Document
As filed with the United States Securities and Exchange Commission on July 3, 2018.
Registration Statement No. 333-225121
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________________
Amendment No. 5
to
Form F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
______________________________________________
Realm Therapeutics plc
(Exact name of registrant as specified in its charter)
______________________________________________
England and Wales
 
2834
 
Not applicable
(State or other jurisdiction of
incorporation or organization)
 
(Primary Standard Industrial
Classification Code Number)
 
(I.R.S. Employer
Identification Number)
______________________________________________
267 Great Valley Parkway
Malvern, PA 19355
United States of America
Tel: +1 484 321 2700
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
______________________________________________
Realm Therapeutics, Inc.
267 Great Valley Parkway
Malvern, PA 19355
United States of America
Tel: +1 484 321 2700
(Name, address, including zip code, and telephone number, including area code, of agent for service)
______________________________________________
Copies to:
Joshua A. Kaufman
Jeffrey P. Libson
Divakar Gupta
Cooley LLP
1114 Avenue of the Americas
New York, New York 10036
+1 212 479 6000
 
Ed Lukins
Ed Dyson
Cooley (UK) LLP
Dashwood
69 Old Broad Street
London EC2M 1QS
United Kingdom
+44 20 7785 9355
______________________________________________
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this registration statement is declared effective.
______________________________________________
If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. þ
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act. Emerging growth company þ
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 7(a)(2)(B) of the Securities Act. þ
The term “new or revised financial accounting standards” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
 





The information contained in this preliminary prospectus is not complete and may be changed. No securities may be sold pursuant to this prospectus until the registration statement filed with the Securities and Exchange Commission with respect to such securities has been declared effective thereby. This preliminary prospectus is not an offer to sell these securities and no offers to buy these securities are being solicited in any jurisdiction where their offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED JULY 3, 2018
PRELIMINARY PROSPECTUS
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12341139&doc=28
126,857,901 Ordinary Shares
Represented by Approximately 5,074,316 American Depositary Shares
American Depositary Shares, or ADSs, each representing 25 ordinary shares of Realm Therapeutics plc, have been approved for listing on the Nasdaq Stock Market, or Nasdaq, under the symbol “RLM”, and are expected to begin trading on Nasdaq on June   , 2018. Our ordinary shares are currently traded on AIM, a market operated by the London Stock Exchange, under the ticker symbol “RLM”. The closing price of our ordinary shares on AIM on July 2, 2018 was £0.39 per share, which is equivalent to $0.51 per share based on the noon buying rate of the Federal Reserve Bank of New York on June 22, 2018, or $12.76 per ADS, after giving effect to the 25:1 ordinary share:ADS ratio. We have appointed Citibank, N.A. to act as the depositary for the ADSs representing our ordinary shares, including the Registered Shares, as defined below. Upon the effectiveness of the registration statement of which this prospectus forms a part, holders of ordinary shares registered hereby are expected to be able to deposit such shares with the depositary in exchange for ADSs representing such shares at the ratio referred to in the first sentence of this paragraph. ADSs representing the ordinary shares registered hereby will be freely tradeable on the effective date of the registration statement of which this prospectus forms a part.
We are filing the registration statement of which this prospectus forms a part in part in respect of its obligations under a Registration Rights Agreement, dated September 21, 2017, concerning an aggregate of 66,396,485 ordinary shares (of which the registrant is hereby registering 66,254,529 of such ordinary shares) that it privately placed with investors on October 12, 2017 and an aggregate of 26,558,600 ordinary shares issuable upon the exercise of warrants issued on the same date to such investors. The registrant is also registering pursuant to such registration statement an aggregate of 34,044,772 ordinary shares held by other shareholders identified herein. All such shareholders are identified in this prospectus and referred to as the Registered Holders. We refer to the aggregate 126,857,901 ordinary shares registered hereby as the Registered Shares. Any Registered Shares offered and sold in the United States by the Registered Holders will be in the form of ADSs. The Registered Holders are also permitted to sell ordinary shares not represented by ADSs in private transactions, including on AIM, a market operated by the London Stock Exchange, which resales are not covered by this prospectus. Unlike an initial public offering, any disposition by the Registered Holders of the Registered Shares represented by ADSs is not being underwritten by any investment bank. The Registered Holders may, or may not, elect to dispose of Registered Shares represented by ADSs as and to the extent that they may individually determine. Such dispositions, if any, will be made through brokerage transactions on Nasdaq or other securities exchanges in the United States at prevailing market prices. See the section entitled “Plan of Distribution.” We will not receive proceeds from any disposition of Registered Shares in the form of ADSs by Registered Holders.
We are an “emerging growth company” as defined under the federal securities laws and, as such, will be subject to reduced public company reporting requirements. See the section entitled “Prospectus Summary — Implications of Being an Emerging Growth Company and a Foreign Private Issuer” for additional information.
Neither the U.S. Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
Investing in ADSs representing our ordinary shares involves a high degree of risk. Before buying any ADSs representing our ordinary shares you should carefully read the discussion of material risks of investing in such securities in “Risk Factors” beginning on page 9 of this prospectus.





TABLE OF CONTENTS
 
Page
We are responsible for the information contained in this prospectus and any free writing prospectus that we may prepare or authorize. We have not authorized anyone to provide you with different or additional information, and we do not take any responsibility for any other information that others may give you. We are not making an offer to sell ADSs representing our ordinary shares in any jurisdiction where the offer or sale thereof is not permitted. You should not assume that the information contained in this prospectus is accurate as of any date other than the date on the front cover of this prospectus, regardless of the time of delivery of this prospectus or the sale of any ADSs representing our ordinary shares.
For investors outside the United States: Neither we nor the Registered Holders have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction other than the United States where action for that purpose is required. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the ADSs and the distribution of this prospectus outside the United States.

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We are incorporated under the laws of England and Wales. Under the rules of the U.S. Securities and Exchange Commission, we are currently eligible for treatment as a “foreign private issuer.” As a foreign private issuer, we will not be required to file periodic reports and financial statements with the U.S. Securities and Exchange Commission as frequently or as promptly as domestic registrants whose securities are registered under the Securities Exchange Act of 1934, as amended, or the Exchange Act.

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MARKET, INDUSTRY AND OTHER DATA
This prospectus contains estimates, projections and other information concerning our industry, our business and the markets for our product candidates. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties, and actual events or circumstances may differ materially from events and circumstances that are assumed in this information. Unless otherwise expressly stated, we obtained this industry, business, market and other data from our own internal estimates and research as well as from reports, research surveys, studies and similar data prepared by market research firms and other third parties such as investment banking analysts, industry, medical and general publications, government data and similar sources. In addition, assumptions and estimates of our and our industry’s future performance are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the section entitled “Risk Factors.” These and other factors could cause our future performance to differ materially from our assumptions and estimates. See the section entitled “Special Note Regarding Forward-Looking Statements.”
ABOUT THIS PROSPECTUS
Unless otherwise indicated or the context otherwise requires, all references in this prospectus to the terms “Realm,” “Realm Therapeutics,” “Realm Therapeutics plc,” “the company,” “we,” “us” and “our” refer to Realm Therapeutics plc together with its subsidiaries.
We own various trademark registrations and applications, and unregistered trademarks. All other trade names, trademarks and service marks of other companies appearing in this prospectus are the property of their respective holders. Solely for convenience, the trademarks and trade names in this prospectus may be referred to without the ® and symbols, but such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto. We do not intend to use or display other companies’ trademarks and trade names to imply a relationship with, or endorsement or sponsorship of us by, any other companies.
PRESENTATION OF FINANCIAL INFORMATION
Our reporting currency is the U.S. dollar given the majority of our operations are located in the United States and transactions are denominated in U.S. dollars. The functional currency of Realm Therapeutics plc, the registrant, is pounds sterling, and its assets and liabilities are translated at the rate of exchange at year-end, while the statements of operations are translated at the average exchange rates in effect during the year. The net effect of these translation adjustments is shown as a component of accumulated other comprehensive income (loss). In this prospectus, we present our consolidated financial statements in accordance with generally accepted accounting principles in the United States, or U.S. GAAP, as issued by the Financial Accounting Standards Board, or FASB.
We are a public limited company incorporated and domiciled in the United Kingdom, and registered in England and Wales, with our shares publicly traded on the Alternative Investment Market of the London Stock Exchange, or AIM. As required by AIM, we also prepare and issue annual and interim financial statements in accordance with International Financial Reporting Standards, or IFRS, as adopted by the European Union. Readers of this prospectus should note that there may be certain differences between the presentation of our financial position, results of operations and cash flows under IFRS and U.S. GAAP accounting standards.

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PROSPECTUS SUMMARY
The following summary highlights information contained elsewhere in this prospectus and does not contain all of the information you should consider before investing in ADSs representing our ordinary shares. You should read the entire prospectus carefully, including “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our consolidated financial statements and the related notes included in this prospectus before making an investment decision.
Overview
We are a clinical-stage biopharmaceutical company focused on developing novel therapeutics for immune-mediated diseases in adults and children. We are using our proprietary immunomodulatory platform technology — a high concentration, stabilized formulation of hypochlorous acid, or HOCl — to develop prescription, topical drugs for the treatment of Atopic Dermatitis, or AD, and other dermatological indications, including Acne Vulgaris, or common Acne, Psoriasis and certain additional indications. Our lead product candidate, PR022, is a non-alcohol based topical gel containing the active ingredient HOCl for the treatment of AD that is in a Phase 2 clinical trial, from which we expect to report top-line data in the third quarter of 2018. Our platform technology, as demonstrated by pre-clinical studies, has the ability to modulate key cytokines that are implicated in multiple dermatological conditions. Cytokines are small protein molecules that aid cell communication in immune responses. This modulation leads us to believe that our platform technology may have broad-spectrum immunomodulatory properties that impact both the innate and adaptive immune system. We are also evaluating, for acquisition or in-licensing, other novel therapeutics for the treatment of immune-mediated diseases with significant unmet medical needs.
Immunity is the equilibrium between immune activation and suppression that permits the body to function in a normal and healthy way. Cytokines, including interleukins, or ILs, provide the signaling pathways that orchestrate the complex immune responses of the body. Immune dysregulation occurs when the body fails to activate or inactivate the immune system appropriately. We believe that cytokines may represent an important frontier in medicine. There are many ways in which immunomodulatory drugs can ameliorate a dysregulated immune response by impacting cytokines. Specifically, cytokines are being investigated in the fields of inflammation and immunology, including diseases such as AD, for the purpose of identifying those to be targeted in the development of drugs.
We believe that HOCl formulations developed with our proprietary technology have the potential to be first in class immunomodulatory treatments. HOCl is known as an anti-microbial molecule that is produced naturally in the body as part of the oxidative burst process, an innate immune response to infectious microbial agents. We have demonstrated that HOCl at higher concentrations acts as an immunomodulatory agent, capable of downregulating many key cytokines associated with inflammation and disease. Our proprietary technology includes a specialized method for manufacturing high purity HOCl, which yields high concentration formulations that are stabilized for certain periods of time within specific pH ranges. We have ongoing development efforts to enhance the period of time over which HOCl is stabilized in a certain concentration. We possess significant know-how based in part on the four members of our research and development team who are experts in HOCl technology, with an average of 21 years of experience working with HOCl. We possess patents granted to us in the United States for composition of matter for the stabilized formulation of HOCl, methods of use and methods of manufacturing, as well as international patent protection and in-licensed HOCl technology related to our manufacturing process.
Our lead product candidate, PR022, is a non-alcohol based topical gel containing the active ingredient HOCl that offers a differentiated mechanism of action for the treatment of AD. PR022 is a topical IL-4/IL-13 inhibitor. AD affects an estimated 20 million people in the United States, including up to 20% of children and up to 3% of adults. Analysts estimate that this market will grow to approximately $5 billion, excluding steroids, in the United States by 2022 driven by recent market approvals of Eucrisa, Pfizer’s topical PDE-4 inhibitor for mild to moderate AD, and Dupixent, an injectable IL-4, IL-13 inhibitor

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for moderate to severe AD. We expect these products will comprise a large portion of the market at the time that our product is anticipated to be approved (if it is in fact approved), and therefore we view the prospective launch of PR022 as taking market share from these products at that point in time (if PR022 is approved for marketing). Symptoms of AD can include rashes; dry, scaly, red skin; open, crusty and weepy sores, which can become infected; and severe and persistent pruritus, which is commonly known as itch. The current standard of care, when emollients and moisturizers no longer adequately control AD, is the use of topical steroids or injectable monoclonal antibodies for more severe cases. Steroids are known to have potentially harmful side effects. Additionally, we believe that our product candidate, which is formulated for topical application, may provide a more convenient solution than injectables. PR022 is currently in a Phase 2 clinical trial, from which we expect to report top-line data in the third quarter of 2018.
PR022’s clinical development is supported by pre-clinical studies that have shown downregulation of key cytokines associated with multiple dermatological conditions and that supported initiation of human drug clinical trials. In pre-clinical studies of PR022 in mouse models of AD, various high concentrations of HOCl have demonstrated the ability to both prevent and treat inflammatory lesions and reduce associated scratching bouts, similar to the effect of betamethasone, a high potency steroid. Importantly, the mice treated with HOCl topical gel did not demonstrate the same level of skin thinning or weight-loss, which are common immunosuppressive side effects of steroids. In-vitro pre-clinical studies have shown that HOCl results in a dose-dependent decrease of IL-8 and TSLP pro-inflammatory cytokine levels in keratinocytes cells and TNF-α and IL-12 pro-inflammatory cytokine levels in dendritic cells.
We previously marketed an FDA-cleared 510(k) medical device product called Aurstat, which was manufactured at 0.045% HOCl. Aurstat is indicated for the management of itch, pain and burning experienced with AD and other dermatoses. Aurstat has a similar formulation to PR022. Clinical data published by an investigator found that approximately 73.7% of subjects with mild to moderate AD treated with Aurstat experienced reduced pruritis on Day 1 and through the full treatment period of the three-day study as compared to 30.0% of the subjects in the untreated group. Approximately 20,000 prescriptions were written for Aurstat while it was marketed by a third party in the United States. We decided to remove Aurstat from the market to develop HOCl as an FDA approved prescription drug. Based on this and other supporting pre-clinical data, we believe that PR022 may have utility for the treatment of AD generally, and pruritus specifically. Unlike an FDA-cleared 510(k) medical device that demonstrates substantial equivalence to a marketed device, an FDA approved prescription drug passes through a more rigorous application process in a New Drug Application. From a business perspective, we believe that the potential safety and efficacy claims that we may be able to make regarding a prescription drug upon approval by the FDA (if and when obtained) versus a 510(k) medical device would allow for better acceptance and use by physicians, improved marketability to patients and potentially greater insurance reimbursements from third party payors.
The second indication we are pursuing is Acne Vulgaris, or common Acne. We plan to initiate a clinical study in Acne in the first quarter of 2019, using a topical formulation based on our proprietary platform technology, following submission of an investigational new drug, or IND, application in the fourth quarter of 2018. Acne is the most common chronic skin condition in the United States, affecting approximately 45 million people, or 14% of the population, and is characterized by the formation of lesions on the face and neck but also extending to other parts of the body. Analysts value the prescription market for Acne at close to $4 billion in the United States in 2017, with continued growth expected. We are developing a new product candidate, RLM023, a topical formulation of HOCl that is optimized for Acne. We believe that a formulation based upon our proprietary HOCl technology may offer a promising treatment for Acne due to HOCl’s anti-inflammatory and anti-microbial properties. Pre-clinical in vivo and in vitro studies using our HOCl formulation have demonstrated a reduction in the expression of pro-inflammatory cytokines such as TNF-α, IL 1β, IL-8 and IL-12, which have been reported to be key cytokines associated with Acne pathogenesis.

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In addition, we are evaluating the use of our platform technology for the treatment of Psoriasis, a common skin disorder characterized by the formation of inflamed, raised plaques that shed scales derived from excessive growth of skin epithelial cells. Psoriasis is the largest indication in dermatology with, according to analyst estimates, approximately $6 billion in sales in the United States in 2017, which can largely be attributed to biologics. Research has identified key cellular and molecular pathways of inflammation that contribute to disease pathogenesis of Psoriasis.  Formulations of our proprietary platform technology have been shown in vitro and in vivo to downmodulate pro-inflammatory cytokines TNF-α, IL-6, and IL-12, which have been reported at elevated levels in patients with Psoriasis and correlated to disease severity. Our ongoing in vitro pre-clinical studies and research coupled with the results of our AD study will inform the next steps in our development of a potential treatment of Psoriasis.
AD, Acne, Psoriasis and other dermatological conditions have been increasingly recognized as serious diseases, many of which are associated with chronic pruritus, which has a significant impact on quality of life including severe sleep disturbance for numerous patients. As demonstrated in the study of Aurstat in AD, as well as our in vivo and in vitro pre-clinical studies, our platform technology has the potential to deliver anti-pruritic, or itch reduction, effects.
We have a highly experienced and well-regarded management team that has gained significant industry know-how through experience at leading biopharmaceutical companies, including GSK, Johnson & Johnson, Novartis and Intercept. Additionally, our Chief Medical Officer is an immunologist with significant experience in studying immune-mediating diseases in various therapeutic areas (including oncology and hematological diseases) and has advanced several drug candidates from pre-clinical development through approval and commercialization.
Recent Developments
In March 2018, we announced that in a Phase 2 clinical trial for Allergic Conjunctivitis, or AC, an ophthalmic disease, PR013, a topical solution containing HOCl as its active ingredient, did not demonstrate efficacy.  As a result, we are no longer pursuing the clinical development of PR013. AC and AD have different disease pathologies. AC is caused by an allergen-induced rapid inflammatory response in which allergens interact. In contrast, AD is a complex inflammatory cutaneous disorder characterized by immune-mediated inflammation and epidermal barrier dysfunction. The design of our Phase 2 clinical trials for AC and AD were also materially different. In the AC trial, the response to the drug was measured at multiple points, all within 20 minutes of treatment, and in the AD trial, the response is measured after 28 days.
Corporate Information
We were initially formed as a private limited company under the laws of England and Wales in April 2006 under the name PuriCore plc. In December 2016, we changed our name to Realm Therapeutics plc to more accurately reflect our strategic focus and direction. Our ordinary shares were initially listed on the main market of the London Stock Exchange in June 2006. The listing was transferred to AIM, a market operated by the London Stock Exchange, in December 2014 and the ordinary shares currently trade thereon under the symbol “RLM”.
Our corporate headquarters are located at 267 Great Valley Parkway, Malvern, PA 19355, United States of America, where the telephone number is +1 484 321 2700. Our registered office is located at c/o CMS Cameron McKenna LLP, Cannon Place, 78 Cannon Street London EC4N 6AF, United Kingdom, where the telephone number is +44.207.367.3000. Our website address is www.realmtx.com. The information contained on, or that can be accessed from, our website does not form part of this prospectus. Our agent for service of process in the United States is Realm Therapeutics, Inc., 267 Great Valley Parkway, Malvern, PA 19355, United States of America.
On October 12, 2017, we announced that we completed a private placement of £19.3 million, comprising 66,396,485 ordinary shares and warrants to purchase an aggregate of 26,558,600 shares with

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U.S. and U.K. healthcare specialist funds including OrbiMed, BVF Partners, RA Capital Management, Abingworth BioEquities and Polar Capital, as well as certain existing investors. The placement included a registration rights agreement requiring us to register the resale of the shares representing the ordinary shares acquired in the private placement as well as the shares issuable upon exercise of warrants sold in conjunction therewith following the initial listing of our ordinary shares (in the form of ADSs) on a U.S. securities exchange. The registration statement of which this prospectus forms a part is being filed in part pursuant to such registration rights agreement.
Risks Associated with Our Business
Our business is subject to a number of risks of which you should be aware before making an investment decision. You should carefully consider all of the information set forth in this prospectus and, in particular, should evaluate the specific factors set forth in the section titled “Risk Factors” before deciding whether to invest in ADSs representing our ordinary shares. These important risks include, but are not limited to, the following:
Clinical product development involves a lengthy and expensive process, with an uncertain outcome. We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our product candidates.
We have incurred significant losses and negative cash flow since our inception. We expect to incur losses over the next several years and may never achieve or maintain profitability.
We will be required to raise additional capital to support our drug development strategy, which may cause dilution to or adversely affect the rights of holders of ADSs representing our ordinary shares and our ordinary shares, restrict our operations or require us to relinquish rights to our technologies or product candidates. Additionally, we may not be able to access capital on favorable terms.
All of our current product candidates contain the same active pharmaceutical ingredient, or API, which was also the API in our former product candidate for the treatment of Allergic Conjunctivitis, or AC, which did not demonstrate efficacy in its Phase 2 clinical trial. Additionally, given they contain the same API, we may not be able to develop products for our target indications that are sufficiently differentiated in their formulations.
HOCl is inherently unstable, which may affect the marketability of our product candidates.
We only have one product candidate, PR022, in clinical trials at this time.
We are subject to significant competition in the indications which we are pursuing and also with respect to our underlying HOCl platform technology.
If we are unable to obtain or protect intellectual property rights related to any of our product candidates, we may not be able to compete effectively in our markets.
We are dependent on third parties to support our drug development efforts.
To date, there has been no public market for ADSs representing our ordinary shares, and an active market may not develop in which investors can resell such ADSs.
If securities or industry analysts do not publish research, or publish inaccurate or unfavorable research, about our business, the price of ADSs representing our ordinary shares or our ordinary shares and the trading volume thereof could decline.

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We currently qualify as a foreign private issuer and an emerging growth company. As a result, we will not be subject to the same level of reporting and corporate governance obligations applicable a U.S. domestic public company that is not an emerging growth company. We may lose our foreign private issuer status, which would then require us to comply with the Exchange Act’s domestic reporting regime and Nasdaq’s corporate governance requirements applicable to a domestic issuer, and cause us to incur significant incremental legal, accounting and other expenses.
We believe that we will likely be classified as a passive foreign investment company, or PFIC, for U.S. federal income tax purposes for the taxable year ended December 31, 2017, and we expect to continue to be a PFIC for our current taxable year resulting in potential adverse consequences to U.S. holders of ADSs representing our ordinary shares or our ordinary shares.
Implications of Being an Emerging Growth Company and a Foreign Private Issuer
Emerging Growth Company
We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As such, we may take advantage of certain exemptions from various reporting requirements that are applicable to other publicly traded entities that are not emerging growth companies. These exemptions include:
the option to present only two years of audited financial statements and related discussion in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this prospectus;
not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002;
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 (i.e., an auditor discussion and analysis);
not being required to submit certain executive compensation matters to stockholder advisory votes, such as “say-on-pay,” “say-on-frequency,” and “say-on-golden parachutes;” and
not being required to disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the chief executive officer’s compensation to median employee compensation.
Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 13(a) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, for complying with new or revised accounting standards. As a result, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We are choosing to irrevocably opt out of this extended transition period and will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Under federal securities laws, our decision to opt out of the extended transition period is irrevocable.
We will remain an emerging growth company until the earliest of: (1) the last day of the first fiscal year in which our annual gross revenues exceed $1.07 billion; (2) the last day of 2023; (3) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur on the last day of any fiscal year that the aggregate worldwide market value of our common equity held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second

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fiscal quarter; or (iv) the date on which we have issued more than $1.0 billion in non-convertible debt securities during any three year period.
Foreign Private Issuer
Upon the effectiveness of the registration statement of which this prospectus forms a part, we will report under the Exchange Act as a non-U.S. company with foreign private issuer status. Even after we no longer qualify as an emerging growth company, as long as we qualify as a foreign private issuer under the Exchange Act we will be exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including:
the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act;
the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and
the rules under the Exchange Act requiring the filing with the U.S. Securities and Exchange Commission, or the SEC, of quarterly reports on Form 10-Q containing unaudited financial and other specific information, and current reports on Form 8-K upon the occurrence of specified significant events.
Foreign private issuers are also are exempt from certain more stringent executive compensation disclosure rules. Thus, even if we no longer qualify as an emerging growth company, but remain a foreign private issuer, we will continue to be exempt from the more stringent compensation disclosures required of companies that are neither an emerging growth company nor a foreign private issuer.

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THE REGISTERED SHARES
Nasdaq Stock Market listing
 
ADSs representing our ordinary shares have been approved for listing on the Nasdaq Stock Market under the symbol “RLM”.
 
 
 
AIM trading symbol for our ordinary shares
 
“RLM”.
 
 
 
Registered Shares being registered on behalf of the Registered Holders
 
126,857,901 ordinary shares, represented by an aggregate of approximately 5,074,316 ADSs.
 
 
 
Ordinary shares issued and outstanding immediately before and after the effectiveness of the registration statement of which this prospectus forms a part
 
116,561,917 ordinary shares.
 
 
 
American Depositary Shares
 
Each ADS represents 25 ordinary shares, nominal value £0.10 per share. Holders of ADSs have the rights of an ADS holder or beneficial owner (as applicable) as provided in the deposit agreement amongst us, the depositary and holders and beneficial owners of ADSs from time to time. To better understand the terms of ADSs representing our ordinary shares, see the section entitled “Description of American Depositary Shares.” We also encourage you to read the deposit agreement, the form of which is filed as an exhibit to the registration statement of which this prospectus forms a part.
 
 
 
Depositary
 
Citibank, N.A.
 
 
 
Use of proceeds
 
We will not receive proceeds from the disposition, if any, of Registered Shares in the form of ADSs by the Registered Holders.
 
 
 
Risk factors
 
See the section entitled “Risk Factors” and the other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in ADSs representing our ordinary shares.
Unless otherwise stated in this prospectus, the number of our ordinary shares set forth herein is as of March 31, 2018 and is based on 116,561,917 ordinary shares issued and outstanding but excludes: 26,917,173 ordinary shares reserved for issuance pursuant to the terms of outstanding warrants, and 11,264,808 ordinary shares reserved for issuance upon the exercise of outstanding options under our Equity Incentive Plan.

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SUMMARY CONSOLIDATED FINANCIAL DATA
The following tables set forth, for the periods and as of the dates indicated, our summary consolidated financial data. The consolidated statements of operations data for the years ended December 31, 2016 and 2017 and the consolidated balance sheet data as of December 31, 2017 is derived from our audited consolidated financial statements appearing elsewhere in this prospectus. Our audited consolidated financial statements included in this prospectus have been prepared in accordance with U.S. GAAP as issued by the Financial Accounting Standards Board, or FASB. You should read this data together with our consolidated financial statements and related notes included elsewhere in this prospectus and the information under the captions “Selected Consolidated Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Our historical results are not necessarily indicative of our future results.
 
Years Ended December 31,
(in thousands except share and per share data)
2016
 
2017
Consolidated statement of operations data:
 
 
 
Revenues
$
867

 
$
1,121

Cost of revenues
121

 

 
746

 
1,121

Operating expenses:
 
 
 
Research and development
4,805

 
8,189

General and administrative
3,248

 
3,622

 
8,053

 
11,811

Loss from operations
(7,307
)
 
(10,690
)
Interest income
3

 
58

Loss from continuing operations before income taxes
(7,304
)
 
(10,632
)
Income tax benefit
2,230

 
108

Net loss from continuing operations
(5,074
)
 
(10,524
)
Net income from discontinued operations, net of tax expense
5,156

 

Net income (loss)
$
82

 
$
(10,524
)
 
 
 
 
Net income (loss) per ordinary share - basic and diluted:
 
 
 
Loss from continuing operations
$
(0.10
)
 
$
(0.16
)
Income from discontinued operations
0.10

 

Net income (loss) per ordinary share
$
0.00

 
$
(0.16
)
 
 
 
 
Weighted average ordinary shares - basic and diluted
50,139,121

 
65,081,903

 
As of December 31, 2017
(in thousands)
 
Consolidated balance sheet data:
 
Cash, cash equivalents and marketable securities
$
33,853

Working capital
$
31,631

Total liabilities
$
2,911

Total shareholders’ equity
$
32,197


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RISK FACTORS
Investing in ADSs representing our ordinary shares involves a high degree of risk. Before deciding whether to invest, you should carefully consider the risks described below, and all other information contained in this prospectus, including our consolidated financial statements and the related notes included elsewhere in this prospectus. The occurrence of any of the events or developments described below could harm our business, financial condition, results of operations and growth prospects. In such an event, the market price of ADSs representing our ordinary shares or our ordinary shares could decline and you may lose all or part of your investment.
Risks Relating to Our Business and Drug Development Strategy
We have incurred significant losses and negative cash flow since our inception. We expect to incur losses over the next several years and may never achieve or maintain profitability.
We are a clinical stage drug development company. Since inception, we have incurred significant net losses and negative cash flows from operations. We incurred net losses from continuing operations of $5.1 million and $10.5 million and negative cash flows from continuing operations of $6.7 million and $9.5 for the years ended December 31, 2016 and 2017, respectively. As of December 31, 2017, we had an accumulated deficit of $189.8 million. We have no pharmaceutical products approved for commercialization from which to generate revenue, and our only source of revenue is the royalty stream from Vashe, which in 2017 was $1.1 million. We expect to continue to incur significant expenses and operating losses over the next several years. Our net losses may fluctuate significantly from quarter to quarter and year to year. We anticipate that our expenses will increase substantially as we:
continue our ongoing clinical trials evaluating PR022 for the treatment of Atopic Dermatitis, or AD, as well as initiate and complete additional clinical trials, as needed;
continue development of and pursue regulatory approvals for our product candidates for the treatment of Acne and Psoriasis;
seek to develop additional product candidates based upon our proprietary technology;
ultimately establish a commercialization infrastructure and scale up external manufacturing and distribution capabilities to commercialize any product candidates for which we may obtain regulatory approval;
seek to in-license or acquire additional product candidates for development;
adapt our regulatory compliance efforts to incorporate requirements applicable to marketed products;
maintain, expand and protect our intellectual property portfolio;
hire additional clinical, manufacturing, scientific, operational, financial, information technology and other personnel; and
incur additional legal, accounting and other expenses in operating as a U.S. public company in the United States and the United Kingdom.
To become and remain profitable, we must succeed in developing and eventually commercializing product candidates that generate significant revenue. This will require us to be successful in a range of challenging activities, including completing pre-clinical testing and clinical trials of our product candidates, obtaining regulatory approval, and manufacturing, marketing and selling any product candidates for which we may obtain regulatory approval, as well as discovering, developing and / or acquiring additional

9



product candidates. We may never succeed in these activities and, even if we do, may never generate revenue that is significant enough to achieve profitability.
In cases where we are successful in obtaining regulatory approval to market one or more of our product candidates, our revenue will be dependent, in part, upon the size of the markets in the territories for which we gain regulatory approval, the accepted price for the product, the ability to obtain coverage and reimbursement, our label claims, and whether we own the commercial rights for that territory. If the number of our addressable patients is not as significant as we estimate, the indication approved by regulatory authorities is narrower than we expect, or the treatment population is narrowed by competition, physician choice or treatment guidelines, we may not generate significant revenue from sales of such products, even if approved.
Because of the numerous risks and uncertainties associated with product development, we are unable to accurately predict the timing or amount of expenses or when, or if, we will be able to achieve profitability. If we are required by regulatory authorities to perform studies in addition to those expected, or if there are any delays in the initiation and completion of our clinical trials or the development of any of our product candidates, our expenses could increase.
Even if we achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would depress the value of our company and could impair our ability to raise capital, expand our business, maintain our development efforts, obtain product approvals, diversify our offerings or continue our operations. A decline in the value of our company could also cause you to lose all or part of your investment in our ordinary shares and ADSs.
We will be required to raise additional capital to support our drug development strategy, which may cause dilution to or adversely affect the rights of holders of ADSs representing our ordinary shares and our ordinary shares, restrict our operations or require us to relinquish rights to our technologies or product candidates.
We had cash, cash equivalents and marketable securities of $33.9 million at December 31, 2017. The costs associated with developing, testing and obtaining regulatory approval for drugs are significant, and the timelines for obtaining regulatory approvals for drugs are lengthy and uncertain. We expect to continue to incur significant expenses and operating losses over the next several years associated to support our clinical development program, the costs of which are subject to the factors set forth in the preceding risk factor. The following factors, among others, may cause our future funding requirements to be greater than anticipated or to accelerate the need for funds:
unforeseen developments during pre-clinical trials, including toxicology studies;
unfavorable or unexpected events related to or the outcomes of clinical trials, including delays in enrollment;
delays in the timing of receipt of required regulatory approvals or clearances for next phases of clinical trials;
broader than anticipated safety or efficacy trials imposed by regulators;
unanticipated expenses in research and development;    
unanticipated expenses or delays in the manufacture of clinical trial material;
the success or failure of existing or potential new therapies for the treatment of diseases being targeted by us;
unanticipated expenses in defending or fortifying intellectual property rights;

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lack of financial resources to adequately support operations;
the need to respond to technological changes and competition;
unforeseen problems in attracting and retaining qualified personnel;
claims that might be brought in excess of our insurance coverage;
warranty claims related to the sale of our Supermarket Retail business in October 2016; or
imposition of penalties for failure to comply with regulatory guidelines.
Until such time, if ever, as we can generate substantial product revenues, we may finance our cash needs through securities offerings, debt financings, license and collaboration agreements, or other capital raising transactions. If we raise capital through equity securities offerings, your equity interest ownership in our company will be diluted, and the terms of the securities that we issue in such transaction may include liquidation or other preferences that adversely affect your rights as a holder of ADSs representing our ordinary shares or of our ordinary shares. Debt financing, if available, could result in fixed payment obligations, and we may be required to agree to certain restrictive covenants, such as limitations on our ability to incur additional debt, to acquire, sell or license intellectual property rights, to make capital expenditures, to declare dividends, or other operating restrictions. If we raise additional funds through collaboration or licensing agreements, we may have to relinquish valuable rights to our technologies, future revenue streams, or product candidates or grant licenses on terms that may not be favorable to us. In addition, we could also be required to seek funds through arrangements with collaborators or others at an earlier stage than otherwise would be desirable. Raising additional capital through any of these or other means could adversely affect our business and the holdings or rights of our security holders, and may cause the market price of ADSs representing our ordinary shares or our ordinary shares to decline.
All of our current product candidates contain the same active pharmaceutical ingredient, or API, which was also the API in our former product candidate for the treatment of Allergic Conjunctivitis, or AC, which did not demonstrate efficacy in its Phase 2 clinical trial.
Hypochlorous acid, or HOCl, based on our proprietary platform technology is the API in all of our current product candidates. Since our current pipeline does not contain product candidates other than those with HOCl as the API, we may be limited in our future product development efforts unless we in-license or acquire additional product candidates, products or technologies, which in any such case could be costly and / or unsuccessful. In March 2018, we announced that our Phase 2 clinical trial of PR013, a product candidate designed as a topical solution for AC, an ophthalmic disease, did not demonstrate efficacy. As a result, we are no longer pursing the clinical development of PR013. While we believe that there are significant differences between our Phase 2 clinical trials in AC and AD, PR013 contains the same API, as the other product candidates in our pipeline. There could be an actual or perceived impact on the likelihood of our other product candidates to be successful in their clinical trials. If the failure of our AC Phase 2 clinical trial is indicative of an underlying inefficacy of HOCl for indications other than AC, it could have a material adverse effect on the other product candidates in our pipeline and on our business, more generally.
HOCl is inherently unstable, which may affect the marketability of our product candidates.
HOCl is formed from the dissolution of chlorine in water. The form of chlorine changes from Cl2 to HOCl to OCL- depending on the pH of its environment. HOCl is the form in which chlorine predominantly exists at a pH range of 4.0 to 6.5. This presents a challenge to the stability, and therefore the marketability, of our product candidates. While we have been granted patents regarding the stabilization of HOCl, there can be no assurance that we will be able to develop and manufacture one or more formulations of HOCl that provide a sufficient shelf-life for the commercialization of product candidates based on such technology. To achieve a commercially viable shelf-life for such product candidates may

11



require a significant investment of money and resources, as well as time to develop, test and potentially patent, new formulations and packaging designs. Cold-chain maintenance may also be required to be instituted in the drug supply chain in order to maintain the necessary shelf life in order for our product candidates, if and when approved, to be competitive in the marketplace. Additionally, we may not be able to achieve a shelf-life comparable to the products of our competitors, which could result in higher costs to manufacture and distribute our products.
We only have one product candidate, PR022, in clinical trials at this time.
Our lead product candidate, PR022, is currently undergoing a Phase 2 clinical trial, from which we expect to report top-line data in the third quarter of 2018. Unsuccessful trial results would have a material adverse effect on the potential viability of PR022 as a product for the treatment of AD. In addition, given this concentration of clinical development risk in a single product candidate, unsuccessful trial results could also have a material adverse effect on the trading value of our ordinary shares and ADSs and our potential to develop the other product candidates in our pipeline due to the actual or perceived impact on the likelihood of our other product candidates being successful in prospective clinical trials.
Our current product candidate pipeline is focused solely on dermatological indications.
All of the candidates currently in our clinical development pipeline are targeted topical treatments for dermatological conditions. This focus on a particular subset of indications may not be sufficiently diversified to manage the risk that the failure of any specific clinical trial may implicate the prospective viability of the other product candidates in our clinical development pipeline. Furthermore, we may not be able to identify other therapeutic areas for which our platform technology has potential utility. If our efforts to develop our HOCl platform technology in dermatology are unsuccessful, and we are not able to pursue alternate indications, our business will be materially adversely affected.
In addition, we are aware of recent high profile failures of products in clinical trials for AD and Acne, which could negatively influence investor confidence in the ability of companies to develop new drugs for these indications and, therefore, their willingness to further invest in products being developed to treat AD or Acne.
It is not uncommon in any trial, but particularly in dermatology trials, for the placebo to demonstrate some level of efficacy, making it more difficult to demonstrate a clinically meaningful or statistically significant difference between the drug and placebo response, which is one of the key measures for determining success in a clinical trial. If we are not able to determine clinically meaningful or statistically significant responses in clinical trials of our product candidates, it will have a material adverse effect on our ability to obtain regulatory approvals to market our product candidates.
Clinical product development involves a lengthy and expensive process, with an uncertain outcome. We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our product candidates.
In clinical development, the risk of failure for product candidates is high. It is impossible to predict when or if any of our product candidates will prove effective or safe in humans or will receive regulatory approval. Before obtaining marketing approval from regulatory authorities for the sale of any product candidate, we must complete pre-clinical testing and then conduct extensive clinical trials to demonstrate the safety and efficacy of our product candidates in humans.
The results of pre-clinical studies and early-stage clinical trials of our product candidates may not be predictive of the results of later-stage clinical trials. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through pre-clinical studies and initial clinical trials. A number of companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier trials. Our future clinical trial results may not be successful.

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Clinical testing is expensive, difficult to design and implement, can take many years to complete and is inherently uncertain as to outcome. A failure of one or more clinical trials can occur at any stage of testing. The outcome of pre-clinical testing and early clinical trials may not be predictive of the success of later clinical trials, and interim results of a clinical trial do not necessarily predict final results. Moreover, pre-clinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in pre-clinical studies and clinical trials have nonetheless failed to obtain marketing approval of their products.
We have not completed all clinical trials required for the approval of any of our product candidates and we cannot assure you that any clinical trial that we are conducting, or may conduct in the future, will demonstrate adequate efficacy and safety to obtain regulatory approval to market our product candidates. We may experience numerous unforeseen events during or as a result of clinical trials that could delay or prevent our ability to receive marketing approval or commercialize our product candidates, including:
regulators or institutional review boards may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site;
we may experience delays in reaching, or fail to reach, agreement on acceptable clinical trial contracts or clinical trial protocols with prospective trial sites or prospective contract research organizations, or CROs, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;
clinical trials of our product candidates may produce negative or inconclusive results, including failure to demonstrate statistical significance, and we may decide, or regulators may require us, to conduct additional clinical trials or abandon product development programs;
the number of patients required for clinical trials of our product candidates may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate or participants may drop out of these clinical trials or fail to return for post-treatment follow-up at a higher rate than we anticipate;
our product candidates may have undesirable side effects, cause adverse events, or AEs, or other unexpected characteristics, causing us or our investigators, regulators or institutional review boards to suspend or terminate the trials and in the case of AEs for us to incur losses as a result of claims, actions or settlements;
our current or future third party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all;
regulators or institutional review boards may require that we or our investigators suspend or terminate clinical development for various reasons, including noncompliance with regulatory requirements or a finding that the participants are being exposed to unacceptable health risks;
the cost of clinical trials of our product candidates may be greater than we anticipate; and
the supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product candidates may be insufficient, delayed or inadequate.
We could also encounter delays if a clinical trial is suspended or terminated by us, by the institutional review boards of the institutions in which such trials are being conducted, by the data safety monitoring board for such trial or by the FDA or other regulatory authorities. Such authorities may impose such a suspension or termination due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold,

13



unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a product, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial. If we experience delays in the completion of, or termination of, any clinical trial of our product candidates, the commercial prospects of our product candidates will be harmed, and our ability to generate product revenues from any of these product candidates will be delayed. In addition, any delays in completing our clinical trials will increase our costs, slow down our product candidate development and approval process and jeopardize our ability to commence product sales and generate revenues. Any of these occurrences may harm our business, financial condition and prospects significantly.
There are also a number of factors particular to the clinical development of our product candidate pipeline that could affect the timing and cost of development of our product candidates. The toxicology studies necessary to support the submission of an NDA for all of our product candidates have not yet been conducted and there is no certainty as to the outcome of these studies. In addition, the toxicology studies necessary to support the submission of an IND for our product candidates in development for the treatment of Acne or Psoriasis have not been completed and there is no certainty as to the outcome of these studies. In determining that we could complete a proof-of-concept study in Acne based on our currently available cash resources, we have made the key assumption that the FDA will permit us to skip a Phase 1 trial based on the fact that the intended product candidate for the Acne study contains the same active pharmaceutical ingredient, or API, that is used in the PR022 candidate used in our AD trial, and we were permitted by the FDA to go directly into a Phase 2 trial for AD. If it is necessary for us to conduct a Phase 1 trial for RLM023 for the treatment of Acne, then it will take longer and cost more than we currently expect to spend on the clinical development of this product candidate, and we may not have sufficient resources to complete the proof-of-concept study. Finally, many of the therapeutic areas being targeted by our pipeline candidates have a significant pediatric patient population. Clinical trials and commercialization of products involving a pediatric population carry a higher degree of risk than they otherwise would, given the potential liability associated with AEs involving children.
In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates. 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 trials or tests are not favorable or if there are safety concerns, we may:
be delayed in obtaining marketing approval for our product candidates;
not obtain marketing approval at all;
obtain approval for indications or patient populations that are not as broad as intended or desired;
obtain approval with labeling that includes significant use or distribution restrictions or safety warnings;
be subject to additional post-marketing testing requirements; or
have the product removed from the market after obtaining marketing approval.
Our product development costs will also increase if we experience delays in testing or marketing approvals. We do not know whether any of our pre-clinical studies or clinical trials will begin as planned, will need to be restructured or will be completed on schedule, or at all. Significant pre-clinical 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 products to market before we do and impair our ability to successfully commercialize, or receive approval for, our product candidates.

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Even if any of our product candidates receive marketing approval, they may fail to achieve the degree of market acceptance by physicians, patients, third party payors and others in the medical community necessary for commercial success.
If any of our product candidates receive marketing approval, they may nonetheless fail to gain sufficient market acceptance by physicians, patients, third party payors and others in the medical community. If our product candidates do not achieve an adequate level of acceptance, we may not generate significant revenue and we may not become profitable. The degree of market acceptance of our product candidates, if approved for commercial sale, will depend on a number of factors, including:
the efficacy, safety and potential advantages of any of our product candidates compared to alternative treatments;
our ability to offer our products for sale at competitive prices;
the stability, shelf life, convenience and ease of storage and administration compared to alternative treatments;
the willingness of the target patient population to try new treatments and of physicians to prescribe these treatments;
our ability to hire and retain a sales force in the United States, or to engage one or more third party distributors for our products;
the strength of marketing and distribution support;
the availability of third party coverage and adequate reimbursement for PR022 and any other product candidates;
the prevalence and severity of any side effects; and
any restrictions on the use of our products together with other medications.
If we are unable to establish sales, marketing and distribution capabilities for PR022 or any other product candidate that may receive regulatory approval, we may not be successful in commercializing those product candidates if and when they are approved.
We do not have sales or marketing infrastructure. To achieve commercial success for PR022 and any other product candidate for which we may obtain marketing approval, we will need to establish a sales and marketing organization or to engage one or more third party distributors for our products. In the future, we expect to build a focused sales and marketing infrastructure to market or co-promote some of our product candidates in the United States, if and when they are approved. There are risks involved with establishing our own sales, marketing and distribution capabilities. For example, recruiting and training a sales force is expensive and time consuming and could delay any product launch. If the commercial launch of a product candidate for which we recruit a sales force and establish marketing capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. This may be costly, and our investment would be lost if we cannot retain or reposition our sales and marketing personnel. If we are unable to establish our own sales, marketing and distribution capabilities and are forced to enter into arrangements with, and rely on, third parties to perform these services, our revenue and our profitability, if any, are likely to be lower than if we had developed such capabilities ourselves. In addition, we may not be successful in entering into arrangements with third parties to sell, market and distribute our product candidates or may be unable to do so on terms that are favorable to us. We likely will have little control over such third parties, and any of them may fail to devote the necessary resources and attention to sell and market our products effectively.

15



If we do not establish sales, marketing and distribution capabilities successfully, either on our own or in collaboration with third parties, we will not be successful in commercializing our product candidates.
Even if we obtain regulatory approval for PR022 or any other product candidates, such product candidates will remain subject to ongoing regulatory oversight.
Even if we obtain any regulatory approval for PR022 or any other product candidates, such product candidates will be subject to ongoing regulatory requirements for manufacturing, labeling, packaging, storage, advertising, promotion, sampling, record-keeping and submission of safety and other post-market information. Any regulatory approvals that we receive for PR022 or any other product candidates may also be subject to Risk Evaluation and Mitigation Strategies, or REMS, limitations on the approved indicated uses for which the drug may be marketed or to the conditions of approval, or contain requirements for potentially costly post-marketing testing, including Phase 4 trials, and surveillance to monitor the quality, safety and efficacy of the drug.
In addition, drug manufacturers and their facilities are subject to payment of user fees and continual review and periodic inspections by the FDA and other regulatory authorities for compliance with cGMP requirements and adherence to commitments made in the NDA or foreign marketing application. If we, or a regulatory authority, discover previously unknown problems with a drug, such as AEs of unanticipated severity or frequency, or problems with the facility where the drug is manufactured or if a regulatory authority disagrees with the promotion, marketing or labeling of that drug, a regulatory authority may impose restrictions relative to that drug, the manufacturing facility or us, including requesting a recall or requiring withdrawal of the drug from the market or suspension of manufacturing.
If we fail to comply with applicable regulatory requirements following approval of PR022 or any other product candidates, a regulatory authority may:
issue an untitled letter or warning letter asserting that we are in violation of the law;
seek an injunction or impose administrative, civil or criminal penalties or monetary fines;
suspend or withdraw regulatory approval;
suspend any ongoing clinical trials;
refuse to approve a pending NDA or comparable foreign marketing application (or any supplements thereto) submitted by us or our strategic partners;
restrict the marketing or manufacturing of the drug;
seize or detain the drug or otherwise require the withdrawal of the drug from the market;
refuse to permit the import or export of product candidates; or
refuse to allow us to enter into supply contracts, including government contracts.
Any government investigation of alleged violations of law could require us to expend significant time and resources in response and could generate negative publicity. The occurrence of any event or penalty described above may inhibit our ability to commercialize PR022 or any other product candidates and harm our business, financial condition, results of operations and prospects.

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We may not be successful in our efforts to increase our pipeline, including by pursuing additional indications for our current product candidates, identifying additional indications for our proprietary platform technology or in-licensing or acquiring additional product candidates for dermatological or other indications.
A key element of our strategy is to build and expand our pipeline of product candidates, including by developing our HOCl platform technology for the treatment of additional indications. In addition, we intend to in-license or acquire additional product candidates for dermatological and other indications. We may not be able to develop or identify product candidates that are safe, tolerable and effective. Even if we are successful in continuing to build our pipeline, the potential product candidates that we identify, in-license or acquire may not be suitable for clinical development, including as a result of being shown to have harmful side effects or other characteristics that indicate that they are unlikely to be products that will receive marketing approval and achieve market acceptance.
The success of PR022 and our other product candidates will depend significantly on adequate reimbursement.
Our product candidates have neither been approved for reimbursement, nor have reimbursement rates for our product candidates been determined by commercial or government payors in the United States or elsewhere, since all of our product candidates remain in clinical development. Our success will depend in part on adequate reimbursement by such payors for PR022 for the treatment AD and of our other product candidates for their respective indications. Third party payors determine which treatments they will cover and establish reimbursement levels. Even if a third party payor covers a particular treatment, the reimbursement rate therefor may not be adequate. Reimbursement by a third party payor may depend upon a number of factors including whether a treatment is appropriate for the specific patient; is cost-effective; is supported by peer-reviewed medical journals; and is included in clinical practice guidelines. In addition, since we are pursuing clinical development of product candidates in AD, Acne and Psoriasis and given that low-cost, and often generic, steroids are one of the standards of care in each of the these three indications, payors could require step-through therapy with steroids before reimbursing a patient for our product candidates, if and when they are approved for marketing, or the low price point of these alternative steroid treatments could result in pricing pressure on our product candidates, which would have a material adverse effect on our business and financial results. Furthermore, the payor reimbursement, competition and pricing in these three indications are different. Since our product candidates are all based on the same API, we may not be able to develop products for the three different indications that are sufficiently differentiated in their formulation such that we would be able to market and price them differently or, even if we did, that clinicians won’t prescribe the least-cost formulation for their patients among these different indications. This could result in price pressures across our planned portfolio of products, which would have a material adverse effect on our business and financial results.
Healthcare legislative reform measures may have a negative impact on our business and results of operations.
In the United States, there have been, and continue to be, legislative and regulatory developments regarding the healthcare system that could prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities, and affect our ability to profitably sell any product candidates for which we obtain marketing approval. Additionally, there has been heightened governmental scrutiny in the United States of pharmaceutical pricing practices in light of the rising cost of prescription drugs and biologics. Such scrutiny has resulted in several recent congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for products. While any proposed measures will require authorization through additional legislation to become effective, Congress and the Trump administration have each indicated that they will continue to seek new legislative and / or administrative measures to control drug costs. At the state level, legislatures are increasingly passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including

17



price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability or successfully commercialize our drugs.
We are subject to significant competition in the indications that we are pursuing and also with respect to our underlying HOCl platform technology.
We currently rely on our HOCl technology platform as the source of the product candidates in our clinical development pipeline. Our HOCl technology platform is subject to competition from other companies whose technology may offer advantages in terms of safety, efficacy or cost. Competitors may also precede us in commercializing, developing and receiving regulatory approval for products developed based on such technology. As a result, our products may not be competitive or available in the market in a timely manner, which could have a material adverse effect on our business by limiting the potential for sales of our products or creating pricing pressure for our products, if and when they are approved for marketing.
We face competition with respect to our current product candidates, and will face competition with respect to any product candidates that we may seek to develop or commercialize in the future, from many different sources, including major pharmaceutical and specialty pharmaceutical companies, academic institutions and governmental agencies and public and private research institutions. We are aware of a significant number of commercialized products as well as products in development in each of the three therapeutic areas that we target in our clinical development pipeline, which could result in a significantly greater field of competition by the time our products are approved and thereafter commercialized. We consider PR022’s prospective competitors for the treatment of AD to be topical steroids; Eucrisa, a topical PDE-4 inhibitor; and Dupixent, an injectable IL-4 and IL-13 inhibitor for moderate to severe AD. Certain calcineurin inhibitors, such as Elidel, are also prescribed for the treatment of AD. Standard treatments for Acne include antibiotics, antibacterials, retinoids and oral contraceptives. There are a number of treatments for Psoriasis on the market, including biologics, topical therapies such as corticosteroids or vitamin D, as well as systemic immunosuppressive drugs, or phototherapy.
Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than PR022 or any other product that we may develop. Our competitors also may obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for our product, which could result in our competitors establishing a strong market position before we are able to enter the market or could result in the approval of our product being delayed until the expiration of any new chemical entity exclusivity or other regulatory exclusivity received by such competitor.
We are also aware of other companies that manufacture, market and / or sell HOCl or chlorine based products at different concentrations and formulations and for different indications than we target. Some of these products are sold over-the-counter, or OTC. If we demonstrate clinical efficacy in our trials with our HOCl based products, these other companies could use our results to promote their products as having the same or similar efficacy as our products. If successful, they may offer their products at a lower cost for the same indications, or they may seek to convince clinicians, patients or payors that their products are a good alternative to our products. If these OTC companies are successful in such efforts, our ability to market our products, if and when approved, may be limited.
Many of the companies against which we are competing, or against which we may compete in the future, have significantly greater financial resources and expertise in research and development, manufacturing, pre-clinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our

18



competitors. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or that may be necessary for, our programs.
We are dependent on third parties to support our drug development efforts.
We currently utilize one contract manufacturer for our API and a separate contract manufacturer PR022. We do not have long-term supply agreements in place with these contract manufacturers. These contract manufacturers may not be able to scale-up sufficiently to meet our requirements for material needed for our pre-clinical studies and clinical trials and potentially for commercialization of PR022 and our other product candidates, and they may not be have the capacity, ability or willingness to manufacture multiple product candidates within our required timeframe. In addition, like many development stage drug companies with small internal teams, we have partnered with third parties in relation to development efforts, clinical trial material manufacturing, pre-clinical / safety studies, analytical studies and regulatory support. As such, we are dependent on a few key partners to deliver equipment, services and products on specified timelines and costs in order to meet our development plans. In some cases, it may be necessary to dual source goods and services in order to meet timelines or other requirements, resulting in additional costs.
We rely on a small team of key management and scientists to execute our business strategy.
We rely on small management and research and development teams. In particular, we rely on the efforts of our Chief Executive Officer, Alex Martin, our Chief Financial Officer and Chief Operating Officer, Marella Thorell, and our Chief Medical Officer, Christian Peters. While we have entered into employment agreements with these executive officers, each of them may currently terminate their employment with us at any time. We do not maintain “key person” insurance for either of these executive officers. Our scientific staff, including our Chief Medical Officer, possesses a significant amount of unregistered intellectual property or know-how regarding chlorine in general and our product candidates specifically which, if these team members were to leave our company, could take a significant amount of time and money to re-build. The loss of key members of either our management or research and development teams could result in a delay of our business and strategic plans and operations or require us to incur additional costs to recruit and / or train replacements, any of which could have a material adverse effect on our business.
We may become subject to claims in connection with past asset dispositions.
We sold our Supermarket Retail business in October 2016. In connection with this transaction, we provided customary representations, warranties and covenants and related indemnities to counterparties. Although we are not aware of any outstanding matters that would reasonably form a basis for a claim under this agreement, circumstances may arise that could result in a claim against us by counterparties to such agreement pursuant to our indemnification obligations thereunder and the underlying representations, warranties and covenants. If we become subject to liability based upon such contractual obligations or otherwise and we are required to indemnify the counterparties, it could have a material adverse effect on our business and financial position.
Product liability lawsuits against us could cause us to incur substantial liabilities and to limit commercialization of any products that we may develop.
We face an inherent risk of product liability exposure related to the testing of our product candidates in human clinical trials and will face an even greater risk if we commercially sell any products that we may develop. If we cannot successfully defend ourselves against claims that our product candidates or drugs caused injuries, we will incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:
decreased demand for any product candidates or drugs that we may develop;

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injury to our reputation and significant negative media attention;
withdrawal of clinical trial participants;
significant costs to defend the related litigation;
substantial monetary awards paid to trial participants or patients;
loss of revenue;
reduced resources of our management to pursue our business strategy; and
the inability to commercialize any products that we may develop.
We currently hold $10 million in product liability insurance coverage in the aggregate, with a per incident limit of $10 million, which may not be adequate to cover all liabilities that we may incur. We may need to increase our insurance coverage as we expand our clinical trials or if we commence commercialization of our product candidates. Insurance coverage is increasingly expensive. We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise.
Our business and operations would suffer in the event of computer system failures, cyberattacks or a deficiency in our cybersecurity.
Despite the implementation of security measures, our internal computer systems, and those of third parties on which we rely, are vulnerable to damage from computer viruses, malware, natural disasters, terrorism, war, telecommunication and electrical failures, cyberattacks or cyber intrusions over the Internet, attachments to emails, persons inside our organization, or persons with access to systems inside our organization. The risk of a security breach or disruption, particularly through cyberattacks or cyber intrusion, including by computer hackers, foreign governments, and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our product development programs. For example, the loss of clinical trial data from completed or 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 was to result in a loss of or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur material legal claims and liability, damage to our reputation, and the further development of our product candidates could be delayed.
Risks Relating to Intellectual Property Matters
If we are unable to obtain or protect intellectual property rights related to any of our product candidates, we may not be able to compete effectively in our markets.
We rely upon a combination of patents, trade secret protection, and confidentiality agreements to protect the intellectual property related to our product candidates. The issuance, scope, validity, enforceability, strength and commercial value of patents in the pharmaceutical field involves complex legal and scientific questions and can be uncertain. Some patent applications that we own may fail to result in issued patents with claims that cover the product candidates in the United States or in foreign jurisdictions. If this were to occur, early generic competition could be expected against our product candidates in development. There may be relevant prior art relating to our current or future patents and patent applications which could invalidate a patent or prevent a patent from issuing based on a pending patent application.

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We have in-licensed certain intellectual property, including patents, from Dr. Vitold Bakhir relating to electrochemical cell devices for production of HOCl. While our licenses are exclusive at least within our field and require cooperation from the licensor to enforce the licensed patents, there is no guarantee that these patents will be successfully enforced against competitors, or that the licensor will fully comply with the terms of the license, including obligations relating to patent enforcement and defense of the patents. Further, we have sublicensed certain intellectual property licensed from Dr. Bakhir to Chemstar Corp. for certain unrelated fields, including rights to enforce this intellectual property in these fields. Enforcement of the intellectual property in the sublicensed fields could compromise or result in invalidation of some or all of the intellectual property sublicensed to Chemstar Corp.
The patent prosecution process is expensive and time consuming. We may not be able to prepare, file, and prosecute all necessary or desirable patent applications for a commercially reasonable cost or in a timely manner or in all jurisdictions. It is also possible that we may fail to identify patentable aspects of inventions made in the course of development and commercialization activities before it is too late to obtain patent protection on them. Further, there are other companies pursuing HOCl related technologies. These third parties may file patent applications or disclose concepts relevant to our technology before we are able to file our patent applications, and thus these third party patents and disclosures may constitute prior art against our patents and applications. Moreover, depending on the terms of any future in licenses to which we may become a party, we may not have the right to control the preparation, filing, and prosecution of patent applications, or to maintain or enforce the patents, covering technology in licensed from third parties. Therefore, these patents and patent applications may not be prosecuted and enforced in a manner consistent with the best interests of our business.
In addition to the protection afforded by patents, we rely on trade secret protection and confidentiality agreements to protect proprietary know-how, information, or technology that is not patentable or is difficult to patent, including processes and information relating to our manufacturing and drug development programs for which patents are difficult to enforce or would not provide a competitive advantage in our market. Although we generally require all of our employees to assign their inventions to us, and all of our employees, consultants, advisors, and any third parties who have access to our proprietary know-how, information, or technology to enter into confidentiality agreements, we cannot provide any assurances that all such agreements have been duly executed, or that our trade secrets and other confidential proprietary information will not be disclosed, or that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques. We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security of our premises and physical and electronic security of our information technology systems. While we have confidence in these individuals, organizations and systems, agreements, or security measures may be breached, and we may not have adequate remedies for any breach. Also, if the steps taken to maintain our trade secrets are deemed inadequate, we may have insufficient recourse against third parties for misappropriating the trade secret. In addition, others may independently discover our trade secrets and proprietary information. For example, the FDA is considering whether to make additional information publicly available on a routine basis, including information that we may consider to be trade secrets or other proprietary information, and it is not clear at the present time how the FDA’s disclosure policies may change in the future. Furthermore, we have sold certain of our businesses over the past few years, pursuant to which licenses were granted to the acquirers of such businesses to utilize certain of our intellectual property rights, including rights to produce and market HOCl for particular purposes. We have also out-licensed our intellectual property to certain third parties. If the licensees do not respect the terms of such agreements, including limitations as to the field of use, then we could be adversely affected due to the loss of potential business opportunities outside the scope of those granted to the licensees, or we could be subject to non-contractual disclosure of such information. If we are unable to prevent material disclosure of the non-patented intellectual property related to our technologies to third parties, and there is no guarantee that we will have any such enforceable trade secret protection, we may not be able to establish or maintain a competitive advantage in our market, which could materially adversely affect our business, results of operations and financial condition.

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We may enjoy only limited geographical protection with respect to certain patents and we may not be able to protect our intellectual property rights throughout the world.
Filing and prosecuting patent applications and defending patents covering our product candidates in all countries throughout the world would be prohibitively expensive. While we have filed patent applications in jurisdictions that we believe are important to our business, our patent position in these jurisdiction may not be the same as our position in the United States. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we have patent protection, but enforcement rights are not as strong as those in the United States or Europe. These products may compete with our product candidates, and our future patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.
In addition, we may decide to abandon national and regional patent applications before grant. The examination of each national or regional patent application is an independent proceeding. As a result, patent applications in the same family may issue as patents in some jurisdictions, such as in the United States, but may issue as patents with claims of different scope or may even be refused in other jurisdictions. It is also quite common that depending on the country, the scope of patent protection may vary for the same product candidate or technology.
While we intend to protect our intellectual property rights in our expected significant markets, we cannot ensure that we will be able to initiate or maintain similar efforts in all jurisdictions in which we may wish to market our product candidates. Accordingly, our efforts to protect our intellectual property rights in such countries may be inadequate, which may have an adverse effect on our ability to successfully commercialize our product candidates in all of our expected significant foreign markets. If we encounter difficulties in protecting, or are otherwise precluded from effectively protecting, the intellectual property rights important for our business in such jurisdictions, the value of these rights may be diminished, and we may face additional competition from others in those jurisdictions.
The laws of some jurisdictions do not protect intellectual property rights to the same extent as the laws or rules and regulations in the United States and Europe, and many companies have encountered significant difficulties in protecting and defending such rights in such jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets, and other intellectual property rights, which could make it difficult for us to stop the infringement of our future patents or marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce our patent rights in other jurisdictions, whether or not successful, could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our future patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing as patents, 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.
Some countries also have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In addition, some countries limit the enforceability of patents against government agencies or government contractors. In those countries, the patent owner may have limited remedies, which could materially diminish the value of such patents. If we are forced to grant a license to third parties with respect to any patents relevant to our business, our competitive position may be impaired.
Patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our future patents.
Our ability to obtain patents is highly uncertain because, to date, some legal principles remain

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unresolved, there has not been a consistent policy regarding the breadth or interpretation of claims allowed in patents in the United States and the specific content of patents and patent applications that are necessary to support and interpret patent claims is highly uncertain due to the complex nature of the relevant legal, scientific, and factual issues. Changes in either patent laws or interpretations of patent laws in the United States and other jurisdictions or countries may diminish the value of our intellectual property or narrow the scope of our patent protection.
Depending on actions by the U.S. Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce patents that we have owned or licensed or that we might obtain in the future. An inability to obtain, enforce, and defend patents covering our proprietary technologies would materially and adversely affect our business prospects and financial condition.
Similarly, changes in patent laws and regulations in other countries or jurisdictions or changes in the governmental bodies that enforce them or changes in how the relevant governmental authority enforces patent laws or regulations may weaken our ability to obtain new patents or to enforce patents that we may obtain in the future. Further, the laws of some foreign countries do not protect proprietary rights to the same extent or in the same manner as the laws of the United States. As a result, we may encounter significant problems in protecting and defending our intellectual property both in the United States and abroad. For example, if the issuance to us, in a given country, of a patent covering an invention is not followed by the issuance, in other countries, of patents covering the same invention, or if any judicial interpretation of the validity, enforceability, or scope of the claims, or the written description or enablement, in a patent issued in one country is not similar to the interpretation given to the corresponding patent issued in another country, our ability to protect our intellectual property in those countries may be limited. Changes in either patent laws or in interpretations of patent laws in the United States and other jurisdictions or countries may materially diminish the value of our intellectual property or narrow the scope of our patent protection.
Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by government patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.
Periodic maintenance fees, renewal fees, annuity fees, and various other government fees on patents and / or applications, including certain in-licensed patents, will be due to be paid to the USPTO and various government patent agencies outside of the United States over the lifetime of our patents and / or applications and patent rights we may obtain or apply for in the future. We rely on our outside counsel to coordinate payment of these fees. The USPTO and various non-U.S. government patent agencies require compliance with several procedural, documentary, fee payment, and other similar provisions during the patent application process. We employ reputable law firms and other professionals to help us comply with procedural and formal requirements relating to our patents. In many cases, an inadvertent lapse can be cured by payment of a late fee or by other means in accordance with the applicable rules. There are situations, however, in which non-compliance can result in abandonment or lapse of the patents or patent applications, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, potential competitors might be able to enter the market, and this circumstance could harm our business.
We may be involved in lawsuits to protect or enforce our patents, which could be expensive, time consuming and unsuccessful.
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. If we initiate legal proceedings against a third party to enforce a patent covering one of our product candidates, the defendant could counterclaim that the patent covering our product or product candidate is invalid and / or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity and / or

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unenforceability are common, and there are numerous grounds upon which a third party can assert invalidity or unenforceability of a patent. In an infringement proceeding, a court may decide that a patent of ours is not valid or is 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. Third parties may also raise similar claims before administrative bodies in the United States or abroad, even outside the context of litigation. Such mechanisms include re-examination, post grant review, inter partes review, or IPR, and equivalent proceedings in foreign jurisdictions (e.g., opposition proceedings). Such proceedings could be more expeditious or cost-effective for plaintiffs than a standard court proceeding, and could result in revocation of or amendment to our patents in such a way that they no longer cover our product candidates or similar products of our competitors. 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 we, our patent counsel, and the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity and / or unenforceability, we would lose at least part, and perhaps all, of the patent protection on our product candidates. An adverse result in any litigation or defense proceedings could put one or more of our patents at risk of being invalidated or interpreted narrowly, could put our patent applications at risk of not issuing and could have a material adverse effect on our business.
Interference or derivation proceedings provoked by third parties or brought by us may be necessary to determine the priority of inventions with respect to our patent applications. Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms. Our defense of litigation or interference or derivation proceedings may fail and, even if successful, may result in substantial costs and distract our management and other employees. We may not be able to prevent misappropriation of our intellectual property rights, particularly in countries where the laws may not protect those rights as fully as in the United States.
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. There could also be public announcements of the results of hearings, motions, or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of our ordinary shares and ADSs.
Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which could have a material adverse effect on our business.
As our current and future product candidates progress toward commercialization, the possibility of a patent infringement claim against us increases. There can be no assurance that our current and future product candidates do not infringe other parties’ patents or other proprietary rights, and competitors or other parties may assert that we infringe their proprietary rights in any event. For instance, we are aware of a significant patent estate around HOCl. We may become party to, or threatened with, adversarial proceedings or litigation regarding intellectual property rights with respect to our current and future product candidates, including interference or derivation proceedings before the USPTO. Third parties may assert infringement claims against us based on existing patents or patents that may be granted in the future. There are third parties that hold significant patent estates relating to HOCl. While we do not believe these third party patent estates cover any of our technology, if we are found to infringe a third party’s intellectual property rights, we could be required to obtain a license from such third party to continue commercializing our product candidates. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if a license can be obtained on acceptable terms, the rights may be non-exclusive, which could give our competitors access to the same technology or intellectual property rights licensed to us. If we fail to obtain a required license, we may be unable to effectively market product candidates based on our technology, which could limit our ability to generate revenue or achieve profitability and possibly prevent us from generating revenue sufficient to sustain our operations. Alternatively, we may need to redesign our infringing products, which may be impossible or require substantial time and monetary expenditure. Under certain circumstances, we could be forced,

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including by court orders, to cease commercializing our product candidates. In addition, in any such proceeding or litigation, we could be found liable for substantial monetary damages, potentially including treble damages and attorneys’ fees, if we are found to have willfully infringed. A finding of infringement could prevent us from commercializing our product candidates or force us to cease some of our business operations, which could harm our business. Any claims by third parties that we have misappropriated their confidential information or trade secrets could have a similar negative impact on our business.
The cost to us in defending or initiating any litigation or other proceeding relating to patent or other proprietary rights, even if resolved in our favor, could be substantial, and litigation would divert our management’s attention. Some of our competitors may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could delay our research and development efforts and limit our ability to continue our operations.
We may be subject to claims challenging the inventorship or ownership of our future patents and other intellectual property.
We may also be subject to claims that former employees, collaborators, or other third parties have an ownership interest in our patent applications, our future patents or other intellectual property. We may be subject to ownership disputes in the future arising, for example, from conflicting obligations of consultants or others who are involved in developing our product candidates. Litigation may be necessary to defend against these and other claims challenging inventorship or ownership. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.
Risks Relating to our Nasdaq Listing and our ADSs and Ordinary Shares
The price of ADSs representing our ordinary shares or our ordinary shares may be volatile and may fluctuate due to factors beyond our control.
The trading market for publicly traded clinical stage drug development companies has been highly volatile and is likely to remain highly volatile in the future. The market price of ADSs representing our ordinary shares or our ordinary shares may fluctuate significantly due to a variety of factors, including:
positive or negative results from, or delays in, testing or clinical trials conducted by us or our competitors;
technological innovations or commercial product introductions by us or competitors;
changes in U.S. and international government regulations;
developments concerning proprietary rights, including patents and litigation matters;
public concern relating to the commercial value or safety of our product candidates;
financing events, or our inability to obtain financing, or other corporate transactions;
publication of research reports or comments by securities or industry analysts;
general market conditions in the biopharmaceutical and pharmaceutical industries or in the economy as a whole;
the loss of any of our key scientific or senior management personnel;

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sales of ADSs representing our ordinary shares or our ordinary shares by us, our senior management and board members, or other holders of such securities in the future; or
other events and factors, many of which are beyond our control.
In addition, we cannot assure investors that our ordinary shares will continue to be traded on AIM. If such trading were to cease, certain investors may decide to sell their ordinary shares, which could have an adverse impact on the price of the ordinary shares and the ADSs. For so long as our ordinary shares are traded on AIM and Nasdaq, it is possible that relatively small trades on AIM could disproportionately affect the trading price of our ordinary shares on AIM and of ADSs representing our ordinary shares on Nasdaq due to the current limited trading volume of our ordinary shares on AIM.
These and other market and industry factors may cause the market price and demand for ADSs representing our ordinary shares or our ordinary shares to fluctuate substantially, regardless of our actual operating performance, which may limit or prevent investors from readily selling their ADSs or ordinary shares and may otherwise negatively affect the liquidity of ADSs representing our ordinary shares or our ordinary shares. In addition, the U.S. and U.K. stock markets in general, and the equities of emerging companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. In the past in the United States, when the market price of a security has been volatile, holders of that security have sometimes instituted securities class action litigation against the issuer. If any of the holders of ADSs representing our ordinary shares or our ordinary shares were to bring such a lawsuit against us, we could incur substantial costs defending the lawsuit and the attention of our senior management would be diverted from the operation of our business. Any adverse determination in litigation could also subject us to significant liabilities.
We will incur increased costs as a result of operating as a company with securities listed in the United States in addition to the United Kingdom, and our senior management will be required to devote substantial time to new compliance initiatives and corporate governance practices.
As a company with securities listed in the United States in addition to the United Kingdom, and particularly after we no longer qualify as an emerging growth company, we will incur significant legal, accounting, and other expenses that we did not incur previously. The Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of Nasdaq and other applicable securities rules and regulations impose various requirements on non-U.S. reporting public companies, including the establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our senior management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly.
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, we will be required to furnish a report by our senior management on our internal control over financial reporting beginning with our second annual report to be filed with the U.S. Securities and Exchange Commission, or SEC. However, while we remain an emerging growth company, we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. To prepare for eventual compliance with Section 404, we will need to continue to dedicate internal resources, potentially engage outside consultants and adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented, and implement a continuous reporting and improvement process for internal control over financial reporting. We anticipate that the process to document and evaluate our internal control over financial reporting will be both costly and challenging.

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To date, there has been no public market for ADSs representing our ordinary shares, and an active market may not develop in which investors can resell such ADSs.
To date, there has been no public market for ADSs representing our ordinary shares although our ordinary shares have traded on AIM since 2014 and prior to that on the main market of the London Stock Exchange since 2006. We cannot predict the extent to which an active market for ADSs representing our ordinary shares will develop or be sustained after the listing of such securities on Nasdaq, or how the development of such a market might affect the market price for our ordinary shares on AIM. The price at which ADSs representing our ordinary shares trade on Nasdaq may or may not be correlated with the price at which our ordinary shares trade on AIM.
Fluctuations in the exchange rate between the U.S. dollar and the pound sterling may increase the risk of holding the ADSs.
Our share price is quoted on AIM in pounds sterling, while the ADSs will trade on Nasdaq in U.S. dollars. Fluctuations in the exchange rate between the U.S. dollar and the pound sterling may result in temporary differences between the value of the ADSs and the value of our ordinary shares, which may result in heavy trading by investors seeking to exploit such differences. In addition, as a result of fluctuations in the exchange rate between the U.S. dollar and the pound sterling, the U.S. dollar equivalent of the proceeds that a holder of the ADSs would receive upon the sale in the United Kingdom of any shares withdrawn from the depositary receipts facility, and the U.S. dollar equivalent of any cash dividends paid in pounds sterling on our ordinary shares represented by the ADSs, could also decline.
Future sales, or the possibility of future sales, of a substantial number of ADSs representing our ordinary shares or our ordinary shares could adversely affect the price of such securities.
Future sales of a substantial number of ADSs representing our ordinary shares or our ordinary shares, or the perception that such sales will occur, could cause a decline in the market price of ADSs representing our ordinary shares and our ordinary shares. As of March 31, 2018, we had 116,561,917 ordinary shares issued and outstanding. There were no ADSs representing our ordinary shares outstanding as of such date. All of our ordinary shares are freely tradeable on AIM. Upon the effectiveness of the registration statement of which this prospectus forms a part, holders of our ordinary shares registered hereby are expected to be able to deposit such ordinary shares with the depositary in exchange for ADSs representing such shares at the ratio referred to on the cover page of this prospectus, which ADSs will be freely tradeable.
If holders sell substantial amounts of ADSs or ordinary shares in the respective public markets therefor, or if the market perceives that such sales may occur, the market price of ADSs representing our ordinary shares and our ordinary shares and our ability to raise capital through an issue of equity securities in the future could be adversely affected.
Because we do not anticipate paying any cash dividends on our ordinary shares which underlie our ADSs in the foreseeable future, capital appreciation, if any, will be the sole source of gains on such securities and you may never receive a return on your investment.
Under the laws of England and Wales, a company’s accumulated realized profits must exceed its accumulated realized losses on a non-consolidated basis before dividends can be paid. Therefore, we must have distributable profits before issuing a dividend. We have not paid dividends in the past on our ordinary shares. We intend to retain earnings, if any, for use in our business and do not anticipate paying any cash dividends in the foreseeable future. As a result, capital appreciation, if any, on ADSs representing our ordinary shares or our ordinary shares are expected to be the sole source of gains on such securities for the foreseeable future.
Securities traded on AIM may carry a higher risk than securities traded on certain other exchanges, which may impact the value of your investment.
Our ordinary shares are currently traded on AIM. Investment in equities traded on AIM is sometimes perceived to carry a higher risk than an investment in equities quoted on exchanges with more stringent

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listing requirements, such as the main market for listed securities of the London Stock Exchange. This is because AIM imposes less stringent corporate governance and ongoing reporting requirements than these other exchanges. In addition, AIM requires only half-yearly financial reporting, rather than the quarterly financial reporting required for U.S.-listed companies that are domestic registrants. You should be aware that the value of our ordinary shares may be influenced by many factors, some of which may be specific to us and some of which may affect AIM-quoted companies generally, including the depth and liquidity of the market, our performance, a large or small volume of trading in our ordinary shares, legislative changes, and general economic, political, or regulatory conditions, and that prices may be volatile and subject to significant fluctuations. Therefore, the market price of ADSs representing our ordinary shares and our ordinary shares may not reflect the underlying value of our company.
Holders of ADSs may not have the same voting rights as the holders of our ordinary shares and may not receive voting materials in time to be able to exercise their right to vote.
Except as described in this prospectus, holders of ADSs representing our ordinary shares will not be able to exercise voting rights attaching to the underlying ordinary shares on an individual basis. Holders of ADSs representing our ordinary shares will appoint the depositary or its nominee as their representative to exercise the voting rights attaching to the ordinary shares underlying such ADSs. Holders of ADSs representing our ordinary shares may not receive voting materials in time to instruct the depositary to vote, and it is possible that they, or persons who hold such ADSs through brokers, dealers or other third parties, will not have the opportunity to exercise a right to vote. Furthermore, the depositary may not be liable for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the effect of any such vote. As a result, holders of ADSs representing our ordinary shares may not be able to exercise voting rights and may lack recourse if such ADSs are not voted as requested. In addition, holders of ADSs representing our ordinary shares will not be able to call a shareholders’ meeting.
Holders of ADSs representing our ordinary shares may not receive distributions on our ordinary shares underlying our ADSs or any value for them if it is illegal or impractical to make them available to such holders.
The depositary for ADSs representing our ordinary shares has agreed to pay to holders of such ADSs cash dividends or other distributions that it or the custodian receives on our ordinary shares after deducting its fees and expenses. Holders of ADSs representing our ordinary shares will receive these distributions in proportion to the number of our ordinary shares underlying their ADSs. However, in accordance with the limitations set forth in the deposit agreement, it may be unlawful or impractical for the depositary to make a distribution available to holders of ADSs representing our ordinary shares. We have no obligation to take any other action to permit the distribution of ADSs representing our ordinary shares, ordinary shares themselves, rights or anything else to holders of ADSs representing our ordinary shares. This means that holders of ADSs representing our ordinary shares may not receive any distributions that we make on our ordinary shares or any value from them if it is unlawful or impractical to make such distributions available to holders. These restrictions may negatively impact the trading value of ADSs representing our ordinary shares.
Holders of ADSs may be subject to limitations on transfer of their ADSs.
ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when it deems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer, or register transfers of ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary deems it advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason in accordance with the terms of the deposit agreement.


28



ADSs holders may not be entitled to a jury trial with respect to claims arising under the deposit agreement, which could augur less favorable results to the plaintiff(s) in any such action.
The deposit agreement governing the ADSs representing our ordinary shares provides that holders and beneficial owners of ADSs irrevocably waive the right to a trial by jury in any legal proceeding arising out of or relating to the deposit agreement or the ADSs, including claims under federal securities laws, against us or the depositary to the fullest extent permitted by applicable law. If this jury trial waiver provision is prohibited by applicable law, an action could nevertheless proceed under the terms of the deposit agreement with a jury trial. To our knowledge, the enforceability of a jury trial waiver under the federal securities laws has not been finally adjudicated by a federal court. However, we believe that a jury trial waiver provision is generally enforceable under the laws of the State of New York, which govern the deposit agreement, by a court of the State of New York or a federal court, which have non-exclusive jurisdiction over matters arising under the deposit agreement, applying such law. In determining whether to enforce a jury trial waiver provision, New York courts and federal courts will consider whether the visibility of the jury trial waiver provision within the agreement is sufficiently prominent such that a party has knowingly waived any right to trial by jury. We believe that this is the case with respect to the deposit agreement and the ADSs. In addition, New York courts will not enforce a jury trial waiver provision in order to bar a viable setoff or counterclaim sounding in fraud or one which is based upon a creditor's negligence in failing to liquidate collateral upon a guarantor's demand, or in the case of an intentional tort claim (as opposed to a contract dispute), none of which we believe are applicable in the case of the deposit agreement or the ADSs. No condition, stipulation or provision of the deposit agreement or ADSs serves as a waiver by any holder or beneficial owner of ADSs or by us or the depositary of compliance with any provision of the federal securities laws. If you or any other holder or beneficial owner of ADSs brings a claim against us or the depositary in connection with matters arising under the deposit agreement or the ADSs, you or such other holder or beneficial owner may not be entitled to a jury trial with respect to such claims, which may have the effect of limiting and discouraging lawsuits against us and / or the depositary. If a lawsuit is brought against us and / or the depositary under the deposit agreement, it may be heard only by a judge or justice of the applicable trial court, which would be conducted according to different civil procedures and may augur different results than a trial by jury would have had, including results that could be less favorable to the plaintiff(s) in any such action, depending on, among other things, the nature of the claims, the judge or justice hearing such claims, and the venue of the hearing.
The rights accruing to holders of our ordinary shares may differ from the rights typically accruing to shareholders of a U.S. corporation.
We are incorporated under the law of England and Wales. The rights of holders of ordinary shares are governed by the laws of England and Wales, including the provisions of the U.K. Companies Act 2006, and by our Articles of Association. These rights differ in certain respects from the rights of shareholders in typical U.S. corporations. See the sections entitled “Description of Share Capital and Articles of Association — Differences in Corporate Law” and “Description of Share Capital and Articles of Association — Articles of Association — Other U.K. Law Considerations — City Code on Takeovers and Mergers” in this prospectus for a description of the principal differences between the provisions of the U.K. Companies Act 2006 applicable to us and, for example, the Delaware General Corporation Law relating to shareholders’ rights and protections.
Claims of U.S. civil liabilities may not be enforceable against us.
We are incorporated under the law of England and Wales. Certain of our directors reside outside the United States. As a result, it may not be possible for investors to effect service of process within the United States upon such persons or to enforce judgments obtained in U.S. courts against them or us, including judgments predicated upon the civil liability provisions of the U.S. federal securities laws. The United States and the United Kingdom do not currently have a treaty providing for recognition and enforcement of judgments (other than arbitration awards) in civil and commercial matters. Consequently, a final judgment for payment given by a court in the United States, whether or not predicated solely upon

29



U.S. securities laws, would not automatically be recognized or enforceable in the United Kingdom. In addition, uncertainty exists as to whether English courts would entertain original actions brought in the United Kingdom against us or our directors predicated upon the securities laws of the United States or any state in the United States. Any final and conclusive monetary judgment for a definite sum obtained against us in U.S. courts would be treated by the courts of the United Kingdom as a cause of action in itself and sued upon as a debt at common law so that no retrial of the issues would be necessary, provided that certain requirements are met. Whether these requirements are met in respect of a judgment based upon the civil liability provisions of the U.S. securities laws, including whether the award of monetary damages under such laws would constitute a penalty, is an issue for the court making such decision. If an English court gives judgment for the sum payable under a U.S. judgment, the English judgment will be enforceable by methods generally available for this purpose. These methods generally permit the English court discretion to prescribe the manner of enforcement. As a result, U.S. investors may not be able to enforce against us or our certain of our directors, or certain experts named herein who are residents of the United Kingdom or countries other than the United States, any judgments obtained in U.S. courts in civil and commercial matters, including judgments under the U.S. federal securities laws.
We currently qualify as a foreign private issuer and, as a result, we will not be subject to U.S. proxy rules and will be subject to reporting obligations under the Exchange Act, that, to some extent, are more lenient and less frequent than those of a U.S. domestic public company.
Upon the effectiveness of the registration statement of which this prospectus forms a part, we will report under the Exchange Act, as a non-U.S. company with foreign private issuer status. Because we qualify as a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including (i) the sections of the Exchange Act regulating the solicitation of proxies, consents, or authorizations in respect of a security registered under the Exchange Act; (ii) the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and (iii) the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified information or current reports on Form 8-K, upon the occurrence of specified significant events. In addition, foreign private issuers are not required to file their annual report on Form 20-F until 120 days after the end of each fiscal year, while U.S. domestic issuers that are accelerated filers are required to file their annual report on Form 10-K within 75 days after the end of each fiscal year. Foreign private issuers also are exempt from Regulation Fair Disclosure, aimed at preventing issuers from making selective disclosures of material information. As a result of the above, you may not have the same protections afforded to shareholders of companies that are not foreign private issuers.
As a foreign private issuer and as permitted by the listing requirements of Nasdaq, we may follow U.K. corporate governance rules instead of certain corporate governance requirements of Nasdaq.
As a foreign private issuer, we may follow our home country corporate governance rules instead of certain corporate governance requirements of Nasdaq. For example, we are exempt from Nasdaq regulations that require a listed U.S. company to:
have a majority of the board of directors consist of independent directors as such term is defined by Nasdaq;
promptly disclose any waivers of the code for directors or executive officers that should address certain specified items;
have a nominating committee that is fully independent, as defined by Nasdaq;
solicit proxies and provide proxy statements for all shareholder meetings; and

30



seek shareholder approval for the implementation of certain equity compensation plans and issuances of ordinary shares.
For an overview of our corporate governance principles, including those which comply with certain of the requirements above, see the section entitled “Description of Share Capital and Articles of Association — Articles of Association.”
In accordance with our Nasdaq listing, our Audit Committee is required to comply with the provisions of Section 301 of the Sarbanes-Oxley Act of 2002 and Rule 10A-3 of the Exchange Act, both of which also are applicable to Nasdaq-listed U.S. companies. Because we are a foreign private issuer, however, our Audit Committee is not subject to additional Nasdaq requirements applicable to listed U.S. companies, including an affirmative determination that all members of the Audit Committee are “independent” using more stringent criteria than those applicable to us as a foreign private issuer.
To the extent we determine to follow U.K. corporate governance practices instead of Nasdaq governance requirements, you may not have the same protections afforded to shareholders of companies that are subject to these Nasdaq requirements.
We may lose our foreign private issuer status, which would then require us to comply with the Exchange Act’s domestic reporting regime and Nasdaq’s corporate governance requirements applicable to a domestic issuer, and cause us to incur significant incremental legal, accounting and other expenses.
A significant portion of our shares are owned by U.S. residents and, following the effectiveness of the registration statement of which this prospectus forms a part, an increased number of ordinary shares are expected to be beneficially owned by U.S. residents. Although we currently qualify as a foreign private issuer, in order to maintain this status, either (a) a majority of our ordinary shares, including ordinary shares represented by ADSs, must be either directly or indirectly owned of record by non-residents of the United States or (b)(i) a majority of our executive officers or directors must not be U.S. citizens or residents, (ii) more than 50 percent of our assets must be located outside of the United States and (iii) our business must be administered principally outside of the United States. If we lose our status as a foreign private issuer, we would be required to comply with the Exchange Act reporting and other requirements applicable to U.S. domestic issuers, which are more detailed and extensive than the requirements for foreign private issuers. We would also be required to make changes in our corporate governance practices in accordance with various SEC and Nasdaq rules. The regulatory and compliance costs to us under U.S. securities laws if we are required to comply with the reporting requirements applicable to a U.S. domestic issuer will be significantly higher than the costs that we would incur as a foreign private issuer. As a result, we expect that the loss of foreign private issuer status would increase our legal and financial compliance costs and would make some activities highly time consuming and costly.
We are an “emerging growth company,” and we cannot be certain if the reduced reporting requirements applicable to “emerging growth companies” will make ADSs representing our ordinary shares or our ordinary shares less attractive to investors.
We are an “emerging growth company” as defined in the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404, exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. As an emerging growth company, we are required to report only two years of financial results and selected financial data in this prospectus compared to three and five years, respectively, for comparable data reported by other public companies. We may take advantage of these exemptions until we are no longer an emerging growth company. We could be an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier, including if the aggregate market value of ADSs representing our

31



ordinary shares and our ordinary shares held by non-affiliates exceeds $700 million as of any June 30 (the end of our second fiscal quarter) before that time, in which case we would no longer be an emerging growth company as of the following December 31 (our fiscal year-end). We cannot predict if investors will find ADSs representing our ordinary shares or our ordinary shares less attractive because we may rely on these exemptions. If some investors find such securities less attractive as a result, there may be a less active trading market for ADSs representing our ordinary shares or our ordinary shares and the price of such securities may be more volatile.
If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, shareholders could lose confidence in our financial and other public reporting, which would harm our business and the trading price of ADSs representing our ordinary shares or our ordinary shares.
Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations. In addition, any testing by us conducted in connection with Section 404, or any subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement. Inadequate internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of ADSs representing our ordinary shares or our ordinary shares.
Management will be required to assess the effectiveness of our internal controls annually. However, for as long as we are an “emerging growth company” under the JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal controls over financial reporting pursuant to Section 404. An independent assessment of the effectiveness of our internal controls could detect problems that our management’s assessment might not. Undetected material weaknesses in our internal controls could lead to financial statement restatements requiring us to incur the expense of remediation and could also result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.
If securities or industry analysts do not publish research, or publish inaccurate or unfavorable research, about our business, the price of ADSs representing our ordinary shares or our ordinary shares and the trading volume thereof could decline.
The trading market for ADSs representing our ordinary shares and our ordinary shares will depend in part on the research and reports that securities or industry analysts publish about us or our business. Since we have not undertaken an initial public offering of ADSs representing our ordinary shares in connection with the listing of ADSs on Nasdaq, we do not anticipate that many or any industry analysts in the United States will publish such research and reports in the United States about our ordinary shares or ADSs. If no or too few securities or industry analysts commence or continue coverage on us, the trading price for ADSs representing our ordinary shares and our ordinary shares could be affected. If one or more of the analysts who cover us downgrade such ADSs or ordinary shares or publish inaccurate or unfavorable research about our business, the trading price of ADSs representing our ordinary shares or our ordinary shares would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for ADSs representing our ordinary shares or our ordinary shares could decrease, which might cause the price of such securities and the trading volume thereof to decline.
Changes to tax laws could materially adversely affect our company.
On December 22, 2017 new legislation was signed into law (H.R. 1 "An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018," or the Tax Cuts and Jobs Act) that significantly revised the U.S. Internal Revenue Code of 1986, as amended, or the Code. The Tax Cuts and Jobs Act, among other things, contains significant changes to

32



corporate taxation, including reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%, limitation of the tax deduction for interest expense to 30% of adjusted earnings (except for certain small businesses), implementation of a “base erosion anti-abuse tax” which requires U.S. corporations to make an alternative determination of taxable income without regard to tax deductions for certain payments to affiliates, taxation of certain non-U.S. corporations’ earnings considered to be “global intangible low taxed income,” or GILTI, repeal of the alternative minimum tax, or AMT, for corporations and changes to a taxpayer’s ability to either utilize or refund the AMT credits previously generated, changes to the limitation on deductions for certain executive compensation particularly with respect to the removal of the previously allowed performance based compensation exception, changes in the attribution rules relating to shareholders of certain “controlled foreign corporations,” limitation of the deduction for net operating losses to 80% of current year taxable income and elimination of net operating loss carrybacks, one-time taxation of offshore earnings at reduced rates regardless of whether they are repatriated, elimination of U.S. tax on foreign earnings (subject to certain important exceptions), immediate deductions for certain new investments instead of deductions for depreciation expense over time, and modifying or repealing many business deductions and credits. Notwithstanding the reduction in the U.S. corporate income tax rate, the overall impact of the Tax Cuts and Jobs Act is uncertain and our business and financial condition could be adversely affected. The impact of the Tax Cuts and Jobs Act on holders of our ordinary shares or ADSs representing our ordinary shares is also uncertain and could be adverse. For example, recent changes in U.S. federal income tax law resulting in additional taxes owed by U.S. Holders (as defined below under “Material Income Tax Considerations — Material U.S. Federal Income Tax Considerations for U.S. Holders”) under the new GILTI tax rules or related to “controlled foreign corporations” may discourage U.S. investors from owning or acquiring 10% or greater of our outstanding ordinary shares (directly or in the form of ADSs representing our ordinary shares), which other shareholders may have viewed as beneficial or may otherwise negatively impact the trading price of our ordinary shares or ADSs representing our ordinary shares.
The tax treatment of the company is subject to changes in tax laws, regulations and treaties, or the interpretation thereof, tax policy initiatives and reforms under consideration and the practices of tax authorities in jurisdictions in which we operate, as well as tax policy initiatives and reforms related to the Organisation for Economic Co-Operation and Development’s, or OECD, Base Erosion and Profit Shifting, or BEPS, Project, the European Commission’s state aid investigations and other initiatives. Such changes may include (but are not limited to) the taxation of operating income, investment income, dividends received or (in the specific context of withholding tax) dividends paid.
We are unable to predict what tax reform may be proposed or enacted in the future or what effect such changes would have on our business, but such changes, to the extent they are brought into tax legislation, regulations, policies or practices, could affect our effective tax rates in the future in countries where we have operations and have an adverse effect on our overall tax rate in the future, along with increasing the complexity, burden and cost of tax compliance. We urge our shareholders to consult with their legal and tax advisors with respect to this legislation and the potential tax consequences of investing in or holding our ordinary shares or ADSs representing our ordinary shares.
If we are a passive foreign investment company, or PFIC, for U.S. federal income tax purposes, the consequences to U.S. holders of ADSs representing our ordinary shares or our ordinary shares may be adverse.
Based on our analysis of our income, assets, activities and market capitalization, we believe that we will likely be classified as a "passive foreign investment company," or PFIC, for the taxable year ended December 31, 2017, and we expect to continue to be a PFIC for our current taxable year. Under the Code, a non-U.S. company will be considered a PFIC for any taxable year in which (1) 75% or more of its gross income consists of passive income or (2) 50% or more of the average quarterly value of its assets consists of assets that produce, or are held for the production of, passive income. For purposes of these tests, passive income includes dividends, interest, gains from the sale or exchange of investment property and certain rents and royalties. In addition, for purposes of the above calculations, a non-U.S. corporation that directly or indirectly owns at least 25% by value of the shares of another corporation is

33



treated as if it held its proportionate share of the assets and received directly its proportionate share of the income of such other corporation. If we are a PFIC for any taxable year during which a U.S. Holder (as defined below under “Material Income Tax Considerations — Material U.S. Federal Income Tax Considerations for U.S. Holders”) holds our ordinary shares or ADSs representing our ordinary shares, we will continue to be treated as a PFIC with respect to such U.S. Holder in all succeeding years during which the U.S. Holder owns the ordinary shares or ADSs representing our ordinary shares, regardless of whether we continue to meet the PFIC test described above, unless the U.S. Holder makes a specified election once we cease to be a PFIC. If we are classified as a PFIC for any taxable year during which a U.S. Holder holds our ordinary shares or ADSs representing our ordinary shares, the U.S. Holder may be subject to adverse tax consequences regardless of whether we continue to qualify as a PFIC, including ineligibility for any preferred tax rates on capital gains or on actual or deemed dividends, interest charges on certain taxes treated as deferred, and additional reporting requirements. For further discussion of the PFIC rules and the adverse U.S. federal income tax consequences in the event we are classified as a PFIC, see the section entitled “Material Income Tax Considerations — Material U.S. Federal Income Tax Considerations For U.S. Holders.”
If a United States person is treated as owning at least 10% of our ordinary shares, such holder may be subject to adverse U.S. federal income tax consequences.
If a U.S. Holder is treated as owning, directly, indirectly or constructively, at least 10% of the value or voting power of our ordinary shares (directly or in the form of ADSs representing our ordinary shares), such U.S. Holder may be treated as a “United States shareholder” with respect to each “controlled foreign corporation” in our corporate group, if any. If such group includes one or more U.S. subsidiaries, certain of our non-U.S. subsidiaries could be treated as controlled foreign corporations, regardless of whether we are treated as a controlled foreign corporation. A United States shareholder of a controlled foreign corporation may be required to annually report and include in its U.S. taxable income its pro rata share of “Subpart F income,” “global intangible low-taxed income” and investments in U.S. property by controlled foreign corporations, regardless of whether we make any distributions. An individual that is a United States shareholder with respect to a controlled foreign corporation generally would not be allowed certain tax deductions or foreign tax credits that would be allowed to a United States shareholder that is a U.S. corporation. Failure to comply with these reporting obligations may subject a United States shareholder to significant monetary penalties and may prevent the statute of limitations with respect to such shareholder's U.S. federal income tax return for the year for which reporting was due from starting. We cannot provide any assurances that we will assist our investors in determining whether any of our non-U.S. subsidiaries are treated as a controlled foreign corporation or whether such investor is treated as a United States shareholder with respect to any of such controlled foreign corporations. Further, we cannot provide any assurances that we will furnish to any United States shareholder information that may be necessary to comply with the reporting and tax paying obligations described in this risk factor. U.S. Holders should consult their tax advisors regarding the potential application of these rules to their investment in our ordinary shares or ADSs representing our ordinary shares.

34



SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that involve substantial risks and uncertainties. In some cases, you can identify forward-looking statements by the words “may,” “might,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “objective,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue” and “ongoing,” or the negative of these terms, or other comparable terminology intended to identify statements about the future. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. The forward-looking statements and opinions contained in this prospectus are based upon information available to us as of the date of this prospectus and, while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. Forward-looking statements include statements about:
the development of PR022 and our other product candidates, including statements regarding the timing of initiation, completion and the outcome of clinical studies or trials and related preparatory work, the period during which the results of the trials will become available and our research and development programs;
our ability to obtain and maintain regulatory approval of our product candidates, including PR022, in the indications for which we plan to develop them, and any related restrictions, limitations or warnings in the label of an approved drug or therapy;
our plans to research, develop, manufacture and commercialize our product candidates;
the timing of our regulatory filings for our product candidates;
the size and growth potential of the markets for our product candidates;
our ability to raise additional capital;
our commercialization, marketing and manufacturing capabilities and strategy;
our expectations regarding our ability to obtain and maintain intellectual property protection;
our ability to attract and retain qualified employees and key personnel;
our ability to contract with third party suppliers and manufacturers and their ability to perform adequately;
our estimates regarding future revenue, expenses and needs for additional financing;
our belief that our existing cash, cash equivalents and marketable securities as of December 31, 2017 will be sufficient to fund our operating expenses and capital expenditure requirements for at least the twelve months following the date of issuance of the financial statements included in this prospectus; and
regulatory developments in the United States, European Union and other jurisdictions.
You should refer to the section entitled “Risk Factors” for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this

35



prospectus will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. You should read this prospectus and the documents that we reference in this prospectus and have filed as exhibits to the registration statement, of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

36



USE OF PROCEEDS
We will not receive proceeds from the disposition, if any, of Registered Shares in the form of ADSs by Registered Holders.

37



DIVIDEND POLICY
We have never declared or paid a dividend, and we do not anticipate declaring or paying dividends in the foreseeable future. We intend to retain all available funds and any future earnings to fund the development and expansion of our business. Under the laws of England and Wales, among other things, we may only pay dividends if we have sufficient distributable reserves (on a non-consolidated basis), which are our accumulated realized profits that have not been previously distributed or capitalized less our accumulated realized losses, so far as such losses have not been previously written off in a reduction or reorganization of capital. There are provisions under the laws of England and Wales that could provide us with the ability to pay a dividend upon completion of recapitalization. However, we do not anticipate utilizing such provisions.

38



PRICE RANGE OF OUR ORDINARY SHARES
Our ordinary shares have been trading on AIM under the symbol “RLM” since December 23, 2014. The following table presents, for the periods indicated, the reported high and low sale prices, including intra-day sales, of our ordinary shares on AIM in pounds sterling and U.S. dollars. For the convenience of the reader, we have translated pound sterling amounts in the table below into U.S. dollars at the rate of £1.00 to $1.3258, which was the noon buying rate of the Federal Reserve Bank of New York on June 22, 2018. On July 2, 2018, the last reported sale price of our ordinary shares on AIM was £0.39 per ordinary share, or $0.51 per ordinary share based on the exchange rate set forth above.
 
Price Per
Ordinary Share
(£)
 
Price Per
Ordinary Share
($)
 
High
 
Low
 
High
 
Low
Year Ended December 31:
 
 
 
 
 
 
 
2014 (beginning December 23)
£
0.33

 
£
0.32

 
$
0.44

 
$
0.42

2015
0.39

 
0.17

 
0.52

 
0.22

2016
0.31

 
0.19

 
0.42

 
0.25

2017
0.45

 
0.27

 
0.60

 
0.36

Quarterly:
 
 
 
 
 
 
 
First Quarter 2016
0.29

 
0.20

 
0.38

 
0.26

Second Quarter 2016
0.26

 
0.20

 
0.34

 
0.27

Third Quarter 2016
0.31

 
0.19

 
0.41

 
0.25

Fourth Quarter 2016
0.31

 
0.25

 
0.42

 
0.33

First Quarter 2017
0.37

 
0.29

 
0.49

 
0.39

Second Quarter 2017
0.33

 
0.30

 
0.43

 
0.39

Third Quarter 2017
0.33

 
0.27

 
0.43

 
0.36

Fourth Quarter 2017
0.45

 
0.30

 
0.60

 
0.40

First Quarter 2018
0.49

 
0.33

 
0.65

 
0.44

Second Quarter 2018
0.40

 
0.33

 
0.53

 
0.44

Third Quarter 2018 (through July 2, 2018)
0.39

 
0.39

 
0.52

 
0.51

Most Recent Six Months:
 
 
 
 
 
 
 
January 1, 2018
0.43

 
0.37

 
0.57

 
0.49

February 1, 2018
0.49

 
0.42

 
0.65

 
0.56

March 1, 2018
0.48

 
0.33

 
0.64

 
0.44

April 2018
0.35

 
0.33

 
0.46

 
0.44

May 2018
0.40

 
0.33

 
0.53

 
0.44

June 2018
0.40

 
0.37

 
0.52

 
0.49

July 2018 (through July 2, 2018)
0.39

 
0.39

 
0.51

 
0.51


39



SELECTED CONSOLIDATED FINANCIAL DATA
This section should be read together with our consolidated financial statements and accompanying notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing elsewhere in this prospectus. We derived the selected consolidated statements of operations data for the years ended December 31, 2016 and 2017 and the consolidated balance sheet data as of December 31, 2016 and 2017 from our audited consolidated financial statements included elsewhere in this prospectus. Our audited consolidated financial statements included in this prospectus have been prepared in accordance with U.S. GAAP as issued by the FASB. Our historical results are not necessarily indicative of the results that may be expected in the future.
 
Years Ended December 31,
(in thousands except share and per share data)
2016
 
2017
Consolidated statement of operations data:
 
 
 
Revenues
$
867

 
$
1,121

Cost of revenues
121

 

 
746

 
1,121

Operating expenses:
 
 
 
Research and development
4,805

 
8,189

General and administrative
3,248

 
3,622

 
8,053

 
11,811

Loss from operations
(7,307
)
 
(10,690
)
Interest income
3

 
58

Loss from continuing operations before income taxes
(7,304
)
 
(10,632
)
Income tax benefit
2,230

 
108

Net loss from continuing operations
(5,074
)
 
(10,524
)
Net income from discontinued operations, net of tax expense
5,156

 

Net income (loss)
$
82

 
$
(10,524
)
 
 
 
 
Net income (loss) per ordinary share - basic and diluted:
 
 
 
Loss from continuing operations
$
(0.10
)
 
$
(0.16
)
Income from discontinued operations
0.10

 

Net income (loss) per ordinary share
$
0.00

 
$
(0.16
)
 
 
 
 
Weighted average ordinary shares - basic and diluted
50,139,121

 
65,081,903

 
As of December 31,
(in thousands)
2016
 
2017
Consolidated balance sheet data:
 
 
 
Cash, cash equivalents and marketable securities
$
21,430

 
$
33,853

Working capital
18,587

 
31,631

Total liabilities
3,198

 
2,911

Total shareholders’ equity
19,049

 
32,197


40



MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes thereto and other financial information included elsewhere in this prospectus. Some of the information contained in this discussion and analysis or set forth elsewhere in this prospectus, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should review the ‘‘Risk Factors’’ section of this prospectus for a discussion of important factors that could cause our actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Overview
We are a clinical-stage biopharmaceutical company focused on developing novel therapeutics for immune-mediated diseases in adults and children. We are using our proprietary immunomodulatory platform technology — a high concentration, stabilized formulation of hypochlorous acid, or HOCl — to develop prescription, topical drugs for the treatment of Atopic Dermatitis, or AD, and other dermatological indications, including Acne Vulgaris, or common Acne, Psoriasis and certain additional indications. Our lead product candidate, PR022, is a non-alcohol based topical gel containing the active ingredient HOCl for the treatment of AD that is in a Phase 2 clinical trial, from which we expect to report top-line data in the third quarter of 2018. Our platform technology, as demonstrated by pre-clinical studies, has the ability to modulate key cytokines that are implicated in multiple dermatological conditions. Cytokines are small protein molecules that aid cell communication in immune responses. This modulation leads us to believe that our platform technology may have broad-spectrum immunomodulatory properties that impact both the innate and adaptive immune system. We are also evaluating, for acquisition or in-licensing, other novel therapeutics for the treatment of immune-mediated diseases with significant unmet medical needs.
HOCl is an anti-microbial molecule produced naturally in the body as part of the oxidative burst innate immune response to infectious microbial agents. We believe that HOCl formulations developed with our proprietary technology have the potential to be first in class immunomodulatory treatments due to their high concentration, stabilized formulation and high purity and their safety profile versus alternative treatments for the indications that we are currently investigating. Our proprietary technology includes a specialized method for manufacturing high purity HOCl, which results in high concentration formulations that are stabilized within specific pH ranges for certain periods of time. Our technology incorporates significant know-how as four members our research and development team are leading experts in HOCl technology, having an average of 21 years of experience working with HOCl. We also possess patents granted to us in the United States for composition of matter for the stabilized formulation of HOCl, methods of use and methods of manufacturing, as well as other international patent protection and in-licenses of certain other HOCl technology applications related to the manufacturing process.
In October 2016, we sold our Supermarket Retail business, as it was no longer relevant to our strategic focus and have classified the related results of operations and cash flows as discontinued operations. Unless indicated otherwise, the information within this discussion and analysis of financial condition and results of operations relate to our continuing operations.
We entered into, and subsequently amended, a licensing arrangement with an independent distributor to manufacture, market and distribute Vashe, as a 510(k)-cleared medical device, for use in cleansing and debriding acute and chronic wounds. Pursuant to the terms of the agreement, we assigned all right and title of the Vashe trademark and the distributor retains sole responsibility and liability in connection with the manufacturing, marketing and distribution of Vashe. We receive royalties that are tiered and based upon net sales. We are entitled to receive minimum royalties of approximately $900,000 per each contract year, based upon annual net sales thresholds through March 2021.

41



In addition, in 2016 we earned revenues for various products and services that we no longer offer after 2016.
Historically, we have incurred net losses and expect to continue to incur significant losses for the foreseeable future. As a development-stage biopharmaceutical company, we expect to continue to incur significant expenses, increasing operating losses and negative cash flow for the foreseeable future. We anticipate that our expenses will increase significantly in connection with our ongoing activities as we:
continue the ongoing and planned clinical development of PR022 and RLM023;
initiate pre-clinical studies (including toxicology) and clinical trials for any future product candidates that we may pursue;
build a portfolio of product candidates through the potential acquisition or in-license of products or product candidates and technologies;
develop, maintain, expand and protect our intellectual property portfolio;
manufacture, or have manufactured, clinical and ultimately commercial supplies of our product candidates;
seek marketing approvals for our current and future product candidates that successfully complete clinical trials;
establish a sales, marketing and distribution infrastructure to commercialize any product candidate for which we may obtain marketing approval;
hire additional administrative, clinical, regulatory and scientific personnel; and
incur additional costs associated with operating as a dually listed public company in the United States and the United Kingdom following the effectiveness of the registration statement of which this prospectus forms a part.
At December 31, 2017, we had cash, cash equivalents and marketable securities of $33.9 million, working capital of $31.6 million, and an accumulated deficit of $189.8 million. We have not generated any product revenues in relation to our drug development business and have not achieved profitable operations. There is no assurance that profitable operations will ever be achieved, and, if achieved, could be sustained on a continuing basis. In addition, development activities, clinical and pre-clinical testing, and commercialization of our products will require significant additional capital.
In March 2018, we announced that in a Phase 2 clinical trial for Allergic Conjunctivitis, or AC, an ophthalmic disease, our product candidate PR013, a topical solution, did not demonstrate efficacy.  As a result, we are no longer pursing the clinical development of PR013 and other than the costs of completing the trial in 2018 and closing out the program, we do not intend to make any additional investments in this program.
Financial Operations Overview
Revenues
We earn royalty income related to our license and distribution agreement for Vashe. We receive royalty payments from our distributor within 30 days after the end of each quarter. As such, the royalty revenues reported are based upon actual royalty revenues earned, including contract minimums.

42



Cost of Revenues
Cost of revenues represent the manufacturing costs in connection with the products and services that we no longer offer after 2016.
Research and Development Expenses
We are organized and record expenses by functional department and our employees spend time on all of our development projects. Additionally, due to the platform nature of our technology, some of the efforts and expenses are attributable across multiple projects or candidates. Where practical, we capture candidate specific expenses. We our research and development expenses by category and by product candidate, as shown below (in thousands).
 
Years Ended December 31,
 
2016
 
2017
PR022
$
1,945

 
$
1,864

RLM023

 
315

PR013
584

 
2,915

Other research and development
442

 
702

Personnel related including share-based compensation
1,834

 
2,393

Total research and development expenses
$
4,805

 
$
8,189

Research and development expense consists primarily of costs incurred in connection with the development of our product candidates. We expense research and development costs as incurred. These expenses include:
expenses incurred under agreements with contract research organizations, or CROs, contract manufacturing organizations, or CMOs, laboratories who perform toxicology and analytical work, as well as investigative sites and consultants that conduct our clinical and pre-clinical studies and other scientific development services;
manufacturing scale-up expenses and the cost of acquiring, manufacturing and labeling pre-clinical study and clinical trial materials;
employee-related expenses, including salaries and related costs, travel and share-based compensation expense for employees engaged in research and development and quality assurance functions;
costs related to compliance with regulatory requirements; and
facilities costs, depreciation and other expenses, which include rent and utilities.
We recognize external development costs based on an evaluation of the progress to completion of specific tasks using information provided to us by our service providers.
General and Administrative Expenses
General and administrative expenses consist principally of salaries and related costs for personnel in executive, administrative, and finance functions, including share-based compensation, travel expenses and recruiting expenses. Other general and administrative expenses include facility related costs, patent filing, maintenance and prosecution costs and professional fees for legal, auditing, tax and business development services, and insurance costs. Additionally, general and administrative expenses include the cost of maintaining a listing on AIM, a market operated by the London Stock Exchange in the United

43



Kingdom, which includes directors compensation and travel, including share-based compensation, insurance and other professional fees such as legal, accounting, tax and other advisory services.
We anticipate that our general and administrative expenses will increase as a result of increased payroll, expanded infrastructure and higher consulting, legal, auditing and tax-related services associated with maintaining compliance with Nasdaq listing and U.S. Securities and Exchange Commission, or SEC, requirements, accounting and investor relations costs, and director and officer insurance premiums associated with being a public company in the United States and dually listed in the United Kingdom. We also anticipate that our general and administrative expenses will increase in support of our clinical trials as we expand and progress our development programs and seek to expand our patent protections. Additionally, if and when we believe a regulatory approval of PR022, RLM023 or another product candidate appears likely, we anticipate an increase in payroll and expense as a result of our preparation for commercial operations, particularly as it relates to the sales and marketing of our products.
Interest Income
Interest income consists of interest earned on our cash and cash equivalents held with banks and our marketable securities.
Income Taxes
We have not recorded any income tax benefits for the net losses we have incurred due to the uncertainty of realizing a benefit from those losses. Our tax benefit during 2017 represents the realization of U.S. alternative minimum tax credits that are refundable under the Tax Cuts and Jobs Act that was enacted in December 2017. Our tax benefit recognized in 2016 corresponds with an offsetting tax expense resulting from the gain on sale of the discontinued operations.
Income from Discontinued Operations
Income from discontinued operations represent our Supermarket Retail business that was sold in October 2016. Income from discontinued operations is presented net of related income taxes.

44



Consolidated Results of Operations
Comparison of Years Ended December 31, 2016 and 2017
The following table sets forth our results of operations for the years ended December 31, 2016 and 2017:
 
Years Ended December 31,
 
 
(in thousands)
2016
 
2017
 
Change
Revenues
$
867

 
$
1,121

 
$
254

Cost of revenues
121

 

 
(121
)
 
746

 
1,121

 
375

Operating expenses:
 
 
 
 
 
Research and development
4,805

 
8,189

 
3,384

General and administrative
3,248

 
3,622

 
374

 
8,053

 
11,811

 
3,758

Loss from operations
(7,307
)
 
(10,690
)
 
(3,383
)
Interest income
3

 
58

 
55

Loss from continuing operations before income taxes
(7,304
)
 
(10,632
)
 
(3,328
)
Income tax benefit
2,230

 
108

 
(2,122
)
Net loss from continuing operations
(5,074
)
 
(10,524
)
 
(5,450
)
Net income from discontinued operations, net of tax
5,156

 

 
(5,156
)
Net income (loss)
$
82

 
$
(10,524
)
 
$
(10,606
)
Revenues
Revenues increased by $0.3 million, or 29%, from $0.9 million for the year ended December 31, 2016 to $1.1 million for the year ended December 31, 2017. The increase was primarily attributable to an increase in Steadmed Medical’s net sales of Vashe and the corresponding royalty payments due to us under our license and distribution agreement, including minimums. These increases were offset by a decrease in revenues upon the cessation of other products and services in 2016.
Cost of Revenues
Cost of revenues decreased as we are no longer offered for sale in 2017 the products and services that we offered for sale in 2016.
Research and Development Expenses
Research and development expenses increased by $3.4 million, or 70%, from $4.8 million for the year ended December 31, 2016 to $8.2 million for the year ended December 31, 2017. The increase was primarily due to net increases of $2.6 million in our pre-clinical and clinical development cost, toxicology studies and regulatory support of as we filed two INDs and thereafter initiated Phase 2 clinical trials for PR022 and PR013 during 2017. As announced in March 2018, we are no longer pursuing the clinical development of PR013. We also had increases in consulting and compensation costs of $0.3 million as a result of our increase in consultants and headcount to support our clinical development efforts and a $0.2 million increase in share-based compensation as we issued additional share options in 2017. We also had increases in facility and related costs of $0.3 million, primarily due to the increase of usage of facilities for the purpose of research and development activities.
General and Administrative Expenses
General and administrative expenses increased $0.4 million or 12%, from $3.2 million for the year ended December 31, 2016 to $3.6 million for the year ended December 31, 2017. The increase was due

45



primarily to the fact that $1.0 million of costs, primarily associated with headcount and related, were allocated to the discontinued operations (Supermarket Retail business) in 2016 with none being allocated in 2017. There was an overall decline of $0.3 million in headcount and related cost in connection with a reduction in staff following the sale of the Supermarket business. There was a $0.1 million increase in share-based compensation and related benefits as we issued additional share options in 2017. We also had an increase in professional fees including legal and patent costs of $0.3 million. These increases were offset by decreases in our facility and related expenses of $0.6 million, primarily due to a move to a smaller facility to focus on research and development activities.
Interest Income
Interest income increased from $3,000 for the year ended December 31, 2016 to $58,000 for the year ended December 31, 2017 as a result of earnings from our cash proceeds from the private placement in October 2017.
Income Taxes
Our tax benefit of $2.2 million recognized in 2016 corresponds with an offsetting tax expense of $2.2 million resulting from the gain on sale of the discontinued operations. Our tax benefit of $0.1 million during 2017 represents the realization of U.S. alternative minimum tax credits that are refundable under the Tax Cuts and Jobs Act that was enacted in December 2017.
Income from Discontinued Operations
We had income from discontinued operations of $7.4 million, before tax impact, and $5.2 million, net of tax, during the year ended December 31, 2016 related to our Supermarket Retail business that was sold in October 2016.
Liquidity and Capital Resources
We have incurred net losses and negative cash flows from operations and expect to continue to incur significant losses for the foreseeable future. Our only source of revenue, since the sale of the Supermarket Retail business in October 2016, is the royalty revenue generated from our marketing agreement for Vashe. We are increasing our investments in research and development and general and administrative expenses in support of our drug development plans. We incurred net losses from continuing operations of $5.1 million and $10.5 million and negative cash flows from continuing operations of $6.7 million and $9.5 million for the years ended December 31, 2016 and 2017, respectively. As of December 31, 2017, we have an accumulated deficit of $189.8 million. We believe that our existing cash, cash equivalents and marketable securities of $33.9 million as of December 31, 2017 will be sufficient to meet our capital requirements and fund our operations for at least twelve months from the date of issuance of the financial statements included in this prospectus.
We will need to raise substantial additional capital to fund our planned future operations, commence and continue clinical trials, receive approval for and commercialize PR022 and RLM023 and advance our business strategy. Please see the section entitled “Cash Flows — Funding Requirements.”
Cash Flows
The following table shows a summary of our cash flows from continuing operations for the periods indicated (in thousands):
 
Year Ended December 31,
 
2016
 
2017
Net cash used in operating activities
$
(6,689
)
 
$
(9,503
)
Net cash used in investing activities
(74
)
 
(24,527
)
Net cash provided by financing activities
7

 
23,225


46



Net Cash Used in Operating Activities
During the year ended December 31, 2016, net cash used in operating activities was $6.7 million and was primarily attributable to our $5.1 million net loss, noncash charges of $1.8 million that was offset by the net change in our operating assets and liabilities of $0.2 million. Noncash charges were primarily related to our income tax benefit offset by depreciation and amortization expense and share-based compensation expense. The change in our operating assets and liabilities was primarily attributable to the increase in accounts payable and accrued expenses due to the timing of when we paid annual bonuses as well as the increase in consulting and professional services.
During the year ended December 31, 2017, net cash used in operating activities was $9.5 million and was primarily attributable to our $10.5 million net loss that was offset by noncash charges of $0.5 million and changes in our operating assets and liabilities $0.5 million.
Net Cash Used in Investing Activities
During the year ended December 31, 2017, net cash used in investing activities was $24.5 million and primarily attributable to the purchase of marketable securities and property and equipment of $29.3 million and $0.2 million, respectively. These decreases in cash were offset by $5.0 in cash proceeds received upon the maturity of our marketable securities.
Net Cash Provided by Financing Activities
During the year ended December 31, 2017, we received gross proceeds of £19.3 million and net cash proceeds of $23.2 million (at an exchange rate of 1.3169, which was the exchange rate in effect on the date of receipt of proceeds) upon completion of a private placement of our ordinary shares and related warrants in October 2017.
Sources of Capital
Private Placement
In October 2017, we completed a private placement and issued 66,396,485 ordinary shares and warrants to purchase 26,558,600 ordinary shares and received $23.2 million in net proceeds. Each warrant carries an exercise price per ordinary share of 58 pence ($0.78 at an exchange rate of 1.3517 as of December 31, 2017) and a term of 2.5 years.
Royalty Revenues
Under our license and distribution agreement with Steadmed for our Vashe product, we receive quarterly royalty payments based on Steadmed’s monthly net sales and contractual minimums.
Funding Requirements
We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the research and development of, continue or initiate clinical trials of, and seek marketing approval for, our product candidates. We have no products approved for sale and there is no assurance that we will obtain future approvals or, if we do, that we will be able to generate revenues or achieve profitable operations. In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to sales, marketing, manufacturing and distribution to the extent that such sales, marketing and distribution are not the responsibility of potential collaborators. Furthermore, following the completion of this registration, we expect to incur additional costs associated with operating as a dually listed public company in the United States and the United Kingdom. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts.

47



We expect that our cash, cash equivalents and marketable securities as of December 31, 2017 will enable us to fund our planned operating expenses and capital expenditure requirements for at least twelve months from the date of the issuance of the financial statements included in this prospectus. We estimate direct costs to complete the current Phase 2 trial of PR022 in Atopic Dermatitis in 2018 will be approximately $4.0 million. Our future capital requirements will depend on many factors, including:
the scope, progress, results and costs of product discovery, pre-clinical studies and clinical trials;
the scope, prioritization and number of our research and development programs;
the costs, timing and outcome of regulatory review of our product candidates;
our ability to establish and maintain potential collaborations on favorable terms, if at all;
the ability of our potential collaboration partners to exercise options to extend research and development programs;
the extent to which we are obligated to reimburse, or entitled to reimbursement of, clinical trial costs under collaboration agreements, if any;
the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;
the extent to which we acquire or in-license other product candidates, technologies or products;
the costs of securing manufacturing arrangements for pre-clinical, clinical and commercial production; and
the costs of establishing or contracting for sales and marketing capabilities if we obtain regulatory approvals to market our product candidates.
Identifying potential product candidates and conducting pre-clinical studies and clinical trials is a time consuming, expensive and uncertain process that takes many years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of product candidates that we do not expect to be commercially available for many years, if at all. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives.
Adequate additional financing may not be available to us on acceptable terms, or at all. Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, investor ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect investor rights as a common stockholder. Debt 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.
If we raise funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant

48



rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Contractual Obligations and Commitments
The following table summarizes our contractual obligations at December 31, 2017:
(in thousands)
Payments Due by Period
 
Total
 
Less Than
1 Year
 
1 to 3
Years
 
3 to 5
Years
 
More Than 5 Years
Operating leases(1)
$
1,260

 
$
173

 
$
337

 
$
338

 
$
412

Total(2)
$
1,260

 
$
173

 
$
337

 
$
338

 
$
412

__________________
(1)
Reflects obligations related to our office and equipment leases in Malvern, Pennsylvania.
(2)
This table does not include contracts that are entered into in the ordinary course of business that are not material in the aggregate in any period presented above and payments under agreements with contract research organizations as such payments are contingent upon services being provided.
Off‑Balance Sheet Arrangements
We did not have arrangements during the periods presented, and we do not currently have, any off‑balance sheet arrangements, as defined in the rules and regulations of the SEC.
Critical Accounting Policies
Our consolidated financial statements in the registration statement of which prospectus forms a part are prepared in accordance with generally accepted accounting principles in the United States, or U.S. GAAP. The preparation of our consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reported period. We base our estimates on historical experience, known trends and events and various other factors that we believe to be 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. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions and conditions.
We define our critical accounting policies as those accounting principles that require us to make subjective estimates and judgments about matters that are uncertain and are likely to have a material impact on our financial condition and results of operations, as well as the specific manner in which we apply those principles. While our significant accounting policies are described in more detail in the notes to our consolidated financial statements appearing elsewhere in this prospectus, we believe that the following accounting policies are those most critical to the preparation of our consolidated financial statements.
Research and Development
Research and development expense consists primarily of costs incurred in connection with the development of our product candidates. We expense research and development costs as incurred. At the end of each reporting period, we compare payments made to third party service providers to the estimated progress toward completion of the applicable research or development objectives. Such estimates are subject to change as additional information becomes available. Depending on the timing of payments to the service providers and the progress that we estimate has been made as a result of the service provided, we may record net prepaid or accrued expense relating to these costs. As of December 31, 2017, we have not made any material adjustments to our prior estimates of accrued research and development expenses.

49



Recent Accounting Pronouncements
See Note 3 to our consolidated financial statements beginning on page F-8 of the registration statement of which this prospectus forms a part for a description of recent accounting pronouncements applicable to our consolidated financial statements.
Qualitative and Quantitative Disclosures About Market Risk
Our consolidated financial statements are prepared using the U.S. dollar which is the functional currency of our primary operating subsidiary. The functional currency of our parent company is the pound sterling which is translated into the U.S. dollar for assets and liabilities at the exchange rate at the balance sheet dates and revenue and expenses are translated at the average exchange rates during the reporting period. Translation adjustments are not included in determining net income (loss) but are included in foreign exchange adjustment to accumulated other comprehensive income (loss), a component of shareholders’ equity.
We do not currently engage in currency hedging activities in order to reduce our currency exposure, but we may begin to do so in the future. Instruments that may be used to hedge future risks may include foreign currency forward and swap contracts. These instruments may be used to selectively manage risks, but there can be no assurance that we will be fully protected against material foreign currency fluctuations.
JOBS Act
On April 5, 2012, the Jumpstart Our Business Startups Act, or the JOBS Act, was enacted. The JOBS Act provides that, among other things, an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. As an emerging growth company, we have irrevocably elected not to take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards and, as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth public companies.
In addition, we intend to rely on the other exemptions and reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, we are entitled to rely on certain exemptions as an “emerging growth company,” we are not required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b), (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) 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 (auditor discussion and analysis), and (iv) disclose certain executive compensation-related items such as the correlation between executive compensation and performance and comparisons of the chief executive officer’s compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of this registration or until we no longer meet the requirements of being an emerging growth company, whichever is earlier.
Change of Independent Auditors
On February 2, 2018, Grant Thornton UK LLP, or Grant Thornton, resigned as our independent auditors as we intended to engage new auditors in connection with the listing to which the registration statement of which this prospectus forms a part. Grant Thornton did not audit our consolidated financial statements for any period subsequent to the year ended December 31, 2016.
For the year ended December 31, 2016, no report by Grant Thornton on our consolidated financial statements contained an adverse opinion or a disclaimer of opinion, or was qualified or modified as to uncertainty, audit scope or accounting principles.

50



During the year ended December 31, 2016, and the subsequent period through February 2, 2018, (1) there were no disagreements (as that term is used in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) between us and Grant Thornton on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Grant Thornton, would have caused Grant Thornton to make reference thereto in its report upon on our audited consolidated financial statements for the year ended December 31, 2016, and (2) there were no “reportable events” as such term is defined in Item 304(a)(1)(v) of Regulation S-K.
Newly Appointed Independent Registered Public Accounting Firm
On February 8, 2018, our board of directors completed an audit retender process and appointed KPMG LLP, or KPMG, as our independent registered public accounting firm to audit our consolidated financial statements prepared in accordance with U.S. GAAP for the years ended December 31, 2016 and 2017.
During the years ended December 31, 2016 and 2017, and the subsequent period preceding our engagement of KPMG as our independent registered public accounting firm, we did not consult with KPMG, on matters that involved the application of accounting principles to a specified transaction, the type of audit opinion that might be rendered on our consolidated financial statements or any other matter that was either the subject of a disagreement or reportable event.

51



BUSINESS
Overview
We are a clinical-stage biopharmaceutical company focused on developing novel therapeutics for immune-mediated diseases in adults and children. We are using our proprietary immunomodulatory platform technology — a high concentration, stabilized formulation of hypochlorous acid, or HOCl — to develop prescription, topical drugs for the treatment of Atopic Dermatitis, or AD, and other dermatological indications, including Acne Vulgaris, or common Acne, Psoriasis and certain additional indications. Our lead product candidate, PR022, is a non-alcohol based topical gel containing the active ingredient HOCl for the treatment of AD that is in a Phase 2 clinical trial, from which we expect to report top-line data in the third quarter of 2018. Our platform technology, as demonstrated by pre-clinical studies, has the ability to modulate key cytokines that are implicated in multiple dermatological conditions. Cytokines are small protein molecules that aid cell communication in immune responses. This modulation leads us to believe that our platform technology may have broad-spectrum immunomodulatory properties that impact both the innate and adaptive immune system. We are also evaluating, for acquisition or in-licensing, other novel therapeutics for the treatment of immune-mediated diseases with significant unmet medical needs.
Immunity is the equilibrium between immune activation and suppression that permits the body to function in a normal and healthy way. Cytokines, including interleukins, or ILs, provide the signaling pathways that orchestrate the complex immune responses of the body. Immune dysregulation occurs when the body fails to activate or inactivate the immune system appropriately. We believe that cytokines may represent an important frontier in medicine. There are many ways in which immunomodulatory drugs can ameliorate a dysregulated immune response by impacting cytokines. Specifically, cytokines are being investigated in the fields of inflammation and immunology, including diseases such as AD, for the purpose of identifying those to be targeted in the development of drugs.
We believe that HOCl formulations developed with our proprietary technology have the potential to be first in class immunomodulatory treatments. HOCl is known as an anti-microbial molecule that is produced naturally in the body as part of the oxidative burst process, an innate immune response to infectious microbial agents. We have demonstrated that HOCl at higher concentrations acts as an immunomodulatory agent, capable of downregulating many key cytokines associated with inflammation and disease. Our proprietary technology includes a specialized method for manufacturing high purity HOCl, which yields high concentration formulations that are stabilized for certain periods of time within specific pH ranges. We have ongoing development efforts to enhance the period of time over which HOCl is stabilized in a certain concentration. We possess significant know-how based in part on the four members of our research and development team who are experts in HOCl technology, with an average of 21 years of experience working with HOCl. We possess patents granted to us in the United States for composition of matter for the stabilized formulation of HOCl, methods of use and methods of manufacturing, as well as international patent protection and in-licensed HOCl technology related to our manufacturing process.
Our lead product candidate, PR022, is a non-alcohol based topical gel containing the active ingredient HOCl that offers a differentiated mechanism of action for the treatment of AD. PR022 is a topical IL-4/IL-13 inhibitor. AD affects an estimated 20 million people in the United States, including up to 20% of children and up to 3% of adults. Analysts estimate that this market will grow to approximately $5 billion, excluding steroids, in the United States by 2022 driven by recent market approvals of Eucrisa, Pfizer’s topical PDE-4 inhibitor for mild to moderate AD, and Dupixent, an injectable IL-4, IL-13 inhibitor for moderate to severe AD. We expect these products will comprise a large portion of the market at the time that our product is anticipated to be approved (if it is in fact approved), and therefore we view the prospective launch of PR022 as taking market share from these products at that point in time (if PR022 is approved for marketing). Symptoms of AD can include rashes; dry, scaly, red skin; open, crusty and weepy sores, which can become infected; and severe and persistent pruritus, which is commonly known as itch. The current standard of care, when emollients and moisturizers no longer adequately control AD,

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is the use of topical steroids or injectable monoclonal antibodies for more severe cases. Steroids are known to have potentially harmful side effects. Additionally, we believe that our product candidate, which is formulated for topical application, may provide a more convenient solution than injectables. PR022 is currently in a Phase 2 clinical trial, from which we expect to report top-line data in the third quarter of 2018.
PR022’s clinical development is supported by pre-clinical studies that have shown downregulation of key cytokines associated with multiple dermatological conditions and that supported initiation of human drug clinical trials. In pre-clinical studies of PR022 in mouse models of AD, various high concentrations of HOCl have demonstrated the ability to both prevent and treat inflammatory lesions and reduce associated scratching bouts, similar to the effect of betamethasone, a high potency steroid. Importantly, the mice treated with HOCl topical gel did not demonstrate the same level of skin thinning or weight-loss, which are common immunosuppressive side effects of steroids. In-vitro pre-clinical studies have shown that HOCl results in a dose-dependent decrease of IL-8 and TSLP pro-inflammatory cytokine levels in keratinocytes cells and TNF-α and IL-12 pro-inflammatory cytokine levels in dendritic cells.
We previously marketed an FDA-cleared 510(k) medical device product called Aurstat, which was manufactured at 0.045% HOCl. Aurstat is indicated for the management of itch, pain and burning experienced with AD and other dermatoses. Aurstat has a similar formulation to PR022. Clinical data published by an investigator found that approximately 73.7% of subjects with mild to moderate AD treated with Aurstat experienced reduced pruritis on Day 1 and through the full treatment period of the three-day study as compared to 30.0% of the subjects in the untreated group. Approximately 20,000 prescriptions were written for Aurstat while it was marketed by a third party in the United States. We decided to remove Aurstat from the market to develop HOCl as an FDA approved prescription drug. Based on this and other supporting pre-clinical data, we believe that PR022 may have utility for the treatment of AD generally, and pruritus specifically. Unlike an FDA-cleared 510(k) medical device that demonstrates substantial equivalence to a marketed device, an FDA approved prescription drug passes through a more rigorous application process in a New Drug Application. From a business perspective, we believe that the potential safety and efficacy claims that we may be able to make regarding a prescription drug upon approval by the FDA (if and when obtained) versus a 510(k) medical device would allow for better acceptance and use by physicians, improved marketability to patients and potentially greater insurance reimbursements from third party payors.
The second indication we are pursuing is Acne Vulgaris, or common Acne. We plan to initiate a clinical study in Acne in the first quarter of 2019, using a topical formulation based on our proprietary platform technology, following submission of an investigational new drug, or IND, application in the fourth quarter of 2018. Acne is the most common chronic skin condition in the United States, affecting approximately 45 million people, or 14% of the population, and is characterized by the formation of lesions on the face and neck but also extending to other parts of the body. Analysts value the prescription market for Acne at close to $4 billion in the United States in 2017, with continued growth expected. We are developing a new product candidate, RLM023, a topical formulation of HOCl that is optimized for Acne. We believe that a formulation based upon our proprietary HOCl technology may offer a promising treatment for Acne due to HOCl’s anti-inflammatory and anti-microbial properties. Pre-clinical in vivo and in vitro studies using our HOCl formulation have demonstrated a reduction in the expression of pro-inflammatory cytokines such as TNF-α, IL 1β, IL-8 and IL-12, which have been reported to be key cytokines associated with Acne pathogenesis.
We may use the PR022 formulation for the initial proof of concept study in Acne to expedite entry into the clinic. See the section entitled “—RLM023 for the Treatment of Acne” for more information.
In addition, we are evaluating the use of our platform technology for the treatment of Psoriasis, a common skin disorder characterized by the formation of inflamed, raised plaques that shed scales derived from excessive growth of skin epithelial cells. Psoriasis is the largest indication in dermatology with, according to analyst estimates, approximately $6 billion in sales in the United States in 2017, which

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can largely be attributed to biologics. Research has identified key cellular and molecular pathways of inflammation that contribute to disease pathogenesis of Psoriasis.  Formulations of our proprietary platform technology have been shown in vitro and in vivo to downmodulate pro-inflammatory cytokines TNF-α, IL-6, and IL-12, which have been reported at elevated levels in patients with Psoriasis and correlated to disease severity. Our ongoing in vitro pre-clinical studies and research coupled with the results of our AD study will inform the next steps in our development of a potential treatment of Psoriasis.
AD, Acne, Psoriasis and other dermatological conditions have been increasingly recognized as serious diseases, many of which are associated with chronic pruritus, which has a significant impact on quality of life including severe sleep disturbance for numerous patients. As demonstrated in the study of Aurstat in AD, as well as our in vivo and in vitro pre-clinical studies, our platform technology has the potential to deliver anti-pruritic, or itch reduction, effects.
We have a highly experienced and well-regarded management team that has gained significant industry know-how through experience at leading biopharmaceutical companies, including GSK, Johnson & Johnson, Novartis and Intercept. Additionally, our Chief Medical Officer is an immunologist with significant experience in studying immune-mediating diseases in various therapeutic areas (including oncology and hematological diseases) and has advanced several drug candidates from pre-clinical development through approval and commercialization.
Recent Developments
In March 2018, we announced that in a Phase 2 clinical trial for Allergic Conjunctivitis, or AC, an ophthalmic disease, PR013, a topical solution containing HOCl as its active ingredient, did not demonstrate efficacy.  As a result, we are no longer pursuing the clinical development of PR013. AC and AD have different disease pathologies. AC is caused by an allergen-induced rapid inflammatory response in which allergens interact. In contrast, AD is a complex inflammatory cutaneous disorder characterized by immune-mediated inflammation and epidermal barrier dysfunction. The design of our Phase 2 clinical trials for AC and AD were also materially different. In the AC trial, the response to the drug was measured at multiple points, all within 20 minutes of treatment, and in the AD trial, the response is measured after 28 days.
Our Pipeline
Our current pipeline of product candidates is summarized in the following chart:
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Our Strategy
Our corporate strategy is to develop and commercialize innovative and differentiated product candidates. We are initially focused on developing and commercializing product candidates based on our proprietary technology, currently in dermatological indications and subsequently in other immune-mediated diseases, and we are also seeking to in-license or acquire novel therapeutics to complement our pipeline. The key components of our strategy to achieve this goal are to:
Complete clinical development and obtain regulatory approval for our product candidate, PR022, for the treatment of AD. We are initially focused on the clinical development, regulatory approval and potential commercialization of PR022 for the treatment of AD, which is currently in a Phase 2 clinical trial with an expected top-line readout in the third quarter of 2018. Pending our evaluation of the results of such trial, we intend to pursue a Phase 2b clinical trial, including evaluating the safety and efficacy of PR022 for adolescents with AD.
Expand our product candidate pipeline based on our proprietary platform technology. We believe that our proprietary platform technology based on high concentrations of HOCl may have broad application in several dermatological indications given its immunomodulatory, anti-inflammatory, anti-pruritic and anti-microbial properties. In the near term, we are focused on developing RLM023, a topical formulation developed for the treatment of Acne, for which we expect to submit an IND in the fourth quarter of 2018 to enter a proof-of-concept study in the first quarter 2019. We are currently evaluating the ability of our topical formulations to treat Psoriasis.
We are also exploring additional indications for our platform technology in dermatology, including Prurigo Nodularis, Epidermolysis Bullosa and Bullous Pemphigoid. Additionally, we are considering potential applications of our proprietary platform technology in non-dermatological immune-mediated diseases, which may include Asthma, Chronic Obstructive Pulmonary Disease, Rheumatoid Arthritis, Multiple Sclerosis, Type I Diabetes, Lupus, Crohn’s and Inflammatory Bowel Disease. We have not yet conducted any research and development and have no product candidates in the pipeline for these additional indications at present.
Acquire additional immunomodulatory assets to complement our portfolio. We intend to build a diversified, multi-asset pipeline of immunomodulatory therapies with a strong focus on patient populations with unmet medical needs. We are evaluating, for acquisition or in-licensing, a range of therapeutics for the treatment of immune-mediated diseases. We are looking to leverage our knowledge and experience, particularly in immunology, to identify assets that complement our existing pipeline.
Build a specialty sales organization to commercialize and market new products in the United States, if and when approved, and explore partnerships with global pharmaceutical companies to maximize the value of our product candidates outside the United States. If approved by the FDA, we ultimately intend to commercialize our dermatological products by developing our own sales organization to target dermatologists, high prescribing pediatricians, primary care physicians and other practitioners for certain dermatological conditions. Alternatively, we may consider contracting with a third party sales organization in certain circumstances. We are also exploring the licensing of commercialization rights or other forms of collaboration agreements with experienced pharmaceutical companies to commercialize our product candidates in certain key markets outside of the United States, including Japan and emerging markets.
Our Proprietary Platform Technology
Our product candidates contain high concentrations of HOCl based on our proprietary technology. We have received composition of matter patents associated with our stabilizing formulations, as well as method of use patents which cover concentrations of HOCl at which we have observed

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immunomodulatory effects. Specifically, in pre-clinical studies, PR022, a topical IL-4/IL-13 inhibitor, had immunomodulatory effects. Our technology incorporates significant know-how as four people on our research and development team are leading experts in HOCl technology having an average of 21 years of experience working with HOCl. We also possess patents granted to us in the United States for composition of matter for the stabilized formulation of HOCl, methods of use and methods of manufacturing, as well as other international patent protection and in-licenses of certain other HOCl technology applications related to the manufacturing process.
The form of chlorine changes from Cl2 to HOCl to OCL- depending on the pH of its environment. HOCl is the form in which chlorine mainly exists within a certain pH range.  As depicted in the figure below, at a higher pH, available free chlorine, or AFC, exists increasingly in the form of hypochlorite ion, or OCl-.  At a lower pH, AFC exists increasingly in the form of molecular chlorine, or Cl2. Between a pH of 4.0 to 6.5, AFC is present predominantly in the form of HOCl. Our proprietary technology has allowed us to develop formulations of HOCl that endeavor to maintain the pH of HOCl within this specific pH range for certain periods of time. Our HOCl products are manufactured using a proprietary manufacturing process designed to produce formulations that deliver the highest level of pure HOCl.  Additionally, through our manufacturing process, we are producing HOCl at a high saturation level at ambient temperature that permits an increased amount of chlorine to be maintained in solution and a low residual salinity level, which are critical to control the stability of HOCl.
Our patented gel formulations of HOCl, manufactured under specified conditions, endeavor to maintain HOCl to be stabilized within a particular pH range for certain periods of time. There are a number of factors that influence the stability duration of chlorine, one of which is concentration. With an increasing concentration of chlorine, it becomes increasingly difficult to maintain HOCl within a specified pH range. Our manufacturing processes allow us to produce formulations which have lower degradation products and minimal elemental impurities, which results in a more stable product. In order to develop our patented stabilizing process and agents, we evaluated many formulations of gels and emulsions with HOCl as the active ingredient to determine excipient compatibility. HOCl is especially sensitive to most organic excipients used for topical drug formulations. We have ongoing development efforts to enhance the period of time over which HOCl is stabilized. Our proprietary buffering technology is able to produce HOCl formulations within a defined pH range where it is pure HOCl with little or no OCl- or Cl2.

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Effect of pH on HOCl
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Source: Realm Report (NovaChem Laboratories, Inc.)
Immune System and Immune Modulation
The body protects itself against infection through the immune system, which identifies and weakens or destroys pathogens or infectious agents, such as viruses, bacteria, fungi and other parasites. Immunity is the equilibrium between immune activation and suppression that permits the body to function in a normal and healthy way. An immune system that does not respond aggressively enough can be fatal. However, responses that are too aggressive or that are triggered by substances that are not true threats are responsible for an increasing disease burden, inducing common diseases such as AD. Accordingly, there are varieties of ways in which medical intervention can modulate a dysregulated immune response.
The immune system works through two broad phases of protection. In the innate phase, the immune system mounts a broad defense that can work against a wide range of attackers, while beginning to identify specifically what it is attacking. The innate immune system consists of non-specific cells and molecules that constantly surveil and react quickly once the presence of any antigen is detected. Cells of the innate immune system act as a physical barrier to invasion by foreign organisms, inactivate pathogens directly, recruit other immune cells through the production of cytokines and activate the adaptive immune response through antigen presentation. Then the immune system enters the adaptive immunity phase in which it targets the specific attacker and protects the body against the attacker more effectively both during the remainder of the attack and in the future.
All immune cells, including those participating in the innate and adaptive immune response, have evolved to express distinct cell surface receptors and secrete cell signaling molecules that respond to environmental cues. Immune cells consistently monitor the dynamic environmental stimuli through their unique receptors to recognize specific changes. Lymphocytes are the principal active components of the adaptive immune system responsible for engulfing and destroying identified antigens. Once an antigen is presented by a dendritic cell, the adaptive immune system responds by activating specific cellular immunity in the form of T-cells and B-cells, and by releasing cytokines and chemokines. Cytokines are small cell-signaling protein molecules secreted by numerous cells and used extensively in intercellular communication. They provide the signaling pathways that orchestrate the complex immune responses of the body.

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Keratinocytes are the predominant cell type in the epidermis, the outermost layer of the skin. Upon activation, keratinocytes express a plethora of cytokines, chemokines (a class of cytokines) and accessory molecules, which can transmit both positive and negative signals to cells of innate and adaptive immunity. Abnormal expression of inflammatory mediators or their receptors in keratinocytes are relevant to the pathogenesis of chronic inflammatory skin diseases such as AD, Psoriasis and Acne.
Dendritic cells are antigen-presenting cells of the immune system. Their main function is to process antigen material and present it on the cell surface to the T-cells of the immune system. Dendritic cells act as messengers between the innate and the adaptive immune systems. Dendritic cells have been shown to play a key role in patients with chronic inflammatory skin diseases, such as AD, Psoriasis and Acne.
Cytokines, such as ILs, affect nearly every biological process, including disease pathogenesis, non-specific response to infections and specific response to antigens. Cytokines have become an important frontier in medicine and hold a vital place as diagnostic, prognostic and therapeutic agents in human disease. Although cytokines are studied today in nearly every biological discipline, cytokine-mediated effects dominate the fields of inflammation and immunology. Some chronic diseases appear to be driven by auto-inflammatory pathways whereas others have classic characteristics of auto-immune mechanisms. The understanding of immune activation has led us to better evaluate the impact of our immunomodulatory agent on relevant cytokine-mediated pathways of AD and other dermatological conditions.
PR022 for the Treatment of Atopic Dermatitis
PR022 is a proprietary, non-alcohol based, topical gel containing the active ingredient HOCl, offering a novel mechanism of action for the treatment of AD. AD is a chronic, relapsing, inflammatory disease characterized by itchy, inflamed skin, which poses a significant burden on patients’ quality of life and on the overall health care system and which is most commonly first diagnosed in childhood. Patients with AD have impaired function of their skin barrier, which, combined with skin damage as a result of the intense itching and scratching associated with the disease, puts them at risk for secondary infections due to colonization with pathogenic bacteria, particularly Staphylococcus aureus, and changes in the skin microbiome. AD is characterized by immune dysregulation. PR022 is a topical IL-4/IL-13 inhibitor that is currently in a Phase 2 clinical trial comparing 0.05% and 0.1% concentrations against the vehicle control gel, which is the product candidate excluding the API.
AD affects an estimated 20 million people in the United States, including up to 20% of children and up to 3% of adults, and prevalence continues to increase. Of those afflicted with AD in the United States, an estimated 37% of those are diagnosed with the disease, and of those diagnosed, an estimated 45% to 50% are actively being treated by a physician. Creams and ointments (including topical corticosteroids) or systemic agents (for more severe cases) are routinely used to treat patients with AD. The U.S. market for AD treatments, excluding steroids, is estimated by analysts to grow to $5 billion by 2022 driven by recent market approvals of Eucrisa, Pfizer’s topical PDE-4 inhibitor for mild to moderate AD, and Dupixent, an injectable IL-4, IL-13 inhibitor for moderate to severe AD. We expect these products will comprise a large portion of the market at the time that our product is anticipated to be approved (if it is in fact approved), and therefore we view the prospective launch of PR022 as taking market share from these products at that point in time (if PR022 is approved for marketing).
Limitations of Current Treatment Options
Current topical treatment options for AD have known safety drawbacks. Adverse effects include skin thinning, folliculitis, contact dermatitis and telangiectasia, which is commonly known as “spider veins”. Long-term use of topical corticosteroids on large body surface areas may lead to adrenal suppression. The increased use of steroid treatments has led to an increase of serious local and systemic side effects. In pediatric patients, a large proportion of AD sufferers, there is the chance for enhanced capacity for absorption and therefore side effects. Low acceptance of steroid treatment among parents of children is well known. Calcineurin inhibitors carry a boxed warning for a possible link to cancer and are therefore

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limited in use. Systemic therapies such as antihistamines are used as adjunct therapies to help control pruritus with limited efficacy, antibiotics are sometimes used short term to manage infection, but carry concerns of resistance, and oral corticosteroids or immunosuppressants carry associated side effects and toxicities. In addition, injectable treatments for AD are both inconvenient and costly.
Ongoing Phase 2 Clinical Trial
Our IND for PR022 for AD was submitted to the FDA and took effect in 2017. In December of 2017, the first subject was dosed in our Phase 2 clinical trial of PR022, which is being conducted in the United States. This trial is a randomized, double-blind, vehicle-controlled, multicenter, parallel-group trial to assess the safety and efficacy of PR022 topical gel for the treatment of adults with mild-to-moderate AD with a total affected body surface area, or BSA, of 5% to 20%. Approximately 120 patients from approximately 18 study sites are being randomized 1:1:1 to receive PR022 Topical Gel 0.05% HOCl, PR022 Topical Gel 0.1% HOCl, or vehicle control gel. The primary endpoint measures the percentage change from baseline to Day 29 using the Eczema Area and Severity Index, or EASI. The percentage of subjects who achieve success in Investigator’s Global Assessment, or IGA, scale is also being evaluated. Additionally, secondary endpoints assess pruritus and quality of life on a variety of scales. Pruritus is being measured throughout the study using a variety of tools such as the numeric rating scale, or NRS, and the 5-D itch questionnaire. The secondary endpoints measure the percent change from basline in the numeric rating scale, or NRS; change in the 5 dimensions of itch scale, or 5-D itch, questionnaire; and shifts in the dermatology life quality index, or DLQUI, scores. Top-line data is expected to be reported in the third quarter of 2018. Pending our evaluation of the results of the trial, we intend to pursue a Phase 2b clinical trial, including evaluating the safety and efficacy of PR022 for adolescents with AD.
Pre-clinical Study Results
The NC/Nga mouse model has been widely used for evaluating new therapeutic options of AD as lesions can be induced with a relevant allergen and the phenotype resembles human AD. We conducted pre-clinical preventative and therapeutic treatment studies evaluating the efficacy of PR022 topical gel in the NC/Nga mouse model.
The mice were sensitized with house dust mite allergen, or HDM, and treated topically with PR022 both preventively and therapeutically twice daily against established lesions. In the prevention model, topical application of PR022 delayed the onset of lesions and reduced the severity of lesions. In the treatment model, topical application of PR022 reduced lesions comparable to a potent topical corticosteroid. Additionally, the prevention model demonstrated fewer itching bouts in the mice treated with PR022 compared to vehicle control gel. The reduced skin thinning and absence of weight loss observed in the PR022 treatment group indicates that PR022 does not exhibit the undesired effects often induced by steroids. PR022 reduced levels of cytokines shown to be increased in patients with AD (IL-4, IL-13, TARC) and cytokines described to play a major role in the mediation of pruritis (IL-31, TSLP). Additionally, PR022 reduced the presence of T-cells in the inflammatory lesions and reduced serum Immunoglobulin E, or IgE.
Lesion Formation in Prevention Model
In the prevention model, to determine the efficacy of PR022, NC/Nga mice were treated twice weekly with HDM to induce lesions similar to human AD.  Concurrently, vehicle control gel or PR022 was applied. Mice were rated for the presence or absence of skin dryness, skin eruptions, skin edema, and wounding, each on a scale of 0 to 4, where 0 = no symptoms, 1 = mild symptoms, 2 = moderate symptoms, 3 = severe symptoms, and 4 = extreme symptoms. As shown in Figure 1, in the vehicle control gel group, lesion scores gradually increased starting 24 days after the initial HDM application. Topical application of PR022 delayed the onset of lesions and reduced the severity of lesions compared to the vehicle control gel group over 12-weeks. The p-values are shown below the figure. P-value is a conventional statistical method for measuring the statistical significance of clinical results. A p-value of 0.05 or less represents statistical significance, meaning that there is a less than 1-in-20 likelihood that the observed results occurred by chance. 

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Figure 1     Clinical Lesion Score After Concurrent Treatment With PR022 or Vehicle Control Gel
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* = p < 0.05 and ** = p < 0.01.
Pruritis Effect in Prevention Model
Pruritus is one of the most persistent symptoms of AD, with a high impact on quality of life. The majority of AD therapies available today focus on restoring skin barrier properties, but do not effectively manage pruritus. Therefore, a treatment that reduces both lesion formation and pruritus would be considered optimal.
As shown in Figure 2, scratching behavior, which is known to be indicative of pruritus, increased throughout the study in the vehicle control gel group, while scratching behavior was significantly reduced by topical administration of PR022.
Figure 2     Changes in Scratching Behavior During Treatment With PR022 or Vehicle Control Gel
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* = p < 0.05 and ** = p < 0.01.
Treatment of Established Lesions in Therapeutic Model
Our subsequent treatment study focused on the therapeutic effect of PR022 to reduce established

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lesions.  
In this model, to determine the efficacy of PR022 as compared to a high potency steroid and vehicle control gel, mice were treated twice weekly with HDM until they developed at least moderate lesions. Starting at day 22, the mice were treated with PR022, the high potency steroid, betamethasone or vehicle control gel. The lesions on the mice were rated for the presence or absence of skin dryness, skin eruptions, skin edema, and wounding, each on a scale of 0 to 4, where 0 = no symptoms, 1 = mild symptoms, 2 = moderate symptoms, 3 = severe symptoms, and 4 = extreme symptoms. As shown in Figure 3, there was a steady decrease in lesion severity in the PR022 treatment group as well as in the steroid group.
Figure 3     Comparison of Lesion Severity Scores After Treatment With PR022, Betamethasone or Vehicle Control Gel
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* = p < 0.05 and ** = p < 0.01.
Effects on Ear Thickness in Therapeutic Model
Sensitization with HDM results in inflammation which is a quantitative measurement of allergic response. Mice were sensitized with HDM on their ears and significant ear swelling was noted by day 22 when the treatment began.  As shown in Figure 4, ear thickness was significantly reduced in the PR022 and betamethasone treated ears.

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Figure 4     Comparison of Ear Thickness Scores After Treatment With PR022, Betamethasone or Vehicle Control Gel
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* = p < 0.05 and ** = p < 0.01.
Effects on Body Weight and Skin Thinning in Therapeutic Model
Two of the undesired effects of topical steroid treatment are weight loss and skin thinning. In the therapeutic model, as shown in Figures 5a and 5b, no significant change in body weight was observed in mice treated with PR022, whereas a significant decrease in body weight was observed in the betamethasone treated mice. Significantly greater skin thinning was observed in the betamethasone treated mice compared to the mice treated with PR022.
Figure 5a     Comparison of Body Weight After Treatment With PR022, Betamethasone or Vehicle Control Gel
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* = p < 0.05 and ** = p < 0.01.

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Figure 5b     Comparison of Skin Thickness After Treatment With PR022, Betamethasone or Vehicle Control Gel
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* = p < 0.05 and ** = p < 0.01.
Effects on Cytokine Levels in Therapeutic Model
Elevated levels of pro-inflammatory cytokines, observed in patients with AD, result in a coordinated immune response. To characterize this immune response, the levels of cytokines in the back skin of the mice were measured. As shown in Figure 6, levels of all cytokines tested: IL-4, IL-13, IL 1β, IL-6, TNF-α, TARC, IL-31 and TSLP were significantly reduced by treatment with PR022 and betamethasone.
Figure 6     Cytokine Concentration in Back Skin After Treatment With PR022, Betamethasone or Vehicle Control Gel
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http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12341139&doc=24http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12341139&doc=25http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12341139&doc=29
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* = p < 0.05 and ** = p < 0.01.
Effects on Dendritic Cells in Therapeutic Model
Dendritic cells act as an important component between the innate and adaptive immune system. Cytokines activate dendritic cells whose primary function is to present antigen material to immature T-cells and B-cells leading to their activation. As shown in Figure 7, PR022 and betamethasone significantly reduced the number of activated dendritic cells present in auricular lymph nodes.

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Figure 7      Dendritic Cell Counts After Treatment With PR022, Betamethasone or Vehicle Control Gel
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* = p < 0.05 and ** = p < 0.01.
Effects on T-Cells and B-Cells in Therapeutic Model
Current thinking is that T-cells and B-cells are involved in the pathophysiology of AD. T-cells are mainly activated by dendritic cells and other antigen presenting cells. T-cells release cytokines and chemokines in response to activation. One subgroup of T-cells is referred to as Naïve CD4+ T-cells, which mature into several types of T-cells (Th1, Th2, Th17, Treg) depending on the cytokines present. Another subgroup of T-cells is referred to as CD4+ T-helper cells, which activate other immune cells generally through the production of cytokines. Another type of lymphocyte is referred to as B-cells, which secrete antibodies.
As shown in Figure 8, both PR022 and betamethasone treated groups displayed significantly lower counts for each type of T-cell. As shown in Figure 9, both PR022 and betamethasone treated groups also displayed significantly lower counts for each type of B-cell.

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Figure 8     T-Cell Counts After Treatment With PR022, Betamethasone or Vehicle Control Gel
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* = p < 0.05 and ** = p < 0.01.
Figure 9     B-Cell Counts After Treatment With PR022, Betamethasone or Vehicle Control Gel
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* = p < 0.05 and ** = p < 0.01.
Effects on Serum IgE levels
High serum levels of IgE indicate that there has been an adaptive immune response to repeat exposure to HDMs. As shown in Figure 10 treatment with PR022 and betamethasone significantly reduced the levels of IgE in serum.

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Figure 10     Serum IgE Levels After Treatment With PR022, Betamethasone or Vehicle Control Gel
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* = p < 0.05 and ** = p < 0.01.
In-vitro Study Results of Effect of Hypochlorous Acid on Cytokine Production in Keratinocytes and Dendritic cells
Studies were performed to evaluate the effect of HOCl on cytokines produced by murine keratinocytes and dendritic cells. Activated cells were pre-incubated with three different concentrations of HOCl (0.00075%, 0.0015% and 0.003%) or vehicle control. As shown in Figure 11, treatment with HOCl produced a dose-dependent decrease of IL-8 and TSLP cytokine levels in keratinocytes and as shown in Figure 12, treatment with HOCl produced a dose-dependent decrease of IL-12 and TNF-α cytokines secretion in dendritic cells.
Figure 11    In-vitro Cytokine Levels in Keratinocyte Cells Treated with HOCl or Vehicle Control
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12341139&doc=26 http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12341139&doc=31
* = p < 0.05 and ** = p < 0.01.

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Figure 12    In-vitro Cytokine Levels in Dendritic Cells Treated with HOCl or Vehicle Control
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12341139&doc=27 http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12341139&doc=30
* = p < 0.05 and ** = p < 0.01.
Aurstat Licensing History
In 2013, our HOCl based hydrogel was cleared by the FDA as a medical device for the management and relief of pain, burning and itching experienced with various dermatoses, including AD, allergic contact dermatitis and radiation dermatitis. That same year, we out-licensed this hydrogel to Onset Dermatologics, which launched the product under the tradename Aurstat Anti-Itch Hydrogel. In 2014, Onset Dermatologics, then part of Precision Dermatology, was acquired by Valeant Pharmaceuticals, and we exercised our right to terminate the out-licensing agreement. We subsequently withdrew the product from the market in order to evaluate the potential opportunity to develop an HOCl based topical formulation into a drug, which we now refer to as PR022. While Aurstat and PR022 are similar in formulation, we developed PR022 gel with improved properties, including a higher concentration of HOCl, enhanced physical and chemical stability, more consistent viscosity and an improved manufacturing process which yields higher purity.
Aurstat Initial Clinical Data
In 2013, Dr. Brian Berman initiated a clinical study, sponsored by Onset Dermatologics, which demonstrated that Aurstat manufactured at 0.045% HOCl had a significant effect on pruritis at Day 1 and Day 3 of treatment when applied twice daily or as needed, indicating both rapid onset and sustained anti-pruritic effects. Dr. Berman conducted a blinded, randomized (2:1) study evaluating the effects of Aurstat compared to an untreated control on the pruritis of 30 subjects with mild to moderate AD. Pruritis and tolerability were assessed at baseline through the third day using the VAS scale, which measures pruritis, and investigator and subject assessment of tolerability. Dr. Berman observed that treatment with Aurstat reduced pruritus in subjects with mild to moderate AD as early as the initial day of treatment and lasting through the final day of study treatment. As shown in Figure 13, the group treated with Aurstat experienced significantly reduced itch compared to the untreated group. At Day 3, 73.7% of subjects treated with Aurstat experienced reduced itch (p=0.009) while 70% of subjects in the untreated control group had worse itch. Treatment with Aurstat at least twice daily was well-tolerated by the patient population, and there were no serious adverse events and no treatment-related discontinuations reported in the study.

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Figure 13     Itch Response of Patients Treated with Aurstat or Untreated at Day 3
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12341139&doc=23
Source: Berman et al. ‘Evaluation of an Anti-Itch Hydrogel Containing 0.045% Hypochlorous Acid (HOCl) versus Untreated Control in the Treatment of Atopic Dermatitis Associated Pruritus’ Presented at the 2013 Fall Clinical Dermatology Conference, Las Vegas, NV.
RLM023 for the Treatment of Acne
Acne Vulgaris, which is common Acne, is the most common chronic skin condition. The disease can range from mild to severe cystic acne and is associated with significant physical and psychosocial effects on quality of life, including permanent scarring, depression and anxiety. The two main factors involved in the development of Acne are clogged pores and / or the presence of bacteria, leading to irritation, lesions and inflammation. Studies have demonstrated a central role of inflammation in the development of Acne lesions and have opened new opportunities for therapeutic intervention that target inflammation.  Acne affects approximately 45 million people, or 14% of the population, in the United States. Analysts valued the prescription market for Acne at close to $5 billion in the United States for 2017, including retinoids such as Epiduo and Absorica and antibiotics such as Solodyn and Aczone, with continued growth expected.
Current Limitations of Acne Treatments
Current topical treatment options for Acne have known safety drawbacks. Antibiotics and antibacterials are used to manage infection associated with Acne, but long term use is not indicated due to concerns of resistance. Retinoids, often considered the mainstay therapy, can cause dryness, erythema, irritation photosensitivity and carry a Category C pregnancy risk requiring women of child bearing age to use birth control or other measures to protect against pregnancy. Oral contraceptives are also sometimes used to manage acne, but carry cardiovascular risks and are contraindicated in pediatric and male patients. Recent product introductions in Acne have been combinations of approved antibiotics / antibacterials and retinoids, and therefore carry the compounded risks described above. There have been no new clinically meaningful therapies approved to treat Acne in over a decade.

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We believe that an HOCl based formulation may offer a promising treatment for Acne due to HOCl’s anti-inflammatory and anti-microbial properties. In in vitro and in vivo pre-clinical studies, our HOCl formulation demonstrated a reduction in the expression of pro-inflammatory cytokines such as TNF-α, IL 1β, IL-8 and IL-12 (see Figures 6, 11 and 12), which have been reported to be key cytokines associated with Acne pathogenesis.
In the fourth quarter of 2018, we expect to file an IND for a new product candidate, RLM023, a topical formulation of HOCl that is optimized for Acne. This IND is intended to support entry into a Phase 2 clinical trial for the treatment of Acne. We may use the PR022 formulation for the initial proof of concept study in Acne to expedite entry into the clinic. We anticipate initiating this Phase 2 clinical study in the first quarter of 2019, contingent upon clearance by the FDA. The proposed trial design provides for a double-blind, randomized, vehicle-controlled, parallel-group study of the topical gel in adult subjects with moderate to severe facial Acne.
If we use the PR022 formulation in the initial Acne proof of concept trial, we believe that we will be able to file an amendment to our existing IND for PR022 for Atopic Dermatitis, which could result in a quicker submission to the FDA and potentially an earlier allowance by the FDA to proceed into the clinical study. Additionally, we have an established process for manufacturing PR022 formulations and thus we would save time and money in entering clinical studies in Acne if we use this same formulation. Among the changes we are considering in developing RLM023 for Acne are using different concentrations of the API or adding or modifying certain excipients in the formulation. These formulation changes may not require additional toxicology studies or may require a bridging or a full toxicology program in order to permit their use in further clinical studies. Additionally, depending upon the extent of formulation changes made, if any, we may need to perform an additional proof of concept study for Acne. Therefore, using PR022 in the proof of concept study and using a different formulation in later clinical studies could provide benefits but also carries risks and therefore we are considering our plans on an on-going basis.
PR022 for the Treatment of Psoriasis
Psoriasis is a common chronic autoimmune disorder of the skin characterized by focal formation of inflamed, raised plaques that constantly shed scales derived from excessive growth of skin epithelial cells. Research has identified key cellular and molecular pathways of inflammation that contribute to the pathogenesis of Psoriasis. Approximately 12 million people in the United States suffer from Psoriasis, of whom an estimated 7.5 million have been diagnosed with the skin disease, and an estimated 50% to 60% are actively being treated for the disease.  Psoriasis is the largest indication in dermatology, which per analysts estimates, it generated approximately $6 billion in sales in the United States in 2017, which can largely be attributed to biologics.
Mild to moderate Psoriasis is typically treated with topical therapies such as corticosteroids or vitamin D analogs. Moderate to severe Psoriasis may be treated with topical therapies, systemic immunosuppressive or immunomodulatory drugs (biologics) or phototherapy. While all of these therapies can help reduce the skin irritation and plaques in patients with Psoriasis, and may also reduce pruritus to some degree, they may not adequately resolve these symptom in patients.
Pre-clinical studies of our HOCl formulation have shown in vitro and in vivo to down modulate pro-inflammatory cytokines TNF-α, IL-6, and  IL-12 (see Figures 6 and 12), which have been reported at elevated levels in patients with Psoriasis and correlated to disease severity. We are further evaluating this indication in pre-clinical studies and may develop a new HOCl based formulation to target this disease.
Potential Additional Indications
In addition to the indications discussed above, we are also considering the possible utilization of our proprietary platform technology in Prurigo Nodularis, Epidermolysis Bullosa and Bullous Pemphigoid. We have not yet conducted any research and development and have no product candidates in the pipeline for these indications at present.

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Prurigo Nodularis, or PN, is a chronic dermatologic condition, associated with severe pruritus that markedly affects the quality of life in patients.  The vicious cycle of repeated itching and scratching leads to formation of raised, inflamed skin nodules that can develop sores or become hard and crusty. To date, no treatment for PN has been approved in the United States. Recently, higher levels of the pruritic cytokine IL-31, which our HOCl formulations have been shown to reduce, were found in the skin of patients with PN than in other pruritic skin diseases. 
Epidermolysis bullosa, or EB, is an inherited disorder characterized by blistering of the skin following minor friction or mechanical trauma. Currently there is no effective therapy or cure for EB. The disease is primarily managed with symptomatic therapy. EB is generally caused by abnormalities in the site of attachment of the epidermis to dermis, suggesting that a topical product could be beneficial. Several studies have suggested that EB patients’ skin shows increased signaling and overexpression of IL1β, which our HOCl based formulations have been shown to downregulate.
Bullous Pemphigoid, or BP, is an autoimmune blistering disease. BP is characterized by spontaneous flare-ups and remissions. It classically presents as generalized pruritic plaques and tense sub-epithelial blisters. Steroids and immunosuppressants are used to manage the disease, but long term use of both is linked to negative side effects. IgE, which PR022 has been shown to downregulate, has been implicated in the pathogenesis of BP.
Recently Announced Clinical Results of Discontinued Product Candidate
In March 2018, we announced that in a Phase 2 clinical trial for Allergic Conjunctivitis, or AC, an ophthalmic disease, PR013, a topical solution containing HOCl as its active ingredient, did not demonstrate efficacy. As a result, we are no longer pursuing the clinical development of PR013. There are significant differences between the diseases and as well as between our Phase 2 trials in AC and AD.
Disease pathology is one area of significant difference between AC and AD. Seasonal AC is a distinctly different disease state compared to AD. AC is caused by an allergen-induced rapid inflammatory response in which allergens interact with IgE bound to mast cells inducing the allergic symptoms. This immediate clinical response typically lasts approximately 20 to 30 minutes. In contrast, AD is a complex inflammatory cutaneous disorder characterized by immune-mediated inflammation and epidermal barrier dysfunction.
The design of our Phase 2 clinical trials in AC and AD are also different. In the Phase 2 clinical trial in AC, the clinical endpoints of ocular itching and ocular redness were limited to the signs and symptoms of the eye only.  The disease state of allergic symptoms was artificially induced by instilling a defined allergic antigen into the eye of a study subject. The endpoints of itching and redness were measured within the 20 minutes following the instillation of the allergen. In our ongoing Phase 2 clinical trial of AD, on the other hand, the disease state is not being artificially induced, as only patients with an established disease participate in the clinical trial. In addition, the clinical endpoints consist of a compressive clinical scoring of the patient’s entire skin after a treatment period of 28 days, resulting in a longer period for the drug candidate to deliver immunomodulatory effects. Clinical efficacy scoring takes into account the extent of skin lesions, and the degree of inflammation as well as quality of life factors, such as itch and sleep.
Competition
We face competition with respect to our current product candidates, and will face competition with respect to any product candidates that we may seek to develop or commercialize in the future, from many different sources, including major pharmaceutical and specialty pharmaceutical companies, academic institutions and governmental agencies and public and private research institutions. We are aware of a significant number of commercialized products as well as products in development in each of the three therapeutic areas that we target in our clinical development pipeline. We consider PR022’s prospective competitors for the treatment of AD to be topical steroids; Eucrisa, a topical PDE-4 inhibitor; and Dupixent, an injectable IL-4 and IL-13 inhibitor for moderate to severe AD. Certain calcineurin inhibitors,

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such as Elidel, are also prescribed for the treatment of AD. Standard treatments for Acne include antibiotics, antibacterials, retinoids and oral contraceptives. There are a number of treatments for Psoriasis on the market, including biologics, topical therapies such as corticosteroids or vitamin D, as well as systemic immunosuppressive drugs, or phototherapy.
Intellectual Property Summary
We strive to protect and enhance our proprietary technologies and inventions that we believe are important to our business, including seeking, maintaining and defending patent rights, whether developed internally or licensed from third parties. Our policy is to seek to protect our proprietary position by, among other methods, pursuing and obtaining patent protection related to our proprietary technologies and inventions, including our product candidates, in the United States and other jurisdictions that we believe are important to the development and implementation of our business.
As of March 23, 2018, our intellectual property portfolio included thirteen issued U.S. patents, eight pending U.S. patent applications, 27 issued foreign patents in countries including Canada, Australia, China and Mexico, and European validations in European Patent Convention member states such as Germany, France, Great Britain and Italy. We also had 33 foreign patent applications pending, as well as one patent pending under the Patent Cooperation Treaty and one U.S. provisional application pending, at such date. Our patents and applications claim methods of treatment with HOCl, as well as stabilized HOCl compositions and uses thereof, and electrochemical methods for making HOCl.
The patent portfolio relating to PR022 includes four patent families.The first patent family was filed in the U.S., and includes one issued patent, an allowed pending application, as well as two continuation applications. The issued U.S. patent claims methods for treating conditions characterized by chronic type 1 or type 4 hypersensitivity with HOCl. The issued U.S. patent has a Patent Term Adjustment of 1150 days putting its expiration at August 10, 2031, not including any patent term extensions that may apply upon product approval.
The second patent family was filed in the United States, United Arab Emirates, Australia, Brazil, Canada, Chile, China, Europe, Hong Kong, Japan, Mexico, and South Africa. This family includes five issued US patents, and patents issued in Australia, China, Hong Kong, Mexico, and South Africa. There are also two patent applications pending in the U.S., including one application that is allowed, with patents also pending in United Arab Emirates, Brazil, Canada, Chile, China, Europe, Japan, and Mexico. Patents in this family expire March 19, 2032, not including patent term extensions that may apply upon product approvals. In particular, U.S. patents in this family include claims to stabilized HOCl solutions or formulations and methods of use, and include claims to methods of treating inflammatory conditions with the stabilized HOCl solution or formulation. The allowed U.S. application claims the composition-of-matter for Realm’s PR022 formulation.
The third patent family was nationalized in 2017 in the U.S., Australia, Canada, China, Europe, Israel, Mexico, Japan, South Korea, and Singapore. This application family discloses dose-dependent anti-inflammatory properties of HOCl, and claims methods of treating various skin inflammatory disorders. Applications in this family are expected to expire December 16, 2034 in the U.S., and December 16, 2035 outside the U.S.
The fourth patent family was also nationalized in 2017 in the U.S., Australia, Canada, China, Europe, Israel, Mexico, Japan, South Korea, and Singapore. This application family discloses dose-dependent anti-inflammatory properties of HOCl, including methods of treating various inflammatory disorders, of the skin and other tissues and organs. Applications in this family are expected to expire March 27, 2035 in the U.S., and March 28, 2036 outside the United States.
In addition, we are the exclusive licensee from Professor Vitold Bakhir of two U.S. patents relating to devices for producing HOCI. We are the licensee of all rights to one U.S. patent which claims an

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assembly of electrochemical cells for production of HOCl, and which is used for preparing the API in our product candidates. The exclusive license, as last amended on September 2, 2016, includes the right to enforce and sublicense and expires on March 10, 2028. We have sublicensed this patent to Chemstar in connection with our intellectual property license to Chemstar for floral preservative and produce wash fields. Our license to Chemstar further includes an exclusive field-limited license to certain patents relating to our HOCl production technologies and certain patents relating to our stabilized HOCl solution, as well as foreign counterparts relevant to Chemstar’s field. We maintain full control of the first Professor Bakhir patent, with the first right to enforce upon infringement in the field by a third party. We have a license to a second patent from Professor Bakhir effective April 4, 2018, which includes an exclusive license in the field of pharmaceuticals and pharmaceutical development. This patent covers electrochemical cells invented by Professor Bakhir, and which are used for preparing the API in our product candidates, and has a term to February 26, 2030. This second Professor Bakhir patent is not subject to the Chemstar license. We are responsible for maintaining both patents licensed from Professor Bakhir.
Government Regulation and Product Approval
Government authorities in the United States, at the federal, state and local levels, and in other countries, extensively regulate, among other things, the research, development, testing, manufacture, packaging, storage, recordkeeping, labeling, advertising, promotion, distribution, marketing, import and export of pharmaceutical products, such as those we are developing. The processes for obtaining regulatory approvals in the United States and in foreign countries, along with subsequent compliance with applicable statutes and regulations, require the expenditure of substantial time and financial resources.
United States Government Regulation
In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, or FDCA, and its implementing regulations. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations requires the expenditure of substantial time and financial resources. Failure to comply with the applicable United States requirements at any time during the drug development process, approval process or after approval, may subject an applicant to a variety of administrative or judicial sanctions, such as the FDA’s refusal to approve pending new drug applications, or NDAs, withdrawal of an approval, imposition of a clinical hold, issuance of warning or untitled letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement or civil or criminal penalties.
The process required by the FDA before a drug may be marketed in the United States generally involves:
completion of pre-clinical laboratory tests, animal studies and formulation studies in compliance with the FDA’s good laboratory practice, or GLP, regulations, including laboratory evaluation of product chemistry, toxicity and formulation, as well as animal studies to assess potential safety and efficacy;
submission to the FDA of an IND, which must become effective before human clinical trials may begin;
approval by an independent institutional review board, or IRB, at each clinical site before each trial may be initiated;
performance of adequate and well-controlled clinical trials in accordance with good clinical practice, or GCP, requirements to establish the safety and efficacy of the proposed drug for each indication;
submission to the FDA of an NDA;

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satisfactory completion of an FDA advisory committee review, if applicable;
satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product is produced to assess compliance with cGMP requirements, and to assure that the facilities, methods and controls are adequate to preserve the drug’s identity, strength, quality and purity;
satisfactory completion of an FDA inspection of selected clinical sites to assure compliance with GCPs and the integrity of the clinical data;
payment of user fees; and
FDA review and approval of the NDA.
Clinical Trials
We expect that all of our current product candidates will be reviewed by the FDA on a de novo basis, which means that extensive clinical testing will be required. Prior to the initiation of clinical testing, a sponsor must submit to the FDA an investigational new drug, or IND, application to the FDA, including the results of pre-clinical studies, manufacturing information, analytical data and any available clinical data or literature. Some pre-clinical testing may continue even after the IND is submitted. An IND automatically becomes effective 30 days after receipt by the FDA, unless before that time the FDA raises concerns or questions related to one or more proposed clinical trials and places the clinical trial on a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. As a result, submission of an IND may not result in the FDA allowing clinical trials to commence.
Clinical trials involve the administration of the investigational new drug to human subjects under the supervision of qualified investigators in accordance with GCP requirements, which include the requirement that all research subjects provide their informed consent in writing for their participation in any clinical trial. Clinical trials are conducted under protocols detailing, among other things, the objectives of the trial, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. A protocol for each clinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND. In addition, an IRB at each institution participating in the clinical trial must review and approve the plan for any clinical trial before it commences at that institution, and the IRB must continue to oversee the clinical trial while it is being conducted. Information about certain clinical trials must be submitted within specific timeframes to the National Institutes of Health, or NIH, for public dissemination on their ClinicalTrials.gov website.
Human clinical trials are typically conducted in three sequential phases, which may overlap or be combined. In Phase 1, the drug is initially introduced into healthy human subjects or patients with the target disease or condition and tested for safety, dosage tolerance, absorption, metabolism, distribution, excretion and, if possible, to gain an initial indication of its effectiveness. In Phase 2, the drug typically is administered to a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage. In Phase 3, the drug is administered to an expanded patient population, generally at geographically dispersed clinical trial sites, in well-controlled clinical trials to generate enough data to statistically evaluate the safety and efficacy of the product for approval, to establish the overall risk-benefit profile of the product and to provide adequate information for the labeling of the product.
Progress reports detailing the results of the clinical trials must be submitted, at least annually, to the FDA, and more frequently if serious adverse events occur. Phase 1, Phase 2 and Phase 3 clinical trials may not be completed successfully within any specified period, or at all. Furthermore, the FDA or the sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or

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terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements, or if the drug has been associated with unexpected serious harm to patients.
Marketing Approval
Assuming successful completion of the required clinical testing, the results of the pre-clinical and clinical studies, together with detailed information relating to the product’s chemistry, manufacture, controls and proposed labeling, among other things, are submitted to the FDA as part of an NDA requesting approval to market the product for one or more indications. In most cases, the submission of an NDA is subject to a substantial application user fee. Under the Prescription Drug User Fee Act, or PDUFA, guidelines that are currently in effect, the FDA has a goal of ten months from the date of “filing” of a standard NDA for a new molecular entity to review and act on the submission. This review typically takes twelve months from the date the NDA is submitted to the FDA because the FDA has approximately two months to make a “filing” decision.
In addition, under the Pediatric Research Equity Act, certain NDAs or supplements to an NDA must contain data that are adequate to assess the safety and effectiveness of the drug for the claimed indications in all relevant pediatric subpopulations, and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The FDA may, on its own initiative or at the request of the applicant, grant deferrals for submission of some or all pediatric data until after approval of the product for use in adults, or full or partial waivers from the pediatric data requirements. Unless otherwise required by regulation, the pediatric data requirements do not apply to products with orphan designation.
The FDA also may require submission of a risk evaluation and mitigation strategy, or REMS, plan to ensure that the benefits of the drug outweigh its risks. The REMS plan could include medication guides, physician communication plans, assessment plans, and / or elements to assure safe use, such as restricted distribution methods, patient registries or other risk minimization tools.
The FDA conducts a preliminary review of all NDAs within the first 60 days after submission, before accepting them for filing, to determine whether they are sufficiently complete to permit substantive review. The FDA may request additional information rather than accept an NDA for filing. In this event, the application must be resubmitted with the additional information. The resubmitted application is also subject to review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive review. The FDA reviews an NDA to determine, among other things, whether the drug is safe and effective and whether the facility in which it is manufactured, processed, packaged or held meets standards designed to assure the product’s continued safety, quality and purity.
The FDA may refer an application for a novel drug to an advisory committee. An advisory committee is a panel of independent experts, including clinicians and other scientific experts, that reviews, evaluates and provides a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.
Before approving an NDA, the FDA typically will inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. Additionally, before approving an NDA, the FDA will typically inspect one or more clinical trial sites to assure compliance with GCP requirements.
The testing and approval process for an NDA requires substantial time, effort and financial resources, and takes several years to complete. Data obtained from pre-clinical and clinical testing are not always conclusive and may be susceptible to varying interpretations, which could delay, limit or prevent regulatory approval. The FDA may not grant approval of an NDA on a timely basis, or at all.

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After evaluating the NDA and all related information, including the advisory committee recommendation, if any, and inspection reports regarding the manufacturing facilities and clinical trial sites, the FDA may issue an approval letter, or, in some cases, a complete response letter. A complete response letter generally contains a statement of specific conditions that must be met in order to secure final approval of the NDA and may require additional clinical or pre-clinical testing in order for FDA to reconsider the application. Even with submission of this additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval. If and when those conditions have been met to the FDA’s satisfaction, the FDA will typically issue an approval letter. An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications.
Even if the FDA approves a product, it may limit the approved indications for use of the product, require that contraindications, warnings or precautions be included in the product labeling, require that post-approval studies, including Phase 4 clinical trials, be conducted to further assess a drug’s safety after approval, require testing and surveillance programs to monitor the product after commercialization, or impose other conditions, including distribution and use restrictions or other risk management mechanisms under a REMS, which can materially affect the potential market and profitability of the product. The FDA may prevent or limit further marketing of a product based on the results of post-marketing studies or surveillance programs. After approval, some types of changes to the approved product, such as adding new indications, manufacturing changes, and additional labeling claims, are subject to further testing requirements and FDA review and approval.
Orange Book Listing
In seeking approval for a drug through an NDA, applicants are required to list with the FDA certain patents whose claims cover the applicant’s product. Upon approval of an NDA, each of the patents listed in the application for the drug is then published in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations, known as the Orange Book. Any applicant who files an Abbreviated New Drug Application, or ANDA, seeking approval of a generic equivalent version of a drug listed in the Orange Book referencing a drug listed in the Orange Book must certify, for each patent listed in the Orange Book for the referenced drug, to the FDA that (1) no patent information on the drug product that is the subject of the application has been submitted to the FDA, (2) such patent has expired, (3) the date on which such patent expires or (4) such patent is invalid or will not be infringed upon by the manufacture, use or sale of the drug product for which the application is submitted. The fourth certification described above is known as a paragraph IV certification. A notice of the paragraph IV certification must be provided to each owner of the patent that is the subject of the certification and to the holder of the approved NDA to which the ANDA. The applicant may also elect to submit a “section viii” statement certifying that its proposed label does not contain (or carves out) any language regarding the patented method-of-use rather than certify to a listed method-of-use patent. This section viii statement does not require notice to the patent holder or NDA owner. There might also be no relevant patent certification.
If the reference NDA holder and patent owners assert a patent challenge directed to one of the Orange Book listed patents within 45 days of the receipt of the paragraph IV certification notice, the FDA is prohibited from approving the application until the earlier of 30 months from the receipt of the paragraph IV certification expiration of the patent, settlement of the lawsuit, or a decision in the infringement case that is favorable to the applicant. Even if the 45 days expire, a patent infringement lawsuit can be brought and could delay market entry, but it would not extend the FDA-related 30-month stay of approval.
Post-Approval Requirements
Drugs manufactured or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to recordkeeping, periodic reporting, product sampling and distribution, advertising and promotion and reporting of adverse experiences with the product. After approval, most changes to the approved product, such as adding new

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indications, manufacturing changes or other labeling claims, are subject to further testing requirements and prior FDA review and approval. There also are continuing annual user fee requirements for any marketed products and the establishments at which such products are manufactured, as well as application fees for supplemental applications with clinical data.
Even if the FDA approves a product, it may limit the approved indications for use of the product, require that contraindications, warnings or precautions be included in the product labeling, including a boxed warning, require that post-approval studies, including Phase 4 clinical trials, be conducted to further assess a drug’s safety after approval, require testing and surveillance programs to monitor the product after commercialization, or impose other conditions, including distribution restrictions or other risk management mechanisms under a REMS, which can materially affect the potential market and profitability of the product. The FDA may prevent or limit further marketing of a product based on the results of post-marketing studies or surveillance programs.
In addition, drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and state agencies, and are subject to periodic unannounced inspections by the FDA and these state agencies for compliance with cGMP requirements. Changes to the manufacturing process are strictly regulated and often require prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP and impose reporting and documentation requirements upon the sponsor and any third party manufacturers that the sponsor may decide to use. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain cGMP compliance.  
Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in mandatory revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical trials to assess new safety risks; or imposition of distribution or other restrictions under a REMS program. Other potential consequences include, among other things:
restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls;
fines, warning letters or holds on post-approval clinical trials;
refusal of the FDA to approve pending NDAs or supplements to approved NDAs, or suspension or revocation of product approvals;
product seizure or detention, or refusal to permit the import or export of products; or
injunctions or the imposition of civil or criminal penalties.
The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market. Drugs may be promoted only for the approved indications and in accordance with the provisions of the approved label, although physicians, in the practice of medicine, may prescribe approved drugs for unapproved indications. 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 liability.
In addition, the distribution of prescription pharmaceutical products is subject to the Prescription Drug Marketing Act, or PDMA, which regulates the distribution of drugs and drug samples at the federal level, and sets minimum standards for the registration and regulation of drug distributors by the states. Both the

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PDMA and state laws limit the distribution of prescription pharmaceutical product samples and impose requirements to ensure accountability in distribution.
Federal and State Fraud and Abuse, Data Privacy and Security, and Transparency Laws and Regulations
In addition to FDA restrictions on marketing of pharmaceutical products, federal and state healthcare laws and regulations restrict business practices in the biopharmaceutical industry. These laws may impact, among other things, our current and future business operations, including our clinical research activities, and proposed sales, marketing and education programs and constrain the business or financial arrangements and relationships with healthcare providers and other parties through which we market, sell and distribute our products for which we obtain marketing approval. These laws include anti-kickback and false claims laws and regulations, data privacy and security, and transparency laws and regulations, including, without limitation, those laws described below.
The federal Anti-Kickback Statute prohibits, among other things, individuals or entities from knowingly and willfully offering, paying, soliciting or receiving remuneration, directly or indirectly, overtly or covertly, in cash or in kind to induce or in return for purchasing, leasing, ordering or arranging for or recommending the purchase, lease or order of any item or service reimbursable under Medicare, Medicaid or other federal healthcare programs. The term “remuneration” has been broadly interpreted to include anything of value. The federal Anti-Kickback Statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on one hand and prescribers, purchasers and formulary managers on the other hand. 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.
The reach of the federal Anti-Kickback Statute was also broadened by the Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively the ACA, which, among other things, amended the intent requirement of the federal Anti-Kickback Statute such that a person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it in order to have committed a violation. In addition, the ACA provides that 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 and the civil monetary penalties statute.
The federal civil and criminal false claims laws, including the False Claims Act, which prohibit, among other things, any individual or entity from knowingly presenting, or causing to be presented, a false claim for payment to the federal government or knowingly making, using or causing to be made or used a false record or statement material to a false or fraudulent claim to the federal government. A claim includes “any request or demand” for money or property presented to the U.S. government. Several pharmaceutical and other healthcare companies have been prosecuted under these laws for allegedly providing free product to customers with the expectation that the customers would bill federal programs for the product. Other companies have been prosecuted for causing false claims to be submitted because of the companies’ marketing of products for unapproved, and thus non-reimbursable, uses.
The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, created additional federal criminal statutes that prohibit, among other things, knowingly and willfully executing a scheme to defraud any healthcare benefit program, including private third party payors and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.

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HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and their respective implementing regulations, impose certain requirements relating to the privacy, security and transmission of individually identifiable health information without appropriate authorization on certain health plans, healthcare clearinghouses and certain healthcare providers, known as covered entities, and their respective business associates, independent contractors that perform certain services involving the use or disclosure of individually identifiable health information. HITECH also created new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce HIPAA and seek attorneys’ fees and costs associated with pursuing federal civil actions.
The federal Physician Payments Sunshine Act 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 specific exceptions, to report annually to the Centers for Medicare & Medicaid Services, or CMS, information related to payments or other transfers of value made to physicians and teaching hospitals, and applicable manufacturers and applicable group purchasing organizations to report annually to CMS ownership and investment interests held by physicians and their immediate family members.
We may also be subject to state and foreign law equivalents of each of the above federal laws; state laws that require manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government, or that otherwise restrict payments that may be made to healthcare providers; state and local laws that require the registration of pharmaceutical sales representatives; as well as state and foreign laws that 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.
Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs. Because of the breadth of these laws and the narrowness of the statutory exceptions and regulatory safe harbors available, it is possible that some of our business activities could be subject to challenge under one or more of such laws. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment, exclusion from participating in government funded healthcare programs, such as Medicare and Medicaid, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, contractual damages, reputational harm and the curtailment or restructuring of our operations. To the extent that any of our products are sold in a foreign country, we may be subject to similar foreign laws and regulations, which may include, for instance, applicable post-marketing requirements, including safety surveillance, anti-fraud and abuse laws and implementation of corporate compliance programs and reporting of payments or transfers of value to healthcare professionals.
Coverage and Reimbursement
Market acceptance and sales of any drug products depend in part on the extent to which reimbursement for drug products will be available from third party payors, including government health administration authorities, managed care organizations and other private health insurers. third party payors decide which drug products they will pay for and establish reimbursement levels. third party payors often rely upon Medicare coverage policy and payment limitations in setting their own coverage and reimbursement policies. However, decisions regarding the extent of coverage and amount of

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reimbursement to be provided for drug products are made on a payor-by-payor basis. One payor’s determination to provide coverage for a drug product does not assure that other payors will also provide coverage, and adequate reimbursement, for the drug product. Additionally, a third party payor’s decision to provide coverage for a drug product does not imply that an adequate reimbursement rate will be approved. Each payor determines whether or not it will provide coverage for a drug product, what amount it will pay the manufacturer for the therapy, and on what tier of its formulary it will be placed. The position on a payor’s list of covered drugs, or formulary, generally determines the co-payment that a patient will need to make to obtain the drug product and can strongly influence the adoption of such drug product by patients and physicians. Patients who are prescribed drug products for their conditions and providers prescribing such drug products generally rely on third party payors to reimburse all or part of the associated costs. Patients are unlikely to use a drug product unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of the drug product.
Reimbursement by a third party payor may depend upon a number of factors, including the third party payor's determination that a drug product is neither experimental nor investigational, safe, effective, and medically necessary, appropriate for the specific patient, cost-effective, supported by peer-reviewed medical journals and included in clinical practice guidelines.
Third party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular drug products. Even if reimbursement is available, the level of reimbursement is unpredictable. Inadequate coverage and reimbursement can impact the demand for, or the price of, drug products. If coverage and adequate reimbursement are not available, or are available only to limited levels, drug products may not be successfully commercialized. Further, adequate third party payor reimbursement may not be available to enable price levels sufficient to realize appropriate returns on investment in drug product development.
In addition, the federal government and state legislatures have continued to implement cost containment programs, including price controls and restrictions on coverage and reimbursement. To contain costs, governmental healthcare programs and third party payors are increasingly challenging the price, scrutinizing the medical necessity and reviewing the cost-effectiveness of drug products.
Impact of Healthcare Reform on our Business
In the United States and some foreign jurisdictions, there have been, and continue to be, several legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval of drug product candidates, restrict or regulate post-approval activities, and affect the profitable sale of drug product candidates.
Among policy makers and payors in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality and / or expanding access. In the United States, the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives. In March 2010, the ACA was passed, which substantially changed the way healthcare is financed by both the government and private insurers, and significantly impacts the U.S. pharmaceutical industry. The ACA, among other things: (i) increased the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program and extends the rebate program to individuals enrolled in Medicaid managed care organizations; (ii) established an annual, nondeductible fee on any entity that manufactures or imports certain specified branded prescription drugs and biologic agents apportioned among these entities according to their market share in some government healthcare programs; (iii) expanded the availability of lower pricing under the 340B drug pricing program by adding new entities to the program; (iv) increased the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program, to 23.1% and 13% of the average manufacturer price for most branded and generic drugs, respectively and capped the total rebate amount for innovator drugs at 100% of the Average Manufacturer Price, or AMP; (v) expanded the eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals and by adding new mandatory eligibility

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categories for individuals with income at or below 133% of the federal poverty level, thereby potentially increasing manufacturers’ Medicaid rebate liability; (vi) established a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% (and 70%, commencing January 1, 2019) point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D; (vii) created a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research; and (viii) established a Center for Medicare Innovation at CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug.
Some of the provisions of the ACA have yet to be implemented, and there have been judicial and Congressional challenges to certain aspects of the ACA, as well as recent efforts by the Trump administration to repeal or replace certain aspects of the ACA. Since January 2017, President Trump has signed two Executive Orders and other directives designed to delay the implementation of certain provisions of the ACA or otherwise circumvent some of the requirements for health insurance mandated by the ACA. Concurrently, Congress has considered legislation that would repeal or repeal and replace all or part of the ACA. While Congress has not passed comprehensive repeal legislation, two bills affecting the implementation of certain taxes under the ACA have been signed into law. On December 22, 2017, new legislation was signed into law (H.R. 1, “An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018,” or the Tax Cuts and Jobs Act) that significantly revised the U.S. Internal Revenue Code of 1986, as amended, or the Code. The Tax Cuts and Jobs Act includes a provision repealing, effective January 1, 2019, 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”. Additionally, on January 22, 2018, President Trump signed a continuing resolution on appropriations for fiscal year 2018 that delayed the implementation of certain ACA-mandated fees, including the so-called “Cadillac” tax on certain high cost employer-sponsored insurance plans, the annual fee imposed on certain health insurance providers based on market share, and the medical device excise tax on non-exempt medical devices. Further, the Bipartisan Budget Act of 2018, or the BBA, among other things, amends the ACA, effective January 1, 2019, to close the coverage gap in most Medicare drug plans, commonly referred to as the “donut hole”.
Other legislative changes have been proposed and adopted since the ACA was enacted. These changes include aggregate reductions to Medicare payments to providers of 2% per fiscal year pursuant to the Budget Control Act of 2011, which began in 2013, and due to subsequent legislative amendments to the statute, including the BBA, will remain in effect through 2027 unless additional Congressional action is taken. The American Taxpayer Relief Act of 2012, among other things, further reduced Medicare payments to several providers, including hospitals and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. These new laws may result in additional reductions in Medicare and other healthcare funding, which could have an adverse effect on customers for our drug candidates, if approved, and, accordingly, our financial operations.
Additionally, there has been heightened governmental scrutiny in the United States of pharmaceutical pricing practices in light of the rising cost of prescription drugs and biologics. Such scrutiny has resulted in several recent congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for products. At the federal level, the Trump administration’s budget proposal for fiscal year 2019 contains further drug price control measures that could be enacted during the 2019 budget process or in other future legislation, including, for example, measures to permit Medicare Part D plans to negotiate the price of certain drugs under Medicare Part B, to allow some states to negotiate drug prices under Medicaid, and to eliminate cost sharing for generic drugs for low-income patients. While any proposed measures will require authorization through additional legislation to become effective, Congress

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and the Trump administration have each indicated that it will continue to seek new legislative and / or administrative measures to control drug costs. At the state level, legislatures are increasingly passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.
Manufacturing and Supply
We outsource the manufacturing of our product candidates to various parties who are responsible for producing API, manufacturing the drug formulations and packaging, and randomizing / labeling the product for clinical trials. We intend to continue to outsource the manufacturing of any product candidates if and when they are approved for marketing and commercialized.
Employees
We had 15 full-time employees as of December 31, 2017. None of our employees are represented by any collective bargaining unit. We believe that we maintain good relations with our employees.
Property and Facilities
Our headquarters are located in Malvern, Pennsylvania, and consist of approximately 7,000 square feet of office and lab space, which houses our in-house R&D function, under a lease that expires in 2025. We may require additional space and facilities as our business expands.
Legal Proceedings
From time to time, we may become involved in litigation or other legal proceedings relating to claims arising from the ordinary course of business. There are currently no claims or actions pending against us that, in the opinion of our management, are likely to have a material adverse effect on our results of operations, financial condition or cash flows.

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MANAGEMENT
Executive Officers and Directors
The following table sets forth information regarding our executive officers and directors as of March 31, 2018.
NAME
 
AGE
 
POSITION(S)
Executive Officers:
 
 
 
 
Alex Martin
 
50
 
Chief Executive Officer and Director
Marella Thorell
 
51
 
Chief Financial Officer, Chief Operating Officer, Company Secretary and Director
Christian Peters, M.D., PhD
 
56
 
Chief Medical Officer
Non-Executive Directors:
 
 
 
 
Charles Spicer
 
53
 
Chairman of the Board of Directors and Independent Non-Executive Director
Joseph William Birkett
 
70
 
Independent Non-Executive Director
Ivan Gergel, M.D.
 
57
 
Independent Non-Executive Director
Balkrishan (Simba) Gill, PhD
 
53
 
Independent Non-Executive Director
Sanford (Sandy) Zweifach
 
62
 
Independent Non-Executive Director
Executive Officers
Alex Martin joined Realm Therapeutics in June 2015 as Chief Executive Officer (CEO) and Executive Director. He brings more than 25 years of experience having held senior positions in both private and public companies principally in the pharmaceutical and biopharmaceutical industry. He previously served as a CEO of Affectis Pharmaceuticals AG, Chief Operating Officer of Intercept Pharmaceuticals (Nasdaq: ICPT) and Chief Business Officer at Bioxell S.p.A, which was acquired by Cosmo Pharmaceuticals S.A. He began his career at SmithKline Beecham Pharmaceuticals before joining Novartis as Vice President, Global Business Development & Licensing. Prior to Realm, Mr. Martin served as President at moksha8 Pharmaceuticals Inc., a leading Latin American specialty pharmaceutical company. Mr. Martin holds a BA from Cornell University and an MBA from Harvard.
Marella Thorell was appointed Chief Financial Officer and Executive Director in March 2013 and was appointed Chief Operating Officer in October 2014. Previously, she was a key member of the Realm Therapeutics senior leadership team, and has been Company Secretary since October 2011. She offers more than 25 years of experience in finance, operations, and human resources. Previously, she was the President of Thorell Consulting, a business consulting firm. Ms. Thorell worked at Campbell Soup Company (NYSE: CPB), where she held a number of financial and management roles. She began her career and earned her CPA accounting qualification with Ernst & Young LLP. Ms. Thorell holds a BS in Business from Lehigh University.
Christian Peters, MD, PhD joined Realm Therapeutics in April 2016 as the Chief Medical Officer (CMO). He has over 25 years’ experience, including 15 years of successful clinical development and commercialization in a number of senior leadership positions in the pharmaceutical industry, and more than 10 years of clinical and research experience in academic settings. Prior to Realm, Dr. Peters served as CMO of Therakos. He oversaw corporate strategy and execution for Global Clinical Development, Regulatory Affairs, Pharmacoeconomics and Medical/Scientific Affairs. He previously held a number of senior positions at CSL Behring, and its predecessor Aventis Behring LLC, and at Therakos, then owned by Johnson & Johnson. He received his M.D. and Ph.D. in cellular immunology from the Free University Berlin Medical School in Germany

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Non-Executive Directors
Charles Spicer joined Realm Therapeutics in June 2013 as an Independent Non-Executive Director and was named Non-Executive Chairman in June 2014. He has more than 20 years of experience working within the healthcare sector and specifically medtech and life sciences segments. Mr. Spicer is a Non-Executive Chairman of IXICO plc (LSE: IXI), Creo Medical Group plc (LSE: CREO) and 11 Health & Technologies Limited and chairs a U.K. Department of Health Invention for Innovation (i4i) Funding Panel. Mr. Spicer has also served as a Non-Executive of Aircraft Medical Limited and Stanmore Implants. Previously he was Chief Executive of MDY Healthcare plc, an AIM-quoted strategic investment company focused on medtech, and prior to that head of healthcare at Numis Securities and Nomura International. Mr. Spicer was awarded an MA in history from Cambridge University.
Joseph William Birkett joined Realm Therapeutics in 1999 as an Independent Non-Executive Director and currently serves as Senior Independent Non-Executive Director and as Chairman of the Audit Committee. Mr. Birkett is an independent consultant and investor who has served on the board of a wide range of companies, both public and private, throughout his career. Following receipt of a BSc in Economics from Sheffield University, he qualified as an FCA with Touche Ross (now Deloitte & Touche LLP) before pursuing a career in finance, global investment banking, and private equity.
Ivan Gergel, M.D. joined Realm Therapeutics in January 2017 as an Independent Non-Executive Director and serves on the Remuneration Committee. Dr. Gergel was Senior Vice President Drug Development and Chief Medical Officer at Nektar Therapeutics. He has more than 25 years of pharmaceutical leadership and drug development experience. Prior to Nektar, Dr. Gergel was Executive Vice President R&D and Chief Scientific Officer at Endo Pharmaceuticals and a Senior Vice President R&D at Forest Laboratories (subsequently acquired by Actavis / Allergan) and he has advanced multiple compounds from research through approval. Dr. Gergel received his M.D. from The Royal Free Medical School of The University of London and an MBA from the Wharton School of the University of Pennsylvania.
Balkrishan (Simba) Gill, Ph.D. joined Realm Therapeutics in 2016 as an Independent Non-Executive Director and serves as Chairman of the Remuneration Committee. He is currently President, CEO and a member of the board of directors of Evelo Biosciences, which he joined in September 2015. He is also the executive Chairman of Blackfynn Inc. Dr. Gill has served as a Venture Partner at Flagship Pioneering, a life sciences innovation enterprise, since 2015. From 2006 to 2015, Dr. Gill served as the President and Chief Executive Officer of moksha8 Pharmaceuticals, Inc. Dr. Gill has an MBA from INSEAD and completed his Ph.D., with a focus on developing humanized antibodies to treat cancer, at King’s College, London.
Sanford (Sandy) Zweifach joined Realm Therapeutics in December 2017 as an Independent Non-Executive Director and serves on the Audit Committee. Mr. Zweifach has over 25 years’ experience in the life sciences industry, with a focus in corporate partnering, business development, operations, private and public investing, and capital raising. He is the Founder and Chief Executive Officer of Nuvelution Pharma, Inc.  Previously, Mr. Zweifach was the founder and CEO of Ascendancy Healthcare, Inc. He has also been a Partner at Reedland Capital Partners, CEO of Pathways Diagnostics, Managing Director / CFO of Bay City Capital, and President and CFO of Epoch Biosciences, which was acquired by Nanogen. He currently serves as the Chairman of Lyric Pharmaceuticals Inc. and  IMIDomics SL. He received his BA in Biology from UC San Diego and an MS in Human Physiology from UC Davis.

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Foreign Private Issuer Exemption
As a “foreign private issuer,” as defined by the SEC, we are permitted to follow home country corporate governance practices, instead of certain corporate governance practices required by Nasdaq for U.S. domestic issuers. While we intend to follow most Nasdaq corporate governance rules, we intend to follow U.K. corporate governance practices in lieu of Nasdaq corporate governance rules as follows:
We do not intend to comply with Nasdaq Rule 5605(b)(1), which requires that our board of directors be comprised of a majority of independent directors. Such requirements are not required under the laws of England and Wales. However, we do make an assessment of the independence of our directors under U.K. corporate governance practices and have concluded that the majority of our directors are independent based upon those standards.
We do not intend to follow Nasdaq Rule 5605(d)(1) regarding the compensation committee charter or Nasdaq Rule 5605(d)(2) regarding compensation committee composition. Such requirements are not required under the laws of England and Wales. However, we do maintain a remuneration committee in line with U.K. corporate governance practices. See the section entitled “Management - Committees of Our Board of Directors - Remuneration Committee” for additional information.
While we intend to follow Nasdaq Rule 5605(e)(1)(A) with respect to having director nominees selected by independent directors constituting a majority of our board's independent directors in a vote in which only independent directors participate, we do not intend to follow Nasdaq Rule 5605(e)(2) regarding the adoption of a formal written charter or board resolution, as applicable, addressing the nominations process. Such requirements are not required under the laws of England and Wales.
We do not intend to follow Nasdaq Rule 5620(c) regarding quorum requirements applicable to meetings of shareholders. Such quorum requirements are not required under the laws of England and Wales. In accordance with generally accepted business practice, our Articles of Association provide alternative quorum requirements that are generally applicable to meetings of shareholders. See the section entitled “Description of Share Capital and Articles of Association - Quorum of General Meetings”.
We must comply with Nasdaq Rule 5640 Notification of Noncompliance and Rule 5640 Voting Rights. Further, we must have an audit committee that satisfies Rule 5605(c)(3), which addresses audit committee responsibilities and authority, and that consists of committee members that meet the independence requirements of Rule 5605(c)(2)(A)(ii), subject to a transition period for newly public companies.
Because we are a foreign private issuer, our directors and senior management are not subject to short-swing profit and insider trading reporting obligations under Section 16 of the Exchange Act. They will, however, be subject to the obligations to report changes in share ownership under Section 13 of the Exchange Act and related SEC Rules.
Composition of Our Board of Directors
Our board of directors is currently composed of seven members. As a foreign private issuer, under the listing requirements and rules of Nasdaq, we are not required to have independent directors on our board of directors, except that our audit committee is required to consist fully of independent directors, subject to certain phase-in schedules. However, our board of directors has determined that Charles Spicer, Joseph William Birkett, Dr. Ivan Gergel, Dr. Balkrishan (Simba) Gill and Sanford (Sandy) Zweifach do not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of director and that each of these directors is “independent” as that term is defined under Nasdaq rules. There are no family relationships among any of our directors or senior management.

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At every annual general meeting each director shall retire from office who is required to do so in accordance with any corporate governance policy adopted from time to time by the Company, and each director shall in any event retire at that annual general meeting unless he or she was appointed or re-appointed as a director at either of the last two general meetings before that annual general meeting. A director retiring at a meeting shall, if he or she is not re-elected at such meeting, retain office until the conclusion of the meeting or adjourned meeting at which he or she is due to retire. See the section entitled “Description of Share Capital and Articles of Association — Articles of Association — Directors.”
Committees of Our Board of Directors
The audit committee, which consists of Joseph William Birkett, Sanford (Sandy) Zweifach and Alex Martin, assists the board of directors in overseeing our accounting and financial reporting processes. Mr. Birkett serves as chairman of the audit committee. The audit committee consists exclusively of members of our board who are financially literate, and Mr. Birkett and Mr. Zweifach are considered “audit committee financial experts” as defined by applicable SEC rules and has the requisite financial sophistication as defined under the applicable Nasdaq rules and regulations. Under Rule 10A-3 under the Securities Exchange Act of 1934, as amended, or the Exchange Act, we are permitted to phase in our compliance with the independent audit committee requirements set forth in Nasdaq Rule 5605(c) and Rule 10A-3 as follows: (1) one independent member at the time of listing; (2) a majority of independent members within 90 days of listing; and (3) all independent members within one year of listing. Our board of directors has determined that each of Mr. Birkett and Mr. Zweifach are independent directors under Nasdaq listing rules and under Rule 10A-3 under the Exchange Act and we are relying on the independence phase-in with respect to Mr. Martin. The audit committee is governed by a charter that complies with Nasdaq rules. The audit committee’s responsibilities include:
recommending the appointment of the independent auditor to shareholders for approval at the general meeting of shareholders;
the appointment, compensation, retention and oversight of any accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit services;
pre-approving the audit services and non-audit services to be provided by our independent auditor before the auditor is engaged to render such services;
evaluating the independent auditor’s qualifications, performance and independence, and presenting its conclusions to the full board of directors on at least an annual basis;
reviewing and discussing with management and our independent registered public accounting firm our financial statements and our financial reporting process; and
reviewing procedures for detection of fraud, whistleblowing and prevention of bribery, and reports on systems for internal financial control, financial reporting and risk management.
Remuneration Committee
The remuneration committee, which consists of Dr. Balkrishan (Simba) Gill and Dr. Ivan Gergel, advises the board in determining executive compensation. The remuneration committee’s responsibilities include:
identifying, reviewing and proposing policies relevant to the salary, annual incentives equity and other compensation of our directors, executive officers and all other employees;
evaluating the performance of each executive officer, the chairman of the board, the company secretary and such members of the executive management as it is designated to consider, in light of such policies and reporting to the board;

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reviewing the design of all employee share option scheme or equity incentive plans in operation from time to time; and
reviewing, approving or ratifying any related party transactions between the company and any director, executive officer or related party.
Code of Business Conduct and Ethics
In connection with our listing on Nasdaq, we will revise our Code of Business Conduct and Ethics applicable to our employees, executive officers and directors.
Compensation of Executive Officers and Directors
For the year ended December 31, 2017, the aggregate compensation accrued or paid to the non-executive members of our board of directors and to our principal executive officer and principal financial officer / principal accounting officer for services in all capacities was $1.8 million.
The following table provides information regarding the compensation awarded to, earned by or paid to our principal executive officer and principal financial officer / principal accounting officer for the year ended December 31, 2017.
Name and Principal Position
 
Salary
($)
 
Option
Awards
($)
(1)(2)
 
Non-Equity Incentive Compensation(3)
 
All Other Compensation(4)
 
Total
($)
Alex Martin
Chief Executive Officer
 
$
370,000

 
$
162,681

 
$
277,500

 
$
51,419

 
$
861,601

Marella Thorell
Chief Financial Officer and Chief Operating Officer
 
$
300,000

 
$
68,601

 
$
187,500

 
$
39,280

 
$
595,381

__________________
(1)
The amounts in this column represent the aggregate grant date fair value of the options granted during 2017 and exclusive of any additional options issued on previous option grants as made under certain antidilution provisions. The grant date fair value of the options was computed in accordance with Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, Topic 718. These amounts do not necessarily correspond to the actual value that may be realized by the executive in connection with his or her option awards. The assumptions made in valuing the option awards reported in this column are described in Note 10 to our consolidated financial statements included in this prospectus.
(2)
In December 2017, Mr. Martin and Ms. Thorell were granted 830,000 and 350,000 options, respectively, to purchase ordinary shares at an exercise price of £0.39 per share. Additionally, in October 2017 as a result of our private placement and as permitted under the terms of our equity incentive plan, the number of shares issuable pursuant to options to purchase ordinary shares previously awarded to Mr. Martin and Ms. Thorell was increased by 1,985,326 and 671,747 shares, respectively, such that each of their percentages of our outstanding share capital following the private placement represented by their respective outstanding options was the same as it is had been prior to the private placement. Option exercise prices, vesting terms and expiry dates for these options remained unchanged.
(3)
The amounts in this column represent performance bonuses earned by the named executive officers in the calendar year 2017 based upon the achievement of pre-established performance objectives. See “Compensation of Executive Officers and Directors — Executive Director Employment Agreements” below.
(4)
Amounts in this column reflect the payment of medical insurance premiums, life and disability insurance premiums, and 401(k) employer contributions. All of these benefits are provided to the named executive officers on the same terms as provided to all of our regular full-time employees. Mr.

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Martin and Ms. Thorell are entitled to a monthly car allowance of $1,500 and $1,000, respectively, pursuant to their employment agreements.

Executive Director Employment Agreements
Alex Martin
We and our U.S. subsidiary, Realm Therapeutics, Inc., entered into an employment agreement with Mr. Martin in May 2015. This agreement entitles Mr. Martin to receive an initial annual base salary of not less than $370,000 per year and subject to annual adjustments as determined by the remuneration committee. Mr. Martin is eligible to receive an annual bonus of 50% of his base salary, which may be adjusted up or down based on his performance, such bonus amount to be determined in the Company’s sole discretion. Mr. Martin’s agreement also stipulated that he is entitled to receive 1,000,000 options to purchase our ordinary shares. These options were issued in June 2015 with an exercise price of £0.2975 per share ($0.45 per share at an exchange rate of 1.5267). The options vest over a three year period and upon the achievement of performance objectives as defined by our remuneration committee. As of December 31, 2017, Mr. Martin’s options granted in June 2015 were two-thirds vested. During his employment with us, Mr. Martin is eligible to participate in all of our long term incentive plans, including future equity awards.
Mr. Martin is also entitled to the same fringe benefits that we provide to our other executives from time to time. If Mr. Martin’s employment with the company is terminated without cause, or if he resigns for good reason (as such terms are defined in the agreement), he will also be entitled to receive severance equal to continuation of his base salary and auto allowance, in effect at the time of termination, for twelve months following his date of termination and will be eligible for reimbursement for medical coverage premiums or to remain on our health insurance plans for up to the same period. Mr. Martin is also entitled to a pro rata portion of his annual bonus and based upon the timing of termination. Mr. Martin’s severance benefits are conditioned on, among other things, his execution of our standard separation agreement and a general release of claims in our favor. The agreement provides that if payments and benefits payable to Mr. Martin in connection with a change in control would result in adverse tax consequences under Sections 280G and 499 of the Code, such payments will be cut back to the extent necessary to avoid such adverse tax consequences unless Mr. Martin would be better off on an after-tax basis receiving the full amount of such payments and benefits.
The agreement provides that Mr. Martin’s employment with us is at-will.  If required by the company, the agreement further provides that Mr. Martin will resign from his position on our board of directors effective as of the date of his termination for any reason. The agreement, and as further revised in another agreement, contains a twelve month non-competition covenant and a twelve month non-solicitation covenant by Mr. Martin.
Marella Thorell
We and our U.S. subsidiary, Realm Therapeutics, Inc., entered into an employment agreement with Ms. Thorell in March 2013. This agreement entitles Ms. Thorell to receive an initial annual base salary of not less than $250,000 per year and subject to annual adjustments as determined by the remuneration committee. Ms. Thorell is eligible to receive an annual bonus of up to 50% of her base salary, which may be adjusted up or down based on her performance, such bonus amount to be determined in the company’s sole discretion. During her employment with us, Ms. Thorell is eligible to participate in all of our long term incentive plans, including future equity awards.
Ms. Thorell is also entitled to the same fringe benefits that we provide to our other executives from time to time. If Ms. Thorell’s employment with the company is terminated without cause, or if she resigns for good reason (as such terms are defined in the agreement), Ms. Thorell will also be entitled to receive severance equal to continuation of her base salary and auto allowance, in effect at the time of termination, for twelve months following her date of termination and will be eligible for reimbursement for medical coverage premiums or to remain on our health insurance plans for up to the same period. Ms.

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Thorell is also entitled to a pro rata portion of her annual bonus and based upon the timing of termination. Ms. Thorell’s severance benefits are conditioned on, among other things, her execution of our standard separation agreement and a general release of claims in our favor. The agreement provides that if payments and benefits payable to Ms. Thorell in connection with a change in control would result in adverse tax consequences under Sections 280G and 499 of the Code, such payments will be cut back to the extent necessary to avoid such adverse tax consequences unless Ms. Thorell would be better off on an after-tax basis receiving the full amount of such payments and benefits.
Non-Executive Director Letters of Appointment
Non-executive directors are engaged on letters of appointment that set out their duties and responsibilities. The remuneration of our non-executive directors is determined by our board as a whole, based on a review of current practices in other companies. Fees and other compensation paid to non-executive directors who served during 2017 are set out in the table below. Fees include basic fees, fees paid to committee chairmen and fees paid to our non-executive chairman.
Name
 
Fees
 
Option
Awards
($)
(3)
 
All Other Compensation(4)
 
Total
($)
Charles Spicer
Chairman of Board of Directors
 
$
64,408

 
$
19,600

 
$

 
$
84,008

Joseph William Birkett
Chairman of Audit Committee
 
$
34,780

 
$
19,600

 
$

 
$
54,380

Balkrishan (Simba) Gill, PhD
Chairman of the Remuneration Committee
 
$
34,780

 
$
19,600

 
$
36,000

 
$
90,380

Ivan Gergel, M.D.(1)
Director
 
$
28,984

 
$
44,099

 
$

 
$
73,083

Sanford (Sandy) Zweifach(1)
Director
 
$
2,415

 
$
29,400

 
$

 
$
31,815

Matthew Hammond(2)
Director
 
$
26,568

 
$

 
$

 
$
26,568

Daniel Hegglin(2)
Director
 
$

 
$

 
$

 
$

__________________
(1)
Dr. Gergel and Mr. Zweifach were appointed to our board of directors in January and December of 2017, respectively.
(2)
Mr. Hammond and Mr. Hegglin resigned from our board of directors in November 2017. Mr. Hegglin waived the fees that he would otherwise have been entitled to in his capacity as director, prior to his resignation.
(3)
In December 2017, Mr. Spicer, Mr. Birkett, Dr. Gill and Dr. Gergel were each granted 100,000 options to purchase ordinary shares at an exercise price of £0.39 per share. Upon their appointment in 2017, Dr. Gergel and Mr. Zweifach were granted 65,000 and 150,000 options, respectively, to purchase ordinary shares at an exercise price of £0.30 and £0.39 per share, respectively. Additionally, in October 2017 as a result of our private placement and as permitted under the terms of our equity incentive plan, the number of shares issuable pursuant to options to purchase ordinary shares previously awarded to Mr. Spicer, Mr. Birkett, Dr. Gill and Dr. Gergel was increased by 178,589, 92,649, 132,355 and 86,031, respectively, such that each of their percentages of our outstanding share capital following the private placement represented by their respective outstanding options was the same as it is had been prior to the private placement. Option exercise prices, vesting terms and expiry dates for these options remained unchanged.
(4)
Amounts in this column reflect the payment of a monthly advisory fee of $3,000 pursuant to a consulting agreement with us, which has concluded.


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Realm Therapeutics 2016 Executive Omnibus Incentive Plan
We operate the Realm Therapeutics 2016 Executive Omnibus Incentive Plan, or the Plan, an equity compensation plan adopted by our board of directors in June 2016. The Plan provides that a variety of equity instruments can be issued to employees. Since adoption, options to acquire our ordinary shares are the only equity awards that have been granted under the Plan. As of March 31, 2018, there were 11,264,808 options outstanding under the Plan.
Eligibility, Awards and Administration
The Plan is administered by the Remuneration Committee of our board of directors which sets the terms and conditions of all equity awards granted under the Plan. Equity awards are granted at the discretion of the Remuneration Committee. We may grant equity awards to directors, consultants and other non-employees outside the Plan, but such grants are subject to certain terms set out in the Plan.
Vesting, Exercise Price, Term and Exercise
Under the Plan, our Remuneration Committee may determine the vesting schedule of an equity award and whether the vesting of an award will be subject to the satisfaction of a performance condition. Options granted to executive directors must be subject to vesting based on performance conditions. Thus far, only options granted to our executive directors have been made subject to vesting based on performance conditions which are measured over a three year period. Time based vesting options generally vest in equal annual installments over a three year period. All options granted to date under the Plan have exercise prices equal to the fair value of the underlying ordinary shares on the date of the grant. Once an option has vested, it may be exercised until the end of its term, which is either the fifth or tenth anniversary of the date of grant, after which time it will lapse. Options are exercisable in cash or as otherwise determined by the board of directors
Limitation on Awards
Subject to certain exceptions, no eligible employee may be granted options that, at the time they are granted, would cause the market value of shares subject to the options granted to the employee in respect of a financial year to exceed 200% of the employee’s base salary.
Plan Lapse
If a participant ceases to hold office or employment with us as a result of dismissal for gross misconduct, any option the participant holds, whether vested or unvested, will lapse. If a participant ceases to hold office or employment with us for any reason other than dismissal for gross misconduct then: (i) if the option is already vested, it may be exercised within ninety days from the date of cessation of services if such cessation did not occur as a result of the participant’s death, and within twelve months from the date of cessation of services if such cessation occurred as a result of the participant’s death; and (ii) if the option is not already vested, it will vest on the normal vesting date as described above, unless our board of directors determines that the option will vest on the date of cessation of services. Where an option vests in these circumstances, any performance condition will be taken into account and, unless our Remuneration Committee determines otherwise, will be pro-rated for time.
Variation of Share Capital
In the event of any variation of our share capital (including any demerger, capitalization, rights issue, open offer or any consolidation, sub-division or reduction of capital), our Remuneration Committee may make such adjustments as it considers appropriate. 
Insurance and Indemnification
To the extent permitted by the U.K. Companies Act 2006, we are empowered to indemnify our directors and executive officers against any liability they incur by reason of their directorship. We maintain directors’ and officers’ insurance to ensure such persons against certain liabilities. We have entered into a deed of indemnity with each of our directors and executive officers prior to the effectiveness of the registration statement of which this prospectus forms a part. Insofar as indemnification of liabilities arising

90



under the Securities Act may be permitted to our board, executive officers or persons controlling us, we have been informed that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

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RELATED PARTY TRANSACTIONS
The following is a description of related party transactions we have entered into since January 1, 2015 with any members of our board of directors or executive officers and the holders of more than 5% of our ordinary shares.
2017 Private Placement
On October 12, 2017, we issued an aggregate of 66,396,485 units, consisting of 66,396,485 of our ordinary shares and warrants to purchase up to 26,558,600 of our ordinary shares, at a price per unit of £0.29. Each warrant has an exercise price per ordinary share of £0.58 and a term of 2.5 years. We utilized the net proceeds of the private placement of units primarily to advance our drug development programs and for general corporate purposes. The table below summarizes the issuance of such units, with each unit consisting of one of our ordinary shares and one warrant to purchase 0.40 of our ordinary shares, that were issued to members of our board of directors, our executive officers or holders of more than 5% of our voting securities.
5% or Greater Shareholders:
Units Purchased
OrbiMed Private Investments VI, LP
25,537,109

BVF Partners LP
15,322,266

RA Capital Management, LLC
11,491,699

Abingworth Bioequities Master Fund Ltd
6,384,277

Sussex Trading Company Limited
827,586

 
 
Executive Officers and Non-Executive Directors:
 
Charles Spicer
86,207

Alex Martin
148,115

In connection with the foregoing private placement of securities, we entered into a registration rights agreement with the purchasers of the securities, pursuant to which we granted such purchasers the right to have their ordinary shares and ordinary shares issuable upon the exercise of warrants purchased in the private placement registered with the SEC for resale in the United States. The registration statement of which this prospectus forms a part has been filed in part in satisfaction of such purchasers’ rights thereunder.
In connection with the foregoing private placement of securities, we also entered into relationship agreement with OrbiMed Private Investments VI, LP, which together with its affiliates we refer to as OrbiMed, and N+1 Singer Advisory LLP, pursuant to which OrbiMed and we agreed that all transactions, agreements, relationships and arrangements entered into between OrbiMed and us will only be made on an arm’s length basis and on normal commercial terms, and that we will be capable at all times of carrying on our business independently of OrbiMed.
Agreements with Our Executive Officers and Directors
We have entered into employment agreements with certain of our executive officers and service agreements with our non-executive directors. See the section entitled “Management — Compensation of Executive Officers and Directors.”
Deeds of Indemnity
We have entered into a deed of indemnity with each of our directors and executive officers. These agreements and our Articles of Association require us to indemnify our directors and executive officers to

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the fullest extent permitted by law. See the section entitled “Management — Compensation of Executive Officers and Directors — Insurance and Indemnification.”

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PRINCIPAL AND REGISTERED HOLDERS
The following table sets forth information with respect to the beneficial ownership of our ordinary shares as of March 31, 2018, by:
each beneficial owner of 5% or more of our outstanding ordinary shares, each of whom is a Registered Holder;
each of our directors and executive officers, each of whom is a Registered Holder;
all of our directors and executive officers as a group; and
each of our other shareholders, in addition to the foregoing, who is a Registered Holder hereunder.
Beneficial ownership is determined in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities and include ordinary shares that can be acquired within 60 days of March 31, 2018. Percentage ownership calculations are based on 116,561,917 ordinary shares issued and outstanding as of March 31, 2018 plus, consistent with SEC rules on disclosure of beneficial ownership, shares that each security holder has the ability to acquire within 60 days of March 31, 2018, due to outstanding options becoming vested or outstanding warrants being exercisable. The percentage of shares beneficially owned before offering shown on the table reflect these incremental shares that a security holder has the ability to acquire within the time frame noted. To the extent that any Registered Holder sells ADSs representing its ordinary shares following registration, the Registered Holder’s percentage ownership will decrease accordingly. We have included pro forma columns in the table, representing ownership numbers and percentages at the lowest level of ownership that would exist if the Registered Holders sold 100% of the Registered Shares owned by them, which may or may not happen.
Except as otherwise indicated in the table below, addresses of the directors and executive officers are c/o Realm Therapeutics plc, 267 Great Valley Parkway, Malvern, PA 19355.

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NUMBER OF
SHARES
BENEFICIALLY
OWNED BEFORE OFFERING
 
PERCENTAGE
OF SHARES
BENEFICIALLY
OWNED BEFORE OFFERING
 
NUMBER OF
SHARES
BEING REGISTERED
IN THE OFFERING
 
PRO FORMA POTENTIAL NUMBER OF
SHARES
BENEFICALLY
OWNED FOLLOWING
THE OFFERING**
 
PRO FORMA POTENTIAL PERCENTAGE
OF SHARES
BENEFICALLY
OWNED FOLLOWING
THE OFFERING**
5% or Greater Shareholders:
 
 
 
 
 
 
 
 
 
OrbiMed Private Investments VI, LP (1)
35,751,953

 
28.2%
 
35,751,953

 
0

 
0%
BVF Partners LP (2)
21,451,173

 
17.5%
 
21,451,173

 
0

 
0%
RA Capital Management, LLC(3)
16,088,379

 
13.3%
 
16,088,379

 
0

 
0%
Invesco Asset Management Limited (4)
14,747,027

 
12.7%
 
14,747,027

 
0

 
0%
Abingworth Bioequities Master Fund Ltd (5)
8,937,988

 
7.5%
 
8,937,988

 
0

 
0%
Sussex Trading Company Limited(6)
6,429,915

 
5.5%
 
6,429,915

 
0

 
0%
Oracle Management Limited (7)
6,397,190

 
5.4%
 
6,397,190

 
0

 
0%
Daniel Hegglin(8)
5,909,091

 
5.1%
 
5,909,091

 
0

 
0%
 
 
 
 
 
 
 
 
 
 
Executive Officers and Directors:
 
 
 
 
 
 
 
 
 
Charles Spicer (9)
467,188

 
*
 
308,413

 
158,775

 
*
Alex Martin (10)
2,243,653

 
1.9%
 
307,361

 
1,936,292

 
1.7%
Marella Thorell (11)
437,258

 
*
 
50,000

 
387,258

 
*
Christian Peters, MD, PhD (12)
444,258

 
*
 
57,000

 
387,258

 
*
Joseph William Birkett (13)
143,029

 
*
 
92,686

 
50,343

 
*
Ivan Gergel, MD (14)
50,343

 
*
 
0

 
50,343

 
*
Balkrishan (Simba) Gill, PhD (15)
131,667

 
*
 
0

 
131,667

 
*
Sanford (Sandy) Zweifach (16)

 
 

 

 
All current directors and executive officers as a group (8 persons)
3,917,396

 
3.4%
 
997,470

 
2,919,926

 
2.5%
 
 
 
 
 
 
 
 
 
 
Other Registered Holders:
 
 
 
 
 
 
 
 
 
Kanton Services Limited (17)
4,629,196

 
4.0%
 
4,629,196

 
0

 
0%
Polar Capital Funds Plc – Biotechnology Fund (18)
4,290,235

 
3.6%
 
4,290,235

 
0

 
0%
Killik & Co. (19)
803,794

 
*
 
803,794

 
0

 
0%
N+1 Singer Advisory LLP (20)
56,783

 
*
 
56,783

 
0

 
0%
Belsize Asset Management (21)
214,513

 
*
 
214,513

 
0

 
0%
Cleveland Capital (22)
214,513

 
*
 
214,513

 
0

 
0%
JSJ International Limited (23)
120,691

 
*
 
120,691

 
0

 
0%
__________________
** Unlike an initial public offering, any disposition by the Registered Holders of the Registered Shares represented by ADSs is not being underwritten by any investment bank. The Registered Holders may or may not elect to dispose of Registered Shares represented by ADSs as and to the extent that they may individually determine. Such dispositions, if any, will be made through brokerage transactions on Nasdaq or other securities exchanges in the United States at prevailing market prices, and the post-offering ownership figures in these columns represent the lowest level of ownership that would exist if the Registered Holders sold 100% of the Registered Shares owned by them, which may or may not happen.

*
Represents beneficial ownership of less than one percent.

95



(1)
Consists of 35,751,953 ordinary shares that are registered hereby, including 25,537,109 ordinary shares and 10,214,844 shares issuable upon exercise of outstanding warrants. OrbiMed Capital GP VI LLC or GP VI is the sole general partner of OrbiMed Private Investments VI, LP or OPI VI.  OrbiMed Advisors LLC or OrbiMed Advisors, is the managing member of GP VI.  By virtue of such relationships, GP VI and OrbiMed Advisors may be deemed to have voting and investment power with respect to the shares held by OPI VI and as a result may be deemed to have beneficial ownership of such shares.  Advisors exercises investment and voting power through a management committee comprised of Carl L. Gordon, Sven H. Borho and Jonathan T. Silverstein. Each of GP VI, OrbiMed Advisors, Carl L. Gordon, Sven H. Borho and Jonathan T. Silverstein disclaims beneficial ownership of the shares held by OPI VI, except to the extent of its or his pecuniary interest therein if any.  The address of these entities is 601 Lexington Avenue, 54th floor, New York, New York 10022.
(2)
Consists of 21,451,173 ordinary shares that are registered hereby, including 15,322,266 ordinary shares and 6,128,907 shares issuable upon exercise of outstanding warrants. The address of BVF Partners LP is One Sansome Street 30th Floor, San Francisco, CA 94949.
(3)
Consists of 16,088,379 ordinary shares that are registered hereby, including 11,491,699 ordinary shares and 4,596,680 shares issuable upon exercise of outstanding warrants. The address of RA Capital Management, LLC is 20 Park Plaza Suite 1200, Boston, MA 02116.
(4)
Consists of 14,747,027 ordinary shares that are registered hereby. The address of Invesco Limited is Perpetual Park, Perpetual Park Drive, Henley on Thames, U.K., RG1 1HH.
(5)
Consists of 8,937,988 ordinary shares that are registered hereby, including 6,384,277 ordinary shares and 2,553,711 shares issuable upon exercise of outstanding warrants. The address of Abingworth Bioequities Master Fund Ltd. is 38 Jermyn Street, London SW1Y 6DN.
(6)
Consists of 6,429,915 ordinary shares that are registered hereby, including 6,098,880 ordinary shares and 331,035 ordinary shares issuable upon the exercise of outstanding warrants.
(7)
Consists of 6,397,190 ordinary shares that are registered hereby, including 5,426,780 ordinary shares and 970,410 ordinary shares issuable upon exercise of outstanding warrants.
(8)
Consists of 5,909,091 ordinary shares that are registered hereby.
(9)
Consists of 308,413 ordinary shares that are registered hereby, including 273,930 ordinary shares and 34,483 ordinary shares issuable upon exercise of outstanding warrants, and 158,775 ordinary shares issuable upon the exercise of outstanding options that are not registered hereby. Does not include 254,904 ordinary shares issuable upon exercise of outstanding options that have not vested.
(10)
Consists of 307,361 ordinary shares that are registered hereby, including 248,115 ordinary shares and 59,246 ordinary shares issuable upon exercise of outstanding warrants, and 1,936,292 ordinary shares issuable upon the exercise of outstanding options that are not registered hereby. Does not include 2,379,034 ordinary shares issuable upon exercise of outstanding options that have not vested.
(11)
Consists of 50,000 ordinary shares that are registered hereby and 387,258 ordinary shares issuable upon exercise of outstanding options that are not registered hereby. Does not include 1,124,517 ordinary shares issuable upon exercise of outstanding options that have not vested.
(12)
Consists of 57,000 ordinary shares that are registered hereby and 387,258 ordinary shares issuable upon exercise of outstanding options that are not registered hereby. Does not include 1,124,517 ordinary shares issuable upon exercise of outstanding options that have not vested.
(13)
Consists of 92,686 ordinary shares that are registered hereby and 50,343 ordinary shares issuable upon exercise of outstanding options that are not registered hereby. Does not include 200,688 ordinary shares issuable upon exercise of outstanding options that have not vested.