UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended ~~September 30~~March 31, ~~2017~~2018

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

For the transition period from to

Commission file number: 001-34637

ANTHERA PHARMACEUTICALS, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware		20-1852016
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

25801 Industrial Boulevard, Suite B
Hayward, California		94545
(Address of Principal Executive Offices)		(Zip Code)

(510) 856-5600

(Registrant’s Telephone Number, Including Area Code)

–––––––––––––

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

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

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

Large accelerated filer ☐ Accelerated filer ☒☐ Non-accelerated filer ☐ Smaller reporting company ☐☒ (Do not check if a smaller reporting company) Emerging growth company ☐

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

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

As of ~~October~~April 3130, ~~2017,~~2018 the number of outstanding shares of the registrant’s common stock, par value $0.001 per share, was 1326,~~849~~179,~~678~~302.

ANTHERA PHARMACEUTICALS, INC.

FORM 10-Q FOR THE QUARTER ENDED ~~SEPTEMBER~~MARCH 3031, ~~2017~~2018

INDEX

	Page
Part I — Financial Information
Item 1. Financial Statements (Unaudited)	3
Condensed Consolidated Balance Sheets as of September 30, 2017 (Unaudited) and December 31, 2016	3
Condensed Consolidated Balance Sheets as of March 31, 2018 (Unaudited) and December 31, 2017	3
Condensed Consolidated Statements of Operations for the Three Months and Nine Months Ended September 30, 2017 and 2016 (Unaudited)	4
Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2018 and 2017 (Unaudited)	4
Condensed Consolidated Statement of Series X Convertible Preferred Stock and Stockholders’ Equity for the Nine Months Ended September 30, 2017 (Unaudited)	5
Condensed Consolidated Statement of Convertible Preferred Stock and Stockholders’ Equity for the Three Months Ended March 31, 2018 (Unaudited)	5
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2017 and 2016 (Unaudited)	6
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2018 and 2017 (Unaudited)	6
Notes to Condensed Consolidated Financial Statements (Unaudited)	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	1716
Item 3. Quantitative and Qualitative Disclosures About Market Risk	2520
Item 4. Controls and Procedures	2520
Part II — Other Information
Item 1. Legal Proceedings	2621
Item 1A. Risk Factors	2721
Item 6. Exhibits	4436
Signatures	4537

Table of Contents

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ANTHERA PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

(unaudited)

ASSETS	~~September~~March 3031, ~~2017~~2018			December 31, ~~2016~~2017
				~~(1)~~	(1)
Current assets:
Cash and cash equivalents	$	68,~~076~~086		$	202,~~843~~196
Prepaid expenses and other current assets		~~1,771~~653			~~1,865~~995
Total current assets		78,~~847~~739			223,~~708~~191
Property and equipment — net		~~521~~72			~~763~~482
TOTAL	$	8,~~368~~811		$	233,~~471~~673
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,~~009~~845		$	41,~~782~~832
Accrued clinical expenses		~~2,105~~756			31,~~884~~785
Accrued liabilities		~~111~~45			~~113~~28
Accrued payroll and related costs		~~750~~—			1,~~845~~066
Total current liabilities		32,~~975~~646			104,~~624~~711
Warrant liability		~~4,050~~704			—4,457
Total liabilities		83,~~025~~350			109,~~624~~168
Commitments and Contingencies (Note 7)
Commitments and Contingencies (Note 6)
Contingently Redeemable Series X Convertible Preferred Stock, $0.001 par value, 0 and 487 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively		—			377
Stockholders’ equity (deficit) :
Stockholders’ equity (2):
Series X Convertible Preferred Stock, $0.001 par value, 5,000,000 shares authorized; 0 and 430 shares issued and outstanding as of March 31, 2018 and December 31, 2017, respectively		—			333
Series X Convertible Preferred Stock, $0.001 par value, 5,000,000 shares authorized; 430 and 9,012 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively		333			8,614
Common stock, $0.001 par value, 100,000,000 shares authorized; 26,179,302 and 13,854,491 shares issued and outstanding as of March 31, 2018 and December 31, 2017, respectively		26			14
Common stock, $0.001 par value, 100,000,000 shares authorized; 11,446,920 and 5,745,536 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively		12			6
Additional paid-in capital		447,587			428,586
Additional paid-in capital		424,753			411,404
Accumulated deficit		(442,152	)		(434,428	)
Accumulated deficit		(424,755	)		(407,554	)
Total stockholders’ equity (deficit)		5,461			(5,495	)
Total stockholders’ equity		343			12,470
TOTAL	$	8,811		$	3,673
TOTAL	$	8,368		$	23,471

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

(1)

Derived from audited Financial Statements.

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ANTHERA PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

(unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	Three Months Ended March 31,
	2017			2016			2017			2016
	2018			2017
REVENUES:
OPERATING EXPENSES
License fee	$	—		$	—		$	—		$	139
Research and development		7,468			7,801
Collaborative revenue		—			—			—			6
General and administrative		3,503			2,903
Total revenues		—			—			—			145
Research award		—			(100	)
OPERATING EXPENSES:
Total operating expenses		10,971			10,604
Research and development	$	6,104		$	14,096		$	20,939		$	35,686
LOSS FROM OPERATIONS		(10,971	)		(10,604	)
General and administrative		1,810			2,504			6,338			7,318
OTHER EXPENSE:
Research award		—			—			(100	)		(261	)
Other income (expense)		(43	)		(3	)
Total operating expenses		7,914			16,600			27,177			42,743
Fair value of warrant liability in excess of proceeds from financing		—			(600	)
LOSS FROM OPERATIONS		(7,914	)		(16,600	)		(27,177	)		(42,598	)
Change in fair value of warrant liability		3,290			—
OTHER INCOME (EXPENSE):
Total other income (expense)		3,247			(603	)
Other (expense)		(43	)		(47	)		(74	)		(109	)
NET LOSS	$	(7,724	)	$	(11,207	)
Fair value of warrant liability in excess of proceeds from financing		—			—			(600	)		—
Deemed dividends attributable to preferred stock		(1,540	)		(2,503	)
Change in fair value of warrant liability		1,650			169			10,650			169
Net loss applicable to common stockholders	$	(9,264	)	$	(13,710	)
Total other income		1,607			122			9,976			60
Net loss per share applicable to common stockholders — basic and diluted (1)	$	(0.42	)	$	(2.03	)
NET LOSS	$	(6,307	)	$	(16,478	)	$	(17,201	)	$	(42,538	)
Weighted-average number of shares used in per share calculation — basic and diluted (1)		22,166,869			6,759,567
Deemed dividends attributable to preferred stock		—			(8,807	)		(2,503	)		(8,807	)
Net loss applicable to common stockholders	$	(6,307	)	$	(25,285	)	$	(19,704	)	$	(51,345	)
Net loss per share applicable to common stockholders —basic and diluted (1)	$	(0.58	)	$	(4.85	)	$	(2.12	)	$	(10.04	)
Weighted-average number of shares used in per share calculation—basic and diluted (1)		10,947,338			5,210,334			9,296,890			5,115,560

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

(1)

All per share amounts and shares of the Company’s common stock issued and outstanding for all periods have been retroactively adjusted to reflect the one-for-eight reverse stock split which became effective April 28, 2017.

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ANTHERA PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENT OF ~~SERIES X~~ CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY

(in thousands except share and per share amounts)

(unaudited)

	Contingently Redeemable Series X Convertible Preferred Stock						Series X Convertible Preferred Stock						Common Stock (1)
	Series X Convertible Preferred Stock						Class Y Convertible Preferred Stock						Common Stock
	Shares			Amount			Shares			Amount			Shares		Amount		Additional Paid-inIn Capital			Accumulated Deficit			Total Stockholders’' Equity (Deficit)
Balance at December 31, 2016		487		$	377			9,012		$	8,614			5,745,536	$	6	$	411,404		$	(407,554	)	$	12,470
Balance at December 31, 2017		430		$	333			-		$	-			13,854,491	$	14	$	428,586		$	(434,428	)	$	(5,495	)
Issuance of common stock pursuant to exercise of stock options and employee stock purchase plan		-			-			-			-			39,386		-		80			-			80
Issuance of common stock pursuant to employee stock purchase plan		-			-			-			-			27,630		-		40			-			40
Share based compensation related to equity awards		-			-			-			-			-		-		2,923			-			2,923
Share-based compensation related to equity awards		-			-			-			-			-		-		3,266			-			3,266
Issuance of common stock and warrants for cash at $4.00 per share, net of warrant liability of $14,700		-			-			-			-			3,750,000		-		-			-			-
Issuance of common stock pursuant to exercise of warrants		-			-			-			-			1,902,683		2		2,992			-			2,994
Issuance of common stock pursuant to an equity purchase agreement, net of issuance cost of $316		-			-			-			-			1,336,320		1		1,693			-			1,694
Issuance of common stock pursuant to an equity purchase agreement, net of issuance cost of $16		-			-			-			-			673,939		1		1,308			-			1,308
Reclassification of contingently redeemable Series X convertible preferred stock		(487	)		(377	)		487			377			-		-		-			-			377
Issuance of common stock for cash at $1.25 per share in a private placement, net of issuance cost of $450		-			-			-			-			7,625,741		7		4,771			-			4,779
Conversion of Series X convertible preferred stock into common stock		-			-			(9,069	)		(11,161	)		575,678		5		11,156			-			-
Issuance of warrants pursuant to a private placement, net of issuance cost of $471		-			-			-			-			-		-		4,999			-			4,999
Deemed dividend attributable to Series X convertible preferred stock		-			-			-			2,503			-		-		(2,503	)		-			-
Issuance of Class Y convertible preferred stock for cash at $1.25 per share in a private placement		-			-			2,067,522			1,416			-		-		(122	)		-			1,294
Net loss		-			-			-			-			-		-		-			(17,201	)		(17,201	)
Beneficial conversion feature on Class Y convertible preferred stock		-			-			-			(1,416	)		-		-		1,416			-			-
Balance at September 30, 2017		-		$	-			430		$	333			11,446,920	$	12	$	424,753		$	(424,755	)	$	343
Deemed dividend attributable to beneficial conversion feature on Class Y convertible preferred stock		-			-			-			1,416			-		-		(1,416	)		-			-
Conversion of Class Y convertible preferred stock into common stock		-			-			(2,067,522	)		(1,416	)		2,067,522		2		1,414			-			-
Conversion of Series X convertible preferred stock into common stock		(430	)		(333	)		-			-			27,296		-		333			-			-
Net loss		-			-			-			-					-					(7,724	)		(7,724	)
Balance at March 31, 2018		-		$	-			-		$	-			26,179,302	$	26	$	447,587		$	(442,152	)	$	5,461

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

(1)

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ANTHERA PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Nine Months Ended September 30,
	Three Months Ended March 31,
	2017			2016
	2018			2017
CASH FLOW FROM OPERATING ACTIVITIES:
Net loss	$	(177,~~201~~724	)	$	(4211,~~538~~207	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		~~246~~161			~~241~~45
Stock-based compensation expense		23,~~923~~304			31,~~943~~086
Fair value of warrant liability in excess of proceeds from financing		~~600~~—			—600
Change in fair value of warrant liability		(103,~~650~~290	)		~~(169~~—	)
Changes in assets and liabilities:
Accounts receivable		—			~~326~~(100	)
Prepaid expenses and other assets		93342			(~~358~~256	)
Accounts payable		(~~3,773~~97	)		(12,~~868~~023	)
Accrued clinical expenses		(1,~~782~~029	)		3(1,~~184~~659	)
Accrued liabilities		(118	)		~~419~~695
Accrued payroll and related costs		(1,~~095~~066	)		~~267~~(1,510	)
Deferred revenue		—			(138	)
Net cash used in operating activities		(9,381	)		(14,329	)
Net cash used in operating activities		(30,640	)		(36,691	)
INVESTING ACTIVITIES:
Property and equipment purchases		—			(952	)
Proceeds from disposal of property and equipment		358			—
Net cash used in investing activities		—			(952	)
Net cash provided by investing activities		358			—
FINANCING ACTIVITIES:
Net proceeds from issuance of common stock and warrants pursuant to equity offering		14,099			6,037
Net proceeds from issuance of common stock, preferred stock and warrants pursuant to equity offering		11,075			14,100
Proceeds from issuance of preferred stock, warrants and options, net of offering cost		—			16,920
Net proceeds from issuance of common stock pursuant to an equity purchase agreement		1,307			—
Net proceeds from issuance of common stock pursuant to equity purchase agreement		1,694			—
Net proceeds from issuance of common stock pursuant to exercise of warrants		2,531			—
Net proceeds from issuance of common stock pursuant to exercise of stock options and employee stock purchase plan		80—			~~305~~38
Net cash provided by financing activities		1514,~~873~~913			2314,~~262~~138
NET DECREASE IN CASH AND CASH EQUIVALENTS		(14,767	)		(14,381	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		5,890			(191	)
CASH AND CASH EQUIVALENTS — Beginning of period		202,~~843~~196			4620,~~951~~843
CASH AND CASH EQUIVALENTS — End of period	$	68,~~076~~086		$	3220,~~570~~652
SUPPLEMENTAL CASH DISCLOSURES OF CASH FLOW INFORMATION
Non-cash financing activities:
Fair value of warrants issued in connection with registered direct offering	$	14,700		$	3,678
Issuance of common stock as a commitment fee pursuant to an equity purchase agreement	$	16		$	—
Issuance of common stock as a commitment fee pursuant to an equity purchase agreement	$	316		$	87
Fair value of warrants issued in connection with equity offering	$	—		$	14,700

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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ANTHERA PHARMACEUTICALS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. ~~ORGANIZATION~~BUSINESS ~~AND~~OF ~~SIGNIFICANT~~THE ~~ACCOUNTING POLICIES~~COMPANY

~~Organization~~Description of Business

Anthera Pharmaceuticals, Inc. (“the Company”) is a biopharmaceutical company ~~focused~~headquartered onin ~~advancing~~Hayward, ~~the development and commercialization of innovative medicines that benefit patients with unmet medical needs~~California. The Company currently ~~has~~licenses two compounds ~~in development~~, Sollpura and blisibimod. The Company licensed Sollpura from Eli Lilly & Co (“Eli Lilly”) in July 2014. Sollpura is a novel, non-porcine investigational Pancreatic Enzyme Replacement Therapy (“PERT”) intended for the treatment of patients with Exocrine Pancreatic Insufficiency (“EPI”), often seen in patients with cystic fibrosis and other conditions. The Company licensed blisibimod from Amgen, Inc. (“Amgen”) in December 2007. Blisibimod targets B-cell activating factor or (“BAFF”) which has been shown to be elevated in a variety of B-cell mediated autoimmune diseases, including Immunoglobulin A nephropathy, or IgA nephropathy.

Since incorporation, the Company has been primarily performing research and development activities, including clinical trials, manufacturing of clinical drugs, filing patent applications, hiring personnel, and raising capital to support and expand these activities.

On March 12, 2018, the Company announced that the RESULT Phase 3 clinical trial of Sollpura for the treatment of patients with EPI did not meet its primary endpoint of non-inferiority to porcine PERT. All ongoing clinical trials of Sollpura were concluded by the end of April 2018. The Company has also discontinued the development of blisibimod.

Liquidity and Need for Additional Capital

The Company’s ~~planned~~has ~~principal~~never ~~operations~~generated ~~are~~net ~~acquiring~~income ~~product~~from operations, and, ~~technology~~at ~~rights~~March 31, ~~raising~~2018, ~~capital~~had ~~and~~an ~~performing~~accumulated ~~research~~deficit ~~and~~of ~~development activities~~$442.2 ~~The~~million, ~~Company~~primarily isas ~~currently~~a ~~conducting~~result of research and development ~~activities~~and togeneral ~~treat EPI~~ and ~~IgA~~administrative ~~Nephropathy~~expenses. Due ~~The~~to ~~Company’s~~the ~~activities~~RESULT ~~are~~clinical ~~subject~~trial tonot ~~significant~~meeting ~~risks~~its ~~and~~primary ~~uncertainties.~~endpoint, ~~Successful~~in ~~completion~~April of2018, the Company’s ~~development~~began ~~programs~~a ~~and,~~formal ~~ultimately,~~process ~~the attainment~~ of ~~profitable~~evaluating ~~operations~~strategic ~~are~~alternatives ~~dependent~~and onimplemented ~~future~~a ~~events,~~number ~~including,~~of ~~among~~cost ~~other~~reduction ~~things~~measures, ~~its~~including ~~ability~~a to90% ~~access~~reduction ~~potential~~in ~~markets;~~its ~~secure~~workforce ~~financing;~~and ~~develop~~termination aof ~~customer~~major ~~base;~~vendor ~~attract~~contracts, ~~retain~~which ~~and~~substantially ~~motivate~~reduced ~~qualified~~the ~~personnel;~~Company’s ~~and~~capital ~~develop~~needs ~~strategic~~in ~~alliances~~the foreseeable future.

~~Since~~As ~~inception~~of inMarch ~~2004~~31, 2018, the Company ~~has~~had ~~funded~~cash ~~its~~and ~~operations~~cash ~~through~~equivalents ~~equity~~of ~~offerings,~~approximately ~~private~~$8.1 ~~placements~~million. The ofCompany’s ~~convertible~~current ~~debt,~~cash ~~debt~~balance ~~financing,~~is ~~equity~~not ~~investment~~expected ~~and~~to ~~cost~~fund ~~reimbursement~~its ~~from~~operations athrough ~~former~~the ~~collaborative~~next ~~partner~~twelve months. As such, ~~and~~in aApril ~~research~~2018, ~~award~~the ~~from~~Company ~~Cystic~~began ~~Fibrosis~~to ~~Foundation~~wind ~~Therapeutics~~down ~~Incorporated~~its ~~("CFFT")~~activities. The OnCompany ~~April~~also ~~21,~~decided ~~2016,~~to ~~the~~discontinue ~~Company~~further ~~entered~~development ~~into~~of anSollpura Atand ~~Market~~blisibimod ~~Issuance~~and ~~Sales~~devote ~~Agreement~~its ~~(“ATM~~time ~~Agreement”)~~and ~~with~~resources ~~H.C.~~to ~~Wainwright~~identifying &and ~~Co.,~~evaluating ~~LLC~~strategic ~~(“H~~alternatives.C. ~~Wainwright”)~~The toprocess ~~create~~is anaimed at~~-the-market~~ ~~equity~~identifying ~~program~~opportunities ~~under~~to ~~which~~diversify the Company’s ~~from~~pipeline, ~~time~~including tothrough ~~time~~potential ~~may~~strategic ~~offer~~combinations. If ~~and~~a ~~sell~~strategic ~~shares~~transaction ofis ~~its~~not ~~common stock~~consummated, ~~par~~the ~~value~~Company ~~$0.001~~may ~~per~~be ~~share,~~required ~~having~~to andissolve ~~aggregate~~or ~~offering~~liquidate. The ~~price~~Company ofcannot upbe tocertain ~~$25~~if ~~million~~any ~~through~~future ~~H.C~~financing ~~Wainwright,~~will asbe ~~agent,~~available ~~which~~on ~~was~~terms ~~amended~~favorable ~~and reduced~~ to ~~$23~~the ~~million~~Company, onif ~~March~~at ~~14, 2017~~all. InThe ~~June~~financial ~~2017,~~statements indo ~~connection~~not ~~with~~include ~~the~~any ~~execution~~adjustments ofthat anmight ~~equity~~result ~~purchase~~from ~~agreement~~the ~~with~~outcome ~~Lincoln~~of ~~Park~~this ~~Capital, LLC~~uncertainty. ~~(“LPC”),~~If ~~the~~adequate ~~Company~~funds ~~filed~~are anot ~~prospectus~~available, ~~supplement~~the ~~suspending~~Company ~~and~~will ~~reducing~~terminate all ~~offerings~~strategic ~~pursuant~~transaction toefforts ~~the~~and ~~H.C.~~eliminate ~~Wainwright ATM~~all ~~agreement~~remaining personnel.

~~In March 2017, the Company entered into an underwriting agreement with H~~2.C. ~~Wainwright,~~SUMMARY ~~pursuant~~OF toSIGNIFICANT ~~which~~ACCOUNTING the Company sold an aggregate of 30,000,000 shares of its common stock and agreed to issue warrants to purchase an aggregate of 60,000,000 shares of its common stock. On April 28, 2017, with shareholders’ approval, the Company effectuated a one-for-eight reverse split of its outstanding common stock (“Reverse Stock Split”). Subsequent to the Reverse Stock Split, the common stock shares and warrant shares were adjusted to 3,750,000 and 7,500,014, respectively. The financing transaction resulted in proceeds of $14.1 million. POLICIES

On June 19, 2017, the Company entered into an equity purchase agreement (the “2017 Purchase Agreement”) with Lincoln Park Capital Fund, LLC. (“LPC”), pursuant to which the Company has the right, at its discretion, to sell up to an aggregate of $10.0 million in shares of the Company’s common stock and issue up to 181,708 shares of the Company’s common stock as a commitment fee to LPC. The 2017 Purchase Agreement will expire on December 19, 2019.

On October 23, 2017, the Company entered into a definitive agreement with certain accredited investors in connection with a private placement of equity securities, (the “Private Placement”) for potentially $15 million in gross proceeds. The Private Placement is structured with two closings. The first closing occurred on October 27, 2017 and resulted in gross proceeds of approximately $2.9million. The second closing, contingent upon the requisite shareholder approval pursuant to Nasdaq Rule 5635(d), is expected to result in gross proceeds of approximately $12.1 million. The Company plans to obtain such shareholder approval in the first quarter of 2018. See Footnote 10 for further details.

To fully execute its business plan, the Company will need to complete certain research and development activities and clinical studies. Further, the Company’s product candidates will require regulatory approval prior to commercialization. These activities may span many years and will require substantial capital to complete and may ultimately be unsuccessful. Any delays in completing these activities could adversely impact the Company. The Company will need substantial additional financing to continue development of its product candidates, obtain regulatory approvals, and prepare for commercial readiness if the clinical trials are successful; such financing may not be available on terms favorable to the Company, if at all, which raises substantial doubt about the Company’s ability to continue as a going concern as of the date of this report and that is not alleviated after consideration management’s plans to mitigate such concerns. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. If adequate funds are not available, the Company may be required to delay, reduce the scope of, or eliminate one or more of its clinical trials. The Company plans to meet its capital requirements primarily through issuances of equity securities, future partnerships, debt financing, and in the longer term, revenue from product sales. Failure to generate revenue or raise additional capital would adversely affect the Company’s ability to achieve its intended business objectives.

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Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for Quarterly Reports on Form 10-Q and do not contain all the information and footnotes required by U.S. generally accepted accounting principles (“U.S. GAAP”) for complete financial statements. The accompanying unaudited Condensed Consolidated financial statements and notes thereto should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016~~2017, filed with the SEC on March 165, ~~2017~~2018. In the opinion of management, the accompanying unaudited Condensed Consolidated financial statements reflect all adjustments, which include only normal recurring adjustments necessary to present fairly the Company’s interim consolidated financial information. The results for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2017~~2018 are not necessarily indicative of the results to be expected for the year ending December 31, ~~2017~~2018 or for any other period. The consolidated balance sheet as of December 31, ~~2016~~2017 has been derived from the audited financial statements as of that date but it does not include all the information and notes required by U.S. GAAP.

On April 28, 2017, the Company implemented a one-for-eight reverse split of its outstanding common stock resulting in a reduction of its total common stock issued and outstanding from 80,609,310 shares to 10,076,164 shares. The Reverse Stock Split affected all stockholders of the Company’s common stock equally. The par value of the Company’s common stock and preferred stock remains unchanged at $0.001 per share and the number of authorized shares of common stock and preferred stock remained unchanged at 100,000,000 and 5,000,000, respectively, after giving effect to the Reverse Stock Split. All references to shares of common stock, stock options, warrants to purchase common stock, the conversion rate of preferred stock and outstanding per share data for all periods presented in the accompanying financial statements and notes thereto have been adjusted to reflect the Reverse Stock Split on a retroactive basis and all share information is rounded down to the nearest whole share after reflecting the reverse split, except where described otherwise.

The Company has evaluated events and transactions subsequent to the balance sheet date and has disclosed all events or transactions that occurred subsequent to the balance sheet date but prior to filing this Quarterly Report on Form 10-Q that would require recognition or disclosure in the unaudited Condensed Consolidated Financial Statements.

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Use of Estimates

The preparation of these ~~condensed~~ consolidated financial statements in conformity with GAAP requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, expenses, and related disclosures. On an ongoing basis, management evaluates its estimates, including critical accounting policies or estimates related to clinical trial accruals, ~~the~~ tax provision, stock-based compensation, ~~and~~ warrant liabilities, and computation of beneficial conversion features. The Company bases its estimates on historical experience and on various other market specific and other relevant assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ significantly from these estimates.

Financial Instruments with Characteristics of Both Equity and Liabilities

The Company has issued certain financial instruments, including warrants to purchase common stock, which have characteristics of both liabilities and equity. Financial instruments such as warrants that are classified as liabilities are fair valued upon issuance and are re-measured at fair value at subsequent reporting periods with the resulting change in fair value recorded in other income/(expense). The fair value of warrants is estimated using valuation models that require the input of subjective assumptions including stock price volatility, expected life, and the probability of future equity issuances ~~and their impact to the price protection feature~~.

Recent Accounting Pronouncements

InFrom ~~May~~time ~~2014~~to time, ~~the~~new ~~Financial~~accounting ~~Accounting~~pronouncements ~~Standards~~are ~~Board~~issued ~~(“FASB”)~~by ~~issued~~the Financial Accounting Standards ~~Update~~Board (“~~ASU~~FASB”) ~~No. 2014-09~~, ~~Revenue from Contracts with Customers (ASC Topic 606). The standards update outlines a single comprehensive model for entities to utilize to recognize revenue when it transfers goods~~ or ~~services~~other tostandard ~~customers~~setting inbodies ~~an amount that reflects the consideration that will be received in exchange for the goods~~ and ~~services. Additional~~adopted ~~disclosures~~by ~~will~~us ~~also~~as ~~be required to enable users to understand the nature, amount, timing and uncertainty~~ of ~~revenue and cash flows arising from contracts with customers. In 2016,~~ the ~~FASB~~specified ~~issued~~effective accounting standards updates to address implementation issues and to clarify the guidance for identifying performance obligations, licenses and determining if a company is the principal or agent in a revenue arrangementdate. InUnless ~~August~~otherwise ~~2015~~discussed, the ~~FASB~~impact ~~issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral~~ of ~~the~~recently ~~Effective~~issued ~~Date,~~standards ~~which~~that ~~deferred~~are ~~the~~not yet effective ~~date of ASU 2014-09. The mandatory adoption date of ASC 606 for the Company~~ is ~~now~~not ~~January~~expected 1,to ~~2018.~~have ~~There are two methods of adoption allowed, either~~ a ~~“full”~~material ~~retrospective~~impact ~~adoption or a “modified” retrospective adoption. The Company expects to adopt the standard~~ on ~~a modified retrospective basis applying~~ the ~~new rules to all contracts existing at January 1, 2018, with an adjustment for the cumulative effect of all changes recognized in beginning retained earnings. Given that the~~ Company’s isfinancial ~~not~~position ~~currently~~or ~~generating~~results ~~revenue and most likely will not be generating revenue at the date~~ of ~~adoption,~~operations ~~the~~upon adoption ~~of this guidance is not expected to materially impact the Company’s consolidated financial statements~~.

In ~~February~~July ~~2016~~2017, the FASB issued ASU 2017-11, Earnings ~~No.~~Per ~~2016-02~~Share (Topic 260), ~~Leases~~ Distinguishing Liabilities from Equity (Topic ~~842~~480). ~~ASU~~and ~~2016-02~~Derivatives ~~impacts~~and ~~any~~Hedging ~~entity~~(Topic ~~that~~815): ~~enters~~I. ~~into~~Accounting afor ~~lease~~Certain Financial Instruments with ~~some~~Down ~~specified~~Round ~~scope~~Features; ~~exceptions~~II. ~~This~~ ~~new~~Replacement ~~standard~~of ~~establishes~~the aIndefinite ~~right-~~Deferral for Mandatorily Redeemable Financial Instruments of~~-use~~ ~~(ROU)~~Certain ~~model~~Nonpublic ~~that~~Entities ~~requires~~and aCertain ~~lessee~~Mandatorily toRedeemable ~~record~~Noncontrolling Interests with a ~~ROU~~Scope ~~asset~~Exception, ~~and~~(ASU 2017-11). Part aI ~~lease~~of ~~liability~~this onupdate addresses the ~~balance~~complexity ~~sheet~~of accounting for ~~all~~certain ~~leases~~financial instruments with ~~terms~~down ~~longer~~round ~~than~~features. 12Down ~~months. Leases~~round ~~will~~features beare ~~classified~~features asof ~~either~~certain ~~finance~~equity-linked instruments (or ~~operating,~~embedded ~~with~~features) ~~classification~~that ~~affecting~~result in the ~~pattern~~strike ofprice ~~expense~~being ~~recognition~~reduced inon the ~~statement~~basis of ~~operations. The~~the ~~guidance~~pricing ~~updates~~of ~~and~~future ~~supersedes~~equity ~~Topic~~offerings. ~~840,~~Current ~~Leases.~~accounting ~~For~~guidance ~~public~~creates cost and complexity for entities, ~~ASU~~that ~~2016-02~~issue isfinancial ~~effective~~instruments ~~for~~(such ~~fiscal~~as ~~years,~~warrants and ~~interim~~convertible ~~periods~~instruments) with ~~those~~down ~~years,~~round ~~beginning~~features ~~after~~that ~~December~~require ~~15,~~fair ~~2018,~~value ~~and~~measurement ~~early~~of ~~adoption~~the isentire ~~permitted~~instrument or conversion option. APart ~~modified~~II ~~retrospective~~of ~~transition~~this ~~approach~~update isaddresses ~~required~~the ~~for~~difficulty ~~leases~~of ~~existing~~navigating atTopic 480, orDistinguishing ~~entered~~Liabilities ~~into~~from ~~after~~Equity, because of the ~~beginning~~existence of extensive pending content in the ~~earliest~~FASB ~~comparative~~Accounting ~~period~~Standards ~~presented~~Codification. inThis pending content is the result of the indefinite deferral of accounting requirements about mandatorily redeemable financial ~~statements,~~instruments ~~with~~of certain ~~practical~~nonpublic ~~expedients~~entities ~~available. The~~and ~~Company~~certain ~~does~~mandatorily ~~not~~redeemable ~~expect~~noncontrolling ~~the~~interests. ~~adoption~~The amendments in Part II of this ~~standard~~update todo not have aan ~~material~~accounting effect. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. The Company is currently assessing the potential impact of adopting ASU 2017-11 on its financial statements and related disclosures, but does not expect it to have a significant impact.

In May 2017, the FASB issued, ASU-2017-09, Compensation—Stock Compensation (Topic 718). This guidance clarifies when changes to the terms and conditions of share-based awards must be accounted for as modifications. The guidance does not change the accounting treatment for modifications. The Company adopted this guidance from January 1, 2018 and it did not have a material impact on its consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This ASU is a comprehensive new leases standard that amends various aspects of existing guidance for leases and requires additional disclosures about leasing arrangements. The new standard requires that all lessees recognize the assets and liabilities that arise from leases on the balance sheet and disclose qualitative and quantitative information about its leasing arrangements. The classification criteria for distinguishing between finance leases and operating leases are substantially similar to the classification criteria for distinguishing between capital leases and operating leases in the previous lease guidance. The ASU is effective for annual periods beginning after December 15, 2018, including interim periods within those fiscal years, and earlier adoption is permitted. In the financial statements in which the ASU is first applied, leases shall be measured and recognized at the beginning of the earliest comparative period presented with an adjustment to equity. The Company is currently evaluating the impact of the adoption of this guidance on its consolidated financial condition, results of operations and cash flows.

In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (ASC Topic 606). The standards update outlines a single comprehensive model for entities to utilize to recognize revenue when it transfers goods or services to customers in an amount that reflects the consideration that will be received in exchange for the goods and services. Additional disclosures will also be required to enable users to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. In 2016, the FASB issued accounting standards updates to address implementation issues and to clarify the guidance for identifying performance obligations, licenses and determining if a company is the principal or agent in a revenue arrangement. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which deferred the effective date of ASU 2014-09. The mandatory adoption date of ASC 606 for the Company is now January 1, 2018. There are two methods of adoption allowed, either a “full” retrospective adoption or a “modified” retrospective adoption. The Company adopted the standard from January 1, 2018, however, given that the Company is not generating revenue and has no revenue contracts, the adoption of this guidance did not impact its consolidated financial statements.

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Effective January 1, 2017, the Company adopted ASU No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. Among other requirements, the new guidance requires all tax effects related to share-based payments at settlement (or expiration) to be recorded through the income statement. Previously, tax benefits in excess of compensation cost ("windfalls") were recorded in equity, and tax deficiencies ("shortfalls") were recorded in equity to the extent of previous windfalls, and then to the income statement. As required, this change was applied prospectively to all excess tax benefits and tax deficiencies resulting from settlements. Under the new guidance, the windfall tax benefit is to be recorded when it arises, subject to normal valuation allowance considerations. As required, this change was applied on a modified retrospective basis. There was $0.3 ~~million of unrecognized deferred tax assets attributable to excess tax benefits that were not previously recognized as the Company did not reduce income taxes payable~~. ~~The~~NET ~~cumulative~~LOSS ~~adjustment~~PER for the adoption of ASU No. 2016-09 did not have an impact on net equity as the incremental deferred tax assets were fully offset by a corresponding increase in the deferred tax asset valuation allowance.SHARE

~~ASU~~Basic ~~No.~~net ~~2016-09~~loss ~~addressed~~attributable to common stockholders per share is computed by dividing income available to common stockholders (the ~~presentation~~numerator) by the weighted-average number of ~~employee~~common ~~taxes~~shares ~~paid~~outstanding on(the denominator) during the ~~statement~~period. Shares issued during the period and shares reacquired during the period are weighted for the portion of ~~cash~~the ~~flows~~period that they were outstanding. The ~~Company~~computation isof ~~now~~diluted ~~required~~Earnings toPer ~~present~~Share, or EPS, is similar to the ~~cost~~computation of ~~shares~~basic ~~withheld~~EPS ~~from~~except that the ~~employee~~denominator is increased to ~~satisfy~~include the ~~employees’~~number ~~income~~of ~~tax~~additional ~~liability~~common asshares athat ~~financing~~would ~~activity~~have onbeen outstanding if the ~~statement~~dilutive ofpotential ~~cash~~common ~~flows~~shares ~~rather~~had ~~than~~been asissued. anIn ~~operating~~addition, ~~cash~~in ~~flow.~~computing ~~This~~the ~~change~~dilutive effect of convertible securities, the numerator is ~~applied~~adjusted onto aadd ~~retrospective~~back ~~basis,~~any asconvertible ~~required,~~preferred ~~but~~dividends. ~~did~~Diluted ~~not~~EPS ~~impact~~is ~~the~~identical ~~statement~~to ofbasic ~~cash~~EPS ~~flows~~since ~~for~~common ~~the~~equivalent ~~nine~~shares ~~months~~are ~~ended~~excluded ~~September~~from 30the calculation, ~~2017~~as their effect is anti-dilutive.

ASU No. 2016-09 also permits entities to make an accounting policy election related to how forfeitures will impact the recognition of compensation cost for stock-based compensation to either estimate the total number of awards for which the requisite service period will not be rendered, as currently required, or to account for forfeitures as they occur. Upon adoption, the Company elected to not make any changes to the current policy of accounting for forfeitures.

2. COLLABORATIVE AGREEMENT

In December 2014, the Company entered into an exclusive license agreement with Zenyaku (“Zenyaku Agreement”) for the development and commercialization of blisibimod in Japan and potentially other countries throughout Asia, while the Company retained full development and commercialization rights of blisibimod for all other global territories including North America and the European Union. The Zenyaku Agreement was mutually terminated in January 2016. Consequently, the Company accelerated the amortization period of its deferred revenue and fully amortized it as of January 7, 2016.

3. RESEARCH AWARD

In March 2015, the Company received a research award of up to $3 million from the CFFT for the Company's development of Sollpura. The Company retains the right to develop and commercialize Sollpura and will owe royalties to CFFT on net sales of any drug candidate approved and commercialized under the collaboration. The funding is disbursed by CFFT to the Company upon the Company’s achievement of milestones specified in the grant agreement. At its discretion, the Company may choose to fund a particular stage of the Sollpura development plan without CFFT funds. Any CFFT funds not expended on the development program of Sollpura must be returned to CFFT and, upon such return, the amounts of such returned funds will not be included as part of the research award for the purpose of calculating royalties or other amounts owed by the Company to CFFT. To the extent CFFT provides or makes available any information, expertise, know-how or other intellectual property related to cystic fibrosis or the treatment, prevention or cure there-of (“CFFT Know-How”) to the Company, CFFT grants to the Company a non-exclusive, transferrable, sub-licensable, worldwide rights and license under all of CFFT’s rights in such CFFT Know-How to assist the Company to research, develop, commercialize, make or have made, use, sell, have sold, offer for sale, import, export and otherwise exploit the product.

In consideration for CFFT’s research award and any licenses of intellectual property granted by CFFT, the Company agrees to pay royalties to CFFT as follows: i) a one-time royalty in an amount equal to five times the actual award, payable in three installments between the first and second anniversaries of the first commercial sale of a product; ii) a one-time royalty in an amount equal to the actual award after net product sales reaches $100 million; and iii) in the event of a license, sale or other transfer of the product or a change of control transaction prior to the commercial sale of the product, a milestone payment equal to three times the actual award.

As of March 31, 2017, the Company has fully recognized the research award.

4. NET LOSS PER SHARE

Basic net loss attributable to common stockholders per share is computed by dividing income available to common stockholders (the numerator) by the weighted-average number of common shares outstanding (the denominator) during the period. Shares issued during the period and shares reacquired during the period are weighted for the portion of the period that they were outstanding. The computation of diluted Earnings Per Share, or EPS, is similar to the computation of basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued. For the three and nine months ended September 30, 2016, diluted EPS is identical to basic EPS since common equivalent shares are excluded from the calculation, as their effect is anti-dilutive. For the three and nine months ended September 30, 2017, diluted EPS is identical to basic EPS due to all of the Company’s outstanding warrants and stock options having exercise prices higher than the Company’s average stock price during the period. The effect of preferred shares is excluded during periods with a net loss as their effect is anti-dilutive.

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The following table summarizes the Company’s calculation of net loss per common share (in thousands except share and per share amounts):

		Three Months Ended September 30,							Nine Months Ended September 30,
	Three Months Ended March 31
		2017				2016			2017			2016
	2018				2017
Net loss per share
Numerator
Net loss		$	(67,~~307~~724	)		$	(1611,~~478~~207	)	$	~~(17,201~~	)	$	~~(42,538~~	)
Deemed dividend attributable to preferred stock			—(1,540	)			(82,~~807~~503	)		~~(2,503~~	)		~~(8,807~~	)
Net loss applicable to common stockholders		$	(69,~~307~~264	)		$	(2513,~~285~~710	)	$	~~(19,704~~	)	$	~~(51,345~~	)
Denominator
Weighted average common shares outstanding			1022,~~947~~166,~~338~~869				56,~~210~~759,~~334~~567			~~9,296,890~~			~~5,115,560~~
Basic and diluted net loss per share		$	(0.5842	)		$	(42.8503	)	$	~~(2.12~~	)	$	~~(10.04~~	)

The following outstanding options, warrants, and Series X convertible preferred stock that are potentially dilutive securities were excluded from the computation of diluted net loss per share, as the effect of including them would have been antidilutive.

	Three Months Ended September 30,				Nine Months Ended September 30,
	Three Months Ended March 31,
	2017		2016		2017		2016
	2018		2017
Options to purchase common stock		1,240,974		721,252		995,274		654,567
Total options to purchase common stock		6,724,345		750,355
Warrants to purchase common stock		7,774,815		57,805		5,796,789		22,810
Total warrants to purchase common stock		18,725,764		274,801
Series X convertible preferred stock		~~27,295~~—		~~299~~30,~~755~~930		~~91,496~~		~~98,800~~
Total		925,~~043~~450,~~084~~109		1,~~078~~056,~~812~~086		~~6,883,559~~		~~776,177~~

54. FAIR VALUE OF FINANCIAL INSTRUMENTS

Pursuant to the accounting guidance for fair value measurement and its subsequent updates, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date. The accounting guidance establishes a hierarchy for inputs used in measuring fair value that minimizes the use of unobservable inputs by requiring the use of observable market data when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on active market data. Unobservable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances.

The fair value hierarchy is broken down into the three input levels summarized below:

Level 1 —Valuations are based on quoted prices in active markets for identical assets or liabilities and readily accessible by us at the reporting date. Examples of assets and liabilities utilizing Level 1 inputs are certain money market funds, U.S. Treasuries and trading securities with quoted prices on active markets.

· Level 2 —Valuations based on inputs other than the quoted prices in active markets that are observable either directly or indirectly in active markets. Examples of assets and liabilities utilizing Level 2 inputs are U.S. government agency bonds, corporate bonds, commercial paper, certificates of deposit and over-the- counter derivatives.

~~· Level 3 —Valuations based on unobservable inputs in which there are little or no market data, which require the Company to develop its own assumptions.~~9

The following tables present the Company’s fair value hierarchy for all its financial assets and liabilities (including those in cash and cash equivalents), in thousands, by major security type measured at fair value on a recurring basis as of September 30, 2017 and December 31, 2016 (in thousands):

	September 30, 2017
	Estimated Fair Value		Level 1		Level 2		Level 3
Warrant Liability	$	4,050	$	—	$	—	$	4,050

	December 31, 2016
	Estimated Fair Value		Level 1		Level 2		Level 3
Money market funds	$	19,416	$	19,416	$	—	$	—

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Level 3 —Valuations based on unobservable inputs in which there are little or no market data, which require the Company to develop its own assumptions.

The following tables present the Company’s fair value hierarchy for all its financial assets and liabilities (including those in cash and cash equivalents), in thousands, by major security type measured at fair value on a recurring basis as of March 31, 2018 and December 31, 2017 (in thousands):

	March 31, 2018
	Estimated Fair Value			Level 1			Level 2			Level 3


Assets:
Money market funds		$	7,989			7,989		$	—		$	—

Liabilities:
Warrant Liability		$	704		$	—		$	—		$	704

	December 31, 2017
	Estimated Fair Value		Level 1		Level 2		Level 3

Assets:
Money market funds	$	2,097	$	2,097	$	—	$	—

Liabilities:
Warrant liability	$	4,457	$	—	$	—	$	4,457

The Company used quoted market prices to determine the fair value of cash equivalents, which consist of money market funds and therefore these are classified in Level 1 of the fair value hierarchy.

Warrants containing price protection rights are accounted for as liabilities, with changes in the fair values included in net loss for the respective periods. Because some of the inputs to the valuation model are either not observable or are not derived principally from or corroborated by observable market data by correlation or other means, the warrant liability is classified as Level 3 in the fair value hierarchy.

The following table summarizes the changes in the Company’s Level 3 warrant liability (in thousands):

	September 30, 2017
	March 31, 2018
Beginning balance	$	-
Beginning balance at December 31, 2017	$	4,457
Addition to fair value of warrant liability during the three months ended March 31, 2017		14,700
Decrease in fair value of warrant liability from January 1 to March 31, 2018		(3,290	)
Decrease in fair value of warrant liability from April 1 to September 30, 2017		(10,650	)
Balance reclassified to additional paid-in capital upon exercise of warrants		(463	)
Ending balance	$	~~4,050~~704

There were no transfers between Level 1, Level 2 or Level 3 for the ~~nine~~three months ended ~~September~~March 3031, ~~2017~~2018 and year ended December 31, ~~2016~~2017.

65. WARRANT LIABILITY

Pursuant to an underwriting agreement entered into in March 2017, the Company issued warrants to purchase 30,000,000 shares of common stock at an initial exercise price of $0.55 per share (“Tranche 1 Warrants”) and warrants to purchase 30,000,000 shares of common stock at an initial exercise price of $0.50 per share (“Tranche 2 Warrants”) to ~~certain~~the investors. On April 28, 2017, the Company implemented a one-for-eight reverse split of its outstanding common stock. The Reverse Stock Split did not change the number of authorized shares of common stock, which remained at 100,000,000, but did increase the number of authorized but unissued shares of common stock, resulting in sufficient authorized shares of common stock to settle the warrants. After giving effect to the Reverse Stock Split, the number of shares issuable upon exercise and the exercise price of the Tranche 1 Warrants were 3,750,007 and $4.40, respectively, and the number of shares issuable upon exercise and the exercise price of the Tranche 2 Warrants were 3,750,007 and $4.00, respectively. The Tranche 1 Warrants will expire on April 28, 2022 and the Tranche 2 Warrants expired on October 2827, 2017.

The exercise price of the Tranche 1 and Tranche 2 warrants are subject to adjustment in the event of a stock combination, reverse split, or similar transaction involving common stock (each, a “Stock Combination Event”) if the average volume weighted average price (“VWAP") of the common stock for the five lowest trading days during the 15 consecutive trading day period ending and including the trading day immediately preceding the 16th trading day after such Stock Combination Event is less than the exercise price of the warrant. In such an event, the exercise price of the warrants is adjusted to the average VWAP. As a result of the Reverse Stock Split, the exercise price for the Tranche 1 and Tranche 2 Warrants were each adjusted to $1.8918.10

The Company accounted for the warrants under ASC Topic 815, Derivatives and Hedging (“ASC 815”). The Company determined that, on the date of issuance, the warrants were not considered indexed to its own stock because the underlying instruments were not “fixed-for-fixed” due to the price protection and therefore, the warrants should be accounted for as derivatives. The warrants also permitted the holder to require the Company to settle the warrants for cash in the event of a fundamental transaction, including a sale of the business. At the end of each reporting period, the changes in fair value during the period are recorded as a component of non-operating income (expense) in the consolidated statement of operations. The initial fair value of the liability associated with these warrants was $14.7 million. As of September 30, 2017, the fair value of the liability associated with these warrants was $4.1 million. The decrease in fair value of the warrant liability was recorded as non-operating income during the nine months ended September 30, 2017.

The Company estimated the fair value of the warrants using the Monte Carlo simulation model, which combines expected cash outflows with market-based assumptions regarding risk-adjusted yields, stock price volatility, and the probability of future equity events. Inputs used in the valuation of each tranche on issuance date and September 30, 2017 were as follows:

Issuance Date	Tranche 1			Tranche 2
Common stock price	$	3.44		$	3.44
Exercise price	$	4.40		$	4.00
Expected Volatility		112.5	%		112.5	%
Dividend Yield		0	%		0	%
Risk-Free Interest Rate		2.03	%		2.03	%
Expected Term (years)		5.0			0.5

September 30, 2017	Tranche 1			Tranche 2
Common stock price	$	1.44		$	1.44
Exercise price	$	1.89		$	1.89
Expected Volatility		93.7	%		93.7	%
Dividend Yield		0	%		0	%
Risk-Free Interest Rate		1.86	%		1.86	%
Expected Term (years)		4.6			0.1

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~~For~~The exercise price of the ~~fair~~Tranche ~~value~~1 ~~determination,~~Warrants ~~the~~is ~~Company~~subject ~~computed~~to adjustment in the ~~historical~~event ~~volatility~~of ~~based~~a onstock ~~daily~~combination, ~~pricing~~reverse ~~observations~~split, ~~for~~or similar transaction involving common stock (each, a ~~period~~“Stock ~~that~~Combination ~~corresponds~~Event”) toif the ~~expected~~average ~~term~~volume weighted average price (“VWAP") of the ~~warrants.~~common ~~The~~stock ~~expected~~for ~~term~~the ~~for~~five ~~both~~lowest ~~valuation~~trading ~~dates~~days ~~are~~during ~~based~~the on15 consecutive trading day period ending and including the ~~remaining~~trading ~~contractual~~day ~~term~~immediately preceding the 16th trading day after such Stock Combination Event is less than the exercise price of the ~~warrants~~warrant. In ~~The~~such ~~risk-free~~an ~~interest~~event, ~~rates~~the ~~are~~exercise price of the ~~U.S.~~warrants ~~Treasury~~is ~~bond~~adjusted ~~rate~~to asthe average VWAP. As a result of the ~~valuation~~Reverse ~~dates~~Stock Split, the exercise price for the Tranche 1 Warrants was adjusted to $1. 8918.

The ~~fair value of these warrants also incorporated the~~ Company’s ~~assumptions~~accounted ~~about~~for ~~future equity issuances and their impact to~~ the ~~price protection feature. For the Tranche 1~~ warrants ~~the~~under ~~valuation~~ASC ~~factored~~Topic ~~in one potential reverse split subsequent to the reverse-split on April 28~~815, ~~2017~~Derivatives and ~~prior~~Hedging to(“ASC ~~the~~815”) ~~expiration~~pursuant ~~of the 5-year term. No reverse split was factored in with respect~~ to ~~valuation of~~ the ~~Tranche~~following ~~2 warrants as they became expired on October 28, 2017.~~ features:

71. ~~COMMITMENTS~~On ~~AND~~the ~~CONTINGENCIES~~date of issuance, the warrants were not considered indexed to the Company’s own stock because the underlying instruments were not “fixed-for-fixed” due to the exercise price being subject to adjustment in a Stock Combination Event.

The warrants permit the holder to require the Company to settle the warrants for cash in an amount equal to the Black-Scholes value of the warrants in the event of a fundamental transaction, including a sale of the business.

At the end of each reporting period, the changes in fair value during the period are recorded as a component of non-operating income (expense) in the consolidated statement of operations. The initial fair value of the liability associated with these warrants was $14.7 million. The Tranche 2 warrants, which expired in October 2017 were out of the money and had a fair value of zero upon expiration. As of March 31, 2018, the fair value of the liability associated with the Tranche 1 Warrants decreased to $0.7 million from $4.5 million as of December 31, 2017 due to a decrease in the fair value of the common stock underlying the warrant shares, as well as reduction in the number of outstanding warrants pursuant to exercises by the warrant holders. The decrease in fair value of the warrant liability was recorded as non-operating income during the three months ended March 31, 2018. The Company estimated the fair value of the warrants using the Black-Scholes model with the following valuation assumptions

March 31, 2018
Common stock price	$	0.32
Exercise price	$	1.89
Expected volatility		132.1	%
Dividend yield		0	%
Risk-free interest rate		2.53	%
Expected term (years)		4.08

For the fair value determination, the Company computed the historical volatility based on daily pricing observations for a period that corresponds to the expected term of the warrants. The expected term for all valuation dates were based on the remaining contractual terms of the warrants. The risk-free interest rates were the U.S. Treasury bond rate as of the valuation months and years.

6. COMMITMENTS AND CONTINGENCIES

Leases

The Company ~~leases~~subleases its main operating facility in Hayward, California. The lease ~~was~~is for approximately 148,000 square feet and the ~~lease~~sublease agreement ~~was~~will ~~due to~~ expire inon ~~September~~August ~~2017~~31, 2019. On In ~~July~~April 202016, ~~2017,~~ the Company ~~terminated~~leased ~~the~~its ~~lease~~second ~~agreement~~operating ~~and~~facility ~~concurrently~~in ~~entered~~Pleasanton, ~~into~~California ~~a sublease agreement~~ for approximately 81,~~000~~200 square feet, ofwhich ~~the~~was ~~same~~subsequently ~~facility. The~~terminated ~~sublease~~early ~~agreement~~by ~~will~~the ~~expire~~Company onin ~~August~~February ~~31, 2019~~2018.

In April 2016, the Company leased its second operating facility in Pleasanton, California. The lease is for approximately 1,200 square feet and the lease agreement will expire in May 2019.

Other Commitments

In December 2007, the Company and Amgen entered into a worldwide, exclusive license agreement (the “Amgen Agreement”) to develop and commercialize blisibimod in any indication, including for the treatment of systemic lupus erythematosus (“lupus”). Under the terms of the Amgen Agreement, the Company paid a nonrefundable, upfront license fee of $6.0 million. As there was no future alternative use for the technology, the Company expensed the license fee in research and development expenses during 2007. Under the terms of the Amgen Agreement, the Company is obligated to make additional milestone payments to Amgen of up to $33.0 million upon the achievement of certain development and regulatory milestones. The Company is also obligated to pay tiered royalties on future net sales of products, ranging from the high single digits to the low double digits, which are developed and approved as defined by this collaboration. The Company’s royalty obligations as to a particular licensed product will be payable, on a country-by-country and licensed product-by-licensed product basis, for the longer of (a) the date of expiration of the last to expire valid claim within the licensed patents that covers the manufacture, use or sale, offer to sell, or import of such licensed product by the Company or a sublicense in such country or (b) 10 years after the first commercial sale of the applicable licensed product in the applicable country.

~~On July~~ 11, 2014, the Company and Eli Lilly and Company (“Eli Lilly”) entered into a worldwide, exclusive license agreement (the “Lilly Agreement”), to develop and commercialize Sollpura, a Phase 3 novel investigational Pancreatic Enzyme Replacement Therapy (“PERT”), for the treatment of patients with Exocrine Pancreatic Insufficiency, or EPI, often seen in patients with cystic fibrosis and other conditions. Under the terms of the Lilly Agreement, the Company was not required to make any up-front payment but is obligated to make milestone payments of up to up to $33.5 million for capsule products and $9.5 million for reformulated products upon the achievement of certain regulatory and commercial sales milestones, none of which have been achieved as of September 30, 2017. In addition, after sales of the licensed products exceed an aggregate of $100.0 million in the United States, the Company is obligated to pay tiered royalties on future net sales of products, ranging from the single digits to the mid-teens, that are developed and approved as defined in the Lilly Agreement. The Company’s royalty obligations as to a particular licensed product will be payable, on a licensed product-by-licensed product basis, for the longer of (a) the date of expiration of the last to expire valid claim within the licensed patents that covers the manufacture, use or sale, offer to sell, or import of such licensed product by the Company or a sublicense in such country, or (b) 12 years after the first commercial sale of the applicable licensed product in the applicable country.

See Note 3 – “Research Award” for discussion of commitments and contingencies associated with the research award received from the CFFT.

Litigation

On February 13, 2017, a complaint was filed in the United States District Court for the Northern District of California captioned Brian Clevlen v. Anthera Pharmaceuticals, Inc., et al., Case No. 3:17-cv-715, on behalf of a putative class of the Company’s stockholders against the Company and certain of its current and former officers. The complaint asserts claims under sections 10(b) and 20(a) of the Securities Exchange Act of 1934 on behalf of all stockholders that purchased the Company’s common stock between February 10, 2015 and December 27, 2016. The complaint alleges that the Company made false or misleading statements and/or omissions with respect to the CHABLIS-SC1 trial and SOLUTION study. The complaint seeks unspecified damages, interest, attorneys’ fees, costs, and such other relief at the Court may deem just and proper. On April 17, 2017, Urešomir Čorak, a putative stockholder of the Company, filed a motion to be appointed as lead plaintiff, and to have the law firm of Levi & Korsinsky LLP appointed as lead counsel in the action. On April 17, 2017, a group of putative stockholders of the Company, comprised of Kent Roberts, Kent Roberts FBO Evan Roberts, Kent Roberts Parent FBO Owen Roberts, and Bobby King, filed a motion to be appointed as lead plaintiff, to have the law firm of Lifschitz & Miller LLP appointed as lead counsel, and to have the law firm of Reich Radcliffe & Hoover LLP appointed as liaison counsel in the action. On May 18, 2017, the Court appointed Urešomir Čorak as lead plaintiff, and Levi & Korsinsky LLP as lead counsel in the action. On July 17, 2017, lead plaintiff filed a notice of voluntary dismissal of the action without prejudice.

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8On July 11, 2014, the Company and Eli Lilly and Company (“Eli Lilly”) entered into a worldwide, exclusive license agreement (the “Lilly Agreement”), to develop and commercialize Sollpura, a Phase 3 novel investigational Pancreatic Enzyme Replacement Therapy (“PERT”), for the treatment of patients with Exocrine Pancreatic Insufficiency, or EPI, often seen in patients with cystic fibrosis and other conditions. ~~STOCKHOLDERS~~Under the terms of the Lilly Agreement, the Company was not required to make any up-front payment but is obligated to make milestone payments of up to up to $33.5 million for capsule products and $9.5 million for reformulated products upon the achievement of certain regulatory and commercial sales milestones, none of which have been achieved as of March 31, 2018. In addition, after sales of the licensed products exceed an aggregate of $100.0 million in the United States, the Company is obligated to pay tiered royalties on future net sales of products, ranging from the single digits to the mid-teens, that are developed and approved as defined in the Lilly Agreement. The Company’s ~~EQUITY~~royalty obligations as to a particular licensed product will be payable, on a licensed product-by-licensed product basis, for the longer of (a) the date of expiration of the last to expire valid claim within the licensed patents that covers the manufacture, use or sale, offer to sell, or import of such licensed product by the Company or a sublicense in such country, or (b) 12 years after the first commercial sale of the applicable licensed product in the applicable country.

7. STOCKHOLDERS’ EQUITY

Preferred Stock

The Company has authorized 5,000,000 shares of $0.001 par value preferred stock. The Company’s Board of Directors is authorized to designate the terms and conditions of any preferred stock issued by the Company without further action by the common stockholders. The Company designated 17,000 and 2,067,522 shares of its authorized and unissued preferred stock as Series X ~~convertible~~Convertible ~~preferred~~Preferred stock and ~~filed~~Class anY ~~Amended and Restated Certificate of Designation of Preferences, Rights and Limitations of Series X~~ Convertible Preferred ~~Stock with the Delaware Secretary of State. As of September 30~~stock, ~~2017, there were 430 shares of Series X Convertible Preferred Stock issued, outstanding and convertible into 27,296 shares of common stock~~respectively.

In September 2016, the Company entered into a subscription agreement with certain institutional investors pursuant to which it sold 17,000 Series X units for a purchase price of $1,000 per unit in a registered direct offering (the “Subscription Agreement”). Each unit consists of one share of Series X Convertible Preferred Stock and a warrant to purchase 15.87 shares of common stock. ~~The~~As ~~conversion~~of ~~price~~March ~~for the Series X Convertible Preferred Stock became fixed on November 16~~31, ~~2016 at $15.7536 per share~~2018, ~~which~~all represented the VWAP of the Company’s common stock over the five full trading days following the date of the Company’s initial public announcement of topline and/or efficacy data from the CHABLIS-SC1 study on November 10, 2016. The registered direct offering resulted in gross proceeds of $17.0 million. The holders of Series X Convertible Preferred Stock do not have any voting rights nor the right to elect any members to the board of directors. The Series X Convertible Preferred Stock has a contingent redemption clause. The Company is not required to issue any shares of common stock upon conversion of any shares of Series X Convertible Preferred Stock to the extent that (i) the aggregate issuance of common stock will be greater than 1,~~048,229~~000 shares ~~or 19.99%~~ of the total outstanding shares of the Company (the “Threshold Amount”) and (ii) the conversion has not been approved by the Company’s stockholders in accordance with the stockholder approval requirements of Nasdaq Marketplace Rule 5635(d) (a “Blocked Conversion”). On April 27, 2017, the shareholders approved a proposal to allow holders of Series X ~~Convertible~~convertible ~~Preferred~~preferred ~~Stock to convert their shares of Series X Convertible Preferred Stock that converted into common~~ stock in excess of the Threshold Amount which was 30,890 shares of common stock or 487 shares of Series X Convertible Preferred Stock. As a result, the Series X Preferred shares are no longer redeemable by the holder and the shares were reclassified from temporary to permanent equity in the statement of stockholders’ equity. As of September 30, 2017, 16,570 shares of Series X Convertible Preferred Stock have been converted into ~~a total of 1,051,823~~ shares of common stock. The conversion is reflected as a reduction in Series X Convertible Preferred Stock. An aggregate of $13.4 million discount has been recognized as a deemed dividend in connection with the conversion of Series X Convertible Preferred stock as of September 30, 2017 and no warrants had been exercised.

~~The~~On ~~Subscription~~October 23, 2017, the Company entered into a Securities Purchase Agreement ~~also~~(the ~~provided~~“Securities Purchase Agreement”) for a private placement (the “Private Placement”) with a select group of investors (the ~~right~~“Purchasers”). The Private Placement was structured with two closings. Pursuant to the Securities Purchase Agreement, ~~but~~at ~~not~~the second closing on January 9, 2018, (the ~~obligation~~“Second toClosing”), ~~make~~the ~~additional~~Purchasers ~~investments~~purchased 7,625,741 shares of the Company’s common stock at $1.25 ~~These~~per ~~rights~~share ~~expired~~and ~~unexercised~~2,067,522 shares of the Company’s non-voting Class Y Convertible Preferred Stock (“Class Y Convertible Preferred Stock”) at $1.25 per share, convertible into 2,067,522 shares of Company common stock upon certain conditions. In the event of the Company’s liquidation, dissolution or winding up, holders of Class Y Preferred Stock will participate pari passu with the holders of the Company’s common stock in any distribution of proceeds, pro rata based on ~~January~~the 26number of shares held by each such holder. The Preferred Shares will generally have no voting rights. As of March 31, ~~2017~~2018, all 2,067,522 shares of Class Y Convertible Preferred Stock have been converted into shares of common stock.

Accounting Treatment

The Company has allocated the proceeds from the Private Placement amongst the Class Y Preferred Stock, common stock, and the warrants to purchase shares of common stock based on the relative fair values, as all the instruments are equity classified.

Beneficial Conversion Feature - Because the conversion price of the shares of Class Y Preferred Stock was less than the fair value of the Company’s common stock at the date of issuance, the in-the-money conversion feature (Beneficial Conversion Feature, or BCF) requires separate financial statement recognition and is measured at the intrinsic value (i.e., the amount of the increase in value that preferred stockholders would realize upon conversion based on the value of the conversion shares on the issuance date in excess of the amount allocated to the Class Y Preferred Stock for accounting purposes). The BCF is recorded as a discount to the Class Y Convertible Preferred Stock and is immediately accreted as a deemed preferred stock dividend and, accordingly, an adjustment to net loss to arrive at net loss applicable to common stockholders. During the quarter ended March 31, 2018, the Company recorded a deemed dividend of $1.5 million.

Common Stock

In March ~~2016~~2018, the Company filed a universal shelf registration statement with the SEC on Form S-3 ~~(File No. 333-210166)~~ for the proposed offering from time to time of up to $100.0 million of its securities, including common stock, preferred stock, ~~debt~~warrants ~~securities~~ and/or ~~warrants~~units. As of March 31, 2018, the balance of $100.0 million is available for future issuance under the registration statement.

OnThe ~~April~~S-3 ~~21,~~registration ~~2016~~statement is subject to Instruction I.B.6. of Form S-3, which imposes a limitation on the maximum amount of securities that the Company ~~registered~~may ~~$25.0~~sell ~~million~~pursuant ~~under~~to the registration statement ~~(File~~during ~~No.~~any ~~333~~twelve-~~210166)~~month ~~for~~period. When the ~~at-the-market~~Company ~~sales~~sells ~~agreement~~securities ~~with~~pursuant ~~H.C.~~to ~~Wainwright~~the (registration statement, the ~~“H.C.~~amount ~~Wainwright~~of ~~ATM~~securities ~~Agreement”). On~~to ~~March~~be ~~14,~~sold ~~2017,~~plus the amount of any securities the Company ~~amended~~has sold during the Hprior twelve months in reliance on Instruction I.CB.6. ~~Wainwright~~may ~~ATM~~not ~~Agreement~~exceed ~~and~~one-third ~~reduced~~of the ~~amount~~aggregate ~~registered~~market ~~under~~value of its outstanding common stock held by non-affiliates as of a day during the ~~registration~~60 ~~statement~~days toimmediately ~~$23~~preceding ~~million~~such sale, as computed in accordance with Instruction I.B.6. InBased ~~June~~on ~~2017~~this calculation, inthe ~~connection~~Company ~~with~~expects it will be significantly limited to sell securities pursuant to its effective registration statement on Form S-3 for a period of twelve months from March 5, 2018, unless and until the ~~execution~~market value of the ~~2017~~Company’s ~~Purchase~~outstanding ~~Agreement,~~common stock held by non-affiliates increases to above $75 million. If the Company ~~filed~~cannot asell ~~prospectus~~securities ~~supplement~~under ~~suspending~~its ~~and~~shelf ~~reducing~~registration ~~all~~statement, ~~offerings~~the ~~pursuant~~Company may be required to utilize more costly and time-consuming means of accessing the ~~H.C.~~capital ~~Wainwright ATM~~markets, ~~agreement~~which could materially adversely affect its liquidity and cash position.

On April 27, 2016, the Company registered $14.4 million under the registration statement (File No. 333-210166) for the equity purchase agreement with LPC (the “2015 Purchase Agreement”). On March 12, 2017, upon the expiration of the 2015 Purchase Agreement, $13.4 million of unused amount became available under the registration statement. On June 19, 2017, the Company entered into a new equity purchase agreement with LPC, the 2017 Purchase Agreement, and registered $10.3 million under the registration statement (File No. 333-210166). Pursuant to the 2017 Purchase Agreement, the Company has the right, but not the obligation, to sell up to an aggregate of $10.0 million in shares of common stock and issue up to 181,708 shares of common stock as a commitment fee to LPC over a period of thirty months. Upon executing the 2017 Purchase Agreement, LPC made an initial purchase of 291,036 shares of common stock for gross proceeds of $0.5 million. As of September 30, 2017, the Company has sold 1,204,411 shares of common stock for an aggregate cash proceeds of $1.8 million pursuant to the 2017 Purchase Agreement and issued 131,909 shares of common stock to LPC as commitment fee, leaving a balance of $8.2 million available for future issuance pursuant to the 2017 Purchase Agreement. The 2017 Purchase Agreement will expire on December 19, 2019.

On September 8, 2016, the Company registered $22.1 million under the registration statement (File No. 333-210166) for a subscription agreement with certain institutional investors for the sale of convertible preferred stock and issuance of warrants in a registered direct offering.

On March 14, 2017, in connection with a registered direct offering of common stock and warrants, the Company registered $46.5 million under the registration statement (File No. 333-210166) (the “March 2017 Offering”). During the three months ended June 30, 2017, the exercise price of certain warrants issued in connection with the March 2017 Offering was reduced and therefore resulted in $17.3 million re-allocated back to the shelf registration statement.

As of September 30, 2017, there was a balance of $14.4 million available for future issuance under the registration statement (File No. 333-210166).

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~~The~~In ~~S-3~~June ~~registration statement is subject to Instruction I.B.6. of Form S-3~~2017, ~~which imposes a limitation on~~ the ~~maximum amount of securities that the~~ Company ~~may~~executed ~~sell~~an ~~pursuant~~equity topurchase ~~the~~agreement ~~registration~~with ~~statement~~Lincoln ~~during~~Park ~~any~~Capital, ~~twelve-month period~~LLP. ~~When~~ (“LPC”) (the ~~Company~~“2017 ~~sells~~Equity ~~securities~~Purchase ~~pursuant~~Agreement”) to ~~the~~sell ~~registration~~to ~~statement,~~LPC ~~the~~up ~~amount of securities~~ to bean ~~sold~~aggregate ~~plus the amount~~ of ~~any~~$10.0 ~~securities~~million ~~the Company has sold during the prior twelve months~~ in ~~reliance~~shares onof ~~Instruction~~common ~~I.B.6.~~stock ~~may~~and ~~not~~issue ~~exceed~~up ~~one-third~~to of181,708 ~~the~~shares ~~aggregate market value~~ of ~~its~~our ~~outstanding~~ common stock ~~held~~valued byat ~~non-affiliates~~$0.3 million as of a ~~day~~commitment ~~during~~fee ~~the 60 days immediately preceding such sale, as computed in accordance with Instruction I.B.6. Based on this calculation, the Company expects it will be significantly limited, and likely unable~~ to ~~sell~~LPC ~~additional~~over ~~securities pursuant to its effective registration statement on Form S-3 for~~ a period of ~~twelve~~thirty months. ~~from~~As of March 1631, ~~2017~~2018, ~~unless~~the ~~and~~Company ~~until~~has ~~the~~sold ~~market~~an ~~value~~aggregate of ~~the~~1,870,411 ~~Company’s~~shares ~~outstanding~~of common stock ~~held~~for bynet ~~non-affiliates~~proceeds ~~increases~~of ~~significantly~~$3. If1 ~~the~~million ~~Company~~and ~~cannot~~issued ~~sell~~an ~~securities~~aggregate ~~under~~of ~~its~~139,848 ~~shelf~~shares ~~registration,~~of ~~the~~common ~~Company~~stock ~~may~~as becommitment ~~required~~fee to ~~utilize~~LPC ~~more costly~~ and ~~time-consuming~~maximized ~~means~~the number of ~~accessing~~shares ~~the~~of ~~capital~~common ~~markets,~~stock ~~which~~it ~~could~~can ~~materially~~sell ~~adversely~~to ~~affect~~LPC ~~its~~pursuant ~~liquidity~~to ~~and~~Nasdaq ~~cash~~Rule ~~position~~5635(d)(2).

AtOn ~~September~~October 3023, 2017, the Company ~~had~~entered ~~reserved~~into a Securities Purchase Agreement (“SPA”) for a private placement of equity securities (the ~~following~~“Private Placement”) with a select group of accredited investors (the “Purchasers”). The Private Placement was structured with two closings. The first closing occurred on October 27, 2017 (“Initial Closing”) and resulted in net proceeds of approximately $2.7 million. The second closing (“Second Closing”) was conditioned upon and subject to the Company receiving the requisite shareholder approval pursuant to Nasdaq Rule 5635(d), which was obtained on January 5, 2018. The Second Closing subsequently occurred on January 9, 2018 and resulted in incremental allocated proceeds of $11.1 million. Pursuant to the SPA, at the Initial Closing, the Purchasers purchased 2,306,737 shares of the Company’s common stock at $1.25 per share. Each share of common stock was issued with a warrant to purchase 3.0 additional shares of the Company’s common stock at an exercise price of $1.55 per share. At the Second Closing, the Purchasers purchased 7,625,741 shares of the Company’s common stock at $1.25 per share and 2,067,522 shares of the Company’s non-voting Class Y Convertible Preferred Stock (the “Class Y Preferred Stock”) at $1.25 per share, convertible into 2,067,522 shares of Company common stock upon certain conditions. Each share of common stock or Class Y Preferred Stock was issued with a warrant that was immediately exercisable to purchase 1.0 additional share of the Company’s common stock at an exercise price of $1.25 per share. The financial instrument represented by the obligation to issue Class Y Preferred Stock and warrants upon shareholder approval is equity classified. The Company accounted for ~~future~~the ~~issuance:~~Initial Closing in October 2017 and the Second Closing in January 2018. For both closings, the Company allocated the net proceeds based on the relative fair value method. As of March 31, 2018, all of the 2,067,522 shares of Class Y Convertible Preferred Stock were converted into 2,067,522 shares of common stock.

Convertible Series X preferred stock			27,296
Common stock options outstanding			1,179,986
Common stock warrants outstanding			7,774,815
Common stock options available for future grant under stock option plan			128,616
Common stock available for future grant under ESPP plan			449
Total			9,111,162

At March 31, 2018, the Company had reserved the following shares for future issuance:

Common stock options outstanding			6,724,345
Common stock warrants outstanding			18,725,764
Common stock options available for future grant under stock option plan			584,257
Common stock available for future grant under ESPP plan			504,069
Total			26,538,435

Warrants

In connection with athe ~~venture~~issuance ~~debt~~of ~~executed~~Series X convertible preferred stock in ~~March~~September ~~2011~~2016, the Company issued awarrants ~~seven-year warrant~~ to ~~the~~certain ~~lender~~institutional ~~for~~investors ~~the~~to purchase ~~of 5,022~~ shares of the Company’s common stock. atOn anNovember 16, 2016, the exercise price and number of shares of common stock underlying the warrants became fixed at $~~384~~18.0090 ~~per~~and ~~share~~269,779, respectively. The ~~warrant~~warrants ~~was~~are ~~immediately~~ exercisable at any time and ~~expires~~from intime to time after March ~~2018~~13, 2017 and will expire on September 13, 2019. As of ~~September~~March 3031, ~~2017~~2018, the warrants remained outstanding ~~and exercisable~~. These warrants are classified in permanent equity on the Company’s consolidated Balance Sheet.

InPursuant ~~connection~~to ~~with~~ the ~~issuance~~underwriting ofagreement ~~Series~~for Xthe ~~convertible~~sale ~~preferred~~of common stock and warrants in ~~September~~March ~~2016~~2017, the Company issued ~~warrants~~30,000,000 toTranche ~~certain~~1 ~~institutional~~Warrants at an initial exercise price of $0.55 per share and 30,000,000 Tranche 2 Warrants at an initial exercise price of $0.50 per share to the investors to purchase shares of the Company’s common stock. On ~~November~~April 1628, ~~2016~~2017, with shareholders’ approval, the ~~exercise~~Company ~~price~~effectuated ~~and~~a ~~number~~one-for-eight ofreverse ~~shares~~split of its outstanding common stock. ~~underlying~~Subsequent to the ~~warrants~~Reverse ~~became~~Stock ~~fixed~~Split, atthe Tranche 1 Warrant shares and exercise prices were adjusted to 3,750,007 and $184.9040, respectively, and ~~269~~the Tranche 2 Warrant shares and exercise price were adjusted to 3,~~779~~750,007 and $4.00, respectively. Effective ~~The~~as ~~warrants~~of ~~are~~May ~~exercisable~~22, at2017, ~~any~~the ~~time~~Tranche 1 and ~~from~~Tranche ~~time~~2 Warrants’ exercise price were further adjusted to ~~time~~$1.8918 ~~after~~pursuant ~~March~~to 13the terms of the warrant agreements. A total of 96,021 ~~2017~~Tranche 2 Warrants were exercised on October 5, 2017 and ~~will~~the ~~expire~~remaining 3,653,986 Tranche 2 Warrants expired on ~~September~~October 1327, ~~2019~~2017. AsDuring the three months ended March 31, 2018, a total of ~~September~~236,318 30Tranche 1 Warrants were exercised at $1.8918 per share, ~~2017~~leaving a balance of 3,507,626 ~~the~~Tranche ~~warrants~~1 ~~remained~~Warrants outstanding and exercisable as of March 31, 2018 with an expiry date of April 28, 2022. These warrants are classified inas ~~permanent~~liabilities ~~equity~~ on the Company’s consolidated Balance Sheet until the warrants are exercised or expired, (see Note 5).

Pursuant to the ~~underwriting~~Private ~~agreement~~Placement for the sale of common stock and warrants in ~~March~~October 2017, the Company issued ~~30,000,000~~ warrants ~~(“Tranche~~to 1certain ~~Warrants”)~~institutional atinvestors anto ~~initial~~purchase ~~exercise~~shares ~~price~~ of ~~$0.55~~the ~~per~~Company’s ~~share~~common ~~and~~stock. The ~~30,000,000~~Private ~~(“Tranche~~Placement 2was ~~Warrants”)~~structured atwith antwo ~~initial exercise price of $0~~closings.50 The ~~per~~Initial ~~share~~Closing tooccurred ~~the~~in ~~investors~~October to2017, ~~purchase~~which ~~shares~~resulted ofin the Company’s ~~common~~issuing ~~stock. The~~6,920,211 ~~Company~~warrants ~~did~~(“Initial ~~not~~Closing ~~have~~Warrants”) ~~sufficient~~to ~~authorized~~the ~~but~~investors ~~unissued~~at ~~common~~an ~~stock~~exercise toprice ~~issue~~of ~~the~~$1.55 ~~warrants~~per atshare ~~the~~and ~~time~~a ~~the~~term ~~underwriting~~of ~~agreement~~five ~~was~~years ~~executed~~and six months. OnAs ~~April~~of ~~28,~~March ~~2017~~31, ~~with shareholders’ approval~~2018, the ~~Company~~Initial ~~effectuated~~Closing aWarrants ~~one-for-eight~~remained ~~reverse~~outstanding. The ~~split~~Second ofClosing ~~its~~occurred ~~outstanding~~in ~~common~~January ~~stock. Subsequent~~2018 toand resulted in the ~~Reverse~~Company ~~Stock~~issuing ~~Split~~9,693,263 ~~the~~warrants ~~Tranche~~(“Second 1Closing ~~Warrant~~Warrants”) ~~shares~~to ~~and~~the ~~exercise~~investors ~~prices~~at ~~were~~an ~~adjusted~~exercise toprice ~~3,750,007~~of ~~and~~ $41.~~40,~~25 ~~respectively,~~per share and ~~the~~a ~~Tranche~~term 2of ~~Warrants~~five ~~shares~~years. ~~and~~During ~~exercise~~the ~~price~~three-month ~~were~~period ~~adjusted~~ended toMarch 331,~~750,007~~ ~~and $4.00~~2018, ~~respectively. Effective~~a astotal of ~~May 22~~1, ~~2017~~665,115 ~~the~~Second ~~Tranche~~Closing 1Warrants ~~and~~were ~~Tranche~~exercised 2at ~~Warrants’~~an exercise price ~~were~~of ~~further adjusted to~~ $1.~~8918~~25, ~~pursuant~~leaving toa ~~Section~~balance ~~2(c)~~ of ~~the warrant agreements~~8,028,148 ~~which~~outstanding. Warrants ~~was~~from ~~the~~both ~~average~~closings ~~VWAP~~are ofclassified ~~the~~in ~~five~~equity ~~(5)~~pursuant ~~lowest~~to ~~trading days during~~ the ~~fifteen~~accounting ~~(15)~~guidance ~~consecutive~~prescribed ~~trading~~under ~~days~~ASC ~~following~~Topic ~~the~~815, ~~April~~ASC ~~28,~~Topic ~~2018~~480 ~~reverse~~Distinguishing ~~stock~~Liabilities ~~split. The~~from ~~Tranche~~Equity 1and ~~Warrants~~ASC ~~will~~825 ~~expire~~Financial onInstruments ~~April~~– ~~28,~~Registration ~~2022~~Payment Arrangements. The ~~Tranche~~Company 2measured ~~Warrants~~the ~~expired~~fair onvalue ~~October~~of ~~28,~~the ~~2017. These~~ warrants ~~are~~from ~~classified~~the asInitial ~~liabilities~~and onSecond Closing using the ~~Company’s~~Black-Scholes ~~consolidated~~option ~~Balance~~pricing ~~Sheet~~model ~~until~~on ~~the~~issuance ~~warrants~~date ~~are~~based ~~exercised~~on orthe ~~expired.~~following assumptions:

~~9. SHARE-BASED COMPENSATION PLANS~~13

~~2013~~Table ~~Plan~~of Contents

On March 25, 2013, the Company’s board of directors adopted the 2013 Stock Option and Incentive Plan (the “2013 Plan”), which was also approved by the Company’s stockholders at its annual general meeting on May 16, 2013. The Company initially reserved 218,750 shares of its common stock for the issuance of awards under the 2013 Plan, plus all shares remaining available for grant under the Company’s 2010 Stock Option and Incentive Plan (the “2010 Plan”), plus any additional shares returned under the 2010 Plan or 2013 Plan as a result of the cancellation, forfeiture or other termination (other than by exercise) of awards issued pursuant to the 2010 Plan or 2013 Plan, subject in all cases to adjustment including reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other similar change in the Company’s capital stock. In May 2015, the Company’s shareholders approved an additional 223,852 shares of its common stock for issuance of awards under the 2013 Plan. Of the shares of common stock reserved for issuance under the 2013 Plan, no more than 93,750 shares will be issued to any individual participant as incentive options, non-qualified options or stock appreciation rights during any calendar year. The 2013 Plan permits the granting of incentive and non-statutory stock options, restricted and unrestricted stock awards, restricted stock units, stock appreciation rights, performance share awards, cash-based awards and dividend equivalent rights to eligible employees, directors and consultants. The option exercise price of an option granted under the 2013 Plan may not be less than 100% of the fair market value of a share of the Company’s common stock on the date the stock option is granted. Options granted under the 2013 Plan have a maximum term of 10 years and generally vest over four years. In addition, in the case of certain large stockholders, the minimum exercise price of incentive options must equal 110% of fair market value on the date of grant and the maximum term is limited to five years. Subject to overall Plan limitations, the maximum aggregate number of shares of common stock that may be issued in the form of incentive options shall not exceed 781,250 shares of common stock. The 2013 Plan does not allow the option holders to exercise their options prior to vesting.

	Initial Closing			Second Closing
Common stock price	$	1.72		$	1.50
Exercise price	$	1.55		$	1.25
Expected volatility		110	%		113	%
Dividend yield		0	%		0	%
Risk-free interest rate		1.98	%		2.18	%
Expected term (years)		5.5			5.0

For the fair value determination, the Company computed the historical volatility based on daily pricing observations for a period that corresponds to the expected terms of the warrants, which were based on the contractual terms of the warrants. The risk-free interest rates were the U.S. Treasury bond rate as of the valuation month and year.

8. SHARE-BASED COMPENSATION PLANS

2018 Plan

In December 2017, the Company’s Board of Directors adopted the 2018 Stock Option and Incentive Plan (the “2018 Plan”), which was also approved by the Company’s stockholders at a special meeting of the shareholders on January 5, 2018. The Company initially reserved 6,000,000 shares of its common stock for the issuance of awards under the 2018 Plan, plus all shares remaining available for grant under the Company’s 2013 Stock Option and Incentive Plan (the “2013 Plan”), plus any additional shares returned under the 2010 Plan and 2013 Plan as a result of the cancellation, forfeiture or other termination (other than by exercise) of awards issued pursuant to the 2010 Plan and 2013 Plan, subject in all cases to adjustment including reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other similar change in the Company’s capital stock. Of the shares of common stock reserved for issuance under the 2018 Plan, no more than 2,000,000 shares can be issued to any individual participant as incentive options, non-qualified options or stock appreciation rights during any calendar year. The 2018 Plan permits the granting of incentive and non-statutory stock options, restricted and unrestricted stock awards, restricted stock units, stock appreciation rights, performance share awards, cash-based awards and dividend equivalent rights to eligible employees, directors and consultants. The option exercise price of an option granted under the 2018 Plan may not be less than 100% of the fair market value of a share of the Company’s common stock on the date the stock option is granted. Options granted under the 2018 Plan have a maximum term of 10 years and generally vest over four years. In addition, in the case of certain large stockholders, the minimum exercise price of incentive options must equal 110% of fair market value on the date of grant and the maximum term is limited to five years. Subject to overall Plan limitations, the maximum aggregate number of shares of common stock that may be issued in the form of incentive options shall not exceed 6,000,000 shares of common stock. The 2018 Plan does not allow the option holders to exercise their options prior to vesting.

The terms of awards granted during the three months ended March 31, 2018 and the method for determining the grant date fair value of the awards were consistent with those described in the financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.

The following table summarizes stock option activity for the three months ended March 31, 2018 (in thousands except share and per share information):

	Number of Options			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life in Years		Aggregate Intrinsic Value
Balance at December 31, 2017		1,066,121		$	10.04		8.68	$	18
Granted		6,190,674		$	1.65
Exercised		—			—
Cancelled and expired		(4,257	)	$	30.43
Forfeited		(528,283	)	$	1.65
Balance at March 31, 2018		6,724,345		$	2.96		9.50	$	—
Exercisable at March 31, 2018		2,576,796		$	4.01		9.23	$	—

The intrinsic value of stock options represents the difference between the exercise price of stock options and the market price of our stock on that day for all in-the-money options. As of March 31, 2018, there was $7.42 million of total unrecognized compensation expense related to stock options and is expected to be amortized on a straight-line basis over a weighted-average remaining period of 2.28 years.

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The terms of awards granted during the three and nine months ended September 30, 2017 and the method for determining the grant date fair value of the awards were consistent with those described in the financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

The following table summarizes stock option activity for the nine months ended September 30, 2017 (in thousands except share and per share information):

	Number of Options			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life in Years		Aggregate Intrinsic Value
Balance at December 31, 2016		749,517		$	29.82		8.19	$	—
Granted		697,265		$	1.69
Exercised		—			—
Cancelled and expired		(34,315	)	$	31.23
Forfeited		(232,481	)	$	34.05
Balance at September 30, 2017		1,179,986		$	12.33		8.65	$	—
Exercisable at September 30, 2017		382,449		$	22.51		7.17	$	—

The intrinsic value of stock options represents the difference between the exercise price of stock options and the market price of our stock on that day for all in-the-money options. As of September 30, 2017, there was $4.43 million of total unrecognized compensation expense related to stock options and is expected to be amortized on a straight-line basis over a weighted-average remaining period of 2.21 years.

The assumptions used in the Black-Scholes option-pricing model to value stock options are as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	Three Months Ended March 31,
	2017			2016			2017			2016
	2018			2017
Expected Volatility		~~109~~106	%		97106	%		~~134~~	%		98	%
Dividend Yield		0	%		0	%		0	%		0	%
Risk-Free Interest Rate		2.0224	%		12.2312	%		~~1.89~~	%		~~1.45~~	%
Expected Term (years)		65.8782			6.02			~~6.07~~			~~5.93~~
Weighted-average fair value per option	$	1.3135		$	194.5820		$	~~1.52~~		$	~~21.62~~

2010 Employee Stock Purchase Plan (“ESPP”)

Effective July 2010, under the terms of the ESPP, eligible employees of the Company may authorize the Company to deduct amounts from their compensation, which amounts are used to enable the employees to purchase shares of the Company’s common stock. ~~The~~On ~~Company initially reserved 1,562 shares of common stock for issuance thereunder on January 1, 2011, and on~~ each January 1 ~~thereafter~~, the number of shares of stock reserved and available for issuance under the Plan ~~shall~~is ~~be cumulatively~~ increased by the lesser of (i) one percent (1%) of the number of shares of common stock issued and outstanding on the immediately preceding December 31 or (ii) 3,906 shares of common stock. On January 1, 2017, in accordance with the ESPP’s annual increase provisions, the authorized shares in the ESPP increased by 3,906. On April 27, 2017, the Company’s shareholders approved a one-time increase to the ESPP pool by 27,344 shares and increase the number of shares available for issuance under the Plan by the lesser of (i) one percent (1%) of the number of shares of common stock issued and outstanding on the immediately preceding December 31 ~~or (ii) 31~~,250 shares of common stock~~, starting in January 1, 2018~~.

Under the ESPP, eligible employees of the Company may authorize the Company to deduct amounts from their compensation, which amounts are used to enable the employees to purchase shares of the Company’s common stock. The purchase price per share is 85% of the fair market value of the common stock as of the first date or the ending date of the applicable semi-annual purchase period, whichever is less (the “Look-Back Provision”). The 15% discount and the Look-Back Provision make the ESPP compensatory. The Black-Scholes option pricing model was used to value the employee stock purchase rights. There were no participants in the ESPP as at March 31, 2018.

The assumptions used in the Black-Scholes option-pricing model to value the employee stock purchase rights are as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Expected Volatility		107	%		99	%		157	%		94	%
Dividend Yield		0	%		0	%		0	%		0	%
Risk-Free Interest Rate		0.88	%		0.40	%		0.58	%		0.33	%
Expected Term (years)		0.50			0.50			0.50			0.50

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Stock-Based Compensation Expense

Total stock-based compensation expense, including expense recorded for the ESPP, was as follows (in thousands):

		Three Months Ended September 30,					Nine Months Ended September 30,
	Three Months Ended March 31,
		2017			2016		2017		2016
	2018			2017
Research and development		$	~~261~~1,168		$	~~454~~396	$	~~1,155~~	$	~~1,330~~
General and administrative			~~707~~2,098			~~932~~690		~~1,768~~		~~2,613~~
Total		$	~~968~~3,266		$	1,~~386~~086	$	~~2,923~~	$	~~3,943~~

10. SUBSEQUENT ~~EVENT~~EVENTS

On ~~October~~April 2312, ~~2017~~2018, the ~~Company~~Board ~~entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) for a private placement (the “Private Placement”) with a select group~~ of ~~accredited~~Directors investors (the “Purchasers”). The Private Placement is structured with two closings. Pursuant to the Securities Purchase Agreement, at the initial closing on October 27, 2017 (the “Initial Closing”), Purchasers purchased 2,306,737 shares of the Company’s ~~common~~approved stock, par value $0.001, at $1.25 per share for gross proceeds of approximately $2.9 million. Each share of common stock was issued with a warrant to purchase 3.0 additional shares of the Company’s common stock at an exercise price of $1.55 per share. The warrants will become exercisable on the six month and ~~one~~commenced ~~day anniversary of the Initial Closing and will have~~ a ~~term~~management ~~of five years~~ and ~~six~~administrative ~~months. At~~personnel ~~the~~reorganization ~~second~~plan ~~closing~~furthering ~~(the~~its ~~“Second~~on-going ~~Closing”),~~efforts ~~Purchasers are expected~~ to ~~purchase~~effectively ~~7,625,741~~align ~~shares of the~~ Company’s ~~common stock, par value $0~~resources.~~001,~~ In atconnection ~~$1.25~~with ~~per~~this ~~share and 2~~plan,~~067,522~~ ~~shares of~~ the Company’s eliminated all non-~~voting~~essential ~~Class~~salaried Ypositions ~~Convertible~~by ~~Preferred~~April ~~Stock~~30, ~~par value $0~~2018.~~001~~ The ~~(the “Class Y Preferred Stock”), at $1.25 per share, convertible into 2,067,522 shares of~~ Company ~~common~~expects ~~stock upon certain conditions. Each share of common stock or Class Y Preferred Stock will be issued with a warrant that is immediately exercisable~~ to ~~purchase~~record ~~1.0~~exit ~~additional~~charges, ~~share~~in of the ~~Company’s~~form ~~common~~of ~~stock~~termination atbenefits ~~an exercise price~~ of approximately $1.252 ~~per~~million ~~share. The warrants issued~~ in ~~the~~connection ~~Second Closing will have a term of five years from their date of issuance~~therewith. ~~Gross proceeds from the Second Closing are expected to be approximately $12.1 million.~~

The Company ~~expects~~has ~~that~~decided ~~the aggregate number of voting securities~~ to bediscontinue ~~sold~~further atdevelopment ~~the~~of ~~Initial~~Sollpura ~~Closing~~ and ~~Second~~blisibimod ~~Closing~~and ofdevote ~~the~~its ~~private~~time ~~placement~~and ~~shall~~resources ~~constitute the sale, issuance or potential issuance by the Company of common stock (or securities convertible into or exercisable into common stock) equal~~ to ~~20%~~identifying orand ~~more~~evaluating ofstrategic ~~the voting power outstanding before the Private Placement in contravention of Nasdaq Rule 5635(d)(2)~~alternatives. The ~~Therefore,~~process ~~after~~is ~~the~~aimed ~~Initial~~at ~~Closing,~~identifying ~~the~~opportunities ~~Company intends~~ to ~~solicit~~diversify ~~approval from holders of~~ the ~~currently outstanding shares of the~~ Company’s ~~immediately~~pipeline, ~~prior~~including tothrough ~~the~~potential ~~issuance~~strategic ofcombinations. If ~~the~~a ~~securities~~strategic intransaction ~~connection with the Second Closing and such Second Closing~~ is ~~contingent~~not ~~upon~~consummated, ~~receiving~~the ~~such~~Company ~~stockholder~~may ~~approval.~~be ~~The~~required ~~Company plans~~ to ~~obtain~~dissolve ~~such~~or ~~stockholder approval in the first quarter of 2018~~liquidate.

1615

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which are subject to the “safe harbor” created by those sections. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. All statements other than statements of historical factors are “forward-looking statements” for purposes of these provisions. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “project,” “predict,” “potential” and similar expressions intended to identify forward-looking statements. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the section titled “Risk Factors” in this report. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.

Overview

Anthera Pharmaceuticals, Inc. is a biopharmaceutical company that has historically focused on advancing the development and commercialization of innovative medicines that benefit patients with unmet medical needs. We currently ~~have~~license two compounds ~~in development~~, Sollpura and blisibimod. We licensed Sollpura from Eli Lilly & Co (“Eli Lilly”) in July 2014. Sollpura is a novel, non-porcine investigational Pancreatic Enzyme Replacement Therapy (“PERT”) intended for the treatment of patients with Exocrine Pancreatic Insufficiency (“EPI”), often seen in patients with cystic fibrosis and other conditions. We licensed blisibimod from Amgen, Inc. (“Amgen”) in December 2007. Blisibimod targets B-cell activating factor, or BAFF, which has been shown to be elevated in a variety of B-cell mediated autoimmune diseases, including Immunoglobulin A nephropathy and others.

We were incorporated in September 2004. We have devoted substantially all our resources to research and development of our product candidates. We have not generated any revenue from the commercial sales of our product candidates, and since inception we have funded our operations through equity offerings, private placements of convertible debt, debt financing, equity investment and cost reimbursement from a former collaborative partner, ~~Zenyaku Kogyo Co., Ltd (“Zenyaku”),~~ and a research award from Cystic Fibrosis Foundation Therapeutics Incorporated ("CFFT"). We will need substantial additional financing to continue to develop our product candidates, obtain regulatory approvals and to fund operating expenses, which we will seek to raise through public or private equity or debt financings, collaborative or other arrangements with third parties or through other sources of financing. We cannot assure you that such funds will be available on terms favorable to us, if at all. In addition to the normal risks associated with drug development companies, we may never successfully complete development of our product candidates, obtain adequate patent protection for our technology, obtain necessary government regulatory approval for our product candidates or achieve commercial viability for any approved product candidates. In addition, we may not be profitable even if we succeed in commercializing our product candidates.

InOn March ~~2015~~12, we2018, ~~received~~the aCompany ~~research~~announced ~~award~~that ofthe upRESULT toPhase $3 ~~million~~clinical ~~from~~trial ~~CFFT for our development~~ of Sollpura~~. We~~ ~~retain~~for the ~~right~~treatment ~~to develop and commercialize Sollpura and will owe royalties to CFFT on net sales~~ of ~~any~~patients ~~drug~~with ~~candidate~~EPI ~~approved~~did ~~and~~not ~~commercialized~~meet ~~under~~its ~~the~~primary ~~collaboration.~~endpoint ~~The funding is to be disbursed by CFFT to us upon our achievement~~ of ~~milestones~~non-inferiority ~~specified in the agreement. At our discretion, we may choose~~ to ~~fund~~porcine ~~a particular stage of the Sollpura development plan without CFFT funds~~PERT. ~~Any~~All ~~CFFT~~ongoing ~~funds~~clinical ~~not~~trials ~~expended on the development program~~ of Sollpura ~~must~~were beconcluded ~~returned to CFFT and, upon such return, the amounts of such returned funds will not be included as part of the research award for the purpose of calculating royalties or other amounts owed~~ by ~~us to CFFT. To~~ the ~~extent~~end CFFT provides or makes available any information, expertise, know-how or other intellectual property related to cystic fibrosis or the treatment, prevention or cure thereof (“CFFT Know-How”) to us, CFFT grants to us a non-exclusive, transferrable, sub licensable, worldwide rights and license under all of ~~CFFT’s~~April ~~rights in such CFFT Know-How to assist us to research, develop, commercialize, make or have made, use, sell, have sold, offer for sale, import, export and otherwise exploit the product~~2018.

~~Our~~Financial ~~Phase 3 Development of Sollpura in EPI~~Overview

We ~~initiated~~have ~~the~~never ~~Phase~~generated 3net ~~SOLUTION~~income ~~study~~from inoperations, ~~the~~and, ~~third~~at ~~quarter~~March ~~of 2015. SOLUTION was a randomized~~31, ~~open-label~~2018, ~~assessor-blind,~~we ~~non-inferiority,~~had ~~active-comparator~~an ~~study~~accumulated ~~evaluating~~deficit ~~the efficacy and safety~~ of ~~Sollpura in patients with cystic fibrosis-related exocrine pancreatic insufficiency~~$442.2 ~~This pivotal study enrolled 128 patients in North America~~million, ~~Europe~~primarily ~~and~~as ~~Israel~~a ~~was~~result ~~intended to evaluate the non-inferiority~~ of ~~Sollpura~~research ~~compared~~and ~~with~~development ~~another~~and ~~commercially~~general ~~available~~and ~~PERT~~administrative ~~in a population of porcine-derived PERT responders~~expenses. Due ~~Topline~~to ~~data announced in December 2016 showed that~~ the ~~study~~RESULT ~~narrowly~~clinical ~~missed~~trial ~~the~~not ~~CFA~~meeting ~~non-inferiority~~its ~~margin of the~~ primary ~~modified Intent to Treat (mITT) analysis by one percent; however~~endpoint, byin ~~additional~~April ~~pre-specified analyses of CFA (mITT-Baseline Observation Carried Forward and Per Protocol)~~2018, ~~Sollpura~~we ~~met~~began ~~the~~a ~~non-inferiority~~formal ~~criterion. The~~process ~~study also confirmed that the ratio~~ of ~~the~~evaluating ~~three~~strategic ~~enzymes~~alternatives inand ~~Sollpura~~implemented ~~demonstrated an appropriate response in the coefficient of nitrogen absorption (CNA). CNA is~~ a ~~measure~~number of ~~protein~~cost ~~digestion~~reduction ~~and~~measures, ~~absorption~~including ~~and is~~ a ~~key~~90% ~~requirement~~reduction ofin our ~~planned~~workforce ~~US Food~~ and ~~Drug~~termination ~~Administration~~of ~~(“FDA”)~~major ~~regulatory~~vendor ~~submission. In March 2017~~contracts, ~~we announced data from the extension phase of the study,~~ which ~~showed~~substantially ~~that~~reduced ~~Sollpura~~our ~~demonstrated~~capital ~~comparable~~needs ~~maintenance~~ in ~~key measurements of height, weight, and body mass index in addition to being well tolerated throughout~~ the ~~12-week~~foreseeable ~~extension period~~future.

17As of March 31, 2018, we had cash and cash equivalents of approximately $8.1 million. Our current cash balance is not expected to fund our operations through the next twelve months. As such, in April 2018, we began to wind down our activities. We also decided to discontinue further development of Sollpura and blisibimod and devote our time and resources to identifying and evaluating strategic alternatives. The process is aimed at identifying opportunities to diversify our pipeline, including through potential strategic combinations. If a strategic transaction is not consummated, we may be required to dissolve or liquidate. We cannot be certain if any future financing will be available on terms favorable to us, if at all. If adequate funds are not available, we will terminate all strategic transaction efforts and eliminate all remaining personnel.

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Due to the narrow miss of the SOLUTION study and informed by its data, we initiated a new Phase 3 study (RESULT) in the second quarter of 2017. Similar to the SOLUTION study, the RESULT study is a randomized, open-label, non-inferiority, active-comparator study. Approximately 150 cystic fibrosis patients who are porcine PERT responders will be enrolled in the US, Europe and Israel. Based on data from the analysis from the SOLUTION study, we believe that efficacy in the SOLUTION trial was limited by a restrictive dose optimization paradigm in a population whose dose of lipase at baseline had been optimized for porcine PERTs (but not for Sollpura) and that modification of the dosing paradigm may allow for success in the RESULT study. The RESULT study’s design is modified from the SOLUTION study design to account for the design limitations in the SOLUTION study by 1) starting Sollpura dosing as 125% of the pre-study PERT dose, 2) allowing for a more “real life” dose adjustment, as needed, based on signs and symptoms throughout the primary treatment phase of the study, and 3) randomizing the use of acid suppression on a 1-to-1 basis, as is seen in cystic fibrosis patients. The study design was discussed with the FDA in the first quarter of 2017. As of September 30, 2017, the RESULT study has screened more than 50% patients. In July 2017, the Company was informed that the RESULT study had been approved by the Cystic Fibrosis Foundation Therapeutics Development Network (CFF-TDN) Protocol Review Committee. In August 2017, the European Cystic Fibrosis Society Clinical Trial Network (ECFS CTN) Executive Committee approved the RESULT study. We believe the approval of the RESULT study by the CFF-TDN and ECFS CTN may expedite patient recruitment in the U.S and EU. The safety of subjects enrolled in this study will be monitored by independent experts appointed by the CFF-TDN. Top line data from the RESULT study, which will be evaluated after assessment of coefficient of fat absorption after 4 weeks of dosing, is expected in Q1 2018.

A second, smaller Phase 3 study, SIMPLICITY, was initiated in the second quarter of 2016. The SIMPLICITY study utilizes sachets containing Sollpura powder for oral solution. The study was designed in two parts (Part A and Part B). Part A which evaluated the safety and general usability of Sollpura powder for oral solution in 15 patients ≥7 years of age, was completed in the fourth quarter of 2016. On December 9, 2016, an independent Data Monitoring Committee evaluated the data from Part A and approved progression to Part B, which will enroll pediatric subjects below 7 years of age. Before we proceed with Part B, we plan to amend the SIMPLICITY study to follow a similar dosing approach as the RESULT study and initiate enrollment in Part B after we report topline from the RESULT study.

During the third quarter of 2016, we initiated the EASY study, which provides continued access to Sollpura for patients in the Sollpura arm who completed the SOLUTION study. We plan to modify this study to allow certain patients completing the RESULT study to have continued access until the Biological License Application (“BLA”) for Sollpura is approved by the FDA.

We believe our Sollpura studies may offer potential opportunities for differentiation versus the currently marketed porcine-derived PERTs, including:

· Use of biotechnology-derived high-purity enzymes that are produced by fermentation processes rather than from mammalian organs, the latter of which requires a label warning for potential viral transmission;

· ability to manufacture at a fixed ratio of lipase, protease and amylase that is similar to the enzyme secretions from the human pancreas;

· use of a novel, chemically-modified lipase drug substance that provides resistance to degradation at gastric pH, thereby obviating the need for enteric coating;

· lack of enteric coating allows for potentially fewer and smaller, easy to swallow capsules and adequate storage stability compared with porcine PERTs of an equivalent unit dose strength; and

· a sachet formulation containing Sollpura power for oral solution which can be easily dissolved into water, and finally provides patients, especially young pediatric patients, with an easy-to-swallow dosing option.

Our Phase 2 Development of Blisibimod for in IgA Nephropathy

In June 2013, we initiated a Phase 2 clinical study, (“BRIGHT-SC”) of patients with IgA nephropathy in Asia and Eastern Europe. The BRIGHT-SC study is a Phase 2 multicenter, randomized, double-blind, placebo-controlled study to evaluate the efficacy, safety, tolerability and immunogenicity of blisibimod in IgA nephropathy. Enrollment criteria are biopsy-proven IgA nephropathy and proteinuria greater than one gram but less than six grams per 24 hours (1g-6g/24hr). Patients must be receiving standard of care medication including angiotensin converting enzyme inhibitors and angiotensin receptor blockers. Patients enrolled in the BRIGHT-SC study receive 300mg weekly blisibimod or placebo subcutaneously during the first 8 weeks of therapy, the induction phase, followed by a minimum of 24 weeks of 200mg weekly blisibimod or placebo, the maintenance phase. Patients were treated for up to 2 years, and all patients had the opportunity to complete at least 60 weeks of treatment. The BRIGHT-SC study enrolled 58 patients.

In March 2015, an interim futility analysis of the BRIGHT-SC study was conducted by an independent unblinded statistician, who evaluated several important biomarkers of renal disease in patients who had completed at least 8 weeks of treatment and recommended the study to continue to completion as planned.

In June 2016, an interim analysis of the BRIGHT-SC study was conducted after all ongoing patients had completed at least 24 weeks of treatment, and the results showed a tendency toward lower proteinuria in blisibimod versus placebo treated patients. While the numerical reduction in proteinuria in blisibimod versus placebo treated patients at week 24 did not meet the predefined statistical primary endpoint of complete or partial response, longer-term data from the study demonstrated an increasingly large separation in proteinuria favoring the blisibimod treated arm compared to the placebo. Additionally, secondary biomarker data from the study, including changes in total B cell counts and changes in immunoglobulins IgA, IgG, and IgM, were highly consistent with previous studies with blisibimod in patients with other diseases and demonstrated marked reduction after 8 weeks on study.

In December 2016, an additional interim analysis of the BRIGHT-SC study was reported after all ongoing patients had completed at least 48 weeks. In this extension analysis there was again a trend toward slowing the progression of proteinuria with blisibimod.

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In August 2017, we received orphan drug designation from the U.S. FDA for blisibimod for the treatment of IgA nephropathy. Additionally, in August 2017, we announced top line data from the completed extension of the BRIGHT-SC study in which all patients had the opportunity to complete at least 60 weeks of treatment and some patients were treated for up to 2 years. Throughout the treatment period and for up to one year of additional follow up off treatment, blisibimod appeared to halt disease progression as measured by the mean estimate of 24-hour urinary protein excretion levels. Specifically, in patients treated with blisibimod, the mean change in proteinuria was stable to trending slightly downward, whereas the mean levels increased for patients in the placebo arm. Additionally, blisibimod showed a trend toward preservation of renal function based upon individual rates of change in estimated glomerular filtration rate (eGFR), with an annualized improvement of +6.2mL/min/1.73 m2 per year compared to a worsening of -4.8 mL/min/1.73 m2 with placebo. As seen with previous interim analyses of the BRIGHT data, serum immunoglobulins IgA, IgG, and IgM, demonstrated marked reduction throughout the treatment period.

Revenue

We have not generated any revenue from the commercial sales of our product candidates since our inception and do not expect to generate any revenue from the commercial sales of our product candidates in the near term. However, because of the collaborative arrangement that we entered into with Zenyaku in December 2014 for the development of blisibimod, we began recognizing license fee revenue and collaborative revenue in 2015. The license fee from the collaborative arrangement with Zenyaku was initially amortized as revenue over the performance obligation period (product development period) while reimbursement for our FTEs was recorded as collaborative revenues as incurred. In September 2015, we received a termination notice from Zenyaku to terminate the collaborative arrangement, effective January 7, 2016. Consequently, we revised the amortization period of our deferred revenue to correspond with the shortened collaboration period and have fully amortized our deferred revenue as of January 7, 2016.

Research and Development Expenses

Since our inception, we have focused our activities on our product candidates’ development programs. We expense research and development costs as they are incurred. Research and development expenses consist of personnel costs, including salaries, benefits and stock-based compensation, clinical studies performed by contract research organizations, or CROs, ~~materials~~manufacturing and ~~supplies,~~distribution ~~licenses~~of ~~and~~clinical ~~fees~~drugs, and overhead allocations consisting of various administrative and facilities-related costs. Research and development ~~activities~~expenses are ~~also~~ separated into ~~three~~two main categories: ~~licensing,~~ clinical development and pharmaceutical development. ~~Licensing costs consist primarily of fees paid pursuant to license agreements.~~ Historically, our clinical development costs have included costs for preclinical and clinical studies. ~~We expect to incur substantial clinical development costs for the continued development of blisibimod.~~ Pharmaceutical development costs consist of expenses incurred relating to clinical studies and product formulation and manufacturing.

WeThe ~~are~~product ~~developing~~candidates ~~our~~have ~~product~~been ~~candidates~~developed in parallel, and we typically use our employee and infrastructure resources across several projects. Thus, some of our research and development costs are not attributable to an individually named project. These unallocated costs include salaries, stock-based compensation charges and related “fringe benefit” costs for our employees (such as workers’ compensation and health insurance premiums), consulting fees and travel.

~~The following table shows our total research and development expenses for the three and nine months ended September 30, 2017 and 2016 (in thousands):~~16

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Allocated costs:
Liprotamase	$	4,365	$	8,386	$	13,321	$	19,517
Blisibimod		387		3,748		2,703		10,817	(1)
Unallocated costs		1,352		1,962		4,915		5,352
Total research and development expenses	$	6,104	$	14,096	$	20,939	$	35,686

(1) Offset by $0.4 million in reimbursable expense for IgA nephropathy from a collaborative partner.

We expect that a large percentage of our research and development expenses in the future will be incurred in support of our current and future clinical development programs. These expenditures are subject to numerous uncertainties in timing and cost to completion. As we obtain results from clinical studies, we may elect to discontinue or delay clinical studies for certain clinical development programs to focus our resources on more promising clinical development programs. Completion of clinical studies may take several years or more, but the length of time generally varies according to the type, complexity, novelty and intended use of product candidates. The cost of clinical development may vary significantly over the life of a program because of differences arising during clinical development, including:

· the number of sites included in the studies;

· the length of time required to enroll suitable patient subjects;

· the number of patients that participate in the studies;

· the number of doses that patients receive;

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·The following table shows our total research and development expenses for the ~~drop-out~~three ormonths ~~discontinuation~~ended ~~rates~~March of31, ~~patients;~~2018 and 2017 (in thousands):

· the duration of patient follow-up, and

	Three Months Ended March 31,
	2018			2017
Allocated costs:
Sollpura		$	5,212		$	4,701
Blisibimod			129			1,250
Unallocated costs			2,127			1,850
Total research and development expense		$	7,468		$	7,801

· the uncertainty associated with manufacturing of drug products.

Our expenses related to clinical studies are based on estimates of the services received and efforts expended pursuant to contracts with many research institutions, clinical research organizations and other service providers that conduct and manage clinical studies on our behalf. The financial terms of these agreements are subject to negotiation and vary from contract to contract and may result in uneven payment flows. Generally, these agreements set forth the scope of work to be performed at a fixed fee or unit price. Payments under the contracts are mainly driven by time and materials incurred by these service providers. Expenses related to clinical studies generally are accrued based on time and materials incurred by the service providers and in accordance with the contracts. If timelines or contracts are modified based upon changes to the clinical study design or scope of work to be performed, we modify our estimates of accrued expenses accordingly on a prospective basis.

None of our product candidates has received FDA or foreign regulatory marketing approval. To grant marketing approval, the FDA or foreign regulatory agencies must conclude that clinical data establishes the safety and efficacy of our product candidates and that the manufacturing facilities, processes and controls are adequate. Despite our efforts, our product candidates may not offer therapeutic or other improvement over existing, comparable drugs, be proven safe and effective in clinical studies, or meet applicable regulatory standards.

Because of the uncertainties discussed above, we are unable to determine the duration and completion costs of our development projects or when and to what extent we will receive cash inflows from the commercialization and sale of an approved product candidate, if ever.

General and Administrative Expenses

General and administrative expenses consist primarily of compensation for employees in general and administrative functions, including executive, finance and business development. Other significant costs include professional fees for legal services, including legal services associated with obtaining and maintaining patents, and costs associated with operating as a public company. We will continue to incur significant general and administrative expenses as a public company, including costs for insurance, costs related to the hiring of additional personnel, payment to outside consultants, lawyers and accountants and complying with the corporate governance, internal controls and similar requirements applicable to public companies.

Critical Accounting Policies and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S. Generally Accepted Accounting Principles, or GAAP. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses. On an ongoing basis, we evaluate these estimates and judgments, including those described below. We base our estimates on our historical experience and on various other assumptions that we believe to be reasonable under the circumstances. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results and experiences may differ materially from these estimates.

While our significant accounting policies are more fully described in the accompanying notes to the consolidated financial statements included in ~~this~~our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2017, we believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating our reported financial results and affect the more significant judgments and estimates that we use in the preparation of our consolidated financial statements.

Stock-Based Compensation

We account for stock options and stock purchase rights related to our equity incentive plans under the provisions of ASC 718 which requires the recognition of the fair value of stock-based compensation. The fair value of stock options is estimated using a Black-Scholes option valuation model. This model requires the input of subjective assumptions including expected stock price volatility, expected life and estimated forfeitures of each award. The fair value of equity-based awards is amortized ratably over the requisite service period of the award. Due to the limited amount of historical data available to us, particularly with respect to stock-price volatility, employee exercise patterns and forfeitures, actual results could differ from our assumptions.

We account for equity instruments issued to non-employees in accordance with the provisions of ASC 718 and ASC 505, “Equity.” As a result, the non-cash charge to operations for non-employee options with service or other performance criteria is affected each reporting period by changes in the estimated fair value of our common stock, as the underlying equity instruments vest. The two factors which most affect these changes are the price of the common stock underlying stock options for which stock-based compensation is recorded and the volatility of the stock price. If our estimates of the fair value of these equity instruments change, it may have the effect of significantly changing compensation expense

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Fair Value of Financial Instruments with Characteristics of Both Equity and Liability

The Company has issued certain financial instruments, including warrants to purchase common stock, which have characteristics of both liabilities and equity. Financial instruments such as warrants that are classified as liabilities are fair valued upon issuance and are re-measured at fair value at subsequent reporting periods with the resulting change in fair value recorded in other income/(expense). The fair value of warrants is estimated using valuation models that require the input of subjective assumptions including stock price volatility, expected life, and the probability of future ~~equity~~stock ~~issuances~~combination events and their impact to the ~~price~~exercise ~~protection feature~~price.

Accrued Clinical Expense

We make estimates of our accrued clinical expenses as of each balance sheet date in our consolidated financial statements based on facts and circumstances known to us at that time. 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 cost. The majority of our service providers invoice us at least monthly in arrears for services performed. We periodically confirm the accuracy of our estimates with the service providers and adjust if necessary. Examples of estimated accrued clinical expenses include:

~~• fees paid to CROs in connection with clinical studies;~~17

•Table ~~fees~~of ~~paid to investigative sites in connection with clinical studies;~~Contents

•· fees paid to ~~contract~~CROs ~~manufacturers~~ in connection with ~~the production of~~ clinical ~~study materials~~studies; ~~and~~

•· fees paid to ~~vendors~~investigative sites in connection with ~~preclinical~~clinical ~~development activities.~~studies;

We· ~~base~~fees ~~our~~paid ~~accruals related~~ to clinical studies on our estimates of the services received and efforts expended pursuant to contracts with many research institutions, clinical research organizations and other service providers that conduct and manage clinical studies on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract tomanufacturers ~~contract and may result~~ in ~~uneven~~connection ~~payment~~with ~~flows. Generally, these agreements set forth~~ the ~~scope~~production of ~~work~~clinical tostudy ~~be performed at a fixed fee or unit price. Payments under the contracts are mainly driven by time and~~ materials; ~~incurred by these service providers. In accruing for service fees, we estimate the time~~ and materials incurred by these service providers in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual accordingly. If we do not identify costs that we have begun to incur or if we underestimate or overestimate the level of services performed or the costs of these services, our actual expenses could differ from our estimates.

fees paid to vendors in connection with preclinical development activities.

Our expenses related to clinical studies and manufacturing are based on estimates of the services received and efforts expended pursuant to contracts with many research institutions, clinical research organizations, contract manufacture organizations, and other service providers. The financial terms of these agreements are subject to negotiation and vary from contract to contract and may result in uneven payment flows. Generally, these agreements set forth the scope of work to be performed at a fixed fee or unit price. Payments under the contracts are mainly driven by time and materials incurred by these service providers. Expenses related to clinical studies and manufacturing activities are accrued based on time and materials incurred by the service providers and in accordance with the contracts. If timelines or contracts are modified based on scope of work to be performed, we modify our estimates of accrued expenses accordingly on a prospective basis.

Results of Operations

Comparison of ~~the~~ Three ~~months~~Months ~~ended~~Ended ~~September~~March 3031, ~~2017~~2018 and ~~2016~~2017

The following table summarizes our research and development expenses for the three months ended ~~September~~March 3031, ~~2017~~2018 and ~~2016~~2017 (in thousands, except percentages):

		Three months ended September 30,
	Three months ended March 31,
		2017			2016			$ Change				% Change
	2018			2017			$ Change				% Change
Research and development expenses		$	67,~~104~~468		$	147,~~096~~801		$	(~~7,992~~333	)			(574	)%

Research and development expense decreased during the three months ended ~~September~~March 3031, ~~2017~~2018 from the same period in ~~2016~~2017 primarily due to ~~lower clinical development expenses as~~ a ~~result~~$1.0 ofmillion ~~the~~decrease ~~SOLUTION study~~ in ~~cystic~~regulatory ~~fibrosis~~related ~~patients~~expense, ~~with~~offset ~~exocrine~~by ~~pancreatic~~a ~~insufficiency~~$0.3 ~~and~~million ~~CHABLIS~~increase ~~clinical studies~~ in ~~patients with systemic lupus erythematosus being substantially completed at the end of 2016, which resulted in reductions in~~ clinical trial expense byand a $40.93 million ~~and~~increase ~~manufacturing/clinical~~in ~~drug supplies by $1~~payroll.~~9 million.~~

The following table summarizes our general and administrative expenses for the three months ended ~~September~~March 3031, ~~2017~~2018 and ~~2016~~2017 (in thousands, except percentages):

		Three Months Ended September 30,
	Three Months Ended March 31,
		2017			2016			$ Change				% Change
	2018			2017			$ Change				% Change
General and administrative expenses		$	13,~~810~~503		$	2,~~504~~903		$	~~(694~~600	)			~~(28~~21	)%

General and administrative expenses ~~decreased~~increased during the three months ended ~~September~~March 3031, ~~2017~~2018 asfrom ~~compared to~~ the same period in ~~2016~~2017 primarily due to anhigher ~~approximately one-third reduction in administrative headcount, which resulted in lower payroll and~~ stock-based compensation expense of $01.4 million~~. Furthermore,~~ ~~professional~~due ~~services~~to ~~decreased~~higher bynumber ~~$0.2~~of ~~million~~options asvested ~~compared~~in to2018, ~~the~~offset ~~same~~by ~~period~~a decrease in ~~2016~~professional ~~due~~services toby ~~lower~~$0.6 ~~legal fees~~million.

21The following table summarizes our non-operating income (expense) for the three months ended March 31, 2018 and 2017 (in thousands, except percentages):

	Three Months Ended March 31,
	2018			2017			$ Change			% Change
Other income (expense)	$	(43	)	$	(3	)	$	(40	)		1,333	%
Fair value of warrant liability in excess of proceeds from financing		—			(600	)		600			100	%
Change in fair value of warrant liability		3,290			—			3,290			100	%
Total other income (expense)	$	3,247		$	(603	)	$	3,850			638	%

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~~The~~Other ~~following~~income ~~table~~(expense) ~~summarizes~~recorded for the three months ended March 31, 2018 is comprised of mainly a change in fair value of warrant liability. In connection with a direct offering of our common stock in March 2017, we issued common stock warrants to the investors. We accounted for the warrants under ASC Topic 815, Derivatives and Hedging (“ASC 815”). The fair value of the warrant liability is remeasured at the end of each reporting period with the change in fair value during the period recorded as a component of non-operating income (expense) ~~for~~in the ~~three~~consolidated ~~months~~statement ~~ended~~of ~~September~~operations. As 30of March 31, ~~2017~~2018, ~~and~~the ~~2016~~fair (value of the warrant liability decreased from $4.5 million to $0.7 million due to a decrease in ~~thousands~~the fair value of the common stock underlying the warrant shares, ~~except~~as ~~percentages):~~well as reduction in the number of outstanding warrants pursuant to exercises by the warrant holders. The decrease in fair value of the warrant liability was recorded as non-operating income during the three months ended March 31, 2018.

	Three Months Ended September 30,
	2017			2016			$ Change		% Change
Other income (expense)	$	(43	)	$	(47	)	$	4		9	%
Change in fair value of warrant liability		1,650			169			1,481		876	%
Total other income (expense)	$	1,607		$	122		$	1,485		1,217	%

Other income (expense) recorded for the three months ended September 30, 2017 is comprised of mainly a change in the fair value of warrant liability. We issued common stock warrants to the investors in connection with a public offering of our common stock in March 2017. The fair value of the liability associated with these warrants was $5.7 million at June 30, 2017. The fair value decreased to $4.1 million as of September 30, 2017 due to a decrease in the fair value of the common stock underlying the warrant shares. The decrease is recognized as part of non-operating income in the statement of operations during the three months ended September 30, 2017.

Comparison of the nine months ended September 30, 2017 and 2016

	Nine Months Ended September 30,
	2017		2016		$ Change			% Change
License fee revenue	$	—	$	139	$	(139	)		(100	)%
Collaborative revenue		—		6	$	(6	)		(100	)%
Total revenues	$	—	$	145	$	(145	)		(100	)%

We began to recognize revenue in 2015 from the collaborative arrangement we entered into with a collaborative partner in December 2014 for the development of blisibimod. In January 2016, we recorded total revenue of $0.1 million for the amortization of the license fee revenue and for the reimbursement of FTEs. This collaborative arrangement was terminated effective January 7, 2016 and no collaborative revenue has been recognized subsequent to the termination.

The following table summarizes our research and development expenses for the nine months ended September 30, 2017 and 2016 (in thousands, except percentages):

	Nine Months Ended September 30,
	2017		2016		$ Change			% Change
Research and development expenses	$	20,939	$	35,686	$	(14,747	)		(41	)%

Research and development expense decreased during the nine months ended September 30, 2017 from the same period in 2016 primarily due to lower clinical development expenses as a result of the SOLUTION study in cystic fibrosis patients with exocrine pancreatic insufficiency and CHABLIS clinical studies in patients with systemic lupus erythematosus were substantially completed at the end of 2016, which resulted in reductions in clinical trial expense by $9.3 million and manufacturing/clinical drug supplies by $3.9 million.

The following table summarizes our general and administrative expenses for the nine months ended September 30, 2017 and 2016 (in thousands, except percentages):

	Nine Months Ended September 30,
	2017		2016		$ Change			% Change
General and administrative expense	$	6,338	$	7,318	$	(980	)		(13	)%

General and administrative expenses decreased during the nine months ended September 30, 2017 from the same period in 2016 primarily due to an approximately one-third reduction in administrative headcount implemented in January 2017, which resulted in lower payroll and stock-based compensation expense of $1.3 million.

The following table summarizes our non-operating income (expense) for the nine months ended September 30, 2017 and 2016 (in thousands, except percentages):

	Nine Months Ended September 30,
	2017			2016			$ Change			% Change
Other income (expense)	$	(74	)	$	(109	)	$	35			(32	) %
Fair value of warrant liability in excess of proceeds from financing		(600	)		—			(600	)		(100	)%
Change in fair value of warrant liability		10,650			169			10,481			6,202	%
Total other income (expense)	$	9,976		$	60		$	9,916			16,527	%

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Other income (expense) recorded for the nine months ended September 30, 2017 is comprised of mainly a change in fair value of warrant liability. In connection with a direct offering of our common stock in March 2017, we issued common stock warrants to the investors. The initial fair value of the liability associated with these warrants was $14.7 million. The fair value decreased to $4.1 million as of September 30, 2017 due to a decrease in the fair value of the common stock underlying the warrant shares. The decrease is recognized as part of non-operating income in the statement of operations.

Liquidity and Capital Resources

To date, we have funded our operations primarily through private placements of preferred stock and common stock, convertible debt, debt financings and public offerings of common stock, equity investment and cost reimbursement from a collaborative partner, and a research award from ~~CFFT. As~~Cystic ofFibrosis ~~September~~Foundation ~~30,~~Therapeutics ~~2017,~~Incorporated we had cash and cash equivalents of approximately $6.1 million. On October 23, 2017, we entered into a Securities Purchase Agreement for a private placement our common stock and warrants for potentially $15 million in gross proceeds. The private placement is structured with two closings. The initial closing was completed on October 27, 2017 for gross proceeds of $2.9 million. The second closing for gross proceeds of $12.1 million is contingent on stockholder approval pursuant to Nasdaq Rule 5635(d"CFFT")~~(2)~~. ~~We intend to solicit stockholder approval in the first quarter of 2018.~~

~~Our~~On ~~principal~~March ~~liquidity~~12, ~~requirements~~2018, ~~are~~we ~~primarily~~announced tothat the RESULT Phase 3 clinical trial of Sollpura for the treatment of patients with EPI did not meet ~~our~~its ~~working~~primary ~~capital~~endpoint ~~needs,~~of ~~support~~non-inferiority to porcine PERT. All ongoing ~~business~~clinical ~~activities,~~trials ~~research~~of ~~and~~Sollpura ~~development~~were concluded by the end of April 2018, and ~~our~~we ~~capital~~began ~~expenditure~~a formal process of evaluating strategic alternatives. Our expected cash needs for the foreseeable future have been significantly reduced with our current initiatives, termination of personnel and major vendor contracts.

InAs of March ~~2016~~31, we2018, ~~filed~~the aCompany ~~universal~~had ~~shelf~~cash ~~registration~~and ~~statement~~cash ~~with~~equivalents ~~the~~of ~~SEC~~approximately on$8.1 ~~Form~~million. The ~~S-3~~Company’s ~~(File~~current Nocash balance is not expected to fund its operations through the next twelve months. As ~~333-210166)~~such, ~~for~~in April 2018, the ~~proposed~~Company ~~offering~~began ~~from~~to ~~time~~wind down its activities. The Company also decided to ~~time~~discontinue further development of upSollpura and blisibimod and devote its time and resources to ~~$100~~identifying and evaluating strategic alternatives.0 ~~million~~The ofprocess ~~its~~is ~~securities~~aimed at identifying opportunities to diversify the Company’s pipeline, including ~~common~~through ~~stock~~potential strategic combinations. If a strategic transaction is not consummated, ~~preferred~~the ~~stock~~Company may be required to dissolve or liquidate. The Company cannot be certain if any future financing will be available on terms favorable to the Company, ~~debt~~if ~~securities~~at all. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. If adequate funds are not available, the Company will terminate all strategic transaction efforts and~~/or~~ ~~warrants~~eliminate all remaining personnel.

On April 21, 2016, we registered $25.0 million under the registration statement (File No. 333-210166) for the at-the-market sales agreement with H.C. Wainwright (the “H.C. Wainwright ATM Agreement”). On March 14, 2017, we amended the H.C. Wainwright ATM Agreement and reduced the amount registered under the registration statement to $23 million. In June 2017, in connection with the execution the 2017 Purchase Agreement, we filed a prospectus supplement suspending and reducing all offerings pursuant to the H.C. Wainwright ATM agreement.

On April 27, 2016, we registered $14.4 million under the registration statement (File No. 333-210166) for the equity purchase agreement with LPC (the “2015 Purchase Agreement”). On March 12, 2017, upon the expiration of the 2015 Purchase Agreement, $13.4 million of unused amount became available under the registration statement. On June 19, 2017, we executed an equity purchase agreement with LPC (the “2017 Purchase Agreement”) to sell to LPC up to an aggregate of $10.0 million in shares of common stock and issue up to 181,708 shares of our common stock as a commitment fee to LPC over a period of thirty months. As of September 30, 2017, we have sold 1,204,411 shares of common stock for an aggregate cash proceeds of $1.8 million pursuant to the 2017 Purchase Agreement and issued 131,909 shares of common stock to LPC as commitment fee, leaving a balance of $8.2 million available for future issuance pursuant to the 2017 Purchase Agreement. The 2017 Purchase Agreement will expire on December 19, 2019.

On September 8, 2016, we registered $22.1 million under the registration statement (File No. 333-210166) for a subscription agreement with certain institutional investors for the sale of convertible preferred stock and issuance of warrants in a registered direct offering.

On March 14, 2017, in connection with a registered direct offering of common stock and warrants, we registered $46.5 million under the registration statement (File No. 333-210166) (the “March 2017 Offering”). During the three months ended September 30, 2017, the exercise price of certain warrants issued in connection with the March 2017 Offering was reduced which resulted in $17.3 million re-allocated back to the shelf registration statement.

As of September 30, 2017, there was a balance of $14.4 million available for future issuance under the registration statement.

On October 23, 2017, the Company entered into a definitive agreement with certain accredited investors in connection with a private placement of equity securities (the “Private Placement”). The Private Placement is expected to have two closings. The first closing occurred on October 27, 2017 and resulted in gross proceeds of approximately $2.9 million. The second closing, contingent upon the requisite shareholder approval pursuant to Nasdaq Rule 5635(d), is expected to result in gross proceeds of $12.1 million. The Company expects to receive such shareholder approval in the first quarter of 2018. If we are unable to obtain shareholder approval for the transaction, or are otherwise unable to complete the second closing, we will need to seek other sources of financing, and there can be no assurance that we will be able to do so on favorable terms, or at all.

We will need substantial additional financing to continue the development of our product candidates, obtain regulatory approvals, and prepare for commercial readiness if the clinical trials are successful; such financing may not be available on terms favorable to us if at all, which raises substantial doubt about our ability to continue as a going concern as of the date of this report and that is not alleviated after consideration of management’s plans to mitigate such concerns. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. If adequate funds are not available, we may be required to delay, reduce the scope of, or eliminate one or more of our clinical trials. We plan to meet our capital requirements primarily through issuances of equity securities, future partnerships, debt financing, and in the longer term, revenue from product sales. Failure to generate revenue or raise additional capital would adversely affect our ability to achieve our intended business objectives.

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Cash Flows

Comparison of ~~Nine~~Three months ended ~~September~~March 3031, ~~2017~~2018 and ~~2016~~2017

Cash flows during the nine months ended ~~September~~March 3031, ~~2017~~2018 and ~~2016~~2017 consisted of the following (in thousands):

	September 30,
	March 31,
	2017			2016
	2018			2017
Net cash used in operating activities	$	(309,~~640~~381	)	$	(3614,~~691~~329	)
Net cash used in investing activities		—			(952	)
Net cash provided by investing activities		358			—
Net cash provided by financing activities		1514,~~873~~913			2314,~~262~~138
Total	$	~~(14~~5,~~767~~890	)	$	(~~14,381~~191	)

During the ~~nine~~three months ended ~~September~~March 3031, ~~2017~~2018 and ~~2016~~2017, our operating activities used cash of $309.64 million and $3614.73 million, respectively, primarily resulting from our net losses and changes in our working capital accounts, adjusted for non-cash items including stock -based compensation and change in the fair value of warrant liability.

~~No cash was provided by nor used in investing activities during the nine months ended September 30, 2017.~~ During the ~~nine~~three months ended ~~September~~March 3031, ~~2016~~2018, cash ~~used~~provided inby investing activities was $1.0.4 million, which was ~~primarily~~ driven by the ~~purchase~~sale of capital equipment to ~~support~~a ~~the~~contract ~~manufacturing~~manufacturer. No cash was provided by nor used in investing activities ~~for~~during the ~~development~~three ofmonths ~~Sollpura~~ended March 31, 2017.

During the ~~nine~~three months ended ~~September~~March 3031, ~~2017~~2018, cash provided by financing activities was $1514.9 million, which was driven by net proceeds received from the sale of our common stock and warrants. During the same period in ~~2016~~2017, cash provided by financing activities was $2314.31 million, which was driven by net proceeds from the sale of stock pursuant to an equity purchase agreement and an at-the-market sales agreement.

Contractual Obligations and Commitments

We have a lease ~~obligations~~obligation consisting of ~~two~~one operating ~~leases~~lease for our ~~operating~~facility ~~facilities~~ that ~~expire~~expires in August 2019 ~~and May 2019, respectively~~.

The following table summarizes our estimated scheduled future minimum contractual obligations and commitments as of ~~September~~March 3031, ~~2017~~2018 (in thousands):

Payment Due by Period

~~Payment Due by Period~~

Contractual Obligations

< 1 year

~~< 1 year~~

1-3 years

~~1-3 years~~

3-5 years

~~3-5 years~~

> 5 years

~~> 5 years~~

Total

~~Total~~

Facility Leases

~~191~~158

~~154~~53

—

~~345~~211

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The above amounts exclude potential payments to be made under our license agreements to our licensors that are based on the progress of our product candidates in development, as these payments are not determinable.

In December 2007, the Company and Amgen Inc. (“Amgen”) entered into a worldwide, exclusive license agreement (the “Amgen Agreement”) to develop and commercialize blisibimod in any indication. Under the Amgen Agreement, we are obligated to make additional milestone payments upon the achievement of certain development, regulatory and commercial objectives. We are also obligated to pay royalties on future net sales of products that are developed and approved as defined by this collaboration. Our royalty obligations as to a particular licensed product will be payable on a country-by-country basis and licensed on a product-by-licensed-product basis, for the longer of (a) the date of expiration of the last-to-expire valid claim within the licensed patents that covers the manufacture, use or sale, offer to sell or import of such licensed product by us or a ~~sub-licensee~~sublicensee in such country, or (b) 10 years after the first commercial sale of the applicable licensed product in the applicable country.

On July 11, 2014, the Company and Eli Lilly and Company (“Eli Lilly”) entered into a worldwide, exclusive license agreement (the “Lilly Agreement”), to develop and commercialize Sollpura. Under the Lilly Agreement, we are obligated to make milestone payments upon the achievement of certain regulatory and commercial sales milestones. In addition, after sales of the licensed products exceed an aggregate of $100.0 million in the United States, we are obligated to pay tiered royalties on future net sales, ranging from the single digits to the mid-teens, for products that are developed and approved as defined in the Lilly Agreement. Our royalty obligations as to a particular licensed product will be payable, on a licensed product-by-licensed product basis, for the longer of (a) the date of expiration of the last to expire valid claim within the licensed patents that covers the manufacture, use or sale, offer to sell, or import of such licensed product by the Company or a sublicense in such country, or (b) 12 years after the first commercial sale of the applicable licensed product in the applicable country.

Under the research award agreement with CFFT, we are obligated to pay royalties to CFFT as follows: i) a one-time royalty in an amount equal to five times the actual award, payable in three installments between the first and second anniversaries of the first commercial sale of a product; ii) a one-time royalty in an amount equal to the actual award after net product sales reaches $100 million; and iii) in the event of a license, sale or other transfer of the product or a change of control transaction prior to the commercial sale of the product, a milestone payment equal to three times the actual award.

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Off-Balance Sheet Arrangements

We do not currently have, nor have we ever had, any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. In addition, we do not engage in trading activities involving non-exchange traded contracts.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates. We are exposed to market risk related to fluctuations in interest rates and market prices. However, since a majority of our investments are in highly liquid money market funds, we do not believe we are subject to any material market risk exposure. As of ~~September~~March 3031, ~~2017~~2018, we did not have any material derivative financial instruments. The fair value of our cash and cash equivalents was $68.1 million as of ~~September~~March 3031, ~~2017~~2018.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Principal Accounting Officer, evaluated the effectiveness of our disclosure controls and procedures as of ~~September~~March 3031, ~~2017~~2018. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to that company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by SEC Rule 13a-15(e), we carried out an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Principal Accounting Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, our Chief Executive Officer and Principal Accounting Officer concluded that, as of ~~September~~March 3031, ~~2017~~2018, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There have been no other changes in our internal control over financial reporting during the most recent quarter ended ~~September~~March 3031, ~~2017~~2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On February 13, 2017, a complaint was filed in the United States District Court for the Northern District of California captioned Brian Clevlen v. Anthera Pharmaceuticals, Inc., et al., Case No. 3:17-cv-715, on behalf of a putative class of the Company’s stockholders against the Company and certain of its current and former officers. The complaint asserts claims under sections 10(b) and 20(a) of the Securities Exchange Act of 1934 on behalf of all stockholders that purchased the Company’s common stock between February 10, 2015 and December 27, 2016. The complaint alleges that the Company made false or misleading statements and/or omissions with respect to the CHABLIS-SC1 trial and SOLUTION study. The complaint seeks unspecified damages, interest, attorneys’ fees, costs, and such other relief at the Court may deem just and proper. On April 17, 2017, Urešomir Čorak, a putative stockholder of the Company, filed a motion to be appointed as lead plaintiff, and to have the law firm of Levi & Korsinsky LLP appointed as lead counsel in the action. Also on April 17, 2017, a group of putative stockholders of the Company, comprised of Kent Roberts, Kent Roberts FBO Evan Roberts, Kent Roberts Parent FBO Owen Roberts, and Bobby King, filed a motion to be appointed as lead plaintiff, to have the law firm of Lifschitz & Miller LLP appointed as lead counsel, and to have the law firm of Reich Radcliffe & Hoover LLP appointed as liaison counsel in the action. On May 18, 2017, the Court appointed Urešomir Čorak as lead plaintiff, and Levi & Korsinsky LLP as lead counsel in the action. On July 17, 2017, lead plaintiff filed a notice of voluntary dismissal of the action without prejudice. None

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ITEM 1A. RISK FACTORS

You should carefully consider the risks described below, together with the other information contained in this Quarterly Report on Form 10-Q, including the consolidated financial statements and the related notes that appear at the end of this report. If any of the following risks occur, our business, financial condition, results of operations and future growth prospects would likely be materially and adversely affected.

An investment in our securities involves a high degree of risk. We operate in a dynamic and rapidly changing industry that involves numerous risks and uncertainties. The risks and uncertainties described below are not the only ones we face. Other risks and uncertainties, including those that we do not currently consider material, may impair our business. If any of the risks discussed below actually occur, our business, financial condition, operating results or cash flows could be materially adversely affected. This could cause the value of our securities to decline, and you may lose all or part of your investment.

Risks Related to Our ~~Financial~~Evaluation ~~Condition~~of ~~and~~Strategic ~~Capital Requirements~~Alternatives

WeOur business to date has been almost entirely dependent on the success of Sollpura and blisibimod, and we have ~~incurred~~decided ~~significant~~to ~~losses~~discontinue ~~since~~further development of Sollpura and blisibimod and devote our ~~inception~~time and ~~anticipate~~resources ~~that~~to weidentifying ~~will~~and ~~incur~~evaluating ~~continued~~strategic ~~significant~~alternatives, ~~losses~~which ~~for~~may ~~the~~not ~~foreseeable~~be ~~future~~successful.

WeTo ~~are~~date, awe ~~clinical-stage~~have ~~biotechnology~~invested ~~company~~substantially ~~with~~all ~~two~~of ~~assets~~our efforts and financial resources in the ~~clinical~~research ~~stage~~and development of ~~development~~Sollpura and blisibimod. ~~Investment~~ inOn ~~biopharmaceutical~~March ~~product~~12, ~~development~~2018, iswe ~~highly~~announced ~~speculative~~that ~~because~~the itRESULT ~~entails~~Phase ~~substantial~~3 ~~upfront~~clinical ~~capital~~trial ~~expenditures~~of ~~and~~Sollpura ~~significant~~for ~~risk~~the ~~that~~treatment ~~any~~of ~~potential~~patients ~~product~~with ~~candidate~~EPI ~~will~~did ~~fail~~not meet its primary endpoint of non-inferiority to ~~demonstrate~~porcine ~~adequate~~PERT. All ~~effect~~ongoing orclinical antrials ~~acceptable~~of ~~safety~~Sollpura ~~profile,~~were ~~gain~~concluded ~~regulatory~~by ~~approval~~the end of April 2018, and ~~become~~we ~~commercially~~began ~~viable~~a formal process of evaluating strategic alternatives. The Weprocess ~~have~~is noaimed ~~products~~at ~~approved~~identifying ~~for~~opportunities ~~commercial~~to ~~sale~~diversify ~~and~~our ~~have~~pipeline, ~~not~~including ~~generated~~through ~~any~~potential ~~revenue~~strategic ~~from~~combinations. There ~~product~~can ~~sales~~be no assurance that our process to ~~date~~identify and weevaluate ~~continue~~potential strategic alternatives will result in any definitive offer to ~~incur~~consummate ~~significant~~a ~~research~~strategic ~~and~~transaction, ~~development~~or ~~and~~if ~~other~~made ~~expenses~~what ~~related~~the toterms ~~our~~thereof ~~ongoing~~will ~~operations~~be or that any transaction will be approved or consummated. AsIf any definitive offer to consummate a ~~result~~strategic transaction is received, wethere ~~are~~can ~~not~~be ~~profitable~~no ~~and~~assurance ~~have~~that ~~incurred~~a ~~losses~~definitive inagreement ~~each~~will ~~period~~be ~~since~~executed ~~our~~or ~~inception~~that, inif ~~2004. As~~a ofdefinitive ~~September~~agreement 30is executed, ~~2017~~the transaction will be consummated. In addition, wethere ~~had~~can anbe ~~accumulated~~no ~~deficit~~assurance ofthat ~~$424.5~~any ~~million. Substantially~~transaction, ~~all~~involving our ~~losses~~company ~~resulted~~and/or ~~from~~assets, ~~costs~~that ~~incurred~~is ~~with~~consummated ~~our~~would ~~product~~enhance ~~development~~shareholder ~~programs~~value. ~~and~~There ~~from~~also ~~general~~can ~~and~~be ~~administrative~~no ~~costs~~assurance ~~associated~~that ~~with~~we ~~our~~will ~~operations~~conduct further drug research or development activities in the future.

~~Our~~Any ~~historical~~such ~~losses,~~strategic ~~combined~~transaction ~~with~~may ~~expected~~require ~~future~~us ~~losses, have had and will continue~~ to ~~have~~incur annon-recurring ~~adverse~~or ~~effect~~other ~~on our stockholders’ equity and working capital. In addition~~charges, ifmay weincrease ~~obtain regulatory approval for~~ our ~~product candidates, we may incur significant sales, marketing, in~~near-~~licensing~~ and ~~outsourced~~long-term ~~manufacturing~~expenditures ~~expenses~~and asmay ~~well~~pose ~~as continued product development expenses. As a result, we expect to continue to incur~~ significant ~~and~~integration ~~increasing~~challenges ~~losses~~or ~~for~~disrupt ~~the foreseeable future. We believe there is substantial doubt about~~ our ~~ability~~management toor ~~continue~~business, aswhich acould ~~going~~adversely ~~concern~~affect ~~as we do not currently have sufficient cash resources to fund~~ our operations ~~through~~and 12financial ~~months from the filing date of the Form 10-Q~~results. ~~Our~~ ~~financial~~For ~~statements~~example, dothese ~~not~~transactions ~~include any adjustments that~~ may ~~result~~entail ~~from~~numerous ~~the~~operational ~~outcome~~and offinancial ~~this uncertainty. If we are unable to continue as a viable entity~~risks, ~~our stockholders may lose their entire investment.~~including:

We· ~~expect~~exposure to ~~incur~~unknown ~~substantial expenses and generate significant operating losses over the next several years as we continue to advance our product candidates into clinical studies and as we:~~liabilities;

· ~~continue~~incurrence ~~clinical~~of ~~development~~substantial debt or dilutive issuances of ~~Sollpura~~equity ~~and~~securities ~~blisibimod~~to pay for acquisitions;

· ~~manufacture~~write-downs ~~our~~of ~~drug~~assets ~~product~~or ~~candidates~~goodwill ~~for~~or ~~use~~impairment ~~in clinical trials and to support future applications for marketing approval~~charges; ~~and~~

· ~~hire~~incurrence ~~additional~~of ~~clinical,~~amortization ~~scientific and management personnel, if needed.~~expenses;

~~Our~~· ~~future~~impairment ~~capital~~of ~~uses~~relationships ~~and~~with ~~requirements~~key ~~depend~~suppliers onor ~~numerous~~customers ~~forward-looking~~of ~~factors.~~any ~~These~~acquired ~~factors~~businesses ~~include~~due ~~the~~to ~~following:~~changes in management and ownership; and;

· ~~the~~inability ~~progress~~to ofretain ~~clinical~~key ~~studies~~employees of our ~~product~~company ~~candidates;~~or any acquired businesses.

~~· the cost of manufacturing our product candidates;~~21

· the time and costs involved in obtaining regulatory approvals;

· delays that may be caused by evolving requirements of regulatory agencies;

· the costs involved in filing and prosecuting patent applications and enforcing or defending patent claims;

· our ability to establish, enforce and maintain selected strategic alliances; and

· the acquisition of technologies, product candidates and other business opportunities that require financial commitments.

At September 30, 2017, our capital resources consisted of cash and cash equivalents of $6.1 million. On October 23, 2017, the Company entered into a definitive agreement with certain accredited investors in connection with a private placement of equity securities (the “Private Placement”). The Private Placement is expected to have two closings. The first closing occurred on October 27, 2017 and resulted in gross proceeds of approximately $2.9 million. The second closing, contingent upon the requisite shareholder approval pursuant to Nasdaq Rule 5635(d), is expected to result in gross proceeds of $12.1 million. The Company expects to receive such shareholder approval in the first quarter of 2018. If we are unable to obtain shareholder approval for the transaction, or are otherwise unable to complete the second closing, we will need to seek other sources of financing, and there can be no assurance that we will be able to do so on favorable terms, or at all.

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WeIf ~~will~~we ~~need~~do ~~substantial~~not ~~additional~~successfully ~~financing~~consummate toa ~~continue~~strategic ~~the~~transaction, ~~development of~~ our ~~product~~Board ~~candidates,~~of ~~obtain~~Directors ~~regulatory approvals, and prepare for commercial readiness if the clinical trials are successful; such financing~~ may ~~not~~decide ~~be available on terms favorable~~ to ~~us,~~pursue ~~if at all, which raises substantial doubt about our ability to continue as~~ a ~~going~~dissolution ~~concern as of the date of this report~~ and ~~that~~liquidation ~~is not alleviated after consideration~~ of ~~management’s~~our ~~plans~~company. toIn ~~mitigate~~ such ~~concerns. The~~an ~~financial~~event, ~~statements do not include any adjustments that might result from~~ the ~~outcome~~amount of ~~this~~cash ~~uncertainty. If adequate funds are not~~ available, wefor ~~may~~distribution ~~be required~~ to ~~delay,~~our ~~reduce~~stockholders ~~the~~will ~~scope~~depend ~~of,~~heavily oron ~~eliminate~~the ~~one~~timing ~~or more~~ of ~~its~~such ~~clinical~~liquidation ~~trials. We~~as ~~plan~~well toas ~~meet~~the ~~our~~amount ~~capital requirements primarily through issuances~~ of ~~equity~~cash ~~securities,~~that ~~future~~will ~~partnerships,~~need ~~debt financing, and in the longer term, revenue from product sales. Failure~~ to ~~generate~~be ~~revenue~~reserved orfor ~~raise~~commitments ~~additional~~and ~~capital~~contingent ~~would adversely affect our ability to achieve its intended business objectives~~liabilities.

~~Additional~~There ~~funding~~can ~~may~~be ~~not~~no beassurance ~~available~~that the process to usidentify ona ~~acceptable~~strategic ~~terms~~transaction orwill atresult ~~all~~in a successfully consummated transaction. If no transaction is completed, our Board of Directors may decide to pursue a dissolution and liquidation of our company. In ~~addition~~such an event, the ~~terms~~amount of ~~any~~cash ~~financing~~available ~~may~~for ~~adversely~~distribution ~~affect~~to our stockholders will depend heavily on the ~~holdings~~timing orof such decision and, ultimately, such liquidation, since the ~~rights~~amount of cash available for distribution continues to decrease as we fund our ~~stockholders~~operations while we evaluate our strategic alternatives. ~~For~~In ~~example~~addition, if weour ~~raise~~Board ~~additional~~of ~~funds~~Directors bywere ~~issuing~~to ~~equity~~approve ~~securities~~and orrecommend, byand ~~selling~~our ~~debt~~stockholders ~~securities~~were to approve, ifa ~~convertible~~dissolution and liquidation of our company, ~~further~~we ~~dilution~~would be required under Delaware corporate law to pay our ~~existing~~outstanding obligations, as well as to make reasonable provision for contingent and unknown obligations, prior to making any distributions in liquidation to our stockholders. Our commitments and contingent liabilities may ~~result.~~include To(i) obligations under our employment and related agreements with certain employees that provide for severance and other payments following a termination of employment occurring for various reasons, including a change in control of our company; (ii) potential litigation against us, and other various claims and legal actions arising in the ~~extent~~ordinary course of business; and (iii) non-cancelable facility lease obligations. As a result of this requirement, a portion of our ~~capital~~assets ~~resources~~may ~~are~~need ~~insufficient~~to be reserved pending the resolution of such obligations. In addition, we may be subject to ~~meet~~litigation or other claims related to a dissolution and liquidation of our ~~future~~company. ~~capital~~If ~~requirements~~a dissolution and liquidation were pursued, weour ~~will~~Board of Directors, in consultation with its advisors, would need to ~~finance~~evaluate these matters and make a determination about a reasonable amount to reserve. Accordingly, holders of our ~~future~~common ~~cash~~stock ~~needs~~could ~~through~~lose ~~public~~all or ~~private~~a ~~equity~~significant ~~offerings,~~portion ~~collaboration~~of ~~agreements,~~their ~~debt~~investment ~~financings~~in the event of a liquidation, dissolution or ~~licensing~~winding ~~arrangements~~up of our company.

IfRisks ~~adequate~~Related ~~funds are not available, we may be required~~ to ~~terminate,~~Our ~~significantly~~Financial ~~modify~~Condition orand ~~delay~~Capital our development programs, or obtain funds through collaborators that may require us to relinquish rights to our technologies or product candidates that we might otherwise seek to develop or commercialize independently. We may elect to raise additional funds even before we need them if the conditions for raising capital are favorable.Requirements

We ~~will~~have ~~not~~incurred besignificant ~~able~~losses tosince ~~meet~~ our cash requirements beyond the first quarter of 2018 without obtaining additional capital from external sources if the Second Closing of the Private Placement does not occur, and if we are unable to do so, we may not be able to continue as a going concerninception.

We ~~anticipate~~are ~~that~~a ~~our~~clinical-stage ~~cash~~biotechnology ~~and~~company ~~cash~~with ~~equivalents~~two ~~of $6~~assets.1 Investment ~~million~~in asa ofbiopharmaceutical ~~September~~company ~~30,~~is ~~2017,~~highly ~~together~~speculative ~~with~~because ~~the~~it ~~proceeds~~entails ~~from~~substantial ~~the~~upfront ~~First~~capital ~~Closing~~expenditures ofand ~~the~~significant ~~Private~~risk ~~Placement~~that any potential product candidate will ~~meet~~fail ~~our~~to ~~cash~~demonstrate ~~requirements~~adequate ~~into~~effect ~~the~~or ~~fourth~~an ~~quarter~~acceptable ofsafety ~~2017~~profile, gain regulatory approval and become commercially viable. IfWe ~~the~~have ~~Second~~no ~~Closing~~products ~~occurs,~~approved wefor ~~anticipate~~commercial wesale ~~will~~and behave ~~able~~not generated any revenue from product sales to ~~meet~~date ~~our~~and ~~cash~~we ~~requirements~~continue ~~into~~to ~~the~~incur ~~second~~significant ~~quarter~~research ofand ~~2018~~development and other expenses related to our ongoing operations. ~~However~~ As a result, we are not profitable and have incurred losses in ~~order~~each ~~for~~period ussince toour ~~continue~~inception asin a2004. As ~~going~~of ~~concern~~March ~~beyond~~31, ~~the~~2018, ~~fourth~~we ~~quarter~~had an accumulated deficit of ~~2017~~$442.2 ~~(if~~million. Substantially ~~the~~all ~~Private~~our ~~Placement~~losses ~~Second~~resulted ~~Closing~~from ~~does~~costs ~~not~~incurred ~~occur)~~with orour ~~beyond~~product ~~the~~development ~~second~~programs ~~quarter~~and offrom ~~2018~~general ~~(if~~and ~~the~~administrative ~~Private~~costs ~~Placement~~associated ~~Second~~with ~~Closing~~our ~~does~~operations. Our ~~occur)~~historical losses, wecombined ~~will~~with bepotential ~~required~~future losses, have had and will continue to ~~obtain~~have ~~capital~~an ~~from~~adverse ~~external~~effect ~~sources~~on our stockholders’ equity and working capital.

WeOur ~~have~~current ~~never~~cash ~~generated~~balance ~~any~~is ~~product~~not ~~revenue~~sufficient ~~and~~to ~~may~~fund ~~never~~our beoperations ~~profitable~~for the next twelve months.

~~Our~~We ~~ability~~anticipate tothat ~~generate~~our ~~product~~cash ~~revenue~~ and ~~achieve~~cash ~~profitability~~equivalents ~~depends~~of on$8.1 ~~our~~million ~~ability,~~as ~~alone or with collaborators, to successfully complete the development~~ of ~~our~~March ~~product candidates~~31, ~~conduct~~2018 ~~clinical~~will ~~studies in patients, obtain the necessary regulatory approvals for our product candidates and commercialize any approved products. We have~~ not ~~generated~~be ~~any~~sufficient ~~revenue~~to ~~from~~fund ~~the commercial sales of~~ our ~~product~~operations ~~candidates~~for ~~since~~next ~~our~~twelve ~~inception~~months ~~and do not expect to generate any revenue~~ from the ~~commercial~~filing ~~sales~~ of ~~our~~this ~~product candidates in the near term~~report. ~~However,~~ asChanging acircumstances ~~result~~may ofcause ~~the~~us ~~collaborative~~to ~~arrangement~~consume ~~that~~capital wesignificantly ~~entered~~faster ~~into~~than ~~with Zenyaku in December 2014 for the development of blisibimod,~~ we ~~began~~currently ~~recognizing license fee revenue and collaborative revenue in 2015~~anticipate. The license fee revenue from the collaborative arrangement with Zenyaku was initially amortized as revenue over the performance obligation period (product development period) while reimbursement for our full-time employees (“FTEs”) was recorded as collaborative revenues as incurred. InIf ~~September~~adequate ~~2015,~~funds ~~Zenyaku~~are ~~provided~~not usavailable ~~a notice of its intent~~ to ~~terminate~~us ~~the~~on ~~Zenyaku~~a ~~Agreement,~~timely ~~effective January 7~~basis, ~~2016. The~~or ~~termination was “~~at ~~will” and Zenyaku alleged no breach of the Zenyaku Agreement by us. Because of an early termination of the Zenyaku Agreement~~all, we ~~did~~may ~~not~~be ~~recognize~~required ~~revenues~~to ~~under~~cease ~~the~~our ~~Zenyaku~~operations ~~Agreement~~and ~~beyond~~terminate ~~January~~all ~~2016~~personnel.

The ~~commercial~~substantial ~~success~~doubt ofabout our ~~development-stage~~ability ~~product~~to ~~candidates~~continue ~~will~~as ~~depend~~a ongoing aconcern ~~number~~as of ~~factors,~~the ~~including,~~date ~~but~~of this report is not ~~limited~~alleviated ~~to,~~after ~~our~~consideration ~~ability~~of management’s plans to: mitigate such concerns. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

·Risks ~~obtain~~Related ~~favorable~~to ~~results~~the ~~for~~Development and ~~advance~~Commercialization ~~the development~~ of ~~Sollpura,~~ our ~~product~~Product ~~candidate for the treatment of patients with low digestive enzyme levels and potentially other diseases;~~Candidate

·The ~~obtain~~termination ~~favorable results for and advance the development~~ of ~~blisibimod,~~ our Phase 3 product candidate, ~~for~~Sollpura, ~~the~~could ~~treatment~~result ofin ~~B-cell~~increased ~~mediated~~costs ~~autoimmune~~to ~~diseases~~us, ~~including~~delay ~~successfully~~or ~~launching~~limit ~~and~~our ~~completing~~ability ~~clinical~~to ~~studies~~generate inrevenue ~~patients~~and ~~with~~adversely ~~IgA~~affect ~~nephropathy,~~our orcommercial ~~other indications related to the development of blisibimod;~~prospect.

·The ~~obtain~~termination ~~regulatory~~of ~~approval~~our ~~for~~late stage product candidate, Sollpura, could adversely affect our commercial prospect and financial condition. We do not currently have funds to continue the development of our second product candidate, blisibimod;. The lack of funding will delay the commencement and completion of clinical studies for blisibimod in a number of ways, including delays related to:

· if regulatory approvals are obtained, begin the commercial manufacturing of our product candidates with third-party manufacturers;

· launch commercial sales and effectively market our product candidates, either independently or in strategic collaborations with third parties; and

· achieve broad market acceptance of our product candidates in the medical community and with third-party payors.

Our product candidates are subject to the risks of failure inherent in the development of therapeutics based on new technologies. Our product candidates have failed in clinical studies because we were unable to demonstrate that they were effective. Furthermore, our products candidates could fail if they cause unacceptable adverse effects in the patients we treat. Failure of our product candidates in clinical studies will have a material adverse effect on our ability to generate revenue or become profitable. If we are not successful in achieving regulatory approval for our product candidates or are significantly delayed in doing so, our business will be materially harmed.

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We will need substantial additional capital in the future to fund our operations. If additional capital is not available, we will have to delay, reduce or cease operations. Our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern.

We will need to raise substantial additional capital to fund our operations and to develop our product candidates. Our future capital requirements will depend on many factors including:

· the scope, size, rate of progress, results and costs of our clinical studies and other development activities for our product candidates;

· manufacturing campaign for Sollpura and blisibimod clinical materials, including data to support the application for marketing approval, formulation development and product enhancement;

· non-clinical activities that we may pursue parallel to our clinical studies;

· the filing, prosecution and enforcement of patent claims;

· the costs associated with commercializing our product candidates if they receive regulatory approval, including the cost and timing of developing sales and marketing capabilities, or entering into strategic collaboration with others relating to the commercialization of our product candidates; and

· revenues received from approved products, if any, in the future

The amount of cash and other sources of capital available to us, including the net proceeds from the Private Placement, are not expected to be sufficient to fund our expected needs for the next twelve months, which results in substantial doubt about our ability to continue as a going concern. Changing circumstances may cause us to consume capital significantly faster than we currently anticipate. Additional financing may not be available when we need it or may not be available on terms that are favorable to us. If adequate funds are not available to us on a timely basis, or at all, we may be required to:

· terminate, reduce or delay clinical studies or other development activities for our product candidates; or;

· terminate, reduce or delay our (i) establishment of sales and marketing capabilities, (ii) pursuit of strategic collaborations with others relating to the sales, marketing and commercialization of our product candidates or (iii) other activities that may be necessary to commercialize our product candidates, if approved for sale.

The timing of the milestone and royalty payments we are required to make to our licensors is uncertain and could adversely affect our cash flows and results of operations.

In December 2007, we entered into the Amgen Agreement, pursuant to which we obtained an exclusive worldwide license to certain technology and compounds relating to blisibimod. Pursuant to the Amgen Agreement, we are required to make various milestone payments upon our achievement of certain development, regulatory and commercial objectives for any blisibimod formulation. We are required to pay up to $10.0 million upon achievement of certain pre-approval clinical development milestones and up to $23.0 million upon achievement of certain post-approval milestones. We are also required to make tiered quarterly royalty payments on net sales, which increase as a percentage from the high single digits to the low teens as net sales increase.

In July 2014, we entered into the Lilly Agreement, pursuant to which we obtained an exclusive worldwide license to certain technology and compounds relating to Sollpura. Pursuant to the Lilly Agreement, we are required to make various milestone payments upon our achievement of certain regulatory and commercial objectives for any Sollpura formulation. We are also required to make tiered royalty payments on net sales, which percentage increases from the high single digits to the mid-teens as net sales increase.

In March 2015, we received a research award of up to $3 million from Cystic Fibrosis Foundation Therapeutics Incorporated (“CFFT”) for the development of Sollpura. Under the research award agreement, we are obligated to pay royalties to CFFT as follows: i) a one-time royalty in an amount equal to the five times the award, payable in three installments between the first and second anniversaries of the first commercial sale of a product; ii) a one-time royalty in an amount equal to the actual award after net product sales reaches $100 million; and iii) in the event of a license, sale or other transfer of the product or a change of control transaction prior to the commercial sale of the product, a milestone payment equal to three times the actual award.

The timing of our achievement of these events and corresponding milestone payments becoming due to our licensors is subject to factors relating to the clinical and regulatory development and commercialization of our product candidates, as applicable, many of which are beyond our control. We may become obligated to make a milestone payment during a period in which we do not have the cash on hand to make such payment, which could require us to delay our clinical studies, curtail our operations, scale back our commercialization and marketing efforts, seek funds to meet these obligations at terms unfavorable to us or default on our license agreements, which could result in license termination.

Our limited operating history makes it difficult to evaluate our business and prospects.

We were incorporated in September 2004. Our operations to date have been limited to organizing and staffing our company, acquiring product and technology rights, conducting product development activities for our primary product candidates, Sollpura and blisibimod, and performing research and development. We have not yet demonstrated an ability to obtain regulatory approval for or commercialize a product candidate. Consequently, any predictions about our future performance may not be as accurate as they could be if we had a history of successfully developing and commercializing pharmaceutical products.

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Risks Associated with Development and Commercialization of Our Product Candidates

We depend substantially on the success of our product candidates which are still under clinical development. We cannot assure you that our product candidates will receive regulatory approval or be successfully commercialized.

To date, we have not obtained marketing approval for, or marketed, distributed or sold any products. The success of our business depends primarily upon our ability to develop and commercialize our product candidates successfully.

Our product candidates are prone to the risks of failure inherent in drug development. Before obtaining regulatory approvals for the commercial sale of any product candidates for a target indication, we must demonstrate with substantial evidence gathered in preclinical and well- controlled clinical studies, and, with respect to approval in the United States, to the satisfaction of the U.S. FDA and, with respect to approval in other countries, similar regulatory authorities in those countries, that the product candidates are safe and effective for use for that target indication and that the manufacturing facilities, processes and controls are adequate. Despite our efforts, our product candidates may not:

· offer therapeutic or other improvement over existing, comparable therapeutics;

· be proven safe and effective in clinical studies;

· meet applicable regulatory standards;

· be capable of being produced in sufficient quantities at acceptable costs;

· be successfully commercialized; or

· obtain favorable reimbursement.

We are not permitted to market our product candidates in the United States until the U.S. FDA approves our biologics license applications, or BLAs, or in any foreign countries until we receive the requisite approval from such countries. We have not submitted any BLA or received marketing approval for our product candidates.

Preclinical testing and clinical studies are long, expensive and uncertain processes. We may spend several years completing our testing for any particular product candidate, and failure can occur at any stage. Negative or inconclusive results or adverse medical events during a clinical study could also cause the U.S. FDA or us to terminate a clinical study or require that we repeat it or conduct additional clinical studies. Additionally, data obtained from a clinical study are susceptible to varying interpretations and the U.S. FDA or other regulatory authorities may interpret the results of our clinical studies less favorably than we do. The U.S. FDA and equivalent foreign regulatory agencies have substantial discretion in the approval process and may decide that our data are insufficient to support a marketing application and require additional preclinical, clinical or other studies.

From time to time during the regulatory approval process of our product candidates, we engage in discussions with the U.S. FDA and other non-US regulatory authorities regarding the regulatory requirements for our development programs. We may receive informal verbal and or written guidance from these authority agencies which may help form the basis of our clinical trial designs. The U.S. FDA and other non-US regulatory agencies may change their position on such informal guidance prior to the approval of our product candidates. As a result, we are unable to determine whether the outcome of informal deliberations will become final. If we are unable to effectively and efficiently resolve and comply with inquires and requests from the U.S. FDA and other non-US regulatory authorities, the approval of our product candidates may be delayed and their value maybe be reduced.

Any termination or suspension of, or delays in the commencement or completion of, clinical testing of our product candidates could result in increased costs to us, delay or limit our ability to generate revenue and adversely affect our commercial prospect.

Delays in the commencement or completion of clinical testing could significantly affect our product development costs. We do not know whether planned clinical studies will begin on time or be completed on schedule, if at all. The commencement and completion of clinical studies can be delayed for numerous reasons, including delays related to:

obtaining regulatory approval to commence a clinical study or complying with conditions imposed by a regulatory authority regarding the scope or design of a clinical study;

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

manufacturing, including manufacturing sufficient quantities of product candidates or other materials for use in clinical studies;

· obtaining IRB, approval or the approval of other reviewing entities to conduct a clinical study at prospective sites; and

· recruiting and enrolling patients to participate in clinical studies for a variety of reasons, including size of patient population, nature of clinical study protocol, the availability of approved effective treatments for the relevant disease and competition from other clinical study programs for similar indications;22

· severe or unexpected drug-related adverse effects experienced by patients in a clinical study; and

· retaining patients who have initiated a clinical study, but may withdraw due to treatment protocol, adverse effects from the therapy, lack of efficacy from the treatment, personal issues or who are lost to further follow-up.

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~~Clinical~~· ~~studies~~recruiting ~~may~~and ~~also~~enrolling bepatients ~~delayed,~~to ~~suspended~~participate orin ~~terminated~~clinical asstudies for a ~~result~~variety of ~~ambiguous or negative interim results~~reasons, orincluding ~~results~~size ~~that~~of ~~are~~patient ~~inconsistent with earlier results. In addition~~population, anature of clinical study ~~may be suspended or terminated by us~~protocol, the ~~U.S.~~availability ~~FDA,~~of ~~the~~approved ~~IRB~~effective ortreatments ~~other~~for ~~reviewing entity overseeing~~ the ~~clinical~~relevant ~~study~~disease atand ~~issue,~~competition ~~any~~from ofother ~~our~~ clinical study ~~sites~~programs ~~with~~for ~~respect~~similar ~~to that site, or other regulatory authorities due to a number of factors, including:~~indications.

· failure to conduct the clinical study in accordance with regulatory requirements or our clinical protocols;

· inspection of the clinical study operations or study sites by the U.S. FDA or other regulatory authorities resulting in the imposition of a clinical hold;

· unforeseen safety issues or any determination that a clinical study presents unacceptable health risks; and

· lack of adequate funding to continue the clinical study, including the incurrence of unforeseen costs due to enrollment delays, requirements to conduct additional clinical studies and increased expenses associated with the services of our CROs and other third parties.

Product development costs to us will increase if we have delays in testing or approval of our product candidates or if we need to perform more or larger clinical studies than planned. We typically rely on third-party clinical investigators at medical institutions and health care facilities to conduct our clinical studies and, as a result, we may face additional delays outside our control.

Additionally, changes in regulatory requirements and policies may occur and we may need to amend clinical development plans or clinical study protocols to reflect these changes. Amendments may require us to resubmit our clinical study protocols to IRBs for re- examination, which may impact the costs, timing or successful completion of a clinical study. If we experience delays in completion of, or if we, the ~~U.S.~~ FDA or other regulatory authorities, the IRB or other reviewing entities, or any of our clinical study sites suspend or terminate any of our clinical studies, the commercial prospects for our product candidates may be harmed and our ability to generate product revenues will be delayed. In addition, many of the factors that cause, or lead to, termination or suspension of, or a delay in the commencement or completion of, clinical studies may also ultimately lead to the denial of regulatory approval of our product candidates. Also, if one or more clinical studies are delayed, our competitors may be able to bring products to market before we do, and the commercial viability of our product candidates could be significantly reduced.

Any delays in the development and validation of drug manufacturing processes for commercialization could result in increased costs to us, delay or limit our ability to generate revenue and adversely affect our commercial prospect.

Delays in the commencement or completion of drug manufacturing could significantly affect our readiness to commercialize our drug products. We do not know whether planned manufacturing processes will be successful or be completed on schedule. The development and validation of drug manufacturing processes can be delayed for numerous reasons, including delays related to:

· reaching agreement on acceptable terms with prospective chemical manufacturing organizations, or CMOs, the terms of which can be subject to extensive negotiation;

· lack of availability of raw materials;

· lack of adequate funding to continue the development and validation of drug manufacturing processes;

· inability to demonstrate of robustness of the process at our CMOs;

· equipment failure that results in the loss of some or all of a batch of manufactured drug;

· irregularities or errors in shipping between manufacturing facilities or distributors that result in the loss of some or all of a batch of drug; and

· uncontrollable natural forces that may render the CMO temporarily or permanently incapable of manufacturing our drugs.

Drug manufacturing may also be delayed, suspended or changed as a result of advice from regulatory authorities such as the U.S. FDA or other international regulatory authorities due to a number of factors, including:

· failure of the CMO to conform with appropriate quality standards; and

· inspection of the CMO by the U.S. FDA or other regulatory authorities resulting in the imposition of a manufacturing hold.

Additionally, changes in regulatory requirements and policies may occur and we may need to amend our manufacturing plans or processes to reflect these changes. Amendments to the processes may impact the costs, timing or successful completion development and validation of the drug manufacturing processes for commercialization. If we experience delays in completion of, or if we, the U.S. FDA or other regulatory authorities suspend or terminate any of our clinical studies, the commercial prospects for our product candidates may be harmed and our ability to generate product revenues will be delayed. In addition, many of the factors that cause, or lead to, termination or suspension of, or a delay in the commencement or completion of, product commercialization may also ultimately lead to the denial of regulatory approval of our product candidates. Also, if product commercialization is delayed, our competitors may be able to bring products to market before we do, and the commercial viability of our product candidates could be significantly reduced.

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Because the results of preclinical testing or earlier clinical studies are not necessarily predictive of future results, any product candidate we advance into clinical studies may not have favorable results in later clinical studies or receive regulatory approval.

Success in preclinical testing and early clinical studies does not ensure that later clinical studies will generate adequate data to demonstrate the efficacy and safety of an investigational drug or biologic. A number of companies in the pharmaceutical and biotechnology industries, including those with greater resources and experience, have suffered significant setbacks in Phase 3 clinical studies, even after seeing promising results in earlier clinical studies. Despite the results reported in earlier clinical studies for our product candidates, we do not know whether any Phase 3 or other clinical studies we may conduct will demonstrate adequate efficacy and safety to result in regulatory approval to market our product candidates. If later stage clinical studies do not produce favorable results, our ability to achieve regulatory approval for any of our product candidates may be adversely impacted. Even if we believe that our product candidates have performed satisfactorily in preclinical testing and clinical studies, we may nonetheless fail to obtain ~~U.S.~~ FDA or other regulatory authority approval for our product candidates.

If we breach the license ~~agreements~~agreement for ~~our product candidates~~blisibimod, we could lose the ability to continue the development and commercialization of ~~our product candidates~~blisibimod.

We are party to the Amgen Agreement, which provides for the exclusive worldwide licenses of the compositions of matter and methods of use for blisibimod, as well as non-exclusive worldwide licenses of compositions of matter and methods of use relating to peptibodies generally. We The ~~are~~agreement ~~also~~requires ~~party to the Lilly Agreement, which provides for an exclusive worldwide license of the compositions of matter, formulation, and methods of use patents for Sollpura. These agreements require~~ us to make timely milestone and royalty payments, provide regular information, maintain the confidentiality of and indemnify our licensors under the terms of the agreements.

If we fail to meet these obligations, our ~~licensors~~licensor may terminate our licenses and may be able to re-obtain licensed technologies and aspects of any intellectual properties controlled by us that relate to the licensed technologies that originated from our ~~licensors~~licensor. Our ~~licensors~~licensor could effectively take control of the development and commercialization of the licensed product candidates after an uncured, material breach of our license agreements by us or if we voluntarily terminate the agreements. While we would expect to exercise all rights and remedies available to us, including seeking to cure any breach by us, and otherwise seek to preserve our rights under the patents and patent applications licensed to us, we may not be able to do so in a timely manner, at an acceptable cost or at all. Any uncured, material breach under the license ~~agreements~~agreement could result in our loss of exclusive rights and may lead to a complete termination of our product development and any commercialization efforts for our product candidates.

Our industry is subject to intense competition. If we are unable to compete effectively, our product candidates may be rendered non-competitive or obsolete.

The pharmaceutical industry is highly competitive and subject to rapid and significant technological change. Our potential competitors include large pharmaceutical and more established biotechnology companies, specialty pharmaceutical and generic drug companies, academic institutions, government agencies and other public and private research organizations that conduct research, seek patent protection and establish collaborative arrangements for research, development, manufacturing and commercialization. All of these competitors currently engage in, have engaged in or may engage in the future in the development, manufacturing, marketing and commercialization of pharmaceuticals and biotechnologies, some of which may compete with our present or future product candidates. It is possible that any of these competitors could develop technologies or products that would render our product candidates obsolete or non-competitive, which could adversely affect our revenue potential. Key competitive factors affecting the commercial success of our product candidates are likely to be efficacy, safety profile, reliability, convenience of dosing, price and reimbursement.

The market for pancreatic enzyme replacement therapy is also highly competitive. There are currently several marketed products for EPI caused by cystic fibrosis, including Creon marketed by AbbVie, Inc., Pancreaze by Janssen Pharmaceuticals, Inc., Pertzye by Cornerstone Therapeutics, Inc., and Ultresa and Zenpep by Aptalis Pharma US. Inc. We are also aware of companies with other products in development that are being tested for potential treatment of EPI caused by cystic fibrosis: Johnson and Johnson Research and Development LLC recently completed a Phase 3 study to assess the effectiveness and safety of oral pancrelipase MT in the treatment of adult and pediatric/adolescent cystic fibrosis patients with clinical symptoms of EPI; Alcresta Therapeutics markets RELiZORB, a lipase enzyme cartridge designed for use by adults receiving nutrition by enteral tube who have trouble digesting and absorbing ingested fats; and AzurRx Biopharma’s MS1819 lipase is currently being tested in a Phase 2 trial in patients with chronic pancreatitis.23

Many of our potential competitors have substantially greater financial, technical and human resources than we do and significantly greater experience in the discovery and development of drug candidates, and in obtaining U.S. FDA and other regulatory approvals of products and the commercialization of those products. Accordingly, our competitors may be more successful than we may be in obtaining U.S. FDA approval for drugs and achieving widespread market acceptance. Our competitors’ drugs may be more effective, have fewer adverse effects, be less expensive to develop and manufacture or be more effectively marketed and sold than any product candidates we may commercialize and may render our product candidates obsolete or non-competitive before we can recover the expenses of developing and commercializing our product candidates. We anticipate that we will face intense and increasing competition as new drugs enter the market and advanced technologies become available. These entities may also establish collaborative or licensing relationships with our competitors. Finally, the development of new treatment methods for the diseases we are targeting could render our drugs non-competitive or obsolete. All these factors could adversely affect our business.

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Many of our potential competitors have substantially greater financial, technical and human resources than we do and significantly greater experience in the discovery and development of drug candidates, and in obtaining FDA and other regulatory approvals of products and the commercialization of those products. Accordingly, our competitors may be more successful than we may be in obtaining FDA and other regulatory approvals for drugs and achieving widespread market acceptance. Our competitors’ drugs may be more effective, have fewer adverse effects, be less expensive to develop and manufacture or be more effectively marketed and sold than any product candidates we may commercialize and may render our product candidates obsolete or non-competitive before we can recover the expenses of developing and commercializing our product candidates. We anticipate that we will face intense and increasing competition as new drugs enter the market and advanced technologies become available. These entities may also establish collaborative or licensing relationships with our competitors. Finally, the development of new treatment methods for the diseases we are targeting could render our drugs non-competitive or obsolete. All of these factors could adversely affect our business.

Our product candidates may cause undesirable adverse effects or have other properties that could delay or prevent their regulatory approval or limit the commercial profile of any approved label.

~~Undesirable~~Although we are not currently conducting any clinical studies, undesirable adverse effects caused by our product candidates could cause us, IRBs or other reviewing entities, clinical study sites, or regulatory authorities to interrupt, delay or halt clinical studies and could result in the denial of regulatory approval by the ~~U.S.~~ FDA or other regulatory authorities.

~~Sollpura,~~ If ~~which~~serious weadverse ~~licensed~~events ~~from~~related ~~Eli~~to ~~Lilly~~our inproduct ~~July~~candidates ~~2014,~~are ~~received~~observed ~~a complete response letter (“CRL”) from the U.S. FDA while it was under development by Eli Lilly~~ in ~~April~~any ~~2011.~~clinical ~~Eli~~studies, ~~Lilly~~our ~~has~~ability ~~attempted~~ to ~~address~~obtain ~~the~~regulatory ~~material~~approval ~~items~~for ~~highlighted~~our byproduct ~~the~~candidates ~~FDA~~may inbe ~~the~~adversely ~~CRL and worked directly with the U~~impacted.S. ~~FDA on a clinical development program for Sollpura which~~Further, if ~~successful,~~our ~~could~~product ~~result~~candidates inreceive ~~regulatory~~marketing approval ofand ~~Sollpura. There are still open items from the CRL that~~ we ~~will~~or ~~need~~others tolater ~~address~~discover, ~~with~~after ~~the~~approval ~~U.S. FDA. While we plan to make reasonable efforts to accommodate~~ and ~~address~~use ~~the~~in ~~U.S.~~an ~~FDA’s~~increasing ~~inquires~~number ~~and~~of ~~request~~patients, wethat ~~are~~our ~~unable~~products tocould ~~determine~~have ~~the~~adverse ~~final~~effect ~~outcome~~profiles ofthat ~~the~~limit ~~CRL.~~their ~~Any~~usefulness ~~delay~~or inrequire ~~addressing~~their ~~the~~withdrawal ~~CRL~~(whether toor not the ~~satisfaction~~therapies ofshowed the ~~U.S.~~adverse ~~FDA~~effect ~~may~~profile ~~result~~ in ~~postponement~~Phase of1 ~~our~~through Phase 3 clinical ~~trial~~studies), a number of ~~Sollpura~~potentially insignificant ~~patients~~negative ~~with~~consequences ~~EPI.~~could result, including:

If· ~~serious adverse events that are considered related to our product candidates are observed in any Phase 3 clinical studies, our ability to obtain~~ regulatory ~~approval~~authorities ~~for our product candidates~~ may bewithdraw ~~adversely~~their ~~impacted. Further, if our product candidates receive marketing~~ approval ~~and we or others later discover, after approval and use in an increasing number~~ of ~~patients, that our products could have adverse effect profiles that limit their usefulness~~ or ~~require~~revoke ~~their withdrawal (whether or not~~ the ~~therapies~~licenses ~~showed~~for the ~~adverse effect profile in Phase 1 through Phase 3 clinical studies), a number of potentially significant negative consequences could result, including:~~products;

· regulatory authorities may withdraw their approval of the products;

regulatory authorities may require the addition of labeling statements, such as warnings or contraindications;

we may be required to change the way the products are administered, conduct additional clinical studies or change the labeling of the products;

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

our reputation may suffer.

Any of these events could prevent us from achieving or maintaining market approval and acceptance of the affected product candidates and could substantially increase the costs of commercialization.

After the completion of our clinical studies, we cannot predict whether or when we will obtain regulatory approval to commercialize our product candidates and we cannot, therefore, predict the timing of any future revenue from the product candidates.

Even if we project positive clinical results and file for regulatory approval, we cannot commercialize any product candidate until the clinical and drug manufacturing data have been generated and submitted to the appropriate regulatory authorities, and they have reviewed and approved the applications for such product candidate. We cannot assure you that the regulatory agencies will complete their review processes in a timely manner or that we will obtain regulatory approval for any product candidates we develop. Satisfaction of regulatory requirements typically takes many years, is dependent upon the type, complexity and novelty of the product and requires the expenditure of substantial resources. In addition, we may experience delays or rejections based upon additional government regulation from future legislation or administrative action or changes in ~~U.S.~~ FDA policy during the period of product development, clinical studies and ~~U.S.~~ FDA regulatory review.

Even if our product candidates receive regulatory approval, they may still face future development and regulatory difficulties.

Even if U.S. regulatory approval is obtained, the ~~U.S.~~ FDA may still impose significant restrictions on a product’s indicated uses or marketing or impose ongoing requirements for potentially costly post-approval studies or post-market surveillance. For example, the label ultimately approved for blisibimod or Sollpura, if any, may include restrictions on use. Further, the ~~U.S.~~ FDA has indicated that long-term safety data on blisibimod may need to be obtained as a post-market requirement. Our product candidates will also be subject to ongoing ~~U.S.~~ FDA requirements governing the labeling, packaging, storage, distribution, safety surveillance, advertising, promotion, recordkeeping and reporting of safety and other post-market information. In addition, manufacturers of drug products and their facilities are subject to continual review and periodic inspections by the ~~U.S.~~ FDA and other regulatory authorities for compliance with current good manufacturing procedures, or cGMP, regulations. If we or a regulatory agency discovers previously unknown problems with our product candidates, such as adverse events of unanticipated severity or frequency, or problems with the facility where the products are manufactured, a regulatory agency may impose restrictions on the products, the manufacturing facility or us, including requiring recall or withdrawal of the products from the market or suspension of manufacturing. If we, our product candidates or the manufacturing facilities for our product candidates fail to comply with applicable regulatory requirements, a regulatory agency may:

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issue warning letters or untitled letters;

seek an injunction or impose civil or criminal penalties or monetary fines;

· suspend or withdraw regulatory approval or revoke a license;

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suspend any ongoing clinical studies;

refuse to approve pending applications or supplements to applications filed by us;

suspend or impose restrictions on operations, including costly new manufacturing requirements; or

seize or detain products, refuse to permit the import or export of products, or require us to initiate a product recall.

The occurrence of any event or penalty described above may inhibit our ability to commercialize our products and generate revenue.

If our product candidates for which we receive regulatory approval do not achieve broad market acceptance, the revenue that we generate from their sales, if any, will be limited.

The commercial success of our product candidates for which we obtain marketing approval from the ~~U.S.~~ FDA or other regulatory authorities will depend upon the acceptance of these products by the medical community, including physicians, patients and health care payors. The degree of market acceptance of our approved products will depend on a number of factors, including:

demonstration of clinical safety and efficacy compared to other products;

the relative convenience, ease of administration and acceptance by physicians and payors of our product candidates;

the prevalence and severity of any adverse effects;

· limitations or warnings contained in a product’s ~~U.S.~~ FDA-approved labeling;

availability of alternative treatments;

pricing and cost-effectiveness;

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

our ability to obtain and maintain sufficient third-party coverage or reimbursement from government health care programs, including Medicare and Medicaid; and

the willingness of patients to pay out-of-pocket in the absence of third-party coverage.

If our product candidates are approved but do not achieve an adequate level of acceptance by physicians, health care payors and patients, we may not generate sufficient revenue from these products, and we may not become or remain profitable. In addition, 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.

We face potential product liability exposure, and, if successful claims are brought against us, we may incur substantial liability.

The use of product candidates in clinical studies and the sale of any products for which we obtain marketing approval expose us to the risk of product liability claims. Product liability claims might be brought against us by consumers, health care providers, pharmaceutical companies or others selling or otherwise coming into contact with our products. If we cannot successfully defend ourselves against product liability claims, we could incur substantial liabilities. In addition, regardless of merit or eventual outcome, product liability claims may result in:

impairment of our business reputation;

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withdrawal of clinical study participants;

costs of related litigation;

distraction of management’s attention from our primary business;

substantial monetary awards to patients or other claimants;

the inability to commercialize product candidates; and

decreased demand for product candidates, if approved for commercial sale.

34Our product liability insurance coverage for our clinical studies may not be sufficient to reimburse us for all 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 and when we obtain marketing approval for any product candidate, we intend to expand our insurance coverage to include the sale of commercial products; however, we may be unable to obtain this product liability insurance on commercially reasonable terms. On occasion, large judgments have been awarded in class action lawsuits based on drugs that had unanticipated adverse effects. A successful product liability claim or series of claims brought against us could cause our stock price to decline and, if judgments exceed our insurance coverage, could decrease our cash and adversely affect our business.

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Our product liability insurance coverage for our clinical studies may not be sufficient to reimburse us for all 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 or when we obtain marketing approval for any product candidate, we intend to expand our insurance coverage to include the sale of commercial products; however, we may be unable to obtain this product liability insurance on commercially reasonable terms. On occasion, large judgments have been awarded in class action lawsuits based on drugs that had unanticipated adverse effects. A successful product liability claim or series of claims brought against us could cause our stock price to decline and, if judgments exceed our insurance coverage, could decrease our cash and adversely affect our business.

If we use hazardous and biological materials in a manner that causes injury or violates applicable law, we may be liable for damages.

Our research and development activities involve the controlled use of potentially hazardous substances, including toxic chemical and biological materials. We could be held liable for any contamination, injury or other damages resulting from these hazardous substances. In addition, our operations produce hazardous waste products. While third -parties are responsible for disposal of our hazardous waste, we could be liable under environmental laws for any required cleanup of sites at which our waste is disposed. Federal, state, foreign and local laws and regulations govern the use, manufacture, storage, handling and disposal of these hazardous materials. If we fail to comply with these laws and regulations at any time, or if they change, we may be subject to criminal sanctions and substantial civil liabilities, which may harm our business. Even if we continue to comply with all applicable laws and regulations regarding hazardous materials, we cannot eliminate the risk of accidental contamination or discharge and our resultant liability for any injuries or other damages caused by these accidents.

We rely on third parties to conduct, supervise and monitor our clinical studies, and those third parties may perform in an unsatisfactory manner, such as by failing to meet established deadlines for the completion of these clinical studies, or may harm our business if they suffer a catastrophic event.

We rely on third parties such as CROs, medical institutions and clinical investigators to enroll qualified patients and conduct, supervise and monitor our clinical studies. Our reliance on these third parties for clinical development activities reduces our control over these activities. Our reliance on these third parties, however, does not relieve us of our regulatory responsibilities, including ensuring that our clinical studies are conducted in accordance with good clinical practices, or GCP, and the investigational plan and protocols contained in the relevant regulatory application, such as the investigational new drug application, or IND. In addition, the CROs with whom we contract may not complete activities on schedule, or may not conduct our preclinical studies or clinical studies in accordance with regulatory requirements or our clinical study design. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, our efforts to obtain regulatory approvals for, and to commercialize, our product candidates may be delayed or prevented. In addition, if a catastrophe such as an earthquake, fire, flood or power loss should affect one of the third parties on which we rely, our business prospects could be harmed. For example, if a central laboratory holding all our clinical study samples were to suffer a catastrophic loss of their facility, we would lose all of our samples and would have to repeat our studies.

Any failure by our third-party manufacturers on which we rely to produce our preclinical and clinical drug supplies and on which we intend to rely to produce commercial supplies of any approved product candidates may delay or impair our ability to commercialize our product candidates.

We have relied upon third-party manufacturers and active pharmaceutical ingredient formulators for the manufacture of our material for preclinical and clinical testing purposes and intend to continue to do so in the future. We also expect to rely upon third parties to produce materials required for the commercial production of our product candidates if we succeed in obtaining necessary regulatory approvals. If we are unable to arrange for third-party manufacturing sources, or to do so on commercially reasonable terms, we may not be able to complete development of our product candidates or market them.

Reliance on third-party manufacturers entails risks to which we would not be subject if we manufactured product candidates ourselves, including reliance on the third party for regulatory compliance and quality assurance, the possibility of breach of the manufacturing agreement by the third party because of factors beyond our control (including a failure to synthesize and manufacture our product candidates in accordance with our product specifications) and the possibility of termination or nonrenewal of the agreement by the third party, based on its own business priorities, at a time that is costly or damaging to us. In addition, the U.S. FDA and other regulatory authorities require that our product candidates be manufactured according to cGMP and similar foreign standards. Any failure by our third-party manufacturers to comply with cGMP or failure to scale up manufacturing processes, including any failure to deliver sufficient quantities in a timely manner, could lead to a delay in, or failure to obtain, regulatory approval. In addition, such failure could be the basis for action by the U.S. FDA to withdraw approvals previously granted to us and for other regulatory action, including recall or seizure, total or partial suspension of production or injunction.

We rely on our manufacturers to purchase from third-party suppliers the materials necessary to produce drug product for our clinical studies. There are a small number of suppliers, and in some instances, a single supplier for certain capital equipment and raw materials that we use to manufacture drug product. Such suppliers may not sell these raw materials and equipment to our manufacturers at the times we need them or on commercially reasonable terms. We do not have any control over the process or timing of the acquisition of these raw materials and equipment by our manufacturers. Moreover, we currently do not have any agreements for the commercial production of these raw materials. Although we generally do not begin a clinical study unless we believe we have a sufficient supply of product candidates to complete the clinical study, any significant delay in the supply of product candidates or the raw material components thereof for an ongoing clinical study due to the need to replace a third-party manufacturer could considerably delay completion of our clinical studies, product testing and potential regulatory approval. If our manufacturers or we are unable to purchase these raw materials after regulatory approval has been obtained, the commercial launch would be delayed or there would be a shortage in supply of such product candidates, which would impair our ability to generate revenues from the sale of such product candidates.

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Because of the complex nature of our compounds, our manufacturers may not be able to manufacture our compounds at a cost or in quantities or in a timely manner necessary to make commercially successful products. If we successfully commercialize a product candidate, we may be required to establish large-scale commercial manufacturing capabilities. In addition, as our drug development pipeline increases and matures, we will have a greater need for clinical study and commercial manufacturing capacity. We have no experience manufacturing pharmaceutical products on a commercial scale and some of these suppliers will need to increase their scale of production to meet our projected needs for commercial manufacturing, which may not occur on a timely basis.

Some of our manufacturing suppliers are located overseas, and the transportation of drug supplies to or from these facilities to their intended destinations is subject to certain risks of loss and damage beyond our control. Additionally, the importation of drug supplies into and from foreign countries is subject to customs regulations that may require us to incur additional regulatory costs.

If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to market and sell our product candidates, we may be unable to generate any revenue.

We do not currently have an organization for the sales, marketing and distribution of pharmaceutical products and the cost of establishing and maintaining such an organization may exceed the cost-effectiveness of doing so. To market any products that may be approved by the U.S. FDA, we must build our sales, marketing, managerial and other non-technical capabilities or make arrangements with third parties to perform these services. If we are unable to establish adequate sales, marketing and distribution capabilities, whether independently or with third parties, we may not be able to generate product revenue and may not become profitable. 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.

Guidelines and recommendations published by various organizations may adversely affect the use of any products for which we may receive regulatory approval.

Government agencies issue regulations and guidelines directly applicable to us and to our product candidates. In addition, professional societies, practice management groups, private health or science foundations and organizations involved in various diseases from time to time publish guidelines or recommendations to the medical and patient communities. These various sorts of recommendations may relate to such matters as product usage and use of related or competing therapies. Changes to these recommendations or other guidelines advocating alternative therapies could result in decreased use of any products for which we may receive regulatory approval, which may adversely affect our results of operations.

Recently enacted and future legislation or regulatory requirements or reform of the health care system in the United States and foreign jurisdictions may affect our ability to sell our products profitably.

New federal legislation or regulatory requirements could affect the requirements for obtaining regulatory approvals of our product candidates or otherwise limit our ability to commercialize any approved products or subject our products to more rigorous post-approval requirements. New legislation and additional proposals if enacted, may make it more difficult or burdensome for us to obtain approval of our product candidates, any approvals we receive may be more restrictive or be subject to onerous post-approval requirements, our ability to successfully commercialize approved products may be hindered and our business may be harmed as a result.

Our ability to commercialize our future products successfully, alone or with collaborators, will depend in part on the extent to which reimbursement for the products will be available from government and health administration authorities, private health insurers and other third-party payors. The continuing efforts of the U.S. and foreign governments, insurance companies, managed care organizations and other payors of health care services to contain or reduce health care costs may adversely affect our ability to set prices for our products which we believe are fair, and our ability to generate revenues and achieve and maintain profitability.

~~Specifically,~~In ~~in both~~ the United States ~~and some foreign jurisdictions~~, there have been and continue to be a number of legislative and regulatory ~~proposals~~changes toand ~~change~~proposed ~~the~~changes ~~health~~regarding ~~care~~the healthcare system ~~in ways~~ that could prevent or delay marketing approval of our drug candidates, restrict or regulate post-approval activities and affect our ability to profitably sell ~~our~~any ~~products~~drug ~~profitably.~~candidates Infor ~~March~~which ~~2010,~~we ~~President~~obtain ~~Obama~~marketing ~~signed~~approval. ~~into~~For ~~law~~example, in 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or ~~collectively,~~ the ~~Health~~Affordable Care ~~Reform Law~~Act, aor ~~sweeping~~the ~~law~~ACA, ~~intended~~was ~~to broaden access to health insurance~~passed, ~~reduce~~which orsubstantially ~~constrain~~changed the ~~growth~~way ofhealth ~~healthcare~~care ~~spending,~~is ~~enhance~~financed ~~remedies~~by ~~against~~both ~~fraud~~governmental and ~~abuse~~private insurers, ~~add~~and ~~new~~significantly ~~transparency~~impacts ~~requirements~~the ~~for~~U.S. ~~healthcare~~pharmaceutical ~~and~~industry. ~~health~~The ~~insurance~~provisions ~~industries,~~of ~~impose~~the ~~new~~ACA ~~taxes~~of ~~and~~importance ~~fees~~to on the ~~health~~pharmaceutical ~~industry~~ and ~~impose~~biotechnology ~~additional~~industry ~~health~~are, ~~policy~~among ~~reforms.~~others, the following:

We· ~~will~~an not know the full effects of the Health Care Reform Law until applicable federal and state agencies issue regulations or guidance under the new law. Although it is too early to determine the effect of the Health Care Reform Lawannual, ~~the~~nondeductible ~~new~~fee ~~law appears likely to continue the pressure~~ on ~~pharmaceutical~~any ~~pricing,~~entity ~~especially~~that ~~under~~manufactures ~~the~~or ~~Medicare~~imports ~~program,~~certain ~~and~~branded ~~also~~prescription ~~may~~drugs ~~increase our regulatory burdens~~ and ~~operating~~biologic ~~costs. We expect further federal and state proposals and health care reforms to continue to be proposed by legislators~~agents, which ~~could~~is ~~limit~~apportioned ~~the~~among ~~prices~~these ~~that~~entities ~~can~~according beto ~~charged~~their ~~for~~market ~~any~~share ~~product~~in wecertain ~~develop~~government ~~and~~healthcare ~~may limit our commercial opportunity.~~programs;

~~Also~~· inan ~~the~~increase ~~United~~in ~~States,~~ the ~~Medicare~~statutory ~~Prescription~~minimum ~~Drug,~~rebates Improvement, and Modernization Act of 2003, also called the Medicare Modernization Act, or MMA, changed the way Medicare covers and pays for pharmaceutical products. The legislation expanded Medicare coverage for drug purchases by the elderly and introduced a ~~new~~manufacturer ~~reimbursement~~must ~~methodology~~pay ~~based~~under ~~on average sales prices for drugs. In addition, this legislation authorized Medicare Part D prescription drug plans to use formularies where they can limit~~ the ~~number~~Medicaid ofDrug ~~drugs~~Rebate ~~that~~Program ~~will be covered in any therapeutic class. As a result of this legislation and the expansion of federal coverage of drug products, we expect that there will be additional pressure~~ to ~~contain and reduce costs~~23.1% ~~These cost reduction initiatives~~ and ~~other~~13% ~~provisions~~ of ~~this legislation could decrease~~ the ~~coverage~~average ~~and~~manufacturer price ~~that we receive~~ for ~~any~~branded ~~approved products~~ and ~~could~~generic ~~seriously harm our business. While the MMA applies only to drug benefits for Medicare beneficiaries~~drugs, private payors often follow Medicare coverage policy and payment limitations in setting their own reimbursement rates, and any reduction in reimbursement that results from the MMA may result in a similar reduction in payments from private payors.respectively;

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~~The~~· ~~continuing~~a ~~efforts~~new ofMedicare ~~government~~Part ~~and~~D ~~other~~coverage ~~third-party~~gap ~~payors~~discount toprogram, ~~contain~~in orwhich ~~reduce~~manufacturers ~~the~~must ~~costs~~agree ~~of health care through various means may limit our commercial opportunity. It will be time-consuming and expensive for us~~ to gooffer ~~through~~50% ~~the process~~ point-of ~~seeking reimbursement from Medicare and private payors. Our products may not be considered cost~~-~~effective,~~sale ~~and~~discounts ~~government and third- party private health insurance coverage and reimbursement may not be available~~ to ~~patients~~negotiated ~~for~~prices ~~any~~ of ~~our~~applicable ~~future~~brand ~~products~~drugs ~~or sufficient~~ to ~~allow~~eligible usbeneficiaries toduring ~~sell~~their ~~our products on a competitive and profitable basis. Our results of operations could be adversely affected by the MMA, the Health Care Reform Law and additional prescription drug~~ coverage ~~legislation,~~gap ~~by the possible effect of this legislation on amounts that private insurers will pay and by other health care reforms that may be enacted or adopted in the future. In addition~~period, ~~increasing~~as ~~emphasis~~a oncondition ~~managed~~for ~~care in~~ the ~~United~~manufacturer’s ~~States~~outpatient ~~will~~drugs ~~continue~~ to ~~put~~be ~~pressure~~covered onunder ~~the~~Medicare ~~pricing~~Part of pharmaceutical products. Cost control initiatives could decrease the price that we or any potential collaborators could receive for any of our future products and could adversely affect our profitability.D;

extension of manufacturers’ Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations, unless the drug is subject to discounts under the 340B drug discount program;

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;

expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals and by adding new mandatory eligibility categories for certain individuals with income at or below 133% of the federal poverty level, thereby potentially increasing manufacturers’ Medicaid rebate liability;

expansion of healthcare fraud and abuse laws, including the False Claims Act and the Anti-Kickback Statute, new government investigative powers, and enhanced penalties for noncompliance;

expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program;

new requirements under the federal Physician Payments Sunshine Act for drug manufacturers to report information related to payments and other transfers of value made to physicians and teaching hospitals as well as ownership or investment interests held by physicians and their immediate family members;

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

creation of the Independent Payment Advisory Board, which, if and when impaneled, will have authority to recommend certain changes to the Medicare program that could result in reduced payments for prescription drugs; and

establishment of a Center for Medicare and Medicaid 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, however, there have been modifications and challenges to numerous aspects of the ACA:

In 2012, the U.S. Supreme Court heard challenges to the constitutionality of the individual mandate and the viability of certain provisions of the Healthcare Reform Act. The Supreme Court’s decision upheld most of the Healthcare Reform Act and determined that requiring individuals to maintain “minimum essential” health insurance coverage or pay a penalty to the Internal Revenue Service was within Congress’s constitutional taxing authority. However, as a result of tax reform legislation passed in late December 2017, the individual mandate has been eliminated. The long ranging effects of the elimination of the individual mandate on the viability of the ACA are unknown at this time.

On January 20, 2017, President Trump signed an Executive Order directing federal agencies with authorities and responsibilities under the ACA to waive, defer, grant exemptions from, or delay the implementation of any provision of the ACA that would impose a fiscal burden on states or a cost, fee, tax, penalty or regulatory burden on individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices.

On October 13, 2017, President Trump signed an Executive Order terminating the cost-sharing subsidies that reimburse insurers under the ACA. Several state Attorneys General filed suit to stop the administration from terminating the subsidies, but their request for a restraining order was denied by a federal judge in California on October 25, 2017.

CMS has recently proposed regulations that would give states greater flexibility in setting benchmarks for insurers in the individual and small group marketplaces, which may have the effect of relaxing the essential health benefits required under the ACA for plans sold through such marketplaces.

In 2018, litigation, regulation, and legislation related to the ACA are likely to continue, with unpredictable and uncertain results. The full impact of the ACA, any law repealing. replacing, and/or modifying elements of it, and the political uncertainty surrounding any repeal or replacement legislation on our business remains unclear.

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In addition, other legislative changes have been proposed and adopted that, directly or indirectly, affect or are likely to affect, the pharmaceutical industry and the commercialization of our products, including: the Budget Control Act of 2011; the American Taxpayer Relief Act of 2012; the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, also called the Medicare Modernization Act (“MMA”); and the Middle Class Tax Relief and Job Creation Act of 2012. We expect that any of these, as well as any healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and additional downward pressure on the price that we receive for any approved product. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our products.

Individual U.S. state governments have also become increasingly aggressive in passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our product candidates or additional pricing pressures. The continuing efforts of government and other third-party payors to contain or reduce the costs of health care through various means may limit our commercial opportunity. It will be time-consuming and expensive for us to go through the process of seeking reimbursement from Medicare and private payors. Our products may not be considered cost-effective, and government and third-party private health insurance coverage and reimbursement may not be available to patients for any of our future products or sufficient to allow us to sell our products on a competitive and profitable basis. Our results of operations could be adversely affected by the MMA, attempts to repeal, replace, or modify the ACA, additional prescription drug coverage legislation, and by other health care reforms that may be enacted or adopted in the future. In addition, increasing emphasis on managed care in the United States will continue to put pressure on the pricing of pharmaceutical products. Cost control initiatives could decrease the price that we or any potential collaborators could receive for any of our future products and could adversely affect our profitability.

In some foreign countries, including major markets in the EU and Japan, the pricing of prescription pharmaceuticals is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take six to 12 months or longer after the receipt of regulatory marketing approval for a product. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical study that compares the cost-effectiveness of our product candidates to other available therapies. Such pharmacoeconomic studies can be costly and the results uncertain. Our business could be harmed if reimbursement of our products is unavailable or limited in scope or amount or if pricing is set at unsatisfactory levels.

~~Our future success depends on our ability to retain our chief executive officer and other key executives and to attract, retain and motivate qualified personnel.~~28

WeTable are highly dependent on Mr. Craig Thompson, our Chief Executive Officer, Dr. William R. Shanahan, our Chief Medical Officer, Dr. Renee Martin, our Senior Vice President, Medical Sciences, and the other principal members of our executive team. The loss of the services of any of these persons might impede the achievement of our research, development and commercialization objectives. Recruiting and retaining qualified scientific personnel and possibly sales and marketing personnel will also be critical to our success. We may not be able to attract and retain these 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 personnel from universities and research institutions. Failure to succeed in clinical studies may make it more challenging to recruit and retain qualified scientific personnel. 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 employed by employers other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us.Contents

We are subject to healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings.

Healthcare providers, physicians and others will play a primary role in the recommendation and prescription of our product candidates, if approved. Our future arrangements with third-party payors will expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell and distribute our product candidates, if we obtain marketing approval. In addition, we may be subject to patient privacy regulation by both the federal government and the states in which we conduct our business. Restrictions under applicable federal and state healthcare laws and regulations include the following:

The federal Anti-Kickback Statute prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or paying remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, order or recommendation of, any good or service for which payment may be made under federal healthcare programs such as Medicare and Medicaid.

The federal false claims laws impose criminal and civil penalties, including those from civil whistleblower or qui tam actions pursuant to the federal False Claims Act, against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease, or conceal an obligation to pay money to the federal government.

The federal Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act, imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program and also imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information.

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

The federal transparency requirements, sometimes referred to as the “Sunshine Act,” under the Patient Protection and Affordable Care Act, require manufacturers of drugs, devices, biologics, and medical supplies to report to the Department of Health and Human Services information related to physician payments and other transfers of value and physician ownership and investment interests.

HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, and their respective implementing regulations, which impose requirements on certain covered healthcare providers, health plans, and healthcare clearinghouses as well as their respective business associates that perform services for them that involve the use, or disclosure of, individually identifiable health information, relating to the privacy, security and transmission of individually identifiable health information.

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

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

Ensuring that our future business arrangements with third-parties comply with applicable healthcare laws and regulations could be costly. It is possible that governmental authorities will conclude that our business practices do not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations, including anticipated activities to be conducted by our sales team, were found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines and exclusion from government funded healthcare programs, such as Medicare and Medicaid, any of which could substantially disrupt our operations. If any of the physicians or other providers or entities with whom we expect to do business is found not to be in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.

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Risks Related to the Securities Markets and Investment in Our Common Stock

We are subject to securities litigation, which is expensive and could divert management attention.

Our share price has been and may continue to be volatile. Companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We are a target of this type of litigation. For example, on February 13, 2017, a complaint was filed in the United States District Court for the Northern District of California captioned Brian Clevlen v. Anthera Pharmaceuticals, Inc., et al., Case No. 3:17- cv-715, on behalf of a putative class of the Company’s stockholders against the Company and certain of its current and former officers that was voluntarily dismissed, as discussed in Item 3. Legal Proceedings. Litigation of this type could result in substantial costs and diversion of management’s attention and resources, which could adversely impact our business. Any adverse determination in litigation could also subject us to significant liabilities.

Our common stock is currently at risk for delisting from NASDAQ. Delisting could adversely affect the liquidity of our common stock and the market price of our common stock could decrease.

Our common stock is currently listed on The NASDAQ ~~Global~~Capital Market (“NASDAQ”). NASDAQ has minimum requirements that a company must meet to remain listed on NASDAQ. ~~These~~To ~~requirements~~be ~~include~~listed ~~maintaining~~under the Equity Standard 5505(a) and 5505(b) (1), a company must maintain a minimum closing bid price of $1.00 per share ~~under Listing Rule 5450(a)(1) and maintaining~~ , stockholders’ equity at ~~above~~no ~~$10~~less ~~million~~than ~~or market value at above~~ $502.5 million, ~~pursuant~~and topublicly ~~Nasdaq~~held ~~Listing~~shares ~~Rules~~of ~~5450(a)~~at ~~and~~least ~~5450(b)~~500,000 ~~respectively. On~~by ~~May~~at ~~15,~~least ~~2017,~~300 weholders ~~received~~with amarket ~~letter~~value ~~from~~of ~~NASDAQ~~at ~~informing~~least us$1 ~~that~~million. To ~~our~~be ~~most~~listed ~~recent~~under ~~Form 10-Q for~~ the ~~period~~Market ~~ended~~Value ~~March 31, 2017 reported stockholders’ equity fell below the minimum~~ of ~~$10~~Listed ~~million~~Securities ~~for~~Standard ~~continued~~5505(a) ~~inclusion~~and ~~under Listing Rule 5450~~5505(b) (12)~~(A). We~~, ~~submitted~~ a ~~compliance~~company ~~plan~~must tomaintain ~~NASDAQ~~the onsame ~~June~~minimum ~~28,~~closing ~~2017. Based~~bid ~~on our submission~~price, ~~NASDAQ~~publicly ~~has~~held ~~determined~~shares toand ~~grant~~public usholders anas ~~extension~~the ~~until~~Equity ~~November 13~~Standard, ~~2017~~and tomust ~~regain~~maintain ~~compliance~~a ~~with~~market ~~Listing~~value ~~Rule~~of ~~5450~~listed ~~(b)(1)(A). After~~securities ~~the~~of ~~expiration~~no ofless ~~the~~than ~~extension~~$35 ~~period~~million, webut ~~plan~~does tonot ~~submit~~need ~~a request~~ to maintain a ~~Hearings~~minimum ~~Panel~~shareholders’ ~~(the~~equity ~~“Panel”)~~requirement. We ~~for~~currently ~~further~~do ~~extension~~not ~~pursuant~~meet ~~to procedures set forth in~~ the ~~Nasdaq~~minimum ~~Listing~~closing ~~5800~~bid ~~Series. A~~price ~~hearing~~requirement ~~request will stay the suspension~~ of ~~our~~both ~~stock~~listing ~~pending the Panel’s decision~~standards.

If our common stock were to be delisted, the liquidity of our common stock would be adversely affected and the market price of our common stock could decrease. In addition, if delisted we would no longer be subject to NASDAQ rules, including rules requiring us to have a certain number of independent directors and to meet other corporate governance standards. Our failure to be listed on NASDAQ or another established securities market would have a material adverse effect on the value of your investment in us.

If our common stock is not listed on NASDAQ or another national exchange, the trading price of our common stock is below $5.00 per share and we have net tangible assets of $6.0 million or less, the open-market trading of our common stock will be subject to the “penny stock” rules promulgated under the Securities Exchange Act of 1934, as amended. If our shares become subject to the “penny stock” rules, broker-dealers may find it difficult to effectuate customer transactions and trading activity in our securities may be adversely affected. Under these rules, broker-dealers who recommend such securities to persons other than institutional accredited investors must:

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make a special written suitability determination for the purchaser;

receive the purchaser’s written agreement to the transaction prior to sale;

provide the purchaser with risk disclosure documents which identify certain risks associated with investing in “penny stocks” and which describe the market for these “penny stocks” as well as a purchaser’s legal remedies; and

· obtain a signed and dated acknowledgement from the purchaser demonstrating that the purchaser has actually received the required risk disclosure document before a transaction in a “penny stock” can be completed.

As a result of these requirements, the market price of our securities may be adversely impacted, and current stockholders may find it more difficult to sell our securities.

Our stock price has been and will likely continue to be volatile, which could result in the decline of the value of your investment in our common stock or class action litigation against us and our management, which could cause us to incur substantial costs and divert management’s attention and resources.

The market price for our common stock has been and is likely to continue to be volatile. In addition, the market price of our common stock may fluctuate significantly in response to a number of factors, most of which we cannot predict or control, including:

plans for, progress in and results from clinical studies for our product candidates;

announcements of new products, services or technologies, commercial relationships, acquisitions or other events by us or our competitors;

developments concerning proprietary rights, including those pertaining to patents patent applications held by our licensors;

failure of any of our product candidates, if approved, to achieve commercial success;

· fluctuations in stock market prices and trading volumes of securities of similar companies;

general market conditions and overall fluctuations in U.S. equity markets;

variations in our operating results, or the operating results of our competitors;

changes in our financial guidance or securities analysts’ estimates of our financial performance;

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changes in accounting principles;

sales of large blocks of our common stock, including sales by our executive officers, directors and significant stockholders;

publication of research reports about us or our industry or positive or negative recommendations or withdrawal of research coverage by securities analysts;

additions or departures of any of our key personnel;

announcements related to litigation;

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

· delisting from the NASDAQ Global Market; and

discussion of us or our stock price by the financial press and in online investor communities.

Although our common stock is listed for trading on the NASDAQ ~~Global Market~~, our securities have been relatively thinly traded. Investor trading patterns could serve to exacerbate the volatility of the price of the stock. Accordingly, it may be difficult to sell shares of common stock quickly without significantly depressing the value of the stock. Unless we are successful in developing continued investor interest in our stock, sales of our stock could result in major fluctuations in the price of the stock. In addition, the stock market in general, and ~~The~~ NASDAQ ~~Global Market~~ in particular, have experienced substantial price and volume volatility that is often seemingly unrelated to the operating performance of particular companies. These broad market fluctuations may cause the trading price of our common stock to decline. In the past, securities class action litigation has often been brought against a company after a period of volatility in the market price of its common stock. Securities litigation against us, including as discussed elsewhere in this ~~form~~Form 10-QK, could result in substantial expenses and the diversion of our management’s attention and resources and could harm our business, operating results and financial condition.

38Future sales of our common stock by the selling stockholders could cause our stock price to decline.

~~Table~~Sales of ~~Contents~~a substantial number of shares of our common stock by the selling stockholders in the public market or the perception that these sales might occur, could depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities, even if there is no relationship between such sales and the performance of our business.

~~Future~~As ~~sales~~of April 30, 2018, there were 26,179,302 shares of our common stock ~~may~~outstanding. In ~~cause~~addition, we had outstanding options and warrants to purchase 25,450,109 shares of our common stock that, if converted and exercised, will result in these additional shares becoming available for sale. A large portion of these shares and outstanding equity awards are held by a small number of persons and investment funds. Sales by these stockholders or option holders in the public market or the perception that these sales might occur, could depress the market price of our common stock and could impair our ability to ~~decline~~raise capital through the sale of additional equity securities, even if there is no relationship between such sales and the performance of our business.

As of the date of this report, we have 13,849,678 shares of common stock, 10,945,019 shares of warrants, and 1,036,121 shares of stock options outstanding. Furthermore, on October 23, 2017, we entered into a Securities Purchase Agreement for a private placement of securities with a select group of accredited investors. The private placement is structured with two closings. The initial closing was completed on October 27, 2017. The second closing for 7,625,741 shares of our common stock and 2,067,522 shares of our non-voting Class Y Convertible Preferred Stock, convertible into 2,067,522 shares of our common stock upon certain conditions, is subject to stockholders approval, which we plan to obtain in the first quarter of 2018. Each share of common stock or Class Y Preferred Stock will be issued with a warrant that is immediately exercisable to purchase 1.0 additional share of our common stock for a total of 9,693,263 shares of common stock. If the warrants and options were exercised, they will result in significant additional shares becoming available for sale. Sales by these stockholders or option holders of a substantial number of shares could reduce the market price of our common stock. Moreover, certain holders of shares of common stock will have rights, subject to some conditions, to require us to file registration statements covering the shares they currently hold, or to include these shares in registration statements that we may file for ourselves or other stockholders.

In addition, we may sell shares of stock pursuant to the 2017 Purchase Agreement executed in June 2017 under which we have the right, but not obligation, to sell up to an aggregate of $10.0 million in shares of our common stock and issue up to 181,807 in shares of our common stock as commitment fee to LPC. There is $8.2 million available for future issuance pursuant to the equity purchase agreement as of September 30, 2017. The 2017 Purchase Agreement will expire on December 19, 2019.

We will need to raise additional capital to fund our operations, which may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights.

We ~~will~~may ~~need to~~ seek additional capital through a combination of private and public equity offerings, debt financings and collaboration, strategic and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest may be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a stockholder. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions such as incurring debt, making capital expenditures or declaring dividends. If we raise additional funds through collaboration, strategic alliance and licensing arrangements with third -parties, we may have to relinquish valuable rights to our technologies or product candidates or grant licenses on terms that are not favorable to us.

Operating as a public company increases our expenses and administrative burden.

As a public company, we incur significant legal, accounting and other expenses that we ~~did~~would not incur as a private company. ~~In addition, our administrative staff will be required to perform additional tasks.~~ For example, the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, as well as rules subsequently implemented by the SEC and The ~~NASDAQ~~Nasdaq ~~Global~~Capital Market, impose various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices. We must also bear all of the internal and external costs of preparing and distributing periodic public reports in compliance with our obligations under the securities laws.

In particular, the Sarbanes-Oxley Act requires, among other things, that we maintain effective internal control over financial reporting and disclosure controls and procedures. We must perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on the effectiveness of our internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. Our compliance with Section 404 will require that we incur substantial accounting expense and expend significant management time on compliance-related issues. Moreover, if we are not able to comply with the requirements of Section 404 in a timely manner, our stock price could decline, and we could face sanctions, delisting or investigations by The ~~NASDAQ~~Nasdaq ~~Global~~Capital Market, or other material adverse effects on our business, reputation, results of operations, financial condition or liquidity.

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We do not intend to pay dividends on our common stock so any returns will be limited to the value of our stock.

We have never declared or paid any cash dividend on our common stock. 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. Any return to stockholders will therefore be limited to the value of their stock.

Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us, 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 amended and restated certificate of incorporation and amended and restated bylaws may delay or prevent an acquisition of us or a change in our management. These provisions include:

a classified and staggered board of directors whose members can only be dismissed for cause;

the prohibition on actions by written consent of our stockholders;

the limitation on who may call a special meeting of stockholders;

39· the establishment of advance notice requirements for nominations for election to our Board of Directors or for proposing matters that can be acted upon at stockholder meetings;

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· the establishment of advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon at stockholder meetings;

the ability of our board of directors to issue preferred stock without stockholder approval, which would increase the number of outstanding shares and could thwart a takeover attempt; and

the requirement of at least 75% of the outstanding common stock to amend any of the foregoing provisions.

In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which limits the ability of stockholders owning in excess of 15% of our outstanding voting stock to merge or combine with us. Although we believe these provisions collectively provide for an opportunity to obtain greater value for stockholders by requiring potential acquirers to negotiate with our ~~board~~Board of ~~directors~~Directors, they would apply even if an offer rejected by our ~~board~~Board of Directors were considered beneficial by some stockholders. In addition, 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~~Board of ~~directors~~Directors, which is responsible for appointing the members of our management.

Our ability to use our net operating loss carryforwards may be subject to limitation and may result in increased future tax liability to us.

Generally, a change of more than 50% in the ownership of a corporation’s stock, by value, over a three-year period constitutes an ownership change for U.S. federal income tax purposes. An ownership change may limit a company’s ability to use its net operating loss carryforwards attributable to the period prior to such change. We underwent an ownership ~~change~~changes within the meaning of Section 382 ownership of the Internal Revenue Code during 2012 and in January 2018, as such, our net operating loss carryforwards are limited. In addition, the pre-change R&D tax credits have also been limited for federal tax purposes. ~~Our outstanding common shares have increased significantly since 2012.~~ ~~As such, we believe we have underwent further ownership change within the meaning of Section 382 and therefore further limit our net operating loss carryforwards and R&D credits.~~ If we earn net taxable income, our ability to use our pre-change net operating loss carryforwards to offset U.S. federal taxable income will be subject to limitations, which will result in increased future tax liability to us.

We may be unable to issue securities under our shelf registration statement, which may have an adverse effect on our liquidity.

We have filed a shelf registration statement on Form S-3 with the SEC. The registration statement is subject to Instruction I.B.6. of Form S-3, which imposes a limitation on the maximum amount of securities that we may sell pursuant to the registration statement during any twelve-month period. When we sell securities pursuant to the registration statement, the amount of securities to be sold plus the amount of any securities we have sold during the prior twelve months in reliance on Instruction I.B.6. may not exceed one-third of the aggregate market value of our outstanding common stock held by non-affiliates as of a day during the 60 days immediately preceding such sale, as computed in accordance with Instruction I.B.6. Based on this calculation and the current market value of our outstanding common stock, we expect that we will be significantly limited, ~~and likely unable~~ to ~~sell~~selling additional securities pursuant to our effective registration statement on Form S-3 ~~for a period of twelve months from March 16~~, ~~2017,~~ unless and until the market value of our outstanding common stock held by non-affiliates increases significantly. If we cannot sell securities under our shelf registration, we may be required to utilize more costly and time-consuming means of accessing the capital markets, which could materially adversely affect our liquidity and cash position.

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Risks Related to Our Intellectual Property

If our or our licensors’ patent positions do not adequately protect our product candidates or any future products, others could compete with us more directly or prevent us from commercializing our products, which would harm our business.

We hold license rights to ~~numerous~~ U.S., numerous European (“EP”), and non-EP foreign patents and patent applications relating to blisibimod and Sollpura. Our Sollpura portfolio is made up of exclusively licensed patents and patent applications from Eli Lilly. Our blisibimod portfolio is made up of exclusively and non-exclusively licensed patents and patent applications from Amgen, ~~Inc.,~~ as well as U.S. and Patent Cooperation Treaty (“PCT”) patent applications owned by us.

Our commercial success will depend in part on our and our licensors’ ability to obtain additional patents and protect our existing patent positions, particularly those patents for which we have secured exclusive rights, as well as our ability to maintain adequate protection of other intellectual property for our technologies, product candidates and any future products in the United States and other countries. If we or our licensors do not adequately protect our intellectual property, competitors may be able to use our technologies and erode or negate any competitive advantage we may have, which could materially harm our business, negatively affect our position in the marketplace, limit our ability to commercialize our product candidates and delay or render impossible our achievement of profitability. The laws of some foreign countries do not protect our proprietary rights to the same extent as the laws of the United States, and we may encounter significant problems in protecting our proprietary rights in these countries.

The patent positions of biotechnology and pharmaceutical companies, including our patent position, involve complex legal and factual questions, and, therefore, validity and enforceability cannot be predicted with certainty. Patents may be challenged, deemed unenforceable, invalidated or circumvented. We and our licensors will be able to protect our proprietary rights from unauthorized use by third -parties only to the extent that our proprietary technologies, product candidates and any future products are covered by valid and enforceable patents or are effectively maintained as trade secrets.

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The degree of future protection for our proprietary rights is uncertain, and we cannot ensure that:

we or our licensors were the first to make the inventions covered by each of our pending patent applications;

we or our licensors were the first to file patent applications for these inventions;

others will not independently develop similar or alternative technologies or duplicate any of our technologies;

any of our or our licensors’ pending patent applications will result in issued patents;

any of our or our licensors’ patents will be valid or enforceable;

· any patents issued to us or our licensors and collaborators will provide a basis for commercially viable products, will provide us with any competitive advantages or will not be challenged by third -parties;

we will develop additional proprietary technologies or product candidates that are patentable; or

the patents of others will not have an adverse effect on our business.

We are aware of two third-party issued United States patents that contain broad claims related to BLyS or BAFF binding polypeptides. Based on our analyses, if these patents were asserted against us, we do not believe that blisibimod would be found to infringe any valid claim of these patents. If we were to challenge the validity of either of these issued United States patent in court, we would need to overcome the presumption of validity that attaches to every United States patent by presenting clear and convincing evidence as to the invalidity of the patent’s claims. There is no assurance that a court would find in our favor on questions of infringement or validity, and we could incur substantial costs in litigation if we are required to defend against patent suits brought by third -parties or if we initiate these suits. If third -party patents are determined to be valid and construed to cover blisibimod, the development and commercialization of this program could be affected, subjecting us to potential liability for damages and in addition may require us to obtain a license to continue marketing the affected product. Such a license may not be available on commercially acceptable terms, if at all.

We may be unable to adequately prevent disclosure of trade secrets and other proprietary information.

We rely on trade secrets to protect our proprietary know-how and technological advances, especially where we do not believe patent protection is appropriate or obtainable. However, trade secrets are difficult to protect. We rely in part on confidentiality agreements with our employees, consultants, outside scientific collaborators, sponsored researchers and other advisors to protect our trade secrets and other proprietary information. These agreements may not effectively prevent disclosure of confidential information and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. In addition, others may independently discover our trade secrets and proprietary information. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights. Failure to obtain or maintain trade secret protection could enable competitors to use our proprietary information to develop products that compete with our products or cause additional, material adverse effects upon our competitive business position.

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We license patent rights from third-party owners. If we, or such owners, do not properly maintain or enforce the patents underlying such licenses, our competitive position and business prospects will be harmed.

We are party to a license agreement with Amgen that provides exclusive and worldwide rights to develop and commercialize the novel BAFF inhibitor blisibimod, as well as non-exclusive rights to certain technology relating to peptibody compositions and formulations. We are also a party to a license agreement with Eli Lilly and Company that provides exclusive and worldwide rights to develop and commercialize Sollpura, as well as non-exclusive rights to certain technology relating to Sollpura compositions and formulations.

We depend in part on our licensors to protect the proprietary rights covering blisibimod and Sollpura. Our licensors are responsible for maintaining certain issued patents and prosecuting certain patent applications. We have limited, if any, control over the amount or timing of resources that our licensors devote on our behalf or the priority they place on maintaining these patent rights and prosecuting these patent applications to our advantage. Our licensors may also be notified of alleged infringement and be sued for infringement of third-party patents or other proprietary rights. We may have limited, if any, control or involvement over the defense of these claims, and our licensors could be subject to injunctions and temporary or permanent exclusionary orders in the United States or other countries. Our licensors are not obligated to defend or assist in our defense against third-party claims of infringement. We have limited, if any, control over the amount or timing of resources, if any, that our licensors devote on our behalf or the priority they place on defense of such third-party claims of infringement.

Our success will depend in part on the ability of us or our licensors to obtain, maintain and enforce patent protection for their intellectual property, in particular, those patents to which we have secured exclusive rights. We or our licensors may not successfully prosecute the patent applications which we have licensed. Even if patents issue in respect of these patent applications, we or our licensors may fail to maintain these patents, may determine not to pursue litigation against other companies that are infringing these patents or may pursue such litigation less aggressively than we would. Without protection for the intellectual property we license, other companies might be able to offer substantially identical products for sale, which could adversely affect our competitive business position and harm our business prospects.

41If we do not obtain protection under the Hatch-Waxman Amendment and similar foreign legislation to extend our licensed patent terms and/or we do not obtain market exclusivity for our product candidates, our business will be materially harmed.

~~Table~~The Drug Price Competition and Patent Term Restoration Act of ~~Contents~~1984, referred to as the Hatch-Waxman Amendment provides for an extension of patent term for drug compounds for a period of up to five years to compensate for time spent in clinical testing and the regulatory approval process. If the USPTO grants a five-year patent term extension for Sollpura and for blisibimod and if we continue to have rights under our license agreements with respect to both, our exclusive rights to one of Sollpura’s U.S. composition of matter patents could extend until 2030 or 2033 and our exclusive rights to one of blisibimod’s U.S. composition of matter patents could extend until 2027 or 2028. In Europe, similar legislative enactments allow patent terms in the European Union to be extended for up to five years through the grant of a Supplementary Protection Certificate. If each European country where we seek such grants a five-year extension for Sollpura and for blisibimod and if we continue to have rights under our license agreements with respect to both, our exclusive rights to Sollpura’s European composition of matter patents could extend until 2026 or 2030, and our exclusive rights to blisibimod’s European composition of matter patents could extend until 2027 in those European countries.

If we do not obtain protection under the Hatch-Waxman Amendments and similar foreign legislation to extend our licensed patent terms and/or we do not obtain market exclusivity for our product candidates, our business will be materially harmed.

The Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the Hatch-Waxman Amendments, provides for an extension of patent term for drug compounds for a period of up to five years to compensate for time spent in clinical testing and the regulatory approval process. If the USPTO grants a five-year patent term extension for liprotamase and for blisibimod, and if we continue to have rights under our license agreements with respect to both, our exclusive rights to one of liprotamase’s U.S. composition of matter patents could extend until 2030 or 2033. and our exclusive rights to one of blisibimod’s U.S. composition of matter patents could extend until 2027 or 2028. In Europe, similar legislative enactments allow patent terms in the European Union to be extended for up to five years through the grant of a Supplementary Protection Certificate. If each European country where we seek such extension grants a five-year extension for liprotamase and for blisibimod, and if we continue to have rights under our license agreements with respect to both, our exclusive rights to liprotamase’s European composition of matter patents could extend until 2026 or 2030, and our exclusive rights to blisibimod’s European composition of matter patents could extend until 2027 in those European countries.

However, we may not be granted an extension in a particular country if we, for example, fail to apply within applicable deadlines, fail to apply prior to expiration of relevant patents or otherwise fail to satisfy applicable requirements. Moreover, the applicable time period of the extension or the scope of patent protection afforded could be less than we request. If we are unable to obtain patent term extension or restoration of the term of any such extension is less than we request, our competitors, including manufacturers of generic alternatives, may obtain approval of competing products following our patent expiration, and our revenue could be reduced, possibly materially.

Further, since neither ~~liprotamase~~ Sollpura nor blisibimod have been previously approved in the U.S., both may be eligible for 12 years of biologic data exclusivity from the ~~U.S.~~ FDA. During this data exclusivity period, competitors are barred from relying on the innovator biologic’s safety and efficacy data to gain approval. Similarly, the European Union provides that companies who receive regulatory approval for a new biologic will have a 10-year period of data exclusivity for that biologic (with the possibility of a further one-year extension) in most EU countries, beginning on the date of such European regulatory approval, regardless of when the European composition of matter patent covering such biologic expires. A generic version of the approved drug may not be marketed or sold during such market exclusivity period. The law governing biologic data exclusivity in the U.S. is complex and is still being interpreted and implemented by the FDA. As a result, its ultimate impact, implementation, and meaning are subject to uncertainty. While it is uncertain when such processes intended to implement the Biologics Price Competition and Innovation Act of 2009 may be fully adopted by the FDA, any such processes could have a material adverse effect on the future commercial prospects for liprotamase or blisibimod. For example, there is a risk that the 12-year period of exclusivity could be shortened due to congressional action or otherwise, or that the FDA will not consider liprotamase or blisibimod to be a reference product for competing products, potentially creating the opportunity for competition sooner than anticipated. Moreover, the extent to which a biosimilar, once approved, will be substituted for liprotamase or blisibimod in a way that is similar to traditional generic substitution for non-biological products is not yet clear, and will depend on a number of marketplace and regulatory factors that are still developing.

~~There~~Similarly, isthe noEuropean ~~assurance~~Union provides that wecompanies ~~will~~who receive ~~extensions~~regulatory approval for ~~our~~a ~~patents~~new ~~under~~biologic will have a 10-year period of data exclusivity for that biologic (with the ~~Hatch~~possibility of a further one-~~Waxman~~year ~~Amendment~~extension) orin ~~similar~~most ~~foreign~~EU ~~legislation~~countries, beginning on the date of such European regulatory approval, regardless of when the European composition of matter patent covering such biologic expires. A generic version of the approved drug may not be marketed or ~~that~~sold weduring ~~will~~such ~~receive~~market exclusivity period. The law governing biologic data exclusivity orin ~~other~~the ~~exclusive~~U.S. ~~marketing~~is ~~rights~~complex and is still being interpreted and implemented by the FDA. As Ifa weresult, ~~fail~~its ultimate impact, implementation, and meaning are subject to ~~receive~~uncertainty. While it is uncertain when such ~~extensions~~processes orintended ~~exclusivities~~to implement the Biologics Price Competition and Innovation Act of 2009 may be fully adopted by the FDA, orany ifsuch weprocesses ~~receive~~could ~~extensions~~have a material adverse effect on the future commercial prospects for Sollpura or blisibimod. For example, there is a risk that the 12-year period of exclusivity ~~periods~~could be shortened due to congressional action or otherwise, or that ~~are~~the ~~materially~~FDA ~~shorter~~will not consider Sollpura or blisibimod to be a reference product for competing products, potentially creating the opportunity for competition sooner than ~~expected~~anticipated. Moreover, ~~our~~the ~~ability~~extent to ~~prevent~~which ~~competitors~~a ~~from~~biosimilar, ~~manufacturing~~once approved, ~~marketing~~will ~~and~~be ~~selling~~substituted ~~biosimilars~~for Sollpura or blisibimod in a way that is similar to traditional generic substitution for non-biological products is not yet clear, and will bedepend ~~materially~~on ~~harmed~~a number of marketplace and regulatory factors that are still developing.

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There is no assurance that we will receive extensions for our patents available under the Hatch-Waxman Amendment or similar foreign legislation, or that we will receive data exclusivity or other exclusive marketing rights. If we fail to receive such extensions or exclusivities or if we receive extensions or exclusivity periods that are materially shorter than expected, our ability to prevent competitors from manufacturing, marketing and selling biosimilars of our products will be materially harmed.

Our current patent positions and license portfolio may not include all patent rights needed for the full development and commercialization of our product candidates. We cannot be sure that patent rights we may need in the future will be available for license to us on commercially reasonable terms, or at all.

We typically develop product candidates using compounds for which we have in-licensed and original composition of matter patents and patents that claim the activities and methods for such compounds’ production and use to the extent known at that time. As we learn more about the mechanisms of action and new methods of manufacture and use of product candidates, we may file additional patent applications for these new inventions or we may need to ask our licensors to file them. We may also need to license additional patent rights or other rights on compounds, treatment methods or manufacturing processes because we learn that we need such rights during the continuing development of our product candidates.

Although our in-licensed and original patents may prevent others from making, using or selling similar products, they do not ensure that we will not infringe the patent rights of third -parties. We may not be aware of all patents or patent applications that may impact our ability to make, use or sell our product candidates. For example, because we sometimes identify the mechanism of action or molecular target of a given product candidate after identifying its composition of matter and therapeutic use, we may not be aware until the mechanism or target is further elucidated that a third -party has an issued or pending patent claiming biological activities or targets that may cover our product candidates. U.S. patent applications filed after November 29, 2000 are confidential in the U.S. Patent and Trademark Office for the first 18 months after such applications’ earliest priority date, and patent offices in non-U.S. countries often publish patent applications for the first time six months or more after filing. Furthermore, we may not be aware of published or granted conflicting patent rights. Any conflicts resulting from patent applications and patents of others could significantly reduce the coverage of our patents and limit our ability to obtain meaningful patent protection. If others obtain patents with conflicting claims, we may need to obtain licenses to these patents or to develop or obtain alternative technology.

We may not be able to obtain any licenses or other rights to patents, technology or know-how from third -parties necessary to conduct our business as described in this report and such licenses, if available at all, may not be available on commercially reasonable terms. Any failure to obtain such licenses could delay or prevent us from developing or commercializing our product candidates or proposed product candidates, which would harm our business. Litigation or patent interference proceedings may be necessarily brought against third -parties, as discussed below, to enforce any of our patents or other proprietary rights or to determine the scope and validity or enforceability of the proprietary rights of such third -parties.

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Litigation regarding patents, patent applications and other proprietary rights may be expensive and time consuming. If we are involved in such litigation, it could cause delays in bringing product candidates to market and harm our ability to operate.

Our commercial success will depend in part on our ability to manufacture, use, sell and offer to sell our product candidates and proposed product candidates without infringing patents or other proprietary rights of third -parties. Although we are not currently aware of any litigation or other proceedings or third-party claims of intellectual property infringement related to our product candidates, the pharmaceutical industry is characterized by extensive litigation regarding patents and other intellectual property rights. Other parties may obtain patents in the future and allege that the use of our technologies infringes these patent claims or that we are employing their proprietary technology without authorization. Likewise, third -parties may challenge or infringe upon our or our licensors’ existing or future patents.

Proceedings involving our patents or patent applications or those of others could result in adverse decisions regarding the patentability of our inventions relating to our product candidates or the enforceability, validity or scope of protection offered by our patents relating to our product candidates.

Even if we are successful in these proceedings, we may incur substantial costs and divert management time and attention in pursuing these proceedings. If we are unable to avoid infringing the patent rights of others, we may be required to seek a license, defend an infringement action or challenge the validity of the patents in court. Patent litigation is costly and time-consuming. We may not have sufficient resources to bring these actions to a successful conclusion. In addition, if we do not obtain a license, develop or obtain non-infringing technology, fail to defend an infringement action successfully or have our patents declared invalid, we may incur substantial monetary damages; encounter significant delays in bringing our product candidates to market; or be precluded from participating in the manufacture, use or sale of our product candidates or methods of treatment requiring licenses.

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ITEM 6. EXHIBITS

The exhibits listed in the accompanying Exhibit Index are filed or incorporated by reference as part of this report.

Number		Description
3.1		~~Certificate~~Fifth ofAmended ~~Designation of Preferences, Rights~~ and ~~Limitations~~Restated Certificate of ~~Class Y Convertible Preferred Stock~~Incorporation, ~~dated~~as ~~October~~amended ~~24, 2017~~ (filed as Exhibit 3.1 to the registrant’s ~~Form 8~~10-KQ filed with the SEC on ~~October~~May 2510, 2017 and incorporated herein by reference).
10.1		Securities Purchase Agreement, dated October 23, 2017, by and among the Company and the Purchasers (filed as Exhibit 10.1 to the registrant’s Form 8-K filed with the SEC on October 25, 2017 and incorporated herein by reference).
3.2		Amended and Restated Bylaws, as amended on May 21, 2015 (filed as Exhibit 3.4 to the registrant’s Form 10-Q filed with the SEC on August 10, 2015 and incorporated herein by reference).
10.2		Registration Rights Agreement, dated October 23, 2017, by and among the Company and the Purchasers (filed as Exhibit 10.2 to the registrant’s Form 8-K filed with the SEC on October 23, 2017 and incorporated herein by reference).
4.1		Form of Tranche 1 Warrant (filed as Exhibit 4.1 to the registrant’s Form 8-K filed with the SEC on March 16, 2017 and incorporated herein by reference).
10.3		Form of Warrant to Purchase Common Stock (filed as Exhibit 10.3 to the registrant’s Form 8-K filed with the SEC on October 23, 2017 and incorporated herein by reference).
#10.1		Amended and Restated Employment Agreement by and between the Company and Craig Thompson, dated January 5, 2018 (Filed as Exhibit 10.35 to the Company’s Annual Report on Form 10-K, filed with the SEC on March 5, 2018 and incorporated herein by reference).
#10.2		Amended and Restated Employment Agreement by and between the Company and May Liu, dated January 5, 2018 (Filed as Exhibit 10.36 to the Company’s Annual Report on Form 10-K, filed with the SEC on March 5, 2018 and incorporated herein by reference).
#10.3		Employment Agreement by and between the Company and William Shanahan, M.D., dated January 5, 2018 (Filed as Exhibit 10.37 to the Company’s Annual Report on Form 10-K, filed with the SEC on March 5, 2018 and incorporated herein by reference).
#10.4		Employment Agreement by and between the Company and Renee Martin, Ph.D., dated January 5, 2018 (Filed as Exhibit 10.38 to the Company’s Annual Report on Form 10-K, filed with the SEC on March 5, 2018 and incorporated herein by reference).
#10.5		Employment Agreement by and between the Company and Patrick Murphy, dated January 5, 2018 (Filed as Exhibit 10.39 to the Company’s Annual Report on Form 10-K, filed with the SEC on March 5, 2018 and incorporated herein by reference).
31.1		Certification of Principal Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.
31.2		Certification of Principal Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.
32.1		Certification of Principal Executive Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification of Principal Financial Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as adopted pursuant Section 906 of the Sarbanes-Oxley Act of 2002.
101.LAB		XBRL Taxonomy Extension Label Linkbase Document.
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document.

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SIGNATURES

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

	ANTHERA PHARMACEUTICALS, INC.
November 8, 2017	By:	/s/ J. Craig Thompson
May 15, 2018	By:	/s/ J. Craig Thompson
		J. Craig Thompson
		Chief Executive Officer (Principal Executive Officer)
November 8, 2017	By:	/s/ May Liu
May 15, 2018	By:	/s/ May Liu
		May Liu
		Senior Vice President, Finance and Administration
		(Principal Accounting Officer)

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Filing Compare · Anthera Pharmaceuticals Inc