RISK FACTORS

The combined company will be faced with a market environment that cannot be predicted and that involves significant risks, many of which will be beyond its control. In addition to the other information contained in this proxy statement/prospectus/information statement, you should carefully consider the material risks described below before deciding how to vote your shares of stock. You should also read and consider the other information in this proxy statement/prospectus/information statement and additional information about Threshold set forth in its Annual Report on Form 10-K, as updated by subsequent Quarterly Reports on Form 10-Q, all of which are filed with the SEC. Please see the section titled “Where You Can Find More Information” beginning on page 341 of this proxy statement/prospectus/information statement.

Risks Related to the Merger

The exchange ratio is not adjustable based on the market price of Threshold common stock so the merger consideration at the closing may have a greater or lesser value than at the time the merger agreement was signed.

At the effective time of the merger, outstanding shares of Molecular common stock (excluding shares held by Threshold, Molecular or Merger Sub and dissenting shares, and after giving effect to the purchase or conversion rights of Molecular’s preferred stockholders, warrant holders and noteholders) will be converted into shares of Threshold common stock. Applying the exchange ratio, the former Molecular securityholders immediately before the merger are expected to own approximately     % of the aggregate number of shares of Threshold common stock following the merger, and the Threshold stockholders immediately before the merger are expected to own approximately     % of the aggregate number of shares of Threshold common stock following the merger, in each case without giving effect to the issuance of shares of Threshold common stock in the concurrent financing and excluding, in each case, out-of-the-money securities. These estimates are subject to adjustment prior to closing of the merger, including an upward adjustment to the extent that Threshold’s net cash at the effective time of the merger is less than $12,500,000 (and as a result, Threshold securityholders could own less, and Molecular securityholders could own more, of the combined company), or a downward adjustment to the extent that Threshold’s net cash at the effective time of the merger is more than $17,500,000 (and as a result, Threshold securityholders could own more, and Molecular securityholders could own less, of the combined company).

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

Failure to complete the merger may result in Threshold or Molecular paying a termination fee to the other party and could harm the common stock price of Threshold and future business and operations of each company.

If the merger is not completed, Threshold and Molecular are subject to the following risks:

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In addition, if the merger is not consummated and Molecular were to be unable to repay the $2.0 million bridge loan Threshold made to Molecular in connection with the execution of the merger agreement, Threshold would be an unsecured creditor of Molecular. Threshold’s bridge loan is effectively subordinated to Molecular’s secured debt.

If the merger agreement is terminated and the board of directors of Threshold or Molecular determines to seek another business combination, there can be no assurance that either Threshold or Molecular will be able to find a partner willing to provide equivalent or more attractive consideration than the consideration to be provided by each party in the merger.

If the conditions to the merger are not met, the merger may not occur.

Even if the merger is approved by the stockholders of Molecular and the related share issuance is approved by the Threshold stockholders, specified conditions must be satisfied or waived to complete the merger. These conditions are set forth in the merger agreement and described in the section titled “ The Merger Agreement—Conditions to the Completion of the Merger ” beginning on page 167 of this proxy statement/prospectus/information statement. Threshold and Molecular cannot assure you that all of the conditions will be satisfied or waived. If the conditions are not satisfied or waived, the merger may not occur or will be delayed, and Threshold and Molecular each may lose some or all of the intended benefits of the merger.

The completion of the merger is not conditioned upon Threshold holding a minimum amount of net cash at the effective time of the merger.

While the merger agreement provides that the exchange ratio may be adjusted upward or downward depending on variations in Threshold’s net cash determined shortly prior to the closing of the merger, the merger agreement does not condition the completion of the merger upon Threshold’s holding a minimum amount of net cash at the effective time of the merger. If Threshold has less cash at the time of the merger than the parties currently expect, the combined company will need to raise substantial additional capital sooner than expected. Failure to raise capital as and when needed, on favorable terms or at all, would have a negative impact on the financial condition of the combined company and its ability to develop product candidates. If the combined company is unable to obtain funding on a timely basis, it may be required to delay or discontinue one or more of its development programs or the commercialization of any product candidates or be unable to expand its operations or otherwise capitalize on potential business opportunities, which could materially harm its business, financial condition, and results of operations.

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

In general, either Threshold or Molecular can refuse to complete the merger if there is a material adverse change affecting the other party between March 16, 2017, the date of the merger agreement, and the closing of the merger. However, certain types of changes do not permit either party to refuse to complete the merger, even if such change could be said to have a material adverse effect on Threshold or Molecular, including:

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If adverse changes occur and Threshold and Molecular still complete the merger, the stock price of the combined company may suffer. This in turn may reduce the value of the merger to the stockholders of Threshold, Molecular or both.

While Threshold and Molecular have received commitments for the purchase of $40.0 million in equity securities of the combined company, consummation of the concurrent financing is subject to conditions and is not a condition to closing the merger. If Molecular and Threshold complete the merger, but they do not complete the concurrent financing, then the combined company may need to raise additional capital by issuing securities or debt or through licensing arrangements, which may be on worse commercial terms than the concurrent financing, cause significant dilution to the combined company’s stockholders, restrict the combined company’s operations or require the combined company to relinquish proprietary rights.

Threshold and Molecular have received from Longitude Venture Partners III, L.P., or Longitude, an equity commitment letter, pursuant to which, immediately following the closing of the merger, Longitude will purchase $20.0 million of equity securities in the combined company. Longitude’s investment is subject to certain conditions, including the closing of the merger and the parties’ having secured commitments from additional investors for the purchase of an additional $20.0 million of such securities, which minimum condition has been satisfied. The closing of the merger is not contingent upon the completion of this financing. Holders of equity in the combined company immediately following the merger will experience significant dilution as a result of the closing of the concurrent financing, which, assuming the conditions to the closing of the concurrent financing are satisfied, will take place immediately following the completion of the merger. Since the concurrent financing is subject to conditions and is not a condition to the merger, Molecular and Threshold may complete the merger but not the concurrent financing. If this were to occur, the combined company would have substantially less funds than Molecular and Threshold currently anticipate and may be required to raise additional funds sooner than currently planned.

Additional financing may not be available to the combined company when it needs it or may not be available on favorable terms. To the extent that the combined company raises additional capital by issuing equity securities, the terms of such an issuance may be on worse commercial terms than the concurrent financing and may cause more significant dilution to the combined company’s stockholders’ ownership, and the terms of any new equity securities may have preferences over the combined company’s common stock. Any debt financing

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the combined company enters into may involve covenants that restrict its operations. These restrictive covenants may include limitations on additional borrowing and specific restrictions on the use of the combined company’s assets, as well as prohibitions on its ability to create liens, pay dividends, redeem its stock or make investments. In addition, if the combined company raises additional funds through licensing arrangements, it may be necessary to relinquish potentially valuable rights to current product candidates and potential products or proprietary technologies, or grant licenses on terms that are not favorable to the combined company.

Some Threshold and Molecular executive officers and directors have interests in the merger that are different from yours and that may influence them to support or approve the merger without regard to your interests.

Some officers and directors of Threshold and Molecular participate in arrangements that provide them with interests in the merger that are different from yours, including, among others, the continued service as an officer or director of the combined company, severance and retention benefits, the acceleration of stock option or restricted stock vesting, the ability to require Threshold to repurchase certain warrants, payment of deferred and current year incentive compensation, continued indemnification and the potential ability to sell an increased number of shares of common stock of the combined company in accordance with Rule 144 under the Securities Act of 1933, as amended, or the Securities Act. For example, in connection with Threshold’s employment of its executive officers, Threshold entered into customary severance agreements with its executive officers that provide them with cash severance payments, reimbursement for health coverage costs and the acceleration of their outstanding equity awards by 24 months in the event their employment is terminated without cause in connection with or following a change of control of Threshold. Based on the terms of these employment agreements, Threshold’s executive officers are contractually entitled to these severance payments, benefits and accelerated vesting because they will be terminated in connection with the consummation of the merger.

Based on the terms of their respective severance agreements, Threshold’s executive officers will be entitled to receive an aggregate total value of approximately $1.4 million in severance benefits due to the terminations of their employment upon a change of control to occur in connection with the consummation of the merger. These interests, among others, may influence the officers and directors of Threshold to support or approve the merger.

For more information regarding the interests of the Threshold and Molecular executive officers and directors in the merger, please see the sections titled “ The Merger—Interests of the Threshold Directors and Executive Officers in the Merger ” beginning on page 131 and “ The Merger—Interests of the Molecular Directors and Executive Officers in the Merger ” beginning on page 138 of this proxy statement/prospectus/information statement.

The market price of Threshold common stock following the merger may decline as a result of the merger.

The market price of Threshold common stock may decline as a result of the merger for a number of reasons, including if:

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Threshold stockholders may not realize a benefit from the merger commensurate with the ownership dilution they will experience in connection with the merger.

If the combined company is unable to realize the full strategic and financial benefits currently anticipated from the merger, Threshold stockholders will have experienced substantial dilution of their ownership interests without receiving any commensurate benefit, or only receiving part of the commensurate benefit to the extent the combined company is able to realize only part of the strategic and financial benefits currently anticipated from the merger. Threshold stockholders will experience further dilution upon the closing of the concurrent financing, which is expected to occur immediately following the closing of the merger.

If the merger is not completed, Threshold’s stock price may decline significantly.

The market price of Threshold common stock is subject to significant fluctuations. During the 12-month period ended December 31, 2016, the closing sales price of Threshold common stock on The NASDAQ Capital Market ranged from a high of $1.22 in September 2016 to a low of $0.27 in February 2016. Market prices for securities of early-stage pharmaceutical, biotechnology and other life sciences companies have historically been particularly volatile. In addition, the market price of Threshold common stock will likely be volatile based on whether stockholders and investors believe that Threshold can complete the merger or otherwise raise additional capital to support Threshold’s operations if the merger is not consummated and another strategic transaction cannot be identified, negotiated and consummated in a timely manner, if at all. The volatility of the market price of Threshold common stock is exacerbated by low trading volume. Additional factors that may cause the market price of Threshold common stock to fluctuate include:

Moreover, the stock markets in general have experienced substantial volatility that has often been unrelated to the operating performance of individual companies. These broad market fluctuations may also adversely affect the trading price of Threshold common stock. In the past, following periods of volatility in the market price of a company’s securities, stockholders have often instituted class action securities litigation against Threshold. Such litigation, if instituted, could result in substantial costs and diversion of management attention and resources, which could significantly harm Threshold’s profitability and reputation.

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Molecular and Threshold securityholders will have a reduced ownership and voting interest in, and will exercise less influence over the management of, the combined company following the completion of the merger as compared to their current ownership and voting interests in the respective companies.

After the completion of the merger, the current stockholders of Molecular and Threshold will own a smaller percentage of the combined company than their ownership of their respective companies prior to the merger. Immediately after the merger but before taking into account the concurrent financing, Molecular securityholders will own approximately     % of the fully-diluted common stock of Threshold, with Threshold securityholders, whose shares of Threshold common stock will remain outstanding after the merger, owning approximately     % of the fully-diluted common stock of the combined company, in each case without giving effect to the issuance of shares of Threshold common stock in the concurrent financing and excluding, in each case, out-of-the-money securities. These estimates are based on the anticipated exchange ratio and are subject to adjustment.

During the pendency of the merger, Threshold and Molecular may not be able to enter into a business combination with another party on favorable terms because of restrictions in the merger agreement, which could adversely affect their respective businesses.

Covenants in the merger agreement impede the ability of Threshold and Molecular to make acquisitions, subject to specified exceptions relating to fiduciary duties or complete other transactions that are not in the ordinary course of business pending completion of the merger. As a result, if the merger is not completed, the parties may be at a disadvantage to their competitors during that period. In addition, while the merger agreement is in effect, each party is generally prohibited from soliciting, initiating, encouraging or entering into specified extraordinary transactions, such as a merger, sale of assets or other business combination, with any third party, subject to specified exceptions. Any such transactions could be favorable to such party’s stockholders.

Certain provisions of the merger agreement may discourage third parties from submitting competing proposals, including proposals that may be superior to the arrangements contemplated by the merger agreement.

The terms of the merger agreement prohibit each of Threshold and Molecular from soliciting competing proposals or cooperating with persons making unsolicited takeover proposals, except in limited circumstances when such party’s board of directors determines in good faith, after consultation with its independent financial advisor, if any, and outside counsel, that an unsolicited competing proposal constitutes, or would reasonably be expected to result in, a superior competing proposal and that failure to take such action would be reasonably likely to result in a breach of the fiduciary duties of the board of directors. In addition, if Threshold or Molecular terminates the merger agreement under specified circumstances, including terminating because of a decision of a board of directors to recommend a superior competing proposal, Threshold or Molecular would be required to pay a termination fee of $750,000 and reimburse up to $150,000 of the other party’s non-legal third-party expenses as well as all of its legal third-party expenses associated with preparing this Registration Statement on Form S-4. This termination fee may discourage third parties from submitting competing proposals to Threshold or Molecular or their stockholders, and may cause the respective boards of directors to be less inclined to recommend a competing proposal.

Because the lack of a public market for Molecular’s capital stock makes it difficult to evaluate the fair market value of Molecular’s capital stock, the stockholders of Molecular may receive consideration in the merger that is less than the fair market value of Molecular’s capital stock and/or Threshold may pay more than the fair market value of Molecular’s capital stock.

The outstanding capital stock of Molecular is privately held and is not traded in any public market. The lack of a public market makes it extremely difficult to determine the fair market value of Molecular’s capital stock. Because the percentage of Threshold equity to be issued to Molecular stockholders was determined based on negotiations between the parties, it is possible that the value of the Threshold common stock to be received by Molecular stockholders will be less than the fair market value of Molecular’s capital stock, or Threshold may pay more than the aggregate fair market value for Molecular’s capital stock.

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Threshold’s severance agreements with Threshold’s executive officers and certain other employees require Threshold to pay severance benefits to any of those persons who are terminated under specified circumstances, including in connection with a change of control of Threshold, which could harm Threshold’s financial condition or results.

Threshold’s executive officers and certain other employees are parties to severance agreements that contain change of control and severance provisions providing for severance and other benefits and acceleration of vesting of stock options in the event of a termination of employment under specified circumstances. Based on the terms of their respective severance agreements, Threshold’s executive officers will be entitled to receive an aggregate total value of approximately $1.4 million in severance benefits due to the terminations of their employment upon a change of control to occur in connection with the consummation of the merger. The payment of these severance benefits could harm Threshold’s financial condition and results and reduce the cash available to the combined company following the merger.

Risks Related to Threshold’s Business

The Merger may not be consummated or may not deliver the anticipated benefits Threshold expects.

On March 16, 2017, Threshold entered into the merger agreement with Molecular pursuant to which the securityholders of Molecular will become the majority owners of Threshold common stock. In addition, the proposed concurrent financing is subject to certain conditions, including the closing of the merger. The merger, however, is not conditioned upon the closing of the concurrent financing. Threshold is devoting substantially all of Threshold’s time and resources to consummating the merger and the concurrent financing; however, there can be no assurance that such activities will result in the consummation of the merger and the concurrent financing or that such transaction will deliver the anticipated benefits or enhance stockholder value. Threshold cannot assure you that Threshold will complete the merger in a timely manner or at all. The merger agreement is subject to many closing conditions and termination rights. If the merger does not occur, Threshold’s board of directors may elect to attempt to complete another strategic transaction similar to the merger and the concurrent financing. Attempting to complete another similar strategic transaction will be costly and time-consuming, and Threshold cannot make any assurances that a future strategic transaction will occur on terms that provide the same or greater opportunity for potential value to Threshold’s stockholders, or at all. If Threshold is unable to close another strategic transaction and unable to successfully obtain funding for the continued development of evofosfamide and/or partner TX-3424 or HX4, Threshold’s board of directors may determine to sell or otherwise dispose of Threshold’s various assets, and distribute any remaining cash proceeds to Threshold’s stockholders. In that event, Threshold would be required to pay all of its debts and contractual obligations, and to set aside certain reserves for potential future claims, so Threshold can provide no assurances as to the amount or timing of available cash remaining to distribute to stockholders after paying its obligations and setting aside funds for reserves.

Prior to September 2016, Threshold’s business was almost entirely dependent on the success of evofosfamide and tarloxotinib, and Threshold has suspended further clinical development of tarloxotinib.

Prior to September 2016, Threshold invested substantially all of Threshold’s efforts and financial resources in the research and development of evofosfamide and tarloxotinib. In December 2015, Threshold announced topline results from two pivotal Phase III clinical trials of evofosfamide: TH-CR-406 conducted by Threshold in patients with soft tissue sarcoma, or the 406 trial, and MAESTRO conducted by Merck KGaA, Darmstadt, Germany, or Merck KGaA, in patients with advanced pancreatic cancer; and that neither trial met its primary endpoint of demonstrating a statistically significant improvement in overall survival. In September 2016, Threshold announced that its Phase II proof-of-concept trial evaluating tarloxotinib bromide for the treatment of patients with mutant EGFR-positive, T790M-negative advanced non-small cell lung cancer, or NSCLC, progressing on an EGFR tyrosine kinase inhibitor (TH-CR-601) did not achieve its primary interim response rate endpoint. Threshold is conducting only limited evofosfamide development activities and has suspended all further development of tarloxotinib.

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If Threshold is unable to consummate the merger with Molecular, there can be no assurance that Threshold will conduct drug development activities in the future. Pharmaceutical product development is a highly speculative undertaking and involves a substantial degree of risk. To date, Threshold has focused substantially all of Threshold’s efforts on Threshold’s research and development activities on Threshold’s lead product candidate, evofosfamide. To date, Threshold has not commercialized any products or generated any revenue from product sales. Threshold is not profitable and has incurred losses in each year since Threshold’s inception in 2001, and Threshold does not know whether or when Threshold will become profitable. Threshold has only a limited operating history upon which to evaluate Threshold’s business and prospects. Threshold continues to incur significant development and other expenses related to Threshold’s ongoing operations. Threshold’s net loss for the year ended December 31, 2016 was $24.1 million and as of December 31, 2016, Threshold had an accumulated deficit of $353.5 million. To date, Threshold has financed Threshold’s operations primarily through the sale of equity securities and debt facilities. The amount of Threshold’s future net losses will depend, in part, on the rate of Threshold’s future expenditures and Threshold’s ability to obtain funding through equity and/or debt financings and strategic collaborations. It will be several years, if ever, before evofosfamide is ready for commercialization.

Threshold’s history of net losses and Threshold’s expectation of future losses, together with Threshold’s limited operating history, make it difficult to evaluate Threshold’s current business and predict Threshold’s future performance. In addition, the net losses Threshold incurs may fluctuate significantly from quarter to quarter and year to year, such that a period-to-period comparison of Threshold’s results of operations may not be a good indication of Threshold’s future performance. In any particular quarter or quarters, Threshold’s operating results could be below the expectations of securities analysts or investors, which could cause Threshold’s stock price to decline.

Threshold may not be able to complete the merger, and Threshold may not have sufficient funds to pursue another strategic transaction similar to the merger.

Threshold cannot be sure that Threshold will be able to complete the merger in a timely manner, or at all. The merger agreement is subject to many closing conditions and termination rights.

If the merger is not consummated, Threshold may require substantial additional funding to operate.

Threshold’s future capital requirements will depend on many factors, including:

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Until such time, if ever, as Threshold can generate substantial revenue, Threshold would need to finance Threshold’s cash needs through a combination of equity offerings, debt financings, government or other third-party funding and licensing or collaboration arrangements. To the extent that Threshold raises additional capital through the sale of equity or convertible debt securities, the ownership interests of Threshold’s common stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of Threshold’s common stockholders. Debt financing, if available, may involve agreements that include covenants limiting or restricting Threshold’s ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If Threshold raises additional funds through government or other third-party funding, marketing and distribution arrangements or other collaborations, strategic alliances or licensing arrangements with third parties, Threshold may have to relinquish valuable rights to Threshold’s technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to Threshold.

Additional funds may not be available when Threshold needs them on terms that are acceptable to Threshold, or at all. If adequate funds are not available to Threshold on a timely basis, Threshold may be required to curtail Threshold’s operations.

If Threshold does not successfully consummate the merger, Threshold’s board of directors may decide to pursue a dissolution and liquidation of Threshold. In such an event, the amount of cash available for distribution to Threshold’s stockholders will depend heavily on the timing of such liquidation as well as the amount of cash that will need to be reserved for commitments and contingent liabilities.

There can be no assurance that Threshold can successfully consummate the merger. If the transaction is not completed, Threshold’s board of directors may decide to pursue a dissolution and liquidation of Threshold. In such an event, the amount of cash available for distribution to Threshold’s stockholders will depend heavily on the timing of such decision and, ultimately, such liquidation, because the amount of cash available for distribution continues to decrease as Threshold funds its operations. Further, the merger agreement with Molecular contains certain termination rights for each party, and provides that, upon termination under specified circumstances, Threshold may be required to pay Molecular a termination fee of $750,000 and to reimburse certain fees and expenses incurred by Molecular, which would further decrease Threshold’s available cash resources. If Threshold’s board of directors were to approve and recommend, and Threshold’s stockholders were to approve, a dissolution and liquidation of Threshold, Threshold would be required under Delaware corporate law to pay Threshold’s outstanding obligations, as well as to make reasonable provision for contingent and unknown obligations, prior to making any distributions in liquidation to Threshold’s stockholders. Threshold’s commitments and contingent liabilities may include (i) regulatory and clinical obligations remaining under Threshold’s evofosfamide trial; (ii) obligations under Threshold’s employment and separation agreements with certain employees that provide for severance and other payments following a termination of employment occurring for various reasons, including a change in control of Threshold; and (iii) potential litigation against Threshold, and other various claims and legal actions arising in the ordinary course of business. As a result of this requirement, a portion of Threshold’s assets may need to be reserved pending the resolution of such obligations. In addition, Threshold may be subject to litigation or other claims related to a dissolution and liquidation of Threshold. If a dissolution and liquidation were pursued, Threshold’s board of directors, in consultation with its advisors, would need to evaluate these matters and make a determination about a reasonable amount to reserve. Accordingly, holders of Threshold common stock could lose all or a significant portion of their investment in the event of a liquidation, dissolution or winding up of Threshold.

If the merger is not completed, Threshold would need to raise significant capital to support Threshold’s operations, including continued development of Threshold’s existing drug candidate, or to acquire and develop other products or product candidates.

Given the limited development of evofosfamide, Threshold’s limited cash resources, and the additional capital and resources that would be required to pursue such development if the merger is not completed,

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Threshold could be required to rely on securing a collaborative or strategic arrangement for evofosfamide to support Threshold’s operations and Threshold’s future development and clinical trial costs. Due to Threshold’s history, limited cash resources, limited operational and management capabilities and the intense competition for pharmaceutical product candidates, even if Threshold generates interest in a collaborative or strategic arrangement to support the further development of evofosfamide, Threshold may not be able to enter into a final agreement on commercially reasonable terms, on a timely basis or at all. Proposing, negotiating and implementing an economically viable collaborative or strategic arrangement is a lengthy and complex process. As of December 31, 2016, Threshold had cash and cash equivalents totaling $23.6 million. Threshold believes that its current cash and cash equivalents will only be sufficient to fund its operations through next 12 months. Threshold competes for collaborative arrangements and license agreements with the drug candidates and technology developed by other pharmaceutical and biotechnology companies and academic research institutions. Threshold’s competitors may have stronger relationships with third parties with whom they may be interested in collaborating, or which have greater financial, development and commercialization resources and/or more established histories of developing and commercializing products than Threshold. As a result, competitors may have a competitive advantage over Threshold in entering into collaborative arrangements with such third parties. In addition, even if Threshold enters into a collaborative or strategic arrangement, the arrangement may not provide Threshold with sufficient funds to support its operations, and there is no assurance that its drug candidates would satisfy the development and/or clinical milestones established in the collaborative or strategic arrangement. Further, any drug candidate Threshold pursues will require additional development and regulatory efforts prior to commercial sale, including extensive clinical testing and approval by the U.S. Food and Drug Administration, or FDA, and other non-U.S. regulatory authorities. All product candidates are subject to the risks of failure inherent in pharmaceutical product development, including the possibility that the product candidate will not be shown to be sufficiently safe and effective for approval by regulatory authorities and the possibility that, due to strategic considerations, Threshold will discontinue research or development with respect to a product candidate for which it has already incurred significant expense. Even if the product candidates are approved, Threshold cannot be sure that they would be capable of economically feasible production or commercial success.

Threshold is substantially dependent on Threshold’s remaining employees to facilitate the consummation of the merger.

Threshold’s ability to successfully complete the merger depends in large part on Threshold’s ability to retain Threshold’s remaining personnel, particularly Wilfred E. Jaeger, M.D., Threshold’s Interim Chief Executive Officer, Kristen Quigley, Threshold’s Vice President of Clinical Operations, and Joel Fernandes, Threshold’s Senior Vice President of Finance. However, despite Threshold’s efforts to retain these members of Threshold’s management, one or more may terminate their employment with Threshold on short notice. The loss of the services of any of these employees could potentially harm Threshold’s ability to consummate the merger, as well as fulfill Threshold’s reporting obligations as a public company.

Risks Related to Drug Discovery, Development and Commercialization

Threshold remains dependent upon the success of evofosfamide. If Threshold is unable to successfully develop and obtain regulatory approval for evofosfamide, Threshold’s business and future prospects will be severely harmed.

Threshold has focused Threshold’s development activities on evofosfamide, and substantially all of Threshold’s efforts and expenditures continue to be devoted to evofosfamide. Accordingly, Threshold’s future prospects are dependent on the successful development, regulatory approval and commercialization of evofosfamide. On June 2, 2016, Threshold received preliminary comments from the FDA relating to Threshold’s request for a meeting indicating that Threshold’s analysis of the data from the MAESTRO study and the data from a supporting randomized Phase II study would not provide adequate efficacy data to support the submission of a new drug application, or NDA, for evofosfamide for the treatment of patients with locally advanced

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unresectable or metastatic pancreatic adenocarcinoma previously untreated with chemotherapy. Accordingly, Threshold would be required to successfully conduct one or more additional Phase III clinical trials before the FDA would accept any NDA for evofosfamide. Threshold’s inability to submit an NDA to the FDA for evofosfamide in the absence of additional Phase III development has significantly harmed Threshold’s business and future prospects. Threshold has conducted additional analyses of the data from MAESTRO trial and has reviewed and discussed the results of Threshold’s analyses with the PMDA in Japan, to determine potential registration pathways. However, in March 2017, Threshold received minutes from its formal meeting with the PMDA in Japan indicating that its analysis of the data from the MAESTRO trial and the data from the supporting randomized Phase II study would not provide adequate efficacy data to support the submission of a New Drug Application, or JNDA, to the PDMA for evofosfamide for the treatment of patients with locally advanced unresectable or metastatic pancreatic adenocarcinoma previously untreated with chemotherapy. While Threshold is currently in discussions with the PMDA to clarify the scope of a new clinical trial for which the PMDA would consider necessary to accept a JNDA for evofosfamide in Japan based on the previous results observed in the Japanese sub-population in the MAESTRO trial, Threshold would be required to obtain additional capital in order to conduct any such new clinical trial, and there can be no assurances that Threshold would be successful in obtaining the additional funding, whether through new collaborative, partnering or other strategic arrangements or otherwise, necessary to support any additional clinical development of evofosfamide. Threshold’s current evofosfamide development strategy is limited to the Phase I clinical trial of evofosfamide in combination with immune checkpoint antibodies in collaboration with researchers and clinicians at The University of Texas MD Anderson Cancer Center, and Threshold does not expect to conduct any further development of evofosfamide beyond the Phase I clinical trial unless such development is part of a new collaborative or partnering arrangement or other strategic transaction or Threshold is otherwise able to raise significant additional funding.

In any event, the process of obtaining regulatory approvals is expensive, often takes many years, if approval is obtained at all, and can vary substantially based upon the type, complexity and novelty of the product candidates involved. Changes statutes or regulations, or changes in regulatory review for each submitted product application, may cause delays in the approval or rejection of an application. In addition, varying interpretations of the data obtained from preclinical and clinical testing could delay, limit or prevent regulatory approval of evofosfamide. Any regulatory approval Threshold may ultimately obtain, from the PMDA or otherwise, may be limited in scope, subject to restrictions or post-approval commitments that render evofosfamide or potential future product candidates not commercially viable. In particular, even if Threshold is able to obtain and maintain regulatory approval of evofosfamide in Japan, the commercial prospects for evofosfamide could be diminished as a result of the more limited patient population in Japan. If any regulatory approval that Threshold does obtain, including from the PMDA, is delayed or is limited, Threshold may decide not to commercialize the applicable product candidate after receiving the approval. In addition, in March 2016, Threshold and Merck KGaA agreed to terminate Threshold’s collaboration and, as a result, Threshold will not receive any clinical development milestones or any other funding from Merck KGaA for the purpose of conducting any further clinical development of evofosfamide. Under Threshold’s former collaboration with Merck KGaA, Merck KGaA was responsible for 70% of the worldwide development expenses for evofosfamide. If Threshold is unable to obtain sufficient additional funding for the further development of evofosfamide, whether through new collaborative, partnering or other strategic arrangements or otherwise, Threshold may be required to cease further development of Threshold’s evofosfamide program. Also, issues with the successful and timely transfer of evofosfamide development activities from Merck KGaA could significantly impact Threshold’s ability to pursue registration with regulatory authorities and potential partners, and there can be no assurance that such development activities will be successfully transferred to Threshold in a timely manner or at all. For these and other reasons, Threshold cannot assure you that Threshold will be able to advance the development of evofosfamide. In such event, Threshold may be required to abandon the development of evofosfamide and forego any return on Threshold’s investment from Threshold’s evofosfamide program, which would severely harm Threshold’s future prospects and may cause Threshold to cease operations.

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Even if Threshold is able to meaningfully advance the development of evofosfamide, the failure of evofosfamide in the future to achieve successful clinical trial endpoints, delays in clinical trial enrollment or events or in the clinical development of evofosfamide, unanticipated adverse side effects related to evofosfamide or any other unfavorable developments or information related to evofosfamide would further significantly harm Threshold’s business and Threshold’s future prospects. Moreover, evofosfamide is not expected to be commercially available in the near term, if at all. Further, the commercial success of evofosfamide, if any, will depend upon its acceptance by physicians, patients, third party payors and other key decision-makers as a therapeutic and cost effective alternative to currently available products. In any event, if Threshold is unable to successfully develop, obtain regulatory approval for and commercialize evofosfamide, Threshold’s ability to generate revenue from product sales will be significantly delayed or precluded altogether and Threshold’s business would be materially and adversely affected, and Threshold may not be able to continue as a going concern.

Threshold currently lacks the ability to discover additional prodrug product candidates and Threshold also may not be able to successfully acquire or in-license and develop additional prodrug product candidates or programs suitable for clinical testing, either of which could limit Threshold’s growth and revenue potential.

Evofosfamide is currently Threshold’s only product candidate in the clinical development stage and Threshold may be unable to develop additional product candidates suitable for clinical testing. In this regard, as part of Threshold’s workforce reduction in December 2015 that followed the reported negative results from the two Phase III clinical trials of evofosfamide, Threshold eliminated Threshold’s discovery research activities conducted in-house, which prevents Threshold’s ability to discover additional prodrug product candidates at this time. In addition, given the uncertain prospects for evofosfamide, Threshold’s strategy includes evaluating opportunities to acquire or in-license additional product candidates or development programs that build on Threshold’s expertise and complement Threshold’s pipeline. Any growth through acquisition or in-licensing will depend upon the availability of suitable product candidates at favorable prices and upon advantageous terms and conditions. Even if appropriate acquisition or in-licensing opportunities are available, Threshold currently does not have, and may not in the future have, the financial resources necessary to pursue them. In addition, other companies, many of which may have substantially greater financial, marketing and sales resources, compete with Threshold for acquisition or in-licensing opportunities. In addition, Threshold may not be able to realize the anticipated benefits of any acquisition or in-licensing opportunity for a variety of reasons, including the possibility that a product candidate proves not to be safe or effective in later clinical trials or the integration of an acquired or licensed product candidate gives rise to unforeseen difficulties and expenditures. For example, in September 2014, Threshold licensed rights to tarloxotinib, a clinical-stage investigational compound that Threshold evaluated in two Phase II proof-of-concept clinical trials. However, based on the interim results of the two Phase II proof-of-concept clinical trials, Threshold determined in September 2016 to discontinue any further development of tarloxotinib, and Threshold will therefore not realize any return on Threshold’s investment in tarloxotinib. In any event, any growth through development of additional product candidates will depend principally on Threshold’s ability to identify, and then to obtain the necessary funding to pursue the acquisition of in-licensing of, additional product candidates on commercially reasonable terms, as well as Threshold’s ability to develop those product candidates and Threshold’s ability to obtain additional funding, whether through partnering arrangements or otherwise, to complete the development of, obtain regulatory approval for and commercialize these product candidates. If Threshold is unable to discover or obtain suitable product candidates for development, Threshold’s growth and revenue potential could be significantly harmed, and Threshold could be required to cease operations.

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If Threshold does not establish collaborations or other strategic transactions for Threshold’s current and potential future product candidates or otherwise raise substantial additional capital, Threshold will likely need to alter, delay or abandon Threshold’s development and any commercialization plans.

Threshold’s strategy includes selectively partnering or collaborating with other pharmaceutical and biotechnology companies to assist Threshold in furthering the development and potential commercialization of Threshold’s current and potential future product candidates. In this regard, as a result of the termination of Threshold’s collaboration with Merck KGaA, Threshold is no longer eligible to receive any further milestone payments or other funding from Merck KGaA, including the 70% of worldwide development costs for evofosfamide that were previously borne by Merck KGaA. In this regard, Threshold’s ability to advance the clinical development of evofosfamide is dependent upon Threshold’s ability to enter into new partnering, collaborative or other strategic arrangements for evofosfamide, or to otherwise obtain sufficient additional funding for such development. Threshold faces significant competition in seeking appropriate strategic partners, and collaborative and partnering arrangements are complex and time consuming to negotiate and document. Threshold may not be successful in entering into new partnering, collaborative or other strategic arrangements with third parties on acceptable terms, or at all. In addition, Threshold is unable to predict when, if ever, Threshold will enter into any additional partnering, collaborative or other strategic arrangements because of the numerous risks and uncertainties associated with establishing such arrangements. If Threshold is unable to negotiate new partnering, collaborative or other strategic arrangements, Threshold may have to curtail the development of a particular product candidate, reduce, delay, or terminate its development or one or more of Threshold’s other development programs, delay its potential commercialization or reduce the scope of Threshold’s sales or marketing activities or increase Threshold’s expenditures and undertake development or commercialization activities at Threshold’s own expense. For example, Threshold may have to cease further development of Threshold’s evofosfamide program if Threshold is unable to raise sufficient funding for any additional clinical development of evofosfamide through new partnering, collaborative or other strategic arrangements with third parties or other financing alternatives. In this regard, if Threshold decides to undertake any further development of evofosfamide beyond Threshold’s planned Phase I clinical trial of evofosfamide, Threshold would need to obtain additional funding for such development, either through financing or by entering into partnering, collaborative or other strategic arrangements with third parties for any such further development and Threshold may be unable to do. While Threshold is currently determining third party interest in partnering or acquiring TH-3424 and HX4, Threshold may be unable to partner or divest these assets in a timely manner, or at all, and therefore may not receive any return on Threshold’s investment in these assets. If Threshold does not have sufficient funds, Threshold will not be able to advance the development of Threshold’s product candidates or otherwise bring Threshold’s product candidates to market and generate product revenues.

Any partnering, collaborative or other strategic arrangements that Threshold establishes in the future may not be successful or Threshold may otherwise not realize the anticipated benefits from these arrangements. In addition, any such future arrangements may place the development and commercialization of Threshold’s product candidates outside Threshold’s control, may require Threshold to relinquish important rights or may otherwise be on terms unfavorable to Threshold

Threshold has in the past established and intends to continue to establish partnering, collaborative or other strategic arrangements with third parties to develop and commercialize Threshold’s product candidates, and these arrangements may not be successful or Threshold may otherwise not realize the anticipated benefits from these arrangements. Threshold currently has no ongoing collaborations for the development and commercialization of Threshold’s product candidates. Threshold may not be able to locate third-party strategic partners to develop and market Threshold’s product candidates, and Threshold lacks the capital and resources necessary to develop Threshold’s product candidates alone.

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Preclinical studies and Phase I or II clinical trials of Threshold’s product candidates may not predict the results of subsequent human clinical trials.

Preclinical studies, including studies of Threshold’s product candidates in animal models of disease, may not accurately predict the results of human clinical trials of those product candidates. In particular, promising animal studies suggesting the efficacy of evofosfamide for the treatment of different types of cancer may not accurately predict the ability of evofosfamide to treat cancer effectively in humans. Evofosfamide or any other compounds Threshold may develop may be found not to be efficacious in treating cancer, alone or in combination with other agents, when studied in human clinical trials. In addition, Threshold will not be able to commercialize Threshold’s product candidates until Threshold obtains FDA approval in the United States or approval by comparable regulatory agencies in Japan, Europe and other countries. A number of companies in the pharmaceutical industry, including Threshold and those with greater resources and experience than Threshold, have suffered significant setbacks in Phase III clinical trials, even after encouraging results in earlier clinical trials.

To satisfy FDA, PMDA or other foreign regulatory approval standards for the commercial sale of Threshold’s product candidates, Threshold must demonstrate in adequate and controlled clinical trials that Threshold’s product candidates are safe and effective. Success in early clinical trials, including in Phase I and Phase II clinical trials, does not ensure that later clinical trials will be successful. Initial results from Phase I and Phase II clinical trials of evofosfamide have in the past not been, and may again in the future not be, confirmed by later analysis or in subsequent larger clinical trials. For example, the results that achieved the primary endpoint for progression-free survival in the Phase IIb trial of evofosfamide in pancreatic cancer did not predict the results of overall survival for patients in the MAESTRO trial. Likewise, the results in the Phase I/II trial of evofosfamide in patients with soft tissue sarcoma did not predict the results of overall survival for patients in the 406 trial. In both cases, the 406 trial and the MAESTRO trial failed to meet their primary endpoints of demonstrating a statistically significant improvement in overall survival, based on Threshold’s analyses for the 406 trial and Merck KGaA’s analyses for the MAESTRO trial, notwithstanding positive results in earlier clinical trials. In addition, in January 2016, Threshold announced that an independent data and safety monitoring board, or DSMB, concluded that Threshold’s registrational Phase II clinical trial of evofosfamide plus pemetrexed versus pemetrexed alone in patients with NSCLC was unlikely to reach its primary endpoint of improving overall survival with statistical significance and, as a result, enrollment in this trial was closed. As these examples illustrate, despite the results reported in earlier clinical trials for evofosfamide, Threshold does not know whether potential future clinical trials that Threshold may conduct will demonstrate adequate efficacy and safety to result in regulatory approval to market evofosfamide. Threshold’s failure to successfully complete any potential future clinical trials and obtain regulatory approval for evofosfamide would materially and adversely affect Threshold’s business and severely harm Threshold’s future prospects.

Delays in Threshold’s potential future clinical trials could result in increased costs and delay Threshold’s ability to obtain regulatory approval and commercialize Threshold’s product candidates.

Delays in the progression of Threshold’s potential future clinical trials could materially impact Threshold’s product development costs and delay regulatory approval of Threshold’s product candidates. Threshold does not know whether Threshold’s potential future clinical trials of evofosfamide, including Threshold’s Phase I clinical trial of evofosfamide, will be completed on schedule, if at all. Clinical trials can be delayed for a variety of reasons, including:

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Delays in clinical trials can also result from difficulties in enrolling patients in Threshold’s potential future clinical trials, which could increase the costs or affect the timing or outcome of these clinical trials. This is particularly true with respect to diseases with relatively small patient populations. Timely completion of clinical trials depends, in addition to the factors outlined above, on Threshold’s ability to enroll a sufficient number of patients, which itself is a function of many factors, including:

If Threshold does not successfully complete Threshold’s potential future clinical trials on schedule, the price of Threshold common stock may further decline.

Threshold’s product candidates must undergo rigorous clinical testing, the results of which are uncertain and could substantially delay or prevent Threshold from bringing them to market.

Before Threshold can obtain regulatory approval for a product candidate, Threshold must undertake extensive clinical testing in humans to demonstrate safety and efficacy to the satisfaction of the FDA or other regulatory agencies. Clinical trials of new drug candidates sufficient to obtain regulatory marketing approval are expensive and take years to complete.

Threshold cannot be certain of Threshold’s successfully completing clinical testing within the time frames Threshold has planned or anticipated, or at all. Threshold may experience numerous unforeseen events during, or as a result of, the clinical trial process that could delay or prevent Threshold from receiving regulatory approval or commercializing Threshold’s product candidates, including the following:

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In addition, clinical results are susceptible to varying interpretations that may delay, limit or prevent regulatory approvals. Negative or inconclusive results or adverse safety events, including patient fatalities that may be attributable to Threshold’s product candidates, during a clinical trial could cause the trial to be terminated or require additional studies. Furthermore, any of Threshold’s future clinical trials may be overseen by an independent data monitoring committees, or DMC, or DSMBs. These independent oversight bodies are comprised of external experts who review the progress of the ongoing clinical trials as well as safety from other trials, and make recommendations concerning a trial’s continuation, modification, or termination based on periodic review of, unblinded data. Any of Threshold’s potential future clinical trials overseen by an independent DMC or DSMB may be discontinued or amended in response to recommendations made by responsible independent DMCs or DSMBs based on their review of trial results and an independent DMC or DSMB may determine to delay or suspend the trial due to safety or futility findings based on events occurring during a clinical trial. For example, in January 2016, Threshold announced that a DSMB concluded that Threshold’s registrational Phase II clinical trial of evofosfamide plus pemetrexed versus pemetrexed alone in patients with NSCLC was unlikely to reach its primary endpoint of improving overall survival with statistical significance and, as a result, enrollment in this trial was closed and in connection therewith, Threshold determined to cease enrollment in all Threshold-sponsored trials of evofosfamide. The recommended termination or modification of any of Threshold’s potential future clinical trials by an independent DMC or DSMB, could materially and adversely impact the future development of Threshold’s product candidates, and Threshold’s business, prospects, operating results, and financial condition may be materially harmed.

Threshold is subject to significant regulatory approval requirements, which could delay, prevent or limit Threshold’s ability to market Threshold’s product candidates.

Threshold’s research and development activities, preclinical studies, clinical trials and the anticipated manufacturing and marketing of Threshold’s product candidates are subject to extensive regulation by the FDA, the PMDA and other regulatory agencies in the United States and Japan and by comparable authorities in Europe and elsewhere. Threshold requires the approval of the relevant regulatory authorities before Threshold may commence commercial sales of Threshold’s product candidates in a given market. The regulatory approval process is expensive and time consuming, and the timing of receipt of regulatory approval is difficult to predict. Threshold’s product candidates could require a significantly longer time to gain regulatory approval than expected, or may never gain approval. Threshold cannot be certain that, even after expending substantial time and financial resources, Threshold will obtain regulatory approval for any of Threshold’s product candidates. This was the case with the FDA, which would not accept an NDA based on the data from the MAESTRO study. A delay or denial of regulatory approval could delay or prevent Threshold’s ability to generate product revenues and to achieve profitability.

Changes in regulatory approval policies during the development period of any of Threshold’s product candidates, changes in, or the enactment of, additional regulations or statutes, or changes in regulatory review practices for a submitted product application may cause a delay in obtaining approval or result in the rejection of an application for regulatory approval. Regulatory approval, if obtained, may be made subject to limitations on the indicated uses for which Threshold may market a product. These limitations could adversely affect Threshold’s potential product revenues. Regulatory approval may also require costly post-marketing follow-up studies. In addition, the labeling, packaging, adverse event reporting, storage, advertising, promotion and record-keeping related to the product will be subject to extensive ongoing regulatory requirements. Furthermore, for any marketed product, its manufacturer and its manufacturing facilities will be subject to continual review and periodic inspections by the FDA or other regulatory authorities. Failure to comply with applicable regulatory requirements may, among other things, result in fines, suspensions of regulatory approvals, product recalls, product seizures, operating restrictions and criminal prosecution.

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Evofosfamide is based on targeting the microenvironment of solid tumors and some hematological malignancies, which currently is an unproven approach to therapeutic intervention.

Threshold’s product candidates are designed to target the microenvironment of solid tumors and some hematological malignancies by, in the case of evofosfamide, harnessing hypoxia for selective toxin activation. Threshold has not nor, to Threshold’s knowledge, has any other company, received regulatory approval for a drug based on these approaches. Threshold cannot be certain that Threshold’s approaches will lead to the development of approvable or marketable drugs. Threshold’s approaches may lead to unintended, or off-target, adverse effects or may lack efficacy or contribution to efficacy in combination with other anti-cancer drugs.

In addition, the FDA, the PMDA or other regulatory agencies may lack experience in evaluating the safety and efficacy of drugs based on these targeting approaches, which could lengthen the regulatory review process, increase Threshold’s development costs and delay or prevent commercialization of Threshold’s current and potential future product candidates.

Threshold’s product candidates may have undesirable side effects that prevent or delay their regulatory approval or limit their use if approved.

Anti-tumor drugs being developed by Threshold are expected to have undesirable side effects. For example, in clinical trials of evofosfamide, some patients have exhibited skin and/or mucosal toxicities that have in some cases caused patients to stop or delay therapy. The extent, severity and clinical significance of these or other undesirable side effects may not be apparent initially and may be discovered or become more significant during drug development or even post-approval. These expected side effects or other side effects identified in the course of clinical trials or that may otherwise be associated with Threshold’s product candidates may outweigh the benefits of Threshold’s product candidates. Side effects may prevent or delay regulatory approval or limit market acceptance if Threshold’s products are approved. In this regard, Threshold’s product candidates may prove to have undesirable or unintended side effects or other characteristics adversely affecting their safety, efficacy or cost effectiveness that could prevent or limit their approval for marketing and successful commercial use, or that could delay or prevent the commencement and/or completion of clinical trials for Threshold’s product candidates.

Threshold has not yet gained sufficient experience with a commercial formulation of evofosfamide.

The formulation of evofosfamide that was the subject of Threshold’s prior clinical trials and is the subject of Threshold’s Phase I clinical trial was changed to address issues with a prior formulation that was subject to storage and handling requirements that were not suitable for a commercial product. The current formulation of evofosfamide may be suitable for a commercial product, but additional data will be required to verify this, and there can be no assurance that Threshold will be able to do so in a timely manner, if at all. If Threshold is not able to develop a viable commercial formulation of evofosfamide, then Threshold may be required to conduct additional Phase III clinical trials of evofosfamide, or Threshold may need to develop an alternative commercial formulation, either of which could delay, perhaps substantially, Threshold’s ability to obtain any regulatory approvals of evofosfamide.

The initial clinical formulations developed for evofosfamide or other potential future product candidates may not remain stable throughout the clinical testing phase.

Threshold has limited experience and data on the drug substance synthesis and the initial formulation for evofosfamide. This initial formulation and those of Threshold’s potential future product candidates may not remain stable during the clinical testing phase. If these formulations were found to be unstable during clinical testing, Threshold may be required to repeat the initial clinical trials which could increase Threshold’s costs and delay the development of the applicable product candidate. Threshold may be required to reformulate these product candidates, including evofosfamide, to improve stability. However, it is possible that Threshold might

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not be able to develop a formulation of evofosfamide or other future product candidates with adequate quality that meets the need for testing in Threshold’s clinical trials. Threshold may also be required to perform additional clinical bridging studies which may further delay development. Threshold may also be unable to scale up the manufacturing process to synthesize the current drug substance and current formulations, or the newly developed formulations, any of which could adversely affect Threshold’s ability to advance the development of, and potentially obtain regulatory approval of, the applicable product candidate.

Even if Threshold obtains regulatory approvals for Threshold’s current and potential future product candidates, Threshold’s marketed drugs will be subject to ongoing regulatory review. If Threshold fails to comply with continuing U.S. and foreign regulations, Threshold could lose Threshold’s approvals to market drugs and Threshold’s business would be seriously harmed.

Following initial regulatory approval of any drugs Threshold may develop, Threshold will be subject to continuing regulatory review, including review of adverse drug experiences and clinical results that are reported after Threshold’s drug products become commercially available. This would include results from any post-marketing tests or vigilance required as a condition of approval. The manufacturer and manufacturing facilities used to make any of Threshold’s drug candidates will also be subject to periodic review and inspection by regulatory agencies, including the PMDA should Threshold be able to obtain regulatory approval of evofosfamide in Japan. If a previously unknown problem or problems with a product or a manufacturing and laboratory facility used by Threshold is discovered, regulatory agencies, including potentially the PMDA, may impose restrictions on that product or on the manufacturing facility, including requiring Threshold to withdraw the product from the market. Any changes to an approved product, including the way it is manufactured or promoted, often require regulatory approval before the product, as modified, can be marketed. Manufacturers of Threshold’s products, if approved, will be subject to ongoing regulatory agency requirements for submission of safety and other post- market information. If such manufacturers fail to comply with applicable regulatory requirements, a regulatory agency may:

Regulatory authorities may impose significant restrictions on the indicated uses and marketing of pharmaceutical products.

Even if Threshold obtains regulatory approval for evofosfamide, Threshold would be subject to ongoing requirements by the regulatory authorities governing the manufacture, quality control, further development, labeling, packaging, storage, distribution, safety surveillance, import, export, advertising, promotion, recordkeeping and reporting of safety and other post-market information. The safety profile of any product will continue to be closely monitored by regulatory authorities after approval. If the regulatory authorities become aware of new safety information after approval of any of Threshold’s product candidates, they may require labeling changes or establishment of a Risk Evaluation and Mitigation Strategy, or REMS, or similar strategy, impose significant restrictions on a product’s indicated uses or marketing, or impose ongoing requirements for

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potentially costly post-approval studies or post-market surveillance. For example, the label ultimately approved for evofosfamide, if it achieves marketing approval, may include restrictions on use. Advertising and promotion of any product candidate that obtains approval will be heavily scrutinized by government agencies and the public. Violations, including promotion of Threshold’s products for unapproved or off-label uses, are subject to enforcement letters, inquiries and investigations, and civil and criminal sanctions by regulatory authorities. Engaging in impermissible promotion of any approved products for off-label uses could also subject Threshold to false claims litigation under U.S. federal and state statutes and comparable foreign rules and regulations, which could lead to civil and criminal penalties and fines and agreements that materially restrict the manner in which Threshold promotes or distributes any approved products.

If Threshold does not lawfully promote any approved products, Threshold may become subject to such litigation and, if Threshold is not successful in defending against such actions, those actions could compromise Threshold’s ability to become profitable.

Threshold does not have a sales force or marketing infrastructure and may not develop an effective one.

Threshold has no sales experience as a company. There are risks involved with establishing Threshold’s own sales and marketing capabilities, as well as entering into arrangements with third parties to perform these services. Developing an internal sales force and function will require substantial expenditures and will be time-consuming, and Threshold may not be able to effectively recruit, train or retain sales personnel. On the other hand, if Threshold enters into arrangements with third parties to perform sales, marketing and distribution services, Threshold’s product revenues will be lower than if Threshold markets and sells any products that Threshold develops itself. Threshold may not be able to effectively sell Threshold’s product candidates, if approved, which could materially harm Threshold’s business and Threshold’s financial condition.

Risks Related to Threshold’s Financial Performance and Operations

Threshold has incurred losses since Threshold’s inception and anticipates that it will continue to incur significant losses for the foreseeable future.

Due to the recognition of the remaining $65.9 million of deferred revenue from Threshold’s former collaboration with Merck KGaA during the quarter ended December 31, 2015, Threshold reported net income of $43.8 million for the year ended December 31, 2015. However, during the year ended December 31, 2016 Threshold had a net loss of $24.1 million, and Threshold has incurred losses in each of Threshold’s other years since Threshold’s inception in 2001. Threshold expects to incur losses for the foreseeable future. Threshold has devoted and, subject to Threshold’s ability to obtain additional funding and to otherwise meaningfully advance the development of Threshold’s product candidates, Threshold expects to continue to devote, substantially all of Threshold’s resources to the development of evofosfamide. Accordingly, Threshold’s future prospects remain dependent on the successful development, regulatory approval and commercialization of evofosfamide. In this regard, a substantial portion of Threshold’s efforts have been devoted to the two pivotal Phase III clinical trials of evofosfamide. The failure of the 406 trial and the MAESTRO trial to meet their primary endpoints of demonstrating a statistically significant improvement in overall survival as agreed upon with the FDA, based on Threshold’s analyses for the 406 trial and Merck KGaA’s analyses for the MAESTRO trial, has significantly depressed Threshold’s stock price and harmed Threshold’s future prospects. Likewise, the announcement of Threshold’s decision to discontinue the development of tarloxotinib following Threshold’s analysis of the interim results of two Phase II proof-of-concept trials of tarloxotinib has depressed Threshold’s stock price and harmed Threshold’s future prospects. Although Threshold has conducted Threshold’s own analyses of the data from MAESTRO trial and has reviewed and discussed the results of Threshold’s analyses with the PMDA in Japan to determine whether there is an appropriate path forward for submitting marketing authorization applications based on the data from the MAESTRO trial along with a bridging study, the PMDA and other health regulatory authorities have determined that the data from the MAESTRO trial is insufficient to support the approval of any marketing authorizations and that a bridging study or one or more additional clinical trials of evofosfamide

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would be required to be successfully conducted by Threshold in order to support any such approval, including with respect to the Japanese sub-population Threshold is targeting. If Threshold is required to successfully conduct and complete any additional clinical trials of evofosfamide in order to support potential approval of evofosfamide in Japan, Threshold would be required to obtain additional capital. There can be no assurances that Threshold would be successful in obtaining the additional funding, whether through new collaborative, partnering or other strategic arrangements or otherwise, necessary to support any additional clinical development of evofosfamide. Moreover, apart from the Phase I clinical trial of evofosfamide, Threshold cannot currently predict whether and to what extent Threshold may continue or increase evofosfamide development activities in future periods, if at all, and what Threshold’s future cash needs may be for any such activities. For these and other reasons, Threshold cannot assure you that Threshold will be able to advance the development of evofosfamide. In such event, Threshold may be required to abandon the development of evofosfamide and forego any return on Threshold’s investment from Threshold’s evofosfamide program, which would severely harm Threshold’s future prospects and may cause Threshold to cease operations. In any event, Threshold does not expect to generate any revenue from the commercial sales of evofosfamide or any potential future product candidates, including evofosfamide, in the near term, and Threshold expects to continue to have significant losses for the foreseeable future.

To attain ongoing profitability, Threshold will need to develop products successfully and market and sell them effectively, or rely on other parties to do so. Threshold cannot predict when Threshold will achieve ongoing profitability, if at all. Threshold has never generated revenue from the commercial sales of Threshold’s product candidates, and there is no guarantee that Threshold will be able to do so in the future. If Threshold fails to become profitable, or if Threshold is unable to fund Threshold’s continuing losses, Threshold would be unable to continue Threshold’s research and development programs.

Threshold needs substantial additional funding and may be unable to raise capital, which could force Threshold to delay, reduce or eliminate Threshold’s drug discovery, product development and commercialization activities.

Developing drugs, conducting clinical trials, and commercializing products is expensive. Threshold’s future funding requirements will depend on many factors, including:

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Threshold believes that Threshold’s cash, cash equivalents and marketable securities will be sufficient to fund Threshold’s projected operating requirements for the next 12 months based upon current operating plans and spending assumptions. However, Threshold will need to raise substantial additional capital to meaningfully advance the clinical development of evofosfamide, whether through new collaborative, partnering or other strategic arrangements or otherwise, and to in-license or otherwise acquire and develop additional product candidates or programs. In particular, Threshold’s ability to meaningfully advance the clinical development of evofosfamide is dependent upon Threshold’s ability to enter into new partnering, collaborative or other strategic arrangements for evofosfamide, or to otherwise obtain sufficient additional funding for such development, particularly since Threshold is no longer eligible to receive any further milestone payments or other funding from Merck KGaA for evofosfamide, including the 70% of worldwide development costs for evofosfamide that were previously borne by Merck KGaA.

While Threshold has been able to fund Threshold’s operations to date, Threshold currently has no ongoing collaborations for the development and commercialization of evofosfamide, and no source of revenue, nor do Threshold expects to generate revenue for the foreseeable future. Threshold also does not have any commitments for future external funding. Until Threshold can generate a sufficient amount of product revenue, which Threshold may never do, Threshold expects to finance future cash needs through a variety of sources, including:

Threshold’s ability to raise additional funds and the terms upon which Threshold is able to raise such funds have been severely harmed by the negative results reported from Threshold’s two pivotal Phase III clinical trials of evofosfamide and Threshold’s decision to discontinue development of tarloxotinib, and may in the future be adversely impacted by the uncertainty regarding the prospects for future development of evofosfamide and Threshold’s ability to advance the development of evofosfamide or otherwise realize any return on Threshold’s investments in evofosfamide, if at all. Threshold’s ability to raise additional funds and the terms upon which Threshold is able to raise such funds may also be adversely affected by the uncertainties regarding Threshold’s financial condition, the sufficiency of Threshold’s capital resources, Threshold’s ability to maintain the listing of Threshold common stock on The NASDAQ Capital Market and recent and potential future management turnover. As a result of these and other factors, Threshold cannot be certain that sufficient funds will be available to Threshold or on satisfactory terms, if at all. To the extent Threshold raises additional funds by issuing equity securities, Threshold’s stockholders may experience significant dilution, particularly given Threshold’s currently depressed stock price, and debt financing, if available, may involve restrictive covenants. If adequate funds are not available, Threshold may be required to significantly reduce or refocus Threshold’s operations or to obtain funds through arrangements that may require Threshold to relinquish rights to Threshold’s product candidates, technologies or potential markets, any of which could result in Threshold’s stockholders having little or no continuing interest in Threshold’s evofosfamide program as stockholders or otherwise, or which could delay or require that Threshold curtail or eliminate some or all of Threshold’s development activities or otherwise have a material adverse effect on Threshold’s business, financial condition and results of operations.

If Threshold is unable to secure additional funding on a timely basis or on terms favorable to Threshold, Threshold may be required to cease or reduce any product development activities, to conduct additional workforce reductions, to sell some or all of Threshold’s technology or assets or to merge all or a portion of Threshold’s business with another entity. Insufficient funds may require Threshold to delay, scale back, or eliminate some or all of Threshold’s activities, and if Threshold is unable to obtain additional funding, there is uncertainty regarding Threshold’s continued existence.

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Threshold’s financial results are likely to fluctuate from period to period, making it difficult to evaluate Threshold’s stock based on financial performance.

Threshold believes that period-to-period comparisons of Threshold’s operating results should not be relied upon as predictive of future performance. Threshold’s prospects must be considered in light of the risks, expenses and difficulties encountered by companies with no approved pharmaceutical products, and with only one product candidate in clinical development.

Threshold’s success depends in part on attracting, retaining and motivating key personnel and, if Threshold fails to do so, it may be more difficult for Threshold to execute Threshold’s business strategy. As a small organization Threshold is dependent on key employees and Threshold will need to hire additional personnel to execute Threshold’s business strategy successfully.

Threshold’s success depends on Threshold’s continued ability to attract, retain and motivate highly qualified management, clinical and scientific personnel and on Threshold’s ability to develop and maintain important relationships with leading academic institutions, clinicians and scientists. Threshold is highly dependent upon Threshold’s senior management. The loss of the services of one or more of Threshold’s other key employees could delay or adversely impact the development of Threshold’s product candidates.

In December 2015, Threshold announced a workforce reduction constituting approximately two-thirds of Threshold’s workforce with an additional workforce reduction in September 2016, and as of December 31, 2016, Threshold had only 15 employees. Threshold’s success will depend on Threshold’s ability to retain and motivate remaining personnel and hire additional qualified personnel when required, and Threshold’s history of implementing workforce reductions, along with the potential for future workforce reductions, may negatively affect Threshold’s ability to retain and/or attract talented employees. In addition, competition for qualified personnel in the biotechnology field is intense. Threshold faces competition for personnel from other biotechnology and pharmaceutical companies, universities, public and private research institutions and other organizations. Threshold may not be able to attract and retain qualified personnel on acceptable terms given the competition for such personnel. If Threshold is unsuccessful in Threshold’s retention, motivation and recruitment efforts, Threshold may be unable to execute Threshold’s business strategy.

In addition, certain members of Threshold’s management terms were part of Threshold’s December 2015 and September 2016 workforce reductions, including Threshold’s former Senior Vice Presidents of Regulatory Affairs and Pharmaceutical Development and Manufacturing as well as Threshold’s former Chief Scientific Officer and Threshold’s former Chief Operating Officer. Management transition inherently causes some loss of institutional knowledge, which can negatively affect strategy and execution and disrupt Threshold’s ability to successfully manage and grow Threshold’s business, and Threshold’s results of operations and financial condition could suffer as a result.

Significant disruptions of information technology systems or breaches of data security could adversely affect Threshold’s business.

Threshold’s business is increasingly dependent on critical, complex and interdependent information technology systems, including Internet-based systems, to support business processes as well as internal and external communications. The size and complexity of Threshold’s computer systems make them potentially vulnerable to breakdown, malicious intrusion and computer viruses that may result in the impairment of production and key business processes.

In addition, Threshold’s systems are potentially vulnerable to data security breaches—whether by employees or others—that may expose sensitive data to unauthorized persons. Such data security breaches could lead to the loss of trade secrets or other intellectual property, or could lead to the public exposure of personal information (including sensitive personal information) of Threshold’s employees, clinical trial patients, customers and others. Such disruptions and breaches of security could have a material adverse effect on Threshold’s business, financial condition and results of operations.

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Threshold’s facilities in California are located near an earthquake fault, and an earthquake or other natural disaster or resource shortage could disrupt Threshold’s operations.

Important documents and records, such as hard copies of Threshold’s laboratory books and records for Threshold’s product candidates, are located in Threshold’s corporate facilities in Menlo Park, California, near active earthquake zones. In the event of a natural disaster, such as an earthquake, drought or flood, or localized extended outages of critical utilities or transportation systems, Threshold does not have a formal business continuity or disaster recovery plan, and could therefore experience a significant business interruption. In addition, California from time to time has experienced shortages of water, electric power and natural gas. Future shortages and conservation measures could disrupt Threshold’s operations and could result in additional expense. Although Threshold maintains business interruption insurance coverage, the policy specifically excludes coverage for earthquake and flood.

Risks Related to Threshold’s Dependence on Third Parties

Threshold relies on third parties to manufacture evofosfamide and expects to rely on third parties to manufacture any other potential future product candidates that Threshold may develop. If these parties do not manufacture the active pharmaceutical ingredients or finished drug products of satisfactory quality, in a timely manner, in sufficient quantities and at an acceptable cost, clinical development and commercialization of evofosfamide and any other product candidates Threshold may develop could be delayed.

Threshold does not have Threshold’s own manufacturing capability for the evofosfamide active pharmaceutical ingredient, or API, or evofosfamide drug product. To date, Threshold has relied on, and Threshold expects to continue to rely on, a limited number of third-party contract manufacturers and excipient suppliers for the evofosfamide API and evofosfamide drug product to meet Threshold’s clinical supply needs of evofosfamide. Threshold has no long-term commitments or commercial supply agreements with any of Threshold’s evofosfamide suppliers. Threshold’s current and anticipated future dependence upon others for the manufacture of Threshold’s product candidates may adversely affect Threshold’s ability to develop and commercialize any product candidates on a timely and competitive basis.

Threshold needs to have sufficient evofosfamide API and drug product manufactured to meet the clinical supply demands for Threshold’s clinical trials. If Threshold is not successful in having sufficient quantities of evofosfamide API and drug product manufactured, or if manufacturing is interrupted at Threshold’s contract manufacturers and excipient suppliers for evofosfamide API and Threshold’s evofosfamide drug product manufacturers due to regulatory or other reasons, or consumes more drug product than anticipated because of a higher than expected trial utilization or has quality issues that limit the utilization of the drug product, Threshold may experience a significant delay in Threshold’s evofosfamide clinical program. In any event, Threshold will need to order additional evofosfamide API and drug product and Threshold has in the past experienced delays in the receipt of satisfactory drug product, and any additional delays Threshold may experience in the receipt of satisfactory evofosfamide API or drug product could cause significant delays in Threshold’s potential future evofosfamide clinical trials, which would harm Threshold’s business. Moreover, the need for additional supplies and preparation for registration may require manufacturing process improvements in evofosfamide API and drug product. The manufacturing processes improvements for the evofosfamide API may require facilities upgrades at Threshold’s suppliers, which may lead to delays or disruption in supply, or delays in regulatory approval of evofosfamide. Changes to the formulation of evofosfamide for Threshold’s potential future clinical trials may also require bridging studies to demonstrate the comparability of the new formulation with the old. These studies may delay Threshold’s clinical trials and may not be successful. Even if Threshold is successful in raising the additional capital necessary to meaningfully advance the development of evofosfamide, if Threshold is not successful in procuring sufficient evofosfamide clinical trial material, Threshold may experience a significant delay in Threshold’s evofosfamide clinical program. Finally, Threshold has not engaged any backup or alternative suppliers for parts of Threshold’s evofosfamide supply chain for Threshold’s potential future evofosfamide clinical trials. If Threshold is required to engage a backup or alternative supplier, the transfer of technical expertise and manufacturing process to the backup or alternative supplier would be difficult, costly and

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time-consuming and would increase the likelihood of a significant delay or interruption in manufacturing or a shortage of supply of evofosfamide.

In any event, additional agreements for more supplies of each of Threshold’s product candidates, including evofosfamide, will be needed to complete clinical development and/or commercialize them. In this regard, Threshold may need to enter into agreements for additional supplies of evofosfamide to commercialize it or develop such capability itself. Threshold cannot be certain that Threshold can do so on favorable terms, if at all. Threshold will need to satisfy all current good manufacturing practice, or cGMP, regulations, including passing specifications. Threshold’s inability to satisfy these requirements could delay Threshold’s clinical programs and the potential commercialization of evofosfamide if approved for commercial sale.

If evofosfamide or any of Threshold’s other product candidates is approved by the FDA, the PMDA or other regulatory agencies for commercial sale, Threshold will need to have it manufactured in commercial quantities. It may not be possible to successfully manufacture commercial quantities of evofosfamide or increase the manufacturing capacity for evofosfamide or any of Threshold’s other product candidates in a timely or economically feasible manner. Prior to commercial launch of evofosfamide, Threshold may be required to manufacture additional validation batches, which the FDA, the PMDA and other regulatory agencies must review and approve. If Threshold is unable to successfully manufacture the additional validation batches or increase the manufacturing capacity for evofosfamide or any other product candidates, the regulatory approval or commercial launch of that product candidate may be delayed, or there may be a shortage of supply which could limit sales.

In addition, if the facility or the equipment in the facility that produces Threshold’s product candidates is significantly damaged or destroyed, adversely impacted by an action of a regulatory agency or if the facility is located in another country and trade or commerce with or exportation from such country is interrupted or delayed, Threshold may be unable to replace the manufacturing capacity quickly or inexpensively. The inability to obtain manufacturing agreements, the damage or destruction of a facility on which Threshold relies for manufacturing or any other delays in obtaining supply would delay or prevent Threshold from completing Threshold’s clinical trials and commercializing Threshold’s current product candidates.

In addition, the evofosfamide formulation includes excipients that might be available from a limited number of suppliers. Threshold has not signed long term supply agreements with these excipient suppliers. Threshold will need to enter into long term supply agreements to ensure uninterrupted supply of these excipients to continuously manufacture clinical batches or commercial supplies, which Threshold may be unable to do in a timely or economically feasible manner or at all.

Threshold also expects to rely on contract manufacturers or other third parties to produce sufficient quantities of clinical trial product for any other product candidates that Threshold may develop. It is possible that Threshold might not be able to develop a formulation for evofosfamide with adequate quality that meets the need for testing in Threshold’s clinical trials. In any event, in order for Threshold to commence any potential future clinical trials of Threshold’s current and potential future product candidates, including Threshold’s Phase I clinical trial of evofosfamide, Threshold needs to obtain or have manufactured sufficient quantities of clinical trial product and there can be no assurance that Threshold will be able to obtain sufficient quantities of clinical trial product in a timely manner or at all. Any delay in receiving sufficient supplies of clinical trial product for Threshold’s potential future studies could negatively impact Threshold’s development programs.

Threshold has no control over Threshold’s manufacturers’ and suppliers’ compliance with manufacturing regulations, and their failure to comply could result in an interruption in the supply of Threshold’s product candidates.

The facilities used by Threshold’s single source contract manufacturers must undergo an inspection by the FDA, the PMDA and other foreign agencies for compliance with cGMP regulations, before the respective product candidates can be approved in their region. In the event these facilities do not receive a satisfactory

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cGMP inspection for the manufacture of Threshold’s product candidates, Threshold may need to fund additional modifications to Threshold’s manufacturing process, conduct additional validation studies, or find alternative manufacturing facilities, any of which would result in significant cost to Threshold as well as a delay of up to several years in obtaining approval for such product candidate. In addition, Threshold’s contract manufacturers, and any alternative contract manufacturer Threshold may utilize, will be subject to ongoing periodic inspection by the FDA and corresponding state agencies, the PMDA and other foreign agencies for compliance with cGMP regulations, similar foreign regulations and other regulatory standards. Threshold does not have control over Threshold’s contract manufacturers’ compliance with these regulations and standards. Any failure by Threshold’s third-party manufacturers or suppliers to comply with applicable regulations could result in sanctions being imposed on them (including fines, injunctions and civil penalties), failure of regulatory authorities to grant marketing approval of Threshold’s product candidates, delays, suspension or withdrawal of approvals, warning letters, license revocation, seizures or recalls of product candidates or products, operating restrictions and criminal prosecution.

Threshold expects to rely on third parties to conduct some of Threshold’s potential future clinical trials, and their failure to perform their obligations in a timely or competent manner may delay development and commercialization of Threshold’s product candidates.

Threshold may use clinical research organizations to assist in conduct of Threshold’s clinical trials. There are numerous alternative sources to provide these services. However, Threshold may face delays outside of Threshold’s control if these parties do not perform their obligations in a timely or competent fashion or if Threshold is forced to change service providers. This risk is heightened for clinical trials conducted outside of the United States, where it may be more difficult to ensure that clinical trials are conducted in compliance with FDA and applicable foreign regulatory requirements. Any third-party that Threshold hires to conduct clinical trials may also provide services to Threshold’s competitors, which could compromise the performance of their obligations to Threshold. If Threshold experiences significant delays in the progress of Threshold’s future clinical trials, if any, the commercial prospects for product candidates could be harmed and Threshold’s ability to generate product revenue would be delayed or prevented.

Threshold is dependent on Eleison Pharmaceuticals, Inc. to develop and commercialize glufosfamide

Threshold is dependent upon Eleison Pharmaceuticals, Inc., or Eleison, to which Threshold exclusively licensed glufosfamide in October 2009, to develop and commercialize glufosfamide. Any profit sharing or other payments to Threshold under the Eleison license depend almost entirely upon the efforts of Eleison, which may not be able to raise sufficient funds to continue clinical development activities with glufosfamide. Even if Eleison is successful at raising sufficient funding, it may not be successful in developing and commercializing glufosfamide. Threshold may also be asked to provide technical assistance related to the development of glufosfamide, which may divert Threshold’s resources from other activities. If the Eleison license terminates in such a way that glufosfamide reverts to Threshold and Threshold seeks alternative arrangements with one or more other parties to develop and commercialize glufosfamide, Threshold may not be able to enter into such an agreement with another suitable third party or third parties on acceptable terms or at all. In such event, since Threshold has no further development plans for glufosfamide, Threshold may not receive any further return on Threshold’s investment in glufosfamide.

Risks Related to Threshold’s Intellectual Property

Hypoxia-targeted prodrug technology is not a platform technology broadly protected by patents, and others may be able to develop competitive drugs using this approach.

Although Threshold has U.S. and foreign issued patents that cover certain hypoxia- and AKR1C3-targeted prodrugs, including evofosfamide, Threshold has no issued patents or pending patent applications that would prevent others from taking advantage of hypoxia-prodrug technology generally to discover and develop new

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therapies for cancer or other diseases. Consequently, Threshold’s competitors may seek to discover and develop potential therapeutics that operate by mechanisms of action that are the same or similar to the mechanism of action of Threshold’s hypoxia-prodrug product candidate.

Threshold is dependent on patents and proprietary technology. If Threshold fails to adequately protect this intellectual property or if Threshold otherwise do not have exclusivity for the marketing of Threshold’s products, Threshold’s ability to commercialize products could suffer.

Threshold’s commercial success will depend in part on Threshold’s ability to obtain and maintain patent protection sufficient to prevent others from marketing Threshold’s product candidates, as well as to defend and enforce these patents against infringement and to operate without infringing the proprietary rights of others. Threshold will only be able to protect Threshold’s product candidates from unauthorized use by third parties to the extent that valid and enforceable patents cover Threshold’s product candidates or their manufacture or use or if they are effectively protected by trade secrets. If Threshold’s patent applications do not result in issued patents, or if Threshold’s patents are found to be invalid, Threshold will lose the ability to exclude others from making, using or selling the inventions claimed therein. Threshold has a limited number of patents and pending patent applications.

The patent positions of pharmaceutical and biotechnology companies can be highly uncertain and involve complex legal and factual questions. No consistent policy regarding the breadth of claims allowed in biotechnology patents has emerged to date in the United States. The laws of many countries may not protect intellectual property rights to the same extent as United States laws, and those countries may lack adequate rules and procedures for defending Threshold’s intellectual property rights. Changes in either patent laws or in interpretations of patent laws in the United States and other countries may diminish the value of Threshold’s intellectual property. Threshold does not know whether any of Threshold’s patent applications will result in the issuance of any patents and Threshold cannot predict the breadth of claims that may be allowed in Threshold’s patent applications or in the patent applications Threshold may license from others.

The degree of future protection for Threshold’s proprietary rights is uncertain because legal means afford only limited protection and may not adequately protect Threshold’s rights or permit Threshold to gain or keep Threshold’s competitive advantage. For example:

Moreover, an issued patent does not guarantee Threshold the right to practice the patented technology or commercialize the patented product. Third parties may have blocking patents that could be used to prevent

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Threshold from commercializing Threshold’s patented products and practicing Threshold’s patented technology. Threshold’s issued patents and those that may be issued in the future may be challenged, invalidated or circumvented, which could limit Threshold’s ability to prevent competitors from marketing the same or related product candidates or could limit the length of the term of patent protection of Threshold’s product candidates. In addition, the rights granted under any issued patents may not provide Threshold with proprietary protection or competitive advantages against competitors with similar technology. Furthermore, Threshold’s competitors may independently develop similar technologies. Moreover, because of the extensive time required for development, testing and regulatory review of a potential product, it is possible that, before any of Threshold’s product candidates can be commercialized, any related patent may expire or remain in force for only a short period following commercialization, thereby reducing any advantage of the patent. Patent term extensions may not be available for these patents. If Threshold is not able to obtain adequate protection for, or defend, the intellectual property position of evofosfamide or any other potential future product candidates, then Threshold may not be able to retain or attract collaborators to partner Threshold’s development programs, including evofosfamide. Further, even if Threshold can obtain protection for and defend the intellectual property position of evofosfamide or any potential future product candidates, Threshold or any of Threshold’s potential future strategic partners still may not be able to exclude competitors from developing or marketing competing drugs. Should this occur, Threshold and potential future strategic partners may not generate any revenues or profits from evofosfamide or any potential future product candidates, or Threshold’s revenue or profit potential would be significantly diminished.

Threshold relies on trade secrets and other forms of non-patent intellectual property protection. If Threshold is unable to protect Threshold’s trade secrets, other companies may be able to compete more effectively against Threshold.

Threshold relies on trade secrets to protect certain aspects of Threshold’s technology, especially where Threshold does not believe patent protection is appropriate or obtainable. However, trade secrets are difficult to protect, especially in the pharmaceutical industry, where much of the information about a product must be made public during the regulatory approval process. Although Threshold uses reasonable efforts to protect Threshold’s trade secrets, Threshold’s employees, consultants, contractors, outside scientific collaborators and other advisors may unintentionally or willfully disclose Threshold’s information to competitors. Enforcing a claim that a third party illegally obtained and is using Threshold’s trade secret information is expensive and time consuming, and the outcome is unpredictable. In addition, courts outside the United States may be less willing to or may not protect trade secrets. Moreover, Threshold’s competitors may independently develop equivalent knowledge, methods and know-how.

If Threshold is sued for infringing intellectual property rights of third parties or if Threshold is forced to engage in an interference proceeding, it will be costly and time consuming, and an unfavorable outcome in that litigation or interference would have a material adverse effect on Threshold’s business.

Threshold’s ability to commercialize Threshold’s product candidates depends on Threshold’s ability to develop, manufacture, market and sell Threshold’s product candidates without infringing the proprietary rights of third parties. Numerous United States and foreign patents and patent applications, which are owned by third parties, exist in the general field of cancer therapies or in fields that otherwise may relate to Threshold’s product candidates. If Threshold is shown to infringe, Threshold could be enjoined from use or sale of the claimed invention if Threshold is unable to prove that the patent is invalid. In addition, because patent applications can take many years to issue, there may be currently pending patent applications, unknown to Threshold, which may later result in issued patents that Threshold’s product candidates may infringe, or which may trigger an interference proceeding regarding one of Threshold’s owned or licensed patents or applications. There could also be existing patents of which Threshold is not aware that Threshold’s product candidates may inadvertently infringe or which may become involved in an interference proceeding.

The biotechnology and pharmaceutical industries are characterized by the existence of a large number of patents and frequent litigation based on allegations of patent infringement. For so long as Threshold’s product

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candidates are in clinical trials, Threshold believes Threshold’s clinical activities fall within the scope of the exemptions provided by 35 U.S.C. Section 271(e) in the United States, which exempts from patent infringement liability activities reasonably related to the development and submission of information to the FDA. As Threshold’s clinical investigational drug product candidates progress toward commercialization, the possibility of a patent infringement claim against Threshold increases. While Threshold attempts to ensure that Threshold’s active clinical investigational drugs and the methods Threshold employs to manufacture them, as well as the methods for their use Threshold intends to promote, do not infringe other parties’ patents and other proprietary rights, Threshold cannot be certain they do not, and competitors or other parties may assert that Threshold infringes their proprietary rights in any event.

Threshold may be exposed to future litigation based on claims that Threshold’s product candidates, or the methods Threshold employs to manufacture them, or the uses for which Threshold intends to promote them, infringe the intellectual property rights of others. Threshold’s ability to manufacture and commercialize Threshold’s product candidates may depend on Threshold’s ability to demonstrate that the manufacturing processes Threshold employs and the use of Threshold’s product candidates do not infringe third-party patents. If third-party patents were found to cover Threshold’s product candidates or their use or manufacture, Threshold could be required to pay damages or be enjoined and therefore unable to commercialize Threshold’s product candidates, unless Threshold obtained a license. A license may not be available to Threshold on acceptable terms, if at all.

Risks Related To Threshold’s Industry

If Threshold’s competitors are able to develop and market products that are more effective, safer or more affordable than Threshold’s products, or obtain marketing approval before Threshold does, Threshold’s commercial opportunities may be limited.

Competition in the biotechnology and pharmaceutical industries is intense and continues to increase, particularly in the area of cancer treatment. Most major pharmaceutical companies and many biotechnology companies are aggressively pursuing oncology development programs, including traditional therapies and therapies with novel mechanisms of action. Threshold’s cancer product candidates face competition from established biotechnology and pharmaceutical companies and from generic pharmaceutical manufacturers. In particular, if approved for commercial sale for pancreatic cancer, evofosfamide would compete with Gemzar ^® , marketed by Eli Lilly and Company; Tarceva ^® , marketed by Roche/Genentech and Astellas Oncology; Abraxane ^® marketed by Celgene; and FOLFIRINOX, which is a combination of generic products that are sold individually by many manufacturers. There may also be product candidates of which Threshold is not aware at an earlier stage of development that may compete with evofosfamide or other potential future product candidates Threshold may develop. In short, each cancer indication for which Threshold is or may be developing product candidates has a number of established medical therapies with which Threshold’s candidates will compete. Threshold’s evofosfamide product candidate for targeting the tumor hypoxia is likely to be in highly competitive markets and may eventually compete with other therapies offered by companies who are developing or were developing drugs that target tumor hypoxia.

Threshold also faces potential competition from academic institutions, government agencies and private and public research institutions engaged in the discovery and development of drugs and therapies. Many of Threshold’s competitors have significantly greater financial resources and expertise in research and development, preclinical testing, conducting clinical trials, obtaining regulatory approvals, manufacturing, sales and marketing than Threshold does. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established pharmaceutical companies.

Threshold’s competitors may succeed in developing products that are more effective, have fewer side effects and are safer or more affordable than Threshold’s product candidates, which would render Threshold’s product candidates less competitive or noncompetitive. These competitors also compete with Threshold to recruit

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and retain qualified scientific and management personnel, establish clinical trial sites and patient registration for clinical trials, as well as to acquire technologies and technology licenses complementary to Threshold’s programs or advantageous to Threshold’s business. Moreover, competitors that are able to achieve patent protection obtain regulatory approvals and commence commercial sales of their products before Threshold does, and competitors that have already done so, may enjoy a significant competitive advantage.

Threshold’s relationships with customers and third-party payors will be subject to applicable anti-kickback, fraud and abuse and other healthcare laws and regulations, which could expose Threshold to criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings.

Healthcare providers, physicians and third-party payors will play a primary role in the recommendation and prescription of any product candidates for which Threshold obtains marketing approval. Threshold’s future arrangements with third-party payors and customers may expose Threshold to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which Threshold would market, sell and distribute Threshold’s products. As a biotechnology company, even though Threshold does not and will not control referrals of healthcare services or bill directly to Medicare, Medicaid or other third-party payors, federal and state healthcare laws and regulations pertaining to fraud and abuse and patients’ rights are and will be applicable to Threshold’s business. The laws that may affect Threshold’s ability to operate include:

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Efforts to ensure that Threshold’s business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude that Threshold’s business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If Threshold’s operations are found to be in violation of any of these laws or any other governmental regulations that may apply to Threshold, Threshold may be subject to significant civil, criminal and administrative penalties, damages, fines, imprisonment, exclusion from government funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of Threshold’s operations. If any physicians or other healthcare providers or entities with whom Threshold expects to do business are found to not be in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.

There is a substantial risk of product liability claims in Threshold’s business. If Threshold does not obtain sufficient liability insurance, a product liability claim could result in substantial liabilities.

Threshold’s business exposes Threshold to significant potential product liability risks that are inherent in the development, manufacturing and marketing of human therapeutic products. Regardless of merit or eventual outcome, product liability claims may result in:

If Threshold succeeds in marketing products, product liability claims could result in an FDA or foreign regulatory investigation of the safety or efficacy of Threshold’s products, Threshold’s manufacturing processes and facilities or Threshold’s marketing programs. An FDA or foreign regulatory investigation could also potentially lead to a recall of Threshold’s products or more serious enforcement actions, or limitations on the indications, for which they may be used, or suspension or withdrawal of approval.

Threshold has product liability insurance that covers Threshold’s clinical trials up to a $5 million annual aggregate limit. Threshold intends to expand Threshold’s insurance coverage to include the sale of commercial products if marketing approval is obtained for Threshold’s product candidates or any other compound that Threshold may develop. However, insurance coverage is expensive and Threshold may not be able to maintain insurance coverage at a reasonable cost or at all, and the insurance coverage that Threshold obtains may not be adequate to cover potential claims or losses.

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Even if Threshold receives regulatory approval to market Threshold’s product candidates, the market may not be receptive to Threshold’s product candidates upon their commercial introduction, which would negatively affect Threshold’s ability to achieve profitability.

Threshold’s product candidates may not gain market acceptance among physicians, patients, healthcare payors and the medical community. The degree of market acceptance of any approved products will depend on a number of factors, including:

If Threshold’s product candidates receive regulatory approval but do not achieve an adequate level of acceptance by physicians, patients, healthcare payors and the medical community, Threshold may not generate product revenues sufficient to attain profitability.

If third-party payors do not cover or adequately reimburse patients for any of Threshold’s product candidates if approved for marketing, Threshold may not be successful in selling them.

Threshold’s ability to commercialize any approved products successfully will depend in part on the extent to which coverage and reimbursement will be available from governmental and other third-party payors, both in the United States and in foreign markets. Even if Threshold succeeds in bringing one or more products to the market, the amount reimbursed for Threshold’s products may be insufficient to allow Threshold to compete effectively and could adversely affect Threshold’s profitability. Coverage and reimbursement by a governmental and other third-party payor may depend upon a number of factors, including a governmental or other third-party payor’s determination that use of a product is:

Obtaining coverage and reimbursement approval for a product from each third-party and governmental payor is a time consuming and costly process that could require Threshold to provide supporting scientific, clinical and cost effectiveness data for the use of Threshold’s products to each payor. Threshold may not be able to provide data sufficient to obtain coverage and reimbursement.

Eligibility for coverage does not imply that any drug product will be reimbursed in all cases or at a rate that allows Threshold to make a profit. Interim payments for new products, if applicable, may also not be sufficient to cover Threshold’s costs and may not become permanent. Reimbursement rates may vary according to the use of the drug and the clinical setting in which it is used, may be based on payments allowed for lower-cost drugs that are already reimbursed, may be incorporated into existing payments for other products or services and may reflect budgetary constraints and/or Medicare or Medicaid data used to calculate these rates. Net prices for

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products also may be reduced by mandatory discounts or rebates required by government health care programs or by any future relaxation of laws that restrict imports of certain medical products from countries where they may be sold at lower prices than in the United States.

The health care industry is experiencing a trend toward containing or reducing costs through various means, including lowering reimbursement rates, limiting therapeutic class coverage and negotiating reduced payment schedules with service providers for drug products. The Medicare Prescription Drug, Improvement and Modernization Act of 2003, or MMA, became law in November 2003 and created a broader prescription drug benefit for Medicare beneficiaries. The MMA also contains provisions intended to reduce or eliminate delays in the introduction of generic drug competition at the end of patent or nonpatent market exclusivity. The impact of the MMA on drug prices and new drug utilization over the next several years is unknown. The MMA also made adjustments to the physician fee schedule and the measure by which prescription drugs are presently paid, changing from Average Wholesale Price to Average Sales Price. The effects of these changes are unknown but may include decreased utilization of new medicines in physician prescribing patterns, and further pressure on drug company sponsors to provide discount programs and reimbursement support programs.

In March 2010, the United States Congress enacted the ACA, which, among other things, subjected manufacturers to new annual fees and taxes for certain branded prescription drugs and included the following changes to the coverage and payment for drug products under government health care programs: