Item 4: Information on the Company

A. History and Development of the Company

We were founded in 2003 and are a public limited company incorporated under the laws of England and Wales with the Registrar of Companies of England and Wales, United Kingdom. Our principal office, which we moved to in March 2017, is located at 136a Eastern Avenue, Milton Park, Abingdon, Oxfordshire, OX14 4SB, and our telephone number is +(44) 1235 443 939. Our U.S. operations are conducted by our wholly owned subsidiary Summit Therapeutics Inc., a Delaware corporation. Our ordinary shares have traded on AIM, which is a sub-market of the London Stock Exchange, since October, 2004, under the symbol “SUMM” and our American Depositary Shares have traded on the NASDAQ Global Market since March 2015, under the symbol “SMMT.”

Our website address is www.summitplc.com. The information contained on, or that can be accessed from, our website does not form part of this Annual Report. Our agent for service of process in the United States is C T Corporation System, 111 Eighth Avenue, New York, New York 10011.

In the three-year period ended January 31, 2017, we have invested a total of £0.2 million in equipment and facilities.

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B. Business

Overview

We are a biopharmaceutical company focused on the discovery, development and commercialization of novel medicines for indications for which there are no existing or only inadequate therapies. We are conducting clinical programs focused on the genetic disease Duchenne muscular dystrophy, or DMD, and the infectious disease Clostridium difficile infection, or CDI.

Duchenne Muscular Dystrophy

Our lead DMD product candidate is ezutromid (formerly SMT C1100), an orally administered small molecule. We are conducting a Phase 2 clinical trial of ezutromid in patients with DMD. This trial is designed to evaluate the potential benefits of longer-term dosing of ezutromid by measuring a number of endpoints related to muscle health and muscle function, along with monitoring the safety and tolerability of long-term exposure to ezutromid. We refer to this Phase 2 clinical trial as PhaseOut DMD, a Phase 2 proof of concept clinical trial. We expect to report 24-week biopsy data in the first quarter of 2018 for all patients in PhaseOut DMD who provide a 24-week biopsy sample. At the same time, we also expect to announce 24-week MRI and functional data analysis from all patients in the trial. Our DMD program is based on utrophin modulation, an approach to treating DMD that is independent of the underlying mutations in the dystrophin gene that cause the disease. We are a leader in the field of utrophin modulation, an approach that we believe has the potential to address the entire population of DMD patients. Other DMD approaches, such as exon-skipping and suppression of nonsense mutations, only address subsets of this population. The U.S. Food and Drug Administration, or the FDA, has granted orphan drug designation to ezutromid for the treatment of DMD, and the European Medicines Agency, or the EMA, has designated ezutromid as an orphan medicinal product. The FDA has also granted fast track designation and rare pediatric disease designation to ezutromid. In recent public statements, the FDA has stated that it recognizes the unmet medical need for DMD treatments, the devastating nature of the disease for patients and their families and the urgency to make new treatments available.

In October 2016, we entered into an exclusive license and collaboration agreement with Sarepta Therapeutics, Inc., or Sarepta, pursuant to which we granted Sarepta an exclusive license to commercialize our utrophin modulator pipeline, including ezutromid, in the European Union, Iceland, Norway, Switzerland, Turkey and the Commonwealth of Independent States, with an option to expand its commercial rights to include specified countries in Central and South America. We have retained commercialization rights to our utrophin modulator pipeline in the rest of the world.

DMD is one of the most common and the most severe form of muscular dystrophy. DMD predominantly affects males and results in the progressive wasting of muscles throughout the body. The disease typically results in death by the time DMD patients reach their late twenties. Individuals with DMD are unable to produce dystrophin, a protein essential for maintaining healthy muscle function.

Utrophin is a naturally occurring protein that is functionally and structurally similar to dystrophin. Utrophin plays an active role in the development of new muscle fibers, in particular during fetal development, and in repairing damaged muscle fibers. Utrophin production is down regulated, or switched off, in the late stages of gestation and can switch on and off as needed to repair damaged muscle. We believe that our approach of utrophin modulation can be used to maintain the production of utrophin in all skeletal muscles, including the diaphragm, and the heart to compensate for the lack of dystrophin in DMD patients, thereby restoring and maintaining healthy muscle function. This approach to treating DMD is independent of the underlying dystrophin gene mutation, and we believe has the potential to treat the entire population of DMD patients.

To date, we have conducted four Phase 1 clinical trials of ezutromid. We completed a Phase 1 clinical trial in healthy volunteers in 2012, a Phase 1b clinical trial in DMD patients in May 2014 and another Phase 1b clinical trial in DMD patients in September 2015. In addition, we completed a Phase 1 clinical trial that evaluated a new

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formulation of ezutromid, which we refer to as the “F6” formulation, in healthy volunteers and DMD patients in August 2016. The second Phase 1b clinical trial of ezutromid in DMD patients evaluated the impact of diet on plasma levels of the drug. We refer to this second Phase 1b trial as our Phase 1b modified diet trial. In all of our Phase 1 trials, ezutromid was generally well tolerated at all doses tested.

We are also currently pursuing a broad utrophin modulator technology program to develop future generation utrophin modulator product candidates. This development is being undertaken as part of a strategic alliance with research groups at the University of Oxford.

Clostridium difficile Infection

Our lead CDI product candidate is ridinilazole (formerly SMT19969), an orally administered small molecule antibiotic. We reported positive top-line results from a Phase 2 clinical trial of ridinilazole in November 2015. Ridinilazole is designed to selectively target Clostridium difficile bacteria without causing collateral damage to the gut flora and thereby reduce CDI recurrence rates, which is the key clinical issue in this disease. The FDA has designated ridinilazole as a qualified infectious disease product, or QIDP, and the FDA granted ridinilazole fast track status. In 2013, the Centers for Disease Control and Prevention of the U.S. Department of Health and Human Services, or CDC, highlighted CDI as one of three pathogens that pose an immediate public health threat and require urgent and aggressive action.

CDI is a bacterial infection of the colon that produces toxins causing inflammation of the colon and severe diarrhea. CDI can also result in more serious disease complications, including pseudomembranous colitis, bowel perforation, toxic megacolon and sepsis. CDI typically develops following the use of broad spectrum antibiotics that can cause widespread damage to the natural gut flora and allow overgrowth of Clostridium difficile bacteria. CDI represents a serious healthcare issue in hospitals, long-term care homes and, increasingly, in the wider community. A study published in 2012 in Clinical Infectious Diseases , a peer reviewed journal published by the Infectious Diseases Society of America, estimated that CDI-related acute care costs total $4.8 billion per year in the United States alone.

We completed a Phase 1 clinical trial of ridinilazole in healthy volunteers in 2013. In this Phase 1 clinical trial, ridinilazole was highly selective for total clostridia bacteria with minimal impact on the other gut flora of subjects, which was consistent with the results of our preclinical studies of ridinilazole. In November 2015, we reported top-line results from our double blind, randomized, active controlled Phase 2 clinical trial that evaluated ridinilazole compared to the current standard of care, vancomycin, for the treatment of CDI. The Phase 2 clinical trial exceeded its primary endpoint of non-inferiority, with ridinilazole achieving statistical superiority over vancomycin in sustained clinical response, or SCR. The statistical superiority was driven by a large numerical reduction in recurrent disease compared with vancomycin. We subsequently reported that data from our Phase 2 clinical trial of ridinilazole showed ridinilazole to be highly preserving of the gut microbiome compared to patients who received vancomycin and experienced substantial damage to their gut microbiome that for many patients persisted during the 30-day post-treatment period. Ridinilazole was well tolerated at all doses tested in both Phase 1 and Phase 2 clinical trials. We are also conducting an exploratory open label, active controlled Phase 2 clinical trial evaluating ridinilazole compared to fidaxomicin. We have completed treating patients in this trial and expect to report top-line results in the second quarter of 2017.

In February 2017, following regulatory meetings with the FDA and EMA, we outlined our planned Phase 3 clinical development program for ridinilazole. We expect the program will consist of two Phase 3 clinical trials comparing ridinilazole to vancomycin with the primary endpoint in both trials being superiority in SCR. We plan to commence the Phase 3 clinical trials in the first half of 2018. We are currently exploring funding options for the Phase 3 clinical development program for ridinilazole, including third party collaboration or non-dilutive government or charitable organization funding. We hold exclusive worldwide commercialization rights for ridinilazole.

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Our Product Development Pipeline

The following table summarizes our product development pipeline. We are also developing an earlier stage pipeline of future generation utrophin modulators for the treatment of DMD.

Our Strategy

Our goal is to become a fully integrated biopharmaceutical company focused on the discovery, development and commercialization of novel medicines for indications for which there are no existing or only inadequate therapies, with a current focus on DMD and CDI. The key elements of our strategy to achieve this goal are:

Rapidly advance the development of our lead product candidates, ezutromid for DMD and ridinilazole for CDI.

We are focusing our resources and business efforts primarily on rapidly advancing the development of ezutromid for the treatment of DMD and ridinilazole for the treatment of CDI. We believe that there is significant market potential for each of these product candidates. We also believe that the orphan drug and fast track designations of ezutromid and the QIDP and fast track designations of ridinilazole may expedite the regulatory review process for each of these product candidates and potentially provide market protection benefits. We are currently conducting our PhaseOut DMD clinical trial. This Phase 2 clinical trial is evaluating the benefits of longer-term dosing of ezutromid by measuring a number of endpoints related to muscle health and muscle function, including distribution of utrophin protein in muscle fibers and levels of muscle fiber regeneration from muscle biopsies, changes in muscle inflammation and fat infiltration through the use of magnetic resonance imaging, or MRI, the distance walked during the six minute walk test and the North Star Ambulatory Assessment, a multi-point test of motor functions. We expect to report 24-week biopsy data in the first quarter of 2018 for all patients in PhaseOut DMD who provide a 24-week biopsy sample. At the same time, we also expect to announce 24-week MRI and functional data analysis from all patients in the trial. We reported top-line data from our double blind, randomized, active controlled Phase 2 clinical trial that evaluated ridinilazole compared to vancomycin for the

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treatment of CDI in November 2015. The primary endpoint of the trial was exceeded with ridinilazole achieving statistical superiority over vancomycin in sustained clinical response, with this superiority being driven by a large numerical reduction in recurrent disease compared to vancomycin. We are undertaking activities required to advance ridinilazole into Phase 3 clinical trials and, as detailed below, are evaluating our options to maximize the commercial potential of ridinilazole.

Maintain and expand our leadership in the field of utrophin modulation.

We are developing ezutromid as the first of a new class of drugs called utrophin modulators. Utrophin modulation is an approach to treating DMD that is independent of the underlying dystrophin gene mutation. Our co-founder and scientific advisor, Professor Kay Davies at the University of Oxford, discovered utrophin and then developed the concept of utilizing utrophin modulation as a treatment potentially applicable to all DMD patients. Our DMD program was founded to develop and commercialize drugs for DMD using this approach to treatment. We plan to apply and enhance our existing knowledge, experience and proprietary rights to maintain and expand our leadership in the field of utrophin modulation. In addition to the PhaseOut DMD clinical trial for ezutromid, we are also currently pursuing, in collaboration with the University of Oxford, a broad utrophin modulator technology program consisting of novel, future generation, small molecule utrophin modulators with potential new utrophin-related mechanisms.

Collaborate with Sarepta on the global research, development and commercialization of our utrophin modulator pipeline.

We entered into an exclusive license and collaboration agreement with Sarepta in October 2016 pursuant to which we granted Sarepta the exclusive right to commercialize products in our utrophin modulator pipeline in the European Union, Iceland, Norway, Switzerland, Turkey and the Commonwealth of Independent States, which we refer to as the licensed territory. Such products include ezutromid and our future generation of small molecule utrophin modulators, which we refer to collectively as the licensed products. We have agreed to collaborate with Sarepta on the research and development of the licensed products under a joint, global development plan through a joint steering committee. Sarepta has the final decision making authority with respect to commercialization decisions of the licensed products in the licensed territories. We are working with Sarepta to implement the global development plan and fulfill our respective contractual obligations under the terms of the license and collaboration agreement that includes research and development activities, sharing of global research and development costs beginning in 2018, manufacture and supply of licensed product material, intellectual property, and commercialization activities.

Commercialize ezutromid for DMD in the United States with our own specialty commercial team.

We hold exclusive commercialization rights for ezutromid for all indications in the United States. If ezutromid receives marketing approval, we intend to commercialize it initially in the United States with our own focused, specialized sales force that we plan to establish. We believe that medical specialists treating DMD are sufficiently concentrated that we will be able to effectively promote ezutromid with a targeted sales team in the United States and potentially other territories. We also believe that our relationships with patient advocacy groups will strengthen our ability to market ezutromid. We also plan to evaluate the potential for utilizing collaboration, distribution and other marketing arrangements with third parties to commercialize ezutromid in the jurisdictions where we retain commercial rights.

Maximize the commercial potential of ridinilazole.

We hold exclusive worldwide commercialization rights for ridinilazole for all indications. We are evaluating our options to maximize the commercial opportunity for ridinilazole. We may seek third-party collaborators for the development and commercialization of ridinilazole or potentially retain commercialization rights for ourselves. We are also exploring funding options from government entities and philanthropic, non-government and not for profit organizations. In this evaluation, we are considering factors such as the anticipated development costs required to achieve marketing approval, the sales and marketing resources required in each territory in which we

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receive approval, the relative size of the market opportunity in such territory, the particular expertise of the third party and the proposed financial terms of any arrangement with third party collaborators, government entities or philanthropic, non-government or not for profit organizations.

Seek additional governmental and other third party grants and support.

We have obtained development funding and other assistance from government entities, philanthropic, non-government and not for profit organizations and patient advocacy groups for our product candidates. For example, we have received grant funding and clinical trial support from Innovate UK and several DMD organizations, including groups based in the United States, such as the Muscular Dystrophy Association, Parent Project Muscular Dystrophy, Charley’s Fund, Cure Duchenne, Foundation to Eradicate Duchenne and the Nash Avery Foundation, and groups based in the United Kingdom, such as Joining Jack. The Wellcome Trust Limited provided funding for ridinilazole up until the completion of our Phase 2 proof of concept clinical trial. We plan to continue to encourage these types of organizations to provide additional funding and support for our development programs.

Duchenne Muscular Dystrophy Overview

Duchenne muscular dystrophy is one of the most common and the most severe form of muscular dystrophy. DMD is a fatal disease that results in progressive wasting of muscles throughout the body. DMD is caused by different genetic mutations affecting the dystrophin gene on the X-chromosome, and therefore predominately affects males. As a result of these genetic mutations, DMD patients are unable to produce dystrophin, a protein essential for maintaining healthy muscle function. Over time, the muscles of DMD patients deteriorate and are infiltrated by fat and scar tissue, which is referred to as fibrosis, leading to the loss of ambulation, loss of respiratory and cardiac function and ultimately death.

Based on prevalence data published in November 2016 by Orphanet, a publicly available reference portal for information on rare diseases and orphan drugs, we estimate that there are approximately 50,000 DMD patients in the developed world and 250,000 DMD patients globally. According to an article published in 2013 in the peer reviewed journal Muscle & Nerve , approximately one in every 5,000 males is born with DMD. All ethnic groups are generally susceptible to DMD at approximately the same rates. Approximately two-thirds of DMD cases are due to inherited mutations, with the remainder being the result of spontaneous mutations in the dystrophin gene in patients with no familial history of the disease.

DMD is typically diagnosed in patients who are between two and seven years of age. The onset of the physical symptoms can be difficult to recognize, but early indicators of disease due to muscle weakness include difficulty walking or jumping, frequent falling over and becoming fatigued more easily. A preliminary diagnosis is typically made by measuring blood plasma levels of the enzyme creatine kinase, or CK. CK levels in DMD children are often ten to 100 times higher than CK levels in non-DMD children. A diagnosis of DMD is then confirmed through genetic testing using blood cells or muscle biopsy. In the United States and Europe, there are a number of newborn screening studies that can diagnose DMD at birth, although these tests are not yet routinely performed.

Initially, DMD affects the skeletal muscles in the arms, legs and trunk. By around 12 years of age, most DMD patients will need to use a wheelchair on a regular basis. Significant loss of skeletal muscle function takes place during the teenage years, and, while greater assistance is needed for activities involving arms, legs or trunk, most patients will retain use of their fingers, allowing them to write or use computers. Symptoms of scoliosis, or curvature of the spine, may also develop due to loss of trunk muscle function.

In the later stages of disease progression, life threatening heart and respiratory conditions become common. The function of the diaphragm and muscles responsible for the mechanical aspects of breathing deteriorates, leading to shortness of breath and build-up of fluid in the lungs and requiring ventilation at night and eventually on a

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24-hour basis. DMD patients also develop cardiomyopathy, or enlarged hearts. The failure of the cardiac and respiratory systems typically leads to death by the time DMD patients reach their late twenties.

Current DMD Treatments and Development Approaches

There is currently no approved therapy for the treatment of DMD applicable to all DMD patients that seeks to alter the progression of the disease. Corticosteroids are prescribed to DMD patients from a young age to help treat symptoms of the disease. However, long-term use of corticosteroids is associated with severe side effects and concerns over weight gain. Other treatments to manage the symptoms of the disease include regular physiotherapy, surgery and mechanical support, such as wheelchairs and leg braces, and dietary supplements.

There are different approaches in development for the treatment of DMD, some of which seek to alter the progression of the disease by targeting the underlying genetic cause and others that seek to provide symptomatic relief. One disease modifying treatment for DMD is based on a scientific approach known as exon-skipping. Exons are organic molecules known as nucleotides within the DNA strand that the cellular machinery translates to make truncated but functional protein. In a sub-population of DMD patients, synthesis of the dystrophin protein is disrupted because of mutations that may be due, among other factors, to deleted exons. Exon-skipping technology seeks to allow the production of a truncated but still functional dystrophin protein. According to an article published in 2009 in the peer reviewed journal Human Mutation , skipping of the ten most common exons would treat in aggregate approximately 41% of all DMD patients. There is currently one approved exon-skipping treatment in the United States, called eteplirsen (Exondys 51™), which is being developed and commercialized by Sarepta. Eteplirsen received accelerated approval from the FDA in September 2016, and based on the size of the DMD population described in the aforementioned article in Human Mutation , it has the potential to treat approximately 13% of patients with DMD. We believe that there are additional exon-skipping therapies currently in clinical development to address three additional exons and that these, in aggregate with eteplirsen, would treat less than one-third of all DMD patients. Another approach that seeks to alter the progression of the disease involves targeting the specific genetic mutations known as nonsense mutations. Nonsense mutations create a premature stop signal in the translation of the genetic code and prevent the production of functional dystrophin protein. There is currently one approved nonsense mutation treatment in Europe, called ataluren (Translarna™), which is being developed and commercialized by PTC Therapeutics Inc. Ataluren received conditional approval from the EMA in May 2014. DMD caused by nonsense mutations affects approximately 13% of all DMD patients. One other potential disease modifying treatment approach in development is gene therapy, which has the potential to address the genetic cause of DMD by using an adeno-associated virus to deliver a shortened, yet functional, version of the dystrophin gene to a DMD patient. A number of other treatments being developed seek to alleviate the symptoms of DMD. These include promotion of muscle tissue growth based on myostatin inhibition, anti-inflammatory and anti-fibrotic drugs and treatments to improve cardiac and respiratory function.

The FDA recognizes the unmet medical need in DMD, the devastating nature of the disease for patients and their families and the urgency to make new treatments available. The FDA publicly stated in October 2014 that it remains committed to working with all companies to expedite the development and approval of safe and effective drugs to treat this disease. The Director of the FDA’s Center for Drug Evaluation and Research also stated in a speech in July 2014 that the agency was willing to explore the use of all potential pathways for approval of DMD drugs, including accelerated approval, as appropriate. In June 2015, the FDA issued draft guidance on developing drugs for the treatment of DMD and related dystrophinopathies.

Our Utrophin Modulation Approach for the Treatment of DMD

Our Approach

We believe that our approach of utilizing utrophin modulation for DMD has the potential to slow or stop the progression of DMD in all patients with the disease. Utrophin is a naturally occurring protein that is functionally and structurally similar to dystrophin. The aim of utrophin modulation is to maintain the production of utrophin

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in all skeletal muscles, including the diaphragm, and the heart to compensate for the lack of dystrophin in DMD patients, thereby restoring and maintaining healthy muscle function. This approach to treating DMD is independent of the underlying dystrophin gene mutation. As illustrated in the figure below, we believe utrophin modulation has the potential to treat the entire population of DMD patients, unlike other DMD approaches that also seek to alter the progression of the disease but only address subsets of the total DMD population.

Further, we believe utrophin modulation could potentially be complementary to potential treatments for DMD based on other scientific approaches, including approaches that are focused on restoring dystrophin, such as exon-skipping and suppression of nonsense mutations. We also expect that utrophin modulation has the potential to benefit patients with Becker muscular dystrophy, a milder form of the disease in which the majority of patients produce low levels of shortened dystrophin.

The Role of Utrophin and Dystrophin in Muscle Fibers

Utrophin and dystrophin are structurally and functionally similar proteins that perform a critical role in maintaining the proper function of muscle fibers, although at different times and in different settings. The roles of utrophin and dystrophin depend on whether the muscle fibers are mature, in the development stage or in the process of being repaired and regenerated. As discussed below, dystrophin plays an active role in maintaining the function of mature muscle fibers, while utrophin plays an active role in the development of new muscle fibers and in repairing damaged muscle fibers.

Role of Dystrophin in Mature Muscle

Each muscle in the body is made up of bundles of thousands of muscle fibers. Dystrophin and a group of different proteins that bind to dystrophin, which are called the Dystrophin Associated Protein Complex, or DAPC, are located at specific sites along the entire length of the muscle cell membrane, referred to as the sarcolemma, of every muscle fiber. Dystrophin works by linking the actin cytoskeleton, which is a part of the muscle fiber’s contractile apparatus, to the DAPC in the sarcolemma. The DAPC, in turn, links the sarcolemma to the extracellular matrix, which binds the bundles of muscle fibers together. This link serves as a molecular shock absorber that helps to maintain stability and elasticity of muscle fibers during contraction and relaxation. In the absence of dystrophin, this linkage is lost and muscles become damaged, which leads to continual destructive rounds of muscle degeneration and regeneration and ultimately to progressive muscle wasting. The figure below depicts the DAPC and illustrates the role of dystrophin (or utrophin) and the other proteins that make up this complex.

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The Role of Dystrophin or Utrophin in the Associated Protein Complex

Role of Utrophin in Developing Muscle

In both DMD patients and healthy individuals, utrophin and the proteins that comprise the DAPC are highly localized at specific sites along the length of muscle fibers during fetal development. Utrophin production is then down regulated, or switched off, in the late stages of gestation. In the normal muscle fiber of healthy individuals, the production of dystrophin begins to replace utrophin at these sites in the maturing muscle fiber, eventually fully replacing utrophin. In the muscle fiber of DMD patients, who are unable to produce functional dystrophin to substitute for the down regulating utrophin, these sites in the muscle fiber become unoccupied, which leads to muscle degeneration as muscles mature.

Role of Utrophin in Regenerating Muscle

In both DMD patients and healthy individuals, utrophin is localized to the neuromuscular junctions, which connect nerve fibers and muscles, and myotendinous junctions, which connect tendons and muscles. The other major role of utrophin in muscle fibers is to stabilize newly regenerating muscle fibers as part of the natural repair process. After a muscle fiber is damaged, utrophin production switches on as needed to repair the damaged region and then switches off following successful repair.

Expected Effect of Utrophin Modulation for DMD

We believe that our approach of utrophin modulation can be used to maintain the production of utrophin in maturing and mature muscle fibers and compensate for the lack of dystrophin in DMD patients, thereby restoring and maintaining healthy muscle function. The figure below illustrates the transition from utrophin to dystrophin production in the normal muscle fiber of a healthy individual, the effect of the lack of dystrophin production in

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the muscle fiber of a DMD patient and the expected effect of utrophin modulation in the muscle fiber of a DMD patient to compensate for the lack of dystrophin production.

Origins of Our Utrophin Modulation Approach

Our co-founder and scientific advisor, Professor Kay Davies at the University of Oxford, discovered utrophin and then developed the concept of utilizing utrophin as a treatment potentially applicable to all DMD patients. Our DMD program was founded to develop and commercialize drugs for DMD using this approach to treatment. Professor Davies’ research group at the University of Oxford developed transgenic lines of an mdx mouse that were genetically engineered to continually express utrophin protein. The mdx mouse is a naturally occurring animal model that is dystrophin deficient and is the standard disease model for studies of DMD. In these experiments, the continued expression of utrophin, even at levels just above those in a normal mdx mouse, had a meaningful, positive effect on muscle performance.

Our utrophin modulation program uses small molecule drugs that are designed to achieve the same effect seen in the transgenic mdx mouse experiments and to continually express utrophin to protect muscle fibers against DMD.

Ezutromid Overview

Our most advanced utrophin modulator product candidate is ezutromid, an orally administered small molecule.

To date, we have conducted four Phase 1 clinical trials of ezutromid. We completed a Phase 1 clinical trial of ezutromid in healthy volunteers in 2012, a Phase 1b clinical trial of ezutromid in DMD patients in May 2014 and another Phase 1b clinical trial of ezutromid in DMD patients in September 2015. In addition, we completed a Phase 1 clinical trial evaluating a new formulation of ezutromid, which we refer to as the “F6” formulation, in healthy volunteers and DMD patients in August 2016. The second Phase 1b clinical trial of ezutromid in DMD patients evaluated the current clinical formulation of ezutromid, which we refer to as the “F3” formulation, and the impact of diet on plasma levels of the drug. We refer to this second Phase 1b trial as our Phase 1b modified diet trial. Our Phase 1b modified diet trial met its primary objective with patients achieving plasma levels of

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ezutromid that may be sufficient to modulate the production of utrophin protein and possibly result in clinical benefit while following specific dietary guidance. In our Phase 1 clinical trial evaluating the F6 formulation of ezutromid, the evaluable patients who received the highest dose achieved an over six-fold increase in the average maximum plasma concentration level compared to the F3 formulation of ezutromid.

In all four Phase 1 clinical trials, ezutromid was generally well tolerated at all doses tested. One patient in the Phase 1 clinical trial of the F6 formulation of ezutromid exhibited changes in liver parameters and withdrew from the trial, despite showing no clinical symptoms. The findings were classified as a serious adverse event. No other serious adverse events reported in our Phase 1 clinical trials of ezutromid.

We are conducting a Phase 2 clinical trial of ezutromid, which we refer to as PhaseOut DMD, in patients with DMD at trial sites in the United Kingdom and the United States. The PhaseOut DMD trial is evaluating the benefits of longer-term dosing of the F3 and F6 formulations of ezutromid by measuring a number of endpoints related to muscle health and muscle function, including distribution of utrophin protein in muscle fibers and levels of muscle fiber regeneration from muscle biopsies, changes in muscle inflammation and fat infiltration through the use of MRI, distance walked during a six minute walk test and the North Star Ambulatory Assessment. Based on our current estimates, we expect to complete enrollment for PhaseOut DMD in the second quarter of 2017, and we expect to report 24-week biopsy data in the first quarter of 2018 for all patients in PhaseOut DMD who provide a 24-week biopsy sample. At the same time, we also expect to announce 24-week MRI and functional data analysis from all patients in the trial.

We believe that the F3 and F6 formulations will be appropriate for administration to DMD patients, especially children.

The FDA has granted orphan drug designation to ezutromid for the treatment of DMD, and the EMA has designated ezutromid as an orphan medicinal product. In the United States, if a product with orphan designation receives FDA approval, the FDA will not approve a later product for the same indication that uses the same active ingredient for seven years, unless the later product is shown to be clinically superior. In the European Union, if an orphan medicinal product receives EMA approval, the EMA will not approve a later product for the same therapeutic indication and with the same method of action for ten years after the orphan medicinal product receives EMA approval, subject to certain exceptions, including if the later product demonstrates clinical superiority. The FDA has also granted ezutromid fast track designation and rare pediatric disease designation. Fast track designation provides companies with advantages such as opportunities for more frequent interactions with the FDA during all aspects of development, submission of a new drug application, or NDA, on a rolling basis, and eligibility for accelerated approval and priority review. With rare pediatric disease designation we could qualify for a priority review voucher upon the approval of ezutromid, which could be used for a subsequent marketing application or sold or transferred an unlimited number of times (although only used once).

Collaboration with Sarepta

In October 2016, we entered into an exclusive license and collaboration agreement with Sarepta. Under the terms of the agreement, we granted Sarepta the exclusive right to commercialize products in our utrophin modulator pipeline in the European Union, Switzerland, Norway, Iceland, Turkey and the Commonwealth of Independent States, which we refer to as the licensed territory. Such products include ezutromid and our pipeline of future generation small molecule utrophin modulators, which we refer to as the licensed products. We also granted Sarepta an option to expand the licensed territory to include specified countries in Central and South America. We retained commercialization rights in the rest of the world.

Under the terms of the license and collaboration agreement, we received an upfront payment of $40.0 million from Sarepta. In addition, we will be eligible to receive future ezutromid-related development, regulatory and sales milestone payments totaling up to $522.0 million. This includes a $22.0 million milestone, payable on or after April 1, 2017, following the first dosing of the last patient in our PhaseOut DMD clinical trial. We will also

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be eligible to receive development and sales milestone payments related to potential second generation and future generation utrophin modulator candidate(s). We are also eligible to receive escalating royalties ranging from a low to high teens percentage of net sales on a product-by-product basis in the licensed territories. If Sarepta elects to exercise its option for rights in specified countries in Central and South America, we would be entitled to additional fees, milestones and royalties.

We have agreed to collaborate with Sarepta on the research and development of licensed products under a joint, global development plan. Under the license and collaboration agreement, we will be solely responsible for all research and development costs for the licensed products until December 31, 2017. Thereafter, we will be responsible for 55.0% of all global budgeted research and development costs related to the licensed products, and Sarepta will be responsible for 45.0% of such costs. Sarepta has final decision making authority with respect to commercialization decisions of the licensed products in the licensed territories. Sarepta will be solely responsible for all commercialization activities and associated costs, relating to licensed products in the licensed territories.

Phase 1 Clinical Trial in Healthy Volunteers (Trial 01)

In 2012, we completed a double blind, placebo controlled, ascending single and multiple oral dose Phase 1 clinical trial of ezutromid in healthy volunteers. We conducted this clinical trial at a single site in the United Kingdom under approval from the Medicines and Healthcare products Regulatory Agency, or MHRA, and the U.K. Health Research Authority Ethics Review Committee, or the Ethics Review Committee. We enrolled 49 healthy male subjects who were between 18 and 55 years of age. Forty-seven subjects completed the clinical trial. Two subjects withdrew from the clinical trial for reasons unrelated to ezutromid.

The primary objective of the clinical trial was to determine the safety and tolerability of single and multiple oral doses of ezutromid in healthy male subjects. The secondary objectives were to determine the single and multiple oral dose pharmacokinetics of ezutromid based on the concentration of the drug in blood plasma and the effect of fasting on the single oral dose pharmacokinetics of ezutromid.

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We conducted the clinical trial in two parts. Part 1 consisted of an ascending single dose study with a fasted effect evaluation. We evaluated a total of 32 subjects, who were divided into four equal cohorts of eight subjects each. Subjects in the four cohorts received one of the following doses of ezutromid: 50 mg/kg, 100 mg/kg, 200 mg/kg or 400 mg/kg. Six subjects in each cohort received ezutromid at the specified dose, and two subjects in each cohort received placebo. Each subject in the cohort receiving ezutromid at a dose of 200 mg/kg received doses under both fasted and fed conditions, while the subjects in the other cohorts received doses under normal, fed conditions, with no special dietary rules. One subject was removed during Part 1 of the clinical trial prior to dosing in a fasted state after testing positive for drug use.

Part 2 of the clinical trial consisted of a multiple ascending dose study. We evaluated a total of 16 subjects, who were divided into two cohorts of eight subjects each. In the first cohort, six subjects received 100 mg/kg doses of ezutromid and two subjects received placebo, in each case administered twice per day for ten days. In the second cohort, six subjects received 200 mg/kg doses of ezutromid and two subjects received placebo, in each case administered twice per day for ten days.

Analysis of Trial Results

We observed the following results from this clinical trial:

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Initial Phase 1b Clinical Trial in DMD Patients (Trial 02)

In May 2014, we completed an open label, ascending single and multiple oral dose Phase 1b clinical trial of ezutromid in patients with DMD. We believe this clinical trial was the first time a utrophin modulator drug had been administered to DMD patients. We conducted this clinical trial at four sites in the United Kingdom under approval from the MHRA and the Ethics Review Committee. We enrolled 12 boys with DMD who were between five and 11 years of age.

The primary objective of the clinical trial was to determine the safety and tolerability of single and multiple oral doses of ezutromid. The secondary objectives were to determine the single and multiple oral dose pharmacokinetics of ezutromid and its metabolites in patients with DMD. In addition, an exploratory objective of the clinical trial was to quantify potential systemic activity biomarkers.

We divided the patients into three cohorts of four boys each. Patients in each of the cohorts received different doses of ezutromid for 11 days. The patients in all of the cohorts were treated in a fed state. The clinical trial protocol provided for the administration of ezutromid within ten minutes after consuming a substantial meal. Patients in the first cohort received the following doses of ezutromid:

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Patients in the second cohort received the following doses of ezutromid:

Patients in the third cohort received the following doses of ezutromid:

Analysis of Trial Results

We observed the following results from this clinical trial:

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We believe that the similarity of ezutromid plasma levels between the majority of DMD patients in this Phase 1b clinical trial and fasted healthy volunteers in our completed Phase 1 clinical trial may be due to a complex absorption profile in DMD patients that results from patients following low fat, low calorie diets. DMD patients often follow such diets due to concerns over the consequences of long-term corticosteroid use and potential resulting weight gain. In addition, we believe that other DMD disease-related factors, such as abnormal gastrointestinal physiology, may impact the absorption profile of DMD patients.

Phase 1b Modified Diet Clinical Trial (Trial 03)

In August and September 2015, we reported results from our Phase 1b modified diet trial of ezutromid in patients with DMD. This trial evaluated the formulation of ezutromid, which we refer to as the “F3” formulation, and which was derived from the earlier clinical formulations of ezutromid that were evaluated in Trial 01 and Trial 02. We

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conducted this clinical trial at four sites in the United Kingdom under approval from the MHRA and the Ethics Review Committee. We enrolled a total of 12 boys with DMD who were between five and thirteen years of age.

The primary objective of this clinical trial was to determine the pharmacokinetics of single and multiple oral doses of ezutromid in patients with DMD who followed specific dietary guidance that recommended balanced proportions of fat (30%), protein (25%) and carbohydrates (45%) and dosing with a glass of whole milk. We sought to achieve this dietary balance by requesting that patients, with support from research dietitians and the patients’ legal guardians, consume a diet containing all of the major food groups, vitamins, minerals and dietary fiber, with a daily calorie intake that is appropriate for the age and activity level of each patient. The goal of this dietary guidance was to demonstrate an increase in the level of ezutromid in blood plasma compared to the blood plasma levels we observed among DMD patients in our initial Phase 1b clinical trial. The trial protocol included a number of secondary objectives, including evaluations of the safety and tolerability of single and multiple oral doses of ezutromid; the daily variability in the steady state pharmacokinetics of ezutromid; and the levels of CK as a potential biomarker of ezutromid activity.

We divided the patients into three cohorts of four patients each. The cohorts were randomized into three sequential 14-day treatment periods during which each patient in the clinical trial received ezutromid at a dose level of 1,250 mg, ezutromid at a dose level of 2,500 mg or a placebo. All doses were administered orally with 100 mL of whole milk and with patients having consumed either breakfast or an evening meal depending on the time of day. There was a wash out period, which is a period of time during which patients received no administration of the drug, of at least 14 days between each of the treatment periods. The clinical trial was blinded as to the order in which patients received the lower dose of drug, higher dose of drug or placebo. The patients in each cohort were dosed with either ezutromid or placebo as follows:

A follow-up safety visit was conducted twelve to fourteen days after administration of the final dose in the final treatment period. Each patient received specific dietary guidance after which there was a dietary run-in period of at least one week prior to the start of the first treatment period.

Analysis of Trial Results

We observed the following results from our Phase 1b modified diet trial:

The impact of adhering to the modified diet on the absorption of ezutromid was further evidenced when we compared the results of seven patients who participated in our initial Phase 1b clinical trial in 2014 and our Phase 1b modified diet trial. All of these seven patients had increased plasma levels in the Phase 1b modified diet trial as compared to plasma levels observed in our initial Phase 1b trial. The increase in plasma levels ranged from approximately 100% to nearly 300%.

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Phase 1 Clinical Trial of Potential New Formulation of Ezutromid (Trial 04)

In August 2016, we reported top-line results from an open label, Phase 1 clinical trial of two new formulations of ezutromid. We conducted the trial at six sites in the United Kingdom under approval from the MHRA and the Ethics Review Committee.

The primary objective of the Phase 1 clinical trial was to determine the pharmacokinetics of multiple oral doses of the new formulations of ezutromid. The trial protocol included a number of secondary objectives, including evaluation of the safety and tolerability of single and multiple oral doses of the two formulations of ezutromid; to explore the effect of food to a fasting condition on the pharmacokinetics of ezutromid in healthy volunteers; and the daily variability in the steady state pharmacokinetics of ezutromid. The Phase 1 trial was divided into two parts. Part A evaluated two new formulations in healthy volunteers and Part B evaluated one of the two new formulations tested in Part A based upon the plasma concentration profile data and safety results. All doses were administered orally.

Part A

We enrolled a total of 16 healthy male volunteers between 18 to 55 years of age. There were two treatment periods each lasting five days: treatment period one evaluated one new formulation of ezutromid which we refer to as “F5” formulation, and treatment period two evaluated a different new formulation of ezutromid which we refer to as “F6” formulation.

In treatment period one, eight healthy male volunteers were administered the F5 formulation as follows:

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In treatment period two, eight healthy male volunteers were administered the F6 formulation as follows:

The morning and evening doses were separated by approximately ten to twelve hours.

Based on the plasma concentration levels achived in healthy subjects and the safety data from Part A of the trial, the F6 formulation of ezutromid was selected for further evaluation in patients with DMD in Part B of the trial.

Part B

We enrolled a total of eight patients with DMD aged between 5 and 9 years of age and treated them with the F6 formulation of ezutromid that had been tested in Part A of the clinical trial. Patients received three ascending doses over three treatment periods:

There was a wash out period of a minimum of seven days between treatment periods. Patients followed the same specific dietary guidance as we used in our Phase 1b modified diet clinical trial.

Analysis of trial results

We observed the following results from our Phase 1 clinical trial evaluating the new formulations of ezutromid:

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We plan to publish full results from our Phase 1 clinical trial evaluating new formulations of ezutromid in peer reviewed literature.

BioMarin Phase 1 Clinical Trial in Healthy Volunteers

In 2009, we assigned certain technology relating to our DMD program to BioMarin DMD Regulator Limited, or BioMarin. In 2010, BioMarin conducted a Phase 1 clinical trial of a prior formulation of ezutromid in 48 healthy adult volunteers. The clinical trial was conducted at a single site in the United Kingdom. BioMarin reported that ezutromid was well tolerated by the subjects in this clinical trial. Subjects in this trial achieved low systemic exposure of the drug, and there was variability in systemic exposure across subjects. Following this clinical trial of a prior formulation of ezutromid, BioMarin elected not to continue development of our assigned technology, citing pharmaceutical and pharmacokinetic challenges. In public statements, BioMarin indicated that it had concluded that the likelihood of achieving a therapeutic effect in DMD patients was highly unlikely. In 2010, BioMarin transferred the assets, and all commercialization rights, back to us. As described above, in our Phase 1 clinical trial of ezutromid in healthy volunteers, in which we administered ezutromid as a flavored aqueous suspension, we were able to achieve our target plasma concentrations in all subjects after multiple dosing.

Ongoing Phase 2 ‘PhaseOut DMD’ Clinical Trial

We are conducting PhaseOut DMD, an open-label trial into which we plan to enroll approximately 40 ambulatory boys between their fifth and tenth birthday inclusive who have a genetically confirmed diagnosis of DMD. The enrolled patients must be on stable doses of corticosteroids for a minimum of six months. We began conducting the trial at sites in the United Kingdom after receiving approval from the MHRA in January 2016 and in the United States after our investigational new drug application was cleared by the FDA in April 2016. We commenced enrollment at trial sites in the United Kingdom in June 2016 and at trial sites in the United States in November 2016. Based on our current estimates, we expect to complete enrollment for PhaseOut DMD in the second quarter of 2017. We have also submitted an amendment to the PhaseOut DMD clinical trial protocol to the MHRA, UK Ethics Committee and the FDA to allow the trial to be extended beyond the intial 48 weeks of dosing and to include a new safety arm.

In PhaseOut DMD, approximately 30 patients will receive the F3 formulation of ezutromid at a dose level of 2,500 mg twice daily via oral administration, and approximately ten patients will receive the F6 formulation of ezutromid at a dose level of 1,000 mg twice daily via oral administration. All patients will receive dietary guidance, consistent with that provided in our Phase 1b modified diet trial, to ensure they are receiving balanced proportions of fat, proteins and carbohydrates. At the time of dosing, patients will consume whole milk and will have also recently eaten either breakfast or an evening meal, depending on the time of day. The trial protocol specifies that there should be a gap of between eight to twelve hours between the breakfast and evening meal doses.

We have designed the PhaseOut DMD trial to evaluate the activity and safety of ezutromid and utrophin modulation and it will consist of the following four parts:

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Clinical Trial Objectives

The primary objective of our PhaseOut DMD clinical trial is to investigate changes from baseline in leg muscle health using MRI. Reports in the peer reviewed literature have shown MRI has potential as a non-invasive biomarker to measure disease progression through measurement of changes in inflammation and fat infiltration in leg muscles. This trial will monitor disease progression after treatment with ezutromid by measuring changes from baseline in levels of muscle inflammation and fat infiltration in leg muscle during the course of the 48 week trial. We will also investigate if there are any relationships between changes in leg muscle MRI with blood plasma concentrations of ezutromid, which we will measure at baseline and over the course of the trial.

We also will investigate in our PhaseOut DMD clinical trial changes in utrophin expression in muscle and muscle fiber regeneration. The muscle biopsies taken during the trial will be used to investigate changes from baseline in utrophin protein expression and changes in muscle regeneration biomarkers.

The clinical trial is also expected to investigate a number of functional measures. These will include changes from baseline in distance walked during the six minute walk test, changes from baseline in the North Star Ambulatory Assessment, changes from baseline in a 10 meter run test, and changes from baseline in performance of upper limbs. We will also monitor changes in a variety of blood biomarkers related to muscle health, including the enzyme CK, during the trial.

We believe that these objectives collectively will enable us to better understand the potential benefits of long-term dosing with the F3 and F6 formulations of ezutromid on the progression of DMD in a pediatric population. We will also seek to understand if there are any potential relationships between changes in MRI, utrophin expression, muscle fiber regeneration and other assessments of muscle function. This trial will be the longest period of time that ezutromid has been dosed in patients and will increase the amount of safety and tolerability data for ezutromid.

We expect to report 24-week biopsy data in the first quarter of 2018 for all patients in PhaseOut DMD who provide a 24-week biopsy sample. We expect this group will consist of approximately 20 patients dosed with either the F3 formulation or F6 formulation of ezutromid. We plan to report this full 24-week biopsy data instead of reporting an earlier interim biopsy analysis on the first group of patients enrolled in the trial, which we previously expected to announce in the second quarter or third quarter of 2017. We believe this revised approach

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will allow us to report more complete efficacy and safety data from PhaseOut DMD by evaluating a larger number of patients. We plan to analyze all 24-week biopsy data once all the samples have been taken. In addition, at the same time we expect to announce the 24-week biopsy data, we also expect to announce 24-week MRI and functional data analysis from all patients in the trial.

If we receive positive interim data from PhaseOut DMD, we plan to initiate a randomized, placebo controlled clinical trial of ezutromid. We anticipate that this trial will be designed with the potential to support accelerated regulatory approval in the United States and conditional approval in the European Union. We expect to provide an update on timing for the start of this randomized, placebo controlled clinical trial following the release of the 24-week interim dataset from PhaseOut DMD. In addition, a separate confirmatory clinical trial designed to support full regulatory approvals of ezutromid in major territories is also expected to be conducted.

Ezutromid Preclinical Studies

We have conducted a broad preclinical program for ezutromid in collaboration with Professor Kay Davies and her research group at the University of Oxford. The preclinical program consists of in vitro and in vivo studies designed to support the potential of ezutromid to modulate the expression of utrophin protein. The following is a summary of key observations from studies completed to date:

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Our Pipeline of Future Generation Utrophin Modulators

We plan to apply and enhance our existing knowledge, experience and proprietary rights to maintain and expand our leadership in the field of utrophin modulation. Our co-founder and scientific advisor, Professor Kay Davies at the University of Oxford, discovered utrophin and then developed the concept of utilizing utrophin modulation as a treatment potentially applicable to all DMD patients. Our DMD program was founded to develop and commercialize drugs to treat DMD using this approach. Our intellectual property estate for ezutromid for the treatment of DMD includes composition of matter patents granted in major territories, including the United States and Europe. We plan to apply and enhance our existing knowledge, experience and proprietary rights to maintain and expand our leadership in the field of utrophin modulation. In addition to the F3 and F6 formulations of

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ezutromid, we are currently pursuing novel, future generation utrophin modulators, some of which may have potential new utrophin-related mechanisms, that we are developing in collaboration with the University of Oxford.

We were previously pursuing internally developed second generation utrophin modulators that are structurally related to ezutromid, but designed to include improved pharmacokinetic properties and achieve higher plasma levels of drug at lower doses. However, in September 2016, we announced that the development of our second generation utrophin modulators would be placed on hold due to the substantial increase in ezutromid plasma levels achieved with the F6 formulation of ezutromid in our recently completed Phase 1 trial. We are now focusing on advancing the F3 and F6 formulations of ezutromid and our preclinical future generation utrophin modulators.

Strategic Alliance with the University of Oxford

In November 2013, as part of our program for the development of additional utrophin modulators, we formed a strategic alliance with the University of Oxford. Under this alliance, we acquired an exclusive option to license intellectual property that is generated as part of our research in utrophin modulation as part of the alliance. We announced in November 2015 a multi-year extension of the strategic alliance with the University of Oxford that will run until November 2019, with an option to extend it for a further 12 months. The goal of our collaboration with the University of Oxford is to identify and develop future generations of novel utrophin modulators that will include new mechanisms that could complement ezutromid and our second generation modulators. In December 2015, we reported achievement of the first research milestone as part of the collaboration with the nomination of two series of utrophin modulators for progression into lead optimization studies. These two series of compounds are structurally distinct from ezutromid, with one series having a potential new utrophin modulation mechanism that appears to be distinct from ezutromid.

Biomarker Program

We believe that the development of new biomarkers could play an important role in furthering our understanding of the potential benefits of utrophin modulators in treating DMD. A biomarker is a measurable biological or chemical change that is believed to be associated with the severity or presence of a disease or other physiological state of an organism. We expect our biomarkers will be related to the mechanism of utrophin modulation and will examine other aspects of muscle health, including inflammation and muscle fiber regeneration. Our biomarker program includes the following:

We are collaborating with the specialist biomarker development company Flagship Biosciences Inc., or Flagship, on the development of automated, digital analysis tools to allow for the precise and reproducible measurement of utrophin expression and levels of muscle fiber regeneration. We presented interim results from this research at the 21 ^st International Congress of the World Muscle Society in October 2016. We believe that the development of these tools will have an important role in helping to further our understanding of the potential benefits of utrophin modulator therapies, including ezutromid, and we expect to use these tools in analyzing the muscle biopsies in our PhaseOut DMD clinical trial. Our collaboration with Flagship builds on a manual quantification approach that we developed with research groups at the Institute of Child Health at University College London. Data from our collaboration was published in the peer reviewed literature in March 2016.

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Clostridium difficile Infection Overview

Clostridium difficile Infection is a bacterial infection of the colon that produces toxins causing inflammation of the colon and severe diarrhea. CDI can also result in more serious disease complications, including pseudomembranous colitis, bowel perforation, toxic megacolon and sepsis. CDI represents a serious healthcare issue in hospitals, long-term care homes and, increasingly, in the wider community. We estimate there are over one million cases of CDI each year in the United States and Europe, based on an epidemiology report on CDI that was published in 2015 by Decision Resources, a healthcare research and consulting company. In addition, CDI is responsible for approximately 29,000 deaths per year in the United States, according to a study published in the New England Journal of Medicine in 2015. A separate study published in 2012 in Clinical Microbiology and Infection , a peer reviewed journal published by the European Society of Clinical Microbiology and Infectious Diseases, indicated that CDI may be underdiagnosed in approximately 25% of cases. A study published in The Journal of Hospital Infection , a peer reviewed journal published by the Healthcare Infection Society, reported that CDI is two to four times more common than hospital associated infections caused by methicillin-resistant Staphylococcus aureus , a bacterium frequently associated with such infections. The Healthcare Cost and Utilization Project, a family of databases developed through a federal-state-industry partnership sponsored by the Agency for Healthcare Research and Quality of the U.S. Department of Health and Human Services, reported an approximate 3.5 fold increase in hospital stays associated with CDI between 2000 and 2008. The economic impact of CDI is significant. A study published in 2012 in Clinical Infectious Diseases estimated that acute care costs total $4.8 billion per year in the United States alone.

CDI originates from a bacterium known as Clostridium difficile , or C. difficile . C. difficile sometimes can be a harmless resident of the gastrointestinal tract. The complex community of microorganisms that make up the natural gut flora usually moderates levels of C. difficile . The natural gut flora are an essential part of the normal function of the gastrointestinal tract and also have wide implications to human health, such as the proper function of the immune system. CDI typically develops following the use of broad spectrum antibiotic agents that can cause widespread damage to the natural gut flora and allow overgrowth of C. difficile . Hypervirulent C. difficile strains have also emerged and are frequently associated with more severe disease. In the United States, the hypervirulent strain, ribotype 027, accounts for approximately one-third of all CDI cases.

The primary clinical issue with CDI is disease recurrence. This is in contrast to other bacterial threats for which drug resistance is the principal concern. According to an article published in 2012 in the peer reviewed journal Clinical Microbiology and Infection , up to 25% of patients with CDI suffer a second episode of the infection. The risk of further recurrence rises to 65% after a patient suffers a third episode of CDI. In addition, each episode of recurrent disease is associated with greater disease severity and higher mortality rates. Recurrent disease is associated with an increased burden on the healthcare system.

In 2013, the CDC highlighted CDI as one of three pathogens that pose an immediate public health threat and require urgent and aggressive action. In 2012, the Generating Antibiotics Incentives Now Act provisions of the FDA Safety and Innovation Act, or GAIN, became law. The goal of GAIN is to encourage the development of new antibiotics that treat specific pathogens, including C. difficile , which cause serious and life threatening infections.

Current CDI Treatments

Existing treatment options for CDI are limited. The current standard of care for CDI is treatment with vancomycin or off label use of metronidazole, both of which are broad spectrum antibiotics. Although these antibiotics reduce levels of C. difficile , both also cause significant collateral damage to the gut flora as a result of their broad spectrum of activity. This collateral damage to the gut flora leaves patients vulnerable to recurrent CDI. A review published in 2012 in the peer reviewed journal International Journal of Antimicrobial Agents reported recurrence rates of 24.0% for vancomycin and 27.1% for metronidazole. Metronidazole is frequently used in mild or moderate cases of CDI and has been associated with a number of side effects. A narrower

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spectrum antibiotic fidaxomicin was approved in the United States and the European Union, but it has not been shown to be superior to vancomycin in the treatment of patients with the hypervirulent strain ribotype 027. In October 2016, the FDA approved bezolotoxumab, a monoclonal antibody for use in conjunction with an antibiotic in patients who have a high risk of disease recurrence. Bezolotoxumab binds to toxin B, one of the toxins produced by the C. difficile bacteria, to neutralize its effects.

Ridinilazole for the Treatment of CDI

We are developing ridinilazole as an orally administered small molecule antibiotic for the treatment of CDI. Ridinilazole is designed to selectively target C. difficile bacteria without causing collateral damage to the gut flora and thereby reduce CDI recurrence rates. The active ingredient in ridinilazole is a bis-benzimidazole tetrahydrate. We believe, based on preclinical studies conducted to date, that ridinilazole is part of a novel structural class of antibiotics that is distinct from the major classes of marketed antibacterials.

In November 2015, we reported top-line results from our double blind, randomized, active controlled Phase 2 clinical trial that evaluated ridinilazole compared to the current standard of care, vancomycin, for the treatment of CDI. The Phase 2 clinical trial exceeded its primary endpoint of non-inferiority, with ridinilazole achieving statistical superiority over vancomycin in sustained clinical response, or SCR. The statistical superiority was driven by a large numerical reduction in recurrent disease compared with vancomycin. We subsequently reported that data from our Phase 2 clinical trial also showed ridinilazole to be highly preserving of the gut microbiome compared to patients who received vancomycin and experienced substantial damage to the gut microbiome which for many patients persisted during the 30-day post-treatment period. Ridinilazole was well tolerated at all doses tested in our completed Phase 1 and Phase 2 clinical trials. Activities to prepare ridinilazole for Phase 3 clinical trials continue, and we plan to commence these trials in the first half of 2018. We are currently exploring funding options for the Phase 3 clinical development program for ridinilazole and various options to maximize the value of ridinilazole, including potentially entering into a collaboration with a third party or securing meaningful non-dilutive funding from government entities and philanthropic, non-government and not for profit organizations.

In February 2015, we initiated an exploratory, open label, active controlled Phase 2 clinical trial evaluating ridinilazole compared to fidaxomicin for the treatment of CDI. Enrollment and dosing of patients is complete, and we expect to report top-line results from this clinical trial in the second quarter of 2017. We expect the results of this clinical trial will help to inform the commercial positioning of ridinilazole. The FDA has designated ridinilazole as a qualified infectious disease product, or QIDP. The QIDP incentives are provided through GAIN. The QIDP designation provides for priority review by the FDA, eligibility for “fast track” status and extension of statutory exclusivity periods in the United States for an additional five years upon FDA approval of the product for the treatment of CDI. The FDA granted fast track designation to ridinilazole in July 2015.

Ridinilazole Clinical Development

Phase 1 Clinical Trial in Healthy Volunteers

In 2013, we completed a randomized, partially blind, placebo controlled Phase 1 clinical trial of ridinilazole in healthy volunteers. We conducted this clinical trial at a single site in the United Kingdom under approval from the MHRA and the Ethics Review Committee. We enrolled 56 healthy male subjects in the clinical trial who were between 18 and 55 years of age. The primary objective of the clinical trial was to determine the safety and tolerability of single and multiple ascending oral doses of ridinilazole. The secondary objectives included determining the single and multiple oral dose pharmacokinetics of ridinilazole, assessing the effect of food on systemic exposure of ridinilazole and assessing the effect of multiple oral doses of ridinilazole on gut flora.

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We conducted the clinical trial in two parts. Part 1 consisted of an ascending single dose study and a food effect evaluation study. In Part 1, we evaluated a total of 40 subjects, divided into the following six cohorts:

Part 2 of the clinical trial consisted of a multiple dose study. In Part 2, we evaluated a total of 16 subjects, who were divided into the following two cohorts:

Analysis of Trial Results

We observed the following results in this clinical trial:

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Phase 2 Clinical Trial in Patients with CDI

In November 2015, we reported top-line results from our randomized, double blind, active controlled, multicenter, Phase 2 clinical trial of ridinilazole in patients with CDI, and we presented additional data during 2016. We have referred to this as our Phase 2 proof of concept clinical trial and as “CoDIFy.”

We conducted this clinical trial at approximately 35 sites in the United States and Canada. The trial was conducted under an Investigational New Drug Application, or IND, that we submitted to the FDA in January 2014. We enrolled a total of 100 patients between 18 to 90 years of age. The trial randomized patients in a one-to-one ratio to receive either a 200 mg dose of ridinilazole administered twice per day for ten days or a 125 mg dose of vancomycin administered four times per day for ten days. Patients who received ridinilazole were also administered a placebo twice a day for ten days to ensure the trial remained blinded.

The primary objective of this clinical trial was to evaluate the efficacy of ten days of dosing with ridinilazole compared to treatment with vancomycin. The primary efficacy endpoint was non-inferiority on sustained clinical response, or SCR, which is defined as clinical cure based on the resolution of diarrhea at the test of cure, or TOC, visit on day 12 and no recurrence of CDI within 30 days after the end of treatment. The secondary efficacy endpoints were investigator assessed clinical response at the TOC visit and rate of recurrence of CDI within 30 days after the end of treatment. Secondary objectives of this clinical trial were the assessment of the safety and tolerability of ten days of dosing of ridinilazole compared to vancomycin, the plasma and fecal concentrations of ridinilazole in patients with CDI who received ridinilazole and the health status of CDI patients who received ten days of treatment of ridinilazole compared to patients who received ten days of treatment of vancomycin. We also assessed the impact of ridinilazole on the gut flora of patients in the clinical trial as one of a number of exploratory objectives.

Analysis of Results

We observed the following results in our Phase 2 proof of concept trial:

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Ongoing Phase 2 Exploratory Clinical Trial of Ridinilazole Compared to Fidaxomicin

We have completed treatment in our randomized, open label, active controlled, multicenter Phase 2 clinical trial evaluating ridinilazole compared to fidaxomicin for the treatment of CDI. This clinical trial is designed to generate data comparing ridinilazole to fidaxomicin, a CDI antibiotic launched in 2011, and we expect the results of this clinical trial will help to inform the commercial positioning of ridinilazole. We conducted this clinical trial at sites in the United Kingdom, Europe and the United States, enrolling approximately 30 patients between 18 and 90 years of age. We randomized patients in a one-to-one ratio to receive either a 200 mg dose of ridinilazole administered twice per day for ten days or a 200 mg dose of fidaxomicin administered twice per day for ten days. We expect to report top line data from this clinical trial in the second quarter of 2017.

The primary efficacy objective of clinical this trial is to determine the safety and tolerability of ten days of dosing with 200 mg of ridinilazole compared to dosing with 200 mg of fidaxomicin. The secondary objectives of the clinical trial are to assess the following:

The measurement of efficacy will be based on investigator assessed clinical response at the TOC visit, with clinical cure defined as resolution of diarrhea while on treatment and maintained at the TOC visit, and sustained clinical response, defined as clinical cure at the TOC visit and no recurrence of CDI within 30 days after the end of treatment.

Phase 3 Clinical Trial Program

In February 2017, we outlined our plans for the Phase 3 development program of ridinilazole following an end of Phase 2 meeting with the FDA and a scientific advice process with the EMA. We expect to conduct two Phase 3 clinical trials evaluating ridinilazole compared to the standard of care antibiotic, vancomycin, with each trial expected to enroll approximately 700 patients with CDI. The primary endpoint of the Phase 3 clinical trials is expected to be superiority in SCR. Other planned endpoints include health economic outcome measures. The Phase 3 clinical trial designs are consistent with the successful proof of concept Phase 2 clinical trial of ridinilazole. Activities to prepare ridinilazole for Phase 3 clinical trials continue, and we plan to commence these trials in the first half of 2018. However, we do not expect to be able to complete these trials without significant

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additional capital. We are currently exploring funding options for the Phase 3 clinical development program for ridinilazole and various options to maximize the value of ridinilazole, including potentially entering into a collaboration with a third party or securing meaningful non-dilutive funding from government entities and philanthropic, non-government and not for profit organizations.

CDI Preclinical Data

In a range of preclinical studies, ridinilazole demonstrated an encouraging profile as a potential antibiotic for the treatment of initial CDI and reduction of CDI recurrence. The following is a summary of key observations from these studies:

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Profile of Selectivity of Ridinilazole vs. Other CDI Antibiotics

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Our Collaborations and Funding Arrangements

Sarepta Therapeutics, Inc.

In October 2016, we entered into an exclusive license and collaboration agreement with Sarepta, pursuant to which we granted Sarepta the exclusive right to commercialize products in our utrophin modulator pipeline in the European Union, Switzerland, Norway, Iceland, Turkey and the Commonwealth of Independent States, which we refer to as the licensed territory. Such products include ezutromid and our future generation of small molecule utrophin modulators, which we refer to as licensed products. We also granted Sarepta an option to expand the licensed territory to include certain specified countries in Central and South America. We retain commercialization rights in the rest of the world.

Financial Terms

Under the terms of the license and collaboration agreement, we received an upfront payment of $40.0 million from Sarepta. In addition, we are eligible to receive up to $42.0 million from Sarepta in specified development milestones for ezutromid, including a $22.0 million milestone, payable on or after April 1, 2017, following the

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first dosing of the last patient in PhaseOut DMD, and up to $150.0 million from Sarepta in specified regulatory milestones related to ezutromid in the licensed territory. We are also eligible to receive up to $65.0 million in specified development milestones and up to $225.0 million in specified regulatory milestones from Sarepta for our future generation small molecule utrophin modulators in the licensed territory. In addition, we are also eligible to receive up to $330.0 million from Sarepta in specified sales milestones on a product-by-product basis, as well as tiered, escalating royalties ranging from a low to high teens percentage of net sales on a product-by-product basis in the licensed territory. The royalties are subject to potential reductions, including for a specified portion of royalty payments that Sarepta may become required to pay under any third-party license agreements, subject to a maximum royalty reduction.

Research and Development Obligations

Under the license and collaboration agreement, we have agreed to collaborate with Sarepta on the research and development of the licensed products pursuant to a joint development plan through a joint steering committee comprised of an equal number of representatives from each party. Sarepta has the final decision making authority with respect to commercialization decisions of the licensed products in the licensed territory. If the joint steering committee elects not to pursue development of a second generation or future generation small molecule utrophin modulator candidate, then we may engage, under certain circumstances, in the development of such candidate for commercialization outside of the licensed territory and outside of the agreement, subject to Sarepta’s option, exercisable at Sarepta’s discretion and only available to Sarepta under certain specified circumstances, to bring such candidate under the license and collaboration agreement.

Under the license and collaboration agreement, we are solely responsible for all research and development costs for the licensed products until December 31, 2017. Thereafter, we will be responsible for 55.0% of the budgeted research and development costs related to the licensed products in the licensed territory, and Sarepta will be responsible for 45.0% of such costs. Any costs in excess of 110.0% of the budgeted amount are borne by the party that incurred such costs. We are also obligated to spend a specified minimum amount on the research and development of certain licensed products prior to the end of 2019.

Manufacture and Supply of Licensed Products

We have agreed to use commercially reasonable efforts to supply to Sarepta active pharmaceutical ingredient, finished drug product and placebo for Sarepta to conduct research, development and commercialization activities for the licensed products in accordance with the license and collaboration agreement. Sarepta also will have the right to establish back up and second source suppliers under certain circumstances.

Intellectual Property

Under the terms of the license and collaboration agreement, each party will own the entire right, title and interest in and to all know-how and patent rights first made or invented solely by the employees or consultants of such party in the course of the collaboration, and all such know-how and patent rights will be included in the licenses granted to the other party under the license and collaboration agreement. The parties will jointly own all rights, title and interests in and to all know-how and patent rights first made or invented jointly by employees or consultants of the parties in the course of the collaboration.

Latin America Option

Under the license and collaboration agreement, Sarepta has an exclusive option, which we refer to as the Latin America Option to expand the licensed territory to include specified countries in South and Central America, which we refer to as the Option Territory. Sarepta may exercise the Latin America Option at any time prior to the date that is three months following the first receipt of regulatory approval for a licensed product in the United States or the European Union. We are eligible to receive from Sarepta up to an aggregate of

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$17.0 million for the exercise of the Latin America Option and the achievement of certain regulatory milestones. If Sarepta exercises the Latin America Option, it will be solely responsible for all research, development and commercialization costs of the licensed products that are specific to the Option Territory. We are also be eligible to receive up to $82.5 million in specified sales milestones on a product-by-product basis in the Option Territory, as well as royalties at the same rates as elsewhere in the licensed territory.

Commercialization

Under the license and collaboration agreement, Sarepta will be solely responsible for all commercialization activities and associated costs, relating to licensed products in the licensed territories. Sarepta has agreed to use commercially reasonable efforts to commercialize licensed products in specified countries within the licensed territories and, if the Latin America Option is exercised, to use commercially reasonable efforts to commercialize licensed products in certain specified countries within the Option Territory.

Termination Provision

Unless earlier terminated, the license and collaboration agreement will expire on a licensed product-by-licensed product and country-by-country basis upon the expiration of the royalty term in such country for such licensed product. The license and collaboration agreement may be terminated by Sarepta upon six months’ prior written notice in its entirety or on a licensed product-by-licensed product and country-by-country basis. Either party may, subject to a cure period, terminate the license and collaboration agreement in the event of the other party’s uncured material breach. Sarepta may also terminate the license and collaboration agreement under specified circumstances relating to the safety or regulatory approvability of ezutromid. Except with respect to a second generation or future generation small molecule utrophin modulator candidate that the joint steering committee elects not to pursue, as described above, during the term of the license and collaboration agreement the parties are prohibited from commercializing small molecule utrophin modulators anywhere in the world outside of the collaboration. Such exclusivity commitment may survive for one year following termination with respect to one party depending upon the circumstances of termination.

Standstill Provision

The license and collaboration agreement also contains a standstill provision pursuant to which, among other things, each party has agreed that, for a period from the execution of the license and collaboration agreement until the date that regulatory approval is first received for a licensed product, subject to certain exceptions, or unless invited in writing by the other party to do so, neither party nor its respective affiliates will, directly or indirectly: (i) effect or seek, offer or propose to effect, or cause or participate in any acquisition of securities or assets of the other party; any tender or exchange offer, merger, consolidation or other business combination involving the other party; any recapitalization, restructuring, liquidation, dissolution or other extraordinary transaction with respect to the other party; or any “solicitation” of “proxies” or consents to vote any voting securities of the other party, or in any way advise or, assist any other person in doing so; (ii) form, join or in any way participate in a “group” with respect to any securities of the other party; (iii) act in concert with any person in relation to voting securities of the other party; (iv) otherwise act to seek to control or influence the management, board of directors or policies of the other party; (v) take any action reasonably expected to force the other party to make a public announcement regarding any such matters; or (iv) enter into any agreements, discussions or arrangements with any third party with respect to any of the foregoing.

University of Oxford

In November 2013, we acquired all of the outstanding equity of MuOx Limited, or MuOx, a spin out of the University of Oxford founded by Professors Stephen Davies and Kay Davies. MuOx is our wholly owned subsidiary. In connection with that acquisition, we and MuOx entered into a set of agreements with the University of Oxford and its technology transfer division, Isis Innovation Limited, or Isis, which is now known

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as Oxford University Innovation Limited, regarding the development of small molecule utrophin modulators. In November 2015, this set of agreements were extended through November 2019, with an option to extend for a further twelve months.

Research Sponsorship

We have agreed to fund a drug research and discovery program in the University of Oxford laboratories to identify and research utrophin modulators to treat DMD. The University of Oxford is responsible for conducting this program. Isis has no obligations under the research sponsorship agreement. We refer to the agreement that governs our research sponsorship with the University of Oxford, which we, the University of Oxford and Isis entered into in November 2013, amended and restated in July 2014 and amended in November 2015, as the research sponsorship agreement. Under the research sponsorship agreement, we have agreed to fund up to £4.3 million over a six-year research period ending in November 2019. If we exercise our right to extend the research period by an additional year, we have agreed to fund an additional £0.8 million, for a total of £5.2 million. As of January 31, 2017, we had paid the University of Oxford £2.1 million of this amount.

The University of Oxford will own all intellectual property arising from the sponsored research, and we have agreed to assign to the University of Oxford any intellectual property arising from the sponsored research that either we or third parties whom we engage, may create, subject to our exercise of an option to obtain an exclusive license under the intellectual property arising from the sponsored research, as described below.

Either we or the University of Oxford would have the right to terminate the research sponsorship agreement for specified reasons, including the other party’s insolvency or material breach, if the breach remains uncured for a specified period or is uncurable, or our mutual determination, at specified times, that there are valid scientific reasons for terminating the project. The University of Oxford may also terminate the research sponsorship agreement if we default on more than one payment obligation and do not remedy the failure within a specified period after receiving notice. We may also terminate the research sponsorship agreement, after a specified period of time if any of the principal investigators is unable or unwilling to continue supervising the sponsored research and the successor proposed by the University of Oxford is not acceptable to us on reasonable and substantial grounds.

License of Know-How

In November 2013, Isis executed a know-how license agreement with MuOx. We refer to the agreement, which was amended in July 2014 and March 2017, as the know-how license agreement. In the know-how license agreement, Isis granted MuOx a license under specified know-how, consisting of data and other information associated with specified utrophin modulators and biological screening technology, and all intellectual property rights pertaining to the specified know-how, to research, develop, make, have made, use, have used, import, have imported, export, have exported, and market the licensed know-how and products or processes resulting from the licensed know-how. The know-how license agreement was novated to us in March 2017. We refer to the know-how specified in the know-how license agreement, as Oxford’s background know-how. Our rights under Oxford’s background know-how in the specified utrophin modulators are exclusive and sublicenseable. Our rights under Oxford’s background know-how in the biological screening technology were initially exclusive, but became non-exclusive in November 2016. In March 2017, we amended the know-how license agreement to extend our rights under Oxford’s background know-how for certain biological screening technologies to November 2019, subject to an option to extend for a further twelve months. We paid to Isis a nominal amount upon its entry into the amendment in March 2017 and, pursuant to the amendment, agreed to pay to Isis additional nominal amounts annually for the term of the exclusive license period, provided the amounts payable in the final year of the exclusive license period shall only be payable if we further extend the term of the exclusive license. Our rights under the know-how license agreement are sublicenseable with Isis’ consent, which may not be unreasonably withheld. Our rights are also subject to the rights of the University of Oxford, the Muscular Dystrophy Association and the Muscular Dystrophy Campaign, and their respective employees,

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students and agents, to use and publish Oxford’s background know-how for specified scholarly and academic research and teaching purposes. We have agreed to use commercially reasonable efforts to develop, exploit and market Oxford’s background know-how or any compound deriving from Oxford’s background know-how.

The know-how license agreement will remain in effect at least until November 2019 with respect to the biological screening technology know-how, and otherwise, with respect to each of the compound or biological screening technology know-how, as long as we or our sublicensees are using commercially reasonable efforts to research and develop compounds derived from that know-how. Either we or Isis would have the right to terminate the know-how license agreement if the other party materially breaches the know-how license agreement and the breach remains uncured for a specified period or is uncurable. We may terminate the know-how license agreement at our discretion by giving Isis six months’ prior written notice. Isis may terminate the know-how license agreement on thirty days’ notice if we fail to use commercially reasonable efforts to exploit Oxford’s background know-how and do not remedy such breach within a specified time, or immediately, if we take specified actions relating to winding up or experience certain insolvency-related events.

Exclusive Option Rights

We refer to the intellectual property rights arising under the research sponsorship agreement, or arising from research and development of small molecule utrophin modulation conducted by or under the supervision of certain University of Oxford scientists, that is created or reduced to practice after November 2013 and within a specified time after the expiration or termination of the research sponsorship agreement, as arising IP. Under an option agreement that we, the University of Oxford and Isis entered into in November 2013 and amended in November 2015, which we refer to, as amended, as the option agreement, Isis granted us an exclusive option to license the arising IP. We paid Isis £10,000 in connection with entering into the amendment to the option agreement. We may exercise the option within specified periods.

In connection with entering into the initial option agreement, we paid Isis an option fee of a specified amount and issued to Isis warrants to purchase up to 354,090 of our ordinary shares at a purchase price of £0.20 per ordinary share. In connection with the November 2015 amendment, we extended the period during which Isis may exercise such options to February 2020. The warrants may be exercised based on the achievement of certain research, development and regulatory milestones. In November 2015, we announced the nomination of two series of new utrophin modulators for progression into lead optimization studies to achieve the first research milestone. This entitled Isis to subscribe for 50,000 new ordinary one penny shares at an exercise price of 20 pence per share during the three month period starting November 22, 2016, all of which were exercised in February 2017.

If we exercise our option to obtain a license under arising IP, we would be obligated to pay Isis up to a specified sum in option exercise fees, and Isis will use reasonable efforts to enter into a license agreement as quickly as possible, subject to Isis obtaining all necessary intellectual property assignments and conducting its internal due diligence procedures.

For any arising IP for which we have exercised the option and that comprises new chemical entities or compounds, which we refer to as optioned compounds, we would obtain an exclusive, sublicenseable license. We are obligated to pay milestone payments of up to £75,000 upon the achievement of specified development milestones, whether such milestones occur prior to or after our exercise of the option to obtain an exclusive sublicenseable license. Following exercise of such an option we would also be obligated to pay milestone payments upon the achievement of specified regulatory milestones with respect to each optioned compound. The specified regulatory milestone payment is due each time the specified regulatory milestone is achieved with respect to an optioned compound and, if each optioned compound achieved each regulatory milestone once, we would be obligated to pay Isis a total of £3.7 million in regulatory milestone payments for each optioned compound.

We would also be obligated to pay Isis a low single digit royalty of net sales by us, our affiliates or sublicensees of any product containing an optioned compound, which we refer to as a licensed product, subject to specified

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reductions. Our obligation to pay the royalty would expire on the later of the expiration of the last valid claim of any licensed patent or patent application claiming the licensed product or 20 years after the date on which we enter the license agreement. We would also be obligated to pay Isis a low single digit percentage of any payments we receive in connection with granting a sublicense under the licensed arising IP.

If we funded the development of the arising IP for the optioned compounds, through our funding under the research sponsorship agreement or by funding work at contract research organizations prior to the creation of the arising IP, then the milestone and royalty payments will be reduced to reflect the value that our funding delivered to the arising IP. We and Isis would negotiate such adjustment in good faith. If we and Isis are unable to agree, an expert will be appointed to make the determination.

For any arising IP for which we have exercised the option and that does not comprise new chemical entities or compound, which we call enabling IP, we would obtain an exclusive license, which we could sublicense with Isis’ prior written consent, not to be unreasonably withheld, delayed or conditioned. We and Isis would negotiate the milestone payments and any other payments that we would be obligated to pay to Isis with respect to enabling IP. If we and Isis are unable to agree, an expert will be appointed to make the determination.

Any license granted to us under arising IP would be subject to the rights of the University of Oxford, and any person who at any time worked on the licensed arising IP, to use and publish the arising IP for specified scholarly and academic research and teaching purposes. We would also be obligated to use commercially reasonable efforts to develop, exploit and market the arising IP licensed to us.

The license agreement would remain in effect as long as we are using commercially reasonable efforts to develop and market the licensed products, unless terminated earlier by us or Isis, or extended by mutual agreement. Either we or Isis would be permitted to terminate the license agreement at any time if the other party materially breaches the license agreement and the breach remains uncured for a specified period or the breach is uncurable. We would be permitted to terminate the license agreement for any reason after it has been in effect for three years upon giving six months’ prior written notice. Isis would be permitted to terminate the license agreement if we challenge the validity of the licensed patents or patent applications or if we claim that we are no longer obligated to make payments to Isis under the license agreement because the know-how is unnecessary, or if we take specified actions relating to winding up or experience certain insolvency-related events. Upon termination of the license agreement, we would be obligated to grant Isis an irrevocable, transferable, non-exclusive license to develop, make, have made, use and market any improvements made by us during the option period, and related intellectual property rights, subject to the payment of a reasonable royalty.

The option agreement will remain in effect until a specified period of time, sufficient for us and Isis to enter into the license agreement, after our rights to exercise the options terminate, unless the option agreement is terminated earlier by either Isis and the University of Oxford, or us. Either we, or Isis and the University of Oxford, may terminate the option agreement at any time if the other materially breaches the option agreement and the breach remains uncured for a specified period or the breach is uncurable, or if the other becomes insolvent. We may also terminate the option agreement, effective on each anniversary of the effective date of the option agreement, by giving 60 days’ prior written notice to Isis and the University of Oxford.

Wellcome Trust

In October 2012, we entered into a translation award funding agreement with the Wellcome Trust Limited, as trustee of the Wellcome Trust, in order to support a Phase 1 and a Phase 2 clinical trial of ridinilazole for the treatment of CDI. We refer to the translation award funding agreement as the translation award agreement. Under the translation award agreement, we were eligible to receive up to £4.0 million from the Wellcome Trust, of which we have received the entire £4.0 million. The translation award agreement followed a funding agreement we and the Wellcome Trust entered in October 2009, which we refer to as the discovery award agreement, under which we received £2.3 million for preclinical development of CDI antibiotics. We refer to any compound or

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product that is covered by intellectual property rights created under the discovery award agreement or the translation award agreement, or that is covered by intellectual property rights that we created or to which we had rights prior to October 2009 and that relate to the activities under the discovery award agreement or the translation award agreement, as the award products. We have agreed to use commercially reasonable efforts to achieve certain development milestones by specified dates.

Development and Commercialization Obligations

Under the translation award agreement, we may, subject to the Wellcome Trust’s prior written consent, which will not be unreasonably withheld or delayed, conduct the development and commercialization of award products. We may conduct these activities, which we refer to as exploitation, ourselves or through our affiliates, licensees and third-party collaborators. We refer to any intellectual property rights associated with the exploitation as exploitation IP. The Wellcome Trust’s consent is contingent on the establishment of a revenue sharing agreement that incorporates the financial terms of the translation award agreement. We are required to ensure that any results generated by a third party with whom we collaborate or subcontract will be deemed exploitation IP.

If we or our licensees do not develop or commercialize any exploitation IP in specified markets or specified indications within specified timeframes, the Wellcome Trust is permitted to conduct exploitation of the exploitation IP in those markets or indications. If the Wellcome Trust exercises its exploitation right, we would license or assign to it the appropriate exploitation IP and grant it non-exclusive, royalty-free licenses to our related background intellectual property, and we would be entitled to receive a portion of the net revenue received by the Wellcome Trust from exercise of its exploitation rights.

We may not allow a lien to be imposed on the exploitation IP or on any intellectual property rights licensed to us that we used for the clinical trials funded by the Wellcome Trust, except for certain liens arising in the ordinary course of business. We may also not make any material change to the general nature of our business without consent from the Wellcome Trust.

Financial Terms

Under the terms of the translation award agreement and the terms of the revenue sharing agreement we would enter into with the Wellcome Trust to permit our exploitation of the exploitation IP or award products, the Wellcome Trust is entitled to a share of the cumulative net revenue that we, our affiliates, licensees or third party collaborators receive from exploiting the exploitation IP or award products. The Wellcome Trust would be eligible to receive a tiered portion of the net revenue, ranging from a mid-single digit percentage up to a mid-twenties percentage. Under the translation award agreement, if we, the Wellcome Trust or a third party contributes funding to further develop the exploitation IP or award products, we and the Wellcome Trust will negotiate in good faith modifications to the net revenue sharing percentage to reflect changes in our respective proportionate development costs for award products. If we and the Wellcome Trust are unable to agree, an expert will be appointed to make the determination. We also agreed not to accept funding to complete the Phase 2 clinical trial, without the Wellcome Trust’s consent, if such funding would materially prejudice the Wellcome Trust’s net revenue sharing or exploitation rights. In addition, we would be obligated to pay the Wellcome Trust a milestone in a specified amount if cumulative net revenue exceeds a specified amount.

The revenue sharing agreement would last until the latest of the expiration of the last patent or patent application covering any invention arising out of our activities under the research and clinical trials funded by the Wellcome Trust or the expiration of any agreement or payment obligations relating to exploitation of the intellectual property rights arising out of our activities under the research and clinical trials funded by the Wellcome Trust under the translation award agreement. Either we or the Wellcome Trust would have the right to terminate the revenue sharing agreement if the other party materially breaches the revenue sharing agreement and the breach remains uncured for a specified period or the breach is uncurable, if the other party experiences specified insolvency related events, or if the translation award agreement expires or is terminated.

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If we are obligated to withhold tax on the amounts payable to the Wellcome Trust, we agree to pay the Wellcome Trust a greater amount, such that the Wellcome Trust receives the same amount after the withholding as it would have received without such deduction.

We would be required to make a full or partial repayment to the Wellcome Trust of the funding we received under the translation award agreement, plus accrued interest, under specified conditions, including our unauthorized use of the award amount, our fraudulent or willful misconduct, our knowingly withholding material information from the Wellcome Trust, or an acquisition by certain third parties of all or a material part of our business or assets or of a majority of our equity. Upon such a full repayment, our obligation to share a portion of net revenue with the Wellcome Trust would terminate.

Termination

Unless earlier terminated by the Wellcome Trust, the translation award agreement will terminate on the earlier of our full repayment of the award amount, plus accrued interest, to the Wellcome Trust following its request for repayment, or the expiration of all payment obligations under the translation award agreement and the revenue sharing agreement. The Wellcome Trust may terminate the translation award agreement for specified reasons, including our material breach or insolvency related events or the Wellcome Trust’s determination that the clinical trials should be terminated due to a serious failure in the progress, management or conduct of the clinical trials, if we do not remedy such condition within a specified period after receiving notice.

Assignment

We may not, without the Wellcome Trust’s prior consent, assign, transfer or declare a trust over the translation award agreement or otherwise dispose of any of our rights or obligations under the translation award agreement, with such consent not being unreasonably withheld, delayed or conditioned, other than an assignment to our affiliates.

Muscular Dystrophy Association

In December 2011, we entered into a grant agreement with the Muscular Dystrophy Association, Inc., or MDA, a not for profit corporation based in New York, in order to partially fund a Phase 1 clinical trial of ezutromid to treat DMD. We refer to this grant agreement with MDA as the MDA grant agreement. To date, we have received the entire amount of MDA’s grant to us, or an aggregate of $750,000.

Financial Terms

We refer to small molecules that can upregulate the utrophin gene, including ezutromid and compounds with similar mechanisms of action to which we have rights, as project compounds. Under the MDA grant agreement, we have agreed to make specified milestone payments to MDA during our or our affiliates’ development and commercialization of pharmaceutical products containing the project compounds, which we refer to as project products. Because we raised more than a specified aggregate amount of funding, we have paid a specified sum to MDA under the terms of the agreement, which we refer to as the MDA cash infusion milestone payment.

We have also agreed to pay MDA a specified lump sum amount, less any previously paid MDA cash infusion milestone payment, following the regulatory approval of any project product for use or sale in the United States or European Union for the treatment of DMD or Becker muscular dystrophy, or BMD, and an additional specified sum upon achievement of a commercial milestone. We would be obligated to pay MDA a low single digit percentage royalty of worldwide net sales by us, our affiliates or licensees of any project product. If we assign our rights to any of the project compounds or experience specified change in control events, MDA may require our assignee to assume our obligations under the MDA grant agreement with respect to the assigned rights, or require us to pay MDA the greater of a low single digit percentage of the fair market value of the assigned rights, or an amount that would give MDA an internal rate of return of a low double digit percentage on its grant to us.

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Interruption License

Upon the occurrence of specified events, which we refer to as interruptions, we have agreed to refund to MDA the entire grant amount of $750,000 plus a low double digit interest on that amount, subject to specified exemptions. An interruption may occur if we or our affiliates cease reasonable research, development and commercialization of project products and cease using diligent efforts to obtain a third party development and commercialization partner, which require our annual expenditure of a minimum specified amount on such efforts for longer than a specified period. Interruptions may also occur if we license the rights to develop and commercialize project products to a third party without retaining a right of reversion, and such partner ceases reasonable development and commercialization of project products for longer than a specified period or ceases to sell project products in the United States or European Union, or if we, upon the reversion of such rights from a third party commercialization partner to us, fail to use reasonable efforts to develop and commercialize project products and cease using diligent efforts to obtain a third party development and commercialization partner, or, within a specified period from the date of reversion, to license the development and commercialization activities of project products to a third party. In all such cases, we are exempt from interruption payments in the event of specified scientific failures, including if we fail to achieve primary endpoints for any clinical trial of ezutromid, if the project compounds are unfit for administration to humans or if we cannot develop a commercial manufacturing process.

We have granted to MDA, effective on the occurrence of such an interruption, an exclusive, sublicenseable, worldwide, perpetual, irrevocable and royalty-free license under the patent rights, know-how and intellectual property that we control, useful for the project compounds or project products, to research, develop, manufacture, have manufactured, use, sell, offer to sell, import and export the project compounds and project products for the prevention, treatment, or amelioration of DMD or BMD. We refer to such license as the interruption license. Upon the effectiveness of the interruption license, we would be obligated to assign to MDA or its designee the regulatory filings, regulatory approvals, and contract rights that we or our affiliates own, and deliver specified know-how, in each case, relating to project compounds and project products.

MDA acknowledges that if a royalty or other payment is due to any third party from whom we licensed or acquired the intellectual property licensed to MDA, the interruption license is contingent on MDA or its sublicensee assuming those obligations resulting from their exercise of the interruption license.

Termination

The MDA grant agreement will continue indefinitely.

Duchenne Partners Fund

In December 2011, we entered into a grant agreement with the Duchenne Partners Fund, LLC, or DPF, a Delaware limited liability company, in order to partially fund a Phase 1 clinical trial of ezutromid to treat DMD. We refer to this grant agreement with DPF as the DPF grant agreement. To date, we have received the entire amount of DPF’s grant to us, or an aggregate of $500,000.

Financial Terms

We refer to small molecules that can upregulate the utrophin gene, including ezutromid and compounds with similar mechanisms of action to which we have rights, as project compounds. Under the DPF grant agreement, we have agreed to make specified milestone payments to DPF during our or our affiliates’ development and commercialization of pharmaceutical products containing the project compounds, which we refer to as project products. Because we raised more than a specified aggregate amount of funding, we have paid a specified sum to DPF under the terms of the agreement, which we refer to as the DPF cash infusion milestone payment.

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We have also agreed to pay DPF a specified lump sum amount, less any previously paid DPF cash infusion milestone payment, following the regulatory approval of any project product for use or sale in the United States or European Union for the treatment of DMD or BMD and an additional specified sum upon achievement of a commercial milestone. We would be obligated to pay DPF a low single digit percentage royalty of worldwide net sales by us, our affiliates or licensees of any project product. If we assign our rights to any of the project compounds or experience specified change in control events, DPF may require our assignee to assume our obligations under the DPF grant agreement with respect to the assigned rights, or require us to pay DPF the greater of a low single digit percentage of the fair market value of the assigned rights, or an amount that would give DPF an internal rate of return of a low double digit percentage on its grant to us.

Termination

The DPF grant agreement will continue indefinitely.

Competition

The biotechnology and pharmaceutical industries are characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products. While we believe that our technologies, knowledge, experience and scientific resources provide us with competitive advantages, we face potential competition from many different sources, including major pharmaceutical, specialty pharmaceutical and biotechnology companies, academic institutions, government agencies and private and public research institutions. Any product candidates that we successfully develop and commercialize will compete with existing therapies and new therapies that may become available in the future.

Many of our competitors may have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. These competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs. Smaller or early stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.

Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than any products that we may develop. Our competitors also may obtain marketing approvals for their products more rapidly than we obtain approval for ours. In addition, our ability to compete may be affected because in some cases insurers or other third-party payors seek to encourage the use of generic products. This may have the effect of making branded products less attractive, from a cost perspective, to buyers.

The key competitive factors affecting the success of our product candidates are likely to be their efficacy, safety, convenience, price and the availability of coverage and reimbursement from government and other third-party payors.

The competition for ezutromid and ridinilazole includes the following:

Ezutromid

There is currently no approved therapy for the treatment of DMD applicable to all DMD patients that seeks to alter the progression of the disease. Corticosteroids, such as prednisolone and deflazacort, are the current standard of care for DMD patients, although these are symptomatic treatments that do not address the underlying cause of DMD, and their use can be associated with severe side effects and concerns over weight gain. Other companies are developing alternative therapeutic approaches to the treatment of DMD, a number of which are outlined below.

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Exon Skipping. Sarepta and BioMarin Pharmaceutical Inc., or BioMarin, following the acquisition of Prosensa Holding N.V. in 2015, are developing treatments for DMD based on exon-skipping approaches. Exons are organic molecules known as nucleotides within the DNA strand that the cellular machinery translates to make full-length, functional protein. In a sub-population of DMD patients, synthesis of the dystrophin protein is disrupted because of mutations that may be due, among other things, to deleted exons. Exon-skipping technology seeks to allow the production of a shorter but still functional dystrophin protein. Sarepta is developing treatments for DMD based on exon-skipping approaches and received accelerated approval from the FDA for eteplirsen in September 2016. Eteplirsen targets exon 51 and targets approximately 13% of all DMD patients. Sarepta is also developing other exon-skipping therapies to treat other genetic mutations. Sarepta also has product candidates in clinical trials that are targeting exon 44, which is applicable to approximately 6% of all DMD patients, exon 45, which is applicable to approximately 8% of all DMD patients, and exon 53, which is applicable to approximately 6% of all DMD patients. According to an article published in 2009 in the peer reviewed journal Human Mutation , skipping of the ten most common exons would treat in the aggregate approximately 41% of all DMD patients. We believe that there are exon-skipping therapies currently in clinical development to address four of these exons and that skipping of these exons would treat in the aggregate less than one-third of all DMD patients. BioMarin’s most advanced exon-skipping drug is drisapersen (Kyndrisa™). BioMarin completed a rolling NDA submission for drisapersen to the FDA seeking accelerated approval in April 2015. In January 2016, the FDA issued to BioMarin a “complete response” letter to the NDA for drisapersen which indicated that the review cycle for the application was complete and that the application was not ready for approval in its present form due to the standard of substantial evidence of effectiveness having not been met. In May 2016, BioMarin announced it had withdrawn its market authorization application, or MAA, to the EMA for drisapersen, and that it was discontinuing development of drisapersen and three other exon-skipping therapies in clinical trials that targeted exon 44, exon 45 and exon 53, respectively. BioMarin stated it would continue to explore the development next generation exon-skipping therapies. Other companies developing therapies targeting exon mutations include Nippon Shinyaku Co., Ltd., which is conducting Phase 2 clinical trials in Japan and the United States and Wave Life Sciences Ltd., which expects to commence clinical trials by mid-2017.

Nonsense mutations. PTC Therapeutics, Inc., or PTC, is developing ataluren (Translarna™). Ataluren is a small molecule that enables formation of functional dystrophin in DMD patients with nonsense mutations. DMD caused by nonsense mutations affects approximately 13% of all DMD patients. The European Commission has granted conditional approval for ataluren in Europe, and PTC is commercializing ataluren in several European countries. In October 2015, PTC announced a Phase 3 confirmatory clinical trial of ataluren did not achieve its primary endpoint, and in February 2016, PTC announced its receipt of a “refuse to file” letter from the FDA indicating that PTC’s NDA for ataluren was not sufficiently complete to permit a substantive review. In March 2017, PTC announced the filing over protest of the NDA for ataluren, which allows PTC to have its NDA filed and reviewed following receipt of a refuse to file determination. The FDA granted a Prescription Drug User Fee Act, or PDUFA, date for ataluren of October 24, 2017.

Other DMD approaches. A number of other companies are pursuing alternative therapeutic approaches for the treatment of DMD. Tivorsan Pharmaceuticals is developing a recombinant form of biglycan, a protein that is naturally produced in the body and regulates production of utrophin in developing muscle, which is currently in preclinical development. Pfizer, Inc., or Pfizer, and Bristol-Myers Squibb Company, or BMS, are pursuing an approach based on muscle tissue growth through myostatin inhibition. Pfizer is developing the myostatin inhibitor PF-06252616 (domagrozumab) and initiated a Phase 2 clinical trial in patients with DMD in December 2014. BMS is developing BMS-986089, a myostatin inhibitor that is currently in Phase 1/2 clinical development. Santhera Pharmaceuticals Holding AG, or Santhera, completed a Phase 3 clinical trial of its product candidate, idebenone (Raxone ^® /Catena ^® ), in 2014 and reported that idebenone delayed deterioration in respiratory function. Santhera filed a MAA to the EMA in 2016. Santhera is conducting a confirmatory Phase 3 trial of idebenone in DMD patients who are receiving concomitant corticosteroids. Catabasis Pharmaceuticals, Inc., or Catabasis, is developing edasalonexent as a non-steroidal, anti-inflammatory drug. Catabasis reported top-line results in January 2017 from a Phase 1/2 clinical trial in which edasalonexent did not meet its primary endpoint. Catabasis expects to report results from an open-label extension of this Phase 1/2 clinical trial in 2017. Akashi

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Therapeutics, or Akashi, is developing HT-100, an anti-inflammatory and anti-fibrotic small molecule that aims to reduce fibrosis and inflammation. In February 2016, Akashi announced that dosing and enrollment into a Phase 1b/2a clinical trial of HT-100 was suspended due to a fatality in the trial. A number of companies are targeting gene therapy based approaches for DMD which has the potential to address the genetic cause of DMD by using an adeno-associated virus to deliver a shortened, yet functional, version of the dystrophin gene to a DMD patient. Companies with gene therapy based approaches include Asklepios Biopharmaceuticals, Inc., which is developing biostrophin and is currently in Phase 1 clinical development, and Solid Biosciences, which expect to commence clinical trials in patients with DMD in 2017.

Ridinilazole

Several pharmaceutical and biotechnology companies have established themselves in the market for the treatment of CDI, and several additional companies are developing products for the treatment of CDI. We expect that these products will compete with ridinilazole.

Antibiotics. The current standard of care for CDI is treatment with the broad spectrum antibiotics vancomycin and metronidazole, both of which are available in generic form in the United States. Generic antibiotic therapies typically are sold at lower prices than branded antibiotics and generally are preferred by managed care providers of health services. The antibiotic fidaxomicin (Dificid™ in the United States, Dificlir™ in Europe) is approved for the treatment of CDI in the United States and the European Union. Fidaxomicin was originally developed by Optimer Pharmaceuticals, Inc., which was later acquired by Cubist Pharmaceuticals, Inc., or Cubist. Cubist was recently acquired by Merck & Co., Inc., or Merck. Antibiotics in late-stage clinical trials for treatment of CDI include cadazolid, which was originally being developed by Actelion Pharmaceuticals Limited, or Actelion. Johnson and Johnson acquired global rights to cadazolid as part of the acquisition of Actelion announced in January 2017. Cadazolid is currently in Phase 3 clinical development.

Other CDI approaches. A number of other approaches for the treatment of CDI are in development. Merck is developing the monoclonal antibodies bezlotoxumab (Zinplava™), which received approval from the FDA in October 2016. Bezlotoxumab is an antibody that neutralizes certain toxins that are produced by C. difficile bacteria and indicated to reduce recurrence for CDI in patients who are receiving antibacterial drug treatment and are at high risk of disease recurrence. Merck has also filed a MAA with the EMA, and the CHMP of the EMA issued an opinion recommending approval of bezlotoxumab in November 2016. Sanofi Pasteur SA is developing the vaccine ACAM-CDIFF for primary prevention of CDI. ACAM-CDIFF is likely to be used only in high-risk patients given the difficulty of administering a vaccine to a broad population. Pfizer is developing the vaccine PF-06425090 that aims to induce a functional antibody response to neutralize the C difficile bacterial toxins. Pfizer reported top-line Phase 2 results in January 2017 and expects to progress into Phase 3 trial in the first half of 2017.

Fecal biotherapy aims to recolonize the bacteria that comprise the natural gut flora and would also be adjunctive therapy to antibiotics. Fecal biotherapy approaches in development include SER-109 and SER-262, which are being developed by Seres Therapeutics Inc., formerly Seres Health, Inc., and RBX2660, which is being developed by Rebiotix Inc. Seres reported interim results from a Phase 2 trial in 2016 in which SER-109 missed its primary efficacy endpoint while SER-262 is currently being evaluated in a Phase 1b clinical trial in CDI patients. RBX2660 is currently being evaluated in a Phase 2 clinical trial. Synthetic Biologics, Inc., is developing ribaxamase, an oral enzyme designed to degrade certain IV beta-lactam antibiotics within the GI tract to preserve the natural balance of the microbiome and reduce the risk of colonization by bacterial including C. diffiicle . In January 2017, it was reported that ribaxamase met its primary endpoint in a Phase 2b clinical trial.

Manufacturing

We do not own or operate, and currently have no plans to establish, manufacturing facilities for the production of clinical or commercial quantities of ezutromid, ridinilazole or for the other compounds that we are evaluating in

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our DMD program. We currently rely, and expect to continue to rely, on third parties for the manufacture of our product candidates and any products that we may develop.

We currently engage a single, third-party manufacturer to provide clinical material of the active pharmaceutical ingredient, or API, and fill and finish services for the final drug product of the F3 formulation of ezutromid that is being used in our Phase 2 proof of concept clinical trial. We are engaged with a different drug product manufacturer to provide bulk drug product of the F6 formulation of ezutromid. A different third party manufacturer provides fill and finish services to supply the final drug product of the F6 formulation of ezutromid that is being evaluated in our ongoing Phase 2 proof of concept clinical trial. We are engaged with a different third-party vendor to provide labelling, packaging and distributions services of the F3 and F6 formulations. We are engaged with another third-party manufacturer to provide clinical material of the API of ridinilazole with a different supplier responsible for fill and finish services to supply the final drug product for use in the future Phase 3 clinical trials. We believe these suppliers are suitable for commercial manufacture. We expect to use the same third-party vendor for clinical packaging, labelling and distribution of the finalized ridinilazole drug product that we use for ezutromid. We obtain the supplies of our API and drug products from these manufacturers pursuant to agreements that include specific supply timelines and volume expectations.

We obtain the supplies of our product candidates from these manufacturers under master services contracts and specific work orders. However, we do not have long-term supply arrangements in place. We do not currently have arrangements in place for redundant supply or a second source for API for ezutromid. If any of our current manufacturers should become unavailable to us for any reason, we believe that there are a number of potential replacements, although we might incur some delay in identifying and qualifying such replacements.

All of our product candidates are organic compounds of low molecular weight and are referred to as small molecules. We have selected these compounds based on their potential efficacy and safety, although they are also associated with reasonable cost of goods, ready availability of starting materials and ease of synthesis. We believe that the chemistry for ezutromid and ridinilazole is amenable to scale-up and does not currently require unusual equipment in the manufacturing process. We expect to continue to develop product candidates that can be produced cost-effectively at contract manufacturing facilities.

Intellectual Property

Our success depends in large part on our ability to obtain and maintain proprietary protection for our product candidates, technology and know-how, to operate without infringing the proprietary rights of others and to prevent others from infringing our proprietary rights. We strive to protect the proprietary technology that we believe is important to our business by, among other methods, seeking and maintaining patents, where available, that are intended to cover our product candidates, compositions and formulations, their methods of use and processes for their manufacture and any other inventions that are commercially important to the development of our business. We also rely on trade secrets, know-how, continuing technological innovation and in-licensing opportunities to develop and maintain our proprietary and competitive position.

As of March 15, 2017, we owned or exclusively licensed a total of eight U.S. patents, three U.S. patent applications, six European patents and three European patent applications, including original filings, continuations and divisional applications, as well as numerous other foreign counterparts to these U.S. and European patents and patent applications.

Our DMD patent portfolio includes the following granted patents and patent applications that we own or exclusively license:

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Our CDI patent portfolio includes the following granted patents and patent applications that we own or exclusively license:

While patent protection is not available for composition of matter claims that only recite the API for ridinilazole, protection may be available for the pharmaceutical compositions comprising ridinilazole as well as other forms thereof such as hydrates (and indeed claims have been secured for the latter in both Europe and theUnited States).

The term of individual patents depends upon the legal term for patents in the countries in which they are obtained. In most countries, including the United States, the patent term is 20 years from the filing date of a non-provisional patent application. In the United States, a patent’s term may, in certain cases, be lengthened by patent term adjustment, which compensates a patentee for administrative delays by the U.S. Patent and Trademark Office, or the USPTO, in examining and granting a patent, or may be shortened if a patent is terminally disclaimed over an earlier filed patent.

The term of a U.S. patent that covers a drug, biological product or medical device approved pursuant to a pre-market approval, or PMA, may also be eligible for patent term extension when FDA approval is granted, provided that certain statutory and regulatory requirements are met. The length of the patent term extension is related to the length of time the drug is under regulatory review while the patent is in force. The Drug Price Competition and Patent Term Restoration Act of 1984, or the Hatch-Waxman Act, permits a patent term extension of up to five years beyond the expiration date set for the patent. Patent extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval, only one patent applicable to each regulatory review period may be granted an extension and only those claims reading on the

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approved drug may be extended. Similar provisions are available in Europe and certain other foreign jurisdictions to extend the term of a patent that covers an approved drug, provided that statutory and regulatory requirements are met. Thus, in the future, if and when our product candidates receive approval by the FDA or foreign regulatory authorities, we expect to apply for patent term extensions on issued patents covering those products, depending upon the length of the clinical trials for each drug and other factors. The expiration dates of our patents and patent applications referred to above are without regard to potential patent term extension or other market exclusivity that may be available to us.

In addition to patents, we may rely, in some circumstances, on trade secrets to protect our technology and maintain our competitive position. However, trade secrets can be difficult to protect. We seek to protect our proprietary technology and processes, in part, by confidentiality agreements with our employees, corporate and scientific collaborators, consultants, scientific advisors, contractors and other third parties. We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security of our premises and physical and electronic security of our information technology systems.

Sales and Marketing

In light of our stage of development, we have not yet established a sales and marketing organization or distribution capabilities. Under the terms of our exclusive license and collaboration agreement with Sarepta, we have granted Sarepta the exclusive right to commercialize products in our utrophin modulator pipeline, including our lead candidate ezutromid, in the European Union, Switzerland, Norway, Iceland, Turkey and the Commonwealth of Independent States, which we refer to as the licensed territory. We also granted Sarepta an option to expand the licensed territory to include specified countries in Central and South America. We have retained commercialization rights in the rest of the world including the United States.

If ezutromid receives marketing approval, we intend to commercialize it initially in the United States with our own focused, specialized sales force that we plan to establish. We believe that medical specialists treating DMD are sufficiently concentrated that we will be able to effectively promote ezutromid with a targeted sales team in the United States. We also believe that our relationships with patient advocacy groups will strengthen our ability to market ezutromid. Outside of the United States in the territories where we currently retain commercialization rights, we plan to evaluate the relative mertis of marketing ezutromid ourselves and utilizing collaboration, distribution and other marketing arrangements with third parties to commercialize ezutromid.

We plan to evaluate our options for maximizing the commercial opportunity for ridinilazole. We may determine to commercialize the product directly in the United States and Europe with our own specialized sales force or seek third-party collaborators for the commercialization of ridinilazole. We intend to evaluate the relative merits of retaining commercialization rights for ourselves or entering into collaboration arrangements with third parties depending on factors such as the anticipated development costs required to achieve marketing approval, the sales and marketing resources required in each territory in which we receive approval, the relative size of the market opportunity in such territory, the particular expertise of the third party and the proposed financial terms of the arrangement.

We are also in the process of building key capabilities, such as marketing, market access, sales management and medical affairs, to implement marketing and medical strategies for any products that we market through our own sales organization and to oversee and support our sales force. The responsibilities of the marketing organization would include developing educational initiatives with respect to approved products and expanding relationships with thought leaders in relevant fields of medicine.

Government Regulation

Government authorities in the United States, at the federal, state and local level, and in other countries and jurisdictions, including the European Union, extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval, packaging, storage, recordkeeping, labeling, advertising,

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promotion, distribution, marketing, post-approval monitoring and reporting, and import and export of pharmaceutical products. The processes for obtaining regulatory approvals in the United States and in foreign countries and jurisdictions, along with subsequent compliance with applicable statutes and regulations and other regulatory authorities, require the expenditure of substantial time and financial resources.

Review and Approval of Drugs in the United States

In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, or FDCA, and implementing regulations. The failure to comply with the FDCA and applicable U.S. requirements at any time during the product development process, approval process or after approval may subject an applicant or sponsor to a variety of administrative or judicial sanctions, including refusal by the FDA to approve pending applications, withdrawal of an approval, imposition of a clinical hold, issuance of warning letters and other types of letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement of profits, or civil or criminal investigations and penalties brought by the FDA and the Department of Justice, or DOJ, or other federal and state governmental entities.

An applicant seeking approval to market and distribute a new drug product in the United States must typically undertake the following:

Preclinical Studies

Preclinical studies include laboratory evaluation of the purity and stability of the manufactured drug substance or API and the formulated drug or drug product, as well as in vitro and animal studies to assess the safety and activity of the drug for initial testing in humans and to establish a rationale for therapeutic use. The conduct of preclinical studies is subject to federal regulations and requirements, including GLP regulations. The results of the preclinical tests, together with manufacturing information, analytical data, any available clinical data or literature and plans for clinical trials, among other things, are submitted to the FDA as part of an IND. Some

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long-term preclinical testing, such as animal tests of reproductive adverse events and carcinogenicity, may continue after the IND is submitted.

Companies usually must complete some long-term preclinical testing, such as animal tests of reproductive adverse events and carcinogenicity, and must also develop additional information about the chemistry and physical characteristics of the investigational product and finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the candidate product and, among other things, the manufacturer must develop methods for testing the identity, strength, quality and purity of the final product. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the candidate product does not undergo unacceptable deterioration over its shelf life.

The IND and IRB Processes

An IND is an exemption from the FDCA that allows an unapproved drug to be shipped in interstate commerce for use in an investigational clinical trial and a request for FDA authorization to administer an investigational drug to humans. Such authorization must be secured prior to interstate shipment and administration of any new drug that is not the subject of an approved NDA. In support of a request for an IND, applicants must submit a protocol for each clinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND. In addition, the results of the preclinical tests, together with manufacturing information, analytical data, any available clinical data or literature and plans for clinical trials, among other things, are submitted to the FDA as part of an IND. The FDA requires a 30-day waiting period after the filing of each IND before clinical trials may begin. This waiting period is designed to allow the FDA to review the IND to determine whether human research subjects will be exposed to unreasonable health risks. At any time during this 30-day period, the FDA may raise concerns or questions about the conduct of the trials as outlined in the IND and impose a clinical hold. In this case, the IND sponsor and the FDA must resolve any outstanding concerns before clinical trials can begin.

Following commencement of a clinical trial under an IND, the FDA may also place a clinical hold or partial clinical hold on that trial. A clinical hold is an order issued by the FDA to the sponsor to delay a proposed clinical investigation or to suspend an ongoing investigation. A partial clinical hold is a delay or suspension of only part of the clinical work requested under the IND. For example, a specific protocol or part of a protocol is not allowed to proceed, while other protocols may do so. No more than 30 days after imposition of a clinical hold or partial clinical hold, the FDA will provide the sponsor a written explanation of the basis for the hold. Following issuance of a clinical hold or partial clinical hold, an investigation may only resume after the FDA has notified the sponsor that the investigation may proceed. The FDA will base that determination on information provided by the sponsor correcting the deficiencies previously cited or otherwise satisfying the FDA that the investigation can proceed.

A sponsor may choose, but is not required, to conduct a foreign clinical study under an IND. When a foreign clinical study is conducted under an IND, all FDA IND requirements must be met unless waived. When the foreign clinical study is not conducted under an IND, the sponsor must ensure that the study complies with FDA certain regulatory requirements in order to use the study as support for an IND or application for marketing approval. Specifically, on April 28, 2008, the FDA amended its regulations governing the acceptance of foreign clinical studies not conducted under an investigational new drug application as support for an IND or a new drug application. The final rule provides that such studies must be conducted in accordance with good clinical practice, or GCP, including review and approval by an independent ethics committee, or IEC, and informed consent from subjects. The GCP requirements in the final rule encompass both ethical and data integrity standards for clinical studies. The FDA’s regulations are intended to help ensure the protection of human subjects enrolled in non-IND foreign clinical studies, as well as the quality and integrity of the resulting data. They further help ensure that non-IND foreign studies are conducted in a manner comparable to that required for IND studies.

In addition to the foregoing IND requirements, an IRB representing each institution participating in the clinical trial must review and approve the plan for any clinical trial before it commences at that institution, and the IRB

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must conduct continuing review and reapprove the study at least annually. The IRB must review and approve, among other things, the study protocol and informed consent information to be provided to study subjects. An IRB must operate in compliance with FDA regulations. An IRB can suspend or terminate approval of a clinical trial at its institution, or an institution it represents, if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the product candidate has been associated with unexpected serious harm to patients.

Additionally, some trials are overseen by an independent group of qualified experts organized by the trial sponsor, known as a data safety monitoring board or committee. This group provides authorization for whether or not a trial may move forward at designated check points based on access that only the group maintains to available data from the study. Suspension or termination of development during any phase of clinical trials can occur if it is determined that the participants or patients are being exposed to an unacceptable health risk. Other reasons for suspension or termination may be made by us based on evolving business objectives and/or competitive climate.

Information about certain clinical trials must be submitted within specific timeframes to the National Institutes of Health, or NIH, for public dissemination on its ClinicalTrials.gov website.

Human Clinical Trials in Support of an NDA

Clinical trials involve the administration of the investigational product to human subjects under the supervision of qualified investigators in accordance with GCP requirements, which include, among other things, the requirement that all research subjects provide their informed consent in writing before their participation in any clinical trial. Clinical trials are conducted under written study protocols detailing, among other things, the inclusion and exclusion criteria, the objectives of the study, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated.

Human clinical trials are typically conducted in three sequential phases, which may overlap or be combined:

Phase 1 . The drug is initially introduced into healthy human subjects or, in certain indications such as cancer, patients with the target disease or condition and tested for safety, dosage tolerance, absorption, metabolism, distribution, excretion and, if possible, to gain an early indication of its effectiveness and to determine optimal dosage.

Phase 2 . The drug is administered to a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage.

Phase 3 . The drug is administered to an expanded patient population, generally at geographically dispersed clinical trial sites, in well-controlled clinical trials to generate enough data to statistically evaluate the efficacy and safety of the product for approval, to establish the overall risk-benefit profile of the product, and to provide adequate information for the labeling of the product.

Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and more frequently if serious adverse events occur. In addition, IND safety reports must be submitted to the FDA for any of the following: serious and unexpected suspected adverse reactions; findings from other studies or animal or in vitro testing that suggest a significant risk in humans exposed to the drug; and any clinically important increase in the case of a serious suspected adverse reaction over that listed in the protocol or investigator brochure. Phase 1, Phase 2 and Phase 3 clinical trials may not be completed successfully within any specified period, or at all. Furthermore, the FDA or the sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution, or an institution it represents, if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has

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been associated with unexpected serious harm to patients. The FDA will typically inspect one or more clinical sites to assure compliance with GCP and the integrity of the clinical data submitted.

Concurrent with clinical trials, companies often complete additional animal studies and must also develop additional information about the chemistry and physical characteristics of the drug as well as finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the drug candidate and, among other things, must develop methods for testing the identity, strength, quality, purity, and potency of the final drug. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the drug candidate does not undergo unacceptable deterioration over its shelf life.

Submission of an NDA to the FDA

Assuming successful completion of required clinical testing and other requirements, the results of the preclinical studies and clinical trials, together with detailed information relating to the product’s chemistry, manufacture, controls and proposed labeling, among other things, are submitted to the FDA as part of an NDA requesting approval to market the drug product for one or more indications. Under federal law, the submission of most NDAs is subject to an application user fee, which for the federal fiscal year 2017 is $2,038,100. The sponsor of an approved NDA is also subject to annual product and establishment user fees, which for fiscal year 2017 are $97,750 per product and $512,200 per establishment. Certain exceptions and waivers are available for some of these fees, such as an exception from the application fee for drugs with orphan designation and a waiver for certain small businesses, an exception from the establishment fee when the establishment does not engage in manufacturing the drug during a particular fiscal year and an exception from the product fee for a drug that is the same as another drug approved under an abbreviated pathway.

The FDA conducts a preliminary review of an NDA within 60 calendar days of its receipt and strives to inform the sponsor by the 74th day after the FDA’s receipt of the submission whether the application is sufficiently complete to permit substantive review. The FDA may request additional information rather than accept an NDA for filing. In this event, the application must be resubmitted with the additional information. The resubmitted application is also subject to review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive review.

The FDA has agreed to certain performance goals in the review process of NDAs. Under that agreement, 90% of applications seeking approval of new molecular entities, or NMEs, are meant to be reviewed within ten months from the date on which FDA accepts the NDA for filing, and 90% of applications for NMEs that have been designated for “priority review” are meant to be reviewed within six months of the filing date. For applications seeking approval of drugs that are not NMEs, the ten-month and six-month review periods run from the date that FDA receives the application. The review process may be extended by the FDA for three additional months to consider new information or clarification provided by the applicant to address an outstanding deficiency identified by the FDA following the original submission.

Before approving an NDA, the FDA typically will inspect the facility or facilities where the product is or will be manufactured. These pre-approval inspections cover all facilities associated with an NDA submission, including drug component manufacturing (such as active pharmaceutical ingredients), finished drug product manufacturing, and control testing laboratories. The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. Additionally, before approving an NDA, the FDA will typically inspect one or more clinical sites to assure compliance with GCP.

In addition, as a condition of approval, the FDA may require an applicant to develop a REMS. REMS use risk minimization strategies beyond the professional labeling to ensure that the benefits of the product outweigh the potential risks. To determine whether a REMS is needed, the FDA will consider the size of the population likely

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to use the product, seriousness of the disease, expected benefit of the product, expected duration of treatment, seriousness of known or potential adverse events, and whether the product is a new molecular entity. REMS can include medication guides, physician communication plans for healthcare professionals, and elements to assure safe use, or ETASU. ETASU may include, but are not limited to, special training or certification for prescribing or dispensing, dispensing only under certain circumstances, special monitoring, and the use of patient registries. The FDA may require a REMS before approval or post-approval if it becomes aware of a serious risk associated with use of the product. The requirement for a REMS can materially affect the potential market and profitability of a product.

The FDA may refer an application for a novel drug to an advisory committee or explain why such referral was not made. Typically, an advisory committee is a panel of independent experts, including clinicians and other scientific experts, that reviews, evaluates and provides a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.

Fast Track, Breakthrough Therapy,Priority Review and Regenerative Advanced Therapy Designations

The FDA is authorized to designate certain products for expedited review if they are intended to address an unmet medical need in the treatment of a serious or life-threatening disease or condition. These programs are referred to as fast track designation, breakthrough therapy designation, priority review designation and regenerative advanced therapy designation.

Specifically, the FDA may designate a product for fast track review if it is intended, whether alone or in combination with one or more other products, for the treatment of a serious or life-threatening disease or condition, and it demonstrates the potential to address unmet medical needs for such a disease or condition. For fast track products, sponsors may have greater interactions with the FDA and the FDA may initiate review of sections of a fast track product’s application before the application is complete. This rolling review may be available if the FDA determines, after preliminary evaluation of clinical data submitted by the sponsor, that a fast track product may be effective. The sponsor must also provide, and the FDA must approve, a schedule for the submission of the remaining information and the sponsor must pay applicable user fees. However, the FDA’s time period goal for reviewing a fast track application does not begin until the last section of the application is submitted. In addition, the fast track designation may be withdrawn by the FDA if the FDA believes that the designation is no longer supported by data emerging in the clinical trial process.

Second, a product may be designated as a breakthrough therapy if it is intended, either alone or in combination with one or more other products, to treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the product may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. The FDA may take certain actions with respect to breakthrough therapies, including holding meetings with the sponsor throughout the development process; providing timely advice to the product sponsor regarding development and approval; involving more senior staff in the review process; assigning a cross-disciplinary project lead for the review team; and taking other steps to design the clinical trials in an efficient manner.

Third, the FDA may designate a product for priority review if it is a product that treats a serious condition and, if approved, would provide a significant improvement in safety or effectiveness. The FDA determines, on a case- by-case basis, whether the proposed product represents a significant improvement when compared with other available therapies. Significant improvement may be illustrated by evidence of increased effectiveness in the treatment of a condition, elimination or substantial reduction of a treatment-limiting product reaction, documented enhancement of patient compliance that may lead to improvement in serious outcomes, and evidence of safety and effectiveness in a new subpopulation. A priority designation is intended to direct overall attention and resources to the evaluation of such applications, and to shorten the FDA’s goal for taking action on a marketing application from ten months to six months.

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Finally, with passage of the 21st Century Cures Act, or Cures Act, in December 2016, Congress authorized the FDA to accelerate review and approval of products designated as regenerative advanced therapies. A product is eligible for this designation if it is a regenerative medicine therapy that is intended to treat, modify, reverse or cure a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the drug has the potential to address unmet medical needs for such disease or condition. The benefits of a regenerative advanced therapy designation include early interactions with FDA to expedite development and review, benefits available to breakthrough therapies, potential eligibility for priority review and accelerated approval based on surrogate or intermediate endpoints.

Accelerated Approval Pathway

The FDA may grant accelerated approval to a drug for a serious or life-threatening condition that provides meaningful therapeutic advantage to patients over existing treatments based upon a determination that the drug has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit. The FDA may also grant accelerated approval for such a drug when the product has an effect on an intermediate clinical endpoint that can be measured earlier than an effect on irreversible morbidity or mortality, or IMM, and that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. Drugs granted accelerated approval must meet the same statutory standards for safety and effectiveness as those granted traditional approval.

For the purposes of accelerated approval, a surrogate endpoint is a marker, such as a laboratory measurement, radiographic image, physical sign, or other measure that is thought to predict clinical benefit, but is not itself a measure of clinical benefit. Surrogate endpoints can often be measured more easily or more rapidly than clinical endpoints. An intermediate clinical endpoint is a measurement of a therapeutic effect that is considered reasonably likely to predict the clinical benefit of a drug, such as an effect on IMM. The FDA has limited experience with accelerated approvals based on intermediate clinical endpoints, but has indicated that such endpoints generally may support accelerated approval where the therapeutic effect measured by the endpoint is not itself a clinical benefit and basis for traditional approval, if there is a basis for concluding that the therapeutic effect is reasonably likely to predict the ultimate clinical benefit of a drug.

The accelerated approval pathway is most often used in settings in which the course of a disease is long and an extended period of time is required to measure the intended clinical benefit of a drug, even if the effect on the surrogate or intermediate clinical endpoint occurs rapidly. For example, accelerated approval has been used extensively in the development and approval of drugs for treatment of a variety of cancers in which the goal of therapy is generally to improve survival or decrease morbidity and the duration of the typical disease course requires lengthy and sometimes large clinical trials to demonstrate a clinical or survival benefit.

The accelerated approval pathway is usually contingent on a sponsor’s agreement to conduct, in a diligent manner, additional post-approval confirmatory studies to verify and describe the drug’s clinical benefit. As a result, a drug candidate approved on this basis is subject to rigorous post-marketing compliance requirements, including the completion of Phase 4 or post-approval clinical trials to confirm the effect on the clinical endpoint. Failure to conduct required post-approval studies, or confirm a clinical benefit during post-marketing studies, would allow the FDA to withdraw the drug from the market on an expedited basis. All promotional materials for drug candidates approved under accelerated regulations are subject to prior review by the FDA.

Limited Population Antibacterial Drug Pathway

With passage of the Cures Act, Congress authorized the FDA to approve an antibacterial or antifungal drug, alone or in combination with one or more other drugs, as a “limited population drug.” To qualify for this approval pathway, the drug must be intended to treat a serious or life-threatening infection in a limited population of patients with unmet needs; the standards for approval of drugs and biologics under the FDCA and the Public

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Health Service Act, or PHSA, must be satisfied; and the FDA must receive a written request from the sponsor to approve the drug as a limited population drug pursuant to this provision. The FDA’s determination of safety and effectiveness for such a product must reflect the benefit-risk profile of such drug in the intended limited population, taking into account the severity, rarity, or prevalence of the infection the drug is intended to treat and the availability or lack of alternative treatment in such a limited population.

Any drug or biologic approved under this pathway must be labeled with the statement “Limited Population” in a prominent manner and adjacent to the proprietary name of the drug or biological product. The prescribing information must also state that the drug is indicated for use in a limited and specific population of patients and copies of all promotional materials relating to the drug must be submitted to the FDA at least 30 days prior to dissemination of the materials. If the FDA subsequently approves the drug for a broader indication, the agency may remove any post-marketing conditions, including requirements with respect to labeling and review of promotional materials applicable to the product. Nothing in this pathway to approval of a limited population drug prevents sponsors of such products from seeking designation or approval under other provisions of the FDCA, such as accelerated approval.

The FDA’s Decision on an NDA

On the basis of the FDA’s evaluation of the NDA and accompanying information, including the results of the inspection of the manufacturing facilities, the FDA may issue an approval letter or a complete response letter. An approval letter authorizes commercial marketing of the product with specific prescribing information for specific indications. A complete response letter generally outlines the deficiencies in the submission and may require substantial additional testing or information in order for the FDA to reconsider the application. If and when those deficiencies have been addressed to the FDA’s satisfaction in a resubmission of the NDA, the FDA will issue an approval letter. The FDA has committed to reviewing such resubmissions in two or six months depending on the type of information included. Even with submission of this additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval.

If the FDA approves a product, it may limit the approved indications for use for the product, require that contraindications, warnings or precautions be included in the product labeling, require that post-approval studies, including Phase 4 clinical trials, be conducted to further assess the drug’s safety after approval, require testing and surveillance programs to monitor the product after commercialization, or impose other conditions, including distribution restrictions or other risk management mechanisms, including REMS, which can materially affect the potential market and profitability of the product. The FDA may prevent or limit further marketing of a product based on the results of post-market studies or surveillance programs. After approval, many types of changes to the approved product, such as adding new indications, manufacturing changes and additional labeling claims, are subject to further testing requirements and FDA review and approval.

Post-Approval Requirements

Drugs manufactured or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to recordkeeping, periodic reporting, product sampling and distribution, advertising and promotion and reporting of adverse experiences with the product. After approval, most changes to the approved product, such as adding new indications or other labeling claims, are subject to prior FDA review and approval. There also are continuing, annual user fee requirements for any marketed products and the establishments at which such products are manufactured, as well as new application fees for supplemental applications with clinical data.

In addition, drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and state agencies, and are subject to periodic unannounced inspections by the FDA and these state agencies for compliance with cGMP requirements. Changes to the manufacturing process are strictly regulated and often require prior FDA approval before being

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implemented. FDA regulations also require investigation and correction of any deviations from cGMP and impose reporting and documentation requirements upon the sponsor and any third-party manufacturers that the sponsor may decide to use. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain cGMP compliance.

Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical trials to assess new safety risks; or imposition of distribution or other restrictions under a REMS program. Other potential consequences include, among other things:

The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market. Drugs may be promoted only for the approved indications and in accordance with the provisions of the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability.

In addition, the distribution of prescription pharmaceutical products is subject to the Prescription Drug Marketing Act, or PDMA, as well as the Drug Supply Chain Security Act, or DSCA, which regulate the distribution and tracing of prescription drugs and prescription drug samples at the federal level, and set minimum standards for the registration and regulation of drug distributors by the states. Both the PDMA and state laws limit the distribution of prescription pharmaceutical product samples and impose requirements to ensure accountability in distribution. The DSCA imposes requirements to ensure accountability in distribution and to identify and remove counterfeit and other illegitimate products from the market.

Abbreviated New Drug Applications for Generic Drugs

In 1984, with passage of the Hatch-Waxman Amendments to the FDCA, Congress authorized the FDA to approve generic drugs that are the same as drugs previously approved by the FDA under the NDA provisions of the statute. To obtain approval of a generic drug, an applicant must submit an abbreviated new drug application, or ANDA, to the agency. In support of such applications, a generic manufacturer may rely on the preclinical and clinical testing previously conducted for a drug product previously approved under an NDA, known as the reference listed drug, or RLD.

Specifically, in order for an ANDA to be approved, the FDA must find that the generic version is identical to the RLD with respect to the active ingredients, the route of administration, the dosage form, and the strength of the drug. At the same time, the FDA must also determine that the generic drug is “bioequivalent” to the innovator drug. Under the statute, a generic drug is bioequivalent to a RLD if “the rate and extent of absorption of the drug do not show a significant difference from the rate and extent of absorption of the listed drug.”

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Upon approval of an ANDA, the FDA indicates whether the generic product is “therapeutically equivalent” to the RLD in its publication “Approved Drug Products with Therapeutic Equivalence Evaluations,” also referred to as the “Orange Book.” Physicians and pharmacists consider a therapeutic equivalent generic drug to be fully substitutable for the RLD. In addition, by operation of certain state laws and numerous health insurance programs, the FDA’s designation of therapeutic equivalence often results in substitution of the generic drug without the knowledge or consent of either the prescribing physician or patient.

Under the Hatch-Waxman Amendments, the FDA may not approve an ANDA until any applicable period of non-patent exclusivity for the RLD has expired. The FDCA provides a period of five years of non-patent data exclusivity for a new drug containing a new chemical entity. A new chemical entity is a drug that contains no active moiety that has previously been approved by the FDA in any other NDA. An active moiety is the molecule or ion responsible for the physiological or pharmacological action of the drug substance. In cases where such exclusivity has been granted, an ANDA may not be filed with the FDA until the expiration of five years unless the submission is accompanied by a Paragraph IV certification, in which case the applicant may submit its application four years following the original product approval. The FDCA also provides for a period of three years of exclusivity if the NDA includes reports of one or more new clinical investigations, other than bioavailability or bioequivalence studies, that were conducted by or for the applicant and are essential to the approval of the application. This three-year exclusivity period often protects changes to a previously approved drug product, such as a new dosage form, route of administration, combination or indication.