RISK FACTORS

        The combined company will be faced with a market environment that cannot be predicted and that involves significant risks, many of which will be beyond its control. In addition to the other information contained in this proxy statement, you should carefully consider the material risks described below before deciding how to vote your shares of Proteon common stock. You should also read and consider the other information in this proxy statement/prospectus/information statement. Please see the section titled "Where You Can Find More Information" on page 280 of this proxy statement/prospectus/information statement.

Risks Related to the Proposed Merger

If the Merger with ArTara is not consummated, Proteon's business could suffer materially and Proteon's stock price could decline.

        The consummation of the Merger with ArTara is subject to the satisfaction of a number of closing conditions, including the receipt of Proteon stockholder approvals at the Proteon special meeting, Proteon's successful application for initial listing with Nasdaq, the satisfaction of the Proteon Net Cash condition and other closing conditions. For a more detailed discussion of the Proteon Net Cash condition and other closing conditions, see the section titled "The Merger Agreement—Conditions to the Completion of the Merger." Proteon and ArTara are targeting a closing of the Merger by year end 2019.

        If the Merger is not consummated, Proteon may be subject to a number of material risks, and its business and stock price could be adversely affected, as follows:

•

Proteon has incurred and expects to continue to incur significant expenses related to the Merger with ArTara, even if the Merger is not consummated.



•

The Merger Agreement contains covenants restricting Proteon's solicitation of competing acquisition proposals and the conduct of Proteon's business between the date of signing the Merger Agreement and the closing of the Merger. As a result, significant business decisions and transactions before the closing of the Merger require the consent of ArTara. Accordingly, Proteon may be unable to pursue business opportunities that would otherwise be in its best interest as a standalone company.



•

Proteon has invested significant time and resources in the transaction process and if the Merger Agreement is terminated Proteon will have limited prospects.



•

Proteon could be obligated to pay ArTara a $750,000 termination fee in connection with the termination of the Merger Agreement and could be required to reimburse ArTara's expenses incurred, up to a maximum of $350,000, depending on the reason for the termination.



•

Subject to and in accordance with the Merger Agreement, Proteon may divest certain of its assets in anticipation of the consummation of the Contemplated Transactions, and if the Merger Agreement is terminated such divestiture may result in having a negative impact on the prospects of Proteon as a standalone company.

        In addition, if the Merger Agreement is terminated and the Proteon Board determines to seek another business combination, it may not be able to find a third party willing to provide equivalent or more attractive benefit to Proteon stockholders that is currently expected to be derived from the Merger. Due to the lengthy nature of the strategic process, the further passage of time will diminish cash available. In such circumstances, the Proteon Board may elect to, among other things, divest all or a portion of Proteon's business, or take the steps necessary to liquidate all of Proteon's business and assets, and in either such case, the consideration that Proteon receives may be less attractive than the benefit to Proteon stockholders that is currently expected to be derived from the Merger.

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Some of Proteon's officers and directors have conflicts of interest that may influence them to support or approve the Merger.

        Officers and directors of Proteon participate in arrangements that provide them with interests in the Merger that are different from Proteon stockholders, including, among others, to the extent applicable, their continued service as a director of the combined company, severance benefits and continued indemnification. These interests, among others, may influence the officers and directors of Proteon to support or approve the Merger. For a more detailed discussion see "The Merger—Interests of the Proteon Directors and Executive Officers in the Merger."

Proteon's separation agreement with Proteon's executive officer requires Proteon to pay severance benefits in the event such executive officer is terminated under specified circumstances, which could harm Proteon's financial condition or results.

        Proteon's executive officer is party to a separation agreement that contains provisions providing for severance payments in the event of a termination of employment under specified circumstances. Based on the terms of the separation agreement, Proteon's executive officer will be entitled to receive an aggregate of up to approximately $0.5 million in severance benefits due to the termination of his employment. The payment of these severance benefits could harm Proteon's financial condition and results and reduce the cash available to the combined company following the Merger.

The Merger may be completed even though material adverse changes may result from the announcement of the Merger, industry-wide changes and other causes.

        In general, either party can refuse to complete the Merger if there is a material adverse change affecting the other party following September 23, 2019, the date of the Merger Agreement. However, some types of changes do not permit either party to refuse to complete the Merger, even if such changes would have a material adverse effect on Proteon or ArTara, to the extent they resulted from the following (unless, in some cases, they have a disproportionate effect on Proteon or ArTara, as the case may be):

•

general business, economic or political conditions affecting the industry in which Proteon and ArTara, and their respective affiliates, operate;



•

any natural disaster or any acts of war, armed hostilities or terrorism;



•

changes in financial, banking or securities markets;



•

the failure to meet internal or analysts' expectations or projections or the results of operations;



•

any change in the stock price or trading volume of Proteon common stock (except that any effect causing or contributing to any change in stock price or trading volume of Proteon common stock may be taken into account in determining whether a material adverse effect on Proteon has occurred, unless such effects are otherwise excepted);



•

any clinical trial programs or studies, including any adverse data, event or outcome arising out of or related to any such programs or studies;



•

any change in, or any compliance with or action taken for the purpose of complying with, any law or U.S. GAAP (or interpretations of any law or U.S. GAAP);



•

resulting from the announcement of the Merger Agreement or the pendency of the Contemplated Transactions (including, without limitation, any action, suit or proceeding against Proteon or any of its officers or directors that is seeking to challenge or restrain any of the Contemplated Transactions); or



•

the taking of any action, or the failure to take any action, that is required to be taken or not taken by the Merger Agreement.

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        If adverse changes occur but Proteon and ArTara must still complete the Merger, the combined company's stock price may suffer.

The market price of the combined company's common stock may decline as a result of the Merger.

        The market price of the combined company's common stock may decline as a result of the Merger for a number of reasons, including if:

•

the combined company does not achieve the perceived benefits of the Merger as rapidly or to the extent anticipated by financial or industry analysts;



•

the effect of the Merger on the combined company's business and prospects is not consistent with the expectations of financial or industry analysts; or



•

investors react negatively to the effect on the combined company's business and prospects from the Merger.

Proteon's stockholders may not realize the benefit currently anticipated to be derived from the Merger commensurate with the ownership dilution they will experience in connection with the Merger.

        If the combined company is unable to realize the strategic and financial benefits currently anticipated from the Merger, the current Proteon stockholders will have experienced substantial dilution of their ownership interest without receiving any commensurate benefit currently anticipated to be derived from the Merger. Significant management attention and resources will be required to integrate the two companies. Delays in this process could adversely affect the combined company's business, financial results, financial condition and stock price following the Merger. Even if the combined company is able to integrate the business operations successfully, there can be no assurance that this integration will result in the realization of the full benefits of synergies, innovation and operational efficiencies that may be possible from this integration and that these benefits will be achieved within a reasonable period of time. The combined company will incur significant transaction costs as a result of the Merger, including investment banking, legal and accounting fees. In addition, the combined company will incur significant consolidation and integration expenses which cannot be accurately estimated at this time. Actual transaction costs may substantially exceed estimates and may have an adverse effect on the combined company's financial condition and operating results.

During the pendency of the Merger, Proteon and ArTara will be subject to contractual limitations set forth in the Merger Agreement that restrict the parties' ability to enter into business combination transactions with another party.

        Covenants in the Merger Agreement impede the ability of Proteon or ArTara to make acquisitions or complete other transactions that are not in the ordinary course of business pending completion of the Merger. As a result, if the Merger is not completed, the parties may be at a disadvantage to their competitors. In addition, while the Merger Agreement is in effect and subject to limited exceptions, each party is prohibited from soliciting, initiating, knowingly encouraging or taking actions designed to facilitate any inquiries or the making of any proposal or offer that could lead to the entering into certain extraordinary transactions with any third party, such as a merger, consolidation, amalgamation, share exchange, business combination, issuance or acquisition of securities, reorganization, recapitalization, tender offer, exchange offer, sale, lease, exchange, transfer, license, acquisition or disposition of any business or assets that constitute or account for 20% or more of the consolidated book value or the fair market value of the assets of each party and its respective affiliates, taken as a whole, or other similar transaction (excluding any Divestiture Transaction (as defined in the section titled "The Merger Agreement—Merger Consideration and Exchange Ratio")). Any such transactions could be favorable to such party's stockholders.

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Because the lack of a public market for ArTara's common stock makes it difficult to evaluate the fairness of the Merger, ArTara's stockholders may receive consideration in the Merger that is greater than or less than the fair market value of ArTara's common stock.

        The outstanding share capital of ArTara is privately held and is not traded in any public market. The lack of a public market makes it difficult to determine the fair market value of ArTara. It is possible that the value of Proteon's common stock to be issued in connection with the Merger will be greater than the fair market value of ArTara.

Because the Merger will result in an ownership change under Section 382 of the Internal Revenue Code (the "Code") for Proteon, Proteon's pre-merger net operating loss carryforwards and certain other tax attributes will be subject to limitations. The net operating loss carryforwards and other tax attributes of ArTara and of the combined organization may also be subject to limitations as a result of ownership changes.

        If a corporation undergoes an "ownership change" within the meaning of Section 382 of the Code ("Section 382"), the corporation's net operating loss carryforwards and certain other tax attributes arising before the ownership change are subject to limitations on use after the ownership change. In general, an ownership change occurs if there is a cumulative change in the corporation's equity ownership by certain stockholders that exceeds fifty percentage points over a rolling three-year period. The amount of the annual limitation is determined based on a corporation's value immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years. Similar rules may apply under state tax laws. The Merger will result in an ownership change for Proteon and, accordingly, Proteon's net operating loss carryforwards and certain other tax attributes will be subject to limitations (or disallowance) on their use after the Merger. ArTara's net operating loss carryforwards may also be subject to limitation as a result of prior shifts in equity ownership and/or the Merger. Additional ownership changes in the future could result in additional limitations on Proteon's, ArTara's and the combined organization's net operating loss carryforwards. Consequently, even if the combined organization achieves profitability, it may not be able to utilize a material portion of Proteon's, ArTara's or the combined organization's net operating loss carryforwards and other tax attributes, which could have a material adverse effect on cash flow and results of operations.

If the Merger does not qualify as a "reorganization" or contribution and exchange for U.S. federal income tax purposes, U.S. holders of ArTara's common stock will be required to recognize gain or loss for U.S. federal income tax purposes upon the exchange of their ArTara capital stock for Proteon common stock in the merger.

        The U.S. federal income tax consequences of the merger to U.S. holders (as defined in the section titled "The Merger—Certain Material U.S. Federal Income Tax Consequences of the Merger" in this proxy statement/prospectus/information statement) will depend on whether the Merger qualifies as a reorganization within the meaning of Section 368(a) of the Code or as a contribution and exchange under Section 351 of the Code. If the Merger fails to qualify as a reorganization within the meaning of Section 368(a) of the Code or as a contribution and exchange under Section 351 of the Code, a U.S. holder of ArTara capital stock may recognize gain or loss for U.S. federal income tax purposes on each share of ArTara capital stock surrendered in the merger for Proteon common stock and any cash received in lieu of a fractional share. For a more complete discussion of the material U.S. federal income tax consequences of the merger, please carefully review the information set forth in the section titled "The Merger—Certain Material U.S. Federal Income Tax Consequences of the Merger."

The Exchange Ratio is not adjustable based on the market price of Proteon common stock so the merger consideration at the closing of the Merger may have a greater or lesser value than at the time the Merger Agreement was signed.

        At the Effective Time, outstanding shares of ArTara capital stock will be converted into shares of Proteon common stock. Applying the Exchange Ratio, as of immediately after the closing of the Merger, but prior to the consummation of the Proteon Private Placement, the holders of ArTara capital

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stock (including the holders of any outstanding and unexercised options to purchase ArTara capital stock and the ArTara Private Placement Shares) immediately prior to the Merger are expected to hold approximately 75.22% of the fully diluted capital stock of Proteon outstanding immediately following the Merger, and the holders of Proteon common stock immediately prior to the Merger are expected to hold approximately 24.79% of the fully diluted shares of Proteon capital stock outstanding immediately following the Merger (in each case on a fully diluted basis and after giving effect to the ArTara Private Placement and the Series A Preferred Automatic Conversion but without giving effect to the Proteon Private Placement). After the consummation of the Merger, the Private Placements and the Series A Preferred Automatic Conversion, the Investors participating in the Private Placements are expected to own 60.93% of the outstanding capital stock of Proteon, the former ArTara equity holders (excluding the ArTara Private Placement Shares) immediately before the Merger are expected to own approximately 28.67% of the outstanding capital stock of Proteon, and the equity holders of Proteon immediately before the Merger are expected to own approximately 10.39% of the outstanding capital stock of Proteon (each on a fully diluted basis), subject to adjustment based on the Proteon Net Cash balance (as defined in the section titled "The Merger Agreement—Conditions to the Completion of the Merger") prior to the completion of the Merger.

        Any changes in the market price of Proteon common stock before the completion of the Merger will not affect the number of shares ArTara stockholders will be entitled to receive pursuant to the Merger Agreement. Therefore, if before the completion of the Merger the market price of Proteon common stock declines from the market price on the date of the Merger Agreement, then ArTara securityholders could receive merger consideration with substantially lower value. Similarly, if before the completion of the Merger the market price of Proteon common stock increases from the market price on the date of the Merger Agreement, then ArTara securityholders could receive merger consideration with substantially more value for their shares of ArTara capital stock than the parties had negotiated for in the establishment of the Exchange Ratio. The Merger Agreement does not include a price-based termination right. Because the Exchange Ratio does not adjust as a result of changes in the value of Proteon common stock, for each one percentage point that the market value of Proteon common stock rises or declines, there is a corresponding one percentage point rise or decline, respectively, in the value of the total merger consideration issued to ArTara securityholders.

The opinion received by the Proteon Board from Wainwright has not been, and is not expected to be, updated to reflect changes in circumstances that may have occurred since the date of the opinion.

        On September 22, 2019, Wainwright rendered its oral opinion to the Proteon Board (which was subsequently confirmed in writing by delivery of Wainwright's written opinion dated the same date) to the effect that, based upon and subject to the assumptions, factors, qualifications and limitations set forth in the written opinion described herein, as of September 22, 2019, the Exchange Ratio was fair, from a financial point of view, to Proteon. Wainwright did not express any view on, and its opinion did not address, any other term or aspect of any other agreements or arrangements contemplated by the Merger Agreement or entered into in connection with the Merger, including, without limitation, the private placement, as contemplated as of September 22, 2019.

        Wainwright's opinion was prepared solely for the information of the Proteon Board and only addressed the fairness, from a financial point of view, to Proteon of the Exchange Ratio. Wainwright was not requested to opine as to, and Wainwright's opinion does not address, the relative merits of the Merger or any alternatives to the Merger, Proteon's underlying decision to proceed with or effect the Merger, or any other aspect of the Merger. Wainwright's opinion does not address the fairness of the Merger to the holders of any class of securities, creditors or other constituencies of Proteon and is not a valuation of Proteon or ArTara or their respective assets or any class of their securities. Wainwright did not express an opinion about the fairness of the amount or nature of any compensation payable or to be paid to any of the officers, directors or employees, of Proteon, whether or not relative to the

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Merger. Wainwright also did not express an opinion regarding the fairness, from a financial point of view, to Proteon of the private placement, as contemplated as of September 22, 2019.

        It should be understood that, although subsequent developments may affect the conclusion reached in the opinion, Wainwright does not have any obligation to update, revise or reaffirm such opinion and has not done so. See the section titled "The Merger—Opinion of the Proteon Financial Advisor" and Annex B to this proxy statement/prospectus/information statement.

Proteon and ArTara may become involved in securities litigation or stockholder derivative litigation in connection with the Merger, and this could divert the attention of Proteon and ArTara management and harm the combined company's business, and insurance coverage may not be sufficient to cover all related costs and damages.

        Securities litigation or stockholder derivative litigation frequently follows the announcement of certain significant business transactions, such as the sale of a business division or announcement of a business combination transaction. This risk is especially relevant for Proteon, ArTara and the combined company because biotechnology companies, like Proteon and ArTara, have experienced significant stock price volatility in recent years. Proteon and ArTara may become involved in this type of litigation in connection with the Merger, and the combined company may become involved in this type of litigation in the future. Litigation often is expensive and diverts management's attention and resources, which could adversely affect the business of Proteon, ArTara and the combined company, and insurance coverage may not be sufficient to cover all related costs and damages.

        On November 15, 2019, a lawsuit entitled Patrick Plumley v. Proteon Therapeutics, Inc., et al., Case No. 1:19-cv-02143-UNA, was filed in the United States District Court for the District of Delaware against Proteon, ArTara, Merger Sub and the individual members of the Proteon Board. On November 30, 2019, a lawsuit entitled Jeffrey Teow v. Proteon Therapeutics, Inc., et al., Case No. 1:19-cv-06745, was filed in the United States District Court for the Eastern District of New York against Proteon, ArTara, Merger Sub and the individual members of the Proteon Board. On December 2, 2019, a lawsuit entitled Neil Lanteigne v. Proteon Therapeutics, et al., Case No. 1:19-cv-12436, was filed in the United States District Court for the District of Massachusetts against Proteon, ArTara, Merger Sub and the individual members of the Proteon Board. The Plumley complaint is brought as a purported class action lawsuit. All three lawsuits allege that the preliminary registration statement filed by Proteon on November 7, 2019 with the SEC in connection with the proposed Merger omits material information with respect to the transactions contemplated by the Merger Agreement, rendering it false and misleading in violation of Sections 14(a) (and Rule 14a-9 promulgated thereunder) and 20(a) of the Exchange Act. The plaintiffs in each of the three lawsuits seek, among other things, injunctive relief, rescission, declaratory relief and unspecified monetary damages. Proteon and ArTara intend to defend vigorously against all claims asserted.

If any of the events described in "Risks Related to ArTara" occur, those events could cause the potential benefits of the Merger not to be realized.

        ArTara's business is expected to constitute substantially all of the business of the combined company following the Merger. As a result, the risks described below in the sections titled "Risks Related to ArTara" beginning on page 58 are among the most significant risks to the combined company if the Merger is completed. To the extent any of the events in the risks described in the sections referenced in the previous sentence occur, those events could cause the potential benefits of the Merger not to be realized and the market price of the combined company's common stock to decline.

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The unaudited pro forma financial information included in this proxy statement/prospectus/information statement may not be representative of the combined company's results following the Merger.

        The unaudited pro forma financial information included in this proxy statement has been presented for informational purposes only and is not necessarily indicative of the financial position or results of operations that actually would have occurred had the Merger and related transactions been completed as of the date indicated, nor is it indicative of the combined company's future operating results or financial position. The pro forma financial statements have been derived from the historical financial statements of Proteon and ArTara and adjustments and assumptions have been made regarding the combined company after giving effect to the Merger. The information upon which these adjustments and assumptions have been made is preliminary, and these kinds of adjustments and assumptions are difficult to make with accuracy. Moreover, the pro forma financial statements do not reflect all costs that are expected to be incurred by the combined company in connection with the Merger. As a result, the actual financial condition of the combined company following the Merger may not be consistent with, or evident from, these pro forma financial statements. The assumptions used in preparing the pro forma financial information may not prove to be accurate, and other factors may affect the combined company's financial condition following the Merger and related transactions.

Risks Related to the Proposed Reverse Split

The Reverse Split may not increase the combined company's stock price over the long-term.

        The principal purpose of the Reverse Split is to increase the per-share market price of the combined company's common stock above the minimum bid price requirement under the Nasdaq rules so that the listing of the combined company and the shares of the combined company common stock being issued in the Merger on Nasdaq will be approved. It cannot be assured, however, that the Reverse Split will accomplish this objective for any meaningful period of time. While it is expected that the reduction in the number of outstanding shares of common stock will proportionally increase the market price of the combined company's common stock, it cannot be assured that the Reverse Split will increase the market price of its common stock by a multiple of the reverse stock split ratio mutually agreed by ArTara and Proteon, or result in any permanent or sustained increase in the market price of the combined company's common stock, which is dependent upon many factors, including the combined company's business and financial performance, general market conditions, and prospects for future success. Thus, while the stock price of the combined company might meet the continued listing requirements for Nasdaq initially, it cannot be assured that it will continue to do so.

The Reverse Split may decrease the liquidity of the combined company's common stock.

        Although the Proteon Board believes that the anticipated increase in the market price of the combined company's common stock could encourage interest in its common stock and possibly promote greater liquidity for its stockholders, such liquidity could also be adversely affected by the reduced number of shares outstanding after the Reverse Split. The reduction in the number of outstanding shares may lead to reduced trading and a smaller number of market makers for the combined company's common stock.

The Reverse Split may lead to a decrease in the combined company's overall market capitalization.

        Should the market price of the combined company's common stock decline after the Reverse Split, the percentage decline may be greater, due to the smaller number of shares outstanding, than it would have been prior to the Reverse Split. A reverse stock split is often viewed negatively by the market and, consequently, can lead to a decrease in the combined company's overall market capitalization. If the per share market price does not increase in proportion to the reverse stock split ratio, then the value of the combined company, as measured by its stock capitalization, will be reduced. In some cases, the per-share stock price of companies that have effected reverse stock splits subsequently declined back to

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pre-reverse split levels, and accordingly, it cannot be assured that the total market value of the combined company's common stock will remain the same after the Reverse Split is effected, or that the Reverse Split will not have an adverse effect on the combined company's stock price due to the reduced number of shares outstanding after the Reverse Split.

Risks Related to Proteon's Historical Business Operations and Financial Condition

Proteon's business to date has been almost entirely dependent on the success of vonapanitase, and Proteon has decided to discontinue further development of vonapanitase and devote significant time and resources to identifying and evaluating strategic alternatives, such as the Merger, which may not be successful.

        To date, Proteon has invested substantially all of its efforts and financial resources in the research and development of Proteon's lead indication for vonapanitase in radiocephalic fistulas, which was Proteon's only product candidate to enter Phase 3 clinical trials. On March 28, 2019, Proteon announced that its second Phase 3 trial, PATENCY-2, did not meet its co-primary endpoints of fistula use for hemodialysis (p=0.328) and secondary patency (p=0.932). In April 2019, based on the results of the PATENCY-2 clinical trial, Proteon discontinued research and development activities to reduce operating expenses, including a reduction in Proteon's workforce, to preserve its cash resources while Proteon evaluated its strategic alternatives with a goal to maximize stockholder value, including the possibility of a merger or sale of the company, such as the Merger. Proteon has retained Wainwright to advise and assist Proteon in the strategic review, along with legal advisors. There can be no assurance that the Merger will be consummated. If not consummated, there can be no assurance that Proteon's process to identify and evaluate other potential strategic alternatives would result in any definitive offer to consummate a strategic transaction, or if made that the terms thereof will be acceptable to the Company. If any other definitive offer to consummate a strategic transaction was received, there can be no assurance that a definitive agreement would be executed or that, if a definitive agreement was executed, the transaction would be consummated. In addition, there can be no assurance that any transaction, involving Proteon and/or its assets, that is consummated would enhance stockholder value. There also can be no assurance that Proteon will conduct further drug research or development activities in the future.

Proteon has identified conditions and events that raise substantial doubt about its ability to continue as a going concern.

        As of September 30, 2019, Proteon had approximately $9.3 million in existing cash and cash equivalents. Although Proteon believes that its cash and cash equivalents at September 30, 2019 will be sufficient to fund its operating expenses and capital expenditure requirements into 2020 and enable it to complete the Merger with ArTara, Proteon may not have sufficient cash on hand to fund its current operations for at least the next 12 months from the filing date of the Registration Statement. However, if there is a delay in completing the Merger, Proteon will require additional capital to sustain its operations through such completion or Proteon will need to pursue an immediate dissolution. If Proteon needs additional capital, Proteon would need to raise such capital through debt or equity financings, asset sales or other strategic transactions. However, there can be no assurances that Proteon will be able to complete any such transaction on acceptable terms or otherwise. The failure to obtain sufficient funds on commercially acceptable terms when needed could have a material adverse effect on Proteon's business, results of operations and financial condition and may prevent Proteon from completing the Merger. Accordingly, these factors, among others, raise substantial doubt about Proteon's ability to continue as a going concern.

Proteon has a limited operating history and has incurred significant losses since its inception, and Proteon anticipates that it will continue to incur losses for the foreseeable future.

        Proteon is a biotechnology company, and Proteon has not commercialized any products or generated any revenues from the sale of products. Proteon has historically devoted substantially all of

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its efforts and financial resources to research and development, including its clinical and preclinical development activities. In April 2019, Proteon discontinued substantially all its research and development activities to reduce operating expenses while it evaluated its strategic alternatives with a goal to enhance stockholder value, including the possibility of a merger or sale of the Company, such as the Merger. To date, Proteon has financed its operations primarily through the sale of equity securities and, prior to its initial public offering, the sale of convertible debt. Proteon has incurred losses from operations in each year since its inception, and Proteon's net losses were $20.7 million and $30.0 million for the years ended December 31, 2018 and 2017, respectively and $13.4 million and $15.5 million for the nine months ended September 30, 2019 and 2018, respectively. As of September 30, 2019, Proteon had an accumulated deficit of $223.9 million. Proteon does not expect to generate any product revenues in the foreseeable future. Proteon does not know whether or when it will generate revenue or become profitable.

        Proteon expects to continue to incur significant expenses for the foreseeable future. The net losses Proteon incurs may fluctuate significantly from quarter to quarter and year to year, such that a period-to-period comparison of Proteon's results of operations may not be a good indication of Proteon's future performance. In any particular quarter or quarters, Proteon's operating results could be below the expectations of securities analysts or investors, which could cause Proteon's stock price to decline.

Risks Related to Proteon's Clinical Development, Regulatory Review and Approval of its Product

Proteon may be subject to certain federal or state "fraud and abuse" laws and other healthcare laws and regulations. If Proteon is found to be in violation of any such laws or regulations, Proteon may be required to pay a penalty and/or be suspended from participation in federal or state healthcare programs, which may adversely affect Proteon's business, financial condition and ability to consummate the Merger or any other strategic transaction.

        Proteon may be subject to various federal and state laws pertaining to healthcare "fraud and abuse," including anti-kickback laws and false claims laws. Anti-kickback laws make it illegal for a prescription drug or biologic manufacturer to solicit, offer, receive or pay any remuneration in exchange for, or to induce, the referral of business, including the purchase or prescription of a particular drug or biologic. Other laws that Proteon may be subject to include the civil False Claims Act, criminal False Claims Act, the HIPAA fraud and abuse provisions, the Civil Monetary Penalties statute, Section 1927 of the Social Security Act, the Veterans Health Care Act, the Foreign Corrupt Practices Act, federal and state statutes and regulations pertaining to payments made to physicians and other health care providers, the HIPAA privacy and security provisions, and other analogous state laws. Due to the breadth of the statutory provisions, it is possible that Proteon's practices might be challenged under anti-kickback, healthcare, or other fraud and abuse laws. Moreover, recent healthcare reform legislation has strengthened these laws. For example, the Patient Protection and Affordable Care Act, or ACA, among other things, amends the intent requirement of the federal anti-kickback and certain of the criminal healthcare fraud statutes to clarify that a person or entity does not need to have actual knowledge of this statute or specific intent to violate it. In addition, the ACA clarifies that the government may assert that a claim that includes items or services resulting from a violation of the federal anti-kickback statute constitutes a false or fraudulent claim for purposes of the civil False Claims Act. False claims laws prohibit anyone from knowingly presenting, or causing to be presented for payment, to government third-party payors (including Medicare and Medicaid) claims for reimbursed drugs, or biologics or services that are false or fraudulent, claims for items or services not provided as claimed, or claims for medically unnecessary items or services. Liability may also arise from false certification of compliance with laws and regulations that are conditions of payment. Proteon's activities relating to the sale and marketing of its products may be subject to scrutiny under these laws. Violations of fraud and abuse laws, and other healthcare statutes are punishable by criminal and civil sanctions, including fines and civil monetary penalties, the possibility of exclusion from federal

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healthcare programs (including Medicare and Medicaid) and corporate integrity agreements, which impose, among other things, rigorous operational and monitoring requirements on companies. Proteon may further be subject to such other actions as debarment from government contracts and future orders under existing contracts, refusal to allow Proteon to enter into supply contracts, including government contracts, reputational harm, diminished profits and future earnings and the curtailment or restructuring of Proteon's operations, any of which could adversely affect Proteon's business.

        Given the significant penalties and fines that can be imposed on companies and individuals if convicted or found liable, allegations of violations under fraud and abuse laws often result in settlements even if the company or individual being investigated admits no wrongdoing. Settlements often include significant civil sanctions, including fines and civil monetary penalties, and corporate integrity agreements. If the government were to allege or convict Proteon or its executive officers of violating these laws, Proteon's business and ability to consummate the Merger or any other strategic transaction, could be harmed. In addition, private individuals have the ability to bring similar actions under the False Claims Act. Proteon's activities could be subject to challenge for the reasons discussed above and due to the broad scope of these laws and the increasing attention being given to them by law enforcement authorities. Further, an increasing number of state laws require manufacturers to make reports to states on pricing and marketing information. Many of these laws contain ambiguities as to what is required to comply with the laws. Given the lack of clarity in laws and their implementation, Proteon's reporting actions could be subject to the penalty provisions of the pertinent state authorities.

        Similar rigid restrictions are imposed on the promotion and marketing of medicinal products in the European Union and other countries. Laws (including those governing promotion, marketing and anti-kickback provisions), industry regulations and professional codes of conduct often are strictly enforced. Even in those countries where Proteon is not directly responsible for the promotion and marketing of its products, inappropriate activity by Proteon's international distribution partners can have adverse implications for Proteon.

Risks Related to Proteon's Intellectual Property

If Proteon's efforts to protect its intellectual property related to vonapanitase or any additional product candidates are not adequate, Proteon may not be able to compete effectively in Proteon's market or consummate any strategic transaction on terms that enhance stockholder value.

        Proteon relies upon a combination of patents, patent applications, know-how and confidentiality agreements to protect the intellectual property related to Proteon's only product candidate, vonapanitase, and will use a similar strategy to protect any additional product candidates. The patent position of biotechnology companies is generally uncertain because it involves complex legal and factual considerations. The standards applied by the United States Patent and Trademark Office, or USPTO, and foreign patent offices in granting patents are not always applied uniformly or predictably. For example, there is no uniform worldwide policy regarding patentable subject matter or the scope of claims allowable in biotechnology patents. The patent applications that Proteon owns may fail to result in issued patents with claims that cover vonapanitase or any additional product candidates in the United States or in other countries. There is no assurance that all potentially relevant prior art relating to Proteon's patents and patent applications has been found, and prior art that is not before the patent examiners, as well as prior art that is before the patent examiners, could be used by a third party to invalidate a patent or could be relied on to prevent a patent from issuing from a pending patent application. Even if patents do successfully issue and even if these patents cover vonapanitase or any additional product candidates, third parties may challenge their validity, enforceability or scope, which may result in Proteon's patents being narrowed or invalidated.

        Furthermore, even if they are unchallenged, Proteon's patents and patent applications may not adequately provide exclusivity for vonapanitase or any additional product candidates, prevent others from designing around Proteon's patents with similar products that are outside the scope of Proteon's patents, or prevent others from operating in jurisdictions in which Proteon did not pursue patent protection. Any of these outcomes could impair Proteon's ability to prevent competition from third parties, which may have an adverse impact on Proteon's business.

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        If patent applications Proteon holds with respect to vonapanitase or any additional product candidates fail to issue, if their breadth or strength of protection is threatened, or if they fail to provide meaningful exclusivity for vonapanitase or any additional product candidates, it could dissuade companies from collaborating with Proteon, or from valuing Proteon's intellectual property in a manner that enhances stockholder value in any potential strategic transaction. As of September 30, 2019, Proteon owns 45 issued patents and 9 pending patent applications, most of which cover aspects of vonapanitase or its use. Proteon cannot offer any assurances about which, if any, of the pending patent applications will issue as patents, the breadth of any such patents or any of Proteon's currently issued patents, or whether any issued patents will be challenged by third parties or will be found invalid and unenforceable if challenged. Any successful challenge to these patent applications, or patents that may issue from them, or to currently issued patents owned by Proteon, could deprive Proteon of rights necessary for the successful commercialization of vonapanitase or any other product candidate that Proteon may develop. Since patent applications in the United States and most other countries are confidential for a period of time after filing, and some remain so until issued, Proteon cannot be certain that Proteon was the first to file a patent application relating to any particular aspect of a product candidate. Furthermore, if third parties have filed such patent applications, an interference proceeding in the United States can be initiated by these third parties, or by the USPTO itself, to determine who was the first to invent any of the subject matter covered by the patent claims of Proteon's patents and patent applications.

        In the United States, for patent applications filed prior to March 16, 2013, assuming the other requirements for patentability are met, the first to invent is entitled to the patent, while outside the United States, the first to file a patent application is entitled to the patent. Certain of Proteon's currently pending utility patent applications are examined under the system in place before March 16, 2013. Third parties are allowed to submit prior art prior to the issuance of a patent by the USPTO, and may become involved in reexamination, inter partes review or interference proceedings challenging Proteon's patent rights. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, Proteon's patent rights, which could adversely affect Proteon's competitive position with respect to third parties.

        In addition, patents have a limited lifespan. In most countries, the statutory term of a patent is 20 years from the earliest domestic priority date claimed. In the United States, for applications filed after June 7, 1995, the statutory term of a patent is 20 years from earliest non-provisional priority date claimed. Various extensions of patent protection may be available in particular countries; however, in all circumstances, the life of a patent, and the protection it affords, has a limited term. If Proteon encounters delays in obtaining regulatory approvals, the period of time during which Proteon could market a product under patent protection could be reduced. Proteon expects to seek extensions of patent protection where these are available in any countries where Proteon is prosecuting patents. Such possible extensions include those permitted under the Drug Price Competition and Patent Term Restoration Act of 1984 in the United States, which permits Proteon to five years' extension of patent protection and no more than fourteen years following product approval for a single patent that covers an FDA-approved drug or biologic that contains an active ingredient or salt or ester of the active ingredient that has not previously been marketed. The scope of protection available during an extension of a patent claiming a product is limited to the approved product itself for approved uses, and the scope of protection available during an extension of a patent claiming a method of using a product is limited to the uses claimed in the patent and approved for the product. The actual length of the extension is calculated by adding one half of the time between the IND effective date and a company's initial submission of a marketing application, plus the entire time between the submission of the marketing application and the FDA's approval of the application. However, the applicable authorities, including the FDA and the USPTO in the United States, and any equivalent regulatory authority in other countries, may not agree with Proteon's assessment of whether such extensions are available, and may refuse to grant extensions to Proteon's patents, or may grant more limited

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extensions than Proteon requests. If this occurs, Proteon's competitors may be able to take advantage of Proteon's investment in development and clinical trials by referencing Proteon's clinical and preclinical data, and then may be able to launch their product earlier than might otherwise be the case.

        Any loss of, or failure to obtain, patent protection could have a material adverse impact on Proteon's business. Proteon may be unable to prevent competitors from entering the market with a product that is similar to or the same as Proteon's products.

Confidentiality agreements with employees and third parties may not prevent unauthorized disclosure of proprietary information.

        Proteon seeks to protect its proprietary technology and processes, in part, by entering into confidentiality agreements with its employees, consultants, scientific advisors and contractors. Proteon also seeks to preserve the integrity and confidentiality of Proteon's data and know-how by maintaining physical security of Proteon's premises and physical and electronic security of Proteon's information technology systems. Nonetheless, despite these precautions, agreements or security measures may be breached, and Proteon may not have adequate remedies for any breach. In addition, Proteon's know-how may otherwise become known or be independently discovered by competitors. To the extent that Proteon's consultants, contractors or collaborators use intellectual property owned by others in their work for Proteon, disputes may arise as to the rights in related or resulting know-how and inventions.

        Enforcing a claim that a third party illegally obtained and is using any of Proteon's know-how is expensive and time consuming, and the outcome is unpredictable. In addition, courts outside the United States sometimes are less willing than United States courts to protect know-how. Misappropriation or unauthorized disclosure of Proteon's know-how could impair Proteon's competitive position and may have a material adverse effect on Proteon's business.

Proteon may become involved in lawsuits to protect or enforce Proteon's intellectual property, which could be expensive, time consuming and unsuccessful, and which may lead to a finding that Proteon's patents are invalid and/or unenforceable.

        Competitors may infringe Proteon's patents or misappropriate or otherwise violate Proteon's intellectual property rights. To counter infringement or unauthorized use, litigation may be necessary to enforce or defend Proteon's intellectual property rights, to protect Proteon's know-how and/or to determine the validity and scope of Proteon's own intellectual property rights. Intellectual property litigation can be expensive and time consuming. Many of Proteon's current and potential competitors have the ability to dedicate substantially greater resources to litigate intellectual property rights than Proteon can. Accordingly, despite Proteon's efforts, Proteon may not be able to prevent third parties from infringing or misappropriating Proteon's intellectual property. Litigation could result in substantial costs and diversion of management resources, which could harm Proteon's business and financial results. In addition, in an infringement proceeding, a court may decide that Proteon's patents are invalid or unenforceable, and may refuse to stop the other party from using the technology at issue, including on the grounds that Proteon's patents are invalid or unenforceable or do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of Proteon's patents at risk of being invalidated, held unenforceable or interpreted narrowly. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of Proteon's confidential information could be compromised by disclosure during this type of litigation.

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If Proteon is unable to adequately protect its proprietary technology, or obtain and maintain issued patents which are sufficient to protect its current product candidate, vonapanitase, or any additional product candidates, others could compete against Proteon more directly, which would have a material adverse impact on its business, financial condition and ability to consummate a strategic transaction.

        Proteon strives to protect and enhance the proprietary technologies that Proteon believes are important to its business, including seeking patents intended to cover Proteon's products and compositions, their methods of use and any other inventions that are important to the development of Proteon's business. Proteon also relies on know-how to protect aspects of Proteon's business that are not amenable to, or that Proteon does not consider appropriate for, patent protection.

        Proteon's ability to successfully implement Proteon's business strategies will depend significantly on Proteon's ability to obtain and maintain patent and other proprietary protection for commercially important technology, inventions and know-how related to Proteon's business, defend and enforce Proteon's current patents and any future patents that may issue, preserve the confidentiality of Proteon's know-how and operate without infringing the valid and enforceable patents and proprietary rights of third parties. Proteon also relies on know-how and in-licensing opportunities to develop, strengthen and maintain the proprietary position of vonapanitase or any additional product candidates.

        Proteon cannot provide any assurances that any of Proteon's pending patent applications will mature into issued patents and, if they do, that such patents or Proteon's currently issued patents will include claims with a scope sufficient to protect vonapanitase or any additional product candidates or otherwise provide any competitive advantage. For example, one of Proteon's patents that may provide coverage for vonapanitase only covers particular formulations. As a result, this patent would not prevent third-party competitors from creating, making and marketing alternative formulations that fall outside the scope of Proteon's patent claims. There can be no assurance that any such alternative formulations will not be equally effective.

        Moreover, other parties have developed technologies that may be related or competitive to Proteon's approach, and may have filed or may file patent applications and may have received or may receive patents that may overlap or conflict with Proteon's patent applications, either by claiming the same methods or formulations or by claiming subject matter that could dominate Proteon's patent position. These third party patent positions may limit or even eliminate Proteon's ability to obtain patent protection for certain inventions.

        The patent positions of biotechnology and pharmaceutical companies, including Proteon's patent position, involve complex legal and factual questions, and, therefore, the issuance, scope, validity and enforceability of any patent claims that Proteon may obtain cannot be predicted with certainty. Patents, if issued, may be challenged, deemed unenforceable, invalidated, or circumvented. United States patents and patent applications may also be subject to interference proceedings, ex parte reexamination, or inter partes review proceedings, and challenges in district court. Patents may be subjected to opposition, revocation proceedings, or comparable proceedings lodged in various foreign, both national and regional, patent offices. These proceedings could result in either loss of the patent or denial of the patent application or loss or reduction in the scope of one or more of the claims of the patent or patent application. In addition, such proceedings may be costly. Thus, any patents that Proteon may own or exclusively license may not provide any protection against competitors. Furthermore, an adverse decision in an interference proceeding can result in a third party receiving the patent right sought by Proteon, which in turn could affect Proteon's ability to develop, market or otherwise commercialize vonapanitase or any additional product candidates.

        Furthermore, though a patent is presumed valid and enforceable, its issuance is not conclusive as to its validity or its enforceability and it may not provide Proteon with adequate proprietary protection or competitive advantages against competitors with similar products. Even if a patent issues and is held to be valid and enforceable, competitors may be able to design around Proteon's patents, such as using

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pre-existing or newly developed technology. Other parties may develop and obtain patent protection for more effective technologies, designs or methods. Proteon may not be able to prevent the unauthorized disclosure or use of Proteon's technical knowledge or know-how by consultants, vendors, former employees and current employees. The laws of some foreign countries do not protect Proteon's proprietary rights to the same extent as the laws of the United States, and Proteon may encounter significant problems in protecting Proteon's proprietary rights in these countries. If these developments were to occur, they could have a material adverse effect on Proteon's sales.

        In addition, proceedings to enforce or defend Proteon's patents, if and when issued, could put Proteon's patents at risk of being invalidated, held unenforceable, or interpreted narrowly. These proceedings could also provoke third parties to assert claims against Proteon, including that some or all of the claims in one or more of Proteon's patents are invalid or otherwise unenforceable. If any of Proteon's patents, if and when issued, covering vonapanitase or any additional product candidates, are invalidated or found unenforceable, Proteon's financial position and results of operations would be materially and adversely impacted. In addition, if a court found that valid, enforceable patents held by third parties covered vonapanitase, or any additional product candidates, Proteon's financial position and results of operations would also be materially and adversely impacted.

        The degree of future protection for Proteon's proprietary rights is uncertain, and Proteon cannot ensure that:

•

any of Proteon's patents or pending patent applications, if issued, will include claims having a scope sufficient to protect vonapanitase or any additional product candidates;



•

any of Proteon's pending patent applications will issue as patents at all;



•

Proteon will be able to successfully commercialize product candidates, if approved, before Proteon's relevant patents expire;



•

Proteon was the first to make the inventions covered by each of Proteon's patents and pending patent applications;



•

Proteon was the first to file patent applications for these inventions;



•

others will not develop similar or alternative technologies that do not infringe Proteon's patents



•

others will not use pre-existing technology to effectively compete against Proteon;



•

any of Proteon's patents will be found ultimately to be valid and enforceable;



•

any patents issued to Proteon will provide a basis for an exclusive market for Proteon's commercially viable products, will provide Proteon with any competitive advantages or will not be challenged by third parties;



•

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



•

that Proteon's commercial activities or products will not infringe the patents or proprietary rights of others.

        Proteon relies upon unpatented know-how to maintain its competitive position, which it seeks to protect, in part, by confidentiality agreements with Proteon's employees and Proteon's collaborators and consultants. It is possible that technology relevant to Proteon's business will be independently developed by a person that is not a party to such an agreement. Furthermore, if the employees and consultants who are parties to these agreements breach or violate the terms of these agreements, Proteon may not have adequate remedies for any such breach or violation, and Proteon's confidential know-how could become known to others through such breaches or violations. Further, Proteon's know-how could otherwise become known or be independently discovered by Proteon's competitors.

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Further, the term of confidentiality requirements for current and terminated agreements with some of Proteon's consultants, contract manufacturing or research organizations and other third parties is finite.

Proteon may be subject to claims challenging the inventorship or ownership of Proteon's patents and other intellectual property.

        Proteon enters into confidentiality and intellectual property assignment agreements with its employees, consultants, outside scientific collaborators, sponsored researchers and other advisors. These agreements generally provide that inventions conceived by the party in the course of rendering services to Proteon will be Proteon's exclusive property. However, these agreements may not be honored and may not effectively assign intellectual property rights to Proteon. For example, even if Proteon has a consulting agreement in place with an academic advisor pursuant to which the academic advisor is required to assign any inventions developed in connection with providing services to Proteon, the academic advisor may not have the right to assign these inventions to Proteon, as it may conflict with his or her obligations to assign all intellectual property to his or her employing institution.

        Litigation may be necessary to defend against these and other claims challenging inventorship or ownership of inventions. If Proteon is unsuccessful in defending against any of these claims, in addition to paying monetary damages, Proteon may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property. Such an outcome could have a material adverse effect on Proteon's business. Even if Proteon is successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

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

        The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other provisions during the patent process. There are situations in which noncompliance can result in abandonment or lapse of a patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, competitors might be able to enter the market earlier than would otherwise have been the case.

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

        If Proteon initiated legal proceedings against a third party to enforce a patent, if and when issued, covering vonapanitase or any additional product candidate, the defendant could counterclaim that the patent covering Proteon's product candidate is invalid and/or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity and/or unenforceability are commonplace. Grounds for a validity challenge include alleged failures to meet any of several statutory requirements, including lack of novelty, obviousness or non-enablement. Grounds for unenforceability assertions include allegations that someone connected with prosecution of the patent withheld relevant information from the USPTO, or made a misleading statement, during prosecution. Third parties may also raise similar claims before administrative bodies in the United States or abroad, even outside the context of litigation. These mechanisms include reexamination and inter partes review in the United States and equivalent proceedings in foreign jurisdictions, e.g., opposition proceedings. These proceedings could result in revocation or amendment of Proteon's patents in such a way that they no longer cover, for example, vonapanitase or competitive products. The outcome following legal assertions of invalidity and unenforceability is unpredictable. With respect to validity, for example, Proteon cannot be certain that there is no invalidating prior art, including prior art of which Proteon and the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity and/or unenforceability, Proteon would lose at least part, and perhaps all, of the

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patent protection on the applicable product candidate. A loss of patent protection would have a material adverse impact on Proteon's business.

Proteon will not seek to protect Proteon's intellectual property rights in all jurisdictions throughout the world, and Proteon may not be able to adequately enforce Proteon's intellectual property rights even in the jurisdictions where Proteon seeks protection.

        Filing, prosecuting and defending patents on product candidates in all countries and jurisdictions throughout the world would be prohibitively expensive, and Proteon's intellectual property rights in some countries outside the United States could be less extensive than those in the United States, assuming that rights are obtained in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. Consequently, Proteon may not be able to prevent third parties from practicing Proteon's inventions in all countries outside the United States, or from selling or importing products made using Proteon's inventions in and into the United States or other jurisdictions.

        Competitors may use Proteon's technologies in jurisdictions where Proteon does not pursue and obtain patent protection to develop their own products and further, may export otherwise infringing products to territories where Proteon has patent protection, but enforcement is not as strong as that in the United States. These products may compete with Proteon's products and Proteon's patents or other intellectual property rights may not be effective or sufficient to prevent them from competing. Even if Proteon pursues and obtains issued patents in particular jurisdictions, Proteon's patent claims or other intellectual property rights may not be effective or sufficient to prevent third parties from so competing.

        Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection, particularly those relating to biopharmaceuticals, which could make it difficult for Proteon to stop the infringement of Proteon's patents or marketing of competing products in violation of Proteon's proprietary rights generally. Proceedings to enforce Proteon's patent rights in foreign jurisdictions could result in substantial costs and divert Proteon's efforts and attention from other aspects of Proteon's business, could put Proteon's patents at risk of being invalidated or interpreted narrowly, could put Proteon's patent applications at risk of not issuing and could provoke third parties to assert claims against Proteon. Proteon may not prevail in any lawsuits that Proteon initiates and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, Proteon's efforts to enforce Proteon's intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that Proteon develops or license.

Some of Proteon's intellectual property may have been discovered through government funded programs and thus may be subject to federal regulations such as government "march-in" rights, certain reporting requirements, and a preference for United States industry. Compliance with these regulations may limit Proteon's exclusive rights, subject Proteon to expenditure of resources with respect to reporting requirements, and limit Proteon's ability to contract with foreign manufacturers.

        Some of Proteon's intellectual property rights may have been generated through the use of United States government funding and therefore are subject to certain federal regulations. For example, Proteon's patents relating to some therapeutic uses of vonapanitase and associated systems and kits that include a catheter, which Proteon refers to as the "therapy family," arose from research funded by the United States government. As a result, the United States government has certain rights to this intellectual property pursuant to the Bayh-Dole Act of 1980, or Bayh-Dole Act. These United States government rights in certain inventions developed under a government-funded program include a

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non-exclusive, non-transferable, irrevocable worldwide license to use inventions for any governmental purpose. In addition, the United States government has the right to require Proteon to grant exclusive, partially exclusive, or non-exclusive licenses to any of these inventions to a third party if it determines that: (i) adequate steps have not been taken to commercialize the invention; (ii) government action is necessary to meet public health or safety needs; or (iii) government action is necessary to meet requirements for public use under federal regulations, also referred to as "march-in rights." The United States government also has the right to take title to these inventions if Proteon, or the applicable licensor, fail to disclose the invention to the government and fail to file an application to register the intellectual property within specified time limits. In addition, the United States government may acquire title to these inventions in any country in which a patent application is not filed within specified time limits. Intellectual property generated under a government funded program is also subject to certain reporting requirements, compliance with which may require Proteon or the applicable licensor to expend substantial resources. In addition, the United States government requires that any products embodying the subject invention or produced through the use of the subject invention be manufactured substantially in the United States. The manufacturing preference requirement can be waived if the owner of the intellectual property can show that reasonable but unsuccessful efforts have been made to grant licenses on similar terms to potential licensees that would be likely to manufacture substantially in the United States or that under the circumstances domestic manufacture is not commercially feasible. This preference for United States manufacturers may limit Proteon's ability to contract with foreign product manufacturers for products covered by the applicable intellectual property.

        Proteon currently does not plan to apply for additional United States government funding, but if Proteon does, and Proteon discovers compounds or drug or biological candidates as a result of such funding, intellectual property rights to these discoveries may be subject to the applicable provisions of the Bayh-Dole Act.

If Proteon does not obtain additional protection under the Hatch-Waxman Amendments and similar foreign legislation by extending the patent protection for vonapanitase, Proteon's business may be materially harmed.

        Depending upon the timing, duration and specifics of the first FDA marketing approval of vonapanitase and, if applicable, any additional product candidates, a United States patent that Proteon owns or license may be eligible for limited patent term restoration under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the Hatch-Waxman Amendments. The Hatch-Waxman Amendments permit extension of one patent that covers an FDA-approved drug or biologic that contains an active ingredient or salt or ester of the active ingredient that has not previously been marketed for up to five years and no more than fourteen years after product approval for patent term lost during product development and the FDA regulatory review process. The length of the extension is calculated by adding one half of the time between the IND effective date and a company's initial submission of a marketing application, plus the entire time between the submission of the marketing application and the FDA's approval of the application. During this period of extension, the scope of protection is limited to the approved product for approved uses (for patents claiming a product) and any use claimed by the patent and approved for the product (for patents claiming a method of using a product).

        Although Proteon plans to seek patent term restoration for Proteon's products, it may not be granted if, for example, Proteon fails to apply within applicable deadlines, fails to apply prior to expiration of relevant patents or otherwise fails to satisfy applicable requirements. Moreover, the applicable time period or the scope of patent protection afforded could be less than Proteon request. If Proteon is unable to obtain patent term restoration or the term of any such patent restoration is less than Proteon request, Proteon's competitors may be able to enter the market and compete against Proteon sooner than Proteon anticipates, and Proteon's ability to generate revenues could be materially adversely affected.

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Changes in United States patent law could diminish the value of patents in general, thereby impairing Proteon's ability to protect Proteon's products.

        As is the case with other biotechnology companies, Proteon's success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the biotechnology industry involve both technological and legal complexity, and is therefore costly, time-consuming and inherently uncertain. In addition, the United States has in recent years implemented wide-ranging patent reform legislation, the Leahy-Smith America Invents Act, or America Invents Act. The America Invents Act includes a number of significant changes to United States patent law. These include provisions that affect the way patent applications will be prosecuted, provides expanded opportunities for post-grant administrative review of patents before the USPTO, and may also affect patent litigation. The USPTO developed new regulations and procedures to govern administration of the America Invents Act, and many of the substantive changes to patent law associated with the America Invents Act, in particular the first to file provisions, only became effective on March 16, 2013. A third party that files a patent application in the USPTO after that date but before Proteon could therefore be awarded a patent covering an invention of Proteon's even if Proteon had made the invention before it was made by the third party. This requires Proteon to be cognizant of the time from invention to filing of a patent application. Thus, for Proteon's U.S. patent applications containing a priority claim after March 16, 2013, there is a greater level of uncertainty in the patent law. Moreover, some of the patent applications in Proteon's portfolio will be subject to examination under the pre-America Invents Act law and regulations, while other patents applications in Proteon's portfolio will be subject to examination under the law and regulations, as amended by the America Invents Act. This introduces additional complexities and costs into the prosecution and management of Proteon's portfolio.

        The laws of some foreign countries do not protect intellectual property rights to the same extent as the laws of the United States. Many companies have encountered significant problems in protecting and defending intellectual property rights in certain foreign jurisdictions. The legal systems of some countries, particularly developing countries, do not favor the enforcement of patents and other intellectual property protection, especially those relating to biotechnology. This could make it difficult for Proteon to stop the infringement of Proteon's patents, if obtained, or the misappropriation of Proteon's other intellectual property rights. For example, many foreign countries have compulsory licensing laws under which a patent owner must grant licenses to third parties. In addition, many countries limit the enforceability of patents against third parties, including government agencies or government contractors. In these countries, patents may provide limited or no benefit. Patent protection must ultimately be sought on a country-by-country basis, which is an expensive and time-consuming process with uncertain outcomes. Accordingly, Proteon may choose not to seek patent protection in certain countries, and Proteon will not have the benefit of patent protection in such countries.

        In addition, the America Invents Act and recent Supreme Court and U.S. Court of Appeals for the Federal Circuit decisions limit where a patentee may file a patent infringement suit, and the America Invents Act provides opportunities for third parties to challenge any issued patent in the USPTO. These provisions apply to all of Proteon's U.S. patents, even those filed before March 16, 2013. Because of a lower evidentiary standard in USPTO proceedings compared to the evidentiary standard in U.S. federal court necessary to invalidate a patent claim, a third party could potentially provide evidence in a USPTO proceeding sufficient for the USPTO to hold a claim invalid even though the same evidence would be insufficient to invalidate the claim if first presented in a federal court action. Accordingly, a third party may attempt to use the USPTO procedures to invalidate Proteon's patent claims because it may be easier for them to do so relative to challenging the patent in a federal court action. It is not clear what, if any, impact the America Invents Act will have on the operation of Proteon's business. However, the America Invents Act and its implementation could increase the uncertainties and costs surrounding the prosecution of Proteon's patent applications and the

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enforcement or defense of any patents that may issue from Proteon's patent applications, all of which could have a material adverse effect on Proteon's business and financial condition.

        In addition, recent United States Supreme Court rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. The full impact of these decisions is not yet known. For example, on March 20, 2012 in Mayo Collaborative Services v. Prometheus Laboratories, Inc., the Court held that several claims drawn to measuring drug metabolite levels from patient samples and correlating them to drug doses were not patent-eligible subject matter. The decision appears to impact diagnostics patents that merely apply a law of nature via a series of routine steps and it has created uncertainty around the ability to obtain patent protection for certain inventions. Additionally, on June 13, 2013 in Association for Molecular Pathology v. Myriad Genetics, Inc., the Court held that claims to isolated genomic DNA are not patent-eligible, but claims to complementary DNA molecules are patent-eligible because they are not a natural product. The effect of the decision on patents for other isolated natural products is uncertain. On June 19, 2014 in Alice Corporation Pty. Ltd. v. CLS Bank International, et al., a case involving patent claims directed to a method for mitigating settlement risk, the Court held that the patent eligibility of claims directed to abstract ideas, products of nature, and laws of nature should be determined using the same framework set forth in Prometheus. The USPTO has issued a series of guidelines setting forth procedures for determining subject matter eligibility of claims directed to abstract ideas, products of nature, and laws of nature in line with the Prometheus, Myriad and Alice decisions. This guidance does not limit the application of Myriad to DNA, but, rather, applies the decision to other natural products. The USPTO's interpretation of the case law and new guidelines for examination may influence, possibly adversely, prosecution and defense of certain types of claims in Proteon's portfolio.

        In addition to increasing uncertainty with regard to Proteon's ability to obtain future patents, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on these and other decisions by the United States Congress, the federal courts and the USPTO, the laws and regulations governing patents could change in unpredictable ways that would weaken Proteon's ability to obtain new patents or to enforce Proteon's current or future patents.

Proteon may be subject to damages resulting from claims that Proteon or Proteon's employees have wrongfully used or disclosed alleged trade secrets of their former employers.

        Proteon's employees have been previously employed at other biotechnology or pharmaceutical companies, including Proteon's competitors or potential competitors, or at universities or academic medical centers. Proteon also engages advisors and consultants who are concurrently employed at universities or who perform services for other entities. Although Proteon is not aware of any claims currently pending against Proteon, Proteon may be subject to claims that Proteon or Proteon's employees, advisors or consultants have inadvertently or otherwise used or disclosed intellectual property, including trade secrets or other proprietary information, of a former employer or other third party. Proteon may in the future also be subject to claims that an employee, advisor or consultant performed work for Proteon that conflicts with that person's obligations to a third party, such as an employer, and thus, that the third party has an ownership interest in the intellectual property arising out of work performed for Proteon. Litigation may be necessary to defend against these claims. Even if Proteon is successful in defending against these claims, litigation could result in substantial costs and be a distraction to management. If Proteon is unsuccessful in defending against such claims, in addition to paying monetary damages, Proteon may lose valuable intellectual property rights or personnel. A loss of key personnel or their work product could hamper or prevent Proteon's ability to commercialize vonapanitase or any additional product candidates, which would materially adversely affect Proteon's commercial development efforts.

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Numerous factors may limit any potential competitive advantage provided by Proteon's intellectual property rights.

        The degree of future protection afforded by Proteon's intellectual property rights is uncertain because intellectual property rights have limitations, and may not adequately protect Proteon's business, provide a barrier to entry against Proteon's competitors or potential competitors, or permit Proteon to maintain Proteon's competitive advantage. Moreover, if a third party has intellectual property rights that cover the practice of Proteon's technology, Proteon may not be able to exercise or extract value from Proteon's intellectual property rights fully or at all. The following examples are illustrative:

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Proteon might not have been the first to make the inventions covered by a patent or pending patent application that Proteon owns;



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Proteon might not have been the first to file patent applications covering an invention;



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others may independently develop similar or alternative technologies without infringing Proteon's intellectual property rights;



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third parties may compete with Proteon in jurisdictions where Proteon does not pursue and obtain patent protection;



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pending patent applications that Proteon owns may not lead to issued patents;



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patents that Proteon owns may not provide Proteon with any competitive advantages, or may be held invalid or unenforceable;



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third parties may assert an ownership interest in Proteon's intellectual property;



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Proteon may not develop or in-license additional proprietary technologies that are patentable; and



•

the patents or proprietary rights of others may have an adverse effect on Proteon's business.

        Should any of these events occur, they could significantly harm Proteon's business and results of operations.

Risks Related to Proteon's Business and Industry

If product liability lawsuits are successfully brought against Proteon, Proteon's insurance may be inadequate and Proteon may incur substantial liability.

        Proteon faces an inherent risk of product liability claims as a result of the clinical testing of vonapanitase or any additional product candidates. Proteon will face an even greater risk if Proteon commercially sells vonapanitase or any additional product candidate that Proteon develops. Proteon maintains primary product liability insurance and excess product liability insurance that cover Proteon's clinical trials, and Proteon plans to maintain insurance against product liability lawsuits for commercial sale of Proteon's potential products. Historically, the potential liability associated with product liability lawsuits for pharmaceutical products has been unpredictable. Although Proteon believes that Proteon's current insurance is a reasonable estimate of Proteon's potential liability and represents a commercially reasonable balancing of the level of coverage as compared to the cost of the insurance, Proteon may be subject to claims in connection with Proteon's clinical trials and, in the future, commercial use of Proteon's potential products, for which Proteon's insurance coverage may not be adequate, and the cost of any product liability litigation or other proceeding, even if resolved in Proteon's favor, could be substantial.

        For example, Proteon may be sued if any product Proteon develops allegedly causes injury or is found to be otherwise unsuitable during clinical testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure

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to warn of dangers inherent in the product, negligence, strict liability or a breach of warranties. Large judgments have been awarded in class action lawsuits based on drugs or biologics that had unanticipated adverse effects. Claims could also be asserted under state consumer protection acts. If Proteon cannot successfully defend itself against product liability claims, Proteon may incur substantial liabilities or be required to limit commercialization of vonapanitase or any additional product candidates. Regardless of the merits or eventual outcome, liability claims may result in:

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reduced resources of Proteon's management to pursue Proteon's business strategy;



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decreased demand for Proteon's product candidates or products that Proteon may develop;



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injury to Proteon's reputation and significant negative media attention;



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withdrawal of clinical trial participants;



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termination of clinical trial sites or entire trial programs;



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initiation of investigations by regulators;



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



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significant costs to defend resulting litigation;



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diversion of management and scientific resources from Proteon's business operations;



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substantial monetary awards to trial participants or patients;



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loss of revenue; and



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the inability to commercialize any products that Proteon may develop.

        The product liability insurance Proteon will need to obtain in connection with the commercial sales of vonapanitase or any additional product candidates if and when they receive regulatory approval may be unavailable in meaningful amounts or at a reasonable cost. In addition, insurance coverage is becoming increasingly expensive. If Proteon is unable to obtain or maintain sufficient insurance coverage at an acceptable cost or to otherwise protect against potential product liability claims, it could prevent or inhibit the development and commercial production and sale of vonapanitase or any additional product candidates if and when they obtain regulatory approval, which could materially adversely affect Proteon's business, financial condition, results of operations, cash flows and prospects.

        Additionally, Proteon does not carry insurance for all categories of risk that Proteon's business may encounter. Some of the policies Proteon currently maintains include general liability, employment practices liability, property, auto, workers' compensation, products liability and directors' and officers' insurance. Proteon does not know, however, if Proteon will be able to maintain insurance with adequate levels of coverage. Any significant uninsured liability may require Proteon to pay substantial amounts, which would materially adversely affect Proteon's financial position, cash flows and results of operations.

Proteon's business and operations would suffer in the event of system failures or security breaches.

        Despite the implementation of security measures, Proteon's internal computer systems, and those of Proteon's CROs and other third parties on which Proteon relies, are vulnerable to damage from computer viruses, unauthorized access, cyber attacks, natural disasters, terrorism, war and telecommunication and electrical failures. If issues were to arise and cause interruptions in Proteon's operations, it could result in a material disruption of Proteon's drug and biologic development programs or could cause loss of critical data or the unauthorized disclosure, access, acquisition, alteration, or use of personal or other confidential information. For example, the loss of clinical trial data from completed or planned clinical trials could result in delays in Proteon's regulatory approval

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efforts and significantly increase Proteon's costs to recover or reproduce the data. To the extent that any disruption or security breach were to result in a loss of or damage to Proteon's data or applications, or inappropriate disclosure of confidential or proprietary information, Proteon could incur liability and the further development of vonapanitase or any additional product candidates could be delayed. Proteon may also be vulnerable to cyber attacks by hackers, or other malfeasance. This type of breach of Proteon's cybersecurity may compromise Proteon's confidential information and/or Proteon's financial information and detrimentally impact Proteon's business or result in significant legal and financial exposure and/or reputational harm.

        In addition, while Proteon selects third-party vendors and business partners carefully and routinely evaluate the cybersecurity of Proteon's CROs and other key vendors, Proteon does not control their actions. Any problems caused by these third parties, including those resulting from cyber attacks and security breaches at a vendor, could result in material delays in Proteon's development programs and regulatory approval efforts and adversely affect Proteon's business. Moreover, data security incidents and other inappropriate access can be difficult to detect, and any delay in identifying them may lead to increased harm of the type described above.

        There are also numerous federal, state, and local laws and regulations in the United States and around the world regarding privacy and the collection, processing, storing, sharing, disclosing, using, cross-border transfer, and protecting of personal information and other data, the scope of which are changing, subject to differing interpretations, and which may be costly to comply with, may result in regulatory fines or penalties, and may be inconsistent between countries and jurisdictions or conflict with other requirements. Proteon strives to comply with all applicable laws, policies, legal obligations, and industry codes of conduct relating to privacy and data protection, to the extent possible. However, it is possible that these obligations may be interpreted and applied in new ways or in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or Proteon's practices or that new regulations could be enacted. Several proposals are pending before federal, state, and foreign legislative and regulatory bodies that could affect Proteon's business. Any failure or perceived failure by Proteon to comply with Proteon's privacy-related obligations to third parties, or Proteon's privacy-related legal obligations, or any compromise of security that results in the unauthorized release or transfer of sensitive information, which could include personally identifiable information or other user data, may result in governmental investigations, enforcement actions, regulatory fines, litigation, or public statements against Proteon by advocacy groups or others, and could cause third parties, including clinical sites, regulators or potential partners, to lose trust in Proteon, which could have an adverse effect on Proteon's business.

Proteon's employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements and insider trading, which could significantly harm Proteon's business.

        Proteon is exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with the regulations of the FDA and foreign regulators, provide accurate information to the FDA and foreign regulators, comply with healthcare fraud and abuse laws and regulations in the United States and abroad, and report financial information or data accurately or disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to Proteon's reputation. Proteon has a Code of Business Conduct and Ethics, but it is not always possible to identify and deter employee misconduct, and the precautions Proteon takes to detect and prevent this activity may not be effective in controlling

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unknown or unmanaged risks or losses or in protecting Proteon from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. If any actions are instituted against Proteon, and Proteon is not successful in defending itself or asserting its rights, those actions could have a significant impact on Proteon's business, including the imposition of significant fines or other sanctions.

Proteon has broad discretion in its use of its cash and cash equivalents and may not use them effectively.

        Proteon's management has broad discretion to use its cash and cash equivalents to fund its operations and could spend these funds in ways that do not improve Proteon's results of operations or enhance the value of Proteon common stock. The failure of Proteon's management to apply these funds effectively could result in financial losses that could have a material adverse effect on Proteon's business, cause the price of Proteon's common stock to decline and delay the development of Proteon's product candidates. Pending their use to fund Proteon's operations, Proteon may invest its cash and cash equivalents in a manner that does not produce income or that loses value.

Risks Related to Proteon's Common Stock

Proteon's common stock may be delisted from Nasdaq if Proteon is unable to maintain compliance with Nasdaq's continued listing standards.

        Nasdaq imposes, among other requirements, continued listing standards including minimum bid and public float requirements. The price of Proteon common stock must trade at or above $1.00 to comply with Nasdaq's minimum bid requirement for continued listing on Nasdaq.

        On May 10, 2019, Proteon received a deficiency letter from Nasdaq, which indicated that Proteon was not in compliance with the minimum bid price requirement set forth in Nasdaq rules for continued listing on The Nasdaq Global Market. Pursuant to Nasdaq Listing Rule 5810(c)(3)(A), Proteon was granted a grace period of 180 calendar days, or until November 6, 2019, to regain compliance with the minimum bid price requirement. During the compliance period, Proteon common stock continued to be listed and traded on Nasdaq. Because Proteon does not anticipate being able to regain compliance with the minimum bid price requirement during the compliance period, Proteon submitted an application to transfer the listing of the Proteon common stock to The Nasdaq Capital Market, which, according to the Nasdaq Listing Rules, affords Proteon an additional 180-day compliance period to comply with the minimum bid price requirement. The transfer application also requires Proteon to submit a letter stating its intention to effect the Reverse Stock Split during the second compliance period, which Proteon has done. The application to transfer the listing of the Proteon common stock was granted on September 30, 2019, effective October 7, 2019. If Proteon fails to regain compliance with the minimum bid price requirement during the second compliance period, the Proteon common stock could be subject to delisting. Additionally, if Proteon fails to comply with any other continued listing standards of Nasdaq, Proteon common stock will also be subject to delisting. There can be no assurance that Proteon will be able to regain compliance with the minimum bid price requirement or will otherwise be in compliance with other Nasdaq listing criteria

        Any delisting of Proteon common stock could adversely affect the market liquidity of Proteon common stock and the market price of Proteon common stock could decrease. Furthermore, if Proteon common stock were delisted it could adversely affect Proteon's ability to complete one or more strategic transactions for the company, to obtain financing for the continuation of Proteon's operations and/or result in the loss of confidence by investors, customers, suppliers and employees.

If the proposed Merger is not completed, the market price of Proteon common stock may continue to be volatile and may fluctuate in a way that is disproportionate to Proteon's operating performance.

        Factors affecting the trading price of Proteon common stock may include:

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Proteon's failure to consummate another strategic transaction and the value of such other transaction including whether it is deemed to enhance stockholder value or deliver expected benefits;

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Proteon's failure to develop and commercialize vonapanitase or any additional product candidates;



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actual or anticipated fluctuations in Proteon's quarterly financial results or the quarterly financial results of companies perceived to be similar to us;



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changes in the market's expectations about Proteon's operating results;



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adverse results or delays in preclinical studies or clinical trials;



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Proteon's decision to initiate a clinical trial, not to initiate a clinical trial or to terminate an existing clinical trial;



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adverse regulatory decisions, including failure to receive regulatory approval for vonapanitase or any additional product candidates;



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success of competitive products;



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adverse developments concerning Proteon's collaborations and Proteon's manufacturers;



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inability to obtain adequate product supply for any product candidate for clinical trials or commercial sale or inability to do so at acceptable prices;



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the termination of a collaboration or the inability to establish additional collaborations;



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unanticipated serious safety concerns related to the use of any of vonapanitase or any additional product candidates;



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Proteon's ability to effectively manage its growth;



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the size and growth, if any, of the targeted market;



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Proteon's operating results failing to meet the expectation of securities analysts or investors in a particular period or failure of securities analysts to publish reports about us or its business;



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changes in financial estimates and recommendations by securities analysts concerning Proteon, its market opportunity, or the biotechnology and pharmaceutical industries in general;



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operating and stock price performance of other companies that investors deem comparable to us;



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overall performance of the equity markets;



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announcements by Proteon or its competitors of acquisitions, new product candidates or programs, significant contracts, commercial relationships or capital commitments;



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Proteon's ability to successfully market vonapanitase or any additional product candidates;



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changes in laws and regulations affecting Proteon's business, including but not limited to clinical trial requirements for approvals;



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disputes or other developments relating to proprietary rights, including patents, litigation matters and Proteon's ability to obtain patent protection for vonapanitase or any additional product candidates;



•

commencement of, or involvement in, litigation involving Proteon, its general industry, or both;



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changes in Proteon's capital structure, such as future issuances of securities or the incurrence of additional debt;



•

the volume of shares of Proteon common stock available for public sale;



•

additions or departures of key scientific or management personnel;