As filed with the Securities and Exchange Commission on November 9, 2018

Registration No. 333-227902

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

AMENDMENT NO. 2

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

CENTREXION THERAPEUTICS CORPORATION

(Exact name of registrant as specified in its charter)

Delaware

2834

32-0402377

(State or other jurisdiction of

incorporation or organization)

(Primary Standard Industrial

Classification Code Number)

(I.R.S. Employer

Identification No.)

200 State Street

Boston, Massachusetts 02109

(781) 301-7277

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Jeffrey B. Kindler

Chief Executive Officer

Centrexion Therapeutics Corporation

200 State Street

Boston, Massachusetts 02109

(617) 837-6911

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

Peter N. Handrinos

Wesley C. Holmes

Latham & Watkins LLP

200 Clarendon Street

Boston, Massachusetts 02116

(617) 948-6000

Ilir Mujalovic
Shearman & Sterling LLP
599 Lexington Avenue
New York, New York 10022
(212) 848-4000

Approximate date of commencement of proposed sale to the public:

As soon as practicable after this Registration Statement is declared effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

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


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

If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act. ☒

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

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

Subject to Completion

Preliminary Prospectus dated November 9, 2018.

PROSPECTUS

5,000,000 Shares

LOGO

Common Stock

This is Centrexion Therapeutics Corporation’s initial public offering. We are selling 5,000,000 shares of our common stock.

We expect the public offering price to be between $14.00 and $16.00 per share. Currently, no public market exists for the shares. After pricing of the offering, we expect that the shares will trade on The Nasdaq Global Select Market under the symbol “CNTX.”

We are an “emerging growth company” under the federal securities laws and are subject to reduced public company disclosure standards. See “Prospectus Summary—Implications of Being an Emerging Growth Company.”

Investing in the common stock involves risks that are described in the “Risk Factors” section beginning on page 14 of this prospectus.


	Per Share	Total
Public offering price	$	$
Underwriting discount(1)	$	$
Proceeds, before expenses, to us	$	$

(1)

We refer you to “Underwriting” beginning on page 192 for additional information regarding underwriting compensation.

The underwriters may also exercise their option to purchase up to an additional 750,000 shares from us, at the public offering price, less the underwriting discount, for 30 days after the date of this prospectus.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The shares will be ready for delivery on or about , 2018.


BofA Merrill Lynch		Leerink Partners		Evercore ISI

The date of this prospectus is , 2018.

TABLE OF CONTENTS


	Page
PROSPECTUS SUMMARY		1
RISK FACTORS		14
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS		71
INDUSTRY AND OTHER DATA		71
USE OF PROCEEDS		72
DIVIDEND POLICY		74
CAPITALIZATION		75
DILUTION		78
SELECTED FINANCIAL DATA		82
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		84
BUSINESS		106
MANAGEMENT		148
EXECUTIVE AND DIRECTOR COMPENSATION		156
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS		170
PRINCIPAL STOCKHOLDERS		174
DESCRIPTION OF CAPITAL STOCK		178
SHARES ELIGIBLE FOR FUTURE SALE		185
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS		188
UNDERWRITING		193
LEGAL MATTERS		201
EXPERTS		201
WHERE YOU CAN FIND MORE INFORMATION		201
INDEX TO FINANCIAL STATEMENTS		F-1

Neither we nor the underwriters have authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectus prepared by or on behalf of us or to which we have referred you. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus or in any applicable free writing prospectus is current only as of its date, regardless of its time of delivery or any sale of shares of our common stock. Our business, financial condition, results of operations and prospects may have changed since that date.

Through and including , 2018 (25 days after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This delivery requirement is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

We have proprietary rights to trademarks, trade names and service marks appearing in this prospectus that are important to our business. Solely for convenience, the trademarks, trade names and service marks may appear in this prospectus without the ^® and TM symbols, but any such references are not intended to indicate, in any way, that we forgo or will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensors to these trademarks, trade names and service marks. All trademarks, trade names and service marks appearing in this prospectus are the property of their respective owners.

For investors outside the United States: Neither we nor the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of common stock and the distribution of this prospectus outside the United States.

PROSPECTUS SUMMARY

This summary highlights, and is qualified in its entirety by, the more detailed information and financial statements included elsewhere in this prospectus. This summary does not contain all of the information that may be important to you in making your investment decision. You should read this entire prospectus carefully, especially the “Risk Factors” section beginning on page 14 and our financial statements and the related notes appearing at the end of this prospectus, before deciding to invest in our common stock.

As used in this prospectus, unless the context otherwise requires, references to “we,” “us,” “our” and “Centrexion” refer to Centrexion Therapeutics Corporation.

Overview

We are a late clinical-stage biopharmaceutical company focused on becoming the leader in identifying, developing and commercializing novel, non-opioid and non-addictive therapies to address the large unmet medical need for the treatment of chronic pain.

As of 2011, over 40 million adults in the United States and over 1 billion people worldwide suffer from chronic pain each year. This epidemic exacts a tremendous cost in terms of direct treatment and rehabilitation expenditures, lost worker productivity, prevalent addiction to opioid-based drugs, and emotional and financial burden for patients and their families. The World Health Organization, or WHO, and European Commission estimate the worldwide prevalence of osteoarthritis, or OA, alone will impact 130 million people by 2050, of whom 40 million will be severely disabled by the disease. According to an Institute of Medicine of the National Academies report, pain is a significant public health problem in the United States that costs society between $560 and $635 billion annually. Despite the magnitude of the pain problem, innovation in the development of therapeutic solutions has been largely absent. Since 2010, there have been 19 approvals by the U.S. Food and Drug Administration, or FDA, for the treatment of pain, of which 11 were opioid variants, one was an extended release generic corticosteroid, five were variants of aspirin, and two were variants of other existing drugs. We are developing a portfolio of novel product candidates designed to overcome the limitations of current treatment options for chronic pain and to present patients and physicians with better and safer treatment alternatives.

•

statistically significant and clinically meaningful reduction in pain with walking on a flat surface, corresponding to question A1 of the Western Ontario and McMaster Universities Arthritis Index, or WOMAC index;

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onset of pain relief observed by second day;

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durable pain relief, lasting six months after a single treatment;

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improvement in knee stiffness;

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improvement in knee function; and

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no detectable systemic exposure of CNTX-4975 by 24 hours after IA injection; and

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an observed adverse event, or AE, profile similar to the placebo group based on the overall incidence of AEs and distribution of specific AEs.

In the first quarter of 2018, we began enrolling subjects in VICTORY-1, the first of two planned pivotal Phase 3 registration trials for CNTX-4975, and we expect to report topline results in the first quarter of 2020. In the second half of 2018, we began enrolling subjects in OA-303, an open label safety trial with approximately 850 subjects, and in VICTORY-2, the second pivotal Phase 3 registration trial for CNTX-4975 that includes repeat dosing. We expect to report topline results from OA-303 in the second half of 2019 and VICTORY-2 in the second half of 2020. If the results of these trials are positive, we plan to submit a new drug application, or NDA, in the United States, and a marketing authorization application, or MAA, in Europe, in the second half of 2021. CNTX-4975 was granted Fast Track Designation by the FDA in January 2018 for the treatment of moderate to severe pain associated with knee OA.

We hold worldwide commercialization rights to CNTX-4975, and, if successfully developed and approved, we anticipate initial commercial sales in 2022. Issued and pending patent applications are expected to provide protection for CNTX-4975 through 2038.

In addition to CNTX-4975, we have three other product candidates in clinical development and one in pre-clinical development for the treatment of multiple types of pain. We believe that we have one of the industry’s largest pipelines of novel, non-opioid and non-addictive, clinical-stage product candidates for the treatment of chronic pain.

The pharmaceutical industry is highly competitive and we, along with our competitors, face a number of regulatory and technical challenges. Before obtaining marketing approval from regulatory authorities for the sale of any product candidates, we must complete pre-clinical and clinical development to demonstrate the safety and efficacy of our product candidates. However, we believe that several factors have positioned us to be a leader in the treatment of chronic pain, including our:

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Unique Approach to the Treatment of Chronic Pain—Chronic pain is a highly complex and often misunderstood medical condition. We have a deep understanding of the pathophysiology of chronic pain. We believe we can leverage our knowledge of pain biology to develop targeted treatments that are specific to both the type and source of pain.

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Extensive Clinical Data—We have generated Phase 2 clinical data for our most advanced product candidate, CNTX-4975, that showed onset of response by the second day after administration, a significant reduction from baseline knee OA pain and a clinically meaningful difference compared to the placebo group in subjects with moderate to severe pain associated with knee OA, and the potential for six months of significant pain reduction with a single IA injection. Additionally, in clinical trials to date the safety profile of CNTX-4975 has been similar to placebo with limited systemic exposure of CNTX-4975 after an IA injection.

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Significant Management Team Expertise—We have assembled a senior management team with over 135 years of collective experience in leadership positions at companies such as Abbott, Celgene, Merck, Pfizer and Roche, with substantial product development experience and a successful track record of navigating complex drug development and regulatory pathways. Our clinical team has led or contributed to the development of 20 products, including Rituxan for rheumatoid arthritis, Otezla for psoriasis and psoriatic arthritis and Actemra for rheumatoid arthritis, all three of which have achieved multi-billion dollars in annual sales.

Our product candidates are designed to treat pain conditions of multiple etiologies associated with a wide variety of common disease states. The following table summarizes our current product candidate pipeline:

LOGO

Our Strategy

Our mission is to develop and commercialize novel, non-opioid and non-addictive therapies to safely and effectively address the significant unmet medical need of chronic pain. The principal elements of our strategy to achieve this mission include the following:

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Create novel, non-opioid and non-addictive therapies by leveraging our understanding of pain biology to address the large and growing problem of chronic pain. While innovation in medical sciences has led to exciting new treatment options in many disease areas, chronic pain has seen limited innovation in recent years. We have a deep understanding of the pathophysiology of chronic pain. We intend to leverage this understanding to bring innovation in the chronic pain treatment paradigm through targeted drug development. Our senior management team has over 135 years of collective experience in leadership positions at companies with substantial product development experience, and understands the complexity of designing and executing clinical trials for and developing pain therapies.

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Advance the development of our lead product candidate, CNTX-4975, designed for the treatment of patients with moderate to severe chronic pain associated with knee OA. There are limited therapeutic options available for patients with moderate to severe knee OA and we believe that CNTX-4975 has the potential to transform the standard of care to a once-every-six months IA injection to substantially improve knee OA pain. In the first quarter of 2018, we began enrolling subjects in VICTORY-1, the first of two planned pivotal Phase 3 registration trials for CNTX-4975, and we expect to report topline results in the first quarter of 2020. In the second half of 2018, we began enrolling subjects in OA-303, an open label safety trial with approximately 850 subjects, and in VICTORY-2, the second pivotal Phase 3 registration trial for CNTX-4975 that includes repeat dosing. We expect to report topline results from OA-303 in the second half of 2019 and VICTORY-2 in the second half of 2020. In January 2018, the FDA granted Fast Track Designation for CNTX-4975 for the treatment of moderate to severe pain associated with knee OA. If successfully developed and approved, we anticipate initial commercial sales in 2022.

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Leverage clinical activity of CNTX-4975 to expand into new indications, including pain associated with the arthritis of other joints. We believe that CNTX-4975 may have analgesic utility in additional joints, including small sized joints such as the carpometacarpal joint, or base of the thumb, medium sized joints such as the ankle, and other large joints such as the shoulder. If we are successful in obtaining safety and efficacy data that support the use of CNTX-4975 in both a small and a medium sized joint, in addition to the large joint of the knee, we believe the indication for use of CNTX-4975, if approved, could potentially be broadened to the treatment of moderate to severe pain associated with OA, with no limitation as to which joint is involved. In addition, there are other types of joint disorders associated with chronic pain, such as rheumatoid and psoriatic arthritis, post-traumatic joint injury and temporomandibular joint disorders, where we believe CNTX-4975 may have potential for use as an analgesic.

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Advance our other product candidates through clinical development and pursue development of additional product candidates. Our objective is to build a well-balanced, multi-asset portfolio targeting the large population of patients with chronic pain. To achieve this, in addition to CNTX-4975, we intend to pursue development of our other product candidates, CNTX-0290, CNTX-6970, CNTX-2022 and CNTX-6016, in indications where we believe they could have meaningful impact and address the large unmet medical need. In addition, we may choose to selectively in-license or acquire complementary product candidates by leveraging the insights, network and experience of our management team.

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Maximize the commercial potential of all our product candidates. We currently intend to retain all commercial rights to CNTX-4975 in the United States and selectively partner outside of the United States. Because injectable IA therapies for chronic joint pain in the United States are administered by a relatively small number of specialists, particularly pain management physicians, sports medicine specialists, orthopedists and rheumatologists, we believe that we can effectively commercialize CNTX-4975 in the United States to each of these specialist groups with our own targeted sales and marketing organization and, thereby, retain greater commercial value versus a partnership. As we continue to build and develop our product portfolio, we may opportunistically pursue strategic partnerships that maximize the value of our pipeline while seeking to maintain commercialization rights in the United States for select specialists that treat chronic pain conditions.

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Leverage our management team background and expertise. We have assembled a management team with extensive experience in product development. Our Chief Medical Officer is a rheumatologist with 28 years of drug development experience, our Chief Scientific Officer is a neurosurgeon who also led a pain research laboratory, and our Chief Development Operations Officer is a veterinary surgeon with 22 years of development experience including participation in the development of four approved pain therapies. Their experience with both patients and drug development provides them with deep insight into chronic pain as well as the changing treatment landscape. We believe this experience enables us to better understand unmet medical needs in chronic pain and design and execute efficient clinical trial programs and regulatory strategies.

Risk Factors

Our business is subject to a number of risks of which you should be aware before making an investment decision. These risks are discussed more fully in the “Risk Factors” section of this prospectus immediately following this prospectus summary. These risks include the following:

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we have a limited operating history, have incurred significant losses since our inception, expect to incur losses for the foreseeable future, may never achieve or maintain profitability, and our

recurring losses from operations could continue to raise substantial doubt regarding our ability to continue as a going concern;

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even if this offering is successful, we will need additional funding in order to complete development of and obtain regulatory approval for our product candidates and commercialize our products, if approved;

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our pre-clinical studies and clinical trials may fail to demonstrate adequately the safety and efficacy of any of our product candidates and the development of our product candidates may be delayed or unsuccessful, which could prevent or delay regulatory approval and commercialization;

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our business is highly dependent on the success of our lead product candidate, CNTX-4975, which will require significant additional clinical testing before we can seek regulatory approval and potentially launch commercial sales, and if CNTX-4975 does not receive regulatory approval or is not successfully commercialized, our business may be harmed;

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the clinical trial and regulatory approval processes are lengthy, time consuming and inherently unpredictable, and we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our product candidates;

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if the FDA does not conclude that certain of our product candidates satisfy the requirements for the Section 505(b)(2) regulatory approval pathway, or if the requirements for such product candidates under Section 505(b)(2) are not as we expect, the approval pathway for those product candidates may take significantly longer, cost significantly more and entail significantly greater complications and risks than anticipated, and in either case may not be successful;

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developments by competitors may render our products or technologies obsolete or non-competitive or may reduce the size of our markets;

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failure to obtain or maintain coverage and adequate reimbursement for our product candidates, if approved, could limit our ability to market those products and decrease our ability to generate revenue;

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our product candidates may cause serious adverse events or undesirable side effects, including injury and death;

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we rely on third parties, some of which are sole suppliers, for the manufacture and supply of materials for our research programs, pre-clinical studies and clinical trials and we do not have long-term contracts with any of these parties, which increases the risk that we will not have sufficient quantities of such materials, product candidates, or any therapies that we may develop and commercialize, or that such supply will not be available to us at an acceptable cost, which could delay, prevent, or impair our development or commercialization efforts;

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our existing collaborations are important to our business and future licenses may also be important to us, and if we are unable to maintain any of these collaborations, or if these arrangements are not successful, our business could be adversely affected;

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if we are unable to adequately protect our proprietary technology, or obtain and maintain issued patents which are sufficient to protect our product candidates, others could compete against us more directly, which would negatively impact our business; and

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our future success depends on our ability to retain key executives and to attract, retain and motivate qualified personnel.

Implications of Being an Emerging Growth Company

As a company with less than $1.07 billion in revenue during our last fiscal year, we qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, as amended, or the JOBS Act. An “emerging growth company” may take advantage of reduced reporting requirements that are otherwise applicable to public companies. These provisions include, but are not limited to:

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being permitted to present only two years of audited financial statements and only two years of related Management’s Discussion and Analysis of Financial Condition and Results of Operations in this prospectus;

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not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended;

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

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reduced disclosure obligations regarding executive compensation in our periodic reports, proxy statements and registration statements; and

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exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

We may take advantage of these provisions until the last day of our fiscal year following the fifth anniversary of the completion of this offering. However, if any of the following events occur prior to the end of such five-year period, (i) our annual gross revenue exceeds $1.07 billion, (ii) we issue more than $1.0 billion of non-convertible debt in any three-year period or (iii) if we become a “large accelerated filer” (as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, or the Exchange Act), we will cease to be an emerging growth company prior to the end of such five-year period. We will be deemed to be a “large accelerated filer” at such time that we (a) have an aggregate worldwide market value of common equity securities held by non-affiliates of $700 million or more as of the last business day of our most recently completed second fiscal quarter, (b) have been required to file annual and quarterly reports under the Exchange Act, for a period of at least 12 months and (c) have filed at least one annual report pursuant to the Exchange Act.

We have elected to take advantage of certain of the reduced disclosure obligations in the registration statement of which this prospectus is a part and may elect to take advantage of other reduced reporting requirements in future filings. As a result, the information that we provide to our stockholders may be different than you might receive from other public reporting companies in which you hold equity interests.

In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. We have irrevocably elected not to avail ourselves of this exemption and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

Corporate Information

We were incorporated under the laws of the State of Delaware in February 2013. Our principal executive offices are located at 200 State Street, Boston, Massachusetts 02109 and our telephone number is (617) 837-6911. Our website address is www.centrexion.com. The information contained in, or accessible through, our website does not constitute a part of this prospectus. We have included our website address in this prospectus solely as an inactive textual reference.

The Offering

Common stock offered by us

5,000,000 shares

Common stock to be outstanding after this offering

22,162,604 shares (or 22,912,604 shares if the underwriters exercise their option to purchase additional shares in full).

Option to purchase additional shares

The underwriters have a 30-day option to purchase up to 750,000 additional shares of our common stock at the public offering price less estimated underwriting discounts and commissions.

Use of proceeds

We estimate that the net proceeds from this offering will be approximately $66.7 million (or approximately $77.1 million if the underwriters exercise in full their option to purchase additional shares of common stock), at an assumed public offering price of $15.00 per share (the midpoint of the price range set forth on the cover page of this prospectus), after deducting the estimated underwriting discounts and commissions and the estimated offering expenses payable by us. We anticipate that we will use the net proceeds of this offering, together with our cash and cash equivalents, to fund the Phase 3 program and pre-commercialization expenses for CNTX-4975 through topline results in the first pivotal Phase 3 registration trial, VICTORY-1; to fund the development of CNTX-0290 to complete Phase 1 development and initiate a Phase 2 trial for chronic pain; to fund the development of CNTX-6970 to complete Phase 1 development and initiate a Phase 2 trial for chronic pain; to fund the development of CNTX-6016 to complete Phase 1 development; and the remainder, if any, for other research and development expenses for our pipeline, including unallocated expenses and expenses for CNTX-2022, and for working capital and other general corporate purposes. See “Use of Proceeds” beginning on page 72 for additional information.

Risk factors

You should carefully read the “Risk Factors” beginning on page 14 and the other information included in this prospectus for a discussion of factors you should consider carefully before deciding to invest in our common stock.

Dividend policy

The terms of our current certificate of incorporation provide that, upon conversion of our preferred stock into our common stock upon the closing of this offering, the holders of Series D preferred stock will receive a cumulative accrued dividend calculated at a rate per annum of $0.117 per share of Series D preferred stock (subject to certain adjustment provisions), payable in shares of common stock based on a value of $11.24 per share. Based on an assumed closing date of November 19, 2018, we expect to issue 392,504 shares of our common stock for cumulative accrued dividends to our Series D preferred stockholders. For each day prior to or following the assumed closing date that this offering actually closes, such dividends

decrease or increase, respectively, by an aggregate of approximately 1,157 shares of common stock. The stock dividends will not be paid on any shares of our common stock purchased in this offering. We do not pay dividends on our common stock and do not anticipate paying any dividends on our common stock for the foreseeable future. Any future determinations relating to our dividend policy will be made at the discretion of our board of directors and will depend on various factors. See “Dividend Policy” on page 73.

Nasdaq Global Select Market symbol

“CNTX”

The number of shares of our common stock to be outstanding after this offering is based on 1,244,493 shares of our common stock outstanding as of September 30, 2018 and excludes:

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1,981,815 shares of our common stock issuable upon exercise of stock options outstanding as of September 30, 2018, at a weighted-average exercise price of $4.36 per share;

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83,189 shares of our common stock issuable upon the exercise of certain warrants to purchase common stock outstanding as of September 30, 2018 at a weighted average exercise price of $6.59 per share;

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1,284,465 shares of our common stock issuable upon the exercise of stock options to be granted in connection with this offering under our 2018 Incentive Award Plan, or the 2018 Plan, which will become effective in connection with this offering, to certain of our directors, executive officers and employees, at an exercise price per share equal to the initial public offering price in this offering;

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843,829 shares of our common stock reserved for future issuance under the 2018 Plan, as well as shares of our common stock that become available pursuant to provisions in the 2018 Plan that automatically increase the share reserve under the 2018 Plan as described in “Executive and Director Compensation—Incentive Plans—2018 Incentive Award Plan”; and

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266,000 shares of our common stock that will become available for future issuance under our 2018 Employee Stock Purchase Plan, or the 2018 ESPP, which will become effective in connection with this offering, as well as shares of our common stock that become available pursuant to provisions in the 2018 ESPP that automatically increase the share reserve under the 2018 ESPP as described in “Executive and Director Compensation—Incentive Plans—2018 Employee Stock Purchase Plan.”

Unless otherwise indicated, this prospectus reflects and assumes the following:

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a 1-for- 6.245 reverse split of our common stock, which became effective on November 2, 2018;

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the automatic conversion of all outstanding shares of our preferred stock into an aggregate of 14,979,055 shares of our common stock upon the closing of this offering;

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the issuance of an aggregate of 392,504 shares of our common stock upon the closing of this offering to pay accrued dividends on our Series D preferred stock, assuming a closing date for this offering of November 19, 2018 (for each day prior to or following such assumed closing date that this offering actually closes, such dividends shall decrease or increase, respectively, by an aggregate of approximately 1,157 shares of common stock);

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the automatic cashless exercise of certain outstanding warrants to purchase shares of common stock and preferred stock, which, based on an assumption that the fair market value of our common stock for purposes of automatic exercise under the warrants will be equal to the assumed initial public offering price of $15.00 per share (the midpoint of the price range set forth on the cover page of this prospectus) and assuming the automatic conversion of the shares of preferred stock issued pursuant to such automatic cashless exercise into shares of common stock, would result in the issuance of 139,009 shares of our common stock upon the closing of this offering (a $1.00 increase in the assumed initial public offering price of $15.00 per share would increase the number of additional shares of our common stock issuable in connection with such automatic exercise by an aggregate of 33,128 shares; a $1.00 decrease in the assumed initial public offering price of $15.00 per share would decrease the number of additional shares of our common stock issuable in connection with such exercise by an aggregate of 37,864 shares);

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the assumed exercise prior to the closing of this offering of certain outstanding warrants that shall otherwise expire upon such closing to purchase 2,545,405 shares of preferred stock for an aggregate purchase price of approximately $4.5 million, which, assuming the automatic conversion of the shares of preferred stock issued pursuant to such exercise into shares of common stock, would result in the issuance of 407,543 shares of our common stock upon the closing of this offering;

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for purposes of any automatic cashless exercise of warrants, that the fair market value of our common stock immediately prior to the closing of this offering exceeds the exercise price of the applicable warrant;

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no exercise of outstanding options or warrants after September 30, 2018, other than as described above;

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the filing of our restated certificate of incorporation and the adoption of our amended and restated bylaws, which will occur in connection with the closing of this offering; and

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no exercise by the underwriters of their option to purchase additional shares of our common stock.

Summary Financial Data

The following tables set forth a summary of our financial data as of, and for the periods ended on, the dates indicated. We have derived the summary statement of operations data for the years ended December 31, 2016 and 2017 from our audited financial statements appearing at the end of this prospectus. The statement of operations data for the nine months ended September 30, 2017 and 2018 and the balance sheet data as of September 30, 2018 have been derived from our unaudited financial statements appearing at the end of this prospectus and have been prepared on the same basis as the audited financial statements. In the opinion of management, the unaudited data reflects all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the financial information in those statements. Our historical results are not necessarily indicative of the results that should be expected in the future, and results for the nine months ended September 30, 2018 are not necessarily indicative of the results to be expected for the full year ending December 31, 2018. You should read the following summary financial data together with our financial statements and the related notes appearing at the end of this prospectus and the “Selected Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of this prospectus.


	Year Ended December 31,						Nine Months Ended September 30,
	2016			2017			2017			2018
	(in thousands, except share and per share data)
							(unaudited)
Statements of Operations Data:
Revenue	$	—		$	—		$	—		$	—

Operating Expenses:
Research and development		27,788			17,622			14,077			17,420
General and administrative		5,443			6,433			5,119			6,612

Total operating expenses		33,231			24,055			19,196			24,032

Loss from operations		(33,231	)		(24,055	)		(19,196	)		(24,032	)

Other income (expense), net:
Interest income		22			43			19			564
Interest expense		(2,126	)		(983	)		(617	)		(205	)
Loss on conversion of convertible notes payable		(2,412	)		(497	)		—			—
Loss on disposal of property and equipment		—			(38	)		(38	)		—
Loss on forgiveness of notes receivable from stockholders		—			—			—			(599	)
Loss on extinguishment of long-term debt		—			—			—			(298	)
Revaluation of warrant liabilities		75			475			339			(763	)

Total other income (expense)		(4,441	)		(1,000	)		(297	)		(1,301	)

Net loss before income tax benefit		(37,672	)		(25,055	)		(19,493	)		(25,333	)
Income tax benefit		—			441			—			—

Net loss		(37,672	)		(24,614	)		(19,493	)		(25,333	)
Plus: Cumulative dividends on convertible preferred stock		—			(128	)		—			(2,791	)

Net loss attributable to common stockholders	$	(37,672	)	$	(24,742	)	$	(19,493	)	$	(28,124	)

Net loss per share attributable to common stockholders, basic and diluted(1)	$	(30.36	)	$	(19.91	)	$	(15.68	)	$	(22.60	)

Weighted average shares used in computing net loss per share attributable to common stockholders, basic and diluted(1)		1,240,991			1,242,744			1,243,366			1,244,493

Pro forma net loss per share attributable to common stockholders, basic and diluted (unaudited)(1)										$	(1.56	)

Weighted average shares used in computing pro forma net loss attributable to common stockholders, basic and diluted (unaudited)(1)											16,382,243

(1)

See Note 2 to our audited financial statements included elsewhere in this prospectus for an explanation of the method used to calculate the historical and pro forma basic and diluted net loss per common share and the weighted average number of shares used in the computation of the per share amounts.


	As of September 30, 2018
	Actual			Pro Forma(1)			Pro Forma As Adjusted(2)(3)
				(unaudited) (in thousands)
Balance Sheet Data:
Cash and cash equivalents	$	42,059		$	46,555		$	113,205
Total assets		52,786			57,282			123,932
Working capital(4)		39,963			44,459			111,109
Long term debt		7,740			7,740			7,740
Common stock		1			17			22
Convertible preferred stock		155,627			—			—
Additional paid-in capital		5,695			170,309			236,954
Accumulated deficit		(125,671	)		(126,969	)		(126,969	)
Total stockholders’ (deficit) equity		(119,951	)		43,357			110,007

(1)	The pro forma balance sheet data gives effect to the:

•

automatic conversion of all outstanding shares of our preferred stock into an aggregate of 14,979,055 shares of our common stock upon the closing of this offering;

•

(2)

Reflects the pro forma adjustments described in footnote (1) and the issuance and sale of shares of common stock in this offering at an assumed initial public offering price of $15.00 per share (the midpoint of the price range set forth on the cover page of this prospectus), after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

(3)

Each $1.00 increase (decrease) in the assumed initial public offering price of $15.00 per share (the midpoint of the price range set forth on the cover page of this prospectus) would increase (decrease) the pro forma as adjusted amount of each of cash and cash equivalents, total assets, additional paid-in capital and total stockholders’ equity (deficit) by $4.7 million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each increase (decrease) of 1.0 million shares in the number of shares offered by us at the assumed initial public offering price would increase (decrease) each of cash and cash equivalents, total assets, additional paid-in capital and total stockholders’ equity (deficit) by $14.0 million. The pro forma information discussed above is illustrative only and will be adjusted based on the actual initial public offering price and other terms of our initial public offering determined at pricing.

(4)	We define working capital as current assets less current liabilities.

RISK FACTORS

You should carefully consider the risks and uncertainties described below and the other information in this prospectus before making an investment in our common stock. Our business, financial condition, results of operations or prospects could be materially and adversely affected if any of these risks occurs, and as a result, the market price of our common stock could decline and you could lose all or part of your investment. This prospectus also contains forward-looking statements that involve risks and uncertainties. See “Cautionary Statement Regarding Forward-Looking Statements.” Our actual results could differ materially and adversely from those anticipated in these forward-looking statements as a result of certain factors, including those set forth below.

Risks Related to Our Financial Position and Need for Additional Capital

We have a limited operating history and a history of escalating operating losses, which may make it difficult to evaluate the prospects for our future viability.

We are a late clinical-stage biopharmaceutical company established in February 2013 and have only a limited operating history. Our operations to date have been limited to financing and staffing our company, developing our technology and identifying and developing our product candidates. Our prospects must be considered in light of the uncertainties, risks, expenses, and difficulties frequently encountered by companies in their early stages of operations. We have not yet demonstrated an ability to obtain marketing approval, manufacture a commercial scale product, or arrange for a third party to do so on our behalf, or conduct sales and marketing activities necessary for successful product commercialization. Consequently, predictions about our future success or viability may not be as accurate as they could be if we had a longer operating history or a history of successfully developing, obtaining marketing approval for and commercializing chronic pain treatments.

In addition, as a business with a limited operating history, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown obstacles. We will eventually need to transition from a company with a research focus and development to a company capable of supporting commercial activities. We may not be successful in such a transition.

As we continue to build our business, we expect our financial condition and operating results may fluctuate significantly from quarter to quarter and year to year due to a variety of factors, many of which are beyond our control. Accordingly, you should not rely upon the results of any particular quarterly or annual period as indications of future operating performance.

We have incurred significant losses since inception and expect to incur significant additional losses for the foreseeable future. We may never achieve or maintain profitability.

We have incurred significant operating losses since our inception, including operating losses of approximately $33.2 million and $24.1 million for the fiscal years ended December 31, 2016 and December 31, 2017, respectively, and $19.2 million and $24.0 million for the nine months ended September 30, 2017 and 2018, respectively. In addition, we have not commercialized any products and have never generated any revenue from product sales. We have devoted most of our financial resources to research and development, including our pre-clinical development activities.

In addition, we expect to continue to incur significant additional operating losses for the foreseeable future as we seek to advance product candidates through pre-clinical and clinical development, expand our research and development activities, develop new product candidates, complete pre-clinical studies and clinical trials, seek regulatory approval and, if we receive FDA approval, commercialize our products. In order to obtain FDA approval of any product candidate, we must submit to the FDA an NDA demonstrating that the product

candidate is safe for humans and effective for its intended use. This demonstration requires significant research and animal tests, which are referred to as non-clinical or pre-clinical studies, as well as human tests, which are referred to as clinical trials. Furthermore, the costs of advancing product candidates into each succeeding clinical phase tend to increase substantially over time. The total costs to advance any of our product candidates to marketing approval in even a single jurisdiction would be substantial. Because of the numerous risks and uncertainties associated with chronic pain treatment product development, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to begin generating revenue from the commercialization of products or achieve or maintain profitability. Our expenses will also increase substantially if and as we:

•

continue our current research programs and our pre-clinical and clinical development and approval of product candidates from our current research programs;

•

seek to identify, assess, acquire and/or develop additional research programs and additional product candidates;

•

initiate pre-clinical testing and clinical trials for any product candidates in our pipeline or any other product candidates we identify and develop in the future;

•

seek regulatory approvals for our product candidates;

•

establish a sales, marketing and distribution infrastructure to commercialize any product candidates for which we may obtain marketing approval;

•

maintain, expand and protect our intellectual property portfolio;

•

add clinical, scientific, commercial and support personnel;

•

utilize external vendors for support with respect to research, development, commercialization, regulatory, pharmacovigilance and other functions;

•

add operational, financial and management information systems and personnel, including personnel to support our product development and planned future commercialization efforts, as well as to support our transition to a public reporting company;

•

acquire or in-license other commercial products, product candidates and technologies;

•

make royalty, milestone or other payments under current and any future in-license agreements;

•

implement additional internal systems and infrastructure; and

•

operate as a public company.

Furthermore, our ability to successfully develop, commercialize and license our products and generate product revenue is subject to substantial additional risks and uncertainties. Each of our product candidates will require additional pre-clinical and clinical development and, for some of our product candidates, additional pre-clinical development, potential regulatory approval in multiple jurisdictions, the securing of manufacturing supply, capacity and expertise, the use of external vendors, the building of a commercial organization, substantial investment and significant marketing efforts before we generate any revenue from product sales. As a result, we expect to continue to incur net losses and negative cash flows for the foreseeable future. These net losses and negative cash flows have had, and will continue to have, an adverse effect on our stockholders’ equity and working capital.

The amount of future losses and when, if ever, we will achieve profitability are uncertain. We have no products that have generated any commercial revenue, do not expect to generate revenues from the commercial sale of products in the foreseeable future, and might never generate revenues from the sale of products. Our ability to generate revenue and achieve profitability will depend on, among other things, successful completion of the clinical development of our product candidates; obtaining necessary regulatory approvals from the FDA and international regulatory agencies; establishing manufacturing, sales, and marketing infrastructure to commercialize our product candidates for which we obtain approval; and raising sufficient funds to finance our activities. We might not succeed at any of these undertakings. If we are unsuccessful at some or all of these undertakings, our business, prospects, and results of operations may be materially adversely affected.

Even if this offering is successful, we will need additional funding in order to complete development of and obtain regulatory approval for our product candidates and commercialize our products, if approved. If we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our product development programs or commercialization efforts.

Even after the consummation of this offering, we will continue to need additional capital beyond the proceeds of this offering, which we may raise through equity offerings, debt financings, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements or other sources. Additional sources of financing might not be available on favorable terms, if at all. If we do not succeed in raising additional funds on acceptable terms, we might be unable to complete planned clinical trials or obtain approval of any of our product candidates from the FDA, or any foreign regulatory authorities, and could be forced to discontinue product development. In addition, attempting to secure additional financing may divert the time and attention of our management from day-to-day activities and harm our product candidate development efforts.

We will require substantial funds to further develop, obtain approval for and commercialize our product candidates, including CNTX-4975, which is currently in Phase 3 clinical development. We will also require substantial funds to further develop, obtain approval for and commercialize our other product candidates, CNTX-2022, CNTX-6970, CNTX-0290 and CNTX-6016, which are in various stages of development.

Based on our current operating plan, we believe that the net proceeds from this offering and our current cash and cash equivalents will be sufficient to enable us to fund our operating expenses and capital expenditure requirements into the third quarter of 2020, including the funding of the Phase 3 program and precommercialization expenses for CNTX-4975 through topline results in the first pivotal Phase 3 registration trial, VICTORY-1; the funding of the development of CNTX-0290 to complete Phase 1 development and initiate a Phase 2 trial for chronic pain; the funding of the development of CNTX-6970 to complete Phase 1 development and initiate a Phase 2 trial for chronic pain; the funding of the development of CNTX-6016 to complete Phase 1 development; and the remainder, if any, for other research and development expenses for our pipeline, including unallocated expenses and expenses for CNTX-2022, and for working capital and other general corporate purposes. This estimate is based on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Changing circumstances could cause us to consume capital significantly faster than we currently anticipate, and we may need to spend more than currently expected because of circumstances beyond our control. Because the length of time and activities associated with successful development of CNTX-4975 and our other product candidates is highly uncertain, we are unable to estimate the actual funds we will require for development, approval and any approved marketing and commercialization activities. Our future funding requirements, both near and long-term, will depend on many factors, including, but not limited to:

•

the scope and results of our pre-clinical studies and clinical trials;

•

the timing of, and the costs involved in, obtaining regulatory approvals for CNTX-4975 and our other product candidates;

•

the costs and timing of changes in the regulatory environment and enforcement rules;

•

the costs and timing in changes in pharmaceutical pricing and reimbursement infrastructure;

•

the costs involved in preparing, filing, prosecuting, maintaining and enforcing patent claims and other patent-related costs, including any litigation costs and the results of such litigation;

•

the effect of competing technological and market developments;

•

the costs of operating as a public company;

•

the extent to which we in-license or acquire other products and technologies;

•

the cost of establishing sales, marketing and distribution capabilities for our product candidates in regions where we choose to commercialize our products; and

•

the initiation, progress, timing and results of our commercialization of CNTX-4975 and our other product candidates, if approved for commercial sale.

Depending on our business performance, the economic climate and market conditions, we may be unable to raise additional funds through any sources. If we are unable to obtain adequate funding on a timely basis, we may be required to curtail or discontinue one or more of our development programs for CNTX-4975, CNTX-0290, CNTX-6970, CNTX-2022 or CNTX-6016 or to reduce our operations. If we raise additional funds by issuing equity securities, our then-existing stockholders will experience dilution and the terms of any new equity securities may have preference over those of our existing common stock.

Our recurring losses from operations could continue to raise substantial doubt regarding our ability to continue as a going concern. Our ability to continue as a going concern requires that we obtain sufficient funding to finance our operations.

We have incurred significant operating losses since our inception and have never generated revenue or profit, and it is possible we will never generate revenue or profit. Meaningful revenues will likely not be available until and unless any future product candidates are approved by the FDA or comparable regulatory agencies in other countries and successfully marketed, either by us or a partner, an outcome which may not occur. Accordingly, we have concluded that substantial doubt exists regarding our ability to continue as a going concern. Our audited financial statements appearing at the end of this prospectus have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of these uncertainties related to our ability to operate on a going concern basis. However, in its report on our financial statements for the year ended December 31, 2017, our independent registered public accounting firm included an explanatory paragraph stating that our recurring losses from operations since inception and required additional funding to finance our operations raise substantial doubt about our ability to continue as a going concern.The perception that we may not be able to continue as a going concern may cause others to choose not to deal with us due to concerns about our ability to meet our contractual obligations.

Our ability to continue as a going concern requires that we obtain sufficient funding to finance our operations. If we are unable to obtain sufficient funding, our business, prospects, financial condition and results of operations will be materially and adversely affected and we may be unable to continue as a going concern. If we are unable to continue as a going concern, we may have to liquidate our assets and may receive less than the value at which those assets are carried on our audited financial statements, and it is likely that investors will lose all or a part of their investment. If we seek additional financing to fund our business activities in the future and there remains substantial doubt about our ability to continue as a going concern, investors or other financing sources may be unwilling to provide additional funding to us on commercially reasonable terms or at all.

Raising additional capital may cause dilution to our stockholders, including purchasers of common stock in this offering, restrict our operations or require us to relinquish rights to our technologies or product candidates.

Until such time, if ever, as we can generate substantial revenue, we may finance our cash needs through a combination of equity offerings, debt financings, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerations, even if we believe that we have sufficient funds for our current or future operating plans.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our operations, our ability to take specific actions, such as incurring additional debt, making capital expenditures, declaring dividends, redeeming our stock, making certain investments and engaging in certain merger, consolidation or asset sale transactions, among other restrictions. If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may be required to relinquish valuable rights to our technologies, future revenue streams or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Servicing our debt requires a significant amount of cash, and we may not have sufficient cash flow from our business to pay our debt. In addition, we may still incur substantially more debt.

As of September 30, 2018, our total indebtedness (excluding facility lease obligations) was approximately $7.7 million, comprised of borrowings under our loan and security agreement with Silicon Valley Bank, or the term loan facility. We may also incur additional indebtedness to meet future financing needs. There is a risk that we may be unable to generate enough cash to pay amounts due in respect of our indebtedness.

Our ability to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Our business may not generate cash flow from operations in the future sufficient to satisfy our current indebtedness obligations and any future indebtedness we may incur, as well as to make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as reducing or delaying investments or capital expenditures, selling assets, refinancing or obtaining additional debt or equity financing on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness or future indebtedness will depend on the capital markets and our financial condition at such time.

In addition, the loan and security agreement contains, and the agreements that may govern any future indebtedness that we may incur may contain, financial and other restrictive covenants that will limit our ability to engage in activities that may be in our best interests. Our failure to comply with those covenants could result in an event of default under such agreements that, if not cured or waived, could result in the acceleration of a portion or all of our indebtedness. All obligations under the term loan facility are secured by a first priority lien on substantially all of our personal property, subject to certain exceptions including intellectual property assets. As a result, if we default on any of our obligations under the term loan facility, Silicon Valley Bank could foreclose on its security interest and liquidate some or all of the collateral, which would harm our business, financial condition and results of operations and could require us to reduce or cease operations.

We have no approved products.

To date, we have no approved product on the market and have generated no product revenues. Unless we receive approval from the FDA or other regulatory authorities for our product candidates, we will not have product revenues. Therefore, for the foreseeable future, we will have to fund all of our operations and capital expenditures from the net proceeds of this offering, cash on hand, and licensing fees and grants, if any.

Our product candidates are in various stages of development.

We are a biopharmaceutical company focused on the development of therapeutics that are intended to provide patients with relief from chronic pain, all of which treatments are at stages of clinical development. Favorable results in pre-clinical or early stage clinical trials may not be predictive of success in later clinical trials and may not lead to commercially viable products for any of several reasons. For example, our product candidates may fail to be safe and effective in clinical trials or additional pre-clinical studies, or we may have inadequate financial or other resources to pursue discovery and development efforts for new product candidates. Our product candidates will require significant additional development, clinical trials, regulatory clearances and additional investment by us before they can be commercialized.

Our business is highly dependent on the success of our lead product candidate, CNTX-4975, which is being developed as a synthetic, ultra-pure IA injection of trans-capsaicin. CNTX-4975 and our other product candidates will require significant additional clinical testing before we can seek regulatory approval and potentially launch commercial sales. If CNTX-4975 does not receive regulatory approval or is not successfully commercialized, our business may be harmed.

A substantial portion of our business and future success depends on our ability to develop, obtain regulatory approval for and successfully commercialize our lead product candidate, CNTX-4975. We currently have no products that are approved for commercial sale and may never be able to develop marketable products. We expect that a substantial portion of our efforts and expenditures over the next few years will be devoted to CNTX-4975, which will require additional clinical development, management of clinical, medical affairs and manufacturing activities, regulatory approval in multiple jurisdictions, the securing of manufacturing supply, the building of a commercial organization, substantial investment and significant marketing efforts before we can generate any revenues from any commercial sales. We cannot be certain that CNTX-4975 will be successful in ongoing or future clinical trials, receive regulatory approval or be successfully commercialized even if we receive regulatory approval. Even if we receive approval to market CNTX-4975 from the FDA or other regulatory bodies, we cannot be certain that our product candidates will be successfully commercialized, widely accepted in the marketplace or more effective than other commercially available alternatives. Nor can we be certain that, if and when approved, the safety and efficacy profile of CNTX-4975 or our other product candidates will be consistent with the profiles observed in clinical trials.

CNTX-4975 is being developed as a synthetic, ultra-pure IA injection of trans-capsaicin for the treatment of moderate to severe chronic pain associated with knee OA as our lead indication. We have also studied CNTX-4975 in Morton’s neuroma and in canine OA, although neither of these programs is actively in development at this time due to our prioritization of the knee OA program. If the CNTX-4975 knee OA program is not successfully completed, required regulatory approvals are not obtained, or any approved products are not commercially successful, our business, financial condition and results of operations may be materially harmed.

CNTX-4975 is our most advanced product candidate, and if we experience regulatory or developmental issues with respect to CNTX-4975, our development plans and business could be significantly harmed. Moreover, if we experience similar regulatory or developmental issues with our other pipeline product candidates, our development plans and business could be significantly harmed. Further, our competitors may be developing products with similar mechanisms of action and may experience problems with their products that could identify problems that would potentially harm our business.

We may not be successful in our efforts to identify and successfully commercialize additional product candidates.

Part of our strategy involves identifying novel product candidates. The process by which we identify product candidates may fail to yield product candidates for clinical development for a number of reasons, including those discussed in these risk factors and also:

•

we may not be able to assemble sufficient resources to acquire or discover additional product candidates;

•

competitors may develop alternatives that render our potential product candidates obsolete or less attractive;

•

potential product candidates we develop may nevertheless be covered by third parties’ patents or other exclusive rights;

•

potential product candidates may, on further study, be shown to have harmful side effects, toxicities or other characteristics that indicate that they are unlikely to be products that will receive marketing approval and achieve market acceptance;

•

potential product candidates may not be effective in treating their targeted diseases or symptoms;

•

the market for a potential product candidate may change so that the continued development of that product candidate is no longer reasonable;

•

a potential product candidate may not be capable of being produced in commercial quantities at an acceptable cost, or at all; or

•

the regulatory pathway for a potential product candidate is highly complex and difficult to navigate successfully or economically.

In addition, we may choose to focus our efforts and resources on a potential product candidate that ultimately proves to be unsuccessful, or to license or purchase a marketed product that does not meet our financial expectations. As a result, we may fail to capitalize on viable commercial products or profitable market opportunities, be required to forego or delay pursuit of opportunities with other product candidates or other diseases that may later prove to have greater commercial potential, or relinquish valuable rights to such product candidates through collaboration, licensing or other royalty arrangements in cases in which it would have been advantageous for us to retain sole development and commercialization rights. If we are unable to identify and successfully commercialize additional suitable product candidates, this would adversely impact our business strategy and our financial position.

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

Because we have limited financial and managerial resources, we focus on research programs and product candidates that we identify for specific indications. As a result, we may forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to timely capitalize on viable commercial products or profitable market opportunities. Our spending on current and future research and development programs and product candidates for specific indications may not yield any commercially viable products. If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may

relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate.

Risks Related to Discovery, Development, Clinical Testing, Manufacturing and Regulatory Approval

Clinical trials required for our product candidates are expensive and time-consuming, their outcome is uncertain, and if our clinical trials do not meet safety or efficacy endpoints in these evaluations, or if we experience significant delays in these trials, our ability to commercialize our product candidates and our financial position will be impaired.

We dosed our first patient in a pivotal Phase 3 clinical trial of our lead product, CNTX-4975, in February 2018. Our other product candidates are in pre-clinical or clinical development. It is impossible to predict when or if any of our product candidates will prove effective and safe in humans or will receive regulatory approval, and the risk of failure through the development process is high. Before obtaining marketing approval from regulatory authorities for the sale of any product candidate, we must complete pre-clinical development and then conduct extensive clinical trials to demonstrate the safety and efficacy of our product candidates in humans.

Clinical development is a long, expensive and uncertain process that is subject to significant delays. Due to known or unknown circumstances beyond our control, it may take us several years to complete our testing, and failure can occur at any stage of testing. Delays associated with products for which we are directly conducting pre-clinical studies or clinical trials may cause us to incur additional operating expenses. The commencement and rate of completion of pre-clinical studies or clinical trials may be delayed by, or terminated because of, many factors, including:

•

the FDA or comparable foreign regulatory authorities disagreeing as to the design or implementation of our pre-clinical studies or clinical trials;

•

failure to obtain regulatory approval to commence a trial;

•

failure to reach an agreement on acceptable terms with prospective contract research organizations, or CROs, and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;

•

slower than expected rates of recruitment of patients or failure to recruit a sufficient number of patients;

•

modification of pre-clinical studies or clinical trial protocols;

•

changes in regulatory requirements for pre-clinical studies or clinical trials;

•

the impact of unusual placebo effects;

•

the lack of effectiveness during pre-clinical studies or clinical trials;

•

the emergence of unforeseen safety issues;

•

failure to obtain institutional review board, or the IRB, approval at each site;

•

delays, suspension, or termination of clinical trials by the IRB responsible for overseeing the trial at a particular trial site;

•

failure of patients in completing a trial or returning for post-treatment follow-up;

•

clinical sites deviating from trial protocol or dropping out of a trial;

•

failure to address patient safety concerns that arise during the course of a trial;

•

failure to manufacture sufficient quantities of product candidate for use in clinical trials; and

•

government, IRB or other regulatory delays or “clinical holds” requiring suspension or termination of the trials.

We may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to receive marketing approval or commercialize our product candidates or significantly increase the cost of such trials, including:

•

we may receive feedback from regulatory authorities that requires us to modify the design of our clinical trials;

•

clinical trials of our product candidates may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials or abandon development programs;

•

the number of patients required for clinical trials of our product candidates may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate or participants may drop out of these clinical trials at a higher rate than we anticipate;

•

we may be unable to enroll a sufficient number of patients in our clinical trials to ensure adequate statistical power to detect any statistically significant treatment effects;

•

our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all;

•

regulators, IRBs or independent ethics committees, or IECs, may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site or may require that we or our investigators suspend or terminate clinical trials of our product candidates for various reasons, including non-compliance with regulatory requirements, a finding that our product candidates have undesirable side effects or other unexpected characteristics, or a finding that the participants are being exposed to unacceptable health risks;

•

we may experience delays in reaching or fail to reach agreement on acceptable pre-clinical studies or clinical trial contracts or pre-clinical studies or clinical trial protocols with prospective trial sites;

•

the cost of pre-clinical studies or clinical trials of our product candidates may be greater than we anticipate and we may not have funds to cover the costs;

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the supply or quality of our product candidates or other materials necessary to conduct pre-clinical studies or clinical trials of our product candidates may be insufficient or inadequate;

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regulators may revise the requirements for approving our product candidates, or such requirements may not be as we anticipate; and

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any future collaborators that conduct pre-clinical studies or clinical trials may face any of the above issues, and may conduct pre-clinical studies or clinical trials in ways they view as advantageous to them but that are suboptimal for us.

If we are required to extend the duration of current pre-clinical studies or clinical trials or to conduct additional pre-clinical studies or clinical trials or other testing of our product candidates beyond those that we currently contemplate, if we are unable to successfully complete pre-clinical studies or clinical trials of our product candidates or other testing, if the results of these trials, studies or tests are not positive or are only modestly positive, if there are safety concerns or if we determine that the observed safety or efficacy profile would not be competitive in the marketplace, we may:

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incur unplanned costs;

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be delayed in obtaining marketing approval for our product candidates or not obtain marketing approval at all;

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obtain marketing approval in some countries and not in others;

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

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

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be subject to additional post-marketing testing requirements; or

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have the product removed from the market after obtaining marketing approval.

We could encounter delays if a clinical trial is materially modified, suspended or terminated by us, by the IRBs of the institutions in which such trials are being conducted, by the Data Safety Monitoring Board, or DSMB, for such trial or by the FDA or other regulatory authorities. Such authorities may impose such a material modification, suspension or termination due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects for our product candidates, or other products or product candidates in the same drug class, failure to demonstrate a benefit from using a drug, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial. Furthermore, we may rely on CROs and clinical trial sites to ensure the proper and timely conduct of clinical trials and while we would have agreements governing their committed activities, we would have limited influence over their actual performance, as described in “—Risks Related to Our Dependence on Third Parties.”

Our most advanced product candidate, CNTX-4975, is in clinical development and will require the completion of clinical testing before we are prepared to submit an NDA for regulatory approval. We cannot predict if or when we might complete the development of CNTX-4975 and submit an NDA or whether any such NDA will be approved by the FDA. We may also seek feedback from the FDA or other regulatory authorities on our clinical development programs, and the FDA or such regulatory authorities may not provide such feedback on a timely basis, or such feedback may not be favorable, which could further delay our development programs. If the results of ongoing and future clinical trials for CNTX-4975 are positive, we plan to submit an NDA in the United States, and an MAA in Europe, in the second half of 2021. If CNTX-4975 is successfully developed and approved, we anticipate initial commercial sales in 2022. However, no assurance can be given that we will be successful to meet this timeline, obtain regulatory approval or have any commercial sales of CNTX-4975.

Any clinical test may fail to produce results satisfactory to the FDA or foreign regulatory authorities. Pre-clinical and clinical data can be interpreted in different ways by different reviewers and regulators, which could delay, limit or prevent regulatory approval. Drug-related adverse events during a pre-clinical study or clinical trial could cause us to repeat a trial or study, perform an additional trial or study, expand the size and/or

duration of a trial or study, terminate a trial or study or even cancel a pre-clinical or clinical program. The failure of pre-clinical studies or clinical trials to demonstrate safety and effectiveness for the desired indications could harm the development of that product candidate and other product candidates. This failure could cause us to abandon a product candidate and could delay development of other product candidates. Any delay in, or termination of, our clinical trials would delay the filing of our NDAs with the FDA and, ultimately, our ability to commercialize our product candidates and generate product revenues. A number of companies in the biotechnology and pharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier trials. Even if our future and ongoing pre-clinical studies and clinical trials are completed as planned, we cannot be certain that their results will support the safety and effectiveness of CNTX-4975 for any potential indication.

If we experience delays in the commencement or completion of, or have to extend or expand, our pre-clinical studies or clinical trials, or if we terminate a pre-clinical study or clinical trial prior to completion, the commercial prospects of CNTX-4975 could be harmed, and our ability to generate revenues from CNTX-4975 may be delayed. In addition, any delays in our pre-clinical studies or clinical trials could increase our costs, slow down the development and approval process and jeopardize our ability to commence product sales and generate revenues. Any of these occurrences may harm our business, financial condition and results of operations. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of pre-clinical studies or clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates.

Our pre-clinical studies and clinical trials may fail to demonstrate adequately the safety and efficacy of any of our product candidates and the development of our product candidates may be delayed or unsuccessful, which could prevent or delay regulatory approval and commercialization.

All of our product candidates are in clinical or pre-clinical development stages. Notwithstanding the data obtained to date with respect to CNTX-4975 in both knee OA and Morton’s neuroma, CNTX-4975, as well as all of our other product candidates, will require additional clinical and non-clinical development, regulatory review and approval in multiple jurisdictions, substantial investment, access to sufficient commercial manufacturing capacity and significant marketing efforts before we can generate any revenue from our product sales. In addition, if we encounter safety or efficacy problems, developmental delays or regulatory issues or other problems, our developmental plans and business could be significantly harmed.

If the clinical development of CNTX-4975 or any of our other product candidates is unsuccessful, our ability to generate revenues will be adversely affected. Our development of current and future product candidates is subject to the risks of failure and delay inherent in the development of new products and product candidates, including:

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delays in product development, pre-clinical or clinical testing or manufacturing;

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unplanned expenditures in product development, pre-clinical or clinical testing or manufacturing;

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failure to receive regulatory approvals;

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failure to secure rights from third parties for new technology;

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failure to achieve market acceptance; and

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emergence of superior or equivalent products.

In addition, product candidates in later stages of clinical trials may fail to show the desired safety profiles and efficacy results despite having progressed through pre-clinical studies and initial clinical trials. A

number of companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier trials. Based upon negative or inconclusive results, we may decide, or regulators may require us, to conduct additional clinical trials or pre-clinical studies. In addition, data obtained from trials and studies are susceptible to varying interpretations, and regulators may not interpret our data as favorably as we do, which may delay, limit or prevent regulatory approval.

Additionally, we have not conducted, nor do we believe we are required to conduct, any head-to-head trials comparing CNTX-4975 to other approved or experimental OA pain management drugs. Any such head-to-head trial, if conducted, may show that CNTX-4975 is not more effective than any of such other drugs. Material adverse differences in the relative efficacy of CNTX-4975 could significantly harm the adoptions of CNTX-4975 and our business prospects.

Because of these risks, our research and development efforts may not result in any commercially viable products. If a significant portion of these development efforts are not successfully completed, required regulatory approvals are not obtained, or any approved products are not commercially successful, our business, financial condition and results of operations may be materially harmed.

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

We are developing proprietary product candidates, including CNTX-4975 and CNTX-2022, for which we may seek FDA approval through the Section 505(b)(2) regulatory pathway. The Drug Price Competition and Patent Term Restoration Act of 1984, also known as the Hatch-Waxman Act, added Section 505(b)(2) to the Federal Food, Drug and Cosmetic Act, or FDCA. Section 505(b)(2) permits the filing of an NDA where at least some of the information required for approval comes from trials that were not conducted by or for the applicant and for which the applicant has not obtained a right of reference. Section 505(b)(2), if applicable to us under the FDCA, would allow an NDA we submit to the FDA to rely in part on data in the public domain or the FDA’s prior conclusions regarding the safety and effectiveness of approved compounds, which could expedite the development program for our product candidates by potentially decreasing the amount of clinical data that we would need to generate in order to obtain FDA approval. If the FDA does not allow us to pursue the Section 505(b)(2) regulatory pathway as we anticipated, we may need to conduct additional clinical trials, provide additional data and information and meet additional standards for regulatory approval. Even if we are allowed to pursue the Section 505(b)(2) regulatory pathway, we cannot assure you that our product candidates will receive the requisite approvals for commercialization.

In addition, the pharmaceutical industry is highly competitive, and Section 505(b)(2) NDAs are subject to special requirements designed to protect the patent rights of sponsors of previously approved drugs that are referenced in a Section 505(b)(2) NDA. These requirements may give rise to patent litigation and mandatory delays in approval of our NDAs for up to 30 months or longer depending on the outcome of any litigation. It is not uncommon for a manufacturer of an approved product to file a citizen petition with the FDA seeking to delay approval of, or impose additional approval requirements for, pending competing products. If successful, such petitions can significantly delay, or even prevent, the approval of the new product. However, even if the FDA ultimately denies such a petition, the FDA may substantially delay approval while it considers and responds to the petition. In addition, even if we are able to utilize the Section 505(b)(2) regulatory pathway, there is no guarantee this would ultimately lead to accelerated product development or earlier approval.

Moreover, even if our product candidates are approved under Section 505(b)(2), the approval may be subject to limitations on the indicated uses for which the products may be marketed or to other conditions of

approval, or may contain requirements for costly post-marketing testing and surveillance to monitor the safety or efficacy of the products.

Any breakthrough therapy designation that we may receive from the FDA for our product candidates may not lead to a faster development or regulatory review or approval process, and it would not increase the likelihood that our product candidates will receive marketing approval.

A breakthrough therapy is defined as a drug that is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints. For drugs that have been designated as breakthrough therapies, interaction and communication between the FDA and the sponsor of the trial can help to identify the most efficient path for clinical development while minimizing the number of patients placed in ineffective control regimens. Drugs designated as breakthrough therapies by the FDA are also eligible for accelerated approval.

Designation as a breakthrough therapy is within the discretion of the FDA. Accordingly, even if we believe one of our product candidates meets the criteria for designation as a breakthrough therapy, the FDA may disagree and instead determine not to make such designation. The availability of breakthrough therapy designation was established recently with the passage of the Food and Drug Administration Safety and Innovation Act of 2012. We cannot be sure that any evaluation we may make of our product candidates as qualifying for breakthrough therapy designation will meet the FDA’s expectations. In any event, the receipt of a breakthrough therapy designation for a product candidate may not result in a faster development process, review or approval compared to drugs considered for approval under conventional FDA procedures and does not assure ultimate approval by the FDA. In addition, even if one or more of our product candidates qualify as breakthrough therapies, the FDA may later decide that such product candidates no longer meet the conditions for qualification or decide that the time period for FDA review or approval will not be shortened.

A Fast Track Designation by the FDA may not actually lead to a faster development or regulatory review or approval process.

CNTX-4975 for the treatment of moderate to severe pain associated with knee OA was granted Fast Track Designation in January 2018, and for Morton’s neuroma in August 2016, and we may seek Fast Track Designation for our other product candidates. If a product is intended for the treatment of a serious or life-threatening condition and the product demonstrates the potential to address unmet medical needs for this condition, the product sponsor may apply for FDA Fast Track Designation. The FDA has broad discretion whether or not to grant this designation, and even if we believe a particular product candidate is eligible for this designation, we cannot assure you that the FDA would decide to grant it. A Fast Track Designation may not actually lead to a faster development process, review or approval compared to conventional FDA processes. The FDA may withdraw Fast Track Designation if it believes that the designation is no longer supported by data from our clinical development program.

We may not be able to obtain orphan drug designation for our product candidates, and even if we do, we may be unable to maintain the benefits associated with orphan drug designation, including the potential for market exclusivity.

Regulatory authorities in some jurisdictions, including the United States and Europe, may designate drugs for relatively small patient populations as orphan drugs. CNTX-4975 for Morton’s neuroma was granted orphan drug designation by the FDA in September 2006. We may seek orphan drug designation for other product candidates, although we have not yet applied for or obtained such designation. Under the Orphan Drug Act of 1983, the FDA may designate a product as an orphan product if it is intended to treat a rare disease or condition, which is generally defined as a patient population of fewer than 200,000 individuals annually in the United States, or a patient population of greater than 200,000 individuals in the United States, but for which there is no

reasonable expectation that the cost of developing the drug or biologic will be recovered from sales in the United States.

In the United States, orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical trial costs, tax advantages and user-fee waivers. In addition, if a product candidate that has orphan drug designation subsequently receives the first FDA approval for the disease for which it has such designation, the product is entitled to orphan drug exclusivity, which means that the FDA may not approve any other applications, including a full NDA to market the same drug for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity or where the manufacturer is unable to assure sufficient product quantity. The applicable exclusivity period is ten years in Europe, but such exclusivity period can be reduced to six years if a product no longer meets the criteria for orphan drug designation or if the product is sufficiently profitable so that market exclusivity is no longer justified.

Even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugs can be approved for the same condition. Even after an orphan drug is approved, the FDA can subsequently approve the same drug for the same condition if the FDA concludes that the later drug is clinically superior if it is shown to be safer, more effective or otherwise makes a major contribution to patient care. Orphan drug designation neither shortens the development time or regulatory review time of a drug nor gives the drug any advantage in the regulatory review or approval process, nor does it prevent competitors from obtaining approval of the same product candidate as ours for indications other than those in which we have been granted orphan drug designation.

We have conducted, and in the future, we may conduct clinical trials for our product candidates in sites outside the United States, and the FDA may not accept data from trials conducted in foreign locations.

We have conducted clinical trials of certain of our product candidates outside the United States, and we may in the future choose to conduct other clinical trials outside the United States. Although the FDA may accept data from clinical trials conducted outside the United States, acceptance of this data is subject to certain conditions imposed by the FDA. For example, the clinical trial must be well designed and conducted and performed by qualified investigators in accordance with good clinical practice, or GCP, including review and approval by an IEC and informed consent from subjects. The study population must also adequately represent the U.S. population, and the data must be applicable to the U.S. population and U.S. medical practice in ways that the FDA deems clinically meaningful. In general, the patient population for any clinical trials conducted outside of the United States must be representative of the population for whom we intend to label the product in the United States. In addition, while these clinical trials are subject to the applicable local laws, FDA acceptance of the data will be dependent upon its determination that the trials also complied with all applicable U.S. laws and regulations. There can be no assurance the FDA will accept data from trials conducted outside of the United States. If the FDA does not accept the data from our clinical trials of our product candidates, it would likely result in the need for additional trials, which would be costly and time-consuming and delay or permanently halt our development of our product candidates.

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

From time to time, we may publish interim “top-line” or preliminary data from our clinical trials. Interim data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available. Preliminary or “top-line” data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. As a result, interim and preliminary data should be viewed with caution until the final data are available. Adverse differences between preliminary or interim data and final data could significantly harm our business prospects.

If we fail to obtain the necessary U.S. regulatory approvals to commercialize any product candidate, we will not be able to generate revenue in the U.S. market.

We cannot assure you that we will receive the approvals necessary to commercialize our product candidates, or any product candidate we acquire or develop in the future. We will need FDA approval to commercialize our product candidates in the United States and approvals from equivalent regulatory authorities in foreign jurisdictions to commercialize our product candidates in those jurisdictions. Satisfaction of the FDA’s regulatory requirements typically takes many years, depends upon the type, complexity and novelty of the product candidate and requires substantial resources for research, development and testing. We cannot predict whether our research and clinical efforts will result in drugs that the FDA will determine are safe for humans and effective for their intended uses. The FDA has substantial discretion in the drug approval process and may require us to conduct additional pre-clinical and clinical testing, perform post-marketing studies, address manufacturing concerns, or otherwise limit or impose conditions on any approval we obtain. The approval process may also be delayed by changes in government regulation, future legislation or administrative action or changes in FDA policy that occur prior to or during our regulatory review. Delays in obtaining regulatory approvals may:

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

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impose costly procedures on us; and

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diminish any competitive advantages that we may otherwise enjoy.

Even if we receive approval of an NDA or comparable foreign regulatory filing for our product candidates, the FDA or the applicable foreign regulatory body may approve our product candidates for a more limited indication than we originally requested, and the FDA may not approve the labeling that we believe is necessary or desirable for the successful commercialization of our product candidates.

Even if we comply with all FDA requests, the FDA may ultimately reject one or more of our NDAs. We cannot be sure that we will ever obtain regulatory clearance for our product candidates. Failure to obtain FDA approval of our product candidates will severely undermine our business by leaving us without a commercially available product, and therefore without any source of revenues, until another product candidate can be developed or obtained and ultimately approved. There is no guarantee that we will ever be able to develop or acquire another product candidate or that we will be able to obtain FDA approval to commercialize such product candidate.

Even if we obtain FDA approval for CNTX-4975 in the United States, we may never obtain approval for or commercialize it in any other jurisdiction, which would limit our ability to realize its full market potential.

We intend to market our products in international markets. In order to market any products in the European Union and many other foreign jurisdictions, we must establish and comply with numerous and varying regulatory requirements on a country-by-country basis regarding safety and efficacy. Approval by the FDA in the United States does not ensure approval by regulatory authorities in other countries or jurisdictions. However, the failure to obtain approval in one jurisdiction may negatively impact our ability to obtain approval elsewhere. In addition, clinical trials conducted in one country may not be accepted by regulatory authorities in other countries, and regulatory approval in one country does not guarantee regulatory approval in any other country.

Approval processes vary among countries and can involve additional product testing and validation and additional administrative review periods. Seeking foreign regulatory approval could result in difficulties and increased costs for us and require additional pre-clinical studies or clinical trials which could be costly and time consuming. Regulatory requirements can vary widely from country to country and could delay or prevent the

introduction of our products in those countries. We do not have any product candidates approved for sale in any jurisdiction, including in international markets, and we do not have experience in obtaining regulatory approval in international markets. If we fail to comply with regulatory requirements in international markets or to obtain and maintain required approvals, or if regulatory approvals in international markets are delayed, our target market will be reduced and our ability to realize the full market potential of any product we develop will be unrealized.

We may never obtain approval with respect to CNTX-4975 for the other indications we intend to seek or for a broadened indication of the treatment of beyond moderate to severe pain associated with knee OA and into other joint pain associated with OA, which would limit our ability to realize our full market potential.

Our lead indication for CNTX-4975 is the treatment of moderate to severe pain associated with knee OA. If we obtain regulatory approval for this indication, we intend to follow the knee OA indication with data to support use in small joints, such as the carpometacarpal joint, or the base of the thumb, and medium joints, such as the ankle. If we are successful, then the indication for use of CNTX-4975 could potentially be broadened to the treatment of moderate to severe pain associated with OA generally, with no limitation as to which joint is involved. However, there can be no assurance that, even if we obtain approval for one or more of these additional indications, we will obtain approval for any other or all of these additional indications, or for a broadened indication for the treatment of moderate to severe pain associated with OA. If we fail to obtain and maintain required approvals for these additional or broadened indications, or if regulatory approvals are delayed, our ability to realize the full market potential of CNTX-4975 will be unrealized.

Pain trials are difficult to design and execute due to many factors, including a more pronounced placebo effect, which may make efficacy endpoints harder to achieve and, in the case of CNTX-4975, potential pain on administration, which may affect trial blinding, and could adversely impact the likelihood of regulatory approval from FDA or other regulatory agencies, or could adversely impact product labeling, if approved.

The placebo effect refers generally to a clinical response reported by a patient receiving placebo that cannot be attributed to the properties of the placebo itself, and must therefore be due to the patient’s perception of the treatment or other response. The placebo effect can be considered as a form of contextual healing since the beneficial outcome is due to the context of the clinical encounter, rather than to the efficacy of the actual treatment. This complex phenomenon is influenced by many factors including the doctor-subject relationship, interaction with clinical site staff, complexity of the procedure, the subject’s memory of previous treatments, and the subject’s personal characteristics and expectations. Because one of the primary measurements of efficacy in pain trials is based on a patient’s subjective assessment of their pain and not an objective test or measurement, the placebo effect in pain trials can be more pronounced. While we train all of our clinical sites staff on the placebo effect, there can be no assurance that we will not experience an increased placebo effect in our trials, which could impact the ability of our product candidates to achieve significant separation from placebo and ultimately could adversely impact our ability to achieve regulatory approval for such product candidates.

While our clinical trials include a procedure pain control technique and a retrospective statistical analysis of subjects in our TRIUMPH trial demonstrated that procedure pain had no impact on predicted efficacy outcome, transient pain associated with the IA injection of CNTX-4975 could impact the ability of trial subjects to determine whether they have received placebo or CNTX-4975, which could adversely impact trial blinding and the likelihood of regulatory approval from FDA or other regulatory agencies, or could adversely impact product labeling, if approved.

The regulatory approval processes of the FDA and comparable foreign authorities are lengthy, costly, time-consuming and inherently unpredictable, and if we are ultimately unable to obtain regulatory approval for our product candidates, our business will be substantially harmed.

The time required to obtain approval by the FDA and comparable foreign authorities is unpredictable but typically takes many years following the commencement of clinical trials and depends upon numerous

factors, including the substantial discretion of the regulatory authorities. In addition, approval policies, regulations, or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s clinical development and may vary among jurisdictions. We have not obtained regulatory approval for any product candidate and it is possible that neither CNTX-4975 nor any other product candidates we may seek to develop in the future will ever obtain regulatory approval. Neither we nor any future collaborator is permitted to market any of our product candidates in the United States until we receive regulatory approval of an NDA from the FDA. It is possible that the FDA may refuse to accept for substantive review any NDAs that we submit for our product candidates or may conclude after review of our data that our application is insufficient to obtain marketing approval of our product candidates.

Prior to obtaining approval to commercialize a product candidate in the United States or abroad, we or our collaborators must demonstrate with substantial evidence from well-controlled clinical trials, and to the satisfaction of the FDA or foreign regulatory agencies, that such product candidates are safe and effective for their intended uses in patients. Results from non-clinical studies and clinical trials can be interpreted in different ways. Even if we believe the non-clinical or clinical data for our product candidates are promising, such data may not be sufficient to support approval by the FDA and other regulatory authorities. The FDA may also require us to conduct additional pre-clinical studies or clinical trials for our product candidates either prior to or post-approval, or it may object to elements of our clinical development program. Depending on the extent of these or any other FDA-required studies, approval of any NDA or other application that we submit may be delayed by several years, or may require us to expend significantly more resources than we have available.

Of the large number of potential products in development, only a small percentage successfully completes the FDA or foreign regulatory approval processes and are commercialized. The lengthy and costly approval process as well as the unpredictability of future clinical trial results may result in our failing to obtain regulatory approval to market our product candidates, which would significantly harm our business, results of operations and prospects.

If we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed or otherwise adversely affected.

The timely completion of clinical trials in accordance with their protocols depends, among other things, on our ability to enroll a sufficient number of patients who remain in the trial until its conclusion. We may encounter delays in enrolling, or be unable to enroll, a sufficient number of patients to complete any of our clinical trials, and even once enrolled we may be unable to retain a sufficient number of patients to complete any of our trials. The enrollment of patients depends on many factors, including:

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the patient eligibility criteria defined in the protocol;

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the size of the patient population required for analysis of the trial’s primary endpoints;

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the proximity of patients to trial sites;

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the design of the trial;

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

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

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our ability to obtain and maintain patient consents; and

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the risk that patients enrolled in clinical trials will drop out of the trials before completion.

In addition, our clinical trials will compete with other clinical trials for product candidates that are in the same therapeutic areas as our product candidates, and this competition will reduce the number and types of patients available to us, because some patients 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 investigators is limited, we expect to conduct some of our clinical trials at the same clinical trial sites that some of our competitors use, which will reduce the number of patients who are available for our clinical trials in such clinical trial site.

Delays or failures in planned patient enrollment or retention may result in increased costs, program delays or both, which could have a harmful effect on our ability to develop CNTX-4975 or our other product candidates, or could render further development impossible.

Our product candidates may cause serious adverse events or undesirable side effects including injury and death or have other properties which may delay or prevent their regulatory approval, limit the commercial profile of an approved label, or, result in significant negative consequences following marketing approval, if any.

Serious adverse events, or SAEs, or undesirable side effects caused by our product candidates could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other comparable foreign authorities. Results of our clinical trials or pre-clinical studies could reveal a high and unacceptable severity and prevalence of side effects, toxicities or unexpected characteristics, including death. To date, subjects treated with our lead product candidate, CNTX-4975, have experienced adverse events, including joint pain, headache, pain not otherwise specified, injection site pain, peripheral pain, joint swelling, injection site hemorrhage, nasopharyngitis, burning sensation and nervousness or anxiety, among others. Across the 12 clinical trials of CNTX-4975 we have conducted to date, there were four SAEs in the active groups, all of which were considered not related to CNTX-4975, and which included shoulder OA pain, chest pain, femoral hernia and metrorrhagia.

Subjects enrolled in clinical trials for our other product candidates have also experienced adverse events, albeit at low incidences. In the case of CNTX-0290, subjects in single dose and repeat dose trials reported headache, diarrhea, temporomandibular joint syndrome, nausea, and dry eye. In the case of CNTX-6970, subjects in a single dose trial reported headache and vomiting, among others. The repeat dose trial is ongoing and the clinical trial report will be available before the end of 2018. In the case of CNTX-2022, subjects in a single dose trial reported gastroenteritis, headache and upper respiratory tract infection, among others. CNTX-6016 has not been studied in humans to date. In non-clinical safety toxicology studies of CNTX-6016 in dogs, reported adverse events included increased epileptiform waves at doses100-times greater than, and seizures at dosesequivalent to 400-times greater than, the equivalent starting dose in humans for Phase 1 clinical trials, among others.

If unacceptable side effects arise in the development of our product candidates, we, the FDA, the IRBs at the institutions in which our studies are conducted or DSMB, could materially modify, suspend or terminate our clinical trials or the FDA or comparable foreign regulatory authorities could order us to cease pre-clinical studies or clinical trials or deny approval of our product candidates for any or all targeted indications. Treatment-related side effects could also affect patient recruitment or the ability of enrolled patients to complete the trial or result in potential product liability claims. In addition, these side effects may not be appropriately recognized or managed by the treating medical staff. We currently train and expect to have to train medical personnel using our product candidates to understand the side effect profiles for our clinical trials and upon any commercialization of any of our product candidates. Inadequate training in recognizing or managing the potential side effects of our product candidates could result in patient injury or death. Any of these occurrences may harm our business, financial condition and prospects significantly.

If any of our product candidates receives marketing approval, and we or others later identify undesirable side effects caused by any such product, including during any long-term follow-up observation period

recommended or required for patients who receive treatment using our products, a number of potentially significant negative consequences could result, including:

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regulatory authorities may withdraw approvals of such product;

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we may be required to recall a product or change the way such product is administered to patients;

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additional restrictions may be imposed on the marketing of the particular product or the manufacturing processes for the product;

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regulatory authorities may require additional warnings on the label, such as a “black box” warning or contraindication;

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regulatory authorities may require long-term patient registries for the product;

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we may be required to implement a Risk Evaluation and Mitigation Strategy, or REMS, or create a medication guide outlining the risks of such side effects for distribution to patients;

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the product could become less competitive;

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we could be sued and held liable for harm caused to patients; and

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our reputation may suffer.

Any of these events could prevent us from achieving or maintaining market acceptance of the particular product candidate, if approved, and could significantly harm our business, results of operations and prospects.

Our insurance policies are expensive and protect us only from some business risks, which leaves us exposed to significant uninsured liabilities.

We do not carry insurance for all categories of risk that our business may encounter. Some of the policies we currently maintain include general liability, employment practices liability, property, auto, workers’ compensation, umbrella, and directors’ and officers’ insurance.

Any additional product liability insurance coverage we acquire in the future, may not be sufficient to reimburse us for any expenses or losses we may suffer. Moreover, insurance coverage is becoming increasingly expensive and in the future we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability. If we obtain marketing approval for CNTX-4975, we intend to acquire insurance coverage to include the sale of commercial products; however, we may be unable to obtain product liability insurance on commercially reasonable terms or in adequate amounts. A successful product liability claim or series of claims brought against us could cause our share price to decline and, if judgments exceed our insurance coverage, could adversely affect our results of operations and business, including preventing or limiting the development and commercialization of any product candidates we develop. We do not carry specific biological or hazardous waste insurance coverage, and our property, casualty and general liability insurance policies specifically exclude coverage for damages and fines arising from biological or hazardous waste exposure or contamination. Accordingly, in the event of contamination or injury, we could be held liable for damages or be penalized with fines in an amount exceeding our resources, and our clinical trials or regulatory approvals could be suspended.

We also expect that operating as a public company will make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more

difficult for us to attract and retain qualified people to serve on our board of directors, our board committees or as executive officers. We do not know, however, if we will be able to maintain existing insurance with adequate levels of coverage. Any significant uninsured liability may require us to pay substantial amounts, which would adversely affect our cash position and results of operations.

Our employees and independent contractors, including principal investigators, CROs, consultants, vendors, and any third parties we may engage in connection with research, development, regulatory, manufacturing, quality assurance and other pharmaceutical functions and commercialization may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could have a material adverse effect on our business.

Misconduct by our employees and independent contractors, including principal investigators, CROs, consultants, vendors, and any third parties we may engage in connection with research, development, regulatory, manufacturing, quality assurance and other pharmaceutical functions and commercialization, could include intentional, reckless or negligent conduct or unauthorized activities that violate: (i) the laws and regulations of the FDA, the European Medicines Agency, or the EMA, and other similar regulatory authorities, including those laws that require the reporting of true, complete and accurate information to such authorities; (ii) manufacturing standards; (iii) data privacy, security, fraud and abuse and other healthcare laws and regulations; or (iv) laws that require the reporting of true, complete and accurate financial information and data. Specifically, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Activities subject to these laws could also involve the improper use or misrepresentation of information obtained in the course of pre-clinical studies or clinical trials, creation of fraudulent data in pre-clinical studies or clinical trials or illegal misappropriation of drug product, which could result in regulatory sanctions and cause serious harm to our reputation. It is not always possible to identify and deter misconduct by employees and other third parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with such laws or regulations. Additionally, we are subject to the risk that a person or government could allege such fraud or other misconduct, even if none occurred. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business and results of operations, including the imposition of significant civil, criminal and administrative penalties, damages, monetary fines, disgorgements, possible exclusion from participation in Medicare, Medicaid, other U.S. federal healthcare programs or healthcare programs in other jurisdictions, integrity oversight and reporting obligations to resolve allegations of non-compliance, individual imprisonment, other sanctions, contractual damages, reputational harm, diminished profits and future earnings, and curtailment of our operations.

Our business and operations would suffer in the event of system failures.

Our computer systems, as well as those of our CROs and other contractors and consultants, are vulnerable to damage from computer viruses, unauthorized access, natural disasters (including hurricanes), terrorism, war and telecommunication and electrical failures. If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our product candidate development programs. For example, the loss of pre-clinical studies or clinical trial data from completed, ongoing or planned trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach were to result in a loss of or damage to our data or applications, or inappropriate disclosure of personal, confidential or proprietary information, we could incur liability and the further development of CNTX-4975 or any other product candidate could be delayed.

In the ordinary course of our business, we directly or indirectly collect and store sensitive data, including intellectual property, confidential information, pre-clinical and clinical trial data, proprietary business

information, personal data and personally identifiable health information of our clinical trial subjects and employees, in our data centers and on our networks, or on those of third parties. The secure processing, maintenance and transmission of this information is critical to our operations. Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or internal bad actors, or breached due to employee error, a technical vulnerability, malfeasance or other disruptions. Although, to our knowledge, we have not experienced any such material security breach to date, any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, significant regulatory penalties, and such an event could disrupt our operations, damage our reputation, and cause a loss of confidence in us and our ability to conduct clinical trials, which could adversely affect our reputation and delay our clinical development of our product candidates.

Risks Related to Healthcare Laws and Other Legal Compliance Matters

We will be subject to extensive and costly government regulation.

Product candidates employing our technology will be subject to extensive and rigorous domestic government regulation including regulation by the FDA, the Centers for Medicare and Medicaid Services, or CMS, other divisions of the United States Department of Health and Human Services, the United States Department of Justice, state and local governments, and their respective equivalents outside of the United States. The FDA regulates the research, development, pre-clinical and clinical testing, manufacture, safety, effectiveness, record-keeping, reporting, labeling, storage, approval, advertising, promotion, sale, distribution, import, and export of pharmaceutical products. The FDA generally regulates biotechnology products under the Public Health Service Act, as amended. If products employing our technologies are marketed abroad, they will also be subject to extensive regulation by foreign governments, whether or not they have obtained FDA approval for a given product and its uses. Such foreign regulation may be equally or more demanding than corresponding United States regulation.

Government regulation substantially increases the cost and risk of researching, developing, manufacturing, and selling our products. The regulatory review and approval process, which includes pre-clinical testing and clinical trials of each product candidate, is lengthy, expensive, and uncertain. We or our collaborators must obtain and maintain regulatory authorization to conduct pre-clinical studies and clinical trials. We or our collaborators must obtain regulatory approval for each product we intend to market, and the manufacturing facilities used for the products must be inspected and meet legal requirements. Securing regulatory approval requires the submission of extensive pre-clinical and clinical data and other supporting information for each proposed therapeutic indication in order to establish the product’s safety and efficacy, potency and purity, for each intended use. The development and approval process takes many years, requires substantial resources, and may never lead to the approval of a product.

Even if we are able to obtain regulatory approval for a particular product, the approval may limit the indicated medical uses for the product, may otherwise limit our ability to promote, sell, and distribute the product, may require that we conduct costly post-marketing surveillance, and/or may require that we conduct ongoing post-marketing studies. Material changes to an approved product, such as, for example, manufacturing changes or revised labeling, may require further regulatory review and approval. Once obtained, any approvals may be withdrawn, including, for example, if there is a later discovery of previously unknown problems with the product, such as a previously unknown safety issue.

If we, our collaborators, consultants, contract manufacturers, CROs or other vendors, fail to comply with applicable regulatory requirements at any stage during the regulatory process, such noncompliance could result in, among other things, delays in the approval of applications or supplements to approved applications; refusal of a regulatory authority, including the FDA, to review pending market approval applications or

supplements to approved applications; warning letters; fines; import and/or export restrictions; product recalls or seizures; injunctions; total or partial suspension of production; civil penalties; withdrawals of previously approved marketing applications or licenses; recommendations by the FDA or other regulatory authorities against governmental contracts; and/or criminal prosecutions.

Enacted and future healthcare legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize our product candidates and could adversely affect our business.

In the United States, the EU and other jurisdictions, there have been, and we expect there will continue to be, a number of legislative and regulatory changes and proposed changes to the healthcare system that could prevent or delay marketing approval of our products in development, restrict or regulate post-approval activities of our products, impact pricing and reimbursement and impact our ability to sell our products profitably. In particular, there have been and continue to be a number of initiatives at the U.S. federal and state levels that seek to reduce healthcare costs and improve the quality of healthcare. In addition, new regulations and interpretations of existing healthcare statutes and regulations are frequently adopted.

In March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively the ACA, was enacted, which substantially changed the way healthcare is financed by both governmental and private insurers. Among the provisions of the ACA, those of greatest importance to the pharmaceutical and biotechnology industries include the following:

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an annual, non-deductible fee payable by any entity that manufactures or imports certain branded prescription drugs and biologic agents (other than those designated as orphan drugs), which is apportioned among these entities according to their market share in certain government healthcare programs;

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a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D;

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new requirements to report certain financial arrangements with physicians and teaching hospitals, including reporting “transfers of value” made or distributed to prescribers and other healthcare providers and reporting investment interests held by physicians and their immediate family members;

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an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and 13.0% of the average manufacturer price for branded and generic drugs, respectively;

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a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected;

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extension of a manufacturer’s Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations;

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expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to certain individuals with income at or below 133% of the federal poverty level, thereby potentially increasing a manufacturer’s Medicaid rebate liability;

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a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research; and

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establishment of a Center for Medicare Innovation at CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending.

Since its enactment, there have been judicial and Congressional challenges to certain aspects of the ACA, and we expect there will be additional challenges and amendments to the ACA in the future. For example, the creation of the Independent Payment Advisory Board, which had been included as part of the provisions of the ACA, was repealed in February 2018. The current presidential administration and Congress will likely continue to seek to modify, repeal, or otherwise invalidate all, or certain provisions of, the ACA. It is uncertain the extent to which any such changes may impact our business or financial condition.

In addition, other legislative changes have been proposed and adopted in the United States since the ACA was enacted. In August 2011, the Budget Control Act of 2011 resulted in aggregate reductions of Medicare payments to providers of 2% per fiscal year, which went into effect in April 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2027 unless additional action is taken by Congress. In January 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, further reduced Medicare payments to several types of providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. These new laws or any other similar laws introduced in the future may result in additional reductions in Medicare and other healthcare funding, which could negatively affect our customers and accordingly, our financial operations.

Moreover, payment methodologies may be subject to changes in healthcare legislation and regulatory initiatives. For example, CMS may develop new payment and delivery models, such as bundled payment models. In addition, recently there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several U.S. Congressional inquiries and proposed and enacted federal legislation designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, and review the relationship between pricing and manufacturer patient programs. The Trump administration’s budget proposal for fiscal year 2019 contains further drug price control measures that could be enacted during the 2019 budget process or in other future legislation, including, for example, measures to permit Medicare Part D plans to negotiate the price of certain drugs under Medicare Part B, to allow some states to negotiate drug prices under Medicaid, and to eliminate cost sharing for generic drugs for low-income patients. Further, the Trump administration released a “Blueprint”, or plan, to lower drug prices and reduce out of pocket costs of drugs that contains additional proposals to increase drug manufacturer competition, increase the negotiating power of certain federal healthcare programs, incentivize manufacturers to lower the list price of their products, and reduce the out of pocket costs of drug products paid by consumers. The Department of Health and Human Services has already started the process of soliciting feedback on some of these measures and, at the same, is immediately implementing others under its existing authority. While any proposed measures will require authorization through additional legislation to become effective, Congress and the Trump administration have each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs. We expect that additional U.S. federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that the U.S. federal government will pay for healthcare products and services, which could result in reduced demand for our product candidates or additional pricing pressures.

Individual states in the United States have also increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. Legally-mandated price controls on payment amounts by third-party payors or other restrictions could harm our business, results of operations, financial condition and prospects. In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical

products and which suppliers will be included in their prescription drug and other healthcare programs. This could reduce the ultimate demand for our product candidates or put pressure on our product pricing.

In the EU, similar political, economic and regulatory developments may affect our ability to profitably commercialize our product candidates, if approved. In addition to continuing pressure on prices and cost containment measures, legislative developments at the EU or member state level may result in significant additional requirements or obstacles that may increase our operating costs. The delivery of healthcare in the EU, including the establishment and operation of health services and the pricing and reimbursement of medicines, is almost exclusively a matter for national, rather than EU, law and policy. National governments and health service providers have different priorities and approaches to the delivery of healthcare and the pricing and reimbursement of products in that context. In general, however, the healthcare budgetary constraints in most EU member states have resulted in restrictions on the pricing and reimbursement of medicines by relevant health service providers. Coupled with ever-increasing EU and national regulatory burdens on those wishing to develop and market products, this could prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities and affect our ability to commercialize our product candidates, if approved.

In markets outside of the United States and the EU, reimbursement and healthcare payment systems vary significantly by country, and many countries have instituted price ceilings on specific products and therapies.

We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action in the United States, the EU or any other jurisdiction. If we or any third parties we may engage are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we or such third parties are not able to maintain regulatory compliance, our product candidates may lose any regulatory approval that may have been obtained and we may not achieve or sustain profitability.

Even if we receive regulatory approval of our product candidates, we will be subject to ongoing regulatory obligations and continued regulatory review, which may result in significant additional expense, and we may be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated problems with our product candidates.

Any product candidate for which we obtain marketing approval, along with the manufacturing processes, post-approval clinical data, labeling, packaging, distribution, adverse event reporting, storage, recordkeeping, export, import, advertising and promotional activities for such product, among other things, will be subject to extensive and ongoing requirements of and review by the FDA, the EMA and other regulatory authorities. These requirements include submissions of safety and other post-marketing information and reports, establishment registration and drug listing requirements, continued compliance with current good manufacturing practice, or cGMP, requirements relating to manufacturing, quality control, quality assurance and corresponding maintenance of records and documents, requirements regarding the distribution of samples to physicians and recordkeeping and GCP requirements for any clinical trials that we conduct post-approval. In addition, the sponsor of an approved NDA is subject to periodic inspections and other FDA monitoring and reporting obligations, including obligations to monitor and report adverse events and other information such as the failure of a product to meet the specifications in the NDA. NDA sponsors must submit new or supplemental applications and obtain FDA approval for certain changes to the approved product, product labeling, or manufacturing process. Application holders must also submit advertising and other promotional material to the FDA and report on ongoing clinical trials. The FDA may require changes in the labeling of already approved drug products and require that sponsors conduct post-marketing studies.

Advertising and promotional materials must comply with FDA rules in addition to other potentially applicable federal and state laws. The distribution of product samples to physicians must comply with the requirements of the FDCA. NDA sponsors must obtain FDA approval for product, manufacturing, and labeling changes, depending on the nature of the change.

Depending on the circumstances, failure to meet these post-approval requirements can result in criminal prosecution, fines, injunctions, consent decrees of permanent injunction, recall or seizure of products, total or partial suspension of production, denial or withdrawal of pre-marketing product approvals, or refusal to allow us to enter into supply contracts, including government contracts.

In addition, later discovery of previously unknown adverse events or other problems with our products, manufacturers or manufacturing processes, including adverse events of unanticipated severity or frequency, or with our third-party manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may yield various results, including:

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restrictions on manufacturing such products;

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restrictions on the labeling or marketing of a product;

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restrictions on product distribution or use;

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requirements to conduct post-marketing studies or clinical trials;

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warning letters or holds on clinical trials;

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withdrawal of the products from the market;

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

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recall of products;

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fines, restitution or disgorgement of profits or revenues;

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suspension or withdrawal of marketing approvals;

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refusal to permit the import or export of our products;

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product seizure or detention; or

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injunctions or the imposition of civil or criminal penalties.

The FDA’s policies may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of CNTX-4975 or any other product candidate. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained which would adversely affect our business, prospects and ability to achieve or sustain profitability.

We also cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative or executive action, either in the United States or abroad. For example, certain policies of the Trump administration may impact our business and industry. Namely, the Trump administration has taken several executive actions, including the issuance of a number of Executive Orders, that could impose significant burdens on, or otherwise materially delay, the FDA’s ability to engage in routine regulatory and oversight activities such as implementing statutes through rulemaking, issuance of guidance, and review and approval of marketing applications. It is difficult to predict how these requirements will be implemented, and the extent to which they will impact the FDA’s ability to exercise its regulatory authority. If these executive actions impose constraints on FDA’s ability to engage in oversight and implementation activities in the normal course, our business may be negatively impacted.

Our business operations and current and future relationships with investigators, healthcare professionals, consultants, third-party payors, patient organizations and customers will be subject to applicable healthcare regulatory laws, which could expose us to penalties.

Our business operations and current and future arrangements with investigators, healthcare professionals, consultants, third-party payors, patient organizations and customers, may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations. These laws may constrain the business or financial arrangements and relationships through which we conduct our operations, including how we research, market, sell and distribute our product candidates, if approved. Such laws include:

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the U.S. federal Anti-Kickback Statute, which prohibits, among other things, persons or entities from knowingly and willfully soliciting, offering, receiving or providing any remuneration (including any kickback, bribe, or certain rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, lease, order or recommendation of, any good, facility, item or service, for which payment may be made, in whole or in part, under U.S. federal and state healthcare programs such as Medicare and Medicaid. A person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;

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the U.S. federal civil and criminal false claims laws, including the civil False Claims Act, which, among other things, impose criminal and civil penalties, including through civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the U.S. federal government, claims for payment or approval that are false or fraudulent, knowingly making, using or causing to be made or used, a false record or statement material to a false or fraudulent claim, or from knowingly making a false statement to avoid, decrease or conceal an obligation to pay money to the U.S. federal government. In addition, the government may assert that a claim including items and services resulting from a violation of the U.S. federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act;

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the federal civil monetary penalties laws, which impose civil fines for, among other things, the offering or transfer of remuneration to a Medicare or state healthcare program beneficiary if the person knows or should know it is likely to influence the beneficiary’s selection of a particular provider, practitioner, or supplier of services reimbursable by Medicare or a state healthcare program, unless an exception applies;

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the U.S. federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which imposes criminal and civil liability for, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, or knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement, in connection with the delivery of, or payment for, healthcare benefits, items or services; similar to the U.S. federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;

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HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 and its implementing regulations, which also imposes certain obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information without appropriate authorization by covered entities subject to the rule, such as health plans, healthcare clearinghouses and healthcare providers as well as their business associates that perform certain services involving the use or disclosure of individually identifiable health information;

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the FDCA, which prohibits, among other things, the adulteration or misbranding of drugs, biologics and medical devices;

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the U.S. Physician Payments Sunshine Act and its implementing regulations, which requires certain manufacturers of drugs, devices, biologics and medical supplies that are reimbursable under Medicare, Medicaid, or the Children’s Health Insurance Program to report annually to the government information related to certain payments and other transfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, as well as ownership and investment interests held by the physicians described above and their immediate family members;

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federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers;

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analogous U.S. state laws and regulations, including: state anti-kickback and false claims laws, which may apply to our business practices, including but not limited to, research, distribution, sales and marketing arrangements and claims involving healthcare items or services reimbursed by any third-party payor, including private insurers; state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the U.S. federal government, or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state laws and regulations that require drug manufacturers to file reports relating to pricing and marketing information, which requires tracking gifts and other remuneration and items of value provided to healthcare professionals and entities; state and local laws that require the registration of pharmaceutical sales representatives; and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts; and

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similar healthcare laws and regulations in the EU and other jurisdictions, including reporting requirements detailing interactions with and payments to healthcare providers and laws governing the privacy and security of certain protected information, such as the General Data Protection Regulation, or the GDPR, which imposes obligations and restrictions on the collection and use of personal data relating to individuals located in the EU (including health data).

Ensuring that our internal operations and future business arrangements with third parties comply with applicable healthcare laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude that our business practices do not comply with current or future statutes, regulations, agency guidance or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of the laws described above or any other governmental laws and regulations that may apply to us, we may be subject to significant penalties, including civil, criminal and administrative penalties, damages, fines, exclusion from government-funded healthcare programs, such as Medicare and Medicaid or similar programs in other countries or jurisdictions, integrity oversight and reporting obligations to resolve allegations of non-compliance, disgorgement, individual imprisonment, contractual damages, reputational harm, diminished profits and the curtailment or restructuring of our operations. If any of the physicians or other providers or entities with whom we expect to do business are found to not be in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs and imprisonment, which could affect our ability to operate our business. Further, defending against any such actions can be costly, time-consuming and may require significant personnel resources. Therefore, even if we are successful in defending against any such actions that may be brought against us, our business may be impaired.

We are subject to governmental regulation and other legal obligations, particularly related to privacy, data protection and information security, and we are subject to consumer protection laws that regulate our marketing practices and prohibit unfair or deceptive acts or practices. Our actual or perceived failure to comply with such obligations could harm our business.

We are subject to diverse laws and regulations relating to data privacy and security, including, in the United States, HIPAA and, in the EU and the European Economic Area, or EEA, Regulation 2016/679, known as the GDPR. New privacy rules are being enacted in the United States and globally, and existing ones are being updated and strengthened. Complying with these numerous, complex and often changing regulations is expensive and difficult, and failure to comply with any privacy laws or data security laws or any security incident or breach involving the misappropriation, loss or other unauthorized use or disclosure of sensitive or confidential patient or consumer information, whether by us, one of our business associates or another third-party, could adversely affect our business, financial condition and results of operations, including but not limited to: investigation costs, material fines and penalties; compensatory, special, punitive and statutory damages; litigation; consent orders regarding our privacy and security practices; requirements that we provide notices, credit monitoring services and/or credit restoration services or other relevant services to impacted individuals; adverse actions against our licenses to do business; and injunctive relief. Furthermore, these rules are constantly changing; for example, the GDPR came into force in May 2018 changing the European regime. Before that, the US-EU Safe Harbor framework was declared invalid in 2015 and replaced with the EU-U.S. Privacy Shield framework which, along with other methods which permit transfer under European privacy law, are under ongoing review and subject to challenge.

The privacy laws in the EU have been significantly reformed. On May 25, 2018, the GDPR entered into force and became directly applicable in all EU member states. The GDPR implements more stringent operational requirements than its predecessor legislation. For example, the GDPR requires us to make more detailed disclosures to data subjects, requires disclosure of the legal basis on which we can process personal data, makes it harder for us to obtain valid consent for processing, will require the appointment of data protection officers when sensitive personal data, such as health data, is processed on a large scale, provides more robust rights for data subjects, introduces mandatory data breach notification through the EU, imposes additional obligations on us when contracting with service providers and requires us to adopt appropriate privacy governance including policies, procedures, training and data audit. If we do not comply with our obligations under the GDPR, we could be exposed to fines of up to the greater of €20 million or up to 4% of our total global annual revenue in the event of a significant breach. In addition, we may be the subject of litigation and/or adverse publicity, which could adversely affect our business, results of operations and financial condition.

We cannot assure you that our third-party service providers with access to our or our customers’, suppliers’, trial patients’ and employees’ personally identifiable and other sensitive or confidential information in relation to which we are responsible will not breach contractual obligations imposed by us, or that they will not experience data security breaches or attempts thereof, which could have a corresponding effect on our business, including putting us in breach of our obligations under privacy laws and regulations and/or which could in turn adversely affect our business, results of operations and financial condition. We cannot assure you that our contractual measures and our own privacy and security-related safeguards will protect us from the risks associated with the third-party processing, storage and transmission of such information.

We are subject to environmental, health and safety laws and regulations, and we may become exposed to liability and substantial expenses in connection with environmental compliance or remediation activities.

Our operations, including our development, testing and manufacturing activities, are subject to numerous environmental, health and safety laws and regulations. These laws and regulations govern, among other things, the controlled use, handling, release and disposal of and the maintenance of a registry for, hazardous materials and biological materials, such as chemical solvents, human cells, carcinogenic compounds, mutagenic compounds and compounds that have a toxic effect on reproduction, laboratory procedures and exposure to

blood-borne pathogens. If we fail to comply with such laws and regulations, we could be subject to fines or other sanctions.

As with other companies engaged in activities similar to ours, we face a risk of environmental liability inherent in our current and historical activities, including liability relating to releases of or exposure to hazardous or biological materials. Environmental, health and safety laws and regulations are becoming more stringent. We may be required to incur substantial expenses in connection with future environmental compliance or remediation activities, in which case, the production efforts of our third-party manufacturers or our development efforts may be interrupted or delayed.

Risks Related to Commercialization

Developments by competitors may render our products or technologies obsolete or non-competitive or may reduce the size of our markets.

Our industry has been characterized by extensive research and development efforts, rapid developments in technologies, intense competition and a strong emphasis on proprietary products. We face potential competition from many different sources, including pharmaceutical, biotechnology and specialty pharmaceutical companies either marketing or developing therapeutics to treat chronic pain. Academic research institutions, governmental agencies, as well as public and private institutions are also potential sources of competitive products and technologies. Our competitors may have or may develop superior technologies or approaches, which may provide them with competitive advantages. Our potential products may not compete successfully. If these competitors access the marketplace before we do with better or less expensive drugs, our product candidates, if approved for commercialization, may not be profitable to sell or worthwhile to continue to develop. Technology in the pharmaceutical industry has undergone rapid and significant change, and we expect that it will continue to do so. Any compounds, products or processes that we develop may become obsolete or uneconomical before we recover any expenses incurred in connection with their development. The success of our product candidates will depend upon factors such as product efficacy, safety, reliability, availability, timing, scope of regulatory approval, acceptance and price, among other things. Other important factors to our success include speed in developing product candidates, completing clinical development and laboratory testing, obtaining regulatory approvals and manufacturing and selling commercial quantities of potential products.

Our product candidates are intended to compete directly or indirectly with existing drugs. Even if approved and commercialized, our product candidates may fail to achieve market acceptance with hospitals, physicians or patients. Hospitals, physicians or patients may conclude that our potential products are less safe or effective or otherwise less attractive than these existing drugs. If our product candidates do not receive market acceptance for any reason, our revenue potential would be diminished, which would materially adversely affect our ability to become profitable.

Significant competition exists in the chronic pain field. We will need to compete with all currently available or future therapies within the indications where our development is focused. CNTX-4975, if approved and commercialized, will face significant competition. The main classes of marketed products that are available for the treatment of knee OA pain include opioids, immediate-release and sustained-release injectable steroids, hyaluronic acid, or HA, injections and, to a lesser extent, non-FDA approved treatments such as platelet rich plasma and stem cell injections. Furthermore, numerous monoclonal antibodies targeting nerve growth factor, or NGF inhibitors, are in clinical development, including two product candidates in Phase 3. Also in development are several compounds that seek to produce disease modification through the regeneration of cartilage and/or to reduce cartilage degeneration, though these compounds do not directly treat the pain itself.

approved, our product candidates would potentially compete with include: Acorda Therapeutics, Assertio Therapeutics, Biogen, Cara Therapeutics, Eli Lilly and Company, Endo Pharmaceuticals, Flexion Therapeutics, Grunenthal, Horizon Pharma, Janssen Research & Development, Merck & Co., Novartis, Pacira Pharmaceutics, Pain Therapeutics, Pfizer, Purdue Pharma, Sanofi Trevena and Vertex Pharmaceuticals.

Most of our competitors, including many of those listed above, have substantially greater capital resources, robust drug pipelines, established presence in the market and expertise in research and development, manufacturing, pre-clinical and clinical testing, obtaining regulatory approvals and reimbursement and marketing approved products than we do. As a result, our competitors may achieve product commercialization or patent protection earlier than we can. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These competitors also compete with us in recruiting and retaining qualified clinical, regulatory, scientific, sales, marketing and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs. Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient, or are less expensive than any products that we may develop or that would render any products that we may develop obsolete or noncompetitive.

The successful commercialization of our product candidates will depend in part on the extent to which governmental authorities and health insurers establish coverage, adequate reimbursement levels and pricing policies. Failure to obtain or maintain coverage and adequate reimbursement for our product candidates, if approved, could limit our ability to market those products and decrease our ability to generate revenue.

The availability of coverage and adequacy of reimbursement by 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 such as our product candidates, assuming FDA approval. Our ability to achieve acceptable levels of coverage and reimbursement for our products or procedures using our products by governmental authorities, private health insurers and other organizations will have an effect on our ability to successfully commercialize our product candidates. Obtaining coverage and adequate reimbursement for our products may be particularly difficult because of the higher prices often associated with drugs administered under the supervision of a physician. Separate reimbursement for the product itself or the treatment or procedure in which our product is used may not be available. A decision by a third-party payor not to cover or separately reimburse for our products or procedures using our products, could reduce physician utilization of our products once approved. Assuming there is coverage for our product candidates or procedures using our product candidates by a third-party payor, the resulting reimbursement payment rates may not be adequate or may require co-payments that patients find unacceptably high. Patients are unlikely to use our product candidates unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of our product candidates. Similarly, some of our product candidates, including our lead product candidate, CNTX-4975, are physician-administered injectables and as such, separate reimbursement for the product itself may or may not be available. Instead, the hospital or administering physician may be reimbursed only for providing the treatment or procedure in which our product is used. To the extent separate coverage and reimbursement should become available for CNTX-4975, we anticipate that it will be sold to physicians on a “buy and bill” basis. Buy and bill products must be purchased by healthcare providers before they can be administered to patients. Healthcare providers subsequently must seek reimbursement for the product from the applicable third-party payor, such as Medicare or a health insurance company. Healthcare providers may be reluctant to administer our product candidates, if approved, because they would have to fund the purchase of the product and then seek reimbursement, which may be lower than their purchase price, or because they do not want the additional administrative burden required to obtain reimbursement for the product.

Further, the status of reimbursement codes for any of our product candidates, if approved, could also affect reimbursement. J-Codes and Q-Codes are reimbursement codes maintained by the Centers for Medicare and Medicaid Services, or CMS, that are a component of the Healthcare Common Procedure Coding System and

are typically used to report injectable drugs that ordinarily cannot be self-administered. We currently do not have a specific J-Code or Q-Code for any of our product candidates. If our product candidates are approved, we may apply for one but cannot guarantee that a J-Code or Q-Code will be granted. To the extent separate coverage or reimbursement is available for any product candidate, if approved, and a specific J-Code or Q-Code is not available, physicians would need to use a non-specific miscellaneous J-Code to bill third-party payors for these physician-administered drugs. Because miscellaneous J-Codes may be used for a wide variety of products, health plans may have more difficulty determining the actual product used and billed for the patient. These claims must often be submitted with additional information and manually processed, which can delay claims processing times as well as increase the likelihood for claim denials and claim errors. We cannot be sure that coverage and reimbursement in the United States, the EU or elsewhere will be available for our product candidates or any product that we may develop, and any reimbursement that may become available may not be adequate or may be decreased or eliminated in the future.

Third-party payors increasingly are challenging prices charged for pharmaceutical products and services, and many third-party payors may refuse to provide coverage and reimbursement for particular drugs and biologics when an equivalent generic drug, biosimilar or a less expensive therapy is available. It is possible that a third-party payor may consider our product candidates as substitutable and only offer to reimburse patients for the less expensive product. Even if we show improved efficacy or improved convenience of administration with our product candidates, pricing of existing third-party therapeutics may limit the amount we will be able to charge for our product candidates. These payors may deny or revoke the reimbursement status of a given product or establish prices for new or existing marketed products at levels that are too low to enable us to realize an appropriate return on our investment in our product candidates. If reimbursement is not available or is available only at limited levels, we may not be able to successfully commercialize our product candidates, and may not be able to obtain a satisfactory financial return on our product candidates.

There is significant uncertainty related to the insurance coverage and reimbursement of newly-approved products. In the United States, third-party payors, including private and governmental payors, such as the Medicare and Medicaid programs, play an important role in determining the extent to which new drugs and biologics will be covered. The Medicare and Medicaid programs increasingly are used as models in the United States for how private payors and other governmental payors develop their coverage and reimbursement policies for drugs and biologics. Some third-party payors may require pre-approval of coverage for new or innovative drug therapies before they will reimburse healthcare providers who use such therapies. We cannot predict at this time what third-party payors will decide with respect to the coverage and reimbursement for our product candidates.

No uniform policy for 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 will require us to provide scientific and clinical support for the use of our product candidates 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.

Outside the United States, 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 the EU and other jurisdictions have and will continue to put pressure on the pricing and usage of our product candidates. In 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 our product candidates. Accordingly, in markets outside the United States, the reimbursement for our product candidates may be reduced compared with the United States and may be insufficient to generate commercially-reasonable revenue and profits.

Moreover, increasing efforts by governmental and third-party payors in the United States and abroad to cap or reduce healthcare costs may cause such organizations to limit both coverage and the level of reimbursement for newly approved products and, as a result, they may not cover or provide adequate payment for our product candidates. We expect to experience pricing pressures in connection with the sale of our product candidates due to the trend toward managed healthcare, the increasing influence of health maintenance organizations and additional legislative changes. The downward pressure on healthcare costs in general, particularly prescription drugs and biologics and surgical procedures and other treatments, has become intense. As a result, increasingly high barriers are being erected to the entry of new products.

Even if CNTX-4975 receives marketing approval, it may fail to achieve market acceptance by physicians, patients, third-party payors or others in the medical community necessary for commercial success.

If CNTX-4975 receives marketing approval, it may nonetheless fail to gain sufficient market acceptance by physicians, patients, third-party payors and others in the medical community. If it does not achieve an adequate level of acceptance, we may not generate significant product revenues or become profitable. The degree of market acceptance of CNTX-4975, if approved for commercial sale, will depend on a number of factors, including but not limited to:

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perceptions by members of the healthcare community, including physicians, about the safety and effectiveness of our drug product;

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the perception by patients and clinicians that our procedure pain control technique does not adequately reduce the pain associated with local application of trans-capsaicin;

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the perception by members of the healthcare community, including physicians, or patients that the process of administering CNTX-4975, including our procedure pain control technique, is not unduly cumbersome;

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the efficacy and potential advantages compared to alternative treatments;

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effectiveness of sales and marketing efforts;

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the cost of treatment in relation to alternative treatments;

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our ability to offer our products for sale at competitive prices;

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the convenience and ease of administration compared to alternative treatments;

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the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;

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the strength of marketing and distribution support;

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the timing of market introduction of competitive products;

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the availability of third-party coverage and adequate reimbursement;

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product labeling or product insert requirements of the FDA, the EMA or other regulatory authorities, including any limitations or warnings contained in a product’s approved labeling;

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the prevalence and severity of any side effects; and

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any restrictions on the use of our product together with other medications.

If our product candidates are approved, but do not achieve an adequate level of acceptance by physicians, healthcare payors, and patients, we may not generate sufficient revenue from these products, and we may not be able to achieve or sustain profitability. Our efforts to educate the medical community and third-party payors on the benefits of our product candidates may require significant resources and may never be successful. In addition, our ability to successfully commercialize our product candidates will depend on our ability to manufacture our products through third-party manufacturers, differentiate our products from competing products and defend the intellectual property of our products.

Because we expect sales of CNTX-4975, if approved, to generate substantially all of our product revenues for a substantial period, the failure of this product to find market acceptance would harm our business and could require us to seek additional financing.

If we are unable to establish sales, marketing and distribution capabilities either on our own or in collaboration with third parties, we may not be successful in commercializing CNTX-4975, if approved.

We do not have any infrastructure for the sales, marketing or distribution of our products, and the cost of establishing and maintaining such an organization may exceed the cost-effectiveness of doing so.

We expect to build our own focused sales, distribution and marketing infrastructure to market CNTX-4975 in the United States, if approved. There are significant expenses and risks involved with establishing our own sales, marketing and distribution capabilities, including our ability to hire, retain and appropriately incentivize qualified individuals, generate sufficient sales leads, provide adequate training to sales and marketing personnel, and effectively manage a geographically dispersed sales and marketing team. Any failure or delay in the development of our internal sales, marketing and distribution capabilities could delay any product launch, which would adversely impact the commercialization of CNTX-4975. Additionally, if the commercial launch of CNTX-4975 for which we recruit a sales force and establish marketing capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. This may be costly, and our investment would be lost if we cannot retain or reposition our sales and marketing personnel.

We do not anticipate having the resources in the foreseeable future to allocate to the sales and marketing of CNTX-4975 or our other product candidates in markets outside of the United States. Therefore, our future sales in these markets will largely depend on our ability to enter into and maintain collaborative relationships for such capabilities, the collaborator’s strategic interest in the product and such collaborator’s ability to successfully market and sell the product. We intend to selectively pursue collaborative arrangements regarding the sale and marketing of CNTX-4975, if approved, for certain markets outside of the United States; however, we cannot assure that we will be able to establish or maintain such collaborative arrangements, or if able to do so, that they will have effective sales forces.

If we are unable to build our own sales force or negotiate a collaborative relationship for the commercialization of CNTX-4975, we may be forced to delay the potential commercialization of CNTX-4975 or reduce the scope of our sales or marketing activities for CNTX-4975. If we elect to increase our expenditures to fund commercialization activities ourselves, we will need to obtain additional capital, which may not be available to us on acceptable terms, or at all. We could enter into arrangements with collaborative partners at an earlier stage than otherwise would be ideal and we may be required to relinquish rights to CNTX-4975 or otherwise agree to terms unfavorable to us, any of which may have an adverse effect on our business, operating results and prospects.

If we are unable to establish adequate sales, marketing and distribution capabilities, either on our own or in collaboration with third parties, we will not be successful in commercializing CNTX-4975 and may not become profitable and may incur significant additional losses. We will be competing with many companies that currently have extensive and well-funded marketing and sales operations. Without an internal team or the support

of a third party to perform marketing and sales functions, we may be unable to compete successfully against these more established companies.

If we cannot compete for market share against other drug companies, we may not achieve sufficient product revenues and our business will suffer.

If our product candidates receive FDA approval, they will compete with a number of existing and future drugs and therapies developed, manufactured and marketed by other companies. Existing or future competing products may provide greater therapeutic convenience or clinical or other benefits for a specific indication than our products, or may offer comparable performance at a lower cost. If our products fail to capture and maintain market share, we may not achieve sufficient product revenues and our business will suffer.

We will compete against fully integrated pharmaceutical companies and smaller companies that are collaborating with larger pharmaceutical companies, academic institutions, government agencies and other public and private research organizations. Many of these competitors may have compounds already approved or in development in the therapeutic categories that we are targeting with our current and future product candidates. In addition, many of these competitors, either alone or together with their collaborative partners, may operate larger research and development programs or have substantially greater financial resources than we do, as well as greater experience in:

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developing product candidates;

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undertaking pre-clinical testing and clinical trials;

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obtaining NDA approval by the FDA and comparable foreign regulatory approvals of product candidates;

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formulating and manufacturing products; and

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launching, marketing and selling products.

If we obtain approval to commercialize any products outside of the United States, a variety of risks associated with international operations could materially adversely affect our business.

If CNTX-4975 is approved for commercialization, we intend to selectively partner with third parties to market it in certain jurisdictions outside the United States. We expect that we will be subject to additional risks related to international pharmaceutical operations, including:

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different regulatory requirements for drug approvals and rules governing drug commercialization in foreign countries;

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reduced protection for intellectual property rights;

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foreign reimbursement, pricing and insurance regimes;

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potential noncompliance with the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act 2010 and similar anti-bribery and anticorruption laws in other jurisdictions; and

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production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad.

We have no prior experience in these areas. In addition, there are complex regulatory, tax, labor and other legal requirements imposed by both the European Union and many of the individual countries in Europe with which we will need to comply. Many U.S.-based biotechnology companies have found the process of marketing their own products in Europe to be very challenging.

Certain legal and political risks are also inherent in foreign operations. For example, it may be more difficult for us to enforce our agreements or collect receivables through foreign legal systems. There is a risk that foreign governments may nationalize private enterprises in certain countries where we may operate. In certain countries or regions, terrorist activities and the response to such activities may threaten our operations more than in the United States. Social and cultural norms in certain countries may not support compliance with our corporate policies including those that require compliance with substantive laws and regulations. Also, changes in general economic and political conditions in countries where we may operate are a risk to our financial performance and future growth. Additionally, the need to identify financially and commercially strong partners for commercialization outside the United States who will comply with the high manufacturing and legal and regulatory compliance standards we require is a risk to our financial performance. As we operate our business globally, our success will depend, in part, on our ability to anticipate and effectively manage these and other related risks. There can be no assurance that the consequences of these and other factors relating to our international operations will not have an adverse effect on our business, financial condition or results of operations.

Potential product liability lawsuits against us could cause us to incur substantial liabilities and limit commercialization of any products that we may develop.

The use of our product candidates, including CNTX-4975, in clinical trials and the sale of any products for which we obtain marketing approval exposes us to the risk of product liability claims. Product liability claims might be brought against us by consumers, healthcare providers, pharmaceutical companies or others selling or otherwise coming into contact with our products. On occasion, large judgments have been awarded in class action lawsuits based on products that had unanticipated adverse effects. If we cannot successfully defend against product liability claims, we could incur substantial liability and costs, which may not be covered by insurance. In addition, regardless of merit or eventual outcome, product liability claims may result in:

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impairment of our business reputation and significant negative media attention;

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withdrawal of participants from our clinical trials;

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significant costs to defend the related litigation and related litigation;

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distraction of management’s attention from our primary business;

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substantial monetary awards to patients or other claimants;

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inability to commercialize CNTX-4975 or any other product candidate;

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product recalls, withdrawals or labeling, marketing or promotional restrictions;

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decreased demand for CNTX-4975 or any other product candidate, if approved for commercial sale; and

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loss of revenue.

Risks Related to Our Dependence on Third Parties

We rely on third parties for the manufacture of materials for our research programs, pre-clinical studies and clinical trials and we do not have long-term contracts with any of these parties. This reliance on third parties increases the risk that we will not have sufficient quantities of such materials, product candidates, or any therapies that we may develop and commercialize, or that such supply will not be available to us at an acceptable cost, which could delay, prevent, or impair our development or commercialization efforts.

We do not own or operate manufacturing facilities and have no plans to build our own clinical or commercial scale manufacturing capabilities. We rely, and expect to continue to rely, on third parties for the manufacture of our product candidates and related raw materials for pre-clinical and clinical development, as well as for commercial manufacture if any of our product candidates receive marketing approval. We do not have a long-term agreement with any of the third-party manufacturers we currently use to provide pre-clinical and clinical drug supply, and purchase any required materials on a purchase order basis. Certain of these manufacturers are critical to our production and the loss of these manufacturers to one of our competitors or otherwise would materially and adversely affect our development and commercialization efforts. Additionally, since certain of our manufacturers have only one facility, we face the risk of not having sufficient supply of our products in the case of a natural disaster, calamity, acts of war or terrorism or other major disturbance. The facilities used by third-party manufacturers to manufacture our product candidates must be approved by the FDA pursuant to inspections that will be conducted after we submit an NDA to the FDA. We do not control the manufacturing process of, and are completely dependent on, third-party manufacturers for compliance with cGMP requirements for manufacture of drug products. If these third-party manufacturers cannot successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA or others, including requirements related to the manufacturing of high potency compounds, they will not be able to secure and/or maintain regulatory approval for their manufacturing facilities. Some of our contract manufacturers have not produced a commercially-approved product and therefore have not obtained the requisite FDA approvals to do so. In addition, we have no control over the ability of third-party manufacturers to maintain adequate quality control, quality assurance and qualified personnel. If the FDA or a comparable foreign regulatory authority does not approve these facilities for the manufacture of our product candidates or if it withdraws any such approval in the future, we may need to find alternative manufacturing facilities, which would significantly impact our ability to develop, obtain regulatory approval for or market our product candidates, if approved.

Our failure, or the failure of our third-party manufacturers, to comply with applicable regulations could result in sanctions being imposed on us, including clinical holds, fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, seizures or recalls of product candidates or products, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of our products. In addition, we may be unable to establish any agreements with third-party manufacturers or to do so on acceptable terms.

Even if we are able to establish agreements with third-party manufacturers, reliance on third-party manufacturers entails additional risks, including:

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failure of third-party manufacturers to comply with regulatory requirements and maintain quality assurance;

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breach of the manufacturing agreement by the third party;

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failure to manufacture our product according to our specifications;

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failure to manufacture our product according to our schedule or at all;

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misappropriation of our proprietary information, including our trade secrets and know-how; and

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termination or nonrenewal of the agreement by the third party at a time that is costly or inconvenient for us.

Our product candidates and any products that we may develop may compete with other product candidates and products for access to manufacturing facilities. There are a limited number of manufacturers that operate under cGMP regulations and that might be capable of manufacturing for us. Any performance failure on the part of our existing or future manufacturers could delay clinical development or marketing approval, and any related remedial measures may be costly or time-consuming to implement. We do not currently have arrangements in place for redundant supply or a second source for all required raw materials used in the manufacture of our product candidates. If our current third-party manufacturers cannot perform as agreed, we may be required to replace such manufacturers and we may be unable to replace them on a timely basis or at all. Our current and anticipated future dependence upon others for the manufacture of our product candidates or products may adversely affect our future profit margins and our ability to commercialize any products that receive marketing approval on a timely and competitive basis.

We rely on third parties to conduct many of our pre-clinical studies and clinical trials. Any failure by a third party to conduct the clinical trials according to GCPs and in a timely manner may delay or prevent our ability to seek or obtain regulatory approval for or commercialize our product candidates.

We are dependent on third parties to conduct our pre-clinical studies and clinical trials, including our ongoing clinical trials for CNTX-4975, CNTX-0290 and CNTX-6970, and any future clinical trials and pre-clinical studies for our product candidates, including CNTX-6016 and CNTX-2022. Specifically, we have used and relied on, and intend to continue to use and rely on, medical institutions, clinical investigators, CROs and consultants to conduct our clinical trials in accordance with our clinical protocols and regulatory requirements. These CROs, investigators and other third parties play a significant role in the conduct and timing of these trials and subsequent collection and analysis of data. While we have agreements governing the activities of our third-party contractors, we have limited influence over their actual performance. Nevertheless, we are responsible for ensuring that each of our clinical trials is conducted in accordance with the applicable protocol and legal, regulatory and scientific standards, and our reliance on the CROs and other third parties does not relieve us of our regulatory responsibilities. We and our CROs are required to comply with GCP requirements, which are regulations and guidelines enforced by the FDA and comparable foreign regulatory authorities for all of our product candidates in clinical development. Regulatory authorities enforce these GCPs through periodic inspections of trial sponsors, principal investigators and trial sites. If we or any of our CROs or trial sites fail to comply with applicable GCPs, the clinical data generated in our clinical trials may be deemed unreliable, and the FDA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. In addition, our clinical trials must be conducted with product produced under cGMP regulations. Our failure to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process.

There is no guarantee that any such CROs, investigators or other third parties will devote adequate time and resources to such trials or perform as contractually required. If any of these third parties fail to meet expected deadlines, adhere to our clinical protocols or meet regulatory requirements, or otherwise performs in a substandard manner, our clinical trials may be extended, delayed or terminated. In addition, many of the third parties with whom we contract may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical trials or other drug development activities that could harm our competitive position. In addition, 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 the FDA 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 any NDA we submit to the FDA. Any such delay or rejection could prevent us from commercializing our product candidates.

If any of our relationships with these third-parties terminate, we may not be able to enter into arrangements with alternative third parties or do so on commercially reasonable terms. Switching or adding additional CROs, investigators and other third parties involves additional cost and requires management time and focus. In addition, there is a natural transition period when a new CRO commences work. As a result, delays occur, which can materially impact our ability to meet our desired clinical development timelines. Though we carefully manage our relationships with our CROs, investigators and other third parties, there can be no assurance that we will not encounter challenges or delays in the future or that these delays or challenges will not have a material adverse impact on our business, financial condition and prospects.

We may collaborate with third parties for the development and commercialization of CNTX-4975 and our other clinical and pre-clinical product candidates. We may not succeed in establishing and maintaining collaborative relationships, which may significantly limit our ability to develop and commercialize CNTX-4975 or our other clinical and pre-clinical product candidates successfully, if at all.

We may seek collaborative relationships for the development and commercialization of CNTX-4975. Failure to obtain a collaborative relationship for CNTX-4975 may significantly impair the potential for this product candidate. We also will need to enter into collaborative relationships to provide funding to support our other research and development programs. The process of establishing and maintaining collaborative relationships is difficult, time-consuming and involves significant uncertainty, such as:

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

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

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a collaboration partner may cease development in therapeutic areas which are the subject of our strategic collaboration;

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a collaboration partner may not devote sufficient capital or resources towards our product candidates;

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

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

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

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

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

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a collaboration partner may terminate a strategic alliance;

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a dispute may arise between us and a partner concerning the research, development or commercialization of a product candidate resulting in a delay in milestones, royalty payments or

termination of an alliance and possibly resulting in costly litigation or arbitration which may divert management attention and resources; and

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a partner may use our products or technology in such a way as to invite litigation from a third party.

If any collaborator fails to fulfill its responsibilities in a timely manner, or at all, our research, clinical development, manufacturing or commercialization efforts related to that collaboration could be delayed or terminated, or it may be necessary for us to assume responsibility for expenses or activities that would otherwise have been the responsibility of our collaborator. If we are unable to establish and maintain collaborative relationships on acceptable terms or to successfully transition terminated collaborative agreements, we may have to delay or discontinue further development of one or more of our product candidates, undertake development and commercialization activities at our own expense or find alternative sources of capital. Moreover, any collaborative partners we enter into agreements with in the future may shift their priorities and resources away from our product candidates or seek to renegotiate or terminate their relationships with us.

Data provided by collaborators and others upon which we rely that has not been independently verified could turn out to be false, misleading, or incomplete.

We rely on third-party vendors, such as CROs, scientists and collaborators to provide us with significant data and other information related to our projects, pre-clinical studies or clinical trials and our business. If such third parties provide inaccurate, misleading or incomplete data, our business, prospects and results of operations could be materially adversely affected.

We have also in-licensed three products from Boehringer Ingelheim International GmbH, or BI. Our decision to obtain a license to these products was based on pre-clinical and clinical data as well as intellectual property generated by BI. If any such data or information from BI proves to be inaccurate, misleading or incomplete, our business, prospects and results of operations could be materially adversely affected.

We do not have multiple sources of supply for the components used in CNTX-4975 and our other product candidates, nor long-term supply contracts, and certain of our suppliers are critical to our production. If we were to lose a supplier, it could have a material adverse effect on our ability to complete the development of CNTX-4975. If we obtain regulatory approval for CNTX-4975, we would need to expand the supply of its components in order to commercialize them.

We do not have multiple sources of supply for the components used in the manufacturing of CNTX-4975 and our other product candidates. We also do not have long-term supply agreements with any of our component suppliers. We are currently evaluating manufacturers that will commercially manufacture CNTX-4975 and our other product candidates. It is our intention to qualify a second source of supply for CNTX-4975 drug substance and drug product prior to approval by the FDA. If this does not occur and we only qualify one initial supplier that will be approved by the FDA, or if for any reason we are unable to obtain product from the manufacturer we select, then we would have to qualify new manufacturers. We may not be able to establish additional sources of supply for our product candidates, or may be unable to do so on acceptable terms. Manufacturing suppliers are subject to cGMP quality and regulatory requirements, covering manufacturing, testing, quality control and record keeping relating to our product candidates and subject to ongoing inspections by the regulatory agencies. Failure by any of our suppliers to comply with applicable regulations may result in long delays and interruptions in supply. Manufacturing suppliers are also subject to local, state and federal regulations and licensing requirements. Failure by any of our suppliers to comply with all applicable regulations and requirements may result in long delays and interruptions in supply.

The number of suppliers of the raw material components of our product candidates is limited. In the event it is necessary or desirable to acquire supplies from alternative suppliers, we might not be able to obtain them on commercially reasonable terms, if at all. It could also require significant time and expense to redesign

our manufacturing processes to work with another company. Additionally, certain of our suppliers are critical to our production and the loss of these suppliers to one of our competitors or otherwise would materially and adversely affect our development and commercialization efforts.

As part of any marketing approval, a manufacturer of CNTX-4975 and our other product candidates is required to be licensed by the FDA prior to commercialization. This licensing process includes inspections by regulatory authorities that must be successful prior to them being licensed. Failure of manufacturing suppliers to successfully complete these regulatory inspections will result in delays. If supply from the approved supplier is interrupted, there could be a significant disruption in commercial supply. An alternative vendor would need to be qualified through an NDA amendment or supplement which could result in further delay. The FDA or other regulatory agencies outside of the United States may also require additional studies if a new supplier is relied upon for commercial production. Switching vendors may involve substantial costs and is likely to result in a delay in our desired clinical and commercial timelines.

If we are unable to obtain the supplies we need at a reasonable price or on a timely basis, it could have a material adverse effect on our ability to complete the development of CNTX-4975 and our other product candidates or, if we obtain regulatory approval for CNTX-4975 or our other product candidates, to commercialize them.

We may enter into collaborations, in-licensing arrangements, joint ventures, strategic alliances or partnerships with third-parties that may not result in the development of commercially viable products or the generation of significant future revenues.

In the ordinary course of our business, we may enter into collaborations, in-licensing arrangements, joint ventures, strategic alliances, partnerships or other arrangements to develop new products and to pursue new markets. Proposing, negotiating and implementing collaborations, in-licensing arrangements, joint ventures, strategic alliances or partnerships may be a lengthy and complex process. Other companies, including those with substantially greater financial, marketing, sales, technology or other business resources, may compete with us for these opportunities or arrangements. We may not identify, secure, or complete any such transactions or arrangements in a timely manner, on a cost-effective basis, on acceptable terms or at all. We have limited institutional knowledge and experience with respect to these business development activities, and we may also not realize the anticipated benefits of any such transaction or arrangement. In particular, these collaborations may not result in the development of products that achieve commercial success or result in significant revenues and could be terminated prior to developing any products.

Additionally, we may not be in a position to exercise sole decision making authority regarding the transaction or arrangement, which could create the potential risk of creating impasses on decisions, and our future collaborators may have economic or business interests or goals that are, or that may become, inconsistent with our business interests or goals. It is possible that conflicts may arise with our collaborators, such as conflicts concerning the achievement of performance milestones, or the interpretation of significant terms under any agreement, such as those related to financial obligations or the ownership or control of intellectual property developed during the collaboration. If any conflicts arise with any future collaborators, they may act in their self-interest, which may be adverse to our best interest, and they may breach their obligations to us. In addition, we may have limited control over the amount and timing of resources that any future collaborators devote to our or their future products. Disputes between us and our collaborators may result in litigation or arbitration which would increase our expenses and divert the attention of our management. Further, these transactions and arrangements will be contractual in nature and will generally be terminable under the terms of the applicable agreements and, in such event, we may not continue to have rights to the products relating to such transaction or arrangement or may need to purchase such rights at a premium.

If we enter into in-bound intellectual property license agreements, we may not be able to fully protect the licensed intellectual property rights or maintain those licenses. Future licensors could retain the right to

prosecute and defend the intellectual property rights licensed to us, in which case we would depend on the ability of our licensors to obtain, maintain and enforce such licensed intellectual property. These licensors may determine not to pursue litigation against other companies or may pursue such litigation less aggressively than we would. Further, entering into such license agreements could impose various diligence, commercialization, royalty or other obligations on us. Future licensors may allege that we have breached our license agreement with them, and accordingly seek to terminate our license, which could adversely affect our competitive business position and harm our business prospects.

Risks Related to Our Intellectual Property

If we are unable to obtain, maintain or adequately protect our intellectual property rights, we may not be able to compete effectively in our markets.

We rely upon a combination of patents, trade secret protection and confidentiality agreements to protect our intellectual property and prevent others from duplicating our product candidates.

The strength of patents in the biotechnology and pharmaceutical field involves complex legal and scientific questions and can be uncertain. The patent applications that we own may fail to result in issued patents with claims that cover our product candidates in the United States or in other foreign countries. There is no assurance that all of the potentially relevant prior art relating to our patents and patent applications has been found, which can invalidate a patent or prevent a patent from issuing from a pending patent application. Even if patents do successfully issue and even if such patents cover our product candidates, third parties may challenge their validity, enforceability or scope, which may result in such patents being narrowed or invalidated. Furthermore, even if they are unchallenged, our patents and patent applications may not adequately protect our intellectual property, provide exclusivity for our product candidates or prevent others from designing around our claims. In addition, no assurances can be given that third parties will not create new products or methods that achieve similar results without infringing upon our patents. Any of these outcomes could impair our ability to prevent competition from third parties, which may have an adverse impact on our business.

If the patent applications we hold with respect to our programs or product candidates fail to issue, if their breadth or strength of protection is threatened, or if they fail to provide meaningful exclusivity for our product candidates, it could dissuade companies from collaborating with us to develop product candidates, and threaten our ability to commercialize future products. Several patent applications covering our product candidates have been filed recently. We cannot offer any assurances about which, if any, patents will issue, the breadth of any such patents or whether any issued patents will be found invalid or unenforceable or will be threatened by third parties. Any successful opposition to these patents or any other patents owned by us could deprive us of rights necessary for the successful commercialization of any product candidates that we may develop.

Further, if we encounter delays in regulatory approvals, the period of time during which we could market a product candidate under patent protection could be reduced. Since patent applications in the United States and most other countries are confidential for a period of time after filing, and some remain so until issued, we cannot be certain that we were the first to file any patent application related to a product candidate. Furthermore, if third parties have filed such patent applications before enactment of the Leahy-Smith Act on March 16, 2013, an interference proceeding in the United States can be initiated by a third party to determine who was the first to invent any of the subject matter covered by the patent claims of our applications. In addition, patents have a limited lifespan. In the United States, the expiration of a patent is generally 20 years after it is filed. Various extensions may be available; however, the life of a patent, and the protection it affords, is limited. Even if patents covering our product candidates are obtained, once the patent life has expired for the patent covering a product, we may be open to competition from generic medications.

In addition to the protection afforded by patents, we rely on trade secret protection and confidentiality agreements to protect proprietary know-how that is either not patentable or that we elect not to patent, processes

for which patents are difficult to enforce and any other elements of our product candidate discovery and development processes that involve proprietary know-how, information or technology that is not covered by patents. However, trade secrets can be difficult to protect. We seek to protect our proprietary technology and processes, in part, by entering into confidentiality agreements with our employees, consultants, scientific advisors and contractors. We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security of our premises and physical and electronic security of our information technology systems. While we have confidence in these individuals, organizations and systems, agreements or security measures may be breached, and we may not have adequate remedies for any breach.

Although we require all of our employees and consultants to assign their inventions to us, to the extent that employees or consultants use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions. Further, although we require that all of our employees, consultants, collaborators, advisors and any third parties who have access to our proprietary know-how, information or technology enter into confidentiality agreements, we cannot provide any assurances that our trade secrets and other confidential proprietary information will not be disclosed or that competitors will not otherwise gain access to our trade secrets or independently discover our trade secrets or develop substantially equivalent information and techniques. Any of these parties may breach these agreements and we may not have adequate remedies for any specific breach. Misappropriation or unauthorized disclosure of our trade secrets or other confidential proprietary information could impair our competitive position and may have a material adverse effect on our business. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. Additionally, if the steps taken to maintain our trade secrets or other confidential proprietary information are deemed inadequate, we may have insufficient recourse against third parties for misappropriating the trade secret or other confidential proprietary information.

If we are unable to prevent material disclosure of the non-patented intellectual property related to our technologies to third parties, and there is no guarantee that we will have any such enforceable trade secret protection, we may not be able to establish or maintain a competitive advantage in our market, which could materially adversely affect our business, results of operations and financial condition.

Third-party claims of intellectual property infringement may prevent or delay our development and commercialization efforts.

Our commercial success depends in part on our avoiding infringement, or allegations of infringement, of the patents and other proprietary rights of third parties. There is a substantial amount of litigation, both within and outside the United States, involving patent and other intellectual property rights in the biotechnology and pharmaceutical industries, including patent infringement lawsuits, interferences, oppositions, reexamination, and inter partes review proceedings before the United States Patent and Trademark Office, or USPTO, and corresponding foreign patent offices. Numerous U.S. and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we are pursuing development candidates. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our product candidates may be subject to claims of infringement of the patent rights of third parties.

Third parties may assert that we are employing their proprietary technology without authorization. There may be third-party patents or patent applications with claims to materials, formulations, methods of manufacture or methods for treatment related to the use or manufacture of our product candidates. Because patent applications can take many years to issue, there may be currently pending patent applications which may later result in issued patents that our product candidates may infringe. In addition, third parties may obtain patents in the future and claim that use of our technologies infringes upon these patents. If any third-party patents were held by a court of competent jurisdiction to cover the manufacturing process of any of our product candidates, any molecules formed during the manufacturing process or any final product itself, the holders of any such patents may be able to block our ability to commercialize such product candidate unless we obtained a

license under the applicable patents, which may not be available or may not be available on commercially reasonable terms, or until such patents expire. Similarly, if any third-party patents were held by a court of competent jurisdiction to cover aspects of our formulations, processes for manufacture or methods of use, including combination therapy, the holders of any such patents may be able to block our ability to develop and commercialize the applicable product candidate unless we obtained a license, which may not be available or may not be available on commercially reasonable terms, or until such patent expires.

Parties making claims against us may obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize one or more of our product candidates and/or harm our reputation and financial results. Defense of these claims, regardless of their merit, could involve substantial litigation expense and could be a substantial diversion of employee resources from our business. In the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, pay royalties, redesign our infringing products or obtain one or more licenses from third parties, which may require substantial time and monetary expenditure. Furthermore, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to us; alternatively or additionally it could include terms that impede or destroy our ability to compete successfully in the commercial marketplace.

We may be involved in lawsuits to protect or enforce our patents, which could be expensive, time-consuming and unsuccessful.

Competitors may infringe our patents. To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time-consuming. There can be no assurance that we will have sufficient financial or other resources to file and pursue such infringement claims, which typically last for years before they are concluded.

In addition, in an infringement proceeding, a court may decide that a patent of ours is not valid, is unenforceable and/or is not infringed, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation or defense proceedings could put one or more of our patents at risk of being invalidated or interpreted narrowly and could put our patent applications at risk of not issuing.

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of our common stock.

Recent patent reform legislation has increased the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, and may diminish the value of patents in general.

As is the case with other biopharmaceutical companies, our commercial success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the biopharmaceutical industry involves both technological and legal complexity and is therefore costly, time consuming and inherently uncertain. Recent wide-ranging patent reform legislation in the United States, including the Leahy-Smith America Invents Act, or the Leahy-Smith Act, could increase those uncertainties and costs.

The Leahy-Smith Act includes a number of significant changes to U.S. patent law, including provisions that affect the way patent applications are prosecuted and may also affect patent litigation. The Leahy-Smith Act enlarged the scope of disclosures that qualify as prior art, and it expanded the scope of procedures that a third

party may use to challenge a U.S. patent, including post grant review and inter partes review procedures. The Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business and financial condition.

In addition, recent court rulings in cases such as Association for Molecular Pathology v. Myriad Genetics, Inc., BRCA1- & BRCA2-Based Hereditary Cancer Test Patent Litigation, and Promega Corp. v. Life Technologies Corp. have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents once obtained. Depending on future actions by the U.S. Congress, the U.S. courts, the USPTO and the relevant law-making bodies in other countries, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future.

We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed confidential information of third parties or that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.

We may employ individuals who were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although we try to ensure that our employees, consultants and independent contractors do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or our employees, consultants or independent contractors have inadvertently or otherwise used or disclosed intellectual property, including trade secrets or other proprietary information, of any of our employee’s former employers or other third parties. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel, or our ability to hire personnel, which, in any case of the foregoing, could adversely impact our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

Periodic maintenance fees, renewal fees, annuity fees and various other governmental fees on patents and/or applications will be due to be paid to the USPTO and various governmental patent agencies outside of the United States in several stages over the lifetime of the patents and/or applications. We have systems in place to remind us to pay these fees, and we employ an outside firm and rely on our outside counsel to pay these fees due to non-U.S. patent agencies. The USPTO and various non-U.S. governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. We employ law firms and other professionals to help us comply, and in many cases, an inadvertent lapse can be cured by payment of a late fee or by other means in accordance with the applicable rules. However, there are situations in which non-compliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, our competitors might be able to enter the market, which could have a material adverse effect on our business.

Issued patents covering our product candidates could be found invalid or unenforceable if challenged in court.

If we initiated legal proceedings against a third party to enforce a patent covering one of our product candidates, the defendant could counterclaim that the patent covering our product candidate is invalid and/or

unenforceable. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness or non-enablement. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant information from the USPTO, or made a misleading statement, during prosecution. Third parties may also raise similar claims before administrative bodies in the United States or abroad, even outside the context of litigation. Such mechanisms include re-examination, post grant review, and equivalent proceedings in foreign jurisdictions (e.g., opposition proceedings). Such proceedings could result in revocation or amendment to our patents in such a way that they no longer cover our product candidates. For example, our European patent, EP 1605956, which is directed towards the administration of certain capsaicinoids and related to the CNTX-4975 product candidate for treating knee OA pain, was opposed by a third party in 2016. Oral proceedings were held at the European Patent Office in January 2018, and the European Patent Office’s Opposition Division mailed a communication on September 10, 2018 revoking the European patent on grounds that changes to the claims during prosecution of the application resulted in patent claims that do not meet written support requirements of European law. We intend to appeal the decision of the European Patent Office’s Opposition Division.

The outcome following legal assertions of invalidity and unenforceability is unpredictable. With respect to the validity question, for example, we cannot be certain that there is no invalidating prior art, of which we and the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity and/or unenforceability, we would lose at least part, and perhaps all, of the patent protection on one or more of our product candidates. Such a loss of patent protection could have a material adverse impact on our business. A defendant could also challenge our ownership of patents assigned to us. For example, our patents and some of our patent applications with respect to CNTX-4975 were acquired from Vallinex, Inc., which acquired them from Arcion Therapeutics, Inc. In turn, Arcion Therapeutics, Inc. acquired them from Anesiva, Inc., which was formed as a result of a reverse merger of AlgoRx Pharmaceuticals into Corgentech Inc., during bankruptcy. Because of the foregoing, we cannot be certain that a third party would not challenge our rights to these patents and patent applications. Any legal proceeding or enforcement action can also be expensive and time-consuming.

Patent terms may be inadequate to protect our competitive position on our products for an adequate amount of time.

Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. For patents that are eligible for extension of patent term, we expect to seek extensions of patent terms in the United States and, if available, in other countries. In the United States, the Drug Price Competition and Patent Term Restoration Act of 1984 permits a patent term extension of up to five years beyond the normal expiration of the patent, which is limited to the approved indication (or any additional indications approved during the period of extension). We might not be granted an extension because of, for example, failure to apply within applicable periods, failure to apply prior to the expiration of relevant patents or otherwise failure to satisfy any of the numerous applicable requirements. Moreover, the applicable authorities, including the FDA and the USPTO in the United States, and any equivalent regulatory authority in other countries, may not agree with our assessment of whether such extensions are available, and may refuse to grant extensions to our patents, or may grant more limited extensions than we request. If this occurs, our competitors may be able to obtain approval of competing products following our patent expiration by referencing our clinical and pre-clinical data and launch their product earlier than might otherwise be the case. If this were to occur, it could have a material adverse effect on our ability to generate revenue.

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

Filing, prosecuting and defending our intellectual property in all countries throughout the world could be prohibitively expensive, and our intellectual property rights in some countries outside the United States can be less extensive than those in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. Consequently, we

may not be able to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing products made using our inventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and further, may export otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United States. These products may compete with our products and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property protection, particularly those relating to biotechnology products, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuit that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license. In addition, many countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties (for example, the patent owner has failed to “work” the invention in that country, or the third party has patented improvements) or limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of the patent.

We depend on intellectual property licensed from third parties and termination or modification of any of these licenses could result in the loss of significant rights, which would materially harm our business.

In November 2015, we entered into a patent assignment and licensing agreement with Boehringer Ingelheim International GmbH, or the BI Agreement, pursuant to which BI assigned to us certain patents, and granted us an exclusive, royalty-bearing license to certain know-how owned or controlled by BI, to develop, manufacture and commercialize products containing the CCR2, CB2 and SSTR4 compounds or compounds covered by a claim in the assigned patents, for the treatment or prevention of diseases or conditions in humans or animals.

We are dependent on these patents and the know-how licensed under the BI Agreement. Any termination of or loss of rights under this agreement, or a finding that such intellectual property lacks legal effect, could harm our ability to commercialize any product candidates containing the CCR2, CB2 and SSTR4 compounds. Pursuant to the BI Agreement, in the event that we (or an affiliate or a sublicensee) begin clinical trials or commercialize a competing product that modulates the same target as a product containing the CCR2, CB2 and SSTR4 compounds, BI has the right to convert the exclusivity of our license so that we only have a non-exclusive right to the know-how. In such a situation, BI will also have the right to obtain a perpetual license-back to the assigned patents to independently exploit the products and we will grant BI a license to use any results from our independent exploitation of the compounds and products.

BI may also terminate the BI Agreement in its entirety if we materially breach or default on our obligations under the agreement and do not cure within a specified period of time, which includes a material breach of our obligations to use commercially reasonably efforts to develop and commercialize products under the BI Agreement. If we terminate the BI Agreement for convenience or if BI terminates it due to our uncured material breach, we will no longer have any rights to the patents assigned to us by BI under the BI Agreement and ownership of those patents will transfer back to BI. We will also be obligated to transfer to BI, at its request, all development data and regulatory documentation, approvals and agreements related to the product(s) that are

the subject of the BI Agreement, as well as grant to BI a non-exclusive license to use certain of our intellectual property as may be necessary for the continued development, manufacture and/or commercialization of such product(s).

Disputes may also arise between us and our current or future licensors, including BI, our current or future licensors and their licensors, or us and third parties that co-own intellectual property with our licensors or their licensors, regarding intellectual property subject to a license agreement, including those relating to:

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the scope of rights, if any, granted under the applicable license agreement and other interpretation-related issues;

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

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whether our licensor or its licensor had the right to grant the applicable license agreement;

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whether third parties are entitled to compensation or equitable relief, such as an injunction, for our use of the intellectual property without their authorization;

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our right to sublicense rights to third parties under collaborative development relationships;

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whether we are complying with our obligations with respect to the use of licensed technology in relation to our development and commercialization of product candidates;

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

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the amounts of royalties, milestones or other payments due under the applicable license agreement.

If disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on acceptable terms, or are insufficient to provide us the necessary rights to use the intellectual property, we may be unable to successfully develop and commercialize the affected product candidates. If we or any such licensors fail to adequately protect this intellectual property, our ability to commercialize our products could suffer.

We may be required to pay certain milestones and royalties under our license agreements with third-party licensors.

Under our current and future license agreements, we may be required to pay milestones and royalties based on our revenues from sales of our products utilizing the technologies licensed or sublicensed from licensors, including BI, and these royalty payments could adversely affect the overall profitability for us of any products that we may seek to commercialize. In order to maintain our license rights under current and future license agreements, we may need to meet certain specified milestones, subject to certain cure provisions, in the development of our product candidates and in the raising of funding. In addition, these agreements may contain diligence milestones and we may not be successful in meeting all of the milestones in the future on a timely basis or at all. We may need to outsource and rely on third parties for many aspects of the clinical development, sales and marketing of our products covered under our current and future license agreements. Delay or failure by these third parties could adversely affect the continuation of our license agreements with their third-party licensors. Pursuant to the BI Agreement, if we succeed in developing and commercializing products containing compounds active against CCR2, CB2 or SSTR4 we will owe BI regulatory and commercial milestone payments.

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

While we seek to protect the trademarks we use in the United States and in other countries, we may be unsuccessful in obtaining registrations and/or otherwise protecting these trademarks. If that were to happen, we may be prevented from using our names, brands and trademarks unless we enter into appropriate royalty, license or coexistence agreements, which may not be available or may not be available on commercially reasonable terms. Over the long term, if we are unable to establish name recognition based on our trademarks, trade names, service marks and domain names, then we may not be able to compete effectively, resulting in a material adverse effect on our business. Our trademarks or trade names that we have already obtained may be challenged, infringed, diluted, misappropriated or declared generic, or determined to be infringing on other marks. We rely on both registration and common law protection for our trademarks. We may not be able to protect our rights to these trademarks and trade names or may be forced to stop using these names, which we need for name recognition by potential partners or customers in our markets of interest. During trademark registration proceedings, we may receive rejections. Although we would be given an opportunity to respond to those rejections, we may be unable to overcome such rejections. In addition, in the USPTO and in comparable agencies in many foreign jurisdictions, third parties are given an opportunity to oppose pending trademark applications and to seek to cancel registered trademarks. Opposition or cancellation proceedings may be filed against our trademarks, and our trademarks may not survive such proceedings. Effective trademark protection may not be available or may not be sought in every country in which our products are made available. Any name we propose to use for our products in the United States must be approved by the FDA, regardless of whether we have registered it, or applied to register it, as a trademark. The FDA typically conducts a review of proposed product names, including an evaluation of potential for confusion with other product names. If the FDA objects to any of our proposed product names, we may be required to expend significant additional resources in an effort to identify a usable substitute name that would qualify under applicable trademark laws, not infringe the existing rights of third parties and be acceptable to the FDA. If we are unable to establish name recognition based on our trademarks and trade names, we may not be able to compete effectively and our business may be adversely affected.

Risks Related to Employee Matters and Managing Growth

We will need to expand our organization, and we may experience difficulties in managing this growth, which could disrupt our operations.

We expect to experience significant growth in the number of our employees and the scope of our operations, particularly in the areas of product candidate development, regulatory affairs and sales, marketing and distribution. As of November 1, 2018, we had 14 full-time employees. To manage our growth activities, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualified personnel. Due to our limited financial resources and the limited experience of our management team in managing a company with such anticipated growth, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel. As we expand our organization, we may have difficulty identifying, hiring and integrating new personnel. Future growth would impose significant additional responsibilities on our management, including the need to identify, recruit, maintain, motivate and integrate additional employees, consultants and contractors. Also, our management may need to divert a disproportionate amount of its attention away from our day-to-day activities and devote a substantial amount of time to managing these growth activities. We may not be able to effectively manage the expansion of our operations, which may result in weaknesses in our infrastructure, give rise to operational mistakes, loss of business opportunities, loss of employees and reduced productivity among remaining employees. Our expected growth could require significant capital expenditures and may divert financial resources from other projects, such as the development of product candidates. If our management is unable to effectively manage our growth, our expenses may increase more than expected, our ability to generate and/or grow revenues could be reduced, and we may not be able to implement our business strategy. Our future

financial performance and our ability to commercialize our product candidates and compete effectively will depend, in part, on our ability to effectively manage any future growth.

Many of the biotechnology and pharmaceutical companies that we compete against for qualified personnel and consultants have greater financial and other resources, different risk profiles and a longer history in the industry than we do. If we are unable to continue to attract and retain high-quality personnel and consultants, the rate and success at which we can discover and develop product candidates and operate our business will be limited.

If we lose key management or scientific personnel, cannot recruit qualified employees, directors, officers or other significant personnel or experience increases in our compensation costs, our business may materially suffer.

We are highly dependent on our management and directors, including Jeffrey B. Kindler, James N. Campbell and Sol J. Barer, among others. Due to the specialized knowledge each of our officers and key employees possesses with respect to our product candidates and our operations, the loss of service of any of our officers or directors could delay or prevent the successful enrollment and completion of our clinical trials. We do not carry key man life insurance on our officers or directors. Although we have formal employment agreements with our executive officers, these agreements do not prevent them from terminating their employment with us at any time.

In addition, our future success and growth will depend in part on the continued service of our directors, employees and management personnel and our ability to identify, hire, and retain additional personnel. If we lose one or more of our executive officers or key employees, our ability to implement our business strategy successfully could be seriously harmed. Furthermore, replacing executive officers and key employees may be difficult and may take an extended period of time because of the limited number of individuals in our industry with the breadth of skills and experience required to develop, gain regulatory approval of and commercialize product candidates successfully. Competition to hire from this limited pool is intense, and we may be unable to hire, train, retain or motivate these additional key personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. We also experience competition for the hiring of scientific and clinical personnel from universities and research institutions. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and development and commercialization strategy. Our consultants and advisors may be engaged by entities other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us. If we are unable to continue to attract and retain high quality personnel, our ability to develop and commercialize product candidates will be limited.

Many of our employees have become or will soon become vested in a substantial amount of our common stock or a number of common stock options. Our employees may be more likely to leave us if the shares they own have significantly appreciated in value relative to the original purchase prices of the shares, or if the exercise prices of the options that they hold are significantly below the market price of our common stock, particularly after the expiration of the lock-up agreements described herein. Our future success also depends on our ability to continue to attract and retain additional executive officers and other key employees.

We may engage in acquisitions that could disrupt our business, cause dilution to our stockholders or reduce our financial resources.

In the future, we may enter into transactions to acquire other businesses, products or technologies. If we do identify suitable candidates, we may not be able to make such acquisitions on favorable terms, or at all. Any acquisitions we make may not strengthen our competitive position, and these transactions may be viewed negatively by customers or investors. We may decide to incur debt in connection with an acquisition or issue our common stock or other equity securities to the stockholders of the acquired company, which would reduce the

percentage ownership of our existing stockholders. We could incur losses resulting from undiscovered liabilities of the acquired business that are not covered by the indemnification we may obtain from the seller. In addition, we may not be able to successfully integrate the acquired personnel, technologies and operations into our existing business in an effective, timely and non-disruptive manner. Acquisitions may also divert management attention from day-to-day responsibilities, lead to a loss of key personnel, increase our expenses and reduce our cash available for operations and other uses. We cannot predict the number, timing or size of future acquisitions or the effect that any such transactions might have on our operating results.

We or the third parties upon whom we depend may be adversely affected by natural disasters and our business continuity and disaster recovery plans may not adequately protect us from a serious disaster.

Natural disasters could severely disrupt our operations and have a material adverse effect on our business, results of operations, financial condition and prospects. If a natural disaster, power outage or other event occurred that prevented us from using all or a significant portion of our headquarters, that damaged critical infrastructure, such as the manufacturing facilities on which we rely, or that otherwise disrupted operations, it may be difficult or, in certain cases, impossible for us to continue our business for a substantial period of time. The disaster recovery and business continuity plans we have in place may prove inadequate in the event of a serious disaster or similar event. We may incur substantial expenses as a result of the limited nature of our disaster recovery and business continuity plans, which could have a material adverse effect on our business. For example, following Hurricane Maria, shortages in production and delays in a number of medical supplies produced in Puerto Rico resulted, and any similar interruption due to a natural disaster affecting us or any of our third-party manufacturers could materially delay our operations.

Risks Related to Our Common Stock and this Offering

An active trading market for our common stock may not develop.

Prior to this offering, there has been no public market for our common stock. The initial public offering price for our common stock will be determined through negotiations with the underwriters. Although our common stock has been approved for listing on The Nasdaq Global Select Market, an active trading market for our shares may never develop or be sustained following this offering. If an active market for our common stock does not develop, it may be difficult for you to sell shares you purchase in this offering without depressing the market price for the shares, or at all.

The market price of our common stock may be volatile and fluctuate substantially, which could result in substantial losses for purchasers of our common stock in this offering.

Our stock price is likely to be volatile. The stock market in general and the market for smaller biopharmaceutical companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, you may not be able to sell your common stock at or above the initial public offering price. The market price for our common stock may be influenced by many factors, including:

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the success of competitive products or technologies;

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actual or expected changes in our growth rate relative to our competitors;

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

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developments related to our existing or any future collaborations;

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regulatory actions with respect to our product candidates or our competitors’ products and product candidates;

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regulatory or legal developments in the United States and other countries;

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development of new product candidates that may address our markets and make our product candidates less attractive;

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changes in physician, hospital or healthcare provider practices that may make our product candidates less useful;

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announcements by us, our partners or our competitors of significant acquisitions, strategic partnerships, joint ventures, collaborations or capital commitments;

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developments or disputes concerning patent applications, issued patents or other proprietary rights;

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the recruitment or departure of key personnel;

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the level of expenses related to any of our product candidates or clinical development programs;

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failure to meet or exceed financial estimates and projections of the investment community or that we provide to the public;

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the results of our efforts to discover, develop, acquire or in-license additional product candidates or products;

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actual or expected changes in estimates as to financial results, development timelines or recommendations by securities analysts;

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variations in our financial results or those of companies that are perceived to be similar to us;

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changes in the structure of healthcare payment systems;

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market conditions in the pharmaceutical and biotechnology sectors;

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general economic, industry and market conditions; and

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the other factors described in this “Risk Factors” section and elsewhere in this prospectus.

After this offering, our executive officers, directors and principal stockholders, if they choose to act together, will continue to have the ability to control or significantly influence all matters submitted to stockholders for approval.

Upon the closing of this offering, based on the number of shares of common stock outstanding as of September 30, 2018, our executive officers, directors and stockholders who owned more than 5% of our outstanding common stock before this offering and their respective affiliates will, in the aggregate, hold shares representing approximately 49.5% of our outstanding voting stock. As a result, if these stockholders choose to act together, they would be able to control or significantly influence all matters submitted to our stockholders for approval, as well as our management and affairs. For example, these persons, if they choose to act together, would control or significantly influence the election of directors, the composition of our management and approval of any merger, consolidation or sale of all or substantially all of our assets.

Certain of our existing stockholders, including entities affiliated with certain of our directors, have indicated an interest in purchasing an aggregate of approximately $30 million in shares of our common stock in this offering at the initial public offering price. However, because indications of interest are not binding agreements or commitments to purchase, the underwriters may determine to sell more, fewer or no shares in this offering to any or all of these stockholders, or any or all of these stockholders may determine to purchase more, fewer or no shares in this offering. The underwriters will receive the same underwriting discount on any shares purchased by these stockholders as they will on any other shares sold to the public in this offering. The foregoing ownership percentage does not give effect to any purchases of shares of our common stock by the stockholders.

If you purchase shares of common stock in this offering, you will suffer immediate dilution of your investment.

The initial public offering price of our common stock will be substantially higher than the net tangible book value per share of our common stock. Therefore, if you purchase shares of our common stock in this offering, you will pay a price per share that substantially exceeds our net tangible book value per share after this offering. To the extent shares subsequently are issued under outstanding options or warrants, you will incur further dilution. Based on an assumed initial public offering price of $15.00 per share (the midpoint of the price range set forth on the cover page of this prospectus), you will experience immediate dilution of $10.35 per share as of September 30, 2018, representing the difference between our pro forma as adjusted net tangible book value per share, after giving effect to this offering, and the assumed initial public offering price. In addition, purchasers of common stock in this offering will have contributed approximately 72.7% of the aggregate price paid by all purchasers of our stock but will own only approximately 22.6% of our common stock outstanding after this offering.

We have broad discretion in the use of the net proceeds from this offering and may not use them effectively.

Our management will have broad discretion in the application of the net proceeds from this offering and could spend the proceeds in ways that do not improve our results of operations or enhance the value of our common stock. We expect that we will use the net proceeds of this offering to advance the clinical development of CNTX-4975 and our other product candidates, pursue additional research and development efforts and for general and administrative expenses, working capital and other general corporate purposes as set forth under “Use of Proceeds.” However, our use of these proceeds may differ substantially from our current plans. The failure by our management to apply these funds effectively could result in financial losses that could have a material adverse effect on our business, cause the price of our common stock to decline and delay the development of our product candidates. Pending their use, we may invest the net proceeds from this offering in a manner that does not produce income or that loses value.

A significant portion of our total outstanding shares are eligible to be sold into the market in the near future, which could cause the market price of our common stock to drop significantly, even if our business is doing well.

Sales of a substantial number of shares of our common stock in the public market, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock. After this offering, we will have outstanding 22,162,604 shares of common stock based on the number of shares outstanding as of September 30, 2018. This includes the shares that we are selling in this offering, which may be resold in the public market immediately without restriction, unless purchased by our affiliates or existing stockholders. The remaining shares are currently restricted as a result of securities laws or lock-up agreements (which may be waived, with or without notice, by Merrill Lynch, Pierce, Fenner & Smith Incorporated, Leerink Partners LLC and Evercore Group L.L.C.) but will become eligible to be sold at various times beginning 180 days after this offering, unless held by one of our affiliates, in which case the resale of those securities will be subject to volume limitations under Rule 144 of the Securities Act of 1933, as amended, or Rule 144. Moreover, after this offering, holders of an aggregate of 17,105,305 shares of our common stock will have rights, subject to specified conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders, until such shares can otherwise be sold without restriction under Rule 144 or until the rights terminate pursuant to the terms of the stockholders’ agreement between us and such holders. We also intend to register all shares of common

stock that we may issue under our equity compensation plans. Once we register these shares, they can be freely sold in the public market upon issuance, subject to volume limitations applicable to affiliates and the lock-up agreements described in the “Underwriting” section of this prospectus.

We are an “emerging growth company,” and the reduced disclosure requirements applicable to emerging growth companies may make our common stock less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act, and may remain an emerging growth company until the last day of the fiscal year following the fifth anniversary of the closing of this offering. However, if certain events occur prior to the end of such five-year period, including if we become a “large accelerated filer,” our annual gross revenues exceed $1.07 billion or we issue more than $1.0 billion of non-convertible debt in any three-year period, we will cease to be an emerging growth company prior to the end of such five-year period. For so long as we remain an emerging growth company, we are permitted and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies. These exemptions include:

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

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

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reduced disclosure obligations regarding executive compensation; and

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exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

We have taken advantage of reduced reporting burdens in this prospectus. In particular, in this prospectus, we have provided only two years of audited financial statements and have not included all of the executive compensation related information that would be required if we were not an emerging growth company. We cannot predict whether investors will find our common stock less attractive if we rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be reduced or more volatile. In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of these accounting standards until they would otherwise apply to private companies. We have irrevocably elected to “opt out” of this provision and, as a result, we will comply with new or revised accounting standards when they are required to be adopted by public companies that are not emerging growth companies.

We will incur increased costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives and corporate governance practices.

As a public company, and particularly after we are no longer an emerging growth company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements

of The Nasdaq Global Select Market and other applicable securities rules and regulations impose various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. For example, we expect that these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance, which in turn could make it more difficult for us to attract and retain qualified members of our board of directors.

We are evaluating these rules and regulations, and cannot predict or estimate the amount of additional costs we may incur or the timing of such costs. These rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, we will be required to furnish a report by our management on our internal control over financial reporting. However, while we remain an emerging growth company, we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. To achieve compliance with Section 404 within the prescribed period, we will be engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we will need to continue to dedicate internal resources, potentially engage outside consultants, adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing whether such controls are functioning as documented, and implement a continuous reporting and improvement process for internal control over financial reporting. Despite our efforts, there is a risk that we will not be able to conclude, within the prescribed timeframe or at all, that our internal control over financial reporting is effective as required by Section 404. We may discover significant deficiencies or material weaknesses, which we may not successfully remediate on a timely basis or at all. Any failure to remediate any significant deficiencies or material weaknesses identified by us or to implement required new or improved controls, or difficulties encountered in their implementation, could cause us to fail to meet our reporting obligations or result in material misstatements in our financial statements. If we identify one or more material weaknesses, it could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.

If securities or industry analysts do not publish research or reports about our business, or if they issue an adverse or misleading opinion regarding our stock, our stock price and trading volume could decline.

The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. We do not currently have, and may never obtain, research coverage by securities and industry analysts. If no or few securities or industry analysts commence coverage of us, the trading price for our stock would be negatively impacted. In the event we obtain securities or industry analyst coverage, if any of the analysts who cover us issue an adverse or misleading opinion regarding us, our business model, our intellectual property or our stock performance, or if our target pre-clinical studies or clinical trials and operating results fail to meet the expectations of analysts, our stock price would likely decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.

Provisions in our restated certificate of incorporation and restated bylaws and under Delaware law could make an acquisition of our company, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.

Provisions in our restated certificate of incorporation and our restated bylaws, which will become effective upon the closing of this offering may discourage, delay or prevent a merger, acquisition or other change in control of our company that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares. These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock. In addition, because our board of directors is responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors. Among other things, these provisions include those establishing:

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a classified board of directors with three-year staggered terms, which may delay the ability of stockholders to change the membership of a majority of our board of directors;

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no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;

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the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from filling vacancies on our board of directors;

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the ability of our board of directors to authorize the issuance of shares of preferred stock and to determine the terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer;

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the ability of our board of directors to alter our bylaws without obtaining stockholder approval;

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the required approval of the holders of at least two-thirds of the shares entitled to vote at an election of directors to adopt, amend or repeal our bylaws or repeal the provisions of our restated certificate of incorporation regarding the election and removal of directors;

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a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders;

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the requirement that a special meeting of stockholders may be called only by the chairman of the board of directors, the chief executive officer, the president or the board of directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; and

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advance notice procedures that stockholders must comply with in order to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us.

Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the General Corporation Law of the State of Delaware, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner. Furthermore, our restated certificate of incorporation, which

will become effective upon the closing of this offering, specifies that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for most legal actions involving claims brought against us by stockholders; provided that, the exclusive forum provision will not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction; and provided further that, if and only if the Court of Chancery of the State of Delaware dismisses any such action for lack of subject matter jurisdiction, such action may be brought in another state or federal court sitting in the State of Delaware. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and to have consented to the provisions of our restated certificate of incorporation described above.

We believe this provision benefits us by providing increased consistency in the application of Delaware law by chancellors particularly experienced in resolving corporate disputes, efficient administration of cases on a more expedited schedule relative to other forums and protection against the burdens of multi-forum litigation. However, the provision may have the effect of discouraging lawsuits against our directors, officers, employees and agents as it may limit any stockholder’s ability to bring a claim in a judicial forum that such stockholder finds favorable for disputes with us or our directors, officers, employees or agents. The enforceability of similar choice of forum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings, and it is possible that, in connection with any applicable action brought against us, a court could find the choice of forum provisions contained in our restated certificate of incorporation to be inapplicable or unenforceable in such action. If a court were to find the choice of forum provision contained in our restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business, financial condition or results of operations.

Because we do not anticipate paying any cash dividends on our common shares in the foreseeable future, capital appreciation, if any, would be your sole source of gain.

We have never declared or paid any cash dividends on our common shares. We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. As a result, capital appreciation, if any, of our common shares would be your sole source of gain on an investment in our common shares for the foreseeable future. See the “Dividend Policy” section of this prospectus for additional information.

We could be subject to securities class action litigation.

In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities. This risk is especially relevant for us because biopharmaceutical companies have experienced significant stock price volatility in recent years. If we face such litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business.

Our ability to use our net operating loss carryforwards and research and development credits to offset future taxable income may be subject to certain limitations.

As of December 31, 2017, we had net operating loss carryforwards, or NOLs, of $28.2 million for federal income tax purposes and $28.1 million for state income tax purposes, which may be available to offset our future taxable income, if any, and begin to expire in various amounts in 2030. As of December 31, 2017, we also had federal and state research and development tax credit carryforwards of $2.5 million, which begin to expire in various amounts in 2021. These net operating loss and tax credit carryforwards could expire unused and be unavailable to offset future income tax liabilities. In general, under Sections 382 and 383 of the U.S. Internal Revenue Code of 1986, as amended, or the Code, a corporation that undergoes an “ownership change” is subject to limitations on its ability to use its pre-change NOLs and tax credits to offset future taxable income. Our

existing NOLs or credits may be subject to limitations arising from previous ownership changes, and if we undergo an ownership change in connection with or after this offering, our ability to utilize NOLs or credits could be further limited by Sections 382 and 383 of the Code. Future changes in our stock ownership, some of which are outside of our control, could result in an ownership change under Sections 382 and 383 of the Code. Our NOLs or credits may also be impaired under state law. Furthermore, our ability to use NOLs of companies that we may acquire in the future may be subject to limitations. For these reasons, we may not be able to use a material portion of the NOLs or tax credits, even if we attain profitability. The reduction of the corporate tax rate under the Tax Cuts and Jobs Act of 2017, or the TCJA, may cause a reduction in the economic benefit of our NOLs and other deferred tax assets available to us. Furthermore, under the TCJA, although the treatment of tax losses generated before December 31, 2017 has generally not changed, tax losses generated in calendar year 2018 and beyond may only offset 80% of taxable income. This change may require us to pay federal income taxes in future years despite generating a loss for federal income tax purposes in prior years.

Recent U.S. tax legislation may materially adversely affect our financial condition, results of operations and cash flows.

The TCJA has significantly changed the U.S. federal income taxation of U.S. corporations, including by reducing the U.S. corporate income tax rate, limiting interest deductions, and revising the rules governing net operating losses. Many of these changes are effective immediately, without any transition periods or grandfathering for existing transactions. The TCJA is unclear in many respects and could be subject to potential amendments and technical corrections, as well as interpretations and implementing regulations by the Treasury and Internal Revenue Service, or IRS, any of which could lessen or increase certain adverse impacts of the TCJA. In addition, it is unclear how these U.S. federal income tax changes will affect state and local taxation, which often uses federal taxable income as a starting point for computing state and local tax liabilities.

While some of the changes made by the TCJA may adversely affect the Company in one or more reporting periods and prospectively, other changes may be beneficial on a going forward basis. We continue to work with our tax advisors to determine the full impact that the TCJA as a whole will have on us. We urge our investors to consult with their legal and tax advisors with respect to the TCJA.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements that can involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this prospectus, including statements regarding our future results of operations and financial position, business strategy, prospective products, product approvals, research and development costs, future revenue, timing and likelihood of success, plans and objectives of management for future operations, future results of anticipated products and prospects, plans and objectives of management are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential,” “would” or “continue” or the negative of these terms or other similar expressions. The forward-looking statements in this prospectus are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this prospectus and are subject to a number of risks, uncertainties and assumptions described under the sections in this prospectus entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this prospectus. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

INDUSTRY AND OTHER DATA

We obtained the industry, market and competitive position data in this prospectus from our own internal estimates and research as well as from industry and general publications and research, surveys and studies conducted by third parties. Industry publications, studies and surveys generally state that they have been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. While we believe that each of these studies and publications is reliable, we have not independently verified market and industry data from third-party sources. While we believe our internal company research as to such matters is reliable and the market definitions are appropriate, neither such research nor these definitions have been verified by any independent source.

USE OF PROCEEDS

We estimate that the net proceeds to us from our issuance and sale of shares of our common stock in this offering will be approximately $66.7 million, assuming an initial public offering price of $15.00 per share (the midpoint of the price range set forth on the cover page of this prospectus), and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. If the underwriters’ option to purchase additional shares from us is exercised in full, we estimate that our net proceeds will be approximately $77.1 million. Each $1.00 increase (decrease) in the assumed initial public offering price of $15.00 per share would increase (decrease) the net proceeds to us from this offering by approximately $4.7 million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. Each increase (decrease) of 1.0 million in the number of shares we are offering would increase (decrease) the net proceeds to us from this offering, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, by $14.0 million, assuming the assumed initial public offering price stays the same.

We anticipate that we will use the net proceeds of this offering, together with our cash, cash equivalents and investments, for the following purposes:

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approximately $52.0 million to $54.0 million to fund the Phase 3 program and pre-commercialization expenses for CNTX-4975 through topline results in the first pivotal Phase 3 registration trial;

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approximately $12.0 million to $14.0 million to fund the development of CNTX-0290 to complete Phase 1 development and initiate a Phase 2 trial for chronic pain;

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approximately $6.0 million to $8.0 million to fund the development of CNTX-6016 to complete Phase 1 development;

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approximately $5.0 million to $7.0 million to fund the development of CNTX-6970 to complete Phase 1 development and initiate a Phase 2 trial for chronic pain; and

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the remainder, if any, for other research and development expenses for our pipeline, including unallocated expenses and expenses for CNTX-2022, and for working capital and other general corporate purposes.

Our priority is to advance the development of CNTX-4975 through Phase 3 registration trials and prepare for potential commercialization. To the extent that our CNTX-4975 development costs are more than we anticipate, we are not able secure additional sources of funding, and/or we raise less than the anticipated amount of net proceeds in this offering, we may elect or be required to delay the initiation of the Phase 2 clinical trials for CNTX-0290 and CNTX-6970, as well as other development efforts, in order to enable funding for the CNTX-4975 Phase 3 development program and pre-commercialization preparations for CNTX-4975.

This expected use of the net proceeds from this offering represents our intentions based upon our current plans and business conditions, which could change in the future as our plans and business conditions evolve. We may also use a portion of the net proceeds to in-license, acquire, or invest in additional businesses, technologies, products or assets, although currently we have no specific agreements, commitments or understandings in this regard. As of the date of this prospectus, we cannot predict with certainty all of the particular uses for the net proceeds to be received upon the closing of this offering or the amounts that we will actually spend on the uses set forth above. Predicting the cost necessary to develop product candidates can be difficult and we anticipate that we will need additional funds to complete the development of any product candidates we identify. The amounts and timing of our actual expenditures and the extent of clinical development may vary significantly

depending on numerous factors, including the progress of our development efforts, the status of and results from pre-clinical studies and any ongoing clinical trials or clinical trials we may commence in the future, as well as any collaborations that we may enter into with third parties for our product candidates and any unforeseen cash needs. As a result, our management will retain broad discretion over the allocation of the net proceeds from this offering.

Pending our use of the net proceeds from this offering, we intend to invest the net proceeds in a variety of capital preservation investments, including short-term, investment-grade, interest-bearing instruments and U.S. government securities.

DIVIDEND POLICY

We have never declared or paid any cash dividends on our capital stock. We intend to retain future earnings, if any, to finance the operation and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future. Any future determination related to our dividend policy will be made at the discretion of our board of directors after considering our financial condition, results of operations, capital requirements, business prospects and other factors the board of directors deems relevant, and subject to the restrictions contained in any future financing instruments. In addition, our term loan facility with Silicon Valley Bank, or SVB, restricts our ability to pay any dividends or make any distribution of our capital stock.

Holders of our Series D preferred stock are entitled to dividends upon the conversion of such shares of preferred stock to our common stock in connection with an initial public offering, which will occur immediately prior to the completion of this offering. Each Series D preferred stockholder is entitled to a cumulative accrued dividend calculated at a rate per annum of $0.117 per share of Series D preferred stock (subject to certain adjustment provisions), payable in shares of common stock based on a value of $11.24 per share.

As of September 30, 2018, cumulative dividends of an aggregate of 2,089,808 shares of our common stock had accrued to our Series D preferred stockholders. These cumulative dividends have continued to accrue subsequent to September 30, 2018. Assuming a closing date of November 19, 2018, we expect to issue 392,504 shares of our common stock in payment of such cumulative accrued dividends to our Series D preferred stockholders. For each day prior to or following the assumed closing date that this offering actually closes, such cumulative accrued dividends decrease or increase, respectively, by an aggregate of approximately 1,157 shares of common stock. Stock dividends will not be paid on any shares purchased in this offering.

CAPITALIZATION

The following table sets forth our cash and cash equivalents and capitalization as of September 30, 2018, as follows:

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on an actual basis;

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on a pro forma basis to reflect:

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the automatic conversion of all outstanding shares of our preferred stock into 14,979,055 shares of common stock upon the closing of this offering;

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the filing and effectiveness of our restated certificate of incorporation which will occur upon the closing of this offering.

•

on a pro forma as adjusted basis to give further effect to our issuance and sale of 5,000,000 shares of common stock in this offering at an assumed initial public offering price of $15.00 per share (the midpoint of the price range set forth on the cover page of this prospectus), after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

Our capitalization following the closing of this offering will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing. You should read this information in

conjunction with our financial statements and the related notes appearing at the end of this prospectus and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section and other financial information contained in this prospectus.


	As of September 30, 2018
	(in thousands, except share data)
	Actual			Pro Forma			Pro Forma As Adjusted(1)
Cash and cash equivalents	$	42,059		$	46,555		$	113,205

Long term debt		7,740			7,740			7,740
Warrant liabilities		3,209			—			—
Convertible preferred stock (Series A, B, C and D), par value $0.001 per share; 103,555,395 shares authorized, 93,545,253 shares issued and outstanding, actual; no shares authorized, issued or outstanding, pro forma and pro forma as adjusted		155,627			—			—
Stockholders’ (deficit) equity:
Preferred stock, $0.001 par value; no shares authorized, issued or outstanding, actual; 10,000,000 shares authorized and no shares issued or outstanding, pro forma and pro forma as adjusted		—			—			—
Common stock, par value $0.001 per share; 200,000,000 shares authorized, 1,244,493 shares issued and outstanding, actual; 200,000,000 shares authorized, pro forma and pro forma as adjusted; 17,162,604 shares issued and outstanding, pro forma; 22,162,604 shares issued and outstanding, pro forma as adjusted		1			17			22
Additional paid-in capital		5,695			170,309			236,954
Accumulated deficit		(125,671	)		(126,969	)		(126,969	)

Total stockholders’ (deficit) equity		(119,975	)		43,357			110,007

Total capitalization	$	46,601		$	51,097		$	117,747

(1)

Each $1.00 increase (decrease) in the assumed initial public offering price of $15.00 per share (the midpoint of the price range set forth on the cover page of this prospectus), would increase (decrease) the pro forma as adjusted amount of each of cash and cash equivalents, additional paid-in capital, total stockholders’ (deficit) equity and total capitalization by $4.7 million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each increase (decrease) of 1.0 million shares in the number of shares offered by us at the assumed initial public offering price per share (the midpoint of the price range set forth on the cover page of this prospectus), would increase (decrease) the pro forma as adjusted amount of each of cash and cash equivalents, additional paid-in capital, total stockholders’ (deficit) equity and total capitalization by approximately $14.0 million.

The number of shares in the table above does not include:

•

1,981,815 shares of common stock issuable upon exercise of stock options outstanding as of September 30, 2018, at a weighted-average exercise price of $4.36 per share;

•

83,189 shares of our common stock issuable upon the exercise of certain warrants to purchase common stock outstanding as of September 30, 2018 at a weighted average exercise price of $6.59 per share;

•

1,284,465 shares of our common stock issuable upon the exercise of stock options to be granted in connection with this offering under the 2018 Plan, which will become effective in connection with this offering, to certain of our directors, executive officers and employees, at an exercise price per share equal to the initial public offering price in this offering;

•

266,000 shares of our common stock that will become available for future issuance under the 2018 ESPP, which will become effective in connection with this offering, as well as shares of our common stock that become available pursuant to provisions in the 2018 ESPP that automatically increase the share reserve under the 2018 ESPP as described in “Executive and Director Compensation—Incentive Plans—2018 Employee Stock Purchase Plan.”

DILUTION

If you invest in our common stock in this offering, your ownership interest will be immediately diluted to the extent of the difference between the initial public offering price per share of our common stock and the pro forma as adjusted net tangible book value per share of our common stock after this offering.

As of September 30, 2018, we had a historical net tangible book value of $(126.9) million, or $(101.94) per share of common stock. Our historical net tangible book value per share represents total tangible assets less total liabilities and less convertible preferred stock, divided by the number of shares of our common stock outstanding as of September 30, 2018.

Our pro forma net tangible book value as of September 30, 2018 was $36.5 million, or $2.13 per share. Pro forma net tangible book value represents the amount of our total tangible assets less total liabilities, after giving effect to (1) the automatic conversion of all shares of our preferred stock outstanding as of September 30, 2018 into an aggregate of 14,979,055 shares of our common stock upon the closing of this offering, (2) the issuance of an aggregate of 392,504 shares of our common stock immediately prior to the closing of this offering to pay accrued dividends on our Series D preferred stock, assuming a closing date for this offering of November 19, 2018, (3) the automatic cashless exercise of certain outstanding warrants to purchase shares of common stock and preferred stock, which, based on an assumption that the fair market value of our common stock for purposes of automatic exercise under the warrants will be equal to the assumed initial public offering price of $15.00 per share (the midpoint of the price range set forth on the cover page of this prospectus), and assuming the automatic conversion of the shares of preferred stock issued pursuant to such automatic cashless exercise into shares of common stock, would result in the issuance of 139,009 shares of our common stock upon the closing of this offering, (4) the assumed exercise prior to the closing of this offering of certain outstanding warrants that shall otherwise expire upon such closing to purchase 2,545,405 shares of preferred stock for an aggregate purchase price of approximately $4.5 million, which, assuming the automatic conversion of the shares of preferred stock issued pursuant to such exercise into shares of common stock, would result in the issuance of 407,543 shares of our common stock upon the closing of this offering and (5) for purposes of any automatic cashless exercise of warrants, that the fair market value of our common stock immediately prior to the closing of this offering exceeds the exercise price of the applicable warrant. Pro forma net tangible book value per share represents our pro forma net tangible book value divided by the total number of shares outstanding as of September 30, 2018, after giving effect to the pro forma adjustment described above.

After giving further effect to receipt of the net proceeds from our issuance and the sale of 5,000,000 shares of common stock in this offering at an assumed initial public offering price of $15.00 per share (the midpoint of the price range set forth on the cover page of this prospectus), and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of September 30, 2018 would have been approximately $103.1 million, or approximately $4.65 per share. This amount represents an immediate increase in pro forma net tangible book value of $2.53 per share to our existing stockholders and an immediate dilution of approximately $10.35 per share to new investors participating in this offering. We determine dilution by subtracting the pro forma as adjusted net tangible book value per share after this offering from the amount of cash that a new investor paid for a share of common stock. The following table illustrates this dilution:


Assumed initial public offering price per share				$	15.00
Historical net tangible book value per share as of September 30, 2018	$	(101.94	)
Increase (decrease) per share attributable to (1) the conversion of our preferred stock, (2) the issuance of shares of common stock to pay accrued dividends on our Series D preferred stock, (3) the automatic cashless exercise of certain outstanding warrants to purchase shares of common stock and preferred stock, (4) the assumed exercise of certain outstanding warrants to purchase shares of preferred stock that shall otherwise expire upon the closing of this offering and the conversion thereof and (5) for purposes of any automatic cashless exercise of warrants, that the fair market value of our common stock immediately prior to the closing of this offering exceeds the exercise price of the applicable warrant		104.06

Pro forma net tangible book value (deficit) per share as of September 30, 2018		2.13
Increase per share attributable to this offering		2.53

Pro forma as adjusted net tangible book value per share after this offering				$	4.65

Dilution per share to new investors in this offering				$	10.35

Each $1.00 increase (decrease) in the assumed initial public offering price of $15.00 per share (the midpoint of the price range set forth on the cover page of this prospectus), would increase (decrease) the pro forma as adjusted net tangible book value per share after this offering by $0.21, and dilution in pro forma net tangible book value per share to new investors by $0.21, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. Each increase (decrease) of 1.0 million shares in the number of shares offered by us would increase (decrease) our pro forma as adjusted net tangible book value per share after this offering by $0.63 per share and decrease (increase) the dilution to new investors by $0.63 per share, assuming that the assumed initial public offering price remains the same, and after deducting the estimated underwriting discounts and commissions and the estimated offering expenses payable by us.

If the underwriters exercise their option to purchase additional shares of our common stock in full, the pro forma as adjusted net tangible book value after this offering would be $4.96 per share, the increase in pro forma net tangible book value per share would be $2.83 and the dilution per share to new investors would be $10.04 per share, in each case assuming an initial public offering price of $15.00 per share (the midpoint of the price range set forth on the cover page of this prospectus), and after deducting the estimated underwriting discounts and commissions and the estimated offering expenses payable by us.

The following table summarizes on the pro forma as adjusted basis described above, as of September 30, 2018, the differences between the number of shares purchased from us, the total consideration paid to us in cash and the average price per share that existing stockholders and new investors paid. The calculation below is based on an assumed initial public offering price of $15.00 per share (the midpoint of the

price range set forth on the cover page of this prospectus), before deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.


	Shares Purchased					Total Consideration					Average Price Per Share
	Number		Percent			Amount		Percent			Average Price Per Share
Existing stockholders		17,162,604		77.4	%	$	28,119		27.3	%	$	1.64
New investors		5,000,000		22.6	%	$	75,000		72.7	%	$	15.00

Total		22,162,604		100.0	%	$	103,119		100.0	%	$	4.65

(1)

A $1.00 increase or decrease in the assumed initial public offering price of $15.00 per share (the midpoint of the price range set forth on the cover page of this prospectus), would increase or decrease the total consideration paid by new investors by $5.0 million and, in the case of an increase, would increase the percentage of total consideration paid by new investors by 1.5 percentage points and, in the case of a decrease, would decrease the percentage of total consideration paid by new investors by 1.6 percentage points, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same. An increase or decrease of 1.0 million shares in the number of shares offered by us, as set forth on the cover page of this prospectus, would increase or decrease the total consideration paid by new investors by $15.0 million and, in the case of an increase, would increase the percentage of total consideration paid by new investors by 3.5 percentage points and, in the case of a decrease, would decrease the percentage of total consideration paid by new investors by 4.6 percentage points, assuming no change in the assumed initial public offering price.

The foregoing tables and calculations are based on the number of shares of our common stock outstanding as of September 30, 2018, and exclude:

•

1,981,815 shares of common stock issuable upon exercise of stock options outstanding as of September 30, 2018, at a weighted-average exercise price of $4.36 per share;

•

83,189 shares of our common stock issuable upon the exercise of certain warrants to purchase common stock outstanding as of September 30, 2018 at a weighted average exercise price of $6.59 per share;

•

To the extent any of these outstanding options or warrants is exercised, there will be further dilution to new investors. If all of such outstanding options had been exercised as of September 30, 2018, the pro forma as adjusted net tangible book value per share after this offering would be $5.07, and total dilution per share to new investors would be $9.93.

If the underwriters exercise their option to purchase additional shares of our common stock in full:

•

the percentage of shares of common stock held by existing stockholders will decrease to approximately 74.9% of the total number of shares of our common stock outstanding after this offering; and

•

the number of shares held by new investors will increase to 5,750,000, or approximately 25.1% of the total number of shares of our common stock outstanding after this offering.

SELECTED FINANCIAL DATA

The following tables set forth, for the periods and as of the dates indicated, our selected historical financial data. The statements of operations data for the years ended December 31, 2016 and 2017 and the balance sheet data as of December 31, 2016 and 2017 are derived from our audited financial statements appearing at the end of this prospectus. The statement of operations data for the nine months ended September 30, 2017 and 2018 and the balance sheet data as of September 30, 2018 have been derived from our unaudited financial statements appearing at the end of this prospectus and have been prepared on the same basis as the audited financial statements. In the opinion of management, the unaudited data reflects all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the financial information in those statements. Our historical results are not necessarily indicative of the results that should be expected in the future, and results for the nine months ended September 30, 2018 are not necessarily indicative of the results to be expected for the full year ending December 31, 2018. You should read this data together with the more detailed information contained in our audited financial statements and the related notes thereto and in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus.


	Year Ended December 31,						Nine Months Ended September 30,
	2016			2017			2017			2018
	(in thousands, except share data)
							(unaudited)
Revenue	$	—		$	—		$	—		$	—

Operating expenses:
Research and development		27,788			17,622			14,077			17,420
General and administrative		5,443			6,433			5,119			6,612

Total operating expenses		33,231			24,055			19,196			24,032

Loss from operations		(33,231	)		(24,055	)		(19,196	)		(24,032	)

Other income (expense), net:
Interest income		22			43			19			564
Interest expense		(2,126	)		(983	)		(617	)		(205	)
Loss on conversion of convertible notes payable		(2,412	)		(497	)		—			—
Loss on disposal of property and equipment		—			(38	)		(38	)		—
Loss on forgiveness of notes receivable from stockholders		—			—			—			(599	)
Loss on extinguishment of long-term debt		—			—			—			(298	)
Revaluation of stock warrant liabilities		75			475			339			(763	)

Total other income (expense), net		(4,441	)		(1,000	)		(297	)		(1,301	)

Net loss before income tax benefit		(37,672	)		(25,055	)		(19,493	)		(25,333	)
Income tax benefit		—			441			—			—

Net loss		(37,672	)		(24,614	)		(19,493	)		(25,333	)
Plus: Cumulative dividends on convertible preferred stock		—			(128	)		—			(2,791	)

Net loss attributable to common stockholders	$	(37,672	)	$	(24,742	)	$	(19,493	)	$	(28,124	)

Net loss per share attributable to common stockholders, basic and diluted(1)	$	(30.36	)	$	(19.91	)	$	(15.68	)	$	(22.60	)

Weighted average common shares outstanding, basic and diluted(1)		1,240,991			1,242,744			1,243,366			1,244,493


	As of December 31,						As of September 30,
	2016			2017			2018
	(in thousands)
							(unaudited)
Balance Sheet Data:
Cash and cash equivalents	$	16,231		$	60,679		$	42,059
Working capital(2)		12,146			56,373			39,963
Total assets		24,006			68,337			52,786
Long-term debt, net of discount		3,545			1,973			7,740
Warrant liabilities		2,348			2,446			3,209
Convertible preferred stock		83,678			152,836			155,627
Accumulated deficit		(72,805	)		(97,547	)		(125,671	)
Total stockholders’ deficit		(70,563	)		(93,884	)		(119,975	)

(1)	See Note 11 to our financial statements appearing at the end of this prospectus for further details on the calculation of basic and diluted net loss per share attributable to common stockholders.

(2)	We define working capital as current assets less current liabilities.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with the section entitled “Selected Financial Data” and our financial statements and related notes appearing at the end of this prospectus. This discussion and other parts of this prospectus contain forward-looking statements that involve risks and uncertainties, such as statements regarding our plans, objectives, expectations, intentions and projections. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the “Risk Factors” section of this prospectus. For convenience of presentation some of the numbers have been rounded in the text below.

Overview

Our most advanced product candidate, CNTX-4975, is designed to selectively and locally target and disrupt the signaling of pain-sensing nerve fibers. CNTX-4975 is in pivotal Phase 3 development for the treatment of patients with moderate to severe pain due to knee OA. In a Phase 2 randomized, double-blinded, placebo-controlled clinical trial in 175 subjects with moderate to severe pain due to knee OA, subjects receiving a single IA injection of 1.0 mg of CNTX-4975 experienced statistically significant, onset of activity by second day and durable pain relief, as measured by the Western Ontario and McMaster Universities Arthritis Index, or WOMAC index, and showed an AE profile similar to the placebo group. In this trial, we observed a significant reduction from baseline pain and a clinically meaningful difference compared to the placebo group in subjects with moderate to severe pain associated with knee OA. If the results of our ongoing and future clinical trials are positive, we plan to submit an NDA in the United States, and an MAA in Europe, in the second half of 2021. CNTX-4975 was granted Fast Track Designation by the FDA in January 2018 for the treatment of moderate to severe pain associated with knee OA. We hold worldwide commercialization rights to CNTX-4975, and, if successfully developed and approved, we anticipate initial commercial sales in 2022. In addition to CNTX-4975, we have three other product candidates in clinical development and one in pre-clinical development for the treatment of multiple types of chronic pain. We believe that we have one of the industry’s largest pipelines of novel, non-opioid and non-addictive clinical-stage product candidates for the treatment of chronic pain.

Since our inception in 2013, we have devoted substantially all of our resources to organizing and staffing our company, business planning, raising capital, acquiring and developing product and technology rights, and conducting research and development activities for our product candidates. We do not have any products approved for sale and have not generated any revenue from product sales. We have funded our operations to date with proceeds from the issuance and sale of convertible notes and preferred stock and borrowings under the term loan facility with Silicon Valley Bank. Through December 31, 2017, we had received gross proceeds of $148.5 million from the sale of our convertible notes and issuances and sales of preferred stock. In addition, as of September 30, 2018, the outstanding principal balance under the term loan facility was $7.7 million.

Since our inception, we have incurred significant operating losses. Our operating loss was $33.2 million for the year ended December 31, 2016, $24.1 million for the year ended December 31, 2017 and $24.0 million for the nine months ended September 30, 2018. Our net loss was $37.7 million for the year ended December 31, 2016 and $24.7 million for the year ended December 31, 2017 and $28.1 for the nine months ended September 30, 2018. As of December 31, 2017, we had an accumulated deficit of $97.5 million and as of September 30, 2018, our accumulated deficit was $125.7 million. We expect to continue to incur significant expenses and

increasing operating and net losses for at least the next several years. We expect our expenses and capital requirements will increase substantially in connection with our ongoing activities, as we:

•

continue clinical trials for CNTX-4975;

•

advance our other product candidates through pre-clinical and clinical development;

•

seek regulatory approval for our product candidates;

•

hire additional personnel to support our product development, commercialization and administrative efforts;

•

commercialize CNTX-4975 in the United States with our own targeted sales and marketing organization and selectively partner outside of the United States; and

•

pursue strategic partnerships that maximize the value of our other pipeline while seeking to maintain commercialization rights in the United States for select specialists that treat chronic pain conditions.

We will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for our product candidates. If we obtain regulatory approval for any of our product candidates, we expect to incur significant expenses related to developing our internal commercialization capability to support product sales, marketing and distribution. Further, upon the closing of this offering, we expect to incur additional costs associated with operating as a public company.

As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through the sale of equity, debt financings, including borrowings under the existing or additional term loan facilities, or other capital sources, including potential collaborations with other companies or other strategic transactions, including potentially through licensing arrangements. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If we raise additional funds through collaborations, strategic alliances, or, if applicable, licensing arrangements with third parties, we may have to relinquish valuable rights to our future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. 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 one or more of our product candidates. We will need to generate significant revenue to achieve profitability, and we may never do so.

Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. Even if we are able to generate product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.

As of December 31, 2017, we had cash and cash equivalents of $60.7 million and as of September 30, 2018, we had cash and cash equivalents of $42.1 million. We believe that our existing cash and cash equivalents as of September 30, 2018, will enable us to fund our operating expenses and capital expenditure requirements into the third quarter of 2019, without giving effect to any anticipated proceeds from this offering. We believe that the anticipated net proceeds from this offering, together with our existing cash and cash equivalents, will enable us to fund our operating expenses and capital expenditure requirements into the third quarter of 2020. If we are unable to raise sufficient funding, we may be unable to continue to operate in the long-term. We have based these estimates on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. See “—Liquidity and Capital Resources.”

In its report on our financial statements for the year ended December 31, 2017, our independent registered public accounting firm included an explanatory paragraph stating that our recurring losses from operations since inception and required additional funding to finance our operations raise substantial doubt about our ability to continue as a going concern. See “Risk Factors—Risks Related to Our Financial Position and Need for Additional Capital—Our recurring losses from operations could continue to raise substantial doubt regarding our ability to continue as a going concern. Our ability to continue as a going concern requires that we obtain sufficient funding to finance our operations.”

Components of our Results of Operations

Revenue

To date, we have not generated any revenue from product sales and we do not expect to generate revenue from sales of any product for several years, if at all.

Operating Expenses

Our operating expenses since inception have consisted solely of research and development costs and general and administrative costs.

Research and Development Expenses

Our research and development expenses consist primarily of costs incurred in connection with the discovery and development of our product candidates, which include:

•

expenses incurred in connection with the pre-clinical and clinical development of our product candidates and under agreements with CROs;

•

employee-related expenses, including salaries, related benefits and stock-based compensation expense for employees engaged in research and development functions;

•

facilities, depreciation and other expenses, which include direct and allocated expenses for rent of facilities, travel and insurance; and

•

payments made under third-party licensing agreements.

We expense research and development costs as incurred. We recognize external development costs based on an evaluation of the progress to completion of specific tasks using information provided to us by our service providers.

Our direct research and development expenses are tracked on a program-by-program basis and consist primarily of external costs, such as fees paid to consultants, central laboratories, contractors and CROs in connection with our pre-clinical and clinical development activities. We do not allocate employee costs and facility expenses, including depreciation or other indirect costs, to specific product development programs because these costs are deployed across multiple product development programs and, as such, are not separately classified. We use internal resources to manage our development activities.

The table below summarizes our research and development expenses incurred by development program:


	Year Ended December 31,				Nine Months Ended September 30,
	2016		2017		2017		2018
	(in thousands)
					(unaudited)
Direct research and development expenses by program:
CNTX-4975 program	$	10,789	$	6,525	$	4,850	$	11,028
Other pre-clinical and clinical programs		12,628		4,899		4,413		1,708
Unallocated and other research and development expenses:
Personnel related (including stock-based compensation)		2,341		2,348		1,909		2,135
Services		1,487		3,072		2,257		2,054
Other		543		778		648		495

Total unallocated and other research and development expenses		4,371		6,198		4,814		4,684

Total research and development expenses	$	27,788	$	17,622	$	14,077	$	17,420

Research and development activities are critical to our business model. We expect that our research and development expenses will increase substantially in connection with our planned pre-clinical and clinical development activities in the near term and our planned clinical trials in the future. At this time, we cannot reasonably estimate the costs for completing the pre-clinical and clinical development of any of our other product candidates.

The successful development and commercialization of our product candidates is highly uncertain. This is due to the numerous risks and uncertainties associated with product development and commercialization, including the uncertainty of:

•

the scope, progress, outcome and costs of our pre-clinical development activities, clinical trials and other research and development activities;

•

establishing an appropriate safety profile with IND-enabling studies;

•

successful patient enrollment in, and the initiation and completion of, clinical trials;

•

the timing, receipt and terms of any marketing approvals from applicable regulatory authorities;

•

establishing commercial manufacturing and supply capabilities or making arrangements with third-party manufacturers and suppliers;

•

obtaining, maintaining, defending and enforcing patent claims and other intellectual property rights;

•

significant and changing government regulation;

•

launching commercial sales of our product candidates, if and when approved, whether alone or in collaboration with others; and

•

maintaining a continued acceptable safety profile of the product candidates following approval.

Any changes in the outcome of any of these variables with respect to the development of our product candidates in pre-clinical and clinical development could mean a significant change in the costs and timing

associated with the development of these product candidates. For example, if the FDA or another regulatory authority were to delay our planned start of clinical trials or require us to conduct clinical trials or other testing beyond those that we currently expect or if we experience significant delays in enrollment in any of our planned clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development of that product candidate.

General and Administrative Expenses

Our general and administrative expenses consist primarily of salaries and related costs, including stock-based compensation for employees and consultants and other non-employees, for personnel in executive, finance and administrative functions. General and administrative expenses also include direct and allocated facility-related costs as well as professional fees for legal, patent, consulting, accounting, audit and other non-employee services.

We anticipate that our general and administrative expenses will increase in the future as we support our continued research activities and development of our product candidates. We also anticipate that we will incur increased accounting, audit, tax, legal, regulatory, compliance, director and officer insurance costs as well as investor and public relations expenses associated with being a public company.

Other Income and Expense

Other income and expense items include cash paid for interest and non-cash interest expense for the end-of-term charge and amortization of debt discount associated with our term loan facility. Other income and expense items also include non-cash interest expense on convertible note financings for the years ended December 31, 2016 and 2017 ahead of our Series C preferred stock and Series D preferred stock financings, accounting losses on the conversion of those convertible notes into preferred stock, periodic fair value adjustments on warrants issued in connection with those convertible note financings and interest income on the money market fund investments we make with the proceeds from our preferred stock, convertible notes and debt financings prior to the cash being deployed into operations.

Income Taxes

Since our inception, we have not recorded any U.S. federal or state income tax benefits for the net losses we have incurred in each year or for our earned research and development tax credits, due to our uncertainty of realizing a benefit from those items. As of December 31, 2017, we had federal and state net operating loss carryforwards of $28.2 million and $28.1 million, respectively, both of which begin to expire in 2030. As of December 31, 2017, we also had federal and state research and development tax credit carryforwards of $2.5 million, which begin to expire in 2021.

Critical Accounting Policies and Significant Judgments and Estimates

Our financial statements are prepared in accordance with generally accepted accounting principles in the United States, or GAAP. The preparation of our financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and the disclosure of contingent assets and liabilities in our financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are described in more detail in the notes to our financial statements appearing at the end of this prospectus, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements.

Research Contract Costs and Accruals

As part of the process of preparing our financial statements, we are required to estimate our accrued research and development expenses. This process involves reviewing open contracts and purchase orders, communicating with our applicable personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of actual costs. The majority of our service providers invoice us in arrears for services performed, on a pre-determined schedule or when contractual milestones are met. However, some require advanced payments. We make estimates of our accrued expenses as of each balance sheet date in the financial statements based on facts and circumstances known to us at that time. We periodically confirm the accuracy of the estimates with the service providers and make adjustments if necessary. Examples of estimated accrued research and development expenses include fees paid to:

•

vendors in connection with the pre-clinical and clinical development activities;

•

third-party manufacturers in connection with the production of pre-clinical and clinical trial materials;

•

CROs in connection with pre-clinical studies and clinical trials; and

•

investigative sites in connection with clinical trials.

We base our expenses related to pre-clinical studies and clinical trials on our estimates of the services received and efforts expended pursuant to quotes and contracts with multiple research institutions and CROs that conduct and manage pre-clinical studies and clinical trials and third-party manufacturers that manufacture product for our research and development activities on our behalf. The financial terms of these agreements are subject to negotiation, vary from party to party and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the expense. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from the estimate, we adjust the accrual or prepaid accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in reporting amounts that are too high or too low in any particular period. To date, there have not been any material adjustments to our prior estimates of accrued research and development expenses.

Stock-Based Compensation

We measure stock options and other stock-based awards granted to employees and directors based on the fair value on the date of the grant and recognize the corresponding compensation expense of those awards, net of estimated forfeitures, over the requisite service period, which is generally the vesting period of the respective award. Generally, we issue stock option awards with only service-based vesting conditions and record the expense for these awards using the straight-line method.

We measure stock-based awards granted to consultants and non-employees based on the fair value of the award on the date at which the related service is complete. Compensation expense is recognized over the period during which services are rendered by such consultants and non-employees until completed. At the end of each financial reporting period prior to completion of the service, we remeasure the fair value of these awards using the then-current fair value of our common stock and updated assumption inputs in the Black-Scholes option-pricing model.

We estimate the fair value of each stock option grant using the Black-Scholes option-pricing model, which uses as inputs the fair value of our common stock and assumptions we make for the volatility of our

common stock, the expected term of our stock options, the risk-free interest rate for a period that approximates the expected term of our stock options and our expected dividend yield.

Determination of the Fair Value of Common Stock

As there has been no public market for our common stock to date, the estimated fair value of our common stock has been determined by our board of directors as of the date of each option grant, with input from management, considering our most recently available third-party valuations of common stock and our board of directors’ assessment of additional objective and subjective factors that it believed were relevant and which may have changed from the date of the most recent valuation through the date of the grant. These third-party valuations were performed in accordance with the guidance outlined in the American Institute of Certified Public Accountants’ Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. Our common stock valuations were prepared using back-solve method, relying on the implied option created in our then most recent preferred stock financings to determine exit value where those investors could break even. The common stock value is based on the probability-weighted present value of expected future investment returns considering each of the possible outcomes available as well as the rights of each class of stock. The future value of the common stock under each outcome is discounted back to the valuation date at an appropriate risk-adjusted discount rate and probability weighted to arrive at an indication of value for the common stock. These third-party valuations were performed at various dates, which resulted in valuations of our common stock of $4.02 per share as of December 31, 2015, $5.53 per share as of January 31, 2017, $5.63 as of May 30, 2017, $6.93 as of February 16, 2018, $8.31 as of July 27, 2018, $8.56 as of September 12, 2018 and $8.74 as of October 2, 2018. In addition to considering the results of these third-party valuations, our board of directors considered various objective and subjective factors to determine the fair value of our common stock as of each grant date, which may be as a date later than the most recent third-party valuation date, including:

•

the prices at which we sold shares of preferred stock and the superior rights and preferences of the preferred stock relative to our common stock at the time of each grant;

•

the progress of our research and development programs, including the status of pre-clinical and planned clinical trials for our product candidates;

•

our stage of development and commercialization and our business strategy;

•

external market conditions affecting the biotechnology industry, and trends within the biotechnology industry;

•

our financial position, including cash on hand, and our historical and forecasted performance and operating results;

•

the lack of an active public market for our common stock and our preferred stock;

•

the likelihood of achieving a liquidity event, such as an initial public offering, or IPO, or a sale of our company in light of prevailing market conditions; and

•

the analysis of IPOs and the market performance of similar companies in the biopharmaceutical industry.

The assumptions underlying these valuations represent management’s best estimates, which involve inherent uncertainties and the application of management judgment. As a result, if factors or expected outcomes change and we use significantly different assumptions or estimates, our stock-based compensation expense could be materially different.

Following the closing of this offering, the fair value of our common stock will be determined based on the quoted market price of our common stock.

Options Granted

The following table sets forth by grant date the number of shares subject to options granted between January 1, 2016 and September 30, 2018, the per share exercise price of the options, the fair value of common stock on each grant date, and the per share estimated fair value of the options:


Grant Date	Number of Shares Subject to Options Granted		Per Share Exercise Price of Options		Fair Value of Common Stock per Share on Date of Option Grant		Per Share Estimated Fair Value of Options
February 2016		182,315	$	4.00	$	4.00	$	2.50
February 2016		97,134		4.00		4.00		2.62
February 2016		29,298		4.00		4.00		3.37
March 2017		180,803		5.56		5.56		3.62
March 2017		106,645		5.56		5.56		3.81
March 2017		42,525		5.56		5.56		4.75
March 2017		2,402		5.56		5.56		4.62
June 2017		5,604		5.62		5.62		3.87
April 12, 2018		3,122		6.93		6.93		5.12
April 12, 2018		140,519		6.93		6.93		4.93
April 12, 2018		29,114		6.93		6.93		6.18
August 16, 2018		238,878		8.31		8.31		6.37
August 16, 2018		9,608		8.31		8.31		6.37

On October 3, 2018, we granted options to purchase 268,282 shares of our common stock under the 2013 Plan. The options vest over four years, expire after 10 years and have an exercise price of $8.74 per share.

Valuation of Warrant Liabilities

Outstanding warrants for the purchase of shares of our preferred stock and a number of the warrants for the purchase of shares of our common stock are free-standing financial instruments classified on our balance sheet as liabilities. On issuance, the liability for warrants is initially recorded at fair value, and the liability is subsequently re-measured to fair value at each balance sheet date. Changes in the fair value of warrant liabilities are recognized as a component of other income and expense in our statement of operations and comprehensive loss. We will continue to adjust warrant liabilities for changes in fair value until the earlier of the exercise, conversion or expiration of the warrants.

Fair value of our warrants is determined with reference to the periodic third-party valuations of the Company and our common stock performed with the guidance outlined in the American Institute of Certified Public Accountants’ Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation, with reference to the AICPA’s Statement on Standards for Valuation Services (SSVS) No. 1, Valuation of a Business, Business Ownership Interest, Security, or Intangible Asset (AICPA, Professional Standards, VS sec. 100), ASC 820 (Fair Value Measurement and Disclosures), and ASC 815 (Derivatives and Hedging). Specifically, the valuation of our warrants involves:

•

Estimating our value as of the issuance and subsequent remeasurement dates by relying on the periodic third-party valuation performed in compliance with IRS section 409A and for the purposes of estimating the fair value of our common stock for purposes of ASC 718 (Compensation—Stock Compensation), or 409A valuation reports.

•

For warrants issued prior to the issuance of the underlying securities, or the Pre-Issuance Warrants, we initially estimate the value of the warrant for the purchase of the underlying securities using an Option Pricing Model, or OPM, and allocating our estimated value through the capital structure, or a waterfall analysis.

•

For warrants issued concurrent with or after the underlying securities and from the time the underlying securities associated with the pre issuance warrants are issued, or post-issuance warrants, we estimate the value of the warrant for the purchase of the underlying security using scenario analysis first to estimate possible values for the underlying security and subsequently using an OPM model to allocate our estimated value via a waterfall analysis, thereby estimating the value of the post-issuance warrants in each scenario, and ultimately arriving at a probability-weighted-value for the post-issuance warrants.

•

On warrant issuance and subsequent remeasurement dates at a time where the probability of an IPO are known or knowable, we adjust the value of the pre-issuance and post-issuance warrants to capture the optionality of this scenario through a Black-Scholes model.

•

In the circumstances where we do not have 409A valuation report dated at or near a balance sheet remeasurement date, and provided that no material changes to our business or to our capital structure have taken place, we value the pre-issuance and post-issuance warrants using a linear interpolation of the warrant fair value estimates made at the time of 409A valuation reports before and after the balance sheet remeasurement date.

The following table provides a roll forward of the aggregate fair values of our warrants to purchase convertible preferred stock and common stock for which fair value is determined by Level 3 inputs (in thousands, except number of warrants):


	Warrants for Series B Preferred Stock					Warrants for Series C Preferred Stock					Warrants for Series D Preferred Stock					Warrants for Common Stock					Total Warrant Liability
	Number		Liability Amount			Number		Liability Amount			Number		Liability Amount			Number		Liability Amount			Total Warrant Liability
Balance at January 1, 2016		619,314	$	276			—	$	—			—	$	—			126,033		472		$	748
Issued as inducement for 2019 Notes		—		—			1,714,285		982			—		—			—		—			982
Issued as compensation to placement agent		—		—			1,353,978		693			—		—			—		—			693
Exercised		—		—			—		—			—		—			—		—			—
Cancelled		—		—			—		—			—		—			—		—			—
Adjustment to fair value		—		42			—		(37	)		—		—			—		(80	)		(75	)

Balance at December 31, 2016		619,314		318			3,068,263		1,638			—		—			126,033		392			2,348
Issued as inducement for 2018 Notes		—		—			—		—			831,120		514			—		—			514
Issued as compensation to placement agent		—		—			—		—			—		—			18,905		59			59
Exercised		—		—			—		—			—		—			—		—			—
Cancelled		—		—			—		—			—		—			—		—			—
Adjustment to fair value		—		(52	)		—		(252	)		—		(103	)		—		(68	)		(475	)

Balance at December 31, 2017		619,314	$	266			3,068,263	$	1,386			831,120	$	411			144,938	$	383		$	2,446
Exercised		—		—			—		—			—		—			—		—			—
Cancelled		—		—			—		—			—		—			—		—			—
Adjustment to fair value		—		6			—		565			—		117			—		75			763

Balance at September 30, 2018 (unaudited)		619,314	$	272			3,068,263	$	1,951			831,120	$	528			144,938	$	458		$	3,209

Emerging Growth Company Status

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 until those standards would otherwise apply to private companies. We have irrevocably elected to “opt out” of this provision and, as a result, we will comply with new or revised accounting standards when they are required to be adopted by public companies that are not emerging growth companies.

Results of Operations

Comparison of Nine Months Ended September 30, 2017 and 2018

The following table summarizes our results of operations for the nine months ended September 30, 2017 and 2018:


	Nine Months Ended September 30,						Increase (Decrease)
	2017			2018
	(in thousands and unaudited)
Revenue	$	—		$	—		$	—

Operating expenses:
Research and development		14,077			17,420			3,343
General and administrative		5,119			6,612			1,493

Total operating expenses		19,196			24,032			4,836

Loss from operations		(19,196	)		(24,032	)		4,836

Other income (expense), net:
Interest income		19			564			(545	)
Interest expense		(617	)		(205	)		(412	)
Loss on disposal of property and equipment		(38	)		—			(38	)
Loss on forgiveness of notes receivable from stockholders		—			(599	)		599
Loss on extinguishment of long-term debt		—			(298	)		298
Revaluation of stock warrant liabilities		339			(763	)		1,102

Total other income (expense), net		(297	)		(1,301	)		1,004

Net loss	$	(19,493	)	$	(25,333	)	$	5,840

Research and Development Expenses


	Nine Months Ended September 30,				Increase (Decrease)
	2017		2018
	(in thousands and unaudited)
Direct research and development expenses by program:
CNTX-4975 program	$	4,850	$	11,028	$	6,178
Other pre-clinical and clinical programs		4,413		1,708		(2,705	)
Unallocated and other research and development expenses:
Personnel related (including stock-based compensation)		1,909		2,135		226
Services		2,257		2,054		(203	)
Other		648		495		(153	)

Total unallocated and other research and development expenses		4,814		4,684		130

Total research and development expenses	$	14,077	$	17,420	$	3,342

Research and development expenses were $14.1 million for the nine months ended September 30, 2017 compared to $17.4 million for the nine months ended September 30, 2018.

Research and development expenses with regard to our most advanced product candidate, CNTX-4975, for the treatment of patients with moderate to severe pain due to knee OA were $4.9 million for the nine months ended September 30, 2017 compared to $11.0 million for the nine months ended September 30, 2018. For the

nine months ended September 30, 2017, expenditures on CNTX-4975 were related primarily to regulatory interactions with the FDA, manufacturing clinical batches of product, and preparing for the initiation of our Phase 3 program. During the nine months ended September 30, 2017, we also conducted Phase 1 Clinical Trial OA-101 to refine options regarding the cooling techniques used as part of the administration of CNTX-4975. In October 2017, we were advised by the FDA that it concurred with our plans to proceed with the Phase 3 program for CNTX-4975 and we are currently in Phase 3 development, which will increase our research and development expense as we advance this product candidate through the Phase 3 clinical trial. The $6.1 million increase in spending on the program in the nine months ended September 30, 2018 as compared to the nine months ended September 30, 2017 is primarily attributable to initiation of two pivotal Phase 3 trials, with the first trial now at more than two-thirds of the targeted enrollment, and an open label safety exposure trial, plus the associated manufacturing of the clinical batch.

In addition to CNTX-4975, we have three other product candidates in clinical development and one in pre-clinical development for the treatment of multiple types of chronic pain, including chronic pain of neuropathic and inflammatory origin. Research and development expenses with regard to these other clinical development programs were $4.4 million for the nine months ended September 30, 2017 as compared to $1.7 million for the nine months ended September 30, 2018, representing a decrease of $2.7 million attributable to all four programs.

•

CNTX-0290: In the nine months ended September 30, 2017, our expenses related to CNTX-0290 were related primarily to our MAD clinical trial and more limited pre-clinical toxicology studies. In the nine months ended September 30, 2018, our expenses related to CNTX-0290 were related primarily to preparation of documents to support a clinical trial application for a Phase 1 clinical trial in Germany.

•

CNTX-6970: In the nine months ended September 30, 2017, our activities were focused on supporting ongoing stability for manufacturing batches and starting the Phase 1 MAD clinical trial in the second half of the year. In the nine months ended September 30, 2018, our expenses related to CNTX-6970 were related primarily to completion of the Phase 1 MAD clinical trial.

•

CNTX-2022: Activity and costs in the nine months ended September 30, 2017 and 2018 on CNTX- 2022 related primarily to support of the ongoing drug product stability studies.

•

CNTX-6016: In the nine months ended September 30, 2017 and 2018, our expenses related to CNTX-6016 were related primarily to pre-clinical toxicology studies. We have opened an Investigational New Drug Application, or IND, with FDA and are preparing to initiate a Phase 1 SAD clinical trial in the second half of 2018.

Unallocated and other research and development expenses were $4.8 million for the nine months ended September 30, 2017, and $4.7 million for the nine months ended September 30, 2018. We had nine persons employed and engaged in research and development activities as of September 30, 2017 and ten employees engaged in research and development activities as of September 30, 2018. We plan to recruit and hire additional staff in support of research and development activities as we further develop and advance our product candidates.

General and Administrative Expenses

General and administrative expenses were $5.1 million for the nine months ended September 30, 2017, compared to $6.6 million for the nine months ended September 30, 2018. The increase of $1.5 million in general and administrative expenses was due to:

•

An increase of $0.1 million in personnel-related costs. As of September 30, 2017, we had three persons employed and engaged in general and administrative activities and as of September 30, 2018, we added two additional employees for a total of five employees engaged in general and administrative activities. We plan to recruit and hire additional staff in support of general and administrative activities as we continue to develop and advance our product candidates.

•

Services, including commercialization consulting, communications and investor relations, business development, finance and legal fees increased $1.5 million for the for the nine months ended September 30, 2018 as compared to the nine months ended September 30, 2017.

•

Other general and administrative expenses in total decreased $0.1 million for the for the nine months ended September 30, 2018 as compared to the nine months ended September 30, 2017.

Other Income (Expense), Net


	Nine Months Ended September 30,						Increase (Decrease)
	2017			2018
	(in thousands and unaudited)
Interest income	$	19		$	564		$	(545	)
Interest expense		(617	)		(205	)		(412	)
Loss on disposal of property and equipment		(38	)		—			(38	)
Loss on forgiveness of notes receivable from stockholders		—			(599	)		599
Loss on extinguishment of long-term debt		—			(298	)		298
Revaluation of stock warrant liabilities		339			(763	)		1,102

Total other income (expense), net	$	(297	)	$	(1,301	)	$	1,004

We earn interest income on the money market fund investments we make with the proceeds from our preferred stock, convertible notes and debt financings prior to the cash being deployed into operations. For the nine months ended September 30, 2018, our interest income has increased as a result of having invested the proceeds of our Series D preferred stock financing in December 2017.

Our interest expense in the nine months ended September 30, 2017 primarily relates to the principal amount of $5.3 million of convertible notes payable issued in the first nine months of 2017 ahead of our Series D preferred stock financing, which closed in December 2017. Interest expense includes accrual of the stated interest rate of the convertible notes, which is 10.0% on convertible notes payable issued in 2017 together with the amortization of the discount on the convertible notes that arose on allocation of proceeds to our warrant liability for the fair value of warrants issued together with the convertible notes payable and amortization of costs associated with the issuance of the convertible notes payable. Interest expense in the nine months ended September 30, 2017 and 2018 also includes interest expense and amortization of debt discount associated with our term loan facility.

In April 2018, we fully released executive officers from all liabilities and obligations under partial recourse promissory notes, dated October 8, 2013, resulting in a loss of $0.6 million.

In June 2018, we further amended our loan and security agreement, dated April 22, 2015, entered into with SVB, to provide for a facility of $7.7 million. In connection with this amendment, we wrote-off the discount on the pre-amendment debt balance, the unamortized balance of capitalized debt issue costs and the non-cash charge attendant to the warrants issued to SVB in connection with the 2018 Term Loan, in the aggregate amounting to a loss on extinguishment of long-term debt of $0.3 million.

The fair value of our warrant liabilities has generally been decreasing with each round of additional preferred stock financing we have entered into through the Series D preferred stock financing in December 2017. In 2018, the fair value of our warrant liabilities has been increasing largely due to our assuming an increased probability of an IPO in our scenario analysis. We will continue to adjust warrant liabilities for changes in fair value until the earlier of the exercise, conversion or expiration of the warrants.

Results of Operations

Comparison of the Years Ended December 31, 2016 and 2017


	Year Ended December 31,						Increase (Decrease)
	2016			2017			Increase (Decrease)
	(in thousands)
Revenue	$	—		$	—		$	—

Operating expenses:
Research and development		27,788			17,622			(10,166	)
General and administrative		5,443			6,433			990

Total operating expenses		33,231			24,055			(9,176	)

Loss from operations		(33,231	)		(24,055	)		(9,176	)

Other income (expense), net:
Interest income		22			43			(21	)
Interest expense		(2,126	)		(983	)		(1,143	)
Loss on conversion of convertible notes payable		(2,412	)		(497	)		(1,915	)
Loss on disposal of property and equipment		—			(38	)		38
Revaluation of stock warrant liabilities		75			475			(400	)

Total other income (expense), net		(4,441	)		(1,000	)		(3,441	)

Net loss before income tax benefit	$	(37,672	)	$	(24,742	)	$	(12,930	)
Income Tax benefit		—			441			(441	)

Net loss		(37,672	)		(24,614	)		(13,058	)

Research and Development Expenses


	Year Ended December 31,				Increase (Decrease)
	2016		2017		Increase (Decrease)
	(in thousands)
Direct research and development expenses by program:
CNTX-4975 program	$	10,789	$	6,525	$	(4,264	)
Other pre-clinical and clinical programs		12,628		4,899		(7,729	)
Unallocated and other research and development expenses:
Personnel related (including stock-based compensation)		2,341		2,348		7
Services		1,487		3,072		1,585
Other		543		778		235

Total unallocated and other research and development expenses		4,371		6,198		1,827

Total research and development expenses	$	27,788	$	17,622	$	(10,166	)

Research and development expenses were $27.8 million for the year ended December 31, 2016, compared to $17.6 million for the year ended December 31, 2017.

Research and development expenses with regard to our most advanced product candidate, CNTX-4975 for the treatment of patients with moderate to severe pain due to knee OA were $10.8 million for the year ended December 31, 2016, compared to $6.5 million for the year ended December 31, 2017. During 2016, we conducted our Phase 2 TRIUMPH trial and, in December 2016, we announced the results of this trial. In October 2017, we were advised by the FDA that it concurred with our plans to proceed with the Phase 3 program for CNTX-4975 and we are currently in Phase 3 development. We expect our research and development expenses

will significantly increase as we advance this product candidate through Phase 3 clinical trials. In 2017, we also conducted Phase 1 Clinical Trial OA-101 to refine options regarding the procedure pain control technique used as part of the administration of CNTX-4975. The $4.3 million decrease in spending on the program in 2017 as compared to 2016 is primarily attributable to the ongoing Phase 2 TRIUMPH trial for which the last patient visit was in October 2016 and in respect of which topline data became available in December 2016. In 2017, expenditures on CNTX-4975 were related primarily to regulatory interactions with the FDA, manufacturing clinical batches of product, and preparing for the initiation of our Phase 3 program.

In addition to CNTX-4975, we have three other product candidates in clinical development and one in pre-clinical development for the treatment of multiple types of chronic pain, including chronic pain of neuropathic and inflammatory origin. Research and development expenses with regard to these other clinical development programs were $12.6 million for the year ended December 31, 2016, compared to $4.9 million for the year ended December 31, 2017, representing a decrease of $7.7 million attributable to all four programs.

•

CNTX-0290: In the year ended December 31, 2016, we conducted our Phase 1 single ascending dose, or SAD, clinical trial in healthy volunteers, non-clinical toxicology studies and had extensive manufacturing activities to optimize bulk drug substance and formulate finished drug product whereas, in the year ended December 31, 2017, our expenses related to CNTX-0290 were related primarily to our multiple ascending dose, or MAD, clinical trial and more limited non-clinical toxicology studies. In addition, in the year ended December 31, 2016, we paid to Boehringer Ingelheim a milestone payment of $1.0 million related to the initiation of the single ascending dose clinical trial in our CNTX-0290 program.

•

CNTX-6970: In the year ended December 31, 2016, we conducted extensive manufacturing activities to optimize the drug substance process and formulate tablet finished product for Phase 1 clinical trials, as well as carried-out chronic non-clinical toxicology studies. In the year ended December 31, 2017, our activities were focused on supporting ongoing stability for manufacturing batches and starting the Phase 1 MAD clinical trial in the second half of the year.

•

CNTX-2022: In the year ended December 31, 2016, we conducted activities related to planning a Phase 1 clinical trial in healthy volunteers in Australia and a non-clinical toxicology study. We ultimately decided not to move forward with the trial in Australia due to prioritization of other programs. Activity and costs in the year ended December 31, 2017, on CNTX-2022 related primarily to support of the ongoing drug product stability studies.

•

CNTX-6016: In the year ended December 31, 2016, we conducted extensive manufacturing activities to optimize bulk drug substance and formulate finished drug product and non-clinical toxicology studies. In the year ended December 31, 2017, our expenses related to CNTX-6016 were related primarily to non-clinical toxicology studies.

Unallocated and other research and development expenses were $4.4 million for the year ended December 31, 2016, compared to $6.2 million for the year ended December 31, 2017, representing an increase of $1.8 million principally due to various contracted research and development services. We had six persons employed and engaged in research and development activities throughout 2016 and 2017. We plan to recruit and hire additional staff in support of research and development activities as we develop and advance our product candidates.

General and Administrative Expenses

General and administrative expenses were $5.4 million for the year ended December 31, 2016, compared to $6.4 million for the year ended December 31, 2017. The increase of $1.0 million in general and administrative expenses was due to:

•

An increase of $0.4 million in personnel-related costs. As of December 31, 2016, we had two persons employed and engaged in general and administrative activities and, in the year ended December 31, 2017, we added an additional employee for a total of three employees engaged in general and administrative activities as of December 31, 2017. We plan to recruit and hire additional staff in support of general and administrative activities as we continue to develop and advance our product candidates.

•

Services, including commercialization consulting, communications and investor relations, business development, finance and legal fees increased $0.2 million for the year ended December 31, 2017 as compared to the year ended December 31, 2016.

•

Other general and administrative expenses in total increased $0.3 million for the year ended December 31, 2017 as compared to the year ended December 31, 2016.

Other Income (Expense), Net


	Year Ended December 31,						Increase (Decrease)
	2016			2017			Increase (Decrease)
	(in thousands)
Interest income	$	22		$	43		$	(21	)
Interest expense		(2,126	)		(983	)		(1,143	)
Loss on conversion of convertible notes payable		(2,412	)		(497	)		(1,915	)
Loss on disposal of property and equipment		—			(38	)		38
Revaluation of warrant liabilities		75			475			(400	)

Total other income (expense), net	$	(4,441	)	$	(1,000	)	$	(3,441	)

We earn interest income on the money market fund investments we make of the proceeds from our preferred stock, convertible notes and debt financings prior to the cash being deployed into operations.

Our interest expense in the year ended December 31, 2016 primarily relates to the principal amount of $30.0 million of convertible notes payable issued in 2016 ahead of our Series C preferred stock financing closed in December 2016. Our interest expense in the year ended December 31, 2017 primarily relates to the principal amount of $9.2 million of convertible notes payable issued in 2017 ahead of our Series D preferred stock financing closed in December 2017. Interest expense includes accrual of the stated interest rate of the convertible notes, which is 5.0% on convertible notes payable issued in 2016 and 10.0% on convertible notes payable issued in 2017 together with the amortization of the discount on the convertible notes that arose on allocation of proceeds to our warrant liability for the fair value of warrants issued together with the convertible notes payable and amortization of costs associated with the issuance of the convertible notes payable. Interest expense in the years ended December 31, 2016 and 2017 also includes interest expense and amortization of debt discount associated with our term loan facility.

Our losses on conversion of convertible notes payable into preferred stocks result from the write-off of unamortized discount on the convertible notes together with unamortized issuance costs at the time of conversion of the convertible notes payable into shares of Series C preferred stock, which occurred in 2016, and Series D preferred stock, which occurred in 2017.

The fair value of our warrant liabilities has generally been decreasing with each round of additional preferred stock financing we have entered into. We will continue to adjust warrant liabilities for changes in fair value until the earlier of the exercise, conversion or expiration of the warrants.

Income Tax Benefit

Our income tax benefit for the year ended December 31, 2017 of $441,000 reflects the impact of the reduction in the United States corporate income tax rate from 35% (34% as applies to us) to 21% on our deferred tax liability.

Liquidity and Capital Resources

Since our inception, we have incurred significant operating losses. We have not yet commercialized any of our product candidates, which are in various phases of pre-clinical or clinical development, and we do not expect to generate revenue from sales of any product for several years, if at all. We have funded our operations to date with proceeds from the issuance and sales of convertible notes and preferred stock and borrowings under the term loan facility. Through December 31, 2017, we had received gross proceeds of $148.5 million from the issuance and sale of convertible notes and preferred stock. As of December 31, 2017, we had cash and cash equivalents of $60.7 million and as of September 30, 2018, we had cash and cash equivalents of $42.1 million.

On April 22, 2015, we entered into a $10 million term loan facility (the loan thereunder, the “Initial Loan”) with Silicon Valley Bank, or SVB, pursuant to which we could borrow under two separate tranches. Under the Initial Loan, we could borrow up to $7.5 million through February 29, 2016 and, at SVB’s sole and absolute direction, an additional $2.5 million from the date of receipt of positive data with respect to certain clinical trials for CNTX-4975 through June 30, 2016. The repayment requirements and term under each tranche varied. In addition, at the end of each repayment term (or at early termination of the term loan facility), a final payment of 5% of the original principal amount would have been due and payable. Interest accrued under the Initial Loan at a floating rate per annum equal to the sum of the prime rate plus 3.25%. We borrowed an aggregate of $4.8 million under the Initial Loan.

On January 20, 2016, in connection with our entry into the patent assignment and licensing agreement, or the BI Agreement, with Boehringer Ingelheim International, GmbH, or BI, we entered into the consent and first amendment to the loan and security agreement with SVB. Under the amendment, SVB consented to certain milestone and royalty payments to be made under the BI Agreement, waived the then existing default under the term loan facility resulting from our payment of a certain upfront payment under the BI Agreement and amended certain other provisions of the loan and security agreement.

On June 27, 2018, we entered into a second amendment to the loan and security agreement. Under this second amendment, SVB agreed to extend an additional term loan, or the 2018 Loan, of $7.7 million, the proceeds of which were required to be used to pay down the Initial Loan, including certain premiums, interest and fees. Until the earlier of the repayment-in-full of the 2018 Loan or November 1, 2021, we are required to (i) make monthly interest payments in respect of the 2018 Loan, (ii) commencing June 1, 2019 (or, subject to certain conditions, December 1, 2019), make principal repayments in respect of the 2018 Loan and (iii) make a final payment equal to 5% of the 2018 Loan principal amount in addition to any unpaid principal or interest upon the earliest to occur of (x) maturity of the 2018 Loan, (y) early prepayment (whether voluntary or mandatory) in full of the 2018 Loan, or (z) the termination of the loan and security agreement. In addition, any voluntary or mandatory prepayments of the 2018 Loan are subject to payment of a premium of (x) 3% for a prepayment made on or prior to June 27, 2019, (y) 2% for a prepayment made after June 27, 2019 but on or prior to June 27, 2020 and (z) 1% for a prepayment made after June 27, 2020 but prior to the maturity date of the 2018 Loan, in each case of the then outstanding principal amount of the 2018 Loan as of the date immediately preceding such prepayment. The 2018 Loan matures on November 1, 2021 and interest thereunder accrues at a floating rate per annum equal to the greater of 3.5% or the prime rate minus 1.25%. In addition, our obligations under the term

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loan facility are secured by a first priority security interest in substantially all of our assets, subject to certain exceptions, including intellectual property assets. The loan and security agreement includes customary restrictive covenants and events of default. On June 27, 2018, we borrowed the full principal amount under the 2018 Loan.

Cash Flows

The following table summarizes our sources and uses of cash for each of the periods presented:


	Year Ended December 31,						Nine Months Ended September 30,
	2016			2017			2017			2018
	(in thousands)
							(unaudited)
Cash used in operating activities	$	(30,568	)	$	(22,349	)	$	(16,827	)	$	(24,345	)
Cash used in investing activities		—			(28	)		(28	)		—
Cash provided by financing activities		44,176			66,825			3,930			5,725

Net increase (decrease) in cash and cash equivalents	$	13,608		$	44,448		$	(12,925	)	$	(18,620	)

Operating activities. During the year ended December 31, 2016, net cash used by operating activities was $30.6 million, primarily resulting from the $33.2 million of operating expenses partially offset by non-cash charges of $1.3 million, and by an increase of cash resulting from a net change in our operating assets and liabilities of $1.7 million. During the year ended December 31, 2017, net cash used by operating activities was $22.3 million, primarily resulting from our operating expenses of $24.1 million partially offset by non-cash charges of $1.7 million, and by an increase of cash resulting from a net change in our operating assets and liabilities of $0.2 million.

During the nine months ended September 30, 2017, net cash used by operating activities was $16.8 million, primarily resulting from our operating expenses of $19.2 million partially offset by non-cash charges of $1.5 million, and by an increase of cash resulting from a net decrease in our operating assets and liabilities of $1.0 million. During the nine months ended September 30, 2018, net cash used by operating activities was $24.3 million, primarily resulting from the $24.0 million of operating expenses partially offset by non-cash charges of $1.1 million, $0.6 million of interest income and by an decrease of cash resulting from a net increase in our operating assets and liabilities of $1.9 million.

Investing activities. We had no investing activities during the year ended December 31, 2016. During the year ended December 31, 2017, net cash used in investing activities was $28,000, consisting of our purchases of property and equipment.

During the nine months ended September 30, 2017, net cash used in investing activities was $28,000, consisting of our purchases of property and equipment. We had no investing activities during the nine months ended September 30, 2018.

Financing activities. During the year ended December 31, 2016, net cash provided by financing activities was $44.2 million. During the course of the year, we raised $28.3 million, net, in a series of convertible notes payable financing before we closed our Series C issuance of preferred stock in December 2016, netting a further $15.3 million. In addition, we borrowed an additional $1.8 million and repaid $1.2 million on our term loan facility.

During the year ended December 31, 2017, net cash provided by financing activities was $66.8 million. During the course of the year, we raised, $9.0 million, net, in a series of convertible notes payable financing before we closed our Series D issuance of preferred stock in December 2017, netting a further $59.4 million. In addition, we made payments of $1.6 million on our term loan facility.

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During the nine months ended September 30, 2017, net cash provided by financing activities was $3.9 million. During the course of the first nine months of the year, we raised, $5.1 million, net, in a series of convertible notes payable financing before we closed our Series D issuance of preferred stock in December 2017. In addition, we made payments of $1.2 million on our term loan facility.

During the nine months ended September 30, 2018, net cash provided by financing activities was $5.5 million. Financing activities for the first nine months of the year, principally relate to additional borrowings of $7.7 million on our amended term loan facility and repayments of $2.0 million of principal on the term loan facility.

Funding Requirements

We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we advance the pre-clinical activities and clinical trials of our product candidates in development. In addition, upon the closing of this offering, we expect to incur additional costs associated with operating as a public company.

Our expenses will also increase as we:

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pursue the clinical development of our most advanced product candidates, CNTX-4975;

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continue the research and development of our other product candidates;

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seek to identify and develop additional product candidates;

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seek marketing approvals for any of our product candidates that successfully complete clinical development;

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develop and expand our sales, marketing and distribution capabilities for our product candidates for which we obtain marketing approval;

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scale up our manufacturing processes and capabilities to support our ongoing pre-clinical activities and clinical trials of our product candidates and commercialization of any of our product candidates for which we obtain marketing approval;

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maintain, expand and protect our intellectual property portfolio;

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expand our operational, financial and management systems and increase personnel, including personnel to support our clinical development, manufacturing and commercialization efforts and our operations as a public company; and

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increase our product liability and clinical trial insurance coverage as we initiate and continue to conduct our clinical trials and commercialization efforts.

As of December 31, 2017, we had cash and cash equivalents of $60.7 million and as September 30, 2018 our cash and cash equivalents were $42.1 million. We believe that our existing cash and cash equivalents as of September 30, 2018, will enable us to fund our operating expenses and capital expenditure requirements into the third quarter of 2019, without giving effect to any anticipated proceeds from this offering. If we are unable to raise sufficient funding in 2018 or beyond, we may be unable to continue to operate. We believe that the anticipated net proceeds from this offering, together with our existing cash and cash equivalents, will enable us to fund our operating expenses and capital expenditure requirements into the third quarter of 2020. We have based these estimates on assumptions that may prove to be wrong, and we could utilize our available capital resources

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sooner than we expect. In its report on our financial statements for the year ended December 31, 2017, our independent registered public accounting firm included an explanatory paragraph stating that our recurring losses from operations since inception and required additional funding to finance our operations raise substantial doubt about our ability to continue as a going concern. See “Risk Factors—Risks Related to Our Financial Position and Need for Additional Capital—Our recurring losses from operations could continue to raise substantial doubt regarding our ability to continue as a going concern. Our ability to continue as a going concern requires that we obtain sufficient funding to finance our operations.”

Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical drugs, we are unable to estimate the exact amount of our working capital requirements. Our future funding requirements will depend on many factors, including:

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the number and characteristics of the product candidates we pursue;

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the scope, progress, results and costs of researching and developing our product candidates, and conducting pre-clinical studies and clinical trials;

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the timing of, and the costs involved in, obtaining regulatory approvals for our product candidates;

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the timing of, and costs involved in, manufacturing our drug candidates and any drugs we successfully commercialize;

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our ability to establish and maintain strategic collaborations, licensing or other arrangements and the financial terms of such agreements;

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delays that may be caused by changing regulatory requirements;

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cost and timing of hiring new employees to support our continued growth;

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the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcome of such litigation; and

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the timing, receipt and amount of sales of, or milestone payments related to or royalties on, our current or future product candidates, if any.

Until such time, if ever, as we can generate product revenue sufficient to achieve profitability, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaboration agreements, other third-party funding, strategic alliances, licensing arrangements or marketing and distribution arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through other third-party funding, collaborations agreements, strategic alliances, licensing arrangements or marketing and distribution arrangements, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market products or product candidates that we would otherwise prefer to develop and market ourselves.

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Contractual Obligations and Commitments

The following table summarizes our contractual obligations as of December 31, 2017 and the effects that such obligations are expected to have on our liquidity and cash flows in future periods:


	Payments Due by Period
	Total		Less Than 1 Year		1 to 3 Years		4 to 5 Years		More than 5 Years
	(in thousands)
Operating lease commitments(1)	$	3,908	$	578	$	1,191	$	1,237	$	902
Loan payable(2)		2,317		1,679		638		—		—

Total	$	6,225	$	2,257	$	1,829	$	1,237	$	902

(1)	Amounts in the table reflect payments due for our lease of office space in Boston, Massachusetts under an operating lease agreement that, as amended, expires in 2024.

(2)	Amounts in the table reflect the contractually required principal and interest payments payable and end of term charge pursuant to our term loan facility on $2.0 million outstanding as of December 31, 2017 and does not give effect to any subsequent repayments or borrowings thereunder.

The contractual obligations table does not include any potential contingent payments upon the achievement by us of specified clinical, regulatory and commercial events, as applicable, or patent prosecution or royalty payments we may be required to make under license agreements we have entered into with various universities or partners pursuant to which we have in-licensed certain intellectual property, including the BI Agreement. We have excluded these potential payments in the contractual obligations table because the timing and likelihood of these contingent payments are not known. See “Business—License Agreements” for additional information about these license agreements, including with respect to potential payments thereunder.

We enter into contracts in the normal course of business with CROs for clinical trials, pre-clinical research studies and testing and other services and products for operating purposes. These contracts generally provide for termination upon notice, and therefore we believe that our non-cancelable obligations under these agreements are not material.

On June 27, 2018, we entered into a second amendment to the loan and security agreement with SVB. As of September 30, 2018, we had $7.7 million of borrowings outstanding under our amended term loan facility. See “—Liquidity and Capital Resources” for additional information about our amended term loan facility, including with respect to payments thereunder.

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the Securities and Exchange Commission.

Recently Issued and Adopted Accounting Pronouncements

We have reviewed all recently issued standards and have determined that, other than as disclosed in Note 3 to our financial statements appearing at the end of this prospectus, such standards will not have a material impact on our financial statements or do not otherwise apply to our operations.

Quantitative and Qualitative Disclosures about Market Risks

We are exposed to market risk related to changes in interest rates. As of September 30, 2018, our cash, cash equivalents consisted of cash and money market funds. Our primary exposure to market risk is interest

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income sensitivity, which is affected by changes in the general level of U.S. interest rates. However, because of the short-term nature of the instruments in our portfolio, an immediate 10% change in market interest rates would not have a material impact on the fair market value of our investment portfolio or on our financial position or results of operations.

As of September 30, 2018, we had $7.7 million of borrowings outstanding under our amended term loan facility. The term loan facility bears interest at a floating rate per annum equal to the greater of 3.5% or the prime rate less 1.25%. Based on the $7.7 million of principal outstanding as of September 30, 2018, an immediate 10% change in the prime rate would not have a material impact on our debt-related obligations, financial position or results of operations.

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BUSINESS

Overview

Pain is a protective reaction that alerts the body to the presence of actual or potential tissue damage so that necessary corrective responses can be mounted. The National Institutes of Health, or NIH, defines chronic pain as pain that persists beyond the normal healing time of an injury or that persists longer than three months. As of 2011, over 40 million adults in the United States and over 1 billion people worldwide suffer from chronic pain each year. This epidemic exacts a tremendous cost in terms of direct treatment and rehabilitation expenditures, lost worker productivity, prevalent addiction to opioid-based drugs, and emotional and financial burden for patients and their families. The World Health Organization, or WHO, and the European Commission estimate the worldwide prevalence of osteoarthritis, or OA, alone will impact 130 million people by 2050, of whom 40 million will be severely disabled by the disease. According to an Institute of Medicine of the National Academies reports, pain is a significant public health problem in the United States that costs society between $560 and $635 billion annually. Despite the magnitude of the pain problem, innovation in the development of therapeutic solutions has been largely absent. Since 2010, there have been 19 approvals by the U.S. Food and Drug Administration, or FDA, for the treatment of pain, of which 11 were opioid variants, one was an extended release generic corticosteroid, five were variants of aspirin, and two were variants of other existing drugs. We are developing a portfolio of novel product candidates designed to overcome the limitations of current treatment options for chronic pain and present patients and physicians with better and safer treatment alternatives.

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onset of pain relief observed by second day;

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durable pain relief, lasting six months after a single treatment;

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improvement in knee stiffness;

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improvement in knee function;

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no detectable systemic exposure of CNTX-4975 by 24 hours after IA injection; and

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an observed adverse event, or AE, profile similar to the placebo group based on the overall incidence of AEs and distribution of specific AEs.

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repeat dosing. We expect to report topline results from OA-303 in the second half of 2019 and VICTORY-2 in the second half of 2020. If the results of these trials are positive, we plan to submit a new drug application, or NDA, in the United States, and a marketing authorization application, or MAA, in Europe, in the second half of 2021. CNTX-4975 was granted Fast Track Designation by the FDA in January 2018 for the treatment of moderate to severe pain associated with knee OA. We hold worldwide commercialization rights to CNTX-4975, and, if successfully developed and approved, we anticipate initial commercial sales in 2022. Issued and pending patent applications are expected to provide protection for CNTX-4975 through 2038.

The pharmaceutical industry is highly competitive and we, along with our competitors, face a number of regulatory and technical challenges. Before obtaining marketing approval from regulatory authorities for the sale of any product candidate, we must complete pre-clinical and clinical development to demonstrate the safety and efficacy of our product candidates. However, we believe that several factors have positioned us to be a leader in the treatment of chronic pain, including our:

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Extensive Clinical Data—We have generated Phase 2 clinical data for our most advanced product candidate, CNTX-4975, that showed onset of response by the second day after administration, a significant reduction from baseline knee OA pain and a clinically meaningful difference compared to the placebo group in subjects with moderate to severe knee OA pain, and the potential for six months of significant pain reduction with a single IA injection. Additionally, in clinical trials to date, the safety profile of CNTX-4975 has been similar to placebo and has shown limited systemic exposure of CNTX-4975 after an IA injection.

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Significant Management Team Expertise—We have assembled a senior management team with over 135 years of collective experience in leadership positions at companies such as Abbott, Celgene, Merck, Pfizer and Roche, with substantial product development experience and a successful track record of navigating complex drug development and regulatory pathways. Our clinical team has led or contributed to the development of 20 products, including Rituxan for rheumatoid arthritis, Otezla and Actemra, all three of which have achieved multi-billion dollars in annual sales.

Since our inception in 2013, we have raised approximately $148.5 million in private financings. Our key investors include New Enterprise Associates, InterWest Partners, Quan Capital Management, Arrowmark Partners, Clough Capital Partners and 6 Dimensions Capital.

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Our Product Candidates

LOGO

Our Strategy

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Advance the development of our lead product candidate, CNTX-4975, designed for the treatment of patients with moderate to severe chronic pain associated with knee OA. There are limited therapeutic options available for patients with moderate to severe knee OA and we believe that CNTX-4975 has the potential to transform the standard of care to a once every-six-months IA injection to substantially improve moderate to severe knee OA pain. In the first quarter of 2018, we began enrolling subjects in VICTORY-1, the first of two planned pivotal Phase 3 registration trials for CNTX-4975, and we expect to report topline results in the first quarter of 2020. In the second half of 2018, we began enrolling subjects in OA-303, an open label safety trial with approximately 850 subjects, and in VICTORY-2, the second pivotal Phase 3 registration trial for CNTX-4975 that includes repeat dosing. We expect to report topline results from OA-303 in the second half of 2019 and VICTORY-2 in the second half of 2020. In January 2018, the FDA granted Fast Track Designation for CNTX-4975 for the treatment of moderate to severe pain associated with knee OA. If successfully developed and approved, we anticipate initial commercial sales in 2022.

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Leverage our management team background and expertise. We have assembled a management team with extensive experience in product development. Our Chief Medical Officer is a rheumatologist with 28 years of drug development experience, our Chief Scientific Officer is a neurosurgeon who also led a pain research laboratory, and our Chief Development Operations Officer has 22 years of development experience, including participation in the development of four approved pain therapies. Their experience with both patients and drug development provides them with deep insight into chronic pain as well as the changing treatment landscape. We believe this experience enables us to better understand unmet medical needs in chronic pain and design and execute efficient clinical trial programs and regulatory strategies.

Chronic Pain

The NIH defines chronic pain as pain that persists either beyond the normal healing time of an injury or longer than three months. Chronic pain represents a significant public health crisis. In the United States, chronic pain affects approximately 40 million adults annually, which is greater than the annual prevalence of each of heart disease, cancer and diabetes. It is also estimated that pain leads to between $560 and $635 billion in healthcare and lost productivity costs each year. Chronic pain is the leading cause of long-term disability in the United States, and approximately 23 million adults in the United States experience severe pain over a three-month period. Globally the prevalence of chronic pain is even larger, with over 1 billion people worldwide affected each year.Common types of chronic pain include those of neuropathic and inflammatory origin and may

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involve the skin, muscles, joints, bones, tendons, ligaments, and other soft tissues. Chronic pain is associated with a variety of clinical conditions including, but not limited to, arthritis, spinal conditions, cancer, fibromyalgia, diabetes, surgical recovery, visceral injury and general trauma.

Pain is a necessary protective reaction that alerts the body to the presence of actual or potential tissue damage so that necessary corrective responses can be mounted. Pain is signaled by specialized cells in the peripheral nervous system called nociceptors, or pain-sensing fibers. These pain-sensing fibers normally transmit information about stimuli that approach or exceed harmful intensity from different locations in the body to the brain, which registers this information as a sensation of pain. In the case of tissue injury due to trauma or infection, pain accompanies the associated inflammation, persists for the duration of the inflammatory response, and aids healing by inhibiting use of the affected body part.

Pain also can modify the central nervous system such that the brain becomes sensitized and registers more pain with less provocation. This is called central sensitization. When central sensitization occurs, the nervous system goes through a process called wind-up and gets regulated in a persistent state of high reactivity. This persistent, or up-regulated, state of reactivity lowers the threshold for what triggers the sensation of pain and can result in the sensation of pain even after the initial injury might have healed.

When there is dysfunction in pain signaling, injury to the nervous system, or an unhealed injury, pain becomes no longer just a symptom, but a disease in itself.

Current Therapeutic Approaches to Treating Chronic Pain and Their Limitations

NSAIDs

Some of the most widely used therapies to treat chronic inflammatory pain are non-steroidal anti-inflammatory drugs, or NSAIDs. NSAIDs can have significant side effects that include gastrointestinal bleeding, gastritis, high blood pressure, fluid retention, kidney problems, heart problems and rashes. On April 7, 2005, the FDA announced a decision to require boxed warnings of potential cardiovascular risk for all NSAIDs.

Corticosteroids

Corticosteroids, or steroids, also possess anti-inflammatory properties and are commonly used in the practice of pain management, either systemically or locally, depending on the condition. Steroids work by decreasing inflammation and reducing the activity of the immune system. While steroids are commonly used, they may have numerous and serious side effects. These side effects may include allergic or hypersensitivity reactions, increased risk for infection, adrenal insufficiency, diabetes or decreased glucose tolerance, hypertension, loss of bone density, and loss of joint cartilage volume. In addition, steroids should not be administered when there is an infection present because steroids can inhibit the body’s natural infection-fighting immune response. Also, if a joint is already damaged or is subject to chronic deterioration, IA steroid injections are not likely to provide any long-term restorative benefit. For the above reasons, IA steroid injections are generally recommended to be administered no more often than every six weeks and not more than three to four times per year.

Opioids

Opioids are some of the most widely prescribed therapeutics for chronic and acute pain, and sales of these drugs have quadrupled between 1999 and 2010.According to a National Survey on Drug Use and Health report, in 2016 more than one third of adult Americans were prescribed opioids and 230 million opioid prescriptions were written that year in the United States. Opioids act by binding to specific receptors located on neurons in both the central and peripheral nervous system throughout the body including in the brain, spinal cord and other nervous tissue. Although they can be effective in providing pain relief, the increased medical use of

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opioids has been accompanied by an increase in the abuse and misuse of prescription opioids. In addition, for most patients, chronic opioid use is a poor option due to an intolerance to the many side effects, including nausea, vomiting, drowsiness and constipation, and the propensity for opioids to become less effective with long-term use. According to the Centers for Disease Control and Prevention, or CDC, almost two million individuals abused or were dependent on prescription opioids in 2014. CDC figures show that the number of opioid-related overdose deaths has quadrupled between 1999 and 2010, and currently approximately 40% of opioid overdose deaths in the United States involve a prescription opioid. This increase in prescription opioid-related deaths in the United States prompted President Trump to declare the opioid crisis a national Public Health Emergency in October 2017. Opioid abuse has become an epidemic in the United States, ranking as the nation’s second most prevalent illegal drug problem. These major issues create the need to find new approaches to treating chronic pain.

Our Approach to Treating Chronic Pain

The unmet medical need for treating chronic pain reflects the historic failure to develop novel classes of analgesics with comparable or greater efficacy, an acceptable level of adverse effects and a lower abuse liability than those currently available. Some of the reasons for this include the heterogeneity of chronic pain and its related conditions, and the complexity and diversity of the underlying pathophysiological mechanisms for pain. However, recent advances in the understanding of the neurobiology of pain are beginning to offer opportunities to identify new drug targets and develop new therapeutic strategies.

We have taken an innovative and targeted approach to identifying treatments for chronic pain that leverages our understanding of the pathophysiology of pain. Pain is variable—for example, it can be inflammatory or neuropathic in nature, and it may be localized to a specific area of the body or it may be generalized throughout. We believe that the most effective way to treat chronic pain is through therapies that specifically target the origin of the pain signal. We strive to maximize each of our product candidate’s potential based on its unique mechanism of action related to the origin of the pain signal.

Osteoarthritis and Chronic Pain

OA is the most common joint disease in the United States. According to the CDC, OA currently affects more than 30 million Americans. OA is the highest cause of work loss in the United States.

OA occurs when cartilage, the tissue that envelops the structural bones within a joint, gradually deteriorates. Cartilage has a smooth, slippery exterior that allows bones to glide over each other with little friction as the joint flexes and extends. In individuals with OA, the cartilage breaks down, thus causing pain, swelling and problems moving the joint. OA also results in bony changes of the joints, such as bone spurs, deterioration of tendons and ligaments, and various degrees of joint inflammation, known as synovitis. OA is a chronic and progressive disease. OA can affect any joint, but it occurs most often in knees, hips, lower back and neck, small joints of the fingers and the bases of the thumb and big toe. There is no cure for OA and no approved therapy for reversing cartilage degradation. As a result, current treatments are intended to address symptoms, including pain, and improve function.

Osteoarthritis of the Knee

The primary symptoms of OA are pain, joint stiffness and a lack of patient mobility. As knee OA progresses, the joint lining becomes inflamed and the structure of the knee changes. Cartilage erodes exposing bone and nerve fibers. Patients experience inflammatory pain and discomfort moving the joint. The pain is often severe, and can be debilitating, lead to depression, increase the risk for obesity, diabetes, hypertension and cardiovascular disease, and prevent people from continuing employment or carrying out daily activities.

Knee OA is the most common form of OA. It is currently estimated that approximately 18 million people in the United States have been diagnosed with knee OA, and that number is expected to grow to in excess

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of 30 million by 2030. Of these patients, over 75% suffer from moderate to severe disease. Each year there are approximately 581,000 patients who are newly diagnosed with knee OA, and we expect this number to rise with the aging of the U.S. population and the increase in the prevalence of obesity. The lifetime risk is of developing knee OA is 45%. While the prevalence of knee OA increases with each decade of life, with the annual incidence of knee OA being highest between age 55 and 64 years old, it is estimated that approximately two million people under the age of 45 have knee OA. Further, more than half of all people with knee OA are younger than age 65 and will likely live for three decades or more after diagnosis.

Finally, among patients with knee OA, approximately 60% have unilateral knee OA and 40% have bilateral knee OA. Of those patients with unilateral knee OA, a substantial portion of those patients will go on to develop bilateral knee OA. A 12-year prospective study of patients suffering from chronic knee pain demonstrated that 70% of the patients had radiographic evidence of bilateral knee OA at year 12, compared to only 26% at baseline. The development of bilateral knee OA could result in increased pain and further functional decline over time.

Current Treatments For Osteoarthritis of the Knee

Since there is no cure for knee OA, the primary goals of current treatments are to control symptomatic pain, to continue exercise that maintains muscle mass that supports the knee, to avoid the inactivity which causes muscle loss, and associated comorbidities, including obesity, hypertension, depression and diabetes, and to delay progression to total knee replacement, or TKR. OA is a progressive condition, and over time, the pain often becomes too much for the patient to manage and can no longer be controlled through medication and physical therapy. When the patient can no longer tolerate the pain and disability, a surgical procedure called arthroplasty can be performed which replaces the natural joint with an artificial joint. On average a patient will spend 19 years attempting to manage chronic pain from knee OA before resorting to surgery. It is estimated that 54% of knee OA patients will eventually undergo TKR. As a greater number of younger patients develop knee OA, joint replacement becomes more problematic, given the expected need for one or more surgical revisions of the joint replacement over the course of these patients’ lifetimes. As a result, there is a large and growing need for safe and effective analgesic treatments that can be used for the long-term management of pain associated with knee OA.

Osteoarthritis pain is a patient-reported measure and is generally referenced to their average daily pain, pain while walking, WOMAC index, or the WOMAC pain subscale, with a high degree of correlation across measurement instruments. Scales for scoring pain have been validated and include a 5-point adjectival scale, a 0-100 mm visual analog scale, or VAS, and an 11-point numeric rating scale, or NRS. The results of clinical trials for NSAIDs, immediate release and sustained release corticosteroids and HA presented below were evaluated on 11-point NRS, 0-100 mm visual analog scale or 5-point adjectival scale. The results of clinical trials that were evaluated on a scale other than 11-point NRS were standardized to an 11-point NRS, whereby each score was divided by the applicable scale maximum and then multiplied by 10, the maximum score possible on the 11-point NRS. Response to treatment may be reported as the actual pain score, the change from baseline pain, the change from baseline pain compared to placebo, or the standardized effect size, which is the difference in effect between active and placebo divided by the pooled standard deviation. An advantage of the standardized effect size is that it accounts for variation across scoring scales and individual studies

The choice of treatment in knee OA is guided primarily by the level of pain severity defined as, mild, moderate, or severe. Moderate pain in patients is graded 4-6 on an 11-point NRS. Patients suffering from severe knee OA have pain scores in the range of 7-10. Patients with moderate disease typically have observable cartilage erosion that manifests as a narrowing of the space between the bones of the knee joint on X-ray imaging. These patients are likely to experience frequent pain, joint stiffness and swelling and decreased function. Patients who progress to severe OA exhibit a dramatically reduced joint space on radiographic or magnetic resonance imaging and have severe joint stiffness that can progress to immobility.

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Over time, patients with knee OA tend to become inactive due to pain and joint stiffness and reduced function. In turn, this leads to weight gain that can exacerbate the OA by increasing the weight load on the joint and lack of mobility that can cause deterioration of the muscles supporting the joint. Therefore, part of the treatment regimen for knee OA is to keep the patient active to counter these effects.

Figure 1 below represents the current treatment paradigm for a patient diagnosed with knee OA.

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Figure 1. Current Knee OA Treatment Paradigm

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Treatments for Mild Knee OA Pain. In early disease, treatment begins with over the counter medications and non-pharmacologic therapy, including exercise, weight control and physical therapy. As the disease progresses and pain becomes more symptomatic, physicians prescribe stronger pharmacologic therapy, beginning with acetaminophen and progressing to oral or topical NSAIDs or certain classes of antidepressants and anticonvulsants believed to have analgesic properties.

Although NSAIDs are non-narcotic, they have limited analgesic efficacy. Trials with common NSAIDs have reported a reduction from baseline pain of 1.0 to 2.7 on an 11-point NRS, a change from baseline pain compared to placebo of 0.09 to 0.51, and a standardized effect size of 0.07 to 0.52. Use of NSAIDs can lead to gastric complications, ulcers, bleeding, cardiovascular events, such as heart attack, kidney damage and failure, increased risk for hospitalization, and death. Further, antidepressants and anticonvulsants may have a role in worsening depression and the emergence of suicidality in certain patients.

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Treatments for Moderate Knee OA Pain. When NSAIDs prove inadequate to manage pain and improve joint mobility, physicians generally transition patients to IA injections. According to IQVIA, each year over five million knee OA patients in the United States receive an IA injection treatment. Often, a patient will first receive an IA of a corticosteroid, or steroids. Steroids work by decreasing inflammation which can, in turn, reduce pain. Steroids generally have a short duration of effect and have to be administered frequently to provide sustained pain relief. Even when sustained release technology is applied to steroids, clinical trial results demonstrate that pain relief only lasts up to three months. Trials with immediate release and sustained release corticosteroids have reported similar reductions from baseline pain of 2.9 to 3.12 on an 11-point NRS, a change from baseline pain compared to placebo of 0.7 to 0.98, and a standardized effect size of 0.09 to 0.61. A patient receiving a sustained release steroid still may need to return for injection up to four times

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per year in order to achieve a year of pain relief. However, generally IA steroids are used for short term symptom relief. Further, persistent exposure of joint tissues to steroids has been associated with detrimental effects. A recent clinical trial in patients with knee OA showed that subjects receiving two years of IA steroid had significantly greater cartilage volume loss and no significant difference in knee pain, as compared to those subjects who received IA saline. In the United States, the cost to the patient per course of ZILRETTA^®, a sustained release corticosteroid, is approximately $680 for a single injection over a three month treatment period, which if annualized, would be a $2,700 annual treatment cost.

Another IA therapy frequently used in patients with knee OA is injection of a viscoelastic substance called hyaluronic acid, or HA. HA’s viscosity acts as a lubricant in the joint and may confer limited analgesia by reducing friction in the knee joint. Depending on the product, HA is administered as a series of multiple injections that may be repeated for a total of up to six injections within six months, or as a single injection intended to provide relief for up to six months. Trials with HA have reported reduction from baseline pain of 2.18 to 2.94 on an 11-point NRS, a change from baseline pain compared to placebo of less than 0.5 to 0.75, and a standardized effect size of 0.02 to 0.63. In 2013, the American Academy of Orthopedic Surgeons, or AAOS, revised its 2009 clinical practice guideline on the use of HA in patients with knee OA. Based on a meta-analysis of 14 clinical trials assessing HA injections for knee OA, AAOS concluded that HA did not meet the minimum clinically important improvement thresholds. Despite this, worldwide sales of HA in 2016 were approximately $1 billion, with a cost to the patient per course of treatment in the United States ranging from $600 to $1,600. By 2020, the U.S. market for HA is projected to reach over $1.2 billion in revenues.

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Treatments for Severe Knee OA Pain. When patients progress to a state of severe OA, they have often exhausted therapeutic options, including oral therapies, IA injections, articular cartilage grafts, and experimental procedures such as stem cell therapy and platelet rich plasma injections. In a 2014 paper that reviewed Medicare Current Beneficiary Survey Cost and Use files, up to 40% of patients with knee OA received an opioid as part of their treatment. When the pain becomes unbearable and can no longer be controlled therapeutically, many patients elect to undergo TKR. In 2012, there were more than 700,000 TKR surgeries in the United States and this figure is projected to grow to more than 3 million by 2030. TKR is invasive, costly and short-term recovery requires 12 weeks of physical therapy, while long-term recovery can take up to six months. On average an artificial knee joint will last 15 to 20 years before a revision, or replacement of the original artificial joint, will be required. Reasons for revision surgery include mechanical loosening, infection, fracture, instability, wear and breakage of the implant. Consequently, young patients who receive a TKR will likely need a second surgery later in life, which will carry a higher risk of complications. Certain patients are ineligible for a TKR based on their weight or general medical or physical condition. The cost for a TKR varies widely, ranging from approximately $15,000 to over $50,000. Consequently, deferring surgery for as long as possible is a key goal of patients and payors.

As a result of these issues, the current pharmacologic regimens of treatment generally do not provide long term, safe relief from chronic pain associated with knee OA. We have not conducted, nor do we believe we are required to conduct, any head-to-head trials comparing CNTX-4975 to other approved or experimental OA pain management drugs, including trials with NSAIDs, steroids or HA. Any such head-to-head trial, if conducted, may show that CNTX-4975 is not more effective than any of such other drugs.

We believe that there is a significant unmet need for a novel therapy that can provide long term, durable analgesic effect in a safe manner to the following patient populations:

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patients with moderate to severe knee OA pain;

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patients who have found available treatments to be inadequate because of safety issues associated with chronic use and progressive lack of durable analgesic effect; and

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patients who have tried and failed non-surgical options, including IA injections, but either do not qualify for surgery due to age, complicating comorbidity or weight, or choose not to proceed with surgery.

We believe CNTX-4975 may have the potential to better address these unmet needs.

CNTX-4975 for the Treatment of Moderate to Severe Chronic Pain Associated with Knee OA

CNTX-4975—Background

We are developing CNTX-4975 as a synthetic, ultra-pure IA injection of trans-capsaicin for the treatment of moderate to severe pain associated with knee OA. CNTX-4975 is an injectable product candidate that is designed to be administered directly into the joint where the pain stimulus originates. In a Phase 2 randomized, double-blinded, placebo-controlled clinical trial in 175 subjects with moderate to severe pain due to knee OA, we observed that compared to placebo, a single IA injection of 1.0 mg of CNTX-4975 demonstrated statistically significant (p<0.0001 through the week 12 primary endpoint), onset of activity by second day and significant at week 1 (p=0.0237) and durable (p=0.0002 through week 24) reduction in pain, as measured by the change from baseline pain while walking on a flat surface from question A1 of the WOMAC index, and showed an AE profile similar to the placebo group. In the first quarter of 2018, we began enrolling subjects in VICTORY-1 the first of two planned pivotal Phase 3 registration trials for CNTX-4975. We began enrolling subjects in OA-303, an open label safety trial with approximately 850 subjects, and for VICTORY-2, the second pivotal Phase 3 registration trial for CNTX-4975 that includes repeat dosing, in the third quarter of 2018. In January 2018, the FDA granted Fast Track Designation for CNTX-4975 for the treatment of moderate to severe pain associated with knee OA.

Nociceptors are specialized nerve fibers that sense pain and itch as a result of injury or inflammation in tissues. In the case of knee OA, eroded cartilage exposes nociceptors in the exposed subchondral bone. In addition, in an arthritic knee joint, nociceptors are activated in the adjacent inflamed soft tissue of the joint capsule, meniscus and other structures. As the knee joint deteriorates with OA, there is potential for greater nociceptor activation, and therefore greater pain. The activation of the transient receptor potential vanilloid subtype 1, or TRPV1, a receptor selectively expressed on pain sensing nociceptors, is an initiator of a pain stimulus. The active ingredient in CNTX-4975 is trans-capsaicin, an ultrapure, synthetically-derived form of capsaicin, the pungent compound found in chili peppers that has analgesic properties. Capsaicin is a highly selective activator, or agonist, for the TRPV1 receptor. When given in a sufficient concentration, the action of capsaicin on the TRPV1 receptor induces a localized, reversible degeneration of the pain sensing fibers. This degeneration begins within minutes and prevents the pain sensing fibers from sending a pain signal, whether from stimulation of TRPV1 or other pain receptors. As a result, there is relief from pain until these nociceptors regenerate. Consequently, the analgesia conferred by trimming back the pain sensing fibers, lasts for weeks to months, depending on the level of exposure, until these nerve fibers regenerate and return to their normal functional state. TRPV1 is not present on sensory nerve fibers that mediate touch, pressure, or proprioception or motor nerve fibers, so these functions are not affected. Also, not all pain fibers express the TRPV1 receptor. Thus, capsaicin does not reversibly trim all pain fibers. Therefore, we believe that if there is progressive or new trauma to the knee, newly exposed or activated nociceptors will still signal a pain response. We describe the novel and unique mechanism by which CNTX-4975 is designed to function as “molecular neurosurgery,” where the trans-capsaicin is designed to trim back only the pain sensing nociceptive fibers, while leaving the other nerve fibers, such as those sensing position, touch and pressure, intact and functioning normally.

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Figure 2 below depicts this selective inactivation of pain fibers by CNTX-4975.

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Figure 2. Illustration of Pain Fiber Inactivation by CNTX-4975

Exposure to capsaicin can induce a transient burning or stinging pain sensation. The level of this pain varies widely between individuals. In the initial clinical development of CNTX-4975 it was observed that this activation pain was transient, peaking within the first 30 minutes after IA injection, and typically resolving over an interval of one to two hours. In clinical trials, we have decreased this pain using a proprietary technique which involves controlled cooling of the joint in combination with IA administration of lidocaine before injection of CNTX-4975.

Data generated to date have shown an IA injection of 1.0 mg of CNTX-4975 to have an AE profile similar to placebo based on the incidence of AEs and distribution of specific AEs. This is due in part to CNTX-4975 having shown a short duration of systemic drug exposure, which we believe may reduce the potential for systemic side effects. In clinical trials, the maximum systemic exposure in blood plasma after a 1.0 mg IA injection has been less than the level following ingestion of a meal prepared with capsaicin as a spice. By eight hours after injection, the plasma levels of CNTX-4975 have fallen below the limit of quantitation.

We believe that CNTX-4975, if successfully developed and approved, will be positioned as a non-opioid and non-addictive IA injectable for patients with moderate to severe knee OA pain. We believe that CNTX-4975 has the potential provide substantial pain relief for moderate to severe knee OA pain because of the following attributes shown in the Phase 2 clinical trial, which we refer to as the TRIUMPH trial:

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onset of response seen by second day with statistically significant (p=0.0237) separation for the 1.0 mg dose compared to placebo observed at one week after CNTX-4975 injection;

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potential for six months of significant pain reduction after a single treatment as compared with placebo (p=0.0002 through week 24);

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a decrease of 4.4 points on an 11-point NRS at week 12, and a clinically meaningful difference compared to the placebo group with a separation of 1.5 points at week 12; and

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no detectable systemic exposure of CNTX-4975 by 24 hours after IA injection; and

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an observed adverse event, or AE, profile similar to the placebo group based on the overall incidence of AEs and distribution of specific AEs.

In 2018, we commissioned quantitative market research through a survey of 391 physicians in four specialty areas in the United States likely to use CNTX-4975, if approved: orthopedic surgery, rheumatology, sports medicine and pain management. Physicians were presented with a targeted product candidate profile that had been generalized from results from the Phase 2 clinical trial of CNTX-4975 to manage moderate to severe knee OA pain patients who have failed prior therapies, which profile may differ from CNTX-4975, if approved. This profile included a description of the mechanism of action, onset of activity within one week of treatment, approximately six months duration of activity, and less than 24 hours of systemic exposure to drug after injection. Efficacy was described based on approximately 70% of patients at three months and 40% of patients at six months maintaining a pain score of less than 4 on an 11-point NRS and the extrapolation from the responder analysis plots at 12 weeks, whereby approximately 70% of patients reported a 50% or greater reduction in pain, 50% of patients reported a 70% or greater reduction in pain, and 25% of patients reported a 90% or greater reduction in pain. Safety results were described as similar to the placebo group. The treatment administration was described as an injection once every six months as an in-office procedure, that procedure pain 30 minutes after injection was similar to baseline knee OA pain, and that the procedure involved about 10 minutes of professional time for injections and 60 to 75 minutes for the patient to cool the knee. According to the survey, 99% of physicians believed that CNTX-4975 addresses an unmet medical need for patients with knee OA. 77% of physicians indicated that a drug with the profile presented would be a top three choice for managing moderate knee OA pain and 71% indicated the same for severe knee OA pain. Regarding the administration procedure, 74% of physicians were neutral to positive towards the procedure. The weighted average across physician specialty groups indicated they would use a drug with the profile presented in 40% of their moderate to severe knee OA patients.

CNTX-4975—Clinical Development

TRIUMPH Trial

In December 2016, we announced results from our Phase 2 TRIUMPH trial. The study evaluated the safety and tolerability of a single injection of CNTX-4975 in subjects with chronic, moderate to severe OA knee pain over a period of 24 weeks. A total of 175 subjects were enrolled at 16 sites in the United States.

The trial was designed to measure the efficacy and tolerability of CNTX-4975 when administered as a single injection. In the intent to treat, or ITT, population, 175 subjects were divided into 70 subjects who received a placebo injection, 34 subjects who received a dose of 0.5 mg of CNTX-4975, and 71 subjects who received a dose of 1.0 mg of CNTX-4975. In the modified intent to treat, or mITT, population, 172 subjects were divided into 69 subjects who received a placebo injection, 33 subjects who received a dose of 0.5 mg of CNTX-4975, and 70 subjects who received a dose of 1.0 mg of CNTX-4975. The mITT population excluded three subjects from the efficacy analysis prior to unblinding for the following reasons: one subject entered the trial at two centers, received two IA injections, and was initially counted as two separate subjects, and one subject received trial medication but left the trial site and could not be contacted thereafter. There was no difference in the results between analyses with the ITT and mITT populations. A total of 157 subjects, or 90% of all subjects who were randomized, completed the full 24-week trial.

Key inclusion criteria for the trial included: that the subjects must have been between 45 and 80 years of age with a body mass index, or BMI, less than or equal to 45 kg/m²; that the subjects must have had moderate to

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severe pain in the index knee associated with OA that was stable for a minimum of two months prior to screening and evidence, based on radiography, of chronic OA with a Kellgren-Lawrence grade of 2, 3, or 4, with grade 4 limited to 10 percent of the study population; and that the subjects must have had a certain mean pain score based on their pain while walking from the WOMAC index in the index knee over the seven days prior to study drug injection. In addition, all subjects must have had a therapeutic failure, such as inadequate or no relief or an adverse reaction that resulted in their stopping at least one previous treatment, and/or a contraindication to standard of care therapy.

Key exclusion criteria for the trial included: previous index TKR or open surgery of the index knee within 12 months, or arthroscopic surgery of the index knee within three months prior to commencing the trial; any pain in the index knee due to joint disease other than OA; any other chronic pain that requires use of analgesic medications; periarticular knee pain from any other cause; use of topical capsaicin or corticosteroid injection in the index knee, or IA viscosupplementation, within 90 days prior to commencing the trial; and pain in the non-index knee that was greater than 3 when walking. For rescue pain relief, subjects were allowed concomitant treatment with recommended daily doses of acetaminophen, ibuprofen, naproxen, celecoxib, meloxicam, or tramadol.

The primary variable was change from baseline pain while walking, which is part of the WOMAC index. The WOMAC index is the most widely used evaluation standard for assessment in arthritis research. The WOMAC index consists of a proprietary set of standardized questions designed to evaluate the condition of subjects with knee OA, including pain, stiffness, and physical functioning of the joint. Specifically, the WOMAC index measures the following:

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Part A: Pain during walking, using stairs, in bed, sitting or lying, and standing.

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Part B: Stiffness after first waking and later in the day.

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Part C: Physical function including stair use, rising from sitting, standing, bending, walking, getting in and out of a car, shopping, putting on and taking off socks, rising from bed, lying in bed, getting in and out of bath, sitting, getting on and off the toilet, heavy household duties and light household duties.

The primary endpoint of the trial was the change in average pain with walking on a flat surface through week 12, which corresponds to question A1 of the WOMAC index. Average pain with walking has been widely used as a primary variable in multiple clinical trials, including recently by Flexion for the approval of ZILRETTA^®. The pre-specified primary endpoint was a comparison of the change in pain in the 1.0 mg of CNTX-4975 group versus the placebo group using a statistical method known as area under the curve, or AUC, to measure the difference between the active and placebo groups through 12-weeks. This results in a standardized change from baseline score over the 12 weeks. To generate these results, subjects recorded their daily question A1 score each evening through week 12, and then weekly between weeks 12 and 24, using a 11-point NRS, with zero being “no pain” and 10 being “pain as bad as you can imagine.”

Secondary outcome measures included question A1 through 24 weeks evaluated by the AUC method, question A1 taken as an average weekly score and evaluated by a mixed model repeated measures, or MMRM, analysis at each week of the trial, knee joint stiffness and function as assessed by parts B and C of the WOMAC index, the patient global impression of change, or PGIC, the proportion of subjects improved by percent reduction from their baseline pain, and safety and tolerability. We conducted additional exploratory post-hoc analyses on the datasets, such as the impact of unilateral or bilateral knee OA, the severity of the radiographic signs of OA, and the per protocol population, or all subjects who conformed to all requirements of the protocol.

Safety monitoring occurred through week 24. Clinical laboratory parameters were assessed at screening, baseline, and weeks 12 and 24.

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For clinical trial subjects, the average baseline pain level with walking was rated as moderate to severe and was similar across the three groups with an average pain score of 7.3 on the 11-point NRS. The mean age of the subjects was 59.8 years and ranged in age from 45 to 80 years. The subjects had a mean body mass index, or BMI, of 32.7 kg/m². Commonly accepted BMI weight ranges are characterized as: 1) underweight below 18.5 kg/m²; 2) normal weight 18.5 to 25 kg/m²; 3) overweight 25 to 30 kg/m²; and 4) obese over 30 kg/m², with greater than 35 kg/m² considered morbidly obese. Many OA studies limit BMI to about 37 kg/m² because increased BMI puts more stress on the joint. In contrast, we allowed subjects to have a BMI up to 45 kg/m².

The statistical significance, based on the mITT population, was measured by the probability value, or p-value, a statistical measure which determines the risk of concluding that a difference exists when there is no actual difference.

The p-value for significance is set prior to starting the trial. For a pivotal trial, FDA requires a p-value less than or equal to 0.05, which means there is a 5% risk of concluding that a difference exists when there is no actual difference. For a non-pivotal trial, such as a Phase 2 trial, where the sample size is smaller, there is flexibility to set a different p-value. In the case of our Phase 2 TRIUMPH trial, we set the threshold p-value at or below 0.1, or a 10% risk of concluding that a difference exists when there is no actual difference. In Figure 3 below, the standardized reduction from baseline pain based on the AUC is shown through weeks 12 and 24 for each dose and placebo. Larger negative values denote greater improvement. The results demonstrated a statistically significant reduction in pain in comparison to placebo through both time points for the 1.0 mg treatment group. In the 1.0 mg treatment group the p-value was less than 0.0001 for the AUC analysis through week 12 and equal to 0.0002 through week 24.

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Figure 3. Statistically Significant Reductions in Pain Observed in Subjects Treated with 1.0 mg CNTX-4975 Compared to Placebo through Weeks 12 and 24 Based on the AUC of the WOMAC A1 Change from Baseline Pain

We also used an MMRM analysis to test the treatment effect for the average weekly change from baseline pain scores at specific time points. As shown in Figure 4 below, the onset of pain reduction occurred within days of the injection and reached statistical significance (p=0.0237) at the first statistical evaluation at week one. The maximum effect was seen at week five, and a stable, statistically significant response was

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observed for the primary endpoint at week 12 (p=0.0003) and week 24 (p=0.0667). The clinical trial data showed an absolute reduction of 4.4 points through week 12 which was a 1.5 point greater reduction in baseline pain than placebo. The results also indicated that at week 24 the reduction in pain from baseline was 3.76 points, which was a 0.9 point greater reduction in baseline pain than placebo. Based on these data, we believe that one injection every six months may be sufficient to manage moderate to severe pain associated with knee OA.

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Figure 4. 0.5 mg CNTX-4975 and 1.0 mg CNTX-4975 Change from Baseline Pain While Walking Compared to Placebo— Statistically Significant Reductions in Pain Observed in Subjects Treated with 1.0 mg CNTX-4975 Compared to Placebo at Weeks 1 to 19 and 23 to 24

The TRIUMPH trial results were also clinically meaningful. The Initiative on Methods, Measurement, and Pain Assessment in Clinical Trials, or IMMPACT, defines changes of approximately 30% to 36% to represent clinically meaningful decreases in chronic pain and a decrease of greater than 50% to represent a substantial change in pain. Standardized effect size can also be used to determine whether a result is clinically meaningful. A standardized effect size greater than 0.3 is considered clinically meaningful. For the TRIUMPH trial, the primary variable of pain while walking for the AUC analysis through week 12 and the MMRM analysis at week 12 resulted in decreases in pain while walking for the 1.0 mg dose of CNTX-4975 of 56% and 61%, respectively, based on mean reductions in pain of 4.1 and 4.4 points, respectively, and a baseline score of 7.2. Similarly, the standardized effect sizes for the AUC and MMRM analyses for the 1.0 mg dose of CNTX-4975 were 0.69 and 0.55, respectively, based on a difference from placebo of 1.49 and 1.40 and a pooled standard deviation of 2.14 and 2.55, respectively.

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The proportion of subjects improved by percent reduction from their baseline pain is a responder analysis. Responder analysis evaluation for weekly reduction from baseline pain were performed as an exploratory analysis and the values for the population achieving at least a 30%, 50%, 70% or 90% reduction were tabulated as a post-hoc analysis. As shown in Figure 5 below, at the 1.0 mg dose of CNTX-4975, 61% of subjects achieved at least a 50% reduction in pain and 44% of subjects achieved a 70% or greater reduction in pain at week 12.

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Figure 5. Post-Hoc Responder Analysis Demonstrating the Proportion of Subjects treated with 1.0 mg of CNTX-4975 Compared to Placebo that Decreased Their Pain Score by at Least 30%, 50%, 70% or 90%

In addition to the primary endpoint, the trial achieved statistical significance on its secondary endpoints. An analysis was performed for the changes from baseline in weekly average WOMAC B (knee stiffness) and WOMAC C (physical function) scores using a MMRM analysis. Overall, a 49% to 60% improvement in both knee stiffness and physical function was observed for the 1.0 mg injection of CNTX-4975, which was statistically significant at a p-value less than 0.05, compared with placebo through 16 weeks.

There were no drug-related severe adverse events, or SAEs, and the overall blinded assessment of AEs was similar to that seen with placebo in previous clinical trial of CNTX-4975. One subject in the 0.5 mg CNTX-4975 group experienced an unrelated SAE of intractable shoulder pain from OA. No subject discontinued due to an AE. The most reported AE in the placebo group was arthralgia, or joint pain, not related to the injection, which occurred in 5.7% of the subjects. The most reported AEs in the 0.5 mg CNTX-4975 group was arthralgia and joint effusion, which occurred in 8.8% of the subjects. The most reported AE in the 1.0 mg CNTX-4975 group was arthralgia which occurred in 7.0% of the subjects. Approximately half of the subjects with arthralgia reported the pain in a joint other than the injected knee joint.

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Table 1 below depicts the incidence of treatment emergent adverse events, or TEAEs, in the placebo and 1.0 mg CNTX-4975 groups.


Category	Placebo (n=70)		1.0 mg CNTX-4975 (n=71)
Subjects with at least one TEAE		21 (30.0%0		21 (29.6%)
Subjects with at least one TEAE by severity
Mild		13 (18.6%)		14 (19.7%)
Moderate		8 (11.4%)		7 (9.9%)
Severe		0		0
Treatment Day 1 TEAEs		2 (2.9%)		3 (4.2%)
Non-Treatment Day 1 TEAE		21 (30.0%)		20 (28.2%)
Subjects with at least one Serious AE		0		0

Other Ongoing and Planned Clinical Trials

In October 2017, we were advised by the FDA that it concurred with our plans to proceed with the Phase 3 program for CNTX-4975.

The Phase 3 clinical trial development plan includes the following studies:

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VICTORY-1:

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A pivotal, randomized, double-blind, placebo-controlled, single injection, 52-week clinical trial to evaluate the efficacy and tolerability of a single IA injection of CNTX-4975 in subjects with chronic, moderate to severe pain resulting from knee OA. We expect to enroll 325 subjects in this trial at 30 sites in the United States. The first subject was randomized on February 15, 2018. As of October 15, 2018, the trial had enrolled 259 subjects. We expect 52-week topline data from the VICTORY-1 trial to be available in the first quarter of 2020.

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The primary efficacy endpoint is pain with walking, as measured at week 12. This is consistent with the primary efficacy endpoints of the TRIUMPH trial. We will also assess secondary endpoints including those measured by the WOMAC Parts A, B and C, as well as other instruments pertaining to quality of life, sleep, worker productivity, and others. We are exploring the clinical outcome measures through week 52 following a single injection of 1.0 mg of CNTX-4975. Radiographic assessment of the knee will be performed at baseline, week 12 and week 52.

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VICTORY-2:

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A pivotal, randomized, double-blind, placebo-controlled, two injections, 52-week clinical trial to evaluate the efficacy and tolerability of a repeat IA injection of CNTX-4975 six months apart in subjects with chronic, moderate to severe pain resulting from knee OA. We expect to enroll 325 subjects in this trial at 30 sites in the United States. We began screening subjects for the VICTORY-2 trial in the third quarter of 2018, and as of October 16, 2018, the trial had enrolled two subjects. Topline results are expected in the second half of 2020.

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The primary efficacy endpoint will be pain with walking, as measured at week 12. This is consistent with the primary efficacy endpoints of the TRIUMPH trial. We will also assess secondary endpoints, including those measured by the WOMAC Parts A, B and C, as well as other instruments pertaining to quality of life, sleep, worker productivity, and others. Finally, the trial will evaluate the clinical outcome measures through week 52 following an initial

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injection on day one and a second injection at week 26 of 1.0 mg of CNTX-4975. Radiographic assessment of the knee will be performed at baseline and week 52.

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Clinical Trial OA-303:

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An open label, eight-week trial to evaluate the tolerability of a single IA injection of 1.0 mg of CNTX-4975 in subjects with chronic moderate to severe pain resulting from knee OA. We expect to enroll 850 subjects in this trial at 45 sites, divided approximately evenly between the United States and Europe. We began screening subjects for OA-303 in the third quarter of 2018, and as of October 15, 2018, the trial had enrolled ten subjects. Topline results are expected in the second half of 2019.

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In addition to expanding the safety database for CNTX-4975, this trial will include variations of the procedure pain control technique designed to enable physicians to select options that best fit their practice dynamics and patient needs.

We are also conducting a Phase 1 trial, which we refer to as Clinical Trial OA-101, to refine options regarding the procedure pain control technique. This trial enrolled 15 subjects with bilateral moderate-to-severe knee OA pain in both knees and both knees were treated with IA 1 mg of CNTX-4975 within a one-week interval. All subjects returned for the second injection. Results from this trial are expected in the first half of 2019. Preliminary efficacy data from the trial indicated that the baseline knee OA pain while walking was six out of 10. At day 42 after treatment of both knees, pain while walking had decreased by a mean of 4.5 points to a mean score of 1.5. Preliminary results for the procedure pain control techniques studies are discussed below under the caption “Procedure Pain Control Technique.” Techniques used in this trial are included in design elements for Clinical Trial OA-303.

Clinical Trial OA-102 is a Phase 1 clinical trial, which commenced in June 2018, that compares the systemic pharmacokinetics, or PK, of CNTX-4975, administered by IA injection in subjects with moderate to severe knee OA pain, with that of the QUTENZA^® 8% capsaicin patch for transdermal application. The purpose of this trial is to determine how the systemic exposure following an IA injection into the knee of 1.0 mg of CNTX-4975 relates to that with the labeled dosage for the QUTENZA patch, which allows up to four patches applied simultaneously for one hour. Results of this trial are expected by the end of 2018.

If the results of the clinical trials are positive, we plan to submit an NDA in the United States, and an MAA in Europe, in the second half of 2021. We hold worldwide commercialization rights to CNTX-4975, and if approved, we anticipate our first commercial sales of CNTX-4975 will take place in 2022.

Procedure Pain Control Technique

IA injection of any placebo or drug may be associated with pain. Local application of capsaicin may be associated with pain, most frequently described as burning. In clinical trials with CNTX-4975 administered either via IA injection or by injection into soft tissue, without intervention, procedure pain was transient, most evident between 15 minutes and two hours after injection, and ranged from none to severe. Prior to initiating the TRIUMPH clinical trial, we developed a technique to decrease procedure pain involving a combination of local anesthetic and controlled cooling to the injected joint. Prior to the start of the procedure, subjects in the placebo and 1.0 mg groups reported that their average knee pain at rest was mild to moderate. Thirty minutes after injection of placebo or 1.0 mg of CNTX-4975, subjects reported the full range of possible pain scores and a post-hoc analysis demonstrated there was no correlation between pain associated with the procedure and the primary variable for knee OA pain at week 12, with correlation coefficients of 0.0413 for the placebo group and 0.0028 for the 1.0 mg group, respectively. Following the injection procedure, 27% of subjects receiving 1.0 mg CNTX-4975 reported no pain at rest, and the reported average pain at rest was between mild to moderate. 61% of subjects receiving the placebo injection reported no pain at rest, and the reported average pain at rest was between no pain and mild.

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In our TRIUMPH clinical trial and the VICTORY-1 and VICTORY-2 pivotal Phase 3 clinical trials, we used or are using an aggregate of 75 minutes of controlled cooling using a water-based cooling device. In Clinical Trial OA-101, we studied alternative methods to reduce the method and time of controlled cooling. As depicted in Figure 6 below, we observed that the use of the pump-driven water-based cooling device or a gel-based device each resulted in a greater reduction of procedure pain than when using an ice pack on a subject-reported 11-point NRS. We also observed that a meaningful reduction in cooling time achieved similar results.

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Figure 6. Use of Water-Based and Gel-Based Cooling Devices Resulted in Greater Reduction of Procedure Pain than Ice Pack in Subjects Treated with 1.0 mg of CNTX-4975. Baseline Pain While Walking was 6.0 out of 10.

We are now evaluating these variations of the cooling technique in our OA-303 trial with the goal of meaningful shortening the total controlled cooling time, using different cooling devices that allow untethered patient mobility during the procedure and reducing the time between injection steps during the procedure. We believe the results will enable physicians to select options that best fit their practice dynamics and patient needs.

Early Trials

Prior to 2015, CNTX-4975 was studied in Phase 1 and 2 clinical trials for a number of potential indications, including knee OA, Morton’s neuroma, or MN, and post-operative pain. There were six clinical trials involving knee OA. Results of these trials contributed to proof of concept for managing pain associated with OA, identification of the likely dose range, systemic plasma levels and PK following IA injection, and methods to reduce the transient procedure pain following injection of CNTX-4975.

The most commonly reported systemic AE has been arthralgia, or joint pain, frequently arising from a non-treated joint. In addition to the SAE for unrelated shoulder OA pain noted for the TRIUMPH clinical trial above, earlier knee OA clinical trials had three SAEs in the active groups, all of which were considered not related to study drug, and included chest pain, femoral hernia, and abnormal menstrual bleeding.

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CNTX-4975—Regulatory Strategy

Capsaicin has been previously approved as the active component of the QUTENZA^® 8% capsaicin patch. This means the approval path for CNTX-4975 is through a 505(b)(2) NDA, which we intend to pursue.

If the systemic exposure levels following 1.0 mg of CNTX-4975 injected to the joint are less than or equal to the maximum labeled dose of up to four patches for the topically applied QUTENZA 8% capsaicin patch, we can reference the FDA’s prior findings for a limited amount of the systemic safety exposure data. Clinical Trial OA-102 is a Phase 1 clinical trial described above that compares the systemic PK of CNTX-4975 administered by the IA route into osteoarthritic knees with that of the QUTENZA^® 8% capsaicin patch by transdermal application. Since local exposure with CNTX-4975 is delivered by a different route of administration and dosage form, data regarding local safety exposure and efficacy to manage moderate to severe knee OA pain with CNTX-4975 will be supported by our trials. In total, we have conducted more than 40 systemic and local safety, non-clinical studies to support the safety of CNTX-4975 and have conducted, or plan to conduct, 12 clinical trials in humans, including the two pivotal and one open label Phase 3 clinical trials, to support the safety and efficacy of CNTX-4975 with IA administration. Consequently, whether or not we can reference the QUTENZA systemic safety exposure data has little impact on the composition of our expected NDA filing.

In discussions with the FDA, we have agreed that the safety exposure database for IA injection of CNTX-4975 be comprised of at least 1,500 subjects. This is aligned with the relevant International Conference on Harmonisation Tripartite Guideline regarding extent of population exposure. We believe the available safety data for CNTX-4975, the FDA’s prior findings with QUTENZA^®, and the common use of capsaicin as a dietary ingredient, have all contributed to the relatively low safety database population requirements. For drug classes with known side effects, such as the anti-NGF antibodies and certain NSAIDs, the requirement can be 10,000 or more subjects.

The FDA offers Fast Track Designation to facilitate the development and expedite the review of drugs to treat serious conditions and fill an unmet medical need and breakthrough therapy designation to expedite the development and review of drugs that are intended to treat a serious condition and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over available therapy on a clinically significant endpoint. We applied for both of these designations for CNTX-4975 and were granted Fast Track Designation but denied breakthrough therapy designation. We understand that since 2013, no chronic pain therapy has been awarded breakthrough therapy designation.

Fast Track Designation makes us eligible for more frequent meetings with the FDA to discuss the drug’s development plan and ensure collection of appropriate data needed to support drug approval, more frequent written communication from the FDA about such things as the design of the proposed clinical trials and use of biomarkers, eligibility for accelerated approval and priority review, if relevant criteria are met. Additionally, Fast Track Designation makes us eligible for rolling review, which means we can submit completed sections of our NDA for review by the FDA on a rolling basis, rather than waiting until every section of the NDA is completed before the entire application can be reviewed. Breakthrough therapy designation would provide us with more intensive guidance on an efficient drug development program, beginning as early as Phase 1, and additional FDA organizational commitment involving senior managers. As such, we believe that Fast Track Designation gives us the primary benefits of eligibility for accelerated approval and priority review that would also be provided by breakthrough therapy designation.

We intend to follow the pain associated with knee OA indication with data to support use in small joints, such as the carpometacarpal joint and medium joints, such as the ankle. If we are successful, then the indication for use of CNTX-4975 could potentially be broadened to the treatment of moderate to severe pain associated with OA, with no limitation as to which joint is involved.

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CNTX-4975—Commercial Strategy

We currently intend to build a commercial infrastructure in the United States to effectively support the commercialization CNTX-4975, if we are successful in obtaining FDA approval.

We believe that we can cost effectively promote CNTX-4975 to the four subspecialties that treat the majority of patients with moderate to severe pain associated with knee OA: pain management physicians, sports medicine specialists, orthopedists and rheumatologists. We anticipate our commercial operation to include our own sales management, internal sales support, distribution support and an internal marketing group. Additional requisite capabilities will include focused management of key accounts, such as managed care organizations, group purchasing organizations, and government accounts.

We intend to selectively partner outside of the United States for the worldwide commercialization of CNTX-4975.

CNTX-4975—Additional Indications

We believe that CNTX-4975 may have utility as an analgesic beyond the current planned use in the knee joint.

OA occurs in many other joints in the body, including small sized joints, such as the hand and the carpometacarpal joint, medium sized joints, such as the ankle, and other large joints, such as the shoulder. In addition, there are other types of arthritis, such as inflammatory arthritis, rheumatoid and psoriatic arthritis, where we believe CNTX-4975 may be developed as an analgesic. We believe CNTX-4975 has the potential to be developed as an analgesic for other types of joint pain, including post-traumatic chronic pain, temporomandibular joint pain, as well as nerve generated pain, such as MN.

We plan to test CNTX-4975 in exploratory clinical trials with certain other joints in the body, including large joints such as the shoulder, small sized joints such as the hand, and medium sized joints such as the ankle, to test the drug candidate’s efficacy and tolerability.

Morton’s Neuroma

MN is characterized by a discrete swelling of the common digital nerve that provides sensation in the toes. The hallmark symptom is pain, which can be severe, particularly with walking. Patients may also experience numbness and tingling. We have completed multiple clinical trials with CNTX-4975 in MN, the most recent of which was a Phase 2 clinical trial that we refer to as the STRIDE clinical trial. This trial was a double-blind, randomized placebo controlled clinical trial in 119 patients aimed at evaluating the efficacy and safety of CNTX-4975. Single doses of 200 mcg and 600 mcg of injectable trans-capsaicin were studied. The primary endpoint of this trial was average daily foot pain with walking. In this trial, patients had moderate to severe pain while walking before treatment. On the 11-point NRS, the average baseline pain score was approximately 6. The trial results suggested a clinically meaningful, but not statistically significant, reduction in pain that lasted for 12 weeks. Therefore, the trial failed to meet its primary efficacy endpoint. Additionally, there were no SAEs associated with treatment.

Upon evaluation of outcomes from the STRIDE clinical trial, one of the 13 sites in the trial was excluded in a post-hoc analysis due to a number of factors, including unusually fast enrollment rate, a nearly two-fold greater standard error on the primary end point, and an unusually high placebo response. When this site was removed, the general pattern of treatment response remained intact. However, with removal of the data from this site, the primary endpoint achieved statistical significance with the 200 mcg dose at p<0.05 at week 12. The 600 mcg dose did not achieve statistical significance in the post-hoc analysis.

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In February 2018 we held an end of Phase 2 meeting with the FDA and obtained feedback regarding our Phase 3 regulatory plan. The FDA authorized us to initiate pivotal Phase 3 clinical trials, which have the potential to comprise part of the data package necessary for an NDA. We have prioritized the development of CNTX-4975 for pain associated with knee OA and, at present, have no plans to initiate any Phase 3 clinical trials in pain associated with MN.

Other Early Stage Product Candidates

We have three additional clinical stage product candidates and one in pre-clinical development that are designed to work on multiple types of chronic pain, including chronic pain of neuropathic and inflammatory origin. These pain conditions are associated with a wide variety of diseases where pain is a co-morbid condition. We believe by directly targeting the dysfunction of the nociceptive system, injury to the nervous system, and abnormal pain signaling from unhealed injury, our product candidates have the potential to treat chronic pain originating from multiple causes.

In November 2015, we acquired the rights to three product candidates from Boehringer Ingelheim International GMBH, or BI. We are currently developing these product candidates in Phase 1 clinical trials and pre-clinical studies. We plan to progress or continue to progress these product candidates into clinical development either on our own or in collaboration with third parties.

CNTX-0290—Background

Somatostatin, also known as growth hormone-inhibiting hormone is a peptide hormone found in many sites throughout the body that acts to inhibit the release of certain hormones and other secretory proteins. Somatostatin receptor type 4, or SSTR4, is one of five discrete receptors activated by somatostatin. Multiple studies indicate that somatostatin has analgesic effects, and more recently it has been discovered that these effects are mediated through SSTR4 activation. When activated, SSTR4 modulates certain other known pain associated receptors within the nociceptors and there is a reduction in transmission of the resulting pain signals to the brain.

Our product candidate, CNTX-0290, is an investigational small molecule SSTR4 agonist for chronic pain associated with inflammatory, neuropathic, and mixed pain conditions. We have observed that CNTX-0290 delivered orally confers analgesia in multiple types of pre-clinical chronic pain models. Potential indications include chronic low back pain, chronic neck pain, OA, migraine, rheumatoid arthritis pain and multiple sclerosis pain.

CNTX-0290—Clinical Development

We have completed a Phase 1 single ascending dose, or SAD, clinical trial with CNTX-0290. In the SAD trial, we measured the safety of single doses of CNTX-0290 in healthy subjects. The administered single doses ranged from a base of 20 mg up to 400 mg. We also measured the pharmacokinetics, or PK, of CNTX-0290, which refers to the time course of absorption, bioavailability, distribution, metabolism, and excretion of a drug candidate.

We have also completed a Phase 1 multiple ascending dose, or MAD, clinical trial with CNTX-0290. Healthy subjects were administered repeated doses of CNTX-0290 over a period of 10 days. The administered doses in adult subjects younger than 65 years of age, were as follows: 100 mg once daily, or QD, 100 mg twice daily, or BID, 140 mg BID, and 380 mg/day, wherein subjects received the study drug BID as 200 mg in the morning and 180 mg in the evening. Part 2 of the MAD trial include 12 elderly subjects, 65 years to 80 years of age, that were divided to receive placebo, 40 mg QD, 100 mg QD, and 200 mg QD.

The results of the SAD and MAD clinical trials showed that the drug was well-tolerated and observed AEs were predominately not related to CNTX-0290 and there were no SAEs. Subjects in the single dose and

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repeat dose trials reported a low incidence of headache, diarrhea, temporomandibular joint syndrome, nausea, and dry eye. We also did not observe any clinically meaningful laboratory abnormalities and PK measurements indicated a linear dose response.

In the second half of 2018, we plan to initiate an experimental pain trial in healthy volunteers to assess whether certain doses of CNTX-0290 can decrease pain sensation in response to a number of painful stimuli. The results of this trial will be used to identify potential types of indications and doses to be used in Phase 2 indication selection trials.

CNTX-6970—Background

Cytokines and chemokines are both proteins made by cells in the immune system that help regulate responses to infection or injury such as inflammation. Cytokines are the general category of messenger molecules, while chemokines are a special type of cytokine that direct the migration of white blood cells to infected or damaged tissues.

Chemokine receptor type 2, or CCR2, is the receptor for a cytokine known as monocyte chemoattractant protein-1, or MCP-1. Pre-clinical data suggest that CCR2, and MCP-1, are upregulated in cells, such as macrophages, microglial cells and astrocytes which play a central role in the origination of pain signals.

Our product candidate, CNTX-6970, is a novel, potent and selective investigational CCR2 antagonist. CNTX-6970 is a small molecule intended to be administered orally. We believe that by using CNTX-6970 to block CCR2, we can reduce pain signaling by inhibiting monocyte activation, as well as having a direct effect on sensory nerves responsible for the pain signal. We have observed that CNTX-6970 conferred analgesia in multiple pre-clinical chronic pain models, with particular activity in models of inflammatory pain. We believe these results support our expectation that CNTX-6970 could make a viable drug candidate for the treatment of inflammatory chronic pain by antagonizing CCR2.

CNTX-6970—Clinical Development

We have completed a Phase 1 SAD clinical trial with CNTX-6970. In the SAD trial we measured the safety of single doses of CNTX-0290 in healthy subjects. The administered doses ranged from a base of 10 mg up to 600 mg. The results of the SAD clinical trial showed that the drug was well-tolerated and observed AEs were predominately not related to CNTX-6970 and there were no SAEs. Subjects reported a low incidence of headache and vomiting, among others. We also did not observe any clinically meaningful laboratory abnormalities. We measured the PK of CNTX-6970 and observed dose-proportional levels in plasma. In addition, target engagement was demonstrated, as evidenced by a dose-dependent inhibition of labeled MCP-1 binding to the CCR2 receptor on monocytes.

The Phase 1 MAD clinical trial with CNTX-6970 at dose levels of 100 mg, 300 mg and 600 mg was completed in August 2018. The clinical trial report will be available before the end of 2018. We plan to initiate an experimental pain trial in healthy volunteers to assess the doses needed to decrease pain sensation in response to a number of painful stimuli in 2019. Results of this trial will be used to identify potential indications and doses to be used in Phase 2 indication selection trials.

CNTX-6016—Background

Cannabinoid receptors are proteins that are part of the endocannabinoid system, which is involved in a variety of physiological processes, including pain sensation. There is interest in the role cannabinoids play in the management and treatment of multiple diseases. There are two distinct cannabinoid receptors, CB1 and CB2. A major factor holding back the development of drugs targeting the cannabinoid receptors relates to psychotropic adverse effects from CB1 activation in the central nervous system, or CNS. Whereas adverse CNS effects appear to relate to activation of CB1, published studies support that activation of CB2 receptors results in analgesia without the CB1 psychotropic effects.

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Pre-clinical studies showed that CNTX-6016 was in excess of 16,000-fold selective for CB2 over CB1 in humans. We believe that this selectively can confer analgesia without inducing psychotropic and other side effects seen with less selective cannabinoid agonists. In non-clinical safety toxicology studies of CNTX-6016 in dogs, reported adverse events included increased epileptiform waves at dosesequivalent to 100-times greater and seizures at dosesequivalent to 400-times greater than the equivalent starting dose in humans for human Phase 1 clinical trials. We have observed that CNTX-6016 conferred analgesia in multiple pre-clinical chronic pain models, with particular activity in models of neuropathic pain. These results support our belief that CNTX-6016 is a viable drug candidate for the treatment of chronic neuropathic pain. Potential indications include diabetic and autoimmune neuropathic pain and chemotherapy induced neuropathy.

We have an open IND with the FDA for CNTX-6016. Due to observations of transient, decreased cardiac contractility in a pilot study of CNTX-6016 in dogs at dose levels of 40 mg/kg and above, upon initial submission of our IND to the FDA in 2016, the FDA indicated that the highest systemic exposure level in humans for the Phase 1 SAD, with a proposed starting dose of 25 mg or 0.42 mg/kg based on a 60 kg human, to be limited to 2 µg/mL based on a 10-fold safety factor applied to the systemic exposure levels in dogs. Similarly, owing to potential seizure activity observed in dogs at a dose of 400 mg/kg for 28 days, after applying a safety factor, the FDA indicated an initial limit on the systemic exposure level in humans of 3 µg/mL. Following discussions with the FDA, we conducted additional pharmacology and toxicology studies in dogs and then submitted an IND amendment to the FDA. Based on our amended submission, the FDA determined not to impose the aforementioned dose limit on the trial for cardiac contractility. However, based on observations of data for potential pre-seizure or seizure activity in dogs at doses at or above 100 mg/kg, we have agreed to EEG monitoring for trial subjects receiving doses that result in systemic exposure above 6 µg/mL and to limit the maximum exposure in the study to 10 µg/mL. We have included such monitoring in the trial protocol and are now preparing to initiate a Phase 1 SAD clinical trial in the fourth quarter of 2018 that will initiate dosing at 25 mg or 0.42 mg/kg and progress to increased dose levels based on exposure levels and suitable safety. This will be followed by a Phase 1 MAD clinical trial.

CNTX-2022—Background

Lidocaine is widely used as a local anesthetic in injectable, topical and patch delivery formulations. Lidocaine is characterized by its rapid onset of action. It acts to block sodium ion channels on nerves, which normally work to transmit neuronal signals. As a topical treatment, low concentration lidocaine products can relieve itching, burning, and pain from skin inflammation. Topical delivery has the potential to limit systemic exposure and associated side effects/tolerability issues, as well as drug-drug interactions. Topical lidocaine in the form of a prescription 5.0% patch has an established track record of safety and efficacy for the treatment of post-herpetic neuralgia, with sales in 2012 near $1.0 billion in the United States.

Our product candidate, CNTX-2022, is a proprietary, high concentration topical gel formulation of lidocaine. We believe CNTX-2022 has the potential to be used to address pain across a broad range of indications, including superficial musculoskeletal pain, dermatologic itch and pain, as well as superficial neuropathic pain. As the gel dries, it deposits lidocaine under the skin as a depot, then the residual gel can be washed off with no effect on lidocaine delivery. This differs from many topical patches, such as the LIDODERM patch, that require the patch to be worn for 12 hours and to not get wet. Unlike many topical preparations, clothes can be placed over the area without concern for staining. We believe a topical gel formulation offers convenience and the potential to provide better pain relief, as it can be used on skin conditions and topographies that are not amenable to patches, such as the face, feet and hands, areas that sweat, over areas that are mobile, such as joints, and areas with hair.

In a Phase 1 SAD clinical trial, CNTX-2022 topical gel was used to deliver lidocaine through the skin. There were no safety signals or patterns indicating a safety concern. Subjects in the trial reported a low incidence of gastroenteritis, headache and upper respiratory tract infection, among others. A single application resulted in blood plasma levels that are supportive of once daily administration. The next step will be to initiate a Phase 1 MAD clinical trial in the second half of 2019. This trial will be designed to address the PK requirements for a potential 505(b)(2) regulatory pathway.

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Manufacturing

We currently do not have manufacturing facilities and utilize contract manufacturers to produce our drug substances and drug products. Manufacture of CNTX-4975 is a complex process and there are a limited number of contract manufacturing sites with synthetically-derived capsaicin experience and capability to handle its irritant properties in concentrated form. Certain steps in the manufacturing process are protected by our trade secrets. We use contract manufacturers to produce our proprietary formulated product for clinical supplies. Capsaicin inherently has low solubility and stability in water-based formulations, which typically necessitates an organic solvent-based formulation and an additional dilution or handling step prior to administration. We have submitted a composition of matter and method of use patent application for water-based, injectable formulations of trans-capsaicin, which allow CNTX-4975 to be packaged in a ready-to-use, pre-filled syringe that is stable at room temperature and convenient to administer. The CNTX-4975 study drug used in each of the ongoing Phase 3 clinical trials is such a formulation.

We currently rely on a sole source of supply for the CNTX-4975 drug substance. Because of the low dose required for efficacy and the long term stability of the drug substance, we believe we can stockpile reserves to guard against disruptions in supply. Nonetheless, we will initiate a program in 2019 to identify a secondary source of drug substance supply prior to any potential launch. To date, we have relied on a sole source of supply of CNTX-4975 drug product that is capable of supporting the program through commercialization and launch. We are initiating a program in the second half of 2018 to identify a secondary source of supply for drug product.

Competition

The biotechnology and pharmaceutical industries are characterized by extensive research and development efforts, rapidly advancing technologies, intense competition and a strong emphasis on proprietary products. We are focused on the development and commercialization of our multi-asset pipeline of novel, non-opioid and non-addictive therapies for chronic pain. The number of patients suffering from chronic pain is large and growing. While we believe that our product candidates, development experience and scientific knowledge provide us with competitive advantages, we face potential competition from many different sources, including pharmaceutical, biotechnology and specialty pharmaceutical companies either marketing or developing therapeutics to treat chronic pain. Academic research institutions, governmental agencies, as well as public and private institutions are also potential sources of competitive products and technologies.

Our competitors may have significantly greater financial resources, robust drug pipelines, established presence in the market and expertise in research and development, manufacturing, pre-clinical and clinical testing, obtaining regulatory approvals and reimbursement and marketing approved products than we do. These competitors also compete with us in recruiting and retaining qualified clinical, regulatory, scientific, sales, marketing and management personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.

The key competitive factors affecting the success of all of our product candidates, if approved, are likely to be their efficacy, durability, safety, price and the availability of reimbursement from government and other third-party payors.

Significant competition exists in the chronic pain field. Although we believe our approach to developing novel treatments for chronic pain is unique from most other existing or investigational therapies, such as NSAIDs, corticosteroids and opioids, we will need to compete with all currently available or future therapies within the indications where our development is focused.

With respect to CNTX-4975, the main classes of marketed products that are available for the treatment of knee OA pain include NSAIDs, opioids, immediate-release and sustained-release injectable steroids, HA

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injections, and, to a lesser extent, non-FDA approved treatments such as platelet-rich plasma and stem cell injections. Furthermore, numerous monoclonal antibodies targeting nerve growth factor, or NGF inhibitors, are in clinical development, including two product candidates in Phase 3. These anti-NGF antibodies may be priced as biologics, which would be at least $6,000 per year as an analgesic, based on current prices for disease modifying monoclonal antibody therapies for rheumatic diseases. Also in development are several compounds that seek to produce disease modification through the regeneration of cartilage and/or to reduce cartilage degeneration, though these compounds do not directly treat the pain itself.

There are a number of companies developing or marketing therapies for the treatment and management of chronic pain that may compete with our current product candidates, including many major pharmaceutical and biotechnology companies. Among the companies that currently market or are developing therapies that, if approved, our product candidates would potentially compete with include: Acorda Therapeutics, Assertio Therapeutics, Biogen, Cara Therapeutics, Eli Lilly and Company, Endo Pharmaceuticals, Flexion Therapeutics, Grunenthal, Horizon Pharma, Janssen Research & Development, Merck & Co., Novartis, Pacira Pharmaceuticals, Pain Therapeutics, Pfizer, Purdue Pharma, Sanofi, Trevena and Vertex Pharmaceuticals.

Intellectual Property

Our success depends in large part upon our ability to obtain and maintain proprietary protection for our products and technologies, and to operate without infringing or otherwise violating the proprietary rights of others. We endeavor to protect our products using a combination of intellectual property protections and available government regulatory and marketing exclusivities afforded to new medicines. For example, we endeavor to protect our products by, among other methods, filing U.S. and foreign patent applications related to our proprietary technology, inventions and improvements that are important to the development and implementation of our business. We also use other forms of protection, such as confidential information, trade secrets and know-how, and trademarks to protect our intellectual property, particularly where we do not believe patent protection is appropriate or obtainable.

The proprietary nature of, and protection for, our product candidates, processes and know-how are important to our business. We have sought patent protection in the United States and multiple foreign countries for CNTX-4975 for treating knee OA pain, and for product candidates CNTX-0290, CNTX-6016, CNTX-6970, CNTX-2022, and other inventions, where available and when appropriate. Our policy is to pursue, maintain and defend intellectual property rights, and to protect the technology, inventions, and improvements that are commercially important to our business.

CNTX-4975

The patent portfolio that we own relating to our CNTX-4975 product candidate contains patents directed to methods of use, as well as patent applications directed to compositions of matter and methods of use. As of August 28, 2018, the patent portfolio that we own relating to our CNTX-4975 product candidate contains patents in the United States, Japan, Europe, Australia, Canada, and other foreign countries. Our U.S. patent directed to a method of attenuating pain is scheduled to expire in 2026, and foreign counterpart patents are scheduled to expire in 2023. We own two pending international patent applications directed to CNTX-4975. Our first pending international patent application contains composition of matter and method of use claims directed to our ready-to-use formulation of capsaicin, whereby patents, if granted based on applications arising from this international patent application, would expire in 2037. Our second pending international patent application is directed to techniques for reducing capsaicin post-injection procedure pain, whereby any patents, if granted, based on applications arising from this international patent application, would expire in 2038. Also, we own a pending U.S. provisional patent application directed to repeat dosing of capsaicin to achieve extended relief from osteoarthritic knee pain, whereby patents, if granted, based on applications arising from this U.S. provisional patent application would expire in 2039.

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Our European patent related to the CNTX-4975 product candidate for treating knee OA pain was granted in 2015 and was opposed by a third-party in 2016. Oral proceedings were held at the European Patent Office in January 2018, and the European Patent Office’s Opposition Division mailed a communication on September 10, 2018 revoking the European patent on grounds that changes to the claims during prosecution of the application resulted in patent claims that do not meet written support requirements of European law. We intend to appeal the decision of the Opposition Division. Separate from this European patent, CNTX-4975 is eligible for eight years of data exclusivity plus two years of marketing exclusivity after approval in Europe. Additional protections in Europe may be obtained from patents, if any, that grant based on our two pending international patent applications.

CNTX-0290

The patent portfolio that we own relating to our CNTX-0290 product candidate contains patents and patent applications directed to compositions of matter and methods of use. As of August 28, 2018,the patent portfolio that we own relating to CNTX-0290 contains patents in the United States, Europe, and other foreign countries, as well as patent applications pending in the United States, Australia, Canada, Japan, and other foreign countries. Our first U.S. patent contains claims to compositions of matter, and our second U.S. patent contains claims to methods of treating pain. Our U.S. and foreign patents to CNTX-0290 are scheduled to expire in 2034, and any patents, if granted, based on our pending patent applications, would expire in 2034.

CNTX-6016

The patent portfolio that we own relating to our CNTX-6016 product candidate contains patents and patent applications directed to compositions of matter and to methods of use. As of August 28, 2018, the patent portfolio that we own relating to CNTX-6016 contains patents in the United States, Europe, Japan, and other foreign countries, as well as patent applications pending in the United States, Australia, Canada, and other foreign countries. We own two U.S. patents, each with claims to compositions of matter and methods of treating pain. Our U.S. and foreign patents to CNTX-6016 are scheduled to expire in 2034, and any patents, if granted, based on our pending patent applications would expire in 2034.

CNTX-6970

The patent portfolio that we own relating to our CNTX-6970 product candidate contains patents and patent applications directed to compositions of matter and to methods of use. As of August 28, 2018, the patent portfolio that we own relating to CNTX-6970 contains patents in the United States, Europe, Japan, Australia, Canada, and other foreign countries, as well as patent applications pending in the United States, Europe, Japan, Australia, Canada, and other foreign countries. Our U.S. patent with composition of matter claims to CNTX-6970 is scheduled to expire in 2032, while our U.S. patent with claims to methods of using CNTX-6970 is scheduled to expire in 2030. Our patents relating to CNTX-6970 in foreign countries are scheduled to expire from 2029 to 2030, and patents that may issue in the future based on counterpart patent applications would expire from 2029 to 2030. One segment of our patent portfolio relating to CNTX-6970 is patent applications pending in the United States, Europe, Japan, Australia, Canada, and other foreign countries directed to a salt form of CNTX-6970, whereby any patents, if granted, based on these patent applications would expire in 2036.

CNTX-2022

The patent portfolio that we own relating to our CNTX-2022 product candidate contains patents and patent applications directed to compositions of matter and to methods of use. As of August 28, 2018, the patent portfolio that we own relating to CNTX-2022 contains patents in the United States, Japan, Australia, and Canada, as well as patent applications pending in the United States, Europe, and Hong Kong. Our U.S. patents with method of use claims to CNTX-2022 are scheduled to expire in 2029, while our patents in Japan, Australia, and Canada are scheduled to expire in 2028. Patents that may issue in the future based on our pending European and Hong Kong patent applications would expire in 2028.

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Trade Secrets and Other Proprietary Information

In addition to patents, we rely on trade secrets and know-how to develop and maintain our competitive position. For example, we have developed methods for the more efficient manufacture of high-purity trans-capsaicin used in CNTX-4975. We seek to protect our proprietary information, in part, by confidentiality agreements and invention assignment agreements with our employees, consultants, scientific advisors, contractors and commercial partners.

License Agreements

Patent Assignment and Licensing Agreement with Boehringer Ingelheim

In November 2015 we entered into a patent assignment and exclusive license agreement with BI, or the BI Agreement. Under the BI Agreement, BI assigned to us certain patents and granted to us an exclusive, worldwide, royalty-bearing license to certain know-how owned or controlled by BI, in order to develop, manufacture and commercialize products containing the CCR2 compounds (which includes CNTX-6970), CB2 compounds (which includes CNTX-6016) and SSTR4 compounds (which includes CNTX-0290) or any compounds covered by a claim in the assigned patents, for the treatment or prevention of diseases or conditions in humans and/or animals. The terms of the BI Agreement require us to use commercially reasonable efforts to develop and commercialize these products.

Pursuant to the terms of the BI Agreement, we paid BI an upfront payment upon execution of the agreement. In addition, if we succeed in developing and commercializing products containing compounds active against CCR2, CB2 and SSTR4, as applicable, we may owe BI up to the following total payments (i) for CCR2, $103 million for regulatory milestones and $240 million for commercial milestones, (ii) for CB2, $97 million for regulatory milestones and $180 million for commercial milestones, and (iii) for SSTR4, $97 million for regulatory milestones and $180 million for commercial milestones.

BI is entitled to receive low single-digit to low teens percentage royalties on global annual net sales of products calculated on a country-by-country and product-by-product basis. Our royalty obligations to BI will expire on a country-by-country and product-by-product basis upon the later of (a) the date on which such product is no longer covered by a valid claim of an assigned patent, (b) the date on which such product is no longer covered by any other governmental grant of exclusivity in such country in the indication, or (c) 10 years from first launch of the respective product in the country, provided the licensed know-how is still proprietary. Scheduled expiration dates of assigned patents for CNTX-0290, CNTX-6016, and CNTX-6970 are as set forth above under the caption “Intellectual Property.”

Under the BI Agreement, we may sublicense the licensed rights to third parties, subject to BI’s prior written consent, and provided that the sublicense agreement is consistent with the terms of the BI Agreement. Should we enter into a sublicense agreement, we remain responsible for paying any amounts due on account of sales or other dispositions of the compounds and products by sublicensees.

Pursuant to the BI Agreement, we have control of patent prosecution, defense, and maintenance of the assigned patents. If we cease payment for patent prosecution of an assigned patent, BI has the right to request cost-free assignment and transfer of the assigned patent. We have the primary right, but not obligation, to take action in the prosecution or prevention of any infringement by a third party of the assigned patent rights. If three months after either party becomes aware of an infringement we have not obtained a discontinuance of the infringement or filed an infringement lawsuit, BI will have the right, but not the obligation, to take action in the prosecution or prevention of the infringement.

Pursuant to the BI Agreement, in the event that an affiliate, a sublicensee, or we begin clinical trials or commercialize a competing product that modulates as its primary mechanism of action the same target as a

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product containing the CCR2, CB2 and SSTR4 compounds and is developed for the treatment or prevention of pain in humans or animals, BI will have the right to terminate our exclusivity of the license so that we retain a non-exclusive right to the know-how. BI will also have the right to obtain a perpetual license-back to the assigned patents to independently exploit the products and we will grant BI a license to use any results from our independent exploitation of the compounds and products.

The agreement will expire on a country-by-country and product-by-product basis on the expiration of our last payment obligation. Prior to the expiration date, we may terminate the BI Agreement with written notification to BI. Additionally, prior to the expiration date, we or BI may terminate the BI Agreement if the other party materially breaches or defaults on its obligations under the agreement and does not cure within a specified period of time, such material breach to include our obligations to use commercially reasonable efforts to develop and commercialize products under the BI Agreement. Subject to possible further adjustments if agreed to by BI, the BI Agreement currently requires that the Company commence a Phase 1 trial for CNTX-6016 in early 2019 and later conduct a Phase 2a trial for CNTX-6970. If we terminate the BI Agreement for convenience or if BI terminates it due to our uncured material breach, we will no longer have any rights to the patents assigned to us by BI under the BI Agreement and ownership of those patents will transfer back to BI. We will also be obligated to transfer to BI, at its request, all development data and regulatory documentation, approvals and agreements related to the product(s) that are the subject of the BI Agreement, as well as grant to BI a non-exclusive license to use certain of our intellectual property as may be necessary for the continued development, manufacture and/or commercialization of such product(s). Upon expiration of the BI Agreement, we will retain a perpetual, fully paid-up, non-exclusive and cost-free right to use the licensed know-how solely for the products, on a country-by-country and product-by-product basis.

Commercial Operations

We currently have no marketing and sales organization. We have retained global rights to all of our product candidates, and, if one of our product candidates is approved by the FDA, expect to access the market in the United States through a specialty pain-focused sales force. We expect that our sales force will be supported by sales management, internal sales support, an internal marketing group and distribution support. We intend to invest in our commercial capabilities prudently by focusing our marketing efforts on the physician subspecialties that treat patients with chronic pain. These physicians include, but are not limited to, pain management specialists, rheumatologist, orthopedic surgeons and sports medicine physicians. We will also evaluate licensing and partnering with third parties to help us reach other sales channels and geographic markets outside of the United States.

Government Regulation

The FDA and comparable regulatory authorities in state and local jurisdictions and in other countries impose substantial and burdensome requirements upon companies involved in the clinical development, manufacture, marketing and distribution of drugs, such as those we are developing. These agencies, and other federal, state and local entities regulate, among other things, the research and development, testing, manufacture, quality control, safety, effectiveness, labeling, storage, record keeping, approval, advertising and promotion, distribution, post-approval monitoring and reporting, sampling and export and import of our product candidates.

U.S. Government Regulation of Drug Products

In the United States, the FDA regulates drugs under the FDCA and its implementing regulations. The process of obtaining regulatory approvals and the subsequent compliance with applicable federal, state, local and foreign statutes and regulations requires the expenditure of substantial time and financial resources. Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process or after approval, may subject an applicant to a variety of administrative or judicial sanctions, such as the FDA’s refusal to approve pending applications, withdrawal of an approval, imposition of a clinical hold, issuance

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of warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement or civil or criminal penalties.

The process required by the FDA before a drug may be marketed in the United States generally involves the following:

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completion of pre-clinical laboratory tests, animal studies and formulation studies in compliance with the FDA’s good laboratory practice, or GLP, regulations;

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submission to the FDA of an IND which must become effective before human clinical trials may begin;

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approval by an IRB at each clinical site before each trial may be initiated;

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performance of adequate and well-controlled human clinical trials in accordance with GCP requirements to establish the safety and efficacy of the proposed drug product for each indication;

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submission to the FDA of an NDA;

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satisfactory completion of an FDA advisory committee review, if applicable;

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satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product is produced to assess compliance with cGMP requirements and to assure that the facilities, methods and controls are adequate to preserve the drug’s identity, strength, quality and purity; and

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satisfactory completion of FDA audits of clinical trial sites to assure compliance with GCPs and the integrity of the clinical data;

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payment of user fees and securing FDA and approval of the NDA; and

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compliance with any post-approval requirements, including the potential requirement to implement a REMS and the potential requirement to conduct post-approval studies.

Pre-clinical Studies

Pre-clinical studies include laboratory evaluation of product chemistry, toxicity and formulation, as well as animal studies to assess potential safety and efficacy. An IND sponsor must submit the results of the pre-clinical tests, together with manufacturing information, analytical data and any available clinical data or literature, among other things, to the FDA as part of an IND. Some pre-clinical testing may continue even after the IND is submitted. An IND automatically becomes effective 30 days after receipt by the FDA, unless before that time the FDA raises concerns or questions related to one or more proposed clinical trials and places the clinical trial on a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. As a result, submission of an IND may not result in the FDA allowing clinical trials to commence. Clinical holds also may be imposed by the FDA at any time before or during clinical trials, due to safety concerns about on-going or proposed clinical trials, or non-compliance with specific FDA requirements, and the trials may not begin or continue until the FDA notifies the sponsor that the hold has been lifted.

Clinical Trials

Clinical trials involve the administration of the investigational new drug to human subjects under the supervision of qualified investigators in accordance with GCP requirements, which include the requirement that

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all research subjects provide their informed consent in writing for their participation in any clinical trial. Clinical trials are conducted under protocols detailing, among other things, the objectives of the trial, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated. A protocol for each clinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND. In addition, an IRB at each institution participating in the clinical trial must review and approve the plan for any clinical trial before it commences at that institution. Information about certain clinical trials must be submitted within specific timeframes to the National Institutes of Health for public dissemination on their www.clinicaltrials.gov website. The information contained in, or accessible through, this website does not constitute a part of this prospectus. We have included this website address in this prospectus solely as an inactive textual reference.

Human clinical trials are typically conducted in three sequential phases, which may overlap or be combined:

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Phase 1: The drug is initially introduced into healthy human subjects or patients with the target disease or condition and tested for safety, dosage tolerance, absorption, metabolism, distribution, excretion and, if possible, to gain an early indication of its effectiveness.

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Phase 2: The drug is administered to a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage.

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Phase 3: The drug is administered to an expanded patient population, generally at geographically dispersed clinical trial sites, in well-controlled clinical trials to generate enough data to statistically evaluate the efficacy and safety of the product for approval, to establish the overall risk-benefit profile of the product, and to provide adequate information for the labeling of the product.

Post-approval trials, sometimes referred to as Phase 4 trials, may be conducted after initial marketing approval. These trials are used to gain additional experience from the treatment of patients in the intended therapeutic indication. In certain instances, the FDA may mandate the performance of Phase 4 clinical trials as a condition of approval of an NDA.

The FDA or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associated with unexpected serious harm to patients. In addition, some clinical trials are overseen by an independent group of qualified experts organized by the sponsor, known as a data safety monitoring board or committee. Depending on its charter, this group may determine whether a trial may move forward at designated check points based on access to certain data from the trial.

During the development of a new drug, sponsors are given opportunities to meet with the FDA at certain points. These points may be prior to submission of an IND, at the end of Phase 2, and before an NDA is submitted. Meetings at other times may be requested. These meetings can provide an opportunity for the sponsor to share information about the data gathered to date, for the FDA to provide advice, and for the sponsor and the FDA to reach agreement on the next phase of development. Sponsors typically use the meetings at the end of the Phase 2 trial to discuss Phase 2 clinical results and present plans for the pivotal Phase 3 clinical trials that they believe will support approval of the new drug.

Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry and physical characteristics of the drug and finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the product candidate and,

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among other things, the manufacturer must develop methods for testing the identity, strength, quality and purity of the final drug. In addition, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life.

While the IND is active and before approval, progress reports summarizing the results of the clinical trials and non-clinical studies performed since the last progress report must be submitted at least annually to the FDA, and written IND safety reports must be submitted to the FDA and investigators for serious and unexpected suspected adverse events, findings from other studies suggesting a significant risk to humans exposed to the same or similar drugs, findings from animal or in vitro testing suggesting a significant risk to humans, and any clinically important increased incidence of a serious suspected adverse reaction compared to that listed in the protocol or investigator brochure.

United States Review and Approval Process

The results of product development, pre-clinical and other non-clinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests conducted on the chemistry of the drug, proposed labeling and other relevant information are submitted to the FDA as part of an NDA requesting approval to market the product. The submission of an NDA is subject to the payment of substantial user fees; a waiver of such fees may be obtained under certain limited circumstances. The FDA reviews an NDA to determine, among other things, whether a product is safe and effective for its intended use and whether its manufacturing is cGMP-compliant to assure and preserve the product’s identity, strength, quality and purity. Under the Prescription Drug User Fee Act, or PDUFA, guidelines that are currently in effect, the FDA has a goal of ten months from the date of “filing” of a standard NDA for a new molecular entity to review and act on the submission. This review typically takes twelve months from the date the NDA is submitted to FDA because the FDA has approximately two months to make a “filing” decision after it the application is submitted. The FDA conducts a preliminary review of all NDAs within the first 60 days after submission, before accepting them for filing, to determine whether they are sufficiently complete to permit substantive review The FDA may request additional information rather than accept an NDA for filing. In this event, the NDA must be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA accepts it for filing.

The FDA may refer an application for a novel drug to an advisory committee. An advisory committee is a panel of independent experts, including clinicians and other scientific experts, that reviews, evaluates and provides a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.

Before approving an NDA, the FDA will inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. Additionally, before approving an NDA, the FDA may inspect one or more clinical trial sites to assure compliance with GCP requirements.

After the FDA evaluates an NDA, it will issue an approval letter or a Complete Response Letter. An approval letter authorizes commercial marketing of the drug with prescribing information for specific indications. A Complete Response Letter indicates that the review cycle of the application is complete and the application will not be approved in its present form. A Complete Response Letter usually describes the specific deficiencies in the NDA identified by the FDA and may require additional clinical data, such as an additional pivotal Phase 3 trial or other significant and time-consuming requirements related to clinical trials, non-clinical studies or manufacturing. If a Complete Response Letter is issued, the sponsor must resubmit the NDA or, addressing all of the deficiencies identified in the letter, or withdraw the application. Even if such data and information are submitted, the FDA may decide that the NDA does not satisfy the criteria for approval.

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If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use may otherwise be limited, which could restrict the commercial value of the product. In addition, the FDA may require a sponsor to conduct Phase 4 testing, which involves clinical trials designed to further assess a drug’s safety and effectiveness after NDA approval, and may require testing and surveillance programs to monitor the safety of approved products which have been commercialized. The FDA may also place other conditions on approval including the requirement for REMS, to assure the safe use of the drug. If the FDA concludes a REMS is needed, the sponsor of the NDA must submit a proposed REMS. The FDA will not approve the NDA without an approved REMS, if required. A REMS could include medication guides, physician communication plans or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. Any of these limitations on approval or marketing could restrict the commercial promotion, distribution, prescription or dispensing of products. Marketing approval may be withdrawn for non-compliance with regulatory requirements or if problems occur following initial marketing.

The FDASIA, made permanent the Pediatric Research Equity Act, or PREA, which requires a sponsor to conduct pediatric clinical trials for most drugs, for a new active ingredient, new indication, new dosage form, new dosing regimen or new route of administration. Under PREA, original NDAs and supplements must contain a pediatric assessment unless the sponsor has received a deferral or waiver. The required assessment must evaluate the safety and effectiveness of the product for the claimed indications in all relevant pediatric subpopulations and support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The sponsor or FDA may request a deferral of pediatric clinical trials for some or all of the pediatric subpopulations. A deferral may be granted for several reasons, including a finding that the drug is ready for approval for use in adults before pediatric clinical trials are complete or that additional safety or effectiveness data needs to be collected before the pediatric clinical trials begin. The FDA must send a non-compliance letter to any sponsor that fails to submit the required assessment, keep a deferral current or fails to submit a request for approval of a pediatric formulation.

Special FDA Expedited Review and Approval Programs

The FDA has various programs, including Fast Track Designation, accelerated approval, priority review, and breakthrough therapy designation, which are intended to expedite or simplify the process for the development and FDA review of drugs that are intended for the treatment of serious or life threatening diseases or conditions and demonstrate the potential to address unmet medical needs. The purpose of these programs is to provide important new drugs to patients earlier than under standard FDA review procedures.

To be eligible for a Fast Track Designation, the FDA must determine, based on the request of a sponsor, that a product is intended to treat a serious or life-threatening disease or condition and demonstrates the potential to address an unmet medical need. The FDA will determine that a product will fill an unmet medical need if it will provide a therapy where none exists or provide a therapy that may be potentially superior to existing therapy based on efficacy or safety factors. The FDA may review sections of the NDA for a fast track product on a rolling basis before the complete application is submitted, if the sponsor provides a schedule for the submission of the sections of the NDA, the FDA agrees to accept sections of the NDA and determines that the schedule is acceptable, and the sponsor pays any required user fees upon submission of the first section of the NDA.

The FDA may give a priority review designation to drugs that offer major advances in treatment, or provide a treatment where no adequate therapy exists. A priority review means that the goal for the FDA to review an application is six months, rather than the standard review of ten months under current PDUFA guidelines. Under the new PDUFA agreement, these six and ten month review periods are measured from the “filing” date rather than the receipt date for NDAs for new molecular entities, which typically adds approximately two months to the timeline for review and decision from the date of submission. Most products that are eligible for Fast Track Designation are also likely to be considered appropriate to receive a priority review.

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In addition, products studied for their safety and effectiveness in treating serious or life-threatening illnesses and that provide meaningful therapeutic benefit over existing treatments may be eligible for accelerated approval and may be approved on the basis of adequate and well-controlled clinical trials establishing that the drug product has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity or prevalence of the condition and the availability or lack of alternative treatments. As a condition of approval, the FDA may require a sponsor of a drug receiving accelerated approval to perform post-marketing studies to verify and describe the predicted effect on irreversible morbidity or mortality or other clinical endpoint, and the drug may be subject to accelerated withdrawal procedures.

Moreover, under the provisions of the FDASIA, a sponsor can request designation of a product candidate as a “breakthrough therapy.” A breakthrough therapy is defined as a drug that is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. Drugs designated as breakthrough therapies are also eligible for accelerated approval. The FDA must take certain actions, such as holding timely meetings and providing advice, intended to expedite the development and review of an application for approval of a breakthrough therapy.

Even if a product qualifies for one or more of these programs, the FDA may later decide that the product no longer meets the conditions for qualification or decide that the time period for FDA review or approval will not be shortened. We may explore some of these opportunities for our product candidates as appropriate.

Post-Approval Requirements

Drugs manufactured or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to recordkeeping, periodic reporting, product sampling and distribution, advertising and promotion and reporting of adverse experiences with the product. After approval, most changes to the approved product, such as adding new indications or other labeling claims are subject to prior FDA review and approval. There also are continuing, annual user program fee requirements for any marketed products.

The FDA may impose a number of post-approval requirements as a condition of approval of an NDA. For example, the FDA may require post-marketing testing, including Phase 4 clinical trials, and surveillance to further assess and monitor the product’s safety and effectiveness after commercialization.

In addition, drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and state agencies, and are subject to periodic unannounced inspections by the FDA and these state agencies for compliance with cGMP requirements. Changes to the manufacturing process are strictly regulated and often require prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP requirements and impose reporting and documentation requirements upon the sponsor and any third-party manufacturers that the sponsor may decide to use. Accordingly, manufacturers must continue to expend time, money, and effort in the area of production and quality control to maintain cGMP compliance.

Once an approval of a drug or medical device is granted, the FDA may withdraw the approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in mandatory revisions to the approved labeling to add new safety information;

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imposition of post-market studies or clinical trials to assess new safety risks; or imposition of distribution or other restrictions under a REMS program. Other potential consequences include, among other things:

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restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls;

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fines, warning letters or holds on post-approval clinical trials;

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refusal of the FDA to approve pending NDAs or supplements to approved NDAs, or suspension or revocation of product approvals;

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product seizure or detention, or refusal to permit the import or export of products; or

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injunctions or the imposition of civil or criminal penalties.

The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market. Drugs or devices may be promoted only for the approved indications and in accordance with the provisions of the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability.

Orphan Drug Designation

Under the Orphan Drug Act, the FDA may grant orphan designation to a drug intended to treat a rare disease or condition, which is generally a disease or condition that affects fewer than 200,000 individuals in the United States, or more than 200,000 individuals in the United States and for which there is no reasonable expectation that the cost of developing and making available in the United States a drug for this type of disease or condition will be recovered from sales in the United States for that drug or biologic. Orphan drug designation must be requested before submitting an NDA. After the FDA grants orphan drug designation, the generic identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. The orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review or approval process.

If a product that has orphan drug designation subsequently receives the first FDA approval for the disease for which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications, including a full NDA, to market the same drug for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity. Orphan drug exclusivity does not prevent FDA from approving a different drug for the same disease or condition, or the same drug for a different disease or condition. Among the other benefits of orphan drug designation are tax credits for certain research and a waiver of the NDA application user fee. A designated orphan drug may not receive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation. In addition, exclusive marketing rights in the United States may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantities of the product to meet the needs of patients with the rare disease or condition.

The Hatch-Waxman Amendments

The Drug Price Competition and Patent Term Restoration Act of 1984, known as the Hatch-Waxman Act, added two pathways for FDA drug approval. First, the Hatch-Waxman amendments authorized the FDA to approve an alternative type of NDA under Section 505(b)(2) of the FDCA. Section 505(b)(2) permits the filing of an NDA where at least some of the information required for approval comes from trials not conducted by or for

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the applicant and for which the applicant has not obtained a right of reference from the data owner. The applicant may rely upon the FDA’s findings of safety and efficacy for an approved product that acts as the “listed drug.” The FDA may also require 505(b)(2) applicants to perform additional studies or measurements to support the change from the listed drug. The FDA may then approve the new product candidate for all, or some, of the label indications for which the branded reference drug has been approved, as well as for any new indication sought by the 505(b)(2) applicant.

Second, the Hatch-Waxman amendments to the FDCA also established a statutory procedure for submission and FDA review and approval of abbreviated new drug applications, or ANDAs, for generic versions of branded drugs previously approved by the FDA (such previously approved drugs are referred to as “listed drugs”). An ANDA is a comprehensive submission that contains, among other things, data and information pertaining to the active pharmaceutical ingredient, drug product formulation, specifications and stability of the generic drug, as well as analytical methods, manufacturing process validation data and quality control procedures. Premarket applications for generic drugs are termed abbreviated because they generally do not include pre-clinical and clinical data to demonstrate safety and effectiveness. However, a generic manufacturer is typically required to conduct bioequivalence studies of its test product against the listed drug. The bioequivalence studies for orally administered, systemically available drug products assess the rate and extent to which the API is absorbed into the bloodstream from the drug product and becomes available at the site of action. Bioequivalence is established when there is an absence of a significant difference in the rate and extent for absorption of the generic product and the listed drug. For some drugs, other means of demonstrating bioequivalence may be required by the FDA, especially where rate and/or extent of absorption are difficult or impossible to measure. The FDA will approve the generic product as suitable for an ANDA application if it finds that the generic product does not raise new questions of safety and effectiveness as compared to the innovator product. A product is not eligible for ANDA approval if the FDA determines that it is not bioequivalent to the referenced innovator drug, if it is intended for a different use, or if it is not subject to an approved Suitability Petition.

In seeking approval for a drug through an NDA, including a 505(b)(2) NDA, applicants are required to list with the FDA certain patents whose claims cover the applicant’s product. Upon approval of an NDA, each of the patents listed in the application for the drug is then published in the Orange Book. Any applicant who files an ANDA seeking approval of a generic equivalent version of a drug listed in the Orange Book or a 505(b)(2) NDA referencing a drug listed in the Orange Book must certify to the FDA that (1) no patent information on the drug product that is the subject of the application has been submitted to the FDA; (2) such patent has expired; (3) the date on which such patent expires; or (4) such patent is invalid or will not be infringed upon by the manufacture, use or sale of the drug product for which the application is submitted. This last certification is known as a paragraph IV certification. A notice of the paragraph IV certification must be provided to each owner of the patent that is the subject of the certification and to the holder of the approved NDA to which the ANDA or 505(b)(2) application refers. The applicant may also elect to submit a “section viii” statement certifying that its proposed label does not contain (or carves out) any language regarding the patented method-of-use rather than certify to a listed method-of-use patent.

If the reference NDA holder and patent owners assert a patent challenge directed to one of the Orange Book listed patents within 45 days of the receipt of the paragraph IV certification notice, the FDA is prohibited from approving the application until the earlier of 30 months from the receipt of the paragraph IV certification expiration of the patent, settlement of the lawsuit or a decision in the infringement case that is favorable to the applicant. The ANDA or 505(b)(2) application also will not be approved until any applicable non-patent exclusivity listed in the Orange Book for the branded reference drug has expired.

Marketing Exclusivity

Market exclusivity provisions under the FDCA can delay the submission or the approval of certain marketing applications. The FDCA provides a five-year period of non-patent marketing exclusivity within the

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United States to the first applicant to obtain approval of an NDA for a new chemical entity. A drug is a new chemical entity if the FDA has not previously approved any other new drug containing the same active moiety, which is the molecule or ion responsible for the action of the drug substance. During the exclusivity period, the FDA may not approve or even accept for review an abbreviated new drug application, or ANDA, or a NDA submitted under Section 505(b)(2), or 505(b)(2) NDA, submitted by another company for another drug based on the same active moiety, regardless of whether the drug is intended for the same indication as the original innovative drug or for another indication, where the applicant does not own or have a legal right of reference to all the data required for approval. However, an application may be submitted after four years if it contains a certification of patent invalidity or non-infringement to one of the patents listed with the FDA by the innovator NDA holder.

The FDCA alternatively provides three years of marketing exclusivity for an NDA, or supplement to an existing NDA if new clinical investigations, other than bioavailability studies, that were conducted or sponsored by the applicant are deemed by the FDA to be essential to the approval of the application, for example new indications, dosages or strengths of an existing drug. This three-year exclusivity covers only the modification for which the drug received approval on the basis of the new clinical investigations and does not prohibit the FDA from approving ANDAs or 505(b)(2) NDAs for drugs containing the active agent for the original indication or condition of use. Five-year and three-year exclusivity will not delay the submission or approval of a full NDA. However, an applicant submitting a full NDA would be required to conduct or obtain a right of reference to all of the pre-clinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety and effectiveness.

Pediatric exclusivity is another type of marketing exclusivity available in the United States. Pediatric exclusivity provides for an additional six months of marketing exclusivity attached to another period of exclusivity if a sponsor conducts clinical trials in children in response to a written request from the FDA. The issuance of a written request does not require the sponsor to undertake the described clinical trials. In addition, orphan drug exclusivity, as described above, may offer a seven-year period of marketing exclusivity, except in certain circumstances.

U.S. Coverage and Reimbursement

Significant uncertainty exists as to the coverage and reimbursement status of any therapeutic product candidate for which we may seek regulatory approval. Sales in the United States will depend in part on the availability of adequate financial coverage and reimbursement from third-party payors, which include government health programs such as Medicare, Medicaid, TRICARE and the Veterans Administration, as well as managed care organizations and private health insurers. Prices at which we or our customers seek reimbursement for our therapeutic product candidates can be subject to challenge, reduction or denial by payors.

The process for determining whether a payor will provide coverage for a product is typically separate from the process for setting the reimbursement rate that the payor will pay for the product. A payor’s decision to provide coverage for a product does not imply that an adequate reimbursement rate will be available. Third-party payors are increasingly challenging the price and examining the medical necessity and cost-effectiveness of medical products and services, in addition to their safety and efficacy. In order to obtain coverage and reimbursement for any product that might be approved for marketing, we may need to conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of any products, which would be in addition to the costs expended to obtain regulatory approvals. Third-party payors may not consider our product candidates to be medically necessary or cost-effective compared to other available therapies, or the rebate percentages required to secure favorable coverage may not yield an adequate margin over cost or may not enable us to maintain price levels sufficient to realize an appropriate return on our investment in drug development.

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Healthcare Reform

In the United States and some foreign jurisdictions, there have been, and continue to be, several legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval of drug product candidates, restrict or regulate post-approval activities, and affect the profitable sale of drug product candidates.

Among policy makers and payors in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality and/or expanding access. In the United States, the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives. In March 2010, the ACA was passed, which substantially changed the way healthcare is financed by both the government and private insurers, and significantly impacts the U.S. pharmaceutical industry. The ACA, among other things: (i) increased the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program and extends the rebate program to individuals enrolled in Medicaid managed care organizations; (ii) established an annual, nondeductible fee on any entity that manufactures or imports certain specified branded prescription drugs and biologic agents apportioned among these entities according to their market share in some government healthcare programs; (iii) expanded the availability of lower pricing under the 340B drug pricing program by adding new entities to the program; (iv) increased the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program; (v) expanded the eligibility criteria for Medicaid programs; (vi) created a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research; and (vii) established a Center for Medicare Innovation at CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drugs.

Some of the provisions of the ACA have yet to be implemented, and there have been judicial and Congressional challenges to certain aspects of the ACA, as well as recent efforts by the Trump administration to repeal or replace certain aspects of the ACA. While Congress has not passed comprehensive repeal legislation, bills affecting the implementation of certain taxes under the ACA have been signed into law. The Tax Cuts and Jobs Act of 2017 includes a provision repealing, effective January 1, 2019, the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate.” Additionally, on January 22, 2018, President Trump signed a continuing resolution on appropriations for fiscal year 2018 that delayed the implementation of certain ACA-mandated fees, including the so-called “Cadillac” tax on certain high cost employer-sponsored insurance plans, the annual fee imposed on certain health insurance providers based on market share, and the medical device excise tax on non-exempt medical devices.

Other legislative changes have been proposed and adopted since the ACA was enacted, including aggregate reductions of Medicare payments to providers of 2% per fiscal year and reduced payments to several types of Medicare providers. Moreover, there has recently been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products. At the federal level, the Trump administration’s budget proposal for fiscal year 2019 contains further drug price control measures. While any proposed measures will require authorization through additional legislation to become effective, Congress and the Trump administration have each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

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U.S. Healthcare Fraud and Abuse Laws and Compliance Requirements

Federal and state healthcare laws and regulations restrict business practices in the pharmaceutical industry. The U.S. laws that may affect our ability to operate include:

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the federal Anti-Kickback Statute, which prohibits, among other things, persons from soliciting, receiving, offering or paying remuneration, directly or indirectly, to induce, or in return for, the purchase or recommendation of an item or service reimbursable under a federal healthcare program, such as the Medicare and Medicaid programs;

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the federal civil and criminal false claims laws and civil monetary penalty laws, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid or other third-party payors that are false or fraudulent;

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HIPAA, which created new federal criminal statutes that prohibit executing a scheme to defraud any healthcare benefit program and making false statements relating to healthcare matters;

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HIPAA, as amended by the federal Health Information Technology for Economic and Clinical Health Act and its implementing regulations, also imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information;

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the federal Physician Payments Sunshine Act, which among other things requires certain manufacturers of drugs, devices, and biologics, that are reimbursable by a federal healthcare program to report annually to the U.S. Department of Health and Human Services information related to payments and other transfers of value to physicians and teaching hospitals, and ownership and investment interests held by physicians and their immediate family members; and

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similar federal laws and state law equivalents of each of the above federal laws.

Regulation Outside the United States

To the extent that any of our product candidates, once approved, are sold in a foreign country, we may be subject to similar foreign laws and regulations, which may include, for instance, applicable post-marketing requirements, including safety surveillance, anti-fraud and abuse laws and implementation of corporate compliance programs and reporting of payments or other transfers of value to healthcare professionals.

In order to market our future products in the EEA and many other foreign jurisdictions, we must obtain separate regulatory approvals. More concretely, in the EEA, medicinal products can only be commercialized after obtaining a Marketing Authorization, or MA. There are two types of marketing authorizations:

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the Community MA, which is issued by the European Commission through the Centralized Procedure, based on the opinion of the Committee for Medicinal Products for Human Use of the EMA and which is valid throughout the entire territory of the EEA. The Centralized Procedure is mandatory for certain types of products, such as biotechnology medicinal products, orphan medicinal products, advanced therapy products, and medicinal products containing a new active substance indicated for the treatment certain diseases, such as AIDS, cancer, neurodegenerative disorders, diabetes, auto-immune and viral diseases. The Centralized Procedure is optional for products containing a new active substance not yet authorized in the EEA, or for products that constitute a significant therapeutic, scientific or technical innovation or which are in the interest of public health in the EU; and

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National MAs, which are issued by the competent authorities of the Member States of the EEA and only cover their respective territory, are available for products not falling within the mandatory scope of the Centralized Procedure. Where a product has already been authorized for marketing in a Member State of the EEA, this National MA can be recognized in another Member State through the Mutual Recognition Procedure. If the product has not received a National MA in any Member State at the time of application, it can be approved simultaneously in various Member States through the Decentralized Procedure.

Under the above described procedures, before granting the MA, the EMA or the competent authorities of the Member States of the EEA make an assessment of the risk-benefit balance of the product on the basis of scientific criteria concerning its quality, safety and efficacy.

Data and Marketing Exclusivity

In the EEA, new products authorized for marketing, or reference products, qualify for eight years of data exclusivity and an additional two years of market exclusivity upon marketing authorization. The data exclusivity period prevents generic or biosimilar applicants from relying on the pre-clinical and clinical trial data contained in the dossier of the reference product when applying for a generic or biosimilar marketing authorization in the EU during a period of eight years from the date on which the reference product was first authorized in the EU. The market exclusivity period prevents a successful generic or biosimilar applicant from commercializing its product in the EU until 10 years have elapsed from the initial authorization of the reference product in the EU. The 10-year market exclusivity period can be extended to a maximum of eleven years if, during the first eight years of those 10 years, the marketing authorization holder obtains an authorization for one or more new therapeutic indications which, during the scientific evaluation prior to their authorization, are held to bring a significant clinical benefit in comparison with existing therapies. In Japan, medicinal products approved for administration to a patient via a new route of administration qualify for six years of market exclusivity.

Pediatric Investigation Plan

In the EEA, MAAs for new medicinal products not authorized have to include the results of studies conducted in the pediatric population, in compliance with a pediatric investigation plan, or PIP, agreed with the EMA’s Pediatric Committee, or PDCO. The PIP sets out the timing and measures proposed to generate data to support a pediatric indication of the drug for which marketing authorization is being sought. The PDCO can grant a deferral of the obligation to implement some or all of the measures of the PIP until there are sufficient data to demonstrate the efficacy and safety of the product in adults. Further, the obligation to provide pediatric clinical trial data can be waived by the PDCO when these data is not needed or appropriate because the product is likely to be ineffective or unsafe in children, the disease or condition for which the product is intended occurs only in adult populations, or when the product does not represent a significant therapeutic benefit over existing treatments for pediatric patients. Once the marketing authorization is obtained in all Member States of the EU and study results are included in the product information, even when negative, the product is eligible for six months’ supplementary protection certificate extension.

Orphan Drug Designation

In the EEA, a medicinal product can be designated as an orphan drug if its sponsor can establish that the product is intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition affecting not more than five in ten thousand persons in the EU when the application is made, or that the product is intended for the diagnosis, prevention or treatment of a life-threatening, seriously debilitating or serious and chronic condition in the European Community and that without incentives it is unlikely that the marketing of the drug in the EU would generate sufficient return to justify the necessary investment. For either of these conditions, the applicant must demonstrate that there exists no satisfactory method of diagnosis, prevention or treatment of the condition in question that has been authorized in the EU or, if such method exists, the drug will be of significant benefit to those affected by that condition.

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In the EEA, an application for designation as an orphan product can be made any time prior to the filing of an application for approval to market the product. Marketing authorization for an orphan drug leads to a ten-year period of market exclusivity. During this market exclusivity period, the EMA or the member state competent authorities, cannot accept another application for a marketing authorization, or grant a marketing authorization, for a similar medicinal product for the same indication. The period of market exclusivity is extended by two years for medicines that have also complied with an agreed PIP.

This period may, however, be reduced to six years if, at the end of the fifth year, it is established that the product no longer meets the criteria for orphan drug designation, for example because the product is sufficiently profitable not to justify market exclusivity. Market exclusivity can be revoked only in very selected cases, such as consent from the marketing authorization holder, inability to supply sufficient quantities of the product, demonstration of “clinical superiority” by a similar medicinal product, or, after a review by the Committee for Orphan Medicinal Products, requested by a member state in the fifth year of the marketing exclusivity period (if the designation criteria are believed to no longer apply). Medicinal products designated as orphan drugs pursuant are eligible for incentives made available by the EU and its Member States to support research into, and the development and availability of, orphan drugs.

Clinical Trials

Clinical trials of medicinal products in the European Union must be conducted in accordance with European Union and national regulations and the International Conference on Harmonization, or ICH, guidelines on GCPs. Additional GCP guidelines from the European Commission, focusing in particular on traceability, apply to clinical trials of advanced therapy medicinal products. If the sponsor of the clinical trial is not established within the European Union, it must appoint an entity within the European Union to act as its legal representative. The sponsor must take out a clinical trial insurance policy, and in most EU countries, the sponsor is liable to provide “no fault” compensation to any study subject injured in the clinical trial.

Prior to commencing a clinical trial, the sponsor must obtain a clinical trial authorization from the competent authority, and a positive opinion from an IEC. The application for a clinical trial authorization must include, among other things, a copy of the trial protocol and an investigational medicinal product dossier containing information about the manufacture and quality of the medicinal product under investigation. Currently, clinical trial authorization applications must be submitted to the competent authority in each EU Member State in which the trial will be conducted. Under the new Regulation on Clinical Trials, which is currently expected to take effect in 2019, there will be a centralized application procedure where one national authority takes the lead in reviewing the application and the other national authorities have only a limited involvement. Any substantial changes to the trial protocol or other information submitted with the clinical trial applications must be notified to or approved by the relevant competent authorities and ethics committees. Medicines used in clinical trials must be manufactured in accordance with cGMP. Other national and European Union-wide regulatory requirements also apply.

Employees

As of November 1, 2018, we had 14 full-time employees, including a total of 5 employees with M.D., Sc.D. or Ph.D. degrees. None of our employees are represented by labor unions or covered by collective bargaining agreements. We consider our relationship with our employees to be good.

Facilities

Our principal facilities consist of office space. We occupy approximately 11,486 square feet of office space in Boston, Massachusetts under a lease that currently expires in 2024.

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Corporate Information

We were incorporated under the laws of the State of Delaware in February 2013.

Legal Proceedings

We are not currently subject to any material legal proceedings.

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MANAGEMENT

Executive Officers and Directors

The following table sets forth the name, age and position of each of our executive officers and directors as of November 1, 2018.


Name	Age	Position
*Executive Officers*
Jeffrey B. Kindler	63	Chief Executive Officer and Director
James N. Campbell, M.D.	70	President, Chief Scientific Officer and Director
Randall Stevens, M.D.	60	Executive Vice President, Chief Medical Officer
Andrew Partridge	50	Executive Vice President, Chief Commercial Officer
B. Nicholas Harvey	58	Executive Vice President, Chief Financial Officer, Treasurer and Secretary
Peter Hanson, DVM, Ph.D.	55	Executive Vice President, Chief Development Operations Officer
Kerrie L. Brady	56	Chief Business Officer and Executive Vice President, Corporate Strategy
*Directors*
Sol J. Barer, Ph.D.(2)	71	Chairman of the Board of Directors
Isaac Blech(1)	68	Vice Chairman of the Board of Directors
Daniel N. Mendelson(3)	54	Director
Sara Nayeem, M.D.(2)(3)	41	Director
Arnold L. Oronsky, Ph.D.(1)(2)	79	Director
Joseph R. Swedish(1)(3)	67	Director
Shawn Tomasello(2)(3)	60	Director
Stella Xu, Ph.D.(1)	48	Director

(1)	Member of the audit committee.

(2)	Member of the compensation committee.

(3)	Member of the nominating and corporate governance committee.

Executive Officers and Key Employees

Jeffrey B. Kindler has served as our Chief Executive Officer and a member of our board of directors since 2013. Since 2012, Mr. Kindler has been a venture partner at Lux Capital Management LLC, a venture capital firm. He is also a managing director at Starboard Capital Partners LLC, a private equity firm, and provides consulting services to MacAndrew & Forbes. Mr. Kindler’s current roles at public companies are the executive chairman and director of vTv Therapeutics Inc., a development stage biopharmaceutical company; a director at Intrexon Corporation, a synthetic biology company; a director at Perrigo Company plc, a healthcare company; and a director at Siga Technologies, Inc., a developer of antiviral therapeutics. He also serves on the boards of directors of a number of other privately held companies. Previously, Mr. Kindler was chairman and Chief Executive Officer of Pfizer Inc. from 2006 to 2010, and vice chairman and Executive Vice President from 2002 to 2006. He was also President of Partner Brands, Executive Vice President and General Counsel at McDonald’s Corporation, and Vice President of Litigation and Legal Policy at General Electric Company. In addition, Mr. Kindler serves as global chair of the GLG Institute, a membership-based learning community for leading executives. He also served on President Barack Obama’s Management Advisory Board and on the board of trustees of Tufts University. Mr. Kindler received his J.D. from Harvard Law School in 1980, and his B.A. from Tufts University in 1977. We believe that Mr. Kindler’s significant experience with public companies, including pharmaceutical companies, qualifies him to serve as a member of our board of directors.

James N. Campbell, M.D. has served as our President, Chief Scientific Officer, and a member of our board of directors since 2013. Dr. Campbell is Professor Emeritus of neurosurgery at Johns Hopkins University

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School of Medicine. Dr. Campbell co-founded Amplimmune, Inc. (which was acquired by AstraZeneca plc) and CNS Therapeutics Inc. (which was acquired by Covidien plc). Previously, he served as Chief Executive Officer at Vallinex, Inc., a pain therapeutics company, and Arcion Therapeutics, Inc., also a pain therapeutics company. In addition, he served as Executive-in-Residence at InterWest Partners, a California based venture firm, and for several years also served as a consultant. Dr. Campbell received his M.D. from Yale University and his B.A. in psychology from the University of Michigan. We believe that Dr. Campbell’s significant experience with biotechnology companies and his medical expertise qualify him to serve as a member of our board of directors.

Randall Stevens, M.D. has served as our Chief Medical Officer since April 2015 and Executive Vice President since October 2018. Dr. Stevens is a board-certified internist and rheumatologist with more than 25 years of experience in pharmaceutical medicine. From August 2007 to April 2015, he served as the corporate vice president, head of inflammation and immunology clinical development for Celgene Corporation, a pharmaceutical company. Earlier in his career, Dr. Stevens spent 11 years at F. Hoffmann La Roche Inc. where he was a global leader in inflammation and immunology clinical research. Additionally, he has been a clinical professor of medicine at Robert Wood Johnson School of Medicine since 1990 and a board member for Outcome Measures Rheumatic Clinical Trials since 2007. He holds a B.A. in chemistry and Spanish, and an M.D. from Case Western Reserve University School of Medicine.

Andrew Partridge has served as our Executive Vice President, Chief Commercial Officer and as a consultant to us since October 2018. We expect that Mr. Partridge will join us as a full-time employee in November 2018. Since 2013, Mr. Partridge has served as senior vice president and regional head of North America Commercial at Vertex Pharmaceuticals. From 2003 to 2013 he worked at Amgen, serving as the executive director of sales, oncology business unit in the United States. Prior to Amgen, he held positions of increasing responsibility at Roche and Schering-Plough. Mr. Partridge received a Higher National Diploma in Medical Laboratory Sciences at Birmingham City University in the United Kingdom.

B. Nicholas Harvey has served as our Chief Financial Officer since July 2018, Executive Vice President and Treasurer since October 2018 and Secretary since November 2018. From June 2017 through June 2018, he served as an independent consultant to private and public life science companies. Previously, he served as the Chief Financial Officer of Radius Health Inc., or Radius, from December 2006 to May 2017. Prior to joining Radius, he served as Managing Director of Shiprock Capital, a venture capital firm, from its inception in February 2003 to December 2006 and as a senior advisor to the predecessor entities since March 2002. Before that Mr. Harvey served as Chief Financial Officer of several private, venture-backed life sciences companies, including Transfusion Technologies Corporation and Transcend Therapeutics Inc. He received a Bachelor of Economics degree and a Bachelor of Laws degree with first-class honors from the Australian National University and an M.B.A. from the Harvard Business School.

Peter Hanson, DVM, Ph.D. has served as our Chief Development Operations Officer since 2014 and Executive Vice President since October 2018. He is a Diplomate of the American College of Veterinary Surgeons with more than 20 years of experience in pharmaceutical medicine. Prior to joining us, Dr. Hanson was the head of research and development and medical affairs for Abbott Animal Health Inc. From 1996 to 2012, he worked at Merial Ltd., a global animal health company, serving as the global head, project and portfolio management, the head of pharmaceutical R&D and the executive director, pharmaceutical R&D projects. Dr. Hanson holds a B.A. in biology and a D.V.M. from the University of Minnesota. He also holds a residency certificate, an M.S. and Ph.D. in veterinary science from the University of Wisconsin-Madison.

Kerrie L. Brady has served as our Chief Business Officer and Executive Vice President, Corporate Strategy since 2013. Previously, Ms. Brady served as Chief Operations Officer at Vallinex Inc., a pain therapeutics company, and Arcion Therapeutics Inc., also a pain therapeutics company. Before that, she was the Founder, President and Chief Executive Officer of Traxion Therapeutics, Inc., a biotech company focused on the development of new drugs to treat intractable pain. Ms. Brady holds a Bachelor of Pharmacy from Monash University’s Victorian College of Pharmacy, an M.B.A. from the University of Melbourne and an M.S. in Biopharmaceuticals from the University of New South Wales.

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Non-Employee Directors

Sol J. Barer, Ph.D. has served as our chairman and a member of our board of directors since 2013. Since 1987, Dr. Barer has served as managing partner at SJ Barer Consulting, LLC, a consulting firm, and a member at Barer & Son Capital LLC, an investment firm. He is also an advisor to the Israel Biotechnology Fund, an investor in Israeli-based biotech companies. He is also the Founding Chair of the Hackensack Meridian Health Center for Discovery & Innovation. Dr. Barer’s current roles at public companies are chairman and director of Edge Therapeutics, Inc., Teva Pharmaceutical Industries Limited, and Aevi Genomic Medicine, Inc., and lead independent director of ContraFect Corporation. Dr. Barer previously served as chairman and director of InspireMD, Inc. from 2011 to 2017, and as a director of Amicus Therapeutics, Inc. from 2009 to 2017 and Aegerion Pharmaceuticals, Inc. from 2011 to 2016. From 1987 to 2011, Dr. Barer held various leadership positions at Celgene Corporation, a global biopharmaceutical company. He was chairman from January 2011 until June 2011, executive chairman from June 2010 until January 2011, and chairman and Chief Executive Officer from May 2006 until June 2010. He was also President from 1993, and Chief Operating Officer from 1994, in each case until May 2006. Dr. Barer was the founder of the biotechnology group at the Celanese Research Company that was subsequently spun off as Celgene Corporation. Dr. Barer received his Ph.D. in organic and physical chemistry from Rutgers University and his B.S. in chemistry from Brooklyn College of the City University of New York. We believe that Dr. Barer’s significant scientific, executive and board leadership experience in the biopharmaceutical industry qualifies him to serve as a member of our board of directors.

Isaac Blech has served as our Vice Chairman and a member of our board of directors since 2013. Mr. Blech’s current roles at public companies are vice chairman and director of Edge Therapeutics, Inc., Cerocer Inc., and Diffusion Pharmaceuticals, Inc., and director of ContraFect Corporation, SpendSmart Networks, Inc., and Marina Biotech, Inc. He is also vice chairman of numerous private companies, including Alveo Technologies, Aridis Pharmaceuticals, Elucida Oncology Inc., Nacuity Pharmaceuticals, Inc., Sapience Therapeutics, Inc., X4 Pharmaceuticals, Inc. and X-VAX Technology, Inc. Previously, Mr. Blech served on the Board of Directors of Medgenics, Inc. from 2011 to 2017, of lnspireMD, Inc. from 2016 to 2017, and of root9B Holdings, Inc. from 2011 to 2017. Over the past 38 years, Mr. Blech has helped found many biotechnology companies, including Celgene Corporation, ICOS Corporation, Pathogenesis Corporation, Nova Pharmaceutical Corporation and Genetic Systems Corporation. Mr. Blech received his B.A. from Baruch College in 1975. We believe that Mr. Blech’s extensive experience as a founder, director and major investor in numerous biotechnology companies qualifies him to serve as a member of our board of directors.

Daniel N. Mendelson has served as a member of our board of directors since August 2018. Mr. Mendelson is the founder of Avalere Health LLC, a strategic advisory company focused on solving complex healthcare problems, which he founded in 2000 and sold to Inovalon Holdings in 2015. Prior to founding Avalere, Mr. Mendelson served as Associate Director of Health at the White House Office of Management and Budget (OMB) from 1998 to 2000, where he was responsible for Medicare, Medicaid, discretionary budgetary policy, and the implementation of the Balanced Budget Act healthcare provisions during the Clinton Administration. Prior to joining OMB, Mr. Mendelson was Senior Vice President of The Lewin Group and Director of the Medical Technology practice. Mr. Mendelson currently serves on the board of Champions Oncology, Inc., a service provider to pharmaceutical and biotechnology companies, and previously served on the boards of Coventry Healthcare (which was sold to Aetna in 2013), PharMerica Corporation and HMS Holdings Corp. He holds an undergraduate degree in economics and viola performance from Oberlin College, and an M.P.P. from the Kennedy School of Government at Harvard University. We believe that his business experience in healthcare companies and experience in government and business administration education qualify him to serve as a member of our board of directors.

Sara Nayeem, M.D. has served as a member of our board of directors since 2017. Dr. Nayeem joined New Enterprise Associates LLC, a venture capital firm, in 2009 and has served as a partner since 2015. Dr. Nayeem currently serves as a director of several private companies, including Cydan Development Inc., Imara Inc., Complexa Inc. and BioHealth Innovation Inc. Previously, she served on the board of Mersana

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Therapeutics, Inc. and Vtesse, Inc. (which was acquired by Sucampo). Prior to joining New Enterprise Associates, Dr. Nayeem was an Associate with Merrill Lynch’s Global Healthcare Group, where she advised biotechnology, pharmaceutical and medical device companies on numerous mergers, acquisitions and financing transactions. Dr. Nayeem received her M.D. and M.B.A. from Yale University, and her B.A. in biology from Harvard University. We believe that Dr. Nayeem’s experience working with biopharmaceutical companies and her scientific expertise qualify her to serve as a member of our board of directors.

Arnold L. Oronsky, Ph.D. has served as a member of our board of directors since 2013. Since 1994, Dr. Oronsky has been a managing director of InterWest Partners, a California based venture firm, where he is now a senior partner. Prior to joining InterWest, Dr. Oronsky was vice president for discovery research at the Lederle Laboratories division of American Cyanamid Company. Dr. Oronsky is a senior lecturer in the Department of Medicine at The Johns Hopkins Medical School. Dr. Oronsky’s current roles at public companies are chairman and director of Dynavax Technologies Corporation, and director of KalVista Pharmaceuticals, Inc. and, Tesaro, Inc. Previously, he served as director of MacroGenics, Inc. from 2000 to 2014 and of Applied Genetic Technologies Corporation from 2003 to 2017. Dr. Oronsky received his Ph.D. in immunology from Columbia University and his B.A. from New York University. We believe that his extensive board experience at biotechnology companies and his scientific expertise qualify him to serve as a member of our board of directors.

Joseph R. Swedish has served as a member of our board of directors since June 2018. Mr. Swedish was President and Chief Executive Officer of Anthem, Inc., a large health insurer, from March 2013 to November 2017 and was Chairman from December 2015 to May 2018. Mr. Swedish currently serves as a senior advisor to the board of directors of Anthem. In addition, his current roles at public companies are director of CDW Corporation, an IT provider, director of International Business Machines Corporation, a technology and services company, and director of Mesoblast Limited, a biotech company. He also serves as director of America’s Health Insurance Plans and Proteus Digital Health, and on the Board of Visitors of Duke University’s Fuqua School of Business and the Duke Margolis External Advisory Board. He is also a co-founder and partner at Concord Health Partners, a private equity firm. Previously, Mr. Swedish served as President and Chief Executive Officer of Trinity Health Corporation from 2004 to 2013 and of Centura Health from 1999 to 2004. In addition, Mr. Swedish served as director of Coventry Health Care, Inc. from 2010 to February 2013, and of the Blue Cross Blue Shield Association, the National Institute for Health Care Management, and the Central Indiana Corporate Partnership, each through November 2017. He also served as chair of the Catholic Health Association and on the board of Loyola University Chicago. Mr. Swedish earned a bachelor’s degree in healthcare administration and management from the University of North Carolina at Charlotte and a master’s degree in the same from Duke University. We believe that his extensive board and leadership experience in the healthcare industry qualifies him to serve as a member of our board of directors.

Shawn Tomasello has served as a member of our board of directors since 2017. Ms. Tomasello was the Chief Commercial Officer of Kite Pharma, Inc. (which was acquired by Gilead Sciences, Inc. in August 2017) from December 2015 to July 2018. She is currently a director of Diplomat Pharmacy, Inc., a specialty pharmacy services provider, Clementia Pharmaceuticals Inc., a biopharmaceutical company, Mesoblast Limited, a biotech company, and UroGen Pharma Ltd., a biopharmaceutical company. She also serves as director of Oxford BioTherapeutics Limited, a private oncology company and Geneos Therapeutics, also a private oncology company. Previously, Ms. Tomasello served as founder and Chief Executive Officer of Shawn Tomasello Consulting LLC from August to December 2015 and as the Chief Commercial Officer of Pharmacyclics LLC (which was acquired by Abbvie, Inc. in 2015) from August 2014 to July 2015. Between April 2005 to August 2014, Ms. Tomasello was employed at Celgene Corporation, initially as the Vice President, Sales and Training, and then as President of the Americas, Hematology and Oncology. Prior to that, Ms. Tomasello held positions at Genentech, Inc., Pfizer Laboratories, Miles Pharmaceuticals and The Proctor & Gamble Company. Ms. Tomasello received her B.S. in marketing from the University of Cincinnati and her M.B.A. from Murray State University. We believe that Ms. Tomasello’s considerable experience in drug commercialization, operation and executive management qualifies her to serve as a member of our board of directors.

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Stella Xu, Ph.D. has served as a member of our board of directors since January 2018. Dr. Xu currently serves as director of Tempest Therapeutics, Inc., and previously served as a director of ARMO BioSciences, Inc. prior to its acquisition by Eli Lilly. Since August 2017, Dr. Xu has been a managing director of Quan Capital, a life sciences venture fund with offices in China and the United States. Previously, Dr. Xu was Vice President and site head of Roche Innovation Center Shanghai, and a member of the global management team for Roche’s Immunology, Inflammation & Infectious Diseases Discovery and Translation Area beginning in September 2012. Dr. Xu joined Roche from McKinsey & Company, a consultancy. Dr. Xu received her Ph.D. in immunology from Northwestern University, and her B.S. in biophysics from Peking University. We believe that her extensive, global experience in the development and commercialization of innovative therapies qualifies her to serve as a member of our board of directors.

Board Composition and Election of Directors

Director Independence

Our board of directors currently consists of ten members. Our board of directors has determined that, of our ten directors, Sol J. Barer, Ph.D., Isaac Blech, Daniel N. Mendelson, Sara Nayeem, M.D., Arnold L Oronsky, Ph.D., Joseph R. Swedish, Shawn Tomasello and Stella Xu, Ph.D. do not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is “independent” as that term is defined under the rules of The Nasdaq Stock Market LLC, or Nasdaq. There are no family relationships among any of our directors or executive officers.

Classified Board of Directors

In accordance with our restated certificate of incorporation that will go into effect upon the closing of this offering, our board of directors will be divided into three classes with staggered, three-year terms. At each annual meeting of stockholders, the successors to directors whose terms then expire will be elected to serve from the time of election and qualification until the third annual meeting following election. Effective upon the closing of this offering, our directors will be divided among the three classes as follows:

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the Class I directors will be Sol J. Barer, Ph.D., Isaac Blech, Daniel N. Mendelson and Stella Xu, Ph.D., and their terms will expire at our first annual meeting of stockholders following this offering;

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the Class II directors will be James N. Campbell, M.D., Sara Nayeem, M.D. and Arnold L. Oronsky, Ph.D., and their terms will expire at our second annual meeting of stockholders following this offering; and

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the Class III directors will be Jeffrey B. Kindler, Joseph R. Swedish and Shawn Tomasello, and their terms will expire at the third annual meeting of stockholders following this offering.

Our restated certificate of incorporation that will go into effect upon the closing of this offering will provide that the authorized number of directors may be changed only by resolution of the board of directors. Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. The division of our board of directors into three classes with staggered three-year terms may delay or prevent a change of our management or a change in control of our company. Our directors may be removed only for cause by the affirmative vote of the holders of at least two-thirds of our outstanding voting stock entitled to vote in the election of directors.

Board Leadership Structure

Our board of directors is currently chaired by Sol J. Barer, Ph.D. Our corporate governance guidelines provide that, if the chairman of the board is a member of management or does not otherwise qualify as

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independent, the independent directors of the board may elect a lead director. The lead director’s responsibilities include, but are not limited to: presiding over all meetings of the board of directors at which the chairman is not present, including any executive sessions of the independent directors; approving board meeting schedules and agendas; and acting as the liaison between the independent directors and the chief executive officer and chairman of the board. Our corporate governance guidelines further provide the flexibility for our board of directors to modify our leadership structure in the future as it deems appropriate.

Role of the Board in Risk Oversight

One of the key functions of our board of directors is informed oversight of our risk management process. Our board of directors does not have a standing risk management committee, but rather administers this oversight function directly through our board of directors as a whole, as well as through various standing committees of our board of directors that address risks inherent in their respective areas of oversight. In particular, our board of directors is responsible for monitoring and assessing strategic risk exposure and our audit committee has the responsibility to consider and discuss our major financial risk exposures and the steps our management has taken to monitor and control these exposures, including guidelines and policies to govern the process by which risk assessment and management is undertaken. Our audit committee also monitors compliance with legal and regulatory requirements. Our nominating and corporate governance committee monitors the effectiveness of our corporate governance practices, including whether they are successful in preventing illegal or improper liability-creating conduct. Our compensation committee assesses and monitors whether any of our compensation policies and programs has the potential to encourage excessive risk-taking. While each committee is responsible for evaluating certain risks and overseeing the management of such risks, our entire board of directors is regularly informed through committee reports about such risks.

Board Committees

Our board of directors has established three standing committees—audit, compensation and nominating and corporate governance—each of which operates under a charter that has been approved by our board of directors. Upon our listing on The Nasdaq Global Select Market, each committee’s charter will be available under the Corporate Governance section of our website at www.centrexion.com. The reference to our website address does not constitute incorporation by reference of the information contained at or available through our website, and you should not consider it to be a part of this prospectus.

Audit Committee

The audit committee’s responsibilities include:

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appointing, approving the compensation of, and assessing the independence of our registered public accounting firm;

•

overseeing the work of our registered public accounting firm, including through the receipt and consideration of reports from such firm;

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reviewing and discussing with management and the registered public accounting firm our annual and quarterly financial statements and related disclosures;

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coordinating our board of directors’ oversight of our internal control over financial reporting, disclosure controls and procedures and code of business conduct and ethics;

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discussing our risk management policies;

•

meeting independently with our internal auditing staff, if any, registered public accounting firm and management;

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•

reviewing and approving or ratifying any related person transactions; and

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preparing the audit committee report required by Securities Exchange Commission, or SEC, rules.

The members of our audit committee are Isaac Blech, Arnold L. Oronsky, Ph.D., Joseph R. Swedish and Stella Xu, Ph.D. Mr. Swedish serves as the chairperson of the committee. All members of our audit committee meet the requirements for financial literacy under the applicable listing rules of Nasdaq (the “Nasdaq rules”). Our board of directors has determined that Messrs. Blech and Swedish, and Drs. Oronsky and Xu meet the independence requirements of Rule 10A-3 under the Exchange Act and the applicable Nasdaq rules. Our board of directors has determined that Mr. Swedish is an “audit committee financial expert” as defined by applicable SEC rules and has the requisite financial sophistication as defined under the applicable Nasdaq rules.

Compensation Committee

The compensation committee’s responsibilities include:

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reviewing and approving, or recommending for approval by the board of directors, the compensation of our CEO and our other executive officers;

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overseeing and administering our cash and equity incentive plans;

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reviewing and making recommendations to our board of directors with respect to director compensation;

•

reviewing and discussing annually with management our “Compensation Discussion and Analysis,” to the extent required; and

•

preparing the annual compensation committee report required by SEC rules, to the extent required.

The members of our compensation committee are Sol J. Barer, Ph.D., Sara M. Nayeem, M.D., Arnold L. Oronsky, Ph.D. and Shawn Tomasello. Dr. Barer serves as the chairperson of the committee. Our board of directors has determined that each of Drs. Barer, Nayeem and Oronsky and Ms. Tomasello is independent under the applicable Nasdaq rules, including the Nasdaq rules specific to membership on the compensation committee, and is a “non-employee director” as defined in Rule 16b-3 promulgated under the Exchange Act.

Nominating and Corporate Governance Committee

The nominating and corporate governance committee’s responsibilities include:

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identifying individuals qualified to become board members;

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recommending to our board of directors the persons to be nominated for election as directors and to each board committee;

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developing and recommending to our board of directors corporate governance guidelines, and reviewing and recommending to our board of directors proposed changes to our corporate governance guidelines from time to time; and

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overseeing a periodic evaluation of our board of directors.

The members of our nominating and corporate governance committee are Daniel N. Mendelson, Sara Nayeem, M.D., Joseph R. Swedish and Shawn Tomasello. Mr. Mendelson serves as the chairperson of the committee. Our board of directors has determined that each of Messrs. Mendelson and Swedish, Dr. Nayeem and Ms. Tomasello are independent under the applicable Nasdaq rules.

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Compensation Committee Interlocks and Insider Participation

No member of our compensation committee is or has been our current or former officer or employee. None of our executive officers served as a director or a member of a compensation committee (or other committee serving an equivalent function) of any other entity, one of whose executive officers served as a director or member of our compensation committee during the fiscal year ended December 31, 2017.

Code of Ethics and Code of Conduct

We have adopted a written code of business conduct and ethics that applies to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. Upon our listing on The Nasdaq Global Select Market, our code of business conduct and ethics will be available under the Corporate Governance section of our website at www.centrexion.com. In addition, we intend to post on our website all disclosures that are required by law or the Nasdaq rules concerning any amendments to, or waivers from, any provision of the code. The reference to our website address does not constitute incorporation by reference of the information contained at or available through our website, and you should not consider it to be a part of this prospectus.

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EXECUTIVE AND DIRECTOR COMPENSATION

This section discusses the material components of the executive compensation program for our executive officers who are named in the “2017 Summary Compensation Table” below. In 2017, our “named executive officers” and their positions were as follows:

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Jeffrey B. Kindler, Chief Executive Officer;

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Kerrie Brady, Chief Business Officer, Executive Vice President, Corporate Strategy; and

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Peter Hanson, DVM, Ph.D., Chief Development Operations Officer.

This discussion may contain forward-looking statements that are based on our current plans, considerations, expectations and determinations regarding future compensation programs. Actual compensation programs that we adopt following the completion of this offering may differ materially from the currently planned programs summarized in this discussion.

2017 Summary Compensation Table

The following table sets forth information concerning the compensation of our named executive officers for the year ended December 31, 2017.


Name and Principal Position	Year		Salary ($)		Option Awards ($)(1)		Non-Equity Incentive Plan Compensation ($)(2)		All Other Compensation ($)			Total ($)
Jeffrey B. Kindler		2017		351,689		170,447		351,689		357	(3)		874,182
Chief Executive Officer

Kerrie Brady		2017		333,720		33,481		141,831		51,625	(4)		560,657
Chief Business Officer

Peter Hanson, DVM, Ph.D.		2017		336,192		33,481		150,000		51,625	(4)		571,298
Chief Development Operations Officer

(1)

(2)

Amounts reflect the annual performance bonus earned in 2017 and paid in 2018. The amount disclosed for each named executive officer was paid in the form of stock options granted in 2018 that are fully vested. For additional information, refer to the discussion in the “Narrative to Summary Compensation Table” below under the heading “—Annual Performance-Based Incentive Opportunity.”

(3)	Consists of travel expense reimbursement and a payment to offset any tax liability Mr. Kindler incurs as a result of such expenses.

(4)	Consists of a payment of $50,000 for relocation expenses and $1,625 allowance for cellular telephone service.

NARRATIVE TO SUMMARY COMPENSATION TABLE

Annual Base Salaries

The named executive officers receive a base salary to compensate them for services rendered to our company. The base salary payable to each named executive officer is intended to provide a fixed component of

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compensation reflecting the executive’s skill set, experience, role and responsibilities. The 2017 and 2018 annual base salaries for our named executive officers were:


Name	2017 Annual Base Salary ($)		2018 Annual Base Salary ($)
Jeffrey B. Kindler		351,689		362,240
Kerrie Brady		333,720		343,732
Peter Hanson, DVM, Ph.D.		343,546		346,278

The annual base salary for each named executive officer became effective on January 1 of the applicable year.

Annual Performance-Based Incentive Opportunity

In addition to base salaries, our named executive officers are eligible to receive annual performance-based incentives which are designed to motivate our executives to achieve corporate goals and to reward our executives for their contributions towards achievement of these goals. The annual performance-based incentive that each named executive officer was eligible to receive in 2017 was generally based on the Company’s achievement of corporate goals and, for Ms. Brady and Dr. Hanson, the named executive officer’s achievement of individual objectives. The corporate goals constituted 70% of the named executive officer’s target bonus opportunity and the individual goals constituted 30% of the named executive officer’s target bonus opportunity, except that Mr. Kindler’s annual performance-based incentive was based entirely on the Company’s achievement of corporate goals. After the end of 2017, the compensation committee reviewed Mr. Kindler’s assessment of corporate and individual performance and, after considering his recommendations, determined the extent to which each goal was achieved.

Mr. Kindler was eligible to receive an annual bonus for 2017 targeted at an amount equal to the greater of 100% of his annual salary and 0.5% of the value of our equity as of the first day of the fiscal year for which the bonus award is made while each of Ms. Brady and Dr. Hanson was eligible to receive an annual bonus for 2017 with a target amount of up to 50% and 40%, respectively, of their annual base salary. However, there is no guaranteed bonus percentage or amount established for the named executive officers and, as a result, the bonus amounts have varied from year to year based on corporate and individual performance. As determined by our compensation committee, the annual bonus may be payable in the form of cash or equity (including stock options) or a combination thereof, and any such equity will not be subject to a vesting schedule. Historically, the compensation committee has typically elected to pay annual bonuses in the form of stock options.

In determining the 2017 annual bonuses for our named executive officers, our compensation committee reviewed Mr. Kindler’s assessment of our performance during 2017 and determined that on an overall basis, the Company had made significant progress and achieved certain key corporate goals, taking into account accomplishments related to clinical, regulatory, chemical, manufacturing and control, financing, intellectual property, business development, public and government relations, and scientific presentation objectives. The compensation committee also reviewed Ms. Brady and Dr. Hanson’s individual performance during 2017, taking into account their efforts with respect to the functional areas that they control. In recognition of this achievement and the efforts of each executive, our compensation committee awarded each of our named executive officers their performance bonus for 2017 in the form of stock options, which were granted in 2018 and were fully vested as of the grant date.

The actual value of the annual bonuses awarded to each named executive officer for 2017 performance are set forth above in the 2017 Summary Compensation Table in the column titled “Non-Equity Incentive Plan Compensation.”

Equity Compensation

We generally offer stock options to our employees, including our named executive officers, as the long-term incentive component of our compensation program. Our stock options generally allow employees to

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purchase shares of our common stock at a price equal to the fair market value of our common stock on the date of grant, as determined by the board of directors. Our stock options generally vest as to 25% of the underlying shares on the first anniversary of the date of grant and in equal quarterly installments over the following three years, subject to the holder’s continued employment with us. From time to time, our board of directors may also construct alternate vesting schedules as it determines are appropriate to motivate particular employees. Historically, our stock options have been intended to qualify as “incentive stock options” to the extent permitted under the Internal Revenue Code.

The following table sets forth the stock options granted to our named executive officers during 2017 as the long-term incentive component of our compensation program. These options were granted under our 2013 Equity Incentive Plan, which we refer to as the Prior Plan, with exercise prices equal to the fair market value of our common stock on the date of grant, as determined by the board of directors, and subject to our standard vesting schedule described above.


Named Executive Officer	2017 Stock Options Granted
Jeffrey B. Kindler		44,835
Kerrie Brady		8,807
Peter Hanson, DVM, Ph.D.		8,807

In addition to the stock options set forth above, the board of directors awarded each of our named executive officers eligible for performance bonuses a portion of their target bonus opportunity for 2016 in the form of stock options, which were fully vested as of the grant date. These awards were granted in 2017 and consisted of 65,980 stock options for Mr. Kindler, 30,879 stock options for Ms. Brady and 26,911 stock options for Dr. Hanson.

We intend to adopt the 2018 Plan in order to facilitate the grant of cash and equity incentives to directors, employees (including our named executive officers) and consultants of our company and certain of its affiliates and to enable our company and certain of its affiliates to obtain and retain services of these individuals, which is essential to our long-term success. We expect that the 2018 Plan will be effective on the date on which it is adopted by our board of directors, subject to approval of such plan by our stockholders. Following the effective date of the 2018 Plan, we will not make any further grants under the Prior Plan. However, the Prior Plan will continue to govern the terms and conditions of the outstanding awards granted under it. For additional information about the 2018 Plan, please see the section titled “Incentive Compensation Plans” below.

Other Elements of Compensation: Employee Benefits and Perquisites

Health/Welfare Plans. During their employment and in accordance with their respective employment arrangements, our named executive officers are eligible to participate in our employee benefit plans and programs, including medical and dental benefits, to the same extent as our other full-time employees, subject to the terms and eligibility requirements of those plans.

Other Expenses: We have agreed to provide Mr. Kindler with an office in Fairfield County, Connecticut and to make other arrangements to reimburse him for use of an office in such area. We have also agreed to reimburse Mr. Kindler for travel from Connecticut to our headquarters in Boston, Massachusetts such that he will have no after-tax cost of such travel. In 2017, we also provided each of Ms. Brady and Dr. Hanson a payment of $50,000 for relocation expenses and an allowance of $1,625 for cellular telephone service.

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Outstanding Equity Awards at 2017 Fiscal Year-End

The following table summarizes the number of shares of common stock underlying outstanding equity incentive plan awards for each named executive officer as of December 31, 2017.


				Option Awards
Name	Grant Date			Number of Securities Underlying Unexercised Options (#) Exercisable		Number of Securities Underlying Unexercised Options (#) Unexercisable		Option Exercise Price ($)		Option Expiration Date
Jeffrey B. Kindler		7/23/14	(1)		39,031		9,007	$	2.03		7/23/24
		2/18/15	(2)		94,874		—	$	3.03		2/18/25
		2/18/15	(1)		27,411		12,460	$	3.03		2/18/25
		2/16/16	(2)		58,844		—	$	4.02		2/16/26
		2/16/16	(1)		15,727		20,221	$	4.02		2/16/26
		3/8/17	(2)		65,980		—	$	5.54		3/8/27
		3/8/17	(1)		—		44,835	$	5.54		3/8/27

Kerrie Brady		11/20/13	(3)		120,096		—	$	2.03		11/20/23
		7/23/14	(1)		9,757		2,252	$	2.03		7/23/24
		2/18/15	(2)		38,922		—	$	3.03		2/18/25
		2/18/15	(1)		11,008		5,004	$	3.03		2/18/25
		2/16/16	(2)		34,278		—	$	4.02		2/16/26
		2/16/16	(1)		3,600		4,630	$	4.02		2/16/26
		3/8/17	(2)		30,879		—	$	5.54		3/8/27
		3/8/17	(1)		—		8,807	$	5.54		3/8/27

Peter Hanson, DVM, Ph.D.		7/23/14	(3)		96,076		—	$	2.03		7/23/24
		2/18/15	(2)		24,569		—	$	3.03		2/18/25
		2/18/15	(1)		11,008		5,004	$	3.03		2/18/25
		2/16/16	(2)		27,375		—	$	4.02		2/16/26
		2/16/16	(1)		3,600		4,630	$	4.02		2/16/26
		3/8/17	(2)		26,911		—	$	5.54		3/8/27
		3/8/17	(1)		—		8,807	$	5.54		3/8/27

(1)	Option to purchase shares of our common stock is eligible to vest as to 25% of such shares on the first anniversary of the grant date and as to the remaining shares in equal quarterly installments over the following three years.

(2)	Option to purchase shares of our common stock were fully vested on date of grant.

(3)	Option to purchase shares of our common stock is eligible to vest in 36 equal monthly installments over the three years following the grant date.

Employment Arrangements

We have entered into employment agreements or offer letters with Mr. Kindler, Ms. Brady and Dr. Hanson. The material terms and conditions of these agreements are described below.

Mr. Kindler

We entered into an employment agreement with Mr. Kindler, dated October 8, 2013, pursuant to which we employ Mr. Kindler as our Chief Executive Officer. The employment agreement also provides for Mr. Kindler to serve as a member of our board of directors for as long as he is employed as our Chief Executive Officer. The employment agreement had an initial term of three years, and automatically renews for successive one-year terms unless Mr. Kindler or the Company provides sixty days’ prior written notice to the other party that the agreement shall not be so extended.

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The employment agreement entitles Mr. Kindler to an annual bonus targeted at an amount equal to the greater of one hundred percent (100%) of Mr. Kindler’s base salary and one half of one percent (0.5%) of the value of our equity as of the first day of the fiscal year for which the bonus award is made. The actual amount of the bonus will be determined by the board of directors based on its assessment of the performance of Mr. Kindler and that of the Company against established goals determined and agreed to by our board of directors and Mr. Kindler. Mr. Kindler’s current base salary is listed in the table above in the “Narrative to Summary Compensation Table” under the heading “—Annual Base Salaries.” Mr. Kindler is eligible to receive reimbursement for use of an office by him in Fairfield County, Connecticut, and for travel from such area to our headquarters in Boston, Massachusetts and, in all events, a payment to offset any tax liability Mr. Kindler incurs as a result of any reimbursed travel expenses. The employment agreement further provides that Mr. Kindler will accrue up to four weeks of vacation per year.

In the event the Company terminates Mr. Kindler’s employment without “cause” (as such term is defined in his employment agreement) or he resigns for “good reason” (as such term is defined in his employment agreement), subject to his execution of a general release of claims in our favor, Mr. Kindler is entitled to the following termination payments: (a) continuation of base salary for twelve months, which we refer to as the Salary Continuation Period; (b) a monthly payment equal to the monthly cost of continuation of group health plan benefits, less the amount of the monthly premium being paid as of the Date of Termination, until the earlier of: (i) the end of the Salary Continuation Period; or (ii) the date Mr. Kindler becomes eligible for health insurance through another employer; and (c) a pro rata bonus for the fiscal year in which his termination occurs based on the bonus which would have been earned for such year.

In the event the employment of Mr. Kindler is terminated for any other reason, he is entitled to receive all accrued and unpaid base salary and vacation, and, if such termination of employment is the result of death or disability, a pro-rated target bonus for the calendar year in which such termination of employment occurs.

Mr. Kindler has also agreed to refrain from disclosing our confidential information during or at any time following his employment with us and from competing with us or soliciting our employees or customers during his employment and for twelve months following termination of his employment.

Additionally, in 2018, we agreed to forgive a loan that we had previously made to Mr. Kindler. Mr. Kindler consequently became indebted to us for an amount equal to $189,918.99, which relates to tax withholding amounts due in connection with the loan forgiveness and which was repaid in September 2018.

Ms. Brady and Dr. Hanson

We entered into offer letter agreements with Ms. Brady, dated November 7, 2013, and Dr. Hanson, dated May 30, 2014. The employment of Ms. Brady and Dr. Hanson is “at will” and the agreements endure until terminated by either party. Under the terms of their agreements, Ms. Brady and Dr. Hanson are eligible to participate in any annual bonus programs as may be established from time to time by our board of directors. Under such bonus programs, for 2017, Ms. Brady was eligible to receive a target annual bonus of 50% of her annual base salary and Dr. Hanson was eligible to receive a target annual bonus of up to 40% of his annual base salary. The current base salary of Ms. Brady and Dr. Hanson are listed in the table above in the “Narrative to Summary Compensation Table” under the heading “—Annual Base Salaries.” Under their respective offer letter agreements, we agreed to grant each of Ms. Brady and Dr. Hanson initial awards of incentive stock options covering 750,000 and 600,000 shares of our common stock, respectively. Ms. Brady and Dr. Hanson have each agreed to refrain from disclosing our confidential information during or at any time following their employment with us and from competing with us or soliciting our employees or customers during their employment and for twelve months following termination of their employment.

Executive Compensation Arrangements Effective on Closing of this Offering

In November 2018, in anticipation and subject to the consummation of this offering, our board of directors approved certain changes to our named executive officers’ compensation arrangements. These included

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adjusting annual base salaries and target bonus opportunities and granting equity incentive awards, each as described in more detail below.

Annual Base Salaries

Our board of directors approved the following increases to the annual base salaries for our named executive officers: $600,000 for Mr. Kindler, $344,000 for Ms. Brady and $380,000 for Dr. Hanson. The increases to annual base salaries will become effective upon the consummation of this offering and Mr. Kindler’s employment agreement will be amended to document his new annual base salary.

Target Bonuses

Our board of directors approved target bonus amounts for our named executive officers, setting Mr. Kindler’s target bonus at 65% of his base salary, and setting the target bonus for each of Ms. Brady and Dr. Hanson at 50% of their respective salaries. The target bonuses will become effective upon the consummation of this offering and Mr. Kindler’s employment agreement will be amended to document his new annual target bonus amount.

Equity Incentive Awards

Effective on the date that the registration statement of which this prospectus forms a part becomes effective, our board of directors granted stock options under the 2018 Plan to our named executive officers in the following amounts: Mr. Kindler: 799,200 shares and Dr. Hanson: 66,600 shares. The stock options will have a per share exercise price equal to the initial public offering price of our common stock and will vest as to 25% of the underlying shares on the first anniversary of the date of grant and in equal monthly installments over the following three years, subject to the holder’s continued employment with us.

Director Compensation

Our officers, employees, consultants or advisors who also serve as directors do not receive additional compensation for their service as directors. Our board of directors has historically awarded directors who are not our officers, employees, consultants or advisors, who we refer to as our non-employee directors, a grant of equity awards under the Prior Plan as follows:

•

an option to purchase 5,604 shares of our common stock at an exercise price per share equal to the fair market value of our common stock on the date of grant, as determined by the board of directors, on the date of initial election or appointment to the board of directors; and

•

an annual option grant to purchase 5,604 shares of our common stock at an exercise price per share equal to the fair market value of our common stock on the date of grant, as determined by the board of directors.

2017 Director Compensation Table


Name	Option Awards ($)(1)		Total ($)
Sol J. Barer, Ph.D.		21,306		21,306
Isaac Blech		21,306		21,306
Arnold L. Oronsky, Ph.D.		21,306		21,306
Shengda Zan(2)		21,306		21,306
Shawn Tomasello(3)		21,739		21,739

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(1)

Amounts reflect the aggregate grant date fair value of stock options granted during 2017 computed in accordance with ASC Topic 718. We provide information regarding the assumptions used to calculate the value of all stock option awards made to our directors in Note 10 to the financial statements included in this prospectus. The stock options were granted with an exercise price equal to the fair market value of our common stock on the date of grant, as determined by our board of directors, and vest as to 25% of the underlying shares on the first anniversary of the date of grant and in equal monthly installments over the following 36 months.

(2)	Mr. Zan resigned from the board of directors effective July 27, 2017.

(3)	Ms. Tomasello was appointed to the board of directors on June 22, 2017.

The table below shows the aggregate numbers of option awards (exercisable and unexercisable) held as of December 31, 2017 by each non-employee director who was serving as of December 31, 2017.


Name	Options Outstanding at Fiscal Year End
Sol J. Barer, Ph.D.		16,812
Isaac Blech		16,812
Arnold L. Oronsky, Ph.D.		16,812
Shawn Tomasello		5,604

Recent Developments Regarding Director Compensation

In November 2018, in anticipation and subject to the consummation of this offering, our board of directors approved the following grants of options to purchase shares of our common stock for our non-employee directors, effective on the date that the registration statement of which this prospectus forms a part becomes effective: Sol J. Barer, Ph.D., 37,500 shares; Isaac Blech, 37,500 shares; Daniel N. Mendelson, 16,000 shares; Sara Nayeem, M.D., 37,500 shares; Arnold L. Oronsky, Ph.D., 37,500 shares; Joseph R. Swedish, 16,000 shares; Shawn Tomasello, 37,500 shares; and Stella Xu, 37,500 shares. The options will have an exercise price equal to the initial public offering price of our common stock and will vest, subject to the holder’s continued service to us, in a single installment on the first anniversary of the effective date of grant, provided that the option will vest in full upon the occurrence of a change in control.

In addition, effective on the effectiveness of the registration statement of which this prospectus forms a part, we adopted and, prior to commencing this offering, our stockholders approved a compensation program for our non-employee directors under which each non-employee director will receive the following amounts for their services on our board of directors:

•

an option to purchase 20,000 shares of our common stock upon the director’s initial election or appointment to our board of directors that occurs after our initial public offering;

•

if the director has served on our board of directors for at least six months as of the date of an annual meeting of stockholders and will continue to serve as a director immediately following such meeting, an option to purchase 10,000 shares of our common stock on the date of the annual meeting;

•

an annual director fee of $40,000; and

•

if the director serves on a committee of our board of directors, an additional annual fee as follows:

•

chairman of the board, $35,000;

•

chairman of the audit committee, $15,000;

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•

audit committee member other than the chairman, $7,500;

•

chairman of the compensation committee, $12,000;

•

compensation committee member other than the chairman, $6,000;

•

chairman of the nominating and corporate governance committee, $8,000; and

•

nominating and corporate governance committee member other than the chairman, $4,000.

Director fees under the program will be payable in arrears in four equal quarterly installments not later than the fifteenth day following the final day of each calendar quarter, provided that the amount of each payment will be prorated for any portion of a quarter that a director is not serving on our board and no fee will be payable in respect of any period prior to the effective date of the registration statement of which this prospectus is a part. Additionally, beginning with annual retainers earned in 2019, each director may elect to receive stock options to purchase shares of our common stock in lieu of all (or a portion of) the annual retainers, which we refer to as elective options. The number of elective options will be determined by dividing the annual retainer (or portion thereof) subject to the election by the elective option’s per share fair value of the option determined as of the option’s date of grant using the Black-Scholes option pricing model that we most recently used in preparing our (audited or unaudited) consolidated financial statements that have been filed with the Securities and Exchange Commission.

Stock options granted to our non-employee directors under the program will have an exercise price equal to the fair market value of our common stock on the date of grant and will expire not later than ten years after the date of grant. The stock options granted upon a director’s initial election or appointment will vest in three equal installments on each of the first three anniversaries of the date of grant. The stock options granted annually to directors will vest in a single installment on the earlier of the day before the next annual meeting or the first anniversary of the date of grant. Elective options will vest and become exercisable as to 25% on each of March 31, June 30, September 30 and December 31 of the year to which the elective option relates, provided that if a non-employee director’s service terminates during a calendar quarter, the elective option will become vested as to the portion of the option that would have otherwise vested on the next vesting date, prorated based on the number of days served in such calendar quarter. In addition, all unvested stock options will vest in full upon the occurrence of a change in control.

Incentive Compensation Plans

The following summarizes the material terms of 2018 Plan and the 2018 ESPP, which we intend to adopt in connection with this offering and which we expect will be the long-term incentive compensation plans in which our directors and named executive officers are eligible to participate following the consummation of this offering, and the Prior Plan, under which we have previously made periodic grants of equity and equity-based awards to our directors and named executive officers.

2018 Incentive Award Plan

Our board of directors adopted and our stockholders approved, effective the day prior to the first public trading date of our common stock, the 2018 Plan, under which we may grant cash and equity-based incentive awards to eligible service providers in order to attract, retain and motivate the persons who make important contributions to our company. The material terms of the 2018 Plan are summarized below.

Eligibility and Administration

Our employees, consultants and directors, and employees and consultants of our subsidiaries, will be eligible to receive awards under the 2018 Plan. The 2018 Plan will be administered by our board of directors,

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which may delegate its duties and responsibilities to one or more committees of our directors and/or officers (referred to collectively as the plan administrator below), subject to the limitations imposed under the 2018 Plan, Section 16 of the Exchange Act, stock exchange rules and other applicable laws. The plan administrator will have the authority to take all actions and make all determinations under the 2018 Plan, to interpret the 2018 Plan and award agreements and to adopt, amend and repeal rules for the administration of the 2018 Plan as it deems advisable. The plan administrator will also have the authority to grant awards, determine which eligible service providers receive awards and set the terms and conditions of all awards under the 2018 Plan, including any vesting and vesting acceleration provisions, subject to the conditions and limitations in the 2018 Plan.

Shares Available for Awards

An aggregate of 2,128,294 shares of our common stock will initially be available for issuance under the 2018 Plan. The number of shares initially available for issuance will be increased by an annual increase on January 1 of each calendar year beginning in 2019 and ending in and including 2028, equal to the lesser of (A) 4% of the shares of common stock outstanding on the final day of the immediately preceding calendar year and (B) a smaller number of shares determined by our board of directors. No more than 10,000,000 shares of common stock may be issued under the 2018 Plan upon the exercise of incentive stock options. Shares issued under the 2018 Plan may be authorized but unissued shares, shares purchased on the open market or treasury shares.

If an award under the 2018 Plan or the Prior Plan, expires, lapses or is terminated, exchanged for cash, surrendered, repurchased, canceled without having been fully exercised or forfeited, any unused shares subject to the award will, as applicable, become or again be available for new grants under the 2018 Plan. Awards granted under the 2018 Plan in substitution for any options or other stock or stock-based awards granted by an entity before the entity’s merger or consolidation with us or our acquisition of the entity’s property or stock will not reduce the shares available for grant under the 2018 Plan, but may count against the maximum number of shares that may be issued upon the exercise of incentive stock options, or ISOs.

Awards

The 2018 Plan provides for the grant of stock options, including ISOs, and nonqualified stock options, or NSOs, stock appreciation rights, or SARs, restricted stock, dividend equivalents, restricted stock units, or RSUs, and other stock or cash based awards. Certain awards under the 2018 Plan may constitute or provide for payment of “nonqualified deferred compensation” under Section 409A of the Code. All awards under the 2018 Plan will be set forth in award agreements, which will detail the terms and conditions of awards, including any applicable vesting and payment terms and post-termination exercise limitations. A brief description of each award type follows.

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Stock Options and SARs. Stock options provide for the purchase of shares of our common stock in the future at an exercise price set on the grant date. ISOs, by contrast to NSOs, may provide tax deferral beyond exercise and favorable capital gains tax treatment to their holders if certain holding period and other requirements of the Code are satisfied. SARs entitle their holder, upon exercise, to receive from us an amount equal to the appreciation of the shares subject to the award between the grant date and the exercise date. The plan administrator will determine the number of shares covered by each option and SAR, the exercise price of each option and SAR and the conditions and limitations applicable to the exercise of each option and SAR. The exercise price of a stock option or SAR will not be less than 100% of the fair market value of the underlying share on the grant date (or 110% in the case of ISOs granted to certain significant stockholders), except with respect to certain substitute awards granted in connection with a corporate transaction. The term of a stock option or SAR may not be longer than ten years (or five years in the case of ISOs granted to certain significant stockholders).

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Restricted Stock and RSUs. Restricted stock is an award of nontransferable shares of our common stock that remain forfeitable unless and until specified conditions are met and which may be subject to a purchase price. RSUs are contractual promises to deliver shares of our common stock in the future, which may also remain forfeitable unless and until specified conditions are met and may be accompanied by the right to receive the equivalent value of dividends paid on shares of our common stock prior to the delivery of the underlying shares. The plan administrator may provide that the delivery of the shares underlying RSUs will be deferred on a mandatory basis or at the election of the participant. The terms and conditions applicable to restricted stock and RSUs will be determined by the plan administrator, subject to the conditions and limitations contained in the 2018 Plan.

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Other Stock or Cash Based Awards. Other stock or cash based awards are awards of cash, fully vested shares of our common stock and other awards valued wholly or partially by referring to, or otherwise based on, shares of our common stock or other property. Other stock or cash based awards may be granted to participants and may also be available as a payment form in the settlement of other awards, as standalone payments and as payment in lieu of compensation to which a participant is otherwise entitled. The plan administrator will determine the terms and conditions of other stock or cash based awards, which may include any purchase price, performance goal, transfer restrictions and vesting conditions.

Performance Criteria

The plan administrator may select performance criteria for an award to establish performance goals for a performance period. Performance criteria under the 2018 Plan may include, but are not limited to, the following: net earnings or losses (either before or after one or more of interest, taxes, depreciation, amortization, and non-cash equity-based compensation expense); gross or net sales or revenue or sales or revenue growth; net income (either before or after taxes) or adjusted net income; profits (including but not limited to gross profits, net profits, profit growth, net operation profit or economic profit), profit return ratios or operating margin; budget or operating earnings (either before or after taxes or before or after allocation of corporate overhead and bonus); cash flow (including operating cash flow and free cash flow or cash flow return on capital); return on assets; return on capital or invested capital; cost of capital; return on stockholders’ equity; total stockholder return; return on sales; costs, reductions in costs and cost control measures; expenses; working capital; earnings or loss per share; adjusted earnings or loss per share; price per share or dividends per share (or appreciation in or maintenance of such price or dividends); regulatory achievements or compliance; implementation, completion or attainment of objectives relating to research, development, regulatory, commercial, or strategic milestones or developments; market share; economic value or economic value added models; division, group or corporate financial goals; customer satisfaction/growth; customer service; employee satisfaction; recruitment and maintenance of personnel; human resources management; supervision of litigation and other legal matters; strategic partnerships and transactions; financial ratios (including those measuring liquidity, activity, profitability or leverage); debt levels or reductions; sales-related goals; financing and other capital raising transactions; cash on hand; acquisition activity; investment sourcing activity; and marketing initiatives, any of which may be measured in absolute terms or as compared to any incremental increase or decrease. Such performance goals also may be based solely by reference to the company’s performance or the performance of a subsidiary, division, business segment or business unit of the company or a subsidiary, or based upon performance relative to performance of other companies or upon comparisons of any of the indicators of performance relative to performance of other companies. When determining performance goals, the plan administrator may provide for exclusion of the impact of an event or occurrence which the plan administrator determines should appropriately be excluded, including, without limitation, non-recurring charges or events, acquisitions or divestitures, changes in the corporate or capital structure, events unrelated to the business or outside of the control of management, foreign exchange considerations, and legal, regulatory, tax or accounting changes.

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Certain Transactions

In connection with certain corporate transactions and events affecting our common stock, including a change in control, or change in any applicable laws or accounting principles, the plan administrator has broad discretion to take action under the 2018 Plan to prevent the dilution or enlargement of intended benefits, facilitate the transaction or event or give effect to the change in applicable laws or accounting principles. This includes canceling awards for cash or property, accelerating the vesting of awards, providing for the assumption or substitution of awards by a successor entity, adjusting the number and type of shares subject to outstanding awards and/or with respect to which awards may be granted under the 2018 Plan and replacing or terminating awards under the 2018 Plan. In addition, in the event of certain non-reciprocal transactions with our stockholders, the plan administrator will make equitable adjustments to awards outstanding under the 2018 Plan as it deems appropriate to reflect the transaction.

Provisions of the 2018 Plan Relating to Director Compensation.

The 2018 Plan provides that the plan administrator may establish compensation for non-employee directors from time to time subject to the 2018 Plan’s limitations. Prior to commencing this offering, our stockholders approved a compensation program for our non-employee directors, which is described above under the heading “Director Compensation.” Our board of directors or its authorized committee may modify the non-employee director compensation program from time to time in the exercise of its business judgment, taking into account such factors, circumstances and considerations as it shall deem relevant from time to time, provided that the sum of any cash compensation or other compensation and the grant date fair value of any equity awards granted under the 2018 Plan as compensation for services as a non-employee director during any fiscal year may not exceed $1,100,000 in the fiscal year of the non-employee director’s initial service or the fiscal year in which this offering occurs, and $750,000 in any other fiscal year. The plan administrator may make exceptions to this limit for individual non-employee directors in extraordinary circumstances, as the plan administrator may determine in its discretion, subject to the limitations in the 2018 Plan.

Plan Amendment and Termination

Our board of directors may amend or terminate the 2018 Plan at any time; however, no amendment, other than an amendment that increases the number of shares available under the 2018 Plan, may materially and adversely affect an award outstanding under the 2018 Plan without the consent of the affected participant and stockholder approval will be obtained for any amendment to the extent necessary to comply with applicable laws. Further, the plan administrator cannot, without the approval of our stockholders, amend any outstanding stock option or SAR to reduce its price per share, other than in the context of corporate transactions or equity restructurings, as described above. The 2018 Plan will remain in effect until the tenth anniversary of its effective date, unless earlier terminated by our board of directors. No awards may be granted under the 2018 Plan after its termination.

Foreign Participants, Claw-Back Provisions, Transferability and Participant Payments

The plan administrator may modify awards granted to participants who are foreign nationals or employed outside the United States or establish subplans or procedures to address differences in laws, rules, regulations or customs of such foreign jurisdictions. All awards will be subject to any company claw-back policy as set forth in such claw-back policy or the applicable award agreement. Except as the plan administrator may determine or provide in an award agreement, awards under the 2018 Plan are generally non-transferrable, except by will or the laws of descent and distribution, or, subject to the plan administrator’s consent, pursuant to a domestic relations order, and are generally exercisable only by the participant. With regard to tax withholding obligations arising in connection with awards under the 2018 Plan and exercise price obligations arising in connection with the exercise of stock options under the 2018 Plan, the plan administrator may, in its discretion, accept cash, wire transfer or check, shares of our common stock that meet specified conditions, a promissory

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note, a “market sell order,” such other consideration as the plan administrator deems suitable or any combination of the foregoing.

2018 Employee Stock Purchase Plan

Our board of directors adopted and our stockholders approved, effective the day prior to the first public trading date of our common stock, the 2018 ESPP, the material terms of which are summarized below.

Shares Available for Awards; Administration

A total of 266,000 shares of our common stock will initially be reserved for issuance under the 2018 ESPP. In addition, the number of shares available for issuance under the 2018 ESPP will be annually increased on January 1 of each calendar year beginning in 2019 and ending in and including 2028, by an amount equal to the lesser of (A) 1% of the shares outstanding on the final day of the immediately preceding calendar year and (B) such smaller number of shares as is determined by our board of directors, provided that no more than 3,697,572 shares of our common stock may be issued under the 2018 ESPP. Our board of directors or a committee of our board of directors will administer and will have authority to interpret the terms of the 2018 ESPP and determine eligibility of participants. We expect that the compensation committee will be the initial administrator of the 2018 ESPP.

Eligibility

All of our employees are eligible to participate in the 2018 ESPP. However, an employee may not be granted rights to purchase stock under our 2018 ESPP if the employee, immediately after the grant, would own (directly or through attribution) stock possessing 5% or more of the total combined voting power or value of all classes of our stock.

Grant of Rights

The 2018 ESPP is intended to qualify under Section 423 of the Code and stock will be offered under the 2018 ESPP during offering periods. The length of the offering periods under the 2018 ESPP will be determined by the plan administrator and may be up to twenty-seven months long. Employee payroll deductions will be used to purchase shares on each purchase date during an offering period. The purchase dates for each offering period will be the final trading day in the offering period. Offering periods under the 2018 ESPP will commence when determined by the plan administrator. The plan administrator may, in its discretion, modify the terms of future offering periods.

The 2018 ESPP permits participants to purchase common stock through payroll deductions of up to a specified percentage of their eligible compensation. The plan administrator will establish a maximum number of shares that may be purchased by a participant during any offering period. In addition, no employee will be permitted to accrue the right to purchase stock under the 2018 ESPP at a rate in excess of $25,000 worth of shares during any calendar year during which such a purchase right is outstanding (based on the fair market value per share of our common stock as of the first day of the offering period).

On the first trading day of each offering period, each participant will automatically be granted an option to purchase shares of our common stock. The option will expire at the end of the applicable offering period, and will be exercised at that time to the extent of the payroll deductions accumulated during the offering period. The purchase price of the shares, in the absence of a contrary designation, will be 85% of the lower of the fair market value of our common stock on the first trading day of the offering period or on the purchase date. Participants may voluntarily end their participation in the 2018 ESPP at any time during a specified period prior to the end of the applicable offering period, and will be paid their accrued payroll deductions that have not yet been used to purchase shares of common stock. Participation ends automatically upon a participant’s termination of employment.

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A participant may not transfer rights granted under the 2018 ESPP other than by will or the laws of descent and distribution, and are generally exercisable only by the participant.

Certain Transactions

In the event of certain non-reciprocal transactions or events affecting our common stock, the plan administrator will make equitable adjustments to the 2018 ESPP and outstanding rights. In the event of certain unusual or non-recurring events or transactions, including a change in control, the plan administrator may provide for (1) either the replacement of outstanding rights with other rights or property or termination of outstanding rights in exchange for cash, (2) the assumption or substitution of outstanding rights by the successor or survivor corporation or parent or subsidiary thereof, if any, (3) the adjustment in the number and type of shares of stock subject to outstanding rights, (4) the use of participants’ accumulated payroll deductions to purchase stock on a new purchase date prior to the next scheduled purchase date and termination of any rights under ongoing offering periods or (5) the termination of all outstanding rights.

Plan Amendment

The plan administrator may amend, suspend or terminate the 2018 ESPP at any time. However, stockholder approval will be obtained for any amendment that increases the aggregate number or changes the type of shares that may be sold pursuant to rights under the 2018 ESPP, changes the corporations or classes of corporations whose employees are eligible to participate in the 2018 ESPP or changes the 2018 ESPP in any manner that would cause the 2018 ESPP to no longer be an employee stock purchase plan within the meaning of Section 423(b) of the Code.

2013 Equity Incentive Plan

Our board of directors and stockholders have approved our Prior Plan, under which we may grant stock options and other stock-based awards to employees, directors and consultants of our company or its affiliates. We have reserved a total of 2,305,844 shares of our common stock for issuance under the Prior Plan.

Following the effectiveness of the 2018 Plan, we will not make any further grants under the Prior Plan. However, the Prior Plan will continue to govern the terms and conditions of the outstanding awards granted under it. Shares of our common stock subject to awards granted under the Prior Plan that are forfeited, lapse unexercised or are settled in cash and which following the effective date of the 2018 Plan are not issued under the Prior Plan will be available for issuance under the 2018 Plan.

Eligibility and Administration

Our employees, consultants and directors are eligible to receive awards under the Prior Plan. Our compensation committee will administer the Prior Plan unless our board of directors assumes authority for administration. Subject to the express terms and conditions of the Prior Plan, the plan administrator has the authority to make all determinations and interpretations under the plan, prescribe all forms for use with the plan and adopt, alter and/or rescind rules, guidance and practices for the administration of the Prior Plan. The plan administrator also sets the terms and conditions of all awards under the plan, including any vesting and vesting acceleration conditions.

Awards

The Prior Plan provides for the grant of stock options (including NSOs and ISOs), restricted stock, RSUs, and other equity-based awards. As of the date of this prospectus, only awards of stock options are outstanding under the Prior Plan.

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Certain Transactions

The plan administrator has broad discretion to adjust the provisions of the Prior Plan and the terms and conditions of existing and future awards, including with respect to aggregate number and kind of shares subject to the Prior Plan and awards granted pursuant to the Prior Plan and the purchase or exercise price of awards granted pursuant to the Prior Plan, to prevent substantial dilution or enlargement of the rights of participants under the Prior Plan in the event of certain transactions and events affecting our common stock, such as stock dividends, stock splits, mergers, consolidations and other corporate transactions. The plan administrator may also provide for the acceleration, cash-out, termination, assumption, substitution or conversion of awards in the event of a change in control, provided that upon the occurrence of certain acquisitions, participants may be entitled to receive twenty days to exercise outstanding vested awards prior to termination.

Amendment and Termination

Our board of directors or compensation committee (to the extent permitted by law) may terminate, amend or modify the Prior Plan at any time and from time to time, provided that if the compensation committee determines that the rights of a participant with respect to awards granted prior to such amendment, suspension or termination may be adversely affected, the consent of such participant will be required. Furthermore, we must generally obtain stockholder approval to increase the number of shares available under the Prior Plan (other than in connection with certain corporate events, as described above) or to the extent required by applicable law, rule or regulation (including any applicable stock exchange rule).

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

The following includes a summary of transactions since January 1, 2015 to which we have been a party in which the amount involved exceeded or will exceed $120,000, and in which any of our directors, executive officers or, to our knowledge, beneficial owners of more than 5% of our capital stock or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest, other than equity and other compensation, termination, change in control and other arrangements, which are described under “Executive and Director Compensation.” We also describe below certain other transactions with our directors, executive officers and stockholders.

Formation and Executive Promissory Notes

On October 8, 2013, Jeffrey B. Kindler, our Chief Executive Officer and a member of our board of directors, acquired 320,256 shares of Common Stock for the purchase price of $1.36 per share. On October 7, 2013, James N. Campbell, M.D., our President and Chief Scientific Officer and one of our directors, acquired 120,000 shares of common stock for the purchase price of $1.36 per share. Mr. Kindler and Dr. Campbell paid for their respective shares of common stock by delivering cash payment to us in an amount equal to the aggregate par value of the shares, and the remainder paid by delivering to us 50% recourse promissory notes, or the Executive Notes, with a principal amount equal to the aggregate purchase price less the aggregate par value of the common stock purchased from us. The Executive Notes accrued interest at a rate of 0.32% per annum and matured on October 8, 2016, and were secured by the respective shares of common stock purchased by Mr. Kindler and Dr. Campbell with the proceeds of the Executive Notes. On April 12, 2018, our board of directors forgave all indebtedness and released all collateral in respect of the Executive Notes.

Preferred Stock Financings and Convertible Notes Financings

2019 Notes. From March 1, 2016 to June 15, 2016, we issued convertible promissory notes in the aggregate principal amount of $30.0 million due 2019, or the 2019 notes. The 2019 notes accrued at an interest rate of 5% per annum. On December 30, 2016, we completed the Series C preferred stock financing described below. At that time, all 2019 notes and the then accrued interest totaling $1,039,835 were converted into 17,244,322 shares of Series C preferred stock. We issued to 2019 note holders and, in compensation for certain services, to Maxim Partners LLC, warrants to purchase an aggregate of 3,068,263 shares of Series C preferred stock. Certain of our officers and/or directors, including Sol J. Barer, Ph.D., Isaac Blech, James N. Campbell, M.D., Jeffrey B. Kindler and Arnold L. Oronsky, Ph.D., participated in the 2019 notes financing either personally or through affiliated trusts or funds.

Series C Preferred Stock Financing. On December 30, 2016, we issued and sold to investors in a private placement 26,446,984 shares of our Series C preferred stock at a price per share of $1.80, for aggregate consideration of approximately $47.6 million, consisting of $16.6 million in cash proceeds plus the conversion of our promissory notes in the aggregate amount of approximately $31.0 million. On January 6, 2017, we issued and sold an additional 111,334 shares of our Series C preferred stock for aggregate consideration of approximately $0.2 million. Certain of our officers and/or directors, including Sol J. Barer, Ph.D., Isaac Blech, James N. Campbell, M.D., Jeffrey B. Kindler and Arnold L. Oronsky, Ph.D., participated in the Series C preferred stock financing either personally or through affiliated trusts or funds.

2018 Notes. From April 28, 2017 to October 10, 2017, we issued convertible promissory notes in the aggregate principal amount of $9.2 million due 2018, or the 2018 notes. The 2018 notes accrued at an interest rate of 10% per annum. On December 18, 2017, we completed the Series D preferred stock financing described below. At that time, all 2018 notes and the then accrued interest totaling $406,306 were converted into 5,328,476 shares of Series D preferred stock. We issued to 2018 note holders warrants to purchase an aggregate of 831,120 shares of Series D preferred stock. In addition, in compensation for certain services, we issued to Brookline Capital Markets a warrant to purchase 18,905 shares of common stock. Certain of our officers and/or directors,

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including Sol J. Barer, Ph.D., James N. Campbell, M.D., Jeffrey B. Kindler, Arnold L. Oronsky, Ph.D., Randall Stevens, M.D. and Shawn Tomasello, participated in the 2017 notes financing either personally or through affiliated trusts or funds.

Series D Preferred Stock Financing. On December 18, 2017, we issued and sold to investors in a private placement 36,717,364 shares of our Series D preferred stock at a price per share of $1.80, for aggregate consideration of approximately $66.1 million, consisting of $56.5 million in cash proceeds plus the conversion of our promissory notes in the aggregate amount of approximately $9.6 million. On December 20, 2017, we issued and sold an additional 3,888,885 shares of our Series D preferred stock for aggregate consideration of approximately $7.0 million. Certain of our officers and/or directors, including Sol J. Barer, Ph.D., James N. Campbell, M.D., Jeffrey B. Kindler, Sara Nayeem, M.D., Arnold L. Oronsky, Ph.D., Randall Stevens, M.D., Shawn Tomasello and Stella Xu, Ph.D., participated in the Series D preferred stock financing either personally or through affiliated trusts or funds.

The following table sets forth the aggregate number of shares of our capital stock acquired by beneficial owners of more than 5% of our capital stock and certain officers and directors in the financing transactions described above. Each share of our Series C preferred stock identified in the following table will convert into one share of common stock immediately prior to the closing of this offering. Each share of our Series D preferred stock identified in the following table will convert into one share of common stock immediately prior to the closing of this offering.


Participants(1)	Series C Preferred Stock		Warrants to Purchase Shares of Series C Preferred Stock		Series D Preferred Stock		Warrants to Purchase Shares of Series D Preferred Stock
5% or Greater Stockholders
Entities Affiliated with New Enterprise Associates(2)		—		—		13,888,889		—
Entities Affiliated with InterWest Partners LLC(3)		1,731,734		171,428		4,735,980		355,556
Quan Venture Fund I, L.P.		—		—		6,944,444		—
Kala International Investment Co. Ltd		8,388,889		—		83,333		—
Shanghai Healthcare Industry Investment Fund New York, LLC		5,706,240		571,429		—		—
Officers and/or Directors
Sol J. Barer, Ph.D.(4)		57,869		5,714		318,614		51,389
Isaac Blech(5)		57,579		5,714		—		—
James N. Campbell, M.D.(6)		28,710		2,857		118,143		11,111
Jeffrey B. Kindler(7)		57,579		5,714		742,815		155,556
Randall Stevens, M.D.(8)		—		—		115,631		19,445
Shawn Tomasello(9)		—		—		282,800		69,444

(1)	Additional details regarding these stockholders and their equity holdings are provided in this prospectus under the caption “Principal Stockholders.”

(2)	Represents securities acquired by (i) NEA Ventures 2017, L.P. and (ii) NEA Partners 16, L.P.

(3)

Represents securities acquired by (i) InterWest Partners VIII, L.P., (ii) InterWest Investors VIII, L.P., (iii) InterWest Investors Q VIII, L.P. and (iv) InterWest Partners IX, L.P. Includes 1,731,734 shares of Series C preferred stock issued upon conversion of an aggregate amount of $3,117,123.28 in principal and accrued interest of the 2019 notes. Includes 1,958,203 shares of Series D preferred stock issued upon conversion of an aggregate amount of $3.5 million in principal and accrued interest of the 2018 notes.

(4)

Represents securities acquired by (i) Sol J. Barer, Ph.D. and (ii) Barer & Son Capital, LLC. Includes 57,869 shares of Series C preferred stock issued upon conversion of an aggregate amount of $104,164.38 in principal and accrued interest of the 2019 notes. Includes 177,214 shares of Series D preferred stock issued upon conversion of an aggregate amount of $318,986.30 in principal and accrued interest of the 2018 notes.

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(5)	Represents securities acquired by River Charitable Remainder Trust f/b/o Isaac Blech of which Isaac Blech is the sole trustee. Includes 57,579 shares of Series C preferred stock issued upon conversion of an aggregate amount of $103,643.84 in principal and accrued interest of the 2019 notes.

(6)

Represents securities acquired by (i) James N. Campbell 2012 Dynasty Trust, Regina H. Anderson & Louis F. Friedman, Trustees and (ii) James N. Campbell Regina Anderson. Includes 28,710 shares of Series C preferred stock issued upon conversion of an aggregate amount of $51,678.08 in principal and accrued interest of the 2019 notes. Includes 118,143 shares of Series D preferred stock issued upon conversion of an aggregate amount of $212,657.53 in principal and accrued interest of the 2018 notes.

(7)

Includes 57,579 shares of Series C preferred stock issued upon conversion of an aggregate amount of $103,643.84 in principal and accrued interest of the 2019 notes. Includes 742,815 shares of Series D preferred stock issued upon conversion of an aggregate amount of $1,337,068.49 in principal and accrued interest of the 2018 notes.

(8)	Includes 115,631 shares of Series D preferred stock issued upon conversion of an aggregate amount of $208,136.99 in principal and accrued interest of the 2018 notes.

(9)	Includes 282,800 shares of Series D preferred stock issued upon conversion of an aggregate amount of $509,041.10 in principal and accrued interest of the 2018 notes.

Some of our directors are associated with our principal stockholders as indicated in the table below:


Director		Principal Stockholder
Sara Nayeem, M.D.		Entities Affiliated with New Enterprise Associates
Arnold L. Oronsky, Ph.D.		Entities Affiliated with InterWest Partners LLC
Stella Xu, Ph.D.		Quan Venture Fund I, L.P.

Stockholders’ Agreement

We entered into a stockholders’ agreement in 2013, which was further amended and restated December 18, 2017, as amended on November 2, 2018, with the holders of our preferred stock, including entities with which certain of our directors are related. The stockholders’ agreement provides for certain rights relating to the registration of such holders’ common stock, including shares issuable upon conversion of preferred stock, and a right of first refusal to purchase future securities sold by us. See “Description of Capital Stock—Registration Rights” for additional information.

The stockholders’ agreement also certain voting covenants, pursuant to which the following directors were elected to serve as members on our board of directors and, as of the date of this prospectus, continue to so serve: Sol J. Barer, Ph.D., Isaac Blech, James N. Campbell, M.D., Jeffrey B. Kindler, Sara Nayeem, M.D., Arnold L. Oronsky, Ph.D. and Shawn Tomasello. Jeffrey Kindler was initially selected to serve on our board of directors in his capacity as our chief executive officer. James Campbell was initially selected to serve on our board of directors in his capacity as our chief scientific officer. Sara Nayeem, Arnold Oronsky and Stella Xu were initially selected to serve on our board of directors as representatives of holders of our preferred stock, as designated by entities affiliated with New Enterprise Associates 16, Limited Partnership, InterWest Partners LLC and Quan Venture Fund I, L.P., respectively. Shawn Tomasello was initially selected to serve on our board of directors as a director who is mutually acceptable to a majority of the other directors.

Certain provisions of the stockholders’ agreement will terminate upon the closing of this offering, including the above voting provision, and members previously elected to our board of directors pursuant to this agreement will continue to serve as directors until they resign, are removed or their successors are duly elected by the holders of our common stock. The composition of our board of directors after this offering is described in more detail under “Management—Board Composition and Election of Directors.”

License Agreement with James N. Campbell, M.D.

As successor to the initial licensee, AlgoRx Pharmaceuticals, Inc., we are party to a license agreement, dated August 28, 2001, with James N. Campbell, M.D., one of our officers and directors, whereby Dr. Campbell

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and the other inventors party to the agreement granted an exclusive license under certain technology, including both patent rights and know-how related to capsaicin. The license agreement provides for a possible $350,000 milestone payment payable upon FDA approval of the licensed product, which has not yet occurred. All patents licensed under the license agreement have expired. For a complete description of the license agreement, you should refer to the copy of the agreement that has been filed as an exhibit to the registration statement of which this prospectus is a part.

Employment Agreements

We have entered into employment agreements with our named executive officers. For more information regarding the agreements with our named executive officers, see “Executive and Director Compensation—Executive Compensation Arrangements.”

Indemnification Agreements

We intend to enter into indemnification agreements with each of our directors and executive officers. These agreements, among other things, require us or will require us to indemnify each director (and in certain cases their related venture capital funds) and executive officer to the fullest extent permitted by Delaware law, including indemnification of expenses such as attorneys’ fees, judgments, fines and settlement amounts incurred by the director or executive officer in any action or proceeding, including any action or proceeding by or in right of us, arising out of the person’s services as a director or executive officer. For further information, see “Executive and Director Compensation—Limitations of Liability and Indemnification.”

Stock Option Grants to Executive Officers and Directors

We have granted stock options to our executive officers and certain of our directors as more fully described in the section entitled “Executive and Director Compensation.”

Participation in This Offering

Policies and Procedures for Related Person Transactions

Our board of directors has adopted a written related person transaction policy, to be effective upon the closing of this offering, setting forth the policies and procedures for the review and approval or ratification of related person transactions. This policy will cover, with certain exceptions set forth in Item 404 of Regulation S-K under the Securities Act, any transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships, in which we were or are to be a participant, where the amount involved exceeds $120,000 in any fiscal year and a related person had, has or will have a direct or indirect material interest, including without limitation, purchases of goods or services by or from the related person or entities in which the related person has a material interest, indebtedness, guarantees of indebtedness and employment by us of a related person. In reviewing and approving any such transactions, our audit committee is tasked to consider all relevant facts and circumstances, including, but not limited to, whether the transaction is on terms comparable to those that could be obtained in an arm’s length transaction and the extent of the related person’s interest in the transaction. All of the transactions described in this section occurred prior to the adoption of this policy.

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PRINCIPAL STOCKHOLDERS

The following table sets forth information with respect to the beneficial ownership of our common stock, as of September 30, 2018 by:

•

each person or group of affiliated persons known by us to beneficially own more than 5% of our common stock;

•

each of our named executive officers;

•

each of our directors; and

•

all of our executive officers and directors as a group.

The number of shares beneficially owned by each stockholder is determined under rules issued by the Securities and Exchange Commission. Under these rules, beneficial ownership includes any shares as to which the individual or entity has sole or shared voting power or investment power. Applicable percentage ownership is based on 17,162,604 shares of common stock outstanding as of September 30, 2018, assuming the conversion of all outstanding shares of preferred stock into common stock. In computing the number of shares beneficially owned by an individual or entity and the percentage ownership of that person, shares of common stock subject to options, warrants or other rights held by such person that are currently exercisable or will become exercisable within 60 days of September 30, 2018 are considered outstanding, although these shares are not considered outstanding for purposes of computing the percentage ownership of any other person. Unless noted otherwise, the address of all listed stockholders is 200 State Street, Boston, Massachusetts 02109. Each of the stockholders listed has sole voting and investment power with respect to the shares beneficially owned by the stockholder unless noted otherwise, subject to community property laws where applicable.

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Certain of our existing stockholders, including entities affiliated with certain of our directors, have indicated an interest in purchasing an aggregate of approximately $30 million in shares of our common stock in this offering at the initial public offering price. However, because indications of interest are not binding agreements or commitments to purchase, the underwriters may determine to sell more, fewer or no shares in this offering to any or all of these stockholders, or any or all of these stockholders may determine to purchase more, fewer or no shares in this offering. The underwriters will receive the same underwriting discount on any shares purchased by these stockholders as they will on any other shares sold to the public in this offering. The following table does not reflect any such potential purchases by these existing stockholders or their affiliated entities. If any shares are purchased by these stockholders, the number of shares of common stock beneficially owned after this offering and the percentage of common stock beneficially owned after this offering would increase from that set forth in the table below.


	Number of Shares Beneficially Owned Prior to Offering		Percentage of Shares Beneficially Owned
			Percentage of Shares Beneficially Owned
Name of Beneficial Owner			Prior to Offering			After Offering
*5% or Greater Stockholders*
Entities Affiliated with New Enterprise Associates(1)		2,358,263		13.7	%		10.6	%
Entities Affiliated with InterWest Partners LLC(2)		1,932,003		11.2	%		8.7	%
Quan Venture Fund I, L.P.(3)		1,179,131		6.9	%		5.3	%
Kala International Investment Co Ltd.(4)		1,357,445		7.9	%		6.1	%
Shanghai Healthcare Industry Investment Fund New York, LLC(5)		1,005,230		5.8	%		4.5	%

*Named Executive Officers and Directors*
Jeffrey B. Kindler(6)		879,260		5.0	%		3.9	%
B. Nicholas Harvey		—		—			—
Kerrie L. Brady(7)		285,179		1.6	%		1.3	%
Peter Hanson(8)		220,737		1.3	%		*
Sol J. Barer, Ph.D.(9)		170,218		*			*
Isaac Blech(10)		341,596		2.0	%		1.5	%
James N. Campbell, M.D.(11)		554,816		3.2	%		2.5	%
Daniel N. Mendelson		—		—			—
Sara Nayeem, M.D.(1)		—		—			—
Arnold L. Oronsky, Ph.D.(2)		1,943,209		11.3	%		8.7	%
Joseph R. Swedish		—		—			—
Shawn Tomasello(12)		60,887		*			*
Stella Xu, Ph.D.(3)		1,179,131		6.9	%		5.3	%
All executive officers and directors as a group (15 persons)		5,635,033		32.5	%		25.3	%

*	Less than 1%.

(1)

Consists of (A)(i) 2,222,667 shares of common stock issuable upon the conversion of shares of preferred stock and (ii) 134,182 shares of common stock issuable as a dividend upon the closing of this offering, in each case held by New Enterprise Associates 16, L.P., or NEA 16 and (B)(i) 1,334 shares of common stock issuable upon the conversion of shares of preferred stock and (ii) 80 shares of common stock issuable as a dividend upon the closing of this offering, in each case held by NEA Ventures 2017, L.P., or Ven 2017. The shares directly held by NEA 16 are indirectly held by NEA Partners 16, L.P., or NEA Partners 16, the sole general partner of NEA 16, NEA 16 GP, LLC, or NEA 16 LLC, the sole general partner of NEA Partners 16, and each of the individual Directors of NEA 16 LLC. The individual Managers of NEA 16 LLC (collectively, the “Managers”), are Peter J. Barris, Forest Baskett, Anthony A. Florence, David M. Mott, Mohamad Makhzoumi, Chetan Puttagunta, Jon Sakoda, Joshua Makower, Peter Sonsini, Ravi Viswanathan and Scott D. Sandell. NEA Partners 16, NEA 16 LLC and the Managers share voting and dispositive power with regard to the securities directly held by NEA 16. The shares held directly by Ven 2017 are indirectly held by Karen P. Welsh, the general partner of Ven 2017. Karen P. Welsh has voting and dispositive power

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with regard to the shares of the securities directly held by Ven 2017. Sara Nayeem, M.D., a member of our board of directors and an affiliate of NEA 16 and Ven 2017, has no voting or investment control over any of the shares held by NEA 16 and Ven 2017 and disclaims beneficial ownership of all shares owned by NEA 16 and Ven 2017, except to the extent of any pecuniary interest therein. All indirect holders of the above referenced securities disclaim beneficial o

Centrexion Therapeutics Corp S-1/A