CEMPRA, INC. (Form: 10-Q, Received: 10/29/2013 16:47:49)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2013

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

For the Transition Period from to

Commission File Number: 001-35405

CEMPRA, INC.

(Exact name of registrant specified in its charter)

Delaware

2834

45-4440364

(State or Other Jurisdiction of

Incorporation or Organization)

(Primary Standard Industrial

Classification Code Number)

(I.R.S. Employer

Identification No.)

6320 Quadrangle Drive, Suite 360

Chapel Hill, NC 27517

(Address of Principal Executive Offices)

(919) 313-6601

(Telephone Number, Including Area Code)

6340 Quadrangle Drive, Suite 100

Chapel Hill, North Carolina 27517-8149

(Former name, former address and former fiscal year if changed since last report)

Securities Registered Pursuant to Section 12(b) of the Exchange Act:


Title of Each Class		Name of Exchange on which Registered
Common Stock, $0.001 Par Value		Nasdaq Global Market

Securities Registered Pursuant to Section 12(g) of the Act: None

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

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

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

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

As of October 23, 2013 there were 33,192,972 shares of the registrant’s common stock, $0.001 par value, outstanding.

CEMPRA, INC.

TABLE OF CONTENTS


		Page
PART I—FINANCIAL INFORMATION			1

Item 1.	Financial Statements		1

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operation		20

Item 3.	Quantitative and Qualitative Disclosures about Market Risk		31

Item 4.	Controls and Procedures		31

PART II—OTHER INFORMATION			32

Item 6.	Exhibits		32

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

CEMPRA, INC.

(A Development Stage Company)

Consolidated Balance Sheets


	December 31, 2012			September 30, 2013
				(Unaudited)
Assets
Current assets
Cash and equivalents	$	70,108,754		$	110,403,348
Receivables		—			974,778
Prepaid expenses		264,981			324,725

Total current assets		70,373,735			111,702,851

Furniture, fixtures and equipment, net		43,217			72,359
Deposits		321,394			322,298

Total assets	$	70,738,346		$	112,097,508

Liabilities
Current liabilities
Accounts payable	$	2,171,633		$	3,888,586
Accrued expenses		341,918			422,795
Accrued payroll and benefits		604,548			714,953
Deferred revenue		—			22,848
Warrant liability		—			821,138
Current portion of long-term debt		2,226,610			1,085,361

Total current liabilities		5,344,709			6,955,681
Deferred revenue		—			5,641,740
Long-term debt		7,623,285			13,435,309

Total liabilities		12,967,994			26,032,730

Commitments and contingencies
Shareholder’s Equity
Common stock; $.001par value; 80,000,000 shares authorized; 24,903,774 and 33,186,656 issued and outstanding at December 31, 2012 and September 30, 2013		24,904			33,187
Additional paid-in capital		178,970,975			235,462,570
Deficit accumulated during the development stage		(121,225,527	)		(149,430,979	)

Total shareholders’ equity		57,770,352			86,064,778

Total liabilities and shareholders’ equity	$	70,738,346		$	112,097,508

The accompanying notes are an integral part of these consolidated financial statements

CEMPRA, INC.

(A Development Stage Company)

Consolidated Statements of Operations

(Unaudited)


	Three Months Ended September 30						Nine Months Ended September 30						Period from November 18, 2005 (Inception) to September 30,
	2012			2013			2012			2013			2013
Revenue
Contract research		—			1,172,268			—			1,404,608			1,404,608
License		—			—			—			4,335,412			4,335,412

Total revenue	$	—		$	1,172,268		$	—		$	5,740,020		$	5,740,020

Operating expenses
Research and development		3,156,011			11,919,394			12,456,062			25,617,340			109,344,900
General and administrative		1,494,824			2,167,234			4,244,278			6,895,937			28,458,397

Total operating expenses		4,650,835			14,086,628			16,700,340			32,513,277			137,803,297

Loss from operations		(4,650,835	)		(12,914,360	)		(16,700,340	)		(26,773,257	)		(132,063,277	)

Other income (expense)
Interest income		675			3,152			106,589			16,419			1,489,529
Interest expense		(330,955	)		(736,288	)		(1,065,049	)		(1,448,614	)		(7,087,936	)
Other income		—			—			—			—			488,958

Other income (expense), net		(330,280	)		(733,136	)		(958,460	)		(1,432,195	)		(5,109,449	)

Net loss and comprehensive loss		(4,981,115	)		(13,647,496	)		(17,658,800	)		(28,205,452	)		(137,172,726	)
Accretion of redeemable convertible preferred shares		—			—			(313,588	)		—			(14,002,842	)

Net loss attributable to common shareholders	$	(4,981,115	)	$	(13,647,496	)	$	(17,972,388	)	$	(28,205,452	)	$	(151,175,568	)

Basic and diluted net loss attributable to common shareholders per share	$	(0.24	)	$	(0.41	)	$	(0.97	)	$	(1.00	)

Basic and diluted weighted average shares outstanding		21,038,008			33,184,322			18,450,507			28,187,011

The accompanying notes are an integral part of these consolidated financial statements

CEMPRA, INC.

(A Development Stage Company)

Consolidated Statements of Redeemable Preferred Shares and Shareholders’ Equity (Deficit)


																										Deficit			Total
	Series A						Series B				Series C												Additional			During the			Shareholders’
	Preferred Shares						Preferred Shares				Preferred Shares				Common Shares				Common Stock				Paid-In			Development			Equity
	Shares			Amount			Shares		Amount		Shares		Amount		Shares		Amount		Shares		Amount		Capital			Stage			(Deficit)
Balance as of November 18, 2005 (inception date)		—		$	—			—	$	—		—	$	—		—	$	—		—	$	—	$	—		$	—		$	—
Net loss		—			—			—		—		—		—		—		—		—		—		—			(26,463	)		(26,463	)

Balance as of December 31, 2005		—			—			—		—		—		—		—		—		—		—		—			(26,463	)		(26,463	)
Issuance of common shares to founders		—			—			—		—		—		—		179,825		—		—		—		171			—			171
Issuance of common shares for service		—			—			—		—		—		—		30,702		—		—		—		14,583			—			14,583
Issuance of common shares for license agreement		—			—			—		—		—		—		64,311		—		—		—		91,362			—			91,362
Issuance of Series A preferred share, net of share issuance costs of $150,570		789,191			7,346,745			—		—		—		—		—		—		—		—		—			—			—
Accretion of redeemable convertible preferred shares		—			232,782			—		—		—		—		—		—		—		—		(122,443	)		(110,339	)		(232,782	)
Share-based compensation		—			—			—		—		—		—		—		—		—		—		16,327			—			16,327
Net loss		—			—			—		—		—		—		—		—		—		—		—			(2,228,948	)		(2,228,948	)

Balance as of December 31, 2006		789,191			7,579,527			—		—		—		—		274,838		—		—		—		—			(2,365,750	)		(2,365,750	)
Issuance of common shares upon exercise of options		—			—			—		—		—		—		8,947		—		—		—		5,250			—			5,250
Issuance of Series A preferred shares, net of issuance costs of $20,435		1,557,895			14,779,563			—		—		—		—		—		—		—		—		—			—			—
Conversion of Series A preferred shares to common shares upon financing participation default		(55,120	)		(523,644	)		—		—		—		—		55,120		—		—		—		523,644			—			523,644
Issuance of common shares to CEO		—			—			—		—		—		—		77,368		—		—		—		124,950			—			124,950
Issuance of common shares for license agreement		—			—			—		—		—		—		61,335		—		—		—		99,055			—			99,055
Issuance of Series B preferred shares, net of issuance costs of $43,682		—			—			809,717		9,956,318		—		—		—		—		—		—		—			—			—
Accretion of redeemable convertible preferred shares		—			1,526,057			—		100,000		—		—		—		—		—		—		(808,919	)		(817,138	)		(1,626,057	)
Share-based compensation		—			—			—		—		—		—		—		—		—		—		56,020			—			56,020

CEMPRA, INC.

(A Development Stage Company)

Consolidated Statements of Redeemable Preferred Shares and Shareholders’ Equity (Deficit)


																									Deficit			Total
	Series A				Series B				Series C													Additional			During the			Shareholders’
	Preferred Shares				Preferred Shares				Preferred Shares					Common Shares				Common Stock				Paid-In			Development			Equity
	Shares		Amount		Shares		Amount		Shares		Amount			Shares		Amount		Shares		Amount		Capital			Stage			(Deficit)
Net loss		—		—		—		—		—		—			—		—		—		—		—			(8,075,240	)		(8,075,240	)

Balance as of December 31, 2007		2,291,966		23,361,503		809,717		10,056,318		—		—			477,608		—		—		—		—			(11,258,128	)		(11,258,128	)
Issuance of common shares upon exercise of options		—		—		—		—		—		—			13,469		—		—		—		13,113			—			13,113
Accretion of redeemable convertible preferred shares		—		1,731,269		—		806,390		—		—			—		—		—		—		(106,124	)		(2,431,536	)		(2,537,660	)
Share-based compensation		—		—		—		—		—		—			—		—		—		—		93,011			—			93,011
Net loss		—		—		—		—		—		—			—		—		—		—		—			(14,902,317	)		(14,902,317	)

Balance as of December 31, 2008		2,291,966		25,092,772		809,717		10,862,708		—		—			491,077		—		—		—		—			(28,591,981	)		(28,591,981	)
Issuance of Series C preferred shares, net of issuance cost of $251,733		—		—		—		—		2,488,675		25,248,268			—		—		—		—		—			—			—
Series C Warrant		—		—		—		—		—		(5,174,381	)		—		—		—		—		—			—			—
Accretion of redeemable convertible preferred shares		—		667,997		—		301,946		—		1,321,490			—		—		—		—		(123,404	)		(2,168,029	)		(2,291,433	)
Beneficial conversion costs of Series B preferred shares		—		—		—		73,995		—		—			—		—		—		—		—			(73,995	)		(73,995	)
Share-based compensation		—		—		—		—		—		—			—		—		—		—		123,404			—			123,404
Net loss		—		—		—		—		—		—			—		—		—		—		—			(18,611,814	)		(18,611,814	)

Balance as of December 31, 2009		2,291,966		25,760,769		809,717		11,238,649		2,488,675		21,395,377			491,077		—		—		—		—			(49,445,819	)		(49,445,819	)
Issuance of common shares upon exercise of options		—		—		—		—		—		—			3,947		—		—		—		8,250			—			8,250
Issuance of Series C preferred shares, net of issuance cost of $9,279		—		—		—		—		2,000,700		20,490,721			—		—		—		—		—			—			—
Series C Warrant		—		—		—		—		—		8,597,116			—		—		—		—		—			—			—
Accretion of redeemable convertible preferred shares		—		24,464		—		6,390		—		3,207,407			—		—		—		—		(174,061	)		(3,064,202	)		(3,238,263	)
Beneficial conversion costs of Series B preferred shares		—		—		—		30,082		—		—			—		—		—		—		—			(30,082	)		(30,082	)
Share-based compensation		—		—		—		—		—		—			—		—		—		—		165,811			—			165,811
Net loss		—		—		—		—		—		—			—		—		—		—		—			(19,674,924	)		(19,674,924	)

Balance as of December 31, 2010		2,291,966		25,785,233		809,717		11,275,121		4,489,375		53,690,621			495,024		-		-		-		-			(72,215,027	)		(72,215,027	)

CEMPRA, INC.

(A Development Stage Company)

Consolidated Statements of Redeemable Preferred Shares and Shareholders’ Equity (Deficit)


																															Deficit			Total
	Series A						Series B						Series C															Additional			During the			Shareholders’
	Preferred Shares						Preferred Shares						Preferred Shares						Common Shares					Common Stock				Paid-In			Development			Equity
	Shares			Amount			Shares			Amount			Shares			Amount			Shares			Amount		Shares		Amount		Capital			Stage			(Deficit)
Issuance of common shares upon exercise of options		—			—			—			—			—			—			38,815			—		—		—		69,932			—			69,932
Accretion of redeemable convertible preferred shares		—			24,464			—			6,391			—			3,732,206			—			—		—		—		(513,717	)		(3,249,344	)		(3,763,061	)
Share-based compensation		—			—			—			—			—			—			—			—		—		—		443,785			—			443,785
Net loss		—			—			—			—			—			—			—			—		—		—		—			(21,220,779	)		(21,220,779	)

Balance as of December 31, 2011		2,291,966			25,809,697			809,717			11,281,512			4,489,375			57,422,827			533,839			—		—		—		—			(96,685,150	)		(96,685,150	)
Issuance of common stock upon exercise of options		—			—			—			—			—			—			—			—		10,351		10		34,498			—			34,508
Issuance of common stock upon initial public offering, net of issuance costs of $4.7 million		—			—			—			—			—			—			—			—		9,660,000		9,660		53,184,681			—			53,194,341
Issuance of common stock upon private placement, net of issuance costs of $1.7 million		—			—			—			—			—			—			—			—		3,864,461		3,865		23,508,098			—			23,511,963
Conversion of common shares to common stock		—			—			—			—			—			—			(533,839	)		—		533,839		534		(534	)		—			—
Accretion of redeemable convertible preferred shares		—			2,038			—			533			—			311,017			—			—		—		—		—			(313,588	)		(313,588	)
Conversion of redeemable convertible preferred shares to common stock upon initial public offering		(2,291,966	)		(25,811,735	)		(809,717	)		(11,282,045	)		(4,489,375	)		(57,733,844	)		—			—		9,958,502		9,959		94,817,665			—			94,827,624
Conversion of convertible notes payable to common stock upon initial public offering		—			—			—			—			—			—			—			—		876,621		876		4,723,658			—			4,724,534
Reclassification of warrant liability to additional paid-in capital		—			—			—			—			—			—			—			—		—		—		1,033,647			—			1,033,647
Share-based compensation		—			—			—			—			—			—			—			—		—		—		1,669,262			—			1,669,262
Net loss		—			—			—			—			—			—			—			—		—		—		—			(24,226,789	)		(24,226,789	)

Balance as of December 31, 2012		—		$	—			—		$	—			—		$	—			—		$	—		24,903,774	$	24,904	$	178,970,975		$	(121,225,527	)	$	57,770,352

CEMPRA, INC.

(A Development Stage Company)

Consolidated Statements of Redeemable Preferred Shares and Shareholders’ Equity (Deficit)


Share-based compensation (Unaudited)	—		—	—		—	—		—	—		—	—		—		2,480,137			—			2,480,137
Issuance of common stock upon exercise of warrants (Unaudited)	—		—	—		—	—		—	—		—	8,944		9		53,655			—			53,664
Issuance of common stock upon public offering, net of issuance cost of $3.7 million (Unaudited)	—		—	—		—	—		—	—		—	8,273,938		8,274		54,199,390			—			54,207,664
Relassification of additional paid-in capital to warrant liability (Unaudited)	—		—	—		—	—		—	—		—	—		—		(241,587	)		—			(241,587	)
Net loss (Unaudited)	—		—	—		—	—		—	—		—	—		—		—			(28,205,452	)		(28,205,452	)

Balance as of September 30, 2013 (Unaudited)	—	$	—	—	$	—	—	$	—	—	$	—	33,186,656	$	33,187	$	235,462,570		$	(149,430,979	)	$	86,064,778

The accompanying notes are an integral part of these consolidated financial statements

CEMPRA, INC.

(A Development Stage Company)

Consolidated Statements of Cash Flows

(Unaudited)


	Nine Months ended September 30,						Period From November 18, 2005 (Inception) to
	2012			2013			September 30, 2013
Operating activities
Net loss	$	(17,658,800	)	$	(28,205,452	)	$	(137,172,726	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation		41,880			21,546			263,389
Issuance of common shares for service		—			—			14,583
Issuance of common shares for license agreement		—			—			190,418
Share-based compensation		1,189,182			2,480,137			5,172,707
Change in fair value of warrant liabilities		(87,204	)		118,407			3,449,208
Amortization of debt issuance costs		267,949			432,291			1,182,254
Changes in operating assets and liabilities
Receivables		—			(974,778	)		(974,778	)
Prepaid expenses		123,358			(59,744	)		(324,725	)
Deposits		(311,524	)		(904	)		(322,298	)
Accounts payable		(1,654,242	)		1,716,953			3,888,584
Accrued expenses		(52,394	)		80,877			679,740
Accrued payroll and benefits		81,200			110,405			714,952
Deferred revenue		—			5,664,588			5,664,588

Net cash used in operating activities		(18,060,595	)		(18,615,674	)		(117,574,104	)

Investing activities
Purchases of furniture, fixtures and equipment		(8,437	)		(50,688	)		(335,747	)
Purchase of investments		—			—			(14,306,177	)
Proceeds from sale of investments		—			—			14,306,177

Net cash used in investing activities		(8,437	)		(50,688	)		(335,747	)

Financing activities
Proceeds from borrowing on convertible promissory notes		—			—			8,100,000
Proceeds from borrowing on long-term debt		—			5,238,327			15,238,327
Payments on long-term debt		—			(238,327	)		(238,327	)
Proceeds from exercise of stock options and warrants		34,508			53,664			184,887
Proceeds from issuance of common stock, net of underwriting discounts		54,777,800			54,407,814			132,697,576
Payment of offering costs		(702,716	)		(200,150	)		(2,259,307	)
Payment of debt issuance costs		—			(300,372	)		(607,270	)
Proceeds from issuance of redeemable convertible preferred shares		—			—			75,197,313

Net cash provided by financing activities		54,109,592			58,960,956			228,313,199

Net change in cash and equivalents		36,040,560			40,294,594			110,403,348
Cash and equivalents at beginning of the period		15,602,264			70,108,754			—

Cash and equivalents at end of the period	$	51,642,824		$	110,403,348		$	110,403,348

Supplemental cash flow information
Cash paid for interest	$	679,111		$	846,422		$	1,766,936
Non-cash investing and financing activities
Accretion of redeemable convertible preferred shares	$	313,588		$	—		$	14,002,845
Beneficial conversion costs of Series B preferred shares	$	—		$	—		$	104,077
Notes payable converted into Series A redeemable convertible preferred shares	$	—		$	—		$	3,100,000
Allocation of the Class C proceeds to the Class C Purchase Option	$	—		$	—		$	5,174,381
Conversion of the Class C Purchase Option	$	—		$	—		$	(8,597,116	)
Allocation of the convertible note proceeds to warrant	$	—		$	—		$	852,485
Allocation of the long-term debt proceeds to warrant	$	—		$	461,144		$	734,238
Conversion of convertible notes payable and accrued interest into common stock	$	—		$	—		$	4,724,534
Conversion of redeemable convertible preferred shares into common stock	$	—		$	—		$	94,827,625
Reclassification of warrant liability to additional paid-in capital	$	—		$	—		$	1,033,647
Reclassification of additional paid-in capital to warrant liability	$	—		$	241,587		$	241,587

The accompanying notes are an integral part of these consolidated financial statements

1. Description of Business

Cempra, Inc. (the “Company” or “Cempra”, previously known as Cempra Holdings, LLC) is the successor entity of Cempra Pharmaceuticals, Inc. which was incorporated on November 18, 2005 and commenced operations in January 2006. Cempra is located in Chapel Hill, North Carolina, and is a pharmaceutical company developing medicines to treat drug-resistant bacterial infections in the community and hospital.

On February 2, 2012, Cempra Holdings, LLC converted from a Delaware limited liability company to a Delaware corporation and was renamed Cempra, Inc. As a result of the corporate conversion, the holders of both common and preferred shares of Cempra Holdings, LLC became holders of shares of common stock of Cempra, Inc. Holders of options to purchase common shares of Cempra Holdings, LLC became holders of options to purchase shares of common stock of Cempra, Inc. Holders of notes convertible into preferred shares of Cempra Holdings, LLC and associated warrants exercisable for preferred shares of Cempra Holdings, LLC became holders of shares of common stock and warrants to purchase shares of common stock of Cempra, Inc.

The Company is in its development stage as defined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 915, Development Stage Entities . The Company’s activities since inception have consisted principally of acquiring product and technology rights, raising capital and performing research and development activities. Since inception, the Company has incurred significant losses from operations and expects losses to continue for the foreseeable future. The Company’s success depends primarily on the successful development and regulatory approval of its product candidates and its ability to obtain adequate financing. As of September 30, 2013, the Company has incurred losses since inception of $137.2 million. The Company expects to continue to incur losses and require additional financial resources to advance its products to either the commercial stage or liquidity events.

There can be no assurance that the Company will be able to obtain additional debt or equity financing or generate revenues from collaborative partners on terms acceptable to the Company, on a timely basis or at all. The failure of the Company to obtain sufficient funds on acceptable terms when needed could have a material adverse effect on the Company’s business, results of operations and financial condition.

2. Basis of Presentation

Principles of Consolidation and Basis of Presentation

The accompanying consolidated financial statements include the accounts and results of operations of Cempra, Inc. and its wholly owned subsidiaries. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). All intercompany balances and transactions have been eliminated in consolidation.

Unaudited Interim Financial Data

The accompanying interim consolidated financial statements are unaudited. These unaudited financial statements have been prepared in accordance with the rules and regulations of the United States Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the accompanying notes for the year ended December 31, 2012 contained in the Company’s Annual Report on Form 10-K. The unaudited interim consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments (consisting of normal recurring adjustments) necessary to state fairly the Company’s financial position as of September 30, 2013 and the results of operations and cash flows for the three months and nine months ended September 30, 2012 and 2013. The December 31, 2012 consolidated balance sheet included herein was derived from audited consolidated financial statements, but does not include all disclosures including notes required by GAAP for complete financial statements.

Use of Estimates

The preparation of these consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Receivables

Receivables consist of amounts billed and earned but unbilled under the Company’s contract with the Biomedical Advanced Research and Development Authority of the U.S. Department of Health and Human Services (“BARDA”). Receivables under the BARDA contract are recorded as qualifying research activities are conducted and invoices from the Company’s vendors are received. Unbilled receivables are also recorded based upon work estimated to be complete for which the Company has not received vendor invoices. The Company carries its accounts receivable at cost less an allowance for doubtful accounts. On a periodic basis, the Company evaluates its accounts receivable and establishes an allowance based on its history of collections and write-offs and the current status of all receivables. The Company does not accrue interest on trade receivables. If accounts become uncollectible, they will be written off through a charge to the allowance for doubtful accounts. The Company has not recorded an allowance for doubtful accounts as management believes all receivables are fully collectible.

Clinical Trial Accruals

As part of the process of preparing financial statements, the Company is required to estimate its expenses resulting from its obligation under contracts with vendors and consultants and clinical site agreements in connection with conducting clinical trials. The Company’s objective is to reflect the appropriate clinical trial expenses in its financial statements by matching those expenses with the period in which services and efforts are expended. The Company accounts for these expenses according to the progress of the trial as measured by patient progression and the timing of various aspects of the trial. The Company determines accrual estimates through discussion with applicable personnel and outside service providers as to the progress of trials, or the services completed. During the course of a clinical trial, the Company adjusts its rate of clinical trial expense recognition if actual results differ from its estimates. The Company makes estimates of its accrued expenses as of each balance sheet date in its financial statements based on facts and circumstances known at that time. Although the Company does not expect its estimates to be materially different from amounts actually incurred, its understanding of status and timing of services performed relative to the actual status and timing of services performed may vary and may result in the Company reporting amounts that are too high or too low for any particular period. Through September 30, 2013, there had been no material adjustments to the Company’s prior period estimates of accrued expenses for clinical trials. The Company’s clinical trial accrual is dependent upon the timely and accurate reporting of contract research organizations and other third-party vendors.

Revenue Recognition

The Company’s revenue generally consists of research related revenue under federal contracts and licensing revenue related to non-refundable upfront fees, milestone payments and royalites earned under license agreements. Revenue is recognized when the following criteria are met: (1) persuasive evidence that an arrangement exists; (2) delivery of the products and/or services has occurred; (3) the selling price is fixed or determinable; and (4) collectability is reasonably assured.

For arrangements that involve the delivery of more than one element, each product, service and/or right to use assets is evaluated to determine whether it qualifies as a separate unit of accounting. This determination is based on whether the deliverable has “stand-alone value” to the customer. The consideration that is fixed or determinable is then allocated to each separate unit of accounting based on the relative selling prices of each deliverable. The consideration allocated to each unit of accounting is recognized as the related goods and services are delivered, limited to the consideration that is not contingent upon future deliverables. When an arrangement is accounted for as a single unit of accounting, the Company determines the period over which the performance obligations will be performed and revenue recognized.

3. Fair Value of Financial Instruments

The carrying values of cash equivalents, receivables, prepaid expenses, and accounts payable at September 30, 2013 approximated their fair values due to the short-term nature of these items.

The Company’s valuation of financial instruments is based on a three-tiered approach, which requires that fair value measurements be classified and disclosed in one of three tiers. These tiers are: Level 1, defined as quoted prices in active markets for identical assets or liabilities; Level 2, defined as valuations based on observable inputs other than those included in Level 1, such as quoted prices for similar assets and liabilities in active markets, or other inputs that are observable or can be corroborated by observable input data; and Level 3, defined as valuations based on unobservable inputs reflecting the Company’s own assumptions, consistent with reasonably available assumptions made by other market participants.

At December 31, 2012 and September 30, 2013, these financial instruments and respective fair values have been classified as follows:


	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance at December 31, 2012
Assets:
Money Market Funds	$	67,783,021	$	—	$	—		67,783,021

Total assets at fair value:	$	67,783,021	$	—	$	—	$	67,783,021


	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance at September 30, 2013
Assets:
Money Market Funds	$	106,661,559	$	—	$	—		106,661,559

Total assets at fair value:	$	106,661,559	$	—	$	—	$	106,661,559

Liabilities:
Warrant liabilities	$	—	$	—	$	821,138		821,138

	$	—	$	—	$	821,138	$	821,138

The change in the fair value measurement using significant unobservable inputs (Level 3) is summarized below:


Balance at December 31, 2012	$	—

Allocation of long-term debt proceeds to warrant (Unaudited)		461,144
Reclassification of additional paid-in capital to warrant (Unaudited)		241,587
Change in fair value recorded as interest income (Unaudited)		(14,355	)
Change in fair value recorded as interest expense (Unaudited)		132,762

Balance at September 30, 2013 (Unaudited)	$	821,138

The December 2011 Note, which is classified as a level 2 liability (see Note 8) has a variable interest rate and, accordingly, its carrying value approximates its fair value. At September 30, 2013, the carrying value was $14.5 million. There were no transfers between levels of the fair value hierarchy in the three and nine months ended September 30, 2013.

4. Significant Agreements and Contracts

License Agreements

Optimer Pharmaceuticals, Inc.

In March 2006, the Company, through its wholly owned subsidiary, Cempra Pharmaceuticals, Inc., entered into a Collaborative Research and Development and License Agreement (“Optimer Agreement”) with Optimer Pharmaceuticals, Inc. (“Optimer”). Under the terms of the Optimer Agreement, the Company acquired exclusive rights to further develop and commercialize certain Optimer technology worldwide, excluding member nations of the Association of Southeast Asian Nations.

In exchange for this license, during 2006 and 2007, the Company issued an aggregate of 125,646 common shares with a total fair value of $190,418 to Optimer. These issuances to Optimer were expensed as incurred in research and development expense.

In July 2010, the Company paid a $500,000 milestone payment to Optimer after the successful completion of its first solithromycin Phase 1 program. In July 2012, the Company paid a $1,000,000 milestone after the successful completion of its first solithromycin Phase 2 program. Both milestones were expensed as incurred in research and development expense. Under the terms of the Optimer Agreement, the Company will owe Optimer additional payments, contingent upon the achievement of various development, regulatory and commercialization milestone events. The aggregate amount of such milestone payments the Company may need to pay is based in part on the number of products developed under the agreement and would total $27,500,000 (including payments made to date) if four products are developed through FDA approval. The Company will also pay tiered mid-single-digit royalties based on the amount of annual net sales of its approved products.

The Scripps Research Institute

In June 2012, the Company entered into a license agreement with The Scripps Research Institute (“TSRI”), whereby TSRI licensed to the Company rights, with rights of sublicense, to make, use, sell, and import products for human or animal therapeutic use that use or incorporate one or more macrolides as an active pharmaceutical ingredient and is covered by certain patent rights owned by TSRI claiming technology related to copper-catalysed ligation of azides and acetylenes. The rights licensed to the Company are exclusive as to the People’s Republic of China (excluding Hong Kong), South Korea and Australia, and are non-exclusive in all other countries worldwide, except the member-nations of the Association of Southeast Asian Nations, which are not included in the territory of the license. Under the terms of the agreement with TSRI, the Company paid a one-time only, non-refundable license issue fee in the amount of $350,000 which was charged to research and development expense in the second quarter of 2012.

The Company is also obligated to pay annual maintenance fees to TSRI in the amount of (i) $50,000 each year for the first three years (beginning on the first anniversary of the agreement), and (ii) $85,000 each year thereafter (beginning on the fourth anniversary of the agreement). Each calendar year’s annual maintenance fees will be credited against sales royalties due under the agreement for such calendar year. Under the terms of the agreement, the Company must pay TSRI low single-digit percentage royalties on the net sales of the products covered by the TSRI patents for the life of the TSRI patents, a low single-digit percentage of non-royalty sublicensing revenue received with respect to countries in the nonexclusive territory and a mid-single-digit percentage of sublicensing revenue received with respect to countries in the exclusive territory, with the sublicensing revenue royalty in the exclusive territory and the sales royalties subject to certain reductions under certain circumstances. TSRI is eligible to receive milestone payments of up to $1.1 million with respect to regulatory approval in the exclusive territory and first commercial sale, in each of the exclusive territory and nonexclusive territory, of the first licensed product to

achieve those milestones that is based upon each macrolide covered by the licensed patents. Each milestone is payable once per each macrolide. Each milestone payment made to TSRI with respect to a particular milestone will be creditable against any payment due to TSRI with respect to any sublicense revenues received in connection with the achievement of such milestone. Pursuant to the terms of the Optimer Agreement, any payments made to TSRI under this license for territories subject to the Optimer Agreement can be deducted from any sales-based royalty payments due under the Optimer Agreement up to a certain percentage reduction of the royalties due to Optimer.

Under the terms of the agreement, the Company is also required to pay additional fees on royalties, sublicensing and milestone payments if the Company, an affiliate with TSRI, or a sublicensee challenges the validity or enforceability of any of the patents licensed under the agreement. Such increased payments would be required until all patent claims subject to challenge are invalidated in the particular country where such challenge was mounted.

Biomedical Advanced Research and Development Authority

In May 2013, the Company entered into an agreement with BARDA, for the evaluation and development of the Company’s lead product candidate solithromycin for the treatment of bacterial infections in pediatric populations and infections caused by bioterror threat pathogens, specifically anthrax and tularemia.

The agreement is a cost plus fixed fee development contract, with a base performance segment valued at approximately $17.7 million, and four option work segments that BARDA may request at its sole discretion pursuant to the agreement. If all four option segments are requested, the cumulative value of the agreement would be approximately $58 million. Three of the options are cost plus fixed fee arrangements and one option is a cost sharing arrangement for which the Company would be responsible for a designated portion of the costs associated with that work segment. The estimated period of performance for the base performance segment is May 24, 2013 through May 23, 2015. If all option segments are requested, this estimated period of performance would be extended until approximately May 23, 2018.

Under the agreement, the Company is reimbursed and recognizes revenue as allowable costs are incurred plus a portion of the fixed-fee earned. The Company considers fixed-fees under cost reimbursable agreements to be earned in proportion to the allowable costs incurred in performance of the work as compared to total estimated agreement costs, with such costs incurred representing a reasonable measurement of the proportional performance of the work completed. For the three-month and nine-month periods ended September 30, 2013, the Company recognized $1.2 million and $1.4 million, respectively in revenue under this agreement.

The agreement provides the U.S. government the ability to terminate the agreement for convenience or to terminate for default if the Company fails to meet its obligations as set forth in the statement of work. The Company believes that if the government were to terminate the agreement for convenience, the costs incurred through the effective date of such termination and any settlement costs resulting from such termination would be allowable costs.

Toyama Chemical Co., Ltd.

In May 2013, Cempra Pharmaceuticals, Inc., the Company’s wholly owned subsidiary, entered into a license agreement with Toyama Chemical Co., Ltd. (“Toyama”), whereby the Company licensed to Toyama the exclusive right, with the right to sublicense, to make, use and sell any product in Japan that incorporates solithromycin, the Company’s lead compound, as its sole active pharmaceutical ingredient, or API, for human therapeutic uses, other than for ophthalmic indications or any condition, disease or affliction of the ophthalmic tissues. Toyama also has a nonexclusive license in Japan and certain other countries, with the right to sublicense, to manufacture or have manufactured API for solithromycin for use in manufacturing such products, subject to limitations and obligations of the concurrently executed supply agreement discussed below. Toyama granted the Company certain rights to intellectual property generated by Toyama under the license agreement with respect to solithromycin or licensed products for use with such products outside Japan or with other solithromycin-based products inside or outside Japan.

Following execution of the agreement, the Company received a $10.0 million upfront payment from Toyama. Toyama is also obligated to pay the Company up to an aggregate of $60.0 million in milestone payments, depending on the achievement of various regulatory, patent, development and commercial milestones. Under the terms of the license agreement, Toyama must also pay the Company a royalty equal to a low-to-high first double decimal digit percentage of net sales, subject to downward adjustment in certain circumstances.

As part of the license agreement, Toyama and the Company also entered into a supply agreement, whereby the Company will be the exclusive supplier (with certain limitations) to Toyama and its sublicensees of API for solithromycin for use in licensed products in Japan, as well as the exclusive supplier to Toyama and its sublicensees of finished forms of solithromycin to be used in Phase 1 and Phase 2 clinical trials in Japan. Pursuant to the supply agreement, which is an exhibit to the license agreement, Toyama will pay the Company for such clinical supply of finished product and all supplies of API for solithromycin for any purpose, other than the manufacture of products for commercial sale in Japan, at prices equal to the Company’s cost . All API for solithromycin supplied by the Company to Toyama for use in the manufacture of finished product for commercial sale in Japan will be ordered from the Company at prices determined by the Company’s manufacturing costs, and which may, depending on such costs, equal, exceed, or be less than such costs. Either party may terminate the supply agreement for uncured material breach or insolvency of the other party, with Toyama’s right to terminate for the Company’s breach subject to certain further conditions in the case of the Company’s failure to supply API for solithromycin or clinical supply, but otherwise the supply agreement will continue until the expiration or termination of the license agreement.

The Company has determined that there are six deliverables under this agreement including (1) the license to develop and commercialize solithromycin in Japan, (2) the obligation of the Company to conduct Phase 3 studies and obtain regulatory approval in the United States and one other territory, (3) participation in a Joint Development Committee, or JDC, (4) participation in a Joint Commercialization Committee, or JCC, (5) the right to use the Company’s trademark, and (6) a supply agreement. The amounts received under the license agreement have been allocated to the deliverables based on their relative fair values and will be recognized into income when the revenue recognition criteria have been achieved. As of September 30, 2013, the license is the only unit of accounting that has been delivered. The Company has recognized $4.3 million in revenue associated with the delivery of the license. The Company has recorded $5.7 million as deferred revenue at September 30, 2013 which will be recorded as revenue when the revenue recognition criteria of each deliverable have been met.

Milestone payments are recognized when earned, provided that (i) the milestone event is substantive; (ii) there is no ongoing performance obligation related to the achievement of the milestone earned; and (iii) it would result in additional payments. Milestone payments are considered substantive if all of the following conditions are met: the milestone payment is non-refundable; achievement of the milestone was not reasonably assured at the inception of the arrangement; substantive effort is involved to achieve the milestone; and the amount of the milestone appears reasonable in relation to the effort expended, the other milestones in the arrangement, and the related risk associated with the achievement of the milestone. Contingent-based payments the Company may receive under a license agreement will be recognized when received.

Royalties are recorded as earned in accordance with the contract terms when third party sales can be reliably measured and collectability is reasonably assured.

5. Receivables

Receivables consist of billed and unbilled amounts that have been earned under the Company’s licensing agreements or its contract with BARDA. At September 30, 2013, the Company had $974,778 of earned but unbilled receivables under the BARDA agreement.

6. Furniture, Fixtures and Equipment

Furniture, fixtures and equipment consist of the following as of:


	Useful Life (years)		December 31, 2012		September 30, 2013
					(Unaudited)
Computer equipment		2	$	191,889	$	215,104
Software		2		46,594		39,952
Furniture		5		38,792		38,792
Leasehold improvements		3		4,809		13,680

Total furniture, fixtures and equipment				282,084		307,528
Less accumulated depreciation				238,867		235,169

Furniture, fixtures and equipment, net			$	43,217	$	72,359

During the three-month period ended September 30, 2012 and 2013, the Company recorded $5,452 and $7,641 in depreciation expense, respectively. During the nine-month period ended September 30, 2012 and 2013, the Company recorded $41,879 and $21,546 in depreciation expense, respectively. Depreciation expense for the cumulative period from inception through September 30, 2013 was $263,389.

7. Accrued Expenses

Accrued expenses are comprised of the following as of:


	December 31,		September 30,
	2012		2013
			(Unaudited)
Accrued professional fees	$	207,362	$	242,977
Other accrued fees		30,817		45,693
Accrued interest		82,236		119,375
Deferred rent		21,503		14,750

Total accrued expenses	$	341,918	$	422,795

8. Long-term Debt

In December 2011, the Company entered into a $20,000,000 loan and security agreement (the “December 2011 Note”) with Hercules Technology Growth Capital, Inc. (“Hercules”) and borrowed $10,000,000 upon closing. The principal amount outstanding under the $10,000,000 borrowing bears interest at the greater of (i) 9.55%, or (ii) the sum of 9.55% plus the prime lending rate, as published by the Wall Street Journal, minus 3.25% per annum. The terms of the December 2011 Note agreement provided that the Company could, at any time prior to October 1, 2012, request another borrowing in the aggregate amount of $10,000,000. The Company elected not to request the additional borrowing and let the option expire on September 30, 2012. In May 2013, the Company amended its December 2011 Note, increasing the intial loan amount to $15,000,000, receiving an additional $5,238,327 upon closing. The Company also extended the date by which it could request the additional $10,000,000 to September 30, 2013. The Company elected not to request the additional borrowing and let the option expire on September 30, 2013. This amendment also provides for the Company to make interest only payments through June 2014. Principal and interest payments will start July 1, 2014 over a 36-month amortization period. The principal balance outstanding on the loan agreement and all accrued but unpaid interest thereunder will be due and payable on June 1, 2017. In addition, the Company is to pay Hercules the following fees:

•

$400,000 on the earliest to occur of (i) December 1, 2015, (ii) the date that the Company prepays all of the outstanding advances and accrued interest, or (iii) the date that all of the advances and interest become due and payable.

•

$495,245 on the earliest to occur of (i) June 1, 2017, (ii) the date that the Company prepays all of the outstanding advances and accrued interest, or (iii) the date that all of the advances and interest become due and payable.

The Company granted Hercules a security interest in all of its assets, except intellectual property. The Company’s obligations to Hercules include restrictions on borrowing, asset transfers, placing liens or security interests on the Company’s assets including its intellectual property, mergers and acquisitions and distributions to stockholders.

In connection with the initial closing of the December 2011 note, the Company entered into a warrant agreement with Hercules (the “First Hercules Warrant”), under which Hercules has the right to purchase 39,038 shares of the Company’s common stock. The exercise price of the First Hercules Warrant was initially $10.25 per share, subject to adjustment in the event of a merger, reclassification, subdivision or combination of shares or stock dividend and subject also to antidilution protection. In connection with the amendment to the loan agreement, the exercise price of the first Hercules Warrant was reduced to the lower of (a) $6.11, and (b) the effective price per share of the Company’s common stock issued or issuable in any offering of the Company’s equity or equity-linked

securities that occurs prior to June 1, 2014, provided that such offering is effected principally for equity or debt-financing purposes. The First Hercules Warrant expires on December 20, 2021. Proceeds equal to the fair value of the Hercules Warrant were recorded as a liability at the date of issuance and the borrowings under the December 2011 Note will be increased to equal the face amount of the borrowings plus interest through interest expense over the term of the loan using the effective interest method. Upon completion of the Company’s initial public offering (“IPO”), the warrant liability was reclassified to additional paid-in capital. Since the amendment to the warrant resulted in a variable exercise price, the fair value of the warrant as of the date of the amendment was reclassified from additional paid-in capital to a warrant liability.

Additionally, in connection with the amendment of the December 2011 note, the Company entered into a warrant agreement with Hercules (the “Second Hercules Warrant”), under which Hercules has the right to purchase an aggregate number of shares of the Company’s common stock equal to the quotient derived by dividing $609,533 by the exercise price then in effect, which is defined as the lower of (a) $6.11, and (b) the effective price per share of the Company’s common stock issued or issuable in any offering of the Company’s equity or equity-linked securities that occurs prior to June 1, 2014, provided that such offering is effected principally for equity or debt-financing purposes. The exercise price is subject to adjustment in the event of a merger, reclassification, subdivision or combination of shares or stock dividend and subject also to antidilution protection. The Second Hercules Warrant expires on May 31, 2023. Proceeds equal to the fair value of the Second Hercules Warrant were recorded as a liability at the date of issuance and the borrowings under the December 2011 Note will be increased to equal the face amount of the borrowings plus interest through interest expense over the term of the loan using the effective interest method.

9. Shareholders’ Equity (Deficit)

Initial Public Offering

During February 2012, the Company completed its IPO, issuing 9,660,000 shares of common stock, at a price of $6.00 per share, resulting in net proceeds to the Company of approximately $53.2 million after deducting underwriting discounts of $3.2 million and offering costs of $1.6 million.

In connection with the IPO, all of the Company’s outstanding preferred shares, including accrued yield of $13.7 million, automatically converted into a total of 9,958,502 shares of its common stock and the preferred stock warrant liability was reclassified to additional paid-in capital upon the conversion of warrants to purchase preferred stock into warrants to purchase common stock. In addition, the Company’s August 2011 Notes and related accrued interest converted into 876,621 shares of common stock.

Private Placement

During October 2012, the Company sold 3,864,461 shares of its common stock at $6.50 per share to certain institutional accredited investors in a private placement financing, raising an aggregate of $25.1 million before sales agency fees and offering costs of approximately $1.7 million. In connection with this financing, the Company entered into a registration rights agreement, pursuant to which it registered the resale of the shares of common stock issued in the financing.

Public Offering

During June 2013, the Company completed a public offering issuing 8,273,938 shares of common stock, at a price of $7.00 per share, resulting in net proceeds to the Company of approximately $54.2 million after deducting underwriting discounts of $3.5 million and offering costs of $0.2 million.

10. Share Option Plans

The Company adopted the 2006 Stock Plan in January 2006 (“the 2006 Plan”). The 2006 Plan provided for the granting of incentive share options, nonqualified share options and restricted shares to Company employees, representatives and consultants. As of September 30, 2013, there were options for an aggregate of 702,185 shares issued and outstanding under the 2006 Plan.

The Company’s board of directors adopted the 2011 Equity Incentive Plan in October 2011 (the “2011 Plan”), and authorized the issuance of up to 1,526,316 shares for future issuances under the 2011 Plan. During January 2013, the authorized shares under the 2011 Plan automatically increased by 105,263 shares. During May 2013, the Company’s shareholders approved an increase of 1,500,000 shares reserved under the 2011 Plan. As of September 30, 2013, there were 2,024,728 option shares available under the 2011 Plan.

The 2011 Plan became effective upon the conversion of Cempra Holdings, LLC from a limited liability company to a corporation on February 2, 2012 and was adopted by the Company’s shareholders immediately thereafter. Upon effectiveness of the 2011 Plan, the Company eliminated the authorization for any unissued shares previously reserved under the Company’s 2006 Plan. The stock awards previously issued under the 2006 Plan remain in effect in accordance with the terms of the 2006 Plan.

The following table summarizes the Company’s 2006 Plan and 2011 Plan activity:


	Number of Options			Weighted Average Exercise Price		Weighted Average Contractual Term (in years)		Aggregate Intrinsic Value ⁽¹⁾
Outstanding—December 31, 2012		1,162,602		$	4.18

Granted		698,473			6.73
Exercised		—			—
Forfeited		(54,539	)		7.62
Expired		—			—

Outstanding—September 30, 2013		1,806,536			5.07		7.83	$	11,622,016

Exercisable—September 30, 2013		1,376,922			4.79		7.48	$	9,245,384

Vested and expected to vest at September 30, 2013 ⁽²⁾		1,763,647		$	5.04		7.8	$	11,384,658

⁽¹⁾	Intrinsic value is the excess of the fair value of the underlying common shares as of September 30, 2013 over the weighted-average exercise price.

⁽²⁾	The number of stock options expected to vest takes into account an estimate of expected forfeitures.

The following table summarizes certain information about all options outstanding as of September 30, 2013:


	Options Outstanding				Options Exercisable
Exercise Price	Number of Options		Weighted Average Remaining Contractual Term (in years)		Number of Options		Weighted Average Remaining Contractual Term (in years)
$0.48—$1.71		97,688		2.94		97,688		2.94
$1.71—$2.94		604,497		6.35		526,148		6.22
$5.40—$7.86		1,104,351		9.07		753,086		8.94

		1,806,536				1,376,922

During the three-month period ended September 30, 2012 and 2013, the Company recorded $518,572 and $861,392 in share-based compensation expense, respectively. During the nine-month period ended September 30, 2012 and 2013, the Company recorded $1,189,182 and $2,480,137 in share-based compensation expense, respectively. Since inception, the Company has recognized $5,172,708 in share-based compensation expense. As of September 30, 2013, approximately $1,741,000 of total unrecognized compensation cost related to unvested share options is expected to be recognized over a weighted-average period of 1.8 years.

11. Income Taxes

The Company estimates an annual effective tax rate of 0% for the year ending December 31, 2013 as the Company incurred losses for the nine-month period ended September 30, 2013 and is forecasting additional losses through the fourth quarter, resulting in an estimated net loss for both financial statement and tax purposes for the year ending December 31, 2013. Therefore, no federal or state income taxes are expected and none have been recorded at this time. Income taxes have been accounted for using the liability method in accordance with FASB ASC 740.

Due to the Company’s history of losses since inception, there is not enough evidence at this time to support that the Company will generate future income of a sufficient amount and nature to utilize the benefits of its net deferred tax assets. Accordingly, the deferred tax assets have been reduced by a valuation allowance, since it has been determined that it is more likely than not that all of the deferred tax assets will not be realized.

12. Net Loss Per Share

Basic and diluted net loss per common share was determined by dividing net loss attributable to common shareholders by the weighted average common shares outstanding during the period. The Company’s potentially dilutive shares, which include redeemable convertible preferred shares, convertible debt, warrants and common share options, have not been included in the computation of diluted net loss per share for all periods as the result would be antidilutive.

The following potentially dilutive securities have been excluded from the computation of diluted weighted average shares outstanding, as they would be antidilutive:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2013		2012		2013
	(Unaudited)				(Unaudited)
Redeemable convertible preferred shares		—		—		923,847		—
Convertible debt		—		—		59,685		—
Warrants outstanding		247,370		340,519		236,217		289,723
Stock options outstanding		1,157,545		1,815,830		1,011,738		1,699,525

		1,404,915		2,156,349		2,231,487		1,989,248

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operation

The interim financial statements and this Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the financial statements and notes thereto for the year ended December 31, 2012, and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K for the year ended December 31, 2012. In addition to historical information, this discussion and analysis contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are subject to risks and uncertainties, including those set forth under “Part I. Item 1. Business—Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2012, and in our Form 10-Q for the quarter ended June 30, 2013, that could cause actual results to differ materially from historical results or anticipated results.

Overview

We are a clinical-stage pharmaceutical company focused on developing antibiotics to meet critical medical needs in the treatment of bacterial infectious diseases, particularly respiratory tract infections and chronic staphylococcal infections. Our lead program, solithromycin, which we are developing in both oral and IV formulations initially for the treatment of CABP, one of the most serious infections of the respiratory tract, is in a pivotal Phase 3 clinical trial of the oral formulation for the treatment of CABP in a global multi-center double-blinded study. The U.S. Food and Drug Administration (FDA) has designated both oral and intravenous solithromycin (CEM-101), as Qualified Infectious Disease Products (QIDP) for the indiciation of community-acquired bacterial pneumonia. The QIDP designation is expected to enable Cempra to benefit from certain incentives for the development of new antibiotics, including priority review, and a five year extension of new chemistry entity (NCE) exclusivity. We are also developing a suspension formulation for pediatric use. We have also completed a Phase 2 study of solithromycin in uncomplicated gonorrhea. Our second program is Taksta, which we are developing in the U.S. as an oral treatment for prosthetic joint infections caused by S. aureus , including MRSA.We are conducting a Phase 2 trial for Taksta in patients with prosthetic joint infections.

We acquired worldwide rights (exclusive of ASEAN countries) to a library of over 500 macrolide compounds, including solithromycin, from Optimer Pharmaceuticals, Inc. in March 2006. We entered into a long-term supply arrangement with Ercros, S.A. in March 2011, pursuant to which we have the exclusive right to acquire fusidic acid for the production of Taksta. We believe Ercros is one of only two currently known manufacturers that can produce fusidic acid compliant with the purity required for human use. The United States Patent and Trademark Office (USPTO) issued our patent, entitled “Fusidic Acid Dosgin Regimens for Treatement of Bacterial Infections,” on May 28, 2013 with claims directed to the company’s novel loading dose regiment for Taksta. This patent provides protection until 2029, excluding possible patent term extenstions.

We have devoted substantially all of our resources to our drug development efforts, including conducting clinical trials of our product candidates, protecting our intellectual property and providing general and administrative support for these operations. We do not have any products approved for sale and have not generated any revenue from product sales. From inception in November 2005 through September 30, 2013, we raised a total of $239.5 million from the issuance of debt, sale of convertible notes, convertible preferred shares, common shares and common stock, including $58.0 million from the sale of common stock in our initial public offering, or IPO, in February 2012, $25.1 million from the sale of common stock in a private placement in October 2012 and $57.9 million from the sale of common stock in a public offering in June 2013. As more fully discussed below, in May 2013, we licensed rights to solithromycin in Japan to Toyama Chemical Co., Ltd., or Toyama and received a $10.0 million, non refundable, upfront license fee.

We have incurred losses in each year since our inception in November 2005. Our net losses were approximately $5.0 million and $13.7 million for the three months ended September 30, 2012 and September 30, 2013, respectively, and $17.7 million and $28.2 million for the nine months ended September 30, 2012 and September 30, 2013, respectively. As of September 30, 2013, we had an accumulated deficit of approximately $149.4 million. Substantially all of our operating losses resulted from costs incurred in connection with our development programs and from general and administrative costs associated with our operations.

We expect to continue to incur significant expenses and increasing operating losses for at least the next several years. We anticipate that our expenses will increase substantially as we:

•

initiate or continue our clinical trials of solithromycin and Taksta and our other product candidates;

•

seek regulatory approvals for our product candidates that successfully complete clinical trials;

•

build appropriate manufacturing facilities for the manufacture of, or outsource the manufacture of, any products for which we may obtain regulatory approval;

•

establish our own sales force, or contract with third parties, for the sales, marketing and distribution of any products for which we obtain regulatory approval;

•

maintain, expand and protect our intellectual property portfolio;

•

continue our other research and development efforts;

•

hire additional clinical, quality control, scientific and management personnel; and

•

add operational, financial and management information systems and personnel, including personnel to support our product development and commercialization efforts.

We do not expect to generate product revenue unless and until we successfully complete development and obtain marketing approval for one or more of our product candidates, which we expect will take a number of years and is subject to significant uncertainty. Accordingly, we will need to raise additional capital prior to the commercialization of solithromycin and Taksta or any of our other product candidates. Until such time, if ever, as we can generate substantial product revenue, we expect to finance our operating activities through a combination of equity offerings, debt financings, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements. However, we may be unable to raise additional funds when needed on favorable terms or at all. Our failure to raise capital as and when needed would have a negative impact on our financial condition and our ability to develop our product candidates.

Our Board of Directors approved a 1-for-9.5 reverse stock split of our common and preferred shares on January 12, 2012, which became effective on January 29, 2012. All references to common stock, common shares outstanding, average number of common shares outstanding and per share amounts in our consolidated financial statements and notes to consolidated financial statements have been restated to reflect the 1-for-9.5 reverse stock split on a retroactive basis.

Financial Overview

Revenue

To date, we have not generated revenue from the sale of any products. All of our revenue to date has been derived from (1) a government contract and (2) the receipt of up-front proceeds under our license agreement withToyama, a portion of which has been recognized in accordance with US GAAP.

In May 2013, we entered into an agreement with the Biomedical Advanced Research and Development Authority of the U.S. Department of Health and Human Services, or BARDA, for the evaluation and development of solithromycin for the treatment of bacterial infections in pediatric populations and infections caused by bioterror threat pathogens, specifically anthrax and tularemia.

The agreement is a cost plus fixed fee development contract, with a base performance segment valued at approximately $17.7 million, and four option work segments that BARDA may request in its sole discretion pursuant to the agreement. If all four option segments are requested, the cumulative value of the agreement would be approximately $58 million. Three of the options are cost plus fixed fee arrangements and one option is a cost sharing arrangement for which we would be responsible for a designated portion of the costs associated with that work segment. The estimated period of performance for the base performance segment is May 24, 2013 through May 23, 2015. If all option segments are requested, this estimated period of performance would be extended until approximately May 23, 2018.

Under the contract, we are reimbursed and recognize revenue as allowable costs are incurred plus a portion of the fixed-fee earned. We consider fixed-fees under cost reimbursable contracts to be earned in proportion to the allowable costs incurred in performance of the work as compared to total estimated contract costs, with such costs incurred representing a reasonable measurement of the proportional performance of the work completed. Through September 30, 2013, we recognized $1.4 million in revenue under this agreement.

In May 2013, Cempra Pharmaceuticals, Inc., our wholly owned subsidiary, entered into a license agreement with Toyama, whereby we licensed to Toyama the exclusive right, with the right to sublicense, to make, use and sell any product in Japan that incorporates solithromycin as its sole active pharmaceutical ingredient, or API, for human therapeutic uses, other than for ophthalmic indications or any condition, disease or affliction of the ophthalmic tissues. Toyama also has a nonexclusive license in Japan and certain other countries, with the right to sublicense, to manufacture or have manufactured API for solithromycin for use in manufacturing such products, subject to limitations and obligations of the concurrently executed supply agreement discussed below. Toyama has granted us certain rights to intellectual property generated by Toyama under the license agreement with respect to solithromycin or licensed products for use with such products outside Japan or with other solithromycin-based products inside or outside Japan.

Following execution of the agreement, we received a $10.0 million upfront payment from Toyama. Toyama is also obligated to pay us up to an aggregate of $60.0 million in milestone payments, depending on the achievement of various regulatory, patent, development and commercial milestones. Under the terms of the license agreement, Toyama must also pay us a royalty equal to a low-to-high first double decimal digit percentage of net sales, subject to downward adjustment in certain circumstances. Through September 30, 2013, we recognized $4.3 million in revenue under this agreement and the remainder which is deferred will be recognized when earned

As part of the license agreement, we also entered into a supply agreement with Toyama, whereby we will be the exclusive supplier (with certain limitations) to Toyama and its sublicensees of API for solithromycin for use in licensed products in Japan, as well as the exclusive supplier to Toyama and its sublicensees of finished forms of solithromycin to be used in its clinical trials in Japan. Pursuant to the supply agreement, Toyama will pay us for such clinical supply of finished product and all supplies of API for solithromycin for any purpose, other than the manufacture of products for commercial sale in Japan, at prices equal to our costs . All API for solithromycin supplied by us to Toyama for use in the manufacture of finished product for commercial sale in Japan will be ordered from us at prices determined by our manufacturing costs, and which may, depending on such costs, equal, exceed, or be less than such costs. Either party may terminate the supply agreement for uncured material breach or insolvency of the other party, with Toyama’s right to terminate for our breach subject to certain further conditions in the case of our failure to supply API for solithromycin or clinical supply, but otherwise the supply agreement will continue until the expiration or termination of the license agreement.

In the future, we anticipate generating revenue from a combination of sales of our products, if approved, whether through our own or a third-party sales force, and license fees, milestone payments and royalties in connection with strategic collaborations regarding any of our product candidates. We expect that any revenue we generate will fluctuate from quarter to quarter. If we or our strategic partners fail to complete the development of solithromycin or Taksta in a timely manner or obtain regulatory approval for them, or if we fail to develop our own sales force or find one or more strategic partners for the commercialization of approved products, our ability to generate future revenue, and our financial condition and results of operations would be materially adversely affected.

Research and Development Expenses

Since our inception, we have focused our resources on our research and development activities, including conducting pre-clinical studies and clinical trials, manufacturing development efforts and activities related to regulatory filings for our product candidates. We recognize our research and development expenses as they are incurred. Our research and development expenses consist primarily of:

•

employee-related expenses, which include salaries, benefits and share compensation expense, for personnel in research and development functions;

•

fees paid to consultants and clinical research organizations, or CROs, in connection with our clinical trials, and other related clinical trial costs, such as for investigator grants, patient screening, laboratory work and statistical compilation and analysis;

•

costs related to acquiring and manufacturing clinical trial materials;

•

costs related to compliance with regulatory requirements;

•

consulting fees paid to third parties related to non-clinical research and development;

•

research supplies; and

•

license fees and milestone payments related to in-licensed technologies.

From inception through September 30, 2013, we have incurred $109.3 million in research and development expenses. We plan to increase our research and development expenses for the foreseeable future as we seek to complete development of solithromycin for CABP and Taksta for prosthetic joint infections and to further advance our other product candidates.

Our direct research and development expenses consist principally of external costs, such as fees paid to investigators, consultants, central laboratories and CROs in connection with our clinical trials, and related clinical trial fees. Our internal resources, employees and infrastructure are not directly tied to any individual research project and are typically deployed across multiple projects. Through our clinical development programs, we are advancing solithromycin and Taksta in parallel primarily for the treatment of CABP and prosthetic joint infections, respectively, as well as for other indications. Through our pre-clinical development programs, we are seeking to develop macrolide product candidates for non-antibacterial indications.

The following table sets forth costs incurred on a program-specific basis for solithromycin and Taksta, excluding personnel-related costs. Macrolide research includes costs for discovery programs. All employee-related expenses for those employees working in research and development functions are included in “Research and development personnel” in the table, including salary, bonus, employee benefits and share-based compensation. We do not allocate insurance or other indirect costs related to our research and development function to specific product candidates. Those expenses are included in “Indirect research and development expense” in the table.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2013		2012		2013
	(Unaudited, in thousands)				(Unaudited, in thousands)
Direct research and development expense by program:
Solithromycin	$	1,995	$	10,187	$	9,601	$	20,339
Taksta		317		174		611		1,161
Macrolide research		12		8		33		47
Research and development personnel cost		696		1,289		1,998		3,551

Total direct research and development expense		3,020		11,658		12,243		25,098
Indirect research and development expense		136		261		213		519

Total research and development expense	$	3,156	$	11,919	$	12,456	$	25,617

The successful development of our clinical and pre-clinical product candidates is highly uncertain. At this time, we cannot reasonably estimate the nature, timing or costs of the efforts that will be necessary to complete the remainder of the development of any of our clinical or pre-clinical product candidates or the period, if any, in which material net cash inflows from these product candidates may commence. This is due to the numerous risks and uncertainties associated with developing drugs, including the uncertainty of:

•

the scope, rate of progress and expense of our ongoing, as well as any additional clinical trials required and other research and development activities;

•

future clinical trial results; and

•

the timing of regulatory approvals.

A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. For example, if the FDA or another regulatory authority were to require us to conduct clinical trials beyond those which we currently anticipate or if we experience significant delays in enrollment in any of our clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development.

We are conducting our pivotal trial program for solithromycin, which we believe will require two Phase 3 trials, including one trial with oral solithromycin and one trial with IV solithromycin stepping down to oral solithromycin. Both of these trials will be randomized, double-blinded studies conducted against a comparator drug agreed upon with the FDA, for which we will have to show non-inferiority from an efficacy perspective and acceptable safety and tolerability. Using feedback received from the FDA, we began the Phase 3 trial with oral solithromycin in December 2012. We finalized the overall development program for solithromycin for CABP with the FDA at our end of Phase 2 meeting for solithromycin, which occurred in May 2013, and plan to initiate the IV-to-oral trial in the fourth quarter of 2013. In 2010, we successfully completed a Phase 2 clinical trial with Taksta in ABSSSI patients. In this trial, the Taksta loading dose regimen demonstrated efficacy, safety and tolerability that was comparable to linezolid. Like ABSSSI, prosthetic joint infections are often caused by S. aureus , including MRSA. At this time, however, we do not intend to pursue Taksta as a treatment for ABSSSI. In December 2012, we initiated a Phase 2 trial of Taksta in patients with prosthetic joint infections.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and related costs, including share-based compensation, for employees in executive, operational, finance and human resources functions. Other significant general and administrative expenses include professional fees for accounting, legal, and information technology services, facilities costs, and expenses associated with obtaining and maintaining patents.

We expect that our general and administrative expenses will increase with the continued development and potential commercialization of our product candidates. We believe that these increases will likely include increased costs related to the hiring of additional personnel and increased fees for outside consultants, lawyers and accountants. We also expect to incur significant costs to comply with corporate governance, internal controls and similar requirements applicable to public companies.

Other Income (Expense), Net

Interest income consists of interest earned on our cash and equivalents as well as decreases in fair value of warrants issued in connection with the note issued to Hercules Technology Growth Capital, Inc., or Hercules, in December 2011, referred to as the December 2011 Note, and the warrants issued in connection with the May 31, 2013 amendment to the December 2011 Note.

Interest expense consists of interest incurred on the notes issued in August 2011 to various investors and that converted to common stock at the close of our IPO in February 2012 and the December 2011 Note as well as increases in fair value of warrants issued in connection with the notes.

Accretion of Redeemable Preferred Shares

Our redeemable convertible preferred shares were initially recorded on our balance sheet at their cost, less associated issuance costs. The amount reflected on the balance sheet for our convertible preferred shares was increased by periodic accretion so that the amount reflected on the balance sheet would equal the aggregate redemption price at the redemption date.

Yield was cumulative and payable to the holders of preferred shares in advance of any distributions on common shares but only when, if and as declared by our board of directors. The holders of Class C preferred shares earned an annual yield at a rate of 8.0% of the original purchase price since May 13, 2009. Through May 13, 2009, the holders of Class A preferred shares and Class B preferred shares earned an annual yield at a rate of 8.0% of the original purchase price. Yield was recorded through periodic accretions which increased the carrying value of the preferred shares and was charged against additional paid-in capital to the extent available or shareholders’ equity (deficit).

Upon completion of our IPO, all of our outstanding preferred shares, including $13.7 million of accrued yield, converted into a total of 9,958,502 shares of common stock.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses and the disclosure of contingent assets and liabilities in our financial statements. We evaluate our estimates and judgments, including those related to accrued expenses and share-based compensation, on an ongoing basis. We base our estimates on historical experience, known trends and events and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

For a description of our critical accounting policies and estimates, please refer to the “Critical Accounting Policies and Estimates” section of the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section in our Annual Report on Form 10-K for the year ended December 31, 2012 filed with the Securities Exchange Commission, or SEC, on March 7, 2013. The only material changes to our accounting policies since December 31, 2012 are as follows:

Revenue Recognition

The Company’s revenue generally consists of research related revenue under federal contracts and licensing revenue related to non-refundable upfront fees, milestone payments and royalties earned under license agreements. Revenue is recognized when the following criteria are met: (1) persuasive evidence that an arrangement exists; (2) delivery of the products and/or services has occurred; (3) the selling price is fixed or determinable; and (4) collectability is reasonably assured.

For arrangements that involve the delivery of more than one element, each product, service and/or right to use assets is evaluated to determine whether it qualifies as a separate unit of accounting. This determination is based on whether the deliverable has “stand-alone value” to the customer. The consideration that is fixed or determinable is then allocated to each separate unit of accounting based on the relative selling prices of each deliverable. The consideration allocated to each unit of accounting is recognized as the related goods and services are delivered, limited to the consideration that is not contingent upon future deliverables.When an arrangement is accounted for as a single unit of accounting, the Company determines the period over which the performance obligations will be performed and revenue recognized. Management exercises significant judgment in the determination of whether a deliverable has stand-alone value, is considered to be a separate unit of accounting, and in estimating the relative fair value of each deliverable in the arrangement.

Results of Operations

The following table summarizes the results of our operations for the three-month and nine-month periods ended September 30, 2012 and 2013, together with the changes in those items in dollars:


	Three Months Ended September 30,									Nine Months Ended September 30,
	2012			2013			Change			2012			2013			Change
	(Unaudited, in thousands)									(Unaudited, in thousands)
Revenue:
Contract research	$	—		$	1,172			1,172		$	—		$	1,405			1,405
License		—			—			—			—			4,335			4,335

Total revenue		—			1,172			1,172			—			5,740			5,740
Operating expenses:
Research and development expense (1)		3,156			11,919			8,763			12,456			25,617			13,161
General and administrative expense (1)		1,495			2,167			672			4,244			6,896			2,652

Loss from operations		(4,651	)		(12,914	)		(8,263	)		(16,700	)		(26,773	)		(10,073	)
Other income (expense), net		(330	)		(733	)		(403	)		(959	)		(1,432	)		(473	)

Net income (loss)		(4,981	)		(13,647	)		(8,666	)		(17,659	)		(28,205	)		(10,546	)


(1) Includes the following stock-based compensation expenses:
Research and development expense	$	158		$	259		$	101		$	379		$	744		$	365
General and administrative expense		360			602			242			810			1,736			926

Comparison of the Three Months Ended September 30, 2012 and September 30, 2013

Contract and license revenue

For the three months ended September 30, 2013, total revenue increased to $1.2 million compared to the three months ended September 30, 2012. Contract research revenue increased $1.2 million as we initiated our BARDA contract in May 2013. We expect contract research revenue to continue to increase as the base performance segment of the contract progresses. We did not recognize any license revenue for the three months ended September 30, 2013.

Research and Development Expense

Research and development expense increased $8.8 million for the three months ended September 30, 2013 compared to the three months ended September 30, 2012 as a result of an $8.2 million increase in expenses incurred for solithromycin and a $0.6 million increase in employee expense, primarily stock compensation expense.

Expenses incurred for solithromycin increased primarily as a result of $5.7 million from our ongoing phase 3 trial and $1.8 million from the production of clinical trial drug product and acquisition of comparator products used in the clinical trials during the third quarter of 2013 which did not occur in the third quarter of 2012. Additionally, there was an increase of $0.7 million due to our performance under the BARDA contract during the third quarter of 2013 which did not occur in the third quarter of 2012.

General and Administrative Expense

General and administrative expense increased by $0.7 million for the three months ended September 30, 2013 compared to the three months ended September 30, 2012 as a result of increased professional service fees of $0.4 million and employee expenses of $0.3 million, primarily related to stock compensation expense.

Other Income (Expense), Net

Other income (expense), net increased $0.4 million for the three months ended September 30, 2013 compared to the three months ended September 30, 2012. The increases were primarily resulting from fair value warrant adjustments and the increase in interest expense due to the increase in the loan balance of the December 2011 Note.

Comparison of the Nine Months Ended September 30, 2012 and September 30, 2013

Contract and license revenue

For the nine months ended September 30, 2013, total revenue increased to $5.7 million compared to the nine months ended September 30, 2012. Contract research revenue increased by $1.4 million as we initiated our BARDA agreement in May 2013. We expect contract research revenue to continue to increase as the base performance segment of the BARDA agreement progresses. License revenue increased $4.3 million due to revenue recognized upon receipt of the $10.0 million upfront payment from the execution of the Toyama license agreement in May 2013.

Research and Development Expense

Research and development expense increased $13.1 million for the nine months ended September 30, 2013 compared to the nine months ended September 30, 2012 as a result of a $10.7 million increase in expenses incurred for solithromycin, a $0.5 million increase in expenses incurred for Taksta and a $1.9 million increase in employee expense.

Expenses incurred for solithromycin increased primarily as a result of $7.2 million from our ongoing phase 3 trial and $2.8 million from the production of clinical trial drug product and acquisition of comparator products used in the clinical trials during the first nine months of 2013 which did not occur in the first nine months of 2012. Additionally, there was an increase of $0.7 million due to the initiation of our performance under the BARDA contract during the first nine months of 2013 which did not occur in the first nine months of 2012.

Expenses incurred for research and development personnel increased $1.9 million primarily as a result of an increase in the number of employees and stock compensation expenses during the first nine months of 2013 which did not occur in the first nine months of 2012.

General and Administrative Expense

General and administrative expense increased by $2.7 million for the nine months ended September 30, 2013 compared to the nine months ended September 30, 2012 as a result of increased stock compensation expense of $1.3 million, franchise tax of $0.4 million and professional service fees of $1.0 million.

Other Income (Expense), Net

Other income (expense), net increased $0.5 million for the three months ended September 30, 2013 compared to the three months ended September 30, 2012. The increases were primarily resulting from fair value warrant adjustments and the increase in interest expense due to the increase in the loan balance of the December 2011 Note.

Liquidity and Capital Resources

Sources of Liquidity

Since our inception in November 2005 through September 30, 2013, we have funded our operations primarily with $239.5 million from a combination of debt and the sale of convertible notes, convertible preferred shares, common shares and common stock.

The gross proceeds we have received from the issuance and sale of our convertible notes and preferred and common shares are as follows (dollars in thousands):


		Number of		Gross
Issue		Shares		Proceeds
Class A	2006		789,191	$	7,497	⁽¹⁾
Class A	2007		1,557,895		14,800
Class B	2007		809,717		10,000
Class C	2009		2,488,686		25,500
Class C	2010		2,000,700		20,500
August 2011 Notes	2011		—		5,000
December 2011 Note	2011		—		10,000
Common Stock / Initial Public Offering	2012		9,660,000		57,960
Common Stock / Private Placement	2012		3,864,461		25,119
December 2011 Note Amendment	2013		—		5,238
Common Stock / Public Offering	2013		8,273,938		57,918

In addition to the financing activities listed above, we received $10.0 million of up-front proceeds under our license agreement with Toyama in May 2013 and $0.4 million under our BARDA agreement.

(1)	Includes $3,197 of converted notes payable and accrued interest.

Cash Flows

The following table sets forth the major sources and uses of cash for the periods set forth below:


	Nine Months Ended September 30
	2012			2013
	(Unaudited, in thousands)
Net cash provided by (used in):
Operating activities	$	(18,061	)	$	(18,615	)
Investing activities		(8	)		(51	)
Financing activities		54,109			58,961

Net increase (decrease) in cash and equivalents	$	36,040		$	40,295

Operating Activities. Cash used in operating activities of $18.1 million for the nine months ended September 30, 2012 was primarily a result of our $17.7 million net loss and changes in operating assets and liabilities of $1.8 million offset by non-cash items of $1.4 million. Cash used in operating activities of $18.6 million for the nine months ended September 30, 2013 was primarily a result of our $28.2 million net loss offset by cash provided by changes in operating assets and liabilities of $6.5 million and non-cash items of $3.1 million.

Investing Activities. Net cash used in investing activities was $8,000 for the nine months ended September 30, 2012 and $51,000 for the nine months ended September 30, 2013. Cash used in investing activities during each of these periods reflected our purchases of equipment.

Financing Activities. Net cash provided by financing activities of $54.1 million for the nine months ended September 30, 2012 consisted primarily of gross proceeds of $58.0 million from the IPO offset by $3.2 million of underwriting discounts and $0.7 million of offering costs. Net cash provided by financing activities of $59.0 million for the nine months ended September 30, 2013 consisted of gross proceeds of $57.9 million from the public offering in June 2013 offset by $3.5 million of underwriting discounts and $0.2 million of offering costs, $5.2 million from proceeds from the amendment of the December 2011 Note offset by $0.3 million of issuance costs less principal payments of $0.2 million to the December 2011 Note and proceeds of $0.1 million from warrant exercise.

Funding Requirements

To date, we have not generated any product revenue from our development stage product candidates. All of our revenue has been derived from a government contract and the receipt of up-front proceeds under our license agreement with Toyama. We do not know when, or if, we will generate any product revenue. We do not expect to generate product revenue unless and until we obtain marketing approval of and commercialize solithromycin and/or Taksta or any of our other product candidates. At the same time, we expect our expenses to increase in connection with our ongoing activities, particularly as we continue the research, development and clinical trials of, and seek regulatory approval for, solithromycin and Taksta and our other product candidates. In addition, subject to obtaining regulatory approval of any of our product candidates, we expect to incur significant commercialization expenses for product sales, marketing, manufacturing and distribution. We will need substantial additional funding in connection with our continuing operations.

Based on our estimates of costs and timelines for the development of solithromycin for the treatment of CABP and our resources as of September 30, 2013, we expect that we have sufficient funds in hand to complete all studies and trials currently expected to be necessary for submission of an NDA to the FDA. We will need to obtain additional financing for the continued development of solithromycin outside of CABP, Taksta and our other product candidates and prior to the commercialization of any of these product candidates. We have based our estimates on assumptions that may prove to be wrong, and we may use our available capital resources sooner than we currently expect. Due to the numerous risks and uncertainties associated with the development and commercialization of our product candidates, we are unable to estimate the amounts of increased capital outlays and operating expenditures necessary to complete the development of our product candidates.

Our future capital requirements will depend on many factors, including:

•

the progress, costs and results of our ongoing oral solithromycin Phase 3 trial, the results of our end-of-Phase 2 meeting with the FDA for the planned Phase 3 IV-to-oral trial for solithromycin, our ongoing Taksta Phase 2 trial and any future trials for solithromycin and Taksta;

•

the scope, progress costs, and results of pre-clinical development, laboratory testing and clinical trials for our other product candidates;

•

the costs, timing and outcome of regulatory review of our product candidates;

•

the costs of commercialization activities, including product sales, marketing, manufacturing and distribution, for any of our product candidates for which we receive regulatory approval;

•

our ability to establish collaborations on favorable terms;

•

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

•

revenue if any, received from sales of our product candidates, if approved by the FDA;

•

the extent to which we acquire or invest in businesses, products and technologies; and

•

our ability to obtain government or other third-party funding.

Until we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity offerings, debt financings, government or other third-party funding, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements. We do not have any committed external source of funds. To the extent that we raise additional capital through the sale of equity or convertible debt securities, our stockholders’ ownership interests will be diluted, and the terms of any securities may

include liquidation or other preferences that adversely affect our stockholders’ rights as a stockholder. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, such as currently imposed under the loan from Hercules. If we raise additional funds through government or other third-party funding, marketing and distribution arrangements or other collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us.

We plan to seek partners or other sources of third-party funding, including government grants, for the continued development of solithromycin and Taksta and our other product candidates. If we are unable to raise additional funds when needed, whether on favorable terms or not, we may be required to delay, limit, reduce or terminate our development of our product candidates, or our commercialization efforts, or to grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Contractual Obligations and Commitments

We enter into contracts in the normal course of business with clinical research organizations for clinical trials and clinical supply manufacturing and with vendors for pre-clinical research studies, research supplies and other services and products for operating purposes. These contracts generally provide for termination on notice and therefore we believe that our non-cancelable obligations under these agreements are not material.

During the nine months ended September 30, 2013, there were no material changes to our contractual obligations and commitments outside the ordinary course of business from those specified in our 2012 Annual Report on Form 10-K, except for:

December 2011 Note

In December 2011, we entered into the $20,000,000 the December 2011 Note with Hercules and borrowed $10,000,000 upon closing. The principal amount outstanding under the $10,000,000 borrowing bears interest at the greater of (i) 9.55%, or (ii) the sum of 9.55% plus the prime lending rate, as published by the Wall Street Journal, minus 3.25% per annum. The terms of the December 2011 Note agreement provided that we could, at any time prior to October 1, 2012, request another borrowing in the aggregate amount of $10,000,000. We elected not to request the additional borrowing and let the option expire on September 30, 2012. In May 2013, we amended the December 2011 Note, increasing the intial loan amount to $15,000,000, receiving an additional $5,238,327 upon closing. We also extended the date by which we could request the additional $10,000,000 to September 30, 2013. We elected not to request the additional borrowing and let the option expire on September 30, 2013. This amendment also provides for us to make interest only payments through June 2014. Principal and interest payments will start July 1, 2014 over a 36-month amortization period. The principal balance outstanding on the loan agreement and all accrued but unpaid interest thereunder will be due and payable on June 1, 2017. In addition, we are to pay Hercules the following fees:

•

$400,000 on the earliest to occur of (i) December 1, 2015, (ii) the date that we prepay all of the outstanding advances and accrued interest, or (iii) the date that all of the advances and interest become due and payable.

•

$495,245 on the earliest to occur of (i) June 1, 2017, (ii) the date that we prepay all of the outstanding advances and accrued interest, or (iii) the date that all of the advances and interest become due and payable

We granted Hercules a security interest in all of our assets, except intellectual property. Our obligations to Hercules include restrictions on borrowing, asset transfers, placing liens or security interests on our assets including its intellectual property, mergers and acquisitions and distributions to stockholders.

In connection with the initial closing of the December 2011 Note, we entered into a warrant agreement with Hercules, referred to as the First Hercules Warrant, under which Hercules has the right to purchase 39,038 shares of our common stock. The exercise price of the First Hercules Warrant was initially $10.25 per share, subject to adjustment in the event of a merger, reclassification, subdivision or combination of shares or stock dividend and

subject also to antidilution protection. In connection with the amendment to the December 2011 Note, the exercise price of the First Hercules Warrant was reduced to the lower of (a) $6.11, and (b) the effective price per share of our common stock issued or issuable in any offering of our equity or equity-linked securities that occurs prior to June 1, 2014, provided that such offering is effected principally for equity or debt-financing purposes, The First Hercules Warrant expires on December 20, 2021. Proceeds equal to the fair value of the First Hercules Warrant were recorded as a liability at the date of issuance and the borrowings under the December 2011 Note will be increased to equal the face amount of the borrowings plus interest through interest expense over the term of the loan using the effective interest method. Upon completion of our IPO, the warrant liability was reclassified to additional paid-in capital. Since the amendment to the First Hercules Warrant resulted in a variable exercise price, the fair value of the First Hercules Warrant as of the date of the amendment was reclassified from additional paid-in capital to a warrant liability.

Additionally, in connection with the amendment of the Decmber 2011 Note, we entered into a warrant agreement with Hercules, referred to as the Second Hercules Warrant, under which Hercules has the right to purchase an aggregate number of shares of our common stock equal to the quotient derived by dividing $609,533 by the exercise price then in effect, which is defined as the lower of (a) $6.11, and (b) the effective price per share of the common stock issued or issuable in any offering of the our equity or equity-linked securities that occurs prior to June 1, 2014, provided that such offering is effected principally for equity or debt-financing purposes. The exercise price is subject to adjustment in the event of a merger, reclassification, subdivision or combination of shares or stock dividend and subject also to antidilution protection. The Second Hercules Warrant expires on May 31, 2023. Proceeds equal to the fair value of the Second Hercules Warrant were recorded as a liability at the date of issuance and the borrowings under the December 2011 Note will be increased to equal the face amount of the borrowings plus interest through interest expense over the term of the December 2011 Note using the effective interest method.

Operating Lease

In May 2013, we amended our operating lease agreement for office space in Chapel Hill, North Carolina. The new lease provides for aggregate lease payments of $1.3 million paid over a 68 month term.

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements as defined under SEC rules.

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

There have not been any material changes to our exposure to market risk during the quarter ended September 30, 2013. For additional information regarding market risk, refer to “Item 7A. Quantitative and Qualitative Disclosure About Market Risk” of our 2012 Annual Report on Form 10-K.

Item 4.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended, or the Exchange Act), are designed only to provide reasonable assurance that information to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (our principal executive officer) and Chief Financial Officer (our principal financial and accounting officer), of the effectiveness of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(b). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report to provide the reasonable assurance discussed above.

Changes in Internal Control over Financial Reporting

No change to our internal control over financial reporting occurred during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 6.

Exhibits


Exhibit Number	Description of Document	Registrant’s Form	Dated	Exhibit Number	Filed Herewith

10.18*	Development and Supply Agreement by and between Cempra Pharmaceuticals, Inc. and Hospira Worldwide, Inc. effective as of July 1, 2013.				X

10.19	Amendment No. 1, effective as of September 26, 2013 to Exclusive License And Development Agreement by and between Cempra Pharmaceuticals, Inc. and Toyama Chemical Co., Ltd, dated May 8, 2013.				X

31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.				X

31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.				X

32.1	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.				X

32.2	Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.				X

101	Financials in XBRL format.				X

*	Confidential treatment has been requested with respect to certain portions of this exhibit. Omitted portions have been filed separately with the SEC.

SIGNATURES

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


	CEMPRA, INC.

Dated: October 29, 2013		By:	/s/ Prabhavathi Fernandes, Ph.D.
		Prabhavathi Fernandes, Ph.D.
		President and Chief Executive Officer

Dated: October 29, 2013		By:	/s/ Mark W. Hahn
		Mark W. Hahn
		Chief Financial Officer

EXHIBIT 10.18

*Portions of this exhibit marked [*] are requested to be treated confidentially.

DEVELOPMENT AND SUPPLY AGREEMENT

T HIS D EVELOPMENT AND S UPPLY A GREEMENT (the “ Agreement ”) is entered into and made effective as of July 1, 2013 (the “ Effective Date ”), by and between C EMPRA P HARMACEUTICALS , I NC ., a Delaware corporation ( “Cempra” ) and H OSPIRA W ORLDWIDE , I NC . , a Delaware corporation ( “Hospira” ).

W ITNESSETH :

W HEREAS , Cempra owns or controls certain rights to the compound solithromycin (CEM-101), and wishes to develop and market a form of solithromycin in glass vials;

W HEREAS , Cempra and Hospira desire that Hospira assist Cempra in the development and commercialization of such solithromycin product;

W HEREAS , after Cempra has filed an application for Regulatory Approval and received Regulatory Approval(s), the parties desire that Hospira manufacture and sell to Cempra such of Cempra’s commercial requirements of the Product as the parties may agree hereunder for sale and use in the Territory; and

W HEREAS , Hospira desires to perform such services for Cempra with respect to the Solithromycin product.

N OW , T HEREFORE , in consideration of the premises and the mutual promises and agreements contained herein, Cempra and Hospira hereby agree as follows:

A RTICLE 1. D EFINITIONS

The following words and phrases when used herein with capital letters shall have the meanings set forth or referenced below:

1.1 “Act” shall mean the United States Federal Food, Drug and Cosmetic Act (21 U.S.C. 301), as amended from time to time.

1.2 “Active Pharmaceutical Ingredient” or “API” means the active pharmaceutical substance of the Drug in bulk form prior to incorporation into the Product.

1.3 “Active Pharmaceutical Ingredient Specifications” or “ API Specifications” means the detailed description and parameters of the API set forth on Exhibit 1.3 .

1.4 “Adverse Drug Experience(s)” means any untoward medical occurrence in a patient or clinical investigation subject administered Product and which need not necessarily have a causal relationship with such treatment, including any unfavorable and unintended sign (including an abnormal laboratory finding, for example), symptom, or disease temporally associated with the use of Product, whether or not considered related to thereto, which shall include any such event as set forth in 21 CFR 310.305 or the substantial equivalent provisions of other Applicable Laws.

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1.5 “Affiliate” means, with respect to a party, any corporation, partnership, joint venture and/or firm which controls, is controlled by or is under common control with such party. As used in this Section 1.5 , “control” means (a) in the case of corporate entities, direct or indirect ownership of at least fifty percent (50%) of the stock or shares having the right to vote for the election of directors and (b) in the case of non-corporate entities, the direct or indirect power to manage, direct or cause the direction of the management and policies of the non-corporate entity or the power to elect at least fifty percent (50%) of the members of the governing body of such non-corporate entity.

1.6 “Applicable Law” means all laws applicable to the manufacture, processing, distribution, sale and use of the Product as may be amended and in effect from time to time, including the Act and the regulations promulgated thereunder; European Directive 2003/94/EC and 2001/83/EC, and related legislation; the Canadian Food and Drugs Act (R.S., chapter F-27) and related regulations; all applicable cGMP); and all corresponding laws, ordinances, rules and regulations of any other applicable jurisdiction.

1.7 “Business Day” shall mean a day which is not a Saturday or Sunday or a bank or public holiday in Chapel Hill, North Carolina, Chicago, Illinois or McPherson, Kansas.

1.8 “Cempra Intellectual Property” shall mean all Intellectual Property owned or controlled by Cempra as of the Effective Date or developed, acquired or licensed to or by Cempra after the Effective Date that directly relates to the Product or the use or manufacture thereof, including Cempra Improvements. For purposes of this definition, “controlled by” means possession of the right to grant a license or sub-license without violating (a) any law or governmental regulation applicable to such license or sublicense, or (b) the terms of any agreement or other arrangement with any Third Party.

1.9 “Certificate of Analysis” means a document, signed by an authorized representative of Hospira, describing the Product Specifications of and testing methods applied to the Product, and the results thereof.

1.10 “Certificate of Compliance” means a document, signed by an authorized representative of Hospira, attesting that a particular lot, batch or run was manufactured in accordance with cGMP, Applicable Law, and the Product Specifications. The Certificate of Compliance may be included within the Certificate of Analysis, or separately, if required by Cempra for regulatory purposes or Applicable Law.

1.11 “cGMP” means those principles and guidelines of good manufacturing practices as set forth in 21 C.F.R. Parts 210 and Part 211; EU Directive 2003/94/EC—guidelines of good manufacturing practices for medicinal products for human use (EudraLex Vol. 4); Canadian Good Manufacturing Practices as contained in Canada Food & Drug Regulations C.R.C., c. 870, C.02- C.04; Japanese GMP regulations, ordinances and practice guidelines as contained in or promulgated further to the Japanese Pharmaceutical Affairs Law, 2003 (as amended); the ICH Guideline on Good Manufacturing Practice for Active Pharmaceutical Ingredients (ICH Q7A), as adopted by EU Directive 2004/27; and the corresponding good manufacturing practices requirements of any other applicable jurisdiction.

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1.12 “Commercial Year” means each period of twelve (12) consecutive calendar months during this Agreement beginning on the first day of the month after the month in which Cempra, an Affiliate thereof, or a licensee or sublicensee of either of the foregoing makes a bona fide sale of Product to a non-Affiliate customer after the first Regulatory Approval for the Product in the Territory, and each Commercial Year thereafter shall consist of twelve (12) consecutive calendar months following the end of the preceding Commercial Year.

1.13 “Commercially Reasonable Efforts” means (a) in respect of Cempra, within the range of efforts and resources commonly used by Cempra with respect to any product owned by Cempra or to which Cempra has rights, which product is at a similar stage in its development or product life and is of similar market potential to Product and taking into account the patent and other proprietary position of the product, or (b) in respect of Hospira, within the range of efforts and resources commonly used by a company to perform pharmaceutical contract manufacturing services similar to those to be provided by Hospira hereunder; provided, however , that such efforts shall, in the case of Hospira, be no less than consistent with reasonable, customary practices within the pharmaceutical or pharmaceutical manufacturing industry(ies) for companies of similar size and capabilities as Hospira or Cempra, as applicable, with respect to research, development, sales, or marketing of products of similar market or profit potential or strategic value, taking into account technical, intellectual property, and regulatory factors, target product profiles, labeling, past performance, costs, economic return, the regulatory environment and competitive market conditions, all based on conditions then prevailing. “Commercially Reasonable” shall have a corresponding meaning.

1.14 “Components” means the excipients and all components or component parts of the vials into which the Drug will be filled, and the labeling, packaging, ancillary goods, shipping materials and other items to be supplied by Hospira or its Components supplier(s) to enable Hospira to manufacture the Product in accordance with the Product Specifications.

1.15 “Confidential Information” means all information disclosed hereunder in writing and identified as being confidential or, if disclosed orally, visually or through some other media, is identified as confidential at the time of disclosure, except any portion thereof which:

(a) is known to the recipient at the time of the disclosure independently of any prior disclosure by the disclosing party, as evidenced by its written records or other competent evidence;

(b) is disclosed to the recipient by a Third Party lawfully in possession of such information and not under an obligation of non-disclosure and non-use with respect thereto;

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(d) is developed by or for the recipient independently and without benefit of Confidential Information disclosed to it hereunder by the other party as evidenced by the recipient’s written records or other competent evidence; or

(e) is required by applicable law, rule, or regulation to be disclosed by the recipient; provided, however , that, if such disclosure is not explicitly permitted by Article 11 , the recipient (i) gives the other party hereto prompt written notice of such legal requirement, such that such other party shall, to the extent reasonably practicable, have the opportunity to apply for or obtain confidential or protective treatment of such Confidential Information, (ii) cooperates with the disclosing party, as reasonably requested thereby, in seeking such confidential or protective treatment, and (iii) minimizes the extent of any such disclosure.

Notwithstanding anything to the contrary, Product Data, Cempra Improvements, and information concerning either of the foregoing shall be deemed the Confidential Information of Cempra, and Cempra shall be deemed the disclosing party, and Hospira the recipient, with respect thereto, regardless of the fact that Hospira or an agent or representative thereof may first disclose such information to Cempra under this Agreement; provided, however , that the foregoing shall be subject to the exceptions of sub-sections (a) – (e) , above.

1.16 “Drug” means the human pharmaceutical solithromycin (CEM-101), the structure of which is set forth on Exhibit 1.16.

1.17 “Drug Master File” or “DMF” means a drug master file (as such term is defined in 21 C.F.R. Part 314.420 or in similar fashion under any corresponding foreign Applicable Law) relating to the Product.

1.18 “EMA” means the European Medicines Agency and any successor entity.

1.19 “ Facility ” means Hospira’s pharmaceutical manufacturing plant at McPherson, Kansas, or such other manufacturing facility agreed by the parties in writing.

1.20 “FDA” means the United States Food and Drug Administration or any successor entity.

1.21 “Fill Date” means the date on which Hospira begins manufacturing operations on the Product, commencing with compounding of the API.

1.22 “Health Canada” means the Therapeutic Products Inspectorate of the Canadian Health Product and Food Branch and any successor entity.

1.23 “Hospira Intellectual Property” means all Intellectual Property, including Know-How, owned or controlled by Hospira (a) as of the Effective Date or (b) developed or acquired by Hospira (i) outside of the performance of its obligations under this Agreement and (ii) other than as a result of Hospira’s knowledge or use of, or access to, the Drug or Confidential Information provided by Cempra. For purposes of this definition, “controlled by” means possession of the right to grant a license or sub-license without violating (x) any law or governmental regulation applicable to such license or sublicense or (y) the terms of any agreement or other arrangement with any Third Party.

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1.24 “Intellectual Property” or “IP” means all inventions, formulations, processes, works of authorship, and any and all rights under U.S. and/or foreign patents, trade secrets, know-how, copyrights, trademarks and other industrial or intangible property rights of a similar nature and moral rights; all rights pursuant to grants and/or registrations worldwide in connection with the foregoing and all other rights with respect thereto; all rights under applications for any such grant or registration, all rights of priority under international conventions to make such applications and the right to control their prosecution, and all rights under amendments, continuations, divisions and continuations-in-part of such application; and all rights under corrections, reissues, patents of addition, extensions and renewals of any such grant, registration and/or right.

1.25 “Know-How” means any information or material that is confidential and proprietary, including ideas, concepts, discoveries, inventions, developments, improvements, know-how, trade secrets, designs, devices, equipment, process conditions, algorithms, notation systems, works of authorship, computer programs, technologies, formulas, techniques, methods, procedures, assay systems, applications, data, documentation, reports, chemical compounds, products and formulations, whether patentable or otherwise. Know-How will also include non-Confidential Information and material to the extent such information and material first lost its confidentiality by virtue of its disclosure in an open patent or published patent application, a filing with a Governmental Authority or as part of a legal proceeding.

1.26 “Manufacturing Process” means any and all processes (or any step in any process) that is provided to Hospira by Cempra and that will be used to manufacture the Product, as evidenced in the batch documentation and/or development reports.

1.27 “Master Batch Record” shall mean the document that defines the manufacturing methods, materials, and other procedures, directions and controls associated with the manufacture and testing of the Product, which may be amended in writing from time to time by mutual agreement of the parties.

1.28 “MSDS” means the Material Data Safety Sheet for the Product or the API containing such information as may be required by applicable government agencies.

1.29 “PMDA” means the Japanese Pharmaceuticals and Medical Devices Agency and any successor entity.

1.30 “Product” means the Drug in final dosage form, filled, finished and packaged in glass vials with flip-off caps, as described in the Product Specifications.

1.31 “Product Data” means the information, documents, and records relating to the Product created in connection with Hospira’s performance under this Agreement, the manufacture of the Product, or other use of Drug provided by Cempra. Product Data may include, documents and records pertaining to the manufacture of the Product, Batch records (including the Master

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Batch Record), Certificates of Analysis, Certificates of Compliance, an identification of the analytical test methods employed and analytical test results achieved, and all other relevant documents, reports and data prepared, developed or generated by Hospira in connection with the development or manufacture of Product hereunder. Product Data, however, shall expressly exclude raw data developed that does not pertain to Cempra, the Product, or the Drug and is related to Hospira’s manufacturing processes that are generally applicable to its pharmaceutical manufacturing operations, as well as any Hospira Confidential Information.

1.32 “Product Specifications” means those product, labeling and performance specifications for the Product, including Product formulae, labeling, and materials required for the manufacture of the Product that is to be purchased and supplied under this Agreement, as such are set forth on Exhibit 1.32 , which specifications may be amended from time to time in accordance with this Agreement.

1.33 “Regulatory Approval” means any approvals (including supplements, amendments, pre- and post-marketing approvals, and, if applicable in a particular jurisdiction, pricing and reimbursement approvals), licenses, registrations or authorizations of any Regulatory Authority necessary for the manufacture, distribution, sale or use of the Product for human therapeutic use in a regulatory jurisdiction.

1.34 “Regulatory Authority” means any federal, state or local or other regulatory agency, department, bureau or other governmental entity (including the FDA, EMA and Health Canada), which is responsible for issuing approvals, licenses, registrations or authorizations necessary for the manufacture, import, sale and use of the Product for human therapeutic use in any applicable regulatory jurisdiction.

1.35 “Rework” means the use of additional processing steps, which are different from the process defined in a batch record, because of a failure of the batch to meet one or more Product Specifications. Re-inspection does not constitute Rework. Re-inspection means to re-examine and remove defects according to written instructions.

1.36 “Specially Regulated Waste” means any hazardous waste, toxic waste, medical waste, nuclear waste, mixed waste, or other waste materials or by-products, including waste water, which may be subject to or require special handling, treatment, storage, or disposal under any federal, state or local laws or regulations intended to address such types of waste materials that arise from the manufacture of the Product.

1.37 “Term” means the period of this Agreement beginning on the Effective Date and ending on the expiry or termination pursuant to Article 10 .

1.38 “Territory” means (a) the United States of America (including the District of Columbia, the Commonwealth of Puerto Rico, all territories and possessions of the United States of America, United States military bases, and any other location over which the FDA has jurisdiction to regulate medicinal products intended for human use), (b) the member nations of the European Union as of the Effective Date, as set forth on Exhibit 1.38 ( “EU” ), (c) Canada, (d) Norway, and (e) Switzerland.

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1.39 “Third Party” shall mean a party other than Hospira or Cempra and their respective Affiliates.

1.40 “Waste” shall mean all rejects, improper goods, garbage, refuse, remainder, residue, waste water or other discarded material, including solid, liquid, semisolid, or contained gaseous material that arises from the manufacture of the Product, including rejected, excess or unsuitable materials, API and Products. The term Waste shall not include any Specially Regulated Waste.

A RTICLE 2. P RODUCT D EVELOPMENT P ROJECT

2.1 General . Hospira shall undertake and perform a product development project ( “Project” ) consisting of the activities and applicable timelines set forth on Exhibit 2.1 ( “Statement of Work” ). Under the Project, Hospira shall assist Cempra in developing the Product for purposes of clinical and commercial manufacture and Regulatory Approval, and in obtaining any required Regulatory Approval(s) in the Territory. Subject to the completion of the Project in accordance with the Statement of Work, Hospira shall manufacture and deliver Development Supplies and Product to Cempra for commercial sale by Cempra as a human pharmaceutical product, provided, however , that Cempra shall not sell any Product in a country unless and until all necessary Regulatory Approvals have been obtained with respect thereto. Any standards and procedures listed in the Statement of Work or the Quality & Technical Agreement as “TBD” shall be developed, verified, and mutually agreed upon in good faith by the parties using Commercially Reasonable Efforts as soon as practicable after the Effective Date.

2.2 Clinical Support for Japan . If Cempra so requests in writing, Hospira will agree to provide Cempra with quantities of Development Supplies for purposes of Cempra’s clinical development thereof in Japan. Hospira will propose a supplemental Statement of Work detailing among other items, the quantities of Development Supplies required, the costs of such supplies, the review of Cempra’s regulatory dossier to be submitted to the PMDA and the documentary and other support to be provided by Hospira as is reasonable and customary for pharmaceutical clinical programs. Upon the parties’ mutual written agreement with respect to such supplemental Statement of Work, Hospira will perform the development work thereunder; provided, however , that the parties acknowledge and agree that, (a) the Development Supplies provided by Hospira will be identical to those manufactured for Cempra’s clinical and development activities in the Territory, and (b) that neither of Hospira and Cempra will have any obligations with regard to the manufacture and purchase of Product for commercial sale in Japan unless otherwise specifically agreed in writing.

2.3 Commercially Reasonable Efforts . Each party shall use all Commercially Reasonable Efforts to successfully fulfill its obligations under any Statement of Work to complete the Project. However, the parties understand and agree that neither of them can guarantee that the Project will be successful, nor warrant that a marketable product will result from the Project.

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A RTICLE 3. D EVELOPMENT F EES ; P ROJECT M ANAGEMENT

3.1 Development Fee . Cempra shall pay Hospira a development fee ( “Development Fee” ) for its work under the Project in accordance with the payment schedule set forth in Exhibit 3.1 .

3.2 Stability Studies . Hospira will perform stability studies on the Product separate and apart from the Project. The essential obligations of such stability studies and the terms thereof are set forth on Exhibit 3.2 .

3.3 Changes in Project Scope .

(a) If Cempra requests changes in the Project or the Product Specifications, or if technical difficulties require that Hospira perform either additional work or repeat work, and such additional work is required not because of Hospira’s breach of this Agreement, fault or negligence, Hospira shall promptly provide Cempra with a new or revised proposal with cost estimates for such changes or additional work including costs for reasonable travel and sustenance, materials and supplies. Hospira will base its cost estimates for such additional work or repeat work at its customary per/hour, per/person rates then in effect, relative to the work to be performed, consistent with its charges to other similarly-situated customers, [*]. If Cempra approves such costs in writing, the applicable changes in the Project or the Product Specifications will be documented in writing and signed by both parties as a change order, and, effective upon such signature, Hospira shall perform such agreed-upon new or additional work, and Cempra shall pay any such agreed-upon costs for such additional work or repeat work performance as set forth in such mutually-executed change order or as otherwise provided in this Agreement.

(b) In the event that Cempra decides to have Hospira manufacture Products for development, marketing, and/or sales activities in countries or geographic regions outside of the Territory, Cempra will provide Hospira with reasonable prior written notice of its intent to do so. The parties will then work in good faith to promptly determine the additional work may be required therefor (if any) and upon the parties’ written mutual agreement with respect thereto, Hospira shall provide Cempra with all necessary additional technical/developmental and regulatory support, including, for example, regulatory support for Cempra’s supplemental regulatory filings, packaging and product development, labeling, and relevant Regulatory Authority inspections for such additional country or geographic region outside the Territory. All additional technical/developmental and regulatory support for such other countries or geographic regions shall be considered a change in Project scope and the parties will agree to the reasonable incremental costs of such additional support in accordance with Section 3.3(a) . Any additional pre-Regulatory Approval inspections of the Facility that may be requested or required by relevant Regulatory Authorities as a result shall be reimbursed in accordance with Section 7.3(c) .

3.4 Project Manager . Each party will appoint an authorized individual who will have primary responsibility for day-to-day interactions with the other party for the activities under the Project ( “Project Manager” ). Each party will use all reasonable efforts to provide the other party with at least [*] days prior written notice of any change in its Project Manager. All communications between Hospira and Cempra regarding the conduct of the activities under the Project will be addressed to its Project Manager.

[*] Confidential treatment requested; certain information omitted and filed separately with the SEC.

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3.5 Development Supplies . Based on Cempra’s final Product formulations, concentration and fill volume and the parties’ agreement to the final Product Specifications, [*] as established pursuant to this Agreement, in effect at the time of manufacture, Hospira will manufacture the Products as media runs and engineering, clinical, registration and process validation batches, or other batches not intended for commercial sale or distribution ( “Development Supplies” ) at the applicable prices set forth in Exhibit 3.5 . The parties acknowledge that Development Supplies include material utilized for development purposes that may be used as clinical trial product and stability testing materials, but do not include materials intended for commercial sale in the market, except as otherwise permitted by Applicable Law. In accordance with a schedule to be mutually agreed by the parties, Cempra shall issue its purchase order(s) for such Development Supplies at least [*] days before any agreed-upon Fill Date. For the sake of clarity, all relevant provisions of Articles 5 , 7 , 8 and 9 shall apply to the manufacture and delivery of the Development Supplies.

A RTICLE 4. C EMPRA ’ S R EGULATORY S UBMISSIONS

4.1 Regulatory Review .

(a) Upon Cempra’s request, Hospira shall review those portions of Cempra’s proposed regulatory submissions as relate to Hospira’s manufacturing, packaging and quality control procedures before the submissions are filed with relevant Regulatory Authorities and provide advice, comment, and input with respect thereto. Hospira shall complete its review of any English language submissions within [*] days after receipt. For any non-English language submissions, Cempra shall provide Hospira with a submission translated into English and the parties will agree on a reasonable period of time that Hospira may require for review of said submissions, such agreement not to be unreasonably withheld by either party, and Hospira shall review such submission within such agreed-upon time period. [*]

(b) Upon Cempra’s request, Hospira shall consult with and advise Cempra in responding to questions from Regulatory Authorities regarding Cempra’s regulatory submission(s) for the Products; provided, however, that Cempra shall have the final control over such submissions. Hospira shall provide Cempra with cost estimates (which shall include a professional services rate of at its customary per/hour, per/person rates then in effect relative to the work to be performed, and consistent with its charges to other similarly-situated customers, which shall in no event be greater than Commercially Reasonable) for any additional review and consultation as may be required by, or reasonably helpful or required for purposes of any response to or correspondence with any, Regulatory Authorities (for example, for technical responses to a Regulatory Authority finding of deficiency, should one arise). If Cempra approves such costs in writing, Hospira shall perform such services and Cempra shall reimburse Hospira for such approved costs upon completion of the work and within [*] days of receipt of Hospira’s invoice therefor.

[*] Confidential treatment requested; certain information omitted and filed separately with the SEC.

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4.2 Access to Drug Master Files . Hospira shall grant Cempra and its Affiliates sublicensable reference rights (transferable with this Agreement in the event of any assignment of this Agreement permitted under Section 12.5 ) to all Drug Master Files Hospira maintains for the Facility as reasonably necessary to support Cempra’s [*] regulatory filings, applications, and approvals for the Product, but only in the case where Hospira is the manufacturer of the Product for sale to Cempra[*]. [*] To effect the rights granted by Hospira above, Hospira shall execute certain letters of authorization, which shall be delivered to the appropriate Regulatory Authorities to permit them to consult Hospira’s DMFs in their review of Cempra’s [*] regulatory submissions. Hospira shall send copies of such authorization letters to Cempra [*]. Hospira shall update its DMFs subject to the rights granted above annually and shall inform Cempra prior to making any modifications thereto in order to permit Cempra to amend or supplement any affected regulatory submissions, filings, and/or approvals for the Product.

4.3 Ownership of Regulatory Approvals . The parties agree that, as between the parties, Cempra [*] shall be the sole and exclusive owner(s) of all right, title and interest in and to all Regulatory Approvals related to the API and Product and any submissions for such Regulatory Approvals. Hospira shall reasonably assist Cempra in the preparation of all documents necessary to effect Cempra’s [*] rights in such Regulatory Approval applications and submissions, at the expense of Cempra (which expense shall be at Hospira’s customary per/hour, per/person rates then in effect relative to the work to be performed, and consistent with its charges to other similarly-situated customers [*]. Cempra shall provide to Hospira for its files a final copy of the CMC section of any such applications and/or submissions for Regulatory Approval.

4.4 Regulatory Compliance .

(a) Cempra shall provide to Hospira, within [*] days upon Regulatory Approval, the approved Regulatory Approval dossier information/sections relating to Hospira’s manufacturing, quality control, quality assurance, facilities, personnel, procedures and organization.

(b) Hospira shall discuss any planned changes affecting the approved Regulatory Approval dossier information/sections relating to Hospira’s manufacturing, quality control, quality assurance, facilities, personnel, procedures and organization and use good faith, Commercially Reasonable Efforts to agree with Cempra the changes and the timelines for submission of amendments and variation procedures.

(c) Hospira shall inform Cempra of any changes affecting the approved Regulatory Approval dossier information/sections relating to Hospira’s personnel, procedures and organization within [*] days in case of notifiable changes, respectively within [*] days of becoming aware of the changes for any approvable changes.

(d) Cempra shall discuss any planned changes affecting the approved dossier sections relating to Hospira’s, manufacturing, quality control and quality assurance and agree with Hospira the changes and the timelines for submission of amendments and variation procedures.

[*] Confidential treatment requested; certain information omitted and filed separately with the SEC.

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(e) Hospira shall have the right to appoint and/or delegate the above-listed obligations to one or more of its regulatory support personnel at its Affiliates.

A RTICLE 5. M ANUFACTURE AND S UPPLY OF P RODUCT

5.1 Purchase and Sale of Product . Pursuant to the terms and conditions of this Agreement and during the Term, Hospira shall manufacture, sell and deliver Product to Cempra. Subject to the limitations and exceptions in Sections 6.1 and 6.10 , Cempra shall order, purchase, and take delivery of no less than eighty-percent (80%) of its and its Affiliates’ requirements of the Product for commercial sale as a human pharmaceutical product in the Territory.

5.2 Manufacturing Standards; Changes .

(a) Hospira will manufacture the Product in accordance with the Product Specifications, cGMP and all Applicable Laws, as then in effect. The parties agree that, should Cempra wish to implement any amendment to the Product Specifications ( “Discretionary Changes” ), Cempra shall provide written notice thereof to Hospira for Hospira’s review and approval, [*]. Each party further agrees promptly to notify the other of any new instructions or changes to the Product Specifications required by the FDA or the Act, or of other Applicable Laws ( “Required Changes” ) and shall confer with each other with respect to the best means to comply with such instructions or change requirements; [*].

(b) Except as otherwise agreed herein, Hospira shall be responsible for any and all costs with respect to Required Changes that are required to bring its manufacturing operations into compliance with Applicable Laws, including cGMPs, and Cempra shall be responsible for any and all other reasonable, documented costs related to Required Changes affecting the Product. Any Discretionary Changes to the Product Specifications or the Manufacturing Process initiated by either party shall be agreed to by the parties (and, to the extent required by the change control provisions of the Quality & Technical Agreement, shall not be effective until written agreement between the parties pursuant to the change control provisions of the Quality & Technical Agreement), including which party or parties shall be responsible for the funding of such Discretionary Changes; provided, however , that neither party shall unreasonably delay, condition or otherwise withhold its agreement to any Discretionary Changes.

5.3 Government Approvals . Hospira agrees to manufacture and supply those quantities of Products requested in Purchase Orders by Cempra that are necessary to validate Hospira’s manufacturing facilities, obtain Regulatory Approval(s) and build Cempra’s inventory in anticipation of commercial launch of the Products and Cempra shall be required to pay for such Products ordered irrespective of whether the Products ultimately receive all necessary Regulatory Authorities’ approvals.

[*] Confidential treatment requested; certain information omitted and filed separately with the SEC.

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5.4 Active Pharmaceutical Ingredient

(a) Supply .

(i) Hospira shall manufacture Product for Cempra from API that Cempra shall supply to Hospira at no cost. Cempra shall supply API to Hospira in quantities reasonably sufficient to satisfy Hospira’s gross manufacturing requirements of the Product for a particular order of Product no later than [*] days prior to the scheduled Fill Date as mutually agreed by the parties. Hospira shall use the API received from Cempra only for the development activities contemplated by this Agreement and the manufacture of Product for Cempra. Cempra shall deliver API, DDP, the Facility (Incoterms 2010) pursuant to no-cost purchase orders that Hospira issues to Cempra consistent with the foregoing terms.

(ii) With each delivery of API to Hospira, Cempra will include a certificate of analysis, signed by an authorized individual of Cempra (or its designee or API supplier) containing basic information regarding the API, including (A) the manufacturing date of the batch/lot delivered, (B) the batch/lot number, and (C) the quantity of API in such batch/lot as shipped to Hospira. Cempra shall also supply a separate sample (“tailgate sample”; “satellite sample”) containing an amount of API agreed by the parties for each shipment container of API supplied.

(iii) Within [*] days of Hospira’s receipt of any API supplied by Cempra hereunder, Hospira shall (A) perform an identification test on the API and confirm the shipment quantity, (B) perform any other tests mutually agreed upon in writing, and (C) notify Cempra of any inaccuracies with respect to quantity or of any claim that any portion of the shipment fails the identification or other test. In the event Hospira notifies Cempra of any deficiency in the quantity or quality of API received, Cempra shall promptly ship to Hospira, at Cempra’s own expense, the quantity of API necessary to complete the API shipment. In the event Hospira notifies Cempra that the API shipment does not conform to the Active Pharmaceutical Ingredient Specifications, Cempra shall have the right to confirm such findings at the Facility.

(iv) If Cempra determines that such shipment of API conforms to the Active Pharmaceutical Ingredient Specifications, the parties shall submit samples of such shipment to a mutually acceptable independent, neutral expert for testing. If such independent, neutral expert determines that the shipment conforms to the Active Pharmaceutical Ingredient Specifications, Hospira shall bear all expenses of shipping and testing such shipment samples. If Cempra or such independent expert confirms that such shipment does not meet the Active Pharmaceutical Ingredient Specifications, Cempra shall replace, at no cost to Hospira, the portion of the API shipment which does not conform to the Active Pharmaceutical Ingredient Specifications and bear all reasonable, documented expenses of shipping and testing the shipment samples. Notwithstanding the foregoing, the independent expert may also determine that additional sample testing by an independent laboratory is necessary, in which case the parties shall work in good faith to agree on such independent laboratory. The costs for any such independent laboratory API testing shall be borne in the same manner as specified for API testing conducted by the independent expert. Hospira shall dispose of any nonconforming portion of any API shipment as directed by Cempra in writing, in accordance with the waste disposal provisions of Section 5.8 and Cempra’s material safety data sheet (“MSDS”) for the Drug and at Cempra’s reasonable expense.

[*] Confidential treatment requested; certain information omitted and filed separately with the SEC.

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(b) Title . Notwithstanding the DDP shipping terms of Section 5.4(a)(i) , Cempra shall retain title to the API while it is in the Hospira facility. Subject to the limitation in Section 5.4(c) , Hospira shall assume responsibility and risk for, and exercise Commercially Reasonable Efforts in, the safekeeping, storage and handling for all shipments of API delivered hereunder and accepted by Hospira.

(c) Loss and Replacement of API . In the event of loss, waste, or damage of any API delivered hereunder or the failure of Product to meet Product Specifications, Cempra shall supply to Hospira replacement API according to the terms set forth in Section 5.4(a) , except as otherwise provided herein. If the replacement of such API results from a breach of this Agreement, failure to comply with GMP, Applicable Law, or the Product Specifications, or any negligent act or willful omission by Hospira or any Affiliate thereof (or any employee, agent, or other representative of either of the foregoing) in the manufacture, handling or storage of Product or API, Cempra shall supply to Hospira replacement API and Hospira shall be responsible for the cost of the replacement API equal to Cempra’s purchase cost/kg (as evidenced by Cempra’s invoices). Hospira shall issue Cempra with a credit note (applicable against any amounts due Hospira hereunder) equivalent to the cost of the replacement API no later than [*] days of the determination of Hospira’s liability for such replacement cost; provided, however , that, in the event of the termination or expiry of this Agreement prior to the application of the full amounts of all such credit notes against amounts due Hospira hereunder, Hospira shall pay Cempra the balance remaining of any such credit notes within [*] days of such termination or expiry.

(d) Maximum Liability . Notwithstanding any of the foregoing, in no event shall Hospira’s liability for such replacement costs of API exceed (i) [*] Dollars ($[*]) [*], or (ii) [*] Dollars ($[*]) [*]. This Section 5.4(d) states Cempra’s sole remedy, and Hospira’s sole liability, with respect to any claim arising hereunder for any such loss, damage, or waste of API by Hospira.

5.5 Facility; Dedicated Equipment.

(a) Maintenance of Facility . Hospira shall secure and maintain in good order, at its sole cost and expense, such current governmental registrations, licenses and permits as are required by Regulatory Authorities in order for Hospira to perform all of its obligations under this Agreement and to manufacture the Product in accordance with Cempra’s purchase orders therefor.

(b) Dedicated Equipment . At present, the parties anticipate that no specialized or dedicated equipment ( “Dedicated Equipment” ) will be required of Hospira to manufacture Product for Cempra. In the event that the parties agree to make changes, either to the Product Specifications or to the scope of work as currently described in the Project statement of work, and such changes would require Hospira to use Dedicated Equipment in the manufacture of the Product, Hospira and Cempra shall meet and discuss the methods, means and costs for acquiring, installing and validating any such Dedicated Equipment and the responsibilities of the parties therefor.

[*] Confidential treatment requested; certain information omitted and filed separately with the SEC.

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5.6 Components . Hospira shall be responsible for the procurement and qualification of the Components required for the manufacture of the Product. Hospira will source all of the Components from suppliers that have been approved and qualified by Hospira in accordance with Hospira’s internal vendor qualification and approval processes. The parties understand and agree that Cempra will have reviewed and approved the Components and Component suppliers listed in the Product Specifications. Under no circumstances shall Hospira have any liability to Cempra, nor shall Hospira be deemed to be in breach of this Agreement, if Hospira is unable to supply the Product to Cempra due to a failure of such suppliers to provide such Components to Hospira; provided, however , that Hospira has used all Commercially Reasonable Efforts timely to obtain the Components from approved suppliers in accordance with Cempra’s commercial Product forecasts. Hospira will promptly inform Cempra in writing in the event it anticipates any potential delay in sourcing Components.

5.7 Product Labeling .

(a) Hospira shall label the Product in accordance with the Product Specifications using content provided by Cempra. Cempra shall control the content and type of all labeling and packaging (and any changes or supplements thereto) for the Product and shall have the responsibility, at Cempra’s expense, for (i) ensuring such content is compliant with Regulatory Approval and all Applicable Law and (ii) any changes or supplements to such content, including the expense of securing any approvals required any applicable Regulatory Authority for any such changes or supplements. Hospira shall be responsible for obtaining such labels (and any changes or supplements thereto) and packaging in accordance with content specified by Cempra.

(b) Should Cempra request or be required to make any modifications to Product labeling and/or packaging, it shall submit a written change order to Hospira containing the requested or required modifications, together with any documentation specifying the content of the new labeling and/or packaging, including all necessary photo-ready art (or its substantial equivalent). Hospira shall promptly provide Cempra with a statement of charges for the work to be performed based on its customary per/hour, per/person rates then in effect and its estimated timeline for implementing the changes. Upon written approval by Cempra, which approval shall not be unreasonably withheld, delayed, or conditioned, Hospira will perform all requested or required labeling and packaging work. Cempra shall pay Hospira for the work performed pursuant to the approved charges, in addition to reimbursing Hospira for the cost of any existing labeling and packaging that has become obsolete as a result of such changes.

5.8 Off-Site Waste . If necessary, Hospira shall hire, direct and pay all costs for a waste contractor to remove all Waste from Hospira’s manufacturing facility for Product consistent with the Product’s MSDS. Hospira shall only dispose of Specially Regulated Waste at sites and through waste management vendors that have been approved in writing by Cempra, whose approval shall not be withheld unreasonably. Hospira shall document the destruction of any Specially Regulated Waste in writing and provide copies of such written documentation to an authorized representative of Cempra. Cempra maintains the right, but not the obligation, to witness the actual disposal of Specially Regulated Waste. Cempra shall, upon request by Hospira, provide the MSDS for the API and the MSDS for the Product to Hospira.

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5.9 Delivery . Hospira shall deliver the Product to Cempra, EXW (Incoterms 2010), the Facility. Title to and risk of loss over the Products shall pass to Cempra at the time the Product is placed at the disposal of Cempra’s designated carrier at the loading dock of the Facility. Hospira shall not deliver any Product until both Hospira and Cempra have released such Product pursuant to the Product Specifications and/or the Quality & Technical Agreement. Cempra shall bear all freight, handling, insurance, duties, taxes and shipping expenses. For any shipments outside the United States, Cempra (or its designee, which may include any Affiliate of Cempra or any licensee or sub-licensee of Cempra or any Affiliate thereof) shall be the exporter of record; provided, however , that Hospira shall assist Cempra in the preparation of any required export documentation.

5.10 Price and Payment .

(a) Product Pricing . Hospira shall invoice Cempra for Product it delivers to Cempra at the [*] price(s) as set forth in the pricing tables on Exhibit 5.10 . Each invoice shall reference the price of the Product in effect on the date of Hospira’s invoice. All pricing is firm through December 31, 2013. Beginning January 1, 2014 and on each succeeding January 1 ^st thereafter during the Term, Hospira shall have the right to increase the price(s) of the Product once annually. Price increases shall be effective for deliveries beginning January 1 ^st of each calendar year. Such increases shall not exceed the lesser of (i) the amount of any actual increases in Hospira’s manufacture of Product or (ii) an amount equal to the annual percentage increase for the most recent twelve (12) month period for which figures are [*]. Hospira shall use all Commercially Reasonable Efforts to provide written notice to Cempra of any anticipated price increase no later than October 31 ^st of any calendar year.

(b) Pricing Reconciliation . Within [*] days after the close of any Commercial Year in which Cempra has ordered Product for delivery in such Commercial Year [*] the parties will jointly conduct a reconciliation process under which adjustments to the price previously applied to Hospira’s commercial Product invoicing will be made to determine the credit amount that may be due to Cempra (and which can be applied by Cempra to any then-current or future amounts due Hospira), such that the amount of such credit will equal the difference between the total amount paid (or owed) by Cempra based on the prices invoiced at the time of delivery and the amount that would have been paid or owed Hospira had the price charged for all units delivered in such Commercial Year equaled [*] for each Product and batch size based on the unit volumes thereof ordered for delivery in such Commercial Year. For illustrative purposes, [*]

[*]

(c) Payment . Hospira shall invoice Cempra upon delivery of the Product. Cempra shall make payment net [*] days from the date of receipt of Hospira’s invoice.

[*] Confidential treatment requested; certain information omitted and filed separately with the SEC.

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(d) Taxes; Fees . Cempra shall pay all federal, state, county or municipal sales or use tax, excise, customs charges, duties or similar charge, or any other tax assessment (other than that assessed against income or any similar tax assessed or imposed on Hospira), lawfully assessed or charged on the manufacture or sale of the Product that Hospira manufactures, sell and delivers pursuant to this Agreement. In particular, Cempra shall be responsible for and pay all Prescription Drug User (PDUFA) annual establishment fees imposed on Cempra with respect to the Product. Cempra shall provide Hospira with copies of any tax exemption form(s) or similar documentation if it intends to claim exemption for taxes or similar charges in any state(s) (in the U.S.) or other jurisdictions where the Product is to be shipped.

5.11 Inspection; Nonconforming Product .

(a) Documentation; Inspection . Upon completion of the manufacture of each batch of Product, Hospira will provide Cempra with a Certificate of Analysis confirming that the batch was manufactured in conformity with the Product Specifications, cGMP, and all Applicable Laws. In addition, Hospira will provide Cempra with a copy of the Master Batch Record and all other documents and records as required by the Quality & Technical Agreement for Cempra’s (or its Affiliates’, or Cempra’s or its Affiliates’ licensees’, or sublicensees’) release of the batch and such samples of the batch that Cempra may reasonably request. Cempra shall have a period of thirty (30) days from the date of its receipt of all such documentation (and if, applicable, batch samples) to inspect, and accept or reject, the corresponding batch as conforming or non-conforming with the Product Specifications. If Cempra rejects the batch, it shall promptly so notify Hospira. If, as a result of further review and testing, Hospira determines that the Batch does conform to the Product Specifications, Hospira shall so notify Cempra and the parties shall then submit samples of such batch to a mutually acceptable independent, neutral expert for testing.

(b) Testing . If such independent, neutral expert determines that the batch conforms to the Product Specifications, Cempra shall bear all reasonable, documented expenses of shipping and testing such batch samples and Cempra shall be responsible for Hospira’s invoice price of the batch. If such independent expert confirms that the batch does not meet the Product Specifications, Hospira shall bear all reasonable, documented expenses of shipping and testing the batch samples. Notwithstanding the foregoing, the independent expert may also determine that additional sample testing by an independent laboratory is necessary, in which case the parties shall use good faith efforts to agree on such independent laboratory and the allocation of the costs thereof. Absent error, negligence, and misconduct, the test results of the independent expert (or those of the independent laboratory, if so referred by the expert) shall be binding on the parties.

(c) Replacement; Disposition of Rejected Product . If a batch is rejected due to Hospira’s actual failure to manufacture, store, or handle the Product in conformity with the Product Specifications, cGMP, and all Applicable Laws, then Hospira shall (i) reimburse Cempra for its actual cost/kg of the API used in the manufacture of such Product, subject to the limitations set forth in Section 5.4(d) , and (ii) Hospira will use all Commercially Reasonable Efforts to replace the portion of any batch which does not conform to the Product Specifications, cGMP, and Applicable Law with Products manufactured in accordance with the Specifications, cGMP and Applicable Laws as soon as reasonably practicable, given manufacturing capacities and

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scheduling at the Facility; provided, however , that (A) to the extent necessary to manufacture any such replacement Product, Cempra provides sufficient replacement API to Hospira in accordance with the provisions of Section 5.4(c) , and (B) in the event of any termination or expiry of this Agreement prior to start of manufacturing of any lot or batch of such replacement Product, Cempra shall be entitled, upon Cempra’s election and written request, to receive from Hospira, in lieu of such replacement, a prompt refund of any amount paid with respect to the nonconforming Product. Hospira shall, as directed by Cempra, dispose of any rejected Products at Hospira’s own cost and expense in accordance with the waste disposal provisions of Section 5.8 and Cempra’s MSDS for the Drug and the Product.

(d) Deemed Acceptance; Latent Defects . Any Product that Cempra does not reject pursuant to this Section 5.11 shall be deemed accepted, and all claims with respect to Product not conforming with Product Specifications are waived by Cempra, except as to latent defects which are not reasonably discoverable by the exercise of ordinary diligence by reasonable visible inspection and other testing, if any, as agreed by the parties in the Quality & Technical Agreement to be part of Cempra’s inspection and acceptance process for Product after delivery by Hospira, render the Product not conforming to Product Specifications, cGMP, and Applicable Law, and are primarily caused by negligence, fault, failure to comply with Applicable Law or cGMP, or failure to manufacture Product in accordance with the Product Specifications and Manufacturing Process on the part of Hospira (or any Affiliate thereof or Third Party contractor supplier of Hospira or any Affiliate thereof). The parties shall consult in good faith to attempt to confirm the cause of the latent defect. If the parties do not agree as to whether the Product is non-conforming, they shall submit samples of such Product for independent testing in accordance the provisions of Section 5.11(b) . If it is confirmed that the cause of the latent defect is primarily attributable to Hospira (or any Affiliate thereof or Third Party supplier or contractor of Hospira or any Affiliate thereof) consistent with the foregoing, then Hospira will promptly replace at no cost to Cempra all such non-conforming Products with Products that meet the Product Specifications and are manufactured in accordance with cGMP and Applicable Law, subject to the provisions of Sections 5.4(c) and (d ) ; provided, however , that in the event of any termination or expiry of this Agreement prior to start of manufacturing of any lot or batch of such replacement Product, Cempra shall be entitled, upon Cempra’s election and written request, to receive from Hospira, in lieu of such replacement, a prompt refund of any amount paid with respect to the nonconforming Product. All other relevant provisions of this Section 5.11 shall apply to the testing and release of such replacement Products.

5.12 Miscellaneous .

(a) Rework . Rework that becomes necessary as a result of changes proposed or required by Cempra shall be billed separately at a commercially reasonable fee to be mutually agreed between the parties in writing.

(b) Sub-Lots . Should Cempra desire Hospira to split a manufacturing lot of Product into up to two (2) sub-lots during packaging, Hospira will charge a split fee of [*] Dollars ($[*]) for each sub-lot packaged. Should Cempra request more than two (2) sub-lots per batch, the parties will discuss and agree to more reasonably cost-effective alternatives.

[*] Confidential treatment requested; certain information omitted and filed separately with the SEC.

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(c) Storage Fee . Cempra will use Commercially Reasonable Efforts to take delivery of the Products from the Facility no later than [*] days after full release and clearance of the Products. A storage fee of [*] Dollars ($[*]) [*] shall be due and payable to Hospira if Cempra stores Product at the Facility for more than [*] days after the date of Hospira’s notice to Cempra that such Product is available for delivery; [*].

A RTICLE 6. O RDERS AND F ORECASTS

6.1 Three Year Product Supply Forecast . For capacity planning purposes, no later than [*] months in advance of Cempra’s anticipated date of initial Regulatory Approval or Cempra’s desired commercial Product availability date, Cempra shall provide Hospira with a non-binding, written forecast of its estimated annual requirements of Product for the first three (3) Commercial Years. Thereafter, by [*] of each Commercial Year, Cempra shall update this three (3) year forecast for the three (3) year period commencing on January 1st of the next Commercial Year. Within [*] days after receipt of each such forecast, Hospira shall provide Cempra with (a) a written acceptance of each Commercial Year’s estimate contained within such forecast and accordingly plan to allocate its Facility capacity to manufacture Product for Cempra for each such Commercial Year, or (b) a written rejection of one (1), two (2), or three (3) of the Commercial Year estimates set forth in such forecast and written acceptance of the Commercial Year estimates in such forecast that it did not reject; [*] Any written acceptance of the estimated amount for a particular Commercial Year shall constitute Hospira’s Product supply commitment ( “Product Supply Commitment” ) for such Commercial Year and Hospira shall, notwithstanding anything to the contrary, be obligated to supply Product up to such amount to Cempra, but only to the extent of Cempra’s compliance with the forecasting and ordering provisions set forth in this Agreement. If Cempra delivers, and Hospira accepts, as part of a subsequent three (3) Commercial Years forecast an updated forecast for any Commercial Year covered in a previously-provided forecast hereunder, such subsequent forecast shall constitute Hospira’s Product Supply Commitment for such previously covered Commercial Year and be subject to Hospira’s supply obligations above. If Hospira rejects any Commercial Year forecast as set forth above, (y) Hospira and Cempra shall meet as soon as possible to discuss in good faith the quantities of Product that Hospira could provide during such Commercial Year and the reasons for such rejection, and (z) use Commercially Reasonable, good faith efforts to agree in writing on the amount that shall be Hospira’s Product Supply Commitment for such Commercial Year and be subject to Hospira’s obligation above. To the extent that Cempra’s Product requirements in any Commercial Year exceed Hospira’s Product Supply Commitment therefor, Cempra shall have the right to have such excess requirements manufactured by Cempra, any Affiliate thereof, or any Third Party, without breach of Section 5.1 .

6.2 First Purchase Order . The parties shall cooperate in estimating and scheduling production for Cempra’s first commercial order of Product, which in any case Cempra shall use Commercially Reasonable Efforts to place no later than [*] months in advance of the anticipated date of Regulatory Approval or Cempra’s desired commercial Product availability date.

[*] Confidential treatment requested; certain information omitted and filed separately with the SEC.

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6.3 Rolling Forecast . Concurrent with the placing of its first commercial order of Product, and during each calendar quarter thereafter, Cempra shall provide to Hospira a good faith, estimated rolling forecast of the quantity of Products that Cempra expects to order for the coming [*] [*] period of time (each, a “Rolling Forecast” ). The first [*] [*] of each Rolling Forecast shall be considered a binding commitment upon Cempra to purchase quantities described therein and a binding commitment upon Hospira to produce and deliver such quantities on the delivery dates described therein ( “Firm Order Period” ). The last [*] [*] of each Rolling Forecast shall be non-binding upon the parties. The Project Managers, or their designees, shall review each Rolling Forecast to ensure that each Rolling Forecast delivered by Cempra is consistent with the requirements of this Agreement and, if necessary, to use good faith efforts to adjust such Rolling Forecasts in order to meet Cempra’s ongoing requirements for the Product and to take into account Hospira’s manufacturing schedule at the Facility.

6.4 Purchase Orders . Cempra shall submit to Hospira firm purchase orders for the purchase of Product (each, a “Purchase Order” ) for the quantities of Product Cempra intends to purchase and the required delivery date(s); provided, however , that no delivery date in any Purchase Order is either (a) less than [*] days from [*], or (b) [*] days prior to the requested delivery date. Hospira shall use Commercially Reasonable Efforts to meet the delivery dates set forth in each Purchase Orders. All Purchase Orders shall reference this Agreement and shall be governed exclusively by the terms contained herein. Cempra shall set forth in each Purchase Order (w) the quantity of Product ordered, (x) the amount of API estimated to be required to fill the Purchase Order (based on yield information provided by Hospira), (y) the specified delivery date(s) and delivery instructions, and (z) the price to be paid for the Product.

6.5 Purchase Order Acceptance . Hospira will confirm each Purchase order issued in accordance with Section 6.4 within [*] Days after receipt and shall confirm to Cempra its acceptance of the Purchase Order, delivery date(s), the quantity of Products ordered and the purchase price to be paid by Cempra.

6.6 Excess Quantities . Hospira shall accept all Purchase Orders specifying quantities of Product up to [*] percent ([*]%) in excess of the quantities listed in the corresponding Firm Order Period. Hospira shall not be obligated to supply quantities of Product over and above such [*] percent ([*]%) excess amount ( “Non-Binding Excess” ) but shall use Commercially Reasonable Efforts to manufacture and deliver to Cempra all or part of the Non-Binding Excess within [*] days of issuance of the relevant Purchase Order. In no event, however, shall Hospira be required to supply any Product in excess of its applicable annual Product Supply Commitment except to the extent any relevant Purchase Orders therefor are confirmed by Hospira.

6.7 Format of Forecasts and Purchase Orders . Cempra shall submit each Rolling Forecast and all Purchase Orders electronically in spreadsheet form and will specify the quantities of Products in units and the Hospira product number (list number/inventory number).

6.8 Minimum Purchase Requirement . Cempra agrees to purchase from Hospira in each Commercial Year not less than a stipulated percentage of its annual forecast of the Product in accordance with the provisions of this Section 6.8 ( “Minimum Purchase Requirement” ). The percentage shall be calculated on the number of units of Product estimated to be required for delivery in a particular Commercial Year in the most recent annual forecast that Cempra provides

[*] Confidential treatment requested; certain information omitted and filed separately with the SEC.

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to Hospira pursuant to Section 6.1 . Cempra’s Minimum Purchase requirements are as follows: [*]. In lieu of Cempra taking delivery of all of the Minimum Purchase Requirement, Cempra shall have the option to pay the shortfall of the Minimum Purchase Requirement at the prices set forth in Exhibit 5.10 and waive Hospira’s manufacture and delivery obligations for the Product. In the latter event, Hospira shall invoice Cempra for the amount payable, and Cempra shall pay Hospira such amount within [*] days after receipt of Hospira’s invoice. Notwithstanding anything of the foregoing, all Product paid for by Cempra shall count towards the Minimum Purchase Requirement and, in the event Cempra pays for all Product delivered by Hospira in a particular Commercial Year and the amount set forth above with respect to any waiver of Hospira’s manufacture and delivery obligations with respect to such Commercial Year, Cempra shall be deemed to have satisfied its Minimum Purchase Requirement with respect to such Commercial Year.

6.9 Purchase Order Changes; Cancellations .

(a) Changes . If Cempra requests that changes be made to any of its Purchase Orders within the Firm Order period, Hospira shall use Commercially Reasonable Efforts to accommodate such changes within reasonable manufacturing capabilities and efficiencies. If Hospira can accommodate such changes, but would incur additional expenses in making such changes, Hospira shall advise Cempra of any costs associated therewith. If Cempra agrees in writing to accept these costs, Hospira will make the changes to the Purchase Orders and add the extra costs to the relevant invoice. If Hospira cannot accommodate such change, Cempra shall nonetheless be bound to its original Purchase Orders.

(b) Cancellations . If Cempra cancels any Purchase Order within the Firm Order Period, Hospira shall be relieved of its manufacturing obligations relating to such order; provided, however , that [*]. The foregoing provisions of this Section 6.9(b) shall apply, mutatis mutandis, with respect to any Purchase Order to the extent that Cempra has not supplied sufficient API to allow Hospira to fulfill such Purchase Order or Cempra acts in any other manner that effectively materially interferes with Hospira’s ability to fulfill such Purchase Order.

6.10 Shortage of Supply; Supply Failure . In the event that Hospira is unable to manufacture and supply the Product in accordance with Cempra’s Purchase Orders, Hospira shall notify Cempra promptly in writing.

(a) If such inability is not (i) caused by an event of force majeure, (ii) primarily attributable to Cempra’s acts or omissions or breach of its obligations under this Agreement, or (iii) attributable in whole or in part to Component suppliers’ acts or omissions despite Hospira’s commercially reasonable efforts to obtain the relevant Components from all approved suppliers for such Components, then Hospira shall be solely responsible for undertaking all commercially reasonable measures to minimize any possible shortage of Product to Cempra as a result of its manufacturing issues. If Hospira cannot undertake such measures promptly, then either party may request that the Project Managers convene a meeting to discuss possible remedial action.

[*] Confidential treatment requested; certain information omitted and filed separately with the SEC.

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(b) If such inability is due to Cempra not supplying sufficient Drug to allow Hospira to fulfill any Purchase Order, then with respect to any Product is unable to manufacture and supply to Cempra as a result of such failure by Cempra, Cempra shall remain liable for the full amount of the Purchase Order, regardless of whether Hospira manufactures the Product or whether Cempra takes delivery of the Product.

(c) If due to an inability to supply Product as described in Section 6.10(a) , Hospira delivers less than [*] percent ([*]%) of the number of units of Product ordered by Cempra within [*] days of the delivery date(s) specified in the most recent Rolling Forecast therefor in any [*] [*] periods (“ Supply Failure ”), then [*]; and

(d) Cempra shall have the right to purchase all or a portion of its or its Affiliates requirements of the Product from an alternative supplier, in each case until [*].

(i) If, [*].

(ii) If [*].

A RTICLE 7. Q UALITY

7.1 Quality Control . Hospira shall apply its quality control procedures and in-plant quality control checks on the manufacture of Product for Cempra in (a) accordance with the provisions of the Quality & Technical Agreement, (b) a Commercially Reasonable manner, and (c) in a manner sufficient to ensure compliance with the Product Specifications, cGMP, and all Applicable Laws. In addition, Hospira will test and release Product in accordance with the test methods described in Exhibit 7.1 , cGMP, and all Applicable Laws to ensure that Product conforms to the Product Specifications. The parties may change the test methods from time to time by mutual agreement.

7.2 Quality Agreement . The parties shall use Commercially Reasonable Efforts to negotiate and execute a quality agreement in a form reasonably consistent with the form of Quality & Technical Agreement under negotiation by the Parties as of the Effective Date, and to be attached hereto as Exhibit 7.2 not later than [*] days after the Effective Date.

7.3 Audit Rights .

(a) General Audit. Upon no less than [*] days prior written notice to Hospira, Cempra shall have the right to have representatives or designees (which may include representatives of Cempra’s Affiliates, or Cempra’s or its Affiliates’ licensees or sublicensees) visit the Facility during normal business hours to review Hospira’s manufacturing and development operations, documents, and records relating to the Product and assess its compliance with cGMP, Applicable Laws, the Product Specifications, and quality assurance standards and to discuss any related issues with Hospira’s manufacturing and management personnel. Hospira shall provide Cempra and any such designees with copies of Hospira’s manufacturing records (including the Master Batch Record) and any other relevant documentation relating to the Products or the development or manufacture thereof under this Agreement for the purposes of assuring Product quality and compliance with this Agreement and/or agreed-upon manufacturing procedures. Such general audits shall (i) be limited to [*], (ii) last for no more than [*] days, and (iii) may be conducted not more than [*].

[*] Confidential treatment requested; certain information omitted and filed separately with the SEC.

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(b) For Cause Audits . Cempra shall also have the right to conduct (or to cause Hospira to allow Cempra’s Affiliates or any of Cempra’s Affiliates’ licensees or sublicensees to conduct) “for-cause” audits to address material product or safety concerns related to Product failures related to [*]. Product failures would include issues related to stability out of specification, sterility, labeling or container integrity. Cempra shall notify Hospira in writing in advance of any such audit and thereafter, the parties shall mutually agree on the timing of the audit, such agreement not to be unreasonably withheld by either party. Each for-cause audit shall be limited to [*], for no more than [*] days, except to the extent that the parties mutually agree, such agreement not to be unreasonably withheld by either party, that a longer for cause audit period is required.

(c) Regulatory Authority Inspections . Hospira also agrees to allow the FDA, Health Canada and the EMA to conduct any pre-Regulatory Approval or “for cause” inspection of the Facility related to the manufacture of the Product which the FDA, Health Canada and the EMA requests or requires and Hospira agrees to reasonably cooperate with the FDA, Health Canada and the EMA in connection with such inspection. Hospira will provide Cempra with notice of any such inspection as soon as practicable. In the event that a Regulatory Authority other than the FDA, Health Canada and the EMA, requests or requires an audit or inspection of the Facility in connection with the manufacture of the Product, Hospira shall allow (and agrees to reasonably cooperate with respect to) such audit or inspection and be entitled to charge a fee of [*] Dollars ($[*]) per each such Regulatory Authority inspection, with the exception of any “for cause” Regulatory Authority inspection (“for cause” being defined in a manner materially similar to that set forth in Section 7.3(b) ).

(d) Confidential Information in Audits . Audits pursuant to the foregoing may involve the transfer of Hospira’s Confidential Information to Cempra (including representatives of Cempra’s Affiliates, or Cempra’s or its Affiliates’ licensees or sublicensees), and any such Confidential Information shall be subject to the terms of Article 11 hereof. Cempra shall ensure that any of the foregoing persons not in privity to or with this Agreement shall have signed an agreement containing terms and conditions regarding the non-disclosure and non-use of Confidential Information that are not materially less restrictive as those under this Agreement. The results of such audits and inspections shall, subject to the exceptions set forth in Section 1.15 , be considered Confidential Information and shall not be disclosed to Third Parties, including the FDA, Health Canada and the EMA, unless required by law or as otherwise permitted under Article 11 , and only then upon prior written notice to Hospira.

(e) [*]

7.4 Change in Product Specifications; Manufacturing Process. Each of Cempra and Hospira agrees that it will not change the Product Specifications or any aspect of the Manufacturing Process (including changes to the Components, equipment, processes or procedures used to manufacture Product) without the prior written approval of the other party, which approval shall not be unreasonably withheld, delayed, or conditioned. Upon agreement, the parties shall implement all such changes in accordance with the provisions of Section 5.2 and the change control provisions of the Quality & Technical Agreement.

[*] Confidential treatment requested; certain information omitted and filed separately with the SEC.

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7.5 Complaints and Adverse Reactions . Each party shall promptly advise the other in writing of any complaints, notices of Adverse Drug Experience(s) or event reports, safety issues or toxicity issues relating to the Products of which it becomes aware, and which may be the result of, or have an effect on, the Product manufacturing operations performed by Hospira. Cempra shall be responsible for all reporting of such information to Regulatory Authorities. Hospira shall promptly evaluate any complaint or notice of Adverse Drug Experience(s) and reasonably assist Cempra in responding to the same. To such end, Hospira shall promptly comply with Cempra’s reasonable requests for information, documentation and other records in its possession that relate to Hospira’s manufacture, handling, or storage of the Product that are reasonably necessary to enable Cempra, and any Third Party designated by Cempra, to evaluate and ensure compliance with any Adverse Drug Experience(s) reporting policies and procedures and compliance with any Applicable Laws.

7.6 Record Keeping . Hospira shall supply Cempra with such records documenting the development work as foreseen in the Project Statement of Work or as are otherwise requested by Cempra. Hospira shall retain all records documenting the development work and all records relating to the manufacture of each batch of Products for not less than five (5) years or for such longer period as required by Applicable Law. Thereafter, Hospira shall not destroy such records without giving Cempra prior written notice of such proposed destruction and the reasonable opportunity further to store such records or to have such records shipped to Cempra, at Cempra’s reasonable, documented expense.

7.7 Failed Batch . In the event that any batch of the Product fails the testing requirements set forth in Section 5.11 as a result of non-compliance with cGMP, Applicable Law, or the Product Specifications, or otherwise fails to meet the Product Specifications, Hospira shall notify promptly Cempra in writing (and in any event within [*] Days of discovery of any such failure), investigate such failure, and cooperate fully with Cempra in attempting to determine the cause of the failure. Hospira shall (a) keep Cempra promptly informed in writing of the status of any such investigation, (b) [*], (c) promptly provide Cempra with copies of all batch records associated with such batch failure, to the extent reasonably requested by Cempra in writing, and (d) upon completion of the investigation, shall provide Cempra with a final written report describing the cause of the failure and summarizing the results of the investigation.

7.8 Product Recalls .

(a) In the event (i) any Regulatory Authority or other national government authority issues a request, directive or order that the Product be recalled, withdrawn, or the subject of a field correction (a “Recall” ); (ii) a court of competent jurisdiction orders a Recall of Product; or (iii) Cempra or Hospira reasonably determines that Product should be Recalled, the parties shall take all reasonably appropriate corrective actions, and shall cooperate in any governmental investigations surrounding the Recall.

[*] Confidential treatment requested; certain information omitted and filed separately with the SEC.

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(b) In the event that a Recall of Product results from a breach of Hospira’s express warranties under Sections 8.2(a) and 8.2(b) , Hospira shall be responsible for, as elected by Cempra in writing (i) promptly replacing the quantity of Products that were Recalled at no cost to Cempra, or (ii) issuing a credit to Cempra in the amount paid by Cempra with respect to such Product (which credit shall, to the extent not applied against amounts due Hospira hereunder, be promptly refunded to Cempra following termination or expiry of this Agreement). If Cempra elects Product replacement pursuant to the foregoing, Hospira shall use all Commercially Reasonable Efforts to replace such Product as soon as reasonably practicable. In addition, Hospira agrees that it shall be responsible for all reasonable, documented costs and expenses incurred with

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respect to any Recall, [*], but shall not be responsible for any lost profits, nor the cost to replace API to the extent such cost would be in excess of the limitations stated in Section 5.4(d) . In the event that the Recall does not result from the breach of Hospira’s express warranties or other obligations under this Agreement, Cempra shall be responsible for its reasonable, documented costs and expenses of the Recall.

A RTICLE 8. W ARRANTIES ; C OVENANTS AND I NDEMNIFICATION

8.1 Cempra’s Express Warranties and Covenants . Cempra represents, warrants and covenants to Hospira that:

(a) the API delivered to Hospira pursuant to this Agreement shall, at the time of delivery, not be adulterated or misbranded within the meaning of the Act or within the meaning of any other Applicable Law in which the definitions of adulteration and misbranding are substantially the same as those contained in the Act, as the Act and such laws are constituted and effective at the time of delivery, and will not be an article which, under the provisions of Sections 404 and 505 of the Act, may not be introduced into interstate commerce;

(b) the API supplied to Hospira hereunder shall have been manufactured in accordance with all applicable cGMP (including ICH Q7A) and meets the API Specifications set forth on Exhibit 1.3 ;

(c) all specifications for the Product, including the API Specifications and Product Specifications, that Cempra provides to Hospira (or that are agreed upon by the parties hereunder) shall conform to the relevant portion(s) of any application for Regulatory Approval that Cempra files with the relevant Regulatory Authorities;

(d) as of the Effective Date, to Cempra’s knowledge, having conducted Commercially Reasonable inquiries and searches, the use by Hospira of the Cempra Intellectual Property and the Manufacturing Process in accordance with the Product Specifications hereunder, without taking into consideration any technology or intellectual property rights not related to the Product that Hospira uses in its business generally or independently determines or suggests to apply to the development or manufacture of Product hereunder, does not infringe any patent rights of a Third Party in the US or European Union

(e) as of the Effective Date, to Cempra’s knowledge, the use by Hospira of the Cempra Intellectual Property and the Manufacturing Process in accordance with the Product Specifications hereunder, without taking into consideration any technology or intellectual property rights not related to the Product that Hospira uses in its business generally or independently determines or suggests to apply to the development or manufacture of Product hereunder, will not constitute the misappropriation of any Third Party’s trade secrets, or other similar intellectual property rights;

[*] Confidential treatment requested; certain information omitted and filed separately with the SEC.

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(f) Cempra has the right to have Products made on its behalf by Hospira as an authorized manufacturer pursuant to this Agreement under Cempra Intellectual Property, including any Cempra Intellectual Property controlled by Cempra by license from Third Parties;

(g) to Cempra’s knowledge, without taking into consideration any technology or intellectual property rights not related to the Product that Hospira uses in its business generally or independently determines or suggests to apply to the development or manufacture of Product hereunder, the practice of the Cempra Intellectual Property by Hospira as contemplated by this Agreement will not result in a material violation or breach of any agreement, contract, commitment or obligation to which Cempra or any Affiliate thereof is a party or by which Cempra or any Affiliate thereof is bound; and

(h) it will not sell Product into any regulatory jurisdiction unless and until it receives any necessary Regulatory Authority approvals therefor.

(i) CEMPRA MAKES NO WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO PRODUCT, EXCEPT THOSE EXPLICITLY SET FORTH IN THIS AGREEMENT. CEMPRA HEREBY DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR API OR A PARTICULAR PURPOSE

8.2 Hospira’s Express Warranties and Covenants . Hospira represents and warrants to Cempra that:

(a) all Product that Hospira delivers to Cempra pursuant to this Agreement shall, at the time of delivery, not be adulterated or misbranded within the meaning of the Act or within the meaning of all Applicable Law in which the definitions of adulteration and misbranding are substantially the same as those contained in the Act, as the Act and such laws are constituted and effective at the time of delivery and will not be an article which may not under the provisions of Sections 404 and 505 of the Act be introduced into interstate commerce;

(b) all Product Hospira delivers to Cempra pursuant to this Agreement shall, at the time of delivery, be free from defects in material and workmanship and shall be manufactured (i) in accordance and conformity with the Product Specifications and (ii) in compliance with cGMP and all Applicable Laws, including those relating to the environment, food or drugs and occupational health and safety, including those enforced or promulgated by the FDA (including compliance with cGMP);

(c) in the performance of Hospira’s obligations under the Statement of Work and this Agreement, Hospira will not knowingly incorporate into its manufacturing process or Product, practice, or cause Cempra or any other recipient of Products to practice (or sell, offer for sale, or import) any technology claimed in any patents or constituting trade secrets of a Third Party for which it does not have a license that permits Hospira to (i) do so and (ii) grant to Cempra the licenses and other rights otherwise granted to Cempra hereunder, provided, however, that the foregoing shall not apply to any claim that any processes specifically requested by Cempra (as part of the Product Specifications or otherwise), or that the composition of the Drug, so infringe any Third Party patents or misappropriate any third party trade secrets;

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(d) Hospira and its Affiliates require, and have executed, employment or similar agreements of all of their employees, officers, directors, and other representatives that contain enforceable terms sufficient to enable Hospira to assign and license to Cempra the rights and assets purported to be assigned and licensed to Cempra under this Agreement, including such license and assignments set forth in Article 9 ;

(e) [*]

(f) The foregoing warranties shall not extend to any Product non-conformity or defect to the extent caused by API supplied by Cempra to Hospira. Subject to Hospira’s indemnity obligations in Section 8.3 , the replacement provisions of Sections 5.4(c) , 5.11(c) and 7.8(b) shall be Cempra’s sole and exclusive remedies for nonconforming or defective Products; and

(g) HOSPIRA MAKES NO WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO PRODUCT, EXCEPT THOSE EXPLICITLY SET FORTH IN THIS AGREEMENT. HOSPIRA HEREBY DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.

8.3 Mutual General Warranties . Each party hereby represents and warrants that:

(a) it is duly organized and validly existing under the laws of the country of its organization or state of incorporation, as applicable, and has full corporate power and authority to enter into this Agreement and to carry out the provisions hereof;

(b) its performance of its obligations under this Agreement will not result in a material violation or breach of any agreement, contract, commitment or obligation to which such party or any Affiliate thereof is a party or by which it or any Affiliate thereof is bound and will not conflict with or constitute a default under its corporate charter or bylaws (or those of any Affiliate thereof);

(c) neither it nor any of its officers, directors or employees has been debarred or convicted of a crime which could lead to debarment under 21 U.S.C. Section 335a and 335b or any similar status with respect to any Regulatory Authority outside the United States, and it will not in the performance of its obligations under this Agreement use the services of any person debarred or suspended under 21 U.S.C. §335(a) or (b) or subject to any similar status with respect to any Regulatory Authority outside the United States;

(d) it has the full right, power and authority to grant any of the licenses granted by it hereunder;

[*] Confidential treatment requested; certain information omitted and filed separately with the SEC.

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(e) it has the full right, power and authority to assign Intellectual Property pursuant to Article 9 of this Agreement, and, in the case of Hospira, that its employees shall be the sole inventors and creators of such Intellectual Property (except to the extent sharing ownership with employees or contractors of Cempra or any Affiliate thereof, in which case, such employees of Hospira shall be joint inventors therewith); and

(f) it will provide the other party with prompt written notice of any facts or circumstances (whether occurring prior to or after the date hereof) which cause or may cause any of the representations and warranties contained in this Article 8 not to be true, accurate or complete as of the date hereof or as of any date during the Term of this Agreement.

8.4 Indemnification by Hospira . Hospira shall indemnify, defend and hold Cempra, its Affiliates, and their respective, officers, directors, agents, servants and employees ( “Cempra Indemnitee” ) harmless against all claims, losses, actions, damages (including injuries to, or death of any person, or injury to, or destruction of, property), liabilities and expenses (including reasonable attorneys fees) and costs of investigating and defending against lawsuits, complaints, actions or other pending or threatened litigation ( “Losses” ) to which any Cempra Indemnitee may become subject as a result of any claim, demand, action or other proceeding by any Third Party (“ Claim ”) against a Cempra Indemnitee to the extent arising out of or attributable to (a) personal injury, including death, caused by any negligent or wrongful act or omission, breach of this Agreement, or failure to comply with Product Specifications, cGMP, or Applicable Law on the part, in each case, of Hospira, its Affiliates, or any of its or its Affiliates’ employees, agents, contractors, or representatives or (b) any alleged or actual infringement or misappropriation of any Third Party Intellectual Property arising from the performance of the Project or manufacture of Product hereunder by Hospira, but only to the extent such Claims are not based on (i) the composition of matter of the Drug or, to the extent reflecting the portion of the Product Specifications provided by Cempra (and not provided or proposed by Hospira), Product, (ii) the Manufacturing Process, or (iii) any process specifically proposed, or described in the portion of the Product Specifications provided by Cempra; except, in each case, to the extent such Claims or Losses result from the negligence or willful misconduct of any Cempra Indemnitee or the breach by Cempra of any express warranty or representation made by Cempra in this Agreement.

8.5 Indemnification by Cempra . Cempra shall indemnify, defend and hold Hospira, its Affiliates, and their respective officers, directors, agents, servants and employees ( “Hospira Indemnitee” ) harmless against all Losses to which any Hospira Indemnitee may become subject as a result of any Claim against a Hospira Indemnitee to the extent arising out of or attributable to (a) any infringement of any Third Party Intellectual Property arising from the performance of the Project or manufacture of the Product hereunder by or on behalf of Hospira to the extent such Claims are based on (i) the composition of matter of the Drug or, to the extent reflecting the portion of the Product Specifications provided by Cempra (and not provided or proposed by Hospira), any formulations thereof or Product, (ii) the Manufacturing Process (or intermediates arising as a result thereof), or (iii) any process specifically proposed, or described in the portion of the Product Specifications provided, by Cempra; (b) personal injury, including death, caused by (i) the use of or lack of safety or efficacy of any Product used or sold by or on behalf of Cempra, its Affiliates, or any licensees or sublicensees of any of the foregoing or (ii) any negligent or wrongful

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act or omission on the part of Cempra, its employees, agents or representatives; or (c) Cempra’s breach of this Agreement or failure to comply with Applicable Laws with respect to, in each case, its activities with respect to the Product; except, in each case, to the extent such Claims or Losses result from the negligence or willful misconduct of any Hospira Indemnitee or the breach by Hospira of any express warranty or representation made by Hospira in this Agreement.

8.6 Conditions of Indemnification . Each party’s agreement to indemnify, defend, and hold harmless under Section 8.4 or 8.5 , as applicable, is conditioned upon the indemnified party (a) providing written notice to the indemnifying party of any claim, demand or action arising out of the allegedly or actually indemnified matter as soon as reasonably possible, and in any event no later than within thirty (30) days after the indemnified party has actual knowledge of the applicable Claim, (b) permitting the indemnifying party to, if and as elected by the indemnifying party, assume control over the investigation of, preparation and defense against, and settlement or voluntary disposition of any Claim subject to indemnification, (c) assisting the indemnifying party, as reasonably requested by the indemnifying party and at the indemnifying party’s reasonable expense, in the investigation, preparation, defense, and settlement or voluntary disposition of any such Claim, (d) not compromising, settling, or entering into any voluntary disposition of any such claim, demand or action without the indemnifying party’s prior written consent, which consent shall not be unreasonably withheld, and (e) furnishing promptly to the indemnifying party copies of all notices and documents (including court papers) received by any indemnified party in connection with the Claim for which indemnification is being sought; provided, however , that, if the party entitled to indemnification hereunder fails to comply with any of the foregoing conditions, the indemnifying party will only be relieved of its indemnification obligation under this Agreement to the extent materially prejudiced by such failure. In no event may the indemnifying party compromise, settle, or enter into any voluntary disposition of any claim, demand or action subject to indemnification under this Article 8 in any manner that admits material fault or wrongdoing on the part of the indemnified party or incurs non-indemnified liability on the part of the indemnified party without the prior written consent of the indemnified party. In the event the indemnifying party assumes control over the investigation of, preparation and defense against, and settlement or voluntary disposition of any Claim, the indemnified party shall have the right, but not the obligation, to be represented by counsel of its own selection and at its own expense with respect thereto.

8.7 Limitations on Damages .

EXCEPT WITH RESPECT TO EITHER PARTY’S INDEMNITY OBLIGATIONS OR BREACHES OF SECTION 11, NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR INDIRECT, INCIDENTAL, SPECIAL, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES OR LOST PROFITS RESULTING FROM ANY BREACH OF THIS AGREEMENT, EVEN IF THE PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

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A RTICLE 9. I NTELLECTUAL P ROPERTY R IGHTS

9.1 Hospira’s Proprietary Rights . Except as otherwise provided in this Article 9 , Hospira has granted no license, express or implied, under this Agreement to Cempra to use Hospira Intellectual Property for the development, manufacture and supply of the Product.

9.2 Project and Other Intellectual Property Rights .

(a) All Intellectual Property developed by Hospira, solely or jointly with any Affiliate of Hospira or Third Party, pursuant to or in the performance of Hospira’s obligations under this Agreement, or as a result of Hospira’s knowledge or use of, or access to, the Drug or Confidential Information provided by Cempra, and which relates to the development and manufacture of the Product, including the processes therefor ( “Hospira Project IP” ), shall, as between the parties and their Affiliates, be the sole property of Hospira, and Hospira hereby grants to Cempra a non-exclusive, perpetual, irrevocable, fully paid-up, royalty-free, transferable license, with rights to sub-license, under such Hospira Project IP solely for the purpose of making, having made, using, offering for sale, selling, and/or importing the Product or any materially similar product incorporating the Drug as its sole API.

(b) Notwithstanding the foregoing, all Intellectual Property developed by Hospira, solely or jointly with Cempra, any Affiliate of Hospira or Cempra, or any Third Party, pursuant to or in the performance of Hospira’s obligations under this Agreement, or as a result of Hospira’s knowledge or use of, or access to, the Drug or Confidential Information provided by Cempra, and which:

(i) relates to, or constitutes an improvement or enhancement of the Drug (or any analog(s) or derivative(s) thereof) (or the manufacture or use of any of the foregoing) or the Product (or the use thereof), or

(ii) relates to the utility of the Drug or Drug Product:

(all of the foregoing, “Cempra Improvements” ) shall be the sole property of Cempra. Hospira shall, and does hereby, assign to Cempra, free and clear of all liens, claims, and encumbrances, all right, title, and interest in such Cempra Improvements (and all intellectual property rights related thereto) without any additional compensation to Hospira. Cempra shall be entitled to apply for patent protection on any and all Cempra Improvements at Cempra’s expense and risk. Hospira agrees to execute such assignments and other documents, to cause its employees, consultants and subcontractors to execute such assignments and other documents, and to take such other actions as may be reasonably requested by Cempra from time to time in order to effect to the ownership provisions of this Section 9.2 .

9.3 License to Hospira Intellectual Property . Hospira hereby grants to Cempra a fully paid, royalty-free, perpetual, irrevocable, worldwide, non-exclusive license, with the right to grant and authorize sublicenses, and which is transferable in conjunction with the assignment of this Agreement as permitted under Section 12.5 , under any and all Hospira Intellectual Property and

Page 30

any Hospira Project IP that Hospira incorporates into or utilizes in the Manufacturing Process or that is otherwise necessary for the practice of the Manufacturing Process or the manufacture, use, sale, or import of Product, for the sole and limited purpose of making, having made, using, offering for sale, selling, and/or importing the Product or any materially similar product incorporating the Drug as its sole API.

9.4 Inventorship; Reporting . Inventorship with respect to any Hospira Project IP or Cempra Improvements shall be determined in accordance with United States patent law. Hospira shall promptly notify Cempra in writing of all Hospira Project IP and Cempra Improvements in writing.

9.5 Ownership of Product Data . All Product Data will be the sole property of Cempra, and Hospira shall, and does hereby, assign all right, title, and interest therein (and in all intellectual property rights related thereto) to Cempra, free and clear of all liens, claims, and encumbrances. Hospira agrees to execute such assignments and other documents and to take such other actions as may be reasonably requested by Cempra from time to time in order to effect to the ownership provisions of this Section 9.5. Upon Cempra’s request, Hospira will promptly provide Cempra with complete and accurate copies of such Product Data. Hospira will not transfer, deliver or otherwise provide any such Product Data to any party other than Cempra, without the prior written approval of Cempra, unless required by Applicable Law in accordance with Article 11 . While in the possession or control of Hospira, the Product Data will be made available for inspection, examination and copying by or on behalf of Cempra, at Cempra’s sole cost and expense, during normal business hours and only upon reasonable prior written request to Hospira. All original forms of Product Data relating to the manufacture of the Product hereunder, and any other records that are required to be maintained in compliance with cGMP or Applicable Law, will be retained and archived by Hospira in accordance with cGMP and Applicable Law, but in no case for less than a period of five (5) years following completion of the Project. After such five (5) year period, Hospira will not destroy any Product Data without first giving Cempra written notice and the opportunity to further store the Product Data at Cempra’s expense.

A RTICLE 10. T ERM AND T ERMINATION

10.1 Term . This Agreement shall commence on the Effective Date and, unless earlier terminated in accordance with the provisions of this Article 10 , shall remain in effect until the end of the third (3 ^rd ) Commercial Year ( “Initial Term” ). Thereafter, this Agreement shall automatically renew for an indefinite period ( “Renewal Term” ). Notwithstanding the foregoing, either party may terminate this Agreement at will by giving no less than twenty-four (24) months’ prior written notice of termination; provided, however , that notice of at will termination shall not be given until the expiry of the first (1 ^st ) Commercial Year.

Page 31

10.2 Termination of the Project .

(a) Either party wishing to terminate the Project prior to the earlier of (i) its completion or (ii) submission of an application for Regulatory Approval in the Territory shall request in writing a pre-termination consultation with the other party to review potential concerns and to make Commercially Reasonable Efforts to continue with this Agreement and the performance of the Project hereunder. Upon the earlier of [*] days following said request or [*] days following such meeting, either party may terminate the Project and/or the Agreement, should the party reasonably determine in good faith that the development of the Project is not clinically, commercially or technically feasible using Commercially Reasonable Efforts. Termination under this Section 10.2(a) shall become effective [*] days after receipt of written notice from the party electing termination; provided, however , that such notice must be provided prior to the earlier of (i) the completion of the Project or (ii) submission of an application for Regulatory Approval in the Territory.

(b) If the Project and/or this Agreement is terminated in accordance with this Section 10.2 , Hospira shall advise Cempra of Hospira’s actual reasonable, documented development costs on the Project incurred prior to such termination. Cempra will pay to Hospira that portion of the Development Fee that represents (a) Hospira’s actual reasonable, documented costs of the development work Hospira has completed and for which payment has not yet been received; and (b) on a pro rata basis, Hospira’s actual reasonable, documented costs of all development work that Hospira has undertaken but not yet completed as of the date of notice of termination. In addition, Cempra shall reimburse Hospira for all of its reasonable, documented out-of-pocket costs directly resulting from any non-cancelable commitments for raw materials, Components and services that Hospira has undertaken as part the Project in accordance with the Statement of Work and cannot reasonably be applied to other projects of, or other products being manufactured by, Hospira.

10.3 Failure to Obtain Regulatory Approval . Either party may terminate this Agreement by giving to the other party [*] months prior written notice if the Product has not received Regulatory Approval from at least one of the FDA, Health Canada, the EMA, or the Regulatory Authority of any single country of the EU by [*].

10.4 General Termination Rights . Either party may terminate this Agreement as follows:

(a) immediately by providing written notice to the other party: (i) if proceedings in voluntary or involuntary bankruptcy are initiated by, on behalf of or against the other party (and, in the case of any such involuntary proceeding, not dismissed within ninety (90) days); or (ii) if the other party is adjudicated bankrupt, files a petition under applicable insolvency laws, is dissolved or has a receiver appointed for substantially all of its property; or

(b) by giving to the other party [*] days’ prior written notice upon the breach of any warranty or any other material provision of this Agreement by the other party if the breach is not cured within [*] days after written notice thereof to the party in default; or

(c) Upon [*] days’ written notice to the other party should the other party continue to be unable to perform its obligations under this Agreement for a period in excess of [*] days by reason of force majeure , in accordance with Section 12.1(a) .

[*] Confidential treatment requested; certain information omitted and filed separately with the SEC.

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10.5 Cempra’s Failure to Purchase Minimums . If, in any [*] consecutive Commercial Years after the first Commercial Year, Cempra waives Hospira’s manufacturing and delivery obligations pursuant to Section 6.8 , Hospira may terminate this Agreement upon [*] days prior written notice to Cempra given [*], in which Cempra waived Hospira’s manufacturing and delivery obligations pursuant to Section 6.8 .

10.6 Cempra Termination Rights . In the event Cempra or any of its Affiliates licenses or grants a Third Party exclusive rights to sell, offer for sale, or otherwise commercialize one or more Products in one or more countries, then Cempra shall be entitled to terminate this Agreement with respect to such Product(s) and country(ies) subject to such license or grant upon [*] written notice to Hospira; provided, however , that Cempra may not provide such written notice prior to the end of the first (1 ^st ) Commercial Year.

10.7 Accrued Payment Obligations . Upon termination pursuant to this Article 10 , Cempra shall reimburse Hospira for Hospira’s reasonable, documented, direct cost of all Components purchased and on hand or on order, if such Components were ordered by Hospira based on Firm Purchase Orders, and such supplies of Components cannot be reasonably used by Hospira for other purposes. Hospira shall invoice Cempra for all amounts due hereunder. Payment shall be made pursuant to Section 5.10(c) .

10.8 Return of Inventory and Dedicated Equipment . In the event of expiry or earlier termination of this Agreement, Hospira shall return to Cempra, at Cempra’s option and request, all items of Dedicated Equipment (should it exist), and remaining inventory of API and Product at Cempra’s expense (which shall be reasonable and documented), unless termination shall have been as a result of a breach of this Agreement by Hospira, in which case such Dedicated Equipment and inventory of API and Product shall be returned at Hospira’s expense.

10.9 Return of Confidential Information . Upon expiry or termination of this Agreement for any reason, each party shall immediately return to the other all of the other party’s Confidential Information, in any form or medium disclosed by the disclosing party (or upon a party’s instructions in writing, destroy the same and certify its destruction); provided, however , that each party shall be allowed to retain one (1) copy of the other’s Confidential Information to ensure continuing compliance with Article 11 .

10.10 Survival . The expiry or earlier termination of this Agreement shall not relieve either party of any obligations that it may have incurred prior to such expiry or earlier termination (including, with respect to any Purchase Orders placed by Cempra and confirmed or accepted by Hospira before such expiry or termination, satisfaction of such Purchase Orders in accordance with, and subject to, the terms of this Agreement), and all covenants and agreements contained in this Agreement, which by their terms or context are reasonably intended to survive, including Article 1 and Sections 3.2 , 4.2 , 5.4(c) , 5.4(d) , 5.8 , 5.9 , 5.10 , 5.11 , 5.12 , 7.1 , 7.3 , 7.5 , 7.6 , 7.7 , 7.8 , 8.1(a) , 8.1(b) , 8.1(c) , 8.2 , 8.3 , 8.4 , 8.5 , 8.6 , 8.7 , 9 ( provided that the license granted in Section 9.3 with respect to Hospira Intellectual Property other than Hospira Project IP will only survive termination or expiry of this Agreement with respect to Product actually supplied by Hospira hereunder), 10 , 11 , 12.1(c) , 12.2 , 12.3 , 12.4 , 12.5 , 12.6 , 12.7 , 12.8 , 12.9 (to the extent provided therein), 12.10 , 12.11 , and 12.12 , will continue in full force and effect following such termination or expiry unless a different time period is indicated in this Agreement.

[*] Confidential treatment requested; certain information omitted and filed separately with the SEC.

Page 33

A RTICLE 11. C ONFIDENTIAL I NFORMATION

11.1 Nondisclosure . It is contemplated that in the course of the performance of this Agreement each party may, from time to time, disclose Confidential Information to the other. Hospira agrees that, except as expressly provided herein, it shall not disclose Confidential Information received from Cempra (or otherwise deemed Cempra’s Confidential Information under Section 1.15 ), and shall not use Confidential Information disclosed to it by Cempra (or otherwise deemed Cempra’s Confidential Information under Section 1.15 ,) for any purpose other than to fulfill Hospira’s obligations hereunder. Cempra agrees that, except as expressly provided herein, it shall not disclose Hospira’s Confidential Information, and shall not use Hospira’s Confidential Information, for any purpose other than to fulfill Cempra’s obligations or exercise Cempra’s rights hereunder. Each party shall use reasonable and customary precautions to safeguard the other party’s Confidential Information, including ensuring that it will limit the permitted disclosures of the other’s Confidential Information only to those persons who have a “need to know” such Confidential Information and ensuring that all persons (including such party’s employees, consultants and agents) who are given access to such Confidential Information are informed of the confidential and proprietary nature of such Confidential Information and have contractual or professional confidentiality and non-use obligations that are at least as restrictive as those contained in this Agreement.

11.2 Exceptions to Duty of Nondisclosure .

(a) General Exceptions . Notwithstanding the above, nothing contained in this Agreement shall preclude Cempra from utilizing or disclosing Confidential Information as may be necessary in prosecuting the patent rights of Cempra (including those owned by Cempra pursuant to Article 9 ), obtaining or maintaining Regulatory Approval(s), making, using, or selling Products, exercising those rights granted in Sections 9.2 and 9.3, or complying with Applicable Laws or court orders; provided, however , that the party required to disclose such information uses reasonable efforts to seek confidential treatment of such information. The obligations of the parties relating to Confidential Information shall expire seven (7) years after the expiry or termination of this Agreement.

(b) Public Announcements . Neither party shall make any public announcement concerning the transactions contemplated herein, nor make any public statement which includes the name of the other party or any of its Affiliates, or otherwise use the name of the other party or any of its Affiliates in any public statement or document, except as may be required by law, rule, regulation, or judicial order, without the written consent of the other party, which consent shall not be unreasonably withheld. Notwithstanding the foregoing, Cempra may identify the other party to the this Agreement and disclose the terms of this Agreement as reasonably necessary or useful in connection with the development, commercialization and/or divestiture or other disposition of the Product, subject to reasonable conditions of confidentiality, and either party may disclose the terms of this Agreement subject to the following conditions:

Page 34

(i) to the extent such disclosure is required to comply with applicable laws, rules, or regulations, including the rules and regulations promulgated by the United States Securities and Exchange Commission; provided, further, that prior to making any such disclosure, the party intending to so disclose the terms of this Agreement shall, to the extent reasonably practicable, provide the non-disclosing party with reasonable prior written notice of the proposed disclosure and an opportunity to review and comment on the intended disclosure which is reasonable under the circumstances; or

(ii) to the extent such disclosure is reasonably necessary in the following instances: to its Affiliates, and to prospective and actual acquirers, merger or acquisition targets, licensees, sub-licensees, licensors, other strategic partners, employees, consultants, agents, accountants, lawyers, advisors, investors, lenders, and investment bankers, on a need to know basis, each of whom prior to disclosure must be bound by written or professional ethical obligations of confidentiality and non-use substantially as restrictive in scope as those set forth in this Article 11 and that are of materially similar or greater duration in view of the circumstances of the disclosure.

(c) Subject to any legal or judicial disclosure obligation, any such public announcement proposed by a party that names the other party shall, to the extent reasonably practicable, first be provided in draft to the other party.

11.3 Injunctive Relief . The parties acknowledge that either party’s breach of this Article 11 may cause the other party irreparable injury for which it would not have an adequate remedy at law. In the event of a breach, the non-breaching party may be entitled to injunctive relief in addition to any other remedies it may have at law or in equity.

A RTICLE 12. M ISCELLANEOUS

12.1 Force Majeure; Failure of Suppliers; Responsibility for Affiliates .

(a) Excusable Delay . Neither party shall be considered to be in breach of this Agreement if a delay in the performance of any of its duties or obligations hereunder (except the payment of money) has been caused by or is the result of an act of God, acts of a public enemy, insurrections, riots, embargoes, labor disputes, including strikes, lockouts, job actions, boycotts, fires, explosions, floods, shortages of material or energy, or other unforeseeable causes beyond the reasonable control and without the fault or negligence of the party so affected (each, an event of “force majeure” ). The performance of the affected party shall be extended for a period equal to the period of such delay; provided, however , that the affected party shall give prompt written notice to the other party of such cause, and shall use Commercially Reasonable Efforts to relieve the effect of such force majeure and resume compliance with this Agreement as soon as reasonably possible. Should the event of force majeure continue for a period longer than [*] days, the party not affected thereby may terminate this Agreement in accordance with Section 10.4(c) .

[*] Confidential treatment requested; certain information omitted and filed separately with the SEC.

Page 35

(b) Transfer of Production . If Hospira becomes subject to an event of force majeure which interferes with production of Product at the Facility, the parties shall use good faith efforts to mutually agree in writing on implementation of an agreed-upon action plan to transfer production of Product to another Hospira plant. The parties shall, after the execution of this Agreement and at the written request of either party, meet to discuss and define such an action plan.

(c) Responsibility for Affiliates. The acts and omissions of Cempra’s and Hospira’s respective Affiliates undertaking any obligations or responsibilities under this Agreement shall be deemed the acts and omissions of Cempra and Hospira, respectively, and Cempra and Hospira, respectively, shall be liable and responsible therefor (including with respect to any breach of this Agreement) as if such acts or omissions were those of Cempra and Hospira, respectively, hereunder.

12.2 Notices . All notices hereunder shall be delivered as follows: (a) personally; (b) by facsimile and confirmed by first class mail (postage prepaid); (c) by registered or certified mail (postage prepaid); or (d) by overnight courier service, to the following addresses of the respective parties:


If to Cempra: Cempra Pharmaceuticals, Inc. 6340 Quadrangle Drive, Suite 100 Chapel Hill, NC 27517 USA Attention:Prabhavathi Fernandes, Ph.D., Chief Executive Officer Facsimile 919-481-1063		With a copy (that will not serve as notice) to: Wyrick Robbins Yates & Ponton LLP 4101 Lake Boone Trail, Suite 300 Raleigh, NC 27607 Attention: Jason S. Wood Facsimile: 919-781-4865

If to Hospira: Hospira, Inc. 275 North Field Drive Lake Forest, Illinois 60045 Attention: V.P. Contract Manufacturing Facsimile: 224-212-3210		With copy to: Hospira, Inc. Building H1; Department NLEG 275 N. Field Drive Lake Forest, IL 60045 Attention: General Counsel Facsimile: 224-212-2086

Page 36

Notices shall be effective (a) upon receipt if personally delivered or delivered by facsimile with transmission confirmed, (b) by first class mail, on the third business day following the date of registered or certified mailing, or (c) on the first business day following the date of or delivery to the overnight courier. A party may change its address listed above by written notice to the other party.

12.3 Choice of Law . This Agreement shall be construed, interpreted and governed by the laws of the State of Delaware, excluding its choice of law provisions. The United Nations Convention on the International Sale of Goods is hereby expressly excluded.

12.4 Alternative Dispute Resolution . The parties recognize that bona fide disputes may arise which relate to the parties’ rights and obligations under this Agreement. The parties agree that except as provided in Section 11.4 , any such dispute shall be resolved by alternative dispute resolution in accordance with the procedures set forth in Exhibit 12.4 . [*]

12.5 Assignment . Neither party shall assign this Agreement nor any part thereof without the prior written consent of the other party; provided, however , that either party may, without such consent assign the rights and obligations of this Agreement: (a) to one of its Affiliates; or (b) in connection with the transfer, sale or divestiture of substantially all of its business or assets (or that portion thereof to which this Agreement pertains) or in the event of its merger or consolidation with a Third Party. Any permitted assignee shall assume all obligations of its assignor under this Agreement arising after such assignment. No assignment shall relieve either party of responsibility for the performance of any accrued obligation which such party then has hereunder.

12.6 Entire Agreement . This Agreement, together with the Exhibits referenced and incorporated herein, constitute the entire agreement between the parties concerning the subject matter hereof and supersede all written or oral prior agreements or understandings with respect thereto. If there is any conflict, discrepancy, or inconsistency among the terms of the Quality & Technical Agreement, any Statement of Work, the Agreement or other form used by the parties, the Quality & Technical Agreement will control as regards all issues related to quality assurance; in all other cases, the Agreement will control.

12.7 Severability . This Agreement is subject to the restrictions, limitations, terms and conditions of all applicable governmental regulations, approvals and clearances. If any term or provision of this Agreement shall for any reason be held invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other term or provision hereof, and this Agreement shall be interpreted and construed as if such term or provision, to the extent the same shall have been held to be invalid, illegal or unenforceable, had never been contained herein.

12.8 Waiver-Modification of Agreement . No waiver or modification of any of the terms of this Agreement shall be valid unless in writing and signed by authorized representatives of both parties. Failure by either party to enforce any such rights under this Agreement shall not be construed as a waiver of such rights, nor shall a waiver by either party in one or more instances be construed as constituting a continuing waiver or as a waiver in other instances.

[*] Confidential treatment requested; certain information omitted and filed separately with the SEC.

Page 37

12.9 Insurance. Each party will procure and maintain, at its own expense, for the duration of the Agreement, and for [*] years thereafter if written on a claims made or occurrence reported form, the types of insurance specified below with carriers rated A- VII or better with A. M. Best or like rating agencies:

(a) Workers’ Compensation accordance with applicable statutory requirements and shall provide a waiver of subrogation in favor of the other party;

(b) Employer’s Liability with a limit of liability in an amount of not less than $[*];

(c) Commercial General Liability including premises operations, products & completed operations, blanket contractual liability, personal injury and advertising injury including fire legal liability for bodily injury and property damage in an amount not less than $[*] per occurrence and $[*] in the aggregate;

(d) Commercial Automobile Liability for owned, hired and non-owned motor vehicles with a combined single limit in an amount not less than $[*] each occurrence;

(e) Excess Liability including products liability with a combined single limit in an amount of not less than $[*] per occurrence and in the aggregate; provided that such limit shall be no less than $[*] per occurrence and in the aggregate following the first commercial sale of the Product in the Territory;

(f) Commercial Crime or Fidelity Bond in an amount of not less than $[*] per occurrence and in the aggregate including an endorsement for Third Party liability without the requirement of a conviction.

(g) Marine Insurance covering all shipments from warehouse to warehouse as described on the bill of lading at a full replacement cost.

Each party shall include the other party as an additional insured with respect to Commercial General Liability, Commercial Automobile Liability and Excess Liability but only as their interest may appear by written contract. Prior to commencement of services, and annually thereafter, each party shall furnish to the other party certificates of insurance evidencing the insurance coverages stated above and shall require at least [*] days written notice to the other party prior to any cancellation, non-renewal or material change in said coverage. In the case of cancellation, non-renewal or material change in said coverage, each party shall promptly provide to the other party a new certificate of insurance evidencing that the coverage meets the requirements in this Section 12.9 . Each party agrees that its insurance shall act as primary and noncontributory from any other valid and collectible insurance maintained by the other party. Each party may, at its option, satisfy, in whole or in part, its obligation under this Section through a Commercially Reasonable self- insurance program .

[*] Confidential treatment requested; certain information omitted and filed separately with the SEC.

Page 38

12.10 Exhibits . All Exhibits referred to herein are hereby incorporated by reference.

12.11 Construction . In construing this Agreement, unless expressly specified otherwise (a) references to Articles, Sections and Exhibits are to articles, sections of, and exhibits to, this Agreement, (b) except where the context otherwise requires, use of either gender includes the other gender, and use of the singular includes the plural and vice versa, (c) headings and titles are for convenience only and do not affect the interpretation of this Agreement, (d) any list or examples following the word “including” shall be interpreted without limitation to the generality of the preceding words, (e) except where the context otherwise requires, the word “or” is used in the inclusive sense, (f) all references to “dollars” or “$” herein shall mean U.S. Dollars, and (g) each party represents that it has been represented by legal counsel in connection with this Agreement and acknowledges that it has participated in the drafting hereof. In interpreting and applying the terms and provisions of this Agreement, the parties agree that no presumption will apply against the party which drafted such terms and provisions. Any terms or conditions contained in an invoice that are inconsistent or in conflict with this Agreement shall be deemed not to be a part of such invoice.

12.12 Counterparts and Facsimile Signatures . This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument. Signatures provided by facsimile transmission or in Adobe™ Portable Document Format (PDF) sent by electronic mail shall be deemed to be original signatures.

[Signature Page to Follow]

Page 39

I N W ITNESS W HEREOF , the parties intending to be bound by the terms and conditions hereof have caused this Agreement to be signed by their duly authorized representatives as of the date first above written.


HOSPIRA WORLDWIDE, INC.		CEMPRA PHARMACEUTICALS, INC.

By:		By:
	(Signature)		(Signature)

Name: Kevin Orfan		Name: Prabhavathi Fernandes, Ph.D.

Title: Vice President One 2 One Contract Manufacturing Services		Title: Chief Executive Officer

Page 40

L IST OF E XHIBITS



E XHIBIT 1.3:		Active Pharmaceutical Ingredient Specifications

E XHIBIT 1.16:		Drug Structure

E XHIBIT 1.32:		Product Specifications

E XHIBIT 1.39:		Country by Country Listing of the Territory

E XHIBIT 2.1:		Statement of Work

E XHIBIT 3.1:		Payment Schedule

E XHIBIT 3.2:		Stability Studies

E XHIBIT 3.5:		Development Supply Pricing

E XHIBIT 5.10:		Commercial Product Prices

E XHIBIT 7.1:		Product Test Methods

E XHIBIT 7.2:		Form of Quality Agreement

E XHIBIT 12.4		Alternate Dispute Resolution

Page 41

E XHIBIT 1.3

Active Pharmaceutical Ingredient Specifications

Preliminary API Specifications are attached hereto as of the Effective Date. Cempra shall use all reasonable efforts to prepare and submit to Hospira further refined API Specifications no later than [*] days after the Effective Date. Upon submission thereof, the API Specifications shall be attached to this Exhibit 1.3 and shall be made an integral part of this Agreement, including and covering all country-specific specifications, if any, subject to any further changes made to the API Specifications as contemplated by the Agreement. As API Specifications are changed as contemplated by the Agreement, they shall be attached hereto and made an integral part of the Agreement.

[*] Confidential treatment requested; certain information omitted and filed separately with the SEC.

E XHIBIT 1.16

Drug Structure

LOGO

E XHIBIT 1.32

Product Specifications

Preliminary Product Specifications are attached hereto as of the Effective Date. Cempra and Hospira will consult and use Commercially Reasonable Efforts to prepare and complete, in a final form, the fully-detailed initial Product Specifications no later than [*] days after the Effective Date. Upon completion, such Product Specifications shall be attached to this Exhibit 1.32 and shall be made an integral part of this Agreement. As Product Specifications are changed as contemplated by the Agreement, they shall be attached hereto and made an integral part of the Agreement.

[*] Confidential treatment requested; certain information omitted and filed separately with the SEC.

E XHIBIT 1.38

Country by Country Listing of the Territory

United States

Canada

European Union

•

Austria

•

Belgium

•

Bulgaria

•

Cyprus

•

Czech Republic

•

Denmark

•

Estonia

•

Finland

•

France

•

Germany

•

Greece

•

Hungary

•

Ireland

•

Italy

•

Latvia

•

Lithuania

•

Luxembourg

•

Malta

•

Netherlands

•

Poland

•

Portugal

•

Romania

•

Slovakia

•

Slovenia

•

Spain

•

Sweden

•

United Kingdom

•

Croatia (acceding as of 1 July 2013)

Norway

Switzerland

E XHIBIT 2.1

S TATEMENT OF W ORK

Table I

Project Initiation

Req.

Not
Req.

N/A

Responsibility

Comment

Hospira

Cempra

[*]

Table II

Product Development

Req.

Not
Req.

N/A

Responsibility

Comment

Hospira

Cempra

[*]

Table III

Engineering and

Registration Batch

Not

Responsibility

Per
Batch

Production

Req.

N/A

Hospira

Cempra

Price

Comment

[*]

Table IV

Regulatory Filing

Preparation and

Not

Responsibility

Submission

Req.

N/A

Hospira

Cempra

Comment

[*]

Table V

Process Validation

and Review

Req.

Not
Req.

N/A

Responsibility

Comment

Hospira

Cempra

[*]

[*] Confidential treatment requested; certain information omitted and filed separately with the SEC.

Table VI

Commercialization

Req.

Not
Req.

N/A

Responsibility

Comment

Hospira

Cempra

[*]

Table VII

Commercial Batch

Production

Req.

Not
Req.

N/A

Responsibility

Price
Est.

Comment

Hospira

Cempra

[*]

[*] Confidential treatment requested; certain information omitted and filed separately with the SEC.

E XHIBIT 3.1

Payment Schedule

[*]

[*] Confidential treatment requested; certain information omitted and filed separately with the SEC.

E XHIBIT 3.2

Stability Studies


[*]
Product	Stability Program	Testing	Pricing
[*]	[*]	[*]	[*]

[*] Confidential treatment requested; certain information omitted and filed separately with the SEC.

E XHIBIT 3.5

D EVELOPMENT S UPPLY PRICES

Engineering and

Registration Batch

Not

N/A

Responsibility

Per
Batch

Production

Req.

Hospira

Cempra

Price

Comment

[*]

[*] Confidential treatment requested; certain information omitted and filed separately with the SEC.

E XHIBIT 5.10

Commercial Product Prices

[*]

[*] Confidential treatment requested; certain information omitted and filed separately with the SEC.

E XHIBIT 7.1

Product Test Methods

In consultation with and subject to the written approval of Cempra, no later than [*] days after the Effective Date, Hospira will use all reasonable efforts to prepare and complete documentation describing the Commercially Reasonable procedures, methods and protocols by which the Product will be tested and released, as specified in Section 7.1 of the Agreement, and which will be consistent with and sufficient to satisfy, and shall, upon written notice to Cempra, and subject to Cempra’s written approval, in the future be modified as necessary to be consistent with and sufficient to satisfy the requirements of, cGMP, Applicable Law, and any Regulatory Approval(s). Upon completion and approval by Cempra, such documentation shall be attached to this Exhibit 7.1 and shall be made an integral part of this Agreement.

[*] Confidential treatment requested; certain information omitted and filed separately with the SEC.

E XHIBIT 7.2

Form of Quality Agreement

Cempra and Hospira agree to consult and use all reasonable efforts to prepare and complete the Quality & Technical Agreement in a form reasonably consistent with the form of such agreement under negotiation by the parties as of the Effective Date no later than [*]days after the Effective Date. Upon completion, the Quality & Technical Agreement shall be attached to this Exhibit 7.2 and shall be made an integral part of this Agreement.

[*] Confidential treatment requested; certain information omitted and filed separately with the SEC.

E XHIBIT 12.4

Alternative Dispute Resolution

[*]

[*] Confidential treatment requested; certain information omitted and filed separately with the SEC.

Exhibit 10.19

AMENDMENT NO. 1

EXCLUSIVE LICENSE AND DEVELOPMENT AGREEMENT

This Amendment No. 1 (“ Amendment ”) to the EXCLUSIVE LICENSE AND DEVELOPMENT AGREEMENT, dated as of May 8, 2013, by and between C EMPRA P HARMACEUTICALS , I NC ( “ Cempra ”) and T OYAMA C HEMICAL C O ., L TD . (“ Toyama ”) is hereby effective as of September 26, 2013. Capitalized terms not defined herein shall have the meaning given to them in the Original Agreement.

WITNESSETH:

WHEREAS, Cempra and Toyama are parties to that certain Exclusive License and Development Agreement dated as of May 8, 2013 (the “ Original Agreement ”); and

WHEREAS, Cempra and Toyama wish to amend the Agreement to clarify the definition of Licensed Product.

NOW, THEREFORE, in consideration of the foregoing, the parties hereto, intending to be legally bound hereby, hereby agree as follows:

1. Section 1.63 of the Original Agreement shall be deleted in its entirety and replaced with the following:

““ Licensed Product ” means any human pharmaceutical product, in oral tablet, capsule, intravenous, topical, or oral suspension form (including liquid or powder formulations thereof or therefor) or any form similar to any of the foregoing (other than any forms intended for treatment of ophthalmic indications or any other indications concerning the treatment, prevention, or amelioration of any condition, disease, or affliction of the eye), that incorporates the Compound or a Permitted Derivative as its sole API.”

2. The following definition of “Advanced Taste-Masking Know-How” is hereby inserted as Section 1.109 of the Original Agreement:

““ Advanced Taste-Masking Know-How ” means:

(i) all Know-How conceived, developed or Owned by Toyama prior to the Effective Date of this Agreement to the extent relating to the masking of taste in oral formulations, including but not limited to such Know-How in relation to composition and manufacturing process; and

(ii) all Know-How conceived, developed or coming under the Ownership of Toyama on or after the Effective Date of this Agreement to the extent (a) relating to the masking of taste in oral formulations, including but not limited to such Know-How in relation to composition and manufacturing process, (b) not constituting an Invention (as defined in the BARDA Subcontract (as defined under Section 4.6.2)) or Project Know-How (as defined in the BARDA Subcontract), and (c) not Covered by any Project Patent (as defined in the BARDA Subcontract).”

3. Section 1.86 of the Original Agreement (definition of “Regulatory Approval”) shall be amended by adding the following new sentence to the end thereof:

“Notwithstanding the foregoing, Regulatory Approvals shall not include any of the foregoing to the extent any Advanced Taste-Masking Know-How is incorporated therein.”

4. Section 1.88 of the Original Agreement (definition of “Regulatory Filing”) shall be amended by adding the following new sentence to the end thereof:

“Notwithstanding the foregoing, Regulatory Filing shall not include any of the foregoing to the extent any Advanced Taste-Masking Know-How is incorporated therein.”

5. Section 1.99 of the Original Agreement (definition of “Toyama Know-How”) shall be amended by adding the following new sentence to the end thereof:

“Further, notwithstanding the foregoing, Toyama Know-How shall not include any Advanced Taste-Masking Know-How.”

6. Section 1.101 of the Original Agreement (definition of “Toyama Patents”) shall be amended by adding the following new sentence to the end thereof:

“Further, notwithstanding anything to the contrary, Toyama Patents shall not include any Patents to the extent Covering Advanced Taste-Masking Know-How.”

7. Section 2.5 of the Original Agreement shall be amended by added the following as the last sentence thereof:

“Notwithstanding anything to the contrary, the rights granted under this Section 2.5 shall not include any rights to Advanced Taste-Masking Know-How.”

8. Section 4.6 of the Original Agreement shall be deleted in its entirety and replaced with the following:

“ U.S. Governmental Development Support .

4.6.1

Toyama and Cempra acknowledge and agree that Toyama may have developed, may be developing, and may continue to develop Advanced Taste-Masking Know-How which may be used with Licensed Products, separately and independently from Toyama’s obligations under this Agreement or the BARDA Subcontract. For avoidance of doubt, the rights granted under this Agreement shall not include any rights to Advanced Taste-Masking Know-How.

4.6.2

Toyama and Cempra acknowledge and agree that Cempra has been awarded Contract No. HHSO100201300009C (“ Prime Award ”), entitled “Solithromycin for Civilian Use and Broad Bioterror Threat MCMS” by the Office of Acquisitions Management, Contracts and Grants, and in turn, Cempra has entered into with Toyama a subcontract as of September 26, 2013 (the “ BARDA Subcontract ”) under the Prime Award to allow Toyama to perform the obligations contained therein in accordance with the terms of the BARDA Subcontract, including research, development, formulation, and manufacturing services of powder for oral suspension of Compound and/or Permitted Derivative, to enable Cempra to complete its obligations under the Prime Award.

4.6.4.

If and as requested by Cempra in writing, the Parties shall use Commercially Reasonable, good faith efforts to negotiate and enter into a separate license agreement granting Cempra, on commercially reasonable terms, rights under the Advanced Taste-Masking Know-How (and any Patents Covering Advanced Taste-Masking Know-How) to make, have made, use, sell, offer for sale, and import BARDA Products (as defined in the BARDA Subcontract) or Other Products (as defined in the BARDA Subcontract) or any other products whether in the Territory or outside the Territory.”

9. This Amendment constitutes an amendment to Original Agreement executed pursuant to Section 16.9 thereof.

10. Except as otherwise amended hereby, the Original Agreement shall remain in full force and effect as presently written, and the rights, duties, liabilities and obligations of the parties thereto, as presently constituted, will continue in full effect.

IN WITNESS WHEREOF , the Parties hereto have caused this Amendment No. 1 to be executed by their duly authorized officers with effect as of September 26, 2013.


C EMPRA P HARMACEUTICALS , I NC .				T OYAMA C HEMICAL C O ., L TD .

B Y :				B Y :

N AME :				N AME :

T ITLE :				T ITLE :

Exhibit 31.1

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Prabhavathi Fernandes, Ph.D., certify that:

(1)

I have reviewed this quarterly report on Form 10-Q of Cempra, Inc.;

(2)

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

(3)

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects, the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

(4)

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a – 15(f) and 15d – 15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in the report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

(5)

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: October 29, 2013

/s/ Prabhavathi Fernandes, Ph.D.

Prabhavathi Fernandes, Ph.D.

Chief Executive Officer (Principal Executive Officer)

Exhibit 31.2

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Mark W. Hahn, certify that:

(1)

I have reviewed this quarterly report on Form 10-Q of Cempra, Inc.;

(2)

(3)

(4)

(a)

(b)

(c)

(d)

(5)

(a)

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: October 29, 2013

/s/ Mark W. Hahn

Mark W. Hahn

Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

Exhibit 32.1

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S. C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report on Form 10-Q of Cempra, Inc. (the “Company”) for the period ended September 30, 2013, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Prabhavathi Fernandes, Ph.D., Chief Executive Officer (Principal Executive Officer) of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: October 29, 2013

/s/ Prabhavathi Fernandes, Ph.D.

Prabhavathi Fernandes, Ph.D.

Chief Executive Officer (Principal Executive Officer)

Exhibit 32.2

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S. C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report on Form 10-Q of Cempra, Inc. (the “Company”) for the period ended September 30, 2013, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Mark W. Hahn, Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: October 29, 2013

/s/ Mark W. Hahn

Mark W. Hahn

Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

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