relieve us of our responsibilities. For example, we will remain responsible for ensuring that each of our clinical trials is conducted in accordance with the general investigational plan and protocols for the trial. If any of our CROs’ processes, methodologies or results were determined to be invalid or inadequate, our own clinical data and results and related regulatory approvals could be adversely affected. Moreover, the FDA requires us to comply with standards, commonly referred to as GCPs for conducting, recording and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of trial participants are protected. The FDA enforces GCPs through periodic inspections of trial sponsors, principal investigators and clinical trial sites. If we or our CRO or trial sites fail to comply with applicable GCPs, the clinical data generated in our clinical trials may be deemed unreliable and the FDA may require us to perform additional clinical trials before approving any marketing applications. Upon inspection, the FDA may determine that our clinical trials did not comply with GCPs. In addition, our clinical trials will require a sufficiently large number of test subjects to evaluate the safety and effectiveness of a product candidate. Accordingly, if our CROs fail to comply with these regulations or fail to recruit a sufficient number of patients, our clinical trials may be delayed, or we may be required to repeat such clinical trials, which would delay the regulatory approval process.

Furthermore, these third parties may also have relationships with other entities, some of which may be our competitors. If these third parties do not successfully carry out their contractual duties, meet expected deadlines, or if the quality of the clinical data they obtain is compromised due to the failure to conduct our clinical trials in accordance with regulatory requirements or our stated protocols, we will not be able to obtain, or may be delayed in obtaining, marketing approvals for our product candidates and will not be able to, or may be delayed in our efforts to, successfully commercialize our product candidates.

If our current collaborations are not successful or we are not able to establish collaborations, we may have to alter our development plans.

Our product development programs and the potential commercialization of our product candidates will require substantial additional cash to fund our expenses. We may seek to collaborate with third parties for certain of our development programs, and for the commercialization of our product candidates, if approved. For example, we recently entered into a commercialization agreement with Eversana for the commercialization of Qtrypta, if approved by the FDA.

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We face significant competition in seeking appropriate collaborators. Whether we reach a definitive collaborative agreement will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of a number of factors. Those factors may include the design or results of clinical trials, the likelihood of approval by the FDA or similar regulatory authorities outside the United States, the potential market for the subject product candidate, the costs and complexities of manufacturing and delivering such product candidate to patients, the potential existence of competing drugs, the existence of uncertainty with respect to our ownership of technology, which can exist if there is a challenge to such ownership without regard to the merits of the challenge and industry and market conditions generally. The collaborator may also consider alternative product candidates or technologies for similar indications that may be available on which to collaborate and whether such a collaboration could be more attractive than the one with us for our product candidate. In addition, there have been a significant number of recent business transactions among large pharmaceutical companies that have resulted in a reduced number of potential future collaborators.

We face significant competition in seeking appropriate collaborators. Collaborations are complex and time-consuming to negotiate and document. We may also be restricted under collaboration agreements from entering into agreements with other potential collaborators. We may not be able to negotiate collaborations on acceptable terms, or at all. If that were to occur, we may have to curtail, reduce or delay the development of a particular product candidate, or one or more of our other development programs, delay its or their potential commercialization or reduce the scope of our sales or marketing activities, or increase our expenditures and undertake development or commercialization activities at our own expense. If we elect to increase our expenditures to fund development or commercialization activities on our own, we may need to obtain additional capital, which may not be available to us on acceptable terms or at all. If we do not have sufficient funds, we will not be able to bring our product candidate to market and generate revenue.

In addition, any current or future collaborations that we enter into may not be successful. The success of our collaboration arrangements will depend heavily on the efforts and activities of our collaborators. Collaborators generally have significant discretion in determining the efforts and resources that they will apply to these collaborations. Disagreements between parties to a collaboration arrangement regarding clinical development and commercialization matters can lead to delays in the development process or commercializing the applicable product candidate and, in some cases, termination of the collaboration arrangement. These disagreements can be difficult to resolve if neither of the parties has final decision-making authority. Collaborations with pharmaceutical or biotechnology companies and other third parties may be terminated or allowed to expire by the other party. Any such termination or expiration would adversely affect us financially and could harm our business reputation.

We may form strategic partnerships and collaborations in the future, and we may not realize the benefits of such alliances.

We may seek strategic partnerships, create joint ventures or collaborations or enter into licensing arrangements with third parties that we believe will complement or augment our existing business. These relationships may require us to incur non-recurring and other charges, increase our near- and long-term expenditures, issue securities that dilute our existing stockholders or disrupt our management and business. In addition, we face significant competition in seeking appropriate strategic partners and the negotiation process is time-consuming and complex.

The process of establishing and maintaining collaborative relationships is difficult, time-consuming and involves significant uncertainty, including:

•a collaboration partner may seek to renegotiate or terminate their relationships with us due to unsatisfactory clinical results, manufacturing issues, a change in business strategy, a change of control or other reasons;

•a collaboration partner may shift its priorities and resources away from our product candidate due to a change in business strategy, or a merger, acquisition, sale or downsizing;

•a collaboration partner may not devote sufficient resources towards, or cease development in, therapeutic areas which are the subject of our strategic collaboration;

•a collaboration partner may change the success criteria for a product candidate thereby delaying or ceasing development of such candidate;

•a collaboration partner could develop a product candidate that competes, either directly or indirectly, with our product candidate;

•a significant delay in initiation of certain development activities by a collaboration partner will also delay payment of milestones tied to such activities, thereby impacting our ability to fund our own activities;

•a collaboration partner with commercialization obligations may not commit sufficient financial or human resources to the marketing, distribution or sale of a product;

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•a collaboration partner with manufacturing responsibilities may encounter regulatory, resource or quality issues and be unable to meet demand requirements;

•a dispute may arise between us and a collaboration partner concerning the research, development or commercialization of a product candidate resulting in a delay in milestones, royalty payments or termination of an alliance and possibly resulting in costly litigation or arbitration which may divert management attention and resources;

•a collaboration partner may use our products or technology in such a way as to invite litigation from a third party; and

•a collaboration partner may exercise a contractual right to terminate a strategic alliance, making us ineligible to receive milestone or royalty payments under such agreement.

RISKS RELATED TO MARKETING AND SALE OF OUR PRODUCTS

We have no experience selling, marketing or distributing approved product candidates and have no internal capabilities to do so, and will rely on Eversana and other third parties for the commercialization of Qtrypta, and we and they may not be able to effectively market, sell and distribute Qtrypta, if approved.

We currently have no internal sales, marketing or distribution capabilities. Even if Qtrypta is approved by the FDA, we may not be able to effectively market and distribute Qtrypta. We have engaged Eversana to conduct agreed commercialization activities, and to utilize its internal sales organization along with its other commercial capabilities for market access, marketing, distribution and patient support services for Qtrypta. Eversana may be unable to identify and retain suitable candidates to fill our direct sales force needs, on our expected launch timeframe or otherwise. To the extent we and Eversana are not successful in retaining qualified sales and marketing personnel, we may not be able to effectively market Qtrypta. Further, there can be no assurance that the capabilities of Eversana will be effective in marketing and selling Qtrypta, or that their personnel will be more effective than an internally developed sales organization. In addition, Eversana may terminate our agreement, including the obligation to provide a revolving credit facility, and can terminate the agreement under certain additional circumstances, including if FDA approval of Qtrypta is not received by July 31, 2021, if net profits are not realized within a specified time period following commercial launch, for material breach of the agreement by us that is not cured within a defined time period, for our insolvency, if Qtrypta is subject to a safety recall in the United States or if Qtrypta is not commercially launched within a specified time period after FDA approval of the NDA. As result of our receipt of the CRL, it is not likely that we will obtain FDA approval prior to July 31, 2021, which would provide Eversana with the right to terminate our agreement. If we and Eversana fail to hire, train, retain and manage qualified sales personnel, market our product successfully or on a cost-effective basis or otherwise terminate our relationship, our ability to generate revenue will be limited and we will need to identify and retain an alternative organization, or develop our own sales and marketing capability. In such an event, we would have to invest significant amounts of financial and management resources to develop internal sales, distribution and marketing capabilities. This could involve significant delays and costs, including the diversion of our management’s attention from other activities. We may also need to retain additional consultants or external service providers to assist us in sales, marketing and distribution functions, and may be unsuccessful in retaining such services on acceptable financial terms or at all.

If we do perform sales, marketing and distribution functions ourselves, we could face a number of additional related risks, including:

•inability to attract and build an effective marketing department or sales force;

•the cost of establishing a marketing department or sales force may exceed our available financial resources and the revenues generated by Qtrypta or any other product candidates that we may develop, in-license or acquire; and

•our direct sales and marketing efforts may not be successful.

If we are unsuccessful in building and managing a sales and marketing infrastructure internally or through a third-party partner for any approved product, we will have difficulty commercializing Qtrypta or any other product candidate, if approved, which would materially adversely affect our business, financial condition and results of operations.

If Qtrypta does not obtain sufficient market share against competitive products, we may not achieve substantial product revenues and our business will suffer.

The market for the potential indication for Qtrypta is characterized by intense competition and rapid technological advances. Our product candidates will, if approved, compete with a number of existing and future drug delivery systems and therapies developed, manufactured and marketed by others. Existing or future competing products may provide greater therapeutic convenience or clinical or other benefits for a specific indication than our product candidate or may offer comparable performance at a lower cost. If our product candidates fail to capture and maintain market share, we may not achieve sufficient revenues and our business will suffer.

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We will compete against fully integrated pharmaceutical companies and smaller companies that are collaborating with larger pharmaceutical companies, academic institutions, government agencies and other public and private research organizations. Many of these competitors, either alone or together with their collaborative partners, operate larger research and development programs or have substantially greater financial and other resources than we do, as well as significantly greater experience in:

•developing drugs;

•undertaking preclinical testing and human clinical trials;

•obtaining FDA and other regulatory approvals of drugs;

•formulating and manufacturing drugs; and

•launching, marketing and selling drugs.

The development and commercialization of new products to treat migraine is highly competitive. We expect to have considerable competition from major pharmaceutical, biotechnology, specialty pharmaceutical and medical device companies. Companies marketing products or have product candidates that treat migraine that may compete with Qtrypta, include but are not limited, to Teva Pharmaceutical Industries, GlaxoSmithKline, Eli Lilly & Company, AstraZeneca, Novartis, Allergan, Biohaven Pharmaceuticals, Lundbeck, Amgen, Merck & Co., Pfizer, Janssen Pharmaceutica, Endo International, Assertio, Upsher-Smith Laboratories, Satsuma Pharmaceuticals, Supernus Pharmaceutical, Currax Pharmaceuticals, Impel NeuroPharma, Axsome Therapeutics, electroCore, eNeura, Cefaly, Theranica and Amneal Pharmaceuticals.

Products developed or under development by competitors may render our product candidates or technologies obsolete or non-competitive.

The biotechnology and pharmaceutical industries are intensely competitive and subject to rapid and significant technological change. Our product candidates will have to compete with existing therapies, new formulations of existing drugs and new therapies that may be developed in the future. We face competition from pharmaceutical, biotechnology and medical device companies, including transdermal delivery companies, in the United States and abroad. In addition, companies pursuing different but related fields represent substantial competition. Many of these organizations competing with us have substantially greater capital resources, larger research and development staffs and facilities, longer drug development history in obtaining regulatory approvals and greater manufacturing and marketing capabilities than we do. These organizations also compete with us to attract qualified personnel and parties for acquisitions, joint ventures or other collaborations, and therefore, we may not be able to hire or retain qualified personnel to run all facets of our business.

We face potential product liability exposure, and if successful claims are brought against us, we may incur substantial liability and may have to limit development of a product candidate or commercialization of an approved product.

The use of our product candidates in clinical trials and the sale of any product candidate for which we may obtain marketing approval expose us to the risk of product liability claims. Product liability claims may be brought against us by participants enrolled in our clinical trials, patients, healthcare providers or others using, administering or selling our product candidates. If we cannot successfully defend ourselves against any such claims, we would incur substantial liabilities. Regardless of merit or eventual outcome, product liability claims may result in:

•withdrawal of clinical trial participants;

•termination of clinical trial sites or entire trial programs;

•costs of related litigation;

•substantial monetary awards to patients or other claimants;

•decreased demand for an approved product and loss of revenue;

•impairment of our business reputation;

•diversion of management and scientific resources from our business operations; and

•the inability to commercialize an approved product candidate.

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Insurance coverage is becoming increasingly expensive, and, in the future, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to product liability. We intend to expand our insurance coverage to include the sale of commercial products if we obtain marketing approval for any product candidate, but we may be unable to obtain commercially reasonable product liability insurance for any product candidate approved for marketing. Large judgments have been awarded in class action lawsuits based on drugs that had unanticipated side effects. A successful product liability claim or a series of claims brought against us, particularly if judgments exceed our insurance coverage, could cause our stock price to decline and could adversely affect our results of operations and business.

We may be exposed to liability claims associated with the use of hazardous materials and chemicals.

Our research and development activities may involve the controlled use of hazardous materials and chemicals. Although we believe that our safety procedures for using, storing, handling and disposing of these materials comply with federal, state and local laws and regulations, we cannot completely eliminate the risk of accidental injury or contamination from these materials. In the event of such an accident, we could be held liable for any resulting damages and any liability could materially adversely affect our business, financial condition and results of operations. In addition, the federal, state and local laws and regulations governing the use, manufacture, storage, handling and disposal of hazardous materials and waste products may require us to incur substantial compliance costs that could materially adversely affect our business, financial condition and results of operations.

Business disruptions could seriously harm our future revenues, results of operations and financial condition and increase our costs and expenses.

Our operations could be subject to earthquakes, power shortages, telecommunications failures, water shortages, floods, fires, extreme weather conditions, medical pandemics and epidemics, such as the COVID-19 pandemic and other natural or man-made disasters or business interruptions, for which we are predominantly self-insured. We do not carry insurance for all categories of risk that our business may encounter. Many of these events are beyond our control and the occurrence of any of these business disruptions could seriously harm our operations and financial condition and increase our costs and expenses.

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RISKS RELATED TO OUR INTELLECTUAL PROPERTY

If we fail to comply with our obligations to our licensor in our intellectual property license, we could lose license rights that are important to our business.

We are a party to an Intellectual Property License Agreement dated October 5, 2006, as amended, with ALZA and we may enter into additional license agreements in the future. Our existing license agreement imposes, and we expect that any future license agreements will impose, various diligence, product payment, royalty, insurance and other obligations on us. If we fail to comply with these obligations, our licensors may have the right to terminate these agreements, in which event we might not be able to develop and market any product candidate that is covered by these agreements. Termination of these licenses or reduction or elimination of our licensed rights may result in our having to negotiate new or reinstated licenses with less favorable terms. These risks could delay or prevent us from offering our product candidate(s). We might not have the necessary rights or the financial resources to develop, manufacture or market our current or future product candidates without the rights granted under these licenses, and the loss of sales or potential sales in such product candidate(s) could have a material adverse effect on our business, financial condition, results of operations and prospects. The occurrence of such events could have a material adverse effect on our business, financial condition and results of operations. Determining the scope of licenses and related obligations may be difficult and could lead to disputes between us and the licensor. Disputes may arise regarding intellectual property subject to a licensing agreement, including:

•the scope of rights granted under a license agreement and other interpretation-related issues;

•the extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the licensing agreement;

•the sublicensing of patent and other rights under our collaborative development relationships;

•our diligence obligations under the license agreement and what activities satisfy those diligence obligations;

•the inventorship or ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us and our partners; and

•the priority of invention of patented technology.

Additionally, the agreement under which we currently license intellectual property is complex, and certain provisions may be susceptible to multiple interpretations. The resolution of any contract interpretation disagreement that may arise could narrow what we believe to be the scope of our rights to the relevant intellectual property or technology, increase what we believe to be our financial or other obligations under the relevant agreement, or decrease the third party’s financial or other obligations under the relevant agreement, any of which could have a material adverse effect on our business, financial condition, results of operations and prospects.

Our failure to obtain and maintain patent protection for our technology and our product candidates could permit our competitors to develop and commercialize technology and products similar or identical to ours, and our ability to successfully commercialize our technology and product candidates may be adversely affected.

Our commercial success is significantly dependent on intellectual property related to our product candidate portfolio. We are either the licensee or assignee of numerous issued and pending patent applications that cover various aspects of our assets, including, most importantly, our transdermal microneedle system and our product candidates.

Our success depends in large part on our and our licensor’s ability to obtain and maintain patent protection in the United States and other countries with respect to our proprietary technology and product candidates. In some circumstances, we may not have the right to control the preparation, filing and prosecution of patent applications, or to maintain the patents, covering technology or product that we license from third parties. Therefore, we cannot be certain that these patents and applications will be prosecuted and enforced in a manner consistent with the best interests of our business. In addition, if third parties who license patents to us fail to maintain such patents, or lose rights to those patents, the rights we have licensed may be reduced or eliminated.

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The patent prosecution process is expensive, time-consuming and complex, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner or in all jurisdictions where protection may be commercially advantageous, or we may not be financially able to protect our proprietary rights at all. It is also possible that we may fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. We may not be able to obtain or maintain patent protection from our pending patent applications, from those we may file in the future, or from those we may license from third parties. There is no assurance that all potentially relevant prior art relating to our patents and patent applications has been found. We may be unaware of prior art that could be used to invalidate an issued patent or prevent our pending patent applications from issuing as patents. Moreover, even if we are able to obtain patent protection, such patent protection may be of insufficient scope to achieve our business objectives or provide any competitive advantage. In addition, although we enter into non-disclosure and confidentiality agreements with parties who have access to patentable aspects of our research and development output, any of these parties may breach such agreements and disclose such output before a patent application is filed, thereby jeopardizing our ability to seek patent protection.

The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions and has in recent years been the subject of much litigation. As a result, the issuance, scope, validity, enforceability and commercial value of our and our licensor’s patent rights are highly uncertain. Our and our licensor’s pending and future patent applications may not result in patents being issued which protect our technology or products or which effectively prevent others from commercializing competitive technologies and products. Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our patents or narrow the scope of our patent protection. The standards which the United States Patent and Trademark Office (“USPTO”) and foreign patent offices use to grant patents are not always applied predictably or uniformly and can change. There is also no uniform, worldwide policy regarding the subject matter and scope of claims granted or allowable in pharmaceutical or biotechnology patents. The laws of foreign countries may not protect our rights to the same extent as the laws of the United States, and many companies have encountered significant problems and costs in protecting their proprietary information in these non-U.S. countries. Outside the United States, patent protection must be sought in individual jurisdictions, further adding to the cost and uncertainty of obtaining adequate patent protection outside of the United States. Accordingly, we cannot predict whether additional patents protecting our product candidates will issue in the United States or in non-U.S. jurisdictions, or whether any patents that do issue are valid, enforceable and have claims of adequate scope to provide competitive advantage. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. Therefore, we cannot be certain that we or our licensor were the first to make the inventions claimed in our owned and licensed patents or pending patent applications, or that we or our licensor were the first to file for patent protection of such inventions. Assuming the other requirements for patentability are met, the first to file a patent application is entitled to the patent. We may become involved in opposition or interference proceedings challenging our patent rights or the patent rights of others. An adverse determination in any such proceeding could reduce the scope of, or invalidate our patent rights, allow third parties to commercialize our technology or product candidates and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize our product candidate without infringing third-party patent rights.

Even if our owned and licensed patent applications issue as patents, they may not issue in a form that will provide us with any meaningful protection, prevent competitors from competing with us or otherwise provide us with any competitive advantage. Our competitors may be able to circumvent our owned or licensed patents by developing similar or alternative technologies or products in a non-infringing manner. Third parties may have patents that could prevent us from marketing our own patented product candidate. Third parties may also seek to market generic versions of any of our approved product. Even if we have valid and enforceable patents, these patents still may not provide protection against competing products or processes sufficient to achieve our business objectives. The issuance of a patent is not conclusive as to its scope, validity or enforceability, and our owned and licensed patents may be challenged in the courts or patent offices in the United States and abroad. Such challenges may result in patent claims being narrowed, invalidated or held unenforceable, which could limit our ability to stop or prevent us from stopping others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of our technology and product candidates. Given the amount of time required for the development, testing and regulatory review of product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.

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Bearing the costs and other requirements associated with prosecution of pending patent applications and maintenance of issued patents are essential to procurement and maintenance of patents integral to our product candidates, and our patent protection could be reduced or eliminated for non-compliance for these requirements.

Periodic maintenance fees, renewal fees, annuity fees and various other governmental fees on patents and/or patent applications will come due for payment periodically throughout the lifecycle of patent applications and issued patents. In order to help ensure that we comply with any required fee payment, documentary and/or procedural requirements as they might relate to any patents for which we are an assignee or co-assignee, we employ legal help and related professionals as needed to comply with those requirements. Failure to meet a required fee payment, document production or procedural requirement can result in the abandonment of a pending patent application or the lapse of an issued patent. In some instances, the defect can be cured through late compliance, but there are situations where the failure to meet the required deadline cannot be cured. Such an occurrence could compromise the intellectual property protection around a preclinical or clinical product candidate and possibly weaken or eliminate our ability to protect our eventual market share for that product candidate.

Our business will be harmed if we do not successfully protect the confidentiality of our trade secrets.

In addition to our patented technology and product candidates, we rely on trade secrets, including unpatented know-how, technology and other proprietary information, to maintain our competitive position. We seek to protect these trade secrets, in part, by entering into non-disclosure and confidentiality agreements with parties that have access to them, such as our corporate collaborators, outside scientific collaborators, sponsored researchers, contract manufacturers, consultants, advisors and other third parties. We also enter into confidentiality and invention or patent assignment agreements with our employees and consultants. However, any of these parties may breach the agreements and disclose our proprietary information, 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 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, our competitive position would be harmed.

In addition to contractual measures, we try to protect the confidential nature of our proprietary information using commonly accepted physical and technological security measures. Such security measures may not provide adequate protection for our proprietary information, for example, in the case of misappropriation of a trade secret by an employee, consultant, or third party with authorized access. Monitoring unauthorized uses and disclosures is difficult, and we do not know whether the steps we have taken to protect our proprietary technologies will be effective. Unauthorized parties may also attempt to copy or reverse engineer certain aspects of our products that we consider proprietary. Even though we use commonly accepted security measures, the criteria for protection of trade secrets can vary among different jurisdictions.

We could be prevented from selling our product candidates, if approved, and could be forced to pay damages and defend against litigation, if we infringe the rights of third parties.

We conduct freedom-to-operate studies to guide our early-stage research and development away from areas where we are likely to encounter obstacles in the form of third-party intellectual property conflicts, and to assess the advisability of licensing third-party intellectual property or taking other appropriate steps to address any freedom-to-operate or development issues. However, with respect to third-party intellectual property, it is impossible to establish with certainty that our product candidates will be free of claims by third-party intellectual property holders or whether we will require licenses from such third parties. Even with modern databases and on-line search engines, literature searches are imperfect and may fail to identify relevant patents and published applications.

In the pharmaceutical industry, significant litigation and other proceedings, including interferences, oppositions, reexamination, inter partes review, derivation and post-grant review proceedings before the USPTO and corresponding foreign patent offices, regarding patents, patent applications, trademarks and other intellectual property rights have become commonplace. The types of situations in which we may become a party to such proceedings include:

•we or our collaborators may initiate litigation or other proceedings against third parties seeking to invalidate the patents held by those third parties or to obtain a judgment that our products or processes do not infringe those third parties’ patents;

•if our competitors file patent applications that claim technology also claimed by us or our licensors, we or our licensors may be required to participate in interference or opposition proceedings to determine the priority of invention, which could jeopardize our patent rights and potentially provide a third party with a dominant patent position;

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•if third parties initiate litigation claiming that our processes or products infringe their patent or other intellectual property rights, we and our collaborators will need to defend against such proceedings; and,

•if a license to necessary intellectual property is terminated, the licensor may initiate litigation claiming that our processes or products infringe, misappropriate or otherwise violate their patent or other intellectual property rights and/or that we breached our obligations under the license agreement, and we and our collaborators would need to defend against such proceedings.

Third parties may assert that we are employing their proprietary technology without authorization or have infringed upon, misappropriated or otherwise violated their intellectual property or other rights. Even if we believe third-party claims of infringement against us or our collaborators are without merit, there is a risk that a court would decide that we or our collaborators are infringing the third party’s valid and enforceable patents. If our product candidates, methods, processes or other technologies infringe the proprietary rights of other parties, we could incur substantial costs and may have to:

•obtain licenses, which may not be available on commercially reasonable terms, if at all;

•abandon an infringing product;

•redesign our product candidates or processes to avoid infringement;

•stop using the subject matter claimed in the patents held by others;

•pay damages; or

•defend litigation or administrative proceedings which may be costly whether we win or lose, and which could result in a substantial diversion of our financial and management resources.

We intend to pursue Section 505(b)(2) regulatory approval filings with the FDA for Qtrypta and potentially for our other product candidates where applicable. Such filings involve significant costs, and we may also encounter difficulties or delays in obtaining regulatory approval for Qtrypta or any other product candidates under Section 505(b)(2).

We intend to pursue regulatory approval for Qtrypta and potentially for any other product candidates, pursuant to Section 505(b)(2) of the FDCA. A Section 505(b)(2) application is a type of NDA that enables the applicant to rely, in part, on the FDA’s findings of safety and efficacy of a previously approved product for which the applicant has no right of reference, or published literature, in support of its application. Section 505(b)(2) NDAs often provide an alternate path to FDA approval for new or improved formulations or new uses of previously approved products. Such applications involve significant costs, including filing fees.

To the extent that a Section 505(b)(2) NDA relies on clinical trials conducted for a previously approved product or the FDA’s prior findings of safety and effectiveness for a previously approved product, the Section 505(b)(2) applicant must submit patent certifications in its Section 505(b)(2) application with respect to any patents for the previously approved product on which the applicant’s application relies and that are listed in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations, commonly known as the Orange Book. Specifically, the applicant must certify for each listed patent that, in relevant part, (Paragraph I) the required patent information has not been filed by the original applicant; (Paragraph II) the listed patent has expired; (Paragraph III) the listed patent has not expired, but will expire on a particular date and approval is not sought until after patent expiration; or (Paragraph IV) the listed patent is invalid, unenforceable or will not be infringed by the proposed new product. A certification that the new product will not infringe the previously approved product’s listed patent or that such patent is invalid or unenforceable is known as a Paragraph IV certification. If the applicant does not challenge one or more listed patents through a Paragraph IV certification, the FDA will not approve the Section 505(b)(2) NDA application until all the listed patents claiming the referenced product candidate have expired.

If the Section 505(b)(2) NDA applicant has provided a Paragraph IV certification to the FDA, the applicant must also send notice of the Paragraph IV certification to the owner of the referenced NDA for the previously approved product and relevant patent holders within 20 days after the Section 505(b)(2) NDA has been accepted for filing by the FDA. The NDA and patent holders may then initiate a patent infringement suit against the Section 505(b)(2) applicant. Under the FDCA, the filing of a patent infringement lawsuit within 45 days of receipt of the notification regarding a Paragraph IV certification automatically prevents the FDA from approving the Section 505(b)(2) NDA until the earliest to occur of 30 months beginning on the date the patent holder receives notice, expiration of the patent, settlement of the lawsuit, or until a court deems the patent unenforceable, invalid or not infringed.

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If we rely in our Section 505(b)(2) regulatory filings on clinical trials conducted, or the FDA’s prior findings of safety and effectiveness, for a previously approved product that involves patents referenced in the Orange Book, then we will need to make the patent certifications or the Paragraph IV certification described above. If we make a Paragraph IV certification and the holder of the previously approved product that we referenced in our application initiates patent litigation within the time periods described above, then any FDA approval of our Section 505(b)(2) application would be delayed until the earlier of 30 months, resolution of the lawsuit, or the other events described above. Accordingly, our anticipated dates of commercial introduction of our product candidates would be delayed. In addition, we would incur the expenses, which could be material, involved with any such patent litigation. As a result, we may invest a significant amount of time and expense in the development of our product candidates only to be subject to significant delay and patent litigation before our product candidates may be commercialized, if at all.

In addition, even if we submit a Section 505(b)(2) application that relies on clinical trials conducted for a previously approved product where there are no patents referenced in the Orange Book for such other product with respect to which we have to provide certifications, we are subject to the risk that the FDA could disagree with our reliance on the particular previously approved product, conclude that such previously approved product is not an acceptable reference product, and require us instead to rely as a reference product on another previously approved product that involves patents referenced in the Orange Book, requiring us to make the certifications described above and subjecting us to additional delay, expense and the other risks described above.

We may become involved in costly and time-consuming lawsuits with uncertain outcomes to protect or enforce our patents.

Competitors may infringe our patents. To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time consuming. In addition, in an infringement proceeding, a court may decide that a patent of ours is invalid or unenforceable or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. If we initiate legal proceedings against a third party to enforce a patent covering our product candidates, the defendant could counterclaim that the patents covering our product candidates are invalid or unenforceable. In patent litigation in the United States, 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, including a lack of novelty, obviousness, written description or non-enablement. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld information material to patentability from the USPTO, or made a misleading statement, during prosecution. Third parties also may raise similar claims before administrative bodies in the United States or abroad, even outside the context of litigation. Such mechanisms include ex parte reexamination, post-grant review, inter partes review, interference proceedings, derivation proceedings, and equivalent proceedings in foreign jurisdictions (e.g., opposition proceedings).

There is a risk that a court or administrative body would decide to revoke, cancel or amend our patents in such a way that they no longer cover and protect a product candidate. In addition, a court or administrative body may decide that our patents are invalid, unenforceable or not infringed by a third party’s activities. The outcome following legal assertions of invalidity and unenforceability is unpredictable. With respect to the validity question, for example, we cannot be certain that there is no invalidating prior art of which the patent examiner and we or our licensing partners were unaware during prosecution. An adverse result in any litigation or proceeding could put one or more of our patents at risk of being invalidated or interpreted narrowly. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. In addition, our licensors may have rights to file and prosecute such claims and we may be reliant on them to do so.

An adverse outcome in a litigation or proceeding involving our patents could limit our ability to assert our patents against competitors, affect our ability to receive royalties or other licensing consideration from our licensees, and may curtail or preclude our ability to exclude third parties from making, using and selling similar or competitive products. Any of these occurrences could have a material adverse effect on our business, financial condition, results of operations and prospects.

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We may be subject to claims that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.

Some of our employees were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although we try to ensure that our employees do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or our employees have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such employee’s former employer, or that patents and applications we have filed to protect inventions of these employees, even those related to our product candidates, are rightfully owned by their former or concurrent employer. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management.

Our agreements with employees and our personnel policies also provide that any inventions conceived by the individual in the course of rendering services to us shall be our exclusive property. Although our policy is to have all employees complete these agreements, we may not obtain these agreements in all circumstances, and individuals with whom we have these agreements may not comply with their terms. The assignment of intellectual property may not be self-executing and despite such agreement, such inventions may become assigned to third parties. In the event of unauthorized use or disclosure of our trade secrets or proprietary information, these agreements, even if obtained, may not provide meaningful protection, particularly for our trade secrets or other confidential information. To the extent that our employees, consultants or contractors use technology or know-how owned by third parties in their work for us, disputes may arise between us and those third parties as to the rights in related inventions. We may also be subject to claims that former employees, collaborators, or other third parties have an ownership interest in our patents or other intellectual property. In addition, we may face claims by third parties that our agreements with employees, contractors, or consultants obligating them to assign intellectual property to us are ineffective or in conflict with prior or competing contractual obligations of assignment, which could result in ownership disputes regarding intellectual property we have developed or will develop and interfere with our ability to capture the commercial value of such intellectual property. To the extent that an individual who is not obligated to assign rights in intellectual property to us is rightfully an inventor of intellectual property, we may need to obtain an assignment or a license to that intellectual property from that individual, or a third party or from that individual’s assignee. Such assignment or license may not be available on commercially reasonable terms or at all.

Intellectual property litigation could cause us to spend substantial resources and distract our personnel from their normal responsibilities.

There is a great deal of litigation concerning intellectual property in our industry, and we could become involved in litigation. Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses and could distract our technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments, and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock. Such litigation or proceedings could substantially increase our operating losses and reduce our resources available for development activities. We may not have sufficient financial or other resources to adequately conduct such litigation or proceedings. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their substantially greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our business, financial condition, results of operations and ability to compete in the marketplace.

Recent patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents.

On September 16, 2011, the Leahy-Smith America Invents Act (“Leahy-Smith Act”) was signed into law. The Leahy-Smith Act includes a number of significant changes to U.S. patent law. These include provisions that affect the way patent applications will be prosecuted and may also affect patent litigation. In particular, under the Leahy-Smith Act, the United States transitioned in March 2013 to a “first to file” system in which the first inventor to file a patent application will be entitled to the patent. Third parties are allowed to submit prior art before the issuance of a patent by the USPTO and may become involved in opposition, derivation, reexamination, inter-parties review or interference proceedings challenging our patent rights or the patent rights of others. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our patent rights, which could adversely affect our competitive position.

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The USPTO is implementing regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the first to file provisions, did not become effective until March 16, 2013. In addition, courts continue to decide how to interpret and enforce patent law. Accordingly, it is not clear what, if any, impact the Leahy-Smith Act will have on the operation of our business. However, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business, results of operations, financial condition and cash flows and future prospects.

In addition, the patent positions of companies in the development and commercialization of biologics and pharmaceuticals are particularly uncertain. Recent U.S. Supreme Court rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. This combination of events has created uncertainty with respect to the validity and enforceability of patents, once obtained. Depending on future actions by the U.S. Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change in unpredictable ways that could have a material adverse effect on our existing patent portfolio and our ability to protect and enforce our intellectual property in the future. Similarly, statutory or judicial changes to the patent laws of other countries may increase the uncertainties and costs surrounding the prosecution of patent applications and the enforcement or defense of issued patents.

We may not be successful in obtaining necessary rights to future product candidates through acquisitions and in-licenses.

Any future programs we choose to pursue may require the use of proprietary rights held by third parties, and the growth of our business will likely depend in part on our ability to acquire, in-license, maintain or use these proprietary rights. We may be unable to acquire or in-license any compositions, methods of use, processes, or other third-party intellectual property from third parties that we later identify as necessary for our future product candidates or such intellectual property may not be available on commercially reasonable terms. The licensing and acquisition of third-party intellectual property rights is a competitive area, and a number of more established companies are also pursuing strategies to license or acquire third-party intellectual property rights that we may consider attractive. These established companies may have a competitive advantage over us due to their size, financial resources, and greater clinical development and commercialization capabilities.

For example, we may in the future collaborate with non-profit and academic institutions to accelerate our preclinical research or development under written agreements with these institutions. These institutions may provide us with an option to negotiate a license to any of the institution’s rights in technology resulting from the collaboration. Regardless of such option, we may be unable to negotiate a license within the specified time frame or under terms that are acceptable to us. If we are unable to do so, the institution may offer the intellectual property rights to other parties, potentially blocking our ability to pursue our applicable product candidate or program.

In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We also may be unable to license or acquire third-party intellectual property rights on terms that would allow us to make an appropriate return on our investment. If we are unable to successfully obtain a license to third-party intellectual property rights necessary for the development of a product candidate or program on reasonable terms or at all, we may have to abandon development of that product candidate or program and our business and financial condition could materially adversely suffer.

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

Filing, prosecuting, and defending patents on our product candidates in all countries throughout the world may be prohibitively expensive, and our intellectual property rights in some countries outside the United States and Europe can be less extensive than those in the United States and Europe. In addition, the laws of some countries outside the United States and Europe do not protect intellectual property rights to the same extent as federal and state laws in the United States and laws in Europe. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States and Europe, or from selling or importing products made using our inventions in and into the United States, Europe or other jurisdictions. Third parties may use our technologies in jurisdictions where we have not obtained or are unable to adequately enforce patent protection to develop their own products and further, may export otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United States and Europe. These products may compete with our product and our patents or other intellectual property may not be effective or sufficient to prevent them from competing.

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Many companies have encountered significant problems in protecting and defending intellectual property rights in jurisdictions outside the United States and Europe. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets, and other intellectual property protection, particularly those relating to biotechnology products, which could make it difficult for us to stop the infringement of our patents, the reproduction of our manufacturing or other know-how or marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce our intellectual property rights in jurisdictions outside the United States and Europe, whether or not successful, could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.

Many countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In addition, many countries limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of such patent. If we or any of our licensors is forced to grant a license to third parties with respect to any patents relevant to our business, our competitive position may be impaired, and our business, financial condition, results of operations and prospects may be adversely affected.

If we do not obtain patent term extensions and data exclusivity for Qtrypta or any of our other product candidates, our business may be materially harmed.

Depending upon the timing, duration and conditions of any FDA marketing approval of our product candidates, one or more of our U.S. patents may be eligible for limited patent term extension under the Hatch-Waxman Act and similar legislation in the EU. The Hatch-Waxman Act permits a patent term extension of up to five years for a patent covering an approved product as compensation for effective patent term lost during the FDA regulatory review process. A patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval, only one patent may be extended and only those claims covering the approved drug, a method for using it or a method for manufacturing it may be extended. However, we may not receive an extension, for example, if we fail to apply within applicable deadlines, fail to apply prior to expiration of relevant patents or otherwise fail to satisfy applicable requirements. Moreover, the length of the extension could be less than we request. If we are unable to obtain patent term extension or the term of any such extension is less than we request, the period during which we can enforce our patent rights for that product will be shortened and our competitors may obtain approval to market competing products sooner. As a result, our business, financial condition, results of operations, and prospects may be adversely affected.

If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and our business may be adversely affected.

Our pending or future registered or unregistered trademarks or trade names may not issue and may be challenged, infringed, circumvented or declared generic or determined to be infringing on other marks. We may not be able to protect our rights to these trademarks and trade names, which we need to build name recognition by potential partners or customers in our markets of interest. At times, competitors may adopt trade names or trademarks similar to ours, thereby impeding our ability to build brand identity and possibly leading to market confusion. Over the long term, if we are unable to establish name recognition based on our trademarks and trade names, then we may not be able to compete effectively, and our business may be adversely affected.

Intellectual property rights do not necessarily address all potential threats to any competitive advantage we may have.

The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may not adequately protect our business, or permit us to maintain our competitive advantage. The following examples are illustrative:

•Others may be able to make compounds that are the same as or similar to our product candidates, which are aimed initially at the generic market and are not covered by the claims of the patents that we own or have exclusively licensed;

•We or any of our licensors or strategic partners might not have been the first to make the inventions covered by the issued patent or pending patent application that we own or have exclusively licensed;

•Others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights;

•It is possible that our pending patent applications will not lead to issued patents;

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•Issued patents that we own or have exclusively licensed may not provide us with any competitive advantages, or may be held invalid or unenforceable, as a result of legal challenges by our competitors;

•Our competitors might conduct research and development activities in the United States and other countries that provide a safe harbor from patent infringement claims for certain research and development activities, as well as in countries where we do not have patent rights, and then use the information learned from such activities to develop competitive products for sale in our major commercial markets.

RISKS RELATED TO LEGISLATION AND ADMINISTRATIVE ACTIONS

Our relationships with customers and third-party payers 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 payers will 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 payers 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 any products for which we obtain marketing approval. Restrictions under applicable federal and state healthcare laws and regulations include the following:

•the federal Anti-Kickback Statute prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing 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; The term “remuneration” has been broadly interpreted to include anything of value. Although there are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution, the exceptions and safe harbors are drawn narrowly. Practices that involve remuneration that may be alleged to be intended to induce prescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exception or safe harbor. A person or entity does not need to have actual knowledge of the federal Anti-Kickback Statute or specific intent to violate it to have committed a violation. Violations of the federal Anti-Kickback Statute may result in significant civil monetary penalties, plus up to three times the remuneration involved. Violations can also result in criminal penalties, including criminal fines and imprisonment of up to 10 years. Similarly, violations can result in exclusion from participation in government healthcare programs, including Medicare and Medicaid;

•the federal False Claims Act imposes criminal and civil penalties, including civil whistleblower or qui tam actions, against individuals or entities for, among other things, knowingly presenting, or causing to be presented false or fraudulent claims for payment by a federal government program, or making a false statement or record material to payment of a false claim or avoiding, decreasing or concealing an obligation to pay money to the federal government. In addition, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act. When an entity is determined to have violated the federal civil False Claims Act, the government may impose civil fines and penalties and exclude the entity from participation in Medicare, Medicaid and other government healthcare programs;

•the federal Health Insurance Portability and Accountability Act of 1996, (“HIPAA”), as amended by the Health Information Technology for Economic and Clinical Health Act, imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program and also imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information. Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;

•HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and its implementing regulations, also imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information;

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

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•the federal Physician Payments Sunshine Act, which requires certain manufacturers of drugs, devices, biologics, and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to report annually to the government information related to payments or other “transfers of value” made to physicians (as defined by statute), certain other healthcare providers beginning in 2022, and teaching hospitals, and requires applicable manufacturers and group purchasing organizations to report annually to the government ownership and investment interests held by the physicians described above and their immediate family members and payments or other “transfers of value” to such physician owners; and

•analogous state laws and regulations, such as state anti-kickback and false claims laws and analogous non-U.S. fraud and abuse laws and regulations, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payers, including private insurers, and some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government in addition to requiring drug manufacturers to report information related to payments to physicians and other health care providers or marketing expenditures.

State and foreign laws also govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts. For instance, the collection and use of health data in the European Union is governed by the General Data Protection Regulation, or the GDPR, which extends the geographical scope of European Union data protection law to non-European Union entities under certain conditions, tightens existing European Union data protection principles, creates new obligations for companies and new rights for individuals. Failure to comply with the GDPR may result in substantial fines and other administrative penalties. The GDPR may increase our responsibility and liability in relation to personal data that we process and we may be required to put in place additional mechanisms ensuring compliance with the GDPR. This may be onerous and if our efforts to comply with GDPR or other applicable European Union laws and regulations are not successful, it could adversely affect our business in the European Union. In addition, on June 28, 2018, the State of California enacted the California Consumer Privacy Act, or CCPA, which took effect on January 1, 2020. The CCPA creates individual privacy rights for California consumers and increases the privacy and security obligations of entities handling certain personal information. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation. The CCPA may increase our compliance costs and potential liability, and similar laws have been proposed at the federal level and in other states.

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, imprisonment, exclusion of products from government funded healthcare programs, such as Medicare and Medicaid, integrity oversight and reporting obligations, contractual damages, reputational harm, disgorgement, diminished profits and future earnings and the curtailment or restructuring of our operations. Defending against any such actions can be costly, time-consuming and may require significant financial and personnel resources. Therefore, even if we are successful in defending against any such actions that may be brought against us, our business may be impaired.

Our ability to generate revenue from the sale of our product candidates will be diminished if we are unable to obtain third-party coverage and adequate levels of reimbursement for any approved product candidate.

Our ability to commercialize any product candidate for which we receive regulatory approval, alone or with collaborators, will depend in part on the extent to which coverage and reimbursement for the product candidate will be available from government and health administration authorities, private health maintenance organizations and health insurers, and other third-party payers.

A substantial portion of our potential future revenue depends or will depend, in part, on the extent to which the costs of our products, purchased by our customers are reimbursed by third-party payers, including Medicare, Medicaid, other U.S. government sponsored programs, non-U.S. governmental payers and private payers. Our customers’ ability to obtain adequate reimbursement for products and services from these third-party payers affects the selection of products they purchase and the prices they are willing to pay. Some of our target customers may be unwilling to adopt our products in light of the additional associated cost. If we are forced to lower the price we will charge for our U.S. product candidates, if approved, our profit margins will decrease, which will adversely affect our ability to invest in and grow our business. With the global pressure on healthcare costs, payers are attempting to contain costs by, for example, limiting coverage of, and the level of reimbursement for, new therapies. Any limitations on, decreases in or elimination of payments by third-party payers may have an adverse effect on our financial condition, business, prospects and/or results of operations.

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Additionally, healthcare payers, including Medicare, are challenging the prices charged for medical products and services. Government and other healthcare payers increasingly attempt to contain healthcare costs by limiting both coverage and the level of reimbursement for drugs. Even if our product candidates are approved by the FDA, insurance coverage may not be available, and reimbursement levels may be inadequate, to cover the product candidates. If government and other healthcare payers do not provide adequate coverage and reimbursement levels for our product candidates, once approved, market acceptance of the product could be reduced.

Healthcare reform may have a material adverse effect on our industry and our results of operations.

Significant uncertainty exists as to the reimbursement status of newly approved healthcare products. The regulations that govern marketing approvals, pricing and reimbursement for new drug products vary widely from country to country. In the United States, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act of 2010 (“ACA”) is significantly changing the way healthcare is financed by both governmental and private insurers. From time to time, legislation is implemented to rein in rising healthcare expenditures. The ACA included a number of provisions affecting the pharmaceutical and medical device industries, including annual, non-deductible fees on any entity that manufactures or imports certain branded prescription drugs and biologics and increases in Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program. In addition, among other things, the ACA also established a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in and conduct comparative clinical effectiveness research. The increased funding and focus on comparative clinical effectiveness research, which compares and evaluates the risks and benefits, clinical outcomes, effectiveness and appropriateness of products, may result in lower reimbursements by payers for our product and decreased profits to us.

Since its enactment, there have been judicial and Congressional challenges to certain aspects of the ACA, and we expect there will be additional challenges and amendments to the ACA in the future. By way of example, the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) included a provision repealing the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate”. On December 14, 2018, a U.S. District Court Judge in the Northern District of Texas, 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 Act, the remaining provisions of the ACA are invalid as well. This decision was subsequently appealed, and on December 18, 2019, the U.S. Court of Appeals for the Fifth Circuit affirmed the decision of the district court that the individual mandate, as amended by the Tax Act, was unconstitutional. The Fifth Circuit remanded the case to the district court to consider a remedy, including to consider and explain which provisions of the ACA are inseverable and invalid. On March 2, 2020, the United States Supreme Court granted the petitions for writs of certiorari to review this case, although it is unclear when the Supreme Court will make a decision. It is also unclear how other efforts to challenge, repeal or replace the ACA will impact the ACA or our business.

Other federal legislative changes have been proposed and adopted since the ACA was enacted. These changes included an aggregate reduction in Medicare payments to providers of 2% per fiscal year, which went into effect on April 1, 2013 and will remain in effect through 2030 unless additional Congressional action is taken, with the exception of a temporary suspension from May 1, 2020 through December 31, 2020 implemented under the Coronavirus Aid, Relief, and Economic Security Act, which was signed into law on March 27, 2020.

Moreover, there has recently been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and proposed and enacted legislation designed, among other things, to bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs and reform government program reimbursement methodologies for pharmaceutical products. These new laws and any other future legislative or policy changes may result in additional reductions in Medicare and other healthcare funding, which may result in downward pressure on pharmaceutical reimbursement, which could negatively affect market acceptance of our out-licensed products and product candidates (if and when approved) and accordingly, our financial results.

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If our product candidates become subject to recall it could harm our reputation, business and financial results.

The FDA and similar foreign governmental authorities have the authority to request the recall of commercialized products in the event of material deficiencies or defects in design, manufacture or labeling. A recall by us could occur as a result of component failures, manufacturing errors, design or labeling defects or other deficiencies and issues. Recalls of any of our products would divert managerial and financial resources and have an adverse effect on our financial condition and results of operations. The FDA requires that certain classifications of recalls be reported to the FDA within 10 working days after the recall is initiated. Companies are required to maintain records of recalls, even if they are not reportable to the FDA. We may initiate voluntary recalls involving our products in the future that we determine do not require notification of the FDA. If the FDA disagrees with our determinations, we could be required to report those actions as recalls. A recall announcement could harm our reputation with customers and negatively affect our sales. In addition, the FDA could take enforcement action for failing to report the recalls when they were conducted.

Governments outside the United States may impose strict price controls, which may adversely affect our revenue, if any.

In some countries, particularly in the European Union, the pricing of prescription pharmaceuticals is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product. To obtain coverage and reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of our product candidates to other available therapies. If reimbursement for our product candidates is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our business could be harmed, possibly materially.

Our ability to utilize our net operating loss carryforwards and certain other tax attributes may be limited.

Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, if a corporation undergoes an “ownership change” (generally defined as a greater than 50 percentage point change (by value) in the ownership of its equity by certain significant stockholders over a rolling three-year period), the corporation’s ability to use its pre-change net operating loss carryforwards and certain other pre-change tax attributes to offset its post-change income or tax liability may be limited. We have experienced such ownership changes in the past (and derecognized certain deferred tax assets as of December 31, 2019 in connection with ownership changes we determined had occurred prior to such date), and we likely have experienced an additional ownership change as a result of equity and warrant issuances in the nine months ended September 30, 2020. We may experience ownership changes in the future as a result of future offerings and/or subsequent shifts in our stock ownership, some of which may be outside our control. Because our ability to use our net operating loss carryforwards and other tax attributes is limited by ownership changes, we may be unable to utilize a material portion of our net operating losses and other tax attributes.

RISKS RELATED TO EMPLOYEE MATTERS, OUR OPERATIONS AND MANAGING GROWTH

We rely on key executive officers and their knowledge of our business and technical expertise would be difficult to replace.

We are highly dependent on our key executive officers. We do not have “key person” life insurance policies for any of our officers. The loss of the technical knowledge and management and industry expertise of any of our key personnel could result in delays in product development and diversion of management resources, which could have a material adverse effect on our business, financial condition and results of operations.

On February 1, 2020, Gregory Kitchener resigned as our chief financial officer. We cannot guarantee that we will not face similar turnover in the future. Management transition is often difficult. Our ability to execute our business strategies may be adversely affected by the uncertainty associated with any transition and the time and management attention needed to fill any vacant role could disrupt our business.

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If we are unable to hire additional qualified personnel, our ability to grow our business may be harmed.

We will need to hire additional qualified personnel with expertise in preclinical testing, clinical research and testing, government regulation, formulation and manufacturing and sales and marketing. We compete for qualified individuals with numerous biopharmaceutical companies, universities and other research institutions. Competition for such individuals is intense, and we cannot be certain that our search for such personnel will be successful. Attracting and retaining qualified personnel will be critical to our success.

Our operations and employees face risks related to health epidemics that could adversely affect our financial condition and operating results.

Our business could be adversely impacted by the effects of a health epidemic, such as the COVID-19 pandemic. Our sole laboratory, executive team, and most of our employee base are located in the San Francisco Bay Area. In the event of a health epidemic that becomes widespread in or around the San Francisco Bay Area, we may take precautionary measures such as limiting our employees’ travel activities, implementing alternative work arrangements for our employees, and suspending our lab operations. For example, as a result of the COVID-19 pandemic, a majority of our workforce has moved to a remote working environment. With our employees working remotely, we could face operational difficulties that could impair our ability to conduct and manage our business effectively. Furthermore, such health epidemic, even outside of the San Francisco Bay Area, may also adversely impact the operations of our CMOs, suppliers and business partners as they implement their own precautionary measures, and we would be unable to predict how a health epidemic, such as the COVID-19 pandemic, and the related changing economic conditions will affect our third-party partners. Such conditions could disrupt our operational activities and may result in an inability to meet our operational targets, and therefore our financial condition and operating results could be adversely affected.

Our employees may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements.

We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with FDA regulations, to provide accurate information to the FDA, to comply with manufacturing standards we have established, to comply with federal and state healthcare fraud and abuse laws and regulations, 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 individually identifiable information, including, without limitation, information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. We have adopted 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 improper activities 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 could have a significant impact on our business, including the imposition of significant fines or other sanctions, including civil, criminal or administrative.

We may not successfully manage our growth.

Our success will depend upon the effective management of our growth, which will place a significant strain on our management and on administrative, operational and financial resources. To manage this growth, we may be required to expand our facilities, augment our operational, financial and management systems and hire and train additional qualified personnel. Our inability to manage this growth could have a material adverse effect on our business, financial condition and results of operations.

Our business and operations would suffer in the event of computer system failures or security breaches.

Despite the implementation of security measures, our internal computer systems, and those of our CROs and other third parties on which we rely, are vulnerable to damage from computer viruses, unauthorized access, natural disasters, fire, terrorism, war and telecommunication and electrical failures. If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our development and manufacturing programs. For example, the loss of clinical trial data from completed, ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach results in a loss of or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and development of our product candidates could be delayed.

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Risks associated with use of our company-wide enterprise resource planning (“ERP”) system may adversely affect our business and results of operations or the effectiveness of internal control over financial reporting.

We completed the implementation of a company-wide ERP system in the first fiscal quarter of 2019 to handle the business and financial processes within our operations and corporate functions. The use of the ERP system will increase as we expand our operations, possibly requiring the implementation of additional modules or system functionality. To reap the benefits of our ERP system, we may need to change certain business and financial processes. Our business and results of operations may be adversely affected if we experience operating problems or cost overruns following the implementation process, or if the systems and the associated process changes do not give rise to the benefits that we expect. If we do not effectively maintain or integrate the ERP system as planned or if the systems do not operate as intended, it may adversely affect our ability to manage and run our business operations, file reports with the SEC in a timely manner, and/or otherwise affect our internal control environment. Any of these consequences could have an adverse effect on our results of operations and financial condition.

RISKS RELATING TO AN INVESTMENT IN OUR COMMON STOCK

The trading price of our common stock has been volatile with substantial price fluctuations on heavy volume, which could result in substantial losses for purchasers of our common stock and existing stockholders.

Our stock price has been and, in the future, may be subject to substantial volatility. During the period from January 2, 2018 through November 10, 2020, for example, our stock has traded in a range with a low of $0.328 and a high of $25.70. The stock market in general and the market for biopharmaceutical companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. We do not, for example, have any explanations for the volatility in our stock price or the heavy volume of trading (on some days exceeding six times the number of shares outstanding) that occurred in our common stock in February and March of 2019. As a result of this volatility, investors may not be able to sell their common stock at or above the price paid for the shares. The market price for our common stock may be influenced by many factors, including:

•announcements relating to development, regulatory approvals or commercialization of our product candidates or those of competitors;

•results of clinical trials of our product candidates or those of our competitors;

•announcements by us or our competitors of significant strategic partnerships or collaborations or terminations of such arrangements;

•actual or anticipated variations in our operating results;

•changes in financial estimates by us or by any securities analysts who might cover our stock;

•conditions or trends in our industry;

•changes in laws or other regulatory actions affecting us or our industry;

•stock market price and volume fluctuations of comparable companies and, in particular, those that operate in the biopharmaceutical industry;

•announcements of investigations or regulatory scrutiny of our operations or lawsuits filed against us;

•capital commitments;

•investors’ general perception of our company and our business;

•disputes concerning our intellectual property or other proprietary rights;

•recruitment or departure of key personnel; and

•sales of our common stock, including sales by our directors and officers or specific stockholders.

Moreover, the global stock markets have experienced, and may continue to experience, significant volatility as a result of the COVID-19 pandemic. The COVID-19 pandemic and the significant uncertainties it has caused for the global economy, business activity and business confidence have had, and is likely to continue to have, a significant effect on the market price of securities generally, including our common stock.

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We and certain of our current and former executive officers have been named as defendants in a purported securities class action lawsuit, which could cause us to incur substantial costs and divert management's attention, financial resources and other company assets.

In the past, stockholders have initiated class action lawsuits against pharmaceutical and biotechnology companies following periods of volatility in the market prices of these companies’ stock. On October 29, 2020 and November 6, 2020, two stockholders filed alleged class action lawsuits against us and certain of our current and former executive officers in the United States District Court for the Northern District of California. The complaints were filed purportedly on behalf of all persons who purchased or otherwise acquired our securities between February 13, 2017 and September 30, 2020. The complaints allege that we and certain of our current and former executive officers made false and/or misleading statements and failed to disclose material adverse facts about our business, operations and prospects in violation of Sections 10(b) (and Rule 10b-5 promulgated thereunder) and 20(a) of the Securities Exchange Act of 1934, as amended. These lawsuits and any future lawsuits to which we may become a party are subject to inherent uncertainties and will likely be expensive and time-consuming to investigate, defend and resolve, and will divert our management's attention and financial and other resources. The outcome of litigation is necessarily uncertain, and we could be forced to expend significant resources in the defense of this and other suits, and we may not prevail. Any litigation to which we are a party may result in an onerous or unfavorable judgment that may not be reversed upon appeal or in payments of substantial monetary damages or fines, or we may decide to settle this or other lawsuits on similarly unfavorable terms, which could adversely affect our business, financial condition, results of operations or stock price. See Part II – Item 1. “Legal Proceedings” for additional information regarding the class actions.

If we are unable to maintain listing of our securities on the Nasdaq Capital Market or another reputable stock exchange, it may be more difficult for our stockholders to sell their securities.

Nasdaq requires listing issuers to comply with certain standards in order to remain listed on its exchange. If, for any reason, Nasdaq should delist our securities from trading on its exchange and we are unable to obtain listing on another reputable national securities exchange, a reduction in some or all of the following may occur, each of which could materially adversely affect our stockholders:

•the liquidity of our common stock;

•the market price of our common stock;

•our ability to obtain financing for the continuation of our operations;

•the number of institutional and general investors that will consider investing in our common stock;

•the number of market makers in our common stock;

•the availability of information concerning the trading prices and volume of our common stock; and

•the number of broker-dealers willing to execute trades in shares of our common stock.

On March 26, 2020, we received written notice from Nasdaq indicating that we were not in compliance with the $1.00 minimum bid price requirement for continued listing on The Nasdaq Capital Market, as set forth in Listing Rule 5550(a)(2). On August 14, 2020, we received a notice from Nasdaq notifying us that we had regained compliance with the $1.00 minimum bid price requirement. On November 12, 2020, we received another written notice from Nasdaq indicating that we are not in compliance with the $1.00 minimum bid price requirement for continued listing on The Nasdaq Capital Market. In accordance with Listing Rule 5810(c)(3)(A), we have a period of 180 calendar days to regain compliance with the minimum bid price requirement. To regain compliance, the closing bid price of our common stock must meet or exceed $1.00 per share for a minimum of ten consecutive business days during this 180-day period. If we are not in compliance by May 11, 2021, we may be eligible for additional time to regain compliance, subject to certain requirements. There is no assurance that we will be able to regain compliance with the minimum bid price requirement.

We have a significant number of warrants outstanding, and while these warrants are outstanding, it may be more difficult to raise additional capital, and the outstanding warrants may adversely affect our stock price and cause dilution to existing stockholders.

As of September 30, 2020, we had outstanding warrants to purchase 5,148,108 shares of our common stock. We may find it more difficult to raise additional capital while these warrants are outstanding. Further, the terms on which we may obtain additional financing during the period any of the warrants remain outstanding may be adversely affected by the existence of these warrants. In addition, sales of shares of our common stock issuable upon exercise of the warrants could have a depressive effect on the price of our stock, particularly if there is not a coinciding increase in demand by purchasers of our common stock, and

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exercise of the warrants may cause dilution in the interests of other stockholders as a result of the additional common stock that would be issued upon exercise.

We do not currently intend to pay cash dividends on our common stock and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.

We have never declared or paid any cash dividends on our common stock, and we currently intend to retain future earnings, if any, to fund the development and growth of our business. Therefore, we do not expect to declare or pay any dividends on our common stock for the foreseeable future. As a result, your ability to receive a return on an investment in our common stock will depend on any future appreciation in the market value of our common stock. There is no guarantee that our common stock will appreciate or even maintain the price at which you purchased it.

Anti-takeover provisions in our amended and restated certificate of incorporation and amended and restated bylaws, as well as provisions in Delaware law, might discourage, delay or prevent a change of control of our company or changes in our management and, therefore, depress the trading price of our common stock.

Our amended and restated certificate of incorporation, amended and restated bylaws and Delaware law contain provisions that could have the effect of rendering more difficult or discouraging an acquisition deemed undesirable by our board of directors. Our corporate governance documents include provisions:

•providing for three classes of directors with the term of office of one class expiring each year, commonly referred to as a staggered board;

•authorizing blank check preferred stock, which could be issued with voting, liquidation, dividend and other rights superior to our common stock;

•limiting the liability of, and providing indemnification to, our directors;

•limiting the ability of our stockholders to call and bring business before special meetings and to take action by written consent in lieu of a meeting;

•requiring advance notice of stockholder proposals for business to be conducted at meetings of our stockholders and for nominations of candidates for election to our board of directors;

•controlling the procedures for the conduct and scheduling of board and stockholder meetings;

•limiting the determination of the number of directors on our board and the filling of vacancies or newly created seats on the board to our board of directors then in office; and

•providing that directors may be removed by stockholders only for cause.

These provisions, alone or together, could delay hostile takeovers and changes in control or changes in our management.

As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the Delaware General Corporation law, which prohibits a publicly-held Delaware corporation from engaging in a business combination with an interested stockholder, generally a person which together with its affiliates owns, or within the last three years has owned, 15% of our voting stock, for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner.

The existence of the foregoing provisions and anti-takeover measures could limit the price that investors might be willing to pay in the future for shares of our common stock. They could also deter potential acquirers of our company, thereby reducing the likelihood that our stockholders could receive a premium for their common stock in an acquisition.

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We are an “emerging growth company,” and as a result of the reduced disclosure and governance requirements applicable to emerging growth companies, our common stock may be less attractive to investors.

We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”), and we intend to take advantage of some of the exemptions from reporting requirements that are applicable to other public companies that are not emerging growth companies, including:

•being permitted to provide only two years of audited financial statements, in addition to any required unaudited interim financial statements, with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure;

•not being required to comply with the auditor attestation requirements in the assessment of our internal control over financial reporting;

•not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements;

•reduced disclosure obligations regarding executive compensation; and

•not being required to hold a non-binding advisory vote on executive compensation or obtain stockholder approval of any golden parachute payments not previously approved.

We cannot predict whether investors will find our common stock less attractive because we will rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile. We may take advantage of these reporting exemptions until we are no longer an emerging growth company. We will remain an emerging growth company until December 31, 2020, the end of the fiscal year following the fifth anniversary of the first sale of our common equity securities pursuant to an effective registration statement filed under the Securities Act.

Under Section 107(b) of the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

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GENERAL RISK FACTORS

We may enter into or seek to enter into business partnerships, combinations and/or acquisitions which may be difficult to integrate, disrupt our business, divert management attention or dilute stockholder value.

We may enter into business partnerships, combinations and/or acquisitions. We have limited experience in making acquisitions, which are typically accompanied by a number of risks, including:

•the difficulty of integrating the operations and personnel of the acquired companies;

•the potential disruption of our ongoing business and distraction of management;

•potential unknown liabilities and expenses;

•the failure to achieve the expected benefits of the combination or acquisition;

•the maintenance of acceptable standards, controls, procedures and policies; and

•the impairment of relationships with employees as a result of any integration of new management and other personnel.

If we are not successful in completing acquisitions that we may pursue in the future, we would be required to reevaluate our business strategy and we may have incurred substantial expenses and devoted significant management time and resources in seeking to complete the acquisitions. In addition, we could use substantial portions of our available cash as all or a portion of the purchase price, or we could issue additional securities as consideration for these acquisitions, which could cause our stockholders to suffer significant dilution.

Failure in our information technology systems, including by cybersecurity attacks or other data security incidents, could significantly disrupt our operations.

Our operations depend, in part, on the continued performance of our information technology systems. Our information technology systems are potentially vulnerable to physical or electronic break-ins, computer viruses and similar disruptions. Failure of our information technology systems could adversely affect our business, profitability and financial condition. As a result of the COVID-19 pandemic, we may face increased cybersecurity risks due to our reliance on internet technology and the number of our employees who are working remotely, which may create additional opportunities for cybercriminals to exploit vulnerabilities. Although we have information technology security systems, a successful cybersecurity attack or other data security incident could result in the misappropriation and/or loss of confidential or personal information, create system interruptions, or deploy malicious software that attacks our systems. It is possible that a cybersecurity attack might not be noticed for some period of time. The occurrence of a cybersecurity attack or incident could result in business interruptions from the disruption of our information technology systems, or negative publicity resulting in reputational damage with our shareholders and other stakeholders and/or increased costs to prevent, respond to or mitigate cybersecurity events. In addition, the unauthorized dissemination of sensitive personal information or proprietary or confidential information could expose us or other third parties to regulatory fines or penalties, litigation and potential liability, or otherwise harm our business.

Substantial future sales of shares by existing stockholders, or the perception that such sales may occur, could cause our stock price to decline.

If our existing stockholders, particularly our directors and executive officers, are perceived by the public market as intending to sell substantial amounts of our common stock, the trading price of our common stock could decline significantly. Sales of a substantial number of shares of our common stock in the public market, or the perception that these sales might occur may reduce the prevailing market price of our common stock and make it more difficult for you to sell your common stock at a time and price that you deem appropriate. In addition, certain holders of our common stock and warrants to purchase our common stock are entitled to rights with respect to the registration of their shares under the Securities Act of 1933, as amended (“Securities Act”). As long as the registration statements covering the resale of such shares remain in effect, such shares shall be freely tradable without restriction under the Securities Act, except for shares held by affiliates, as defined in Rule 144 under the Securities Act. Any sales of securities by existing stockholders could have a material adverse effect on the market price of our common stock.

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If equity research analysts do not publish research or reports, or publish unfavorable research or reports about us, our business or our market, our stock price and trading volume could decline.

The trading market for our common stock depends in part on the research and reports that securities and industry analysts publish about us or our business. If one or more of the analysts who covers us downgrades our stock or publishes unfavorable research about our business, or if our clinical trials or operating results fail to meet the analysts’ expectations, our stock price would likely decline. If one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly, demand for our stock could decrease, which could cause our stock price and trading volume to decline.

Requirements associated with being a public reporting company will continue to increase our costs significantly, as well as divert significant company resources and management attention.

As a public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (“Exchange Act”) and the other rules and regulations of the SEC. Compliance with the various reporting and other requirements applicable to public reporting companies require considerable time, attention of management, and financial resources.

Further, the listing requirements of the Nasdaq Capital Market require that we satisfy certain corporate governance requirements relating to director independence, stockholder meetings, approvals and voting, soliciting proxies, conflicts of interest and a code of conduct. Our management and other personnel will need to devote a substantial amount of time and financial resources to ensure that we comply with all of these requirements. These reporting and corporate governance requirements, coupled with the increase in potential litigation exposure associated with being a public company, could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors or board committees or to serve as executive officers, or to obtain certain types of insurance, including directors’ and officers’ insurance, on acceptable terms.

Any changes we make to comply with these obligations may not be sufficient to allow us to satisfy our obligations as a public company on a timely basis, or at all.

If we fail to maintain proper and effective internal controls, our ability to produce accurate financial statements on a timely basis could be impaired.

We are subject to the reporting requirements of the Exchange Act, certain provisions of the Sarbanes-Oxley Act and the rules and regulations of the Nasdaq Capital Market. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal controls over financial reporting.

If we are not able to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, or if we are unable to maintain proper and effective internal controls, we may not be able to produce timely and accurate financial statements. If that were to happen, the market price of our stock could decline, and we could be subject to sanctions or investigations by Nasdaq, the SEC or other regulatory authorities.

Our disclosure controls and procedures may not be effective to ensure that we make all required disclosures.

As a public reporting company, we are subject to the periodic 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, 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.

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Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3.    Defaults Upon Senior Securities

None.

Item 4.    Mine Safety Disclosures

Not Applicable.

Item 5.    Other Information

None.

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Item 6.    Exhibits

Exhibit number	Description
10.1#	Business Understanding Agreement, dated September 13, 2018, by and between the Company and CSP Technologies, Inc. (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on August 6, 2020 (File No. 001-36570)).
10.2#	Amendment No. 1 to Business Understanding Agreement, dated July 31, 2020, by and between the Company and CSP Technologies, Inc. (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on August 6, 2020 (File No. 001-36570)).
10.3†#	Master Services Agreement, dated August 6, 2020, by and between the Company and Eversana Life Science Services, LLC.
31.1†	Certification of Principal Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2†	Certification of Principal Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1†*	Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS†	Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
101.SCH†	Inline XBRL Taxonomy Extension Schema Document
101.CAL†	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF†	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB†	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE†	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104†	Cover Page Interactive Data File (embedded within the Inline XBRL document)

†	Filed herewith
#	Certain portions of this exhibit have been redacted pursuant to Item 601(b)(10) of Regulation S-K. A copy of the omitted portions will be furnished supplementally to the Securities and Exchange Commission upon request.
*	Exhibit 32.1 is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, nor shall such exhibit be deemed to be incorporated by reference in any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as otherwise specifically stated in such filing.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated: November 13, 2020	Zosano Pharma Corporation (Registrant)
	/s/ Steven Lo
	Steven Lo
	Chief Executive Officer (Principal Executive Officer)
	/s/ Christine Matthews
	Christine Matthews
	Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

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EX-10.3

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed. EXECUTION COPY MASTER SERVICES AGREEMENT This Master Services Agreement (the “Agreement”) is made on August 6, 2020 (the “Effective Date”) by and between Zosano Pharma Corporation, with a place of business at 34790 Ardentech Court, Fremont, California 94555 (“Zosano”); and Eversana Life Science Services, LLC, with a place of business at 190 N. Milwaukee Street, Milwaukee, WI 53202 (“Eversana”). Zosano and Eversana are hereinafter referred to individually as a “Party” and collectively as the “Parties”. BACKGROUND Whereas, Zosano is a pharmaceutical company that is developing the Product (as defined below) to treat migraines; Whereas, Eversana is a life sciences services company that has experience supervising and managing sales teams that provide marketing and promotional services related to pharmaceutical products; and Whereas, Zosano wishes to engage Eversana to supervise and manage the day to day Commercialization of the Product in the Territory (as defined below) under the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth below, and other consideration received by the Parties, the Parties hereby agree as follows: 1. DEFINITIONS For the purposes of this Agreement, the following words and expressions shall have the stated definitions: 1.1. “Act” means the Federal Food, Drug, and Cosmetic Act (21 U.S.C. §§ 301 et seq.), as amended from time to time, together with any rules, regulations, guidances, guidelines and requirements of the FDA as may be in effect from time to time. 1.2. “Adverse Event” means the development of an undesirable medical condition or the deterioration of a pre-existing medical condition following or during exposure to the Product, whether or not considered causally related to the Product, the exacerbation of any pre- existing condition(s) occurring following or during the use of the Product or any other adverse event, adverse experience, adverse drug experience, life-threatening adverse drug experience, serious adverse drug experience, or unexpected adverse drug experience as defined and/or as described in the FDA’s Investigational New Drug safety reporting and post-marketing reporting regulations, 21 C.F.R. § 312.32 and § 314.80, respectively, as they may be amended from time to time. For purposes of this Agreement, without limiting the forgoing, “undesirable or unexpected medical condition” includes symptoms (e.g., nausea, chest pain), signs (e.g., tachycardia, enlarged liver) or the abnormal results of an investigation (e.g., laboratory findings, electrocardiogram), including without limitation unfavorable side effects, toxicity, injury, overdose, sensitivity reactions or failure of the Product to exhibit its expected pharmacologic/biologic effect.

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed. 1.3. “Affiliate” means any entity that is, directly or indirectly, controlled by, under common control with, or in control of a party, where “control” means power to elect or appoint a majority of directors or to direct the management of an entity. 1.4. “Anti-Corruption Laws” means the Foreign Corrupt Practices Act of 1977, as amended, the UK Bribery Act 2010, the Anti-Kickback Statute, the False Claims Act, the Department of Health and Human Services Office of Inspector General Compliance Program Guidance for Pharmaceutical Manufacturers, released April 2003, the Antifraud and Abuse Amendment to the Social Security Act, and any other applicable law, rule, regulation or industry code governing anti-bribery and anti-corruption laws and laws for the prevention of kickbacks, fraud, abuse, racketeering, money laundering or terrorism. 1.5. “Applicable Law” means (a) all applicable laws, rules and regulations, including without limitation any applicable rules, regulations, guidelines or other requirements of Governmental Authorities that may be in effect in the Territory from time to time during the Term, including without limitation (i) the Act, (ii) the PDMA, (iii) Anti-Corruption Laws, (iv) all federal, state or local statutes, laws, ordinances, regulations or guidelines relating to employment, safety and health of employees and the withholding and payment of required taxes with respect to employees, and (v) all federal, state or local statutes, laws, ordinances, regulations or guidelines relating to data protection and privacy, including without limitation the United States Department of Health and Human Services privacy rules under the Health Insurance Portability and Accountability Act and the Health Information Technology for Economic and Clinical Health Act and (b) the PhRMA Code on Interactions with Healthcare Professionals. 1.6. “Arising Product IP” means all Know-How and other Intellectual Property Rights relating to the Product arising out of or in connection with either Party’s or their respective Affiliates’ activities under or in connection with this Agreement. Arising Product IP excludes any Eversana IP or any Zosano IP. 1.7. “Business Day” means a day on which companies in the United States are generally open for business. 1.8. “Change of Control” means (a) the closing of a merger, consolidation, liquidation or reorganization of Zosano into or with another company or other legal person, after which merger, consolidation, liquidation or reorganization the capital stock of Zosano outstanding prior to consummation of the transaction is not converted into or exchanged for or does not represent more than 50% of the aggregate voting power of the surviving or resulting entity; (b) the direct or indirect acquisition by any person (as the term “person” is used in Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended) of more than 50% of the voting capital stock of Zosano, in a single or series of related transactions; or (c) the sale, exchange, or transfer of all or substantially all of the assets of Zosano to which this Agreement pertains (other than a sale, exchange, or transfer to one or more entities where the stockholders of the Company immediately before such sale, exchange or transfer retain, directly or indirectly, at least a majority of the beneficial interest in the voting stock of the entities to which the assets were transferred). 1.9. “Commercial Launch” is the date of first commercial sale of the Product to a Customer in the Territory. 2

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed. 1.10. “Commercial Services” means the services set forth in Exhibit B. 1.11. “Commercialization,” “Commercialize” and “Commercializing” mean any and all customary processes and activities undertaken by a pharmaceutical company to accomplish the commercialization of a pharmaceutical product, including without limitation with respect to the Product, the storage, distribution, sales activities, promotion and marketing of the Product and managing returns of the Product, the conduct of Patient Access Programs, Patient Assistance Programs, and reimbursement activities, but expressly exclude activities related to development or clinical testing of the Product or Manufacturing of the Product, and expressly excludes, as to Eversana, booking sales of the Product. For clarity, all product sales shall be booked by, and in the name of, Zosano. 1.12. “Commercialization Budget” means the budget for Commercializing the Product as approved by the Joint Management Committee, as such budget may be amended by the Joint Management Committee from time to time. 1.13. “Commercialization Fees” shall have the meaning set forth in Section 5.4. 1.14. “Commercialization Plan” means the plan for Commercializing the Product as approved by the Joint Management Committee, as such plan may be amended by the Joint Management Committee from time to time. 1.15. “Commercially Reasonable Efforts” means the efforts and resources which would be used (including the promptness in which such efforts and resources would be applied) by a similarly situated Party conducting similar activities for products of similar nature, consistent with generally accepted industry standards with regard to the activity to be undertaken. 1.16. “Competing Product” means a product with an indication approved by FDA for the [***]. 1.17. “Confidential Information” means all business, operational, marketing, financial, technical, manufacturing, scientific, or other information that is confidential or proprietary to a Party, or an Affiliate of a Party, provided by or on behalf of such Party or its Affiliate to the other Party pursuant to this Agreement and not generally known to the public. Confidential Information includes Manufacturing Data (which shall be deemed Confidential Information disclosed by Zosano) and this Agreement (and the terms hereof, which collectively shall be deemed Confidential Information disclosed by each Party). Confidential Information of the disclosing Party may include processes and methods, process specifications and designs, inventions, Know-How, intellectual property, business and marketing plans, financial information, customer data, research and development activities and other materials or information relating to business or activities which are not generally known to the public, all confidential information of Third Parties in the possession of the disclosing Party; and all notes, analysis, compilations, studies, summaries and other material prepared by or for the disclosing Party containing or based, in whole or in part, on any information included in the foregoing. 1.18. “Corporate Trademarks” means the trade names, corporate names and corporate logos of Zosano or Zosano’s Affiliates, not specific to the Product, that are used in the Prescribing Information, Promotional Materials, training materials or other material provided hereunder or that are authorized or approved by Zosano for use in connection with Eversana’s performance of activities under this Agreement. 3

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed. 1.19. “Customer” means any Third-Party purchaser of the Product that is not an Affiliate of a Party. 1.20. “Dedicated Employees” shall have the meaning set forth in Section 3.2.e. 1.21. “Detail” means a face-to-face visit during which a Sales Force representative makes a presentation with respect to the Product to an Eligible Prescriber, such that (i) the relevant characteristics of the Product are described by the Sales Force representative in a fair and balanced manner consistent with the requirements of this Agreement and Applicable Law, (ii) the Product is the only product presented in such presentation to an Eligible Prescriber and (iii) such Eligible Prescriber is given an opportunity to prescribe or place an order for Product in accordance with this Agreement. When used as a verb, “Detail” means to perform a Detail. 1.22. “Eligible Prescriber” means a health care provider that has the authority to prescribe the Product under Applicable Law and, in the event the Commercialization Plan includes the provision of Product samples by members of the Sales Force, Eligible Prescriber shall further mean, as to the provision of Product samples, a health care provider that is allowed to receive Product samples. 1.23. “Eversana IP” means all Know-How and other Intellectual Property Rights (a) in Eversana’s possession and control of as of the Effective Date of this Agreement (“Eversana Pre- existing IP”) or (b) independently developed by or on behalf of Eversana during the Term outside of the scope of this Agreement. 1.24. “Executive Officers” means, with respect to Zosano, its Chief Executive Officer, and with respect to Eversana, its Chief Executive Officer. 1.25. “FDA” means the Unites States Food and Drug Administration. 1.26. “Field” means the [***]. 1.27. “Field Alert” means a field alert report, as required under 21 C.F.R. § 314.81(b)(1), as such regulation may be amended from time to time. 1.28. “Functional Services” means the services set forth in Exhibit C. 1.29. “Governmental Authority” means any federal, state or local court, administrative agency, commission or other governmental authority or instrumentality, including without limitation the FDA, having authority in the United States over the activities contemplated hereunder. Governmental Authority shall include any Regulatory Authority. 1.30. “Intellectual Property Rights” means all intellectual property rights anywhere in the world, whether or not registered, including without limitation patents, utility models, rights in inventions, trademarks, service marks, rights in trade dress (including without limitation product configuration and packaging), rights in business and trade names, rights in domain names, designs, copyrights, trade secrets, rights in Know-How and confidential information, and, in each case, rights of a similar or corresponding character. 1.31. “Joint Management Committee” or “Committee” has the meaning set forth in Section 4. 4

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed. 1.32. “Know-How” means all proprietary information related to a product or service, including without limitation all patentable and non-patentable inventions, discoveries, technologies, knowledge, trade secrets, experience, skill, techniques, methods, processes (including without limitation manufacturing processes), procedures, formulas, compounds, compositions of matter, assays, tests (including without limitation diagnostic tests), materials, specifications, descriptions, results and data (including without limitation Manufacturing Data and Regulatory Documentation), business or financial information or information of any type whatsoever, in any tangible or intangible form, marketing reports, business plans, standard operating procedures, and procedures. 1.33. “Manufacture” and “Manufacturing” mean all activities related to the manufacture of a pharmaceutical product for use or sale in the Territory, including without limitation manufacturing for clinical use or commercial sale, as well as compliance with Applicable Laws relating to the foregoing activities. 1.34. “Manufacturing Costs” means with respect to the Manufacture of Product (a) to the extent that Product is Manufactured by Zosano or its Affiliates, or by a Third Party contract manufacturing organization, the [***] incurred by Zosano or its Affiliate that are [***] attributable to such Manufacture and/or (b) to the extent that the Product is Manufactured by (i) a Third Party and subsequently subject to quality control and quality assurance activities conducted by Zosano or its Affiliates or (ii) Zosano or its Affiliates, the [***] cost of Manufacture of the Product or the performance of such activities, as calculated in a manner consistent with a costing methodology agreed to by the Joint Management Committee. 1.35. “Manufacturing Data” means all data, information, material, and documentation developed or generated with respect to the Manufacturing of a pharmaceutical product, including without limitation manufacturing and control data and other data and documentation requested by or submitted to a Regulatory Authority. 1.36. “NDA” means a New Drug Application filed with the FDA requesting permission to place a drug on the market in accordance with 21 CFR Part 314, and all amendments or supplements filed pursuant to the requirements of the FDA. 1.37. “NDA Approval” means the approval of an NDA by FDA for the Product in the Territory. 1.38. “NDA Approval Date” means date on which Zosano receives NDA Approval. 1.39. “Net Profit” means Net Sales, less the following: [***]. 1.40. “Net Sales” means the gross invoiced price (not including value added taxes, sales taxes or similar taxes) of Product actually sold to a Customer hereunder after deducting, if not previously deducted, from the amount invoiced or received: a. trade and quantity discounts other than early payment cash discounts that are actually allowed or granted; b. rebates, chargebacks and other allowances that are actually allowed or granted; c. credits or allowances actually given or made by Zosano to Customers for rejection or return of the Products to Zosano; 5

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed. d. retroactive price reductions that are actually allowed or granted; e. deductions to gross invoice price of such Product required by a Regulatory Authority or other Governmental Authority, including without limitation with respect to a Patient Access Program, Patient Assistance Program, couponing, discount cards or co-pay assistance program designed to provide a discount to the patient for a prescription for the Product; f. the annual fee on branded prescription pharmaceutical manufacturers and importers under the Affordable Care Act, to the extent attributable to the Product; g. a reasonable reserve up to [***] percent ([***]%) of the amount invoiced to cover bad debt, early payment cash discounts, transportation and insurance; and h. the standard inventory cost of devices or delivery systems that are included as part of, and intended for, dispensing or administering the Product. 1.41. “Other Reportable Information” means any communication or other information that is otherwise required to be reported by Eversana to Zosano in accordance with the training to be provided under this Agreement, other than Adverse Events. 1.42. “Out-of-Pocket Costs” means amounts paid by a Party to Third Parties for goods and services required for such Party to perform its obligations under this Agreement. 1.43. “Patient Access Programs” means programs to assist patients with filling their prescriptions, including, without limitation, through co-pay assistance, through help desks, triage procedures, bailment programs, and reduced cost prescription fulfillment to certain eligible patients in financial need. 1.44. “Patient Assistance Programs” means any program to offer the Product free of charge, or at a significant discount, to individuals who are unable to pay for their medication, alternatively known as indigent drug programs, charitable drug programs or medication assistance programs. 1.45. “PDMA” means the Prescription Drug Marketing Act of 1987, as amended from time to time, together with any rules, regulations and requirements promulgated thereunder and in effect from time to time. 1.46. “Person” means any individual, partnership, limited partnership, limited liability company, joint venture, syndicate, sole proprietorship, corporation, unincorporated association, trust, trustee, executor, administrator or other legal personal representative, or any other legal entity, including without limitation a Governmental Authority. 1.47. “Pre-Commercial Fees” means the total fees (including but not limited to Out-of-Pocket Costs) agreed upon by the Committee to be paid by Zosano to Eversana in accordance with the terms set forth herein, for Eversana to perform the Pre-Commercial Services to the extent such fees and costs are incurred prior to Commercial Launch. 1.48. “Pre-Commercial Budget” means the budget for the conduct of the Pre-Commercial Services by Eversana hereunder as approved by the Joint Management Committee, as 6

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed. such budget may be amended from time to time. 1.49. “Pre-Commercial Plan” means the plan for the conduct of the Pre-Commercial Services by Eversana hereunder as approved by the Joint Management Committee, as such plan may be amended from time to time. 1.50. “Pre-Commercial Services” means the services set forth in Exhibit A. 1.51. “Prescribing Information” means the FDA-approved labeling for the Product. 1.52. “Product” means Qtrypta (zolmitriptan intracutaneous microneedle system). 1.53. “Product Copyrights” means all copyrightable subject matter related to the Product included in the Prescribing Information, the Promotional Materials, training materials or other material provided hereunder or otherwise authorized or approved by Zosano under this Agreement for use by Eversana in performing the Services. 1.54. “Product Quality Complaint” means any and all manufacturing or packaging-related complaints related to the Product, including without limitation (a) any complaint involving the possible failure of the Product to meet any of the specifications for the Product and (b) any dissatisfaction with the design, package or labeling of the Product. 1.55. “Product Trademarks” means the trademarks used for the Product that are controlled by Zosano during the Term in the Territory, including without limitation any such trademarks for the Product used in the Prescribing Information, Promotional Materials, training materials or other material provided hereunder or otherwise authorized or approved by Zosano, excluding the Corporate Trademarks. 1.56. “Regulatory Authority” means any national, federal, state, or local governmental or regulatory authority, agency, department, bureau, commission, council or other government entity located in the Territory, including without limitation FDA, Centers for Medicare and Medicaid Services (CMS), and the Office of Inspector General of the U.S. Department of Health and Human Services, regulating or otherwise (a) exercising authority with respect to the development, manufacture, approval, registrations, licensing, or commercialization of the Product in such regulatory jurisdiction in the Territory, or (b) having legal authority with respect to the exploitation of the Product in the Territory. 1.57. “Regulatory Documentation” means all applications, registrations, licenses, authorizations and approvals, all correspondence submitted to or received from Regulatory Authorities (including without limitation minutes and official contact reports relating to any communications with any Regulatory Authority) and all supporting documents and all clinical studies and tests, relating to the Product, and all data contained in any of the foregoing, including without limitation all Regulatory Authority approvals, regulatory drug lists, advertising and promotion documents and related FDA submissions and correspondence, adverse event files and complaint files and related FDA submissions. 1.58. “Sales Force” shall have the meaning set forth in Section 3.2.e. 1.59. “Sales & Promotion Policies” means Eversana’s compliance policies and other policies generally applicable to the Commercialization of pharmaceutical products in the Territory, in 7

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed. each case approved by Zosano, as the same may be amended, modified or supplemented from time to time upon notice by Eversana to Zosano, provided that any such amendment, modification or supplement is approved by the Committee. 1.60. “Services” means: (a) the day-to-day supervision and management by Eversana of the Commercialization of the Product in the Territory, including without limitation the Pre- Commercial Services, the Commercial Services, and the Functional Services and any other services as may be set forth in a Statement(s) of Work. 1.61. “SGA Costs” means a fixed fee for Zosano’s standard general and administrative costs, which shall be equal to [***] percent ([***]%) of Net Sales for the applicable reporting period. 1.62. “Statement(s) of Work” shall have the meaning set forth in Section 2.8. 1.63. “Term” shall have the meaning set forth in Section 14.1. 1.64. “Territory” means the United States and all of its territories and possessions. 1.65. “Third Party” means any Person other than Zosano, Eversana and their respective Affiliates. 1.66. “Third Party Royalties” means amounts payable by Zosano to Third Parties for licenses or rights related to the Product, which solely for purposes of this Agreement shall be deemed to fixed at [***] percent ([***]%) of Net Sales throughout the Term. 1.67. “Zosano IP” means all Know-How and other Intellectual Property Rights (a) in Zosano’s possession and control of as of the Effective Date of this Agreement (“Zosano Pre-existing IP”) or (b) independently developed by or on behalf of Zosano during the Term outside the scope of this Agreement. 2. APPOINTMENT, EXCLUSIVITY AND STATEMENTS OF WORK 2.1. Appointment. On and from the Effective Date and for the duration of the Term, and subject to the terms of this Agreement, Zosano appoints Eversana to perform the Services, and Eversana hereby agrees to perform the Services in accordance with this Agreement and Applicable Law. Eversana shall use [***] to perform the Services and shall maintain a reasonably adequate number of qualified and trained staff to execute the Services in a [***] and workman like manner in accordance with industry standards. 2.2. Exclusivity. a. License Grant. During the Term, subject to the terms and conditions of this Agreement, Zosano hereby grants Eversana (and [***] (the “Permitted Eversana Affiliate”) a limited, non-transferable, non-sublicensable (except with the prior written consent of Zosano at Zosano’s sole discretion), co-exclusive license under the Zosano IP, Zosano’s interest in the Arising Product IP, the Product Trademarks, and the Corporate Trademarks, solely to the extent necessary for Eversana to perform its obligations and provide the Services in the Territory under this Agreement (the “License”). For clarity, the License does not grant Eversana any right to Manufacture the Product. 8

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed. b. Non-Compete. During the Term: (i) no [***] shall, either directly or indirectly, in conjunction with any Third Party or through any other business arrangement, Commercialize a Competing Product in the Territory, including without limitation by [***] (ii) Eversana shall not transfer any [***] to a program that involves [***] for [***]; and (iii) all Eversana employees providing services [***] shall not provide services in connection with any other product for [***] and all such Eversana employees [***] the use of or access to Zosano Confidential Information by employees or independent contractors providing services for [***]. [***]. 2.3. Other Rights and Obligations. a. Eversana acknowledges and agrees that, as between the Parties, Zosano owns all rights, title and interest in and to the Intellectual Property Rights and regulatory rights in the Product. Zosano reserves the right under the Zosano IP, Zosano’s interest in the Arising Product IP, the Product Trademarks, and the Corporate Trademarks, to market and offer for sale Product in the Field in the Territory, through itself or through its Affiliates solely for the purpose of supporting Eversana’s Commercialization of the Product or as provided in Section 2.3.b. Without limiting the foregoing, Zosano shall own all right, title and interest in and to the Product, the Zosano IP, the Product Trademarks, the Corporate Trademarks, and the Product Copyrights, and Arising Product IP, and Eversana shall and hereby does assign to Zosano any and all of its right, title, and interest in, to, and under all Arising Product IP. As requested by Zosano, Eversana shall assign to Zosano all right, title and interest in Arising Product IP, if any, developed by Eversana or its employees during the Term. b. If Zosano desires to obtain Third Party support for Commercialization activities for the Product that are not the subject of a then-existing SOW, Zosano shall first notify Eversana of the nature of the support it is seeking and other material information regarding such potential support. If Eversana reasonably demonstrates that it can provide the relevant support at a quality and cost and in a time period comparable to that available from Third Parties, then the Parties will negotiate in good faith for up to [***] days, or for a period otherwise agreed upon in writing by the parties the terms pursuant to which Eversana would provide such support under a new SOW. If the Parties do not enter into an SOW within such [***] day time period, or if Eversana fails to reasonably demonstrate that it can provide the relevant support at a quality and cost and in a time period comparable to that available from Third Parties, then Zosano shall have the right to engage a Third Party to provide such support. 2.4. Use of Affiliates and Third Parties. With the prior written consent of Zosano (except for the Permitted Eversana Affiliate for which prior consent shall not be required), Eversana shall have the right to perform any or all of its obligations and exercise any or all of its rights under this Agreement through any of its Affiliates or through a Third Party; provided, however, that (a) any such Affiliate or Third Party shall be bound by the obligations set forth in this Agreement, (b) any actions, omissions or conduct by such Affiliate or Third Party shall be deemed to be actions, omissions or conduct of Eversana, and (c) Eversana shall remain liable for all acts and omissions of such Affiliates or Third Parties and shall remain responsible for the performance of its obligations under this Agreement. 2.5. Initial Delivery of Information and Materials. Zosano shall promptly deliver to Eversana 9

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed. copies or embodiments of all information and materials controlled by Zosano (including Zosano IP, as determined by Zosano) relating to the Product that Zosano in its reasonable discretion deems to be necessary for Eversana to perform the Services in the Territory in accordance with the terms and conditions of this Agreement and Applicable Law. 2.6. Provision of Assistance and Support. Upon written request by Eversana, Zosano shall promptly provide to Eversana or if applicable its Affiliates, such reasonable and currently available information and materials controlled by Zosano relating to the Product as is necessary for Eversana to perform the Services in the Territory in accordance with the terms and conditions of this Agreement and Applicable Law. 2.7. Non-Solicitation. During the Term of this Agreement and, except as permitted under Section 14.3.b below, for a period of [***] after the Term, neither Party shall, directly or indirectly, in any manner solicit for employment, or hire, any employee or contractor of the other Party or induce any such employee or contractor to terminate their employment or contractual relationship with the other Party. A general advertisement or notice of a job listing or opening or other similar general publication of a job search or availability to fill employment positions, including without limitation on the internet, shall not be construed as a solicitation or inducement for the purposes of this provision. If either Party breaches this Section 2.7, the breaching Party shall pay a sum to the other Party equal to [***] payable by the non-breaching Party to the relevant employee, plus the recruitment costs incurred by the non-breaching Party in replacing such individual. 2.8. Statement(s) of Work. Certain Services to be provided by Eversana to Zosano, such as the provision of a Sales Force and other Pre-Commercial Services and Commercial Services, are set forth in detail in this Agreement. The Parties acknowledge and agree that to the extent the Parties agree that Eversana will provide additional Services to Zosano in furtherance of the Commercialization of the Product in the Territory, the details of such additional services shall be set forth in one or more “Statement(s) of Work” or “SOW”. For example, and without limitation, the Parties agree to enter into Statements of Work addressing the provision by Eversana of patient support and market access services. Unless specifically so provided in a Statement of Work, any terms and conditions within a Statement of Work that contradict the terms and conditions set forth in this Agreement shall be null, void and of no force or effect, it being understood and agreed by the Parties that the terms and conditions set forth in this Agreement shall govern and control to the extent of a conflict with the terms and conditions of a SOW with respect to the Services provided by Eversana and the overall relationship of the Parties. Statements of Work are intended solely to set forth a description of the Services not otherwise set forth in this Agreement as well as applicable deliverables, schedules, milestones and payments (if not otherwise set forth herein), with the terms and conditions of this Agreement continuing to apply to such Services in all other respects. 3. COMMERCIALIZATION 3.1. Alliance Managers. Each Party shall designate a single person (each, an “Alliance Manager”) to oversee contact between the Parties for all matters related to Commercialization of the Product in the Field in the Territory by Eversana on behalf of Zosano hereunder. The Alliance Managers shall: (a) strive to function as a single point of contact in all substantive communications with the other Party; and (b) perform any other 10

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed. functions agreed in writing by the Parties. Each Party may replace its Alliance Manager at any time by written notice to the other Party. The initial Alliance Managers are set forth on Exhibit E. 3.2. Pre-Commercial Plan and Pre-Commercial Budget; Commercialization Plan and Commercialization Budget a. Content. Promptly after the Effective Date, Eversana shall prepare and submit to the Committee for review and approval (i) a Pre-Commercial Plan and Pre- Commercial Budget and (ii) a Commercialization Plan and a Commercialization Budget, in each case of (i)-(ii), for the relevant Services to be conducted by Eversana on behalf of Zosano for the Product in the Territory hereunder. Eversana is responsible for all activities under the Pre-Commercial Plan and Commercialization Plan, except to the extent the Pre-Commercial Plan and Commercialization Plan accounts for activities and functions as set forth in Exhibit D, which such activities and functions shall instead be provided by Zosano personnel in connection with this Agreement. The Pre-Commercial Budget and Commercialization Budget will include [***]. All subsequent versions of updates to the Pre-Commercial Plan, Pre- Commercial Budget, Commercialization Plan and Commercialization Budget are subject to the written approval of the Committee. It is anticipated that the total amount of Pre-Commercial Fees and Commercialization Fees to be incurred by Eversana and paid or reimbursed by Zosano [***] during the entire Term shall be approximately Two Hundred and Fifty Million Dollars ($250,000,000), subject to the terms and conditions set forth herein. b. Updates. [***], or on another frequency agreed to by the Committee, Eversana shall update the Pre-Commercial Plan, Pre-Commercial Budget, Commercialization Plan and Commercialization Budget to cover Services to be provided during the remainder of the Term. Eversana shall submit such updated Commercialization Plans and Commercialization Budgets to the Committee for review and approval. Within [***] days following such submission, the Committee shall either approve the Pre-Commercial Plan, Pre-Commercial Budget, Commercialization Plan and Commercialization Budget prepared by the Parties or approve a modified Commercialization Plan and Commercialization Budget reflecting adjustments agreed upon by the Committee. Any proposed changes to a previously approved Commercialization Plan or Commercialization Budget shall not take effect unless and until reviewed and approved in writing by the Committee. c. Eversana Responsibilities and Expenses. Eversana shall provide the Services as set forth in the Pre-Commercial Plan and Commercialization Plan and shall be responsible for all costs incurred under the Pre-Commercial Budget and Commercialization Budget, as well as under any additional SOW entered into by the Parties, subject to the reimbursement and payment obligations set forth in Section 5 below. d. Zosano Responsibilities. Zosano shall provide the functions and responsibilities set forth herein, including without limitation Product Manufacturing and obtaining and maintaining all regulatory approvals for the Product in the Territory as required by Applicable Law. 11

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed. e. Sales Force. Eversana shall engage employee sales representatives as set forth in the Commercialization Plan (the “Sales Force”) to Commercialize the Product in the Territory and in accordance with this Agreement. Eversana shall engage at least [***] Eversana sales representatives to so Commercialize the Product in the Territory upon the date agreed to by the Committee and set forth in the Commercialization Plan and such sales representatives shall be [***] dedicated to the Product to perform the Commercialization activities for the Product as set forth under Exhibit B (the “Dedicated Employee(s)”). For clarity, and by way of example only, [***]. Eversana would be permitted, subject to the Committee’s written approval, to decrease the number of sales representatives in the Sales Force [***] as appropriate due to [***]. 3.3. Field Observations and Sales Meetings. a. Upon Zosano’s request, Eversana shall conduct a reasonable number of field observations per year, with a minimum of [***] per year per Eversana sales representative (which field observations Zosano may also attend in its reasonable discretion) during normal business hours to evaluate overall quality assurance of the Detailing of the Product by the Sales Force representative. If any such observations indicate that a Detail is not being delivered or received in accordance with the terms set forth in this Agreement or in compliance with Applicable Laws, Eversana shall promptly report such deficiencies to Zosano, and the Alliance Managers shall discuss what, if any, corrective plan of action is required to address such issue; provided that the Committee shall have the sole authority to determine whether to change the content of the Promotional Materials or messages being delivered with respect to the Product during Details. b. At any sales meetings (e.g. annual sales meetings, training meetings, plan of action meetings) in the Territory during which the Product is discussed, Eversana shall have a reasonable number of Eversana personnel with responsibilities for the Product attend such sales meetings (which meetings Zosano may also attend in its sole discretion) and, if necessary, communicate critical Product-related information (as determined by the Committee) at such meetings. 3.4. Training Program and Materials. Eversana shall train the members of the Sales Force, prior to such member performing any Commercialization activities in the Territory hereunder, with respect to: (i) Product knowledge; (ii) competitive product knowledge; (iii) compliance with Applicable Law; (iv) reporting of Adverse Events, Field Alerts, Product Quality Complaints and Other Reportable Information; (v) use of Product samples (if applicable) and Promotional Materials; and (vi) such other information the Committee deems necessary or appropriate. All such Sales Force training conducted by Eversana shall be in accordance with training materials prepared by Eversana and approved in writing by Zosano. Prior to Commercialization of the Product in the Territory, Eversana shall verify to the Committee that each Sales Force representative has (a) satisfactorily completed the initial training, (b) has completed role-playing scenarios of a Detail of the Product and has received a certification from Eversana of competence in connection therewith, and (c) shall verify on an annual basis that each Sales Force representative maintains any required licenses. 3.5. Promotional Materials. Eversana shall be responsible for designing and producing 12

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed. promotional, marketing and educational materials (in any form or medium), such as printed brochures, videos, and other materials for use by Sales Force representatives, distributors or medical providers or in advertisements or web sites (“Promotional Materials”) in coordination with and based on feedback from Zosano. Eversana shall provide Zosano with copies of all drafts of Promotional Materials in a timely manner to enable Zosano to review and approve in writing such Promotional Materials. Zosano is solely responsible for ensuring any and all Promotional Materials are reviewed and approved by appropriate medical, legal and regulatory personnel to ensure compliance with Applicable Laws. Eversana will not use any Promotional Materials in the performance of any Commercialization activities hereunder unless Zosano has approved such Promotional Materials in advance in writing. 3.6. Sales Reports. Without limiting Eversana’s reporting obligations elsewhere in this Agreement, within [***] days after the end of each calendar month, Eversana shall deliver to Zosano a report setting forth the total prescriptions for the Product written in the Territory (regardless if contacted by representatives of Eversana) during such calendar month broken out by Sales Force representative and territory. 3.7. No Registration of Trademarks and Copyrights. Eversana shall not use (other than in connection with the Services as approved by the Committee), seek to register or register, nor permit any of its Affiliates to use, seek to register or register, any trademark, service mark, name or logo, including without limitation as part of any domain name, social media handle or other identifiers, which is confusingly similar to, or a colorable imitation of, the Product Trademarks, Corporate Trademarks or Product Copyrights in any jurisdiction worldwide. Eversana shall not challenge, nor permit any of its Affiliates to challenge, Zosano’s or its Affiliates’ rights in, or the validity, enforceability, scope, or registerability of, any of the Product Trademarks, Corporate Trademarks or Product Copyrights or any registration or application therefor. 3.8. Channel Management Services. Promptly after the Effective Date, the Parties agree to negotiate in good faith the terms and conditions of an SOW whereby Eversana shall, on behalf of Zosano, manage and supervise the logistics, distribution, marketing (within the Eversana commercial sales organization), and sale of the Products and coordinate activities within its 3PL division for such logistics and distribution of the Products in the Territory (the “3PL SOW”). [***]. 4. MANAGEMENT OF THE COLLABORATION 4.1. Joint Management Committee. The Parties shall establish a committee (the “Joint Management Committee” or “Committee”) as more fully described in this Section 4. The Committee shall have review, oversight, and decision-making responsibilities for all Commercialization activities performed under this Agreement. Each Party agrees to keep the Committee informed of its progress and activities under this Agreement. The Committee shall convene at least [***], or more frequently as requested by either Party’s Alliance Manager, to discharge its responsibilities. The Alliance Managers shall meet at least [***]. 4.2. Membership. The Committee shall be comprised of [***] representatives (or such other number of representatives as the Parties may agree) from each of Zosano and Eversana. Each Party shall provide the other with a list of its initial members of the Committee no later than [***] days prior to the first scheduled meeting of the Committee, which shall be no later 13

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed. than [***] days after the Effective Date. Each Party may, in its reasonable discretion, invite non-member representatives of such Party to attend meetings of the Committee as non- voting participants, subject to the confidentiality obligations of Section 11. Each Party may replace any or all its representatives on the Committee at any time upon written notice to the other Party. Each representative of a Party shall have relevant expertise in pharmaceutical drug product Commercialization, and be suitable in seniority and experience and have been delegated the authority to make decisions on behalf of the applicable Party with respect to matters within the scope of the Committee’s responsibilities. Any member of the Committee may designate a substitute with comparable experience and expertise to attend and perform the functions of that member at any meeting of the Committee. Zosano shall designate a chairperson to oversee the operation of the Committee. Such chairperson shall confer with the Alliance Managers of both Parties prior to each Committee meeting to identify issues for review and discussion at each Committee meeting and circulate a meeting agenda at least [***] before the meeting. 4.3. Responsibilities. The Committee shall perform the following functions: a. review and approve the Pre-Commercial Plan and the Commercialization Plan or recommend amendments or revisions thereto; b. review and approve the Pre-Commercial Budget Commercialization Budget or recommend amendments or revisions thereto; c. [***]; d. review and approve payer contracting; e. monitor and assess the effectiveness and performance of Eversana’s Sales Force representatives hereunder and consider and decide (i) whether to expand or reduce the size of the Sales Force and (ii) whether the Sales Force deployment requires territory realignment; f. in the event the Parties execute the 3PL SOW, monitor and oversee the conduct of channel management services pursuant to the 3PL SOW, and any additional Services conducted pursuant to additional SOWs; g. coordinate the preparation of training materials and oversee and monitor the training, in each case in accordance with Section 3.4; h. review and approve Promotional Materials, provided that, pursuant to Section 3.5: (i) all such Promotional Materials will be reviewed and approved by Zosano and its medical, legal and regulatory personnel to ensure compliance with Applicable Laws (as set forth in Section 3.5 above) prior to Committee review, and (ii) the Committee will not be permitted to change any Promotional Materials without the prior written consent of Zosano; and i. in the event the Parties execute the 3PL SOW, review and approve channel management strategies and tactics. The Committee shall further serve as a forum for discussion and shall perform such 14

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed. other functions as may be agreed to by the Parties mutually in writing or as otherwise expressly specified elsewhere in this Agreement. 4.4. Decisions. Except as otherwise provided herein, with respect to Commercialization of the Product, all decisions of the Committee shall be made by consensus, with each Party having one vote. If the Committee cannot agree on a matter within its authority hereunder within [***] days after it has met and attempted to reach such decision, then, either Party may, by written notice to the other, have such issue referred to the Executive Officers for resolution. The Parties’ respective Executive Officers shall meet within [***] days after such matter is referred to them and shall negotiate in good faith to resolve the matter. If the Executive Officers are unable to resolve the matter within [***] days after the matter is referred to them, then the issue shall be finally resolved by Zosano. 5. Fees and Payments 5.1. Product Supply. Zosano shall supply the Product to Eversana for the purposes of performing the Services hereunder [***]. 5.2. Pre-Commercial Fees. [***] of all Pre-Commercial Fees shall be paid by Zosano to Eversana on a [***] basis, [***]. Eversana shall invoice Zosano for said [***] of such Pre- Commercial Fees on a [***] basis [***] and Zosano shall pay all undisputed amounts of such invoices within [***] days of receipt thereof. The balance of the Pre-Commercial Fees shall be treated as [***]. 5.3. Reporting of Sales; Calculation of Net Sales. Within [***] days after each month end, Eversana shall report to Zosano the [***] and other sales data that is suitable for use under generally accepted accounting principles (“GAAP”), as well as any other information reasonably necessary for Zosano to calculate Net Sales (including without limitation information regarding rebates, discounts, chargebacks and other deductions). 5.4. Payment to Eversana of Certain Fees and Costs. Subject to Section 5.6, on a [***] basis following receipt of monies from sales of the Product made in the Territory and at such time when Zosano has received from Eversana all necessary information and has the ability to recognize the sales of such Product on its balance sheet in accordance with GAAP, the following amounts shall be deducted from such Net Sales in accordance with Section 5.6 below and shall be paid to Eversana: (a) the agreed upon compensation as set forth in the Commercialization Budget for the applicable reporting period and (b) [***] (collectively “Commercialization Fees”). 5.5. Payment to Zosano of Certain Fees and Costs. Subject to Section 5.6, on a [***] basis following receipt of monies from sales of the Product made in the Territory and at such time when Zosano has received from Eversana all necessary information and has the ability to recognize the sales of such Product on its balance sheet in accordance with GAAP, the following amounts shall be deducted from such Net Sales in accordance with Section 5.6 below and shall be paid to Zosano (or retained by Zosano, as applicable): (a) Manufacturing Costs incurred for the applicable reporting period, (b) SGA Costs incurred for the applicable reporting period, and (c) Third Party Royalties incurred for the applicable reporting period. 5.6. Party Reimbursement. During each [***] in which Net Sales are generated, the payments to the Parties described in Sections 5.4 and 5.5 above, shall first be calculated and paid as 15

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed. set forth in this Section 5.6. First, a pool of available reimbursement funds shall be calculated for each Party out of Net Sales in such [***], which for each of Section 5.4 and Section 5.5 shall be equal to [***] percent ([***]%) of the Net Sales recognized by Zosano in accordance with GAAP during such [***] (such amount available for reimbursement under each of Section 5.4 and 5.5, respectively, a “Party Reimbursement Pool”). Zosano shall then pay to Eversana from the Party Reimbursement Pool [***] provided that Zosano shall not be required to pay in any [***] to Eversana any amounts [***] in excess of the Party Reimbursement Pool for [***] for such [***] (the “Limit”), and further provided that any such amounts payable to Eversana [***] that are not so deducted from the Party Reimbursement Pool [***] in a [***] by reason of the Limit shall roll forward to future [***] until such amounts have been fully deducted from the Party Reimbursement Pool [***]. Similarly, Zosano shall then deduct from the Party Reimbursement Pool [***] for such [***] the amounts Zosano is permitted to deduct [***], provided that if any amount Zosano is permitted to deduct in a [***] pursuant to [***] exceeds the Party Reimbursement Pool [***] for such [***] (such excess amounts, the “Excess”), Zosano shall roll forward to future [***] the Excess [***] 5.7. Profit Sharing. Following payments and deductions [***] from each Party Reimbursement Pool in accordance with Section 5.6, during the applicable [***], Zosano shall compensate Eversana by paying [***] ([***]%) of any remaining annual Net Profit, with Zosano retaining the remainder (“Profit Split”). Notwithstanding the prior sentence, to the extent Net Profits on annual Net Sales exceed [***] Dollars ($[***]), Zosano shall compensate Eversana by paying [***] ([***]%) of such portion of annual Net Profits (and Zosano retaining the remainder of such portion of annual Net Profits). The Parties shall agree on and implement an appropriate true-up mechanism to effect the foregoing allocation of annual Profit Split. Zosano shall provide to Eversana [***] estimates of the Profit Split it expects to distribute for such [***] in accordance with this Section 5.7. 5.8. Manner of Payment. Zosano shall pay to Eversana the amount required to effectuate the Profit Split in accordance with Section 5.7 above for each applicable reporting period by wire transfer to a bank account designated by Eversana. All payments owed under Sections 5.4, 5.5 and 5.6 shall be paid on a [***] basis, with such payment being made for the prior [***] no later than [***] days after the end of such prior [***] in which such amounts could be calculated. 5.9. Taxes. a. Except as provided in this Section 5.9, each Party shall be liable for all income and other taxes (including interest) imposed upon any payments received by such Party under this Agreement, including this Article 5. The amounts payable by a Party (the “paying Party”) to the other Party (the “receiving Party”) pursuant to this Agreement shall be paid free and clear of any and all taxes; provided that a paying Party shall be entitled to deduct and withhold from any amounts payable pursuant to this Agreement such taxes as are required to be deducted or withheld therefrom as required by Applicable Law. The paying Party shall deduct or withhold from the payments any taxes that it is required by Applicable Law to deduct or withhold; provided, however, that before making any such deduction or withholding, the paying Party shall give the receiving Party notice of the intention to make such deduction or withholding (such notice, which shall include the authority, basis and method of calculation for the proposed deduction or withholding, shall be given at least a reasonable period of time before such deduction or withholding is required, in order for 16

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed. such receiving Party to obtain reduction of or relief from such deduction or withholding in accordance with the following sentence). Notwithstanding the foregoing, if the receiving Party is entitled under any applicable tax treaty to a rate reduction of, or the elimination of, applicable withholding tax, it may deliver to the paying Party or the appropriate Governmental Authority (with the assistance of the paying Party to the extent that this is reasonably required and is expressly requested in writing) the prescribed forms necessary to reduce the applicable rate of withholding or to relieve the paying Party of its obligation to withhold such tax and the paying Party shall apply the reduced rate of withholding or dispense with withholding, as the case may be; provided that the paying Party has received evidence, in a form satisfactory to the paying Party, of the receiving Party’s delivery of all applicable forms (and, if necessary, its receipt of appropriate governmental authorization) at least [***] days prior to the time that the payments are due. If, in accordance with the foregoing, the paying Party withholds any amount, it shall pay to the receiving Party the balance when due, make timely payment to the proper taxing authority of the withheld amount and send to the receiving Party proof of such payment within [***] days following such payment. b. In addition, the Parties shall cooperate in accordance with Applicable Laws to minimize indirect taxes (such as value added tax, sales tax, consumption tax and other similar taxes (“Indirect Taxes”)) in connection with this Agreement, as applicable (including providing resale exemption certificates, if applicable). c. Each Party has provided a properly completed and duly executed IRS Form W-9 or applicable Form W-8 to the other Party and shall provide such updated IRS Form W-9 or applicable Form W-8 at the time or times reasonably requested by the other Party or as required by Applicable Law. d. Notwithstanding the foregoing, in the event that a Party (or its assignee pursuant to Section 16.4) redomiciles or assigns its rights or obligations under this Agreement pursuant to Section 16.4 (each action, a “Tax Action” and such Party, the “Acting Party”), and as a result of such Tax Action, (i) the Acting Party is required by Applicable Law to withhold taxes, or such Tax Action results in the imposition of Indirect Taxes that were not otherwise applicable, from or in respect of any amount payable under this Agreement to the other Party (the “Non-Acting Party”), and (ii) such withholding taxes or Indirect Taxes exceed the amount of withholding taxes or Indirect Taxes that would have been applicable but for such Tax Action, then any such amount payable shall be increased to take into account such withholding taxes or Indirect Taxes as may be necessary so that, after making all required withholdings (including withholdings on the additional amounts payable) and/or paying such Indirect Taxes, as the case may be, the Non-Acting Party receives an amount equal to the sum it would have received had no such increased withholding been made and no such Indirect Taxes had been imposed. The obligation to adjust payments pursuant to the preceding sentence shall not apply, however, to the extent such increased withholding Tax or Indirect Taxes would not have been imposed but for a Tax Action by the Non-Acting Party pursuant to the preceding sentence, to the extent such Tax Action occurs after the Tax Action referenced in the preceding sentence. For purposes of this Section 5.9, a “redomiciliation” shall include a reincorporation or other action resulting in a change in tax residence of the applicable Party or its assignee. e. The Parties intend that Eversana be treated as providing commercialization services to 17

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed. Zosano pursuant to this Agreement and it is expressly agreed that the relationship between Eversana and Zosano shall not constitute a partnership, joint venture, agency or similar business relationship, including for all tax purposes. 5.10. Loan Facility. Pursuant to and subject to the terms and conditions of a loan agreement on the terms attached as Exhibit F (the “Loan Agreement”), and following Zosano’s receipt of NDA Approval for the Product, and as further specified in this Section 5.10, Eversana will provide Zosano with a revolving loan facility of five million dollars ($5,000,000) (the “Loan”) which can be [***] and used by Zosano pursuant to the terms and conditions set forth in such Loan Agreement and solely in connection with Zosano’s obligations and responsibilities under this Agreement (i.e., Manufacturing Costs, IP development, prosecution, maintenance and enforcement, regulatory activities for the Product). Following NDA Approval for the Product, Zosano can access up to $1 million of the Loan on November 1, 2020 and an additional $1 million on December 1, 2020. The remaining drawdowns are to occur in 2021 with [***] written notice to Eversana. All amounts drawn down from the loan shall bear interest at a rate of 10% annually, to be paid monthly as further outlined in the Loan Agreement. Zosano would have the right to repay the loan at its option and without penalty prior to termination. The Loan shall be paid in full to Eversana on the earlier of termination (for any or no reason), Change of Control by Zosano, or expiration of this Agreement, or as otherwise set forth in the Loan Agreement. At least [***] days prior to a Change of Control by Eversana, Zosano shall pay all outstanding interest due on the Loan as of the date Zosano received notice of such Change of Control. 5.11. Rate Increases. In the course of agreeing upon the Commercialization Budget, Eversana will specify the costs for services or activities to be performed by individual Eversana employees or independent contractors over a [***] month period (the “Fee Listing”). On each [***]-month anniversary of the Effective Date, Eversana shall have the right to increase any then-current agreed-upon compensation to be paid by Eversana for such employees or independent contractors performing Services for Zosano hereunder during the subsequent [***] month period, by an amount [***] of [***] percent ([***]%) of the applicable Fee Listing or the applicable Fee Listing multiplied by [***] for the immediately preceding year of the Term, or as otherwise agreed to in writing by the Parties, for such employee’s or independent contractor’s Services, as agreed upon by the Committee in the applicable Commercialization Budget. 6. REGULATORY MATTERS 6.1. Ownership of Regulatory Documentation and Approvals. Zosano is solely responsible for and owns all right, title and interest in and to (a) all Regulatory Documentation concerning the Product in the Territory and all information contained therein, (b) all regulatory approvals made or granted with respect to the Product in the Territory, including without limitation any NDA Approval, and (c) all final Promotional Materials approved by Zosano for use in the Territory pursuant to Section 3.5. 6.2. Responsibility for Regulatory Approvals and Regulatory Communications. a. Zosano has the sole right and responsibility for any regulatory approvals with respect to the Product in the Territory. b. Zosano has the sole right and obligation: (i) to make any communications, reports, 18

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed. submissions and responses to FDA concerning the Product in the Territory, including without limitation by reporting Adverse Events, Other Reportable Information and Field Alerts and (ii) to take any action (including without limitation any investigations) and conduct all communications with all Third Parties that relate to all Product Quality Complaints or complaints related to tampering or contamination with respect to the Product, Adverse Events, Other Reportable Information and Field Alerts with respect to the Product; provided, however, that Eversana shall be responsible for any communications, reports, submissions or responses to Regulatory Authorities that it may be required to make under Applicable Law in connection with performing the Services; and provided, further that Eversana shall, to the extent permitted by Applicable Law, provide Zosano with either (x) reasonable advance written notice of, and an opportunity to discuss in good faith, any proposed communication with FDA in advance thereof with respect to the Product or any activities of Eversana hereunder or (y) otherwise provide written notice to Zosano of any communication with FDA concerning the Product or any activities of Eversana hereunder promptly following such communication and attach copies of such communication (whether by FDA or Eversana) to such notice. Eversana will consider all comments made by Zosano with respect to the proposed communications with the FDA pursuant to the immediately preceding sentence. Notwithstanding the above, all investigations of Eversana employees or agents related to employment matters and Eversana internal policies and procedures may be conducted independently (with prompt notice to Zosano as provided in Section 6.3.d. hereof) by Eversana, provided that Eversana shall report to Zosano the results of any such investigations promptly after the completion thereof, and all investigations relating to the Product or potential violations of Applicable Law by Eversana shall be conducted in collaboration with Zosano. c. Eversana shall cooperate with Zosano’s reasonable requests and assist Zosano in connection with Zosano’s: (i) preparing any and all reports to FDA concerning the Product; (ii) preparing and disseminating all communications to Third Parties concerning the Product; and (iii) investigating and responding to any product quality complaint, adverse event, other reportable information, Field Alert, or other compliance inquiry or investigation related to the Product. Notwithstanding anything to the contrary set forth above, Zosano is solely responsible for any and all communications with a Governmental Authority related to the Product and for ensuring all such communications comply with Applicable Laws. For purposes of clarification, Zosano shall be responsible for any and all regulatory reporting requirements including but not limited to aggregate spend reporting, reporting required by any State, as applicable, and pursuant to the disclosures required under the Patient Protection and Affordable Care Act (“PPACA”), even if there are joint disclosure obligations; and to the extent Eversana is deemed an applicable manufacturer under PPACA, Zosano shall provide Eversana with confirmation that such disclosures were properly made. Zosano is also solely responsible for: (x) all state and other municipal disclosures, including without limitation those related to drug samples, marketing expenses, product pricing, etc., and (y) all state and local municipal disposal laws related to the Product. Eversana shall reasonably cooperate with and assist Zosano, as reasonably requested in connection with such reporting requirements, including by providing Zosano, on a monthly basis, with details of Eversana’s aggregate spending in connection with the program set forth herein, to allow Zosano to comply with the reporting requirements set forth above. 19

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed. d. Zosano is responsible for (i) all communications, whether written or oral, to a Third Party regarding a Product Quality Complaint, Adverse Event, Other Reportable Information, Field Alert, or other compliance inquiry or investigation with respect to the Product in the Territory, and (ii) taking any action concerning any Regulatory Authority approval under which the Product is sold in the Territory. For clarification, in the event Eversana becomes aware of a Product Quality Complaint, Adverse Event, Other Reportable Information, Field Alert, or other compliance inquiry or investigation with respect to the Product, Eversana is only responsible for informing the Third Party that information in respect thereof has been or will be conveyed by Eversana to Zosano. 6.3. Adverse Events, Other Reports and Threatened Governmental Authority Action. a. Eversana shall report to Zosano and the Committee within [***] hours from the time it becomes aware of any of the following (to the extent such event may reasonably impact the Product in the Field in the Territory): i. an Adverse Event or Other Reportable Information associated with the use of the Product or information in or coming into its possession or control concerning such Adverse Event or Other Reportable Information; ii. information that might necessitate the filing by Zosano of a Field Alert; iii. information relating to an actual or threatened recall of the Product; or iv. any Product Quality Complaint associated with the use of the Product. b. Without limitation of Section 6.3.a., with respect to Adverse Events, Other Reportable Information, Field Alerts, recall, and Product Quality Complaints, in each case with respect to the Product, Eversana shall (i) train and inform members of the Sales Force in accordance with this Agreement, the Sales Force compliance program created and executed pursuant to Section 8.1, and Applicable Law, and require any Eversana employee who has performed or is performing any Commercialization activity under this Agreement, to comply with Applicable Law in connection with collection of information regarding the foregoing, and the reporting of such information; and (ii), establish and actively supervise and manage procedures and protocols reasonably designed to ensure that all relevant information relating to the foregoing that comes to the attention of Eversana, with respect to any member of the Sales Force or any Eversana employee who has performed or is performing any Commercialization activity under this Agreement, is promptly conveyed to Eversana so that Eversana can comply with its reporting obligations hereunder. For the avoidance of doubt, Eversana shall be responsible for training, informing, managing, and supervising members of the Sales Force in accordance with this Agreement and Applicable Law, and Eversana shall notify Zosano promptly should any member of the Sales Force fail to comply with the policies and procedures of Eversana or Applicable Law. c. Zosano may, at its option, establish procedures for members of the Sales Force to provide such information referenced in Sections 6.3.a. and 6.3.b. directly to Zosano or its designee, which procedures may be established or modified by Zosano from time to time by written notice to Eversana and the Committee. d. Unless restricted or prohibited by Applicable Law or Governmental Authority, Eversana shall promptly notify Zosano if it receives information regarding any threatened or pending action regarding the Product by any Governmental Authority in the Territory. 20

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed. e. All training materials regarding Adverse Events, Other Reportable Information, Field Alerts and Product Quality Complaints to be utilized by Eversana in connection with its provision of the Services shall either be provided by Zosano to Eversana or, to the extent Eversana prepares such materials, shall be approved in writing by Zosano. These training materials shall include the contact number and method of transferring potential reports and any specific product information related to the Product. 7. PRODUCT MATTERS 7.1. Orders for Product; Terms of Sale; Returns. All sales will be recorded and booked solely in Zosano’s name. Zosano shall have the ultimate responsibility to set the policy for taking, accepting, rejecting or cancelling orders, filling orders and establishing and modifying the terms and conditions of the sale of the Product (including without limitation with regard to any Patient Assistance Programs, Patient Access Programs, co-pay assistance programs, and returns), subject to compliance with the approved Commercialization Plan and all action plans previously approved by the Committee. [***] 7.2. Returned Product. Eversana shall notify Zosano of any returned Product, cooperate with Zosano regarding the handling of such Product, and follow such other Product return procedures as shall be agreed upon in the 3PL SOW. 7.3. Recalled Product. Each Party shall promptly notify the other Party in writing of any facts relating to the advisability of the recall, withdrawal or withholding from the market of the Product in the Territory. Zosano shall have the sole responsibility and right to determine if any recall, withdrawal or other form of market action is necessary with respect to the Product and shall be solely responsible for taking all actions to effect such recall, withdrawal or market action. At Zosano’s request, Eversana will cooperate with Zosano regarding Zosano’s handling of any recalls, withdrawals or market actions in the Territory. Zosano shall be responsible for all costs incurred in connection with any recalls, withdrawals or market actions concerning the Product except that Eversana shall be responsible for such costs if such recalls, withdrawals or market actions are solely caused by Eversana’s negligence, failure to comply with Applicable Law, or breach of this Agreement. 8. COMPLIANCE MATTERS 8.1. Compliance with Laws and Policies. a. Eversana shall train the Sales Force on compliance with Applicable Laws and in accordance with Section 3.4, and shall promptly inform Zosano of any incident of noncompliance by such Sale Force that comes to the attention of Eversana. Without limiting the foregoing, Eversana shall cause the Sales Force and its other personnel performing the Services to comply with Zosano’s anti-corruption and anti-bribery policy, approved by the Committee in advance and in writing. Zosano shall similarly comply with such anti-corruption and anti-bribery policies, and approved by the Committee in advance and in writing. Eversana shall notify Zosano in writing promptly if any Third Party (including without limitation any Governmental Authority) notifies Eversana that either Party’s Commercialization activities are not in compliance with Applicable Law. Each Party shall be legally responsible and liable for the actions, omissions and conduct of its and its Affiliates employees and agents in connection with their performance hereunder, including without limitation any breach of Applicable Laws thereby. 21

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed. b. Without limiting Section 8.1.a, Eversana shall maintain a Sales Force compliance program that includes: (i) Eversana compliance monitoring focused on specific risk areas (including without limitation off-label promotion, fraud and abuse and false claims) to assess whether Eversana’s policies and procedures are being followed by the Sales Force; and (ii) a mechanism for the Sales Force to report, anonymously if they choose, any concerns including without limitation matters such as potential illegal activity. Eversana shall report to Zosano promptly, but in no event later than [***] after becoming aware of any allegation or investigation of illegal activity (and before reporting any such activity to any Governmental Authority) with respect to the alleged failure by a member of the Sales Force to comply with the requirements set forth in Section 8.1.a or any reports provided pursuant to clause (ii) above and what action, if any, was taken by Eversana as a result. Eversana will comply with any reasonable requests by Zosano for additional information regarding such activity or reports. The Committee shall review and approve Eversana’s Sales Force compliance program. c. The Parties acknowledge and agree that any direct or indirect payment or transfer of value, as defined in the Physician Payments Sunshine Act (42 U.S.C. § 1320a-7h(e)(10)) and its implementing regulations (42 C.F.R. § 403.900 et seq.), including without limitation any compensation, reimbursement for expenses, meals, travel, and medical journal reprints (“Payments or Transfers of Value”) to any physician licensed to practice in the Territory or any teaching hospital in the Territory (each, a “Covered Recipient”) is subject to transparency reporting requirements, including without limitation disclosure on the federal Open Payments website. Eversana shall implement Eversana’s policies and procedures requiring the Sales Force not to contract with or make any Payment or Transfer of Value to a Covered Recipient on behalf of Zosano without the prior written approval of Zosano. Eversana shall comply with all reporting required by Applicable Law with respect to any Payments or Transfers of Value provided by the Sales Force to Covered Recipients in connection with this Agreement that come to the attention of Eversana. Eversana shall also provide Zosano with any and all information about Payments or Transfers of Value the Sales Force provides to Covered Recipients that come to the attention of Eversana in connection with this Agreement to the extent required to enable Zosano to comply with its transparency obligations under Applicable Law. All Payments or Transfers of Value made by the Sales Force to Covered Recipients in connection with this Agreement shall be made in accordance with Applicable Law to a centrally managed, pre-set rate structure based on a fair market value analysis. Eversana shall provide to Zosano detailed expenditure information in a manner that conforms to industry standards, and Eversana shall maintain such documentation for a minimum of [***]. 8.2. Obligation to Notify. Each Party shall promptly notify the other Party upon becoming aware of any breach or violation by the Sales Force or by the other Party’s employees with obligations under this Agreement with respect to the Territory of the Anti-Corruption Laws and Eversana shall take such steps as the Parties may reasonably agree with respect to mitigation of any violation or potential violation of the Anti-Corruption Laws by Eversana. 9. INDEPENDENT CONTRACTOR STATUS 9.1. The status of each Party under this Agreement shall be that of an independent contractor. Except as otherwise expressly set forth herein, neither Party shall have the right to enter 22

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed. into any agreements on behalf of the other Party, nor shall it represent to any Person that it has any such right or authority. 9.2. Without limiting Section 9.1, Eversana and its directors, officers, employees, contractors and any persons providing Services under the Agreement (collectively, “Eversana Personnel”), which includes without limitation the Sales Force, are at all times independent contractors with respect to Zosano. Eversana Personnel are not, and shall not be deemed, employees of Zosano. Neither this Agreement nor the Services to be rendered hereunder shall for any purpose whatsoever or in any way or manner create any employer-employee relationship between any Eversana Personnel and Zosano or its Affiliates or any of their directors, officers, agents or employees. Zosano understands that Eversana may, as set forth in Section 2.4 above), utilize independent contractors in connection with its performance of the Services. Eversana shall retain all Liability associated with the classification of any such contractors or other Eversana Personnel. 9.3. Eversana is, and at all times shall remain, solely responsible for the human resource and performance management functions of all Eversana Personnel. Eversana shall be solely responsible for complying with all labor and employment laws applicable to Eversana Personnel, including as relates to hiring, background checks, testing, employment eligibility verification, classification, compensation, wage and hour matters, taxes, occupational health and safety, notice, record retention, training, accommodations, benefits, time off work and leave of absences, medical accommodations, labor relations, privacy, discipline, and termination. Eversana shall be solely responsible for all disciplinary, probationary and termination actions taken with respect to Eversana Personnel, and for the formulation, content and dissemination of all employment policies and rules (including without limitation written disciplinary, probationary and termination policies) applicable to Eversana Personnel. 9.4. Eversana shall obtain and maintain worker’s compensation insurance and other insurances required for Eversana Personnel providing the Services and acknowledges that Zosano does not, and shall not, have any obligation to obtain or maintain such insurances, all of which shall be Eversana’s sole responsibility. 9.5. The Parties agree that Eversana Personnel are not, and are not intended to be or be treated as, employees of Zosano and that no such individual is, or is intended to be, eligible to participate in any benefits programs or in any Zosano “employee benefit plans” (as defined in Section 3(3) of ERISA). 9.6. Except as otherwise set out in this Agreement, Zosano shall have no responsibility to Eversana or any Eversana Personnel for any compensation, expense reimbursements or benefits (including, without limitation, sick leave, vacation and holiday remuneration, family or medical leave or benefits, healthcare coverage or insurance, life insurance, pension or retirement, severance profit-sharing benefits and disability benefits), payroll-related or withholding taxes, or any governmental charges or benefits (including, without limitation, unemployment and disability insurance contributions or benefits and workers compensation contributions or benefits) that may be imposed upon or be related to the performance by Eversana or Eversana Personnel of the obligations under this Agreement or other labor or employment-related obligations concerning Eversana Personnel, all of which shall be the sole responsibility of Eversana. To clarify, Zosano will not have any right or obligation to withhold or pay any income tax or payroll tax of any kind on behalf of Eversana. 23

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed. 9.7. Limitations. Notwithstanding anything to the contrary in this Section 9, Eversana shall have no obligation or responsibility for any damages, liability, loss and costs, including without limitation but not limited to attorney’s fees (collectively, “Liability”) to the extent such Liability is attributed to either: (i) discriminatory and/or intentional acts of Zosano, its employees, agents or contractors (other than Eversana Personnel); or (ii) any benefits payable under any Zosano Benefit Plan, and any other bonus, stock option, stock purchase, incentive, deferred compensation, supplemental retirement, severance and other similar fringe or employee benefit plans, programs or arrangements that may be sponsored at any time by Zosano that are interpreted by any court or Regulatory Authority to cause, any Eversana Personnel to be reclassified as an employee of Zosano. In the event any Liability is alleged against Eversana or its employees which is attributable to Zosano (as set forth in this Section 9.7), Zosano shall indemnify, defend, and hold harmless Eversana and its directors, officers, employees and contractors. 10. STATEMENTS, RECORD-KEEPING AND AUDITS 10.1. Zosano Records. Zosano shall keep complete and accurate books and records (financial and otherwise), of Net Sales, all regulatory and compliance matters, financial information necessary to determine reimbursement of costs, Profit Split, and any and all other payments to be made under this Agreement. Without limitation of the foregoing, Zosano shall further keep, or cause to be kept, complete and accurate books and records reflecting all of its obligations under this Agreement. Zosano shall keep such books and records or shall cause such books and records to be kept, for a period of [***] months after the expiration or termination of this Agreement or such longer period as required by Applicable Law. All financial books and records kept by Zosano hereunder shall be maintained in accordance with GAAP, consistently applied. 10.2. Audits of Zosano. At the request of Eversana, Zosano shall, and shall cause its Affiliates to, permit an independent auditor with financial or compliance expertise, as applicable, designated by Eversana and acceptable to Zosano, at reasonable times and upon reasonable notice, to audit the books and records maintained pursuant to Section 10.1 to ensure the accuracy of all reports and payments made hereunder, no more than [***] during any twelve (12)-consecutive month period during the Term and a period of [***] after the expiration or termination of this Agreement or such longer period as required by Applicable Law, and no more than [***] with respect to any period so examined; provided that if any such audit reveals that Zosano is or was not in material compliance with Applicable Law or this Agreement, Eversana shall have the right to conduct such additional audits as may be reasonably required by Eversana to determine whether Zosano has appropriately remedied such non-compliance. The cost of any such audit shall be borne by Eversana, unless (a) with respect to an audit of payments made hereunder, the audit reveals that Eversana has been underpaid by more than [***] percent ([***]%) of the total it is due for the period in question, or (b) with respect to an audit of the compliance records, such audit reveals material and continuous noncompliance by Zosano with Applicable Law, regulatory and compliance obligations with respect to its obligations under this Agreement, in which case ((a) or (b)), Zosano shall reimburse Eversana for any third-party costs reasonably incurred in connection with the audit, up to a maximum of $[***]. 10.3. Eversana Records. Eversana shall keep, or shall cause to be kept, complete and accurate books and records (financial and otherwise) pertaining to the performance of its obligations 24

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed. under this Agreement, including without limitation with respect the distribution of the Product by its 3PL division, hub reimbursement team and Commercialization activities, regulatory and compliance matters and any other such records as is necessary for calculating Net Sales, Detail performance and training test results, in sufficient detail to verify compliance with its obligations hereunder and to calculate and verify all amounts payable hereunder. Eversana shall keep such books and records or shall cause such books and records to be kept, for a period of [***] after the expiration or termination of this Agreement or such longer period as required by Applicable Law. All financial books and records kept by Eversana hereunder shall be maintained in accordance with GAAP, consistently applied. 10.4. Audits of Eversana. At the request of Zosano, Eversana shall, and shall cause its Affiliates to, permit an independent auditor with financial or compliance expertise, as applicable, designated by Zosano and acceptable to Eversana, at reasonable times and upon reasonable notice, to audit the books and records maintained pursuant to Section 10.3 to ensure Eversana’s compliance with this Agreement, including without limitation the accuracy of all reports and payments made or costs incurred hereunder, no more than [***] during any twelve (12)-consecutive month period during the Term and a period of [***] after the expiration or termination of this Agreement or such longer period as required by Applicable Law, and no more than [***] with respect to any period so examined; provided that if any such audit reveals that Eversana is or was not in material compliance with Applicable Law and the Sales & Promotion Policies with respect to its obligations under this Agreement, Zosano shall have the right to conduct such additional audits as may be reasonably required by Zosano to determine whether Eversana has appropriately remedied such non-compliance. The cost of any such audit shall be borne by Zosano, unless (a) with respect to an audit of payments made hereunder, the audit reveals that Eversana has been overpaid by more than [***] percent ([***]%) of the total owed for the period in question, or (b) with respect to an audit of the Compliance Records, such audit reveals material and continuous noncompliance by Eversana with Applicable Law, the Sales & Promotion Policies with respect to its obligations under this Agreement, in which case ((a) or (b)), Eversana shall reimburse Zosano for any third-party costs reasonably incurred in connection with the audit, up to a maximum of $[***]. 10.5. Financial Audit Payments. If any such audit conducted pursuant to Sections 10.2 or 10.4 concludes that additional payments were owed or that excess payments were received during such period, the owing Party shall pay the additional payments or the receiving Party shall reimburse such excess payments within [***] days after the date on which such audit is completed. 11. CONFIDENTIALITY 11.1. Maintaining Confidentiality. Confidential Information disclosed under this Agreement shall remain the property of the disclosing Party. At all times during the Term and for [***] years following the expiration or termination of this Agreement, the receiving Party shall use the Confidential Information solely for the purposes set forth in this Agreement and shall not disclose such Confidential Information to any Third Party except as permitted under this Agreement or with the disclosing Party’s prior written consent. The receiving Party shall use at least the same care for maintaining confidentiality of the Confidential Information as it uses to maintain the confidentiality of its own Confidential Information of similar value, but in no event less than commercially reasonable measures within the pharmaceutical industry. 25

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed. 11.2. Exceptions to Confidentiality. The receiving Party’s obligations set forth in this Agreement shall not extend to any Confidential Information of the disclosing Party: a. that the receiving Party can demonstrate by reasonable evidence was in the receiving Party’s possession and at its free disposal prior to disclosure by the disclosing Party; b. that was in the public domain at the time of disclosure by the disclosing Party; c. that subsequently comes into the public domain through no fault, action or omission of the receiving Party; d. that becomes available to receiving Party without any obligation of confidentiality from a Third Party that is not known to have a confidentiality obligation to the disclosing Party; or e. that the receiving Party can demonstrate by reasonable evidence was developed independently by the receiving Party without use of or reliance on any Confidential Information of the other Party. 11.3. Authorized Disclosure. Each Party may disclose Confidential Information to the extent that such disclosure is: a. to its directors, officers, employees, advisers, consultants, attorneys, auditors, agents, contractors, or representatives that reasonably need to know the information for the purposes set out in this Agreement, and who are subject to confidentiality substantially as protective as those set forth in this Agreement; b. to its Affiliates, including without limitation their directors, officers, employees, advisors, consultants, agents, contractors or representatives, to the extent they reasonably need to know the information for the purposes set out in this Agreement, and who are subject to confidentiality obligations substantially as protective as those set forth in this Agreement; c. to its legal counsels or auditors to conduct internal checks, assessments or auditing who need to know the Confidential Information for the purpose of a Party’s internal checks, assessments or auditing; or d. as required by laws, rules of public stock exchanges or court orders, provided that the receiving Party may disclose only such information as is legally required, and provided further that the receiving Party shall provide the disclosing Party with as much advance written notice of such requirement as is reasonably practicable under the circumstances and a reasonable opportunity to object to or limit such disclosure. Notwithstanding the foregoing, if either Party determines a disclosure of the terms of this Agreement and/or ancillary documents is required by such law, rule or court order, it shall notify the other Party in writing at least [***] before the time of the proposed disclosure, to the extent reasonably practicable under the circumstances. Without limiting the foregoing, prior to public disclosure of the terms of this Agreement by either Party pursuant to the rules of a Government Authority or public stock exchange, such Party shall provide the other Party with an opportunity to review the proposed publicly filed version of this Agreement and request that the filing Party seek confidential treatment of sensitive terms that are eligible 26

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed. for redaction from such public filing under Applicable Law, which such request the filing Party shall use reasonable efforts under the circumstances to implement. 11.4. Return or Destruction of Confidential Information. Upon the effective date of the expiration or termination of this Agreement for any reason, either Party may request in writing that the non-requesting Party: (a) promptly destroy all copies of the requesting Party’s Confidential Information in the possession or control of the non-requesting Party and confirm such destruction in writing to the requesting Party; or (b) promptly deliver to the requesting Party, at the non-requesting Party’s sole cost and expense, all copies of such Confidential Information in the possession or control of the non-requesting Party. Notwithstanding the foregoing, the non-requesting Party shall be permitted to retain such Confidential Information (i) to the extent necessary or useful for purposes of performing any continuing obligations or exercising any ongoing rights hereunder and, in any event, a single copy of such Confidential Information for archival purposes and (ii) any computer records or files containing such Confidential Information that have been created solely by such non- requesting Party’s automatic archiving and back-up procedures, to the extent created and retained in a manner consistent with such non-requesting Party’s standard archiving and back-up procedures, but not for any other uses or purposes. All retained Confidential Information shall continue to be subject to the terms of this Agreement for the period set forth in Section 11.1. 11.5. Use of Name and Disclosure of Terms. a. Except as necessary to perform a Party’s obligations under this Agreement, each Party (a) shall keep the existence, terms, and the subject matter (including without limitation the applicable transactions) covered by this Agreement confidential and shall not disclose such information to any other Person through a press release or otherwise and (b) shall not mention or otherwise use the name or any trademark of the other Party or its Affiliates in connection with this Agreement, in each case ((a) and (b)), without the prior written consent of the other Party in each instance (which shall not be unreasonably withheld, conditioned or delayed). Notwithstanding the foregoing, (i) the restrictions imposed by this Section 11.5 shall not prohibit either Party from making any disclosure identifying the other Party that is required by Applicable Law or the requirements of a national securities exchange or another similar regulatory body, provided that any such disclosure shall be governed by Section 11.3, and (ii) the restrictions imposed by this Section 11.5 shall not prohibit either Party from announcing this Agreement to the public promptly following the Effective Date, including without limitation such key terms and other items appropriate for such a public release, in each case subject to the written consent of the other Party, which shall not be unreasonably withheld. Further, the restrictions imposed on each Party under this Section 11.5 are not intended, and shall not be construed, to prohibit a Party from (x) identifying the other Party in its internal business communications, provided that any Confidential Information in such communications remains subject to this Article 11 or (y) disclosing (i) information for which consent has previously been obtained and (ii) information of a similar nature to that which has been previously disclosed publicly with respect to this Agreement, each of which ((i) and (ii)) shall not require advance approval, but copies of which shall be provided to the other Party as soon as practicable after the release or communication thereof. 27

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed. b. If this Agreement and/or any Statement of Work executed by the Parties is considered a “material contract” for either Party requiring such Party to disclose this Agreement (and/or any Statement of Work) in its filings with the Securities and Exchange Commission (“SEC”), the applicable Party shall provide the other Party with an opportunity to review the proposed filing with the SEC (for a period not to exceed [***]) and request redactions to protect non-public proprietary information of the other Party from being disclosed publicly (which request the applicable Party shall use reasonable efforts to seek unless advised by its counsel that such information must be disclosed under law). 12. REPRESENTATIONS AND WARRANTIES 12.1. Mutual Representations and Warranties. Each Party represents and warrants to the other Party that as of the Effective Date: a. It is an independent legal entity duly organized, validly existing in good standing under the laws of the place of its establishment or incorporation; b. it has full authority to enter into this Agreement and to perform its obligations under this Agreement and the provisions of this Agreement are legally binding upon it from the Effective Date; c. its execution of this Agreement and performance of its obligations under it will not violate (i) any provision of its business license, articles of incorporation, articles of association or similar organizational documents; (ii) any Applicable Laws or any governmental authorization or approval; and (iii) any contract to which it is a party or to which it is subject, or result in a default under any such contract; d. no lawsuit, arbitration or other legal or governmental proceeding is pending or, to its knowledge, threatened against it that would affect its ability to perform its obligations under this Agreement; e. it has disclosed to the other Party all documents received from any Governmental Authority or Regulatory Authority that may have a material adverse effect on its ability to fully perform its obligations under this Agreement; f. it has not been debarred and is not subject to debarment and that it shall not knowingly use in any capacity, in connection with the Services and the program described herein, any Person who has been debarred pursuant to Section 306 of the Act or who is the subject of a conviction described in such section; g. (i) it and its Affiliates are in compliance with (A) the PhRMA Code on Interactions with Healthcare Professionals and (B) all state codes or requirements that limit or regulate interactions with healthcare practitioners and (ii) it has not been debarred, suspended or excluded from any federal health care program, including without limitation Medicare, Medicaid and the Civilian Health and Medical Program of the Uniformed Services. If it or any of its employees who are involved in performing the Services or working with the other Party in connection with the program described herein, is debarred, suspended or excluded during the Term or such Party reasonably believes debarment, suspension or exclusion is contemplated, it shall immediately notify the other Party in writing upon it becoming aware of such debarment, suspension or exclusion. If a Party is so debarred, 28

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed. suspended or excluded, or in the case of any employee who is debarred, suspended or excluded, if the applicable Party permits such employee to continue to perform any Services or work on the program described herein, then the other Party shall have the right to terminate this Agreement upon written notice to the other Party. Any termination of this Agreement pursuant to this Section 12.1.g. shall be treated as a termination pursuant to Section 14.2.e. as if such Party had committed a material breach, except that in such event no cure period shall apply, and such Party shall have the right to effect such termination immediately upon written notice to other Party; and h. it will comply in all material respects with Applicable Laws in performing its obligations and exercising its rights hereunder. 12.2. Zosano’s Representations and Warranties. Zosano represents and warrants that as of the Effective Date: a. Zosano has no knowledge of any claim alleging that the manufacture, packaging, distribution, sale or use of the Product in the Territory, or that the use of any registered trademark or registered copyright within the Product Trademarks, Corporate Trademarks or Product Copyrights, infringes or misappropriates the Intellectual Property Rights or other rights of any Third Party; b. to Zosano’s knowledge, the manufacture, packaging, distribution, sale or use of the Product in the Territory and the use of any registered Trademark or Corporate Trademarks in the Territory does not infringe or misappropriate the Intellectual Property Rights or other rights of any Third Party; and c. to Zosano’s knowledge, the manufacture, packaging, distribution, sale or use of the Product in the Territory and the use of any registered copyright within the Product Trademarks, or Product Copyrights in the Territory does not infringe or misappropriate the Intellectual Property Rights or other rights of any Third Party. 12.3. Eversana’s Representations and Warranties. Eversana represents and warrants that as of the Effective Date: a. it has adequate cash flow and otherwise has the financial resources, capacity and capabilities to timely and adequately perform its obligations hereunder; b. Eversana has no knowledge of any claim alleging that the use of Eversana IP in connection with the Services and the Product in the Territory infringes or misappropriates the Intellectual Property Rights or other rights of any Third Party; and c. to the knowledge of Eversana, any use of Eversana IP in connection with the Services and the Product in the Territory does not infringe or misappropriate the Intellectual Property Rights or other rights of any Third Party. 12.4. Covenant. a. Each party shall, and cause its Affiliates, employees, and agents, to comply with Applicable Laws in connection with its obligations and responsibilities hereunder. 29

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed. b. Eversana will not use any marketing, educational, promotional or training materials in the course of performing activities under this Agreement other than those reviewed and approved by Zosano; c. Without limiting Eversana’s other obligations in this Agreement, Eversana will comply with its obligations under Sections 2.2.b, 2.3.a and 9.2 through 9.6. d. Zosano is solely responsible for reviewing, finalizing and approving all Product Promotional Materials and literature (including but not limited Product inserts and all Product Promotional Materials initially prepared by Eversana) and for ensuring all such materials comply with Applicable Law. 12.5. DISCLAIMER OF WARRANTIES. EXCEPT FOR THE EXPRESS WARRANTIES SET FORTH HEREIN, NEITHER PARTY MAKES ANY REPRESENTATIONS OR GRANTS ANY WARRANTIES, EXPRESS OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, BY STATUTE OR OTHERWISE, AND EACH PARTY SPECIFICALLY DISCLAIMS ANY OTHER WARRANTIES, WHETHER WRITTEN OR ORAL OR EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY WARRANTY OF QUALITY, MERCHANTABILITY OR FITNESS FOR A PARTICULAR USE OR PURPOSE. 13. INDEMNIFICATION, LIMITATION OF LIABILITY AND INSURANCE 13.1. Zosano Indemnity. Zosano shall indemnify, hold harmless and defend Eversana, its Affiliates, and their respective directors, officers, employees, representatives and agents (the “Eversana Indemnitees”) from and against any and all losses, damages, liabilities, judgments, fines, and amounts paid in settlement, including without limitation any associated costs and expenses (including without limitation reasonable attorneys’ fees) (“Losses”), which result directly or indirectly from any claim, demand, suit, action or proceeding brought or initiated by a Third Party against them (“Claims”) to the extent that such Claims arise out of (i) the manufacture, packaging, branding, labeling, sale or use of the Product, including without limitation any death or personal injury arising out of the defective manufacture of the Product by or on behalf of Zosano, (ii) any product liability or similar claims with respect to the Product (regardless of legal theory including but not limited to strict liability), (iii) any actual or asserted violation of the Federal Food, Drug and Cosmetic Act or any other Applicable Law by virtue of which the Product is alleged or determined to be adulterated, misbranded, mislabeled or otherwise not in full compliance with Applicable Law; (iv) infringement or misappropriation of the Intellectual Property Rights of a Third Party through the conduct of Services or use of the Product Copyrights or Product Trademarks in connection therewith, except to the extent such infringement or misappropriation relates to the use of the Eversana IP; or (v) the gross negligence, fraud or willful misconduct of any of the Zosano Indemnitees in performing any obligations under this Agreement; or (vi) a breach of a representation, warranty or covenant set forth in this Agreement by a Zosano Indemnitee; provided, however, with respect to Section 13.1(iv) – Section 13.1 (vi) Zosano shall not be required to indemnify, hold harmless or defend any Eversana Indemnitee against any claim to the extent that Eversana has an obligation to indemnify an Zosano Indemnitee under Section 13.2. 13.2. Eversana Indemnity. Eversana shall indemnify, hold harmless and defend the Zosano, its Affiliates, and their respective directors, officers, employees, representatives and agents 30

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed. (the “Zosano Indemnitees”) from and against any Losses, which result directly or indirectly from any Claims to the extent that such Claims arise out of: (i) the gross negligence, fraud or willful misconduct of any of the Eversana Indemnitees in performing any obligations under this Agreement, (ii) any infringement of the Intellectual Property Rights of a Third Party predicated on Eversana IP; or (iii) a breach of a representation, warranty or covenant set forth in this Agreement by an Eversana indemnitee; provided, however, that Eversana shall not be required to indemnify, hold harmless or defend any Zosano Indemnitee against any claim to the extent that Zosano has an obligation to indemnify a Eversana Indemnitee under Section 13.1. 13.3. Zosano Reimbursement of Certain Expenses. Zosano shall reimburse Eversana for [***] and Eversana employee [***] in connection with any of the following events or occurrences, [***] of its express obligations contained in this Agreement: (i) [***]; or (ii) [***]. 13.4. Procedures. Any indemnified party submitting an indemnity claim under this Section 13, as applicable (“Indemnified Party”) shall: (a) promptly notify the indemnifying Party (“Indemnifying Party”), of such claim in writing and furnish the Indemnifying Party with a copy of the applicable communication, notice or other action relating to the event for which indemnity is sought; provided that, no failure to provide such notice pursuant to this clause (i) shall relieve the Indemnifying Party of its indemnification obligations, except to the extent such failure materially prejudices the Indemnifying Party’s ability to defend or settle the claim; (ii) give the Indemnifying Party the authority, information and assistance necessary to defend or settle such suit or proceeding in such a manner as the Indemnifying Party shall determine; and (iii) give the Indemnifying Party sole control of the defense (including without limitation the right to select counsel, at the Indemnifying Party’s expense) and the sole right to compromise and settle such suit or proceeding; provided, however, that in the case of the foregoing clauses (ii) and (iii), the Indemnifying Party shall not, without the written consent of the Indemnified Party, compromise or settle any suit or proceeding unless such compromise or settlement (x) is solely for monetary damages (for which the Indemnifying Party shall be responsible), (y) does not impose injunctive or other equitable relief against the Indemnified Party and (z) includes an unconditional release of the Indemnified Party from all liability on claims that are the subject matter of such proceeding. The Indemnified Party (in its capacity as such) may participate in the defense at its own expense. 13.5. Limitation of Liability. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW AND EXCEPT AS A RESULT OF GROSS NEGLIGENCE, COMMON LAW FRAUD OR WILLFUL MISCONDUCT, A BREACH OF ARTICLE 11 OR SECTION 2.2.b OR IN CONNECTION WITH A PARTY’S INDEMNIFICATION OBLIGATIONS SET FORTH HEREIN, NEITHER PARTY NOR ANY OF ITS AFFILIATES SHALL BE LIABLE TO THE OTHER OR THEIR AFFILIATES, FOR ANY CLAIMS, DEMANDS OR SUITS FOR CONSEQUENTIAL, SPECIAL, EXEMPLARY, PUNITIVE, INDIRECT OR MULTIPLE DAMAGES, OR FOR LOSS OF PROFITS, REVENUE OR INCOME, DIMINUTION IN VALUE OR LOSS OF BUSINESS OPPORTUNITY (IN EACH CASE, WHETHER OR NOT FORESEEABLE AT THE EFFECTIVE DATE) OR ANY DAMAGES CALCULATED BY REFERENCE TO A MULTIPLIER OF REVENUE, PROFITS, OR SIMILAR METHODOLOGY, CONNECTED WITH OR RESULTING FROM ANY BREACH OF THIS AGREEMENT, OR ANY ACTIONS UNDERTAKEN IN CONNECTION WITH, OR RELATED HERETO, INCLUDING WITHOUT LIMITATION ANY SUCH DAMAGES WHICH ARE 31

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed. BASED UPON BREACH OF CONTRACT, TORT, BREACH OF WARRANTY, STRICT LIABILITY, STATUTE, OPERATION OF LAW OR ANY OTHER THEORY OF RECOVERY. EACH PARTY FURTHER ACKNOWLEDGES AND AGREES THAT UPON ANY BREACH OF A WARRANTY BY A PARTY CONTAINED HEREIN, EXCEPT TO THE EXTENT SUCH BREACH IS A RESULT OF SUCH PARTY’S GROSS NEGLIGENCE, COMMON LAW FRAUD OR WILLFUL MISCONDUCT, OR ARISES IN CONNECTION WITH SUCH PARTY’S INDEMNIFICATION OBLIGATIONS SET FORTH HEREIN, SUCH PARTY’S MAXIMUM LIABILITY TO THE OTHER PARTY FOR DAMAGES SHALL IN NO EVENT EXCEED THE SUM OF ALL PAYMENTS ACTUALLY RECEIVED FROM OR PAID BY THE OTHER PARTY DURING THE SIX (6) MONTH PERIOD IMMEDIATELY PRECEDING THE DATE THE PARTY’S CLAIM AROSE”, PROVIDED THAT DURING THE ONE (1) YEAR PERIOD COMMENCING UPON THE EFFECTIVE DATE, THE MAXIMUM LIABILITY SHALL BE [***] DOLLARS ($[***]) [***] AND DURING THE [***] OF THE EFFECTIVE DATE, THE MAXIMUM LIABILITY SHALL BE [***] DOLLARS ($[***]) [***]. 13.6. Insurance. Each Party shall at all times maintain general liability insurance policies or self- insurance in such amounts and with such scope of coverage as are normal and customary in the pharmaceutical industry for a Person of comparable size and engaged in activities comparable to the activities in which such Party engages hereunder. As of the NDA Approval Date, Zosano shall maintain Product Liability insurance of at least [***] dollars ($[***]) (and increasing to [***] dollars ($[***]) prior to Commercial Launch) naming Eversana as an additional insured under such policy, it being understood and agreed that Eversana shall not need to obtain any product liability insurance during the Term. If requested by the other Party, the insured Party shall furnish a certificate of insurance or other reasonable proof of coverage (which may be a certificate or other evidence issued by a Party under a program of self-insurance) evidencing the requisite coverage required under this Section 13.6 during the Term. The insurance policies shall be under an occurrence form, but if only a claims-made form is available to a Party, then such Party shall continue to maintain such insurance after the expiration or termination of this Agreement for a period of [***] years. 14. TERM AND TERMINATION 14.1. Term. The Agreement shall take into effect as of the Effective Date and shall remain in effect for a term of five (5) years after the NDA Approval Date unless earlier terminated as provided hereunder (the “Term”). 14.2. Termination. This Agreement may be terminated as follows: a. Termination for Delays in Providing Pre-Commercial and Commercial Plans and Budgets. Zosano shall have the right to terminate this Agreement immediately upon written notice to Eversana if Eversana does not provide the initial (i) Pre-Commercial Plan and Pre-Commercial Budget to the Committee for review and approval within seventy- five (75) days of the Effective Date or (ii) the initial Commercial Plan and Commercial Budget for review and approval within ninety (90) days of the Effective Date. b. Termination for Late Approval. Either Party shall have the right to terminate this Agreement if NDA Approval does not occur by July 31, 2021 effectively upon providing written notice to the other Party within sixty (60) days after such date (such notice to be effective upon receipt thereof by the other Party). 32

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed. c. Termination for Discontinuance of Product Commercialization in the Territory. Zosano may, in its sole discretion, decide to discontinue its development or Commercialization efforts for the Product in the Territory, and in connection therewith, may terminate this Agreement upon sixty (60) days prior written notice provided to Eversana. In the event Zosano terminates the Agreement pursuant to this Section 14.2c. during the first [***] from the Effective Date, Zosano shall pay Eversana an early termination fee in an amount equal to [***] percent ([***]%) of the Commercialization Fees actually incurred by Eversana up to the termination date and not previously reimbursed to Eversana. d. Termination for Revenue Shortfall. Each Party shall be entitled to terminate the Agreement if cumulative Net Profits are negative in at least [***] commencing upon or after the date that is [***] after the Commercial Launch, by providing the other Party with thirty (30) days’ prior written notice, provided that such condition is not directly attributable to breach by the terminating Party of its obligations under this Agreement. e. Termination upon Material Breach. Either Party may terminate this Agreement by written notice to the other Party if the other Party materially breaches this Agreement, and such breach is not cured within sixty (60) days after the other Party receives written notice of such breach from such Party specifying in detail the nature and extent of the alleged material breach. Such termination shall be effective upon a subsequent written notice from such Party after expiration of the foregoing sixty (60) day period. f. Termination for Insolvency. Either Party may terminate this Agreement immediately on written notice if the other Party (or, if applicable, a parent of such other Party) shall file in any court or Governmental Authority, pursuant to any statute or regulation of any state or country, a petition in bankruptcy or insolvency or for reorganization or for an arrangement or for the appointment of a receiver or trustee of the other Party or of its assets, or if the other Party (or, if applicable, a parent of such other Party) shall be served with an involuntary petition against it, filed in any insolvency proceeding, and such petition shall not be dismissed within sixty (60) days after the filing thereof, or if the other Party (or, if applicable, a parent of such other Party) shall propose or be a party to any dissolution or liquidation, or if the other Party (or, if applicable, a parent of such other Party) shall make a general assignment for the benefit of its creditors. g. Termination for Change of Control. In the event of a Change of Control of Zosano, Zosano will make reasonable efforts to ensure that such Third Party (“Acquiring Party”) will continue to utilize the Services of Eversana for the remainder of the Term. Notwithstanding the prior sentence, Zosano shall have the right to terminate this Agreement upon entering into a definitive binding agreement for a Change of Control of Zosano upon sixty (60) days advance written notice provided to Eversana, such notice to be provided to Eversana at any time within the [***] day period following the effective date of such Change of Control. [***] Eversana shall also receive all payments due in accordance with Section 14.6 below. Any termination payment owed under this Section 14.2.g would be reduced by the amount of previously reimbursed Commercialization Fees and Profit Split share payments paid for the relevant twelve (12) month period. h. Termination for Recall; Failure to Launch. Either Party may terminate this Agreement 33

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed. upon ninety (90) days written notice to the other Party if: (i) the Product is subject to a recall in the Territory based on material safety concerns for the Product, which shall not include any recall for packaging or labeling issues, manufacturing concerns, or the like; or (ii) the Product is not Commercially Launched within [***] of the NDA Approval Date, other than by reason of the terminating Party’s failure to perform its obligations under this Agreement, provided that a written notice of termination is given within sixty (60) days of the end of the [***] month period. i. Termination for Product Withdrawal. Eversana can terminate this Agreement upon thirty (30) days written notice to Zosano if: (i) Zosano withdraws the Product from the market in the Territory for a period of greater than ninety (90) days, provided that a written notice of termination is given within sixty (60) days after the expiration of such ninety (90) day Product withdrawal period. 14.3. Effect of Termination or Expiration. a. Upon the effective date of expiration or termination of this Agreement, and subject to Section 14.3.b below, Eversana shall promptly cease all performance of the Services and promptly discontinue the use of any Zosano IP, Arising Product IP, Product Trademarks, Product Copyrights, and Corporate Trademarks. At Zosano’s election, Eversana either shall (a) promptly return to Zosano or (b) destroy and certify to Zosano such destruction of, all Promotional Materials, training materials, and all other information and materials related to the Product or the activities provided for by this Agreement. b. Except as otherwise expressly provided herein, termination of this Agreement in accordance with the provisions hereof shall not limit any remedies that may otherwise be available in law or equity. 14.4. Accrued Rights. Termination or expiration of this Agreement for any reason shall be without prejudice to any rights that shall have accrued to the benefit of a Party prior to such termination or expiration, including, without limitation, Eversana’s rights to any amounts owed by Zosano hereunder and pursuant to the Loan Agreement. Such termination or expiration shall not relieve a Party from obligations that are expressly indicated to survive the termination or expiration of this Agreement. 14.5. Loan Agreement. On termination or expiration of this Agreement for any reason, Zosano shall owe Eversana all amounts due pursuant to the Loan Agreement, in accordance with the terms set forth in the Loan Agreement. For clarification, there are no circumstances pursuant to which Zosano shall not repay Eversana for all amounts loaned by Eversana to Zosano, pursuant to the Loan Agreement. 14.6. Payments Due Eversana Upon Termination. In addition to other payment obligations set forth in this Agreement due on termination, in the event of termination of this Agreement: Zosano shall reimburse or pay Eversana for: a. [***] percent ([***]%) of all Commercialization Fees owed by Zosano to Eversana as of the date termination it; 34

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed. b. Eversana’s share of the any remaining positive Profit Split not already paid and due as of the effective date of termination. c. Fees and expenses incurred (or to be incurred by Eversana following termination) for work to be provided by Third Parties and other related commitments entered into by Eversana pursuant to written agreements existing at the time of termination in connection with the Services that could not be terminated; provided Eversana uses reasonable efforts to mitigate such costs and expenses incurred. d. the following expenses actually incurred by Eversana (or to be incurred by Eversana) related to fleet automobiles provided to members of the Sales Force and supported by reasonable documentation: (i) a [***] early termination fee (if any); and (ii) a [***] in the amount equal to the net loss to Eversana on such [***] determined by deducting the [***], as of date the [***] is returned to Eversana's [***] provider, [***]; and (iii) all remaining [***] by Eversana between the [***]; and (iv) [***] by Eversana. 14.7. Survival. The rights and obligations of the Parties set forth in Section 1 (Definitions), Section 2.3.a (Other Rights and Obligations), Section 2.7 (Non-Solicitation), Section 6.1 (Ownership of Regulatory Documentation and Approvals), Section 8.1.c (Eversana Compliance with Laws and Policies), Section 10 (Statement, Record-keeping and Audits), Section 11 (Confidentiality), Section 13 (Indemnification, Limitation of Liability and Insurance), Section 14.3 (Effect of Termination), Section 14.4 (Accrued Rights), Section 14.5 (Loan Agreement), Section 14.6 (Payments on Termination), Section 14.7 (Survival), Section 15 (Notice), and Section 16 (General Provisions) shall survive the termination or expiration of this Agreement. 15. NOTICE Any notice or written communication provided for in this Agreement by a Party to the other Party, including without limitation but not limited to any and all offers, writings, or notices to be given hereunder, shall be made by registered mail or by courier service delivered letter, promptly transmitted or addressed to the appropriate Party. The date of receipt of a notice or communication hereunder shall be the date of delivery confirmed by the USPS or the courier service in the case of a courier service delivered letter. All notices and communications shall be sent to the appropriate address set forth below, until the same is changed by notice given in writing to the other Party effective as above. Notice to Zosano: [***] Address: Zosano Pharma Corporation 34790 Ardentech Court Fremont, California 94555 35

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed. With a copy to: Latham and Watkins LLP 140 Scott Drive, Menlo Park, CA, 94025 Attention: [***] Notice to Eversana: [***] Address: EVERSANA Life Science Services, LLC 190 N. Milwaukee Street Milwaukee, WI 53202 With a copy to: [***] EVERSANA Life Science Services, LLC 190 N. Milwaukee Street Milwaukee, WI 53202 16. GENERAL PROVISIONS 16.1. Force Majeure. Except as otherwise set out in this Agreement, no Party to this Agreement shall have any liability whatsoever or (without prejudice to any payments of monies due) be deemed to be in default for any delays or failures in performance of any of its obligations under this Agreement to the extent such delay or failure is caused by or results from causes beyond the reasonable control of the affected Party, potentially including without limitation, pandemics. embargoes, war, acts of war (whether war be declared or not), acts of terrorism, insurrections, riots, civil commotions, strikes, lockouts or other labor disturbances, fire, floods, or other acts of God, or acts, omissions or delays in acting by any governmental authority (including without limitation government shut down) or the other Party. The affected Party shall notify the other Party of such force majeure circumstances as soon as reasonably practical. The affected Party shall use all reasonable endeavors to remedy the event or limit the effects of the said event of force majeure upon the other Party in a timely manner. When such circumstances arise, the Parties shall negotiate in good faith any modifications of the terms of this Agreement that may be necessary or appropriate in order to arrive at an equitable solution. If any force majeure event continues for a period of at least [***] days that would prevent the performance of any material obligation of or receipt of any material benefit (including, without limitation, payment) by a Party under this Agreement, the affected Party shall have the right to terminate this Agreement upon thirty (30) days written notice to the other Party. 16.2. Governing Law. This Agreement shall in all respects be governed by and interpreted according to the laws of Delaware and the United States without regard to or application of conflict-of-law rules or principles. 16.3. Integrity. This Agreement together with the Exhibits attached hereto constitutes the entire agreement between the Parties relating to the subject matter hereof and supersedes all prior agreements, understandings and discussions, whether oral or written, of the Parties with respect to the subject matter hereof. Any modification of this Agreement shall be effective only when made in writing and signed and delivered by the Parties. 36

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed. 16.4. Assignability. Neither Party may assign this Agreement without the consent of the other Party, except either Party may assign this Agreement in whole or in part to any Affiliate of such Party without the consent of the other Party. Further, either Party may assign this Agreement, and all of its rights and obligations, without the consent of the other Party, to its successor in interest by way of merger, acquisition, or sale of all or substantially all of its business or assets; provided that, the assigning Party provides the other Party with written notice of such assignment within [***] days after such assignment, merger, acquisition or sale. 16.5. Severability. If any provision contained in this Agreement shall, for any reason, be held invalid, illegal or unenforceable, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement, but this Agreement shall be construed by limiting such invalid, illegal or unenforceable provision, or if such is not possible, by deleting such invalid, illegal or unenforceable provision from this Agreement; provided that (i) such provision shall be deemed to be replaced by a provision which achieves the original intent of the Parties to the fullest extent possible; (ii) should this Agreement as a result of such deleting no longer reflect the good faith intent of the Parties, either Party may propose amendments to the other provisions of this Agreement in order to have the Agreement correspond to such good faith intent and the Parties shall negotiate in good faith on such amendments. 16.6. Waiver. No course of dealing or failing of either Party to strictly enforce any term, right or condition of this Agreement in any instance shall be construed as a general waiver or relinquishment of such term, right or condition. Such waiver or relinquishment (either generally or any given instance and either retroactively or prospectively) shall only be effective if made expressly in writing by the Party with reference to the specific term, right or condition. 16.7. No Third Party Rights. The provisions of this Agreement are for the sole benefit of the Parties, their successors and permitted assignees, and they shall not be construed as conferring any rights in any other Persons except as otherwise expressly provided in this Agreement. 16.8. Headings. The descriptive headings in this Agreement are for convenience only and shall not be interpreted so as to limit or affect in any way the meaning of the language in the pertaining article, section, paragraph or sub-paragraph. 16.9. Costs and Expenses. Each Party shall, unless specifically otherwise agreed hereunder, bear their own costs and expenses connected with such Party’s activities and performance under this Agreement. 16.10. Counterparts. This Agreement may be executed in two (2) counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement may be executed by facsimile or electronically transmitted signatures and such signatures shall be deemed to bind each Party hereto as if they were original signatures. 37

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed. IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the Effective Date. Zosano Pharma Corporation By: /s/ Steven Lo________________________________ Name: Steven Lo Title: President & Chief Executive Officer Eversana Life Science Services, LLC By: /s/ Gregory Skalicky________________________________ Name: Gregory Skalicky Title: Chief Revenue Officer 38

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed. EXHIBIT A PRE- COMMERCIAL SERVICES Omitted pursuant to Regulation S-K, Item 601(a)(5). 39

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed. EXHIBIT B LAUNCH and COMMERCIAL SERVICES Omitted pursuant to Regulation S-K, Item 601(a)(5). 40

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed. EXHIBIT C FUNCTIONAL SERVICES Omitted pursuant to Regulation S-K, Item 601(a)(5). 41

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed. EXHIBIT D CORPORATE FUNCTIONS Omitted pursuant to Regulation S-K, Item 601(a)(5). 42

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed. EXHIBIT E Initial Alliance Managers For Zosano Pharma, Inc.: [***] For Eversana, Inc.: [***] 43

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed. Exhibit F Terms and Conditions to be incorporated into the Loan Agreement • [***] 44

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO EXCHANGE ACT RULE 13a-14(a) AND 15d-14(a) AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY

ACT OF 2002

I, Steven Lo, certify that:

1.    I have reviewed this Quarterly Report on Form 10-Q of Zosano Pharma Corporation;

2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.    The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)    Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)    Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)    Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.    The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 13, 2020	By:	/s/ Steven Lo
		Steven Lo
		Chief Executive Officer
		(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO EXCHANGE ACT RULE 13a-14(a) AND 15d-14(a) AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Christine Matthews, certify that:

1.    I have reviewed this Quarterly Report on Form 10-Q of Zosano Pharma Corporation;

2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.    The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)    Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)    Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)    Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.    The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 13, 2020	By:	/s/ Christine Matthews
		Christine Matthews
		Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER PURSUANT TO

18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, Steven Lo, the Chief Executive Officer of Zosano Pharma Corporation (the “Company”), and Christine Matthews, the Chief Financial Officer of the Company, hereby certify that, to their knowledge:

1.    The Quarterly Report on Form 10-Q for the period ended September 30, 2020 of the Company (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.    The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 13, 2020	By:	/s/ Steven Lo
		Steven Lo
		Chief Executive Officer
		(Principal Executive Officer)
Date: November 13, 2020	By:	/s/ Christine Matthews
		Christine Matthews
		Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)

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Cover Page - shares	9 Months Ended
	Sep. 30, 2020	Nov. 10, 2020
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2020
Document Transition Report	false
Entity File Number	001-36570
Entity Registrant Name	ZOSANO PHARMA CORPORATION
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	45-4488360
Entity Address, Address Line One	34790 Ardentech Court
Entity Address, City or Town	Fremont
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	94555
City Area Code	510
Local Phone Number	745-1200
Title of 12(b) Security	Common Stock, $0.0001 par value
Trading Symbol	ZSAN
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	true
Entity Ex Transition Period	true
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		102,066,218
Amendment Flag	false
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q3
Entity Central Index Key	0001587221
Current Fiscal Year End Date	--12-31

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CONDENSED BALANCE SHEETS - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Current assets:
Cash and cash equivalents	$ 43,554	$ 6,316
Prepaid expenses and other current assets	615	497
Total current assets	44,169	6,813
Restricted cash	455	455
Property and equipment, net	30,621	24,636
Operating lease right-of-use assets	5,204	5,763
Other long-term assets	3	3
Total assets	80,452	37,670
Current liabilities:
Accounts payable	1,972	4,356
Accrued compensation	1,982	2,015
Build-to-suit obligation, current portion	4,293	4,554
Operating lease liabilities, current portion	1,332	1,140
Paycheck Protection Program loan, current portion	201	0
Other accrued liabilities	3,394	4,172
Total current liabilities	13,174	16,237
Build-to-suit obligation, long-term portion, net of debt issuance costs and discount	5,447	6,095
Operating lease liabilities, long-term portion	5,058	5,931
Paycheck Protection Program loan, long-term portion	1,416	0
Other liabilities	113	15
Total liabilities	25,208	28,278
Commitments and contingencies (note 8)
Stockholders’ equity:
Preferred stock, $0.0001 par value; 5,000,000 shares authorized; none issued and outstanding as of September 30, 2020 and December 31, 2019	0	0
Common stock, $0.0001 par value; 250,000,000 shares authorized; 102,066,218 and 23,503,214 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively	10	2
Additional paid-in capital	379,326	308,211
Accumulated deficit	(324,092)	(298,821)
Total stockholders’ equity	55,244	9,392
Total liabilities and stockholders’ equity	$ 80,452	$ 37,670

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CONDENSED BALANCE SHEETS (Parenthetical) - $ / shares	Sep. 30, 2020	Dec. 31, 2019
Statement of Financial Position [Abstract]
Preferred stock, par value (usd per share)	$ 0.0001	$ 0.0001
Preferred stock, shares authorized (in shares)	5,000,000	5,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in USD per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized (in shares)	250,000,000	250,000,000
Common stock, shares issued (in shares)	102,066,218	23,503,214
Common stock, shares outstanding (in shares)	102,066,218	23,503,214

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CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Income Statement [Abstract]
Revenue	$ 0	$ 0	$ 0	$ 0
Operating expenses:
Research and development	5,824	6,486	16,270	19,742
General and administrative	2,704	3,071	8,552	8,709
Total operating expenses	8,528	9,557	24,822	28,451
Loss from operations	(8,528)	(9,557)	(24,822)	(28,451)
Other income (expense):
Interest income	2	41	17	203
Interest expense	(165)	(281)	(561)	(357)
Other income (expense), net	4	(66)	95	(44)
Loss before provision for income taxes	(8,687)	(9,863)	(25,271)	(28,649)
Provision for income taxes	0	0	0	0
Net loss	(8,687)	(9,863)	(25,271)	(28,649)
Unrealized gain on marketable securities, net of tax	0	0	0	5
Comprehensive loss	$ (8,687)	$ (9,863)	$ (25,271)	$ (28,644)
Net loss per common share – basic and diluted (in USD per share)	$ (0.11)	$ (0.55)	$ (0.45)	$ (1.84)
Weighted-average shares used in computing net loss per common share – basic and diluted (in shares)	77,883,158	17,832,092	56,437,417	15,579,387

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CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY - USD ($) $ in Thousands	Total	Series D Warrants	Series C Warrants	Series E Warrants	Registered Direct Offering	Public Stock Offering	At-the-market Offering	Common Stock	Common Stock Series D Warrants	Common Stock Series C Warrants	Common Stock Series E Warrants	Common Stock Registered Direct Offering	Common Stock Public Stock Offering	Common Stock At-the-market Offering	Additional Paid-In Capital	Additional Paid-In Capital Series C Warrants	Additional Paid-In Capital Series E Warrants	Additional Paid-In Capital Registered Direct Offering	Additional Paid-In Capital Public Stock Offering	Additional Paid-In Capital At-the-market Offering	Accumulated   Deficit	Accumulated Other Comprehensive Income (Loss)
Beginning balance (in shares) at Dec. 31, 2018								11,973,039
Beginning balance at Dec. 31, 2018	$ 18,710							$ 1							$ 279,946						$ (261,232)	$ (5)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock-based compensation	361														361
Unrealized gain (loss) on marketable securities, net of tax	6																					6
Net loss	(9,426)																				(9,426)
Ending balance (in shares) at Mar. 31, 2019								11,973,039
Ending balance at Mar. 31, 2019	9,651							$ 1							280,307						(270,658)	1
Beginning balance (in shares) at Dec. 31, 2018								11,973,039
Beginning balance at Dec. 31, 2018	18,710							$ 1							279,946						(261,232)	(5)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Unrealized gain (loss) on marketable securities, net of tax	5
Net loss	(28,649)
Ending balance (in shares) at Sep. 30, 2019								18,230,803
Ending balance at Sep. 30, 2019	10,379							$ 2							300,258						(289,881)	0
Beginning balance (in shares) at Mar. 31, 2019								11,973,039
Beginning balance at Mar. 31, 2019	9,651							$ 1							280,307						(270,658)	1
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock (in shares)								5,750,000
Issuance of common stock	18,331							$ 1							18,330
Stock-based compensation	386														386
Unrealized gain (loss) on marketable securities, net of tax	(1)																					(1)
Net loss	(9,360)																				(9,360)
Ending balance (in shares) at Jun. 30, 2019								17,723,039
Ending balance at Jun. 30, 2019	19,007							$ 2							299,023						(280,018)	0
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock (in shares)														507,764
Issuance of common stock							$ 812													$ 812
Stock-based compensation	423														423
Unrealized gain (loss) on marketable securities, net of tax	0
Net loss	(9,863)																				(9,863)
Ending balance (in shares) at Sep. 30, 2019								18,230,803
Ending balance at Sep. 30, 2019	$ 10,379							$ 2							300,258						(289,881)	0
Beginning balance (in shares) at Dec. 31, 2019	23,503,214							23,503,214
Beginning balance at Dec. 31, 2019	$ 9,392							$ 2							308,211						(298,821)	0
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock (in shares)												11,903,506	11,992,307	2,151,346
Issuance of common stock		$ 0			$ 10,211	$ 8,264	2,706					$ 1	$ 2					$ 10,210	$ 8,262	2,706
Issuance of common stock upon exercise of warrants (in shares)									2,161,539	2,649,723
Issuance of common stock upon exercise of warrants			$ 1,722													$ 1,722
Stock-based compensation	364														364
Net loss	(8,689)																				(8,689)
Ending balance (in shares) at Mar. 31, 2020								54,361,635
Ending balance at Mar. 31, 2020	$ 23,970							$ 5							331,475						(307,510)	0
Beginning balance (in shares) at Dec. 31, 2019	23,503,214							23,503,214
Beginning balance at Dec. 31, 2019	$ 9,392							$ 2							308,211						(298,821)	0
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Unrealized gain (loss) on marketable securities, net of tax	0
Net loss	$ (25,271)
Ending balance (in shares) at Sep. 30, 2020	102,066,218							102,066,218
Ending balance at Sep. 30, 2020	$ 55,244							$ 10							379,326						(324,092)	0
Beginning balance (in shares) at Mar. 31, 2020								54,361,635
Beginning balance at Mar. 31, 2020	23,970							$ 5							331,475						(307,510)	0
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock (in shares)														1,550,231
Issuance of common stock							1,161							$ 1						1,160
Issuance of common stock upon exercise of warrants (in shares)										1,333,385
Issuance of common stock upon exercise of warrants			867													867
Stock-based compensation	361														361
Net loss	(7,895)																				(7,895)
Ending balance (in shares) at Jun. 30, 2020								57,245,251
Ending balance at Jun. 30, 2020	18,464							$ 6							333,863						(315,405)	0
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock (in shares)													15,937,130	11,686,795
Issuance of common stock						$ 20,387	$ 12,366						$ 1	$ 1					$ 20,386	$ 12,365
Issuance of common stock upon exercise of warrants (in shares)										10,003,038	7,194,004
Issuance of common stock upon exercise of warrants			$ 6,502	$ 5,773						$ 1	$ 1					$ 6,501	$ 5,772
Stock-based compensation	439														439
Unrealized gain (loss) on marketable securities, net of tax	0
Net loss	$ (8,687)																				(8,687)
Ending balance (in shares) at Sep. 30, 2020	102,066,218							102,066,218
Ending balance at Sep. 30, 2020	$ 55,244							$ 10							$ 379,326						$ (324,092)	$ 0

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CONDENSED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Cash flows from operating activities
Net loss	$ (25,271)	$ (28,649)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation	1,164	1,170
Change in operating lease right-of-use assets	712	619
Depreciation and amortization	993	518
Effective interest on financing obligations	207	208
Other	0	61
Change in operating assets and liabilities:
Prepaid expenses and other assets	(179)	(554)
Accounts payable	(1,915)	1,086
Accrued compensation and other accrued liabilities	(312)	(1,108)
Operating lease liabilities	(835)	(701)
Net cash used in operating activities	(25,436)	(27,350)
Cash flows from investing activities:
Proceeds from maturities of marketable securities	0	17,400
Purchases of marketable securities	0	(3,476)
Purchases of property and equipment	(7,711)	(10,939)
Net cash (used in) provided by investing activities	(7,711)	2,985
Cash flows from financing activities:
Proceeds from Paycheck Protection Program loan	1,610	0
Proceeds from build-to-suit obligation, net of issuance costs	0	4,550
Principal payments on financing obligations	(1,482)	(2,083)
Net cash provided by financing activities	70,385	21,717
Net increase (decrease) in cash, cash equivalents and restricted cash	37,238	(2,648)
Cash, cash equivalents and restricted cash at beginning of period	6,771	9,595
Cash, cash equivalents and restricted cash at end of period	44,009	6,947
Supplemental cash flow information:
Cash paid for interest	738	580
Cash paid for taxes	12	1
Non-cash investing and financing activities:
Acquisition of property and equipment under accounts payable and other accrued liabilities	3,237	3,571
Capitalized effective interest	353	410
Unpaid offering costs	425	107
Asset retirement obligation	97	0
Right-of-use assets acquired under finance lease obligations	0	22
Series C Warrants
Cash flows from financing activities:
Proceeds from exercises of warrants	9,091	0
Series E Warrants
Cash flows from financing activities:
Proceeds from exercises of warrants	5,773	0
Public Offering
Cash flows from financing activities:
Proceeds from offering of securities, net of costs	20,728	18,331
At-the-market Offering
Cash flows from financing activities:
Proceeds from offering of securities, net of costs	16,266	919
Registered Direct Offering
Cash flows from financing activities:
Proceeds from offering of securities, net of costs	10,135	0
Public Stock Offering
Cash flows from financing activities:
Proceeds from offering of securities, net of costs	$ 8,264	$ 0

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Organization and Basis of Presentation

9 Months Ended

Sep. 30, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization and Basis of Presentation

Organization and Basis of Presentation

The Company

Zosano Pharma Corporation (the “Company”) is a clinical-stage biopharmaceutical company focused on providing rapid systemic administration of therapeutics and other bioactive molecules to patients using its proprietary transdermal microneedle system ("System").

The Company filed a 505(b)(2) New Drug Application (“NDA”) for Qtrypta™ (M207) (“Qtrypta”) with the U.S. Food and Drug Administration (“FDA”) on December 20, 2019, and on October 20, 2020, the Company received a Complete Response Letter (“CRL”) from FDA for the NDA. The CRL cited inconsistent zolmitriptan exposure levels observed across clinical pharmacology studies, which had been previously identified in the FDA’s discipline review letter received by the Company in September. Specifically, the CRL noted differences in zolmitriptan exposures observed between subjects receiving different lots of Qtrypta in the Company’s trials and inadequate pharmacokinetic bridging between the lots that made interpretation of some safety data unclear. The CRL referenced unexpected high plasma concentrations of zolmitriptan observed in five study subjects enrolled in the Company’s pharmacokinetic studies. The FDA recommended that the Company conduct a repeat bioequivalence study between three of the lots used during development. The NDA included data on a total of 774 subjects across 5 trials who were administered or dosed with Qtrypta. The CRL noted that additional product quality validation data, which were planned to be submitted following approval, if received, were required to be submitted with the application. In addition, the CRL mentioned that due to U.S. Government and/or Agency-wide restrictions on travel, inspections of the Company’s contract manufacturing facilities were not able to be conducted but would be required before the application may be approved.

The Company does not anticipate realizing product revenues until FDA approves the NDA and the Company begins commercializing Qtrypta, which events may never occur.

Basis of Presentation

The accompanying condensed financial statements have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information, the instructions to Form 10-Q and Regulation S-X. They do not include all the information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal and recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020, or any other subsequent period. These financial statements should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2019, included in the Company’s annual report on Form 10-K and filed with the United States Securities and Exchange Commission (“SEC”) on March 13, 2020.

Use of Estimates

The preparation of the accompanying condensed financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the condensed financial statements, and the reported amounts of expenses during the periods reported. Actual results could differ from those estimates.

Liquidity and Substantial Doubt in Going Concern

Since inception, the Company has incurred recurring operating losses and negative cash flows from operating activities, and as of September 30, 2020, had an accumulated deficit of $324.1 million. As of September 30, 2020, the Company had $43.6 million in cash and cash equivalents. Presently, the Company does not have sufficient cash and cash equivalents to enable it to fund its anticipated level of operations and meet its obligations as they become due within twelve months following the date of issuance of this Quarterly Report on Form 10-Q. The aforementioned factors raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the issuance of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The Company filed a shelf registration statement on Form S-3 with the SEC, which was declared effective by the SEC on April 16, 2020. This shelf registration statement provides the Company with the ability to issue common stock and other securities as described in the registration statement from time to time up to an aggregate amount of $74.5 million.

On August 31, 2020, the Company entered into an underwriting agreement with BTIG, LLC (“BTIG”) pursuant to which the Company issued and sold 15,937,130 shares of its common stock to BTIG at a price of $1.304 per share. The offering closed on September 3, 2020. The Company received net proceeds of approximately $20.4 million after deducting estimated expenses payable by the Company in connection with the offering. The shares were sold pursuant to the Company’s effective shelf registration statement, the base prospectus filed as part of such registration statement and the prospectus supplement dated August 31, 2020.

On June 8, 2020, the Company entered into a sales agreement with BTIG, as sales agent, to establish an at-the-market offering program (“2020 ATM”), under which the Company is permitted to offer and sell, from time to time, shares of common stock having a maximum aggregate offering price of up to $20.0 million. The Company is required to pay BTIG a commission of 3% of the gross proceeds from the sale of shares and also agreed to provide BTIG with customary indemnification rights. During the quarter ended September 30, 2020, the Company issued and sold 11,686,795 shares of its common stock at an average price of $1.09 per share under the 2020 ATM program with aggregate net proceeds of approximately $12.4 million after BTIG's commission and estimated offering expenses of approximately $360,000. During the nine months ended September 30, 2020, the Company issued and sold 13,237,026 shares of its common stock at an average price of $1.07 per share under the 2020 ATM program with aggregate net proceeds of approximately $13.5 million after BTIG's commission and estimated offering expenses of approximately $660,000. The shares were sold pursuant to the Company’s effective shelf registration statement, the base prospectus filed as part of such registration statement and the prospectus supplement dated June 8, 2020.

On May 27, 2020, the Company entered into the First Amendment to Lease Documents (the “Trinity Amendment”) with Trinity Funding 1, LLC (“Trinity”), which, among other things, extended the term of each lease schedule from a 36-month term to a 42-month term by providing for an interest-only period from May 2020 through October 2020. Principal payments recommenced on November 1, 2020. Additionally, the Trinity Amendment removed all end-of-term options other than the option to purchase the equipment at 12% of equipment cost at the end of each 42-month-term.

On April 21, 2020, the Company executed a promissory note (the “PPP Note”) evidencing an unsecured loan in the amount of $1.6 million under the Paycheck Protection Program (the “PPP Loan”). The Paycheck Protection Program (“PPP”) was established under the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) and is administered by the U.S. Small Business Administration (“SBA”). Under the terms of the CARES Act, PPP loan recipients can apply for and be granted forgiveness for all or a portion of loans granted under the PPP. Such forgiveness will be determined, subject to limitations, based on the use of loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and the maintenance of the Company's payroll levels. The Company applied for forgiveness of the $1.6 million loan amount and accrued interest on October 4, 2020, however, no assurance is provided that the Company will obtain forgiveness of the PPP Loan in whole or in part.

On March 4, 2020, the Company entered into a securities purchase agreement with certain institutional investors for the issuance and sale in a registered direct offering (the “March 2020 Offering”) of (i) 11,903,506 shares of the Company's common stock and (ii) Series E Warrants to purchase up to a total of 11,903,506 shares of common stock at an offering price of $0.9275 per share and accompanying warrant. The Series E Warrants have an exercise price of $0.8025 per share, are immediately exercisable and will expire five years from the date of issuance. The aggregate net proceeds from the offering were approximately $10.2 million, after deducting the placement agent fees and other offering expenses. During the quarter ended September 30, 2020, Series E Warrants to purchase 7,194,004 shares of common stock were exercised at an exercise price of $0.8025 per share for aggregate proceeds of approximately $5.8 million.

On February 14, 2020, the Company closed an underwritten offering (the “February 2020 Offering”) for the issuance and sale of (i) 10,146,154 Class A Units, each consisting of one share of common stock and one Series C Warrant to purchase one share of common stock, at a public offering price of $0.65 per Class A Unit, and (ii) 2,161,539 Class B Units, each consisting of one Series D Pre-Funded Warrant to purchase one share of common stock and one Series C Warrant to purchase one share of common stock, at a public offering price of $0.6499 per Class B Unit. The Series C Warrants have an exercise price of $0.65 per share, are immediately exercisable and will expire five years from the date of issuance. The Series D Pre-Funded Warrants had an exercise price of $0.0001 per share and were fully exercised in connection with the closing of the offering. The Company granted the underwriter a 30-day option to purchase up to an additional 1,846,153 shares of common stock and/or additional Series C Warrants to purchase up to 1,846,153 shares of common stock. The underwriter fully exercised its option to purchase the shares and the Series C Warrants. The aggregate net proceeds from the offering were $8.3 million after deducting underwriting commissions and other offering expenses. During the quarter ended September 30, 2020, Series C Warrants to purchase 10,003,038 shares of common stock were exercised at an exercise price of $0.65 per share for aggregate proceeds of approximately $6.5 million. During the nine months ended September 30, 2020, Series C Warrants to purchase 13,986,146 shares of common stock were exercised at an exercise price of $0.65 per share for aggregate proceeds of approximately $9.1 million.

On August 19, 2019, the Company entered into a sales agreement with BTIG, LLC, as sales agent (“BTIG”), to establish an at-the-market offering program ("2019 ATM"), under which the Company was permitted to offer and sell, from time to time, shares of common stock having a maximum aggregate offering price of up to $15.0 million. The Company was required to pay BTIG a commission of 3% of the gross proceeds from the sale of shares and also agreed to provide BTIG with customary indemnification rights. During the quarter ended March 31, 2020, the Company issued and sold 2,151,346 shares of its common stock at an average price of $1.30 per share under the 2019 ATM program. The aggregate net proceeds were approximately $2.7 million after BTIG's commission of $84,000 and other offering expenses. On March 4, 2020, the Company delivered notice of termination of the sales agreement to BTIG. The Company did not incur any penalties as a result of its termination of the sales agreement.

The Company plans to raise additional funding through equity or debt financings, licensing or collaboration agreements, or strategic alliances with pharmaceutical partners, or any combination of the above. However, there are no assurances that additional funding will be obtained and that the Company will succeed in its future operations. The Company’s inability to obtain required funding in the near future or its inability to obtain funding on favorable terms will have a material adverse effect on its operations and strategic development plan for future growth. If the Company cannot successfully raise additional capital and implement its strategic development plan, its liquidity, financial condition and business prospects will be materially and adversely affected, and it may have to cease operations.

The Company will continue to evaluate its timelines, strategic needs, and working capital requirements. There can be no assurance that if the Company attempts to raise additional capital, it will be successful in doing so on terms acceptable to the Company, or at all. Further, there can be no assurance that it will be able to gain access and/or be able to execute on securing new sources of funding, new development opportunities, successfully obtain regulatory approvals for and commercialize new products, achieve significant product revenues from its products (if approved), or achieve or sustain profitability in the future.

COVID-19 Pandemic

On March 11, 2020, the World Health Organization designated COVID-19 as a global pandemic. Due to the COVID-19 pandemic, there has been uncertainty in the global financial markets and economic conditions. The Company is closely monitoring the impact of the COVID-19 pandemic on its business, including how it will impact its employees, clinical trials and third-party service providers who perform critical services for the Company's business. In addition, the impact of the COVID-19 pandemic on the global financial markets and economic conditions could impact the Company's ability to raise capital through an equity financing, debt financing, a license or collaboration or a combination of such sources of capital, and as a result, its ability to continue as a going concern. The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company's business, results of operations and financial condition will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain or treat it. As of the date of issuance of this Quarterly Report on Form 10-Q, management is not aware of any specific event or circumstances that would require an update to its estimates or a revision of the carrying value of its assets or liabilities. These estimates may change, as new events occur, and additional information is obtained.

On March 27, 2020, the CARES Act was signed into law. The CARES Act includes provisions relating to refundable payroll tax credits, deferment of the employer portion of certain payroll taxes, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. The Company analyzed the provisions of the CARES Act and determined there was no significant impact on the Company's provision for income taxes for the three and nine months ended September 30, 2020.

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Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2020

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Significant Accounting Policies

The Company’s significant accounting policies are included in Note 2. Summary of Significant Accounting Policies to the financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

Cash, Cash Equivalents and Restricted Cash

The Company considers all highly liquid investments with an original maturity of 90 days or less to be cash equivalents.

As of September 30, 2020, and December 31, 2019, the Company had restricted cash of approximately $0.5 million primarily consisting of deposits of $0.3 million to secure its building lease until the end of the lease term and a deposit of approximately $0.1 million to a utility provider.

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the balance sheets and as presented as cash, cash equivalents and restricted cash in the statements of cash flows:

	September 30, 2020		September 30, 2019
	(unaudited; in thousands)
Cash and cash equivalents	$	43,554	$	6,492
Restricted cash	455		455
Total	$	44,009	$	6,947

Marketable Securities

Marketable securities generally consist of debt securities with original maturities greater than 90 days and remaining maturities of less than one year. Marketable securities with an original maturity greater than one year, if any, would be considered long-term investments. All of the Company's investments are classified as available-for-sale and carried at fair value based upon quoted market price. The change in unrealized gains and losses related to fixed maturity debt securities is reported as a separate component of comprehensive loss in the statements of operations and comprehensive loss and as a separate component of stockholders' equity on the balance sheets. Interest income includes interest, dividends, amortization and accretion of purchase premiums and discounts and realized gains and losses on sales of securities, if any. The cost of securities sold is based on the specific-identification method.

The Company monitors its investment portfolio for potential impairment on a quarterly basis. If the carrying amount of an investment in available-for-sale debt securities exceeds its fair value and the decline in value is determined to be other-than-temporary, an allowance is recorded in the amount that the carrying amount of the security exceeds its fair value and a loss is recognized in operating results for the amount of such decline. If the carrying amount of an investment in marketable securities, other than available-for-sale debt securities, exceeds its fair value and the decline in value is determined to be other-than-temporary, the carrying amount of the security is reduced to fair value and a loss is recognized in operating results for the amount of such decline. In order to determine whether a decline in value is other-than-temporary, the Company evaluates, among other factors, the cause of the impairment, including the creditworthiness of the security issuers, the number of securities in an unrealized loss position, the severity and duration of the unrealized losses, and its intent and ability to hold the security to maturity or expected recovery.

Fair Value of Financial Instruments

The Company records its financial assets and liabilities at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting guidance establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value as follows:

•Level 1: Inputs which include quoted prices in active markets for identical assets and liabilities.

•Level 2: Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

•Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The carrying values of certain assets and liabilities of the Company, such as cash and cash equivalents and accounts payable approximate fair value due to their relatively short maturities. The carrying value of the Company’s short-term financial obligations approximates their fair value as the terms of the borrowing are consistent with current market rates and the duration to maturity is short. The carrying value of the Company's long-term financial obligations approximates fair value because interest rates approximate market rates that the Company could obtain for debt with similar terms and maturities.

Net Loss Per Common Share

Basic net loss per common share is calculated by dividing the net loss by the weighted-average number of common shares outstanding during the period, without consideration for potentially dilutive securities. Diluted net loss per common share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common shares and potentially dilutive securities outstanding for the period determined using the treasury-stock and if-converted methods. For purposes of the diluted net loss per share calculation, common stock warrants, stock options and restricted stock units (“RSUs”) are considered to be potential dilutive securities but are excluded from the calculation of diluted net loss per share because their effect would be anti-dilutive and therefore, basic and diluted net loss per share were the same for all periods presented.

The following outstanding common stock equivalents were excluded from the computations of diluted net loss per common share for the periods presented as the effect of including such securities would be antidilutive:

	September 30, 2020	September 30, 2019
	(unaudited)
Warrants to purchase common stock	5,148,108	274,524
Options to purchase common stock	2,673,444	1,865,978
RSUs	342,317	—
Total	8,163,869	2,140,502

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In November 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-18 Collaborative Arrangements (Topic 808), Clarifying the Interaction between Topic 808 and Topic 606, which (1) clarifies that certain transactions between collaborative arrangement participants should be accounted for under ASC Topic 606, Revenue from Contracts with Customers (Topic 606), when the collaborative arrangement participant is a customer in the context of a unit of account, (2) adds unit-of-account guidance in Topic 808 to align with Topic 606 when an entity is assessing whether the collaborative arrangement, or a part of the arrangement, is within the scope of Topic 606, (3) precludes presenting transactions together with revenue when those transactions involve collaborative arrangement participants that are not directly related to third parties and are not customers. The Company adopted ASU 2018-18 in the third quarter of 2020. The adoption of ASU 2018-18 did not have a material impact on the Company's condensed financial statements.

The FASB issued ASU 2019-05, Financial Instruments - Credit Losses, Targeted Transition Relief in May 2019, ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments — Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments in April 2019, and ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses in November 2018. This new guidance is intended to present credit losses on available-for-sale debt securities as an allowance rather than as a write-down. Entities are required to apply the standards' provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The Company adopted ASU 2019-05, ASU 2019-04 and ASU 2018-19 effective January 1, 2020. The adoption of this guidance did not have an impact on the Company's financial statements.

In August 2018, the FASB issued ASU 2018-15, Intangible - Goodwill and Other - Internal-Use Software (Subtopic 350-40), which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The Company adopted ASU 2018-15, Subtopic 350-40 effective January 1, 2020 on a prospective basis. The adoption of this guidance did not have a material impact on the Company's financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820). The new guidance modifies the disclosure requirements on fair value measurements. The Company adopted Topic 820 effective January 1, 2020 on a modified retrospective basis. The adoption of this guidance did not have a material impact on the Company's financial statement disclosures.

Recent Accounting Pronouncements Not Yet Adopted

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This new guidance simplifies the accounting for income taxes by removing certain exceptions to general principles, clarifying requirements and including amendments to improve consistent application of the guidance. The guidance specifically removes the exception to the incremental approach for intra period tax allocation when there is a loss from continuing operations and income or a gain from other items, such as discontinued operations or other comprehensive income. The guidance also requires an entity to recognize a franchise tax that is partially based on income as an income-based tax and to account for any other amounts incurred as a non-income based tax. The guidance is effective for the Company beginning January 1, 2021 using a prospective approach. Early adoption is permitted. The Company is evaluating the effect of implementation on its financial statements and disclosures.

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Master Services Agreement with Eversana

9 Months Ended

Sep. 30, 2020

Related Party Transactions [Abstract]

Master Services Agreement with Eversana

Master Services Agreement with Eversana

On August 6, 2020, the Company entered into a master services agreement (the “Eversana Agreement”) with Eversana Life Science Services, LLC (“Eversana”) for the commercialization of Qtrypta in the United States, if approved by the FDA. Under the terms of the Eversana Agreement, Eversana and the Company will cooperate to conduct activities over the term of the Eversana Agreement. The Company maintains ownership of the Qtrypta NDA as well as all legal, regulatory and manufacturing responsibilities for Qtrypta. Eversana receives an exclusive right to conduct agreed commercialization activities and will utilize its internal sales organization along with its other commercial capabilities for market access, marketing, distribution and patient support services for Qtrypta. Eversana will receive reimbursement of certain commercialization costs pursuant to a commercialization budget estimated at approximately $250.0 million and a low double digit to mid-teen percentage of product profits when Company net sales of Qtrypta surpass certain costs incurred by the parties pursuant to the commercialization budget.

The term of the Eversana Agreement is five years following the date, if any, that the FDA approves the NDA. Upon expiration or termination of the Eversana Agreement, the Company will retain all profits from product sales consummated after expiration or termination and assume all future corresponding commercialization responsibilities. The Company may terminate the Eversana Agreement if Eversana fails to provide pre-commercial or commercial plans and budgets by specified dates, if the Company decides to discontinue development or commercialization efforts for Qtrypta in the United States (subject to a termination payment if such termination occurs within a specified time period), or upon a change of control of the Company. Either party may terminate the Eversana Agreement if FDA approval is not received by July 31, 2021, if net profits are not realized within a specified time period following commercial launch, for material breach of the Eversana Agreement by the other party that is not cured within a defined time period, for insolvency of the other party, if Qtrypta is subject to a safety recall in the United States or if Qtrypta is not commercially launched within a specified time period after FDA approval of the NDA (other than by reason of the terminating party’s failure to perform its obligations under the Eversana Agreement).

In addition, under the Eversana Agreement, following FDA approval of the NDA, Eversana has agreed to provide a revolving credit facility of up to $5.0 million (the “Credit Facility”) to the Company pursuant to a loan agreement to be entered into between Eversana and the Company on a subsequent date. The loan will bear interest at an annual rate equal to 10.0%, to be paid monthly, and the Company will be able to prepay any amounts borrowed under the Credit Facility at any time without penalty or premium. The Credit Facility will be secured by substantially all of the Company’s assets, subject to prior liens and security interests.

The Company is accounting for the Eversana Agreement as a collaborative arrangement. As of September 30, 2020, no material accruals, expenses, payments, or revenues were recorded by the Company in connection with the Eversana Agreement.

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Cash Equivalents and Investments in Marketable Securities

9 Months Ended

Sep. 30, 2020

Cash, Cash Equivalents, and Short-term Investments [Abstract]

Cash Equivalents and Investments in Marketable Securities

Cash Equivalents and Investments in Marketable Securities

The following table summarizes the Company's cash equivalents and investments in marketable securities measured at fair value on a recurring basis as of September 30, 2020:

			Fair Value Measurements
	Total		Quoted prices in active market Level 1		Significant other observable inputs Level 2		Significant unobservable inputs Level 3
	(unaudited; in thousands)
Money market funds classified as cash equivalents	$	38,417	$	38,417	$	—	$	—

The Company did not hold any cash equivalents and investments in marketable securities as of December 31, 2019.

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Balance Sheet Components

9 Months Ended

Sep. 30, 2020

Balance Sheet Related Disclosures [Abstract]

Balance Sheet Components

Balance Sheet Components

The following table summarizes the Company’s prepaid expenses and other current assets for each of the periods presented:

	September 30, 2020		December 31, 2019
	(unaudited; in thousands)		(in thousands)
Prepaid insurance	$	289	$	49
Prepaid services	144		316
Prepaid software, subscriptions and deferred implementation costs	133		61
Deferred offering costs	48		65
Other	1		6
Total	$	615	$	497

The following table summarizes the Company’s property and equipment for each of the periods presented:

	September 30, 2020		December 31, 2019
	(unaudited; in thousands)		(in thousands)
Leasehold improvements	$	24,212	$	16,932
Manufacturing equipment	14,532		12,173
Laboratory and office equipment	1,617		1,585
Right-of-use laboratory and office equipment	25		25
Computer equipment and software	138		138
Right-of-use computer equipment and software	29		29
Construction-in-progress	17,885		20,602
Property and equipment at cost	58,438		51,484
Less: accumulated depreciation property and equipment	(27,778)		(26,821)
Less: accumulated amortization right-of-use assets	(39)		(27)
Total	$	30,621	$	24,636

As of September 30, 2020, construction-in-progress included $14.3 million of an asset relating to the build-to-suit arrangement for construction of the Company's commercial coating and primary packaging system, of which capitalized construction period interest was $2.2 million (See Note 7. Debt Financing).

The following table summarizes the Company's depreciation and amortization expense for each of the periods presented:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(unaudited; in thousands)				(unaudited; in thousands)
Depreciation and amortization expense	$	476	$	157	$	993	$	518

The following table summarizes the Company’s other accrued liabilities for each of the periods presented:

	September 30, 2020		December 31, 2019
	(unaudited; in thousands)		(in thousands)
Construction-in-progress obligations	$	2,962	$	3,422
Professional service fees	239		206
Pre-clinical and clinical studies	16		43
Contract manufacturing	13		250
Accrued taxes	—		27
Other	164		224
Total	$	3,394	$	4,172

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Leases

9 Months Ended

Sep. 30, 2020

Leases [Abstract]

Leases

Leases

Operating Leases

The Company has a non-cancelable operating lease for office, research and development, and manufacturing facilities in Fremont, California through August 31, 2024, with an option to further extend the lease for an additional 60 months subject to certain terms and conditions. The operating lease right-of-use asset and associated lease liability do not consider the option to extend the term after August 31, 2024, as the Company is not reasonably certain of exercising the extension option. The Company entered into a three year, non-cancelable lease for telephone equipment in January 2018. Per the terms of the agreements, the Company does not have any residual value guarantees, restrictions or covenants. In calculating the present value of the lease payments, the Company utilized its incremental borrowing rate, as the rates implicit in the leases were not readily determinable. The Company estimates its incremental borrowing rate based on qualitative factors including company specific credit offers, lease term, general economics and the interest rate environment. The Company accounts for lease and non-lease components separately. The building lease includes non-lease components (i.e. common area maintenance) which are charged and paid separately from rent based on actual costs incurred and therefore are not included in the right-of-use asset and lease liability but reflected in operating expense in the period incurred.

As of September 30, 2020, the Company had operating leases for manufacturing space at two of its contract manufacturing organizations ("CMOs"). The operating leases are embedded in agreements with these CMOs that include lease and non-lease components. The Company accounts for lease and non-lease components separately and determined the lease and non-lease components of the agreements based upon estimates of relative standalone prices and a residual estimation approach for components that are highly variable or uncertain and where standalone prices were not readily available or estimable. These agreements have initial terms and options to extend that are dependent upon FDA approval of the Company's NDA for Qtrypta. Both agreements have cancellation clauses if the FDA does not approve the NDA for Qtrypta. As the Company does not currently have an intention to cancel the agreements prior to an FDA approval decision, the Company has recorded right-of-use assets and lease liabilities at the present value of the amount in each CMO agreement that was identified as an embedded operating lease. The lease term does not extend past the estimated date of an FDA approval decision, as it is not reasonably certain that the Company would not exercise the cancellation options in the event that Qtrypta was not approved. Per the terms of the agreements, the Company does not have any residual value guarantees, restrictions or covenants. In calculating the present value of the lease payments, the Company utilized its incremental borrowing rate, as the rates implicit in the leases were not readily determinable. The Company estimates its incremental borrowing rate based on qualitative factors including company specific credit offers, lease term, general economics and the interest rate environment. Prior to September 30, 2020, any embedded leases within these agreements were not considered long-term and were not separately disclosed as lease commitments, but included as commitments to CMOs in the commitments and contingencies footnote of the financial statements. The establishment of the embedded leases resulted in $153,000 of right-of-use assets and associated lease liabilities and was reflected as a non-cash operating activity in the statement of cash flows as of September 30, 2020.

Finance Leases

The Company leases certain equipment under non-cancelable agreements which expire between 2021 and 2022.

The following table summarizes the components of lease costs for each of the periods presented:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(unaudited; in thousands)				(unaudited; in thousands)
Operating lease costs	$	422	$	422	$	1,266	$	1,250
Finance lease costs:
Amortization of finance lease right-of-use assets	4		4		12		23
Interest on finance lease obligations	2		3		6		15
Total	$	428	$	429	$	1,284	$	1,288

The following table summarizes cash payments for leases for each of the periods presented:

	Nine Months Ended September 30,
	2020		2019
	(unaudited; in thousands)
Operating cash flows from operating leases - cash paid for operating leases	$	1,388	$	1,332
Operating cash flows from finance leases - cash paid for interest	$	6	$	9
Financing cash flows from finance leases - cash paid for principal	$	12	$	10

The following table summarizes the lease terms and discount rates for the Company's leases as of September 30, 2020:

	Operating leases		Finance leases
	(unaudited)
Weighted-average remaining lease term (in years)	3.96		1.22
Weighted average discount rate	11	%	26	%

The following table summarizes the maturities of the Company's lease liabilities for each year ending December 31, as of September 30, 2020:

	Operating leases		Finance leases
	(unaudited; in thousands)
Remainder of 2020	$	490	$	7
2021	1,981		14
2022	2,045		3
2023	2,017		—
2024	1,372		—
Total undiscounted cash flows	7,905		24
Less: amount representing interest	(1,515)		(4)
Present value of lease liabilities	$	6,390	$	20
Current portion	$	1,332	$	14
Long-term portion	5,058		6
Total	$	6,390	$	20

Leases

Leases

Operating Leases

The Company has a non-cancelable operating lease for office, research and development, and manufacturing facilities in Fremont, California through August 31, 2024, with an option to further extend the lease for an additional 60 months subject to certain terms and conditions. The operating lease right-of-use asset and associated lease liability do not consider the option to extend the term after August 31, 2024, as the Company is not reasonably certain of exercising the extension option. The Company entered into a three year, non-cancelable lease for telephone equipment in January 2018. Per the terms of the agreements, the Company does not have any residual value guarantees, restrictions or covenants. In calculating the present value of the lease payments, the Company utilized its incremental borrowing rate, as the rates implicit in the leases were not readily determinable. The Company estimates its incremental borrowing rate based on qualitative factors including company specific credit offers, lease term, general economics and the interest rate environment. The Company accounts for lease and non-lease components separately. The building lease includes non-lease components (i.e. common area maintenance) which are charged and paid separately from rent based on actual costs incurred and therefore are not included in the right-of-use asset and lease liability but reflected in operating expense in the period incurred.

As of September 30, 2020, the Company had operating leases for manufacturing space at two of its contract manufacturing organizations ("CMOs"). The operating leases are embedded in agreements with these CMOs that include lease and non-lease components. The Company accounts for lease and non-lease components separately and determined the lease and non-lease components of the agreements based upon estimates of relative standalone prices and a residual estimation approach for components that are highly variable or uncertain and where standalone prices were not readily available or estimable. These agreements have initial terms and options to extend that are dependent upon FDA approval of the Company's NDA for Qtrypta. Both agreements have cancellation clauses if the FDA does not approve the NDA for Qtrypta. As the Company does not currently have an intention to cancel the agreements prior to an FDA approval decision, the Company has recorded right-of-use assets and lease liabilities at the present value of the amount in each CMO agreement that was identified as an embedded operating lease. The lease term does not extend past the estimated date of an FDA approval decision, as it is not reasonably certain that the Company would not exercise the cancellation options in the event that Qtrypta was not approved. Per the terms of the agreements, the Company does not have any residual value guarantees, restrictions or covenants. In calculating the present value of the lease payments, the Company utilized its incremental borrowing rate, as the rates implicit in the leases were not readily determinable. The Company estimates its incremental borrowing rate based on qualitative factors including company specific credit offers, lease term, general economics and the interest rate environment. Prior to September 30, 2020, any embedded leases within these agreements were not considered long-term and were not separately disclosed as lease commitments, but included as commitments to CMOs in the commitments and contingencies footnote of the financial statements. The establishment of the embedded leases resulted in $153,000 of right-of-use assets and associated lease liabilities and was reflected as a non-cash operating activity in the statement of cash flows as of September 30, 2020.

Finance Leases

The Company leases certain equipment under non-cancelable agreements which expire between 2021 and 2022.

The following table summarizes the components of lease costs for each of the periods presented:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(unaudited; in thousands)				(unaudited; in thousands)
Operating lease costs	$	422	$	422	$	1,266	$	1,250
Finance lease costs:
Amortization of finance lease right-of-use assets	4		4		12		23
Interest on finance lease obligations	2		3		6		15
Total	$	428	$	429	$	1,284	$	1,288

The following table summarizes cash payments for leases for each of the periods presented:

	Nine Months Ended September 30,
	2020		2019
	(unaudited; in thousands)
Operating cash flows from operating leases - cash paid for operating leases	$	1,388	$	1,332
Operating cash flows from finance leases - cash paid for interest	$	6	$	9
Financing cash flows from finance leases - cash paid for principal	$	12	$	10

The following table summarizes the lease terms and discount rates for the Company's leases as of September 30, 2020:

	Operating leases		Finance leases
	(unaudited)
Weighted-average remaining lease term (in years)	3.96		1.22
Weighted average discount rate	11	%	26	%

The following table summarizes the maturities of the Company's lease liabilities for each year ending December 31, as of September 30, 2020:

	Operating leases		Finance leases
	(unaudited; in thousands)
Remainder of 2020	$	490	$	7
2021	1,981		14
2022	2,045		3
2023	2,017		—
2024	1,372		—
Total undiscounted cash flows	7,905		24
Less: amount representing interest	(1,515)		(4)
Present value of lease liabilities	$	6,390	$	20
Current portion	$	1,332	$	14
Long-term portion	5,058		6
Total	$	6,390	$	20

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Debt Financing

9 Months Ended

Sep. 30, 2020

Debt Disclosure [Abstract]

Debt Financing

Debt Financing

Build-to-Suit Obligation with Trinity

In September 2018, the Company entered into a build-to-suit arrangement with Trinity Capital Fund III, L.P. (the “Agreement”) in order to obtain financing for the third-party construction of the Company's commercial coating and primary packaging system (the “Equipment”). Under the Agreement, Trinity (as successor in interest to Trinity Capital Fund III, L.P.) made available to the Company $14.0 million for equipment costs and associated soft costs (“Total Cost”), with an initial drawdown of $5.0 million and additional drawdowns in increments of not less than $0.5 million. Under the Agreement, each individual drawdown represents a separate financing arrangement with its own term and stated interest rate. Each drawdown is non-cancelable, with no prepayment options. In consideration of the financing arrangement, as collateral, the Company granted Trinity a first-priority lien and security interest in substantially all of the Company's assets. On May 27, 2020, the Company entered into the Trinity Amendment.

The Trinity Amendment, among other things, extended each individual drawdown term from 36 months to 42 months by providing for an interest-only period from May 2020 through October 2020. Principal payments recommenced November 1, 2020. Additionally, the Trinity Amendment removed all end-of-term options other than the option to purchase the equipment at 12% of the Total Cost, which is equal to the drawdown amount (“Purchase Option Fee”), which the Company intends to exercise at the end of each 42-month-term. The transfer of title from Trinity to the Company will occur at the end of the final 42-month-term, provided that the purchase option was executed, and the Purchase Option Fee was paid in full at the end of each 42-month-term. The security interest will terminate on the earlier to occur of (i) the date that falls six (6) months after the delivery and installation of the Equipment or (ii) payment in full of all amounts owed. The Company accounted for the Trinity Amendment as a debt modification under ASC 470-50, as the amended terms were not substantially different from the terms of the Agreement.

The Company determined that it controls the Equipment during the construction period due to its involvement in and its obligations related to the construction of the Equipment. Accordingly, construction costs incurred were recorded as construction-in-progress, a component of property and equipment on the balance sheet, and the Trinity financing obligation was recorded as a build-to-suit obligation on the balance sheet. As of September 30, 2020, the Company had an aggregate commercial coating and primary packaging system construction-in-progress balance of $14.3 million that included $2.2 million of interest related to its build-to-suit obligation.

In connection with the build-to-suit arrangement, the Company issued common stock warrants (“Trinity Warrants”) for a total of 75,000 shares of common stock at an exercise price of $3.5928 per share. The Trinity Warrants will expire on September 25, 2025. Proceeds allocated to the Trinity Warrants based on their relative fair value approximated $243,000 and were recorded as a discount to the initial $5.0 million drawdown under the Trinity financing arrangement and are being amortized as interest over the term of the September 2018 drawdown.

The Trinity build-to-suit arrangement requires compliance with various affirmative and restrictive covenants in regard to making certain investments and other restricted payments, engaging in mergers or consolidations, and the sale or transfer of certain assets. Failure to comply with any of these covenants, or pay principal, interest or other amounts when due, would constitute an event of default under the applicable agreement. The Company was in compliance with its covenants with respect to the Trinity build-to-suit arrangement as of September 30, 2020.

The following table summarizes the debt obligations as of September 30, 2020 including the amended effective interest rate and maturity dates pursuant to the terms of the Trinity Amendment:

Drawdown Date	Drawdown Amount		Principal Balance		Purchase Option Fee		Discount on Purchase Option Fee		Unamortized Discounts and Issuance Costs		Monthly Payment		Monthly Payment (interest only period)		Stated Interest Rate		Amended Effective Interest Rate		Maturity Date
			(unaudited; in thousands)
09/25/18	$	5,000	$	2,378	$	600	$	(28)	$	(170)	$	160	$	20	9.43	%	24.38	%	04/01/22
12/11/18	2,800		1,566		336		(22)		(73)		90		13		9.68	%	18.25	%	07/01/22
06/06/19	2,300		1,654		276		(31)		(100)		74		14		9.93	%	18.08	%	01/01/23
09/13/19	2,300		1,831		276		(38)		(126)		74		16		9.93	%	18.04	%	04/01/23
11/27/19	1,600		1,354		192		(31)		(104)		52		12		9.93	%	18.16	%	06/01/23
Total	$	14,000	$	8,783	$	1,680	$	(150)	$	(573)	$	450	$	75

The following table summarizes the Company's build-to-suit obligation as of September 30, 2020 (unaudited; in thousands):

Build-to-suit obligation principal amount	$	8,783
Build-to-suit obligation Purchase Option Fees at present value	1,530
Less: unamortized Purchase Option Fees	(441)
unamortized fair value of free-standing warrants	(46)
unamortized debt discount	(81)
unamortized debt issuance costs	(5)
Build-to-suit obligation, net of debt issuance costs and discount	$	9,740
Build-to-suit obligation, current portion	$	4,293
Build-to-suit obligation, long-term portion, net of debt issuance costs and discount	5,447
Build-to-suit obligation, net of debt issuance costs and discount	$	9,740

The following table summarizes the future minimum payments on the Company’s build-to-suit obligation for each year ending December 31, including payment of principal, interest and Purchase Option Fees as of September 30, 2020:

	Principal		Interest		Purchase Option Fee
	(unaudited; in thousands)
Remainder of 2020	$	753	$	222	$	—
2021	4,779		618		—
2022	2,979		189		936
2023	272		8		744
Total	$	8,783	$	1,037	$	1,680

The following table summarizes interest incurred on the Company's build-to-suit obligation for each of the periods presented:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(unaudited; in thousands)				(unaudited; in thousands)
Build-to-suit obligation, cash interest expense	$	225	$	210	$	705	$	556
Build-to-suit obligation, effective interest expense	147		159		560		545
Less: build-to-suit obligation, interest capitalized	(217)		(109)		(746)		(841)
Build-to-suit obligation interest expense	$	155	$	260	$	519	$	260

PPP Loan

On April 21, 2020, the Company executed a PPP Note evidencing a PPP Loan in the amount of $1.6 million. The PPP was established under the CARES Act and is administered by the Small Business Association ("SBA"). The Loan was made through Silicon Valley Bank (the “Lender”).

The PPP Loan has a two-year term and bears interest at a rate of 1.0% per annum. Under the terms of the CARES Act, PPP loan recipients can apply for and be granted forgiveness for all or a portion of the loan granted under the PPP. Such forgiveness will be determined, subject to limitations, based on the use of loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and the maintenance of the Company's payroll levels. The Company applied for forgiveness of the entire $1.6 million loan amount and accrued interest on October 4, 2020, utilizing the 24-week covered period allowed by the SBA. The Company submitted its forgiveness application utilizing eligible expenses incurred during a 19-week period from April 22, 2020 through September 1, 2020. The lender reviewed the application and submitted it to the SBA on October 7, 2020 from which time, the SBA has 90 days to review and make a decision on the forgiveness of the loan. No assurance is provided that forgiveness for any portion of the PPP Loan or accrued interest will be obtained.

The Paycheck Protection Flexibility Act of 2020, P.L. 116-142, extended the deferral period for loan payments to either (1) the date that the SBA remits the borrower’s loan forgiveness amount to the lender or (2) if the borrower does not apply for loan forgiveness, ten months after the end of the borrower’s loan forgiveness covered period. The Lender has modified the Company’s first payment from November 21, 2020 to September 21, 2021 and if the loan is fully forgiven, the Company is not responsible for any payments. If only a portion of the loan is forgiven, or if the forgiveness application is denied, any remaining balance due on the loan must be repaid by the Company on or before April 21, 2022, the maturity date of the loan. Interest accrues during the time between the disbursement of the loan and SBA remittance of the forgiveness amount. The Company is responsible for paying the accrued interest on any amount of the loan that is not forgiven.

The PPP Note contains customary events of default relating to, among other things, payment defaults, providing materially false and misleading representation to the SBA or Lender or breaching the terms of the PPP Note. The occurrence of an event of default may result in the immediate repayment of all amounts outstanding, collection of all amounts owing from the Company or filing suit and obtaining judgment against the Company.

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2020

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Equipment Purchase Commitments

The Company has a remaining commitment of $4.0 million, of which $2.8 million was recorded as a current liability as of September 30, 2020, with an equipment manufacturer for the construction and purchase of a commercial coating and primary packaging system for the production of its product candidate, Qtrypta. The terms of the purchase commitment are contingent upon performance of certain milestones. The Company anticipates that the obligation will be paid within the next 9 months.

Contract Manufacturing Organizations

The Company has a technology transfer agreement and a manufacturing and supply agreement with a CMO to provide services related to the manufacture and commercialization of Qtrypta. During the term of the agreement, the CMO will provide services related to processing, packaging, labeling and storing Qtrypta, in addition to other services such as stability testing, quality control and assurance, and waste disposal.

The agreements call for annual fees of $2.0 million in 2020 escalating to $14.0 million in 2024, to be paid in equal monthly installments. Beginning in 2020, the annual fee includes the production of a defined number of units with an option to purchase additional units at a defined price. The agreement contains negotiated representations and warranties, indemnification, limitations of liability, and other provisions. The initial term of the manufacturing and supply agreement continues until the seventh anniversary of the date on which the Company receives New Drug Application approval of Qtrypta in the United States. As of September 30, 2020, the Company had recorded a right-of-use asset and associated lease liabilities at the present value of the amount of the manufacturing and supply agreement identified as an embedded operating lease (See Note 6. Leases).

The Company may terminate the agreements upon denial of regulatory approvals or if regulatory approvals are withdrawn under certain circumstances. The Company may also elect to terminate the contracts for convenience, which would result in cancellation fees in the amount of 50% of the annual fee due in the year that the contract is terminated, and costs to remove the Company's equipment and restore the CMO's facility. The Company or the CMO may terminate the agreement for the other’s uncured material breach, uncured force majeure or bankruptcy or insolvency-related events.

The Company has non-cancelable commitments with this CMO for the construction of manufacturing space and technology transfer fees totaling $3.9 million, of which $0.5 million was a current liability on the balance sheet as of September 30, 2020.

On July 31, 2020, the Company entered into an amendment to a Business Understanding Agreement dated September 13, 2018 with a CMO (the “Amended Agreement”). Pursuant to the Amended Agreement, this CMO agreed to provide services related to the manufacture and assembly of a component (the “Product”) of Qtrypta. Under the Amended Agreement, the parties expressed their mutual intent to enter into a commercial supply agreement (“Supply Agreement”) addressing certain of the terms set forth in the Amended Agreement. The Amended Agreement provides that if the Company does not enter into a Supply Agreement with this CMO or ceases to purchase the Product from this CMO prior to reaching a minimum commitment level, then the Company would be required to pay the CMO up to $2.5 million; however, no such payment will be required in the event of this CMO’s material breach. The Company may be required to pay an additional payment of up to $4.6 million if the Company ceases to purchase the Product from this CMO and a Supply Agreement is not entered into, except that no such payment will be required in the event of this CMO’s material breach or if the FDA does not approve Qtrypta. As of September 30, 2020, the Company had recorded a right-of-use asset and associated lease liabilities at the present value of the amount of the agreement identified as an embedded operating lease (See Note 6. Leases).

The Company has a manufacturing and supply agreement through September 2023 with a supplier for a component part that includes an inactivity fee of up to $85,000 annually.

Indemnifications

In the normal course of business, the Company enters into contracts and agreements that contain a variety of representations and warranties and provide for general indemnifications. The Company’s exposure under these agreements is unknown because it involves claims that may be made against the Company in the future but have not yet been made. To date, the Company has not paid any claims or been required to defend any action related to its indemnification obligations. However, the Company may record charges in the future as a result of these indemnification obligations. The Company also has indemnification obligations to its officers and directors for specified events or occurrences, subject to some limits, while they are serving at the Company’s request in such capacities. There have been no claims to date and the Company has director and officer insurance that may enable the Company to recover a portion of any amounts paid for future potential claims. The Company believes the fair value of these indemnification agreements is minimal. Accordingly, the Company has not recorded any liabilities for these agreements as of September 30, 2020.

Legal Proceedings

On October 29, 2020 and November 6, 2020, two stockholders filed alleged class action lawsuits against the Company and certain of its current and former executive officers in the United States District Court for the Northern District of California: Carr v. Zosano Pharma Corporation, et al., Case No. 3:20-cv-07625, and Becerra v. Zosano Pharma Corporation, et al., Case No. 3:20-cv-07850. The complaints were filed purportedly on behalf of all persons who purchased or otherwise acquired the Company’s securities between February 13, 2017 and September 30, 2020. The complaints allege that the Company and certain of its current and former executive officers made false and/or misleading statements and failed to disclose material adverse facts about the Company’s business, operations and prospects in violation of Sections 10(b) (and Rule 10b-5 promulgated thereunder) and 20(a) of the Securities Exchange Act of 1934, as amended. The plaintiffs seek damages, interest, costs, attorneys’ fees and other unspecified relief. The Company believes the cases are without merit and it intends to vigorously defend itself against the claims. Given the uncertainty of litigation and the preliminary stage of the cases, the Company cannot predict the outcome of or estimate the possible loss or range of loss that may result from these actions.

The Company, from time to time, may be involved in other lawsuits and legal proceedings, which arise, in the ordinary course of business. Such matters are subject to many uncertainties and outcomes and are not predictable with assurance. The Company accrues for contingencies when it believes that a loss is probable and that it can reasonably estimate the amount of any such loss. To the extent that there is a reasonable possibility that a loss exceeding amounts already recognized may be incurred and the amount of such additional loss would be material, the Company will either disclose the estimated additional loss or state that such an estimate cannot be made.

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Common Stock Warrants

9 Months Ended

Sep. 30, 2020

Stockholders' Equity Note [Abstract]

Common Stock Warrants

Common Stock Warrants

The following table summarizes the Company’s common stock warrants issued and outstanding as of the periods presented:

	Warrants Outstanding as of December 31, 2019	Issued	Exercised	Expired	Warrants Outstanding as of September 30, 2020	Exercise Price		Expiration Date
		(unaudited)
Series E - March 2020	—	11,903,506	(7,194,004)	—	4,709,502	$	0.8025	03/06/25
Series D - February 2020	—	2,161,539	(2,161,539)	—	—
Series C - February 2020	—	14,153,846	(13,986,146)	—	167,700	$	0.65	02/14/25
Trinity - September 2018	75,000	—	—	—	75,000	$	3.5928	09/25/25
Series B - August 2016	195,906	—	—	—	195,906	$	31.00	08/19/21
Amendment to Hercules Term Loan - June 2015	2,035	—	—	(2,035)	—
Hercules Term Loan - June 2014	1,583	—	—	(1,583)	—
Total	274,524	28,218,891	(23,341,689)	(3,618)	5,148,108

The Company evaluated the Series E and Series C common stock warrants under ASC 480, Distinguishing Liabilities from Equity, and ASC 815, Derivatives and Hedging, and determined permanent equity treatment was appropriate for these freestanding financial instruments. The March 2020 Offering and the February 2020 Offering did not include any embedded features that would require bifurcation. Each Series E and Series C common stock warrant grants the holder the right to purchase one share of common stock, subject to proportional adjustments in the event of stock splits, combinations or similar events. The Series E and Series C common stock warrants do not have any dividend or liquidation preferences or participation rights. Subject to certain conditions, the warrants are exercisable on a cashless basis, and subject to certain beneficial ownership limitations, any unexercised Series E or Series C common stock warrants will be automatically exercised via cashless exercise on the expiration date pursuant to the terms of the respective warrant agreements.

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Stock-Based Compensation

9 Months Ended

Sep. 30, 2020

Share-based Payment Arrangement [Abstract]

Stock-Based Compensation

Stock-Based Compensation

During the second quarter of 2020, the Company granted RSUs to its employees and Board of Directors. Upon vesting, each RSU converts into one share of the Company’s common stock. The value of an RSU award is based on the Company’s closing stock price on the date of grant. The RSUs granted to employees vest annually over four years and are subject to the employee’s continuing service to the Company. The RSUs granted to members of the Board of Directors vest fully after one year and are subject to the director's continuing service to the Company. Stock-based compensation expense is recognized straight-line over the vesting term.

The following table summarizes activity under the Amended and Restated 2014 Equity and Incentive Plan (“2014 Plan”), the 2012 Stock Incentive Plan (“2012 Plan”) and inducement grants issued to new employees outside of the 2014 Plan in accordance with Nasdaq Listing Rule 5635(c)(4) for the nine months ended September 30, 2020 (unaudited):

	Number of Shares Subject to Outstanding Stock Options	Weighted-Average Exercise Price per Share		Number of RSUs outstanding	Weighted-Average grant date fair value
Outstanding at January 1, 2020	2,260,307	$	4.29	—	$	—
Granted	775,625	$	0.99	343,442	$	0.84
Canceled/forfeited/expired	(362,488)	$	3.81	(1,125)	$	0.84
Outstanding at September 30, 2020	2,673,444	$	3.40	342,317	$	0.84

On January 1, 2020, the shares of common stock authorized for issuance under the 2014 Plan were increased by 822,612 shares pursuant to the automatic annual increase provisions of the 2014 Plan. As of September 30, 2020, 28,182 shares of common stock were available for issuance under the 2014 Plan.

The following table summarizes the Company's stock compensation expense for each of the periods presented:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(unaudited; in thousands)				(unaudited; in thousands)
Research and development	$	177	$	206	$	507	$	549
General and administrative	262		217		657		621
Total	$	439	$	423	$	1,164	$	1,170

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2020

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying condensed financial statements have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information, the instructions to Form 10-Q and Regulation S-X. They do not include all the information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal and recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020, or any other subsequent period. These financial statements should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2019, included in the Company’s annual report on Form 10-K and filed with the United States Securities and Exchange Commission (“SEC”) on March 13, 2020.

Use of Estimates

Use of Estimates

The preparation of the accompanying condensed financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the condensed financial statements, and the reported amounts of expenses during the periods reported. Actual results could differ from those estimates.

Liquidity and Substantial Doubt in Going Concern

Liquidity and Substantial Doubt in Going ConcernPresently, the Company does not have sufficient cash and cash equivalents to enable it to fund its anticipated level of operations and meet its obligations as they become due within twelve months following the date of issuance of this Quarterly Report on Form 10-Q. The aforementioned factors raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the issuance of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. On May 27, 2020, the Company entered into the First Amendment to Lease Documents (the “Trinity Amendment”) with Trinity Funding 1, LLC (“Trinity”), which, among other things, extended the term of each lease schedule from a 36-month term to a 42-month term by providing for an interest-only period from May 2020 through October 2020. Principal payments recommenced on November 1, 2020. Additionally, the Trinity Amendment removed all end-of-term options other than the option to purchase the equipment at 12% of equipment cost at the end of each 42-month-term.

The Company plans to raise additional funding through equity or debt financings, licensing or collaboration agreements, or strategic alliances with pharmaceutical partners, or any combination of the above. However, there are no assurances that additional funding will be obtained and that the Company will succeed in its future operations. The Company’s inability to obtain required funding in the near future or its inability to obtain funding on favorable terms will have a material adverse effect on its operations and strategic development plan for future growth. If the Company cannot successfully raise additional capital and implement its strategic development plan, its liquidity, financial condition and business prospects will be materially and adversely affected, and it may have to cease operations.

The Company will continue to evaluate its timelines, strategic needs, and working capital requirements. There can be no assurance that if the Company attempts to raise additional capital, it will be successful in doing so on terms acceptable to the Company, or at all. Further, there can be no assurance that it will be able to gain access and/or be able to execute on securing new sources of funding, new development opportunities, successfully obtain regulatory approvals for and commercialize new products, achieve significant product revenues from its products (if approved), or achieve or sustain profitability in the future.

Cash, Cash Equivalents, and Restricted Cash

Cash, Cash Equivalents and Restricted Cash

The Company considers all highly liquid investments with an original maturity of 90 days or less to be cash equivalents.

Marketable Securities

Marketable Securities

Marketable securities generally consist of debt securities with original maturities greater than 90 days and remaining maturities of less than one year. Marketable securities with an original maturity greater than one year, if any, would be considered long-term investments. All of the Company's investments are classified as available-for-sale and carried at fair value based upon quoted market price. The change in unrealized gains and losses related to fixed maturity debt securities is reported as a separate component of comprehensive loss in the statements of operations and comprehensive loss and as a separate component of stockholders' equity on the balance sheets. Interest income includes interest, dividends, amortization and accretion of purchase premiums and discounts and realized gains and losses on sales of securities, if any. The cost of securities sold is based on the specific-identification method.

The Company monitors its investment portfolio for potential impairment on a quarterly basis. If the carrying amount of an investment in available-for-sale debt securities exceeds its fair value and the decline in value is determined to be other-than-temporary, an allowance is recorded in the amount that the carrying amount of the security exceeds its fair value and a loss is recognized in operating results for the amount of such decline. If the carrying amount of an investment in marketable securities, other than available-for-sale debt securities, exceeds its fair value and the decline in value is determined to be other-than-temporary, the carrying amount of the security is reduced to fair value and a loss is recognized in operating results for the amount of such decline. In order to determine whether a decline in value is other-than-temporary, the Company evaluates, among other factors, the cause of the impairment, including the creditworthiness of the security issuers, the number of securities in an unrealized loss position, the severity and duration of the unrealized losses, and its intent and ability to hold the security to maturity or expected recovery.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The Company records its financial assets and liabilities at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting guidance establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value as follows:

•Level 1: Inputs which include quoted prices in active markets for identical assets and liabilities.

•Level 2: Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

•Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The carrying values of certain assets and liabilities of the Company, such as cash and cash equivalents and accounts payable approximate fair value due to their relatively short maturities. The carrying value of the Company’s short-term financial obligations approximates their fair value as the terms of the borrowing are consistent with current market rates and the duration to maturity is short. The carrying value of the Company's long-term financial obligations approximates fair value because interest rates approximate market rates that the Company could obtain for debt with similar terms and maturities.

Net Loss Per Common Share

Net Loss Per Common Share

Basic net loss per common share is calculated by dividing the net loss by the weighted-average number of common shares outstanding during the period, without consideration for potentially dilutive securities. Diluted net loss per common share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common shares and potentially dilutive securities outstanding for the period determined using the treasury-stock and if-converted methods. For purposes of the diluted net loss per share calculation, common stock warrants, stock options and restricted stock units (“RSUs”) are considered to be potential dilutive securities but are excluded from the calculation of diluted net loss per share because their effect would be anti-dilutive and therefore, basic and diluted net loss per share were the same for all periods presented.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In November 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-18 Collaborative Arrangements (Topic 808), Clarifying the Interaction between Topic 808 and Topic 606, which (1) clarifies that certain transactions between collaborative arrangement participants should be accounted for under ASC Topic 606, Revenue from Contracts with Customers (Topic 606), when the collaborative arrangement participant is a customer in the context of a unit of account, (2) adds unit-of-account guidance in Topic 808 to align with Topic 606 when an entity is assessing whether the collaborative arrangement, or a part of the arrangement, is within the scope of Topic 606, (3) precludes presenting transactions together with revenue when those transactions involve collaborative arrangement participants that are not directly related to third parties and are not customers. The Company adopted ASU 2018-18 in the third quarter of 2020. The adoption of ASU 2018-18 did not have a material impact on the Company's condensed financial statements.

The FASB issued ASU 2019-05, Financial Instruments - Credit Losses, Targeted Transition Relief in May 2019, ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments — Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments in April 2019, and ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses in November 2018. This new guidance is intended to present credit losses on available-for-sale debt securities as an allowance rather than as a write-down. Entities are required to apply the standards' provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The Company adopted ASU 2019-05, ASU 2019-04 and ASU 2018-19 effective January 1, 2020. The adoption of this guidance did not have an impact on the Company's financial statements.

In August 2018, the FASB issued ASU 2018-15, Intangible - Goodwill and Other - Internal-Use Software (Subtopic 350-40), which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The Company adopted ASU 2018-15, Subtopic 350-40 effective January 1, 2020 on a prospective basis. The adoption of this guidance did not have a material impact on the Company's financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820). The new guidance modifies the disclosure requirements on fair value measurements. The Company adopted Topic 820 effective January 1, 2020 on a modified retrospective basis. The adoption of this guidance did not have a material impact on the Company's financial statement disclosures.

Recent Accounting Pronouncements Not Yet Adopted

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This new guidance simplifies the accounting for income taxes by removing certain exceptions to general principles, clarifying requirements and including amendments to improve consistent application of the guidance. The guidance specifically removes the exception to the incremental approach for intra period tax allocation when there is a loss from continuing operations and income or a gain from other items, such as discontinued operations or other comprehensive income. The guidance also requires an entity to recognize a franchise tax that is partially based on income as an income-based tax and to account for any other amounts incurred as a non-income based tax. The guidance is effective for the Company beginning January 1, 2021 using a prospective approach. Early adoption is permitted. The Company is evaluating the effect of implementation on its financial statements and disclosures.

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Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2020

Accounting Policies [Abstract]

Schedule of Cash and Cash Equivalents

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the balance sheets and as presented as cash, cash equivalents and restricted cash in the statements of cash flows:

	September 30, 2020		September 30, 2019
	(unaudited; in thousands)
Cash and cash equivalents	$	43,554	$	6,492
Restricted cash	455		455
Total	$	44,009	$	6,947

Schedule of Restricted Cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the balance sheets and as presented as cash, cash equivalents and restricted cash in the statements of cash flows:

	September 30, 2020		September 30, 2019
	(unaudited; in thousands)
Cash and cash equivalents	$	43,554	$	6,492
Restricted cash	455		455
Total	$	44,009	$	6,947

Schedule of Outstanding Common Stock Equivalents Excluded from Computations of Diluted Net Loss per Common Share

The following outstanding common stock equivalents were excluded from the computations of diluted net loss per common share for the periods presented as the effect of including such securities would be antidilutive:

	September 30, 2020	September 30, 2019
	(unaudited)
Warrants to purchase common stock	5,148,108	274,524
Options to purchase common stock	2,673,444	1,865,978
RSUs	342,317	—
Total	8,163,869	2,140,502

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Cash Equivalents and Investments in Marketable Securities (Tables)

9 Months Ended

Sep. 30, 2020

Cash, Cash Equivalents, and Short-term Investments [Abstract]

Summary of Cash Equivalents and Marketable Securities

The following table summarizes the Company's cash equivalents and investments in marketable securities measured at fair value on a recurring basis as of September 30, 2020:

			Fair Value Measurements
	Total		Quoted prices in active market Level 1		Significant other observable inputs Level 2		Significant unobservable inputs Level 3
	(unaudited; in thousands)
Money market funds classified as cash equivalents	$	38,417	$	38,417	$	—	$	—

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Balance Sheet Components (Tables)

9 Months Ended

Sep. 30, 2020

Balance Sheet Related Disclosures [Abstract]

Schedule of Prepaid Expenses and Other Current Assets

The following table summarizes the Company’s prepaid expenses and other current assets for each of the periods presented:

	September 30, 2020		December 31, 2019
	(unaudited; in thousands)		(in thousands)
Prepaid insurance	$	289	$	49
Prepaid services	144		316
Prepaid software, subscriptions and deferred implementation costs	133		61
Deferred offering costs	48		65
Other	1		6
Total	$	615	$	497

Schedule of Property and Equipment

The following table summarizes the Company’s property and equipment for each of the periods presented:

	September 30, 2020		December 31, 2019
	(unaudited; in thousands)		(in thousands)
Leasehold improvements	$	24,212	$	16,932
Manufacturing equipment	14,532		12,173
Laboratory and office equipment	1,617		1,585
Right-of-use laboratory and office equipment	25		25
Computer equipment and software	138		138
Right-of-use computer equipment and software	29		29
Construction-in-progress	17,885		20,602
Property and equipment at cost	58,438		51,484
Less: accumulated depreciation property and equipment	(27,778)		(26,821)
Less: accumulated amortization right-of-use assets	(39)		(27)
Total	$	30,621	$	24,636

The following table summarizes the Company's depreciation and amortization expense for each of the periods presented:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(unaudited; in thousands)				(unaudited; in thousands)
Depreciation and amortization expense	$	476	$	157	$	993	$	518

Schedule of Other Accrued Liabilities

The following table summarizes the Company’s other accrued liabilities for each of the periods presented:

	September 30, 2020		December 31, 2019
	(unaudited; in thousands)		(in thousands)
Construction-in-progress obligations	$	2,962	$	3,422
Professional service fees	239		206
Pre-clinical and clinical studies	16		43
Contract manufacturing	13		250
Accrued taxes	—		27
Other	164		224
Total	$	3,394	$	4,172

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Leases (Tables)

9 Months Ended

Sep. 30, 2020

Leases [Abstract]

Lease, Cost

The following table summarizes the components of lease costs for each of the periods presented:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(unaudited; in thousands)				(unaudited; in thousands)
Operating lease costs	$	422	$	422	$	1,266	$	1,250
Finance lease costs:
Amortization of finance lease right-of-use assets	4		4		12		23
Interest on finance lease obligations	2		3		6		15
Total	$	428	$	429	$	1,284	$	1,288

The following table summarizes cash payments for leases for each of the periods presented:

	Nine Months Ended September 30,
	2020		2019
	(unaudited; in thousands)
Operating cash flows from operating leases - cash paid for operating leases	$	1,388	$	1,332
Operating cash flows from finance leases - cash paid for interest	$	6	$	9
Financing cash flows from finance leases - cash paid for principal	$	12	$	10

The following table summarizes the lease terms and discount rates for the Company's leases as of September 30, 2020:

	Operating leases		Finance leases
	(unaudited)
Weighted-average remaining lease term (in years)	3.96		1.22
Weighted average discount rate	11	%	26	%

Operating Leases, Scheduled Lease Payments

The following table summarizes the maturities of the Company's lease liabilities for each year ending December 31, as of September 30, 2020:

	Operating leases		Finance leases
	(unaudited; in thousands)
Remainder of 2020	$	490	$	7
2021	1,981		14
2022	2,045		3
2023	2,017		—
2024	1,372		—
Total undiscounted cash flows	7,905		24
Less: amount representing interest	(1,515)		(4)
Present value of lease liabilities	$	6,390	$	20
Current portion	$	1,332	$	14
Long-term portion	5,058		6
Total	$	6,390	$	20

Finance Leases, Scheduled Lease Payments

The following table summarizes the maturities of the Company's lease liabilities for each year ending December 31, as of September 30, 2020:

	Operating leases		Finance leases
	(unaudited; in thousands)
Remainder of 2020	$	490	$	7
2021	1,981		14
2022	2,045		3
2023	2,017		—
2024	1,372		—
Total undiscounted cash flows	7,905		24
Less: amount representing interest	(1,515)		(4)
Present value of lease liabilities	$	6,390	$	20
Current portion	$	1,332	$	14
Long-term portion	5,058		6
Total	$	6,390	$	20

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Debt Financing (Tables)

9 Months Ended

Sep. 30, 2020

Debt Disclosure [Abstract]

Schedule of Long-term Debt Instruments

The following table summarizes the debt obligations as of September 30, 2020 including the amended effective interest rate and maturity dates pursuant to the terms of the Trinity Amendment:

Drawdown Date	Drawdown Amount		Principal Balance		Purchase Option Fee		Discount on Purchase Option Fee		Unamortized Discounts and Issuance Costs		Monthly Payment		Monthly Payment (interest only period)		Stated Interest Rate		Amended Effective Interest Rate		Maturity Date
			(unaudited; in thousands)
09/25/18	$	5,000	$	2,378	$	600	$	(28)	$	(170)	$	160	$	20	9.43	%	24.38	%	04/01/22
12/11/18	2,800		1,566		336		(22)		(73)		90		13		9.68	%	18.25	%	07/01/22
06/06/19	2,300		1,654		276		(31)		(100)		74		14		9.93	%	18.08	%	01/01/23
09/13/19	2,300		1,831		276		(38)		(126)		74		16		9.93	%	18.04	%	04/01/23
11/27/19	1,600		1,354		192		(31)		(104)		52		12		9.93	%	18.16	%	06/01/23
Total	$	14,000	$	8,783	$	1,680	$	(150)	$	(573)	$	450	$	75

The following table summarizes the Company's build-to-suit obligation as of September 30, 2020 (unaudited; in thousands):

Build-to-suit obligation principal amount	$	8,783
Build-to-suit obligation Purchase Option Fees at present value	1,530
Less: unamortized Purchase Option Fees	(441)
unamortized fair value of free-standing warrants	(46)
unamortized debt discount	(81)
unamortized debt issuance costs	(5)
Build-to-suit obligation, net of debt issuance costs and discount	$	9,740
Build-to-suit obligation, current portion	$	4,293
Build-to-suit obligation, long-term portion, net of debt issuance costs and discount	5,447
Build-to-suit obligation, net of debt issuance costs and discount	$	9,740

Schedule of Maturities of Long-term Debt

The following table summarizes the future minimum payments on the Company’s build-to-suit obligation for each year ending December 31, including payment of principal, interest and Purchase Option Fees as of September 30, 2020:

	Principal		Interest		Purchase Option Fee
	(unaudited; in thousands)
Remainder of 2020	$	753	$	222	$	—
2021	4,779		618		—
2022	2,979		189		936
2023	272		8		744
Total	$	8,783	$	1,037	$	1,680

Schedule of Interest

The following table summarizes interest incurred on the Company's build-to-suit obligation for each of the periods presented:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(unaudited; in thousands)				(unaudited; in thousands)
Build-to-suit obligation, cash interest expense	$	225	$	210	$	705	$	556
Build-to-suit obligation, effective interest expense	147		159		560		545
Less: build-to-suit obligation, interest capitalized	(217)		(109)		(746)		(841)
Build-to-suit obligation interest expense	$	155	$	260	$	519	$	260

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Common Stock Warrants (Tables)

9 Months Ended

Sep. 30, 2020

Stockholders' Equity Note [Abstract]

Summary of Warrants Issued and Outstanding

The following table summarizes the Company’s common stock warrants issued and outstanding as of the periods presented:

	Warrants Outstanding as of December 31, 2019	Issued	Exercised	Expired	Warrants Outstanding as of September 30, 2020	Exercise Price		Expiration Date
		(unaudited)
Series E - March 2020	—	11,903,506	(7,194,004)	—	4,709,502	$	0.8025	03/06/25
Series D - February 2020	—	2,161,539	(2,161,539)	—	—
Series C - February 2020	—	14,153,846	(13,986,146)	—	167,700	$	0.65	02/14/25
Trinity - September 2018	75,000	—	—	—	75,000	$	3.5928	09/25/25
Series B - August 2016	195,906	—	—	—	195,906	$	31.00	08/19/21
Amendment to Hercules Term Loan - June 2015	2,035	—	—	(2,035)	—
Hercules Term Loan - June 2014	1,583	—	—	(1,583)	—
Total	274,524	28,218,891	(23,341,689)	(3,618)	5,148,108

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Stock-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2020

Share-based Payment Arrangement [Abstract]

Disclosure of Share-based Compensation Arrangements by Share-based Payment Award

The following table summarizes activity under the Amended and Restated 2014 Equity and Incentive Plan (“2014 Plan”), the 2012 Stock Incentive Plan (“2012 Plan”) and inducement grants issued to new employees outside of the 2014 Plan in accordance with Nasdaq Listing Rule 5635(c)(4) for the nine months ended September 30, 2020 (unaudited):

	Number of Shares Subject to Outstanding Stock Options	Weighted-Average Exercise Price per Share		Number of RSUs outstanding	Weighted-Average grant date fair value
Outstanding at January 1, 2020	2,260,307	$	4.29	—	$	—
Granted	775,625	$	0.99	343,442	$	0.84
Canceled/forfeited/expired	(362,488)	$	3.81	(1,125)	$	0.84
Outstanding at September 30, 2020	2,673,444	$	3.40	342,317	$	0.84

Summary of Stock-Based Compensation Expense

The following table summarizes the Company's stock compensation expense for each of the periods presented:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(unaudited; in thousands)				(unaudited; in thousands)
Research and development	$	177	$	206	$	507	$	549
General and administrative	262		217		657		621
Total	$	439	$	423	$	1,164	$	1,170

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Organization and Basis of Presentation (Detail)										3 Months Ended		9 Months Ended
	Oct. 20, 2020 subject trail	Sep. 30, 2020 USD ($) $ / shares shares	Aug. 31, 2020 USD ($) $ / shares shares	Jun. 08, 2020 USD ($)	May 27, 2020	May 26, 2020	Mar. 04, 2020 USD ($) $ / shares shares	Feb. 14, 2020 USD ($) $ / shares shares	Aug. 19, 2019 USD ($)	Sep. 30, 2020 USD ($) $ / shares shares	Mar. 31, 2020 $ / shares shares	Sep. 30, 2020 USD ($) $ / shares shares	Sep. 30, 2019 USD ($)	Oct. 06, 2020 USD ($)	Oct. 04, 2020 USD ($)	Aug. 05, 2020 $ / shares	Apr. 16, 2020 USD ($)	Dec. 31, 2019 USD ($)
Subsequent Event [Line Items]
Accumulated deficit | $		$ 324,092,000								$ 324,092,000		$ 324,092,000						$ 298,821,000
Money market funds classified as cash equivalents | $		$ 43,600,000								$ 43,600,000		$ 43,600,000
Average price per share (in USD per share) | $ / shares											$ 1.30
Series E - March 2020
Subsequent Event [Line Items]
Exercise price (in USD per share) | $ / shares		$ 0.8025								$ 0.8025		$ 0.8025
Series C Warrant
Subsequent Event [Line Items]
Proceeds from exercises of warrants | $										$ 6,500,000		$ 9,091,000	$ 0
Series D Pre Funded Warrant
Subsequent Event [Line Items]
Exercise price (in USD per share) | $ / shares								$ 0.0001
Paycheck Protection Program Loan | Forgivable Loan
Subsequent Event [Line Items]
Drawdown amount | $															$ 1,600,000
Build to Suit Obligation | Trinity Capital Fund III, L.P.
Subsequent Event [Line Items]
Term of agreement					42 months	36 months
Drawdown amount | $		$ 14,000,000								$ 14,000,000		$ 14,000,000
Build-to-Suit Obligation, Condition One | Trinity Capital Fund III, L.P.
Subsequent Event [Line Items]
Purchase percentage of equipment cost					12.00%
Shelf Registration
Subsequent Event [Line Items]
Shelf registration, ability to offer securities | $																	$ 74,500,000
Over-Allotment Option
Subsequent Event [Line Items]
Shares issued in transaction (in shares)			15,937,130				11,903,506
Price of stock sold (in USD per share) | $ / shares			$ 1.304
Consideration from sale of stock | $			$ 20,400,000					$ 8,300,000
Option to purchase period								30 days
Over-Allotment Option | Common Class A
Subsequent Event [Line Items]
Shares issued in transaction (in shares)								10,146,154
Price of stock sold (in USD per share) | $ / shares								$ 0.65
Number of shares of common stock issued (in shares)								1
Over-Allotment Option | Common Class B
Subsequent Event [Line Items]
Shares issued in transaction (in shares)								2,161,539
Price of stock sold (in USD per share) | $ / shares								$ 0.6499
Term of warrants								5 years
Over-Allotment Option | Common Class C
Subsequent Event [Line Items]
Shares issued in transaction (in shares)								1,846,153
Over-Allotment Option | Series E - March 2020
Subsequent Event [Line Items]
Price of stock sold (in USD per share) | $ / shares		$ 0.8025					$ 0.8025			$ 0.8025		$ 0.8025
Number of shares issued (in shares)		7,194,004								7,194,004		7,194,004
Over-Allotment Option | Series C Warrant
Subsequent Event [Line Items]
Number of shares of warrants issued (in shares)										10,003,038		13,986,146
Over-Allotment Option | Series C Warrant | Common Class A
Subsequent Event [Line Items]
Number of shares of warrants issued (in shares)								1
Number of securities called by each warrant (in shares)								1
Over-Allotment Option | Series C Warrant | Common Class B
Subsequent Event [Line Items]
Number of shares of warrants issued (in shares)								1
Number of securities called by each warrant (in shares)								1
Exercise price (in USD per share) | $ / shares		$ 0.65						$ 0.65		$ 0.65		$ 0.65				$ 0.65
Over-Allotment Option | Series D Pre Funded Warrant | Common Class B
Subsequent Event [Line Items]
Number of shares of common stock issued (in shares)								1
Number of shares of warrants issued (in shares)								1
Underwriting Agreement
Subsequent Event [Line Items]
Shares issued in transaction (in shares)										11,686,795	2,151,346	13,237,026
Consideration from sale of stock | $									$ 2,700,000	$ 12,400,000		$ 13,500,000
Maximum aggregate offering price | $				$ 20,000,000.0					$ 15,000,000.0
Commissions on proceeds from the sale of shares				3.00%					3.00%
Average price per share (in USD per share) | $ / shares										$ 1.09		$ 1.07
Commissions and other offering expenses | $									$ 84,000	$ 360,000		$ 660,000
Public Stock Offering
Subsequent Event [Line Items]
Shares issued in transaction (in shares)							11,903,506
Price of stock sold (in USD per share) | $ / shares							$ 0.9275
Private Investment in Public Equity
Subsequent Event [Line Items]
Term of warrants							5 years
Proceeds from issuance | $							$ 10,200,000
Private Investment in Public Equity | Series E - March 2020
Subsequent Event [Line Items]
Proceeds from exercises of warrants | $		$ 5,800,000
Subsequent Event | Paycheck Protection Program Loan | Forgivable Loan
Subsequent Event [Line Items]
Drawdown amount | $														$ 1,600,000
Subsequent Event | Commercialization Of Ortypta | Affiliated Entity
Subsequent Event [Line Items]
Total number of subjects | subject	774
Number of trails | trail	5

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Summary of Significant Accounting Policies - Restricted Cash (Detail) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019	Sep. 30, 2019
Cash and Cash Equivalents [Line Items]
Restricted cash	$ 455	$ 455	$ 455
Deposit, Building Lease
Cash and Cash Equivalents [Line Items]
Restricted cash	300	300
Deposit, Utility Provider
Cash and Cash Equivalents [Line Items]
Restricted cash	$ 100	$ 100

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Summary of Significant Accounting Policies - Summary of Reconciliation of Cash and Cash Equivalents, and Restricted Cash (Detail) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019	Sep. 30, 2019	Dec. 31, 2018
Accounting Policies [Abstract]
Cash and cash equivalents	$ 43,554	$ 6,316	$ 6,492
Restricted cash	455	455	455
Total	$ 44,009	$ 6,771	$ 6,947	$ 9,595

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Summary of Significant Accounting Policies - Schedule of Outstanding Common Stock Equivalents Excluded From Computations of Diluted Net Loss per Common Share (Detail) - shares	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Common stock excluded from computation of diluted net loss per share (in shares)	8,163,869	2,140,502
Warrants to purchase common stock
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Common stock excluded from computation of diluted net loss per share (in shares)	5,148,108	274,524
Options to purchase common stock
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Common stock excluded from computation of diluted net loss per share (in shares)	2,673,444	1,865,978
RSUs
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Common stock excluded from computation of diluted net loss per share (in shares)	342,317	0

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Master Services Agreement with Eversana (Details) - Commercialization Of Ortypta - Eversana $ in Millions	Aug. 06, 2020 USD ($)
Related Party Transaction [Line Items]
Commercialization budget	$ 250.0
Affiliated Entity
Related Party Transaction [Line Items]
Term of agreement	5 years
Affiliated Entity | Revolving Credit Facility
Related Party Transaction [Line Items]
Maximum borrowing capacity	$ 5.0
Stated interest rate	10.00%

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Cash Equivalents and Investments in Marketable Securities - Summary of Cash Equivalents and Investments Carried at Fair Value (Detail) - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Schedule Of Cash Equivalents And Available For Sale Investments [Line Items]
Money market funds classified as cash equivalents	$ 43,600,000
Money Market Funds | Recurring
Schedule Of Cash Equivalents And Available For Sale Investments [Line Items]
Money market funds classified as cash equivalents	38,417,000	$ 0
Money Market Funds | Recurring | Quoted prices in active market Level 1
Schedule Of Cash Equivalents And Available For Sale Investments [Line Items]
Money market funds classified as cash equivalents	38,417,000
Money Market Funds | Recurring | Significant other observable inputs Level 2
Schedule Of Cash Equivalents And Available For Sale Investments [Line Items]
Money market funds classified as cash equivalents	0
Money Market Funds | Recurring | Significant unobservable inputs Level 3
Schedule Of Cash Equivalents And Available For Sale Investments [Line Items]
Money market funds classified as cash equivalents	$ 0

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Balance Sheet Components - Prepaid Expenses and Other Current Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Balance Sheet Related Disclosures [Abstract]
Prepaid insurance	$ 289	$ 49
Prepaid services	144	316
Prepaid software, subscriptions and deferred implementation costs	133	61
Deferred offering costs	48	65
Other	1	6
Total	$ 615	$ 497

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Balance Sheet Components - Schedule of Property and Equipment (Detail) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Property, Plant and Equipment [Line Items]
Property and equipment at cost	$ 58,438	$ 51,484
Less: accumulated depreciation property and equipment	(27,778)	(26,821)
Less: accumulated amortization right-of-use assets	(39)	(27)
Total	30,621	24,636
Accumulated capitalized interest costs	2,200
Leasehold improvements
Property, Plant and Equipment [Line Items]
Property and equipment, gross	24,212	16,932
Manufacturing equipment
Property, Plant and Equipment [Line Items]
Property and equipment, gross	14,532	12,173
Laboratory and office equipment
Property, Plant and Equipment [Line Items]
Property and equipment, gross	1,617	1,585
Right-of-use asset, gross	25	25
Computer equipment and software
Property, Plant and Equipment [Line Items]
Property and equipment, gross	138	138
Right-of-use asset, gross	29	29
Construction-in-progress
Property, Plant and Equipment [Line Items]
Property and equipment, gross	17,885	$ 20,602
Construction In Progress, Build-to-suit
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 14,300

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Balance Sheet Components - Depreciation and Amortization Expense (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Property, Plant and Equipment [Abstract]
Depreciation and amortization expense	$ 476	$ 157	$ 993	$ 518

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Balance Sheet Components - Other Accrued Liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Balance Sheet Related Disclosures [Abstract]
Construction-in-progress obligations	$ 2,962	$ 3,422
Professional service fees	239	206
Pre-clinical and clinical studies	16	43
Contract manufacturing	13	250
Accrued taxes	0	27
Other	164	224
Total	$ 3,394	$ 4,172

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Leases - Narrative (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019	Jan. 31, 2018
Lessee, Lease, Description [Line Items]
Renewal term	60 months
Operating lease right-of-use assets	$ 5,204	$ 5,763
Operating lease liability	6,390
Telephone Equipment
Lessee, Lease, Description [Line Items]
Term of lease			3 years
Embedded Lease
Lessee, Lease, Description [Line Items]
Operating lease right-of-use assets	153
Operating lease liability	$ 153

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Leases - Description of Lease Costs (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Leases [Abstract]
Operating lease costs	$ 422	$ 422	$ 1,266	$ 1,250
Finance lease costs:
Amortization of finance lease right-of-use assets	4	4	12	23
Interest on finance lease obligations	2	3	6	15
Total	$ 428	$ 429	$ 1,284	$ 1,288

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Leases - Description of Cash Payment (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Leases [Abstract]
Operating cash flows from operating leases - cash paid for operating leases	$ 1,388	$ 1,332
Operating cash flows from finance leases - cash paid for interest	6	9
Financing cash flows from finance leases - cash paid for principal	$ 12	$ 10

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Leases - Description of Other Lease Information (Details)	Sep. 30, 2020
Operating leases
Weighted-average remaining lease term (in years)	3 years 11 months 15 days
Weighted average discount rate	11.00%
Finance leases
Weighted-average remaining lease term (in years)	1 year 2 months 19 days
Weighted average discount rate	26.00%

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Leases - Future Minimum Lease Payments (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Operating leases
Remainder of 2020	$ 490
2021	1,981
2022	2,045
2023	2,017
2024	1,372
Total undiscounted cash flows	7,905
Less: amount representing interest	(1,515)
Present value of lease liabilities	6,390
Current portion	1,332	$ 1,140
Long-term portion	5,058	$ 5,931
Finance leases
Remainder of 2020	7
2021	14
2022	3
2023	0
2024	0
Total undiscounted cash flows	24
Less: amount representing interest	(4)
Present value of lease liabilities	20
Current portion	14
Long-term portion	$ 6

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Debt Financing - Narrative (Detail) - USD ($)			1 Months Ended
	May 27, 2020	May 26, 2020	Sep. 30, 2018	Oct. 06, 2020	Oct. 04, 2020	Sep. 30, 2020	Dec. 31, 2019
Debt Instrument [Line Items]
Accumulated capitalized interest costs						$ 2,200,000
Common stock issued (in shares)						102,066,218	23,503,214
Paycheck Protection Program Loan | Forgivable Loan
Debt Instrument [Line Items]
Drawdown amount					$ 1,600,000
Paycheck Protection Program Loan | Forgivable Loan | Subsequent Event
Debt Instrument [Line Items]
Drawdown amount				$ 1,600,000
Construction In Progress, Build-to-suit
Debt Instrument [Line Items]
Property and equipment, gross						$ 14,300,000
Trinity Capital Fund III, L.P.
Debt Instrument [Line Items]
Proceeds from issuance of warrants			$ 243,000
Trinity Capital Fund III, L.P. | Warrants to purchase common stock
Debt Instrument [Line Items]
Common stock issued (in shares)			75,000
Trinity Capital Fund III, L.P. | Build to Suit Obligation
Debt Instrument [Line Items]
Maximum borrowing capacity			$ 14,000,000.0
Proceeds from lines of credit			5,000,000.0
Minimum incremental borrowing capacity			$ 500,000
Term of agreement	42 months	36 months
Debt instrument, no interest payment period	6 months
Common stock warrant exercise price (in USD per share)			$ 3.5928
Build-to-suit obligation			$ 5,000,000.0
Drawdown amount						$ 14,000,000
Trinity Capital Fund III, L.P. | Build-to-Suit Obligation, Condition One
Debt Instrument [Line Items]
Purchase percentage of equipment cost	12.00%

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Debt Financing - Summary of Debt Obligations (Details) - Build to Suit Obligation	9 Months Ended
	Sep. 30, 2020 USD ($)
Debt Instrument [Line Items]
Principal Balance	$ 8,783,000
Trinity Capital Fund III, L.P.
Debt Instrument [Line Items]
Drawdown Amount	14,000,000
Principal Balance	8,783,000
Purchase Option Fee	1,680,000
Discount on Purchase Option Fee	(150,000)
Unamortized Discounts and Issuance Costs	(573,000)
Monthly Payment	450,000
Monthly Payment (interest only period)	75,000
Trinity Capital Fund III, L.P. | Drawdown Maturity Date Of April 01, 2022
Debt Instrument [Line Items]
Drawdown Amount	5,000,000
Principal Balance	2,378,000
Purchase Option Fee	600,000
Discount on Purchase Option Fee	(28,000)
Unamortized Discounts and Issuance Costs	(170,000)
Monthly Payment	160,000
Monthly Payment (interest only period)	$ 20,000
Stated Interest Rate	9.43%
Amended Effective Interest Rate	24.38%
Trinity Capital Fund III, L.P. | Drawdown Maturity Date Of July 1, 2022
Debt Instrument [Line Items]
Drawdown Amount	$ 2,800,000
Principal Balance	1,566,000
Purchase Option Fee	336,000
Discount on Purchase Option Fee	(22,000)
Unamortized Discounts and Issuance Costs	(73,000)
Monthly Payment	90,000
Monthly Payment (interest only period)	$ 13,000
Stated Interest Rate	9.68%
Amended Effective Interest Rate	18.25%
Trinity Capital Fund III, L.P. | Drawdown Maturity Date Of January 1 2023
Debt Instrument [Line Items]
Drawdown Amount	$ 2,300,000
Principal Balance	1,654,000
Purchase Option Fee	276,000
Discount on Purchase Option Fee	(31,000)
Unamortized Discounts and Issuance Costs	(100,000)
Monthly Payment	74,000
Monthly Payment (interest only period)	$ 14,000
Stated Interest Rate	9.93%
Amended Effective Interest Rate	18.08%
Trinity Capital Fund III, L.P. | Drawdown Maturity Date Of April 1, 2023
Debt Instrument [Line Items]
Drawdown Amount	$ 2,300,000
Principal Balance	1,831,000
Purchase Option Fee	276,000
Discount on Purchase Option Fee	(38,000)
Unamortized Discounts and Issuance Costs	(126,000)
Monthly Payment	74,000
Monthly Payment (interest only period)	$ 16,000
Stated Interest Rate	9.93%
Amended Effective Interest Rate	18.04%
Trinity Capital Fund III, L.P. | Drawdown Maturity Date Of June 01 2023
Debt Instrument [Line Items]
Drawdown Amount	$ 1,600,000
Principal Balance	1,354,000
Purchase Option Fee	192,000
Discount on Purchase Option Fee	(31,000)
Unamortized Discounts and Issuance Costs	(104,000)
Monthly Payment	52,000
Monthly Payment (interest only period)	$ 12,000
Stated Interest Rate	9.93%
Amended Effective Interest Rate	18.16%

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Debt Financing - Schedule of Long-term Debt Instruments (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Debt Instrument [Line Items]
Build-to-suit obligation, long-term portion, net of debt issuance costs and discount	$ 1,416	$ 0
Build to Suit Obligation
Debt Instrument [Line Items]
Build-to-suit obligation principal amount	8,783
Build-to-suit obligation Purchase Option Fees at present value	1,530
Less: unamortized Purchase Option Fees	(441)
unamortized fair value of free-standing warrants	(46)
unamortized debt discount	(81)
unamortized debt issuance costs	(5)
Build-to-suit obligation, net of debt issuance costs and discount	9,740
Build-to-suit obligation, current portion	4,293
Build-to-suit obligation, long-term portion, net of debt issuance costs and discount	$ 5,447

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Debt Financing - Future Minimum Payments (Details) $ in Thousands	Sep. 30, 2020 USD ($)
Principal
Remainder of 2020	$ 753
2021	4,779
2022	2,979
2023	272
Total	8,783
Interest
Remainder of 2020	222
2021	618
2022	189
2023	8
Total	1,037
Purchase Option Fee
Remainder of 2020	0
2021	0
2022	936
2023	744
Total	$ 1,680

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Debt Financing - Interest Expense (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Debt Instrument [Line Items]
Build-to-suit obligation interest expense	$ 165	$ 281	$ 561	$ 357
Build to Suit Obligation
Debt Instrument [Line Items]
Build-to-suit obligation, cash interest expense	225	210	705	556
Build-to-suit obligation, effective interest expense	147	159	560	545
Less: build-to-suit obligation, interest capitalized	(217)	(109)	(746)	(841)
Build-to-suit obligation interest expense	$ 155	$ 260	$ 519	$ 260

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Commitments and Contingencies (Detail)			1 Months Ended	9 Months Ended
	Nov. 06, 2020 lawsuit	Oct. 29, 2020 lawsuit	Sep. 30, 2018 USD ($)	Sep. 30, 2020 USD ($)
Other Commitments [Line Items]
Purchase commitment period				9 months
Cancellation fees			50.00%
Subsequent Event
Other Commitments [Line Items]
Number of stock holders of class action | lawsuit	2	2
In 2020
Other Commitments [Line Items]
Annual fees			$ 2,000,000.0
By 2024
Other Commitments [Line Items]
Annual fees			$ 14,000,000.0
Commercial Coating and Primary Packaging System
Other Commitments [Line Items]
Purchase commitments related to fixed assets				$ 4,000,000.0
Commitment liability				2,800,000
Manufacturing Space and Technology
Other Commitments [Line Items]
Purchase commitments related to fixed assets				3,900,000
Commitment liability				500,000
Fee for not entering an agreement				2,500,000
Fee for not purchasing the product				4,600,000
Inactivity fee				$ 85,000

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Common Stock Warrants (Detail)	9 Months Ended
	Sep. 30, 2020 $ / shares shares
Warrants Outstanding Rollforward [Roll Forward]
Warrants Outstanding as of December 31, 2019 (in shares)	274,524
Issued (in shares)	28,218,891
Exercised (in shares)	(23,341,689)
Expired (in shares)	(3,618)
Warrants Outstanding as of September 30, 2020 (in shares)	5,148,108
Series E - March 2020
Warrants Outstanding Rollforward [Roll Forward]
Warrants Outstanding as of December 31, 2019 (in shares)	0
Issued (in shares)	11,903,506
Exercised (in shares)	(7,194,004)
Expired (in shares)	0
Warrants Outstanding as of September 30, 2020 (in shares)	4,709,502
Exercise price (in USD per share) | $ / shares	$ 0.8025
Series D - February 2020
Warrants Outstanding Rollforward [Roll Forward]
Warrants Outstanding as of December 31, 2019 (in shares)	0
Issued (in shares)	2,161,539
Exercised (in shares)	(2,161,539)
Expired (in shares)	0
Warrants Outstanding as of September 30, 2020 (in shares)	0
Series C - February 2020
Warrants Outstanding Rollforward [Roll Forward]
Warrants Outstanding as of December 31, 2019 (in shares)	0
Issued (in shares)	14,153,846
Exercised (in shares)	(13,986,146)
Expired (in shares)	0
Warrants Outstanding as of September 30, 2020 (in shares)	167,700
Exercise price (in USD per share) | $ / shares	$ 0.65
Trinity - September 2018
Warrants Outstanding Rollforward [Roll Forward]
Warrants Outstanding as of December 31, 2019 (in shares)	75,000
Issued (in shares)	0
Exercised (in shares)	0
Expired (in shares)	0
Warrants Outstanding as of September 30, 2020 (in shares)	75,000
Exercise price (in USD per share) | $ / shares	$ 3.5928
Series B - August 2016
Warrants Outstanding Rollforward [Roll Forward]
Warrants Outstanding as of December 31, 2019 (in shares)	195,906
Issued (in shares)	0
Exercised (in shares)	0
Expired (in shares)	0
Warrants Outstanding as of September 30, 2020 (in shares)	195,906
Exercise price (in USD per share) | $ / shares	$ 31.00
Amendment to Hercules Term Loan - June 2015
Warrants Outstanding Rollforward [Roll Forward]
Warrants Outstanding as of December 31, 2019 (in shares)	2,035
Issued (in shares)	0
Exercised (in shares)	0
Expired (in shares)	(2,035)
Warrants Outstanding as of September 30, 2020 (in shares)	0
Hercules Term Loan - June 2014
Warrants Outstanding Rollforward [Roll Forward]
Warrants Outstanding as of December 31, 2019 (in shares)	1,583
Issued (in shares)	0
Exercised (in shares)	0
Expired (in shares)	(1,583)
Warrants Outstanding as of September 30, 2020 (in shares)	0

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Stock-Based Compensation - Narrative (Details)	9 Months Ended
	Sep. 30, 2020 shares
Share-based Payment Arrangement [Abstract]
Number of additional shares authorized (in shares)	822,612
Number of shares available for grant (in shares)	28,182

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Stock-Based Compensation - Summary of Stock Option and Award Activity Including Inducement Grants (Detail)	9 Months Ended
	Sep. 30, 2020 $ / shares shares
Number of Shares Subject to Outstanding Stock Options
Outstanding at January 1, 2020 (in shares) | shares	2,260,307
Granted (in shares) | shares	775,625
Canceled/forfeited/expired (in shares) | shares	(362,488)
Outstanding at September 30, 2020 (in shares) | shares	2,673,444
Weighted-Average Exercise Price per Share
Outstanding at January 1, 2020 (in USD per share) | $ / shares	$ 4.29
Granted (in USD per share) | $ / shares	0.99
Canceled/forfeited/expired (in USD per share) | $ / shares	3.81
Outstanding at September 30, 2020 (in USD per share) | $ / shares	$ 3.40
RSUs
Number of RSUs outstanding
Outstanding at January 1, 2020 (in shares) | shares	0
Granted (in shares) | shares	343,442
Canceled/forfeited/expired (in shares) | shares	(1,125)
Outstanding at September 30, 2020 (in shares) | shares	342,317
Weighted-Average grant date fair value
Outstanding at January 1, 2020 (in USD per share) | $ / shares	$ 0
Granted (in USD per share) | $ / shares	0.84
Canceled/forfeited/expired (in USD per share) | $ / shares	0.84
Outstanding at September 30, 2020 (in USD per share) | $ / shares	$ 0.84

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Stock-Based Compensation - Stock Compensation Expense (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Total stock-based compensation expense	$ 439	$ 423	$ 1,164	$ 1,170
Research and development
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Total stock-based compensation expense	177	206	507	549
General and administrative
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Total stock-based compensation expense	$ 262	$ 217	$ 657	$ 621