UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended ~~September~~March 3031, ~~2022~~2023


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

For the transition period from _____________ to ____________

Commission File Number: 001-39041

Satsuma Pharmaceuticals, Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware	81-3039831
(State or other jurisdiction of incorporation or organization)	(I.R.S. EmployerIdentification No.)
(State or other jurisdiction ofincorporation or organization)	(I.R.S. EmployerIdentification No.)
400 Oyster Point Boulevard, Suite 221 South San Francisco, CA	94080
4819 Emperor Boulevard, Suite 340Durham, NC	27703
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (650) 410-3200

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

Title of each class		~~Trading Symbol~~TradingSymbol(s)		Name of each exchange on which registered
Common stock, par value $0.0001		STSA		Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

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

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

As of ~~October~~May 318, ~~2022~~2023, the registrant had 33,~~125~~152,~~954~~498 shares of common stock, $0.0001 par value per share, outstanding.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Any statements contained in this Quarterly Report on Form 10-Q that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “predict,” “potential,” “positioned,” “seek,” “should,” “target,” “will,” “would,” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:

•

•the implementation of our strategic plans for our business and ~~expectations~~STS101, ~~for~~including ~~the~~our ~~further~~reduction ~~clinical~~in ~~development~~force ofand ~~STS101~~any changes to senior management;

•

•our expectations related to the Merger Agreement, including our ~~clinical~~ability to complete the pending transaction as contemplated by the Merger Agreement, the parties’ ability to satisfy the conditions to the consummation of the Offer and ~~regulatory~~the ~~development~~other ~~plans~~conditions set forth in the Merger Agreement, the expected timetable for ~~STS101~~completing the transaction, and the potential benefits of the transaction for the Company;

•

•our intentions and our ability to conclude the ~~implementation~~Offer ofand ~~our~~Merger, ~~business~~as ~~model~~announced on April 16, 2023, with SNBL whereby SNBL will acquire Satsuma and ~~strategic~~assume ~~plans~~responsibility for ~~our~~completing ~~business~~development of and commercializing STS101;

•

•the ~~our~~timing ~~expectations~~or ~~with~~likelihood ~~regard~~of to the ~~data~~acceptance toand bethe ~~derived~~approval ~~from~~of our ~~ongoing~~STS101 ~~and~~New ~~planned~~Drug ~~clinical~~Application ~~trials~~(NDA) ~~and~~by ~~timing~~the ofUnited ~~expected~~States ~~data~~Food ~~announcements~~and Drug Administration (FDA);

•

•expectations ~~the~~with ~~impacts~~regard ofto the ~~COVID-19~~data ~~pandemic~~to onbe derived from our ~~operations~~completed clinical trials and timing of expected data announcements;

•

•expectations regarding the ~~timing~~potential ofmarket ~~commencement~~size and size of ~~future~~the ~~nonclinical~~potential ~~studies~~patient ~~and~~populations ~~clinical~~for ~~trials~~STS101, ~~and~~if ~~research~~approved ~~and~~for ~~development~~commercial ~~programs~~use;

•

•commercialization, ~~our~~marketing ~~intentions~~ and ~~our~~manufacturing ~~ability~~plans ~~to establish collaborations~~ and~~/or~~ ~~partnerships~~expectations;

•

• the ~~timing~~pricing orand ~~likelihood~~reimbursement of ~~regulatory~~STS101, ~~filings~~if ~~and approvals for STS101~~approved;

•

•the ~~our~~scope ~~expectations~~of ~~regarding~~protection ~~the~~we ~~potential~~are ~~market~~able ~~size~~to establish and ~~size~~maintain offor ~~the~~intellectual ~~potential~~property ~~patient~~rights ~~populations~~covering ~~for~~ STS101, ifincluding ~~approved~~the ~~for~~projected ~~commercial~~terms ~~use~~of patent protection;

•

•estimates of our ~~commercialization~~expenses, ~~marketing~~future ~~and~~revenue, ~~manufacturing~~capital ~~plans~~requirements, our needs for additional financing and ~~expectations~~our ability to obtain additional capital;

•

•our ~~the~~future ~~pricing~~financial ~~and reimbursement of STS101, if approved~~performance; and

•

•developments ~~the~~and ~~scope~~projections ofrelating ~~protection we are able~~ to ~~establish~~our competitors and ~~maintain~~our ~~for intellectual property rights covering STS101~~industry, including ~~the~~competing ~~projected~~therapies ~~terms~~and ~~of patent protection;~~procedures.

• estimates of our expenses, future revenue, capital requirements, our needs for additional financing and our ability to obtain additional capital;

• our future financial performance; and

• developments and projections relating to our competitors and our industry, including competing therapies and procedures.

These forward-looking statements are based on management’s current expectations, estimates, forecasts and projections about our business and the industry in which we operate and management’s beliefs and assumptions and are not guarantees of future performance or development and involve known and unknown risks, uncertainties and other factors that are in some cases beyond our control. As a result, any or all of our forward-looking statements in this Quarterly Report on Form 10-Q may turn out to be inaccurate and you should not rely upon forward-looking statements as predictions of future events. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under the section of this Quarterly Report on Form 10-Q titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time and it is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. These forward-looking statements speak only as of the date of this Form Quarterly Report on 10-Q. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future. You should, however, review the factors and risks we describe in the reports we will file from time to time with the SEC after the date of this Quarterly Report on Form 10-Q.

SUMMARY OF MATERIAL RISKS ASSOCIATED WITH OUR BUSINESS

Below is a summary of the principal factors that make an investment in our common stock speculative or risky. This summary does not address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below under the heading “Risk Factors” and should be carefully considered, together with other information in this Quarterly Report on Form 10-Q and our other filings with the Securities and Exchange Commission (SEC) before making investment decisions regarding our common stock.

•

•The WeOffer ~~are~~and aMerger ~~clinical-stage~~are ~~biopharmaceutical~~subject ~~company~~to ~~with~~ a ~~limited~~number ~~operating~~of ~~history~~conditions ~~and~~beyond noour ~~products approved for commercial sale~~control. WeFailure ~~have~~to ~~incurred~~complete ~~significant~~the ~~losses~~Offer ~~since our inception,~~ and wethe ~~anticipate~~Merger ~~that~~within wethe ~~will~~expected ~~continue~~time toframe, ~~incur~~or ~~significant~~at ~~losses~~all, ~~for~~could ~~the~~have ~~foreseeable~~a ~~future,~~material ~~which,~~adverse ~~together~~effect ~~with~~on our ~~limited~~business, operating ~~history~~results, ~~makes~~financial itcondition ~~difficult~~and ~~to assess~~ our ~~prospects~~share price.

•

• We ~~will~~do ~~require~~not ~~substantial~~plan ~~additional~~to ~~financing~~independently tocommercialize ~~achieve~~STS101 in the event that our ~~goals~~STS101 new drug application (NDA), ~~and~~which awe ~~failure~~submitted to ~~obtain~~the ~~this~~FDA ~~capital~~in ~~when~~March ~~needed~~2023, onis ~~acceptable~~approved. ~~terms~~If we are unable to timely complete the Offer and Merger we would likely terminate development of STS101, orwithdraw atour ~~all~~NDA and pursue other strategic alternatives, ~~could~~such ~~force~~as usdissolution toand ~~delay~~wind-down. Moreover, ~~limit~~we have incurred significant losses since our inception, ~~reduce~~and orwe ~~terminate~~anticipate that we will continue to incur significant losses for the foreseeable future, which, together with our ~~product~~limited ~~development~~operating orhistory, ~~commercialization~~make ~~efforts~~it difficult to assess our prospects.

•

•We ~~Our~~would ~~business~~require substantial additional financing to continue operations. We do not plan to raise additional financing as we believe it is ~~entirely~~unlikely ~~dependent~~that we would be able to raise substantial additional funds on ~~the~~favorable ~~successful~~terms. ~~development,~~If ~~regulatory~~we ~~approval~~are unable to timely complete the Offer and ~~commercialization~~Merger on favorable terms we will likely be forced to terminate development of STS101, withdraw our ~~only~~NDA ~~product~~and ~~candidate~~pursue ~~under~~other ~~development~~strategic alternatives, such as dissolution and wind-down.

•

•Our ~~Previously,~~financial incondition ~~our~~raises ~~Phase~~substantial 3doubt ~~EMERGE study, STS101 did not demonstrate a statistically significant difference~~ as ~~compared~~ to ~~placebo~~our onability ~~either~~to ofcontinue ~~the~~as ~~co-primary~~a ~~endpoints~~going concern.

•

•There ~~Clinical~~can ~~development~~be ~~involves~~no aassurance ~~lengthy~~that ~~and~~we ~~expensive~~can ~~process~~timely ~~with~~complete anthe ~~uncertain~~Offer ~~outcome~~and Merger, ~~and~~or ~~delays~~any ~~can~~other ~~occur~~transaction, ~~for~~prior ato ~~variety~~exhausting ofour ~~reasons~~financial ~~outside~~resources or that the terms of ~~our~~any ~~control~~such other transaction will be favorable.

•

•The Weterms ~~may~~of bethe ~~unable~~Merger Agreement and CVR Agreement provide that significant payments to ~~obtain~~our ~~regulatory~~stockholders ~~approval~~are ~~for~~contingent upon the monetization of STS101 ~~under~~and/or ~~applicable~~achievement ~~regulatory~~of ~~requirements~~certain milestones. The ~~denial~~failure orof ~~delay~~STS101 ofto achieve any such ~~approval~~milestones, ~~would~~and ~~delay~~any ~~commercialization~~failure ofto ~~STS101~~receive ~~and~~such ~~adversely~~payments, ~~impact~~would ~~our~~have ~~potential~~a tomaterial ~~generate~~adverse ~~revenue,~~impact ~~our~~on ~~business~~the ~~and~~consideration ~~our~~ultimately ~~results~~received ofby ~~operations~~our stockholders.

•

•We, Ifor weSNBL, ~~encounter~~may ~~difficulties~~fail ~~with~~to ~~subject~~timely ~~enrollment~~obtain orregulatory ~~completion~~approval infor ~~our~~STS101 ~~clinical~~under ~~trials,~~applicable ~~our~~regulatory ~~clinical~~requirements. ~~development~~The ~~activities~~denial ~~could~~or bedelay ~~delayed~~of any such approval would prevent or ~~otherwise~~delay commercialization of STS101 and could adversely ~~affected~~affect potential economic returns to us and our stockholders.

•

•STS101 ~~The~~may ~~ongoing~~cause ~~COVID-19~~undesirable ~~pandemic~~side ~~and~~effects ~~outbreak~~or inhave ~~the~~other ~~United~~properties ~~States~~that ~~and~~could ~~related~~delay ~~impacts~~or onprevent its regulatory approval, limit the ~~global~~commercial ~~economy~~profile ~~may~~of ~~adversely~~an ~~affect~~approved ~~our~~label, ~~business~~or result in significant negative consequences following marketing approval, if any.

•

•Even if STS101 ~~may~~obtains ~~cause undesirable side effects or have other properties that could delay or prevent its~~ regulatory approval, ~~limit~~it ~~the~~may ~~commercial~~fail ~~profile~~to ofachieve anbroad ~~approved~~market ~~label, or result in significant negative consequences following marketing approval, if any~~acceptance.

•

•Even Weif ~~may~~STS101 beobtains ~~unable~~regulatory toapproval, ~~rely~~the onability ~~Section 505(b)(2)~~ of the ~~Federal~~party ~~Food~~that ultimately commercializes STS101, ~~Drug~~whether ~~and~~that ~~Cosmetic~~is ~~Act~~SNBL ~~(FDCA),~~or ~~which~~a ~~could~~third ~~result~~party in(the aCommercializing ~~longer~~Party), ~~development~~to ~~program~~market and ~~more~~promote ~~costly~~STS101 ~~trials~~may ~~than~~be welimited ~~anticipate~~by FDA-approved labeling.

•

•We ~~Even~~face significant competition in an environment of rapid technological and scientific change, and STS101, if approved, will face significant competition. The failure of STS101 ~~obtains~~to ~~regulatory~~effectively ~~approval~~compete may prevent STS101, itif approved, from achieving significant market penetration. Many competitors in the migraine field have significant resources that may ~~fail~~be togreater ~~achieve~~than ~~broad~~those ~~market~~of ~~acceptance~~the Commercializing Party and as a result the Commercializing Party may not be able to successfully compete.

•

•The Wesuccessful ~~face,~~commercialization ~~and~~of STS101 by the Commercializing Party will ~~continue~~depend in part on the extent to ~~face~~which governmental authorities, ~~significant~~private ~~competition~~health ininsurers, anand ~~environment~~other ofthird-party ~~rapid~~payors ~~technological~~provide ~~and~~coverage, ~~scientific~~adequate ~~change~~reimbursement levels and ~~our~~implement ~~failure~~pricing topolicies ~~effectively~~favorable ~~compete~~for ~~may~~it. ~~prevent~~Failure usto ~~from~~obtain ~~achieving~~or ~~significant~~maintain ~~market~~coverage ~~penetration~~and adequate reimbursement for STS101, if approved., ~~Most~~could oflimit ~~our~~the ~~competitors~~ability ~~have~~of ~~significantly~~the ~~greater~~Commercializing ~~resources~~Party ~~than~~to wemarket ~~have~~it and wethereby ~~may~~decrease ~~not~~its beability ~~able~~ to ~~successfully~~generate ~~compete~~revenue.

•

•We ~~The~~have ~~successful~~relied, ~~commercialization~~and ofwe ~~STS101~~anticipate ~~will~~the ~~depend~~Commercializing inParty ~~part~~would onneed ~~the~~to ~~extent~~continue to ~~which~~rely, ~~governmental~~on ~~authorities,~~qualified ~~private~~third ~~health~~parties ~~insurers~~to supply all components of STS101, and ~~other~~to ~~third-party~~manufacture ~~payors~~supplies ~~provide~~of ~~coverage~~STS101 for commercial sale. As a result, ~~adequate~~the ~~reimbursement~~successful ~~levels~~development and ~~implement~~commercialization ~~pricing~~of ~~policies~~STS101 ~~favorable~~is ~~for~~dependent ~~it.~~on ~~Failure~~the tosupply ~~obtain~~chain orwe ~~maintain~~have ~~coverage~~established, ~~and~~comprising ~~adequate~~multiple ~~reimbursement~~third parties, most of which are sole source suppliers, for the manufacture of STS101. Should problems arise with any of these suppliers, or if ~~approved,~~they ~~could~~fail ~~limit~~to ~~our~~comply ~~ability~~with applicable regulatory requirements or to ~~market~~supply ~~our~~sufficient ~~product~~quantities at acceptable quality levels or prices, or at all, it would materially and ~~decrease~~adversely affect our ~~ability~~potential tofuture ~~generate~~economic ~~revenue~~prospects.

Table of Contents

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)	1
	Condensed Balance Sheets	1
	Condensed Statements of Operations and Comprehensive Loss	2
	Condensed Statements of Stockholders’ Equity	3
	Condensed Statements of Cash Flows	54
	Notes to Unaudited Interim Condensed Financial Statements	65
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1314
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2021
Item 4.	Controls and Procedures	2021
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	2122
Item 1A.	Risk Factors	2122
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	6265
Item 3.	Defaults Upon Senior Securities	6265
Item 4.	Mine Safety Disclosures	6265
Item 5.	Other Information	6265
Item 6.	Exhibits	6366
Signatures		6467

iii

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited).

SATSUMA PHARMACEUTICALS, INC.

Condensed Balance Sheets

(in thousands, except share and per share amounts)

(unaudited)

	September 30,			December 31,
	March 31,			December 31,
	2022			2021
	2023			2022
Assets
Cash and cash equivalents	$	4019,~~556~~526		$	1516,~~835~~429
Short-term marketable securities		2321,~~880~~844			7736,~~315~~052
Prepaid expenses and other current assets		32,~~127~~005			62,~~698~~328
Total current assets		6743,~~563~~375			9954,~~848~~809
Property and equipment, net		6,769			6,792
Operating lease right-of-use asset		82			108
Operating lease right-of-use asset		154			—
Other non-current assets		22			22
Long-term marketable securities		—			2,620
Total assets	$	43,479		$	54,939
Other non-current assets		551			572
Total assets	$	75,037		$	109,832
Liabilities
Accounts payable	$	~~1,940~~874		$	1,~~469~~911
Accrued and other current liabilities		4,~~546~~841			56,~~943~~066
Operating lease liability		~~172~~116			—138
Current portion of long-term debt		—			1,080
Total current liabilities		5,831			8,115
Total current liabilities		6,658			8,492
Total liabilities		5,831			8,115
Total liabilities		6,658			8,492
Commitments and contingencies (Note 7)
Commitments and contingencies (Note 8)
Stockholders’ equity
Preferred stock, $0.0001 par value, 10,000,000 shares authorized as of September 30, 2022 and December 31, 2021; no shares issued and outstanding as of September 30, 2022 and December 31, 2021		—			—
Preferred stock, $0.0001 par value, 10,000,000 shares authorized as of March 31, 2023 and December 31, 2022; no shares issued and outstanding as of March 31, 2023 and December 31, 2022		—			—
Common stock, $0.0001 par value, 300,000,000 shares authorized as of September 30, 2022 and December 31, 2021; 33,125,954 shares and 31,545,564 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively		3			3
Common stock, $0.0001 par value, 300,000,000 shares authorized as of March 31, 2023 and December 31, 2022; 33,152,498 shares issued and outstanding as of March 31, 2023 and December 31, 2022		3			3
Additional paid-in-capital		~~257~~259,~~100~~735			~~243~~258,~~115~~642
Accumulated other comprehensive loss		(635	)		(4230	)
Accumulated deficit		(~~188~~222,~~661~~085	)		(~~141~~211,~~736~~791	)
Total stockholders’ equity		6837,~~379~~648			~~101~~46,~~340~~824
Total liabilities and stockholders’ equity	$	7543,~~037~~479		$	~~109~~54,~~832~~939

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

SATSUMA PHARMACEUTICALS, INC.

Condensed Statements of Operations and Comprehensive Loss

(in thousands, except share and per share amounts)

(unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	Three Months Ended March 31,
	2022			2021			2022			2021
	2023			2022
Operating expenses
Research and development	$	117,~~342~~459		$	1011,~~170~~556		$	~~35,394~~		$	~~25,769~~
General and administrative		43,~~067~~309			3,~~160~~990			~~11,961~~			~~9,837~~
Total operating expenses	$	1510,~~409~~768		$	1315,~~330~~546		$	~~47,355~~		$	~~35,606~~
Loss from operations		(1510,~~409~~768	)		(1315,~~330~~546	)		~~(47,355~~	)		~~(35,606~~	)
Interest income		~~269~~474			3340			~~443~~			~~124~~
Interest expense		—			(3511	)		~~(13~~	)		~~(139~~	)
Net loss	$	(1510,~~140~~294	)	$	(1315,~~332~~517	)	$	~~(46,925~~	)	$	~~(35,621~~	)
Unrealized gain (loss) on marketable securities		4425			(779	)		~~(21~~	)		~~(41~~	)
Comprehensive loss	$	(1510,~~096~~269	)	$	(1315,~~339~~596	)	$	~~(46,946~~	)	$	~~(35,662~~	)
Net loss per share attributable to common stockholders, basic and diluted	$	(0.4831	)	$	(0.4249	)	$	~~(1.48~~	)	$	~~(1.26~~	)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted		3133,~~855~~152,~~051~~498			31,~~529~~545,~~417~~564			~~31,652,318~~			~~28,379,743~~

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

SATSUMA PHARMACEUTICALS, INC.

Condensed Statements of Stockholders’ Equity

(in thousands, except share amounts)

(unaudited)

	Common Stock				~~Additional Paid~~AdditionalPaid-In		~~Accumulated Other Comprehensive~~AccumulatedOtherComprehensive			Accumulated			~~Total Stockholders~~TotalStockholders’
	Shares		Amount		Capital		Income (Loss)			Deficit			Equity
Balances at January 1, 2022		31,545,564	$	3	$	243,115	$	(42	)	$	(141,736	)	$	101,340
Balances at January 1, 2023		33,152,498	$	3	$	258,642	$	(30	)	$	(211,791	)	$	46,824
Stock-based compensation		—		—		1,~~239~~093		—			—			1,~~239~~093
Net loss		—		—		—		—			(1510,~~517~~294	)		(1510,~~517~~294	)
Other comprehensive loss		—		—		—		(79	)		—			(79	)
Other comprehensive income		—		—		—		25			—			25
Balances at March 31, 2022		31,545,564		3		244,354		(121	)		(157,253	)		86,983
Balances at March 31, 2023		33,152,498	$	3	$	259,735	$	(5	)	$	(222,085	)	$	37,648
Stock-based compensation		—		—		1,355		—			—			1,355
Issuance of common stock under employee share purchase plan		41,929		—		105		—			—			105
Net loss		—		—		—		—			(16,268	)		(16,268	)
Other comprehensive income		—		—		—		14			—			14
Balances at June 30, 2022		31,587,493		3		245,814		(107	)		(173,521	)		72,189
Stock-based compensation		—		—		1,586		—			—			1,586
Issuance of common stock as part of At-the-Market offering, net of issuance costs of $300		1,538,461		—		9,700		—			—			9,700
Net loss		—		—		—		—			(15,140	)		(15,140	)
Other comprehensive income		—		—		—		44			—			44
Balances at September 30, 2022		33,125,954	$	3	$	257,100	$	(63	)	$	(188,661	)	$	68,379


	Common Stock				Additional Paid-In		Accumulated Other Comprehensive			Accumulated			Total Stockholders’
	Shares		Amount		Capital		Loss			Deficit			Equity
Balances at January 1, 2022		31,545,564	$	3	$	243,115	$	(42	)	$	(141,736	)	$	101,340
Stock-based compensation		—		—		1,239		—			—			1,239
Net loss		—		—		—		—			(15,517	)		(15,517	)
Other comprehensive loss		—		—		—		(79	)		—			(79	)
Balances at March 31, 2022		31,545,564	$	3	$	244,354	$	(121	)	$	(157,253	)	$	86,983

	Common Stock				Additional Paid-In		Accumulated Other Comprehensive			Accumulated			Total Stockholders’
	Shares		Amount		Capital		Income (Loss)			Deficit			Equity
Balances at January 1, 2021		17,436,978	$	2	$	162,469	$	29		$	(90,564	)	$	71,936
Issuance of common stock upon exercise of stock options		7,932		—		8		—			—			8
Issuance of common stock in private placement financing, net of issuance costs of $4,785		14,084,507		1		75,214		—			—			75,215
Stock-based compensation		—		—		1,469		—			—			1,469
Net loss		—		—		—		—			(10,457	)		(10,457	)
Other comprehensive loss		—		—		—		(26	)		—			(26	)
Balances at March 31, 2021		31,529,417		3		239,160		3			(101,021	)		138,145
Stock-based compensation		—		—		1,434		—			—			1,434
Net loss		—		—		—		—			(11,832	)		(11,832	)
Other comprehensive loss		—		—		—		(8	)		—			(8	)
Balances at June 30, 2021		31,529,417		3		240,594		(5	)		(112,853	)		127,739
Stock-based compensation		—		—		1,273		—			—			1,273
Net loss		—		—		—		—			(13,332	)		(13,332	)
Other comprehensive loss		—		—		—		(7	)		—			(7	)
Balances at September 30, 2021		31,529,417	$	3	$	241,867	$	(12	)	$	(126,185	)	$	115,673

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

SATSUMA PHARMACEUTICALS, INC.

Condensed Statements of Cash Flows

(in thousands)

(unaudited)

	Nine Months Ended			Nine Months Ended
	Three Months Ended March 31,
	September 30,			September 30,
	2023			2022
	2022			2021
Cash flows from operating activities
Net loss	$	(4610,~~925~~294	)	$	(3515,~~621~~517	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation		~~334~~—			~~292~~92
Amortization of operating lease right-of-use asset		~~127~~37			—37
Non-cash interest expense, and amortization of debt discount and issuance costs		3—			413
Amortization of premiums / (accretion of discounts), net on marketable securities		~~278~~(249	)		~~377~~253
Stock-based compensation		41,~~180~~093			41,~~176~~239
Changes in assets and liabilities
Prepaid expenses and other assets		~~3,592~~323			1,~~850~~178
Accounts payable		~~495~~(1,037	)		~~(1,167~~339	)
Accrued and other current liabilities		(1,~~397~~225	)		~~666~~(1,900	)
Operating lease liabilities, net		(~~109~~33	)		—(41	)
Other non-current liabilities		—			(9	)
Net cash used in operating activities		(11,385	)		(14,317	)
Net cash used in operating activities		(39,422	)		(29,395	)
Cash flows from investing activities
Purchases of marketable securities		(251,~~292~~430	)		(691,~~226~~989	)
Proceeds from maturities of marketable securities		8115,~~048~~912			3222,~~830~~354
Purchases of property and equipment		~~(335~~—	)		(~~2,000~~24	)
Net cash provided by (used in) investing activities		55,421			(38,396	)
Net cash provided by investing activities		14,482			20,341
Cash flows from financing activities
Repayment of debt		~~(1,083~~—	)		(1,500	)
Proceeds from private placement financing, net of issuance costs		—			75,215
Net cash used in financing activities		—			(500	)
Proceeds from At-the-Market offering, net		9,700			—
Net increase in cash and cash equivalents		3,097			5,524
Proceeds from issuance of common stock under employee plans		105			8
Net cash provided by financing activities		8,722			73,723
Net increase in cash and cash equivalents		24,721			5,932
Cash and cash equivalents
Cash and cash equivalents, at beginning of period		1516,~~835~~429			3615,~~326~~835
Cash and cash equivalents, at end of period	$	4019,~~556~~526		$	4221,~~258~~359
Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	—		$	5
Cash paid for interest	$	—		$	11
Cash paid for interest	$	14		$	107
Supplemental non-cash investing and financing activities:
Operating lease right-of-use asset recorded on the adoption of ASC 842	$	80—		$	—80
Operating lease right-of-use assets obtained in exchange for new lease liabilities	$	~~201~~11		$	—201
Purchases of property and equipment in accounts payable and accrued and other current liabilities	$	—		$	~~218~~39

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

SATSUMA PHARMACEUTICALS, INC.

Notes to Unaudited Interim Condensed Financial Statements

Note 1. Organization and Summary of Significant Accounting Policies

Description of the Business

Satsuma Pharmaceuticals, Inc. (the “Company”) is a ~~clinical~~development-stage biopharmaceutical company developing a novel therapeutic for the acute treatment of migraine. The Company’s product candidate, STS101, is a drug-device combination of a proprietary dry-powder formulation of dihydroergotamine mesylate, or DHE, which can be quickly and easily self-administered by a proprietary pre-filled, single-use, nasal delivery device. The Company, headquartered in South San Francisco, was incorporated in 2016 in the state of Delaware.

Private Placement

In February 2021, the Company entered into a Securities Purchase Agreement with certain purchasers, pursuant to which the Company agreed to sell and issue to certain purchasers an aggregate of 14,084,507 shares of its common stock at a per share purchase price of $5.68, the closing price of its common stock on the Nasdaq Global Market on February 26, 2021, for gross proceeds of $80.0 million (“Private Placement”). The Private Placement closed in March 2021 and the Company received $75.2 million in net proceeds after deducting commissions and offering expenses.

At-the-Market Equity Offering

In October 2020, the Company entered into a sales agreement (the “SVB Sales Agreement”) with SVB Securities LLC (formerly known as SVB Leerink LLC) (“SVB”) to sell shares of its common stock, from time to time, through an at-the-market (“ATM”) equity offering program under which SVB acted as its sales agent and pursuant to which the Company could sell common stock for aggregate gross sales proceeds of up to $50.0 million. The issuance and sale of shares of common stock by the Company pursuant to the SVB Sales Agreement was deemed an ATM offering under the Securities Act of 1933, as amended. SVB was entitled to compensation for its services equal to up to 3.0% of the gross proceeds of any shares of common stock sold through SVB under the SVB Sales Agreement. In September 2022, the Company issued and sold 1,538,461 shares of common stock under the SVB Sales Agreement. The shares were sold at a price of $6.50 per share for aggregate net proceeds of approximately $9.7 million, after deducting sales commission of $0.3 million payable by the Company. Prior to the quarter ended September 30, 2022, the Company had not issued any shares of common stock under the SVB Sales Agreement. In October 2022, the Company terminated the SVB Sales Agreement and the offer and sale of shares under the SVB Sales Agreement prospectus supplement filed in October 2020.

In November 2022, the Company entered into an At-the-Market Sales Agreement (the “Virtu Sales Agreement”), with Virtu Americas LLC (“Virtu”), to sell shares of its common stock, from time to time, through an ATM equity offering program under which Virtu will act as its sales agent and pursuant to which the Company may sell common stock for aggregate gross sales proceeds of up to $100.0 million. The issuance and sale of shares of common stock by the Company pursuant to the Virtu Sales Agreement is deemed an ATM offering under the Securities Act of 1933, as amended. Virtu is entitled to compensation for its services equal to up to 3.0% of the gross proceeds of any shares of common stock sold through Virtu under the Virtu Sales Agreement. As of March 31, 2023, no shares of common stock have been sold pursuant to this agreement.

Liquidity

The Company is subject to risks and uncertainties common to early-stage companies in the biopharmaceutical industry, including, but not limited to, risks of clinical delays or failure, development by competitors of new technological innovations, protection of proprietary technology, dependence on key personnel, reliance on contract manufacturing organizations (“CMOs”) and contract research organizations (“CROs”), compliance with government regulations and the need to obtain additional financing to fund operations. STS101 is an investigational product candidate that will require completion of clinical development prior to any submission for regulatory approval and commercialization, if approved. These efforts require significant amounts of additional capital, adequate personnel, infrastructure, and extensive compliance and reporting.

The Company has incurred significant losses and negative cash flows from operations in all periods since its inception and had an accumulated deficit of $~~188~~222.71 million as of ~~September~~March 3031, ~~2022~~2023. The Company has historically financed its operations primarily through its initial public offering (“IPO”), private placements of its equity securities, an ATM equity offering and borrowings under its former long-term debt facility. The Company has no products approved for sale, and the Company has not generated any revenue since its inception. The Company expects to incur significant additional operating losses over at least the next several years. There can be no assurance that in the event the Company requires additional financing, such financing will be available on terms which are favorable or at all. Failure to generate sufficient cash flows from operations or raise additional capital to support its operations would have a material adverse effect on the Company’s ability to achieve its intended business objectives.

The Company has suffered recurring losses from operations that raise substantial doubt about its ability to continue as a going concern. As a result of the reported topline results from the STS101 SUMMIT Phase 3 efficacy trial, the Company does not plan to invest in commercialization of STS101. The Company will continue to look for strategic alternatives and does not plan on raising additional funds. As of March 31, 2023, the Company had cash, cash equivalents and marketable securities of $41.4 million. The Company’s management believes that the Company’s cash, cash equivalents and marketable securities may not be sufficient to continue as a going concern for a period of one year from the issuance date of these unaudited interim condensed financial statements and as such, substantial doubt exists about the Company’s ability to continue as a going concern. Failure to manage discretionary spending may adversely impact the Company’s ability to achieve its intended business objectives and have an adverse effect on its results of operations and future prospects.

The accompanying unaudited interim condensed financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The accompanying unaudited interim condensed financial statements do not reflect any adjustments relating to the recoverability and reclassifications of assets and liabilities that might be necessary if the Company is unable to continue as a going concern.

During the quarter ended December 31, 2022, the Company recorded an impairment loss of $11.7 million consisting of $6.7 million impairment loss to write down the property and equipment to its fair market value, $2.2 million impairment loss to write off prepaid expenses and other current assets related to purchases of property and equipment, and $2.8 million impairment loss to accrue non-cancelable future payments related to purchases of the property and equipment. The impairment loss was a result of the reported topline results from the STS101 SUMMIT Phase 3 efficacy trial and the plan not to invest in commercialization of STS101.

On April 16, 2023, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Shin Nippon Biomedical Laboratories, Ltd., a Japanese corporation (the “Parent” or “SNBL”) and SNBL23 Merger Sub, Inc., a Delaware corporation and a direct wholly owned subsidiary of the Parent (the “Purchaser”).

The Merger Agreement provides that, upon the terms and subject to the conditions thereof, as promptly as practicable (but in no event more than fifteen (15) business days after the date of the Merger Agreement), Purchaser will commence a tender offer (the “Offer”) to acquire (upon the terms and subject to the conditions of the Merger Agreement) any and all of the issued and outstanding shares of common stock, par value $0.0001 per share, of the Company (the “Company Common Stock”) in exchange for (i) an amount in cash equal to $0.91, without interest and less applicable withholding taxes (the “Per Share Price”), and (ii) one contingent value right per share of Company Common Stock (a “CVR”) representing the right to receive, subject to the terms and conditions of the Contingent Value Rights Agreement, substantially in the form attached to the Merger Agreement (the “CVR Agreement”), the consideration set forth in the CVR Agreement (the CVRs together with the aggregate Per Share Price paid in accordance with the Merger Agreement, the “Offer Consideration”). The Merger Agreement includes a remedy of specific performance and is not subject to a financing condition. As soon as practicable following the completion of the Offer, upon the terms and subject to the conditions of the Merger Agreement, Purchaser will be merged with and into the Company, with the Company surviving as a wholly owned subsidiary of Parent (the “Merger”). The Merger Agreement contemplates that the Merger will be effected pursuant to Section 251(h) of the General Corporation Law of the State of Delaware (the “DGCL”), which permits completion of the Merger without a vote of the holders of the Company Common Stock upon the acquisition by Purchaser of a majority of the aggregate number of the shares of Company Common Stock.

Subject to the terms and conditions of the Merger Agreement, if certain conditions are satisfied and the Offer closes, Parent, following the satisfaction of such conditions, would acquire any remaining shares by virtue of the Merger, with the Company surviving the Merger as a wholly-owned subsidiary of Parent. If the Merger is consummated, the Company will cease to be a publicly-traded company. The consummation of the transaction is subject to customary closing conditions, including the Company’s stockholders tendering a minimum number of shares of Company Common Stock in the Offer.

Concurrently with the execution of the Merger Agreement, the Parent entered into a tender and support agreement (the “Support Agreement”) with certain stockholders and directors of the Company (the “Supporting Persons”), who in the aggregate own approximately 18.8% of the Company Common Stock, pursuant to which such Supporting Persons have agreed, among other things, to tender their shares of Company Common Stock in the Offer and to vote against certain matters at meetings of the Company’s stockholders which are intended to or would reasonably be expected to impede, delay or prevent, in any material respect, the Offer or the Merger.

As of September 30, 2022, the Company had cash, cash equivalents and marketable securities of $64.4 million. The Company’s management believes that the Company’s current cash, cash equivalents and marketable securities will be sufficient to fund its planned operations for at least 12 months from the date of the issuance of these unaudited interim condensed financial statements as of and for the three and nine months ended September 30, 2022.

Basis of Presentation

The unaudited interim condensed financial statements and accompanying notes have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”), as defined by the Financial Accounting Standards Board, or the FASB.

Unaudited Interim Financial Information

The accompanying condensed balance sheet as of ~~September~~March 3031, ~~2022~~2023, the condensed statements of operations and comprehensive loss ~~for the three and nine months ended September 30~~, ~~2022 and 2021,~~ the condensed statements of stockholders’ equity ~~for the three~~ and ~~nine months ended September 30, 2022 and 2021 and~~ the condensed statements of cash flows for the ~~nine~~three months ended ~~September~~March 3031, ~~2022~~2023 and ~~2021~~2022 are unaudited. The unaudited interim condensed financial statements have been prepared on the same basis as the audited annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of ~~September~~March 3031, ~~2022~~2023 and the results of its operations ~~for the three~~ and ~~nine months ended September 30, 2022 and 2021 and~~ its cash flows for the ~~nine~~three months ended ~~September~~March 3031, ~~2022~~2023 and ~~2021~~2022. The financial data and other information disclosed in these notes related to the three ~~and nine~~ months ended ~~September~~March 3031, ~~2022~~2023 and ~~2021~~2022 are also unaudited. The results for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2022~~2023 are not necessarily indicative of results to be expected for the year ending December 31, ~~2022~~2023, any other interim periods, or any future year or period. The balance sheet as of December 31, ~~2021~~2022 included herein was derived from the audited financial statements as of that date. Certain disclosures have been condensed or omitted from the unaudited interim condensed financial statements.

The accompanying interim unaudited condensed financial statements should be read in conjunction with the audited financial statements and the related notes thereto for the year ended December 31, ~~2021~~2022, which are included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021~~2022 filed with the Securities and Exchange Commission, or the SEC, on March 1528, ~~2022~~2023.

Use of Estimates

The preparation of unaudited interim condensed financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited interim condensed financial statements and the reported amounts of income and expenses during the reporting period. Such estimates include the accrual of research and development expenses, ~~useful~~impairment ~~lives~~ of property and equipment and the fair value of stock-based awards. The Company evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the impact of the COVID-19 pandemic and related impacts on the global economy which may delay the enrollment of subjects for our clinical trials and may disrupt our supply chain for development and manufacturing activities, and adjust those estimates and assumptions when facts and circumstances dictate. Actual results could differ materially from those estimates and assumptions.

Concentration of Credit Risk

The Company has no significant off-balance sheet concentrations of credit risk. Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash, cash equivalents and marketable securities. Substantially all the Company’s cash, iscash equivalents and marketable securities are held by ~~one~~Silicon ~~financial~~Valley ~~institution~~Bank, ~~that~~and ~~management~~the ~~believes~~Company tohistorically behas relied primarily on Silicon Valley Bank for commercial banking services. On March 10, 2023, the California Department of ~~high~~Financial ~~credit~~Protection ~~quality~~and Innovation closed Silicon Valley Bank and appointed the Federal Deposit Insurance Corporation ("FDIC") as receiver. ~~Such~~On ~~deposits~~March ~~may~~12, at2023, ~~times~~the U.S. Department of the Treasury, ~~exceed~~the ~~federally~~Federal ~~insured~~Reserve ~~limits~~and the FDIC released a joint statement confirming that all depositors of Silicon Valley Bank would have access to all of their money after only one business day of closure, including funds held in uninsured deposit accounts. The Company ~~invests~~received ~~its~~full ~~cash~~access ~~equivalents~~to the funds in ~~marketable~~its ~~securities~~deposit and money market ~~funds~~accounts on March 13, 2023. ~~The~~In light of actions by the federal government to fully protect deposit accounts, the Company has not experienced any credit losses on its deposits of cash or cash equivalents. The Company invests its cash equivalents in marketable securities and money market funds.

~~Leases~~Credit Losses - Marketable Securities

InFor ~~February~~marketable ~~2016,~~securities ~~the~~in ~~FASB~~an ~~issued~~unrealized ~~Accounting~~loss ~~Standards~~position, ~~Update No. 2016-02 (Topic 842) "Leases." Topic 842 supersedes~~ the ~~lease~~Company ~~requirements~~will inperiodically ~~Accounting~~assess ~~Standards~~its ~~Codification~~portfolio ~~(“ASC”)~~for ~~Topic~~impairment. ~~840,~~The ~~"Leases."~~assessment ~~Under~~first ~~Topic~~considers ~~842,~~the ~~lessees~~intent ~~are~~or ~~required~~requirement to ~~recognize~~sell ~~assets and liabilities on~~ the ~~balance~~marketable ~~sheet for most leases and provide enhanced disclosures~~security. ~~Leases~~If ~~will continue to be classified as~~ either ~~finance~~of orthese ~~operating.~~criteria Inare ~~July 2018~~met, the ~~FASB~~amortized ~~issued~~cost ~~ASU~~basis ~~2018-11,~~will ~~“Leases~~be ~~(ASC~~written ~~842):~~down ~~Targeted Improvements,” which provides companies an optional adoption method~~ to ~~ASU~~fair ~~2016-02~~value ~~whereby~~through ~~a company does not have to adjust comparative period financial statements for the new standard~~earnings.

If not met, the Company evaluates whether the decline resulted from credit losses or other factors by considering the extent to which fair value is less than amortized cost, any changes to the rating of the marketable security by a rating agency, and any adverse conditions specifically related to the marketable security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the marketable security is compared to the amortized cost basis of the

~~The~~marketable ~~reported~~security. ~~results~~If ~~for~~ the ~~three~~present ~~and~~value ~~nine months ended September 30, 2022 reflect the application~~ of ~~ASC~~cash ~~842,~~flows ~~while~~expected ~~the comparative information has not been restated and continues~~ to be ~~reported~~collected ~~under~~is ~~the~~less ~~related~~than ~~lease~~the ~~accounting~~amortized ~~standards~~cost inbasis, ~~effect for those periods. The adoption of this update represents~~ a ~~change~~credit inloss ~~accounting~~exists ~~principle~~ and ~~resulted~~an inallowance ~~the~~for ~~recognition~~credit oflosses ~~right-of-use~~is ~~("ROU") assets and operating lease liabilities. The Company elected the package of practical expedients~~recorded, ~~which~~limited ~~permits~~by the ~~Company~~amount ~~not~~that ~~to reassess prior conclusions about lease identification, lease classification and initial direct costs incurred. The Company also elected~~ the ~~practical~~fair ~~expedient~~value tois ~~combine~~less ~~lease~~than ~~and non-lease components when determining~~ the ~~ROU~~amortized ~~asset~~cost ~~and~~basis. ~~lease~~Any ~~liability,~~impairment asthat ~~well~~has asnot ~~the~~been ~~practical~~recorded ~~expedient~~through ~~to exclude leases with~~ an ~~initial~~allowance ~~term~~for ofcredit 12losses ~~months~~is orrecognized ~~less.~~in ~~The~~other ~~primary~~comprehensive ~~effect of adopting this standard relates to the recognition of operating leases on the condensed balance sheets and providing additional disclosures about the Company’s leasing activities~~loss.

~~The~~Impairment ~~Company adopted ASC 842 effective January 1, 2022 using a modified retrospective method and did not restate comparative periods. The Company recognized ROU assets~~ of ~~$0.1~~Long-Lived million and lease liabilities of $0.1 million for its operating leases as of January 1, 2022. The adoption of these ASUs did not have any impact on the condensed statements of operations and comprehensive loss and condensed statements of cash flows. See Note 8 for more information related to the Company’s lease obligations.Assets

Long-lived assets consist of property and equipment. The Company reviews property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable or that the useful life is shorter than the Company had originally estimated. Recoverability is measured by comparison of the carrying amount of the asset or asset group to the future undiscounted cash flows which the asset or asset group is expected to generate. If the asset or asset group is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset or asset group exceeds the fair value of the asset or asset group. If the useful life is shorter than originally estimated, the Company amortizes the remaining carrying value over the new shorter useful life.

In November 2022, the Company reported topline results from the STS101 SUMMIT Phase 3 efficacy trial. Although topline data showed numerical differences in favor of STS101 5.2 mg versus placebo on the pre-specified co-primary endpoints of freedom from pain and freedom from most bothersome symptom at two hours post-administration, these differences did not achieve statistical significance. This significant change was a triggering event which resulted in an evaluation of impairment of the Company's property and equipment which were designed for future use in production of STS101 after the commercialization. The Company evaluated the recoverability of the property and equipment by comparing their carrying amount to the future undiscounted cash flows expected to be generated by the assets to determine if the carrying value was not recoverable. The recoverability test indicated that the Company's property and equipment were impaired. As a result, the Company recognized an impairment loss of $11.7 million for the quarter ended December 31, 2022.

Recent Accounting Pronouncements

New Accounting Pronouncements ~~Not Yet~~ Adopted

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326), to provide financial statement users with more useful information about expected credit losses, which was subsequently updated by ASU 2019-04, Codification Improvements to Topic 326, Financial Instrument - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, and ASU 2019-05, Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief. The amendment updates the guidance for measuring and recording credit losses on financial assets measured at amortized cost by replacing the “incurred loss” model with an “expected loss” model. Accordingly, these financial assets will be presented at the net amount expected to be collected. The amendment also requires that credit losses related to available-for-sale debt securities be recorded as an allowance through net income rather than reducing the carrying amount under the current, other-than-temporary-impairment model. In November 2019, the FASB issued ASU No. 2019-10, according to which, the new standard is effective for public business entities that meet the definition of an SEC filer, excluding entities eligible to be smaller reporting companies (“SRC”) as defined by the SEC, for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. For all other entities, the new standard is effective for fiscal years beginning after December 15, 2022, and interim periods within that fiscal year. ~~Early adoption is permitted.~~ The Company isadopted ~~a SRC for fiscal year 2021. For the Company~~ this ~~standard~~ASU is effective ~~for~~January ~~fiscal years beginning after December 15~~1, ~~2022, and interim periods within that fiscal year~~2023. The adoption of this ~~standard~~ASU isdid not ~~expected to~~ have a material ~~impact~~effect on the Company’s financial statements and related disclosures.

2. Fair Value Measurements

The Company applies fair value accounting for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the unaudited interim condensed financial statements on a recurring basis. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, a three-tier fair value hierarchy has been established, which prioritizes the inputs used in measuring fair value as follows:

Level 1—Observable inputs, such as quoted prices in active markets for identical assets or liabilities at the measurement date.

Level 2—Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3—Unobservable inputs which reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value.

8As of March 31, 2023, financial assets measured and recognized at fair value were as follows (in thousands):

As of September 30, 2022, financial assets measured and recognized at fair value were as follows (in thousands):


	Fair Value Measurements at March 31, 2023
	Level 1		Level 2		Level 3		Total
Assets
U.S. government bonds	$	13,876	$	—	$	—	$	13,876
U.S. government agency bonds		—		1,444		—		1,444
Corporate bonds		—		6,446		—		6,446
Asset backed securities		—		78		—		78
Marketable securities		13,876		7,968		—		21,844
Money market funds (1)		19,463		—		—		19,463
Total fair value of assets	$	33,339	$	7,968	$	—	$	41,307

(1)

	Fair Value Measurements at September 30, 2022
	Level 1		Level 2		Level 3		Total
Assets
U.S. government bonds	$	8,553	$	—	$	—	$	8,553
Corporate bonds		—		14,456		—		14,456
Asset backed securities		—		871		—		871
Marketable securities		8,553		15,327		—		23,880
Money market funds (1)		40,513		—		—		40,513
Total fair value of assets	$	49,066	$	15,327	$	—	$	64,393

Included in cash and cash equivalents on the balance sheet.

(1) Included in cash and cash equivalents on the balance sheet.


	Fair Value Measurements at March 31, 2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimate Fair Value
Assets
U.S. government bonds	$	13,883	$	1	$	(8	)	$	13,876
U.S. government agency bonds		1,443		1		—			1,444
Corporate bonds		6,445		1		—			6,446
Asset backed securities		78		—		—			78
Marketable securities		21,849		3		(8	)		21,844
Money market funds (1)		19,463		—		—			19,463
Total fair value of assets	$	41,312	$	3	$	(8	)	$	41,307

(1)

	Fair Value Measurements at September 30, 2022
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimate Fair Value
Assets
U.S. government bonds	$	8,595	$	—	$	(42	)	$	8,553
Corporate bonds		14,468		—		(12	)		14,456
Asset backed securities		880		—		(9	)		871
Marketable securities		23,943		—		(63	)		23,880
Money market funds (1)		40,513		—		—			40,513
Total fair value of assets	$	64,456	$	—	$	(63	)	$	64,393

Included in cash and cash equivalents on the balance sheet.

~~(1)~~As ~~Included~~of inDecember ~~cash~~31, 2022, financial assets measured and ~~cash~~recognized ~~equivalents~~at onfair ~~the~~value ~~balance~~were ~~sheet.~~as follows (in thousands):

As of December 31, 2021, financial assets measured and recognized at fair value were as follows (in thousands):


	Fair Value Measurements at December 31, 2022
	Level 1		Level 2		Level 3		Total
Assets
U.S. government bonds	$	18,703	$	—	$	—	$	18,703
Corporate bonds		—		16,941		—		16,941
Asset backed securities		—		408		—		408
Marketable securities		18,703		17,349		—		36,052
Money market funds (1)		16,384		—		—		16,384
Total fair value of assets	$	35,087	$	17,349	$	—	$	52,436

(1)

	Fair Value Measurements at December 31, 2021
	Level 1		Level 2		Level 3		Total
Assets
U.S. government bonds	$	4,667	$	—	$	—	$	4,667
Foreign government agency bonds (1)		—		6,526		—		6,526
Corporate bonds		—		49,989		—		49,989
Asset backed securities		—		18,753		—		18,753
Marketable securities		4,667		75,268		—		79,935
Money market funds (2)		15,809		—		—		15,809
Total fair value of assets	$	20,476	$	75,268	$	—	$	95,744

Included in cash and cash equivalents on the balance sheet

(1) Consists of short-term agency bonds of Asian Development Bank and International Bank for Reconstruction and Development.

(2) Included in cash and cash equivalents on the balance sheet.

	Fair Value Measurements at December 31, 2021
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimate Fair Value
Assets
U.S. government bonds	$	4,670	$	—	$	(3	)	$	4,667
Foreign government agency bonds (1)		6,530		—		(4	)		6,526
Corporate bonds		50,008		—		(19	)		49,989
Asset backed securities		18,769		—		(16	)		18,753
Marketable securities		79,977		—		(42	)		79,935
Money market funds (2)		15,809		—		—			15,809
Total fair value of assets	$	95,786	$	—	$	(42	)	$	95,744

(1) Consists of short-term agency bonds of Asian Development Bank and International Bank for Reconstruction and Development.


	Fair Value Measurements at December 31, 2022
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimate Fair Value
Assets
U.S. government bonds	$	18,724	$	2	$	(23	)	$	18,703
Corporate bonds		16,947		1		(7	)		16,941
Asset backed securities		411		—		(3	)		408
Marketable securities		36,082		3		(33	)		36,052
Money market funds (1)		16,384		—		—			16,384
Total fair value of assets	$	52,466	$	3	$	(33	)	$	52,436

(1)

~~(2)~~ Included in cash and cash equivalents on the balance sheet.

There were no financial liabilities measured and recognized at fair value as of ~~September~~March 3031, 2023 and December 31, 2022. The unrealized losses for marketable securities related to changes in interest rates. No allowance for credit losses was recorded as of March 31, 2023 and December 31, ~~2021~~2022, and no impairment losses were recognized for the three months ended March 31, 2023.

3. Balance Sheet Components

Property and Equipment, Net

Depreciation is computed using the straight-line method. Depreciation expense was $0.3 ~~million~~ and $0.~~3 million for the nine months ended September 30, 2022 and 2021, respectively. Depreciation expense was $0.~~1 million ~~and $0.1 million~~ for the three months ended ~~September~~March 3031, ~~2022~~2023 and ~~2021, respectively. Accumulated depreciation as of September 30,~~ 2022 ~~and December 31~~, ~~2021 was $1.0 million and $0.6 million,~~ respectively.

In 2022, the Company performed a recoverability test for its property and equipment when it was determined that it was more likely than not that the carrying value of the long-lived assets would not be recoverable. As a result, the Company recognized a non-cash impairment loss of $6.7 million in the quarter ended December 31, 2022, to write down the property and equipment to its fair market value, which was determined to be nil as of December 31, 2022. The Company determined that prepaid expenses and other current assets of $2.2 million related to purchases of property and equipment were impaired as of December 31, 2022. The Company recognized a non-cash impairment loss of $2.2 million in the quarter ended December 31, 2022, to write off prepaid expenses and other current assets related to purchases of property and equipment. Additionally, as of December 31, 2022, the Company had non-cancelable future payments of $2.8 million related to purchases of the property and equipment. The Company recognized a non-cash impairment loss of $2.8 million in the quarter ended December 31, 2022, and recorded a $2.8 million accrued impairment loss in accrued and other current liabilities on the Company's balance sheets.

Accrued and Other Current Liabilities

Accrued and other current liabilities consisted of the following (in thousands):

	September 30,		December 31,
	March 31,		December 31,
	2022		2021
	2023		2022
Accrued salaries and benefits	$	~~1,959~~460	$	~~2,117~~536
Accrued research and development expenses		2,294		3,396
Accrued severance payments		1,310		—
Accrued professional services		245		361
Accrued research and development expenses		1,661		2,630
Other		48		69
Accrued impairment loss		965		2,765
Total	$	4,546	$	5,943
Accrued professional services		392		66
Other		53		69
Total	$	4,841	$	6,066

~~4. Long-Term~~ Debt

On October 26, 2018, the Company entered into a Loan and Security Agreement (the “Loan Agreement”) with Silicon Valley Bank. The Loan Agreement provided for loan advances of up to $10.0 million. The first advance (the “Term A Loan”) of $5.0 million was available for draw down by the Company as of the effective date of the Loan Agreement. The remaining $5.0 million under the facility was never drawn down and is no longer available for draw. Interest on the loan advances were payable monthly at a floating per annum rate equal to the greater of 1.5% above the prime rate or 6.5%. Upon the occurrence of an event of default, interest would increase to 5.0% above the rate that is otherwise applicable. The maturity date of the loan advances was May 1, 2022. The effective interest rate of the Term Loan approximated its stated interest rates.

The Company accreted the final payment due at maturity using the effective interest rate method. The accrued liabilities related to the accretion of the final payment were $0.2 million as of December 31, 2021 and were included in the current portion of long-term debt on the Company’s condensed balance sheets.

On May 3, 2022, the Company repaid its entire obligation under the Loan Agreement amounting to $0.4 million, including outstanding loan amount of $0.2 million and final payment of $0.2 million.

5.Stock-Based Compensation

A summary of stock option activity for the nine months ended September 30, 2022 is set forth below:

				Outstanding Options
	Shares Available for Grant			Number of Shares			Weighted Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)
Balance, January 1, 2022		1,493,893			3,202,588		$	9.14		7.7
Additional shares authorized		1,261,822
Options granted		(2,154,500	)		2,154,500		$	3.52		9.7
Options cancelled		64,685			(64,685	)	$	10.21
Balance, September 30, 2022		665,900			5,292,403		$	6.84		8.1
Exercisable as of September 30, 2022					2,237,795		$	8.48		6.8
Vested and expected to vest, September 30, 2022					5,292,403		$	6.84		8.1

The Company incurred debt issuance costs of $0.1 million, which was presented as reduction of the Term A Loan advance balance. Debt issuance cost and final payment of $0.3 million was recognized as additional interest expense using the effective interest method over the term of the loan.

~~The~~On ~~weighted-average~~May ~~grant-date~~3, ~~fair~~2022, ~~value~~the ofCompany ~~options~~repaid ~~granted~~its ~~during~~entire obligation under the ~~nine~~Loan ~~months~~Agreement ~~ended~~amounting ~~September~~to 30$0.4 million, ~~2022~~including ~~and~~outstanding ~~2021~~loan ~~was~~amount of $20.762 million and ~~$3.77~~final ~~per~~payment ~~share,~~of ~~respectively~~$0.2 million.

~~As of September 30, 2022, the total unrecognized stock~~Stock-~~based~~Based ~~compensation expense for stock options was $11.4 million, which is expected to be recognized over a weighted-average period of 2.7 years.~~Compensation

~~The~~A ~~total~~summary ~~fair value~~ of ~~options~~stock ~~vested~~option activity for the ~~nine~~three months ended ~~September~~March 3031, ~~2022~~2023 ~~and~~is ~~2021~~set ~~was~~forth ~~$4.0 million and $6.0 million, respectively.~~below:


			Outstanding Options
	Shares Available for Grant		Number of Shares			Weighted Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)
Balance, January 1, 2023		665,900		5,292,403		$	6.84		7.9
Options cancelled		86,744		(86,744	)	$	4.21
Balance, March 31, 2023		752,644		5,205,659		$	6.88		7.6
Exercisable as of March 31, 2023				2,554,076		$	8.72		6.4
Vested and expected to vest, March 31, 2023				5,205,659		$	6.88		7.6

The weighted-average grant-date fair value of options granted during the three months ended March 31, 2022 was $3.42 per share. No stock options were granted during the three months ended March 31, 2023.

As of March 31, 2023, the total unrecognized stock-based compensation expense for stock options was $5.8 million, which is expected to be recognized over a weighted-average period of 2.2 years.

The total fair value of options vested for the three months ended March 31, 2023 and 2022 was $1.2 million and $1.2 million, respectively.

2019 Employee Share Purchase Plan

In September 2019, the Company adopted the 2019 Employee Share Purchase Plan (“ESPP”), which became effective on the day of effectiveness of the Company’s registration statement on Form S-1 filed in connection with its IPO. As of ~~September~~March 3031, ~~2022~~2023, ~~750~~724,~~802~~258 shares under the ESPP remain available for purchase. ~~On June 15, 2022, the Company issued 41,929 shares under the ESPP.~~ The offering period and purchase period is determined by the board of directors ~~(the “Board”)~~. ~~The~~As ~~Board authorized a new offering period~~ of ~~six~~March ~~months~~31, ~~beginning June 16~~2023, ~~2022~~no ~~through~~new ~~December~~offerings ~~15,~~had ~~2022~~been authorized.

Stock-Based Compensation Expense

Total stock-based compensation expense recorded related to options granted to employees and non-employees was as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	Three Months Ended March 31,
	2022		2021		2022		2021
	2023		2022
Research and development	$	~~578~~318	$	~~476~~436	$	~~1,481~~	$	~~1,372~~
General and administrative		~~1,008~~775		~~797~~803		~~2,699~~		~~2,804~~
	$	1,~~586~~093	$	1,~~273~~239	$	~~4,180~~	$	~~4,176~~

6. Net Loss Per Share Attributable to Common Stockholders

The following table sets forth the computation of basic and diluted net loss per share attributable to common stockholders (in thousands, except share and per share data):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Numerator:
Net loss attributable to common stockholders	$	(15,140	)	$	(13,332	)	$	(46,925	)	$	(35,621	)
Denominator:
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted		31,855,051			31,529,417			31,652,318			28,379,743
Net loss per share attributable to common stockholders, basic and diluted	$	(0.48	)	$	(0.42	)	$	(1.48	)	$	(1.26	)

Net Loss Per Share Attributable to Common Stockholders

The following table sets forth the computation of basic and diluted net loss per share attributable to common stockholders (in thousands, except share and per share data):


	Three Months Ended March 31,
	2023			2022
Numerator:
Net loss attributable to common stockholders	$	(10,294	)	$	(15,517	)
Denominator:
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted		33,152,498			31,545,564
Net loss per share attributable to common stockholders, basic and diluted	$	(0.31	)	$	(0.49	)

The following outstanding shares of potentially dilutive securities were excluded from the computation of diluted net loss per share attributable to common stockholders for the period presented because including them would have been antidilutive:

	September 30,
	March 31,
	2022		2021
	2023		2022
Options to purchase common stock		5,~~292~~205,~~403~~659		3,~~209~~214,~~616~~903
Shares committed under ESPP		~~57,199~~—		—28,746
Total		5,~~349~~205,~~602~~659		3,~~209~~243,~~616~~649

7.Commitments ~~Related~~and ~~Party Transactions~~Contingencies

Two existing stockholders of the Company that are affiliated with directors of the Company purchased a total of 2,464,788 shares of the Company’s common stock, with an aggregate purchase price of $14.0 million, in the Private Placement.

8. Commitments and Contingencies

Operating Leases

Rent expense for the three and nine months ended September 30, 2021 was $0.1 million and 0.2 million, respectively.

Operating lease cost consists of the following (in thousands):

	Three Months Ended		Nine Months Ended
	Three Months Ended March 31,
	September 30, 2022		September 30, 2022
	2023		2022
Operating lease cost	$	4740	$	~~134~~39
Short-term lease cost		3538		~~102~~33
Total lease cost	$	8278	$	~~236~~72

~~Future~~The ~~minimum~~maturities ~~lease~~of ~~payments under non-cancelable~~ operating ~~leases~~lease liabilities as of ~~December~~March 31, ~~2021~~2023 ~~were~~are as follows (in thousands):

	Operating Leases
	March 31, 2023
2022	$	201
2023 (remaining nine months)	$	130
Total minimum lease payments	$	201
Total undiscounted lease payments		130
Less: imputed interest		14
Total operating lease liability		116
Less: current portion		116
Operating lease liability, net of current portion	$	—

~~The~~As ~~maturities~~ of March 31, 2023, the remaining term for the operating lease ~~liabilities~~in asNorth ofCarolina ~~September~~was 300.6 years, and the discount rate used to measure the lease liability for such operating lease upon recognition was 9.8%. During the three months ended March 31, 2023 and 2022, ~~are~~cash aspaid ~~follows~~for (amounts included in ~~thousands):~~operating lease liabilities of less than $0.1 million and less than $0.1 million, respectively, was included in cash flows from operating activities on the condensed statements of cash flows.

	September 30, 2022
2022 (remaining three months)	$	35
2023		141
Total undiscounted lease payments		176
Less: imputed interest		4
Total operating lease liability		172
Less: current portion		172
Operating lease liability, net of current portion	$	—

Income Taxes

AsFor ~~of September 30, 2022,~~ the ~~remaining~~three ~~term~~months ~~for~~ended ~~the~~March ~~operating~~31, ~~lease~~2023 inand ~~North Carolina was 0.8 years~~2022, ~~and~~ the ~~discount~~Company ~~rate~~did ~~used~~not torecord ~~measure~~an ~~the~~income ~~lease~~tax ~~liability~~provision. ~~for~~The ~~such operating lease upon recognition was 4~~U.9%S. ~~During~~federal ~~the~~and ~~nine~~California ~~months~~deferred ~~ended~~tax ~~September~~assets ~~30,~~generated ~~2022,~~from ~~cash~~the ~~paid~~Company’s ~~for~~net ~~amounts included in~~ operating ~~lease~~losses ~~liabilities~~have ofbeen ~~$0.1~~fully ~~million~~reserved, ~~was~~as ~~included~~the inCompany ~~cash~~believes ~~flows~~it ~~from~~is ~~operating~~more ~~activities~~likely onthan not the ~~condensed~~benefit ~~statements~~will ofnot ~~cash~~be ~~flows~~realized.

9. Income Taxes

For the nine months ended September 30, 2022 and 2021, the Company did not record an income tax provision. The U.S. federal and California deferred tax assets generated from the Company’s net operating losses have been fully reserved, as the Company believes it is more likely than not the benefit will not be realized.

10. Subsequent Events

For the purposes of the unaudited interim condensed financial statements as of September 30, 2022 and for the three and nine months ended, the Company has evaluated the subsequent events through November 3, 2022, the date the unaudited interim condensed financial statements were issued.

Workforce Reduction

On March 27, 2023, the Company's board of directors approved a plan to reduce its workforce by 9 employees, or approximately 36% of its total headcount as of such date (the "Workforce Reduction"), in order to preserve cash and maximize the value of STS101 for a potential strategic transaction partner. In connection with the Workforce Reduction, the position of Detlef Albrecht, M.D., the Company's Chief Medical Officer, with the Company was eliminated. During the three months ended March 31, 2023, the Company incurred aggregate charges in connection with the Workforce Reduction of approximately $1.3 million, which related primarily to severance payments and related continuation of benefits costs, all of which resulted in cash expenditures, along with the payment of approximately $0.2 million in accrued benefits including paid-time-off.

Item 2. 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 financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and with our audited financial statements and notes thereto for the year ended December 31, ~~2021~~2022, included in our Annual Report on Form 10-K, filed with the U.S. Securities and Exchange Commission, or SEC, on March 1528, ~~2022~~2023. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business, includes forward looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of this Quarterly Report on Form 10-Q and the Form 10-K, our actual results could differ materially from the results described, in or implied, by these forward-looking statements. Please also see the section of this Quarterly Report on Form 10-Q titled “Forward-Looking Statements.”

Pending Transaction

On April 16, 2023, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Shin Nippon Biomedical Laboratories, Ltd., a Japanese corporation (“Parent” or “SNBL”) and SNBL23 Merger Sub, Inc., a Delaware corporation and a direct wholly owned subsidiary of Parent (“Purchaser”).

The Merger Agreement provides that, upon the terms and subject to the conditions thereof, as promptly as practicable (but in no event more than fifteen (15) business days after the date of the Merger Agreement), Purchaser will commence a tender offer (the “Offer”) to acquire (upon the terms and subject to the conditions of the Merger Agreement) any and all of the issued and outstanding shares of common stock, par value $0.0001 per share, of the Company (the “Company Common Stock”) in exchange for (i) an amount in cash equal to $0.91, without interest and less applicable withholding taxes (the “Per Share Price”), and (ii) one contingent value right per share of Company Common Stock (a “CVR”) representing the right to receive, subject to the terms and conditions of the CVR Agreement, substantially in the form attached to the Merger Agreement (the “CVR Agreement”), the consideration set forth in the CVR Agreement (the CVRs together with the aggregate Per Share Price paid in accordance with the Merger Agreement, the “Offer Consideration”). The Merger Agreement includes a remedy of specific performance and is not subject to a financing condition. As soon as practicable following the completion of the Offer, upon the terms and subject to the conditions of the Merger Agreement, Purchaser will be merged with and into the Company, with the Company surviving as a wholly owned subsidiary of Parent (the “Merger”). The Merger Agreement contemplates that the Merger will be effected pursuant to Section 251(h) of the General Corporation Law of the State of Delaware (the “DGCL”), which permits completion of the Merger without a vote of the holders of the Company Common Stock upon the acquisition by Purchaser of a majority of the aggregate number of the shares of Company Common Stock.

Subject to the terms and conditions of the Merger Agreement, if certain conditions are satisfied and the Offer closes, Parent, following the satisfaction of such conditions, would acquire any remaining shares by virtue of a merger of Purchaser with and into the Company (the “Merger”), with the Company surviving the Merger as a wholly-owned subsidiary of Parent. If the Merger is consummated, the Company will cease to be a publicly-traded company. The consummation of the transaction is subject to customary closing conditions, including the Company’s stockholders tendering a minimum number of shares of Company Common Stock in the Offer.

Overview

We are a ~~clinical~~development-stage biopharmaceutical company developing a novel therapeutic product for the acute treatment of migraine. Our product candidate, STS101, is a drug-device combination of a proprietary dry-powder formulation of dihydroergotamine mesylate, or DHE, which is designed to be quickly and easily self-administered with a proprietary pre-filled, single-use, nasal delivery device. DHE products have long been recommended as a first-line therapeutic option for the acute treatment of migraine and have significant advantages over other therapeutics for many patients. However, broad use has been limited by invasive and burdensome administration and/or sub-optimal clinical performance of available injectable and liquid nasal spray products. STS101 is specifically designed to deliver the clinical advantages of DHE while overcoming these shortcomings. If ~~approved~~we can timely complete the Offer and Merger, continue development of STS101, and if SNBL can obtain regulatory approval for and successfully commercialize STS101, we believe STS101 has the potential to be an important and differentiated option for the acute treatment of migraine that can address the unmet needs of many people living with migraines.

In ~~September~~January ~~2020~~2023, we ~~announced~~completed ~~topline~~our ~~data~~STS101 ~~from~~clinical ~~the~~development ~~EMERGE~~program ~~Phase~~in 3which ~~efficacy~~a ~~trial,~~total orof ~~EMERGE~~more ~~trial,~~than ~~which randomized~~ 1,~~201~~600 ~~migraine~~ subjects tohave ~~one~~treated ofmore ~~two~~than ~~STS101~~10,000 ~~dose~~migraine ~~strengths~~attacks orwith ~~placebo~~STS101. ~~Although~~The STS101 ~~3.9~~clinical mgdevelopment ~~and~~program ~~5.2~~included mgmultiple ~~showed~~Phase ~~favorable~~1 ~~numerical~~clinical ~~differences~~trials, ~~versus~~two ~~placebo~~Phase on3 ~~the pre~~placebo-~~specified~~controlled ~~co-primary~~efficacy ~~endpoints~~trials of(the ~~freedom~~EMERGE ~~from pain~~ and ~~freedom~~SUMMIT ~~from~~trials) ~~most bothersome symptom (from among photophobia, phonophobia~~ and ~~nausea)~~a ~~at two hours post~~long-~~administration~~term, ~~these~~open-label ~~differences~~safety ~~did~~trial ~~not~~(the ~~achieve~~ASCEND ~~statistical significance for either dose strength~~trial). ~~Both~~We ~~dose~~believe ~~strengths~~the results of our STS101 ~~did,~~clinical ~~however,~~development ~~demonstrate~~program ~~significant~~are ~~effects~~supportive onof ~~both~~the ~~freedom~~efficacy ~~from pain~~ and ~~most~~safety ~~bothersome~~of ~~symptom by three hours post-dose and later time points~~STS101. ~~Both~~We ~~STS101~~have ~~dose~~also ~~strengths~~worked ~~were~~to ~~well-tolerated~~establish, in ~~the~~collaboration ~~EMERGE trial,~~ with ~~low~~our ~~adverse~~contract ~~event~~manufacturing ~~rates~~partners, ~~and~~the noability ~~serious~~to ~~adverse~~manufacture ~~events reported.~~

In March 2021, we announced an update to our development plan for STS101 that takes into account the findings from our analyses of results from our EMERGE efficacy trial and results from our ongoing ASCEND open-label, Phase 3 long-term safety trial of STS101 5.2 mg, or ASCEND trial. Our updated development plan for STS101 included a Phase 1 trial, which we completed in June 2021, to evaluate the pharmacokinetics, safety and tolerability of STS101 5.2 mg and two higher dose strengths, as well as a new pivotal Phase 3 efficacy trial, or SUMMIT trial, of STS101 5.2 mg that we initiated in June 2021. We anticipate announcing topline results in November 2022 and we are planning for submission of a NDA to the FDA in the first quarter of 2023.

In September 2022, we reported results from the ongoing ASCEND open-label, Phase 3 long-term safety trial of STS101 5.2 mg indicating that STS101 demonstrated a favorable safety and tolerability profile, consistent with clinical experience to date. Subject exposures over time with the STS101 incorporating the second-generation nasal delivery device designed to improve performance exceeded the FDA requirement to support the submission and potential approval of the STS101 NDA.

A secondary objective of the ASCEND open-label trial is to assess the open-label efficacy of STS101 in the acute treatment of migraine attacks over time. STS101 incorporating the second-generation nasal delivery device demonstrated anti-migraine effects, including achievement of high rates of pain freedom and most-bothersome-symptom freedom at two hours post-treatment, consistent with our expectations and suggested that the second-generation nasal delivery device introduced during the conduct of the ASCEND trial was associated with improved clinical performance.

Our net losses were $46.9 million and $35.6 million for the nine months ended September 30, 2022 and 2021, respectively. As of September 30, 2022, we had an accumulated deficit of $188.7 million.

As we continue to develop, seek regulatory approval for and prepare to commercialize STS101, if approved, our expenses will increase substantially over recent periods.

as we prepare for commercialization of STS101, if approved; obtain, maintain, protect and enforce our intellectual property portfolio; and hire additional personnel. In addition, we expect to continue to incur increasing costs associated with operating as a public company.

In October 2020, we entered into a sales agreement (the “SVB Sales Agreement”) with SVB Securities LLC (formerly known as SVB Leerink LLC) (“SVB”) to sell shares of our common stock, from time to time, through an at-the-market (“ATM”) equity offering program under which SVB acted as our sales agent and pursuant to which we could sell common stock for aggregate gross sales proceeds of up to $50.0 million. The issuance and sale of shares of common stock by us pursuant to the SVB Sales Agreement was deemed an ATM offering under the Securities Act of 1933, as amended. SVB was entitled to compensation for its services equal to up to 3.0% of the gross proceeds of any shares of common stock sold through SVB under the SVB Sales Agreement. As of September 30, 2022, we had received $9.7 million in net proceeds from the sale of 1,538,461 shares of common stock pursuant to the SVB Sales Agreement. Prior to the quarter ended September 30, 2022, we had not issued any shares of common stock under the SVB Sales Agreement. In October 2022, we terminated the SVB Sales Agreement and the offer and sale of shares under the SVB Sales Agreement prospectus supplement filed in October 2020.

In November 2022, we entered into an At-the-Market Sales Agreement (the “Virtu Sales Agreement”), with Virtu Americas LLC (“Virtu”), to sell shares of our common stock, from time to time, through an ATM equity offering program under which Virtu will act as its sales agent and pursuant to which we may sell common stock for aggregate gross sales proceeds of up to $100.0 million. The issuance and sale of shares of common stock by us pursuant to the Virtu Sales Agreement is deemed an ATM offering under the Securities Act of 1933, as amended. Virtu is entitled to compensation for its services equal to up to 3.0% of the gross proceeds of any shares of common stock sold through Virtu under the Virtu Sales Agreement.

We do not have any products approved for sale and have not generated any product revenue since our inception. Our ability to generate product revenue will depend on the successful development and eventual commercialization of STS101. Until such time as we can generate significant revenue from sales of STS101, if ever, we expect to finance our operations through the sale of equity, debt financings or other capital sources, including potential collaborations with other companies or other strategic transactions. Adequate funding may not be available to us on acceptable terms, or at all. If we fail to raise capital or enter into such agreements as and when needed, we may have to significantly delay, scale back, or discontinue the development and commercialization of STS101.

As of September 30, 2022, we had cash, cash equivalents and marketable securities of $64.4 million. Based on our current operating plans, we believe that those cash, cash equivalents and marketable securities will be sufficient to fund our projected operations for at least 12 months from the date of the issuance of these condensed financial statements.

COVID-19

COVID-19 has placed strains on the providers of healthcare services, including the healthcare clinics and institutions where we conduct our ongoing clinical trials and may conduct planned clinical trials. To date, we have initiated and completed enrollment of subjects in our planned STS101 clinical trials in accordance with our previously communicated timeline objectives. We will continue to follow the U.S. Food and Drug Administration (“FDA”) guidance on clinical trial conduct during the COVID-19 pandemic, including with respect to remote monitoring of clinical data. To date, subjects in our clinical trials have generally been able to complete their scheduled visits or treatments and we have been able to collect the essential data from those visits or treatments, as well as from the internet-connected electronic diary devices, as applicable, subjects in our trials may use to record efficacy and other key data.

To date, we have not experienced any disruption in our supply of investigational product necessary to conduct our clinical trials and, given our investigational product inventories, believe we will be able to supply the needs of our clinical trials. We are supporting our employees by utilizing remote work when necessary and appropriate, leveraging virtual meeting technology and encouraging employees to follow local guidelines.

commercial quantities of STS101 utilizing proprietary processes, custom mold tooling that we own, and custom, automated filling, assembly and packaging equipment that we own.

In May 2022, we completed meetings with the Food and Drug Administration (FDA) related to our clinical data and chemistry, manufacturing and controls (CMC) for our planned new drug application (NDA) for STS101. The purpose of these meetings was to discuss and confirm required nonclinical, clinical and CMC content of the STS101 NDA. In November 2022, we announced topline results from our STS101 SUMMIT Phase 3 efficacy trial showing numerical differences in favor of STS101 versus placebo on the pre-specified co-primary endpoints of freedom from pain and freedom from most bothersome symptom (from among photophobia, phonophobia and nausea) at the two-hour post-administration timepoint. However, these differences did not achieve statistical significance (p-value <0.05). In addition, we announced that we do not plan to invest in commercializing STS101 and that we will actively explore alternatives to maximize value for shareholders, while minimizing cash expenditures.

In January 2023, we completed our STS101 ASCEND Phase 3 long-term, open-label safety trial. During the course of the trial, more than 446 subjects treated more than 9,000 attacks with more than 10,500 doses of STS101, with some subjects treating their migraines with STS101 for up to 18 months. STS101 demonstrated a favorable safety and tolerability profile in the ASCEND trial, consistent with clinical experience to date.

In March 2023, we filed an NDA for STS101 with the FDA, and if the FDA accepts the NDA for substantive review, we anticipate the FDA action date for the STS101 NDA will be in January 2024. As has been our longstanding plan, we are seeking FDA approval of STS101 under the 505(b)(2) regulatory pathway that allows us to reference some of the information required for STS101 approval from studies not conducted by Satsuma. Based on written feedback provided to us by the FDA, we believe the results of our completed Phase 1 pharmacokinetic (PK) clinical trials and our ASCEND Phase 3 long-term safety trial are sufficient, in combination with information referenced from studies not conducted by Satsuma, to support FDA approval of STS101.

The FDA has communicated to us in multiple meetings that a pivotal efficacy trial, such as the STS101 SUMMIT Phase 3 trial, which we completed and announced results from in November 2022, is not required for approval of STS101, as the efficacy of STS101 may be established via a “pharmacokinetic bridge” to the 505(b)(2) DHE reference products, D.H.E. 45 (DHE injectable solution) and Migranal (DHE liquid nasal spray). The FDA has also communicated to us that the results of the SUMMIT trial may be considered for inclusion in the STS101 prescribing information if the study is adequate and well-controlled and has results supportive of efficacy. We believe that the SUMMIT trial was adequate and well-controlled and that the results from the trial provide a totality of evidence that is supportive of the efficacy of STS101 in the acute treatment of migraine despite STS101 not having demonstrated statistical superiority over placebo on the co-primary endpoints at the two-hour post-administration timepoint. We further believe that STS101 can address unmet needs of many people with migraine, and that the results of the SUMMIT trial, if included in the prescribing information for STS101, if approved by FDA, would provide important treatment information to physicians and patients.

The clinical portion of our STS101 NDA is supported primarily by clinical trial results, generated with investigational product that incorporates our second-generation, nasal delivery device, from (i) the Phase 1 comparative PK study of STS101 that we completed in June 2021; and (ii) the STS101 Phase 3 ASCEND long-term, open-label safety trial that we completed in January 2023.

We believe our second-generation nasal device, which we introduced into the then-ongoing ASCEND trial in January 2021, in conjunction with improved instructions for STS101 use and training of subjects in our clinical trials, effectively addressed the under-delivery issue first identified with our first-generation delivery device shortly following our announcement of results from the EMERGE Phase 3 efficacy trial in September 2020. Based on our discussions with the FDA, we believe the data in our NDA support approval of STS101 incorporating this second-generation delivery device.

In November 2022 we announced that we do not plan to invest in commercializing STS101 and that we would actively explore alternatives to maximize value for shareholders, while minimizing cash expenditures. Based on the following factors, we revised our business plan and strategy in order to maximize value for our stockholders:

•

results of the Phase 3 SUMMIT trial, in which STS101 did not achieve statistical superiority to placebo on the co-primary outcome measures;

•

our belief, based on review of the SUMMIT trial results in their entirety and our primary market research conducted subsequent to announcement of the SUMMIT trial results, that STS101, if approved and successfully commercialized, has the potential to be an important and differentiated option for the acute treatment of migraine that can address the unmet needs of many people living with migraines;

•

the significant decrease in our stock price that occurred following our announcement of the SUMMIT trial results;

•

current and anticipated future capital market conditions; and

•

our projected need for substantial additional capital were we to continue to develop STS101 through potential regulatory approval and pursue independent commercialization of STS101.

Accordingly, key elements of our revised business plan and strategy are as follows:

•

seek to complete the Offer and Merger on favorable terms under which SNBL will financially support and assume responsibility for completing development of and commercializing STS101;

•

minimize cash expenditures and continue to invest in and advance the STS101 development program only to the extent necessary to maintain its viability until such time as we may be able to complete the Offer and Merger. To this end, in March 2023, we filed an NDA with the FDA for STS101, and if the FDA accepts the NDA for substantive review, we anticipate the FDA action date for the STS101 NDA will be in January 2024; and

•

seek no further funding, as such funding, if available at all, would likely not be available on terms that would be acceptable or favorable to us.

There can be no assurance that we will be able to successfully execute our revised business plan and strategy, and in the event we are unable to timely complete the Offer and Merger on acceptable terms, we may be forced to discontinue development of STS101, withdraw the STS101 NDA and pursue other strategic alternatives, such as dissolution and wind-down.

Our net losses were $10.3 million and $15.5 million for the three months ended March 31, 2023 and 2022, respectively. As of March 31, 2023 we had an accumulated deficit of $222.1 million.

Since our inception in June 2016, we have invested substantially all of our efforts and financial resources in the development of STS101 for the acute treatment of migraine. We have incurred significant operating losses to date and we expect our operating expenses will decrease significantly as we complete the clinical development of STS101, refine the manufacturing processes and seek regulatory approval of STS101 with the filing of an NDA. In addition, until the completion of the Offer and Merger, we expect to continue to incur costs associated with operating as a public company and to maintain, protect and enforce our intellectual property portfolio.

We do not have any products approved for sale and have not generated any product revenue since our inception. Our ability to generate revenues will depend on the successful development of STS101 and eventual commercialization of STS101 by a third party. We do not intend to seek further funding, as we believe such funding, if available at all, would likely not be available on terms that would be acceptable or favorable to us.

As of March 31, 2023, we had cash, cash equivalents and marketable securities of $41.4 million. We believe our cash, cash equivalents and marketable securities would be insufficient to enable us to fund current operations for a period of one year or more from the issuance date of this Quarterly Report on Form 10-Q were we to continue to pursue development and commercialization of STS101. We believe that this raises substantial doubt about our ability to continue as a going concern. See “Organization and Summary of Significant Accounting Policies—Liquidity” in Note 1 to our condensed financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information on our assessment. If we are unable to timely complete the Offer and Merger on acceptable terms, we may be forced to discontinue development of STS101, withdraw the STS101 NDA and pursue other strategic alternatives, such as dissolution and wind-down.

Workforce Reduction

On March 27, 2023, our board of directors approved a plan to reduce our workforce by 9 employees, or approximately 36% of our headcount as of such date (the "Workforce Reduction"), in order to preserve cash and maximize the value of STS101 for a potential strategic transaction partner. In connection with the Workforce Reduction, the position of Detlef Albrecht, M.D., our Chief Medical Officer, with the Company was eliminated. We incurred aggregate charges in connection with the Workforce Reduction of

approximately $1.3 million, which relate primarily to severance payments and related continuation of benefits costs, all of which resulted in cash expenditures, along with the payment of approximately $0.2 million in accrued benefits including paid-time-off.

The foregoing estimates of the charges and expenditures that we expect to incur in connection with the Workforce Reduction, and the timing thereof, are subject to several assumptions and the actual amounts incurred may differ materially from these estimates. In addition, we may incur other charges or cash expenditures not currently contemplated due to unanticipated events that may occur, including in connection with the implementation of the Workforce Reduction.

As requested by Parent, the Company will terminate the employment of each of John Kollins, President and Chief Executive Officer of the Company, and Tom O’Neil, Chief Financial Officer of the Company, effective as of the closing of the Offer and the Merger (and subject to the occurrence of the closing of the Offer and Merger). Prior to the closing, such executive officers shall remain in their current positions with their current compensation. In connection to the Merger and in accordance with the Merger Agreement, each of the directors of the Company will resign as directors of the Company, effective as of the closing of the Offer and the Merger (and subject to the occurrence of the closing of the Offer and Merger).

Components of Operating Results

Operating Expenses

Research and Development Expenses

All of our research and development expenses consist of expenses incurred in connection with the development of STS101 for the acute treatment of migraine. These expenses include:

•

• payroll and personnel-related expenses, including salaries, annual cash bonuses, employee benefit costs and stock-based compensation expenses for our research and product development employees;

•

• fees paid to third parties to conduct preclinical and clinical studies and other research and development activities, including contract research organizations, or CROs, contract manufacturing organizations, or CMOs, consultants, and other service providers; and

•

• costs for licenses and allocated overhead, including rent, equipment, depreciation, information technology costs and utilities.

We expense both internal and external research and development expenses as they are incurred. We have entered into various agreements with third party vendors and CMOs. Our research and development accruals are estimated based on the level of services performed, progress of the studies, including the phase or completion of events or tasks, and contracted costs. The estimated costs of research and development provided, but not yet invoiced, are included in accrued and other current liabilities on the balance sheet. If the actual timing of the performance of services or the level of effort varies from the original estimates, we adjust the accrual accordingly. Payments made to CROs and CMOs under these arrangements in advance of the performance of the related services are recorded as prepaid expenses and other current assets until the services are rendered. Nonrefundable payments made prior to the receipt of goods or services that will be used or rendered for future research and development activities are deferred and capitalized as prepaid expenses and other current assets on our balance sheet. The capitalized amounts are recognized as expense as the goods are delivered or the related services are performed.

As we continue the development of STS101, we ~~will~~expect ~~continue~~that we and Parent, subsequent to the anticipated consummation of the Offer and Merger, will incur ~~significant~~significantly lower research and development expenses, due to decreased clinical trial expenses and as wea ~~seek~~result toof ~~advance~~the ~~STS101~~workforce ~~through~~reduction ~~clinical~~announced ~~development,~~in ~~manufacturing~~March ~~and~~2023. ~~regulatory~~We ~~approval,~~expect that future research and ~~prepare~~development ~~for~~expenses ~~commercialization~~will ofbe incurred as we refine the STS101, ifmanufacturing ~~approved~~processes and seek regulatory approval of STS101. Predicting the timing or the cost to complete ~~our clinical trials or~~ validation of ~~our~~ commercial manufacturing and supply processes is difficult, and delays may occur because of many factors, including factors outside of our control. For example, if the FDA or other regulatory authorities were to require us to conduct clinical trials beyond those ~~that~~completed ~~we currently anticipate~~ or if we experience delays in manufacturing with any of our CMOs, we could be required to expend significant additional financial resources and time on the completion of clinical development. Furthermore, we are unable to predict with certainty when or if STS101 will receive regulatory approval.

General and Administrative Expenses

General and administrative expenses consist principally of payroll and personnel expenses, including salaries, annual cash bonuses, benefits, and stock-based compensation expenses, professional fees for legal, consulting, accounting and tax services, directors and officers insurance, allocated overhead, including rent, equipment, depreciation, information technology costs, and ~~utilities, and other general operating expenses not otherwise classified as research and development expenses including expenses associated with pre-commercialization activities.~~

We anticipate that our general and administrative expenses will increase as a result of increased personnel costs, including salaries, benefits and stock-based compensation expenses, expanded infrastructure and higher consulting, legal and accounting services associated with maintaining compliance with stock exchange listing and Securities and Exchange Commission, or SEC, requirements, expenses associated with pre-commercialization activities, investor relations costs and director and officer insurance premiums associated with being a public company.17

utilities, and other general operating expenses not otherwise classified as research and development expenses including expenses associated with pre-commercialization activities.

We anticipate that general and administrative expenses will decrease as the result of the workforce reduction announced in March 2023, and effective as of the closing of the Offer and the Merger (and subject to the occurrence of the closing of the Offer and Merger), and termination of pre-commercialization activities due to our decision not to pursue independent commercialization STS101. These costs consist of personnel costs, including salaries, benefits and stock-based compensation expenses, consulting, until the closing of the Offer and the Merger, legal and accounting services associated with maintaining compliance with stock exchange listing and Securities and Exchange Commission, or SEC, requirements, investor relations costs and director and officer insurance premiums associated with being a public company.

Interest Income

Interest income consists primarily of interest earned on our cash, cash equivalents and marketable securities.

Interest Expense

Interest expense ~~consists~~consisted primarily of interest related to our long-term debt and accretion of debt discount, debt issuance costs and final payment.

Results of Operations

Comparison of the Three Months Ended ~~September~~March 3031, ~~2022~~2023 and ~~2021~~2022

The following table summarizes our results of operations for the periods indicated (in thousands, except percentages):

	Three Months Ended September 30,
	Three Months Ended March 31,
	2022			2021			Change			Change %
	2023			2022			Change			Change %
Operating expenses:
Research and development	$	117,~~342~~459		$	1011,~~170~~556		$	1(4,~~172~~097	)		12(35	)%
General and administrative		43,~~067~~309			3,~~160~~990			~~907~~(681	)		29(17	)%
Loss from operations		(1510,~~409~~768	)		(1315,~~330~~546	)		(24,~~079~~778	)		16(31	)%
Interest income		~~269~~474			3340			~~236~~434			~~715~~1,085	%
Interest expense		—			(3511	)		3511			(100	)%
Net loss	$	(1510,~~140~~294	)	$	(1315,~~332~~517	)	$	(15,~~808~~223	)		14(34	)%

Research and Development Expenses

Research and development expenses ~~increased~~decreased from the three months ended ~~September~~March 3031, ~~2021~~2022 to the three months ended ~~September~~March 3031, ~~2022~~2023 primarily due to ana ~~increase~~decrease of $15.07 million in clinical trial costs, which was ~~mainly~~the ~~due~~net toof ana ~~increase~~decrease of $4.6 million for the SUMMIT efficacy trial and $1.2 million for the ASCEND safety trial, offset by increase of $0.1 million for NDA preparation work, as well as ana ~~increase~~decrease of $0.42 million in payroll and personnel expenses, ~~partly~~partially offset by aan ~~decrease~~increase of $0.29 million in severance payments due to the Workforce Reduction, and an increase of $0.9 million in manufacturing activities.

General and Administrative Expenses

General and administrative expenses ~~increased~~decreased from the three months ended ~~September~~March 3031, ~~2021~~2022 to the three months ended ~~September~~March 3031, ~~2022~~2023 primarily due to ana ~~increase~~decrease of $0.52 million ~~due to increased pre-commercialization activity, an increase~~ of ~~$0.3 million of~~ payroll and personnel expenses, including salaries, benefits and stock-based compensation expenses, and ana ~~increase~~decrease of $0.28 inmillion ~~professional~~due ~~services~~to ~~for~~decreased ~~consulting,~~pre-commercialization ~~accounting~~activity, ~~legal,~~partly ~~tax~~offset ~~and~~by ~~other~~an ~~administrative~~increase ~~fees~~of $0.3 million in severance payments due to the Workforce Reduction.

Interest Income

Interest income increased from the three months ended ~~September~~March 3031, ~~2021~~2022 to the three months ended ~~September~~March 3031, ~~2022~~2023 primarily as a result of the higher interest yields in the three months ended ~~September~~March 3031, ~~2022~~2023, partly offset by a decrease in average balances of our cash, cash equivalents and marketable securities in the three months ended ~~September~~March 3031, ~~2022~~2023.

~~Interest Expense~~18

Interest expense decreased from the three months ended September 30, 2021 to the three months ended September 30, 2022 primarily attributable to a decrease of outstanding debt balance, which was fully repaid in May 2022.

Comparison of the Nine Months Ended September 30, 2022 and 2021

	Nine Months Ended September 30,
	2022			2021			Change			Change %
Operating expenses:
Research and development	$	35,394		$	25,769		$	9,625			37	%
General and administrative		11,961			9,837			2,124			22	%
Loss from operations		(47,355	)		(35,606	)		(11,749	)		33	%
Interest income		443			124			319			257	%
Interest expense		(13	)		(139	)		126			(91	)%
Net loss	$	(46,925	)	$	(35,621	)	$	(11,304	)		32	%

Research and Development Expenses

Research and development expenses increased from the nine months ended September 30, 2021 to the nine months ended September, 2022 primarily due to an increase of $9.6 million in clinical trial costs, which was the net of an increase of $10.1 million for the SUMMIT efficacy trial, $0.7 million for the ASCEND safety trial, and $0.4 million for NDA preparation work, as well as an increase of $1.3 million in payroll and personnel expenses offset by decreases of $1.7 million for the STS101 Phase 1 trials, and a decrease of $1.5 million in manufacturing activities.

General and Administrative Expenses

General and administrative expenses increased from the nine months ended September 30, 2021 to the nine months ended September 30, 2022 primarily due to an increase of $2.0 million due to increased pre-commercialization activity, and an increase of $0.6 million of payroll and personnel expenses, including salaries, benefits and stock-based compensation expenses, partly offset by a decrease of $0.3 in professional services for consulting, accounting, tax and other administrative fees, and a decrease of $0.2 million in allocated facilities related expenses.

Interest Income

Interest income increased from the nine months ended September 30, 2021 to the nine months ended September 30, 2022 primarily as a result of the higher interest yields in the nine months ended September 30, 2022, partly offset by a decrease in average balances of our cash, cash equivalents and marketable securities in the nine months ended September 30, 2022.

Interest Expense

Interest expense decreased from the nine months ended September 30, 2021 to the nine months ended September 30, 2022 primarily attributable to a decrease of outstanding debt balance, which was fully repaid in May 2022.

Liquidity and Capital Resources

Sources of Liquidity

We have historically financed our operations primarily through the issuance of common stock in our IPO, and private placements of equity securities and borrowings under our long-term debt facility. We have no products approved for sale, and we have not generated any revenue since inception. We expect to incur significant additional operating losses over at least the next several years.

In October 2020, we entered into the SVB Sales Agreement with SVB to sell shares of our common stock, from time to time, through an ATM equity offering program under which SVB acted as our sales agent and pursuant to which we could sell common stock for aggregate gross sales proceeds of up to $50.0 million. AsIn of September ~~30,~~ 2022, we ~~had~~ received $9.7 million in net proceeds from the sale of shares of common stock pursuant to the SVB Sales Agreement. On October 26, 2022, we terminated the SVB Sales Agreement. As a result, the ATM equity offering facility under the SVB Sales Agreement is no longer available for use.

In November 2022, we entered into the Virtu Sales Agreement with Virtu to sell shares of our common stock, from time to time, through an ATM equity offering program under which Virtu will act as our sales agent and pursuant to which we may sell common stock for aggregate gross sales proceeds of up to $100.0 million.

Credit Facility

In October 2018, we entered into the Loan Agreement with Silicon Valley Bank. The Loan Agreement provided for loan advances of up to $10.0 million. We drew down the first advance of $5.0 million as of the effective date of the Loan Agreement. The remaining $5.0 million under the facility was never drawn down and is no longer available for draw. Interest on the loan advances was payable monthly at a floating per annum rate equal to the greater of 1.5% above the prime rate and 6.5%. Upon the occurrence of an event of default, interest would increase to 5.0% above the rate that is otherwise applicable. Principal on the outstanding loan advance was repayable commencing on December 1, 2019 in 30 monthly payments through maturity. The maturity date of the loan advances was May 1, 2022.

In May 2022, we repaid our entire obligation under the Loan Agreement amounting to $0.4 million, including outstanding loan amount of $0.2 million and final payment of $0.2 million.

On March 10, 2023, the California Department of Financial Protection and Innovation closed Silicon Valley Bank and appointed the Federal Deposit Insurance Corporation ("FDIC") as receiver. On March 12, 2023, the U.S. Department of the Treasury, the Federal Reserve and the FDIC released a joint statement confirming that all depositors of Silicon Valley Bank would have access to all of their money after only one business day of closure, including funds held in uninsured deposit accounts. We received full access to the funds in our deposit and money market accounts on March 13, 2023. In light of actions by the federal government to fully protect deposit accounts, we believe that the impact on our liquidity is immaterial.

Future Funding Requirements

We have incurred net losses since our inception. Our net losses were $4610.93 million and $3515.65 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2022~~2023 and ~~2021~~2022, respectively. ~~Based~~We ~~on our current operating plan, we~~ believe ~~that~~ our ~~existing~~ cash, cash equivalents and marketable securities ~~will~~would be ~~sufficient~~insufficient to ~~fund~~enable ~~our~~us ~~planned~~to fund current operations for ata ~~least~~period 12of ~~months~~one year or more from the issuance date of ~~the~~this ~~issuance~~Quarterly Report on Form 10-Q were we to continue to pursue development and commercialization of ~~these~~STS101. We believe that this raises substantial doubt about our ability to continue as a going concern. See Note 1 to our condensed financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information on our assessment.

AsBased weon ~~continue~~our ~~the~~current ~~development~~plans ofand ~~STS101~~strategies, we anticipate our operating expenses ~~may~~will ~~increase~~decrease ~~substantially,~~ as we ~~seek~~do not plan to ~~advance~~invest in commercializing STS101 ~~through~~and ~~clinical~~plan ~~development,~~to ~~manufacturing~~complete the Offer and ~~regulatory~~Merger. ~~approval~~While less than historically incurred, ~~and~~on-going ~~prepare~~expenses ~~for~~will ~~commercialization~~be required to continue development of STS101, ifto ~~approved~~maintain its viability for SNBL.

17We do not intend to pursue further funding and, instead, are seeking to complete the Offer and Merger with SNBL, who would fund further development and commercialization of STS101.

ToIf ~~the extent~~ we ~~continue~~are tounable ~~develop, seek approval for and prepare~~ to ~~commercialize~~timely ~~STS101,~~complete ~~if approved, we will continue to require additional capital to fund operations for~~ the ~~foreseeable~~Offer ~~future. We do not expect to generate any meaningful revenue unless~~ and ~~until~~Merger, we ~~obtain~~would ~~regulatory~~likely ~~approval~~terminate development of ~~and commercialize~~ STS101, orwithdraw ~~enter~~our ~~into~~NDA ~~collaborative agreements with third parties,~~ and wepursue ~~do not know when, or if, either will occur. We may seek to raise capital through private or public equity or debt financings, collaborative or~~ other ~~arrangements~~strategic ~~with corporate sources~~alternatives, orsuch ~~through other sources of financing. Adequate additional funding may not be available to us on acceptable terms, or at all. Our failure to raise capital~~ as ~~and~~dissolution ~~when needed would have a negative impact on our financial condition~~ and ~~our ability to pursue the development and commercialization of STS101~~wind-down. ~~Our~~See ~~need~~“Risk Factors” for additional ~~capital~~risks ~~will~~associated ~~depend~~with onsubstantial ~~many~~capital ~~factors, including:~~requirements.

• the scope, timing, rate of progress, results and costs of our clinical trials for STS101, and most particularly, the SUMMIT Phase 3 efficacy trial for STS101, as well as any clinical program we may pursue in any foreign jurisdictions;19

• the scope and costs of manufacturing development and commercial manufacturing activities;

• the cost, timing and outcome of regulatory review of STS101;

• the cost of building a commercial organization, including a sales force, in anticipation of commercialization of STS101;

• the cost and timing associated with commercializing STS101, if approved;

• the number and scope of clinical programs we decide to pursue;

• the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;

• any product liability or other lawsuits related to STS101;

• our efforts to enhance operational systems and our ability to attract, hire and retain qualified personnel, including personnel to support the commercialization of STS101;

• the extent to which we acquire or in-license other product candidates or technologies;

• the payment of royalty payments owed under our existing license agreement;

• our ability to establish and maintain collaborations on favorable terms, if at all;

• the costs associated with being a public company; and

• the timing, receipt and amount of sales of STS101, if approved.

We are subject to the risks typically related to the development of new drug product candidates, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. Despite our implementation of a new development plan for STS101, such plan may change, which could significantly change the costs and timing associated with its development of STS101 and our operations. Furthermore, our operating plans may change in the future, and we will continue to require additional capital to meet operational needs and capital requirements associated with such operating plans. If we raise additional funds by issuing equity securities, our stockholders may experience dilution. Any debt financing into which we enter may impose upon us covenants that restrict our operations, including limitations on our ability to incur liens or additional debt, pay dividends, repurchase our common stock, make certain investments or engage in certain merger, consolidation or asset sale transactions. For example, the Loan Agreement contained many of these restrictions. Any debt financing or additional equity that we raise may contain terms that are not favorable to us or our stockholders. If we are unable to raise additional funds when needed, we may be required to delay, reduce, or terminate our development program and clinical trials. We may also be required to sell or license to others rights to STS101 in certain territories or indications that we would prefer to develop and commercialize ourselves. Adequate additional funding may not be available to us on acceptable terms or at all. See “Risk Factors” for additional risks associated with our substantial capital requirements.

Summary Statement of Cash Flows

The following table sets forth the primary sources and uses of cash and cash equivalents for each of the periods presented below (in thousands):

	Nine Months Ended September 30,
	Three months ended March 31,
	2022			2021
	2023			2022
Net cash (used in) provided by:
Operating activities	$	(3911,~~422~~385	)	$	(2914,~~395~~317	)
Investing activities		5514,~~421~~482			~~(38~~20,~~396~~341	)
Financing activities		~~8,722~~—			~~73,723~~(500	)
Net increase in cash and cash equivalents	$	243,~~721~~097		$	5,~~932~~524

Cash Flows Used in Operating Activities

Net cash used in operating activities was $3911.4 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2022~~2023. Cash used in operating activities was primarily due to the use of funds in our operations to develop STS101, which resulted in a net loss of $4610.93 million, adjusted for a decrease in accrued and other current liabilities of $1.42 million, ~~which amounts were partially offset by~~ a decrease in ~~prepaid~~accounts ~~expenses~~payable ~~and other assets~~ of $31.60 million, anand ~~increase~~net inamortization ~~accounts payable~~ of ~~$0.5~~premiums ~~million,~~and ~~stock-based~~discounts ~~compensation~~on ~~expense~~marketable securities of $40.2 million, ~~net~~which ~~amortization~~amounts ofwere ~~premiums~~partially ~~and~~offset ~~discounts~~by ona ~~marketable~~decrease ~~securities~~in prepaid expenses and other assets of $0.3 million, and ~~depreciation~~stock-based compensation expense of $01.31 million. The decrease in prepaid expenses and other assets, ~~and~~ accrued and other current liabilities and ~~increase in~~ accounts payable were primarily the result of the timing of payments to our vendors.

Net cash used in operating activities was $2914.43 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2021~~2022. Cash used in operating activities was primarily due to the use of funds in our operations to develop STS101, which resulted in a net loss of $3515.65 million, adjusted for a decrease in ~~accounts~~accrued ~~payable~~and other liabilities by $1.29 million, which amounts were partially offset by a decrease in prepaid expenses and other assets of $1.92 million, an increase in ~~accrued~~accounts ~~and~~payable ~~other liabilities~~ of $0.73 million, stock-based compensation expense of $41.2 million, ~~depreciation expense of $0.3 million,~~ and net amortization of premiums and discounts on marketable securities of $0.43 million. The decrease in ~~accounts~~accrued ~~payable~~and other liabilities and prepaid expenses and other assets and increase in ~~accrued~~accounts ~~and~~payable ~~other liabilities~~ were primarily the result of the timing of payments to our vendors.

Cash Flows Provided by ~~(Used in)~~ Investing Activities

Net cash provided by investing activities was $5514.45 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2022~~2023, which consisted of proceeds from maturities of marketable securities of $8115.09 million, which amounts were partially offset by purchases of marketable securities of $251.34 million ~~and purchases of property and equipment of $0~~.~~3 million.~~

Net cash ~~used~~provided inby investing activities was $3820.43 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2021~~2022, which consisted of ~~purchases~~proceeds from maturities of marketable securities of $6922.24 million ~~and purchases of property and equipment of $2.0 million~~, which amounts were partially offset by ~~proceeds~~purchases ~~from maturities~~ of marketable securities of $322.80 million.

Cash Flows ~~Provided~~Used byin Financing Activities

Net cash ~~provided~~used byin financing activities was $80.75 million for the ~~nine~~three months ended ~~September~~March 3031, 2022, which ~~consisted~~primarily ofrelated ~~$9.7~~to ~~million of net cash proceeds from our At-the-Market offering and proceeds from the issuance of common stock under employee share purchase plan of $0.1 million, partially offset by~~ repayment of debt of $10.15 million.

Net cash provided by financing activities was $73.7 million for the nine months ended September 30, 2021, which consisted of $75.2 million of net cash proceeds from our Private Placement, partially offset by repayment of debt of $1.5 million.

Critical Accounting Policies, Significant Judgments and Estimates

Our unaudited interim condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP. The preparation of these unaudited interim condensed financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

19Our critical accounting policies are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies, Significant Judgments and Use of Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2022. During the three months ended March 31, 2023, there were no material changes to our critical accounting policies from those discussed in the Annual Report on Form 10-K for the year ended December 31,

Our critical accounting policies are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies, Significant Judgments and Use of Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2021. During the nine months ended September 30, 2022, there were no material changes to our critical accounting policies from those discussed in the Annual Report on Form 10-K for the year ended December 31, 2021. See Note 1 to the unaudited interim condensed financial statements appearing elsewhere in this Quarterly Report on Form 10-Q for related discussions on updates on recently issued accounting pronouncements.20

2022. See Note 1 to the unaudited interim condensed financial statements appearing elsewhere in this Quarterly Report on Form 10-Q for related discussions on updates on recently issued accounting pronouncements.

JOBS Act Accounting Election

The Jumpstart Our Business Startups Act of 2012, or the JOBS Act, permits an “emerging growth company” such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We have elected to use this extended transition period under the JOBS Act. As a result, our financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies, which may make comparison of our financials to those of other public companies more difficult.

Recent Accounting Pronouncements

See “Organization and Summary of Significant Accounting Policies—Recent Accounting Pronouncements” in Note 1 to our unaudited interim condensed financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Interest Rate Sensitivity

As of ~~September~~March 3031, ~~2022~~2023, we had cash, cash equivalents and marketable securities of $6441.4 million, consisting of interest-bearing money market funds, investments in U.S. government agency bonds, corporate bonds and asset backed securities for which the fair value would be affected by changes in the general level of U.S. interest rates. However, due to the short-term maturities and the low-risk profile of our cash equivalents and marketable securities, an immediate 10% change in interest rates would not have a material effect on the fair value of our cash equivalents and marketable securities.

We do not believe that inflation, interest rate changes or exchange rate fluctuations have had a significant impact on our results of operations for any periods presented herein.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Due to the inherent limitations of control systems, not all misstatements may be detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of a simple error or mistake. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of ~~September~~March 3031, ~~2022~~2023.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the ~~nine~~three months ended ~~September~~ 30March 31, ~~2022~~ 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

2021

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

Legal Proceedings

We are not currently involved in any litigation or legal proceedings that, in management’s opinion, are likely to have any material adverse effect on our company.

Item 1A. Risk Factors.

Our business involves significant risks, some of which are described below. You should carefully consider these risks, as well as the other information in this Quarterly Report on Form 10-Q, including our unaudited condensed financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The occurrence of any of the events or developments described below could have a material adverse effect on our business, results of operations, financial condition, prospects and stock price. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations.

Risks Related to ~~Our~~the ~~Business~~Offer and Merger

WeThe ~~are~~Offer aand ~~clinical-stage~~Merger ~~biopharmaceutical~~are ~~company~~subject ~~with~~to a ~~limited~~number ~~operating~~of ~~history~~conditions ~~and~~beyond noour ~~products approved for commercial sale~~control. WeFailure ~~have~~to ~~incurred~~complete ~~significant~~the ~~losses~~Offer ~~since our inception,~~ and wethe ~~anticipate~~Merger ~~that~~within wethe ~~will~~expected ~~continue~~time toframe, ~~incur~~or ~~significant~~at ~~losses~~all, ~~for~~could ~~the~~have ~~foreseeable~~a ~~future,~~material ~~which,~~adverse ~~together~~effect ~~with~~on our ~~limited~~business, operating ~~history~~results, ~~makes~~financial itcondition ~~difficult~~and ~~to assess~~ our ~~prospects~~share price.

~~Biopharmaceutical~~On ~~product~~April ~~development~~16, is2023, awe ~~highly~~entered ~~speculative~~into ~~undertaking~~the Merger Agreement, pursuant to which, and ~~involves~~upon athe ~~substantial~~terms ~~degree~~and subject to the conditions thereof, Purchaser commenced the Offer to purchase each issued and outstanding share of ~~risk~~common stock of the Company. WeSubject ~~are~~to athe ~~clinical-stage~~terms ~~biopharmaceutical~~and ~~company~~conditions of the Merger Agreement, if certain conditions are satisfied and wethe ~~have~~Offer ~~only~~closes, Parent would acquire any remaining shares in connection with a ~~limited~~merger ~~operating~~of ~~history~~Purchaser ~~upon~~with ~~which~~and ~~you~~into ~~can~~the ~~evaluate~~Company, ~~our~~with ~~business~~the Company being the surviving corporation and ~~prospects~~a wholly-owned subsidiary of Parent. WeConsummation ~~have~~of nothe ~~products~~Offer ~~approved~~is ~~for~~subject ~~commercial~~to ~~sale~~certain conditions, ~~have~~including, ~~not~~the ~~generated~~Company’s ~~any~~stockholders ~~revenue~~tendering ~~from~~a ~~product~~minimum ~~sales~~number ~~and~~of ~~have~~shares ~~incurred~~of ~~losses~~Company Common Stock in ~~each~~the ~~year~~Offer ~~since~~(the ~~our~~“Minimum ~~inception~~Condition”), inno ~~June~~governmental ~~2016.~~entity Inwith ~~addition~~competent jurisdiction having enacted, weissued, ~~have~~promulgated, ~~limited~~enforced ~~experience~~or ~~and~~entered ~~have~~into ~~not~~any ~~yet~~law ~~demonstrated~~or anjudgment ~~ability~~that torestrains, ~~successfully~~enjoins ~~overcome~~or ~~many~~otherwise ofprohibits the ~~risks~~Merger ~~and~~(the ~~uncertainties~~“Governmental ~~frequently~~Entity ~~encountered~~Condition”) byand ~~companies~~us inhaving ~~new~~a ~~and~~minimum ~~rapidly~~net ~~evolving~~cash ~~fields~~balance, ~~particularly~~as determined in accordance with the ~~pharmaceutical~~Merger ~~industry.~~Agreement (the “Net Cash Condition”).

InWe ~~September~~cannot ~~2020,~~predict wewhether ~~announced~~and ~~topline~~when ~~data from~~ the ~~EMERGE~~conditions ~~Phase~~to 3the ~~efficacy~~Offer ~~trial,~~will ~~which~~be ~~randomized~~satisfied. ~~1,201~~If ~~migraine~~one ~~subjects~~or tomore ~~one~~ of ~~two~~these ~~STS101~~conditions ~~dose~~are ~~strengths~~not orsatisfied, ~~placebo. Although STS101 3.9 mg~~ and ~~5.2~~as mga ~~showed~~result, ~~favorable~~we ~~numerical~~do ~~differences~~not ~~versus~~complete ~~placebo on~~ the ~~pre-specified~~Offer ~~co-primary endpoints of freedom from pain~~ and ~~freedom~~Merger, ~~from~~we ~~most~~would ~~bothersome~~remain ~~symptom~~liable ~~(from~~for ~~among~~significant ~~photophobia~~transaction costs, ~~phonophobia~~ and ~~nausea)~~the atfocus ~~two~~of ~~hours~~our ~~post-administration,~~management ~~these~~would ~~differences~~have ~~did~~been ~~not~~diverted ~~achieve~~from ~~statistical~~seeking ~~significance~~other ~~for~~potential ~~either~~strategic ~~dosage strength. In March 2021~~opportunities, wein ~~announced~~each ancase ~~update~~without torealizing ~~our~~any ~~development~~benefits ~~plan~~of ~~for~~the ~~STS101~~Offer ~~that~~and ~~takes into account~~ the ~~findings~~Merger. ~~from~~Certain ~~our~~costs ~~detailed~~associated ~~analyses~~with ofthe ~~results~~Offer and ~~data~~Merger ~~from~~have ~~our~~already ~~EMERGE~~been ~~efficacy~~incurred ~~trial.~~or ~~Our~~may ~~updated~~be ~~development~~payable ~~plan~~even ~~for~~if ~~STS101~~the ~~included~~Offer aand ~~Phase~~Merger 1are ~~trial,~~not ~~which~~consummated. weFinally, ~~completed~~any indisruptions ~~June~~to ~~2021,~~our tobusiness ~~evaluate~~resulting from the ~~pharmacokinetics,~~announcement ~~safety~~ and ~~tolerability~~pendency of ~~STS101~~the ~~5.2~~Offer mg and ~~two~~Merger, ~~higher~~including ~~dose~~any ~~strengths,~~adverse ~~the~~changes ~~ongoing~~in ~~ASCEND~~our ~~Phase~~relationships 3with ~~long-term~~our ~~safety~~customers, ~~trial~~partners, suppliers and ~~the~~employees, ~~ongoing~~could ~~pivotal~~continue ~~SUMMIT~~or ~~Phase~~accelerate 3in ~~efficacy~~the ~~trial~~event that we ~~initiated~~fail into ~~June~~consummate ~~2021 and for which we expect topline results in~~ the ~~fourth~~Offer ~~quarter~~and ~~of 2022~~Merger.

WeOur ~~have~~share ~~limited~~price ~~experience~~may asalso afluctuate ~~company~~significantly ~~conducting~~based ~~Phase~~on 3announcements ~~clinical~~by ~~trials~~SNBL, ~~submitting~~other ~~applications~~third ~~for~~parties, ~~regulatory~~or ~~approvals~~us regarding the Offer and Merger or based on market perceptions of the likelihood of the satisfaction of the Minimum Condition or other conditions to the consummation of the Offer and Merger. Such announcements may lead to perceptions in the market that the Offer and Merger may not be completed, which could cause our share price to fluctuate or decline. Other factors outside of our control, such as ana ~~NDA~~governmental entity enacting legislation that prohibits the merger, orcould ~~commercializing~~cause ~~any~~us ~~products~~not to satisfy the Governmental Entity Condition and thus the merger would not be consummated. Further, unforeseen and unexpected expenses could cause our net cash to be below the applicable threshold thus causing us to fail to satisfy the Net Cash Condition.

WeIf ~~have~~we ~~had~~do ~~significant~~not ~~operating~~consummate ~~losses since our inception. Our net losses for~~ the ~~nine~~Offer ~~months ended September 30, 2022~~ and ~~2021 were approximately $46.9 million and $35.6 million~~Merger, ~~respectively.~~the Asprice of ~~September~~our ~~30,~~common ~~2022,~~stock wemay ~~had~~decline ansignificantly ~~accumulated~~from ~~deficit~~the ofcurrent ~~$188.7~~market ~~million.~~price, ~~Substantially~~which ~~all~~may ofreflect ~~our~~a ~~losses~~market ~~have~~assumption ~~resulted~~that ~~from~~the ~~expenses~~Offer ~~incurred~~and inMerger ~~connection~~will ~~with~~be ~~the~~consummated. ~~development~~Any of ~~STS101~~these ~~and~~events ~~general~~could ~~and~~have ~~administrative costs associated with our operations.~~

STS101 will require substantial additional development time and resources before we would be able to apply for or receive regulatory approvals and begin generating revenue from product sales. In addition, we expect to continue to incur increasing costs associated with operating as a public company. We also do not yet have a sales organization or commercial infrastructure and, accordingly, we will incur significant expenses to establish a sales organization and associated commercial infrastructure in advance of generating any commercial product sales. We expect to continue to incur losses for the foreseeable future, and we anticipate these losses will increase as we continue to develop STS101 through clinical trials and regulatory submissions. Even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods. Our prior losses, combined with expected losses, have had and will continue to have an adverse effect on our stockholders’ equity and working capital.

We will require substantial additional financing to achieve our goals, and a failure to obtain this capital when needed on acceptable terms, or at all, could force us to delay, limit, reduce or terminate our product development or commercialization efforts.

Since our inception, we have invested substantially all of our efforts and financial resources in the development of STS101 for the acute treatment of migraine. We believe that we will continue to expend substantial resources for the foreseeable future in connection with the clinical development of STS101. These expenditures will include costs associated with clinical trials, obtaining regulatory approvals, and manufacturing and supply, as well as commercializing STS101, if approved for sale. In addition, other unanticipated costs may arise. Because the outcome of any clinical trial is highly uncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of STS101.

As of September 30, 2022, we had resources consisting of cash, cash equivalents and marketable securities of $64.4 million. Based on our current operating plan, we believe our existing cash, cash equivalents and marketable securities will be sufficient to fund our planned operations into the second half of 2023. However, our operating plans may change as a result of many factors currently unknown to us, and we may need to seek additional funds sooner than planned. Adequate funding may not be available to us on acceptable terms, or at all, particularly in light of the current economic uncertainty and potential local and/or global economic recession. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. We do not expect to generate any meaningful revenue unless and until we obtain regulatory approval of and commercialize STS101 or enter into collaborative agreements with third parties, and we do not know when, or if, either will occur. We may seek to raise capital through private or public equity or debt financings, collaborative or other arrangements with corporate sources, or through other sources of financing. Adequate additional funding may not be available to us on acceptable terms, or at all. Our failure to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue the development and commercialization of STS101.

Our future capital requirements depend on many factors, including:

• the scope, timing, rate of progress, results and costs of our clinical trials for STS101, including our ongoing SUMMIT Phase 3 efficacy and ASCEND Phase 3 long-term safety trials, and including in connection with any clinical program we may pursue in foreign jurisdictions;

• the cost of building a sales force and associated commercial infrastructure in anticipation of commercializing STS101;

• the cost and timing associated with commercializing STS101, if approved;

• the number and scope of clinical programs we decide to pursue;

• the scope and costs of manufacturing development and commercial manufacturing activities;

• the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;

• any product liability or other lawsuits related to STS101;

• the extent to which the recent COVID-19 pandemic may impact our ongoing or planned clinical trials;

• our efforts to enhance operational systems and our ability to attract, hire and retain qualified personnel, including personnel to support the development of STS101;

• the extent to which we acquire or in-license other product candidates or technologies;

• the payment of royalty payments owed under our existing license agreement;

• our ability to establish and maintain collaborations on favorable terms, if at all;

• the costs associated with being a public company; and

• the timing, receipt and amount of revenues generated by sales of STS101, if approved.

Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timely basis, we may be required to:

•a ~~delay,~~material ~~limit~~adverse effect on our business, ~~reduce~~operating orresults ~~terminate~~and ~~clinical~~financial ~~studies~~condition orand ~~other~~could ~~development~~cause ~~activities~~a ~~for~~decline ~~STS101;~~in orthe price of our common stock.

•The ~~delay,~~Offer ~~limit,~~consideration ~~reduce~~payable orto ~~terminate~~holders of our ~~efforts~~common tostock ~~establish~~will ~~manufacturing~~not ~~and~~be ~~sales~~adjusted ~~and~~for ~~marketing~~changes ~~capabilities~~in orour ~~other~~business, ~~activities~~assets ~~that~~liabilities, ~~may~~prospects, beoutlook, ~~necessary~~financial tocondition ~~commercialize~~or ~~STS101~~results of operations, or ~~reduce~~in ~~our~~the ~~flexibility~~event inof ~~developing~~any orchange ~~maintaining~~in our ~~sales~~share ~~and marketing strategy~~price.

WeThe ~~also~~Offer ~~could~~consideration bepayable ~~required~~ to ~~seek~~holders ~~funds through arrangements with collaborators or others that may require us to relinquish rights to some~~ of our ~~technologies~~common orstock ~~STS101~~will ~~that we would otherwise pursue on our own. We do~~ not ~~expect~~be toadjusted ~~realize~~for ~~revenue~~changes ~~from sales of STS101~~ in ~~the~~our ~~foreseeable~~business, ~~future~~assets, ~~if at all~~liabilities, ~~unless and until STS101 is clinically tested~~prospects, ~~approved for commercialization and successfully commercialized. To date~~outlook, wefinancial ~~have~~condition ~~funded~~or ~~our~~results ~~operations through private placements~~ of ~~convertible preferred stock~~operations, aor ~~convertible~~changes ~~promissory note, long-term debt, and common stock. We will be required to seek additional funding~~ in the ~~future~~market ~~and~~price ~~currently intend to do so through public or private equity offerings or debt financings~~of, ~~credit~~analyst orestimates ~~loan facilities or a combination~~ of, ~~one~~ or ~~more~~projections ofrelating ~~these funding sources. Our ability~~ to ~~raise additional funds will depend on financial~~, ~~economic and other factors, many of which are beyond~~ our ~~control~~ordinary shares. IfFor ~~we raise additional funds by issuing equity securities~~example, ~~including~~if ~~pursuant~~we toexperienced ~~the~~an ~~Virtu~~improvement ~~Sales~~in ~~Agreement,~~ our ~~stockholders~~business, ~~will suffer dilution and the terms of any financing may adversely affect the rights of our stockholders. In addition~~assets, ~~as a condition to providing additional funds to us~~liabilities, ~~future investors may demand~~prospects, ~~and may be granted~~outlook, ~~rights~~financial ~~superior~~condition toor ~~those~~results of ~~existing~~operations ~~stockholders.~~prior ~~Debt financing, if available, is likely~~ to ~~involve~~the ~~restrictive~~consummation ~~covenants~~of ~~limiting~~the ~~our~~Offer ~~flexibility in conducting future business activities,~~ and, ~~in the event of insolvency~~Merger, ~~debt~~there ~~holders~~ would be ~~repaid~~no ~~before~~adjustment ~~holders~~to ofthe ~~our~~amount ~~equity securities received any distribution~~ of ~~our~~the ~~corporate~~proposed ~~assets~~Offer consideration.

Our ~~business~~stockholders ismay ~~entirely~~not ~~dependent~~receive any payment on the ~~successful~~CVRs ~~development, regulatory approval~~ and ~~commercialization~~the ofCVRs ~~STS101,~~may ~~our~~otherwise ~~only~~expire ~~product candidate under development~~valueless.

WeIf ~~have~~the ~~invested~~Offer ~~substantially~~and ~~all~~the Merger are completed, the holders of our ~~efforts~~common stock will be entitled to receive one contingent value right per share of our common stock (a "CVR") representing the right to receive, subject to the terms and ~~financial~~conditions ~~resources~~of the contingent value rights agreement substantially in the ~~development~~form ofattached ~~STS101~~to ~~for~~the Merger Agreement (the ~~acute~~"CVR ~~treatment~~Agreement"), ofadditional ~~migraine~~payments based on the proceeds, ~~which~~subject ~~has~~to ~~not~~certain ~~been~~adjustments, ~~approved~~received ~~for~~by Parent from (i) the sale, license or ~~commercial~~other ~~use.~~grant ~~Currently,~~of ~~STS101~~rights iswith ~~our~~respect ~~only~~to ~~product~~the ~~candidate~~STS101 ~~and~~program weor ~~have~~any ~~not~~part ~~licensed~~thereof, ~~acquired~~(ii) the sale or disposition of all or substantially all of the business or assets of the Company (that exists immediately prior to the closing of the Merger), or ~~invented~~(iii) ~~any~~the ~~other~~sale ~~product~~or ~~candidates~~disposition ~~for~~of ~~pre-clinical~~all or ~~clinical~~substantially ~~evaluation~~all of the equity of the Company or Purchaser. ~~This~~The ~~may~~CVRs ~~make~~will annot ~~investment~~be transferable, except in ~~our~~the ~~company~~limited ~~riskier~~circumstances ~~than~~specified ~~similar~~in ~~companies~~the ~~that~~CVR ~~have~~Agreement, ~~multiple~~will ~~product~~not ~~candidates~~have inany ~~active~~voting ~~development~~or ~~and~~dividend ~~that~~rights, ~~therefore~~and ~~may~~interest bewill ~~able~~not toaccrue ~~better~~on ~~sustain~~any aamounts ~~failure~~potentially ofpayable aon ~~lead~~the ~~candidate~~CVRs. ~~The~~Accordingly, ~~success~~the right of ~~our~~any ~~business,~~of ~~including~~ our ~~ability~~stockholders to ~~finance~~receive ~~our~~any ~~company~~future ~~and~~payment ~~generate~~on or derive any ~~revenue~~value infrom the ~~future,~~CVRs will ~~depend~~be ~~entirely~~contingent onsolely upon the ~~successful~~proceeds ~~development~~received by Parent, ~~regulatory~~as ~~approval~~outlined above, and ~~commercialization~~if ofthese ~~STS101~~events are not achieved for any reason within the time periods specified in the CVR Agreement, ~~which~~no ~~may~~payments ~~never~~will ~~occur.~~be made under the CVRs, and the CVRs will expire valueless.

AsThe weMerger ~~continue~~Agreement ~~development~~contains ofprovisions STS101, we will continue to incur significant research and development expenses, as we seek to advance STS101 through clinical development, manufacturing and regulatory approval, and prepare for commercialization of STS101, if approved. We may have inadequate financial or other resources to advance STS101 through the clinical trial process, depending on the requirements of the FDA. In addition, our clinical development program for STS101 may not lead to regulatory approval from the FDA and similar foreign regulatory agencies if we fail to demonstrate in ongoing or future trials that ~~STS101~~could isdiscourage safe and effective, and we may therefore fail to commercialize STS101. The challenge of establishing STS101 as being safe and effective may be even more difficult given the failure of STS101 to demonstrate statistically significant effects as compared to placebo on the co-primary endpoints of our EMERGE trial. Even if approved, we may fail to obtain differentiated product labeling for STS101 as compared to other available products for migraine and, as a ~~result,~~potential ~~our~~competing ~~commercial prospects may be impaired~~acquirer. Further, STS101 may not receive regulatory approval even if it is successful in planned and future clinical trials. Any failure to obtain regulatory approval of STS101 would have a material and adverse impact on our business. Even if we successfully obtain regulatory approvals to market STS101, our revenue will be dependent, in part, upon the size of the markets in the territories for which we gain regulatory approval. If the markets or patient subsets that we are targeting are not as significant as we estimate, we may not generate significant revenues from sales of STS101, even if approved.

The ~~clinical~~Merger Agreement provides that, upon the terms and ~~commercial~~subject ~~success~~to ofthe ~~STS101~~conditions ~~may~~thereof, ~~depend~~the Company and its representatives cannot solicit or initiate discussions with third parties regarding other proposals to acquire the Company and we are subject to restrictions on our ability to respond to any such proposal, except as permitted under the terms of the Merger Agreement. In the event that we receive an acquisition proposal from a ~~number~~third party, we must notify Parent of ~~factors~~such proposal and negotiate in good faith with Parent prior to terminating the Merger Agreement or effecting a change in the recommendation of our Board of Directors to our stockholders with respect to the Offer and Merger. The Merger Agreement also contains certain termination rights for Parent and us and further provides that, upon termination of the Merger Agreement under specified circumstances, including certain terminations in connection with an alternative business combination transaction as permitted by the ~~following:~~terms of the Merger Agreement, we will be required to pay Parent a termination fee of $905,136. These provisions could discourage a potential third-party acquirer that might have an interest in acquiring all or a significant portion of us from considering or proposing that acquisition, even if it were prepared to pay consideration with a higher per share cash or market value than the market value proposed to be received or realized in the transaction. These provisions also might result in a potential third-party acquirer proposing to pay a lower price to our stockholders than it might otherwise have proposed to pay due to the added expense of the termination fee that may become payable in certain circumstances.

•If ~~our~~the ~~ability~~Merger toAgreement ~~successfully~~is ~~address~~terminated ~~the~~and ~~issues~~we ~~that~~determine weto ~~believe~~seek ~~resulted~~another inbusiness ~~the~~combination, ~~EMERGE~~we ~~trial~~may not ~~achieving~~be ~~statistical~~able ~~significance~~to onnegotiate ~~the~~a ~~co-primary~~transaction ~~endpoints,~~with ~~including,~~another ~~but~~party ~~not~~on ~~limited~~terms comparable to, or better than, the ~~DHE~~terms ~~under-delivery~~of wethe ~~observed;~~Offer and Merger.

•Stockholder ~~the~~litigation ~~ability~~could ofprevent ~~the~~or ~~STS101~~delay ~~5.2~~the mgconsummation ~~dose~~of ~~strength~~the ~~that~~Offer weand ~~selected~~Merger ~~for~~or ~~our~~otherwise ~~Phase~~negatively 3impact ~~clinical~~our ~~trial program to demonstrate adequate efficacy~~business, ~~safety~~operating ~~and~~results ~~tolerability in the ACSEND~~ and ~~SUMMIT~~financial ~~Phase 3 clinical trials;~~condition.

•We may incur additional costs in connection with the defense or settlement of existing and any future stockholder litigation in connection with the Offer and Merger. These lawsuits or other future litigation may adversely affect our ability to ~~raise~~complete the Offer and Merger. We could incur significant costs in connection with any ~~additional~~such ~~required~~litigation, ~~capital~~including oncosts ~~acceptable~~associated ~~terms~~with the indemnification of our directors and officers. Furthermore, one of the conditions to the consummation of the Offer and Merger is the absence of any governmental order or atlaw ~~all;~~preventing the consummation of the Offer and Merger or making the consummation of the Offer and Merger illegal. Consequently, if a plaintiff were to secure injunctive or other relief prohibiting, delaying or otherwise

• timely completion of our clinical trials, which may be significantly slower or cost more than we currently anticipate and will depend substantially upon the performance of third-party contractors;

•adversely affecting our ability to ~~successfully conduct and~~ complete ~~clinical~~the ~~studies~~consummation inof the ~~COVID-19~~Offer ~~pandemic~~and ~~environment~~Merger, ~~and~~then tosuch ~~adequately~~injunctive ~~control~~or ~~for~~other ~~any~~relief ~~factors~~may ~~introduced~~prevent by the ~~pandemic~~Offer ~~that~~and ~~may~~Merger ~~potentially~~from ~~affect~~becoming effective within the ~~outcomes~~expected oftime ~~our~~frame ~~clinical~~or ~~studies;~~at all.

•Our ~~whether~~executive weofficers ~~are~~and ~~required~~directors bymay ~~the~~have ~~FDA~~interests orin ~~similar~~the ~~foreign~~Offer ~~regulatory~~and ~~agencies~~the toMerger ~~conduct~~that ~~additional~~are ~~clinical~~different ~~trials~~from, or ~~other~~in ~~studies~~addition ~~beyond~~to, those ~~planned~~of toour ~~support~~stockholders ~~approval of STS101;~~generally.

•Our ~~our~~executive ~~ability~~officers and directors may have interests in the Offer and the Merger that are different from, or are in addition to, ~~consistently~~those ~~manufacture~~of ~~STS101~~our stockholders generally. These interests include direct or indirect ownership of our common stock and equity awards, the acceleration of equity awards upon consummation of the transactions and other interests. Such interests of our directors and executive officers are set forth in further detail in the Schedule 14D-9 filed by the Company with the SEC on aMay ~~timely~~5, ~~basis;~~2023.

•While ~~our~~the ~~ability,~~Offer and ~~the~~Merger ~~ability~~is ofpending, ~~any~~we ~~third~~are ~~parties~~subject ~~with~~to ~~whom~~business weuncertainties ~~contract,~~and tocontractual ~~remain~~restrictions inthat ~~good~~could ~~standing~~disrupt ~~with~~our ~~regulatory~~business, ~~agencies~~and the Offer and ~~develop,~~Merger ~~validate~~may impair our ability to attract and ~~maintain~~retain ~~commercially~~qualified ~~viable~~employees ~~manufacturing~~or ~~processes~~retain ~~that~~and ~~are~~maintain ~~compliant~~relationships with ~~current~~our ~~good~~suppliers ~~manufacturing~~and ~~practices,~~other orbusiness ~~cGMPs;~~partners.

•Whether or not the Offer and Merger are consummated, the Offer and Merger may disrupt our current plans and operations, which could have an adverse effect on our business and financial results. The pendency of the Offer and Merger may also divert management’s attention and our resources from ongoing business and operations and our employees and other key personnel may have uncertainties about the effect of the Offer and Merger, and the uncertainties may impact our ability to ~~demonstrate~~retain, recruit and hire key personnel while the Offer and Merger are pending or if it fails to close. Furthermore, if key personnel depart because of such uncertainties, or because they do not wish to remain with the ~~satisfaction~~combined company after the consummation of the ~~FDA~~Offer and ~~similar~~Merger, ~~foreign~~our ~~regulatory~~business ~~authorities~~and ~~the~~results ~~safety~~of operations may be adversely affected. In addition, ~~efficacy~~we cannot predict how our suppliers and ~~acceptable~~other ~~risk-benefit~~business ~~profile~~partners will view or react to the Offer and Merger upon consummation. If we are unable to reassure our suppliers and other business partners to continue transacting business with us, our financial condition and results of ~~STS101;~~operations may be adversely affected.

•In addition, the ~~prevalence~~Merger Agreement generally requires us to operate in the ordinary course of business consistent with past practice, ~~duration~~pending consummation of the Offer and ~~severity~~Merger, ofand ~~potential~~restricts ~~side~~us ~~effects~~from taking certain actions with respect to our business and financial affairs without Parent’s consent. Such restrictions will be in place until either the Offer and Merger are consummated or the Merger Agreement is terminated. These restrictions could restrict our ability to, or prevent us from, pursuing attractive business opportunities (if any) that arise prior to the consummation of the Offer and Merger. For these and other ~~safety~~reasons, ~~issues~~the ~~experienced~~pendency ~~with~~of ~~STS101;~~the Offer and Merger could adversely affect our business, operating results and financial condition.

•We ~~the~~have ~~timely~~incurred, ~~receipt~~and ofwill ~~necessary~~continue ~~marketing~~to ~~approvals~~incur, ~~from~~direct ~~the~~and ~~FDA~~indirect ~~and~~costs ~~similar~~as ~~foreign~~a ~~regulatory~~result ~~authorities;~~of the Offer and Merger.

•We ~~achieving~~have incurred, and ~~maintaining~~will continue to incur, significant costs and expenses, ~~where~~including ~~applicable~~fees for professional services and other transaction costs, ~~ensuring~~in connection with the Offer and Merger, including costs that ~~our~~we ~~third-party~~may ~~contractors~~not ~~achieve~~currently expect. We must pay substantially all of these costs and ~~maintain~~expenses whether or not the transaction is completed. If the Merger Agreement is terminated under specified circumstances, ~~compliance~~we ~~with~~would ~~our~~be ~~contractual~~required ~~obligations~~to ~~and~~pay ~~with~~to ~~all~~Parent ~~regulatory~~a ~~requirements~~termination ~~applicable~~fee equal to ~~STS101;~~$905,136. There are a number of factors beyond our control that could affect the total amount or the timing of these costs and expenses.

•Risks ~~the~~Related ~~differentiation of STS101 from other available DHE products and other acute treatments of migraine, and the willingness of physicians, operators of hospitals and clinics and patients~~ to ~~adopt~~Our ~~and utilize STS101;~~Business

•We ~~our~~do ~~ability~~not plan to ~~successfully~~independently ~~develop~~commercialize aSTS101 ~~commercial~~in ~~strategy~~the ~~and~~event ~~thereafter~~that ~~commercialize~~our STS101 innew drug application (NDA), which we submitted to the ~~United~~FDA ~~States~~in ~~and~~March ~~internationally~~2023, ifis approved. ~~for~~If ~~marketing~~we are unable to timely complete the Offer and Merger we would likely terminate development of STS101, ~~sale~~withdraw our NDA and ~~distribution~~pursue inother strategic alternatives, such ~~countries~~as dissolution and ~~territories~~wind-down. Moreover, ~~whether~~we ~~alone~~have orincurred insignificant ~~collaboration~~losses since our inception, and we anticipate that we will continue to incur significant losses for the foreseeable future, which, together with aour ~~partner~~limited oroperating ~~partners;~~history, make it difficult to assess our prospects.

•Biopharmaceutical ~~the~~product ~~availability~~development ofis ~~coverage~~a highly speculative undertaking and ~~adequate~~involves ~~reimbursement~~a ~~from~~substantial ~~managed~~degree ~~care~~of ~~plans,~~risk. ~~private~~We ~~insurers~~are a development-stage biopharmaceutical company, ~~government~~and ~~payors~~we ~~(such~~have asonly ~~Medicare~~a limited operating history upon which you can evaluate our business and ~~Medicaid~~prospects. We have limited experience and ~~similar~~have ~~foreign~~not ~~authorities)~~yet demonstrated an ability to successfully overcome many of the risks and ~~other~~uncertainties ~~third-party~~frequently ~~payors~~encountered ~~for~~by ~~STS101;~~companies in new and rapidly evolving fields, particularly in the pharmaceutical industry.

•We ~~patients’~~are ~~willingness~~focused toon ~~pay~~developing ~~out-~~a single therapeutic product, STS101 (dihydroergotamine (DHE) nasal powder) for the acute treatment of~~-pocket~~ migraine. We have no products approved for commercial sale, have not generated any revenue from product sales and have incurred losses in each year since our inception in June 2016. We do not plan to independently commercialize STS101 in the ~~absence~~event ofthat ~~coverage~~our ~~and/or~~STS101 ~~adequate~~new ~~reimbursement~~drug ~~from~~application ~~third-party~~(NDA), ~~payors;~~which we submitted to the FDA in March 2023, is approved, and we seek to

• the convenience of the administration of STS101;

• acceptance by physicians, payors and patients of the benefits, safety and efficacy of STS101, if approved;

• patient demand for STS101, if approved;

• our ability to establish and enforce intellectual property rights in and to STS101; and

• our ability to avoid third-party patent interference, intellectual property challenges or intellectual property infringement claims.

These factors, many of which are beyond our control, could cause us to experience significant delays or an inability to obtain regulatory approvals or commercialize STS101. Even if regulatory approvals are obtained, we may never be able to successfully commercialize STS101. Accordingly, we cannot provide assurances that we will be able to generate sufficient revenue through the sale of STS101 to continue our business or achieve profitability. In addition, disruptions caused by the COVID-19 pandemic may increase the likelihood that we encounter such difficulties or delays in initiating, enrolling, conducting or completing our planned clinical trials.

While the scope of regulatory approval generally is similar in other countries, in order to obtain separate regulatory approval in other countries we must comply with numerous and varying regulatory requirements of such countries regarding safety and efficacy. Other countries also have their own regulations governing, among other things, requirements for nonclinical studies, clinical trials and

~~commercial~~complete ~~sales,~~the asOffer ~~well as pricing~~ and ~~distribution~~Merger. ofIf ~~STS101, and~~ we ~~may~~are beunable ~~required~~ to ~~expend~~timely ~~significant~~complete ~~resources~~the toOffer ~~obtain regulatory approval~~ and toMerger, ~~comply~~we ~~with~~would ~~ongoing~~likely ~~regulations~~terminate indevelopment ~~these~~of ~~jurisdictions.~~STS101, ~~Regulatory~~withdraw ~~approval~~our inNDA ~~one~~and ~~country~~pursue ~~does~~other ~~not~~strategic ~~ensure regulatory approval in another~~alternatives, ~~but~~such aas ~~failure~~dissolution orand ~~delay in obtaining regulatory approval in one country may have a negative effect on the regulatory process in others~~wind-down.

~~STS101~~In ~~failed~~November to2022, ~~demonstrate~~we aannounced ~~statistically~~topline ~~significant~~data ~~difference~~from asthe ~~compared~~SUMMIT trial, which randomized approximately 1,600 migraine subjects to STS101 5.2 mg dose or placebo. onAlthough ~~either~~STS101 ofshowed favorable numerical differences versus placebo on the pre-specified co-primary endpoints inof ~~our~~freedom ~~first~~from ~~pivotal~~pain ~~efficacy~~and freedom from most bothersome symptom (from among photophobia, phonophobia and nausea) at the two-hour, post-administration timepoint, these differences did not achieve statistical significance. In January 2023, we completed the ASCEND trial, and in March 2023 we submitted an NDA to the FDA seeking approval of STS101 for the acute treatment of migraine, with or without aura, via the 505(b)(2) regulatory pathway.

InWe ~~September~~have ~~2020,~~limited weexperience ~~announced~~as ~~topline~~a ~~data~~company ~~from~~in ~~the~~submitting ~~EMERGE~~applications ~~Phase~~for 3regulatory ~~efficacy~~approvals, ~~trial.~~such ~~Although~~as ~~topline~~an ~~data~~NDA. ~~showed~~We ~~numerical~~do ~~differences~~not inplan ~~favor~~to ofindependently commercialize STS101 ~~3.9 mg~~ and ~~5.2~~our mgplan ~~versus~~is ~~placebo~~to oncomplete the ~~pre-specified~~Offer ~~co-primary endpoints of freedom from pain~~ and freedom from most bothersome symptom (from among photophobia, phonophobia and nausea) at two hours post-administration, these differences did not achieve statistical significance for either dose strengthMerger. ~~Both~~There ~~dose~~can ~~strengths~~be ofno ~~STS101~~assurance ~~did,~~that ~~however,~~we ~~demonstrate~~will ~~significant~~timely ~~effects~~complete onthe ~~both~~Offer ~~freedom from pain~~ and ~~most~~Merger ~~bothersome~~prior ~~symptom~~to byexhausting ~~three~~our ~~hours~~financial ~~post-dose~~resources ~~and~~or ~~later~~that ~~time points. Both STS101 dose strengths were well-tolerated in~~ the ~~EMERGE~~terms ~~efficacy~~of ~~trial,~~any ~~with~~such ~~low~~transaction ~~adverse~~will ~~event~~be ~~rates and no serious adverse events reported~~favorable.

~~Based~~We ~~on our analyses and review of EMERGE efficacy trial results and other data, including preliminary results from the ongoing ASCEND safety trial, we believe we~~ have ~~identified~~had ~~and~~significant ~~have~~operating ~~taken~~losses ~~steps~~since in our updated development plan to address the key reasons that STS101 did not achieve statistical significance versus placebo on the co-primary endpoints at two hours post-administration in the EMERGE efficacy trialinception. Our ~~analyses~~net ~~suggest~~losses afor ~~significant~~the ~~proportion~~three ofmonths ~~subjects~~ended inMarch ~~EMERGE~~31, ~~who~~2023 ~~self-administered STS101 to treat their migraine attacks may not have achieved~~ and ~~sustained~~2022 ~~targeted~~were ~~DHE~~approximately ~~concentrations due to under-delivery of STS101~~$10.3 Wemillion ~~believe we have addressed this under-delivery issue through a combination of introducing improved instructions for STS101 use~~ and ~~subject~~$15.5 ~~training~~million, ~~in our clinical trials and by making several minor modifications to the second-generation STS101 delivery device to improve its performance~~respectively. WeAs ~~also~~of ~~believe~~March ~~other~~31, ~~factors contributed to a negative outcome in the EMERGE efficacy trial~~2023, ~~and~~ we ~~believe~~had wean ~~have~~accumulated ~~taken~~deficit ~~appropriate~~of ~~steps~~222.1 ~~to mitigate these issues in the ongoing SUMMIT efficacy trial through modifications to the trial design and conduct~~million. ~~However,~~Substantially ~~these~~all ~~efforts~~of ~~may~~our ~~prove~~losses ~~to be ineffective and there can be no assurance that the measures we~~ have ~~taken~~resulted orfrom ~~plan~~expenses toincurred ~~take will result~~ in ~~successful~~connection ~~outcomes~~with inthe ~~our~~development ~~future clinical trials~~ of STS101, ~~including~~and ~~our~~general ~~ongoing~~and ~~SUMMIT~~administrative ~~efficacy~~costs ~~trial,~~associated orwith beour ~~sufficient to obtain regulatory approval~~operations.

InWe ~~addition,~~expect weto ~~may~~continue ~~not be able~~ to ~~obtain~~incur ~~regulatory~~losses ~~approval~~ for ~~and~~the ~~successfully~~foreseeable ~~commercialize~~future ~~STS101~~as ~~without~~we ~~conducting~~continue ~~further~~to ~~clinical~~develop ~~trials~~STS101 inand ~~addition~~seek to ~~those~~complete ~~trials~~the ~~that~~Offer ~~are ongoing or planned,~~ and ~~there~~Merger. ~~can~~Our beprior nolosses, ~~assurance~~combined ~~that~~with ~~the~~expected ~~results of any ongoing~~losses, ~~planned~~have orhad ~~additional~~and ~~clinical~~will ~~trials~~continue ~~will~~to behave ~~sufficient~~an toadverse ~~obtain~~effect ~~regulatory~~on ~~approval~~our orstockholders’ ~~support~~equity ~~successful~~and ~~commercialization~~working capital.

~~The~~Our ~~ongoing~~financial ~~COVID-19~~condition ~~pandemic~~raises ~~and~~substantial ~~outbreak~~doubt inas ~~the~~to ~~United~~our ~~States~~ability ~~and~~to ~~related~~continue ~~impacts~~as ona ~~the~~going ~~global economy may adversely affect our business~~concern.

AsOur financial statements have been prepared assuming that we will continue to operate as a ~~result~~going concern, which contemplates the realization of assets and the ~~COVID-19~~satisfaction ~~virus~~of ~~pandemic,~~liabilities wein ~~may~~the ~~experience~~normal ~~disruptions~~course ~~that~~of ~~could~~business. ~~severely~~We ~~impact~~believe our ~~business~~cash, ~~preclinical~~cash ~~studies,~~equivalents ~~clinical~~and ~~trials,~~marketable securities would be insufficient to enable us to fund current operations for a period of one year or more from the issuance date of this Annual Report on Form 10-K were we to continue to pursue development and ~~manufacturing~~commercialization ~~activities,~~of ~~including:~~STS101. We expect to continue to incur net operating losses as we continue our development efforts and seek to complete the Offer and Merger.

~~•delays~~These conditions raise substantial doubt about our ability to continue as a going concern. Additionally, our independent registered public accounting firm has included in its audit opinion for the ~~completion~~year ended December 31, 2022 an explanatory paragraph that there is substantial doubt as to our ability to continue as a going concern. We do not believe that funding will be available to us, will be obtained on terms favorable to us or will provide us with sufficient funds to meet our objectives. We do not plan to raise additional financing, and our failure to complete the Offer and Merger may adversely impact our ability to achieve our intended business objectives and could force us to consider other strategic alternatives such as wind-down and dissolution. The reaction of investors to the inclusion of a going concern statement by our ~~clinical~~auditors ~~trials;~~and our potential inability to continue as a going concern may materially adversely affect our share price and our ability to timely complete the Offer and Merger. If we become unable to continue as a going concern, we may have to liquidate our assets and the values we receive for our assets in liquidation or dissolution could be significantly lower than the values reflected in our financial statements.

•We ~~reduced~~would ~~ability~~require substantial additional financing to ~~monitor~~continue ~~and~~operations. ~~thereby~~We ~~ensure~~do ~~adequate~~not ~~quality~~plan ~~and~~to ~~compliance~~raise inadditional financing as we believe it is unlikely that we would be able to raise substantial additional funds on favorable terms. If we are unable to timely complete the ~~conduct~~Offer and Merger we will likely be forced to terminate development of STS101, withdraw our ~~clinical~~NDA ~~trials;~~and pursue other strategic alternatives, such as dissolution and wind-down.

•We ~~delays~~believe our cash, cash equivalents and marketable securities would be insufficient to enable us to fund current operations for a period of one year or ~~difficulties~~more infrom ~~our~~the ~~ability~~issuance date of this Annual Report on Form 10-K were we to ~~attract~~continue to pursue development and commercialization of STS101. Accordingly, ~~hire~~our financial statements have been prepared on a going concern basis, which contemplates the continuity of operations, realization of assets and ~~retain~~the ~~qualified~~satisfaction ~~personnel~~of liabilities and commitments in the ordinary course of business. Our operating plans may change as a result of many factors currently unknown to us, ~~including~~and ~~personnel~~our resources may not be sufficient to ~~support~~fund operations until completion of the ~~commercialization~~Offer and Merger. It is unlikely that adequate funding would be available to us on acceptable terms, or at all, particularly in light of the current economic uncertainty and potential local and/or global economic recession, and we may be forced to terminate development of STS101; or pursue other strategic alternatives such as dissolution and wind-down. We do not expect to provide any meaningful economic benefits to our stockholders unless we are able to timely complete the Offer and Merger.

•diversion of healthcare resources away from the conduct of clinical trials;

• interruption of key clinical trial activities due to limitations on travel imposed or recommended by federal or state governments, employers and others or interruption of clinical trial subject visits and study procedures, which may impact the integrity of subject data and clinical study endpoints;

•interruption or delays in the operations of the FDA, which may impact review and approval timelines;

• interruption of, or delays in receiving, supplies of our investigational product from CMOs due to staffing shortages, production slowdowns or stoppages and disruptions in delivery systems;

• interruption of, or delays in completing manufacturing and manufacturing-related activities such as CMO qualification, production equipment manufacture, delivery and qualification, validation of manufacturing processes, manufacture and/or analytical characterization of our product candidate, completion of stability studies and/or manufacture of registration batches of our product candidate required for NDA submission; and

•We ~~limitations~~do onnot ~~employee~~plan ~~resources~~to ~~that~~raise additional funds through the issuance of equity, equity-linked or debt securities, as those securities would ~~otherwise~~likely behave ~~focused~~rights, onpreferences ~~the~~or ~~conduct~~privileges senior to those of our ~~nonclinical~~common ~~studies~~stock, ~~clinical~~and ~~trials~~our ~~and~~existing ~~product~~stockholders ~~candidate~~would ~~manufacturing~~likely ~~activities,~~experience ~~including~~significant ~~because~~dilution. ofAny ~~sickness~~debt financing secured by us in the future would likely require that a substantial portion of ~~employees~~our oroperating ~~their~~cash ~~families~~flow and/or cash assets be devoted to the ~~desire~~payment of ~~employees~~interest and principal on such indebtedness, which would decrease available funds for other business activities, and likely involve restrictive covenants relating to ~~avoid~~our ~~contact~~capital-raising ~~with~~activities ~~large~~and ~~groups~~other offinancial ~~people~~and operational matters, which would make it more difficult for us to obtain additional capital and to pursue business opportunities. Because we believe that we would be unable to obtain additional financing on favorable terms, if at all, our ability to grow our business or respond to competitive pressures or unanticipated requirements is limited, which may seriously harm our business.

InOur ~~addition~~future capital requirements, ~~the~~our ~~spread~~ability ofto ~~COVID-19~~complete ~~coronavirus~~any ~~may~~strategic ~~negatively~~transaction, ~~impact~~and the ~~trading~~potential ~~price~~economic ofbenefits ~~shares~~that ofmay ~~our~~accrue ~~common~~to ~~stock~~us ~~and~~pursuant ~~could~~to ~~further~~the ~~severely~~Offer ~~impact~~and ~~our~~Merger ~~ability~~depend ~~to raise additional capital~~ on amany ~~timely~~factors, ~~basis or at all.~~including:

•

~~Although global economic conditions have generally improved with~~ the ~~rollout of COVID-19 vaccines~~cost, ~~business~~timing ~~activity may not recover as quickly as anticipated, including as a result of inflationary pressures~~ and ~~the~~outcome responses by central banking authorities to control such inflation, rising interest rates, debt and equity market fluctuations, diminished liquidity and credit availability, increased unemployment rates, decreased investor and consumer confidence, political turmoil, and supply chain challenges. The extent to which the outbreak impacts our business and clinical trials will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the duration of ~~the~~regulatory ~~pandemic,~~review travel restrictions and social distancing in the United States and other countries, business closures or business disruptions, equipment and supply shortages, delays in shipping, delays in manufacturing and the effectiveness of ~~actions taken in the United States and other countries to contain and treat the disease.~~STS101;

•

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

•

~~Clinical~~the ~~development~~costs ~~involves~~of apreparing, ~~lengthy~~filing and ~~expensive~~prosecuting ~~process~~patent ~~with an uncertain outcome~~applications, maintaining and ~~delays~~enforcing ~~can~~our ~~occur~~intellectual ~~for~~property arights ~~variety~~and ofdefending ~~reasons~~intellectual ~~outside~~property-related ~~of our control.~~ claims;

•

~~Clinical development is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at~~ any ~~time~~product ~~during~~liability the clinical trial process. For example, in September 2020, we announced topline data from the EMERGE trial. Although STS101 3.9 mg and 5.2 mg showed favorable numerical differences versus placebo on the pre-specified co-primary endpoints of freedom from pain and freedom from most bothersome symptom (from among photophobia, phonophobia and nausea) at two hours post-administration, these differences did not achieve statistical significance for either dosage strength. In addition, we may experience delays in initiating or ~~completing~~other ~~our~~lawsuits ongoing, planned, or future trials of STS101. Furthermore, we cannot be certain that studies or trials for STS101 will begin on time, not require redesign, enroll an adequate number of subjects on time or be completed on schedule, if at all. Clinical trials can be delayed or terminated for a variety of reasons, including delays or failures related to: STS101;

•

•our ~~the~~ability ~~COVID-19~~to ~~pandemic~~retain qualified personnel, including ~~its~~personnel ~~impact~~to onsupport the ~~providers~~continued development of ~~healthcare services, such as the healthcare clinics and institutions where we conduct our ongoing clinical trials and may conduct planned clinical trials~~STS101;

•

•our ~~the~~ability ~~FDA or comparable foreign regulatory authorities disagreeing as~~ to conclude the ~~design~~Offer orand ~~implementation of our clinical trials~~Merger;

•

•the ~~delays~~costs inassociated ~~obtaining~~with ~~regulatory~~being ~~authorization~~a topublic ~~commence~~company auntil ~~trial~~completion of the Offer and Merger; and

•

•the ~~reaching~~timing, ~~agreement~~receipt onand ~~acceptable~~amount ~~terms~~of ~~with prospective contract research organizations~~payments, orif ~~CROs~~any, ~~and~~generated ~~clinical~~by ~~trial sites~~upfront, ~~the~~milestone ~~terms~~or ofroyalty ~~which~~payments ~~can~~under beany ~~subject~~strategic totransaction ~~extensive~~that ~~negotiation~~we ~~and~~or Parent may ~~vary~~be ~~significantly~~able ~~among~~to ~~different CROs and trial sites;~~conclude.

•It ~~obtaining~~is ~~institutional~~unlikely ~~review~~that ~~board~~additional funds would be available, orshould ~~IRB~~we need them, ~~approval~~on terms that would be acceptable to us, or at ~~each~~all. ~~trial~~If ~~site;~~we are unable to timely complete the Offer and Merger, we would likely be required to:

•

•terminate ~~recruiting~~the anSTS101 ~~adequate~~development ~~number~~program ofand ~~suitable~~withdraw ~~subjects~~the toSTS101 ~~participate~~NDA ~~in a trial~~filing;

•

•delay, ~~having~~limit, ~~subjects~~reduce ~~complete~~or aterminate ~~trial~~our efforts to establish manufacturing capabilities or ~~return~~other activities that may be necessary for ~~post-treatment~~a ~~follow-up~~third party to commercialize STS101; or

•

•pursue ~~clinical~~other ~~sites~~strategic ~~deviating~~alternatives, ~~from~~such ~~trial~~as ~~protocol~~dissolution orand ~~dropping out of a trial;~~wind-down.

To date, we have funded our operations through private placements of convertible preferred stock, a convertible promissory note, long-term debt, and common stock. We do not anticipate raising additional funds, and our current funds may not be sufficient for us to fund the company until such time as we are able to complete the Offer and Merger. Were we to change our plans and seek to raise additional funds, our ability to raise such funds will depend on financial, economic and other factors, many of which are beyond our control. If we raise additional funds by issuing equity securities, including pursuant to the Virtu Sales Agreement, our stockholders would likely suffer significant dilution and the terms of any financing may adversely affect the rights of our stockholders. In addition, as a condition to providing additional funds to us, future investors may demand, and may be granted, rights superior to those of existing stockholders. Debt financing, if available, is likely to involve restrictive covenants limiting our flexibility in conducting future business activities, and, in the event of insolvency, debt holders would be repaid before holders of our equity securities received any distribution of our corporate assets.

There can be no assurance that we can timely complete the Offer and Merger, or any other transaction, prior to exhausting our financial resources or that the terms of any such other transaction will be favorable.

It is likely that we will need to complete the Offer and Merger to continue the development of STS101. Despite our board of directors and management team having devoted and continuing to devote substantial time and resources to the consideration and implementation of the Offer and Merger, there is substantial risk that we may not be able to timely complete the Offer and Merger due to a variety of factors.. The failure to timely complete the Offer and Merger would likely materially and adversely affect our business and force us to terminate development of STS101, withdraw our NDA and consider other strategic alternatives, such as dissolution and wind-down. If we failed to timely complete the Offer and Merger, there would likely be significant risks associated with pursuing another transaction. For example, conditions in the financial markets may lead to an increased number of biotechnology companies that are also seeking to enter into strategic transactions, which may limit our ability to find a suitable transaction counterparty or

•negotiate ~~addressing~~favorable ~~subject~~terms ~~safety~~for ~~concerns~~any ~~that~~such ~~arise~~transaction. ~~during~~Further, ~~the~~our ~~course~~current ofemployees ahave ~~trial;~~limited experience with strategic transaction processes.

•The ~~adding~~terms aof ~~sufficient~~the ~~number~~Merger ofAgreement ~~clinical~~and ~~trial~~CVR ~~sites;~~Agreement provide that significant payments to our stockholders are contingent upon the monetization of STS101 and/or achievement of certain milestones. The failure of STS101 to achieve any such milestones, and any failure to receive such payments, would have a material adverse impact on the consideration ultimately received by our stockholders.

•Even ~~obtaining~~if ~~sufficient~~we ~~quantities~~are ofable to timely conclude the Merger, certain payments to our stockholders are contingent upon STS101 ~~for~~approval ~~use~~and SNBL achieving certain aggregate cumulative net proceeds as specified in ~~clinical~~the ~~trials~~CVR ~~from~~Agreement. ~~third-party~~There ~~suppliers~~can onbe no assurance that our STS101 NDA will be approved or that STS101 will achieve sufficient aggregate cumulative net proceeds such that our stockholders would be eligible to receive such contingent payments. Failure to receive such payments would have a ~~timely~~material ~~basis~~adverse impact on the consideration ultimately received by our stockholders.

We, or SNBL, may ~~experience~~fail ~~numerous~~to ~~adverse~~timely orobtain ~~unforeseen~~regulatory ~~events~~approval ~~during,~~for orSTS101 asunder aapplicable ~~result~~regulatory ~~of,~~requirements. ~~preclinical~~The ~~studies~~denial ~~and~~or ~~clinical~~delay ~~trials~~of ~~that~~any ~~could~~such ~~delay~~approval orwould prevent ~~our~~or ~~ability~~delay tocommercialization ~~receive~~of ~~marketing~~STS101 ~~approval~~and orcould ~~commercialize~~adversely ~~STS101,~~affect ~~including:~~potential economic returns to us and our stockholders.

•We weas ~~may~~a ~~receive~~company ~~feedback~~have ~~from~~limited experience submitting an NDA or any other marketing application to the FDA or similar filings to comparable foreign regulatory authorities, ~~that~~and ~~requires~~SNBL usmay also have similar limited experience. An NDA or other similar regulatory filing requesting approval to ~~modify~~market a product candidate must include extensive preclinical and clinical data and supporting information to establish that the ~~design~~product candidate is safe, effective, pure and potent for each desired indication. The NDA or other similar regulatory filing must also include significant information regarding the chemistry, manufacturing and controls for the product. After receiving an NDA submission, the FDA conducts a preliminary review of ~~our~~the ~~clinical~~NDA ~~trials;~~and within 60 days of the receipt of the NDA submission either formally accepts the NDA submission for substantive review or issues a Refusal to File Letter detailing the deficiencies in the NDA submission that preclude the FDA from undertaking a substantive review.

•The ~~clinical~~research, ~~trials~~testing, manufacturing, labeling, approval, sale, marketing and distribution of ~~STS101~~pharmaceutical ~~may~~products ~~produce~~are ~~negative~~subject orto ~~inconclusive~~extensive ~~results~~regulation ~~(for~~by ~~example,~~the FDA and other regulatory authorities in the ~~EMERGE~~United ~~trial,~~States ~~STS101~~and ~~did~~other ~~not~~countries, ~~achieve~~and ~~statistical~~such ~~significance~~regulations ~~versus~~differ ~~placebo~~from oncountry ~~pre-specified~~to ~~co-primary~~country. ~~endpoints),~~The FDA and weapplicable ~~may~~foreign ~~decide,~~regulatory orauthorities ~~regulators~~will ~~may~~no ~~require~~permit ~~us,~~marketing toof ~~conduct~~STS101 ~~additional~~in ~~clinical~~the ~~trials~~United States or ~~abandon~~in ~~our~~any ~~development~~foreign ~~program~~countries ~~for~~until ~~STS101;~~it receives the requisite approval from the applicable regulatory authorities of such jurisdictions.

• participants may drop out of these clinical trials at a higher rate than we anticipate;

• clinical trial participants may not comply with study protocol procedures and instructions;

• we or our third-party contractors may fail to comply with regulatory requirements, fail to maintain adequate quality controls, or be unable to produce sufficient product supply to conduct and complete clinical trials of STS101 in a timely manner, or at all;

• we or our investigators might have to suspend or terminate clinical trials of STS101 for various reasons, including non-compliance with regulatory requirements, a finding that STS101 has undesirable side effects or other unexpected characteristics, or a finding that the participants are being exposed to unacceptable health risks;

• the cost of clinical trials of STS101 may be greater than we anticipate;

• the quality of STS101 or other materials necessary to conduct clinical trials of STS101 may be insufficient or inadequate;

• regulators may revise the requirements for approving STS101, or such requirements may not be as we anticipate; and

• future collaborators may conduct clinical trials in ways they view as advantageous to them but that are sub-optimal for us.

If we are required to conduct additional clinical trials or other testing of STS101 beyond those that we currently contemplate, including for purposes of demonstrating the potential efficacy of STS101, if we are unable to successfully complete clinical trials of STS101 or other testing, if the results of these trials or tests are not positive or are only moderately positive or if there are safety concerns, we may:

• incur unplanned costs;

• be delayed in obtaining marketing approval for STS101 or not obtain marketing approval at all;

• obtain marketing approval in some countries and not in others;

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

• obtain marketing approval with labeling that includes significant use or distribution restrictions or safety warnings, including boxed warnings;

• be subject to additional post-marketing testing requirements, which could be expensive and time consuming; or

• have the treatment removed from the market after obtaining marketing approval.

We could also encounter delays if a clinical trial is suspended or terminated by us, by the IRBs of the institutions in which such trials are being conducted or by the FDA or other regulatory authorities. Such authorities may suspend or terminate a clinical trial 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, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a product candidate, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial.

Further, conducting clinical trials in foreign countries, as we could do for STS101, presents additional risks that may delay completion of our clinical trials. These risks include the failure of enrolled subjects in foreign countries to adhere to clinical protocol as a result of differences in healthcare services or cultural customs, managing additional administrative burdens associated with foreign regulatory schemes, as well as political and economic risks relevant to such foreign countries.

Principal investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and may receive cash or equity compensation in connection with such services. If these relationships and any related compensation result in perceived or actual conflicts of interest, or a regulatory authority concludes that the financial relationship may have affected the interpretation of the trial, the integrity of the data generated at the applicable clinical trial site may be questioned and the utility of the clinical trial itself may be jeopardized, which could result in the delay or rejection of the marketing application we submit. Any such delay or rejection could prevent or delay us from commercializing STS101.

If any of our clinical trials of STS101 are unsuccessful, delayed or terminated, its commercial prospects may be harmed, and our ability to generate revenues from sales of STS101 will be delayed or not realized at all. In addition, any delays in completing our clinical trials may increase our costs, slow down our STS101 development and approval process and jeopardize our ability to commence product sales and generate revenues. Any of these occurrences may significantly harm our business, financial condition and prospects. 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 STS101. If STS101 generally proves to be ineffective, unsafe or commercially unviable, it would have a material and adverse effect on our business, financial condition, results of operations and prospects.

We may be unable to obtain regulatory approval for STS101 under applicable regulatory requirements. The denial or delay of any such approval would delay commercialization of STS101 and adversely impact our potential to generate revenue, our business and our results of operations.

We as a company have not previously submitted an NDA or any other marketing application to the FDA or similar filings to comparable foreign regulatory authorities. An NDA or other similar regulatory filing requesting approval to market a product candidate must include extensive preclinical and clinical data and supporting information to establish that the product candidate is safe, effective, pure and potent for each desired indication. The NDA or other similar regulatory filing must also include significant information regarding the chemistry, manufacturing and controls for the product.

The research, testing, manufacturing, labeling, approval, sale, marketing and distribution of pharmaceutical products are subject to extensive regulation by the FDA and other regulatory authorities in the United States and other countries, and such regulations differ from country to country. We are not permitted to market STS101 in the United States or in any foreign countries until it receives the requisite approval from the applicable regulatory authorities of such jurisdictions.

The FDA or any foreign regulatory bodies can delay, limit or deny approval of STS101 for many reasons, including:

•

•the FDA could determine that our ~~inability~~STS101 toNDA, ~~demonstrate~~which we submitted in March 2023, is not sufficiently complete to ~~the~~permit ~~satisfaction~~a ofsubstantive ~~the~~review ~~FDA~~and issue a Refusal to File Letter to us or SNBL, the ~~applicable~~receipt ~~foreign~~of ~~regulatory~~which ~~body~~would ~~that~~delay ~~STS101~~approval isof ~~safe~~STS101 and ~~effective~~could ~~for~~adversely affect our ability to complete the ~~requested~~Potential ~~indication~~Offer and Merger and our ability to receive potential future economic benefits;

•

•our ~~the~~inability, ~~FDA’s~~ or the ~~applicable~~inability ~~foreign~~of ~~regulatory~~SNBL, ~~agency’s~~to ~~disagreement~~demonstrate ~~with~~to ~~our~~the ~~trial~~satisfaction ~~protocol~~of the FDA or the ~~interpretation~~applicable offoreign ~~data~~regulatory ~~from~~body ~~preclinical~~that ~~studies~~STS101 oris ~~clinical~~safe ~~trials~~and effective for the requested indication;

•

~~• our inability to demonstrate that~~ the ~~clinical and other benefits of STS101 outweigh any safety or other perceived risks; the~~ FDA’s or the applicable foreign regulatory agency’s ~~requirement~~disagreement ~~for~~with ~~additional~~our trial protocol or the interpretation of data from preclinical studies or clinical trials;

•

•our ~~the~~inability, ~~FDA’s~~ or the ~~applicable~~inability ~~foreign~~of ~~regulatory~~SNBL, ~~agency’s~~to ~~non-approval~~demonstrate ofthat the ~~formulation,~~clinical ~~labeling~~and orother ~~specifications~~benefits of STS101 outweigh any safety or other perceived risks;

•

• the FDA’s or the applicable foreign regulatory agency’s ~~failure~~requirement tofor ~~approve~~additional ~~our~~preclinical ~~manufacturing~~studies ~~processes and facilities~~ or ~~the~~clinical ~~facilities of third-party manufacturers upon which we rely~~trials; or

•

28the FDA’s or the applicable foreign regulatory agency’s non-approval of the formulation, labeling or specifications of STS101;

•

• the ~~potential for approval policies or regulations of the~~ FDA’s or the applicable foreign regulatory ~~agencies~~agency’s failure to ~~significantly~~approve ~~change~~our inmanufacturing aprocesses ~~manner~~and ~~rendering~~facilities ~~our~~or ~~clinical~~the ~~data~~facilities ~~insufficient~~of ~~for~~third-party ~~approval.~~manufacturers upon which we rely;

•

the potential for approval policies or regulations of the FDA or the applicable foreign regulatory agencies to significantly change in a manner rendering our clinical data insufficient for approval; or

•

if the FDA determines that STS101 lies within the scope of the non-patent exclusivity for new clinical investigations granted to Impel Pharmaceuticals’ Trudhesa (DHE liquid nasal spray) and as a result postpones approving STS101 until after expiration of the Trudhesa non-patent exclusivity period on September 2, 2024. Although we do not believe that STS101 lies within the scope of the non-patent exclusivity granted for Trudhesa, we cannot be certain that the FDA will

not determine otherwise and postpone final approval of STS101 until expiration of the Trudhesa non-patent exclusivity period on September 2, 2024.

Of the large number of pharmaceutical products in development, only a small percentage successfully complete the FDA or other regulatory bodies’ approval processes and are commercialized.

Even if weSTS101 eventually ~~complete~~receives ~~clinical testing and receive~~ approval from the FDA or applicable foreign agencies ~~for STS101~~, the FDA or the applicable foreign regulatory agency may grant approval contingent on the performance of costly additional clinical trials, which may be required after approval. The FDA or the applicable foreign regulatory agency also may approve STS101 for a more limited indication or a narrower patient population than we originally requested, and the FDA or applicable foreign regulatory agency, may not approve it with the labeling that we believe is necessary or desirable for its successful commercialization.

In addition, because migraine affects adolescents (12 to 17 years of age) and children (6 to 11 years of age), pediatric studies are required under the Federal Food, Drug, Cosmetic Act, or the FDCA. To address such requirements, we designed an initial pediatric study plan, or iPSP, consistent with the FDA guidance Migraine: Developing Drugs for Acute Treatment (February 2018). We have received agreement from the FDA on this plan, which wethe ~~plan~~FDA tohas ~~initiate~~agreed may be initiated after completing development of STS101 for acute treatment of migraine in adults.

Any delay in obtaining, or inability to obtain, applicable regulatory approval would delay or prevent commercialization of STS101 and could materially adversely impact our ~~business~~prospects ~~and~~for ~~prospects~~economic return from the Merger.

IfAlthough weSTS101 ~~encounter~~has ~~difficulties~~generally ~~with~~been ~~completion~~well-tolerated ofin our clinical trials to date, ~~our~~with low adverse event rates reported, if unacceptable side effects arise in any STS101 trials that may be conducted in the future, the Commercializing Party, or the FDA, or the IRBs at the institutions in which STS101 studies are conducted could suspend or terminate any future STS101 clinical ~~development~~trials ~~activities~~or the FDA or comparable foreign regulatory authorities could beorder ~~delayed~~cessation of clinical trials or ~~otherwise~~deny ~~adversely~~approval ~~affected~~of STS101 for its targeted indications.

~~The~~Treatment-related ~~timely~~side ~~completion~~effects in STS101 clinical trials or in the use of approved DHE products could also affect subject recruitment or the ability or willingness of enrolled subjects to complete any STS101 clinical trials, and/or result in ~~accordance~~potential ~~with~~product ~~their~~liability ~~protocols~~claims. ~~depends~~In addition, ~~among~~if undesirable side effects caused by other ~~things~~available DHE products or DHE products in development, onthe ~~our~~development ~~ability~~and tosuccessful ~~enroll~~commercialization aof ~~sufficient~~STS101, ~~number~~if approved, could be negatively affected. The active pharmaceutical ingredient in STS101 (DHE) is contraindicated for patients with certain pre-existing conditions and the labels of ~~subjects~~approved DHE products warn against use by patients with cardiovascular risk factors. These contraindications and warnings could limit the use of STS101 following marketing approval, if approved, or cause undesirable side effects in individuals who ~~remain~~use STS101 despite these warnings. For example, we received a single report of a treatment-related serious adverse event in an ASCEND trial participant. This adverse event was consistent with a side effect described in prescribing information for DHE and other vasoconstrictive agents, such as triptans. The adverse event occurred following the subject’s sixth use of study ~~until~~medication, ~~its~~and ~~conclusion~~no further occurrences were reported with six subsequent uses of study medication by the subject. WeInvestigation ~~may~~determined ~~experience~~the ~~difficulties~~subject’s inmedical history, which the subject ~~enrollment~~did innot ~~our~~disclose ~~clinical~~to ~~trials~~the trial site, included DHE contraindications and fulfilled key trial exclusion criteria that are disqualifying for trial participation. In addition, approved DHE products carry a ~~variety~~“black box” warning in their labels for a risk that the coadministration of ~~reasons~~DHE and certain other drugs, including asspecific aantivirals and antibiotics, may result in elevated levels of DHE in the ~~availability~~blood, potentially causing vasospasm that may result in inadequate blood flow to the extremities or the brain. While we believe that the coadministration of STS101 and certain other drugs does not result in clinically significant drug-drug interactions, the FDA may still require the label for STS101, if approved, ~~preventive~~to include such warning, and ~~acute~~this ~~treatments~~could ~~for~~result ~~migraine~~in STS101 not achieving its full commercial potential. ~~The~~Treatment-related ~~enrollment~~side effects in STS101 clinical trials or in the use of approved DHE products could also affect subject recruitment or the ability of enrolled subjects ~~depends~~to oncomplete ~~many~~any ~~additional~~future ~~factors,~~STS101 ~~including:~~clinical trials or result in potential product liability claims.

•If ~~the~~STS101 ~~subject~~receives ~~eligibility~~marketing ~~criteria~~approval ~~defined~~and inundesirable ~~the~~side ~~protocol;~~effects caused by STS101 or by other DHE products are subsequently identified, a number of potentially significant negative consequences could result, including:

•

•regulatory ~~the~~authorities ~~general~~may ~~willingness~~withdraw oftheir ~~subjects~~approval toof ~~enroll in the trial~~STS101;

•

• the ~~sample~~Commercializing ~~size~~Party ofmay ~~the~~be ~~subjects~~ required ~~for~~to ~~analysis~~recall ofthe STS101 or change the ~~trial’s~~way ~~primary~~it ~~endpoints~~is administered to patients;

•

•additional restrictions may be imposed on the ~~proximity~~marketing of ~~subjects~~the toSTS101 ~~trial~~or ~~sites~~the manufacturing processes for STS101 or any component thereof;

•

•regulatory authorities may require the ~~design~~addition of labeling statements, such as a “black box” warning or a contraindication similar to those that are currently included with the ~~trial~~labels of DHE products;

•

•the ~~our~~Commercializing ~~ability~~Party may be required to ~~recruit~~implement ~~clinical~~a ~~trial~~Risk ~~investigators~~Evaluation ~~with~~and Mitigation Strategy beyond the ~~appropriate~~creation ~~competencies~~of ~~and~~a ~~experience~~Medication Guide outlining the risks of such side effects for distribution to patients;

•

•we ~~clinicians’~~could ~~and~~be ~~subjects’~~sued ~~perceptions~~and asheld toliable ~~the~~for ~~potential~~harm ~~advantages~~caused ~~of the product candidate being studied in relation~~ to ~~other available therapies, including any new therapies that may be approved for the indications we are investigating~~patients;

~~• the clinical site’s ability to obtain and maintain subject consents;~~28

•

•STS101 ~~subjects~~ may ~~elect~~become ~~not~~less ~~to participate in future trials of STS101 given STS101 did not achieve statistical significance versus placebo on pre-specified co-primary endpoints in the EMERGE trial~~competitive; and

•

•our ~~clinical~~reputation ~~trial participants~~ may ~~not comply with study protocol procedures and instructions~~suffer.

~~Our~~Any ~~clinical~~of ~~trials~~the ~~may~~foregoing ~~also~~events ~~compete~~could ~~with~~prevent ~~other~~STS101 ~~clinical~~from ~~trials~~achieving ~~for~~or ~~product~~maintaining ~~candidates~~market ~~that~~acceptance, ~~seek~~if ~~to treat migraine~~approved, and ~~this~~adversely ~~competition~~affect ~~will~~potential ~~reduce~~economic ~~the~~returns ~~number and types of subjects available~~ to us, ~~because~~pursuant ~~some subjects who might have opted~~ to ~~enroll in our trials may instead opt to enroll in a trial being conducted by one of our competitors. Since~~ the ~~number of qualified clinical~~ Merger.

Even if STS101 obtains regulatory approval, it may fail to achieve broad market acceptance.

Even if STS101 receives FDA or other regulatory approvals, its commercial success will depend significantly on the extent to which it is adopted, prescribed by physicians and used by patients. The degree of market acceptance of STS101, if approved, will depend on a number of factors, including:

•

the safety and efficacy of STS101 as compared to other available acute therapies for treatment of migraine;

•

patient satisfaction with the results and administration of STS101 and overall treatment experience, including, the ease and convenience of administration of STS101;

•

the clinical indications for which STS101 is approved and patient demand for approved products that treat those indications;

•

the ability to manufacture and release adequate commercial supplies on a timely basis;

•

the availability of coverage and adequate reimbursement from managed care plans, private insurers, government payors (such as Medicare and Medicaid) and other third-party payors for STS101;

•

the cost of treatment with STS101 in relation to alternative treatments and patients’ willingness to pay out-of-pocket for the product, if approved, in the absence of coverage and/or adequate reimbursement from third-party payors;

•

acceptance by physicians, operators of hospitals and clinics and patients of the product as a safe, effective and easy to administer treatment;

•

physician and patient willingness to adopt a new therapy over other available preventive and acute therapies for treatment of migraine;

•

the prevalence and severity of side effects;

•

limitations or warnings contained in the FDA-approved labeling for STS101, such as a “black box” warning or a contraindication similar to those that are currently included with the labels of DHE products;

•

the willingness of physicians, operators of hospitals and clinics and patients to utilize or adopt STS101 as a solution, particularly in light of STS101’s failure to demonstrate statistically significant effectiveness on the co-primary outcome measures in our EMERGE and SUMMIT trials;

•

the effectiveness of the STS101 sales, marketing and distribution efforts;

•

adverse publicity about STS101 or favorable publicity about competitive products;

•

patients’ willingness to take a dry-powder intranasal medication;

•

potential product liability claims; and

•

global economic, market and industry conditions, including economic slowdowns, recessions, inflationary pressures, rising interest rates, financial market fluctuations, and reduced credit availability.

We cannot assure you that STS101, if approved, will achieve broad market acceptance among physicians and patients. Any failure by STS101, if approved, to achieve market acceptance or commercial success could adversely affect potential economic returns to us pursuant to the Merger.

Even if STS101 obtains regulatory approval, the ability of the party that ultimately commercializes STS101, whether that is SNBL, us or a third party (the Commercializing Party), to market and promote STS101 may be limited by FDA-approved labeling.

The commercial success of STS101 will likely depend in part upon STS101 receiving sufficiently differentiated FDA-approved product labeling, as compared to other products for migraine. The failure to achieve FDA approval of product labeling containing differentiated information could impair its commercial prospects by preventing advertising and promotion of what we believe are the

~~investigators~~key isfeatures ~~limited,~~of weSTS101. ~~may~~As ~~conduct~~a ~~some~~result, ofthis ~~our~~could ~~clinical~~impair ~~trials~~adoption atand ~~the~~prescribing ~~same~~by ~~clinical~~physicians, ~~trial~~favorable ~~sites~~pricing ~~that~~or ~~some~~adequate ofcoverage, ~~our~~reimbursement ~~competitors~~levels ~~use,~~by ~~which~~third-party ~~will~~payors ~~reduce~~and the ~~number~~ability of ~~subjects~~the ~~who~~Commercializing ~~are~~Party ~~available~~to ~~for~~facilitate ~~our~~broad ~~clinical~~product ~~trials~~trial. This would make STS101 less competitive in ~~such~~the ~~clinical~~market ~~trial~~and ~~sites~~consequentially may adversely affect potential economic returns to us pursuant to the Merger.

~~Delays~~We inface ~~subject~~significant ~~enrollment~~competition ~~may result~~ in ~~increased~~an ~~costs~~environment orof ~~may~~rapid ~~affect~~technological ~~the~~and ~~timing~~scientific orchange, ~~outcome~~and ofSTS101, ~~the~~if ~~planned~~approved, ~~clinical~~will ~~trials,~~face ~~which~~significant ~~could~~competition. ~~prevent~~The ~~completion~~failure of ~~these~~STS101 ~~trials and adversely affect our ability~~ to ~~advance~~effectively ~~the~~compete ~~development~~may ofprevent STS101~~. Furthermore~~, ~~the~~if ~~COVID-19~~approved, ~~pandemic~~from ~~could~~achieving ~~significantly~~significant ~~affect~~market ~~subject enrollment and completion in our ongoing and planned clinical trials to an extent that we have not anticipated~~penetration. ~~Although~~Many ~~subjects~~competitors in ~~our EMERGE trial were generally able to complete their scheduled visits and we were able to collect~~ the ~~essential~~migraine ~~data~~field ~~from~~have ~~those~~significant ~~visits,~~resources ~~there~~that ~~can~~may be nogreater ~~assurances~~than ~~that~~those ~~our~~of ~~experience~~the ~~with~~Commercializing ~~our~~Party ~~ASCEND~~and ~~safety~~as ~~trial,~~a ~~our~~result ~~SUMMIT efficacy trial, or any planned or future clinical trials will be~~ the ~~same~~Commercializing orParty ~~similar~~may ~~or that the COVID-19 pandemic will~~ not ~~have~~be aable ~~significant impact on our ability~~ to ~~complete~~successfully ~~our ASCEND and SUMMIT clinical trials and enroll subjects in any planned or future clinical trials~~compete.

The biotechnology and pharmaceutical industries in particular are characterized by rapidly advancing technologies, intense competition and a strong emphasis on developing proprietary therapeutics. Numerous companies are engaged in the development, patenting, manufacturing and marketing of healthcare products competitive with STS101. ~~may~~The ~~cause~~Commercializing ~~undesirable~~Party ~~side~~will ~~effects~~face orcompetition from a number of sources, such as pharmaceutical companies, generic drug companies, biotechnology companies and academic and research institutions, many of which have ~~other~~greater ~~properties~~financial ~~that~~resources, ~~could~~marketing ~~delay~~capabilities, orsales ~~prevent~~forces, ~~its~~manufacturing ~~regulatory~~capabilities, ~~approval~~research and development capabilities, ~~limit~~clinical study expertise, intellectual property portfolios, experience in obtaining patents and regulatory approvals for drug candidates and other resources. Some of the ~~commercial~~companies ~~profile~~that offer competing products also have a broad range of another ~~approved~~product ~~label~~offerings, orlarge direct sales forces and long-term customer relationships with target physicians for STS101, which could inhibit efforts to penetrate the market with STS101. Mergers and acquisitions in the pharmaceutical industry may result in even more resources being concentrated among a smaller number of competitors. Smaller or early-stage companies may also prove to be significant ~~negative~~competitors, ~~consequences~~particularly ~~following~~through ~~marketing~~collaborative ~~approval~~arrangements with large and established companies. These competitors also compete in recruiting and retaining qualified scientific and management personnel and establishing clinical study sites and patient registration for clinical studies, ifas ~~any~~well as in acquiring technologies complementary to, or necessary for, successful development and commercialization of STS101.

~~The~~Certain ~~results~~alternative oftreatments ~~our~~offered ~~clinical~~by ~~trials~~competitors may ~~show~~be ~~that~~available ~~STS101~~at ~~may~~lower ~~cause~~prices ~~undesirable~~and ~~side~~may ~~effects,~~offer ~~which~~greater ~~could~~efficacy ~~interrupt, delay~~ or ~~halt~~better ~~clinical~~safety ~~trials~~profiles. Furthermore, ~~resulting~~currently inapproved ~~the~~products ~~denial~~could ofbe ~~regulatory~~discovered ~~approval~~to byhave ~~the~~application ~~FDA~~for ~~and~~treatment ~~other regulatory authorities. In light~~ of ~~widely~~migraines ~~publicized~~generally, ~~events~~which ~~concerning~~could ~~the~~give ~~safety~~such ~~risk of certain drug~~ products, significant regulatory ~~authorities, members of Congress, the Government Accounting Office, medical professionals~~ and ~~the~~market ~~general~~timing ~~public~~advantages ~~have~~over ~~raised concerns about potential drug safety issues~~STS101. ~~These~~Competitors ~~events~~also ~~have~~may ~~resulted~~obtain ~~in the withdrawal of drug products~~FDA, ~~revisions~~EMA toor ~~drug~~other ~~labeling~~regulatory ~~that~~approval ~~further limit use of the drug products and establishment of risk management programs that may,~~ for ~~instance,~~their ~~restrict distribution of drug~~ products. ~~The~~more ~~increased~~rapidly ~~attention~~than toSTS101 ~~drug~~obtains ~~safety~~approval ~~issues~~and may ~~result~~obtain inorphan aproduct ~~more~~exclusivity ~~cautious~~from ~~approach by~~ the FDA tofor ~~clinical~~indications ~~trials.~~that ~~Data~~may ~~from~~be ~~clinical~~targeted ~~trials~~in ~~may~~the ~~receive~~future ~~greater scrutiny~~ with ~~respect to safety~~STS101, which ~~may~~could ~~make~~result ~~the~~in ~~FDA~~such orcompetitors ~~other~~establishing ~~regulatory~~a ~~authorities~~strong ~~more~~market ~~likely~~position ~~to terminate clinical trials~~ before ~~completion,~~STS101 oris ~~require~~able ~~longer~~to orenter ~~additional~~the ~~clinical~~market. ~~trials~~Even ~~that~~if ~~may~~a ~~result~~generic inproduct ~~substantial~~is ~~additional~~less ~~expense~~effective ~~and~~than aSTS101, ~~delay~~it ormay ~~failure~~be inmore ~~obtaining~~quickly ~~approval~~adopted orby ~~approval~~physicians ~~for~~and apatients ~~more~~than ~~limited~~STS101 ~~indication~~based ~~than~~upon ~~originally~~cost ~~sought~~or convenience.

~~Although~~The ~~STS101~~successful ~~has~~commercialization ~~generally~~of ~~been~~STS101 ~~well-tolerated~~by inthe ~~our~~Commercializing ~~clinical~~Party ~~trials~~will todepend ~~date,~~in ~~with~~part ~~low~~on ~~adverse~~the ~~event~~extent ~~rates~~to ~~reported,~~which ifgovernmental ~~unacceptable~~authorities, ~~side~~private ~~effects~~health ~~arise~~insurers, inand ~~our~~other ~~ongoing~~third-party ~~ASCEND~~payors ~~safety~~provide ~~trial~~coverage, ~~our~~adequate ~~ongoing~~reimbursement ~~SUMMIT~~levels ~~efficacy~~and ~~trial,~~implement orpricing ~~any~~policies ~~other~~favorable ~~trials~~for weit. ~~may~~Failure ~~conduct~~to inobtain ~~the future, we, the FDA,~~ or ~~the~~maintain ~~IRBs~~coverage atand ~~the~~adequate ~~institutions~~reimbursement infor ~~which~~STS101, ~~our~~if ~~studies~~approved, ~~are conducted~~ could ~~suspend~~limit orthe ~~terminate~~ability ~~our~~of ~~clinical trials or~~ the ~~FDA~~Commercializing orParty ~~comparable foreign regulatory authorities could order us~~ to ~~cease~~market ~~clinical~~it ~~trials~~and orthereby ~~deny~~decrease ~~approval~~its ofability ~~STS101~~to ~~for~~generate ~~its targeted indications~~revenue.

~~Treatment-related~~The ~~side~~availability ~~effects in our clinical trials or in the use~~ of ~~approved~~coverage ~~DHE~~and ~~products~~adequacy ~~could also affect subject recruitment or the ability or willingness~~ of ~~enrolled~~reimbursement ~~subjects~~by tomanaged ~~complete~~care ~~any~~plans, ofgovernmental ~~our~~healthcare ~~clinical trials~~programs, ~~and/or~~such ~~result~~as inMedicare ~~potential~~and ~~product liability claims. In addition~~Medicaid, ifprivate ~~undesirable~~health ~~side~~insurers ~~effects~~and ~~caused by~~ other ~~available~~third-party ~~DHE~~payors ~~products~~are oressential ~~DHE~~for ~~products~~most inpatients ~~development,~~to ~~the development and successful commercialization of STS101, if approved, could~~ be ~~negatively~~able ~~affected.~~to ~~The~~afford ~~active~~medical ~~pharmaceutical~~services ~~ingredient in STS101 (DHE) is contraindicated for patients with certain pre-existing conditions~~ and ~~the~~pharmaceutical ~~labels of approved DHE~~ products ~~warn~~that ~~against~~receive ~~use~~FDA ~~by patients with cardiovascular risk factors~~approval. ~~These~~The ~~contraindications~~Commercializing ~~and~~Party’s ~~warnings~~ability ~~could~~to ~~limit~~achieve ~~the~~acceptable ~~use~~levels of ~~STS101~~coverage ~~following~~and ~~marketing~~reimbursement ~~approval,~~for ~~if approved, or cause undesirable side effects in individuals who use~~ STS101 ~~despite~~by ~~these warnings. For example, we received a single report of a treatment~~third-~~related~~party ~~serious~~payors ~~adverse~~will ~~event~~have in an ~~ASCEND trial participant. This adverse event was consistent with a side~~ effect ~~described~~on inthe ~~prescribing~~ability ~~information~~to ~~for~~successfully ~~DHE~~commercialize ~~and other vasoconstrictive agents, such as triptans~~it. ~~The~~A ~~adverse~~decision ~~event occurred following the subject’s sixth use of study medication, and no further occurrences were reported with six subsequent uses of study medication~~ by ~~the~~a ~~subject.~~third-party ~~Investigation~~payor ~~determined the subject’s medical history, which the subject did~~ not ~~disclose~~ to ~~the~~cover ~~trial~~or ~~site,~~separately ~~included~~reimburse ~~DHE contraindications and fulfilled key trial exclusion criteria that are disqualifying~~ for ~~trial participation. In addition~~STS101, ~~approved~~could ~~DHE~~reduce ~~products~~physician ~~carry~~utilization aif ~~“black~~approved. ~~box”~~Assuming ~~warning~~there inis ~~their~~coverage ~~labels~~ for aSTS101 ~~risk~~by ~~that~~a ~~the~~third-party ~~coadministration of DHE and certain other drugs~~payor, ~~including~~the ~~specific~~resulting ~~antivirals~~reimbursement ~~and~~payment ~~antibiotics,~~rates may ~~result~~not inbe ~~elevated~~adequate ~~levels~~or ofmay ~~DHE~~require inco-payments ~~the blood, potentially causing vasospasm~~ that ~~may~~patients ~~result~~find inunacceptably ~~inadequate blood flow to the extremities or the brain~~high. ~~Unless~~We wecannot ~~can~~be ~~successfully~~sure ~~demonstrate by conducting drug-drug interaction studies and potentially additional studies~~ that ~~the~~coverage ~~coadministration of DHE~~ and ~~certain~~reimbursement ~~other drugs does not result~~ in ~~drug-drug~~the ~~interactions~~United States, the ~~FDA~~European isUnion ~~likely~~or toelsewhere ~~require~~will ~~the~~be ~~label~~available for STS101, ifand ~~approved,~~any toreimbursement ~~include~~that ~~such~~may ~~warning,~~become ~~and~~available ~~this~~may ~~could result in STS101~~ not ~~achieving~~be ~~its~~adequate ~~full commercial potential. Treatment-related side effects in our clinical trials~~ or inmay ~~the~~be ~~use~~decreased ~~of approved DHE products could also affect subject recruitment~~ or ~~the~~eliminated ~~ability of enrolled subjects to complete any of our clinical trials or result~~ in ~~potential~~the ~~product liability claims~~future.

IfMoreover, ~~STS101~~increasing ~~receives~~efforts ~~marketing~~by ~~approval~~governmental and weother third-party payors in the United States and abroad to cap or ~~others~~reduce ~~later~~healthcare ~~identify~~costs ~~undesirable~~have ~~side~~resulted ~~effects~~in ~~caused~~increasing bychallenges ~~STS101~~to prices charged for pharmaceutical products and services, and many third-party payors may refuse to provide coverage and adequate reimbursement for particular drugs when an equivalent generic drug, biosimilar or bya ~~other~~less expensive therapy is available. It is possible that a third-party payor may consider STS101 as substitutable and only offer to reimburse patients for the less expensive product, if any. For example, there are currently generic versions of both DHE liquid nasal spray products and DHE injectable products, awith ~~number~~which STS101 may compete. Even if STS101 demonstrates improved efficacy or improved convenience of ~~potentially~~administration, ~~significant~~pricing ~~negative~~of ~~consequences~~existing ~~could~~third-party ~~result~~therapeutics may limit the amount that the Commercializing Party will be able to charge for it. These third-party payors may deny or revoke the reimbursement status of STS101, ~~including:~~if approved, or establish prices for it at levels that are too low to enable the Commercializing Party to realize an appropriate return on

• regulatory authorities may withdraw their approval of STS101;

•its weinvestment. ~~may~~If bereimbursement ~~required~~is tonot ~~recall~~available ~~the~~or ~~STS101~~is oravailable ~~change~~only at limited levels, the ~~way~~Commercializing itParty ismay ~~administered~~not be able to ~~patients;~~successfully commercialize STS101.

•No ~~additional~~uniform ~~restrictions~~policy ~~may~~for becoverage ~~imposed~~and onreimbursement for products exists among third-party payors in the ~~marketing~~United ofStates. Therefore, coverage and reimbursement for products can differ significantly from payor to payor. As a result, the ~~STS101~~coverage ordetermination process is often a time-consuming and costly process that may require the ~~manufacturing~~Commercializing ~~processes~~Party to provide scientific and clinical support for the use of STS101 to each payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or ~~any~~obtained ~~component~~in ~~thereof;~~the first instance. Furthermore, rules and regulations regarding reimbursement change frequently, in some cases on short notice, and we believe that changes in these rules and regulations are likely.

•Outside ~~regulatory~~the ~~authorities~~United ~~may~~States, ~~require~~international operations are generally subject to extensive governmental price controls and other market regulations, and we believe the ~~addition~~increasing emphasis on cost-containment initiatives in Europe and other countries will likely put pressure on the pricing and usage of ~~labeling~~medical ~~statements~~products. In many countries, ~~such~~the prices of medical products are subject to varying price control mechanisms as apart ~~“black~~of ~~box”~~national ~~warning~~health orsystems. aOther ~~contraindication~~countries ~~similar~~allow companies to ~~those~~fix their own prices for medical products, but monitor and control company profits. Additional foreign price controls or other changes in pricing regulation could restrict the amount that ~~are~~the ~~currently~~Commercializing ~~included~~Party is able to charge for STS101. Accordingly, in markets outside the United States, the reimbursement for STS101 may be reduced compared with the ~~labels~~United States, may be insufficient to generate commercially-reasonable revenue and profits or may not be sufficient to justify commercialization of ~~DHE~~STS101 ~~products;~~in such markets.

•Our webusiness ~~may~~is beentirely ~~required~~dependent toon ~~implement~~the asuccessful ~~Risk~~development, ~~Evaluation~~regulatory approval and ~~Mitigation~~commercialization ~~Strategy~~of STS101, orour ~~create~~only aproduct ~~Medication~~candidate ~~Guide~~under ~~outlining~~development. ~~the~~Failure ~~risks~~to ofsuccessfully ~~such~~develop, ~~side~~receive ~~effects~~regulatory approval for ~~distribution~~and commercialize STS101 would adversely affect potential economic returns to ~~patients;~~us pursuant to the Merger.

•We have invested substantially all of our efforts and financial resources in the development of STS101 for the acute treatment of migraine, which has not been approved for sale or commercial use. Currently, STS101 is our only product candidate and we ~~could~~have not licensed, acquired, or invented any other product candidates for pre-clinical or clinical evaluation. This may make an investment in our company riskier than similar companies that have multiple product candidates in active development and that therefore may be ~~sued~~able to better sustain a failure of a lead candidate. The success of our business, in particular our ability to provide future economic benefits to our stockholders pursuant to a potential strategic transaction, will depend entirely on the successful development, regulatory approval and ~~held~~commercialization, ~~liable~~by ~~for~~the ~~harm~~Commercializing ~~caused~~Party, of STS101, which may never occur and which we do not plan to ~~patients;~~control under the Merger.

•As we continue development of STS101 and pursue completion of the Offer and Merger, we will continue to incur significant development expenses, as we seek to advance STS101 toward manufacturing and regulatory approval, and prepare for commercialization of STS101, if approved, by the Commercializing Party. If we are unable to complete the Offer and Merger, we do not plan to advance STS101 through regulatory approval and, given that we do not plan to raise additional funds that would be required to successfully commercialize STS101, we would likely be forced to terminate development of STS101 and pursue other strategic alternatives, such as dissolution and wind-down. Moreover, our clinical development program for STS101 may ~~become~~not ~~less~~lead ~~competitive;~~to regulatory approval from the FDA and similar foreign regulatory agencies if our STS101 NDA fails to convince the FDA that our clinical trials and the clinical trials of others that we have referenced in our 505(b)(2) NDA demonstrate that STS101 is safe and effective, and therefore STS101 may fail to be commercialized. The challenge of establishing STS101 as being safe and effective may be even more difficult given the failure of STS101 to demonstrate statistically significant effects as compared to placebo on the co-primary endpoints of our EMERGE and SUMMIT trials. Even if approved, STS101 may fail to obtain differentiated product labeling for STS101 as compared to other available products for migraine and, as a result, the commercial prospects for STS101 may be impaired. Any failure to obtain regulatory approval of STS101 would likely have a material and adverse impact on our ability to receive economic returns pursuant to the Merger. Even if STS101 successfully obtains regulatory approvals that permit marketing of the product, its revenue will be dependent, in part, upon the size of the markets in the territories regulatory approvals are granted. If the targeted markets or patient subsets are not as significant as we estimate, sales of STS101 may not generate significant revenues, even if approved, adversely affecting potential economic returns to us pursuant to the Merger.

•The ~~our~~commercial ~~reputation~~success of STS101 may ~~suffer.~~depend on a number of factors, including the following:

•

~~Any~~our ofability ~~the~~to ~~foregoing~~complete ~~events could prevent us from achieving or maintaining market acceptance of~~ the ~~particular~~Offer ~~product candidate, if approved,~~ and ~~result in the loss of significant revenues to us, which would materially and adversely affect our results of operations and business.~~Merger;

•

~~We may be unable to rely on Section 505(b)(2) of~~ the ~~Federal Food~~capabilities, ~~Drug~~resources and ~~Cosmetic~~performance ~~Act~~of ~~(FDCA),~~the ~~which~~Commercializing ~~could result in a longer development program and more costly trials than we anticipate.~~Party;

•

Wewhether ~~may not be able to seek FDA marketing approval of STS101 under Section 505(b)(2) of~~ the ~~FDCA. Section 505(b)(2), if applicable to us, would allow any NDA we file with the~~ FDA ~~to rely in part on data in the public domain~~ or ~~the~~similar ~~FDA’s~~foreign ~~prior~~regulatory ~~conclusions~~agencies ~~regarding~~require ~~the~~additional ~~safety~~clinical ~~and~~trials effectiveness of approved DHE products. Under Section 505(b)(2), the development and approval of STS101 could potentially be expedited by decreasing the overall scope of work we must do ourselves so as to enable an STS101 NDA submission based on Phase 3 efficacy and/or ~~safety~~other ~~trial~~studies ~~data~~beyond ~~combined~~those ~~with~~planned ~~a demonstration of pharmacokinetic comparability of STS101~~ to ~~one~~support orapproval ~~more approved DHE products (i.e., reference listed drugs). Although we believe, based on our communications with the FDA, both our Phase 1 trials have established the pharmacokinetic comparability~~ of STS101 5.2 mg to DHE reference listed drugs, if we are unable to rely on Section 505(b)(2), the development program for STS101 would be longer than we expect, and we would also have to conduct more costly trials than we anticipate, which would harm our business.;

•

~~STS101~~the isability aof ~~drug-device~~our ~~combination~~contract ~~product,~~manufacturing ~~which~~partners ~~may~~to ~~result~~consistently inmanufacture ~~additional~~STS101 ~~regulatory~~on ~~risks.~~a timely basis;

Our finished drug product and nasal delivery device will be regulated as a drug-device combination product. There may be additional regulatory risks for drug-device combination products, and neither the drug formulation nor nasal delivery device incorporated in STS101 is utilized in any drug-device combination product that has undergone regulatory review for marketing approval. We may experience delays in obtaining regulatory approval of STS101 given the increased complexity of the review process when approval of the product and a delivery device is sought under a single marketing application. In the United States, each component of a combination product is subject to the requirements established by the FDA for that type of component, whether a drug, biologic or device. The delivery system device will be subject to FDA device requirements regarding design, performance and validation as well as human factors testing, among other things. We implemented several minor modifications to the second-generation STS101 delivery device to improve its performance and we cannot be certain these changes will not result in additional regulatory risks. Delays in or failure of the studies conducted by us, or failure of our company, our collaborators, if any, or our third-party providers or suppliers to obtain or maintain regulatory approval could result in increased development costs, delays in or failure to obtain regulatory approval, and associated delays in STS101 reaching the market.

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

From time to time, we may publicly disclose preliminary or topline data from our preclinical studies and clinical trials, which is based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change following a more comprehensive review of the data related to the particular study or trial. We also make assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data. As a result, the topline or preliminary results that we report may differ from future results of the same

•

~~studies,~~the orCommercializing ~~different~~Party, ~~conclusions~~as orwell ~~considerations~~as ~~may~~any ~~qualify~~third-party ~~such results~~contractors, ~~once~~to ~~additional data have been received and fully evaluated. Topline data also~~ remain ~~subject to audit and verification procedures that may result~~ in ~~the~~good ~~final~~standing ~~data~~with ~~being~~regulatory ~~materially~~agencies ~~different~~and ~~from~~develop, ~~the~~validate ~~preliminary~~and ~~data~~maintain wecommercially ~~previously~~viable ~~published.~~manufacturing Asprocesses athat ~~result,~~are ~~topline~~compliant ~~data should be viewed~~ with ~~caution~~current ~~until~~good ~~the~~manufacturing ~~final~~practices, ~~data~~or ~~are available.~~cGMPs;

•

~~From~~the ~~time~~ability to ~~time,~~demonstrate ~~we may also disclose interim data from our nonclinical studies and clinical trials. Interim data from clinical trials that we may complete are subject~~ to the ~~risk~~satisfaction ~~that one or more~~ of the ~~clinical~~FDA ~~outcomes may materially change as subject enrollment continues~~ and ~~more~~similar ~~data~~foreign ~~become~~regulatory ~~available.~~authorities ~~Adverse~~the ~~differences~~safety, ~~between~~efficacy ~~preliminary or interim data~~ and ~~final~~acceptable ~~data~~risk-benefit ~~could~~profile ~~significantly harm our business prospects. Further, disclosure~~ of ~~interim data by us or by our competitors could result in volatility in the price of our common stock.~~STS101;

•

~~Further, others, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh~~ the ~~importance of data differently~~prevalence, ~~which~~duration ~~could~~and ~~impact~~severity ~~the value~~ of ~~the~~potential ~~particular~~side ~~program,~~effects ~~the approvability~~ or ~~commercialization~~other ofsafety ~~the~~issues ~~particular~~experienced product candidate or product and our company in general. In addition, the information we choose to publicly disclose regarding a particular study or clinical trial is based on what is typically extensive information, and you or others may not agree with ~~what we determine is material or otherwise appropriate information to include in our disclosure.~~STS101;

•

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

•

~~Even~~achieving ifand ~~STS101~~maintaining, ~~obtains~~and, ~~regulatory~~where ~~approval~~applicable, itensuring ~~may~~that ~~fail~~third-party tocontractors achieve ~~broad~~and ~~market~~maintain, ~~acceptance.~~compliance with our contractual obligations and with all regulatory requirements applicable to STS101;

•

~~Even~~the ifdifferentiation of STS101 ~~receives~~from ~~FDA or~~ other ~~regulatory~~available ~~approvals,~~DHE ~~its~~products ~~commercial~~and ~~success~~other ~~will~~acute ~~depend~~treatments ~~significantly~~of ~~on the extent to which it is adopted~~migraine, ~~prescribed by physicians~~ and ~~used~~the bywillingness ~~patients. The degree~~ of ~~market~~physicians, ~~acceptance~~operators of ~~STS101,~~hospitals ifand ~~approved,~~clinics ~~will~~and ~~depend~~patients onto aadopt ~~number~~and ofutilize ~~factors, including:~~STS101;

•

•the ability of the ~~safety~~Commercializing Party to successfully develop a commercial strategy and ~~efficacy~~thereafter ofcommercialize STS101 asin ~~compared~~the toUnited ~~other~~States ~~available~~and ~~acute~~internationally, ~~therapies~~if approved for ~~treatment~~marketing, ofsale ~~migraine~~and distribution in such countries and territories, whether alone or in collaboration with a partner or partners;

•

•the ~~patient~~availability ~~satisfaction~~of ~~with~~coverage ~~the results~~ and ~~administration~~adequate ofreimbursement ~~STS101~~from ~~and~~managed ~~overall~~care ~~treatment experience~~plans, ~~including~~private insurers, ~~the~~government ~~ease~~payors (such as Medicare and ~~convenience~~Medicaid ofand ~~administration~~similar offoreign authorities) and other third-party payors for STS101;

•

•patients’ ~~the~~willingness ~~clinical~~to ~~indications~~pay out-of-pocket for ~~which~~ STS101 isin ~~approved~~the ~~and~~absence ~~patient~~of ~~demand~~coverage ~~for~~and/or ~~approved~~adequate ~~products~~reimbursement ~~that~~from ~~treat~~third-party ~~those indications~~payors;

•

•the ~~our~~convenience ~~ability~~of tothe ~~manufacture~~administration ~~and~~of ~~release adequate commercial supplies on a timely basis~~STS101;

•

•acceptance ~~the~~by ~~availability~~physicians, ofpayors ~~coverage~~ and ~~adequate~~patients ~~reimbursement~~of ~~from~~the ~~managed care plans~~benefits, ~~private~~safety ~~insurers, government payors (such as Medicare~~ and ~~Medicaid)~~efficacy ~~and~~of ~~other~~STS101, ~~third-party~~if ~~payors for STS101~~approved;

•

•patient ~~the~~demand ~~cost of treatment with STS101 in relation to alternative treatments and patients’ willingness to pay out-of-pocket~~ for ~~the product~~STS101, if approved~~, in the absence of coverage and/or adequate reimbursement from third-party payors~~;

•

•the ~~acceptance~~ability byto ~~physicians,~~establish ~~operators of hospitals~~ and ~~clinics~~enforce ~~and~~intellectual ~~patients~~property ofrights ~~the~~in ~~product as a safe, effective~~ and ~~easy~~ to ~~administer treatment~~STS101; and

•

•the ~~physician~~ability ~~and patient willingness~~ to ~~adopt~~avoid athird-party ~~new~~patent ~~therapy~~interference, ~~over~~intellectual ~~other~~property ~~available~~challenges ~~preventive~~or ~~and~~intellectual ~~acute~~property ~~therapies~~infringement ~~for treatment of migraine;~~claims.

•These factors, many of which are, or will be, beyond our control, could lead to significant delays or an inability to obtain regulatory approvals for or commercialize STS101. Even if regulatory approvals are obtained, the ~~prevalence~~Commercializing ~~and~~Party ~~severity~~may ofnever ~~side~~be ~~effects;~~able to successfully commercialize STS101, adversely affecting potential economic returns to us pursuant to the Merger. In addition, disruptions caused by the COVID-19 pandemic may increase the likelihood that difficulties or delays are encountered in initiating, enrolling, conducting or completing future STS101 clinical trials.

•While ~~limitations~~the orscope ~~warnings~~of ~~contained~~regulatory approval generally is similar in ~~the~~other ~~FDA-approved~~countries, ~~labeling~~in order to obtain separate regulatory approval in other countries it is necessary to comply with numerous and varying regulatory requirements of such countries regarding safety and efficacy. Other countries also have their own regulations governing, among other things, requirements for ~~STS101~~nonclinical studies, ~~such~~clinical trials and commercial sales, as awell ~~“black~~as ~~box”~~pricing ~~warning~~and ordistribution aof ~~contraindication~~STS101, ~~similar~~and the Commercializing Party may be required to ~~those~~expend ~~that~~significant ~~are~~resources ~~currently~~to ~~included~~obtain regulatory approval and to comply with ongoing regulations in these jurisdictions. Regulatory approval in one country does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country may have a negative effect on the ~~labels~~regulatory ofprocess ~~DHE~~in ~~products;~~others.

•STS101 ~~the~~failed ~~willingness of physicians, operators of hospitals and clinics and patients~~ to ~~utilize~~demonstrate ora ~~adopt~~statistically ~~our~~significant ~~product~~difference as acompared ~~solution,~~to ~~particularly~~placebo inon ~~light~~either of ~~STS101’s~~the ~~failure~~co-primary toendpoints ~~demonstrate statistically significant effectiveness~~ in our EMERGE ~~trial;~~and SUMMIT efficacy trials.

In September 2020, we announced topline data from the EMERGE Phase 3 efficacy trial. Although topline data showed numerical differences in favor of STS101 3.9 mg and 5.2 mg versus placebo on the pre-specified co-primary endpoints of freedom from pain and freedom from most bothersome symptom (from among photophobia, phonophobia and nausea) at two hours post-administration, these differences did not achieve statistical significance for either dose strength. Both dose strengths of STS101 did, however, demonstrate significant effects on both freedom from pain and most bothersome symptom by three hours post-dose and later time points. Both STS101 dose strengths were well-tolerated in the EMERGE efficacy trial, with low adverse event rates and no serious adverse events reported.

•In November 2022, we announced topline data from the ~~effectiveness~~SUMMIT Phase 3 efficacy trial. Although topline data showed numerical differences in favor of ~~our~~STS101 ~~sales~~5.2 mg versus placebo on the pre-specified co-primary endpoints of freedom from pain and freedom from most bothersome symptom (from among photophobia, ~~marketing~~phonophobia and ~~distribution~~nausea) ~~efforts;~~at the two-hours post-administration timepoint, these differences did not achieve statistical significance for either dose strength. Both dose strengths of STS101 did, however, demonstrate significant effects on both freedom from pain and most bothersome symptom by three hours post-dose and later time points. Both STS101 dose strengths were well-tolerated in the EMERGE efficacy trial, with low adverse event rates and no serious adverse events reported.

•In ~~adverse~~addition, ~~publicity~~it ~~about~~may not be possible to obtain regulatory approval for and successfully commercialize STS101 orwithout ~~favorable~~conducting ~~publicity~~further ~~about~~clinical ~~competitive~~trials ~~products;~~in addition to those trials that we have completed. We do not plan to conduct any further STS01 clinical trials, any future clinical trials would need to be undertaken by the Commercializing Party, and there can be no assurance that the results of any future STS101 clinical trials will be sufficient to obtain regulatory approval or support successful commercialization.

•Disruptions ~~patients’~~at ~~willingness~~the FDA and other government agencies caused by funding shortages or global health concerns could hinder their ability to ~~take~~hire, retain, or deploy key leadership and other personnel, or otherwise prevent products from being developed, approved, or commercialized in a ~~dry-powder~~timely ~~intranasal~~manner ~~medication;~~or at all, which may adversely affect our business.

•The ~~potential~~ability ~~product~~of ~~liability~~the ~~claims;~~FDA and other government agencies to review and approve new products can be affected by a variety of factors, including government budget and funding levels, ability to hire and retain key personnel and accept the payment of user fees, and statutory, regulatory, and policy changes. In addition, government funding of other government agencies that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable. Disruptions at the FDA and other agencies, including a prolonged government shutdown, may cause significant regulatory delays and, therefore, delay our efforts to seek approvals and adversely affect our business. For example, over the last several years, the U.S. government has shut down several times, and certain regulatory agencies, such as the FDA, have had to furlough critical employees and stop critical activities.

•Separately, in response to the global ~~economic~~COVID-19 pandemic, ~~market~~the FDA postponed most inspections of domestic and ~~industry~~foreign ~~conditions,~~manufacturing ~~including~~facilities ~~economic~~at ~~slowdowns~~various points. Even though the FDA has since resumed standard inspection operations where feasible, ~~recessions~~the FDA has continued to monitor and implement changes to its inspectional activities to ensure the safety of its employees and those of the firms it regulates as it adapts to the evolving COVID-19 pandemic, ~~inflationary~~and ~~pressures~~any resurgence of the virus or emergence of new variants may lead to further inspectional delays. Regulatory authorities outside the United States may adopt similar restrictions or other policy measures in response to the COVID-19 pandemic. If a prolonged government shutdown occurs, ~~rising~~or ~~interest~~if ~~rates~~global health concerns continue to prevent the FDA other regulatory authorities from conducting their regular inspections, ~~financial~~reviews, ~~market~~or ~~fluctuations~~other regulatory activities, it could significantly impact the ability of the FDA and ~~reduced~~other ~~credit~~regulatory ~~availability~~authorities to timely review and process our regulatory submissions, which could have a material adverse effect on our business.

WeClinical ~~cannot~~development ~~assure~~involves ~~you~~a ~~that~~lengthy ~~STS101, if approved, will achieve broad market acceptance among physicians~~ and ~~patients.~~expensive ~~Any~~process ~~failure~~with byan ~~STS101,~~uncertain ~~if approved~~outcome, toand ~~achieve~~delays ~~market~~can ~~acceptance~~occur orfor ~~commercial~~a ~~success~~variety ~~would~~of ~~adversely~~reasons ~~affect~~outside ~~our results~~ of ~~operations~~our control.

WeClinical ~~face,~~development is expensive and ~~will~~can ~~continue~~take many years to ~~face~~complete, ~~significant~~and ~~competition~~its outcome is inherently uncertain. Failure can occur at any time during the clinical trial process. For example, in anNovember ~~environment~~2022, we announced topline data from the SUMMIT trial. Although STS101 5.2 mg showed favorable numerical differences versus placebo on the pre-specified co-primary endpoints of ~~rapid~~freedom ~~technological~~from pain and ~~scientific~~freedom ~~change~~from most bothersome symptom (from among photophobia, phonophobia and ~~our~~nausea) ~~failure~~at the two-hour post-administration regulatory timepoint, these differences did not achieve statistical significance. We do not plan to ~~effectively~~undertake ~~compete~~additional STS101 clinical trials, and the Commercializing Party may ~~prevent~~experience usdelays ~~from~~in ~~achieving~~initiating ~~significant~~or ~~market~~completing ~~penetration~~future trials of STS101 that may be required for regulatory approvals or necessary for successful commercialization of STS101. Furthermore, ifwe ~~approved.~~cannot ~~Most~~be ofcertain ~~our~~that ~~competitors~~any ~~have~~future ~~significantly~~studies ~~greater~~or ~~resources~~trials ~~than~~for weSTS101 ~~have~~will ~~and~~begin weon ~~may~~time, not require redesign, enroll an adequate number of subjects on time or be ~~able~~completed toon ~~successfully~~schedule, ~~compete~~if at all. Clinical trials can be delayed or terminated for a variety of reasons, including delays or failures related to:

•

The pharmaceutical industry is highly competitive, with a number of established, large pharmaceutical companies, as well as many smaller companies. Many of these companies have greater financial resources, marketing capabilities and experience in obtaining regulatory approvals for product candidates. There are many pharmaceutical companies, biotechnology companies, public and private universities, government agencies and research organizations actively engaged in research and development of products which may target the ~~same~~COVID-19 ~~markets as STS101. For instance~~pandemic, ~~companies actively marketing branded products~~ or ~~that~~other ~~have~~unforeseen ~~products~~events in late-stage development for the acute treatment or prevention of migraine which may directly or indirectly compete with STS101 include, but are not limited to, Teva Pharmaceutical Industries, Eli Lilly, Novartis, Abbvie, Pfizer, Lundbeck, Amgen and apublic ~~number~~health ~~of smaller companies~~emergencies, including ~~Impel~~its ~~Pharmaceuticals,~~impact ~~Axsome Therapeutics and Amneal Pharmaceuticals. As well, generic products for the acute treatment or prevention of migraine may directly or indirectly compete with STS101. We expect STS101 to compete~~ on the ~~basis~~providers of, ~~among~~healthcare ~~other things~~services, ~~product~~such ~~efficacy~~as ~~and~~the ~~safety,~~healthcare ~~price,~~clinics ~~extent of adverse side effects experienced~~ and ~~ease~~institutions ofwhere ~~administration.~~we ~~One~~conduct ~~or more of~~ our ~~competitors~~ongoing ~~may~~clinical ~~develop~~trials and ~~commercialize~~may ~~competing~~conduct ~~products~~planned ~~that~~clinical incorporate technologies similar to our proprietary technologies earlier than us, obtain approvals for such products from the FDA more rapidly than us or develop alternative products or therapies that are safer, more effective and/or more cost effective than STS101. trials;

•

The market in which we will compete with STS101 is currently dominated by generic triptan products, and also includes other DHE products, newer oral migraine-specific acute treatments and preventive treatments. The majority of the ~~prescriptions written for the acute treatment of migraine are for generic triptans. There are seven~~ FDA~~-approved~~ ~~triptan~~or ~~molecules~~comparable ~~available~~foreign inregulatory ~~branded~~authorities ~~and~~disagreeing ~~branded~~as ~~generic/generic~~to ~~oral~~the ~~dose~~design ~~forms, and two of these molecules are also available in injectable and/~~or ~~liquid~~implementation ~~nasal spray dose forms that may have faster onset~~ of ~~action~~our ~~than~~clinical ~~oral dose forms.~~trials;

•

~~With~~delays respect to DHE products, we will compete with Bausch Health’s Migranal and several generic versions thereof, which are DHE liquid nasal spray products, as well as branded and generic DHE injectable products. In addition, in ~~September~~obtaining ~~2021~~regulatory ~~Impel~~authorization ~~Pharmaceuticals~~to ~~received~~commence ~~FDA approval for and subsequently commercially introduced~~ a DHE liquid nasal spray product, utilizing the same liquid formulation and container closure system as Migranal, but with a different propellant-powered, single-use delivery device. There can be no assurance that STS101, if approved, will be able to successfully compete against such products.trial;

•

Wereaching ~~also~~agreement ~~face~~on ~~competition~~acceptable ~~from~~terms ~~newer~~with ~~oral~~prospective ~~migraine-specific~~contract ~~acute~~research ~~treatments that have been approved by FDA and commercially introduced in 2020 such as Eli Lilly’s lasmiditan~~organizations, a ditan, and two gepants, Abbvie’s ubrogepant and Pfizer’s rimegepant. Because lasmiditan, ubrogepant, and rimegepant are thought to act by mechanisms other than vasoconstriction, recommended use is not restricted to patients who do not have cardiovascular risk factors or ~~disease~~CROs, ~~as is the case for triptan~~ and ~~ergot~~clinical ~~alkaloid~~trial ~~products (including DHE) due to their vasoconstrictive actions. Although the labels for lasmiditan~~sites, ubrogepant and rimegepant do not limit use to patients without cardiovascular risk factors or disease, we believe these products have disadvantages. For example, lasmiditan has been reported to commonly cause central nervous system adverse events such as dizziness, somnolence and paresthesia, and the ~~lasmiditan~~terms ~~label includes warnings for driving impairment and operation~~ of ~~machinery~~which ~~for~~can atbe ~~least~~subject ~~eight~~to ~~hours~~extensive ~~after~~negotiation ~~taking a lasmiditan dose, central nervous system depression, serotonin syndrome,~~ and ~~medication~~may ~~overuse~~vary ~~headache.~~significantly ~~Additionally,~~among ~~because~~different ~~lasmiditan~~CROs ~~has shown potential for abuse~~ and ~~dependence,~~trial ~~the U.S. Drug Enforcement Agency, or DEA, has designated lasmiditan as a controlled substance~~sites; this designation imposes licensing and documentation requirements upon prescribers and as well restricts distribution. With ubrogepant and rimegepant, reported efficacy is modest in comparison with efficacy historically reported with triptan and DHE products.

•

~~Many~~obtaining ofinstitutional ~~our~~review ~~competitors have significantly greater financial~~board, ~~technical,~~or ~~manufacturing~~IRB, ~~marketing, sales and supply resources and experience than we do. If we successfully obtain~~ approval ~~for~~at ~~STS101,~~each wetrial will face competition based on many different factors, including the safety and effectiveness of STS101, the ease with which STS101 can be administered and the extent to which patients accept the nasal route of administration, the timing and scope of regulatory approvals for STS101, the availability and cost of manufacturing, marketing and sales capabilities, price, reimbursement coverage and patent position. Competing products could present superior treatment alternatives, including by being more effective, safer, less expensive or marketed and sold more effectively than STS101. Competitive products may make any products we develop obsolete or noncompetitive before we recover the expense of developing and commercializing STS101. Such competitors could also recruit our employees, which could negatively impact our level of expertise and our ability to execute our business plan. For additional information regarding our competition, see “Business—Competition” in our Annual Report on Form 10-K for the year ended December 31, 2021.site;

•

~~The~~recruiting ~~successful~~an ~~commercialization of STS101 will depend in part on the extent to which governmental authorities, private health insurers, and other third-party payors provide coverage,~~ adequate ~~reimbursement~~number ~~levels~~of ~~and~~suitable ~~implement~~subjects ~~pricing policies favorable for it. Failure~~ to ~~obtain~~participate orin ~~maintain~~a ~~coverage and adequate reimbursement for STS101, if approved, could limit our ability to market our product and decrease our ability to generate revenue.~~trial;

•

~~The~~having ~~availability~~subjects ofcomplete coverage and adequacy of reimbursement by managed care plans, governmental healthcare programs, such as Medicare and Medicaid, private health insurers and other third-party payors are essential for most patients to be able to afford medical services and pharmaceutical products that receive FDA approval. Our ability to achieve acceptable levels of coverage and reimbursement for STS101 by third-party payors will have an effect on our ability to successfully commercialize it. A decision by a ~~third-party~~trial ~~payor not to cover~~ or ~~separately~~return ~~reimburse~~ for ~~STS101, could reduce physician utilization if approved. Assuming there is coverage for STS101 by a third~~post-~~party~~treatment ~~payor, the resulting reimbursement payment rates may not be adequate or may require co~~follow-payments that patients find unacceptably high. We cannot be sure that coverage and reimbursement in the United States, the European Union or elsewhere will be available for STS101 and any reimbursement that may become available may not be adequate or may be decreased or eliminated in the future.up;

•

~~Moreover,~~clinical ~~increasing~~sites ~~efforts~~deviating byfrom ~~governmental~~trial ~~and~~protocol ~~other third-party payors in the United States and abroad to cap~~ or ~~reduce~~dropping ~~healthcare~~out ~~costs~~of have resulted in increasing challenges to prices charged for pharmaceutical products and services, and many third-party payors may refuse to provide coverage and adequate reimbursement for particular drugs when an equivalent generic drug, biosimilar or a less expensive therapy is available. It is possible that a third-party payor may consider STS101 as substitutable and only offer to reimburse patients for the less expensive product, if any. For example, there are currently generic versions of both DHE liquid nasal spray products and DHE injectable products, with which we may compete. Even if we show improved efficacy or improved convenience of administration with STS101, pricing of existing third-party therapeutics may limit the amount we will be able to charge for it. These third-party payors may deny or revoke the reimbursement status of STS101, if approved, or establish prices for it at levels that are too low to enable us to realize an appropriate return on our investment. If reimbursement is not available or is available only at limited levels, we may not be able to successfully commercialize STS101.trial;

•

Noaddressing ~~uniform~~subject ~~policy~~safety ~~for~~concerns coverage and reimbursement for products exists among third-party payors in the United States. Therefore, coverage and reimbursement for products can differ significantly from payor to payor. As a result, the coverage determination process is often a time-consuming and costly process that ~~may~~arise ~~require~~during ~~us to provide scientific and clinical support for~~ the ~~use~~course of ~~STS101~~a to each payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance. Furthermore, rules and regulations regarding reimbursement change frequently, in some cases on short notice, and we believe that changes in these rules and regulations are likely.trial;

•

~~Outside~~adding ~~the~~a ~~United~~sufficient ~~States,~~number international operations are generally subject to extensive governmental price controls and other market regulations, and we believe the increasing emphasis on cost-containment initiatives in Europe and other countries will likely put pressure on the pricing and usage of ~~medical~~clinical ~~products.~~trial Insites; many countries, the prices of medical products are subject to varying price control mechanisms as part of national health systems. Other countries allow companies to fix their own prices for medical products, but monitor and control company profits. Additional foreign price controls or other changes in pricing regulation could restrict the amount that we are able to charge for STS101. Accordingly, in markets outside the United States, the reimbursement for STS101 may be reduced compared with the United States and may be insufficient to generate commercially-reasonable revenue and profits.

•

Weobtaining ~~currently~~sufficient ~~have~~quantities noof ~~sales~~STS101 ~~organization.~~for Ifuse wein ~~are~~clinical ~~unable~~trials tofrom ~~establish~~third-party ~~sales~~suppliers ~~capabilities~~ on ~~our~~a ~~own~~timely ~~or through third parties, we may not be able to market and sell STS101 effectively in the United States and foreign jurisdictions, if approved, or generate product revenue~~basis.

WeThe ~~currently~~Commercializing doParty ~~not~~may ~~have~~experience anumerous ~~marketing~~adverse or ~~sales~~unforeseen ~~organization.~~events Induring, ~~order~~or toas ~~commercialize~~a ~~STS101,~~result ~~if approved~~of, inany ~~the~~future ~~United~~preclinical ~~States~~studies and ~~foreign~~clinical ~~jurisdictions,~~trials wethat ~~must~~could ~~build~~delay ~~our~~or ~~marketing,~~prevent ~~sales,~~its ~~distribution~~ability, ~~managerial~~or ~~and~~that ~~other~~of ~~non-technical~~a ~~capabilities~~partner or ~~make~~partners, ~~arrangements with third parties~~ to ~~perform~~receive ~~these~~marketing ~~services,~~approval ~~and~~for weor ~~may not be~~ successful incommercialize ~~doing so. If~~ STS101, ~~receives regulatory~~ including:

•

they may receive feedback from regulatory authorities that requires that the design of a future clinical trial be modified;

•

clinical trials of STS101 may produce negative or inconclusive results (for example, in the EMERGE and SUMMIT trials, STS101 did not achieve statistical significance versus placebo on pre-specified co-primary endpoints), and the sponsor may decide, or regulators may require the sponsor to conduct additional clinical trials or abandon development of STS101;

•

participants may drop out of clinical trials at a higher rate than anticipated;

•

clinical trial participants may not comply with study protocol procedures and instructions;

•

a sponsor or third-party contractors may fail to comply with regulatory requirements, fail to maintain adequate quality controls, or be unable to produce sufficient product supply to conduct and complete clinical trials of STS101 in a timely manner, or at all;

•

a sponsor or its investigators might have to suspend or terminate clinical trials of STS101 for various reasons, including non-compliance with regulatory requirements, a finding that STS101 has undesirable side effects or other unexpected characteristics, or a finding that the participants are being exposed to unacceptable health risks;

•

the cost of clinical trials of STS101 may be greater than anticipated;

•

the quality of STS101 or other materials necessary to conduct clinical trials of STS101 may be insufficient or inadequate;

•

regulators may revise the requirements for approving STS101, or such requirements may not be as anticipated; and

•

future collaborators may conduct clinical trials in ways they view as advantageous to them but that are sub-optimal for a sponsor.

We do not plan to conduct additional clinical trials or other testing of STS101 beyond those already completed or contemplated. If the Commercializing Party is required to conduct additional clinical trials or other testing of STS101 beyond those already completed or currently contemplated, including for purposes of demonstrating the potential efficacy of STS101, if such party or parties is unable to successfully complete clinical trials of STS101 or other testing, and if the results of these trials or tests are not positive or are only moderately positive or if there are safety concerns, our future economic prospects may be adversely affected due to:

•

unplanned costs being incurred;

•

delays in obtaining marketing approval for STS101 or not obtaining marketing approval at all;

•

obtaining marketing approval in some countries and not in others;

•

obtaining marketing approval for indications or patient populations that are not as broad as intended or desired;

•

obtaining marketing approval with labeling that includes significant use or distribution restrictions or safety warnings, including boxed warnings;

•

to the imposition of additional post-marketing testing requirements, which could be expensive and time consuming; or

•

having the treatment removed from the market after obtaining marketing approval.

~~approval,~~A wesponsor ~~expect~~could toalso ~~establish~~encounter adelays ~~sales~~if ~~organization~~a inclinical ~~the~~trial ~~United~~is ~~States~~suspended ~~with~~or ~~technical~~terminated ~~expertise~~by ~~and supporting marketing and distribution capabilities to commercialize~~ it, ~~which~~by ~~will~~the beIRBs ~~expensive~~of ~~and~~the ~~time~~institutions ~~consuming.~~in Wewhich ~~have~~such notrials ~~prior~~are ~~experience~~being asconducted aor ~~company~~by in the ~~marketing,~~FDA ~~sale~~or ~~and~~other ~~distribution~~regulatory ofauthorities. ~~pharmaceutical~~Such ~~products~~authorities ~~and~~may ~~there~~suspend ~~are~~or ~~significant~~terminate ~~risks involved in building and managing~~ a ~~sales~~clinical ~~organization,~~trial ~~including~~due ~~our ability~~ to ~~hire,~~a ~~retain,~~number ~~and~~of ~~incentivize qualified individuals~~factors, ~~generate~~including ~~sufficient~~failure ~~sales leads, provide adequate training~~ to ~~sales~~conduct ~~and~~the ~~marketing~~clinical ~~personnel,~~trial ~~and~~in ~~effectively~~accordance ~~manage~~with aregulatory ~~geographically~~requirements ~~dispersed sales and marketing team. Any failure~~ or ~~delay in the development of~~ our ~~internal~~clinical ~~sales~~protocols, ~~marketing~~inspection ~~and~~of ~~distribution capabilities would adversely impact~~ the ~~commercialization~~clinical oftrial ~~STS101.~~operations Weor ~~may~~trial ~~choose~~site toby ~~collaborate~~the ~~with~~FDA ~~third~~or ~~parties~~other ~~that~~regulatory ~~have~~authorities ~~direct~~resulting ~~sales~~in ~~forces~~the ~~and~~imposition ~~established~~of ~~distribution~~a ~~systems~~clinical hold, ~~either~~unforeseen tosafety ~~augment~~issues ~~our own sales force and distribution systems~~ or inadverse ~~lieu~~side ofeffects, ~~our~~failure ~~own sales force and distribution systems. If we are unable~~ to ~~enter~~demonstrate ~~into~~a ~~such~~benefit ~~arrangements~~from onusing ~~acceptable~~a ~~terms~~product ~~or at all~~candidate, wechanges ~~may not be able to successfully commercialize STS101. If we are not successful~~ in ~~commercializing~~governmental ~~STS101,~~regulations ~~either on our own~~ or ~~through~~administrative ~~arrangements~~actions ~~with one~~ or ~~more~~lack ~~third~~of ~~parties,~~adequate wefunding ~~may not be able~~ to ~~generate~~continue ~~product~~the ~~revenue~~clinical ~~and we would incur significant additional losses~~trial.

~~We rely~~Further, ~~and~~conducting ~~intend~~clinical totrials ~~continue~~in toforeign ~~rely~~countries, onas ~~qualified~~the ~~third~~Commercializing ~~parties~~Party tocould ~~supply~~do ~~all~~for ~~components of~~ STS101~~. As a result~~, wepresents ~~are~~additional ~~dependent~~risks onthat ~~several~~may ~~third~~delay ~~parties,~~completion ~~most~~ of ~~which~~clinical ~~are~~trials. ~~sole~~These ~~source~~risks ~~suppliers,~~include ~~for~~ the ~~manufacture~~failure of ~~STS101~~enrolled ~~and~~subjects ~~our~~in ~~supply~~foreign ~~chain,~~countries ~~and~~to ifadhere weto ~~experience~~clinical ~~problems~~protocol ~~with~~as ~~any~~a result of ~~these~~differences ~~suppliers,~~in orhealthcare ~~they~~services ~~fail to comply with applicable regulatory requirements~~ or tocultural ~~supply~~customs, ~~sufficient~~managing ~~quantities~~additional atadministrative ~~acceptable~~burdens ~~quality~~associated ~~levels~~with orforeign ~~prices~~regulatory schemes, oras atwell ~~all,~~as itpolitical ~~would~~and ~~materially~~economic ~~and~~risks ~~adversely~~relevant ~~affect~~to ~~our~~such ~~business~~foreign countries.

WePrincipal doinvestigators ~~not own or operate manufacturing facilities~~ for clinical ortrials ~~commercial~~may ~~manufacture~~serve ofas ~~either~~scientific ~~the~~advisors ~~proprietary~~or ~~dry-powder~~consultants ~~formulation~~to ~~of DHE component of STS101 or~~ the ~~proprietary~~sponsor ~~pre-filled,~~from ~~single-use,~~time ~~nasal~~to ~~delivery~~time ~~device,~~and ~~including~~may ~~the~~receive ~~drug~~cash ~~substance~~or ~~and~~equity ~~packaging.~~compensation Wein ~~have~~connection ~~limited personnel~~ with ~~experience~~such inservices. ~~drug-device~~If ~~product~~these ~~manufacturing~~relationships and weany ~~lack~~related ~~the~~compensation ~~capabilities~~result toin ~~manufacture~~perceived ~~either the drug~~ or ~~device~~actual ~~components~~conflicts of ~~STS101 on a clinical or commercial scale. We currently outsource all manufacturing and packaging of STS101 to third parties~~interest, ~~and we do not plan to own~~ or ~~operate~~a ~~our~~regulatory ~~own~~authority ~~manufacturing~~concludes ~~and packaging facilities. There can be no assurance~~ that ~~our~~the ~~clinical~~financial ~~development~~relationship ~~product~~may ~~supplies~~have ~~will~~affected ~~not~~the beinterpretation ~~limited, interrupted, or~~ of ~~satisfactory~~the ~~quality or continue to be available at acceptable prices. In particular~~trial, ~~any~~the ~~replacement~~integrity of ~~any~~the ofdata ~~our~~generated ~~third-party~~at ~~suppliers~~the ~~could~~applicable ~~require~~clinical ~~significant~~trial ~~effort~~site ~~and expertise because there~~ may be aquestioned ~~limited~~and ~~number~~the utility of ~~qualified~~the ~~replacements.~~clinical Intrial ~~addition,~~itself we may ~~encounter~~be ~~issues with transferring technology to a new third-party manufacturer~~jeopardized, ~~and~~which wecould ~~may~~result ~~encounter~~in ~~regulatory delays if we need to move~~ the ~~manufacturing~~delay ofor ~~our~~rejection ~~products from one third-party manufacturer to another. Some~~ of the ~~third~~marketing ~~parties~~application ~~on which~~ we ~~rely~~submit. ~~may~~Any ~~also~~such bedelay ~~adversely impacted by COVID-19~~ or ~~other~~rejection ~~unforeseen events and public health emergencies, and the foregoing challenges~~ could beprevent ~~compounded~~or asdelay acommercialization ~~result~~of STS101.

InIf ~~addition,~~any wefuture doclinical ~~not~~trials ~~currently~~of ~~have~~STS101 ~~long-term~~are ~~commercial~~unsuccessful, ~~supply~~delayed ~~agreements with third-party manufacturers for either the formulation~~ or ~~device~~terminated, ~~components~~its ofcommercial ~~STS101~~prospects ~~or the STS101 finished product. We~~ may be ~~unable~~harmed, toand ~~enter~~the ~~into~~ability ~~agreements~~to ~~for~~generate ~~commercial~~revenues ~~supply~~from ~~with~~sales ~~all~~of ~~third-party~~STS101 ~~manufacturers,~~will ~~or may~~ be ~~unable~~delayed toor donot sorealized onat ~~acceptable terms~~all. ~~Even~~In ~~if we enter into these agreements or~~addition, ~~for~~any ~~those~~delays ~~agreements~~in ~~that~~completing weclinical ~~have~~trials ~~already~~may ~~entered~~increase ~~into~~costs, ~~the~~slow ~~various~~down ~~manufacturers utilized for~~ STS101 ~~will~~development ~~likely~~and bedelay ~~single~~its ~~source~~approval ~~suppliers~~process toand usjeopardize ~~for~~the aability ~~significant period~~ of ~~time.~~the WeCommercializing ~~may~~Party ~~not be able~~ to ~~establish~~commence ~~additional~~product ~~sources~~sales ofand ~~supply~~generate ~~for STS101 prior to commercialization~~revenues. ~~Certain~~Any of ~~such~~these ~~suppliers are subject to regulatory requirements covering manufacturing~~occurrences, ~~testing,~~as ~~quality~~well ~~control~~as ~~and~~many ~~record~~of ~~keeping~~the ~~relating~~factors tothat ~~STS101~~cause, ~~and~~or ~~are~~lead ~~subject~~ to, ~~pre-approval~~a ~~and~~delay ~~ongoing~~in ~~inspections~~the bycommencement ~~the~~or ~~regulatory~~completion ~~agencies.~~of ~~Failure~~clinical bytrials ~~any~~may ofalso ~~our~~ultimately ~~suppliers~~lead to ~~comply~~the ~~with~~denial ~~applicable~~of ~~regulations~~regulatory ~~may~~approval ~~result~~of inSTS101. ~~long~~If ~~delays~~STS101 ~~and~~generally ~~interruptions~~proves to ~~our~~be ~~manufacturing~~ineffective, ~~capacity~~unsafe ~~while~~or wecommercially ~~seek~~unviable, toit ~~secure~~could ~~another~~have ~~supplier~~materially ~~that~~and ~~meets~~adversely ~~all~~affect ~~regulatory~~our ~~requirements~~future economic prospects.

~~Reliance~~If onthe ~~third-party~~Commercializing ~~manufacturers~~Party ~~entails~~encounters ~~risks~~difficulties towith ~~which~~completion weof ~~would~~any ~~not~~future beclinical ~~subject~~trials, ifSTS101 weclinical ~~manufactured~~development ~~STS101~~activities ~~ourselves,~~could ~~including:~~be delayed or otherwise adversely affected.

•The ~~reliance~~timely completion of clinical trials in accordance with their protocols depends, among other things, on a sponsor’s ability to enroll a sufficient number of subjects who remain in the ~~third~~study ~~parties~~until its conclusion. A sponsor may experience difficulties in subject enrollment in any future clinical trials for ~~regulatory~~a ~~compliance~~variety of reasons, ~~quality~~including ~~assurance~~as a result of the availability of approved preventive and ~~hazardous~~acute ~~materials~~treatments ~~handling;~~for migraine. The enrollment of subjects depends on many additional factors, including:

•

• the ~~possible~~subject ~~breach~~eligibility ofcriteria ~~the~~defined ~~manufacturing~~in ~~and quality agreements by~~ the ~~third parties because of factors beyond our control~~protocol;

•

• the ~~possibility~~general ofwillingness ~~termination or nonrenewal~~ of ~~the~~subjects ~~agreements~~to byenroll ~~the~~in ~~third parties because of our breach of~~ the ~~manufacturing agreement or based on their own business priorities~~trial; ~~and~~

•

•the ~~with~~sample ~~respect~~size toof ~~any manufacturers with which we do not have a long-term agreement,~~ the ~~possibility~~subjects ~~that~~required ~~the~~for ~~manufacturer~~analysis ~~decides~~of ~~to stop supplying to us or changes~~ the ~~price~~trial’s orprimary ~~other terms of supply.~~endpoints;

•

~~Any of these factors could cause~~ the ~~delay~~proximity of ~~required~~subjects approvals or commercialization of STS101, could prevent us from commercializing it successfully, could cause the suspension of initiation or completion of clinical trials and regulatory submissions, and could lead to ~~higher~~trial ~~product costs.~~sites;

•

the design of the trial;

•

the ability to recruit clinical trial investigators with the appropriate competencies and experience;

•

clinicians’ and subjects’ perceptions as to the potential advantages of the product candidate being studied in relation to other available therapies, including any new therapies that may be approved for the indications we are investigating;

•

the clinical site’s ability to obtain and maintain subject consents;

•

subjects may elect not to participate in future trials of STS101 given STS101 did not achieve statistical significance versus placebo on pre-specified co-primary endpoints in the EMERGE and SUMMIT trials; and

•

clinical trial participants may not comply with study protocol procedures and instructions.

A sponsor’s clinical trials may also compete with other clinical trials for product candidates that seek to treat migraine, and this competition will reduce the number and types of subjects available to enroll in any future trials, because some subjects who might have opted to enroll in our trials may instead opt to enroll in a trial being conducted by one or more competitors. Since the number of qualified clinical investigators is limited, a sponsor may conduct some of its clinical trials at the same clinical trial sites that some of its competitors use, which will reduce the number of subjects who are available for its clinical trials in such clinical trial sites.

InDelays ~~addition,~~in ~~the~~subject ~~facilities~~enrollment ~~used~~may byresult ~~our~~in ~~CMOs~~increased tocosts ~~manufacture~~or ~~STS101 are subject to various regulatory requirements and~~ may beaffect ~~subject~~the totiming ~~the~~or ~~inspection~~outcome of the ~~FDA~~planned orclinical ~~other regulatory authorities. We do not directly control manufacturing at our CMOs~~trials, ~~and~~which ~~are~~could ~~completely~~prevent ~~dependent~~completion ~~on them for compliance with current regulatory requirements. If our CMOs cannot successfully manufacture components~~ of ~~finished~~these ~~product~~trials ~~that~~and ~~conforms~~adversely toaffect ~~our specifications and~~ the ~~regulatory~~ability ~~requirements~~ of the ~~FDA~~Commercializing orParty ~~comparable regulatory authorities in foreign jurisdictions, we may not be able~~ to ~~rely~~advance onor ~~them~~complete ~~for~~ the ~~manufacture~~development of STS101. ~~In addition~~Furthermore, ~~we have limited control over~~ the ~~ability~~COVID-19 ofpandemic ~~our~~could ~~CMOs~~significantly toaffect ~~maintain~~subject ~~adequate~~enrollment ~~quality control, quality assurance~~ and ~~qualified~~completion personnel. If the FDA or a comparable foreign regulatory authority finds our facilities or those of our CMOs inadequate for the manufacture of STS101 or if such facilities are subject to enforcement action in ~~the~~any future orclinical ~~are~~trials ~~otherwise inadequate, we may need~~ to ~~find~~an ~~alternative~~extent ~~manufacturing~~that ~~facilities,~~is ~~which~~not ~~would~~anticipated. ~~significantly~~Although ~~impact~~subjects in our ~~ability~~EMERGE, ~~to develop~~ASCEND, ~~obtain regulatory approval for or commercialize STS101~~ and ~~the~~SUMMIT ~~timing~~trials, ofwere ~~any~~generally ~~such~~able ~~approval and commercialization. We implemented several minor modifications~~ to ~~the~~complete ~~STS101~~their ~~delivery~~scheduled ~~device~~visits ~~to improve its performance~~ and we ~~cannot~~were beable ~~certain~~to ~~these~~collect ~~changes~~the ~~will~~essential ~~not~~data ~~result~~from inthose ~~additional regulatory risks. In addition~~visits, ifthere ~~any~~can ofbe ~~our~~no ~~CMOs~~assurances ~~are~~that ~~adversely~~this ~~impacted~~will bycontinue ~~COVID-19 or other unforeseen events and public health emergencies, or if such events impede the ability of the FDA or a comparable regulatory authority~~ to ~~inspect~~be the ~~facilities~~case ~~used~~with byany ~~our~~future ~~CMOs~~clinical ~~to manufacture STS101, which could delay our ability to seek approval or commercialize STS101~~trials.

~~Our~~STS101 ~~CMOs~~ may ~~experience~~cause ~~manufacturing~~undesirable ~~difficulties~~side ~~due~~effects toor ~~resource~~have ~~constraints~~other properties that could delay or asprevent aits ~~result~~regulatory approval, limit the commercial profile of ~~labor~~an ~~disputes~~approved label, or ~~unstable~~result ~~political~~in ~~environments.~~significant negative consequences following marketing approval, if any.

~~Additionally~~Further analysis of the results of our clinical trials, ~~due~~or tothe ~~COVID-19~~results ~~pandemic~~of wefuture STS101 clinical trials or nonclinical studies, may ~~experience~~show ~~interruption~~that ofSTS101 may cause undesirable side effects, orwhich ~~delays~~could result in ~~completing~~the ~~manufacturing~~denial or revocation of regulatory approval by the FDA and ~~manufacturing-related~~other ~~activities~~regulatory ~~such~~authorities. asIn ~~CMO~~light ~~qualification,~~of ~~production~~widely ~~equipment~~publicized ~~manufacture,~~events ~~delivery~~concerning ~~and~~the ~~qualification~~safety risk of certain drug products, ~~validation~~regulatory authorities, members of ~~manufacturing~~Congress, ~~processes~~the Government Accounting Office, ~~manufacture~~medical professionals and~~/or~~ ~~analytical~~the ~~characterization~~general ofpublic ~~our~~have ~~product~~raised ~~candidate,~~concerns ~~completion~~about potential drug safety issues. These events have resulted in the withdrawal of ~~stability~~drug ~~studies~~products, ~~and/or~~revisions ~~manufacture~~to drug labeling that further limit use of ~~registration~~the ~~batches~~drug products and establishment of ~~our~~risk ~~product~~management ~~candidate~~programs ~~required~~that may, for ~~NDA~~instance, ~~submission.~~restrict Ifdistribution ~~our~~of ~~CMOs~~drug ~~were~~products. The increased attention to ~~encounter~~drug ~~any~~safety ofissues ~~these~~may ~~difficulties,~~result ~~our~~in ~~ability~~a tomore ~~provide~~cautious ~~STS101~~approach by the FDA to ~~subjects~~clinical intrials. Data from clinical trials, ormay receive greater scrutiny with respect to ~~provide~~safety, ~~product~~which ~~for~~may make the ~~treatment~~FDA ofor ~~patients~~other ~~once~~regulatory ~~approved~~authorities more likely to terminate clinical trials before completion, ~~would~~or berequire ~~jeopardized~~longer or additional clinical trials that may result in substantial additional expense and a delay or failure in obtaining approval or approval for a more limited indication than originally sought.

WeSTS101 ~~rely,~~is ~~and~~a ~~intend~~drug-device tocombination ~~continue to rely~~product, onwhich ~~third-party~~may ~~suppliers~~result ~~for materials used~~ in ~~the~~additional ~~manufacture~~regulatory ~~of STS101, and the loss of third-party suppliers or their inability to supply us with adequate key materials could harm our business~~risks.

WeOur ~~currently~~finished dodrug ~~not~~product ~~have~~and ~~the~~nasal ~~ability~~delivery todevice ~~independently~~will ~~conduct~~be ~~any~~regulated ~~clinical~~as ~~trials.~~a ~~We rely, and intend to continue to rely, on third~~drug-~~party~~device ~~suppliers,~~combination ~~most~~product. ofThere ~~which~~may ~~are~~be ~~sole~~additional ~~source~~regulatory ~~suppliers,~~risks for ~~certain~~drug-device ~~key~~combination ~~materials~~products, ~~required~~and ~~for~~neither the ~~production~~drug offormulation ~~the~~nor ~~DHE~~nasal ~~dry-powder~~delivery ~~formulation~~device ofincorporated in STS101. ~~Our~~is ~~dependence~~utilized onin ~~these~~any ~~third~~drug-~~party~~device ~~suppliers~~combination ~~and~~product ~~the~~that ~~challenges~~has weundergone ~~may~~regulatory ~~face~~review infor ~~obtaining~~marketing ~~adequate~~approval. ~~supplies~~Delays ofin ~~these~~obtaining ~~materials~~regulatory ~~involve~~approval ~~several~~for ~~risks,~~STS101 ~~including~~may ~~limited~~arise ~~control~~given ~~over~~the ~~pricing,~~increased ~~availability,~~complexity ~~quality~~of ~~and~~the ~~delivery~~review ~~schedules.~~process Aswhen aapproval ~~small~~of ~~company,~~the ~~our~~product ~~negotiation leverage is limited~~ and wea ~~are~~delivery ~~likely~~device tois ~~get~~sought ~~lower~~under ~~priority~~a ~~than~~single ~~other~~marketing ~~companies~~application. orIn ~~purchasers~~the ~~that~~United ~~are~~States, ~~larger~~each ~~than~~component weof ~~are.~~a Wecombination ~~cannot~~product beis ~~certain~~subject ~~that~~to ~~our~~the ~~suppliers~~requirements ~~will~~established ~~continue~~by tothe ~~provide~~FDA usfor ~~with~~that ~~the~~type ~~quantities~~ of ~~these~~component, ~~key~~whether ~~materials~~a ~~that~~drug, webiologic ~~require~~ or ~~satisfy our anticipated specifications and quality requirements~~device. ~~Some~~The ofdelivery ~~these~~system ~~third~~device ~~parties~~will ~~may also~~ be ~~adversely~~subject ~~impacted~~to byFDA ~~COVID-19~~device orrequirements ~~other~~regarding ~~unforeseen~~design, ~~events~~performance and ~~public~~validation ~~health~~as ~~emergencies.~~well ~~Any~~as ~~supply~~human ~~interruption~~factors intesting, ~~limited~~among orother ~~sole~~things. ~~sourced~~We ~~key~~implemented ~~materials~~several ~~could~~minor ~~materially~~modifications ~~harm~~to the ~~manufacture~~second-generation of STS101 ~~until~~delivery adevice ~~new~~to ~~source~~improve ofits ~~supply,~~performance ifand ~~any,~~we ~~could~~cannot be ~~identified~~certain ~~and~~these ~~qualified.~~changes Wewill ~~may~~not beresult ~~unable~~in toadditional ~~find~~regulatory arisks. ~~sufficient~~Failure ~~alternative~~of ~~supplier~~the instudies aconducted ~~reasonable~~by ~~time~~us orto onsatisfy ~~commercially~~FDA ~~reasonable~~requirements, ~~terms.~~or ~~Any~~the ~~performance~~ failure onof the ~~part~~Commercializing ofParty, or our third-party providers or suppliers ~~could~~to ~~delay~~obtain ~~the~~or ~~development~~maintain ~~and~~regulatory ~~potential~~approval ~~commercialization~~could ofresult ~~STS101,~~in ~~including~~increased ~~limiting~~development ~~supplies~~costs, ~~necessary~~delays ~~for~~in ~~clinical~~or ~~trials~~failure ~~and~~to obtain regulatory ~~approvals~~approval, ~~which~~and ~~would~~associated ~~have~~delays ain ~~material~~STS101 ~~adverse~~reaching ~~effect~~the ~~on our business~~market.

WeSTS101 ~~rely~~faces, and ~~intend~~will to continue to ~~rely~~face, onsignificant ~~third~~competition ~~parties~~ in ~~the~~an ~~conduct~~environment of ~~all~~rapid oftechnological ~~our~~and ~~clinical~~scientific ~~trials.~~change Ifand ~~these~~the ~~third~~failure ~~parties~~of dothe ~~not~~Commercializing ~~successfully~~Party ~~carry~~to ~~out~~effectively ~~their~~compete ~~contractual~~may ~~duties~~prevent STS101, ~~fail~~if toapproved, ~~comply~~from ~~with~~achieving ~~applicable~~significant ~~regulatory~~market ~~requirements~~penetration. orMany ~~meet~~competitors ~~expected~~in ~~deadlines,~~the wemigraine field may behave ~~unable~~significantly togreater ~~obtain~~resources ~~regulatory~~than ~~approval~~the ~~for~~Commercializing ~~STS101~~Party, and the Commercializing Party may not be able to successfully compete.

The ~~FDA~~pharmaceutical ~~and~~industry ~~comparable~~is ~~foreign~~highly ~~regulatory~~competitive, ~~authorities~~with ina ~~other~~number ~~jurisdictions~~of ~~require~~established, uslarge topharmaceutical ~~comply with regulations and standards~~companies, ~~commonly~~as ~~referred~~well to as ~~good~~many ~~clinical~~smaller ~~practice,~~companies. orMany ~~GCP,~~of ~~requirements~~these ~~for~~companies ~~conducting,~~have ~~monitoring,~~greater ~~recording~~financial ~~and reporting the results of clinical trials~~resources, inmarketing ~~order~~capabilities ~~to ensure that the data~~ and ~~results~~experience ~~are~~in ~~scientifically~~obtaining ~~credible~~regulatory ~~and~~approvals ~~accurate~~for ~~and~~product ~~that~~candidates. ~~the~~There ~~trial subjects~~ are ~~adequately~~many ~~informed~~pharmaceutical ~~of the potential risks of participating in clinical trials. We rely on medical institutions~~companies, ~~clinical~~biotechnology ~~investigators~~companies, ~~contract~~public ~~laboratories~~ and ~~other~~private ~~third parties~~universities, ~~such~~government asagencies ~~CROs~~ and ~~consultants,~~research toorganizations ~~conduct~~actively ~~GCP-compliant~~engaged ~~clinical~~in ~~trials~~research ofand ~~STS101~~development ~~properly~~of ~~and~~products onwhich ~~time.~~may ~~While~~target wethe ~~have~~same ~~agreements~~markets ~~with~~as ~~these~~STS101. ~~third~~For ~~parties~~instance, wecompanies ~~monitor~~actively ~~and~~marketing ~~control~~branded ~~only~~products ~~certain~~or ~~aspects~~that ~~of their activities and~~ have ~~limited~~products ~~influence~~in ~~over~~late-stage ~~their~~development ~~actual~~for ~~performance and~~ the ~~amount~~acute treatment or ~~timing~~prevention of ~~resources~~migraine ~~that~~which ~~they~~may ~~devote~~directly toor ~~our~~indirectly ~~programs.~~compete ~~Third parties~~ with ~~whom~~STS101 weinclude, ~~contract~~but ~~may~~are ~~also~~not ~~have~~limited ~~relationships~~to, ~~with~~Teva ~~other~~Pharmaceutical ~~commercial entities~~Industries, ~~including~~Eli ~~our~~Lilly, ~~competitors~~Novartis, ~~for~~Abbvie, ~~whom~~Pfizer, ~~they~~Lundbeck, ~~may~~Amgen ~~also~~and bea ~~conducting~~number ~~clinical~~of ~~trials~~smaller orcompanies, ~~other~~including ~~drug~~Impel ~~development~~Pharmaceuticals, ~~activities~~Axsome ~~that~~Therapeutics ~~could~~and ~~harm~~Amneal ~~our competitive position~~Pharmaceuticals. ~~The~~As ~~third~~well, ~~parties~~generic ~~with~~products ~~whom~~for wethe ~~contract~~acute ~~for~~treatment ~~execution~~or prevention of ~~our~~migraine ~~clinical~~may ~~trials~~directly ~~play~~or aindirectly ~~significant~~compete ~~role~~with inSTS101. ~~the~~We ~~conduct~~expect ofSTS101 ~~these~~to ~~trials~~compete ~~and~~on the ~~subsequent~~basis ~~collection and analysis~~ of, ~~data.~~among ~~Although~~other wethings, ~~rely~~product onefficacy ~~these~~and ~~third~~safety, ~~parties~~price, toextent ~~conduct portions~~ of ~~our~~adverse ~~clinical~~side ~~trials,~~effects weexperienced ~~remain~~and ~~responsible~~ease ~~for ensuring that each~~ of ~~our~~administration. ~~clinical~~One ~~trials~~or ismore ~~conducted~~competitors inmay ~~accordance~~develop ~~with its investigational plan~~ and ~~protocol~~commercialize ~~and~~competing ~~applicable~~products ~~laws~~that ~~and~~incorporate ~~regulations,~~technologies ~~and~~similar ~~our~~to ~~reliance~~the onproprietary ~~these~~technologies ~~third~~incorporated ~~parties~~in ~~does~~STS101 ~~not~~before ~~relieve~~STS101 uscan ofbe ~~our~~successfully ~~regulatory~~commercialized ~~responsibilities.~~by ~~These~~the Commercializing

~~challenges~~Party, ~~have~~obtain ~~been~~approvals ~~made~~for ~~more~~such ~~difficult~~products byfrom the ~~COVID-19~~FDA ~~pandemic~~more ~~and~~rapidly ~~resulting~~than ~~shelter-in-place and stay-at-home restrictions~~STS101, ~~which~~or ~~are~~develop ~~driving~~alternative ~~greater~~products ~~dependency~~or ontherapies ~~electronic~~that ~~monitoring~~are ofsafer, ~~our~~more ~~clinical~~effective ~~trial sites. Such monitoring could prove to be less reliable~~ and/or ~~could~~more ~~increase~~cost ~~data~~effective ~~privacy~~than ~~and cybersecurity risks~~STS101.

IfThe ~~the~~market ~~third~~in ~~parties~~which ~~conducting~~STS101 ~~our~~will ~~clinical~~compete ~~trials~~is docurrently ~~not~~dominated ~~adequately~~by ~~perform~~generic ~~their~~triptan ~~contractual duties or obligations~~products, ~~experience~~and ~~significant~~also ~~business~~includes ~~challenges,~~other ~~disruptions~~DHE ~~or failures~~products, donewer ~~not~~oral ~~meet~~migraine-specific ~~expected~~acute ~~deadlines,~~treatments ~~terminate~~and ~~their~~preventive ~~agreements~~treatments. ~~with~~The usmajority orof ~~need~~the toprescriptions bewritten ~~replaced,~~for ~~or if~~ the ~~quality~~acute ortreatment ~~accuracy~~ of ~~the~~migraine ~~data~~are ~~they obtain is compromised due to their failure to adhere to our protocols or to GCPs, or~~ for ~~any~~generic ~~other~~triptans. ~~reason,~~There weare ~~may~~seven ~~need~~FDA-approved totriptan ~~enter~~molecules ~~into~~available ~~new~~in ~~arrangements~~branded ~~with~~and ~~alternative~~branded ~~third~~generic/generic ~~parties.~~oral ~~This~~dose ~~could be difficult~~forms, ~~costly or impossible,~~ and ~~clinical~~two ~~trials~~of ~~may~~these ~~need~~molecules toare bealso ~~extended,~~available ~~delayed, terminated or repeated. As a result, we may not be able to obtain regulatory approval~~ in ainjectable ~~timely fashion,~~ and/or atliquid ~~all,~~nasal ~~for~~spray ~~STS101,~~dose ~~our~~forms ~~results~~that ~~our~~may ~~business~~have ~~and~~faster ~~results~~onset of ~~operations~~action ~~and~~than ~~the~~oral ~~commercial~~dose ~~prospects for STS101 would be harmed, our costs could increase, and our ability to generate revenues could be delayed~~forms.

WeWith respect to DHE products, STS101 will ~~need~~compete towith ~~increase~~Bausch ~~the~~Health’s ~~size~~Migranal ofand ~~our~~several ~~organization~~generic versions thereof, which are DHE liquid nasal spray products, as well as branded and wegeneric ~~may~~DHE ~~experience~~injectable ~~difficulties~~products. In addition, in ~~managing~~September ~~growth~~2021 Impel Pharmaceuticals received FDA approval for and subsequently commercially introduced a DHE liquid nasal spray product, utilizing the same liquid formulation and container closure system as Migranal, but with a different propellant-powered, single-use delivery device. There can be no assurance that STS101, if approved, will be able to successfully compete against such products.

AsSTS101 offace ~~September~~competition 30from newer oral migraine-specific acute treatments that have been approved by FDA and commercially introduced in 2020 such as Eli Lilly’s lasmiditan, ~~2022~~a ditan, weand ~~had~~two 25oral ~~full~~gepants, Abbvie’s ubrogepant and Pfizer’s rimegepant, and a nasally-~~time~~administered ~~employees~~gepant, Pfizer’s zavegepant. WeBecause ~~will~~lasmiditan, ~~need~~ubrogepant, rimegepant and zavegepant are thought to ~~continue~~act by mechanisms other than vasoconstriction, recommended use is not restricted to ~~expand~~patients ~~our~~who ~~managerial~~do not have cardiovascular risk factors or disease, ~~operational~~as is the case for triptan and ergot alkaloid products (including DHE) due to their vasoconstrictive actions. Although the labels for lasmiditan, ~~financial~~ubrogepant and ~~other~~rimegepant ~~resources~~do innot ~~order~~limit use to ~~manage~~patients ~~our~~without ~~operations~~cardiovascular risk factors or disease, we believe these products have disadvantages. For example, lasmiditan has been reported to commonly cause central nervous system adverse events such as dizziness, somnolence and ~~clinical~~paresthesia, ~~trials~~and the lasmiditan label includes warnings for driving impairment and operation of machinery for at least eight hours after taking a lasmiditan dose, ~~continue~~central ~~our~~nervous ~~development~~system ~~activities~~depression, serotonin syndrome, and ~~commercialize~~medication ~~STS101~~overuse headache. ~~Our~~Additionally, ~~management~~because lasmiditan has shown potential for abuse and ~~personnel~~dependence, ~~systems~~the ~~and~~U.S. ~~facilities~~Drug ~~currently~~Enforcement inAgency, ~~place~~or ~~may~~DEA, ~~not~~has bedesignated ~~adequate~~lasmiditan toas ~~support~~a controlled substance; this ~~future~~designation ~~growth~~imposes licensing and documentation requirements upon prescribers and as well restricts distribution. ~~Our~~With ~~need~~ubrogepant, torimegepant, ~~effectively~~and ~~execute~~zavegepant, ~~our~~reported ~~growth~~efficacy ~~strategy~~is ~~requires~~modest ~~that~~in ~~we:~~comparison with efficacy historically reported with triptan and DHE products.

•Many ~~effectively~~STS101 ~~manage~~competitors ~~our~~have ~~clinical~~significantly ~~trials~~greater financial, technical, manufacturing, marketing, sales and supply resources and experience than the ~~development~~Commercializing Party may have. If STS101 is successfully approved for marketing, the Commercializing Party will face competition based on many different factors, including the safety and effectiveness of STS101;, the ease with which STS101 can be administered and the extent to which patients accept the nasal route of administration, the timing and scope of regulatory approvals for STS101, the availability and cost of manufacturing, marketing and sales capabilities, price, reimbursement coverage and patent position. Competing products could present superior treatment alternatives, including by being more effective, safer, less expensive or marketed and sold more effectively than STS101. Competitive products may make STS101 obsolete or noncompetitive. Such competitors could also recruit our employees, or the employees of the Commercializing Party, which could negatively impact our ability to realize potential economic returns pursuant to the Merger. For additional information regarding our competition, see "Business—Competition" in our Annual Report on Form 10-K for the year ended December 31, 2022.

•We ~~identify,~~do ~~recruit~~not intend to independently commercialize STS101 and are seeking to complete the Offer and Merger pursuant to which the Commercializing Party would commercialize STS101, ~~retain~~if approved. If such party does not have or is unable to establish sales capabilities on its own or through third parties, ~~incentivize~~it may not be able to effectively market and ~~integrate~~sell ~~additional~~STS101 ~~employees~~in the United States and foreign jurisdictions, ~~including~~if ~~sales~~approved, ~~personnel;~~or generate product revenue, adversely affecting potential economic returns to us.

•We do not intend to independently commercialize STS101 and are seeking to complete the Offer and Merger. In order to commercialize STS101, if approved, in the United States and foreign jurisdictions, the Commercializing Party must have or build marketing, sales, distribution, managerial and other non-technical capabilities or make arrangements with third parties to perform these services, and may not be successful in doing so. If STS101 receives regulatory approval, such party could be required to establish a sales organization in the United States with technical expertise and supporting marketing and distribution capabilities to commercialize it, which will be expensive and time consuming. They may have limited prior experience as a company in the marketing, sale and distribution of pharmaceutical products and there are significant risks involved in building and managing a sales organization, including the ability to hire, retain, and incentivize qualified individuals, generate sufficient sales leads, provide adequate training to sales and marketing personnel, and effectively manage ~~our~~a ~~internal~~geographically dispersed sales and marketing team. Any failure or delay in the development of internal sales, marketing and ~~operational~~distribution ~~efforts~~capabilities ~~effectively~~would ~~while~~adversely ~~carrying~~impact ~~out~~the ~~our~~commercialization ~~contractual~~of ~~obligations~~STS101. Such party may choose to collaborate with third parties; that have direct sales forces and established distribution systems, either to augment their own sales force and distribution systems or in lieu of their own sales force and distribution systems. If such party is unable to enter into such arrangements on acceptable terms or at all, they may not be able to successfully commercialize STS101. If they are not successful in commercializing STS101, either on their own or through

• continue to improve our operational, financial and management controls, reporting systems and procedures.

We may be unable to successfully implement these tasks, which could have a material adverse effect on our business, results of operations, financial condition, prospects and stock price.

We may conduct additional clinical trials and consider additional headache indications for STS101 to enhance its commercial potential; however, these trials may not produce results necessary to enable additional commercial potential or enhancement of its label.

In addition to our pursuit of initial regulatory approval and successful commercialization of STS101 in the United States, we may conduct additional clinical trials and consider additional headache indications for STS101 to expand its commercial potential, including by potentially conducting clinical programs outside the United States. However, any positive results from our ongoing, planned or future clinical trials of STS101 and results from clinical testing by third parties of other DHE products and product candidates, may not be predictive of the results of any such additional clinical trials. Therefore, there can be no assurance that we will ever be successful enhancing the commercial potential of STS101 or expanding its label.

Any future collaboration arrangements that we may enter into, may not be successful, which could significantly limit the likelihood of receiving the potential economic benefits of the collaboration and adversely affect our ability to develop and commercialize STS101.

To the extent that we pursue collaborations relating to STS101 in the future, we may face significant competition in seeking appropriate collaborators and may not be able to ultimately enter into collaborations. Moreover, any such collaboration arrangements may be complex and time-consuming to negotiate, document, implement and maintain and challenging to manage. We may not be successful in our efforts with any such collaborator and we may never receive any milestone or royalty payments under any such agreements. Further, the terms of any collaborations or other arrangements that we may establish, may not be favorable to us.

The success of any collaboration arrangement will depend heavily on the efforts and activities of our collaborators. Collaborations are subject to numerous risks, which may include risks that:

• collaborators have significant discretion in determining the efforts and resources that they will apply to collaborations;

• collaborators may not pursue development and commercialization of STS101 or may elect not to continue or renew development or commercialization programs based on clinical trial results, changes in their strategic focus due to their

~~acquisition~~arrangements ofwith ~~competitive~~one ~~products~~ or ~~their~~more ~~internal~~third ~~development of competitive products~~parties, ~~availability~~they ofmay ~~funding~~not orbe ~~other~~able ~~external~~to ~~factors,~~generate ~~such~~product asrevenue aand ~~business~~our ~~combination~~potential ~~that~~future ~~diverts~~economic ~~resources~~prospects ormay ~~creates~~be ~~competing~~adversely ~~priorities;~~affected.

•We ~~collaborators~~have ~~may~~relied, ~~delay~~and ~~clinical~~we ~~trials~~anticipate the Commercializing Party would need to continue to rely, ~~provide~~on ~~insufficient~~qualified ~~funding~~third parties to supply all components of STS101, and to manufacture supplies of STS101 for commercial sale. As a ~~clinical~~result, ~~trial~~the ~~program~~successful development and commercialization of STS101 is dependent on the supply chain we have established, ~~stop~~comprising amultiple ~~clinical~~third ~~trial~~parties, ~~abandon~~most aof ~~product~~which ~~candidate~~are sole source suppliers, ~~repeat~~for the manufacture of STS101. Should problems arise with any of these suppliers, or ~~conduct~~if ~~new~~they ~~clinical~~fail ~~trials~~to comply with applicable regulatory requirements or ~~require~~to asupply ~~new~~sufficient ~~formulation~~quantities ofat aacceptable ~~product~~quality ~~candidate~~levels ~~for~~or ~~clinical~~prices, ~~testing;~~or at all, it would materially and adversely affect our potential future economic prospects.

•We ~~collaborators~~do ~~could~~not ~~independently~~own ~~develop,~~or operate manufacturing facilities for clinical or ~~develop~~commercial manufacture of either the proprietary dry-powder formulation of DHE component of STS101 or the proprietary pre-filled, single-use, nasal delivery device, including the drug substance and packaging. We have limited personnel with experience in drug-device product manufacturing and we lack the capabilities to manufacture either the drug or device components of STS101 on a clinical or commercial scale. We currently outsource all manufacturing and packaging of STS101 to third parties, ~~products~~and ~~that~~we ~~compete~~do ~~directly~~not plan to own or ~~indirectly~~operate our own manufacturing and packaging facilities. There can be no assurance that unsatisfactory quality findings affecting product supplies utilized in our clinical trials will not be found, which could jeopardize regulatory approval of STS101. In particular, any replacement of any STS101third-party supplier could require significant effort and expertise because there may be a limited number of qualified replacements. In addition, issues may be encountered with transferring technology to a new third-party manufacturer, and regulatory delays could result were it necessary to move the manufacturing of STS101;, or its components, from one third-party manufacturer to another. Some of the third parties on which we have relied and anticipate the Commercializing Party would need to continue to rely, may also be adversely impacted by COVID-19 or other unforeseen events and public health emergencies, and the foregoing challenges could be compounded as a result.

•In addition, we ~~could~~do ~~grant~~not ~~exclusive~~currently ~~rights~~have long-term commercial supply agreements with third-party manufacturers for either the formulation or device components of STS101 or the STS101 finished product. As a result of the foregoing, the Commercializing Party may be unable to ~~our~~enter ~~collaborators~~into agreements for commercial supply with all third-party manufacturers, or may be unable to do so on acceptable terms. Even if these agreements are consummated, or for those agreements that ~~would~~we ~~prevent~~have already entered into, the various manufacturers utilized for STS101 will likely be single source suppliers to us ~~from~~for ~~collaborating~~a significant period of time. The Commercializing Party may not be able to establish additional sources of supply for STS101 prior to commercialization. Certain of such suppliers are subject to regulatory requirements covering manufacturing, testing, quality control and record keeping relating to STS101, and are subject to pre-approval and ongoing inspections by the regulatory agencies. Failure by any suppliers to comply with ~~others;~~applicable regulations may result in long delays and interruptions to manufacturing capacity while efforts to secure another supplier that meets all regulatory requirements are pursued.

•Reliance ~~collaborators~~on ~~may~~third-party ~~not~~manufacturers ~~properly~~(the ~~maintain~~STS101 orCMOs) ~~defend~~entails ~~our~~risks ~~intellectual property rights or may use our intellectual property or proprietary information in a way that gives rise~~ to ~~actual~~which orwe ~~threatened~~would ~~litigation~~not ~~that~~be ~~could~~subject ~~jeopardize~~if orwe ~~invalidate~~manufactured ~~our~~STS101 ~~intellectual~~ourselves, ~~property or proprietary information or expose us to potential liability;~~including:

•

•reliance ~~collaborations~~on ~~may~~the bethird ~~terminated,~~parties ~~and,~~for ifregulatory ~~terminated~~compliance, ~~this~~quality ~~may~~assurance ~~result~~and inhazardous amaterials ~~need for additional capital to pursue further development or commercialization of STS101~~handling;

•

•the ~~disputes~~possible ~~may~~breach ~~arise~~of ~~with~~the ~~respect~~manufacturing toand ~~the~~quality ~~ownership~~agreements ofby ~~any~~the ~~intellectual~~third ~~property~~parties ~~developed~~because ~~pursuant~~of tofactors beyond our ~~collaborations~~control;

•

•the apossibility ~~collaborator’s~~of ~~sales~~termination ~~and~~or ~~marketing~~nonrenewal ~~activities~~of orthe ~~other~~agreements ~~operations~~by ~~may~~the ~~not~~third beparties inbecause ~~compliance~~of ~~with~~our ~~applicable~~breach ~~laws,~~of ~~resulting~~the inmanufacturing ~~civil~~agreement or ~~criminal~~based ~~proceedings~~on their own business priorities; and

•

•with ~~disputes~~respect ~~may~~to ~~arise~~any ~~between~~manufacturers uswith ~~and~~which awe ~~collaborator~~do ~~that~~not ~~causes~~have ~~the~~a ~~delay~~long-term oragreement, ~~termination~~the ofpossibility that the ~~development~~manufacturer ordecides ~~commercialization~~to ofstop ~~STS101~~supplying or ~~that~~changes ~~results~~the inprice ~~costly litigation~~ or ~~arbitration~~other ~~that~~terms ~~diverts~~of ~~our management’s attention and resources; and~~supply.

•Any ~~collaborators~~of ~~may~~these befactors ~~adversely~~could ~~impacted~~cause bythe ~~COVID-19~~delay of required approvals or ~~other~~commercialization ~~unforeseen~~of ~~events~~STS101, could prevent successful commercialization of STS101, could cause the suspension of initiation or completion of future clinical trials and ~~public~~regulatory ~~health~~submissions, ~~emergencies~~and could lead to higher product costs.

IfIn weaddition, ~~engage~~the infacilities ~~future~~used ~~acquisitions~~by the STS101 CMOs to manufacture STS101 are subject to various regulatory requirements and may be subject to the inspection of the FDA or ~~strategic~~other ~~partnerships~~regulatory authorities. We do not directly control manufacturing at the STS101 CMOs, ~~this~~and ~~may~~are ~~increase~~completely dependent on them for compliance with current regulatory requirements. If the STS101 CMOs cannot successfully manufacture components of finished product that conforms to our ~~capital~~specifications and the regulatory requirements of the FDA or comparable regulatory authorities in foreign jurisdictions, ~~dilute~~the ~~our~~Commercializing ~~stockholders~~Party may not be able to rely on them for the manufacture of STS101. In addition, ~~cause~~we ushave limited control over the ability of the STS101 CMOs to ~~incur~~maintain ~~debt~~adequate quality control, quality assurance and qualified personnel. If the FDA or ~~assume~~a ~~contingent~~comparable ~~liabilities~~foreign regulatory authority finds the facilities of the STS101 CMOs inadequate for the manufacture of STS101 or if such facilities are subject to enforcement action in the future or are otherwise inadequate, it may be necessary to find alternative manufacturing facilities, which would likely significantly and ~~subject~~adversely usimpact future efforts to ~~other~~develop, ~~risks~~obtain regulatory approval for or commercialize STS101 and the timing of any such approval and commercialization. We implemented several minor modifications to the STS101 delivery device to improve its performance and we

We may evaluate various acquisitions and strategic partnerships, including licensing or acquiring complementary products, intellectual property rights, technologies, or businesses. Any potential acquisition or strategic partnership may entail numerous risks, including:

• increased operating expenses and cash requirements;

• the assumption of additional indebtedness or contingent and unforeseen liabilities;

• the issuance of our equity securities;

• assimilation of operations, intellectual property and products of an acquired company, including difficulties associated with integrating new personnel;

• the diversion of our management’s attention from our existing product programs and initiatives in pursuing such a strategic merger or acquisition;

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

Filing Compare · Satsuma Pharmaceuticals, Inc.