RISK FACTORS

The continuing 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/consent solicitation 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/consent solicitation statement.

Risks Related to the Merger

The Exchange Ratio is not adjustable based on the market price of Galena 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.

It is currently anticipated that, at the closing of the Merger, the Exchange Ratio would be approximately 1,249.9648 pre-split shares of Galena Common Stock for each SELLAS Share and would be within a range of approximately 124.9965 and 41.6655 post-split shares of Galena Common Stock for each SELLAS Share. These estimates are subject to adjustment prior to closing of the Merger, including adjustments to account for the issuance of any additional SELLAS Shares or Galena Common Stock, as applicable, prior to the consummation of the Merger. Issuances of Galena Common Stock involving the following securities or transactions, if any, will not impact the Exchange Ratio: (i) a potential third party financing consented to by SELLAS and (ii) any exercise of the Significantly Out-of-the-Money Galena Warrants. Any changes in the market price of Galena Common Stock before the completion of the Merger will not affect the number of shares SELLAS shareholders will be entitled to receive pursuant to the Merger Agreement. Therefore, if before the completion of the Merger the market price of Galena Common Stock declines from the market price on the date of the Merger Agreement, then SELLAS shareholders could receive Merger consideration with substantially lower value. Similarly, if before the completion of the Merger the market price of Galena Common Stock increases from the market price on the date of the Merger Agreement, then SELLAS shareholders could receive Merger consideration with substantially more value for their SELLAS Shares than the parties had negotiated for in the establishment of the Exchange Ratio. Because the Exchange Ratio does not adjust as a result of changes in the market value of Galena Common Stock, for each one percentage point that the market value of Galena 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 SELLAS shareholders.

The market price of Galena Common Stock following the Merger may decline as a result of the Merger.

The market price of Galena Common Stock may decline as a result of the Merger for a number of reasons, including if:

SELLAS and Galena securityholders will have a reduced ownership and voting interest in, and will exercise less influence over the management of, the continuing company as compared to their current ownership and voting interest in the respective companies following the completion of the Merger.

After the completion of the Merger, the current securityholders of SELLAS and Galena will own a smaller percentage of the continuing company than their ownership of their respective companies prior to the Merger.

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Immediately after the Merger, SELLAS securityholders will own approximately 67.5% of the Galena Common Stock and Galena securityholders, whose shares of Galena Common Stock will remain outstanding after the Merger, will own approximately 32.5% of the Galena Common Stock, in each case calculated on a fully diluted basis for the continuing company, except for the exclusion of the impact of a potential third party financing consented to by SELLAS and the Significantly Out-of-the-Money Galena Warrants. These estimates are based on the anticipated pre- and post-Reverse Stock Split Exchange Ratio and are subject to adjustment. In addition, the seven-member board of directors of the continuing company, a majority of whom will be independent, will initially comprise five directors designated by SELLAS and, subject to the prior consent of SELLAS, not to be unreasonably withheld, two directors designated by Galena. Consequently, securityholders of SELLAS and Galena will be able to exercise less influence over the management and policies of the continuing company than they currently exercise over the management and policies of their respective companies.

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

Even if the Merger is approved by the SELLAS shareholders and the Share Issuance Proposal, the Change of Control Proposal and the Reverse Stock Split Proposal are approved by the stockholders of Galena, 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” in this proxy statement/prospectus/consent solicitation statement. Galena and SELLAS 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 Galena and SELLAS each may lose some or all of the intended benefits of the Merger.

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

If the Merger is not completed, Galena and SELLAS are subject to the following risks:

In addition, if the Merger Agreement is terminated and the Galena Board or the SELLAS Board determines to seek another business combination, there can be no assurance that either Galena or SELLAS 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.

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During the pendency of the Merger, Galena and SELLAS may not be able to enter into a business combination with another party at a favorable price because of restrictions in the Merger Agreement, which could adversely affect their respective businesses.

Covenants in the Merger Agreement impede the ability of Galena and SELLAS 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 have been placed at a disadvantage to their competitors during the period leading up to the decision to terminate the Merger. 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 and such party’s securityholders.

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 Galena and SELLAS 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 legal 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 Galena or SELLAS terminate the Merger Agreement under specified circumstances, including terminating because of a decision of a board of directors to recommend a superior competing proposal, Galena or SELLAS would be required to pay a termination fee of $750,000 and/or up to $100,000 in expense reimbursements to the other party, as described under “The Merger Agreement—Termination of the Merger Agreement and Termination Fee.” This termination fee may discourage third parties from submitting competing proposals to Galena or SELLAS or their securityholders, 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 the SELLAS Shares makes it difficult to evaluate the fairness of the Merger, the shareholders of SELLAS may receive consideration in the Merger that is less than the fair market value of the SELLAS Shares or Galena may pay more than the fair market value of the SELLAS Shares.

The outstanding SELLAS Shares are privately held and not traded in any public market. The lack of a public market makes it extremely difficult to determine the fair market value of the SELLAS Shares. Because the percentage of Galena equity to be issued to SELLAS shareholders was determined based on negotiations between the parties, it is possible that the value of the Galena Common Stock to be received by SELLAS shareholders will be less than the fair market value of SELLAS Shares, or Galena may pay more than the fair market value of the SELLAS Shares.

Galena expects that it will need to raise additional capital prior to the completion of the Merger, which may be unavailable on acceptable terms, or at all, which may impair Galena’s ability to complete the Merger.

Galena expects that it will need to raise additional capital in order to complete the Merger, as it is unclear if it will be able meet all of its obligations at the closing of the Merger if it does not raise additional capital. Galena’s ability to raise additional capital will depend in part on conditions in the capital markets at that time, which are outside Galena’s control, on Galena’s financial prospects and the market’s perception of the Merger. Galena may be unable to raise additional capital on acceptable terms, or at all, prior to the closing of the Merger, which may impair Galena’s ability to complete the Merger.

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Even if the Merger is consummated, the continuing company may fail to realize the anticipated benefits of the Merger.

The success of the Merger will depend on, among other things, the continuing company’s ability to achieve its business objectives and raise the necessary capital to fund its operations, including the successful development of its current and future product candidates. If the continuing company is not able to achieve these objectives, the anticipated benefits of the Merger may not be realized fully, may take longer to realize than expected, or may not be realized at all.

Galena and SELLAS have operated and, until the completion of the Merger, will continue to operate independently. Even if the Merger is completed, it is possible that the integration process could result in the loss of key employees, the disruption of each company’s ongoing business, an adverse impact on the value of the continuing company’s assets, or inconsistencies in standards, controls, procedures or policies that could adversely affect the continuing company’s ability to comply with reporting obligations as a public company, an inability to satisfy its obligations to third parties or to achieve the anticipated benefits of the Merger, or an inability to raise the necessary capital to fund each company’s operations. Integration efforts between the two companies will also divert management’s attention and resources. Any delays in the integration process or inability to realize the full extent of the anticipated benefits of the Merger could have an adverse effect on the continuing company’s business and the results of the continuing company’s operations. Such an adverse effect may impact the value of the shares of the Galena Common Stock after the completion of the Merger.

Potential difficulties that may be encountered in the integration process include, among other things, the following:

After the Merger is completed, the continuing company will need to raise capital, and there can be no assurance that such capital will be available.

As of the closing of the Merger, it is expected that the continuing company will have cash and cash equivalents of approximately $        , which is expected to be sufficient to fund the continuing company’s operations for at least          months after the closing of the Merger. The continuing company will, accordingly, need to raise capital through some type of financing after the closing of the Merger. There can be no assurance that any such financing will be available on acceptable terms, or at all.

If the Merger is not completed, Galena may elect to liquidate its remaining assets, and there can be no assurances as to whether any cash would be available to distribute to Galena’s stockholders after paying Galena’s debts and other obligations.

If Galena does not complete the Merger, the Galena Board may elect to take the steps necessary to liquidate all of Galena’s remaining assets. The process of liquidation may be lengthy and Galena cannot make any assurances regarding the timing of completing such a process. In addition, Galena would be required to pay all of Galena’s

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debts and contractual obligations, and to set aside certain reserves for potential future claims. There can be no assurance as to whether any cash would be available to distribute to Galena stockholders after paying Galena’s debts and other obligations and setting aside funds for reserves, or as to the timing of any such distribution.

If Galena fails to continue to meet all applicable requirements of the Nasdaq Capital Market and NASDAQ determines to delist Galena Common Stock, the delisting could adversely affect the value and market liquidity of Galena Common Stock and harm Galena’s business and would impair Galena’s ability to complete the Merger.

It is a condition of SELLAS’ obligation to complete the Merger that Galena maintain the listing of the Galena Common Stock on the Nasdaq Capital Market where the Galena Common Stock is currently listed. In order to maintain that listing, Galena must satisfy minimum financial and other listing requirements, including the closing bid price requirement. On March 24, 2017, Galena received notice from the Listing Qualifications Department of NASDAQ that the Galena Common Stock had not met the $1.00 per share minimum bid price requirement for the previous 30 consecutive business days, and that Galena was therefore not in compliance with the requirements for continued inclusion on the Nasdaq Capital Market under NASDAQ Listing Rule 5550(a)(2). In accordance with Nasdaq Listing Rule 5810(c)(3)(A), Galena had 180 calendar days, or until September 20, 2017, to regain compliance with this minimum bid price requirement. On September 21, 2017, NASDAQ notified Galena that, while Galena had not regained compliance with the minimum bid price requirement, it was eligible for an additional 180-day grace period, or until March 19, 2018, to regain compliance with the $1.00 per share minimum bid price requirement.

NASDAQ’s determination to grant an additional 180-day grace period was based on Galena having met the continued listing requirement for market value of publicly held shares and all other applicable requirements for initial listing on the Nasdaq Capital Market, with the exception of the minimum bid price requirement, and on Galena’s written notice to NASDAQ of its intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary. If at any time during this second 180-day grace period the closing bid price of the Galena Common Stock is at least $1.00 per share for a minimum of ten consecutive business days, NASDAQ will provide written confirmation of compliance and this matter will be closed. Under NASDAQ Rule 5810(c)(3)(F), NASDAQ may, in its discretion require Galena to maintain a minimum bid price of at least $1.00 per share for a period in excess of ten consecutive business days, but generally no more than 20 consecutive business days, before determining Galena has demonstrated an ability to maintain long-term compliance. If Galena does not regain compliance with the minimum bid price requirement by March 19, 2018, NASDAQ will provide written notification to Galena that the Galena Common Stock will be delisted. At that time, Galena may appeal the NASDAQ staff’s determination to a Hearings Panel, which will stay the delisting process pending the decision of the Hearings Panel. Galena will be required to provide a plan to regain compliance to the Hearings Panel. If the Hearings Panel decides to continue with delisting of Galena, the Hearing Panel’s decision may be appealed to the NASDAQ Listing and Hearing Review Council, but such appeal will not stay the delisting process. The closing bid price of the Galena Common Stock on NASDAQ was $0.35 on October 26, 2017.

While Galena intends to engage in efforts to regain compliance through, among other things, the Reverse Stock Split, and thus maintain Galena’s listing, there can be no assurance that Galena will be able to regain compliance during the applicable time periods set forth above. If Galena fails to continue to meet all applicable NASDAQ requirements in the future and NASDAQ determines to delist the Galena Common Stock, the delisting could substantially decrease trading in Galena Common Stock, adversely affect the market liquidity of Galena Common Stock, adversely affect Galena’s ability to obtain financing on acceptable terms, if at all, for the continuation of Galena’s operations and harm Galena’s business. Additionally, the market price of Galena Common Stock may decline further and Galena stockholders may lose some or all of their investment.

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A failure by the continuing company to comply with the initial listing standards of NASDAQ will result in a failure of SELLAS’ obligation to complete the Merger and the Merger may not occur.

Upon the completion of the Merger, the continuing company will be required to meet the initial listing requirements to maintain the listing and continued trading of the Galena Common Stock on the Nasdaq Capital Market. These initial listing requirements are more difficult to achieve than the continued listing requirements under which Galena Common Stock is now trading. Based on information currently available to Galena, Galena anticipates that it will be unable to meet the $4.00 minimum bid price initial listing requirement at the closing of the Merger unless Galena effects the Reverse Stock Split. If Galena is unable to satisfy these requirements, a condition to SELLAS’ obligation to complete the Merger will not be satisfied and the Merger may not occur. It is also a condition of SELLAS’ obligation to complete the Merger that Galena maintain the listing of the Galena Common Stock on NASDAQ. In addition, oftentimes a reverse stock split will not result in a trading price for the affected common stock that is proportional to the ratio of the split. Galena believes that the Reverse Stock Split will be in the best interest of the continuing company and Galena stockholders. However, Galena cannot assure you that the implementation of the Reverse Stock Split will have a positive impact on the price of the Galena Common Stock.

Galena may become involved in securities class action litigation that could divert management’s attention and harm Galena’s business, and insurance coverage may not be sufficient to cover all costs and damages.

In the past, securities class action or shareholder derivative litigation often follows certain significant business transactions, such as the sale of a business division or announcement of a merger. The continuing company may become involved in this type of litigation in the future. Litigation often is expensive and diverts management’s attention and resources, which could adversely affect the continuing company’s business.

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 Galena or SELLAS can refuse to complete the Merger if there is a material adverse change affecting the other party between August 7, 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 Galena or SELLAS, including:

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If adverse changes occur and Galena and SELLAS still complete the Merger, the stock price of the continuing company may suffer. This in turn may reduce the value of the Merger to the stockholders of Galena, shareholders of SELLAS or both.

Some Galena and SELLAS 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 Galena and SELLAS 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 continuing company, severance and retention benefits, payment of current year incentive compensation, continued indemnification and the potential ability to sell an increased number of shares of common stock of the continuing company in accordance with Rule 144 under the Securities Act of 1933, as amended, or the Securities Act. For more information regarding the interests of the Galena and SELLAS executive officers and directors in the Merger, see the sections titled “The Merger—Interests of the Galena Directors and Executive Officers in the Merger” and “The Merger—Interests of SELLAS Directors and Executive Officers in the Merger” of this proxy statement/prospectus/consent solicitation statement.

Because the Merger will result in an ownership change under Section 382 of the Code for Galena, Galena’s pre-Merger net operating loss carryforwards and certain other tax attributes will be subject to limitation or elimination. The net operating loss carryforwards and certain other tax attributes of SELLAS and of the continuing company may also be subject to limitations as a result of ownership changes.

As of June 30, 2017, Galena had $277 million of pre-Merger federal net operating loss carryforwards. If a corporation undergoes an “ownership change” within the meaning of Section 382 of the Code, the corporation’s net operating loss carryforwards and certain other tax attributes arising before the ownership change are subject to limitations on use after the ownership change. In general, an ownership change occurs if there is a cumulative change in the corporation’s equity ownership among certain stockholders (under rules specified in Code Section 382, including, generally, stockholders holding greater than 5% of Galena’s equity and the aggregate “public group” of stockholders) that exceeds fifty percentage points by value over a rolling three-year period. Similar rules may apply under state tax laws. The Merger will result in an ownership change for Galena and, accordingly, Galena’s net operating loss carryforwards and certain other tax attributes will be subject to limitation and possibly elimination after the Merger. This limitation is based on a percentage of the value of the equity of Galena, not the amount of the net operating loss carryovers. SELLAS has not performed an analysis on whether it has experienced any ownership changes in the past. However, it is possible that SELLAS’ net operating loss carryforwards and certain other tax attributes may also be subject to limitation as a result of prior shifts in equity ownership and/or the Merger. Additional ownership changes in the future could result in additional limitations on Galena’s, SELLAS’ and the continuing company’s net operating loss carryforwards and certain other tax attributes. Consequently, even if the continuing company achieves profitability, it may not be able to utilize a material portion of Galena’s, SELLAS’ or the continuing company’s net operating loss carryforwards and certain other tax attributes, which could have a material adverse effect on cash flow and results of operations.

Risks Related to Galena’s Former Commercial Operations

Galena is subject to U.S. federal and state health care fraud and abuse and false claims laws and regulations, and Galena recently has been subpoenaed in connection with marketing and promotional practices related to Abstral (fentanyl) sublingual tablets. Prosecutions under such laws have increased in recent years and Galena may become subject to such prosecutions or related litigation under these laws. If Galena has not fully complied with such laws, Galena could face substantial penalties.

Galena’s former commercial operations and development programs are subject to various U.S. federal and state fraud and abuse laws, including, without limitation, the federal False Claims Act, federal Anti-Kickback Statute,

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and the federal Sunshine Act. A federal investigation led by the U.S. Attorney’s Office for the Southern District of Alabama, or the SDAL, of two of the high-prescribing physicians for Abstral (fentanyl) sublingual tablets resulted in the criminal prosecution of the two physicians for alleged violations of the federal False Claims Act and other federal statutes. On April 28, 2016, a second superseding indictment was filed in the criminal case, which added additional information about the defendant physicians and provided information regarding the facts and circumstances involving a rebate agreement between Galena and the defendant physicians’ pharmacy as well as their ownership of Galena Common Stock. The criminal trial, which began on January 4, 2017, concluded with a jury verdict on February 23, 2017 finding these physicians guilty on 19 of 20 counts. In May 2017, one physician was sentenced to twenty years in prison, and the other physician was sentenced to twenty-one years in prison. At the end of the SDAL case, SDAL dismissed count 18 of the indictment charging that the physicians conspired, through the C&R Pharmacy, to receive illegal kickbacks in exchange for prescribing Abstral. To Galena’s knowledge, Galena was not a target or subject of that investigation.

There have also been federal and state investigations of a company that has a product that competes with Abstral in the same therapeutic class, and Galena has learned that the U.S. Food and Drug Administration, or the FDA, and other governmental agencies were investigating Galena’s Abstral promotion practices. In December 2015, Galena announced it had received a subpoena from the U.S. Attorney’s Office for the District of New Jersey, or the USAO NJ, requesting the production of a broad range of documents pertaining to marketing and promotional practices related to Abstral, a product which it sold to Sentynl Therapeutics Inc. for aggregate gross consideration of $12 million in November 2015. In January 2016, Galena announced that the USAO NJ and Department of Justice, or the DOJ, were conducting a criminal and civil investigation of Galena as well as possibly one or more then-current and/or former employees. On September 8, 2017, DOJ announced a settlement agreement regarding the USAO NJ and DOJ’s investigation as to Galena. The settlement involves a non-criminal resolution agreement and a civil payment of approximately $7.551 million, plus interest accrued since the date of reaching an agreement in principle payable in equal installments over twelve months, in return for a release of government claims of Galena in connection with the investigation.

Galena may be subject to legal or administrative actions as a result of these matters, or the impact of such matters. If Galena is found to be in violation of the False Claims Act, Anti-Kickback Statute, Patient Protection and Affordable Care Act, or any other applicable state or any federal fraud and abuse laws, Galena may be subject to penalties, such as civil and criminal penalties, damages, fines, or an administrative action of exclusion from government health care reimbursement programs. Galena can make no assurances as to the time or resources that will need to be devoted to these matters or their outcome, or the impact, if any, that these matters or any resulting legal or administrative proceedings may have on Galena’s business or financial condition.

Galena is subject to many regulatory provisions that include criminal provisions. If Galena is unable to comply with these provisions in the operation of Galena’s business, Galena may become subject to civil and criminal investigations and proceedings that could have a material adverse effect on Galena’s business, financial condition and prospects.

The federal False Claims Act prohibits persons from knowingly filing, or causing to be filed, a false claim to, or the knowing use of false statements to obtain payment from, the federal government. Qui tam suits filed under the False Claims Act can be brought by any individual on behalf of the government and such individuals, commonly known as “relators” or “whistleblowers,” may share in any amounts paid by the entity to the government in fines or settlement. The frequency of filing qui tam actions has increased significantly in recent years, causing greater numbers of health care companies to have to defend such qui tam actions and pay substantial sums to settle such actions. A qui tam action had been filed against Galena and others as described in the settlement agreement with DOJ and USAO NJ. As set forth in that settlement agreement, for a release of all claims against Galena and its officers and directors and dismissal with prejudice of the qui tam lawsuit, the relator received a portion of the $7.551 million payment to the federal government. Upon payment of the settlement amount, the federal government and the relator will dismiss with prejudice their claims against Galena in the qui tam lawsuit. In a separate settlement agreement, Galena will pay $300,000 in cash and Galena

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Common Stock to the relator’s counsel for the statutory mandated attorneys fees. The federal Anti-Kickback Statute prohibits persons from knowingly and willfully soliciting, offering, receiving, or providing remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual, or the furnishing or arranging for a good or service, for which payment may be made under a federal health care program such as the Medicare and Medicaid programs. Several courts have interpreted the statute’s intent requirement to mean that if any one purpose of an arrangement involving remuneration is to induce referrals of federal health care covered business, the statute has been violated. The Anti-Kickback Statute is broad, and despite a series of narrow safe harbors, prohibits many arrangements and practices that are lawful in businesses outside of the health care industry. Penalties for violations of the federal Anti-Kickback Statute include criminal penalties and civil and administrative sanctions such as fines, imprisonment and possible exclusion from Medicare, Medicaid and other federal health care programs. An alleged violation of the Anti- Kickback Statute may be used as a predicate offense to establish liability pursuant to other federal laws and regulations such as the federal False Claims Act. Many states have also adopted laws similar to the federal Anti-Kickback Statute, some of which apply to the referral of patients for health care items or services reimbursed by any source, not only Medicare and Medicaid programs.

The federal Patient Protection and Affordable Care Act includes provisions expanding the ability of certain relators to bring actions that would have been dismissed under prior law. When an entity is determined to have violated the federal False Claims Act, it may be required to pay up to three times the actual damages sustained by the government, plus civil penalties for each separate false claim. The Deficit Reduction Act of 2005 encouraged states to enact or modify their state false claims acts to be at least as effective as the federal False Claims Act by granting states a portion of any federal Medicaid funds recovered through Medicaid-related actions. Most states have enacted state false claims laws, and many of those states included laws including qui tam provisions. The federal Patient Protection and Affordable Care Act includes provisions known as the Physician Payments Sunshine Act, which requires manufacturers of drugs, biologics, devices and medical supplies covered under Medicare and Medicaid to record any transfers of value to physicians and teaching hospitals and to report this data beginning in 2013 to the Centers for Medicare and Medicaid Services for subsequent public disclosures. Manufacturers must also disclose investment interests held by physicians and their family members. Failure to submit the required information may result in civil monetary penalties of up to $1 million per year for knowing violations and may result in liability under other federal laws or regulations. Similar reporting requirements have also been enacted on the state level in the United States, and an increasing number of countries worldwide either have adopted or are considering similar laws requiring transparency of interactions with health care professionals. In addition, some states such as Massachusetts and Vermont imposed an outright ban on certain gifts to physicians. These laws could affect Galena’s product promotional activities by limiting the kinds of interactions Galena could have with hospitals, physicians or other potential purchasers or users of Galena’s system. Both the disclosure laws and gift bans also will impose administrative, cost and compliance burdens on Galena.

Galena faces product liability exposure and, if successful claims are brought against Galena, Galena may incur substantial liability if Galena’s insurance coverage for those claims is inadequate.

The commercial sale of Galena’s products after they are approved as well as the use of Galena’s product candidates in clinical trials exposes Galena to possible product liability claims. This risk exists even if a product is approved for commercial sale by the FDA and manufactured in facilities licensed and regulated by the FDA, if Galena’s products were sold to third parties, or if Galena’s products are provided in clinical trials. Galena’s products are designed to affect important bodily functions and processes. Any side effects, manufacturing defects, misuse or abuse associated with Galena’s products could result in injury to a patient or even death. For example, because the placebo may have performed better than NeuVax in the PRESENT ( P revention of  R ecurrence in  E arly- S tage, Node-Positive Breast Cancer with Low to Intermediate HER2  E xpression with  N euVax  T reatment) Trial, the use of NeuVax may have worsened the patient’s condition.

Product liability claims may be brought against Galena by consumers, health care providers, pharmaceutical companies or others selling or otherwise coming into contact with Galena’s products or generic versions of

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Galena’s products. If Galena cannot successfully defend itself against product liability claims Galena could incur substantial liabilities. Because Galena has sold Abstral and Zuplenz (ondansetron) oral soluble film and provided NeuVax as a study drug in the PRESENT Trial and other clinical trials, regardless of merit or eventual outcome, product liability claims may result in:

Galena has obtained product liability insurance coverage for commercial product sales with a $10 million per occurrence and a $10 million annual aggregate coverage limit. Galena’s insurance coverage may not be sufficient to cover all of Galena’s product liability related expenses or losses and may not cover Galena for any expenses or losses Galena may suffer. Moreover, insurance coverage is becoming increasingly expensive and, in the future, Galena may not be able to maintain insurance coverage at a reasonable cost, in sufficient amounts or upon adequate terms to protect Galena against losses due to product liability. If Galena determines that it is prudent to increase Galena’s product liability coverage based on sales of Galena’s products, Galena may be unable to obtain this increased product liability insurance on commercially reasonable terms or at all. Large judgments have been awarded in class action or individual lawsuits based on drugs that had unanticipated side effects, including side effects that may be less severe than those of Galena’s products. A successful product liability claim or series of claims brought against Galena could cause Galena’s stock price to decline and, if judgments exceed Galena’s insurance coverage, could decrease Galena’s cash and have a material adverse effect on Galena’s business, results of operations, financial condition and prospects.

Galena’s business involves the use of hazardous materials and Galena and its third-party manufacturers and suppliers must comply with environmental laws and regulations, which can be expensive and restrict how Galena does business.

Galena’s third-party manufacturers’ and suppliers’ activities involve the controlled storage, use and disposal of hazardous materials. Galena and Galena’s manufacturers and suppliers are subject to laws and regulations governing the use, manufacture, storage, handling and disposal of these hazardous materials even after Galena sells or otherwise disposes of the products. In some cases, these hazardous materials and various wastes resulting from their use will be stored at Galena’s contractors or manufacturers’ facilities pending use and disposal. Galena cannot completely eliminate the risk of contamination, which could cause injury to Galena’s employees and others, environmental damage resulting in costly cleanup and liabilities under applicable laws and regulations governing the use, storage, handling and disposal of these materials and specified waste products. Although Galena expects that the safety procedures utilized by Galena’s third-party contractors and manufacturers for handling and disposing of these materials will generally comply with the standards prescribed by these laws and regulations, Galena cannot guarantee that this will be the case or eliminate the risk of accidental contamination or injury from these materials. In such an event, Galena may be held liable for any resulting damages and such liability could exceed Galena’s resources. Galena does not currently carry biological or hazardous waste insurance coverage and Galena’s property and casualty and general liability insurance policies specifically exclude coverage for damages and fines arising from biological or hazardous waste exposure or contamination.

Galena will continue to be responsible for certain liabilities and obligations related to Abstral and Zuplenz, and if unknown liabilities were to arise it could have a material adverse effect on Galena.

Under Galena’s respective asset purchase agreements with Sentynl Therapeutics, Inc. and Midatech Pharma PLC, Galena’s future obligations under Galena’s former agreements with Orexo AB and MonoSol Rx have been assumed by Sentynl and Midatech, respectively, except that Galena will continue to be responsible for chargebacks, rebates, patient assistance and certain other product distribution channel liabilities related to Abstral

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and Zuplenz for a specified period of time post-closing. With respect to Abstral, Galena will continue to be responsible for returns for products sold prior to November 19, 2015, chargebacks and rebates through February 17, 2016 and patient assistance for a period subsequent to November 19, 2015 which shall terminate on the earlier of (i) February 19, 2016 or (ii) cumulative patient benefits accrued following November 19, 2015 equal to $440,000. With respect to Zuplenz, Galena will continue to be responsible for returns for a period from December 24, 2015 through December 24, 2016 for products which Galena previously sold and will be responsible from and after such period for any downstream returns from end user customers or returns from wholesalers from inventory existing as of December 24, 2015 that was sold by Galena prior to December 24, 2015. In addition, Galena will continue to be responsible for Medicaid rebates with respect to the fourth quarter of 2015 and payment claims arising from sales by customers any time prior and up to February 22, 2016. Galena is also responsible for any pre-closing liabilities and obligations related to Abstral and Zuplenz, including unknown liabilities, and have agreed in the respective asset purchase agreements to indemnify Sentynl and Midatech for any breach of Galena’s representations, warranties and covenants in the respective asset purchase agreements up to certain agreed to amounts. As presently believed by Galena, responsibilities to Sentynl and Midatech are not material, but if substantial unknown liabilities were to arise, it could have a material adverse effect on Galena’s financial condition. In this regard, Galena has been advised by one of its wholesale customers that Zuplenx inventory held by that customer under an alleged agreement with Galena is approaching its expiration date and needs to be swapped with better dated Zuplenz product. That customer and Galena have settled the swap by Galena paying the customer $500,000. Midatech has advised Galena that the same Zuplenz inventory is reaching its expiration date and will be returned. Under the terms of the asset purchase agreement, Midatech maintained that the cost of the return is $1.5 million and Galena needs to pay Midatech for the return. Midatech has since withdrawn that claim. Galena believes the settlement with the customer has resolved any return issues with Midatech without additional cost to Galena. However, no assurance can be given that Galena will not face additional liabilities under these asset purchase agreements.

Risks Related to Galena’s Development Programs

Galena’s drug candidates may not receive regulatory approval or be successfully commercialized.

Before they can be marketed, Galena’s clinical trials of its product candidates are subject to inspection. The same products are subject to inspection and approval by the FDA or similar foreign governmental agencies prior to being manufactured or marketed. The inspections by the FDA could delay the completion of the clinical trial and manufacturing of the product and thus the approval of the product. The process for obtaining FDA approval is both time-consuming and costly, with no certainty of a successful outcome.

Before obtaining regulatory approval for the sale of any drug candidate, Galena must conduct extensive preclinical tests and clinical trials to demonstrate the safety and efficacy in humans of Galena’s product candidates. Although Galena’s drug candidates have exhibited no serious adverse events, or SAEs, in the Phase 1 and 1/2 clinical trial, SAEs or other unexpected side effects may arise during further testing and development, and a failure of any preclinical study or clinical trial can occur at any stage of testing. The results of preclinical and initial clinical testing of these products may not necessarily indicate the results that will be obtained from later or more extensive testing. It also is possible to suffer significant setbacks in advanced clinical trials, even after obtaining promising results in earlier trials.

Galena’s Phase 3 PRESENT clinical trial of NeuVax was stopped due to futility and, since Galena has not been able to determine the causes for the failure of the clinical trial, it may be that NeuVax is not effective as a monotherapy in the treatment of the recurrence of breast cancer, which could indicate that certain of Galena’s other product candidates may also not be effective.

On June 27, 2016, the Independent Data Monitoring Committee conducted the pre-planned interim analysis of the PRESENT Trial and recommended that Galena stop the clinical trial because of futility, as the placebo may have performed better than NeuVax in the PRESENT trial. While there may have been factors about the design

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or conduct of the PRESENT trial that caused its failure, it may be that NeuVax is not effective as a monotherapy in the treatment of the recurrence of breast cancer. As Galena product candidates GALE-301 and GALE-302 have a similar mechanism of action to NeuVax, they may no longer be effective product candidates as a monotherapies for the prevention of the recurrence of ovarian cancer or other types of cancer.

A number of different factors could prevent Galena from obtaining regulatory approval or commercializing Galena’s product candidates on a timely basis, or at all.

Clinical trials of a drug candidate may be suspended at any time for various reasons, including if Galena or other regulatory agencies believe the subjects or patients participating in such trials are being exposed to unacceptable health risks. A suspension may come from: Galena; the FDA or other applicable regulatory authorities; an Independent Data Safety Monitoring Board, or DSMB, governing Galena’s clinical trials; or an institutional review board, or IRB, which is an independent committee registered with and overseen by the U.S. Department of Health and Human Services, or the HHS, that functions to approve, monitor and review biomedical and behavioral research involving humans. Among other reasons, adverse side effects of a drug candidate on subjects or patients in a clinical trial could result in the FDA or other regulatory authorities suspending or terminating the trial and refusing to approve a particular drug candidate for any or all indications of use.

Clinical trials of a new drug candidate require the enrollment of a sufficient number of patients, including patients who are suffering from the disease the drug candidate is intended to treat and who meet other eligibility criteria. Rates of patient enrollment are affected by many factors, and delays in patient enrollment can result in increased costs and longer development times than Galena expects at present. Patients who are enrolled at the outset of the trial may eventually choose for personal reasons not to participate in the study. Galena also competes for eligible patients with other clinical trials underway, and Galena may experience delays in patient enrollment due to the dependency of other trials underway in the same patient population.

Clinical trials also require the review and oversight of IRBs, which approve and continually review clinical investigations to protect the rights and welfare of human subjects. An inability or delay in obtaining IRB approval could prevent or delay the initiation and completion of clinical trials, and the FDA may decide not to consider any data or information derived from a clinical investigation not subject to initial and continuing IRB review and approval.

In addition, cancer vaccines are a relatively new form of therapeutic treatment and a very limited number of such products have received regulatory approval. Therefore, the FDA or other regulatory authority may apply standards for approval of a new cancer vaccine that is different from past experience.

Numerous factors could affect the timing, cost or outcome of Galena’s drug development efforts, including the following:

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It is possible that none of the product candidates that Galena develops will obtain the appropriate regulatory approvals necessary for Galena to begin selling them or that any regulatory approval to market a product may be subject to limitations on the indicated uses for which Galena may market the product. The time required to obtain FDA and other approvals is unpredictable but often can take years following the commencement of clinical trials, depending upon the complexity of the drug candidate. Any analysis Galena performs of data from clinical activities is subject to confirmation and interpretation by regulatory authorities, which could delay, limit or prevent regulatory approval. Any delay or failure in obtaining required approvals could have a material adverse effect on Galena’s ability to generate revenue from the particular drug candidate.

In addition, the length of time to develop the product candidates as well as any regulatory delays in the development and regulatory approval process could cause the patent exclusivity to be unavailable or greatly reduced for each product candidate. The lack of patent exclusivity could have a material adverse effect on Galena’s ability to generate revenue from the particular drug candidate.

Galena is also subject to numerous foreign regulatory requirements governing the conduct of clinical trials, manufacturing and marketing authorization, pricing and third-party reimbursement. The foreign regulatory approval process includes all of the risks associated with the FDA approval described above as well as risks attributable to the satisfaction of local regulations in foreign jurisdictions. Approval by the FDA does not assure approval by regulatory authorities outside of the United States.

Galena is dependent upon contract manufacturers for clinical supplies of Galena’s product candidates.

Galena does not have the facilities or expertise to manufacture supplies of any of Galena’s product candidates for clinical trials. Accordingly, Galena is dependent upon contract manufacturers for these supplies. There can be no assurance that Galena will be able to secure needed supply arrangements on reasonable terms, or at all. There is also no assurance that these contract manufacturers will receive the necessary approval after any FDA inspection of their facilities to continue to manufacture the products for trials or commercial sale. Galena’s failure to secure these arrangements as needed could have a materially adverse effect on Galena’s ability to complete the development of Galena’s product candidates or, if Galena obtains regulatory approval for Galena’s product candidates, to commercialize them.

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Galena’s current plans call for the manufacture of Galena’s compounds by contract manufacturers offering research grade, Good Laboratory Practices grade and Good Manufacturing Practices grade materials for preclinical studies ( e.g. , toxicology studies) and for clinical use. Certain of Galena’s product candidates are complex molecules requiring many synthesis steps, which may lead to challenges with purification and scale-up. These challenges could result in increased costs and delays in manufacturing. For GALE-401, Galena would change contract manufacturers for the supply of the clinical study drug and the commercial product, which may lead to delays in the initiation and completion of the Phase 3 trial and filing for regulatory approval.

In the clinical trials using NeuVax, Leukine is also administered and its availability is dependent upon a third-party manufacturer, which may or may not reliably provide Leukine, thus jeopardizing the completion of the trials.

NeuVax is administered in combination with Leukine, a recombinant human granulocyte macrophage-colony stimulating factor, which is referred to herein as rhGM-CSF or GM-CSF, available in both liquid and lyopholyzed forms exclusively from Genzyme Corporation, or Genzyme, a subsidiary of Sanofi-Aventis. Galena will continue to be dependent on Genzyme for Galena’s supply of Leukine in connection with the ongoing NeuVax and GALE-301/GALE-302 trials and the potential commercial manufacture of these programs. Galena has not entered into a supply agreement with Genzyme. Any temporary interruptions or discontinuation of the availability of Leukine, or any determination by Galena to change the GM-CSF used with NeuVax or GALE-301/GALE-302, may have a material adverse effect on Galena’s clinical trials and any commercialization of the assets.

Galena may not be able to establish or maintain the third-party relationships that are necessary to develop or potentially commercialize some or all of Galena’s product candidates.

Galena expects to depend on collaborators, partners, licensees, clinical research organizations and other third parties to support Galena’s discovery efforts, to formulate product candidates, to manufacture Galena’s product candidates, and to conduct clinical trials for some or all of Galena’s product candidates. Galena cannot guarantee that Galena will be able to successfully negotiate agreements for or maintain relationships with collaborators, partners, licensees, clinical investigators, vendors and other third parties on favorable terms, if at all. Galena’s ability to successfully negotiate such agreements will depend on, among other things, potential partners’ evaluation of the superiority of Galena’s technology over competing technologies and the quality of the preclinical and clinical data that Galena has generated, and the perceived risks specific to developing Galena’s product candidates. If Galena is unable to obtain or maintain these agreements, Galena may not be able to clinically develop, formulate, manufacture, obtain regulatory approvals for or commercialize Galena’s product candidates. Under certain license agreements that Galena has already entered into, Galena has minimum dollar amounts per year that Galena is obligated to spend on the development of the technology Galena has licensed from Galena’s contract partners and other obligations to maintain certain licenses. If Galena fails to meet this requirement under any of Galena’s licenses that contain such requirements or any other obligations under these licenses, Galena may be in breach of Galena’s obligations under such agreement, which may result in the loss of the technology licensed. Galena cannot necessarily control the amount or timing of resources that Galena’s contract partners will devote to Galena’s research and development programs, product candidates or potential product candidates, and Galena cannot guarantee that these parties will fulfill their obligations to Galena under these arrangements in a timely fashion. Galena may not be able to readily terminate any such agreements with contract partners even if such contract partners do not fulfill its obligations to Galena.

In addition, Galena may receive notices from third parties from time to time alleging that Galena’s technology or product candidates infringe upon the intellectual property rights of those third parties. Any assertion by third parties that Galena’s activities or product candidates infringe upon its intellectual property rights may adversely affect Galena’s ability to secure strategic partners or licensees for Galena’s technology or product candidates or Galena’s ability to secure or maintain manufacturers for Galena’s compounds.

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If Galena fails to meet its obligations under Galena’s license agreements, Galena may lose the ability to develop its product candidates

Galena’s business depends on Galena’s ability to license therapeutic compounds from third parties. If Galena fails to meet its obligations under Galena’s license agreements, Galena may lose the ability to develop its product candidates, which would adversely affect Galena’s business.

Galena is subject to competition and may not be able to compete successfully.

The biotechnology industry, including the cancer immunotherapy market, is intensely competitive and involves a high degree of risk. Galena competes with other companies that have far greater experience and financial, research and technical resources than Galena. Potential competitors in the United States and worldwide are numerous and include pharmaceutical and biotechnology companies, educational institutions and research foundations, many of which have substantially greater capital resources, marketing experience, research and development staffs and facilities than Galena. Some of Galena’s competitors may develop and commercialize products that compete directly with those incorporating Galena’s technology, introduce products to market earlier than Galena’s products or on a more cost effective basis. In addition, Galena’s technology may be subject to competition from other technology or methods developed using techniques other than those developed by traditional biotechnology methods. Galena’s competitors compete with Galena in recruiting and retaining qualified scientific and management personnel as well as in acquiring technologies complementary to Galena’s technology. Galena and Galena’s collaborators may face competition with respect to product efficacy and safety, ease of use and adaptability to various modes of administration, acceptance by physicians, the timing and scope of regulatory approvals, availability of resources, reimbursement coverage, price and patent position, including the potentially dominant patent positions of others. An inability to successfully complete Galena’s product development could lead to Galena having limited prospects for establishing market share or generating revenue from Galena’s technology.

GALE-401 must successfully complete a Phase 3 clinical trial and obtain regulatory approval before Galena can market the product and Galena’s competitors may obtain a successful clinical trial result and regulatory approval before Galena does.

GALE-401 contains the active ingredient, anagrelide, an FDA-approved product for the treatment of patients with MPNs, to lower abnormally elevated platelet levels. The currently available immediate release, or IR, version of anagrelide causes adverse reactions that are believed to be dose and plasma concentration dependent. According to the Highlights section of the FDA-approved prescribing information for AGRYLIN (anagrelide hydrochloride) capsules, for oral use (as revised in July 2015), the most common adverse reactions (incidence ³ 5%) are headache, palpitations, diarrhea, asthenia, edema, nausea, abdominal pain, dizziness, pain, dyspnea, cough, flatulence, vomiting, fever, peripheral edema, rash, chest pain, anorexia, tachycardia, malaise, paresthesia, back pain, pruritus and dyspepsia. These adverse reactions may limit the use of the IR version of the drug. Therefore, reducing the maximum concentration, or C _max , is hypothesized to reduce the adverse reactions, while preserving efficacy, potentially allowing broader use of the drug. Galena has analyzed data from multiple Phase 1 and 2 GALE-401 clinical trials and the treatment landscape for MPNs, with a current focus on ET, where Galena sees an unmet medical need in patients who are intolerant to the current standard of care. The risks include but are not limited to regulatory (agreement with regulatory agency on the development plan), operational (rate of enrollment), and statistical confirmation of the safety and efficacy endpoints. In addition, pursuant to the terms of the Exclusive License Agreement with BioVascular, Inc., or BVI, dated December 20, 2013, or the BVI License Agreement, if the first patient is not enrolled in the Phase 3 clinical trial by December 31, 2018, BVI shall have the right to terminate the BVI License Agreement. Even if Galena successfully completes a Phase 3 trial, there are other potential competitors whose clinical trials may be successful and obtain regulatory approval prior to Galena’s regulatory approval.

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Galena is dependent on technologies Galena licenses, and if Galena loses the right to license such technologies or fails to license new technologies in the future, Galena’s ability to develop new products would be harmed.

Galena currently is dependent on licenses from third parties for technologies relating to Galena’s product candidates. Galena’s current licenses impose, and any future licenses Galena enters into are likely to impose, various development, funding, royalty, diligence, sublicensing, insurance and other obligations on Galena. If Galena’s license with respect to any of these technologies is terminated for any reason, the development of the products contemplated by the licenses would be delayed, or suspended altogether, while Galena seeks to license similar technology or develop new non-infringing technology. The costs of obtaining new licenses are high.

Risks associated with operating in foreign countries could materially adversely affect Galena’s product development.

Galena may conduct future studies in countries outside of the United States. Consequently, Galena may be subject to risks related to operating in foreign countries. Risks associated with conducting operations in foreign countries include:

Risks Related to Galena’s Financial Position and Capital Requirements

Galena is conducting a review of strategic alternatives for Galena, including evaluating potential paths forward for NeuVax, GALE-301/GALE-302 and GALE-401 that could significantly impact Galena’s future operations and financial position.

In January 2017, Galena announced that the Galena Board had initiated a review of strategic alternatives that could result in changes to Galena’s business strategy and future operations, which has resulted in the Merger. As part of this process, and in connection with the Merger, the Galena Board is reviewing GALE-401 and GALE-301/GALE-302 for potential internal development or strategic partnership, with the goal of maximizing stockholder value. Whether or not Galena completes the Merger, if Galena determines to further develop NeuVax, GALE-301/GALE-302 and GALE-401, or all of the products, Galena will need to obtain substantial additional funding. Such funding is constrained by the disqualifications to use Regulation A and Regulation D of the SEC regulations arising from the cease and desist order issued by the SEC on April 10, 2017 in the stock promotion practices investigation. In addition, Galena’s current ineligibility to use a Form S-3 registration statement currently limits Galena’s ability to raise capital.

Galena may not be able to obtain sufficient financing, and may not be able to develop Galena’s product candidates.

Galena had cash and cash equivalents of approximately $18.1 million as of June 30, 2017. Galena had no revenue during the six months ended June 30, 2017, and Galena’s cash burn from operations for the six months ended

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June 30, 2017 was approximately $20.0 million. Galena believes that Galena’s existing cash and cash equivalents should be sufficient to fund Galena’s operations for at least eight months from August 14, 2017 the date of issuance of Galena’s consolidated financial statements for the quarter ended June 30, 2017. This projection is based on Galena’s current limited planned operations (not taking the Merger into account other than the Merger expenses noted below), anticipated payments for defense costs for the governmental investigation, payments of the resolution of the SEC investigation and the Abstral governmental investigation, estimates of the defense costs to defend certain securities litigation and other matters, and Galena’s impaired ability to raise funds. The projection is also subject to changes in Galena’s operating plans, transaction costs related to the closing of the Merger, unanticipated developments and other legal matters and uncertainties inherent in Galena’s business. Galena expects that it will need to seek to replenish its existing cash and cash equivalents through dilutive and non-dilutive financings over this calendar year.

In addition, Galena had approximately $13.2 million of restricted cash associated with a debenture as of June 30, 2017. Galena cannot currently use the Purchase Agreement with Lincoln Park Capital, LLC, or LPC, and its At The Market Issuance Sales Agreements with FBR & Co. (formerly MLV & Co. LLC) and Maxim Group LLC which are referred to collectively as the ATM, because Galena is not currently eligible to use a Form S-3 registration statement and it does not expect to be eligible to use a Form S-3 registration statement until May 1, 2018. However, even if Galena becomes eligible to use a Form S-3 registration statement as of May 1, 2018, unless the market value of Galena Common Stock held by non-affiliates of Galena increases to $75 million, Galena will be limited in the amounts it may sell under Form S-3.

As discussed above, Galena received a notice of delisting from NASDAQ on March 24, 2017 because Galena’s stock price was below the required $1.00 per share for more than 30 consecutive trading days. Galena is not able to predict whether Galena’s stock price and/or the volume of shares post Reverse Stock Split will be sufficient based upon the current stock price to meet Galena’s ongoing financing requirements to maintain Galena’s operations.

If Galena fails to obtain additional future funding, Galena could be forced to scale back or terminate its operations. Galena may not be able to meet its obligations as they come due, which would raise substantial doubts as to Galena’s ability to continue as a going concern. Any such inability to continue as a going concern may result in Galena stockholders losing their entire investment. Whether or not the Merger is completed, there is no guaranty that Galena will become profitable or secure additional financing.

Galena expects to continue to incur significant operating and non-operating expenses, which may make it difficult for Galena to secure sufficient financing, and may lead to uncertainty about Galena’s ability to continue as a going concern.

Substantial funds were expended to develop Galena’s technologies and product candidates, and additional substantial funds will be required for further clinical trials of Galena’s product candidates, and to manufacture and market any products that are approved for commercial sale. Because the successful development of Galena’s products is uncertain, Galena is unable to precisely estimate the actual funds Galena will require to develop and potentially commercialize them. In addition, Galena may not be able to generate enough revenue, even if Galena is able to commercialize any of Galena’s product candidates, to become profitable.

In the event that Galena is unable to obtain additional financing as needed or if Galena incurs significant expense related to, among other things, transaction costs related to the closing of the Merger, and defense of the putative shareholder class-action and derivative complaints, Galena may not be able to meet Galena’s obligations as they come due, that in turn may raise substantial doubts as to Galena’s ability to continue as a going concern. Any such inability to continue as a going concern may result in holders of Galena Common Stock losing their entire investment. There is no assurance that Galena will secure additional financing. Galena’s financial statements contemplate that Galena will continue as a going concern and do not contain any adjustments that might result if Galena were unable to continue as a going concern. Changes in Galena’s operating plans, Galena’s existing and

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anticipated working capital needs, transaction costs related to the closing of the Merger, defense costs related to the recent securities and derivative lawsuits, resolution of the ongoing government investigation, increased expenses, Galena’s current inability to use a Form S-3 registration statements and even if Galena could use a Form S-3 registration statement limitations on the amounts that Galena could sell on a Form S-3 due to Galena’s low market capitalization, potential acquisitions, or other events may affect Galena’s ability to continue as a going concern. Future financing may be obtained through, and future development efforts may be paid for by, the issuance of debt or equity, which may have an adverse effect on Galena stockholders or may otherwise adversely affect Galena’s business.

If Galena raises funds through the issuance of debt or equity, any debt securities or preferred stock issued will have rights, preferences and privileges senior to those of holders of Galena Common Stock in the event of a liquidation. In such event, there is a possibility that once all senior claims are settled, there may be no assets remaining to pay out to the holders of Galena Common Stock. In addition, if Galena raises funds through the issuance of additional equity, whether through private placements or additional public offerings, such an issuance would dilute your ownership in Galena.

The terms of debt securities may also impose restrictions on Galena’s operations, which may include limiting Galena’s ability to incur additional indebtedness, to pay dividends on or repurchase Galena Common Stock, or to make certain acquisitions or investments. In addition, Galena may be subject to covenants requiring Galena to satisfy certain financial tests and ratios, and Galena’s ability to satisfy such covenants may be affected by events outside of Galena’s control.

You may have difficulty evaluating Galena’s business, and Galena’s historical financial information may not be representative of Galena’s future results.

Galena has closed its NeuVax PRESENT trial due to futility and plans to continue to support the NeuVax investigator-sponsored immunotherapy trials. For GALE-401, Galena has completed a Phase 2 trial of GALE-401 in patients with essential thrombocythemia, or ET. If the Merger is completed, GALE-401 will be evaluated for potential internal development or strategic partnership by management of the continuing company post-Merger. As a result, Galena will have no recurring revenues unless and until Galena is able to obtain marketing approval of one or more of Galena’s other product candidates and Galena’s historical financial information may not be representative of Galena’s future results.

Galena may be unable to comply with reporting and other requirements under federal securities laws.

As a publicly traded company, Galena is subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act. In addition, the Exchange Act requires that Galena file annual, quarterly and current reports. Galena’s failure to prepare and disclose this information in a timely manner could subject Galena to penalties under federal securities laws, expose Galena to lawsuits and restrict Galena’s ability to access financing. The Sarbanes-Oxley Act requires that Galena, among other things, establishes and maintains effective internal controls over financial reporting. From time to time Galena evaluates its existing internal controls in light of the standards adopted by the Public Company Accounting Oversight Board. It is possible that Galena, or Galena’s independent registered public accounting firm, may identify significant deficiencies or material weaknesses in Galena’s internal control over financial reporting in the future. Any failure or difficulties in implementing and maintaining these controls could cause Galena to fail to meet the periodic reporting obligations or result in material misstatements in Galena’s financial statements.

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Intellectual Property Risks Related to Galena’s Business

Galena may not be able to obtain and enforce patent rights or other intellectual property rights that cover Galena’s product candidates and that are of sufficient breadth to prevent third parties from competing against Galena.

Galena’s success with respect to its product candidates will depend in part on its ability to obtain and maintain patent protection in the United States and abroad, to preserve Galena’s trade secrets, and to prevent third parties from infringing upon Galena’s proprietary rights. Galena’s patents and patent applications, however, may not be sufficient to provide protection for NeuVax or Galena’s other product candidates against commercial competition.

The active peptide found in NeuVax, the E75 peptide, has been known and studied for many years. Galena has one issued U.S. patent, US 6,514,942, covering the composition of matter of the E75 peptide, which expired in mid-2015, prior to any potential commercialization of NeuVax. Galena does not have and will not be able to obtain any composition of matter patent protection for E75. Galena also has a license from The Henry M. Jackson Foundation for the Advancement of Military Medicine to issued U.S., European, Japanese, Korean, Mexican and Australian method of use patents, which expire in 2028, that are directed to a method of inducing immunity against breast cancer recurrence by administering a composition comprising the E75 peptide to patients who have both an immunohistochemistry, or IHC, rating of 1+ or 2+ for HER2/neu protein expression, as well as a fluorescence in situ hybridization, or FISH, rating of less than about 2.0 for HER2/neu gene expression. The license further includes an issued U.S. method of use patent directed to a method of inducing immunity against recurrence of any HER2/neu expressing tumors by administering the E75 peptide to patients with tumors having a FISH rating of less than about 2.0 for HER2/neu gene expression; an issued U.S. patent which includes claims to the use of E75 to reduce the risk of cancer recurrence, including bone only recurrence; and pending applications with similar claims in a number of foreign jurisdictions, all of which expire in 2028. Also included in the license is a method of use patent, which expires in 2026, that is directed to the use of NeuVax in combination with trastuzumab (Herceptin; Genentech/Roche) to treat any HER2/neu expressing cancer. Thus, Galena’s method of use patents may not prevent competitors from seeking to develop and market NeuVax for use in cancer patients who do not meet these criteria. If any such alternative uses were approved, this could lead to off-label use and price erosion for Galena’s NeuVax product. Galena may seek FDA approval for use of NeuVax to treat cancer patients who fall outside the claimed IHC and FISH ranges and for other cancers as well. Although Galena is pursuing additional patent protection for NeuVax through pending patent applications, Galena may not be able to obtain additional patent protection that would provide Galena with a significant commercial advantage.

Anagrelide hydrochloride, the sole active pharmaceutical ingredient, or API, in GALE-401, has been approved for many years and, thus, it is not possible to obtain composition of matter patents that cover anagrelide hydrochloride. As a result, competitors who obtain the requisite regulatory approval can offer products with the same API as GALE-401, so long as the competitors do not infringe any formulation patents that Galena may have or may obtain or license, if any. The only patent protection that Galena has or is likely to obtain covering GALE-401 are patents relating to specific formulations, methods using these formulations, and methods of manufacturing and packaging. Galena has an issued U.S. Patent, which expires in 2020, covering methods of using anagrelide to reduce platelet count in patients subject to veno-occlusive events. Galena has granted patents in the United States, United Kingdom and Japan, which expire in 2029, covering controlled release formulations of anagrelide and methods of use. Galena also is prosecuting pending patent applications in other territories including, but not limited to, the United States, Europe, India, and Japan, which may not issue prior to any potential commercialization of GALE-401. Galena may seek FDA approval for use of GALE-401 to treat patients with MPNs that include several hematological disorders, including ET. Although Galena is pursuing additional patent protection for GALE-401 through pending patent applications, Galena may not be able to obtain additional patent protection that would provide Galena with a significant commercial advantage.

The active peptides found in GALE-301 and GALE-302 are derived from folate binding protein, or FBP. One of the active peptides, E39, has been known and studied for many years. The other active peptide, J65, is a

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derivative of E39. Galena has a license from The Henry M. Jackson Foundation to issued and granted patents in the United States, Europe, Canada, and Japan, covering composition of matter for the E39 and J65 peptides alone and in combination with E39, as well as the use of these compositions for the treatment of cancer. These patents are expected to expire in 2022, prior to any potential commercialization of GALE-301. Galena also has pending U.S. and International (PCT) applications with claims to combination dosage regimens of GALE-301 and GAL-302, which, if granted, would expire in 2036. Galena also has pending U.S. and International (PCT) applications with claims to methods of inducing an immune response to tumors with an IHC rating of 0 or 1+ for folate binding protein expression which, if granted, would expire in 2037. Galena does not have and will not be able to obtain any composition of matter patent protection for the E39 peptide in any territory. The license Galena has from The Henry M. Jackson Foundation grants Galena the right to develop and market GALE-301 for any use, including methods of treating cancer. Galena’s patents may not prevent competitors from seeking to develop and market the E39 peptide alone. If any such alternative uses of compositions containing the E39 peptide were approved, this could lead to off label use and price erosion for GALE-301. Galena may seek FDA approval for use of GALE-301, alone or in combination with GALE-302, to treat cancer patients with ovarian and endometrial cancers and for other cancers as well. Although Galena is pursuing additional patent protection for GALE-301 and the combination of GALE-301 and GALE-302 through pending patent applications, Galena may not be able to obtain additional patent protection that would provide Galena with a significant commercial advantage.

Galena’s ability to obtain, maintain and enforce patents is uncertain and involves complex legal and factual questions. Accordingly, rights under any patents Galena has or may obtain or license may not provide Galena with sufficient protection for Galena’s commercial product and product candidates to afford a commercial advantage against competitive products or processes, including those from branded and generic pharmaceutical companies. In addition, Galena cannot guarantee that any patents will issue from any pending or future patent applications owned by or licensed to Galena. Nor can Galena guarantee that the claims of these patents will be held valid or enforceable by the courts or will provide Galena with any significant protection against competitive products or otherwise be commercially valuable to Galena.

Changes in either the patent laws or in the interpretations of patent laws in the United States or abroad may diminish the value of Galena’s intellectual property. In addition, on September 16, 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law. The Leahy-Smith Act includes a number of significant changes to the U.S. patent law. These include provisions that affect the way patent applications will be prosecuted and may also affect patent litigation. Accordingly, it is not clear what, if any, impact the Leahy-Smith Act will have on the operation of Galena’s business. However, the Leahy-Smith Act, in particular the first-to-file provision and its implementation could increase the uncertainties and costs surrounding the prosecution of Galena’s patent applications and the enforcement of or defense of Galena’s issued patents, all of which could have a material adverse effect on Galena’s business and financial condition. Accordingly, Galena cannot predict the breadth of claims that may be allowed or enforced in Galena’s patents or in third-party patents.

While Galena intends to take actions reasonably necessary to enforce Galena’s patent rights, Galena may not be able to detect infringement of Galena’s own or in-licensed patents, which may be especially difficult for methods of manufacturing or formulation products, and Galena depends, in part, on Galena’s licensors and collaborators to protect a substantial portion of Galena’s proprietary rights. In addition, third parties may challenge Galena’s in-licensed patents and any of Galena’s own patents that Galena may obtain, which could result in the invalidation or unenforceability of some or all of the relevant patent claims. Litigation or other proceedings to enforce or defend intellectual property rights is very complex, expensive, and may divert Galena management’s attention from Galena’s core business and may result in unfavorable results that could adversely affect Galena’s ability to prevent third parties from competing with Galena.

If another party has reason to assert a substantial new question of patentability against any of Galena’s claims in Galena’s own and in-licensed patents, the third party can request that the patent claims be reexamined, which may result in a loss of scope of some claims or a loss of the entire patent. In addition to potential infringement

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suits and, interference and reexamination proceedings, Galena may become a party to patent opposition proceedings where either the patentability of the inventions subject of Galena’s patents are challenged, or Galena is challenging the patents of others. The costs of these proceedings could be substantial, and it is possible that such efforts would be unsuccessful. As the medical device, biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that others may assert Galena’s commercial product and/or product candidates infringe their patent rights. If a third-party’s patents were found to cover Galena’s commercial product and product candidates, proprietary technologies or its uses, Galena or Galena’s collaborators could be enjoined by a court and required to pay damages and could be unable to continue to commercialize Galena’s products or use Galena’s proprietary technologies unless Galena obtained a license to the patent. A license may not be available to Galena or Galena’s collaborators on acceptable terms, or at all. In addition, during litigation, the patent holder could obtain a preliminary injunction or other equitable relief, which could prohibit Galena from making, using or selling Galena’s commercial product and product candidates pending a trial on the merits, which could be years away.

Proprietary trade secrets and unpatented know-how are also very important to Galena’s business. Although Galena has taken steps to protect Galena’s trade secrets and unpatented know-how, by entering into confidentiality agreements with third parties, and proprietary information and invention agreements with certain employees, consultants and advisors, third parties may still obtain this information or Galena may be unable to protect Galena’s rights. Galena also has limited control over the protection of trade secrets used by Galena’s licensors, collaborators and suppliers. There can be no assurance that binding agreements will not be breached, that Galena would have adequate remedies for any breach, or that Galena’s trade secrets and unpatented know-how will not otherwise become known or be independently discovered by Galena’s competitors. If trade secrets are independently discovered, Galena would not be able to prevent their use. Enforcing a claim that a third party illegally obtained and is using Galena’s trade secrets or unpatented know-how is expensive and time consuming, and the outcome is unpredictable.

Galena may be subject to claims that Galena’s employees, consultants or independent contractors have wrongfully used or disclosed to Galena alleged trade secrets of their other clients or former employers. As is common in the biotechnology and pharmaceutical industry, certain of Galena’s employees were formerly employed by other biotechnology or pharmaceutical companies, including Galena’s competitors or potential competitors. Moreover, Galena engages the services of consultants to assist Galena in the development of Galena’s commercial product and product candidates, many of whom were previously employed at or may have previously been or are currently providing consulting services to, other biotechnology or pharmaceutical companies, including Galena’s competitors or potential competitors. Galena may be subject to claims that these employees and consultants or Galena has inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers or their former or current customers. Litigation may be necessary to defend against these types of claims. Even if Galena is successful in defending against any such claims, any such litigation would likely be protracted, expensive, a distraction to Galena’s management team, not viewed favorably by investors and other third parties, and may potentially result in an unfavorable outcome.

Galena’s product candidates may face competition sooner than expected after the expiration of Galena’s composition of matter patent protection for such products.

Galena’s composition of matter patents for many of Galena’s product candidates have expired or will expire prior to any product approval. Galena intends to seek data exclusivity or market exclusivity for Galena’s NeuVax as well as Galena’s GALE-301 and GALE-302 product candidates provided under the Federal Food, Drug and Cosmetic Act, or FDCA, and similar laws in other countries. Galena believes that these product candidates will qualify for 12 years of data exclusivity under the Biologics Price Competition and Innovation Act of 2009, or BPCIA, which was enacted as part of the Patient Protection and Affordable Care Act and the Health Care and Education Affordability Reconciliation Act of 2010, which are referred to collectively as the Affordable Care Act or ACA) enacted in March 2010. Under the BPCIA, an application for a biosimilar product or biologics license application, which is referred to herein as BLA, cannot be submitted to the FDA until four years, or if approved

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by the FDA, until 12 years, after the original brand product identified as the reference product is approved under a BLA. The BPCIA provides an abbreviated pathway for the approval of biosimilar and interchangeable biological products. The new abbreviated regulatory pathway establishes legal authority for the FDA to review and approve biosimilars, including the possible designation of a biosimilar as “interchangeable” based on its similarity to an existing brand product. The new law is complex and is only beginning to be interpreted and implemented by the FDA. While it is uncertain when any such processes may be fully adopted by the FDA, any such processes could have a material adverse effect on the future commercial prospects for Galena’s biological product candidates. There is also a risk that the U.S. Congress could amend the BPCIA to shorten this exclusivity period, potentially creating the opportunity for biosimilar competition sooner than anticipated after the expiration of Galena’s patent protection. Moreover, the extent to which a biosimilar, once approved, will be substituted for any reference product in a way that is similar to traditional generic substitution for non-biological products is not yet clear, and will depend on a number of marketplace and regulatory factors that are still developing.

If Galena’s product candidates are not considered biologics that would qualify for exclusivity under the BPCIA, they may be eligible for market exclusivity as drugs under the FDCA. The FDCA provides a five-year period of non-patent marketing exclusivity within the United States to the first applicant to gain approval of a new drug application, or NDA, for a new chemical entity. A drug is a new chemical entity if the FDA has not previously approved any other new drug containing the same active moiety, which is the molecule or ion responsible for the action of the drug substance. During the exclusivity period, the FDA may not accept for review an abbreviated new drug application, or ANDA, or a 505(b)(2) NDA, submitted by another company for another version of such drug where the applicant does not own or have a legal right of reference to all the data required for approval. However, an application may be submitted after four years if it contains a certification of patent invalidity or non-infringement. The FDCA also provides three years of marketing exclusivity for an NDA, 505(b)(2) NDA or supplement to an existing NDA if new clinical investigations, other than bioavailability studies, that were conducted or sponsored by the applicant are deemed by the FDA to be essential to the approval of the application, for example, for new indications, dosages, or strengths of an existing drug. This three-year exclusivity covers only the conditions associated with the new clinical investigations and does not prohibit the FDA from approving ANDAs for drugs containing the original active agent.

Even if, as Galena expects, NeuVax, GALE-301 and GALE-302 are considered to be reference products eligible for 12 years of exclusivity under the BPCIA or five years of exclusivity under the FDCA, another company could market competing products if the FDA approves a full BLA or full NDA for such product containing the sponsor’s own preclinical data and data from adequate and well-controlled clinical trials to demonstrate the safety, purity and potency of the products.

In some countries outside of the United States, peptide vaccines, such as NeuVax, GALE-301 and GALE-302, are regulated as chemical drugs rather than as biologics and may or may not be eligible for non-patent exclusivity.

Although Galena has received Orphan Drug designation for both GALE-301, as well as the combination of GALE-301 and GALE-302, there is no guarantee that the drugs will be successfully approved by the FDA, that they will be commercially successful in the marketplace, or that another drug will not be approved for the same indication ahead of Galena’s drugs.

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

Galena relies to a large extent upon sophisticated information technology systems to operate its business. In the ordinary course of business, Galena collects, stores and transmits large amounts of confidential information (including, but not limited to, personal information and intellectual property). Galena also has outsourced significant elements of its operations to third parties, including significant elements of Galena’s information technology infrastructure and, as a result, Galena is managing many independent vendor relationships with third

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parties who may or could have access to Galena’s confidential information. The size and complexity of Galena’s information technology and information security systems, and those of Galena’s third-party vendors with whom Galena contracts (and the large amounts of confidential information that is present on them), make such systems potentially vulnerable to service interruptions or to security breaches from inadvertent or intentional actions by Galena’s employees or vendors, or from malicious attacks by third parties. Such attacks are of ever-increasing levels of sophistication and are made by groups and individuals with a wide range of motives (including, but not limited to, industrial espionage and market manipulation) and expertise. While Galena has invested significantly in the protection of data and information technology, there can be no assurance that Galena’s efforts will prevent service interruptions or security breaches. Any interruption or breach in Galena’s systems could adversely affect Galena’s business operations and/or result in the loss of critical or sensitive confidential information or intellectual property, and could result in financial, legal, business and reputational harm to Galena or allow third parties to gain material, inside information that they use to trade in Galena’s securities.

Risks Related to Ownership of the Galena Common Stock

Galena Common Stock trades at prices less than $1.00, which is the minimum bid price requirement under NASDAQ’s continued listing standards, as such Galena Common Stock may be subject to delisting from the Nasdaq Capital Market.

On March 24, 2017, Galena received notice from the Listing Qualifications Department of NASDAQ that the Galena Common Stock had not met the $1.00 per share minimum bid price requirement for the previous 30 consecutive business days, and that Galena was therefore not in compliance with the requirements for continued inclusion on the Nasdaq Capital Market under NASDAQ Listing Rule 5550(a)(2). In accordance with Nasdaq Listing Rule 5810(c)(3)(A), Galena had 180 calendar days, or until September 20, 2017, to regain compliance with this minimum bid price requirement. On September 21, 2017, NASDAQ notified Galena that, while Galena had not regained compliance with the minimum bid price requirement, it was eligible for an additional 180-day grace period, or until March 19, 2018, to regain compliance with the $1.00 per share minimum bid price requirement.

NASDAQ’s determination to grant an additional 180-day grace period was based on Galena having met the continued listing requirement for market value of publicly held shares and all other applicable requirements for initial listing on the Nasdaq Capital Market, with the exception of the minimum bid price requirement, and on Galena’s written notice to NASDAQ of its intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary. If at any time during this second 180-day grace period the closing bid price of the Galena Common Stock is at least $1.00 per share for a minimum of ten consecutive business days, NASDAQ will provide written confirmation of compliance and this matter will be closed. Under NASDAQ Rule 5810(c)(3)(F), NASDAQ may, in its discretion require Galena to maintain a minimum bid price of at least $1.00 per share for a period in excess of ten consecutive business days, but generally no more than 20 consecutive business days, before determining Galena has demonstrated an ability to maintain long-term compliance. If Galena does not regain compliance with the minimum bid price requirement by March 19, 2018, NASDAQ will provide written notification to Galena that the Galena Common Stock will be delisted. At that time, Galena may appeal the NASDAQ staff’s determination to a Hearings Panel, which will stay the delisting process pending the decision of the Hearings Panel. Galena will be required to provide a plan to regain compliance to the Hearings Panel. If the Hearings Panel decides to continue with delisting of Galena, the Hearing Panel’s decision may be appealed to the NASDAQ Listing and Hearing Review Council, but such appeal will not stay the delisting process.

As noted above, Galena is not in compliance with the NASDAQ Listing Rule 5550(a)(2), which requires the Galena Common Stock to have a minimum bid price of at least $1.00 per share. The closing bid price of the Galena Common Stock on NASDAQ was $0.35 on October 26, 2017. Galena has been granted a second 180-day grace period, or until March 19, 2018, to regain compliance with the $1.00 per share minimum bid price requirement. As discussed above, if Galena does not regain compliance with the minimum bid price requirement

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by March 19, 2018, NASDAQ will provide written notification to Galena that the Galena Common Stock will be delisted, subject to certain appeal rights that Galena may pursue. Galena will continue to monitor the closing bid price for its common stock and consider its available options to regain compliance with the NASDAQ minimum bid requirements, including the Reverse Stock Split and the Merger.

On January 18, 2017, Galena received an inquiry from the NASDAQ Listing Qualifications Department seeking information in connection with the subpoenas issued to Galena by the U.S. Attorney’s Office for the District of New Jersey and the U.S. Attorney’s Office for the Southern District of Alabama. Galena responded to the inquiry on February 1, 2017 and March 31, 2017. Galena has not received any follow-up inquiries from NASDAQ on this matter. If Galena is not in compliance with the listing requirements under NASDAQ Listing Rule 5502(a)(2), Galena could be delisted by NASDAQ.

On May 17, 2017, Galena received an inquiry from the NASDAQ Listing Qualifications Department seeking information in connection with the settlement with the SEC. Galena responded to the inquiry on June 13, 2017. Galena has not received any follow-up inquiries from NASDAQ on this matter. If Galena is not in compliance with the listing requirements under NASDAQ Listing Rule 5502(a)(2), Galena could be delisted by NASDAQ.

If Galena Common Stock is delisted from the Nasdaq Capital Market in the future, such securities may be traded over-the-counter on the “pink sheets.” Such alternative market, however, is generally considered to be less efficient than, and not as broad as, NASDAQ. Accordingly, delisting of Galena Common Stock from NASDAQ could have a significant negative effect on the trading volume, liquidity and market price of Galena Common Stock. In addition, the delisting of Galena Common Stock could adversely affect Galena’s ability to raise capital on terms acceptable or at all and could reduce the number of investors willing to hold or acquire Galena Common Stock.

The market price and trading volume of Galena Common Stock may be volatile.

The market price of Galena Common Stock has exhibited substantial volatility recently. Between January 1, 2017 and October 26, 2017, the sale price of Galena Common Stock as reported on NASDAQ ranged from a low of $0.26 to a high of $2.41. The market price of Galena Common Stock could continue to fluctuate significantly for many reasons, including the following factors:

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Factors beyond Galena’s control may also have an impact on the price of Galena Common Stock. For example, to the extent that other companies within Galena’s industry experience declines in their stock prices, the price of Galena Common Stock may decline as well.

Galena is, and in the future may be, subject to legal or administrative actions that could adversely affect Galena’s business financial condition and Galena’s business.

In early 2014, Galena and certain of its former officers and certain of its current and former directors had been the subject of shareholder derivative complaints in Oregon state court alleging, among other things, breaches of fiduciary duties and abuse of control by such officers and directors in connection with public statements purportedly issued by Galena or on its behalf and sales of the Galena Common Stock by such officers and directors, improper stock option grants, and excessive compensation of Galena’s non-employee directors. These cases were settled in June 2016.

In early 2014, Galena and certain of its former and current directors, current employee and former officers had been the subject to class action lawsuits in federal court alleging, among other things, that Galena and certain of Galena’s former and current directors, current employee and former officers violated the federal securities laws by making materially false and misleading statements and omissions in press releases and in filings with the SEC and that certain of Galena’s former and current directors and former officers sold Galena Common Stock while in possession of material non-public information. These cases were settled in June 2016.

In September 2015, a federal securities lawsuit was filed alleging, among other things, that Galena and certain of its former officers, its current and former directors and current employee violated Sections 10(b), 20(a) and 20A of the Exchange Act by launching a pump and dump scheme even though Galena and certain of its former and current directors, former officers and current employee knew the price of the Galena Common Stock would decline in the wake of the announcement that its drug NeuVax, which it claimed would prevent the recurrence of breast cancer, would not be approved by the FDA. This case was settled in July 2016.

On December 16, 2015, Galena received a subpoena issued by the U.S. Attorney’s Office for the District of New Jersey, or USAO NJ, requesting the production of a broad range of documents pertaining to Galena’s marketing and promotional practices for Abstral, which Galena had sold to a third party in the fourth quarter of 2015. In September 2017, the Department of Justice announced that Galena is to pay more than $7.55 million to resolve allegations under the civil False Claims Act that it paid kickbacks to doctors to induce them to prescribe its fentanyl-based drug Abstral.

In January 2016, Galena and its former chief executive officer and director were threatened with a lawsuit by the former owners of Mills Pharmaceuticals, LLC, Galena’s wholly owned subsidiary, or Mills, alleging, among other things, breaches of the Purchase Agreement relating to the purchase of Mills by Galena and the representations and warranties contained therein, as well as certain alleged violations of Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder, and alleged violations of Section 20(a) of the Exchange Act. In July 2016, Galena and its former chief executive officer and director resolved the claims with the former owners of Mills.

On February 13, 2017, putative shareholder securities class action complaints were filed in federal court alleging, among other things, that Galena and certain of its former officers and directors and current employee failed to disclose that Galena’s promotional practices for Abstral (fentanyl) sublingual tablets were allegedly improper and that Galena may be subject to civil and criminal liability, and that these alleged failures rendered Galena’s statements about its business misleading. The actions were consolidated, a lead plaintiff was named by the court and an amended complaint was filed. This lawsuit is ongoing.

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On March 16, 2017, a derivative complaint was filed in the federal court against Galena’s current directors and Galena, as a nominal defendant. The complaint purports to assert derivative claims for breach of fiduciary duty on Galena’s behalf against its directors based on substantially similar facts as alleged in the putative shareholder securities class action complaints filed in February 2017 mentioned above. This lawsuit is currently stayed pending resolution of the referenced securities class action lawsuits.

In April 2017, a putative shareholder class action was filed in Delaware state court alleging breaches of Section 225 of the DGCL and breaches of fiduciary duties by the Galena Board regarding the voting results of authorized share and the reverse stock split proposals in the proxy statements for the July 2016 and October 2016 Galena stockholder meetings. On July 24, 2017, Galena entered into a binding settlement term sheet involving the payment of $50,000 in cash and $1,250,000 in unrestricted shares of Galena Common Stock. The parties planned to use the term sheet to enter into a Stipulation of Settlement. The Stipulation of Settlement will not become effective until approved by the Court. Due to the decline in the price of the Galena Common Stock, the plaintiff has demanded to renegotiate the binding settlement term sheet. On September 7, 2017, Galena moved to enforce the binding settlement term sheet. The parties have filed supporting briefs and the hearing will be held on November 30, 2017 in the near future.

On April 10, 2017, the SEC issued a cease and desist order against Galena and the former chief executive officer, or CEO, Mark Ahn, requiring each of them to cease and desist from any future violations of Sections 5(a), 5(b), 5(c), 17(a), and 17(b) of the Securities Act of 1933, as amended, or the Securities Act, and Section 10(b), 13(a), and 13(b)(2)(A) of the Exchange Act, and various rules thereunder, which refer to as the SEC Order. Based upon the order, Galena made a $200,000 penalty payment as well as a payment of approximately $750,000, which was the indemnification payment of Galena’s former CEO for the disgorgement and prejudgment interest payment that he was required to pay by the order. Galena made such indemnification payment after a special committee of the Galena Board determined that Galena was required under Delaware law to indemnify Galena’s former CEO for the disgorgement and prejudgment interest payment. The former CEO also made a penalty payment of $600,000. As a result of the SEC Order, Galena may not use certain exemptions from registration under the federal securities laws, including Regulation A and Regulation D. In addition, Galena is an “ineligible issuer” as the term is defined under Rule 405 promulgated under the Securities Act.

On July 2017, a complaint was filed in California state court against Galena’s current and former directors and Galena, as a nominal defendant. The complaint purports to assert derivative claims for breach of fiduciary duty on Galena’s behalf against its directors based on substantially similar facts as alleged in the derivative complaint filed in early March of 2017 mentioned above. This lawsuit is currently stayed pending resolution of the referenced securities class action lawsuits.

Galena may be subject to legal or administrative actions in the future, which could result in the payment of additional amounts and have a material adverse effect on Galena’s financial condition and results of operations. If Galena is found to be in violation of the False Claims Act, Anti-Kickback Statute, Patient Protection and Affordable Care Act, federal or state securities laws, or any other applicable state or any federal fraud and abuse laws, Galena may be subject to penalties, such as civil and criminal penalties, damages, fines, or an administrative action of exclusion from government health care reimbursement programs or by the SEC. Galena can make no assurances as to the time or resources that will need to be devoted to these matters or their outcome, or the impact, if any, that these matters or any resulting legal or administrative proceedings may have on Galena’s business or financial condition but any further action in respect of any such matter by a governmental agency could have a material adverse effect on Galena’s results of operation and Galena’s business and prospects.

As described below under, “Galena Business—Legal Proceedings,” the settlement of these lawsuits, threatened lawsuits, investigations and administrative actions has resulted in substantial payments, some of which have not been covered by Galena’s insurance policies. Galena may continue to incur substantial unreimbursed legal fees and other expenses in connection with these or other legal and regulatory proceedings that may not qualify for

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coverage under, or may exceed the limits of, Galena’s applicable directors and officers liability insurance policies and could have a material adverse effect on Galena’s financial condition, liquidity, and results of operations. These matters also may distract the time and attention of Galena’s officers and directors or divert Galena’s other resources away from Galena’s ongoing development programs. An unfavorable outcome in any of these matters could damage Galena’s business and reputation or result in additional claims or proceedings against Galena.

For additional information on these legal matters, please see “Galena Business—Legal Proceedings.”

Galena has in the past and expects in the future to settle legal claims through the issuance of freely tradable Galena Common Stock, which will result in dilution to holders of Galena Common Stock and may adversely affect the market price of the Galena Common Stock.

Galena has in the past and expects in the future to settle legal claims through the issuance of freely tradable Galena Common Stock. As described below under, “Galena Business—Legal Proceedings,” Galena currently expects to (i) issue $1,250,000 in unrestricted shares of Galena Common Stock valued at based on the volume-weighted average closing price for the 20 trading days immediately preceding the day before the transfer of the settlement stock to the settlement fund to settle the case entitled Patel vs. Galena Biopharma, Inc. et. al and (ii) $200,000 in unrestricted stock to settle the claim for attorneys’ fees in the pending qui tam action in the U.S. District Court of the District of New Jersey. Payment of these amounts in Galena Common Stock will cause significant dilution to Galena’s stockholders, and the amount of that dilution will vary depending on the price of the Galena Common Stock at the time of the payment (and the 20 trading days prior to such payment in the case of payments made in connection with the Patel litigation). In addition, the issuance of such a significant number of shares of Galena Common Stock may cause a decrease in the trading price of the Galena Common Stock.

Future sales of substantial amounts of Galena Common Stock, or the possibility that such sales could occur, could adversely affect the market price of Galena Common Stock.

Future sales in the public market of shares of Galena Common Stock, including shares referred to in the foregoing risk factors or shares issued upon exercise of Galena’s outstanding stock options or warrants, or the perception by the market that these sales could occur, could lower the market price of Galena Common Stock or make it difficult for Galena to raise additional capital.

As of October 25, 2017, Galena had reserved for issuance 443,272 shares of Galena Common Stock issuable upon the exercise of outstanding stock options at a weighted-average exercise price of $31.23 per share and 19,556,851 shares of Galena Common Stock issuable upon the exercise of outstanding warrants at a weighted-average exercise price of $4.62 per share. Upon exercise of these options and warrants, the underlying shares may be resold into the public market. In the case of outstanding options and warrants that have exercise prices that are below the market price of Galena Common Stock from time to time, Galena stockholders would experience dilution upon the exercise of these options.

Galena’s outstanding warrants may result in dilution to Galena stockholders.

Galena’s outstanding December 2012 warrants to purchase 151,565 shares of common stock as of October 25, 2017 with an exercise price as of that date of $10.32 per share contain so-called weighted-average anti-dilution provisions. These anti-dilution provisions may be triggered by the issuance of the shares being offered hereby or upon any future issuance by Galena of shares of Galena Common Stock or common stock equivalents at a price per share below the then-exercise price of the warrants, subject to some exceptions.

To the extent that these anti-dilution provisions are triggered in the future, Galena would be required to reduce the exercise price of all of the warrants on either a full-ratchet or weighted-average basis, which would have a dilutive effect on Galena stockholders.

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Galena may issue preferred stock in the future, and the terms of the preferred stock may reduce the value of Galena Common Stock.

Galena is authorized to issue up to five million shares of preferred stock in one or more series. The Galena Board may determine the terms of future preferred stock offerings without further action by Galena stockholders. If Galena issues preferred stock, it could affect stockholder rights or reduce the market value of Galena’s outstanding common stock. In particular, specific rights granted to future holders of preferred stock may include voting rights, preferences as to dividends and liquidation, conversion and redemption rights, sinking fund provisions, and restrictions on Galena’s ability to merge with or sell its assets to a third party.

The Debenture Galena entered into in May 2016, as subsequently amended, has resulted, and may continue to result, in significant dilution to the holders of Galena Common Stock.

On May 10, 2016, Galena entered into a Securities Purchase Agreement with JGB (Cayman) Newton Ltd, or JGB, pursuant to which Galena sold to JGB, at a 6.375% original issue discount, a $25,530,000 Senior Secured Debenture, which as subsequently amended is referred to herein as the Debenture, and warrants to purchase Galena Common Stock. As of October 25, 2017, (i) there were 44,333,877 shares of Galena Common Stock outstanding and (ii) 15,887,664 shares of Galena Common Stock had been issued by Galena pursuant to the terms of the Debenture. Assuming all the shares issuable pursuant to the terms of the Debenture subsequent to October 25, 2017 are issued at a stock payment price of $0.35, the lowest stock payment price permitted under the Debenture, Galena estimates that the maximum number of shares of common stock that Galena could issue pursuant to the terms of the Debenture subsequent to October 25, 2017 is 38,281,727.

Anti-takeover provisions of the Galena Certificate of Incorporation and the Galena Bylaws and provisions of Delaware law could delay or prevent a change of control.

Anti-takeover provisions of the Galena Certificate of Incorporation and the Galena Bylaws may discourage, delay or prevent a merger or other change of control that stockholders may consider favorable or may impede the ability of the holders of Galena Common Stock to change Galena’s management and may be constrained by other contractual agreements with third parties. These provisions of the Galena Certificate of Incorporation and the Galena Bylaws, among other things:

In addition, Section 203 of the Delaware General Corporation Law provides that, subject to limited exceptions, persons that acquire, or are affiliated with a person that acquires, more than 15% of the outstanding voting stock of a Delaware corporation such as Galena shall not engage in any business combination with that corporation, including by merger, consolidation or acquisitions of additional shares for a three-year period following the date on which that person or its affiliate crosses the 15% stock ownership threshold. Section 203 could operate to delay or prevent a change of control of Galena.

Galena has never declared or paid cash dividends on Galena’s capital stock and Galena does not anticipate paying cash dividends in the foreseeable future.

Galena’s business requires significant funding. Galena currently plans to invest all available funds and future earnings in the development and growth of Galena’s business and does not anticipate paying any cash dividends

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on Galena Common Stock in the foreseeable future, and Galena is prohibited by the terms of Galena’s outstanding indebtedness from paying dividends on any Galena Common Stock, except with the prior consent of Galena’s lenders. As a result, capital appreciation, if any, of Galena Common Stock will be Galena stockholders’ sole source of potential gain for the foreseeable future.

The terms of Galena’s outstanding indebtedness may inhibit potential acquirers.

Galena is prohibited by the terms of Galena’s outstanding indebtedness from disposing of any of Galena’s business or property, except with the consent of Galena’s lenders or if Galena were to prepay the outstanding indebtedness and related fees in accordance with the loan security agreement. Galena’s outstanding indebtedness may inhibit potential acquirers or other interested parties from seeking to acquire all or a part of Galena’s business or assets, and there is no assurance that Galena’s lenders would consent to any proposed future transaction that might be beneficial to Galena stockholders.

If the Galena Common Stock becomes subject to the penny stock rules, it may be more difficult to sell Galena Common Stock.

The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or authorized for quotation on certain automated quotation systems, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system). The OTC Bulletin Board does not meet such requirements and if the price of the Galena Common Stock remains less than $5.00 and the Galena Common Stock is no longer listed on a national securities exchange such as Nasdaq, the Galena Common Stock may be deemed a penny stock. The penny stock rules require a broker-dealer, at least two business days prior to a transaction in a penny stock not otherwise exempt from those rules, to deliver to the customer a standardized risk disclosure document containing specified information and to obtain from the customer a signed and date acknowledgement of receipt of that document. In addition, the penny stock rules require that prior to effecting any transaction in a penny stock not otherwise exempt from those rules, a broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive: (i) the purchaser’s written acknowledgment of the receipt of a risk disclosure statement; (ii) a written agreement to transactions involving penny stocks; and (iii) a signed and dated copy of a written suitability statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for the Galena Common Stock, and therefore stockholders may have difficulty selling their shares.

Risks Related to SELLAS’ Financial Results and Capital Needs

SELLAS has incurred substantial losses since its inception and anticipates that it will continue to incur substantial and increasing losses for the foreseeable future.

SELLAS is a development-stage biopharmaceutical company focused on the development of novel cancer immunotherapies and therapeutics for a broad range of cancer indications. Investment in biopharmaceutical product development is highly speculative because it entails substantial upfront capital expenditures and significant risk that a product candidate will fail to prove effective, gain regulatory approval or become commercially viable. SELLAS does not have any products approved by regulatory authorities and has not generated any revenues from collaboration and licensing agreements or product sales to date, and has incurred significant research, development and other expenses related to its ongoing operations and expects to continue to incur such expenses. As a result, SELLAS has not been profitable and has incurred significant operating losses in every reporting period since its inception. For the six months ended June 30, 2017, SELLAS reported a net loss of $10.5 million and had an accumulated deficit of $40.9 million as of June 30, 2017. For the year ended December 31, 2016, SELLAS reported a net loss of $17.7 million and had an accumulated deficit of $30.4 million as of December 31, 2016.

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SELLAS does not expect to generate revenues for many years, if at all. SELLAS expects to continue to incur significant expenses and operating losses for the foreseeable future. SELLAS anticipates these losses to increase as it continues to research, develop and seek regulatory approvals for its product candidates and any additional product candidates SELLAS may acquire, and potentially begins to commercialize product candidates that may achieve regulatory approval. SELLAS may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect its business. The size of SELLAS’ future net losses will depend, in part, on the rate of future growth of its expenses and its ability to generate revenues. If any of SELLAS’ product candidates fails in clinical trials or does not gain regulatory approval, or if approved, fails to achieve market acceptance, SELLAS may never become profitable. Even if SELLAS achieves profitability in the future, SELLAS may not be able to sustain profitability in subsequent periods. SELLAS anticipates that its expenses will increase in the future as it continues to invest in research and development of its existing product candidates, investigate and potentially acquire new product candidates and expand its manufacturing and commercialization activities.

There is substantial doubt about SELLAS’ ability to continue as a going concern.

SELLAS’ management concluded that its cash of $4.8 million as of June 30, 2017 will only be sufficient to fund its operations through December 31, 2017. In addition, SELLAS has incurred recurring losses since inception and has an accumulated deficit at June 30, 2017 of $40.9 million. SELLAS also had $6.0 million of indebtedness at June 30, 2017, which includes $5.0 million of convertible notes due May 2019. Accordingly, SELLAS’ management concluded that these matters raise substantial doubt about SELLAS’ ability to continue as a going concern. SELLAS’ consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. SELLAS’ auditors have included an explanatory paragraph in their audit report for this uncertainty. If SELLAS cannot continue as a viable entity, its securityholders may lose some or all of their investment in SELLAS.

SELLAS has a limited operating history, which may make it difficult for you to evaluate the success of its business to date and to assess its future viability.

SELLAS was formed in January 2012. Its operations to date have been limited to organizing and staffing its company, acquiring product and technology rights and conducting product development activities for its product candidate. SELLAS has not yet demonstrated its ability to start or successfully complete any Phase 3 clinical trials, obtain regulatory approval, manufacture a commercial scale product or arrange for a third party to do so on SELLAS’ behalf, or conduct sales and marketing activities necessary for successful commercialization for any of SELLAS’ current or future product candidates. In addition, the adoptive cancer immunotherapy technology underlying SELLAS’ WT1 peptide cancer immunotherapy product candidate is new and largely unproven. Any predictions about SELLAS’ future success, performance or viability, particularly in view of the rapidly evolving cancer immunotherapy field, may not be as accurate as they could be if SELLAS had a longer operating history or approved products on the market.

In addition, as a young business, SELLAS may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors. SELLAS will need to transition at some point from a company with a research and development focus to a company capable of supporting commercial activities. SELLAS may not be successful in such a transition. SELLAS expects its financial condition and operating results to continue to fluctuate significantly from quarter to quarter and year to year due to a variety of factors, many of which are beyond its control. Accordingly, any of SELLAS’ interim or annual periods’ results are not indicative of future operating performance.

SELLAS currently has no source of revenues. SELLAS may never generate revenues or achieve profitability.

To date, SELLAS has not generated any revenues from product sales or otherwise. Even if SELLAS is able to successfully achieve regulatory approval for its product candidates, SELLAS does not know when it will

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generate revenues or become profitable, if at all. SELLAS’ ability to generate revenues from product sales and achieve profitability will depend on its ability to successfully commercialize products, including its current product candidate, and other product candidates that SELLAS may develop, in-license or acquire in the future. SELLAS’ ability to generate revenues and achieve profitability also depends on a number of additional factors, including its ability to:

SELLAS’ revenues for any product candidate for which regulatory approval is obtained will be dependent, in part, upon the size of the markets in the territories for which it gains regulatory approval, the accepted price for the product, the ability to get reimbursement at any price, and whether SELLAS owns the commercial rights for that territory. If the number of SELLAS’ addressable disease patients is not as significant as SELLAS estimates, the indication approved by regulatory authorities is narrower than SELLAS expects, or the reasonably accepted population for treatment is narrowed by competition, physician choice or treatment guidelines, SELLAS may not generate significant revenues from sales of such products, even if approved. In addition, SELLAS anticipates incurring significant costs associated with commercializing any approved product candidate. As a result, even if SELLAS generates revenues, SELLAS may not become profitable and may need to obtain additional funding to continue operations. If SELLAS fails to become profitable or is unable to sustain profitability on a continuing basis, then SELLAS may be unable to continue its operations at planned levels and may be forced to reduce its operations.

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SELLAS will require substantial additional financing to achieve its goals, and a failure to obtain this necessary capital when needed could force SELLAS to delay, limit, reduce or terminate its product development or commercialization efforts.

SELLAS expects to expend substantial resources for the foreseeable future to continue the clinical development and manufacturing of GPS, its WT1 peptide cancer immunotherapy product candidate licensed from MSK, and the advancement and expansion of its preclinical research pipeline. These expenditures will include costs associated with research and development, potentially acquiring new product candidates or technologies, conducting preclinical studies and clinical trials and potentially obtaining regulatory approvals and manufacturing products, as well as marketing and selling products approved for sale, if any. Under the terms of its amended and restated license agreement with MSK, SELLAS is obligated to make royalty payments and payments upon the achievement of certain development and commercial milestones in addition to paying guaranteed annual minimum royalties, sponsoring research and making other guaranteed payments to MSK. In addition, other unanticipated costs may arise. Further, under the terms of the amended and restated MSK license agreement, SELLAS is required to obtain $25.0 million of financing by December 31, 2018, and if such financing conditions are not met, MSK has the right to terminate with prior written notice, unless SELLAS cures during the notice period. Because the design and outcome of SELLAS’ planned and anticipated clinical trials is highly uncertain, SELLAS cannot reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of its current or future product candidates.

SELLAS’ future capital requirements depend on many factors, including:

SELLAS believes that its cash of $4.8 million as of June 30, 2017 will be sufficient to fund its planned operations through December 2017. However, SELLAS’ operating plan may change as a result of many factors currently unknown to SELLAS, and SELLAS may need additional funds sooner than planned. In addition, SELLAS may seek additional capital due to favorable market conditions or strategic considerations even if SELLAS believes SELLAS has sufficient funds for its current or future operating plans. SELLAS does not have any committed external source of funds. Additional funds may not be available when SELLAS needs them on terms that are acceptable to SELLAS, or at all. If adequate funds are not available to SELLAS on a timely basis, SELLAS may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other development activities for one or more of its product candidates or target indications, or delay, limit, reduce or terminate its establishment of sales and marketing capabilities or other activities that may be necessary to commercialize its product candidates.

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Raising additional capital may cause dilution to SELLAS’ existing shareholders, restrict its operations or require SELLAS to relinquish rights to its product candidates on unfavorable terms to SELLAS.

SELLAS may seek additional capital through a variety of means, including through private and public equity offerings and debt financings. To the extent that SELLAS raises additional capital through the sale of equity or convertible debt securities, or through the issuance of shares under management or other types of contracts, or upon exercise or conversion of outstanding derivative securities, the ownership interest of SELLAS’ shareholders will be diluted, and the terms may include liquidation or other preferences that adversely affect its rights as a shareholder. Debt financing, if available, may involve agreements that include covenants limiting or restricting SELLAS’ ability to take certain actions, such as incurring additional debt, making capital expenditures, entering into licensing arrangements, or declaring dividends. If SELLAS raises additional funds from third parties, SELLAS may have to relinquish valuable rights to its technologies or product candidates, or grant licenses on terms that are not favorable to SELLAS. If SELLAS is unable to raise additional funds through equity or debt financing when needed, SELLAS may be required to delay, limit, reduce or terminate its product development or commercialization efforts for its product candidates, or grant to others the rights to develop and market product candidates that SELLAS would otherwise prefer to develop and market itself.

Risks Related to the Development of SELLAS’ Product Candidates

SELLAS is currently a development stage company, and has one product candidate, GPS, in clinical development for up to eight indications, including both as a monotherapy or in combination, and it has GPS delivery technology in preclinical development using in-licensed technology. If SELLAS is unable to successfully develop and commercialize product candidates or experiences significant delays in doing so, its business may be materially harmed.

SELLAS is currently a development stage company, and has one product candidate, GPS, in clinical development for up to eight indications, including both as a monotherapy or in combination. SELLAS also has GPS delivery technology in preclinical development using in-licensed technology. SELLAS has invested substantially all of its efforts and financial resources in identifying and developing potential product candidates and conducting preclinical studies, clinical trials and manufacturing activities. SELLAS’ ability to generate revenues, which SELLAS does not expect will occur for many years, if ever, will depend heavily on the successful development and eventual commercialization of its product candidates. The success of SELLAS’ product candidates will depend on several factors, including the following:

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If SELLAS does not achieve one or more of these factors in a timely manner or at all, it could experience significant delays or an inability to successfully develop and commercialize its product candidates, which could materially harm its business.

SELLAS’ future success is dependent on the regulatory approval of its product candidates.

SELLAS does not have any products that have gained regulatory approval. Currently, SELLAS’ only clinical-stage product candidate is GPS, which has completed Phase 2 clinical trials and has Phase 3 clinical trials planned (pending funding availability) for two indications. SELLAS’ business is substantially dependent on its ability to obtain regulatory approval for, and, if approved, to successfully commercialize its product candidates in a timely manner. SELLAS cannot commercialize product candidates in the United States without first obtaining regulatory approval for the product from the FDA; similarly, SELLAS cannot commercialize product candidates outside of the United States without obtaining regulatory approval from comparable foreign regulatory authorities. Before obtaining regulatory approvals for the commercial sale of any product candidate for a target indication, SELLAS must demonstrate with substantial evidence gathered in preclinical studies and clinical trials, generally including two well-controlled Phase 3 trials, that the product candidate is safe and effective for use for that target indication and that the manufacturing facilities, processes and controls are adequate with respect to such product candidate.

The time required to obtain approval by the FDA and comparable foreign regulatory authorities is unpredictable but typically takes many years following the commencement of preclinical studies and clinical trials and depends upon numerous factors, including the substantial discretion of the regulatory authorities. In addition, approval policies, regulations, or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s clinical development and may vary among jurisdictions. SELLAS has not obtained regulatory approval for any product candidate and it is possible that SELLAS’ existing product candidate or any future product candidates will ever obtain regulatory approval.

SELLAS’ current and future product candidates could fail to receive regulatory approval from the FDA or a comparable foreign regulatory authority for many reasons, including:

The FDA or a comparable foreign regulatory authority may require more information, including additional preclinical or clinical data to support approval or additional studies, which may delay or prevent approval and its

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commercialization plans, or SELLAS may decide to abandon the development program. If SELLAS were to obtain approval, regulatory authorities may approve any of its product candidates for fewer or more limited indications than it requests (including failing to approve the most commercially promising indications), may grant approval contingent on the performance of costly post-marketing clinical trials, or may approve a product candidate with a label that does not include the labeling claims necessary or desirable for the successful commercialization of that product candidate.

Even if a product candidate were to successfully obtain approval from the FDA and comparable foreign regulatory authorities, any approval might contain significant limitations related to use restrictions for specified age groups, warnings, precautions or contraindications, or may be subject to burdensome post-approval study or risk management requirements. If SELLAS is unable to obtain regulatory approval for one of its product candidates in one or more jurisdictions, or any approval contains significant limitations, SELLAS may not be able to obtain sufficient funding to continue the development of that product or generate revenues attributable to that product candidate. Also, any regulatory approval of its current or future product candidates, once obtained, may be withdrawn.

SELLAS’ product candidate, GPS, represents a new therapeutic approach that presents significant challenges.

SELLAS’ future success is dependent in part on the successful development of WT1 peptide immunotherapies in general and GPS in particular. Because this program represents a new approach to cancer immunotherapy for the treatment of cancer and other diseases, developing and commercializing GPS subjects SELLAS to a number of challenges, including:

SELLAS cannot be sure that the manufacturing processes used in connection with GPS will yield a satisfactory product that is safe and effective, scalable or profitable.

Moreover, public perception of safety issues, including adoption of new therapeutics or novel approaches to treatment, may adversely influence the willingness of subjects to participate in clinical trials, or if approved, of

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physicians to subscribe to the novel treatment mechanics. Physicians, hospitals and third-party payors often are slow to adopt new products, technologies and treatment practices that require additional upfront costs and training. Physicians may not be willing to undergo training to adopt this novel therapy, may decide the therapy is too complex to adopt without appropriate training and may choose not to administer the therapy. Based on these and other factors, hospitals and payors may decide that the benefits of this new therapy do not or will not outweigh its costs.

The results of preclinical studies or earlier clinical trials are not necessarily predictive of future results. SELLAS’ existing product candidate in clinical trials, and any other product candidate SELLAS advances into clinical trials, may not have favorable results in later clinical trials or receive regulatory approval.

Success in preclinical studies and early clinical trials does not ensure that later clinical trials will generate adequate data to demonstrate the efficacy and safety of an investigational drug. A number of companies in the pharmaceutical and biotechnology industries, including those with greater resources and experience than SELLAS, have suffered significant setbacks in clinical trials, even after seeing promising results in earlier preclinical studies or clinical trials. For example, a broadly similar anti-cancer peptide immunotherapeutic against melanoma-specific antigen being developed by GlaxoSmithKline for advanced unresectable melanoma initially produced positive efficacy data in a Phase 2 clinical study, but subsequently failed to prove more beneficial than placebo in a controlled, blinded and randomized Phase 3, registration-enabling clinical trial in the same indication in patients after tumor resection. Despite the results reported in earlier preclinical studies or clinical trials for its product candidate, SELLAS does not know whether the clinical trials SELLAS may conduct will demonstrate adequate efficacy and safety to result in regulatory approval to market GPS for a particular indication, either as a monotherapy or in combination, in any particular jurisdiction. Although SELLAS is currently studying GPS as a treatment for up to eight types of cancers, only two indications (acute myeloid leukemia, or AML, and malignant pleural mesothelioma, or MPM) have completed Phase 2 clinical trials and have Phase 3 clinical trials planned (pending funding availability). Efficacy data from prospectively designed trials may differ significantly from those obtained from retrospective subgroup analyses. If later-stage clinical trials do not produce favorable results, SELLAS’ ability to achieve regulatory approval for GPS may be adversely impacted. Even if SELLAS believes that SELLAS has adequate data to support an application for regulatory approval to market any of its current or future product candidates, the FDA or other regulatory authorities may not agree and may require that it conducts additional clinical trials.

SELLAS may use its financial and human resources to pursue a particular research program or product candidate and fail to capitalize on programs or product candidates that may be more profitable or for which there is a greater likelihood of success.

Because SELLAS has limited financial and human resources, it may forego or delay pursuit of opportunities with some programs or potential product candidates or for other indications that later prove to have greater commercial potential. SELLAS’ resource allocation decisions may cause it to fail to capitalize on viable commercial products or more profitable market opportunities. SELLAS’ spending on current and future research and development programs and future product candidates for specific indications may not yield any commercially viable products. SELLAS may also enter into additional strategic collaboration agreements to develop and commercialize some of its programs and potential product candidates in indications with potentially large commercial markets. If SELLAS does not accurately evaluate the commercial potential or target market for a particular product candidate, it may relinquish valuable rights to that product candidate through strategic collaborations, licensing or other royalty arrangements in cases in which it would have been more advantageous for SELLAS to retain sole development and commercialization rights to such product candidate, or SELLAS may allocate internal resources to a product candidate in a therapeutic area in which it would have been more advantageous to enter into a partnering arrangement.

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SELLAS may find it difficult to enroll patients in its clinical trials given the limited number of patients who have the diseases for which its product candidates are being studied. Difficulty in enrolling patients for this or other reasons could delay or prevent clinical trials of its product candidates.

Identifying and qualifying patients to participate in clinical trials of SELLAS’ current and future product candidates is essential to its success. The timing of SELLAS’ clinical trials depends in part on the rate at which SELLAS can recruit patients to participate in clinical trials of its product candidates, and SELLAS may experience delays in its clinical trials if SELLAS encounters difficulties in enrollment.

The eligibility criteria of SELLAS’ planned clinical trials may further limit the available eligible trial participants as SELLAS expects to require that patients have specific characteristics that SELLAS can measure or meet the criteria to assure their conditions are appropriate for inclusion in its clinical trials. For instance, in SELLAS’ planned AML Phase 3 clinical study, only patients who meet specific inclusion criteria will enter the study. Primary entry restrictions include being greater than or equal to 60 years of age, having received upfront treatment with chemotherapy agents only, having achieved complete remission, as well as demonstrating adequate hematologic recovery. The estimated prevalence of AML is 12,000 to 20,000 cases in the United States (across all ages) and only a subset of this group satisfies the enrollment criteria for SELLAS’ AML Phase 3 clinical trial. SELLAS may not be able to identify, recruit, and enroll a sufficient number of patients to complete its clinical trials in a timely manner because of the perceived risks and benefits of the product candidate under study, the availability and efficacy of competing therapies and clinical trials, and the willingness of physicians to participate in its planned clinical trials. If patients are unwilling to participate in SELLAS’ clinical trials for any reason, the timeline for conducting trials and obtaining regulatory approval of its product candidates may be delayed.

If SELLAS experiences delays in the completion of, or termination of, any clinical trials of its current or future product candidates, the commercial prospects of its product candidates could be harmed, and its ability to generate product revenue from any of these product candidates could be delayed or prevented. In addition, any delays in completing its clinical trials would likely increase its overall costs, impair product candidate development and jeopardize its ability to obtain regulatory approval relative to its current plans. Any of these occurrences may harm its business, financial condition, and prospects significantly.

Clinical drug development involves a lengthy and expensive process with an uncertain outcome.

Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical trial process. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through preclinical and clinical trials.

SELLAS may experience delays in its ongoing or future clinical trials and SELLAS does not know whether planned clinical trials will begin or enroll subjects on time, will need to be redesigned or will be completed on schedule, if at all. There can be no assurance that the FDA will not put clinical trials of any of its product candidates on clinical hold in the future. Clinical trials may be delayed, suspended or prematurely terminated for a variety of reasons, such as:

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Patient enrollment, a significant factor in the timing of clinical trials, is affected by many factors including the size and nature of the patient population, the severity of the disease under investigation, the proximity of subjects to clinical sites, the patient referral practices of physicians, the eligibility criteria for the trial, the design of the clinical trial, ability to obtain and maintain patient consents, risk that enrolled subjects will drop out or die before completion, competition for patients from other clinical trials, competing clinical trials and clinicians’ and patients’ perceptions as to the potential advantages and risks of the drug being studied in relation to other available therapies, including any new drugs that may be approved for the indications SELLAS is investigating. SELLAS may not be able to initiate or continue to support clinical trials of GPS for one or more indications, or any future product candidates if SELLAS is unable to locate and enroll a sufficient number of eligible participants in these trials as required by the FDA or other regulatory authorities. Even if SELLAS is able to enroll a sufficient number of patients in its clinical trials, if the pace of enrollment is slower than SELLAS

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expects, the development costs for its product candidates may increase and the completion of its trials may be delayed or its trials could become too expensive to complete. SELLAS relies on CROs, other vendors and clinical trial sites to ensure the proper and timely conduct of its clinical trials, and while SELLAS has agreements governing their committed activities, SELLAS has limited influence over their actual performance.

If SELLAS experiences delays in the completion or termination of any clinical trial of its product candidates, the approval and commercial prospects of such product candidate will be harmed, and SELLAS’ ability to generate product revenues from such product candidate will be delayed. In addition, any delays in completing its clinical trials will increase its costs, slow down its product candidate development and approval process and jeopardize SELLAS’ ability to commence product sales and generate revenues. Any delays in completing its clinical trials for its product candidates may also decrease the period of commercial exclusivity. In addition, many of the factors that could cause a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of its product candidates.

SELLAS’ current and future product candidates, the methods used to deliver them or their dosage levels may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval, limit the commercial profile of an approved label or result in significant negative consequences following any regulatory approval.

Undesirable side effects caused by SELLAS’ current or future product candidates, their delivery methods or dosage levels could cause SELLAS or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other comparable foreign regulatory authority. For example, although no high-grade delayed type hypersensitivity in the skin or systemic anaphylaxis events have been noted after GPS administration in patients treated in SELLAS’ clinical studies to date, it is theoretically possible that such toxicities, or other type of adverse events, may occur in future clinical studies. As a result of safety or toxicity issues that SELLAS may experience in its clinical trials, SELLAS may not receive approval to market any product candidates, which could prevent SELLAS from ever generating revenues or achieving profitability. Results of SELLAS’ trials could reveal an unacceptably high severity and incidence of side effects. In such an event, SELLAS’ trials could be suspended or terminated and the FDA or comparable foreign regulatory authorities could order SELLAS to cease further development of or deny approval of its product candidates for any or all targeted indications. The drug-related side effects could affect patient recruitment or the ability of enrolled subjects to complete the trial or result in potential product liability claims. Any of these occurrences may have a material adverse effect on its business, results of operations, financial condition, cash flows and future prospects.

Additionally, if any of SELLAS’ product candidates receives regulatory approval, and SELLAS or others later identify undesirable side effects caused by such product, a number of potentially significant negative consequences could result, including that:

Any of these events could prevent SELLAS from achieving or maintaining market acceptance of the particular product candidate, if approved.

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SELLAS’ product development program may not uncover all possible adverse events that patients who take GPS may experience. The number of subjects exposed to GPS and the average exposure time in the clinical development program may be inadequate to detect rare adverse events, or chance findings, that may only be detected once the product is administered to more patients and for greater periods of time.

Clinical trials by their nature utilize a sample of the potential patient population. However, with a limited number of subjects and limited duration of exposure, SELLAS cannot be fully assured that rare and severe side effects of GPS will be uncovered. Such rare and severe side effects may only be uncovered with a significantly larger number of patients exposed to the drug. If such safety problems occur or are identified after GPS reaches the market, the FDA may require that SELLAS amend the labeling of the product or recall the product, or may even withdraw approval for the product.

SELLAS currently has Orphan Drug exclusivity for GPS in the treatment of AML and MPM, and may seek Orphan Drug designation for additional product candidates or indications, which might not be received or provide the intended benefits thereof.

Regulatory authorities in some jurisdictions, including the United States and Europe, may designate drugs for relatively small patient populations as Orphan Drugs. Under the Orphan Drug Act, the FDA may designate a product as an Orphan Drug if it is a drug intended to treat a rare disease or condition, which is generally defined as a patient population of fewer than 200,000 individuals annually in the United States. Both the FDA and the European Medicines Agency, or EMA, have granted SELLAS orphan status for GPS in AML and MPM.

Generally, if a product with an Orphan Drug designation subsequently receives the first regulatory approval for the indication for which it has such designation, the product is entitled to a period of marketing exclusivity, which precludes the EMA or the FDA from approving another marketing application for the same drug for that time period. The applicable period is seven years in the United States and ten years in Europe. The European exclusivity period can be reduced to six years if a drug no longer meets the criteria for Orphan Drug designation or if the drug is sufficiently profitable so that market exclusivity is no longer justified. Orphan Drug exclusivity may be lost if the FDA or EMA determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the drug to meet the needs of patients with the rare disease or condition.

Even if SELLAS obtains Orphan Drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugs can be approved for the same condition. Even after an Orphan Drug is approved, the FDA can subsequently approve a new drug for the same condition if the FDA concludes that the later drug is clinically superior in that it is shown to be safer, more effective or makes a major contribution to patient care.

SELLAS currently has Fast Track designation for GPS in the treatment of AML and MPM, and may seek Fast Track designation for additional product candidates or indications, which might not be received or provide the intended benefits thereof.

If a product candidate is intended for the treatment of a serious condition and nonclinical or clinical data demonstrate the potential to address unmet medical need for this condition, a product sponsor may apply for FDA Fast Track designation. If SELLAS seeks Fast Track designation for a product candidate or target indication, SELLAS may not receive it from the FDA. The FDA has given SELLAS Fast Track designation for GPS in AML and MPM.

However, Fast Track designation does not ensure that SELLAS will receive marketing approval or that approval will be granted within any particular timeframe. SELLAS may not experience a faster development or regulatory review or approval process with Fast Track designation compared to conventional FDA procedures. In addition, the FDA may withdraw Fast Track designation if it believes that the designation is no longer supported by data from SELLAS’ clinical development program. Fast Track designation alone does not guarantee qualification for the FDA’s priority review procedures.

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Failure to obtain regulatory approval in international jurisdictions would prevent its product candidates from being marketed abroad.

In addition to regulations in the United States, to market and sell SELLAS’ products in the European Union, many Asian countries and other jurisdictions, SELLAS must obtain separate regulatory approvals and comply with numerous and varying regulatory requirements. The approval procedure varies among countries and can involve additional testing. The time required to obtain approval may differ substantially from that required to obtain FDA approval. The regulatory approval process outside the United States generally includes all of the risks associated with obtaining FDA approval. Clinical trials accepted in one country may not be accepted by regulatory authorities in other countries. In addition, many countries outside the United States require that a product be approved for reimbursement before it can be approved for sale in that country. A product candidate that has been approved for sale in a particular country may not receive reimbursement approval in that country. SELLAS may not be able to obtain approvals from regulatory authorities outside the United States on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one regulatory authority outside the United States does not ensure approval by regulatory authorities in other countries or jurisdictions or by the FDA. SELLAS may not be able to file for regulatory approvals and may not receive necessary approvals to commercialize its products in any market. If SELLAS is unable to obtain approval of any of its current or future product candidates by regulatory authorities in the European Union, Asia or elsewhere, the commercial prospects of that product candidate may be significantly diminished, its business prospects could decline and this could materially adversely affect its business, results of operations and financial condition.

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

Even if SELLAS obtains regulatory approval for a product candidate, it would be subject to ongoing requirements by the FDA and comparable foreign regulatory authorities governing the manufacture, quality control, further development, labeling, packaging, storage, distribution, adverse event reporting, safety surveillance, import, export, advertising, promotion, recordkeeping and reporting of safety and other post-marketing information. These requirements include submissions of safety and other post-marketing information and reports, registration, as well as continued compliance by SELLAS and/or its contract manufacturing organizations, or CMOs, and CROs for any post-approval clinical trials that it conducts. The safety profile of any product will continue to be closely monitored by the FDA and comparable foreign regulatory authorities after approval. If the FDA or comparable foreign regulatory authorities become aware of new safety information after approval of any of its product candidates, they may require labeling changes or establishment of a risk evaluation and mitigation strategy, impose significant restrictions on a product’s indicated uses or marketing or impose ongoing requirements for potentially costly post-approval studies or post-market surveillance.

In addition, manufacturers of drug products and their facilities are subject to continual review and periodic inspections by the FDA and other regulatory authorities for compliance with current good manufacturing practices, or cGMP, current Good Clinical Practices, or GCP, and other regulations. If SELLAS or a regulatory agency discover previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured, a regulatory agency may impose restrictions on that product, the manufacturing facility or SELLAS, including requiring recall or withdrawal of the product from the market or suspension of manufacturing. If SELLAS, its product candidates or the manufacturing facilities for its product candidates fail to comply with applicable regulatory requirements, a regulatory agency may:

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The occurrence of any event or penalty described above may inhibit SELLAS’ ability to successfully commercialize its products and generate revenues.

Advertising and promotion of any product candidate that obtains approval in the United States will be heavily scrutinized by the FDA, the Department of Justice, or the DOJ, the Office of Inspector General of the Department of Health and Human Services, or HHS, state attorneys general, members of Congress and the public. Additionally, advertising and promotion of any product candidate that obtains approval outside of the United States will be heavily scrutinized by comparable foreign regulatory authorities. Violations, including actual or alleged promotion of SELLAS’ products for unapproved or off-label uses, are subject to enforcement letters, inquiries and investigations, and civil and criminal sanctions by the FDA. Any actual or alleged failure to comply with labeling and promotion requirements may have a negative impact on its business.

SELLAS may not successfully identify, acquire, develop or commercialize new potential product candidates.

Part of SELLAS’ business strategy is to explore and evaluate opportunities to expand its product candidate pipeline by identifying and validating new product candidates, which SELLAS may develop itself, in-license or otherwise acquire from others. In addition, in the event that SELLAS’ existing product candidates do not receive regulatory approval or are not successfully commercialized, then the success of its business will depend on SELLAS’ ability to expand its product pipeline through in-licensing or other acquisitions. SELLAS may be unable to identify relevant product candidates. If SELLAS does identify such product candidates, SELLAS may be unable to reach acceptable terms with any third party from which it desires to in-license or acquire them.

SELLAS may not realize the benefits of strategic alliances that SELLAS may form in the future.

SELLAS may form strategic alliances, create joint ventures or collaborations or enter into licensing arrangements with third parties that SELLAS believes will complement or augment SELLAS’ existing business. These relationships, or those like them, may require SELLAS to incur nonrecurring and other charges, increase its near- and long-term expenditures, issue securities that dilute SELLAS’ existing shareholders or disrupt its management and business. In addition, SELLAS faces significant competition in seeking appropriate strategic alliances and the negotiation process is time-consuming and complex. Moreover, SELLAS may not be successful in its efforts to establish a strategic alliance or other alternative arrangements for any future product candidates and programs because its research and development pipeline may be insufficient, its product candidates and programs may be deemed to be at too early a stage of development for collaborative effort and third parties may not view its product candidates and programs as having the requisite potential to demonstrate safety and efficacy. If SELLAS licenses products or acquire businesses, SELLAS may not be able to realize the benefit of such transactions if SELLAS is unable to successfully integrate them with SELLAS’ existing operations and company culture. SELLAS cannot be certain that, following a strategic transaction or license, SELLAS will achieve the revenues or specific net income that justifies such transaction. Any delays in entering into new strategic alliances agreements related to its product candidates could also delay the development and commercialization of its product candidates and reduce their competitiveness even if they reach the market.

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Risks Related to SELLAS’ Manufacturing

SELLAS is subject to a multitude of manufacturing risks, any of which could substantially increase its costs and limit supply of GPS.

Concurrent with the license of GPS, SELLAS acquired certain supplies intended for clinical use, from MSK. These MSK clinical supplies may not be adequate for future clinical studies. SELLAS and its CMOs will need to conduct significant development work for each target indication for studies, trials and commercial launch readiness.

The processes by which GPS is manufactured were initially developed by MSK for clinical purposes. SELLAS intends to improve these existing processes for more advanced clinical trials or commercialization. Developing commercially viable manufacturing processes is a difficult and uncertain task, and there are risks associated with scaling to the level required for advanced clinical trials or commercialization, including cost overruns, potential problems with process scale-up, process reproducibility, stability issues, consistency and timely availability of reagents or raw materials. The manufacturing facilities in which GPS will be made could be adversely affected by earthquakes and other natural disasters, equipment failures, labor shortages, power failures, and numerous other factors.

Additionally, the process of manufacturing cancer immunotherapies is complex, highly regulated and subject to several risks, including but not limited to:

Any adverse developments affecting manufacturing operations for GPS may result in shipment delays, inventory shortages, lot failures, withdrawals or recalls or other interruptions in the supply of SELLAS’ drug substance and drug product, which could delay the development of GPS. SELLAS may also have to write off inventory, incur other charges and expenses for supply of drug product that fails to meet specifications, undertake costly remediation efforts, or seek more costly manufacturing alternatives. Inability to meet the demand for GPS could damage SELLAS’ reputation and the reputation of its products among physicians, healthcare payors, patients or the medical community, and cancer treatment centers, which could adversely affect SELLAS’ ability to operate its business and its results of operations.

SELLAS has limited to no manufacturing, sales, marketing or distribution capability and must rely upon third parties for such.

SELLAS currently has agreements with various third-party manufacturing facilities for production of its cancer immunotherapies for research and development and testing purposes. SELLAS depends on these manufacturers to meet its deadlines, quality standards and specifications. SELLAS’ reliance on third parties for the manufacture

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of its active pharmaceutical ingredient and drug product and, in the future, any approved products, creates a dependency that could severely disrupt SELLAS’ research and development, its clinical testing, and ultimately its sales and marketing efforts if the source of such supply proves to be unreliable or unavailable. If the contracted manufacturing source is unreliable or unavailable, SELLAS may not be able to manufacture clinical drug supplies of its cancer immunotherapies, and SELLAS’ preclinical and clinical testing programs may not be able to move forward and SELLAS’ entire business plan could fail.

Both the active pharmaceutical ingredient and drug product for GPS are currently single sourced. SELLAS believes these single sources are currently capable of supplying all anticipated needs of SELLAS’ proposed clinical studies, as well as initial commercial introduction. If SELLAS is able to commercialize its products in the future, there is no assurance that SELLAS’ manufacturers will be able to meet commercialized scale production requirements in a timely manner or in accordance with applicable standards or cGMP. Once the nature and scope of additional indications and their commensurate drug product demands are established, SELLAS will seek secondary suppliers of both the active pharmaceutical ingredient and drug product for GPS, but SELLAS cannot assure that such secondary suppliers will be found on terms acceptable to SELLAS, or at all.

If any of SELLAS CMOs’ clinical manufacturing facilities are damaged or destroyed or production at such facilities is otherwise interrupted, SELLAS’ business and prospects would be negatively affected.

If SELLAS’ CMOs’ manufacturing facilities or the equipment in them is damaged or destroyed, SELLAS may not be able to quickly or inexpensively replace its manufacturing capacity or replace it at all. In the event of a temporary or protracted loss of this facility or equipment, SELLAS might not be able to transfer manufacturing to another CMO. Even if SELLAS could transfer manufacturing to another CMO, the shift would likely be expensive and time-consuming, particularly because the new facility would need to comply with the necessary regulatory requirements and SELLAS would need FDA approval before selling any products manufactured at that facility. Such an event could delay SELLAS’ clinical trials or reduce its product sales.

Currently, SELLAS maintains insurance coverage against damage to its property and to cover business interruption and research and development restoration expenses. However, SELLAS’ insurance coverage may not reimburse SELLAS, or may not be sufficient to reimburse SELLAS, for any expenses or losses SELLAS may suffer. SELLAS may be unable to meet its requirements for GPS if there were a catastrophic event or failure of its current manufacturing facility or processes.

Risks Related to SELLAS’ Dependence on Third Parties

SELLAS relies on third parties to conduct its preclinical studies and clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, or if SELLAS loses any of its CROs or other key third-party vendors, SELLAS may not be able to obtain regulatory approval for or commercialize its current or future product candidates on a timely basis, if at all.

SELLAS has relied upon and plan to continue to rely upon third-party CROs, vendors and contractors to monitor and manage data for its ongoing preclinical and clinical programs. For example, SELLAS’ collaborating investigators at MSK, along with their clinical and clinical operations teams, manage the conduct of the ongoing clinical trials for GPS as well as perform the analysis, publication and presentation of data and results related to this program. SELLAS also relies on collaborating investigators, along with their clinical and clinical operations teams, at MSK for the collection and transfer of various types of follow-up data regarding studies previously conducted by MSK. SELLAS plans to rely on CROs and other third-party vendors for all currently contemplated clinical studies, with services to be rendered by such CROs ranging from, in the case of assorted Phase 2 trials, specific and need-tailored ( e.g. , data management and biostatistics) only to, in the case of in the case of SELLAS’ immune combination (PD1 blockade) Phase 2 trial and all planned Phase 3 trials, all-encompassing. SELLAS relies on these parties for the execution of its preclinical studies and clinical trials, and SELLAS controls only some aspects of their activities. Nevertheless, SELLAS is responsible for ensuring that each of its

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trials is conducted in accordance with the applicable protocol and legal, regulatory and scientific standards, and its reliance on the CROs does not relieve SELLAS of its regulatory responsibilities. SELLAS also relies on third parties to assist in conducting its preclinical studies in accordance with Good Laboratory Practices, or GLP, and the Animal Welfare Act requirements. SELLAS and its CROs are required to comply with federal regulations, and GCP, which are international standards meant to protect the rights and health of patients that are enforced by the FDA, the Competent Authorities of the Member States of the European Economic Area and comparable foreign regulatory authorities for all of its products in clinical development. Regulatory authorities enforce GCP through periodic inspections of trial sponsors, principal investigators and trial sites. If SELLAS, or any of its partners or CROs, fail to comply with applicable regulations, the clinical data generated in its clinical trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities may require SELLAS to perform additional clinical trials before approving its regulatory applications. SELLAS cannot assure you that upon inspection by a given regulatory authority, such regulatory authority will determine that any of its clinical trials comply with applicable requirements. In addition, SELLAS’ clinical trials must be conducted with product produced under cGMP and other requirements. SELLAS is also required to register ongoing clinical trials and post the results of completed clinical trials on a government-sponsored database, clinicaltrials.gov, within a specified timeframe. Failure to comply with these regulations may require SELLAS to repeat preclinical studies and clinical trials, which would delay the regulatory approval process and result in adverse publicity.

SELLAS’ CROs, third-party vendors and contractors are not SELLAS’ employees, and except for remedies available to SELLAS under its agreements with such CROs, third-party vendors and contractors, SELLAS cannot control whether or not they devote sufficient time and resources, including experienced staff, to its ongoing clinical, nonclinical and preclinical programs. They may also have relationships with other entities, some of which may be SELLAS’ competitors. If CROs, third-party vendors and contractors do not successfully carry out their contractual duties or obligations or meet expected deadlines or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to SELLAS’ clinical protocols, regulatory requirements or for other reasons, SELLAS’ clinical trials may be extended, delayed or terminated and SELLAS may not be able to obtain regulatory approval for or successfully commercialize its current or future product candidates. CRO, vendor or contractor errors could cause SELLAS’ results of operations and the commercial prospects for its current or future product candidates to be harmed, its costs to increase and SELLAS’ ability to generate revenues to be delayed.

SELLAS internal capacity for clinical trial execution and management is limited and therefore SELLAS has relied on third parties. Outsourcing these functions involves risk that third parties may not perform to SELLAS’ standards, may not produce results or data in a timely manner or may fail to perform at all. Other data or data updates from studies or trials previously conducted by MSK or others may emerge in the future. In addition, the use of third-party service providers requires SELLAS to disclose its proprietary information to these parties, which could increase the risk that this information will be misappropriated. SELLAS currently has a small number of employees, which limits the internal resources SELLAS has available to identify and monitor its third-party providers. To the extent SELLAS is unable to identify and successfully manage the performance of third-party service providers in the future, its business may be adversely affected. Though SELLAS carefully manages its relationships with its CROs, there can be no assurance that SELLAS will not encounter challenges or delays in the future or that these delays or challenges will not have a material adverse impact on its business, financial condition and prospects.

SELLAS’ CROs, third-party vendors and contractors have the right to terminate their agreements with SELLAS in the event of an uncured material breach. In addition, some of SELLAS’ CROs, third-party vendors and contractors have an ability to terminate their respective agreements with SELLAS if it can be reasonably demonstrated that the safety of the subjects participating in its clinical trials warrants such termination, if SELLAS makes a general assignment for the benefit of its creditors or if SELLAS is liquidated. Identifying, qualifying and managing performance of third-party service providers can be difficult, time consuming and cause delays in its development programs. In addition, there is a natural transition period when a new CRO, third-party vendor or contractor commences work and the new CRO, third-party vendor or contractor may not provide the

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same type or level of services as the original provider. If any of its relationships with its third-party CROs, third-party vendors or contractors terminate, SELLAS may not be able to enter into arrangements with alternative CROs, third-party vendors or contractors on a timely basis, on commercially reasonable terms or at all.

SELLAS is, and expects to continue to be, dependent on third parties for the manufacturing of GPS and any future product candidates and its supply chain, and if SELLAS experiences problems with any of these third parties, the manufacturing of its product candidates could be delayed.

SELLAS does not operate facilities for the manufacturing of its product candidates. In the case of GPS, SELLAS currently relies on its CMO for the production of this product candidate and the acquisition of materials incorporated in or used in the manufacturing or testing of this product candidate. SELLAS CMOs or partners are not its employees, and except for remedies available to SELLAS under its agreements with such CMOs or partners, SELLAS cannot control whether or not they devote sufficient time and resources, including experienced staff, to the manufacturing of supply for its ongoing clinical, nonclinical and preclinical programs. To meet SELLAS’ projected needs for clinical and commercial materials to support its activities through regulatory approval and commercial manufacturing of GPS, SELLAS will need to develop the manufacturing of such materials at a CMO, and such CMO will need develop relationships with suppliers of critical starting or other materials.

As the manufacturing process for both the active pharmaceutical ingredient and drug product for GPS used by and for MSK is inadequate for Phase 3 and commercial use, SELLAS has begun developing more robust manufacturing processes for both the active pharmaceutical ingredient and drug product. Developing manufacturing processes and know-how is complex and involves review and incorporation of both documented and undocumented processes that may have evolved over time. In addition, developing production for different facilities may require utilization of new or different processes to meet the specific requirements of a given facility.

Demonstrating comparability between the active pharmaceutical ingredient and drug product used by and for MSK and the active pharmaceutical ingredient and drug product intended for use by SELLAS in the proposed clinical studies has been discussed with the FDA and the EMA. The comparative analytical program, designed in conjunction with the FDA and the EMA to confirm such comparability, is currently underway.

If SELLAS is not able to successfully produce comparable active pharmaceutical ingredient and drug product, SELLAS’ ability to further develop and manufacture GPS may be negatively impacted. SELLAS may need to identify additional CMOs for continued production of supply for GPS. In addition, given the manufacturing process for its WT1 peptide cancer immunotherapy product candidate, the number of CMOs who possess the requisite skill and capability to manufacture GPS is limited. SELLAS has not yet identified alternate suppliers in the event the current CMOs that SELLAS utilizes are unable to scale production, or if SELLAS otherwise experiences any problems with them. Manufacturing cancer immunotherapies is complicated and tightly regulated by the FDA and comparable regulatory authorities around the world, and although alternative third-party suppliers with the necessary manufacturing and regulatory expertise and facilities exist, it could be expensive and take a significant amount of time to arrange for alternative suppliers, transfer manufacturing procedures to these alternative suppliers, and demonstrate comparability of material produced by such new suppliers. New manufacturers of any product would be required to qualify under applicable regulatory requirements. These manufacturers may not be able to manufacture SELLAS’ compounds at costs, or in quantities, or in a timely manner necessary to complete development of GPS or make commercially successful products. If SELLAS is unable to arrange for alternative third-party manufacturing sources, or to do so on commercially reasonable terms or in a timely manner, SELLAS may not be able to complete development of GPS, or market or distribute it. In addition, should the FDA not agree with SELLAS’ product candidate specifications and comparability assessments for these materials, further clinical development of GPS could be substantially delayed and SELLAS would incur substantial additional expenses.

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Reliance on third-party manufacturers entails risks to which SELLAS would not be subject if SELLAS manufactured product candidates itself, including reliance on the third party for regulatory compliance and quality assurance, the possibility that the third-party manufacturer does not maintain the financial resources to meet its obligations under the manufacturing agreement, the possibility of breach of the manufacturing agreement by the third party because of factors beyond SELLAS’ control, including a failure to synthesize and manufacture its product candidates or any products SELLAS may eventually commercialize in accordance with its specifications, misappropriation of its proprietary information, including its trade secrets and know-how, and the possibility of termination or nonrenewal of the agreement by the third party, based on its own business priorities, at a time that is costly or damaging to SELLAS. In addition, the FDA and other regulatory authorities require that its product candidates and any products that SELLAS may eventually commercialize be manufactured according to cGMP and similar foreign standards. These requirements include, among other things, quality control, quality assurance and the maintenance of records and documentation. The FDA or similar foreign regulatory agencies may also implement new standards at any time, or change their interpretations and enforcement of existing standards for manufacture, packaging or testing of products. SELLAS has little control over its manufacturers’ compliance with these regulations and standards. Any failure by SELLAS’ third-party manufacturers to comply with cGMP or other applicable regulations or failure to scale up manufacturing processes, including any failure to deliver sufficient quantities of product candidates in a timely manner, could lead to a delay in, or failure to obtain, regulatory approval of any of its product candidates. In addition, such failure could be the basis for the FDA to issue a warning letter, withdraw approvals for product candidates previously granted to SELLAS, or take other regulatory or legal action, including recall or seizure of outside supplies of the product candidate, total or partial suspension of production, suspension of ongoing clinical trials, refusal to approve pending applications or supplemental applications, detention or product, refusal to permit the import or export of products, injunction or imposing civil and criminal penalties.

Any significant disruption in SELLAS’ supplier relationships could harm its business. Any significant delay in the supply of a product candidate for an ongoing clinical trial could considerably delay initiation or completion of SELLAS’ clinical trials, product testing and potential regulatory approval of its product candidates. If SELLAS or its manufacturers are unable to purchase key materials after regulatory approval has been obtained for its product candidates, the commercial launch of its product candidates could be delayed or there could be a shortage in supply, which could impair SELLAS’ ability to generate revenues from the sale of its product candidates.

SELLAS enters into various contracts in the normal course of its business in which SELLAS indemnifies the other party to the contract. In the event SELLAS has to perform under these indemnification provisions, it could have a material adverse effect on its business, financial condition and results of operations.

In the normal course of business, SELLAS periodically enters into academic, commercial, service, collaboration, licensing, consulting and other agreements that contain indemnification provisions. With respect to SELLAS’ academic and other research agreements, SELLAS typically indemnifies the institution and related parties from losses arising from claims relating to the products, processes or services made, used, sold or performed pursuant to the agreements for which SELLAS has secured licenses, and from claims arising from SELLAS’ or its sublicensees’ exercise of rights under the agreement. With respect to SELLAS’ collaboration agreements, SELLAS indemnifies its collaborators from any third-party product liability claims that could result from the production, use or consumption of the product, as well as for alleged infringements of any patent or other intellectual property right by a third party. With respect to consultants, SELLAS indemnifies them from claims arising from the good faith performance of their services.

Should SELLAS’ obligation under an indemnification provision exceed applicable insurance coverage or if SELLAS were denied insurance coverage, SELLAS’ business, financial condition and results of operations could be adversely affected. Similarly, if SELLAS is relying on a collaborator to indemnify SELLAS and the collaborator is denied insurance coverage or the indemnification obligation exceeds the applicable insurance coverage, and if the collaborator does not have other assets available to indemnify SELLAS, its business, financial condition and results of operations could be adversely affected.

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Risks Related to SELLAS’ Intellectual Property

If SELLAS is unable to obtain and maintain sufficient intellectual property protection for its current and future product candidates, or if the scope of the intellectual property protection is not sufficiently broad, SELLAS’ ability to commercialize its product candidates successfully and to compete effectively may be adversely affected.

SELLAS relies upon a combination of patents, trade secrets and confidentiality agreements to protect the intellectual property related to its technology and product candidate. If SELLAS does not adequately protect its intellectual property, competitors may be able to use its technologies and erode or negate any competitive advantage SELLAS may have, which could harm its business and ability to achieve profitability. The patentability of inventions and the validity, enforceability and scope of patents in the biotechnology field is generally uncertain because it involves complex legal, scientific and factual considerations, and it has in recent years been the subject of significant litigation. Moreover, the standards applied by the U.S. Patent and Trademark Office, or USPTO, and non-U.S. patent offices in granting patents are not always applied uniformly or predictably. For example, there is no uniform worldwide policy regarding patentable subject matter or the scope of claims allowable in biotechnology patents.

Consequently, the patent applications that SELLAS owns or in-licenses may fail to result in issued patents with claims that cover its current and future product candidates in the United States or in other countries. There is no assurance that all potentially relevant prior art relating to SELLAS’ patents and patent applications is known to SELLAS or has been found in the instances where searching was done. SELLAS may be unaware of prior art that could be used to invalidate an issued patent or prevent a pending patent application from issuing as a patent. There also may be prior art of which SELLAS is aware, but which SELLAS does not believe affects the validity or enforceability of a claim of one of its patents or patent applications, which may, nonetheless, ultimately be found to affect the validity or enforceability of such claim.

Even if patents have been issued or do successfully issue from patent applications, and even if such patents cover its product candidates, third parties may challenge the validity, enforceability or scope thereof, which may result in such patents being narrowed, invalidated or held to be unenforceable. No assurance can be given that if challenged, SELLAS’ patents would be declared by a court to be valid or enforceable. Furthermore, even if they are unchallenged, SELLAS’ patents and patent applications may not adequately protect its intellectual property, provide exclusivity for its product candidates or prevent others from designing around its claims. Also, the possibility exists that others will develop products on an independent basis which have the same effect as its product candidates and which do not infringe SELLAS’ patents or other intellectual property rights, or that others will design around the claims of patents that SELLAS has had issued that cover its product candidates. If the breadth or strength of protection provided by the patents and patent applications SELLAS holds, licenses or pursues with respect to its product candidates is threatened, it could jeopardize SELLAS’ ability to commercialize its product candidates. In addition, the USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Any of these outcomes could have an adverse impact on its business.

If patent applications that SELLAS holds or in-licenses with respect to its technology or product candidates fail to issue, if their breadth or strength of protection is threatened, or if they fail to provide meaningful exclusivity for its product candidates, it could dissuade companies from collaborating with SELLAS. SELLAS has licensed a number of patent applications covering its product candidates. SELLAS cannot offer any assurances about which, if any, patents will be issued with respect to these pending patent applications, the breadth of any such patents, whether any issued patents will be found invalid and unenforceable or will be threatened by third parties. Any successful challenge to these patents or any other patents owned by or exclusively licensed to SELLAS could deprive SELLAS of rights necessary for the successful commercialization of any product candidate that

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SELLAS or its collaborators may develop. Because patent applications in the United States and most other countries are confidential for a period of time after filing, and some remain so until issued, SELLAS cannot be certain that SELLAS was the first to file any patent application related to a product candidate. Furthermore, if third parties have filed such patent applications that have never had a claim with an effective filing date on or after March 16, 2013, an interference proceeding in the United States can be initiated by the USPTO to determine who was the first to invent any of the subject matter covered by the patent claims of SELLAS’ applications or patents. Similarly, SELLAS could become involved in derivation proceedings before the USPTO to determine inventorship with respect to its patent applications. SELLAS may also become involved in opposition proceedings in the European Patent Office or counterpart offices in other jurisdictions regarding its intellectual property rights. In addition, patents have a limited lifespan. In the United States, the natural expiration of a patent generally occurs 20 years after it is filed. Although various extensions may be available if certain conditions are met, the life of a patent and the protection it affords is limited. If SELLAS encounters delays in its clinical trials or in obtaining regulatory approvals, the period of time during which SELLAS could exclusively market any of its product candidates under patent protection, if approved, could be reduced. Even if patents covering its product candidates are obtained, once the patent life has expired for a product, SELLAS may be vulnerable to competition from biosimilar products. Any loss of patent protection could have a material adverse impact on its business. SELLAS may be unable to prevent competitors from entering the market with a product that is similar or identical to its product candidates, which could harm its business and ability to achieve profitability.

Furthermore, the research resulting in certain of SELLAS’ licensed patent rights and technology was funded by the U.S. government. As a result, the government has certain rights, such as march-in rights, to such patent rights and technology. When new technologies are developed with government funding, the government generally obtains certain rights in any resulting patents, including a non-exclusive license authorizing the government to practice the invention for or on behalf of the United States. These rights may permit the government to disclose SELLAS’ confidential information to third parties and to exercise march-in rights to use or allow third parties to use its licensed technology. The government can exercise its march-in rights if it determines that action is necessary because SELLAS fails to achieve practical application of the government-funded technology, because action is necessary to alleviate health or safety needs, to meet requirements of federal regulations or to give preference to U.S. industry. In addition, its rights in such inventions may be subject to certain requirements to manufacture products embodying such inventions in the United States. Any exercise by the government of such rights could harm SELLAS’ competitive position, business, results of operations, financial condition and future prospects.

If SELLAS is sued for infringing the intellectual property rights of third parties, such litigation could be costly and time-consuming and could prevent or delay its development and commercialization efforts.

SELLAS’ commercial success depends, in part, on SELLAS and its collaborators not infringing the patents and proprietary rights of third parties. There is a substantial amount of litigation and other adversarial proceedings, both within and outside the United States, involving patent and other intellectual property rights in the biotechnology and pharmaceutical industries, including patent infringement lawsuits, interference or derivation proceedings, oppositions, and inter partes and post-grant review proceedings before the USPTO and non-U.S. patent offices. Numerous U.S. and non-U.S. issued patents and pending patent applications owned by third parties exist in the fields in which SELLAS is developing and may develop its current and future product candidates. As the biotechnology and pharmaceutical industries expand and more patents are issued, and as SELLAS’ product pipeline grows, the risk increases that its product candidates may be subject to claims of infringement of third parties’ patent rights as it may not always be clear to industry participants, including SELLAS, which patents cover various types of products or methods of use. The coverage of patents is subject to interpretation by the courts, and the interpretation is not always uniform or predictable.

Third parties may assert infringement claims against SELLAS based on existing or future intellectual property rights, alleging that SELLAS is employing their proprietary technology without authorization. There may be third-party patents or patent applications with claims to materials, formulations, methods of manufacture or

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methods for treatment related to the use or manufacturing of its product candidates that SELLAS failed to identify. For example, applications filed before November 29, 2000, and certain applications filed on or after that date that will not be filed outside the United States, remain confidential until issued as patents. Except for the preceding exceptions, patent applications in the United States and elsewhere are generally published only after a waiting period of approximately 18 months after the earliest filing date. Therefore, patent applications covering SELLAS’ product candidates, or their use or manufacture, could have been filed by others without SELLAS’ knowledge. In addition, pending patent applications that have been published, including some of which SELLAS is aware, could be later amended in a manner that could cover its product candidates or their use or manufacture. SELLAS may analyze patents or patent applications of its competitors that SELLAS believes are relevant to its activities and believe that SELLAS is free to operate in relation to any of its product candidates, but its competitors may obtain issued claims, including in patents SELLAS considers to be unrelated, which may block its efforts or potentially result in any of its product candidates or its activities infringing such claims. If SELLAS is sued for patent infringement, SELLAS would need to demonstrate that its product candidates, products and methods either do not infringe the patent claims of the relevant patent or that the patent claims are invalid, and SELLAS may not be able to do this. Proving that a patent is invalid is difficult. For example, in the United States, proving invalidity in a district court proceeding requires a showing of clear and convincing evidence to overcome the presumption of validity enjoyed by issued patents, and proving invalidity in an inter partes review proceeding in the USPTO requires a showing of a preponderance of the evidence. Even if SELLAS is successful in these proceedings, SELLAS may incur substantial costs and the time and attention of its management and scientific personnel could be diverted, which could have a material adverse effect on SELLAS. If any issued third-party patents were held by a court of competent jurisdiction to cover aspects of SELLAS’ materials, formulations, methods of manufacture or methods for treatment, SELLAS could be forced, including by court order, to cease developing, manufacturing or commercializing the relevant product candidate until such patent expired. Alternatively, SELLAS may be required to obtain a license from such third party in order to use the infringing technology and to continue developing, manufacturing or marketing the infringing product candidate. However, SELLAS may not be able to obtain any required license on commercially reasonably terms, or at all. Even if SELLAS were able to obtain a license, the rights may be nonexclusive, which could result in its competitors gaining access to the same intellectual property licensed to SELLAS. Ultimately, SELLAS could be prevented from commercializing a product candidate, or be forced to cease some aspect of its business operations, if, as a result of actual or threatened patent infringement claims, SELLAS is unable to enter into licenses on acceptable terms. This could harm its business significantly.

Parties making claims against SELLAS may obtain injunctive or other equitable relief, which could effectively block SELLAS’ ability to further develop and commercialize one or more of its product candidates. Defending against claims of patent infringement or misappropriation of trade secrets could be costly and time consuming, regardless of the outcome. Thus, even if SELLAS were to ultimately prevail, or to settle at an early stage, such litigation could burden SELLAS with substantial unanticipated costs. In addition, litigation or threatened litigation could result in significant demands on the time and attention of SELLAS’ management team, distracting them from the pursuit of other company business. In the event of a successful claim of infringement against SELLAS, SELLAS may have to pay substantial damages, including treble damages and attorneys’ fees if SELLAS is found to have willfully infringed a patent, or to redesign its infringing product candidates, which may be impossible or require substantial time and monetary expenditure. SELLAS may also elect to enter into license agreements in order to settle patent infringement claims prior to litigation, and any such license agreement may require SELLAS to pay royalties and other fees that could be significant.

SELLAS may face claims that it misappropriated the confidential information or trade secrets of a third party. If SELLAS is found to have misappropriated a third party’s trade secrets, SELLAS may be prevented from further using such trade secrets, which could limit SELLAS’ ability to develop its product candidates. SELLAS is not aware of any material threatened or pending claims related to these matters, but in the future litigation may be necessary to defend against such claims. If SELLAS fails in defending any such claims, in addition to paying monetary damages, SELLAS may lose valuable intellectual property rights or personnel. Even if SELLAS is successful in defending against such claims, litigation could result in substantial costs and be a distraction to

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management. During the course of any patent or other intellectual property litigation, there could be public announcements of the results of hearings, rulings on motions, and other interim proceedings in the litigation. If securities analysts or investors regard these announcements as negative, the perceived value of its product candidates, programs or intellectual property could be diminished. Accordingly, the market price of SELLAS Shares may decline.

SELLAS may be subject to claims that its employees, consultants, or independent contractors have wrongfully used or disclosed confidential information of third parties or that its employees have wrongfully used or disclosed alleged trade secrets of their former employers.

SELLAS employs individuals who were previously employed at universities or other biotechnology or pharmaceutical companies, including SELLAS’ competitors or potential competitors. Although SELLAS has written agreements and makes every effort to ensure that its employees, consultants, and independent contractors do not use the proprietary information or intellectual property rights of others in their work for SELLAS, SELLAS may in the future be subject to any claims that its employees, consultants, or independent contractors have wrongfully used or disclosed confidential information of third parties. Litigation may be necessary to defend against these claims. If SELLAS fails in defending any such claims, in addition to paying monetary damages, SELLAS may lose valuable intellectual property rights or personnel, which could adversely impact its business. Even if SELLAS is successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

SELLAS may not be able to protect its intellectual property rights throughout the world.

Filing, prosecuting, enforcing and defending patents on SELLAS’ current and future product candidates in all countries throughout the world would be prohibitively expensive. SELLAS or its licensors’ intellectual property rights in certain countries outside the United States may be less extensive than those in the United States. In addition, the laws of certain foreign countries do not protect intellectual property rights to the same extent as laws in the United States. Consequently, SELLAS and its licensors may not be able to prevent third parties from practicing SELLAS and its licensors’ inventions in countries outside the United States, or from selling or importing infringing products made using SELLAS and its licensors’ inventions in and into the United States or other jurisdictions. Competitors may use SELLAS and its licensors’ technologies in jurisdictions where SELLAS has not obtained patent protection or where SELLAS does not have exclusive rights under the relevant patent(s) to develop their own products and, further, may export otherwise infringing products to territories where SELLAS and its licensors have patent protection but where enforcement is not as strong as that in the United States. These infringing products may compete with its product candidates in jurisdictions where SELLAS or its licensors have no issued patents or where SELLAS does not have exclusive rights under the relevant patent(s), or its patent claims and other intellectual property rights may not be effective or sufficient to prevent them from so competing. Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection, particularly those relating to biopharmaceuticals, which could make it difficult for SELLAS and its licensors to stop the infringement of SELLAS and its licensors’ patents or marketing of competing products in violation of SELLAS and its licensors’ proprietary rights generally. Proceedings to enforce SELLAS and its licensors’ patent rights in foreign jurisdictions could result in substantial costs and divert its attention from other aspects of its business, could put SELLAS and its licensors’ patents at risk of being invalidated or interpreted narrowly, could put SELLAS and its licensors’ patent applications at risk of not issuing, and could provoke third parties to assert claims against SELLAS or its licensors. SELLAS or its licensors may not prevail in any lawsuits that SELLAS or its licensors initiate, and even if SELLAS or its licensors are successful the damages or other remedies awarded, if any, may not be commercially meaningful.

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SELLAS has in-licensed a significant portion of its intellectual property from MSK. If SELLAS breaches its license agreement with MSK, SELLAS could lose the ability to continue the development and potential commercialization of GPS.

SELLAS does not currently own any patents or patent applications. SELLAS’ lead asset, GPS, is licensed-in from MSK, and includes a license to U.S. and foreign patent applications. Under the MSK license agreement, SELLAS is subject to various obligations, including diligence obligations with respect to funding, development and commercialization activities, payment obligations upon achievement of certain milestones and royalties on product sales, as well as other material obligations. If there is any conflict, dispute, disagreement or issue of nonperformance between SELLAS and MSK regarding its rights or obligations under the license agreements, including any such conflict, dispute or disagreement arising from SELLAS’ failure to satisfy diligence or payment obligations under any such agreement, SELLAS may be liable to pay damages and MSK may have a right to terminate the affected license. The loss of SELLAS’ license agreement with MSK could materially adversely affect SELLAS’ ability to proceed to utilize the affected intellectual property in its development efforts, SELLAS’ ability to enter into future collaboration, licensing and/or marketing agreements for GPS and SELLAS’ ability to commercialize GPS. The risks described elsewhere pertaining to SELLAS’ patents and other intellectual property rights also apply to the intellectual property rights that SELLAS licenses, and any failure by SELLAS or its licensors to obtain, maintain and enforce these rights could have a material adverse effect on its business.

SELLAS may become involved in lawsuits to protect or enforce its intellectual property, which could be expensive, time-consuming and unsuccessful and have a material adverse effect on the success of its business and on its stock price.

Third parties may infringe SELLAS’ patents, the patents of SELLAS’ licensors, or misappropriate or otherwise violate SELLAS or its licensor’s intellectual property rights. SELLAS and its licensor’s patent applications cannot be enforced against third parties practicing the technology claimed in such applications unless and until a patent issues from such applications, and then only to the extent the issued claims cover the technology. In the future, SELLAS or its licensors may elect to initiate legal proceedings to enforce or defend SELLAS or its licensors’ intellectual property rights, to protect SELLAS or its licensor’s trade secrets or to determine the validity or scope of intellectual property rights SELLAS owns or controls. Any claims that SELLAS asserts against perceived infringers could also provoke these parties to assert counterclaims against SELLAS alleging that it infringes their intellectual property rights or that its intellectual property rights are invalid. In addition, third parties may initiate legal proceedings against SELLAS or its licensors to challenge the validity or scope of intellectual property rights SELLAS owns or controls. The proceedings can be expensive and time-consuming. Many of SELLAS or its licensor’s adversaries in these proceedings may have the ability to dedicate substantially greater resources to prosecuting these legal actions than SELLAS or its licensors can. Accordingly, despite SELLAS or its licensors’ efforts, SELLAS or its licensors may not be able to prevent third parties from infringing upon or misappropriating intellectual property rights SELLAS owns or controls, particularly in countries where the laws may not protect its rights as fully as in the United States. Litigation could result in substantial costs and diversion of management resources, which could harm its business and financial results. In addition, in an infringement proceeding, a court may decide that a patent owned by or licensed to SELLAS is invalid or unenforceable, in whole or in part, or may refuse to stop the other party from using the technology at issue on the grounds that SELLAS or its licensors’ patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of SELLAS or its licensors’ patents at risk of being invalidated, held unenforceable or interpreted narrowly.

Interference or derivation proceedings provoked by third parties, brought by SELLAS or its licensors or collaborators, or brought by the USPTO or any non-U.S. patent authority may be necessary to determine the priority of inventions or matters of inventorship with respect to SELLAS’ or its licensors’ patents or patent applications. SELLAS may also become involved in other proceedings, such as reexamination or opposition proceedings, inter partes review, post-grant review or other pre-issuance or post-grant proceedings in the USPTO

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or its foreign counterparts relating to its intellectual property or the intellectual property of others. An unfavorable outcome in any such proceeding could require SELLAS or its licensors to cease using the related technology and commercializing the affected product candidate, or to attempt to license rights to it from the prevailing party. Its business could be harmed if the prevailing party does not offer SELLAS or its licensors a license on commercially reasonable terms if any license is offered at all. Even if SELLAS or its licensors obtain a license, it may be non-exclusive, thereby giving its competitors access to the same technologies licensed to SELLAS or its licensors. In addition, if the breadth or strength of protection provided by SELLAS or its licensor’s patents and patent applications is threatened, it could dissuade companies from collaborating with SELLAS to license, develop or commercialize current and future product candidates. Even if SELLAS successfully defends such litigation or proceeding, SELLAS may incur substantial costs and it may distract its management and other employees. SELLAS could be found liable for monetary damages, including treble damages and attorneys’ fees, if SELLAS is found to have willfully infringed a patent.

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of SELLAS’ confidential information could be compromised by disclosure during this type of litigation. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of SELLAS Shares.

Changes in patent law could diminish the value of patents in general, thereby impairing SELLAS’ ability to protect its current and future product candidates.

As is the case with other biotechnology and pharmaceutical companies, SELLAS’ success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the biopharmaceutical industry involves both technological and legal complexity, and obtaining and enforcing biopharmaceutical patents is costly, time-consuming, and inherently uncertain. The Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to SELLAS and its licensors’ ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents once obtained. Depending on future decisions by the U.S. Congress, the federal courts and/or the USPTO, the laws and regulations governing patents could change in unpredictable ways that may weaken SELLAS and its licensors’ ability to obtain new patents or to enforce existing patents and patents SELLAS and its licensors or collaborators may obtain in the future.

Patent reform legislation that has occurred could increase the uncertainties and costs surrounding the prosecution of SELLAS and its licensors’ patent applications and the enforcement or defense of SELLAS or its licensors’ issued patents. On September 16, 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law. The Leahy-Smith Act includes a number of significant changes to U.S. patent law. These include provisions that affect the way patent applications are prosecuted and may also affect patent litigation. The USPTO recently developed new regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the first to file provisions, only became effective on March 16, 2013. Accordingly, it is not clear what, if any, impact the Leahy-Smith Act will have on the operation of its business. However, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of SELLAS or its licensors’ patent applications and the enforcement or defense of SELLAS or its licensors’ issued patents, all of which could have a material adverse effect on its business and financial condition.

If SELLAS is unable to protect the confidentiality of its trade secrets and other proprietary information, the value of its technology could be materially adversely affected and its business could be harmed.

In addition to seeking the protection afforded by patents, SELLAS relies on trade secret protection and confidentiality agreements to protect proprietary know-how that is not patentable or that SELLAS elects not to

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patent, processes for which patents are difficult to enforce, and other elements of its technology, discovery and development processes that involve proprietary know-how, information or technology that is not covered by patents. Any disclosure to or misappropriation by third parties of SELLAS’ confidential proprietary information could enable competitors to quickly duplicate or surpass its technological achievements, including by enabling them to develop and commercialize products substantially similar to or competitive with its current or future product candidates, thus eroding SELLAS’ competitive position in the market. Trade secrets can be difficult to protect. SELLAS seeks to protect its proprietary technology and processes, in part, by entering into confidentiality agreements and invention assignment agreements with its employees, consultants, and outside scientific advisors, contractors and collaborators. These agreements are designed to protect SELLAS’ proprietary information. Although SELLAS uses reasonable efforts to protect SELLAS’ trade secrets, SELLAS’ employees, consultants, contractors, or outside scientific advisors might intentionally or inadvertently disclose its trade secrets or confidential, proprietary information to competitors. In addition, competitors may otherwise gain access to SELLAS’ trade secrets or independently develop substantially equivalent information and techniques. If any of SELLAS’ confidential proprietary information were to be lawfully obtained or independently developed by a competitor, SELLAS would have no right to prevent such competitor from using that technology or information to compete with SELLAS, which could harm its competitive position.

Enforcing a claim that a third party illegally obtained and is using any of SELLAS’ trade secrets is expensive and time consuming, and the outcome is unpredictable. In addition, the laws of certain foreign countries do not protect proprietary rights such as trade secrets to the same extent or in the same manner as the laws of the United States. Misappropriation or unauthorized disclosure of SELLAS’ trade secrets to third parties could impair its competitive advantage in the market and could materially adversely affect its business, results of operations and financial condition.

Risks Related to Commercialization of SELLAS’ Current and Future Product Candidates

SELLAS’ commercial success depends upon attaining significant market acceptance of its current and future product candidates, if approved, among physicians, patients, healthcare payors and cancer treatment centers.

Even if SELLAS obtains regulatory approval for any of its current or future product candidates, the product may not gain market acceptance among physicians, healthcare payors, patients or the medical community, including cancer treatment centers. Market acceptance of any product candidates for which SELLAS receives approval depends on a number of factors, including:

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If any of SELLAS’ current and future product candidates are approved but fail to achieve market acceptance among physicians, patients, healthcare payors or cancer treatment centers, SELLAS will not be able to generate significant revenues, which would compromise SELLAS’ ability to become profitable.

Even if SELLAS is able to commercialize its current or future product candidates, the products may not receive coverage and adequate reimbursement from third-party payors in the United States and in other countries in which SELLAS seeks to commercialize its products, which could harm its business.

SELLAS’ ability to commercialize any product successfully will depend, in part, on the extent to which coverage and adequate reimbursement for these products and related treatments will be available from government health administration authorities, private health insurers and other organizations.

Government authorities and third-party payors, such as private health insurers and health maintenance organizations, determine which medications they will cover and establish reimbursement levels. A primary trend in the healthcare industry is cost containment. Government authorities and third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications. Increasingly, third-party payors are requiring that drug companies provide them with predetermined discounts from list prices and are challenging the prices charged for medical products. Third-party payors may also seek additional clinical evidence, beyond the data required to obtain regulatory approval, demonstrating clinical benefits and value in specific patient populations before covering SELLAS’ products for those patients. SELLAS cannot be sure that coverage and adequate reimbursement will be available for any product that it commercializes and, if reimbursement is available, what the level of reimbursement will be. Coverage and reimbursement may impact the demand for, or the price of, any product candidate for which SELLAS obtains regulatory approval. If reimbursement is not available or is available only at limited levels, SELLAS may not be able to successfully commercialize any product candidate for which SELLAS obtains regulatory approval.

There may be significant delays in obtaining coverage and reimbursement for newly approved drugs, and coverage may be more limited than the purposes for which the drug is approved by the FDA or comparable foreign regulatory authorities. Moreover, eligibility for coverage and reimbursement does not imply that any drug will be paid for in all cases or at a rate that covers SELLAS’ costs, including research, development, manufacture, sale and distribution. Interim reimbursement levels for new drugs, if applicable, may also not be sufficient to cover SELLAS’ costs and may only be temporary. Reimbursement rates may vary according to the use of the drug and the clinical setting in which it is used, may be based on reimbursement levels already set for lower cost drugs and may be incorporated into existing payments for other services. Net prices for drugs may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future relaxation of laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the United States. Third-party payors in the United States often rely upon Medicare coverage policy and payment limitations in setting their own reimbursement policies. SELLAS’ inability to promptly obtain coverage and profitable reimbursement rates from both government-funded and private payors for any approved products that it develops could have a material adverse effect on SELLAS’ operating results, ability to raise capital needed to commercialize products and overall financial condition.

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Recently enacted and future legislation, including potentially unfavorable pricing regulations or other healthcare reform initiatives, may increase the difficulty and cost for SELLAS to obtain regulatory approval of and commercialize its current or future product candidates and affect the prices SELLAS may obtain.

The regulations that govern, among other things, regulatory approvals, coverage, pricing and reimbursement for new drug products vary widely from country to country. In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay regulatory approval of its current or future product candidates, restrict or regulate post-approval activities and affect SELLAS’ ability to successfully sell any product candidates for which SELLAS obtains regulatory approval. Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products. SELLAS cannot be sure whether additional legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the regulatory approvals of its product candidates, if any, may be.

In the United States, the European Union and other potentially significant markets for SELLAS’ current and future product candidates, government authorities and third-party payors are increasingly attempting to limit or regulate the price of medical products and services, particularly for new and innovative products and therapies, which has resulted in lower average selling prices. Furthermore, the increased emphasis on managed healthcare in the United States and on country and regional pricing and reimbursement controls in the European Union will put additional pressure on product pricing, reimbursement and usage, which may adversely affect its future product sales and results of operations. These pressures can arise from rules and practices of managed care groups, judicial decisions and governmental laws and regulations related to Medicare, Medicaid and healthcare reform, pharmaceutical reimbursement policies and pricing in general.

Price controls may be imposed in foreign markets, which may adversely affect SELLAS’ future profitability.

In some countries, particularly member states of the European Union, the pricing of prescription drugs is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take considerable time after receipt of regulatory approval for a product. In addition, there can be considerable pressure by governments and other stakeholders on prices and reimbursement levels, including as part of cost containment measures. Political, economic and regulatory developments may further complicate pricing negotiations, and pricing negotiations may continue after reimbursement has been obtained. Reference pricing used by various European Union member states and parallel distribution, or arbitrage between low-priced and high-priced member states, can further reduce prices. In some countries, SELLAS or its collaborators may be required to conduct a clinical trial or other studies that compare the cost-effectiveness of its product candidates to other available therapies in order to obtain or maintain reimbursement or pricing approval. Publication of discounts by third-party payors or authorities may lead to further pressure on the prices or reimbursement levels within the country of publication and other countries. If reimbursement of SELLAS’ products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, its business could be adversely affected.

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SELLAS 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 SELLAS 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 SELLAS obtains regulatory approval. Its future arrangements with third-party payors and customers may expose SELLAS to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which SELLAS would market, sell and distribute its products. As a pharmaceutical company, even though SELLAS 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 its business. Restrictions under applicable federal and state healthcare laws and regulations that may affect SELLAS’ ability to operate include the following:

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Efforts to ensure that its 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 its 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 its operations are found to be in violation of any of these laws or any other governmental regulations that may apply to SELLAS, SELLAS 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 its operations. If any physicians or other healthcare providers or entities with whom SELLAS 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.

SELLAS employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could cause significant liability for SELLAS and harm its reputation.

SELLAS is exposed to the risk of employee fraud or other misconduct, including intentional failures to comply with FDA regulations or similar regulations of comparable foreign regulatory authorities, provide accurate information to the FDA or comparable foreign regulatory authorities, comply with manufacturing standards SELLAS has established, comply with federal and state healthcare fraud and abuse laws and regulations and similar laws and regulations established and enforced by comparable foreign regulatory authorities, report financial information or data accurately or disclose unauthorized activities to SELLAS. Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to SELLAS’ reputation. It is not always possible to identify and deter employee misconduct, and the precautions SELLAS takes to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting SELLAS from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted against SELLAS, and SELLAS is not successful in defending itself or asserting its rights, those actions could have a significant impact on its business and results of operations, including the imposition of significant fines or other sanctions.

Product liability lawsuits against SELLAS could cause SELLAS to incur substantial liabilities and to limit commercialization of any products that SELLAS may develop.

SELLAS faces an inherent risk of product liability exposure related to the testing of its current or future product candidates in human clinical trials and will face an even greater risk if SELLAS commercially sells any products that it may develop. Product liability claims may be brought against SELLAS by subjects enrolled in its clinical trials, patients, healthcare providers or others using, administering or selling its products. If SELLAS cannot successfully defend itself against claims that its product candidates or products caused injuries, SELLAS could incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:

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SELLAS currently holds product liability insurance coverage at a level that SELLAS believes is customary for similarly situated companies and adequate to provide SELLAS with insurance coverage for foreseeable risks, but which may not be adequate to cover all liabilities that SELLAS may incur. Insurance coverage is increasingly expensive. SELLAS may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise. SELLAS intends to expand its insurance coverage for products to include the sale of commercial products if SELLAS obtains regulatory approval for its product candidates in development, but SELLAS may be unable to obtain commercially reasonable product liability insurance for any products that receive regulatory approval. Large judgments have been awarded in class action lawsuits based on drugs that had unanticipated side effects. A successful product liability claim or series of claims brought against SELLAS, particularly if judgments exceed its insurance coverage, could decrease its cash and adversely affect its business.

Risks Related to SELLAS’ Business Operations

SELLAS faces substantial competition, which may result in others discovering, developing or commercializing products before or more successfully than it does.

SELLAS faces competition from numerous pharmaceutical and biotechnology enterprises, as well as from academic institutions, government agencies and private and public research institutions for its current product candidate. SELLAS’ commercial opportunities will be reduced or eliminated if its competitors develop and commercialize products that are safer, more effective, have fewer side effects or are less expensive than any products that SELLAS may develop. Competition could result in reduced sales and pricing pressure on SELLAS’ current or future product candidates, if approved, which in turn would reduce SELLAS’ ability to generate meaningful revenues and have a negative impact on its results of operations. In addition, significant delays in the development of its product candidates could allow SELLAS’ competitors to bring products to market before SELLAS and impair any ability to commercialize its product candidates.

There are several agents in clinical development in similar settings to SELLAS’ planned Phase 3 AML clinical development program. The most advanced of these products is oral Vidaza (azacytidine), under development by Celgene Corporation, which is anticipated to report Phase 3 results by the end of 2017. There are a number of other investigational immunotherapies advancing through Phase 2 and Phase 3 trials for target indications that SELLAS believes are also potential target indications for GPS. If these or other therapies are successful in their development, it could negatively impact SELLAS’ ability to enroll its clinical trials and could negatively impact the commercial potential of GPS.

SELLAS is also planning a clinical development program in combination with cancer checkpoint inhibitors. This is a highly competitive field, with hundreds of such combination trials with various checkpoint inhibitors ongoing. If one or more of these combinations produce positive results in indications which SELLAS believes are targets for GPS (either in combination or in stand-alone administration) this could increase the difficulty for SELLAS to conduct its trials and could negatively impact SELLAS’ path to regulatory approval and its ability to successfully commercialize its products.

Many of SELLAS’ competitors or potential competitors have significantly greater established presence in the market, financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than it does, and as a result may have a competitive advantage over SELLAS. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These third parties compete with SELLAS in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies and technology licenses complementary to SELLAS’ programs or advantageous to its business.

As a result of these factors, these competitors may obtain regulatory approval of their products before SELLAS is able to obtain patent protection or other intellectual property rights, which will limit SELLAS’ ability to develop

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or commercialize its current or future product candidates. SELLAS competitors may also develop drugs that are safer, more effective, more widely used and cheaper than ours, and may also be more successful than SELLAS in manufacturing and marketing their products. These appreciable advantages could render its product candidates obsolete or noncompetitive before SELLAS can recover the expenses of development and commercialization.

Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of SELLAS’ competitors. Smaller and other early stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These third parties compete with SELLAS in recruiting and retaining qualified scientific, management and commercial personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, its programs.

If SELLAS is unable to establish sales and marketing capabilities or enter into agreements with third parties to market and sell its current or future product candidates, SELLAS may be unable to generate any revenue.

SELLAS does not currently have an organization for the sale, marketing and distribution of pharmaceutical products and the cost of establishing and maintaining such an organization may exceed the cost-effectiveness of doing so. In order to market any products that may be approved by the FDA and comparable foreign regulatory authorities, SELLAS must build its sales, marketing, managerial and other non-technical capabilities or make arrangements with third parties to perform these services. There are significant risks involved in building and managing a sales organization, including SELLAS’ ability to hire, retain and incentivize qualified individuals, generate sufficient sales leads, provide adequate training to sales and marketing personnel and effectively manage a geographically dispersed sales and marketing team. Any failure or delay in the development of SELLAS’ internal sales, marketing and distribution capabilities would adversely impact the commercialization of these products. If SELLAS is unable to establish adequate sales, marketing and distribution capabilities, whether independently or with third parties, SELLAS may not be able to generate product revenues and may not become profitable. SELLAS will be competing with many companies that currently have extensive and well-funded sales and marketing operations. Without an internal commercial organization or the support of a third party to perform sales and marketing functions, SELLAS may be unable to compete successfully against these more established companies. If SELLAS is not successful in commercializing its current or future product candidates either on its own or through collaborations with one or more third parties, its future product revenue will suffer and SELLAS would incur significant additional losses.

SELLAS will need to grow the size of its organization, and SELLAS may experience difficulties in managing this growth.

As of September 30, 2017, SELLAS had nine full-time employees. SELLAS needs to grow the size of its organization in order to support its continued development and potential commercialization of GPS. In particular, SELLAS will need to add substantial numbers of additional personnel and other resources to support its development and potential commercialization of GPS. As SELLAS’ development and commercialization plans and strategies continue to develop, or as a result of any future acquisitions, its need for additional managerial, operational, manufacturing, sales, marketing, financial and other resources will increase. SELLAS’ management, personnel and systems currently in place may not be adequate to support this future growth. Future growth would impose significant added responsibilities on members of management, including:

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As its operations expand, SELLAS will also need to manage additional relationships with various strategic partners, suppliers and other third parties. Its future financial performance and SELLAS’ ability to commercialize GPS and to compete effectively will depend, in part, on SELLAS’ ability to manage any future growth effectively. To that end, SELLAS must be able to manage its development efforts and preclinical studies and clinical trials effectively and hire, train and integrate additional management, research and development, manufacturing, administrative and sales and marketing personnel. SELLAS failure to accomplish any of these tasks could prevent SELLAS from successfully growing its company.

Its future success depends on SELLAS’ ability to retain its executive officers and to attract, retain and motivate qualified personnel.

SELLAS is highly dependent upon its personnel, including Dr. Angelos M. Stergiou (M.D., Sc.D. h.c.), SELLAS’ Chief Executive Officer, co-founder and Vice Chairman of the SELLAS board of directors. SELLAS’ employment agreement with Dr. Stergiou does not prevent him from terminating his employment with SELLAS at any time. The loss of Dr. Stergiou’s services could impede the achievement of SELLAS’ research, development and commercialization objectives. SELLAS has not obtained, does not own, nor is the beneficiary of, key-person life insurance.

Governance changes, becoming subject to enhanced regulatory requirements and increased responsibilities associated with becoming a public company may influence SELLAS’ management personnel and its employees to terminate their employment with SELLAS. SELLAS’ former Chief Strategy Officer and Chief Operating Officer recently tendered their resignations from SELLAS. To enhance its ability to retain its executive management personnel, SELLAS has entered into retention agreements with certain executive officers, and may find it beneficial to enter into additional retention agreements with other key personnel in the future, potentially increasing payroll and operating expenses.

Its future growth and success depend on SELLAS’ ability to recruit, retain, manage and motivate its employees. The loss of any member of its senior management team or the inability to hire or retain experienced management personnel could compromise SELLAS’ ability to execute its business plan and harm its operating results. Because of the specialized scientific and managerial nature of its business, SELLAS relies heavily on SELLAS’ ability to attract and retain qualified scientific, technical and managerial personnel. The competition for qualified personnel in the pharmaceutical field is intense and as a result, SELLAS may be unable to continue to attract and retain qualified personnel necessary for the development of its business.

If SELLAS and its third-party manufacturers fail to comply with environmental, health and safety laws and regulations, SELLAS could become subject to fines or penalties or incur costs that could have a material adverse effect on the success of its business.

SELLAS and its third-party manufacturers are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. Its operations involve the use of hazardous and flammable materials, including chemicals and biological materials. Its operations also produce hazardous waste products. SELLAS generally contracts with third parties for the disposal of these materials and wastes. SELLAS cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from SELLAS or its third-party manufacturers’ use of hazardous materials, SELLAS could be held liable for any resulting damages, and any liability could exceed its resources. SELLAS also could incur significant costs associated with civil or criminal fines and penalties.

Although SELLAS maintains workers’ compensation insurance to cover SELLAS for costs and expenses SELLAS may incur due to injuries to its employees resulting from the use of hazardous materials with a policy limit that SELLAS believes is customary for similarly situated companies and adequate to provide SELLAS with insurance coverage for foreseeable risks, this insurance may not provide adequate cover age against potential

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liabilities. SELLAS does not maintain insurance for environmental liability or toxic tort claims that may be asserted against SELLAS in connection with its storage or disposal of biological or hazardous materials.

In addition, SELLAS may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. These current or future laws and regulations may impair SELLAS’ research, development or production efforts. Failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions, which could adversely affect its business, financial condition, results of operations and prospects.

SELLAS’ business and operations would suffer in the event of computer system failures or security breaches.

SELLAS’ internal computer systems, and those of MSK, SELLAS’ CROs, SELLAS’ CMOs, and other business vendors on which SELLAS relies, are vulnerable to damage from computer viruses, unauthorized access, natural disasters, fire, terrorism, war and telecommunication and electrical failures. SELLAS exercises little or no control over these third parties, which increases its vulnerability to problems with their systems. If such an event were to occur and cause interruptions in its operations, it could result in a material disruption of SELLAS’ drug development programs. For example, the loss of clinical trial data from completed, ongoing or planned clinical trials could result in delays in SELLAS’ regulatory approval efforts and significantly increase its costs to recover or reproduce the data. To the extent that any disruption or security breach results in a loss of or damage to SELLAS’ data or applications, or inappropriate disclosure of confidential or proprietary information, SELLAS could incur liability, the further development of SELLAS’ current and future product candidates could be delayed and its business could be otherwise adversely affected.

Business disruptions could seriously harm SELLAS’ future revenues and financial condition and increase its costs and expenses.

SELLAS’ operations could be subject to earthquakes, power shortages, telecommunications failures, water shortages, floods, hurricanes, typhoons, fires, extreme weather conditions, medical epidemics and other natural or manmade disasters or business interruptions, for which SELLAS is predominantly self-insured. The occurrence of any of these business disruptions could seriously harm SELLAS’ operations and financial condition and increase SELLAS’ costs and expenses. SELLAS relies on third-party manufacturers to produce GPS and intends to rely on third-party manufacturers to produce any future product candidates. SELLAS’ ability to obtain clinical supplies of product candidates could be disrupted, if the operations of these suppliers are affected by a man-made or natural disaster or other business interruption. The ultimate impact on SELLAS, its significant suppliers and its general infrastructure is unknown, but its operations and financial condition could suffer in the event of a major earthquake, fire, hurricane or other natural disaster.

SELLAS’ principal shareholders own a significant percentage of its stock and will be able to exert significant control over matters subject to stockholder approval.

SELLAS’ principal shareholders and their affiliates currently beneficially own in excess of 88% of the outstanding SELLAS Shares, without giving effect to certain shares to be issued to certain of such principal shareholders immediately prior to the Merger. Therefore, these shareholders have the ability and may continue to have the ability to influence SELLAS through this ownership position. These shareholders may be able to determine some or all matters requiring stockholder approval. For example, these shareholders, acting together, may be able to control elections of directors, amendments of organizational documents, or approval of any merger, sale of assets, or other major corporate transaction. This may prevent or discourage unsolicited acquisition proposals or offers for SELLAS Shares that you may believe are in your best interest as one of SELLAS’ shareholders.

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If the continuing company fails to develop and maintain proper and effective internal control over financial reporting, the accuracy and timeliness of its financial reporting may be adversely affected.

If the Merger is completed, SELLAS’ financial statements will become those of the continuing company and SELLAS’ management team as the executive officers of the continuing company will be required, pursuant to Section 404 of the Sarbanes-Oxley Act, or Section 404, to furnish a report by management on, among other things, the effectiveness of the continuing company’s internal control over financial reporting. In particular, SELLAS will be required to perform system and process evaluation and testing of its internal control over financial reporting to allow management to report on the effectiveness of its internal control over financial reporting. SELLAS has not yet been required to do such an analysis. Testing may reveal deficiencies in SELLAS’ internal control over financial reporting that are deemed to be material weaknesses. SELLAS was informed by its independent registered public accounting firm that SELLAS has a material weakness in its internal control over financial reporting due to its lack of sufficient management and personnel with appropriate expertise in GAAP and SEC rules and regulations with respect to financial reporting. Currently, SELLAS has only one designated finance and accounting employee and relies primarily on consultants to provide many accounting, book-keeping and administrative services. While SELLAS intends to hire additional finance and accounting personnel to build out its infrastructure and further develop and document its accounting policies and financial reporting procedures, it cannot assure you that it will be successful in these hiring efforts or that these measures will significantly improve or remediate the material weakness described above, or any others that it may identify once it conducts a full Section 404 evaluation. SELLAS also cannot assure you that it has identified all material weaknesses at this time, or that additional material weaknesses may occur in the future. Accordingly, material weaknesses may still exist when the continuing company reports on the effectiveness of its internal control over financial reporting.

The continuing company’s independent registered public accounting firm will not be required to attest to the effectiveness of the continuing company’s internal control over financial reporting for so long as the continuing company remains a “smaller reporting company” as defined in applicable SEC regulations. The management team of the continuing company will be required to disclose changes made in its internal controls and procedures on a quarterly basis. To comply with the requirements of its financial statements becoming those of the public company continuing company following the Merger, SELLAS will need to undertake various actions, such as implementing new internal controls and procedures and hiring additional accounting or internal audit staff. The continuing company’s audit committee must also be advised and regularly updated on management’s review of internal controls. SELLAS is only now beginning the costly and challenging process of compiling the system and processing documentation necessary to perform the evaluation of its internal control over financial reporting needed to comply with Section 404, and SELLAS may not be able to complete its evaluation, testing and any required remediation in a timely fashion. Moreover, if SELLAS is not able to comply with the requirements of Section 404 in a timely manner or if it identifies or its independent registered public accounting firm identifies deficiencies in SELLAS’ internal control over financial reporting that are deemed to be material weaknesses, the market price of the continuing company’s common stock could decline and the continuing company could be subject to sanctions or investigations by NASDAQ, the SEC or other regulatory authorities, which would require additional financial and management resources.

SELLAS will incur significant increased costs as a result of operating as a public company, and SELLAS’ management will be required to devote substantial time to new compliance initiatives.

SELLAS is currently operating as a private company. Following completion of the Merger, because it is deemed the acquiror for accounting purposes, SELLAS will effectively become a public company for accounting purposes, and SELLAS will need to will incur significant legal, accounting and other expenses that it did not incur as a private company. The Sarbanes-Oxley Act, as well as rules subsequently implemented by the SEC and NASDAQ, have imposed various requirements on public companies. In July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, was enacted. There are significant corporate governance and executive compensation related provisions in the Dodd-Frank Act that require the SEC to adopt

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additional rules and regulations in these areas such as “say on pay” and pay parity. Stockholder activism, the current political environment and the current high level of government intervention and regulatory reform may lead to substantial new regulations and disclosure obligations, which may lead to additional compliance costs and impact the manner in which SELLAS operates its business in ways it cannot currently anticipate. SELLAS’ management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will increase SELLAS’ legal and financial compliance costs and will make some activities more time-consuming and costly.

SELLAS’ compliance with Section 404 will require that SELLAS incur substantial accounting expense and expend significant management efforts. SELLAS currently does not have an internal audit group and relies on independent contractors for control monitoring and for the preparation and review of its consolidated financial statements. Following completion of the Merger, SELLAS will need to actively seek additional accounting and financial staff with appropriate public company experience and technical accounting knowledge to augment its current staff.

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