IVERIC bio, Inc. (Form: 10-Q, Received: 08/01/2019 16:05:36)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q



(Mark One)
ý		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2019
Or
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission file number: 001-36080

IVERIC bio, Inc.

(Exact name of registrant as specified in its charter)




Delaware (State or other jurisdiction of incorporation or organization)		20-8185347 (I.R.S. Employer Identification No.)

One Penn Plaza, 35th Floor New York, NY (Address of principal executive offices)		10119 (Zip Code)

(212) 845-8200

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value per share	ISEE	The Nasdaq Global Select Market

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ý Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer ¨	Accelerated filer x	Non-accelerated filer ¨	Smaller reporting company x	Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

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

As of July 29, 2019 there were 41,562,695 shares of Common Stock, $0.001 par value per share, outstanding.

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PART I—FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	Unaudited Consolidated Balance Sheets	3
	Unaudited Consolidated Statements of Operations and Comprehensive Loss	4
	Unaudited Consolidated Statements of Stockholders' Equity	5
	Unaudited Consolidated Statements of Cash Flows	6
	Notes to Unaudited Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	35

PART II—OTHER INFORMATION

Item 1.	Legal Proceedings	36
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	78
Item 5.	Other Information	78
Item 6.	Exhibits	79
	Signatures	80

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FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management, are forward-looking statements. The words "anticipate," "believe," "goals," "estimate," "expect," "intend," "may," "might," "plan," "predict," "project," "target," "potential," "will," "would," "could," "should," "continue" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

The forward-looking statements in this Quarterly Report on Form 10-Q include, among other things, statements about:


•	the potential benefits of our business plan and strategy to develop our gene therapy and therapeutic product candidates and programs and pursue our collaborative gene therapy sponsored research programs;


•	our expectations related to our use of available cash;


•	our estimates regarding expenses, future revenues, capital requirements and needs for, and ability to obtain, additional financing;


•	the timing, costs, conduct and outcome of our ongoing and planned research and preclinical development activities, including statements regarding the timing of the initiation of and completion of these activities, and the costs to obtain and timing of receipt of results from, and the completion of, such activities;


•	the timing, costs, conduct and outcome of our ongoing clinical trials, including statements regarding the timing of the completion of such trials, and the costs to obtain and timing of receipt of initial results from, and the completion of, such trials;


•	our ability to establish and maintain arrangements and capabilities for the manufacture of our product candidates;


•	the timing of and our ability to obtain marketing approval of our product candidates, and the ability of our product candidates to meet existing or future regulatory standards;


•	our ability to in-license or acquire additional product candidates or technologies to treat retinal diseases;


•	the potential advantages of our product candidates and other technologies that we are pursuing, including the advantages and limitations of gene therapy, including use of minigenes, inhibition of the complement system and HtrA1, and other mechanisms of action with which we are pursuing development of our product candidates;


•	our estimates regarding the potential market opportunity for our product candidates;


•	our sales, marketing and distribution capabilities and strategy;


•	the rate and degree of potential market acceptance and clinical utility of our product candidates, if approved;


•	the potential receipt of revenues from future sales of our product candidates, if approved;


•	our intellectual property position;


•	the impact of existing and new governmental laws and regulations; and


•	our competitive position.

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and our stockholders should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Quarterly Report on Form 10-Q, particularly in the "Risk Factors" section, that could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-

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looking statements do not reflect the potential impact of any future acquisitions, mergers, licenses, dispositions, joint ventures or investments we may make.

You should read this Quarterly Report on Form 10-Q and the documents that we have filed as exhibits to this Quarterly Report on Form 10-Q and our other periodic reports, completely and with the understanding that our actual future results may be materially different from what we expect. The forward-looking statements contained in this Quarterly Report on Form 10-Q are made as of the date of this Quarterly Report on Form 10-Q, and we do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

IVERIC bio, Inc.

Unaudited Consolidated Balance Sheets

(in thousands, except share and per share data)



	June 30, 2019			December 31, 2018
Assets
Current assets
Cash and cash equivalents	$	106,889		$	131,201
Prepaid expenses and other current assets	1,937			2,086
Income tax receivable	1,765			—
Total current assets	110,591			133,287
Property and equipment, net	252			335
Right-of-use asset, net	989			—
Income tax receivable, non-current	1,765			3,529
Other assets	11			14
Total assets	$	113,608		$	137,165
Liabilities and Stockholders' Equity
Current liabilities
Accrued research and development expenses	$	7,645		$	7,337
Accounts payable and accrued expenses	3,241			5,869
Lease liability	989			—
Total current liabilities	11,875			13,206
Total liabilities	11,875			13,206
Stockholders' equity
Preferred stock—$0.001 par value, 5,000,000 shares authorized, no shares issued or outstanding	$	—		$	—
Common stock—$0.001 par value, 200,000,000 shares authorized, 41,477,420 and 41,397,197 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively	41			41
Additional paid-in capital	550,303			545,585
Accumulated deficit	(448,611		)	(421,667		)
Total stockholders' equity	101,733			123,959
Total liabilities and stockholders' equity	$	113,608		$	137,165

The accompanying unaudited notes are an integral part of these financial statements.

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IVERIC bio, Inc.

Unaudited Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except per share data)



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Operating expenses:
Research and development	$	10,009		$	8,516		$	17,694		$	16,202
General and administrative	5,198			6,332			10,679			11,977
Total operating expenses	15,207			14,848			28,373			28,179
Loss from operations	(15,207		)	(14,848		)	(28,373		)	(28,179		)
Interest income	617			602			1,287			1,075
Other income (expense)	151			—			151			(16		)
Loss before income tax provision (benefit)	(14,439		)	(14,246		)	(26,935		)	(27,120		)
Income tax provision (benefit)	4			(1,037		)	9			(838		)
Net loss	$	(14,443	)	$	(13,209	)	$	(26,944	)	$	(26,282	)
Comprehensive loss	$	(14,443	)	$	(13,209	)	$	(26,944	)	$	(26,282	)
Net loss per common share:
Basic and diluted	$	(0.35	)	$	(0.37	)	$	(0.65	)	$	(0.73	)
Weighted average common shares outstanding:
Basic and diluted	41,477			36,188			41,452			36,171

The accompanying unaudited notes are an integral part of these financial statements.

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IVERIC bio, Inc.

Unaudited Consolidated Statements of Stockholders' Equity

(in thousands)



	Preferred Stock			Common Stock			Additional paid-in capital		Accumulated Deficit			Total
	Shares	Amount		Shares	Amount		Additional paid-in capital		Accumulated Deficit			Total
Balance at December 31, 2018	—	$	—	41,397	$	41	$	545,585	$	(421,667	)	$	123,959
Issuance of common stock under employee stock compensation plans	—	—		56	—		41		—			41
Share-based compensation	—	—		—	—		2,470		—			2,470
Net loss	—	—		—	—		—		(12,501		)	(12,501		)
Balance at March 31, 2019	—	$	—	41,453	$	41	$	548,096	$	(434,168	)	$	113,969
Issuance of common stock under employee stock compensation plans	—	—		24	—		—		—			—
Share-based compensation	—	—		—	—		2,207		—			2,207
Net loss	—	—		—	—		—		(14,443		)	(14,443		)
Balance at June 30, 2019	—	$	—	41,477	$	41	$	550,303	$	(448,611	)	$	101,733

	Preferred Stock			Common Stock			Additional paid-in capital		Accumulated Deficit			Total
	Shares	Amount		Shares	Amount		Additional paid-in capital		Accumulated Deficit			Total
Balance at December 31, 2017	—	$	—	36,110	$	36	$	522,759	$	(484,754	)	$	38,041
Issuance of common stock under employee stock compensation plans	—	—		54	—		27		—			27
Share-based compensation	—	—		—	—		3,082		—			3,082
Net loss	—	—		—	—		—		(13,073		)	(13,073		)
Balance at March 31, 2018	—	$	—	36,164	$	36	$	525,868	$	(497,827	)	$	28,077
Issuance of common stock under employee stock compensation plans	—	—		24	—		—		—			—
Share-based compensation	—	—		—	—		2,662		—			2,662
Net loss	—	—		—	—		—		(13,209		)	(13,209		)
Balance at June 30, 2018	—	$	—	36,188	$	36	$	528,530	$	(511,036	)	$	17,530

The accompanying unaudited notes are an integral part of these financial statements.

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IVERIC bio, Inc.

Unaudited Consolidated Statements of Cash Flows

(in thousands)



	Six Months Ended June 30,
	2019			2018
Operating Activities
Net loss	$	(26,944	)	$	(26,282	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and other expense	83			94
Gain on sale of property and equipment	(150		)	—
Deferred income taxes	—			233
Share-based compensation	4,677			5,744
Changes in operating assets and liabilities:
Income tax receivable	(1		)	1,387
Prepaid expense and other current assets	299			1,227
Other assets	3			(7		)
Accrued research and development expenses	308			153
Accounts payable and accrued expenses	(2,628		)	(3,557		)
Net cash used in operating activities	(24,353		)	(21,008		)
Investing Activities
Net cash provided by (used in) investing activities	—			—
Financing Activities
Proceeds from employee stock plan purchases	41			27
Net cash provided by financing activities	41			27
Net change in cash and cash equivalents	(24,312		)	(20,981		)
Cash and cash equivalents
Beginning of period	131,201			166,972
End of period	$	106,889		$	145,991
Supplemental disclosure of cash paid
Income tax refunds received	$	—		$	2,467

The accompanying unaudited notes are an integral part of these financial statements.

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IVERIC bio, Inc.

Notes to Unaudited Consolidated Financial Statements

(in thousands, except per share data)

1. Business

Description of Business and Organization

IVERIC bio, Inc. (the “Company”), formerly Ophthotech Corporation, was incorporated on January 5, 2007, in Delaware. The Company is a science-driven biopharmaceutical company with a focus on discovering and developing novel gene therapy solutions to treat orphan inherited retinal diseases ("IRDs") with unmet medical needs. In April 2019, the Company changed its name from Ophthotech Corporation to IVERIC bio, Inc. to reflect the transition of its business to focus principally on gene therapies. The Company believes that gene therapy as a treatment modality, especially gene therapies using adeno-associated virus ("AAV") for gene delivery, holds tremendous promise for retinal diseases. The Company also continues to develop its therapeutic programs, including its ongoing clinical trials for its C5 complement inhibitor Zimura® (avacincaptad pegol) for an age-related retinal disease and for an orphan IRD.

The Company's gene therapy portfolio consists of several ongoing research and preclinical development programs that use AAV for gene delivery. These AAV gene therapy programs are targeting the following orphan IRDs:


•	rhodopsin-mediated autosomal dominant retinitis pigmentosa ("RHO-adRP"), which is characterized by progressive and severe bilateral loss of vision leading to blindness;


•	IRDs associated with mutations in the BEST1 gene, including Best vitelliform macular dystrophy ("Best disease"), which is generally characterized by bilateral egg yolk-like lesions in the central portion of the retina (the "macula") that, over time, progress to atrophy and loss of vision;


•	Leber congenital amaurosis type 10 ("LCA10"), which is characterized by severe bilateral loss of vision at or soon after birth;


•	autosomal recessive Stargardt disease, which is characterized by progressive damage to the macula and retina, leading to loss of vision in children and young adults; and


•	IRDs associated with mutations in the USH2A gene, which include Usher syndrome type 2A ("Usher 2A") and USH2A -associated nonsyndromatic autosomal recessive retinitis pigmentosa.

The Company's therapeutics portfolio consists of Zimura and its program of High temperature requirement A serine peptidase 1 protein ("HtrA1") inhibitors. The Company has Phase 2b clinical trials ongoing evaluating Zimura for the treatment of:


•	geographic atrophy ("GA"), which is a late-stage form of dry age-related macular degeneration ("AMD") characterized by retinal cell death and degeneration of tissue in the macula, and which may result in loss of vision; and


•	autosomal recessive Stargardt disease.

The Company previously also evaluated Zimura in combination with Lucentis® (ranibizumab), an anti-vascular endothelial growth factor ("anti-VEGF") agent, for the treatment of wet AMD, for which it completed a Phase 2a clinical trial during the fourth quarter of 2018. The Company does not currently have plans to develop Zimura further in wet AMD. The Company's HtrA1 inhibitor program, which it is developing for GA secondary to dry AMD and potentially other age-related retinal diseases, is in the preclinical stage of development.

The Company's business development efforts have resulted in the expansion of its research and development pipeline and the transition of the Company to focus principally on gene therapy. The Company initiated multiple gene therapy sponsored research programs with the University of Massachusetts Medical School ("UMMS") in February 2018 and initiated an additional gene therapy sponsored research program with UMMS for USH2A -related IRDs in July 2019. Additionally, the Company in-licensed its novel AAV gene therapy product candidate for the treatment of RHO-adRP ("IC-100") from the University of Florida Research Foundation ("UFRF") and the University of Pennsylvania ("Penn") in June 2018, in-licensed its novel AAV gene therapy product candidate for the treatment of BEST1- related IRDs, including Best disease ("IC-200") from Penn and UFRF in April 2019 and in-licensed its minigene sponsored research program for LCA10 from the University of Massachusetts in July 2019 (See "Note 10—Subsequent Event" for a description of this in-license transaction). The Company also acquired its HtrA1 inhibitor program through the acquisition of Inception 4, Inc. ("Inception 4") in October 2018.

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2. Summary of Significant Accounting Policies

The Company’s significant accounting policies are described in Note 2, “Summary of Significant Accounting Policies,” in the notes to the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 filed with the Securities and Exchange Commission ("SEC") on February 28, 2019.

Basis of Presentation

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") and include all adjustments necessary for the fair presentation of the Company's financial position for the periods presented. The consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Segment and geographic information

Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company views its operations and manages its business in one operating and reporting segment.

Use of Estimates

The preparation of financial statements and related disclosures in conformity with GAAP requires management to make estimates and judgments that affect the amounts reported in the financial statements and accompanying notes. The Company bases its estimates and judgments on historical experience and on various other assumptions that it believes are reasonable under the circumstances. The amounts of assets and liabilities reported in the Company's Consolidated Balance Sheets and the amount of expenses reported for each of the periods presented are affected by estimates and assumptions, which are used for, but not limited to, accounting for research and development costs, revenue recognition, accounting for share-based compensation and accounting for income taxes. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of 90 days or less when purchased to be cash equivalents. The carrying amounts reported in the Balance Sheets for cash and cash equivalents are valued at cost, which approximates their fair value.

As of June 30, 2019 , the Company had cash and cash equivalents of approximately $106.9 million .

Concentration of Credit Risk

The Company's financial instruments that are exposed to concentration of credit risk consist primarily of cash and cash equivalents. The Company maintains its cash in bank accounts, the balances of which generally exceed federally insured limits. The Company maintains its cash equivalents in investments in money market funds and, at times, in U.S. Treasury securities and investment-grade corporate debt securities with original maturities of 90 days or less.

Concentration of Suppliers

The Company currently relies exclusively upon a single third-party contract manufacturer for IC-100 and IC-200, and expects to rely on sole-source suppliers for certain starting materials to be used in the manufacture of such product candidates. The Company currently relies exclusively upon a single third-party manufacturer to provide supplies of the drug substance for Zimura on a purchase order basis. The Company also engages a single third-party manufacturer to provide fill/finish services for clinical supplies of Zimura. In addition, the Company currently relies upon a single third-party supplier to supply it with the polyethylene glycol reagent used to manufacture Zimura on a purchase order basis. Furthermore, the Company and its contract manufacturers currently rely upon sole-source suppliers of certain raw materials and other specialized components of production used in the manufacture and fill/finish of its product candidates. The Company currently relies upon a single third-party contract manufacturer to produce small quantities of the active pharmaceutical ingredient for its HtrA1 inhibitors for preclinical development purposes. If the Company’s third-party manufacturers or fill/finish service providers should become unavailable to the Company for any reason, including as a result of capacity constraints, financial difficulties or insolvency, the Company believes that there are a limited number of potential replacement manufacturers, and the Company likely would incur added costs and delays in identifying or qualifying such replacements.

Foreign Currency Translation

The Company considers the U.S. dollar to be its functional currency. Expenses denominated in foreign currencies are translated at the exchange rate on the date the expense is incurred. The effect of exchange rate fluctuations on translating

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foreign currency assets and liabilities into U.S. dollars is included in the Consolidated Statements of Operations and Comprehensive Loss. Foreign exchange transaction gains and losses are included in the results of operations and are not material in the Company's financial statements.

Financial Instruments

Cash equivalents and available for sale securities are reflected in the accompanying financial statements at fair value. The carrying amount of accounts payable and accrued expenses, including accrued research and development expenses, approximates fair value due to the short-term nature of those instruments.

Leases

The Company has leased its office space and has entered into various other agreements in conducting its business. At inception, the Company determines whether an agreement represents a lease and at commencement evaluates each lease agreement to determine whether the lease is an operating or financing lease. Some of the Company's lease agreements have contained renewal options, tenant improvement allowances, rent holidays and rent escalation clauses, although its remaining outstanding lease for its principal offices has no further options, allowances, holidays or clauses. As described below under "Recently Adopted Accounting Pronouncements," the Company adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842) as of January 1, 2019.

Pursuant to ASU 2016-02, all of the Company's leases outstanding on January 1, 2019 continued to be classified as operating leases. With the adoption of ASU 2016-02, the Company recorded an operating lease right-of-use asset and an operating lease liability on its Consolidated Balance Sheet. Right-of-use lease assets represent the Company's right to use the underlying asset for the lease term and the lease obligation represents the Company's commitment to make the lease payments arising from the lease. Right-of-use lease assets and obligations are recognized at the commencement date based on the present value of remaining lease payments over the lease term. As the Company’s leases do not provide an implicit discount rate, the Company has used an estimated incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The right-of-use lease asset includes any lease payments made prior to commencement and excludes any lease incentives. The lease term may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Operating lease expense is recognized on a straight-line basis over the lease term, subject to any changes in the lease or expectations regarding the terms. Variable lease costs such as common area costs and property taxes are expensed as incurred. For all office lease agreements the Company combines lease and nonlease components. Leases with an initial term of 12 months or less are not recorded on the Company's Consolidated Balance Sheet.

Prior to the adoption of ASU 2016-02, when the Company's lease agreements contained renewal options, tenant improvement allowances, rent holidays and rent escalation clauses, the Company recorded a deferred rent asset or liability equal to the difference between the rent expense and the future minimum lease payments due. The lease expense related to operating leases was recognized on a straight-line basis in the Company's Consolidated Statements of Operations over the term of each lease. In cases where the lessor granted the Company leasehold improvement allowances that reduced the Company's lease expense, the Company capitalized the improvements as incurred and recognized deferred rent, which was amortized over the shorter of the lease term or the expected useful life of the improvements.

Property and Equipment

Property and equipment, which consists mainly of clinical equipment, computers, software, other office equipment, and leasehold improvements, are carried at cost less accumulated depreciation. Depreciation is computed over the estimated useful lives of the respective assets, generally three to ten years, using the straight-line method. Amortization of leasehold improvements is recorded over the shorter of the lease term or estimated useful life of the related asset.

Research and Development

The Company's research and development expenses primarily consist of costs associated with the manufacturing, development and preclinical and clinical testing of its product candidates and costs associated with its collaborative gene therapy sponsored research programs. The Company's research and development expenses consist of:


•	external research and development expenses incurred under arrangements with third parties, such as academic research collaborators, contract research organizations ("CROs"), and contract development and manufacturing organizations ("CDMOs") and other vendors for the production of drug substance and drug product; and


•	employee-related expenses for employees dedicated to research and development activities, including salaries, benefits and share-based compensation expense.

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Research and development expenses also include costs of acquired product licenses, in-process research and development, and related technology rights where there is no alternative future use, costs of prototypes used in research and development, consultant fees and amounts paid to collaborative partners.

All research and development expenses are charged to operations as incurred in accordance with ASC 730, Research and Development .

Income Taxes

The Company utilizes the liability method of accounting for deferred income taxes, as set forth in ASC 740, Income Taxes. Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities. A valuation allowance is established against deferred tax assets when, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company's policy is to record interest and penalties on uncertain tax positions as income tax expense.

Share-Based Compensation

The Company follows the provisions of ASC 718, Compensation—Stock Compensation, which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and non-employee directors, including employee stock options, restricted stock units (“RSUs”) and options granted to employees to purchase shares under the 2016 Employee Stock Purchase Plan (the “ESPP”). Share-based compensation expense is based on the grant date fair value estimated in accordance with the provisions of ASC 718 and is generally recognized as an expense over the requisite service period, net of estimated forfeitures. For grants containing performance-based vesting provisions, expense is recognized over the estimated achievement period only when the performance-based milestone is deemed probable of achievement. If performance-based milestones are later determined not to be probable of achievement, then all previously recorded stock-based compensation expense associated with such options will be reversed during the period in which the Company makes this determination.

Prior to January 1, 2019, share-based compensation awarded to non-employees was subject to revaluation over the vesting term of each award. Subsequent to the adoption of ASU 2018-07, Improvements to Non-Employee Share-Based Payment Accounting , the value of non-employee share-based compensation is measured on the date of grant, similar to share-based compensation granted to employees.

Stock Options

The Company estimates the fair value of stock options granted to employees and non-employee directors on the date of grant using the Black-Scholes option-pricing model. Due to the lack of trading history, the Company's computation of stock-price volatility is based on the volatility rates of comparable publicly held companies over a period equal to the expected term of the options granted by the Company. The Company's computation of expected term is determined using the "simplified" method, which is the midpoint between the vesting date and the end of the contractual term. The Company believes that it does not have sufficient reliable exercise data in order to justify the use of a method other than the "simplified" method of estimating the expected exercise term of employee stock option grants. The Company utilizes a dividend yield of zero based on the fact that the Company has never paid cash dividends to stockholders and has no current intentions to pay cash dividends. The risk-free interest rate is based on the zero-coupon U.S. Treasury yield at the date of grant for a term equivalent to the expected term of the option.

The weighted-average assumptions used to estimate grant date fair value of stock options using the Black-Scholes option pricing model were as follows for the three and six months ended June 30, 2019 and 2018 :



	Three Months Ended June 30,		Six Months Ended June 30,
	2019	2018	2019	2018
Expected common stock price volatility	88%	85%	87%	83%
Risk-free interest rate	2.15%-2.31%	2.83%-2.83%	2.15%-2.54%	2.39%-2.83%
Expected term of options (years)	5.3	5.3	5.6	5.6
Expected dividend yield	—	—	—	—

RSUs

The Company estimates the fair value of RSUs granted to employees using the closing market price of the Company's common stock on the date of grant.

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ESPP

In April 2016, the board of directors adopted the ESPP pursuant to which the Company may sell up to an aggregate of 1,000,000 shares of common stock. The ESPP was approved by the Company’s stockholders in June 2016. The ESPP is considered compensatory and the fair value of the discount and look back provision are estimated using the Black-Scholes option-pricing model and recognized over the six month withholding period prior to purchase.

Recently Adopted Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-2, Leases (Topic 842) . Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: (1) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Under the new guidance, lessor accounting is largely unchanged. Certain targeted improvements were made to align, where necessary, lessor accounting with the lessee accounting model and Topic 606, Revenue from Contracts with Customers . The new lease guidance simplified the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. Lessees will no longer be provided with a source of off-balance sheet financing. Publicly-traded business entities should apply the amendments in ASU 2016-2 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years (i.e., January 1, 2019, for a calendar year entity). Early application is permitted for all publicly-traded business entities and all nonpublicly-traded business entities upon issuance. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. On January 1, 2019 the Company adopted this guidance utilizing the simplified transition option that allows companies to initially apply the new lease standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company elected to adopt the package of practical expedients permitted in Accounting Standards Codification Topic 842, or ASC 842. Accordingly, the Company continues to account for its existing operating leases as operating leases under the new guidance, without reassessing whether the contracts contain a lease under ASC 842 or whether classification of the operating leases would be different under ASC Topic 842.

As a result of the adoption, the Company recognized, as of the beginning of the period of adoption, right-of-use assets and lease liabilities of approximately $1.5 million , which represents the present value of its remaining lease payments using a weighted average estimated incremental borrowing rate of 6% , on its Consolidated Balance Sheet. The adoption of this standard did not have a material impact on the Company’s results of operations for the period ended June 30, 2019 .

In June 2018, the FASB issued ASU No. 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, which supersedes ASC 505-50 and expands the scope of ASC 718 to include all share-based payments arrangements related to the acquisition of goods and services from both employees and nonemployees. For public companies, the amendments are effective for annual reporting periods beginning after December 15, 2018, including interim periods within those annual periods. During the three months ended March 31, 2019, the Company adopted this guidance. The adoption did not have a material impact on its financial statements for the period ended and as of June 30, 2019 .

Recent Accounting Pronouncements

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820) , which modifies the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, including, among other changes, the consideration of costs and benefits when evaluating disclosure requirements. For public companies, the amendments are effective for annual reporting periods beginning after December 15, 2019, including interim periods within those annual periods. Early adoption is permitted. The Company is currently assessing the impact that adopting this new accounting guidance will have on its financial statements and footnote disclosures.

In August 2018, the FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force). ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). This guidance is effective for fiscal years beginning after December 15, 2019, and for interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the potential effects of this guidance on its consolidated financial statements.

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In November 2018, the FASB issued ASU No. 2018-18, Collaborative Arrangements (Topic 808) , which clarifies the interaction between the guidance for collaborative arrangements (Topic 808) and the new revenue recognition standard (Topic 606). For public companies, the amendments are effective for annual reporting periods beginning after December 15, 2019, including interim periods within those annual periods. Early adoption is permitted. The Company is currently assessing the impact that adopting this new accounting guidance will have on its financial statements and footnote disclosures.

3. Net Loss Per Common Share

Basic and diluted net loss per common share is determined by dividing net loss by the weighted average common shares outstanding during the period. For the periods where there is a net loss, shares underlying stock options and RSUs have been excluded from the calculation of diluted net loss per common share because the effect of including such shares would be anti-dilutive. Therefore, the weighted average common shares used to calculate both basic and diluted net loss per common share would be the same. The following table sets forth the computation of basic and diluted net loss per common share for the periods indicated:



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Basic and diluted net loss per common share calculation:
Net loss	$	(14,443	)	$	(13,209	)	$	(26,944	)	$	(26,282	)
Weighted average common shares outstanding - basic and dilutive	41,477			36,188			41,452			36,171
Net loss per share of common stock - basic and diluted	$	(0.35	)	$	(0.37	)	$	(0.65	)	$	(0.73	)

The following potentially dilutive securities have been excluded from the computations of diluted weighted average common shares outstanding for the periods presented, as the effect of including such shares would be anti-dilutive:



	Three Months Ended June 30,		Six Months Ended June 30,
	2019	2018	2019	2018
Stock options outstanding	5,690	4,818	5,690	4,818
Restricted stock units	635	199	635	199
Total	6,325	5,017	6,325	5,017

4. Cash, Cash Equivalents and Available for Sale Securities

The Company considers all highly liquid investments purchased with original maturities of 90 days or less at the date of purchase to be cash equivalents. As of June 30, 2019 and December 31, 2018, the Company had cash and cash equivalents of approximately $ 106.9 million and $ 131.2 million , respectively. Cash and cash equivalents included cash of $2.3 million at June 30, 2019 and $4.4 million at December 31, 2018. Cash and cash equivalents at June 30, 2019 and December 31, 2018 included $104.6 million and $126.8 million , respectively, of investments in money market funds and certain investment-grade corporate debt securities with original maturities of 90 days or less.

The Company considers securities with original maturities of greater than 90 days at the date of purchase to be available for sale securities. The Company held no available for sale securities at June 30, 2019 or at December 31, 2018, respectively.

The Company believes that its existing cash and cash equivalents as of June 30, 2019 will be sufficient to fund its operations and capital expenditure requirements as currently planned for at least the next 12 months.

5. Share-Based Compensation

Pursuant to the evergreen provisions of the Company's 2013 stock incentive plan (the "2013 Plan"), annual increases have resulted in the addition of an aggregate of approximately 8,554,000 additional shares to the 2013 Plan, including for 2019, an increase of approximately 1,656,000 shares, or approximately 4% of the total number of shares of the Company's common stock outstanding as of January 1, 2019. As of June 30, 2019 , the Company had approximately 2,704,000 shares available for grant under the 2013 Plan.

Share-based compensation expense, net of estimated forfeitures, includes expenses related to stock options and RSUs granted to employees, non-employee directors and consultants, as well as options granted to employees to purchase shares under the ESPP. Stock-based compensation by award type was as follows:



	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Stock options	$	1,488	$	1,836	$	3,110	$	3,968
Restricted stock units	709		819		1,530		1,765
Employee stock purchase plan	10		7		37		11
Total	$	2,207	$	2,662	$	4,677	$	5,744

The Company allocated stock-based compensation expense in the Company’s Consolidated Statements of Operations and Comprehensive Loss as follows:



	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Research and development	$	989	$	1,106	$	2,159	$	2,546
General and administrative	1,218		1,556		2,518		3,198
Total	$	2,207	$	2,662	$	4,677	$	5,744

Stock Options

A summary of the stock option activity, weighted average exercise prices, options outstanding, exercisable and expected to vest as of June 30, 2019 is as follows (in thousands except weighted average exercise price):



	Number of Shares Underlying Options		Weighted Average Exercise Price
Outstanding, December 31, 2018	5,903		$	13.72
Granted	137		$	1.35
Forfeited	(261	)	$	26.18
Expired	(89	)	$	12.72
Outstanding, June 30, 2019	5,690		$	12.89
Vested and exercisable, June 30, 2019	2,850		$	21.83
Vested and expected to vest, June 30, 2019	5,463		$	13.26

As of June 30, 2019 , there were approximately $6.4 million of unrecognized compensation costs, net of estimated forfeitures, related to stock option awards grants, which are expected to be recognized over a remaining weighted average period of 1.8 years.

RSUs

The following table presents a summary of the Company's outstanding RSU awards granted as of June 30, 2019 (in thousands except weighted average grant-date fair value):



	Restricted Stock Units		Weighted Average Grant-Date Fair Value
Outstanding, December 31, 2018	679		$	15.61
Awarded	10		$	1.38
Vested	(49	)	$	52.83
Forfeited	(5	)	$	38.98
Outstanding, June 30, 2019	635		$	12.40
Outstanding, Expected to vest	518		$	6.58

As of June 30, 2019 , there were approximately $2.1 million of unrecognized compensation costs, net of estimated forfeitures, related to RSUs grants, which are expected to be recognized over a remaining weighted average period of 1.5 years.

ESPP

As of June 30, 2019 , there were 920,707 shares available for future purchases under the ESPP. There were no shares of common stock issued under the ESPP during the three months ended June 30, 2019 and 2018. There were 31,522 shares of common stock issued under the ESPP during the six months ended June 30, 2019 . Cash proceeds from ESPP purchases were $41 thousand during the six months ended June 30, 2019 . There were 12,229 shares of common stock issued under the ESPP during the six months ended June 30, 2018 . Cash proceeds from ESPP purchases were $27 thousand during the six months ended June 30, 2018 .

6. Income Taxes

For the three and six months ended June 30, 2019 , the Company recorded a de minimis provision for income taxes. For the three and six months ended June 30, 2018 , the Company recorded a benefit for income taxes of $ 1.0 million and $0.8 million , respectively. The benefit for income taxes recorded during the three months ended June 30, 2018 was to reflect the settlement of a local tax audit. The income tax benefit for the six months ended June 30, 2018 includes the provision for income taxes recorded by the Company for the three months ended March 31, 2018 to reflect the impact of sequestration on the Company's estimate of refundable AMT credits.

The Company will continue to evaluate its ability to realize its deferred tax assets on a quarterly basis and will adjust such amounts in light of changing facts and circumstances including, but not limited to, future projections of taxable income, tax legislation, rulings by relevant tax authorities, the progress of ongoing tax audits and the regulatory approval of products currently under development. Any additional changes to the valuation allowance recorded on deferred tax assets in the future would impact the Company’s income taxes.

7. Fair Value Measurements

ASC 820, Fair Value Measurements and Disclosures , defines fair value as the price that would be received to sell an asset, or paid to transfer a liability, in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. The fair value standard also establishes a three-level hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The Company reviews investments on a periodic basis for other than temporary impairments. This review is subjective as it requires management to evaluate whether an event or change in circumstances has occurred in the period that may have a significant adverse effect on the fair value of the investment. The Company uses the market approach to measure fair value for its financial assets. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets. The Company classifies its investment-grade corporate debt securities within the fair value hierarchy as Level 2 assets, as it primarily utilizes quoted market prices or rates for similar instruments to value these securities.

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The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability on the measurement date. The three levels are defined as follows:


•	Level 1—inputs to the valuation methodology are quoted prices (unadjusted) for an identical asset or liability in an active market. The Company's Level 1 assets consist of investments in money market funds and U.S. Treasury securities.


•	Level 2—inputs to the valuation methodology include quoted prices for a similar asset or liability in an active market or model-derived valuations in which all significant inputs are observable for substantially the full term of the asset or liability. The Company's Level 2 assets may consist of investments in investment-grade corporate debt securities.


•	Level 3—inputs to the valuation methodology are unobservable and significant to the fair value measurement of the asset or liability. The Company does not hold any assets that are measured using Level 3 inputs.

The following table presents, for each of the fair value hierarchy levels required under ASC 820, the Company's assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2019 :



	Fair Value Measurement Using
	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Assets
Investments in money market funds*	$	87,572	$	—	$	—
Investments in investment-grade corporate debt securities*	$	—	$	17,031	$	—



	Fair Value Measurement Using
	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Assets
Investments in money market funds*	$	97,402	$	—	$	—
Investments in investment-grade corporate debt securities*	$	—	$	29,425	$	—


*	Investments in money market funds and investment-grade corporate debt securities with maturities less than 90 days are reflected in cash and cash equivalents in the accompanying Consolidated Balance Sheets.

No transfer of assets between Level 1 and Level 2 of the fair value measurement hierarchy occurred during the three and six months ended June 30, 2019 .

The Company held no available for sale securities at June 30, 2019 or at December 31, 2018.

8. Operating Leases

The Company leases office space located in New York, New York and Princeton, New Jersey under non-cancelable operating lease arrangements. The lease for the Company's New York office space expires at the end of June 2020, whereas the sublease for the Company's Princeton office space expires in March 2020. As of January 1, 2019, the Company recognized right-of-use assets and lease liabilities of approximately $1.5 million , which represents the present value of its remaining lease payments using a weighted average estimated incremental borrowing rate of 6% .

For the three and six months ended June 30, 2019 , lease and rent expense was $0.3 million and $0.6 million . Cash paid from operating cash flows for amounts included in the measurement of lease liabilities was $0.3 million and $0.6 million for the three and six months ended June 30, 2019 . At June 30, 2019 , the Company's operating leases had a weighted average remaining lease term of 1.0 year .

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The following presents the maturity of the Company's operating lease liabilities as of June 30, 2019 :



	June 30, 2019
Remainder of 2019	$	520
2020	504
Total remaining obligation	1,024
Less imputed interest	(35		)
Present value of lease liabilities	$	989

9. Commitments and Contingencies

Zimura - Archemix Corp.

The Company is party to an agreement with Archemix Corp., or Archemix, under which the Company in-licensed rights in certain patents, patent applications and other intellectual property related to Zimura and pursuant to which the Company may be required to pay sublicense fees and make milestone payments (the "C5 License Agreement"). Under the C5 License Agreement, for each anti-C5 aptamer product that the Company may develop under the agreement, including Zimura, the Company is obligated to make payments to Archemix of up to an aggregate of $57.5 million if the Company achieves specified development, clinical and regulatory milestones, with $30.5 million of such payments relating to a first indication, $24.5 million of such payments relating to second and third indications and $2.5 million of such payments relating to sustained delivery applications. Under the C5 License Agreement, the Company is also obligated to make additional payments to Archemix of up to an aggregate of $22.5 million if the Company achieves specified commercial milestones based on net product sales of all anti-C5 products licensed under the agreement. The Company is also obligated to pay Archemix a double-digit percentage of specified non-royalty payments the Company may receive from any sublicensee of its rights under the C5 License Agreement. The Company is not obligated to pay Archemix a running royalty based on net product sales in connection with the C5 License Agreement.

IC-100 - University of Florida and the University of Pennsylvania

Under its exclusive license agreement with UFRF and Penn for rights to IC-100, the Company is obligated to make payments to UFRF, for the benefit of Penn and UFRF (together, the "Licensors"), of up to an aggregate of $23.5 million if the Company achieves specified clinical, marketing approval and reimbursement approval milestones with respect to a licensed product and up to an aggregate of an additional $70.0 million if the Company achieves specified commercial sales milestones with respect to a licensed product. The Company is also obligated to pay UFRF, for the benefit of the Licensors, a low single-digit percentage of net sales of licensed products. The Company is also obligated to pay UFRF, for the benefit of the Licensors, a double-digit percentage of specified non-royalty payments the Company may receive from any third-party sublicensee of the licensed patent rights. Further, if the Company receives a rare pediatric disease priority review voucher from the U.S. Food and Drug Administration ("FDA") in connection with obtaining marketing approval for a licensed product and the Company subsequently uses such priority review voucher in connection with a different product candidate, the Company will be obligated to pay UFRF, for the benefit of the Licensors, aggregate payments in the low double-digit millions of dollars based on certain approval and commercial sales milestones with respect to such other product candidate. In addition, if the Company sells such a priority review voucher to a third party, the Company will be obligated to pay UFRF, for the benefit of the Licensors, a low double-digit percentage of any consideration received from such third party in connection with such sale.

IC-200 - University of Pennsylvania and the University of Florida

Under its exclusive license agreement with Penn and UFRF for rights to IC-200, the Company is obligated to make payments to Penn, for the benefit of the Licensors, of up to an aggregate of $15.7 million if the Company achieves specified clinical, marketing approval and reimbursement approval milestones with respect to one licensed product and up to an aggregate of an additional $3.1 million if the Company achieves these same milestones with respect to a different licensed product. In addition, the Company is obligated to make payments to Penn, for the benefit of the Licensors, of up to an aggregate of $48.0 million if the Company achieves specified commercial sales milestones with respect to one licensed product and up to an aggregate of an additional $9.6 million if the Company achieves these same milestones with respect to a different licensed product. The Company is also obligated to pay Penn, for the benefit of the Licensors, a low single-digit percentage of net sales of licensed products. The Company is also obligated to pay Penn, for the benefit of the Licensors, a high single-digit to a mid-teen percentage of specified non-royalty payments the Company may receive from any third-party sublicensee of the licensed patent rights, with the applicable percentage based upon the stage of development of the sublicensed product at the time the Company enters into the sublicense. Further, if the Company receives a rare pediatric disease priority review voucher from the FDA in connection with obtaining marketing approval for a licensed product and the Company subsequently uses such priority

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review voucher in connection with a different product candidate outside the scope of the agreement, the Company will be obligated to pay Penn, for the benefit of the Licensors, aggregate payments in the low double-digit millions of dollars based on certain approval and commercial sales milestones with respect to such other product candidate. In addition, if the Company sells such a priority review voucher to a third party, the Company will be obligated to pay Penn, for the benefit of the Licensors, a high single-digit percentage of any consideration received from such third party in connection with such sale.

HtrA1 Inhibitors - Former Equityholders of Inception 4

Under the agreement and plan of merger pursuant to which the Company acquired Inception 4 (the "Inception 4 Merger Agreement"), the Company is obligated to make payments to the former equityholders of Inception 4 of up to an aggregate of $105 million , subject to the terms and conditions of the Inception 4 Merger Agreement, if the Company achieves certain specified clinical and regulatory milestones with respect to a product candidate from its HtrA1 inhibitor program, with $45 million of such potential payments relating to GA and $60 million of such potential payments relating to wet AMD. Under the Inception 4 Merger Agreement, the Company does not owe any commercial milestones or royalties based on net sales. The future milestone payments will be payable in the form of shares of the Company's common stock, calculated based on the price of its common stock over a five-trading day period preceding the achievement of the relevant milestone, unless and until the issuance of such shares would, together with all other shares issued in connection with the acquisition, exceed an overall maximum limit of approximately 7.2 million shares, which is equal to 19.9% of the number of issued and outstanding shares of the Company's common stock as of the close of business on the business day prior to the closing date of the Inception 4 acquisition, and will be payable in cash thereafter. The Inception 4 Merger Agreement also includes customary indemnification obligations to the former equityholders of Inception 4, including for breaches of the representations and warranties, covenants and agreements of the Company and its subsidiaries (other than Inception 4) in the Inception 4 Merger Agreement.

Employment Contracts

The Company also has letter agreements with certain employees that require the funding of a specific level of payments if certain events, such as a termination of employment in connection with a change in control or termination of employment by the employee for good reason or by the Company without cause, occur.

Contract Service Providers

In addition, in the course of normal business operations, the Company has agreements with contract service providers to assist in the performance of the Company’s research and development and manufacturing activities. Expenditures to CROs and CDMOs represent significant costs in preclinical and clinical development. Subject to required notice periods and the Company’s obligations under binding purchase orders and any cancellation fees that the Company may be obligated to pay, the Company can elect to discontinue the work under these agreements at any time.

Legal Proceedings

On January 11, 2017, a putative class action lawsuit was filed against the Company and certain of its current and former executive officers in the United States District Court for the Southern District of New York, captioned Frank Micholle v. Ophthotech Corporation, et al., No. 1:17-cv-00210. On March 9, 2017, a related putative class action lawsuit was filed against the Company and the same group of its current and former executive officers in the United States District Court for the Southern District of New York, captioned Wasson v. Ophthotech Corporation, et al., No. 1:17-cv-01758. These cases were consolidated on March 13, 2018. On June 4, 2018, the lead plaintiff filed a consolidated amended complaint (the “CAC”). The CAC purports to be brought on behalf of shareholders who purchased the Company’s common stock between March 2, 2015 and December 12, 2016. The CAC generally alleges that the Company and certain of its officers violated Sections 10(b) and/or 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by making allegedly false and/or misleading statements concerning the results of the Company’s Phase 2b trial and the prospects of the Company’s Phase 3 trials for Fovista in combination with anti-VEGF agents for the treatment of wet AMD. The CAC seeks unspecified damages, attorneys’ fees, and other costs. The Company and individual defendants filed a motion to dismiss the CAC on July 27, 2018. That motion is fully briefed.

On February 7, 2018, a shareholder derivative action was filed against the members of the Company’s Board of Directors in the New York Supreme Court Commercial Division, captioned Cano v. Guyer, et al., No. 650601/2018. The complaint alleges that the defendants breached their fiduciary duties to the Company by adopting a compensation plan that overcompensates the non-employee members of the Company's board relative to boards of companies of comparable market capitalization and size. The complaint also alleges that the defendants were unjustly enriched as a result of the alleged conduct. The complaint purports to seek unspecified damages, on behalf of the Company, attorneys’ fees, and other costs, as well as an order directing the Company to reform and improve its corporate governance and internal procedures to comply with applicable laws. The Company filed a motion to dismiss this case on May 14, 2018. On June 4, 2018, the plaintiff filed an amended

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complaint. On June 25, 2018, the Company filed a renewed motion to dismiss this case. On December 3, 2018, the parties filed a stipulation of settlement that contemplates that the Company will adopt certain compensation-related governance reforms and does not obligate the defendants or the Company to pay any monetary damages. The court approved the settlement at a hearing on March 12, 2019. As part of the settlement, in April 2019 the Company paid $300,000 in fees and costs to plaintiff's counsel. As contemplated by the settlement, the Company's board of directors adopted certain compensation-related governance reforms, including a non-employee director compensation policy, which the Company's stockholders approved on May 15, 2019 at its 2019 annual meeting.

On August 31, 2018, a shareholder derivative action was filed against current and former members of the Company's Board of Directors and certain current and former officers of the Company in the United States District Court for the Southern District of New York, captioned Luis Pacheco v. David R. Guyer, et al., Case No. 1:18-cv-07999. The complaint, which is based substantially on the facts alleged in the CAC, alleges that the defendants breached their fiduciary duties to the Company and wasted the Company's corporate assets by failing to oversee the Company's business, and also alleges that the defendants were unjustly enriched as a result of the alleged conduct, including through receipt of bonuses, stock options and similar compensation from the Company, and through sales of the Company's stock between March 2, 2015 and December 12, 2016. The complaint purports to seek unspecified damages on the Company's behalf, attorneys’ fees, and other costs, as well as an order directing the Company to reform and improve its corporate governance and internal procedures to comply with applicable laws, including submitting certain proposed amendments to the Company's corporate charter, bylaws and corporate governance policies for vote by the Company's stockholders. On December 14, 2018, the Company filed a motion to dismiss the complaint. That motion is fully briefed.

On October 16, 2018, the Company’s board of directors received a shareholder demand to investigate and commence legal proceedings against certain members of the Company’s board of directors. The demand alleges facts that are substantially similar to the facts alleged in the CAC and the Pacheco complaint and asserts claims that are substantially similar to the claims asserted in the Pacheco complaint. On January 30, 2019, the Company’s board of directors received a second shareholder demand from a different shareholder to investigate and commence legal proceedings against certain current and former members of the Company’s board of directors based on allegations that are substantially similar to the allegations contained in the first demand letter.

The Company denies any and all allegations of wrongdoing and intends to vigorously defend against these lawsuits. The Company is unable, however, to predict the outcome of these matters at this time. Moreover, any conclusion of these matters in a manner adverse to the Company and for which it incurs substantial costs or damages not covered by the Company's directors’ and officers’ liability insurance would have a material adverse effect on its financial condition and business. In addition, the litigation could adversely impact the Company's reputation and divert management’s attention and resources from other priorities, including the execution of its business plan and strategies that are important to the Company's ability to grow its business, any of which could have a material adverse effect on the Company's business.

10. Subsequent Event

miniCEP290 License Agreement

On July 22, 2019, the Company entered into an Exclusive License Agreement (the “miniCEP290 License Agreement”) with the University of Massachusetts (“UMass”). The Company entered into the miniCEP290 License Agreement by exercising its exclusive option rights under an option agreement and a sponsored research agreement that the Company previously entered into with UMass in February 2018. Under the miniCEP290 License Agreement, UMass granted the Company a worldwide, exclusive license under specified patent rights and specified biological materials and a non-exclusive license under specified know-how to make, have made, use, offer to sell, sell, have sold and import products for the treatment of diseases associated with mutations in the CEP290 gene, including LCA10. The Company may grant sublicenses of the licensed patent rights and know-how without the consent of UMass.

The Company has agreed to use diligent efforts to develop licensed products and to introduce such licensed products into the commercial market. Subject to obtaining marketing approval, the Company agreed to make any approved licensed product reasonably available to the public. In addition, the Company has agreed to meet specified development and regulatory milestones with respect to a licensed product by specified dates, as the same may be extended under the terms of the miniCEP290 License Agreement.

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Financial Terms

The Company has agreed to pay UMass a $0.4 million upfront license fee upon execution of the miniCEP290 License Agreement. In addition, the Company has agreed to issue to UMass 75,000 shares of common stock of the Company, par value $0.001 per share (“Common Stock”), promptly following execution of the miniCEP290 License Agreement pursuant to an exemption from registration afforded by Section 4(a)(2) of the Securities Act of 1933, as amended.

The Company has also agreed to pay UMass an annual license maintenance fee in the low double-digit thousands of dollars, which fee will be payable on an annual basis until the expiration of the royalty term for the licensed products. Furthermore, the Company has agreed to reimburse UMass for the costs and expenses of patent prosecution and maintenance related to the licensed patent rights.

The Company has further agreed to pay UMass up to an aggregate of $14.75 million in cash and issue up to 75,000 shares of Common Stock if the Company achieves specified clinical and regulatory milestones with respect to a licensed product. In addition, the Company has agreed to pay UMass up to an aggregate of $48.0 million if the Company achieves specified commercial sales milestones with respect to a licensed product.

The Company is also obligated to pay UMass royalties at a low single-digit percentage of net sales of licensed products. The Company's obligation to pay royalties under the miniCEP290 License Agreement will continue on a licensed product-by-licensed product and country-by-country basis until the later of: (a) the expiration of the last-to-expire licensed patent rights covering the sale of the applicable licensed product in the country of sale, or (b) 10 years from the first commercial sale of the applicable licensed product in the country of sale. Beginning with the calendar year following receipt of marketing approval for a licensed product, the Company is also obligated to pay certain minimum royalties, not to exceed an amount in the mid-double-digit thousands of dollars on an annual basis, which minimum royalties are creditable against the Company’s royalty obligation with respect to net sales of licensed products due in the year the minimum royalty is paid.

If the Company or any of its affiliates sublicenses any of the licensed patent rights or know-how to a third party, the Company will be obligated to pay UMass a high single-digit to a mid-tens percentage of the consideration received in exchange for such sublicense, with the applicable percentage based upon the stage of development of the licensed products at the time the Company or the applicable affiliate enters into the sublicense.

If the Company receives a rare pediatric disease priority review voucher (a “priority review voucher”) from the FDA in connection with obtaining marketing approval for a licensed product, and the Company subsequently uses such priority review voucher in connection with a different product candidate outside the scope of the miniCEP290 License Agreement, the Company will be obligated to pay UMass a low-tens percentage of the fair market value of the priority review voucher at the time of approval of such product candidate and a low-twenties percentage of the fair market value of the priority review voucher at the time of achievement of a specified commercial sales milestone for such other product candidate. In addition, if the Company sells such a priority review voucher to a third party, the Company will be obligated to pay UMass a low-thirties percentage of any consideration received from such third party in connection with such sale.

Term and Termination

The miniCEP290 License Agreement, unless earlier terminated by the Company or UMass, will expire upon the expiration of the Company's obligation to pay royalties to UMass on net sales of licensed products. The Company may terminate the miniCEP290 License Agreement at any time for any reason upon prior written notice to UMass. The Company may also terminate the miniCEP290 License Agreement if UMass materially breaches the miniCEP290 License Agreement and does not cure such breach within a specified cure period.

UMass may terminate the miniCEP290 License Agreement if the Company materially breaches the miniCEP290 License Agreement and does not cure such breach within a specified cure period.

Following any termination of the miniCEP290 License Agreement prior to expiration of the term of the miniCEP290 License Agreement, all rights to the licensed patent rights and know-how that UMass granted to the Company will revert to UMass.

Other Provisions

The miniCEP290 License Agreement contains patent prosecution and maintenance, indemnification and dispute resolution provisions that are customary for agreements of this kind.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and the audited financial statements and related notes and management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2018 included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 28, 2019. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties and should be read together with the "Risk Factors" section of this Quarterly Report on Form 10-Q for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

We are a science-driven biopharmaceutical company with a focus on discovering and developing novel gene therapy solutions to treat orphan inherited retinal diseases, or IRDs, with unmet medical needs. In April 2019, we changed our name from Ophthotech Corporation to IVERIC bio, Inc. to reflect the transition of our business to focus principally on gene therapies. We believe that gene therapy as a treatment modality, especially gene therapies using adeno-associated virus, or AAV, for gene delivery, holds tremendous promise for retinal diseases. We also continue to develop our therapeutic programs, including our ongoing clinical trials for our C5 complement inhibitor Zimura® (avacincaptad pegol) for an age-related retinal disease and for an orphan IRD. If data from either of our Zimura clinical trials are positive, we plan to seek partnering opportunities for further clinical development of Zimura.

Our team has significant drug development experience in retinal diseases, including designing and executing investigational new drug, or IND, -enabling studies and clinical trials, and we are continuing to build our internal and external capabilities, especially in the preclinical development, clinical development and manufacture of gene therapies. We also have deep relationships with global ophthalmology thought leaders, including those at a number of leading academic research institutions with which we have developed collaborative relationships, and an extensive network of ophthalmic clinical trial sites. We will seek to leverage these existing relationships as we prepare for potential clinical trials for our gene therapy product candidates. We believe that the combination of these factors provide us a competitive advantage in retinal drug development.

Our gene therapy portfolio consists of several ongoing research and preclinical development programs that use AAV for gene delivery. These AAV gene therapy programs are targeting the following orphan IRDs:


•	rhodopsin-mediated autosomal dominant retinitis pigmentosa, or RHO-adRP, which is characterized by progressive and severe bilateral loss of vision leading to blindness;


•	IRDs associated with mutations in the BEST1 gene, including Best vitelliform macular dystrophy, or Best disease, which is generally characterized by bilateral egg yolk-like lesions in the central portion of the retina, referred to as the macula, which, over time, progress to atrophy and loss of vision;


•	Leber congenital amaurosis type 10, or LCA10, which is characterized by severe bilateral loss of vision at or soon after birth;


•	autosomal recessive Stargardt disease, or STGD1, which is characterized by progressive damage to the macula and retina, leading to loss of vision in children and young adults; and


•	IRDs associated with mutations in the USH2A gene, which include Usher syndrome type 2A, or Usher 2A, and USH2A -associated nonsyndromatic autosomal recessive retinitis pigmentosa.

Our therapeutics portfolio consists of Zimura and our program of High temperature requirement A serine peptidase 1 protein, or HtrA1, inhibitors. We have Phase 2b clinical trials ongoing evaluating Zimura for the treatment of:


•	geographic atrophy, or GA, which is a late-stage form of dry age-related macular degeneration, or AMD, characterized by retinal cell death and degeneration of tissue in the macula, and which may result in loss of vision; and


•	autosomal recessive Stargardt disease.

We previously also evaluated Zimura in combination with Lucentis® (ranibizumab), an anti-vascular endothelial growth factor, or anti-VEGF, agent for the treatment of wet AMD, for which we completed a Phase 2a clinical trial, which we refer to as the OPH2007 trial, during the fourth quarter of 2018. We do not currently have plans to develop Zimura further in wet AMD. Our

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HtrA1 inhibitor program, which we are developing for GA secondary to dry AMD and potentially other age-related retinal diseases, is in the preclinical stage of development.

Gene Therapy Research and Development Programs

IC-100: Product Candidate for RHO-adRP

We are pursuing the preclinical development of IC-100, our novel AAV gene therapy product candidate for the treatment of RHO-adRP, to which we acquired exclusive development and commercialization rights through a June 2018 license agreement with the University of Florida Research Foundation, or UFRF, and the University of Pennsylvania, or Penn. We and Penn are conducting additional preclinical studies of IC-100 and a natural history study of RHO-adRP patients. In parallel, we have engaged a gene therapy contract development and manufacturing organization, or CDMO, as the manufacturer for preclinical and Phase 1/2 clinical supply of IC-100. Process development, manufacturing and other IND-enabling activities are ongoing. Based on current timelines and subject to regulatory review, we expect to initiate a Phase 1/2 clinical trial for IC-100 during the second half of 2020.

IC-200: Product Candidate for BEST1-Related IRDs

We are pursuing the preclinical development of IC-200, our novel AAV gene therapy product candidate for the treatment of BEST1- related IRDs, including Best disease, to which we acquired exclusive development and commercialization rights through an April 2019 license agreement with Penn and UFRF. We and Penn are conducting additional preclinical studies of IC-200 and natural history studies of patients with BEST1- related IRDs. In parallel, we have engaged a gene therapy CDMO as the manufacturer for pre-clinical and Phase 1/2 clinical supply of IC-200 and have commenced process development, manufacturing and other IND-enabling activities. Based on current timelines and subject to regulatory review, we expect to initiate a Phase 1/2 clinical trial for IC-200 during the first half of 2021.

Minigene Therapy Research Programs

AAV vectors are generally limited as a delivery vehicle by the size of their genetic cargo, which is restricted to approximately 4,700 base pairs of genetic code. The use of "minigenes" seeks to deliver a smaller but still functional form of a larger gene packaged into a standard-size AAV delivery vector. The predominant or standard, non-mutated form of a gene is referred to as the wildtype form, and the protein resulting from expression of the wildtype gene is referred to as wildtype protein. The goal of minigene therapy is to deliver a gene expressing a protein that, although different from the wildtype protein, is nonetheless functional for purposes of treating the associated disease.

We are funding multiple sponsored research programs at the University of Massachusetts Medical School, or UMMS, seeking to use a minigene approach to develop new gene therapies for orphan IRDs. We refer to each of these programs by reference to the gene of interest for which we are seeking to create a minigene therapy. We refer to these programs collectively as our collaborative gene therapy sponsored research programs. We receive research results from these programs as they become available. UMMS has granted us an option to obtain an exclusive license to any patents or patent applications that result from these programs.

miniCEP290 Program for LCA10

One of the minigene research programs, which we refer to as the miniCEP290 program, is targeting LCA10, which is associated with mutations in the CEP290 gene. The naturally occurring CEP290 gene is approximately 8,000 base pairs. In a 2018 publication in Human Gene Therapy , researchers at UMMS presented their findings that injection of a CEP290 minigene into a newborn mouse model for LCA10 resulted in rescue of photoreceptor cells, as evidenced by both anatomical and functional measures. The goal of the sponsored research was to create and evaluate other CEP290 minigene constructs in the mouse model and optimize the effect observed in that publication.

Encouraged by the results of the sponsored research we received to date, through which we have identified what we believe are multiple promising minigene constructs, we exercised our option and in July 2019 entered into a license agreement for exclusive development and commercialization rights to patent rights and know-how for this program. The sponsored research is ongoing and UMMS is continuing to test additional CEP290 minigene constructs. We plan to continue to advance our miniCEP290 program with the constructs that appear most promising with the goal of identifying a lead product candidate to advance into preclinical development and IND-enabling activities.

miniABCA4 Program for STGD1

Another of the minigene research programs, which we refer to as the miniABCA4 program, is targeting STGD1, which is associated with mutations in the ABCA4 gene. UMMS is constructing and evaluating several ABCA4 minigene constructs in both in vitro and in vivo experiments. We expect to receive results from the miniABCA4 program in 2020.

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miniUSH2A Program for USH2A-Related IRDs

In July 2019, we entered into a sponsored research agreement with UMMS for USH2A -related IRDs. We refer to this program as the miniUSH2A program. This program will employ the minigene approach for the USH2A gene, which encodes a protein called usherin. Usherin is believed to be important in the development and maintenance of cells in the retina and the inner ear. Usher 2A is an autosomal recessive genetic condition characterized by hearing loss from birth and progressive vision loss, due to retinitis pigmentosa, that begins in adolescence or adulthood. USH2A -associated nonsyndromatic autosomal recessive retinitis pigmentosa is a genetic condition that manifests as vision loss without associated hearing loss. The miniUSH2A program seeks to develop an AAV deliverable, mutation independent, minigene therapy option for the vision loss associated with USH2A mutations. There are currently no FDA- or European Medicines Agency, or EMA, approved therapies to treat Usher 2A or USH2A -associated nonsyndromatic autosomal recessive retinitis pigmentosa.

Therapeutic Development Programs

Although we are principally focused on gene therapies, we continue to believe therapeutics will serve an important role in drug development for retinal diseases, particularly as treatments with novel mechanisms of action are developed and brought to market and as the long-term effects of these treatments continue to be understood.

Zimura Clinical Programs

Zimura, our C5 complement inhibitor, is a chemically-synthesized, pegylated RNA aptamer. We currently have two clinical trials for Zimura ongoing. These clinical trials are designed to obtain data to guide potential future development efforts and are not intended to be pivotal studies. The following is a brief description of our ongoing trials and their current status:

•

OPH2003 (geographic atrophy (GA) secondary to dry AMD) : an ongoing, randomized, double-masked, sham controlled, multi-center Phase 2b clinical trial evaluating the safety and efficacy of Zimura monotherapy in patients with GA secondary to dry AMD. We completed enrollment for this clinical trial in October 2018 with a total of 286 patients enrolled. We expect that initial, top-line data from this clinical trial will be available during the fourth quarter of 2019.

•

OPH2005 (autosomal recessive Stargardt disease (STGD1)) : an ongoing, randomized, double-masked, sham controlled, multi-center Phase 2b clinical trial evaluating the safety and efficacy of Zimura monotherapy for the treatment of STGD1. We completed enrollment for this clinical trial in February 2019 with a total of 95 patients enrolled. We expect that initial, top-line data from this clinical trial will be available during the second half of 2020.

HtrA1 Inhibitor Program

We are pursuing the preclinical development of certain HtrA1 inhibitors, to which we acquired rights through our October 2018 acquisition of Inception 4, Inc., or Inception 4, for the treatment of GA secondary to dry AMD. Our HtrA1 inhibitor program includes a number of lead small molecule compounds that show high affinity and specificity for HtrA1 when tested , as well as a number of backup compounds. We are pursuing formulation development studies with the goal of identifying a formulation for intravitreal application in the eye. If we are successful in identifying and formulating a product candidate from this program, we plan to initiate IND-enabling activities for the selected product candidate. Based on current timelines and subject to successful completion of preclinical development, we are targeting submission of an IND to the U.S. Food and Drug Administration, or FDA, for a product candidate from this program by late 2020.

Research and Development Pipeline

We have summarized the current status of our ongoing research and development programs in the table below. We have given an IC number (IC-100 and IC-200) to our preclinical gene therapy product candidates. In the future, we intend to give an IC number to other gene therapy product candidates that advance to preclinical development from our collaborative gene therapy sponsored research programs or that we in-license or acquire, in each case, once a lead product candidate is identified for a particular program.

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Business Development Activities

Since early 2017, we have been pursuing a business development strategy to evaluate available technologies to treat ophthalmic diseases, particularly those in the back of the eye, and to explore opportunities to obtain rights to additional products and product candidates employing these technologies. As we evaluated numerous potential opportunities, we have come to believe that gene therapy is a promising treatment modality for retina diseases for which there are significant unmet medical needs. Our efforts have resulted in the expansion of our research and development pipeline and the transition of our company to focus principally on gene therapy. We expect to continue to evaluate, on a selective basis, opportunities to potentially obtain rights to additional gene therapy product candidates and technologies for retinal diseases. We intend to continue to focus on opportunities that present a compelling scientific rationale, have the potential to address an unmet medical need and present a meaningful commercial opportunity. To the extent feasible, we plan to target opportunities where we believe third-party funding for specific programs or technologies may be available.

Financial Matters

As of June 30, 2019, we had cash and cash equivalents of $106.9 million. We believe that our cash and cash equivalents will be sufficient to fund our operations and capital expenditure requirements as currently planned for at least the next 12 months. After taking into account our recent in-licensing transaction for our miniCEP290 program and sponsored research agreement for our miniUSH2A program, we reaffirm our estimate that year-end 2019 cash and cash equivalents will range between $80 million and $85 million. This estimate is based on our current business plan, including the continuation of our current research and development programs. This estimate does not reflect any additional expenditures, including associated development costs, in the event we in-license or acquire any new product candidates or commence any new sponsored research programs. We have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect.

Financial Operations Overview

Revenue

As we have no products approved for sale, we do not expect to receive any revenue related to our product candidates until we obtain regulatory approval for and commercialize such products, or until we potentially enter into agreements with third parties for the development and commercialization of our product candidates. If our development efforts for any of our product candidates result in regulatory approval or if we enter into agreements with third parties, we may generate revenue from product sales or from such third parties.

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Research and Development Expenses

Our research and development expenses primarily consist of costs associated with the manufacturing, development, and preclinical and clinical testing of our product candidates and costs associated with our collaborative gene therapy sponsored research programs. Our research and development expenses consist of:


•	external research and development expenses incurred under arrangements with third parties, such as academic research collaborators, contract research organizations, or CROs, and CDMOs and other vendors for the production of drug substance and drug product; and


•	employee-related expenses for employees dedicated to research and development activities, including salaries, benefits and share-based compensation expense.

All research and development expenses are charged to operations as incurred in accordance with Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, 730, Research and Development , or ASC 730 . We account for non-refundable advance payments for goods and services that will be used in future research and development activities as expenses when the service has been performed or when the goods have been received, rather than when the payment is made. We do not currently utilize a formal time allocation system to capture expenses on a project-by-project basis because we record expenses by functional department. Accordingly, we do not allocate all research and development expenses to individual projects or product candidates, although we do allocate some portion of these expenses by project or product candidate, as shown below.

The following table summarizes our research and development expenses for the three and six months ended June 30, 2019 and 2018 :



	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
	(in thousands)
Zimura	$	3,778	$	3,761	$	6,979	$	7,736
HtrA1	232		—		232		—
IC-100: RHO-adRP	1,777		914		2,625		914
IC-200: BEST1-related IRDs	1,138		—		1,283		—
Other gene therapy	191		490		439		490
Prior product candidate Fovista	16		35		29		64
Personnel-related	1,689		1,395		3,304		3,276
Share-based compensation	989		1,106		2,159		2,546
Other	199		815		644		1,176
	$	10,009	$	8,516	$	17,694	$	16,202

We expect our research and development expenses to increase as we continue to pursue our research and development programs. Our research and development expenses may also increase if we in-license or acquire any new product candidates or commence any new sponsored research programs.

Although the future development of our product candidates is highly uncertain, we expect we will require substantial, additional funding in order to complete the activities necessary to develop and commercialize one or more of our product candidates. We expect the development of our product candidates will continue for at least the next several years. At this time, we cannot reasonably estimate the remaining costs necessary to complete development, to complete process development and manufacturing scale-up and validation activities and to potentially seek marketing approval with respect to our product candidates.

The successful development of our product candidates is subject to numerous risks and uncertainties associated with developing drugs, including the uncertainty of:


•	the scope, rate of progress and costs of our research and development activities, including manufacturing activities;

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•	the potential benefits of our product candidates over other therapies;


•	preclinical development results and clinical trial results;


•	the terms and timing of regulatory approvals;


•	our ability to market, commercialize and achieve market acceptance for any of our product candidates; and


•	our ability to successfully file, prosecute, defend and enforce patent claims and other intellectual property rights, together with associated expenses.

A change in the outcome of any of these variables with respect to the development of our product candidates could mean a significant change in the costs and timing associated with the development of that product candidate.

Our costs may exceed our expectations due to unforeseen or other reasons. For example, our costs may exceed our expectations if we experience any unforeseen issue in our ongoing clinical trials, such as issues with the retention of enrolled patients or with the availability of drug supply, or in our preclinical development programs, such as if we experience issues with manufacturing or inability to develop formulations, or if we further expand the scope of our clinical trials, preclinical development programs or collaborative gene therapy sponsored research programs. Our costs may also exceed our expectations for other reasons, for example, if we are required by the FDA, the EMA, or regulatory authorities in other jurisdictions to perform clinical or nonclinical trials or other studies in addition to those we currently expect to conduct, if we experience issues with process development, establishing or scaling-up of manufacturing activities or activities to enable and qualify second source suppliers, or if we decide to increase preclinical and clinical research and development activities or build internal research capabilities or pursue internal research efforts. As a result, we may need or may seek to obtain additional funding for our continuing operations sooner or in greater amounts than expected.

See the “Liquidity and Capital Resources” section on page 29 of this Quarterly Report on Form 10-Q for more information regarding our current and future financial resources and our expectations regarding our research and development expenses and funding requirements.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and related costs for personnel, including share-based compensation expense, in our executive, legal, finance, business development, human resources, investor relations and information technology functions. Other general and administrative expenses include facility costs and professional fees for legal, including patent-related, services and expenses, consulting and accounting services, and travel expenses.

Interest Income

We currently have invested our cash and cash equivalents in money market funds and investment-grade corporate debt securities, which generate a nominal amount of interest income.

Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we have prepared in accordance with U.S. generally accepted accounting principles, or GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses and the disclosure of contingent assets and liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to accrued research and development expenses, revenue recognition, share-based compensation and income taxes described in greater detail below. We base our estimates on our limited historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Our significant accounting policies are described in more detail in the notes to our financial statements appearing elsewhere in this Quarterly Report on Form 10-Q. Of those policies, we believe that the following accounting policies are the most critical to aid our stockholders in fully understanding and evaluating our financial condition and results of operations.

Accrued Research and Development Expenses

As part of the process of preparing our financial statements, we are required to estimate our accrued expenses. This process involves reviewing quotations and contracts, identifying services that have been performed on our behalf and

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estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost. The majority of our service providers invoice us monthly in arrears for services performed or when contractual milestones are met. We make estimates of our accrued expenses as of each balance sheet date in our financial statements based on facts and circumstances known to us at that time. We periodically confirm the accuracy of our estimates with the service providers and make adjustments if necessary. The significant estimates in our accrued research and development expenses are related to expenses incurred with respect to academic research collaborators, CROs, CDMOs and other vendors in connection with research and development and manufacturing activities.

We base our expenses related to academic research collaborators, CROs and CDMOs on our estimates of the services received and efforts expended pursuant to quotations and contracts with such vendors that conduct research and development and manufacturing activities on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the applicable research and development or manufacturing expense. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or prepaid expense accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and could result in us reporting amounts that are too high or too low in any particular period. There have been no material changes in estimates for the periods presented.

Share-Based Compensation

We account for all share-based compensation payments issued to employees, non-employee directors, and consultants by estimating the fair value of each equity award. Accordingly, share-based compensation expense is measured based on the estimated fair value of the awards on the date of grant, net of forfeitures. We recognize compensation expense for the portion of the award that is ultimately expected to vest over the period during which the recipient renders the required services to us on a straight-line basis. In accordance with authoritative guidance, we re-measure the fair value of consultant share-based awards as the awards vest, and recognize the resulting value, if any, as expense during the period the related services are rendered.

We apply the fair value recognition provisions of ASC 718, Compensation—Stock Compensation . Determining the amount of share-based compensation to be recorded requires us to develop estimates of the fair value of stock options as of their grant date. We recognize share-based compensation expense ratably over the requisite service period, which in most cases is the vesting period of the award. For grants containing performance-based vesting provisions, expense is recognized over the estimated achievement period only when the performance-based milestone is deemed probable of achievement. If performance-based milestones are later determined not to be probable of achievement, then all previously recorded stock-based compensation expense associated with such options will be reversed during the period in which we make this determination. Calculating the fair value of share-based awards requires us to make highly subjective assumptions.

We use the Black-Scholes option pricing model to value our stock option awards and the options to purchase shares under our employee stock purchase plan. Use of this valuation methodology requires that we make assumptions as to: the volatility of our common stock, the expected term of our stock options, the risk-free interest rate for a period that approximates the expected term of our stock options and the expected dividend yield of our common stock. As a recent public company, we do not have sufficient history to estimate the volatility of our common stock price or the expected life of the options. We calculate expected volatility based on reported data for similar publicly traded companies for which historical information is available and will continue to do so until the historical volatility of our common stock is sufficient to measure expected volatility for future option grants.

We use the simplified method as prescribed by the Securities and Exchange Commission Staff Accounting Bulletin No. 107, Share-Based Payment , to calculate the expected term of stock option grants to employees as we do not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term of stock options granted to employees. The risk-free interest rate used for each grant is based on the U.S. Treasury yield curve in effect at the time of grant for instruments with a similar expected life. We utilize a dividend yield of zero based on the fact that we have never paid cash dividends and have no current intention to pay cash dividends. The weighted-average assumptions used to estimate grant date fair value of stock options using the Black-Scholes option pricing model were as follows for the three and six months ended

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June 30, 2019 and 2018:



	Three Months Ended June 30,		Six Months Ended June 30,
	2019	2018	2019	2018
Expected common stock price volatility	88%	85%	87%	83%
Risk-free interest rate	2.15%-2.31%	2.83%-2.83%	2.15%-2.54%	2.39%-2.83%
Expected term of options (years)	5.3	5.3	5.6	5.6
Expected dividend yield	—	—	—	—

We estimate the fair value of restricted stock units, or RSUs, granted to employees using the closing market price of our common stock on the date of grant.

We also estimate forfeitures at the time of grant and revise those estimates in subsequent periods if actual forfeitures differ from our estimates. We use historical data to estimate pre-vesting forfeitures and record share-based compensation expense only for those awards that are expected to vest. To the extent that actual forfeitures differ from our estimates, the difference is recorded as a cumulative adjustment in the period the estimates were revised.

Share-based compensation expense for equity grants to employees, non-employee directors and consultants was $2.2 million and $2.6 million for the three months ended June 30, 2019 and 2018 , respectively, net of expected forfeitures. Share-based compensation expense for equity grants to employees, non-employee directors and consultants was $4.7 million and $5.7 million for the six months ended June 30, 2019 and 2018 , respectively, net of expected forfeitures.

As of June 30, 2019 , we had $8.5 million of total unrecognized share-based compensation expense, which we expect to recognize over a weighted-average remaining vesting period of approximately 1.7 years. We expect our share-based compensation expense for our equity awards to employees, non-employee directors and consultants to decrease in future periods as a result of a decrease in the fair value of our common stock.

For the three and six months ended June 30, 2019 and 2018 , we allocated share-based compensation as follows:



	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
	(in thousands)
Research and development	$	989	$	1,106	$	2,159	$	2,546
General and administrative	1,218		1,556		2,518		3,198
Total	$	2,207	$	2,662	$	4,677	$	5,744

Income Taxes

For the three and six months ended June 30, 2019 , we recorded a de minimis provision for income taxes. For the three and six months ended June 30, 2018 , we recorded a benefit for income taxes of $ 1.0 million and $0.8 million , respectively. The benefit for income taxes recorded during the three months ended June 30, 2018 was to reflect the settlement of a local tax audit. The income tax benefit for the six months ended June 30, 2018 includes the provision for income taxes that we recorded for the three months ended March 31, 2018 to reflect the impact of sequestration on our estimate of refundable AMT credits.

The deferred tax assets associated with our losses incurred in 2018 and to date in 2019 have a full valuation allowance recorded against them due to our history of losses and the lack of other positive evidence to support future taxable income against which these losses could be applied. See Note 6 to our financial statements in Part I-Item 1 of this Quarterly Report on Form 10-Q for further information regarding our expectations with respect to our income tax provision.

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Results of Operations

Comparison of Three Month Periods Ended June 30, 2019 and 2018



	Three months ended June 30,
	2019			2018			Increase (Decrease)
	(in thousands)
Statements of Operations Data:
Operating expenses:
Research and development	$	10,009		$	8,516		$	1,493
General and administrative	5,198			6,332			(1,134		)
Total operating expenses	15,207			14,848			359
Loss from operations	(15,207		)	(14,848		)	359
Interest income	617			602			15
Other income (expense)	151			—			(151		)
Loss before income tax provision (benefit)	(14,439		)	(14,246		)	193
Income tax provision (benefit)	4			(1,037		)	(1,041		)
Net loss	$	(14,443	)	$	(13,209	)	$	1,234

Research and Development Expenses

Our research and development expenses were $10.0 million for the three months ended June 30, 2019 , an increase of $1.5 million compared to $8.5 million for the three months ended June 30, 2018 . The increase in research and development expenses for the three months ended June 30, 2019 was primarily due to a $ 1.7 million increase in costs resulting from the initiation and expansion of our gene therapy programs and a $0.2 million increase in costs resulting from the initiation of our HtrA1 inhibitor program. This increase was partially offset by a decrease in professional consulting costs. The costs for our Zimura programs were relatively unchanged during the three months ended June 30, 2019 compared to the three months ended June 30, 2018 as a result of decreased clinical trial costs relating to the completion of the OPH2007 wet AMD trial during the fourth quarter of 2018, which were primarily offset by an increase in clinical trial costs related to increased patient enrollment in the OPH2003 dry AMD trial and the OPH2005 STGD1 trial.

General and Administrative Expenses

Our general and administrative expenses were $5.2 million for the three months ended June 30, 2019 , a decrease of $1.1 million , compared to $6.3 million for the three months ended June 30, 2018 . The decrease in general and administrative expenses for the three months ended June 30, 2019 was primarily due to a decrease in costs to support our operations and infrastructure.

Interest Income

Interest income for the three months ended June 30, 2019 was $0.6 million compared to interest income of $0.6 million for the three months ended June 30, 2018 .

Income Tax Provision (Benefit)

For the three months ended June 30, 2019 , we recorded a de minimis provision for income taxes. For the three months ended June 30, 2018 , we recorded an income tax benefit of $1.0 million , which was primarily to reflect a settlement of a local tax audit.

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Comparison of Six Month Periods Ended June 30, 2019 and 2018



	Six months ended June 30,
	2019			2018			Increase (Decrease)
	(in thousands)
Statements of Operations Data:
Operating expenses:
Research and development	$	17,694		$	16,202		$	1,492
General and administrative	10,679			11,977			(1,298		)
Total operating expenses	28,373			28,179			194
Loss from operations	(28,373		)	(28,179		)	194
Interest income	1,287			1,075			212
Other income (expense)	151			(16		)	(167		)
Loss before income tax provision (benefit)	(26,935		)	(27,120		)	(185		)
Income tax provision (benefit)	9			(838		)	(847		)
Net loss	$	(26,944	)	$	(26,282	)	$	662

Research and Development Expenses

Our research and development expenses were $17.7 million for the six months ended June 30, 2019 , an increase of $1.5 million compared to $16.2 million for the six months ended June 30, 2018 . The increase in research and development expenses for the six months ended June 30, 2019 was primarily due to a $2.9 million increase in costs resulting from the initiation and expansion of our gene therapy programs and a $0.2 million increase in costs resulting from the initiation of our HtrA1 inhibitor program. This increase was offset by a $0.8 million decrease in costs associated with our Zimura programs, a $0.4 million decrease in personnel expenses and a $0.5 million decrease in professional and consulting fees. The decreased costs for our Zimura programs included lower costs related to a decrease in Zimura manufacturing activities and lower clinical trial costs as a result of the completion of the OPH2007 wet AMD trial during the fourth quarter of 2018 and the completion of patient recruitment for our OPH2003 dry AMD trial during the fourth quarter of 2018 and the associated reduction in site initiation costs.

General and Administrative Expenses

Our general and administrative expenses were $10.7 million for the six months ended June 30, 2019 , a decrease of $1.3 million , compared to $12.0 million for the six months ended June 30, 2018 . The decrease in general and administrative expenses for the six months ended June 30, 2019 was primarily due to a decrease in costs to support our operations and infrastructure.

Interest Income

Interest income for the six months ended June 30, 2019 was $1.3 million compared to interest income of $1.1 million for the six months ended June 30, 2018 . The increase in interest income was the result of an increase in interest rates and a change in the mix of our investment portfolio, which previously only included investments in money market funds and now includes investment in certain investment-grade corporate debt securities with original maturities of 90 days or less, partially offset by a decrease in cash balances available for investment.

Income Tax Provision (Benefit)

For the six months ended June 30, 2019 , we recorded a de minimis provision for income taxes. For the six months ended June 30, 2018 , we recorded an income taxes benefit of $0.8 million primarily to reflect a settlement of a local tax audit offset by a reduction in the amount of deferred tax assets that we expect will be realized in the future.

Liquidity and Capital Resources

Sources of Liquidity

Since inception, we have financed our operations primarily through private placements of our preferred stock, venture debt borrowings, funding we received under our prior Fovista royalty purchase and sale agreement with Novo Holdings A/S, our initial public offering of common stock, which we closed in September 2013, our follow-on public offering of common

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stock, which we closed in February 2014, funds we received under a prior licensing and commercialization agreement with Novartis Pharma, AG for Fovista, and the approximately $6.1 million in cash that we received in connection with our acquisition of Inception 4 in October 2018. We do not have any committed external source of funds.

We currently have an effective universal shelf registration statement on Form S-3 with the Securities and Exchange Commission, to register for sale from time to time up to $150.0 million of common stock, preferred stock, debt securities, depositary shares, warrants and/or units in one or more registered offerings, of which $50.0 million may be offered, issued and sold under an “at-the-market” Sales Agreement, or the ATM Agreement, with Cowen and Company, LLC. We have not yet issued and sold any shares of our common stock under the ATM Agreement.

Cash Flows

As of June 30, 2019 , we had cash and cash equivalents totaling $106.9 million and no debt. We currently have invested our cash and cash equivalents in money market funds and certain investment-grade corporate debt securities with original maturities of 90 days or less.

The following table shows a summary of our cash flows for the six months ended June 30, 2019 and 2018 :



	Six months ended June 30,
	2019			2018
	(in thousands)
Net cash (used in) provided by:
Operating Activities	$	(24,353	)	$	(21,008	)
Investing Activities	—			—
Financing Activities	41			27
Net change in cash and cash equivalents	$	(24,312	)	$	(20,981	)

Cash Flows from Operating Activities

Net cash used in operating activities in the six months ended June 30, 2019 related primarily to net cash used to fund our research and development activities for Zimura, IC-100 and IC-200 and our collaborative gene therapy sponsored research programs and to support our general and administrative operations. Net cash used in operating activities in the six months ended June 30, 2018 related primarily to net cash used to fund our research and development activities for Zimura and to support our general and administrative operations.

See "—Funding Requirements" below for a description of how we expect to use our cash for operating activities in future periods.

Cash Flows from Investing Activities

We had no net cash provided by investing activities for the six months ended June 30, 2019 and June 30, 2018 .

Cash Flows from Financing Activities

Net cash provided by financing activities was $41 thousand for the six months ended June 30, 2019 and $27 thousand for the six months ended June 30, 2018 and related to purchases made under our employee stock purchase plan.

Funding Requirements

Our gene therapy product candidates IC-100 and IC-200 and our HtrA1 inhibitor program are each in preclinical development, Zimura is in clinical development, and we are funding collaborative gene therapy sponsored research programs that are ongoing. We expect our research and development expenses to increase as we pursue these programs as currently planned. We could also incur additional research and development expenses as we evaluate and potentially in-license or acquire, and undertake development of additional product candidates, including any promising product candidates that emerge from our collaborative gene therapy sponsored research programs. Furthermore, if we successfully develop and obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, distribution and manufacturing. We are party to agreements with UFRF and Penn with respect to IC-100 and IC-200, UMMS with respect to any potential product candidates from our miniCEP290 program, Archemix Corp. with respect to Zimura and the former equityholders of Inception 4 with respect to our HtrA1 inhibitor program, in each case, that impose significant milestone payment obligations on us in connection with our achievement of specified clinical, regulatory and commercial milestones with respect to these product candidates or programs, as well as certain royalties on net

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sales with respect to IC-100, IC-200 and any product candidates we choose to develop from our miniCEP290 program. It is likely that any future in-licensing or acquisition agreements that we enter into with respect to additional product candidates or technologies would include similar obligations.

We expect that we will continue to incur significant expenses as we:


•	continue the development of IC-100 and IC-200 and pursue our collaborative gene therapy sponsored research programs;


•	continue the clinical development of Zimura;


•	continue the preclinical development of our HtrA1 inhibitor program;


•	in-license or acquire the rights to, and pursue the development of, other product candidates or technologies;


•	maintain, expand and protect our intellectual property portfolio;


•	hire additional clinical, manufacturing, quality control, quality assurance and scientific personnel, especially as we increase our internal gene therapy capabilities;


•	seek marketing approval for any product candidates that successfully complete clinical trials;


•	expand our outsourced manufacturing activities or establish commercial operations or sales, marketing and distribution capabilities, if we receive, or expect to receive, marketing approval for any of our product candidates; and


•	expand our general and administrative functions to support our future growth.

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


•	the scope, progress, costs and results of our efforts to develop IC-100 and IC-200, including activities to establish manufacturing capabilities and preclinical testing to enable us to file INDs for these product candidates;


•	the scope, progress, costs and results from our collaborative gene therapy sponsored research programs, including costs related to the in-license and future development of any promising product candidates and technologies that emerge from these programs;


•	the scope, progress, costs and results of our ongoing Zimura clinical programs, as well as our ability to secure external funding for any additional clinical trials we may undertake to obtain data sufficient to seek marketing approval for Zimura in any indication;


•	the scope, progress, costs and results of our efforts to develop our HtrA1 inhibitor program, including formulation development and other preclinical development activities;


•	the costs, progress and timing of process development, manufacturing scale-up and validation activities and stability studies associated with our product candidates;

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•	the extent to which we in-license or acquire rights to, and undertake research or development of, additional product candidates or technologies;


•	our ability to establish collaborations on favorable terms, if at all;


•	the costs, timing and outcome of regulatory filings and reviews of our product candidates;


•	the costs of preparing, filing and prosecuting patent applications, maintaining and protecting our intellectual property rights and defending intellectual property-related claims;


•	the timing, scope and cost of commercialization activities for any of our product candidates if we receive, or expect to receive, marketing approval for a product candidate; and


•	subject to receipt of marketing approval, net revenue received from commercial sales of any of our product candidates, after milestone payments and royalty payments that we would be obligated to make.

We do not have any committed external source of funds. Our ability to raise adequate additional financing when needed, and on terms acceptable to us, will depend on many factors. These factors include investors' perceptions of the potential success of our ongoing business, including the development of our product candidates and other programs, and the potential future growth of our business. Additionally, these factors include general market conditions that also affect other companies. These factors may make raising capital difficult, and may result in us accepting terms that are unfavorable to us, especially if we are in need of financing at the particular time. The size of our company and our status as a company listed on The Nasdaq Stock Market, or Nasdaq, may also limit our ability to raise financing. For example, our ability to raise adequate financing through a public offering may be limited by market conditions and SEC rules based on our current market capitalization. Nasdaq listing rules also generally limit the number of shares we may issue in a private placement to a number less than 20% of the number of shares of our common stock outstanding immediately prior to the transaction, unless we issue such shares at a premium, which investors may be unwilling to accept, or unless we obtain shareholder approval, which can be expensive and time-consuming and can add risk to our ability to complete the financing transaction. If we are unable to raise additional funds when needed, we may be required to delay, limit, reduce or terminate the development of our product candidates, our collaborative gene therapy sponsored research programs, or our future commercialization efforts.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, our existing stockholders' ownership interests would be diluted, and the terms of these new securities may include liquidation or other preferences that adversely affect our existing stockholders' rights as common stockholders. The dilutive effect of future capital raises may be substantial, depending on the price of our common stock at the time of such capital raise, with a lower stock price translating to greater dilution for existing stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. In addition, we may issue equity securities as consideration for business development transactions, which may also dilute our existing stockholders' ownership interests.

If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, products or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to grant rights to develop and market products or product candidates that we would otherwise prefer to develop and market ourselves.

Our need for additional financing may continue even if we are able to successfully develop one or more of our product candidates. Our future commercial revenues, if any, will be derived from sales of such product candidates, which may not be available for at least several years following completion of successful product development, if at all. In addition, if approved, our product candidates may not achieve commercial success. Even if those products are successful and we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Under most, if not all, of the foregoing circumstances, we may need to obtain substantial additional financing to achieve our business objectives.

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Recent Developments - miniCEP290 License Agreement

On July 22, 2019, we entered into an Exclusive License Agreement, which we refer to as the miniCEP290 License Agreement, with the University of Massachusetts, or UMass. We entered into the miniCEP290 License Agreement by exercising our exclusive option rights under an option agreement and a sponsored research agreement that we previously entered into with UMass in February 2018. Under the miniCEP290 License Agreement, UMass granted us a worldwide, exclusive license under specified patent rights and specified biological materials and a non-exclusive license under specified know-how to make, have made, use, offer to sell, sell, have sold and import products for the treatment of diseases associated with mutations in the CEP290 gene, including LCA10. We may grant sublicenses of the licensed patent rights and know-how without the consent of UMass.

We have agreed to use diligent efforts to develop licensed products and to introduce such licensed products into the commercial market. Subject to obtaining marketing approval, we agreed to make any approved licensed product reasonably available to the public. In addition, we have agreed to meet specified development and regulatory milestones with respect to a licensed product by specified dates, as the same may be extended under the terms of the miniCEP290 License Agreement.

Financial Terms

We have agreed to pay UMass a $400,000 upfront license fee upon execution of the miniCEP290 License Agreement. In addition, we have agreed to issue to UMass 75,000 shares of our common stock, par value $0.001 per share promptly following execution of the miniCEP290 License Agreement pursuant to an exemption from registration afforded by Section 4(a)(2) of the Securities Act of 1933, as amended.

We have also agreed to pay UMass an annual license maintenance fee in the low double-digit thousands of dollars, which fee will be payable on an annual basis until the expiration of the royalty term for the licensed products. Furthermore, we have agreed to reimburse UMass for the costs and expenses of patent prosecution and maintenance related to the licensed patent rights.

We have further agreed to pay UMass up to an aggregate of $14.75 million in cash and issue up to 75,000 shares of our common stock if we achieve specified clinical and regulatory milestones with respect to a licensed product. In addition, we have agreed to pay UMass up to an aggregate of $48.0 million if we achieve specified commercial sales milestones with respect to a licensed product.

We are also obligated to pay UMass royalties at a low single-digit percentage of net sales of licensed products. Our obligation to pay royalties under the miniCEP290 License Agreement will continue on a licensed product-by-licensed product and country-by-country basis until the later of: (a) the expiration of the last-to-expire licensed patent rights covering the sale of the applicable licensed product in the country of sale, or (b) 10 years from the first commercial sale of the applicable licensed product in the country of sale. Beginning with the calendar year following receipt of marketing approval for a licensed product, we are also obligated to pay certain minimum royalties, not to exceed an amount in the mid-double-digit thousands of dollars on an annual basis, which minimum royalties are creditable against our royalty obligation with respect to net sales of licensed products due in the year the minimum royalty is paid.

If we or any of our affiliates sublicenses any of the licensed patent rights or know-how to a third party, we will be obligated to pay UMass a high single-digit to a mid-tens percentage of the consideration received in exchange for such sublicense, with the applicable percentage based upon the stage of development of the licensed products at the time we or the applicable affiliate enters into the sublicense.

If we receive a rare pediatric disease priority review voucher, or a priority review voucher, from the FDA in connection with obtaining marketing approval for a licensed product, and we subsequently use such priority review voucher in connection with a different product candidate outside the scope of the miniCEP290 License Agreement, we will be obligated to pay UMass a low-tens percentage of the fair market value of the priority review voucher at the time of approval of such product candidate and a low-twenties percentage of the fair market value of the priority review voucher at the time of achievement of a specified commercial sales milestone for such other product candidate. In addition, if we sell such a priority review voucher to a third party, we will be obligated to pay UMass a low-thirties percentage of any consideration received from such third party in connection with such sale.

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Term and Termination

The miniCEP290 License Agreement, unless earlier terminated by us or UMass, will expire upon the expiration of our obligation to pay royalties to UMass on net sales of licensed products. We may terminate the miniCEP290 License Agreement at any time for any reason upon prior written notice to UMass. We may also terminate the miniCEP290 License Agreement if UMass materially breaches the miniCEP290 License Agreement and does not cure such breach within a specified cure period.

UMass may terminate the miniCEP290 License Agreement if we materially breach the miniCEP290 License Agreement and do not cure such breach within a specified cure period.

Other Provisions

The miniCEP290 License Agreement contains patent prosecution and maintenance, indemnification and dispute resolution provisions that are customary for agreements of this kind.

Contractual Obligations and Commitments

The following table summarizes our contractual obligations as of June 30, 2019 :



	Payments Due by Period
	Total		Less than 1 year		1 - 3 years		3 - 5 years		More than 5 years
	(in thousands)
Sponsored Research (1)	$	1,876	$	1,113	$	763	$	—	$	—
Operating Leases (2)	1,024		1,024		—		—		—
Total (3)	$	2,900	$	2,137	$	763	$	—	$	—


(1)	The table above includes our contracted obligations under our sponsored research agreements. Because we entered into the sponsored research agreement for our miniUSH2A program after June 30, 2019, the above table does not reflect contractual obligations under that agreement.


(2)	The table above includes our continuing rent obligations through June 2020, which is when our lease at One Penn Plaza is currently scheduled to expire.


(3)	This table does not include:


•	any milestone payments which may become payable to third parties under license or acquisition agreements as the timing and likelihood of such payments are not known with certainty;


•	any royalty payments to third parties as the amounts, timing and likelihood of such payments are not known;


•	anticipated expenditures under supply agreements for periods for which we are not yet bound under binding purchase orders; or


•	contracts that are entered into in the ordinary course of business that are not material in the aggregate in any period presented above.

In addition to the amounts set forth in the table above, we may be required, under the miniCEP290 License Agreement and the other agreements under which we acquired rights to our product candidates, to make milestone payments and/or pay royalties. Payments for any potential product candidates that we may develop under the miniCEP290 License Agreement are described above. Payments for IC-100, IC-200, Zimura and our HtrA1 program are described in "Note 9—Commitments and Contingencies" in our unaudited consolidated financial statements appearing elsewhere in this Quarterly Report.

We also have letter agreements with certain employees that require the funding of a specific level of payments if certain events, such as a termination of employment in connection with a change in control or termination of employment by the employee for good reason or by us without cause, occur. For a description of these obligations, see our definitive proxy

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statement on Schedule 14A for our 2019 annual meeting of stockholders, as filed with the SEC on April 18, 2019.

In addition, in the course of normal business operations, we have agreements with contract service providers to assist in the performance of our research and development and manufacturing activities. Expenditures to CROs and CDMOs represent significant costs in preclinical and clinical development. Subject to required notice periods and our obligations under binding purchase orders and any cancellation fees that we may be obligated to pay, we can elect to discontinue the work under these agreements at any time. We may also enter into additional collaborative research, contract research, manufacturing, and supplier agreements in the future, which may require upfront payments and even long-term commitments of cash.

Off-Balance Sheet Arrangements

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to market risk related to changes in interest rates. We had cash and cash equivalents of $106.9 million as of June 30, 2019 , consisting of cash and investments in money market funds and certain investment-grade corporate debt securities. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly because a significant portion of our investments are in short-term securities. Due to the low risk profile of our investments, an immediate 100 basis point change in interest rates would not have a material effect on the fair market value of our portfolio.

We contract with CROs and certain other vendors to perform services outside of the United States. We may be subject to fluctuations in foreign currency rates in connection with certain of these agreements. Transactions denominated in currencies other than the U.S. dollar are recorded based on exchange rates at the time such transactions arise. As of June 30, 2019 , substantially all of our total liabilities were denominated in the U.S. dollar.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2019 . The term "disclosure controls and procedures," as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company's management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Based on the evaluation of our disclosure controls and procedures as of June 30, 2019 , our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

No changes in our internal control over financial reporting (as defined in Rules 13a-15(d) and 15d-15(d) under the Exchange Act) occurred during the quarter ended June 30, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II

Item 1. Legal Proceedings

On January 11, 2017, a putative class action lawsuit was filed against us and certain of our current and former executive officers in the United States District Court for the Southern District of New York, captioned Frank Micholle v. Ophthotech Corporation, et al., No. 1:17-cv-00210. On March 9, 2017, a related putative class action lawsuit was filed against us and the same group of our current and former executive officers in the United States District Court for the Southern District of New York, captioned Wasson v. Ophthotech Corporation, et al., No. 1:17-cv-01758. These cases were consolidated on March 13, 2018. On June 4, 2018, the lead plaintiff filed a consolidated amended complaint, the CAC. The CAC purports to be brought on behalf of shareholders who purchased our common stock between March 2, 2015 and December 12, 2016. The CAC generally alleges that we and certain of our officers violated Sections 10(b) and/or 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by making allegedly false and/or misleading statements concerning the results of our Phase 2b trial and the prospects of our Phase 3 trials for Fovista in combination with anti-VEGF agents for the treatment of wet AMD. The CAC seeks unspecified damages, attorneys' fees, and other costs. We and the individual defendants filed a motion to dismiss the CAC on July 27, 2018. That motion is fully briefed.

On February 7, 2018, a shareholder derivative action was filed against the members of our board of directors in the New York Supreme Court Commercial Division, captioned Cano v. Guyer, et al., No. 650601/2018. The complaint alleges that the defendants breached their fiduciary duties to our company by adopting a compensation plan that overcompensates the non-employee members of our board relative to boards of companies of comparable market capitalization and size. The complaint also alleges that the defendants were unjustly enriched as a result of the alleged conduct. The complaint purports to seek unspecified damages on our behalf, attorneys’ fees, and other costs, as well as an order directing us to reform and improve our corporate governance and internal procedures to comply with applicable laws. We filed a motion to dismiss this case on May 14, 2018. On June 4, 2018, the plaintiff filed an amended complaint. On June 25, 2018, we filed a renewed motion to dismiss this case. On December 3, 2018, the parties filed a stipulation of settlement that contemplates that we will adopt certain compensation-related governance reforms and does not obligate the defendants or us to pay any monetary damages. The court approved the settlement at a hearing on March 12, 2019. As part of the settlement, in April 2019 we paid $300,000 in fees and costs to plaintiff's counsel. As contemplated by the settlement, our board adopted certain compensation-related governance reforms, including a non-employee director compensation policy, which our stockholders approved on May 15, 2019 at our 2019 annual meeting.

On August 31, 2018, a shareholder derivative action was filed against current and former members of our board of directors and certain of our current and former officers in the United States District Court for the Southern District of New York, captioned Luis Pacheco v. David R. Guyer, et al., Case No. 1:18-cv-07999. The complaint, which is based substantially on the facts alleged in the CAC, alleges that the defendants breached their fiduciary duties to our company and wasted our corporate assets by failing to oversee our business, and also alleges that the defendants were unjustly enriched as a result of the alleged conduct, including through receipt of bonuses, stock options and similar compensation from us, and through sales of our stock between March 2, 2015 and December 12, 2016. The complaint purports to seek unspecified damages on our behalf, attorneys’ fees, and other costs, as well as an order directing us to reform and improve our corporate governance and internal procedures to comply with applicable laws, including submitting certain proposed amendments to our corporate charter, bylaws and corporate governance policies for vote by our stockholders. On December 14, 2018, we filed a motion to dismiss the complaint. That motion is fully briefed.

On October 16, 2018, our board of directors received a shareholder demand to investigate and commence legal proceedings against certain members of our board of directors. The demand alleges facts that are substantially similar to the facts alleged in the CAC and the Pacheco complaint and asserts claims that are substantially similar to the claims asserted in the Pacheco complaint. On January 30, 2019, our board of directors received a second shareholder demand from a different shareholder to investigate and commence legal proceedings against certain current and former members of our board of directors based on allegations that are substantially similar to the allegations contained in the first demand letter.

We deny any and all allegations of wrongdoing and intend to vigorously defend against these lawsuits. We are unable, however, to predict the outcome of these matters at this time. Moreover, any conclusion of these matters in a manner adverse to us and for which we incur substantial costs or damages not covered by our directors’ and officers’ liability insurance would have a material adverse effect on our financial condition and business. In addition, the litigation could adversely impact our reputation and divert management’s attention and resources from other priorities, including the execution of our business plan and strategies that are important to our ability to grow our business, any of which could have a material adverse effect on our business.

Item 1A. Risk Factors

The following risk factors and other information included in this Quarterly Report on Form 10-Q should be carefully considered. The risks and uncertainties described below are not the only risks and uncertainties we face. Additional risks and uncertainties not presently known to us or that we presently deem less significant may also impair our business operations. Please see page 1 of this Quarterly Report on Form 10-Q for a discussion of some of the forward-looking statements that are qualified by these risk factors. If any of the following risks occur, our business, financial condition, results of operations and future growth prospects could be materially and adversely affected.

Risks Related to Our Business Plan, Financial Position and Need for Additional Capital

We are a development-stage company without any commercial products. The value of our company, therefore, is highly dependent on the success of our research and development efforts and the amount of our available cash. Our research and development programs, which are focused on novel therapies and technologies, carry significant scientific and other risks. If any of these programs are not successful, the value of your investment may decline.

We are a development-stage company without any approved products. Our growth prospects and the future value of our company are highly dependent on the progress of our research and development programs, including our preclinical development programs for IC-100 and IC-200, our collaborative gene therapy sponsored research programs, our ongoing clinical trials for Zimura and our ongoing preclinical development program for our HtrA1 inhibitors. Drug development is a highly uncertain undertaking and carries significant scientific and other risks.

We may encounter unforeseen difficulties, complications, delays, expenses and other known and unknown factors. We may never be successful in developing or commercializing any of our product candidates or other programs. There is a high rate of failure in pharmaceutical research and development. Even if we have promising preclinical or clinical candidates, their development could fail at any time. Our failure could be due to unexpected scientific, safety or efficacy issues with our product candidates and other programs, invalid hypotheses regarding the molecular targets and mechanisms of action we choose to pursue or unexpected delays in our research and development programs resulting from applying the wrong criteria or experimental systems and procedures to our programs or lack of experience, with the possible result that none of our product candidates or other programs result in the development of marketable products. We have not yet demonstrated our ability to successfully complete the development of a pharmaceutical product, including completion of large-scale, pivotal clinical trials with safety and efficacy data sufficient to obtain marketing approval or activities necessary to apply for and obtain marketing approval, including the qualification of a commercial manufacturer through a pre-approval inspection with regulatory authorities. If successful in developing and obtaining marketing approval of one of our product candidates, we would need to transition from a company with a product development focus to a company capable of supporting commercial activities. We may not be successful in such a transition, as our company has never conducted the sales, marketing and distribution activities necessary for successful product commercialization.

Because the value of our company is largely based on the prospects for our research and development programs and their potential to result in therapies capable of achieving marketing approval and generating future revenues, any failure, delay or setback for these programs will likely have a negative impact on the value of your investment. For example, we expect to receive initial top-line data from OPH2003, our ongoing Phase 2b clinical trial of Zimura for the treatment of GA secondary to dry AMD, during the fourth quarter of 2019. If such data are negative or do not support further development of Zimura in GA, or if we are to cease development of Zimura in STGD1 as a result of such data or for other reasons, the value of our common stock could be negatively impacted. In addition, because a number of our product candidates are in an early, preclinical stage, even if we are successful in advancing the research and development of those product candidates, the value of our common stock may not rise in a meaningful way, which could affect our ability to raise additional finances. As we continue to invest in these research and development programs to generate data to support further development, the amount of our available cash will continue to decline until such time as we raise additional finances.

We have a history of significant operating losses. We expect to continue to incur losses until such time, if ever, that we successfully commercialize our product candidates and may never achieve or maintain profitability.

Since inception, we have experienced significant cash outflows in funding our operations. To date, we have not generated any revenues from commercial product sales and have financed our operations primarily through private placements of our preferred stock, venture debt borrowings, funds received under our prior Fovista royalty purchase and sale agreement with Novo Holdings A/S, our initial public offering, which we closed in September 2013, our follow-on public offering, which we closed in February 2014, funds we received under our prior Fovista licensing and commercialization agreement with Novartis Pharma, AG, and funds we received in connection with our acquisition of Inception 4 in October 2018. As of June 30,

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2019 , we had an accumulated deficit of $448.6 million . Our net loss was $26.9 million for the six months ended June 30, 2019 and we expect to continue to incur significant operating losses for the foreseeable future.

We expect that we will continue to incur significant expenses as we:


•	continue the development of IC-100 and IC-200 and pursue our collaborative gene therapy sponsored research programs;


•	continue the clinical development of Zimura;


•	continue the preclinical development of our HtrA1 inhibitor program;


•	in-license or acquire the rights to, and pursue the development of, other product candidates or technologies;


•	maintain, expand and protect our intellectual property portfolio;


•	hire additional clinical, manufacturing, quality control, quality assurance and scientific personnel, especially as we increase our internal gene therapy capabilities;


•	seek marketing approval for any product candidates that successfully complete clinical trials;


•	expand our outsourced manufacturing activities or establish commercial operations or sales, marketing and distribution capabilities, if we receive, or expect to receive, marketing approval for any of our product candidates; and


•	expand our general and administrative functions to support our future growth.

Our ability to become and remain profitable depends on our ability to generate revenue in excess of our expenses. Our ability to generate revenues from product sales is dependent on our obtaining marketing approval for and commercializing our product candidates or any product candidates we may in-license or acquire. We may be unsuccessful in our efforts to develop and commercialize product candidates or in our efforts to in-license or acquire additional product candidates. Even if we succeed in developing and commercializing one or more of our product candidates, we may never achieve sufficient sales revenue to achieve or maintain profitability. See “—Risks Related to Product Development and Commercialization” for a further discussion of the risks we face in successfully developing and commercializing our product candidates and achieving profitability.

We expect we will require substantial, additional funding in order to complete the activities necessary to develop and commercialize one or more of our product candidates. If we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our product development programs or commercialization efforts. We may require additional funding beyond what we currently expect.

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associated development costs, in the event we in-license or acquire any new product candidates or commence any new sponsored research programs. We have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect.

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


•	the scope, progress, costs and results of our efforts to develop IC-100 and IC-200, including activities to establish manufacturing capabilities and preclinical testing to enable us to file INDs for these product candidates;


•	the scope, progress, costs and results from our collaborative gene therapy sponsored research programs, including costs related to the in-license and future development of any promising product candidates and technologies that emerge from these programs;


•	the scope, progress, costs and results of our ongoing Zimura clinical programs, as well as our ability to secure external funding for any additional clinical trials we may undertake to obtain data sufficient to seek marketing approval for Zimura in any indication;


•	the scope, progress, costs and results of our efforts to develop our HtrA1 inhibitor program, including formulation development and other preclinical development activities;


•	the costs, progress and timing of process development, manufacturing scale-up and validation activities and stability studies associated with our product candidates;


•	the extent to which we in-license or acquire rights to, and undertake research or development of, additional product candidates or technologies;


•	our ability to establish collaborations on favorable terms, if at all;


•	the costs, timing and outcome of regulatory filings and reviews of our product candidates;


•	the costs of preparing, filing and prosecuting patent applications, maintaining and protecting our intellectual property rights and defending intellectual property-related claims;


•	the timing, scope and cost of commercialization activities for any of our product candidates if we receive, or expect to receive, marketing approval for a product candidate; and


•	subject to receipt of marketing approval, net revenue received from commercial sales of any of our product candidates, after milestone payments and royalty payments that we would be obligated to make.

In addition, we may require additional funding beyond what we currently expect due to unforeseen or other reasons. For example, our costs may exceed our expectations if we experience any unforeseen issue in our ongoing clinical trials, such as issues with the retention of enrolled patients or the availability of drug supply, or in our preclinical development programs,

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such as inability to develop formulations or if we experience issues with manufacturing, or if we further expand the scope of our clinical trials, preclinical development programs or collaborative gene therapy sponsored research programs. Our costs may also exceed our expectations for other reasons, for example, if we are required by the FDA, the EMA or regulatory authorities in other jurisdictions to perform clinical or nonclinical trials or other studies in addition to those we currently expect to conduct, if we experience issues with process development, establishing or scaling-up of manufacturing activities or activities to enable and qualify second source suppliers, or if we decide to increase preclinical and clinical research and development activities or build internal research capabilities or pursue internal research efforts. As a result, we may need or may seek to obtain additional funding for our continuing operations sooner or in greater amounts than expected.

Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our technologies or product candidates.

Until such time, if ever, when we can generate substantial product revenues, we may need or may seek to finance our operations through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerations, even if we believe that we have sufficient funds for our current or future operating plans. To the extent that we raise additional capital through the sale of equity or convertible debt securities, our existing stockholders' ownership interests would be diluted, and the terms of these new securities may include liquidation or other preferences that adversely affect our existing stockholders' rights as common stockholders. The dilutive effect of future capital raises may be substantial, depending on the price of our common stock at the time of such capital raise, with a lower stock price translating to greater dilution for existing stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

In addition, we may issue equity securities as consideration for business development transactions, which may also dilute our existing stockholders' ownership interests. For example, under the Inception 4 Merger Agreement pursuant to which we acquired Inception 4 and our HtrA1 inhibitor program, we issued an aggregate of 5,174,727 shares of our common stock as up-front consideration to the former equityholders of Inception 4. The Inception 4 Merger Agreement also requires us to make payments to the former equityholders of Inception 4 upon the achievement of certain clinical and regulatory milestones, subject to the terms and conditions set forth in the Inception 4 Merger Agreement. Those milestone payments will be in the form of shares of our common stock, calculated based on the price of our common stock over a five-trading day period preceding the achievement of the relevant milestone, unless and until the issuance of such shares would, together with all other shares issued under the Inception 4 Merger Agreement, exceed an overall maximum limit of approximately 7.2 million shares, which is equal to 19.9% of the number of issued and outstanding shares of our common stock as of the close of business on the business day prior to the closing date of our acquisition of Inception 4, and will be payable in cash thereafter. In July 2019, we also issued 75,000 shares of our common stock to UMMS as partial upfront consideration for the in-license of our miniCEP290 program, and are obligated to issue up to 75,000 additional shares to UMMS upon the achievement of certain regulatory milestones.

In August 2018, we entered into an agreement with Cowen and Company, LLC, or Cowen, as agent, pursuant to which we may offer and sell shares of our common stock for aggregate gross sale proceeds of up to $50.0 million from time to time through Cowen under an “at-the-market” offering program, subject to the terms and conditions described in the agreement and SEC rules and regulations. We have not yet issued and sold any shares of common stock under our “at-the-market” offering program. If we make sales under our “at-the-market” offering program, the sales could dilute our stockholders, reduce the trading price of our common stock or impede our ability to raise future capital.

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Our strategy of obtaining additional rights to gene therapy product candidates or technologies for the treatment of retinal diseases may not be successful.

An element of our strategy has been to expand our pipeline through potentially in-licensing or acquiring the rights to products, product candidates or technologies that would complement our strategic goals. Since early 2018, we have completed multiple acquisition, in-license, exclusive option and sponsored research arrangements. As we have transitioned our strategy to focus principally on gene therapy opportunities, we have decided to focus our business development efforts on obtaining rights to additional gene therapy product candidates and technologies, which we will continue to evaluate on a selective basis. Because we expect generally that we will not engage directly in internal early stage research and drug discovery efforts, the future growth of our business beyond our current product portfolio will depend on our ability to obtain those rights to additional gene therapy product candidates, including any promising product candidates that may emerge from our collaborative gene therapy sponsored research programs. We may also continue to consider other alternatives, including mergers or other transactions involving our company as a whole or other collaboration transactions, including, if data from either of our Zimura clinical trials are positive, partnering opportunities for further clinical development of Zimura. Our business development efforts may fail to result in our acquiring rights to additional gene therapy product candidates or technologies, or may result in our consummating transactions with which you do not agree.

We may be unable to in-license or acquire the rights to any such gene therapy product candidates or technologies from third parties for several reasons. The success of this strategy depends partly upon our ability to identify, select and acquire or in-license promising product candidates and technologies, which is especially difficult for gene therapies. There are currently a limited number of available gene therapy product candidates or technologies for the retina and the competition for those assets is intense. Although we are planning to target opportunities where we believe third-party funding for specific programs or technologies may be available, funding may not in fact be available for any number of reasons. The process of proposing, negotiating and implementing a license or acquisition of a product candidate is lengthy and complex. For potential product candidates or technologies to which we have entered into option agreements or sponsored research agreements where we have option rights, those agreements generally do not have fixed economic or other key terms for definitive agreements, and we may not obtain favorable terms if and when we choose to exercise our option to acquire or in-license any promising product candidates or technologies.

The in-licensing and acquisition of pharmaceutical products, especially in gene therapy, is an area characterized by intense competition, and a number of companies (both more established and early stage biotechnology companies) are also pursuing strategies to in-license or acquire product candidates or technologies that we may consider attractive. More established companies may have a competitive advantage over us due to their size, cash resources and greater research, preclinical or clinical development or commercialization capabilities, while earlier stage companies may be more aggressive or have a higher risk tolerance. In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We also may be unable to in-license or acquire the rights to the relevant product candidate or technology on terms that would allow us to make an appropriate return on our investment. Moreover, we may devote resources to potential acquisitions or in-licensing opportunities that are never completed, or we may fail to realize the anticipated benefits of such efforts or we may incorrectly judge the value of an acquired or in-licensed product candidate or technology.

Further, any product candidate that we acquire or in-license would most likely require additional development efforts prior to commercial sale, including extensive clinical testing and approval by the FDA and applicable foreign regulatory authorities. All product candidates are prone to risks of failure typical of pharmaceutical product development, including the possibility that a product candidate would not be shown to be sufficiently safe and effective for approval by regulatory authorities.

If we are unable to successfully obtain rights to suitable product candidates or technologies, our business, financial condition and prospects for growth could suffer. In addition, acquisitions and in-licensing arrangements for product candidates and technologies are inherently risky, and ultimately, if we do not complete an announced acquisition or license transaction or integrate an acquired or licensed product candidate or technology successfully and in a timely manner, we may not realize the benefits of the acquisition or license to the extent anticipated and the perception of the effectiveness of our management team and our company may suffer in the marketplace. In addition, even if we are able to successfully identify, negotiate and execute one or more transactions to acquire or in-license new product candidates or technologies, our expenses and short-term costs may increase materially and adversely affect our liquidity.

In addition, acquisitions and in-licenses may entail numerous operational, financial and legal risks, including:


•	exposure to known and unknown liabilities, including possible intellectual property infringement claims, violations of laws, tax liabilities and commercial disputes;


•	incurrence of substantial debt, dilutive issuances of securities or depletion of cash to pay for acquisitions;

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•	higher than expected acquisition and integration costs;


•	difficulty in combining the operations and personnel of any acquired businesses with our operations and personnel;


•	inability to maintain uniform standards, controls, procedures and policies;


•	restructuring charges related to eliminating redundancies or disposing of assets as part of any such combination;


•	large write-offs and difficulties in assessing the relative percentages of in-process research and development expense that can be immediately written off as compare to the amount that must be amortized over the appropriate life of the asset;


•	increased amortization expenses or, in the event that we write-down the value of acquired assets, impairment losses;


•	impairment of relationships with key suppliers or customers of any acquired businesses due to changes in management and ownership;


•	inability to retain personnel, key customers, distributors, vendors and other business partners integral to an in-licensed or acquired product candidate or technology;

•

potential failure of the due diligence process to identify significant problems, liabilities or other shortcomings or challenges of an acquired or licensed product candidate or technology, including, without limitation, problems, liabilities or other shortcomings or challenges with respect to intellectual property, product quality, revenue recognition or other accounting practices, partner disputes or issues and other legal and financial contingencies and known and unknown liabilities; and


•	entry into therapeutic modalities, indications or markets in which we have no or limited direct prior development or commercial experience and where competitors in such markets have stronger market positions.

We and certain of our current and former board members and executive officers have been named as defendants in lawsuits that could result in substantial costs and divert management’s attention.

We and certain of our current and former executive officers have been named as defendants in a purported consolidated putative class action lawsuit initiated in 2017 that generally alleges that we and certain of our officers violated Sections 10(b) and/or 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder by making allegedly false and/or misleading statements concerning the results of our Phase 2b trial and the prospects of our Phase 3 trials for Fovista in combination with anti-VEGF agents for the treatment of wet AMD. Certain current and former members of our board of directors and current and former officers have also been named as defendants in a shareholder derivative action initiated in August 2018, which generally alleges that the defendants breached their fiduciary duties to our company by failing to oversee our business during the period of the Phase 2b and Phase 3 clinical trials of Fovista. These complaints seek equitable and/or injunctive relief, unspecified damages, attorneys’ fees, and other costs. We and the defendants deny any and all allegations of wrongdoing and intend to vigorously defend against these lawsuits. We are unable, however, to predict the outcome of these matters at this time. Moreover, any conclusion of these matters in a manner adverse to us and for which we incur substantial costs or damages not covered by our directors’ and officers’ liability insurance would have a material adverse effect on our financial condition and business. In addition, the litigation could adversely impact our reputation and divert management and our board of directors’ attention and resources from other priorities, including the execution of our business plan and strategies that are important to our ability to grow our business, any of which could have a material adverse effect on our business. Additional lawsuits may be filed.

The comprehensive tax reform bill passed in December 2017 could adversely affect our business and financial condition.

In December 2017, United States President Donald J. Trump signed into law new legislation that significantly revised the Internal Revenue Code of 1986, as amended. The newly enacted federal income tax law, among other things, contains significant changes to corporate taxation, including reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%, limitation of the tax deduction for interest expense to 30% of adjusted earnings (except for certain small businesses), limitation of the deduction for net operating losses to 80% of current year taxable income and elimination of net operating loss carrybacks, one time taxation of offshore earnings at reduced rates regardless of whether they are repatriated, elimination of U.S. tax on foreign earnings (subject to certain important exceptions), immediate deductions for certain new investments instead of deductions for depreciation expense over time, and modification or repeal of many business deductions and credits. Notwithstanding the reduction in the corporate income tax rate, the overall impact of the new federal tax law is uncertain and our business and financial condition could be adversely affected. The United States Department of Treasury and

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the Internal Revenue Service are continuing to issue new guidance and interpretations of various provisions of the new tax law. In addition, various states have responded in different ways to the new federal tax law. The impact of this new tax law on holders of our common stock is also uncertain and could be adverse. We urge our stockholders to consult with their legal and tax advisors with respect to this legislation and the potential tax consequences of investing in or holding our common stock.

Risks Related to Product Development and Commercialization

Companies in our industry face a wide range of challenging activities, each of which entails separate, and in many cases substantial, risk.

The long-term success of our company, and our ability to become profitable as a biopharmaceutical company, will require us to be successful in a range of challenging activities, including:


•	designing, conducting and successfully completing preclinical research and development activities, including preclinical efficacy and IND-enabling studies, for our product candidates or product candidates we are interested in in-licensing or acquiring, including those that we may evaluate as part of our collaborative gene therapy sponsored research programs;


•	making arrangements with third-party manufacturers and providers of starting materials for our product candidates, and having those manufacturers successfully develop manufacturing processes for drug substance and drug product and provide adequate amounts of drug product for preclinical and clinical activities in accordance with our expectations and regulatory requirements;


•	designing, conducting and completing clinical trials for our product candidates;


•	obtaining favorable results from required clinical trials, including for each ophthalmic product candidate, favorable results from two adequate and well-controlled pivotal clinical trials in the relevant indication;


•	applying for and receiving marketing approvals from applicable regulatory authorities for the marketing and sale of our product candidates;


•	making arrangements with third-party manufacturers for scale-up and commercial manufacturing, receiving regulatory approval of our manufacturing processes and our third-party manufacturers’ facilities and ensuring adequate supply of drug product and starting materials used for the manufacture of drug product;


•	establishing sales, marketing and distribution capabilities, either internally or through collaborations or other arrangements, to effectively market and sell our product candidates, if and when approved;


•	achieving acceptance of the product candidate, if and when approved, by patients, the medical community and third-party payors;


•	if our product candidates are approved, obtaining from governmental and third-party payors adequate coverage and reimbursement for our product candidates and, to the extent applicable, associated injection procedures conducted by treating physicians;


•	effectively competing with other therapies, including the existing standard of care, and other forms of drug delivery;


•	maintaining a continued acceptable safety profile of the product candidate during development and following approval;


•	obtaining and maintaining patent and trade secret protection and regulatory exclusivity, including under the Orphan Drug Act and the Hatch-Waxman Amendments to the Federal Food, Drug and Cosmetic Act, or FDCA, if we choose to seek such protections for any of our product candidates;


•	protecting and enforcing our rights in our intellectual property portfolio; and


•	complying with all applicable regulatory requirements, including FDA Good Laboratory Practices, or GLP, FDA Good Clinical Practices, or GCP, current Good Manufacturing Practices, or cGMP, and standards, rules and regulations governing promotional and other marketing activities.

Each of these activities has associated risks, many of which are detailed below and throughout this “Risk Factors” section. We may never succeed in these activities and, even if we do, may never generate revenues from product sales that are significant enough to achieve commercial success and profitability. Our failure to be commercially successful and profitable would decrease the value of our company and could impair our ability to raise capital, expand our business, maintain our

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research and development efforts, diversify our product offerings or continue our operations. A decrease in the value of our company would also cause our stockholders to lose all or part of their investment.

Drug development is a highly uncertain undertaking. Our research and development efforts may not be successful or may be delayed for any number of reasons, in which case potential marketing approval or commercialization of our product candidates could be prevented or delayed.

Before obtaining approval from regulatory authorities for the sale of any product candidate, we must conduct extensive clinical trials to demonstrate the safety and efficacy of our product candidates in humans. Prior to initiating clinical trials, a sponsor must complete extensive preclinical testing of a product candidate, including, in most cases, preclinical efficacy experiments as well as IND-enabling toxicology studies. Drug research, including the gene therapy research we are sponsoring with UMMS, may never yield a product candidate for preclinical or clinical development. Early stage and later stage research experiments and preclinical studies may fail at any point for any number of reasons, and even if completed, may be time-consuming and expensive. As a result of these risks, a potentially promising product candidate may never be tested in humans.

Once it commences, clinical testing is expensive, difficult to design and implement, can take many years to complete and is uncertain as to outcome. A failure of one or more clinical trials can occur at any stage of testing. The outcome of preclinical testing and early clinical trials may not be predictive of the success of later clinical trials, and interim results of a clinical trial do not necessarily predict final results. For example, our pivotal Phase 3 Fovista program for the treatment of wet AMD failed to produce positive safety and efficacy data that support the use of Fovista in wet AMD, despite the results from preclinical testing and earlier clinical trials of Fovista. Furthermore, our Phase 2a OPH2007 trial of Zimura in wet AMD did not replicate the results of our Phase 1/2a OPH2000 trial, following which we decided not to proceed with further development of Zimura in wet AMD. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their products.

We may experience numerous unforeseen events during drug development that could delay or prevent our ability to receive marketing approval or commercialize our product candidates. These risks include, but are not limited to, the following:


•	we may not be able to generate sufficient preclinical, toxicology, or other in vivo or in vitro data to support the initiation of clinical studies for any preclinical product candidates that we are developing or may wish to in-license or acquire;


•	regulators or institutional review boards may not agree with our study design, including our selection of endpoints, or may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site;


•	we may experience delays in reaching, or fail to reach, agreement on acceptable clinical trial contracts or clinical trial protocols with prospective contract research organizations or clinical trial sites, especially in cases where we are working with contract research organizations or clinical trial sites we have not worked with previously;


•	our contract research organizations, clinical trial sites, contract manufacturers, providers of starting materials and packagers and analytical testing service providers may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all;


•	we, through our clinical trial sites, may not be able to locate and enroll a sufficient number of eligible patients to participate in our clinical trials as required by the FDA or similar regulatory authorities outside the United States, especially in our clinical trials for orphan or other rare diseases;


•	we may decide, or regulators or institutional review boards may require us, to suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements, including GCPs, or a finding that the participants are being exposed to unacceptable health risks;


•	as there are no therapies approved for many of the indications we are seeking to treat, in either the United States or the European Union, the regulatory pathway for product candidates in those indications, including the selection of the primary efficacy endpoint for a pivotal clinical trial, is highly uncertain;


•	there may be changes in regulatory requirements and guidance or we may have changes in trial design that require amending or submitting new clinical trial protocols;


•	there may be changes in the standard of care on which a clinical development plan was based, which may require new or additional trials;

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•	we may decide, or regulators may require us, to conduct additional clinical trials beyond those we currently contemplate or to abandon product development programs;

•

the number of patients required for clinical trials of our product candidates to demonstrate statistically significant results may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate or participants may drop out of these clinical trials at a higher rate than we anticipate. These risks may be heightened for clinical trials in orphan diseases, for which the natural history of the disease is less understood, making it more difficult to predict the drug effect required to adequately demonstrate efficacy, and because there are fewer affected individuals available to participate in clinical trials;


•	the cost of clinical trials of our product candidates may be greater than we anticipate;


•	we or our contract manufacturers may be unable to develop a viable manufacturing process for any product candidates that we are developing; and

•

the supply or quality of our product candidates or other materials necessary to conduct preclinical development and clinical trials of our product candidates or other research activities may be insufficient or inadequate or we may face delays in the manufacture and supply of our product candidates as a result of a decision to transfer manufacturing between contract manufacturers or on account of interruptions in our supply chain, including in relation to the procurement of starting materials, such as plasmids used for the manufacture of our gene therapy product candidates, and the packaging and distribution or import/export of materials and products.

If we are required to conduct additional clinical trials or other testing of our product candidates beyond those that we contemplate, if we are unable to successfully complete clinical trials of our product candidates or other testing, if the results of these trials or tests are not positive or are only modestly positive or if there are safety concerns, we may:


•	be delayed in obtaining marketing approval for our product candidates;


•	not obtain marketing approval at all;


•	obtain approval for indications or patient populations that are not as broad as intended or desired;


•	obtain approval with labeling that includes significant use limitations, distribution restrictions or safety warnings, including boxed warnings;


•	be subject to additional post-marketing testing requirements; or


•	have the product removed from the market after obtaining marketing approval.

Despite our current development plans and ongoing efforts, we may not complete any of our ongoing or planned clinical trials for our product candidates. The timing of the completion of, and the availability of results from, clinical trials is difficult to predict. We do not know whether clinical trials will begin as planned, will need to be restructured or will be completed on schedule, or at all. Furthermore, our development plans may change based on feedback we may receive from regulatory authorities throughout the development process. If we experience delays in manufacturing, testing or marketing approvals, our product development costs would increase. Significant clinical trial delays also could allow our competitors to bring products to market before we do, impair our ability to successfully commercialize our product candidates, including by shortening any periods during which we may have the exclusive right to commercialize our product candidates, and may otherwise harm our business and results of operations.

Gene therapy is an emerging field of drug development that poses many scientific and other risks. We have only limited prior experience in gene therapy research and manufacturing and no prior experience in gene therapy clinical development. Our lack of experience may limit our ability to be successful or may delay our development efforts.

Gene therapy is an emerging field of drug development with only two gene replacement therapies having received FDA approval to date. Our gene therapy research and development programs, which we decided to undertake based on a review of a limited set of preclinical data, are still at an early stage. Even with promising preclinical data, there remains several areas of drug development risk, including translational science, manufacturing materials and processes, safety concerns, regulatory pathway and clinical trial design and execution, which pose particular uncertainty for our programs given the relatively limited development history of, and our limited prior experience with, gene therapies. Furthermore, the medical community's understanding of the genetic causes of many diseases continues to evolve and further research may change the medical community's views on what therapies and approaches are most effective for addressing certain diseases.

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For example, while there are more than 200 known mutations to the BEST1 gene, the different types of mutations and their association with various BEST1- related IRDs are still not well-understood. Our product candidate for these diseases, IC-200, may only be effective in treating retinal diseases associated with certain mutations in the BEST1 gene and not other mutations. Additionally, we decided to in-license and pursue the development of IC-200 based on results observed in an autosomal recessive canine disease model. A majority of humans with BEST1- related IRDs, however, have the autosomal dominant form of the disease, commonly referred to as Best disease. If we choose to develop IC-200 for this patient population, using a construct previously studied in an autosomal recessive canine disease model, this approach may ultimately prove ineffective.

For our miniCEP290 program and other minigene programs, we are sponsoring research using a novel approach that is largely untested and presents various scientific and regulatory risks. To date, all the data generated for our miniCEP290 program are in a newborn mouse model for LCA10, and we do not know whether the effect we observed with these minigenes in mice will be replicated in humans. Furthermore, minigenes result in the expression of a protein that differs from the naturally occurring protein. The protein expressed by the minigene may have physiological effects, including toxic effects, that are not yet known. Because of the novelty of minigenes, the medical community's and regulators' receptiveness to this approach remains unknown. Our sponsored research may not fully elucidate all of the physiological risks associated with a particular minigene and the associated expressed protein. For these and other reasons, promising minigene candidates that emerge from our sponsored research programs with UMMS may not succeed in later stage preclinical and clinical development.

We have particularly focused on adeno-associated virus, or AAV, gene therapy, as AAV vectors are relatively specific to retinal cells and their safety profile in humans is relatively well-documented as compared to other delivery vehicles and gene therapy technologies currently in development. However, AAV has a number of drawbacks, including its small packaging capacity (an AAV vector can hold only up to approximately 4,700 base pairs of DNA, whereas the genes that are associated with a number of diseases, such as LCA10, Stargardt disease and Usher 2A, exceed that size). Although AAV is the most commonly used vector in ocular gene therapy today, it may prove to pose safety risks that we are not aware of and other vector forms, such as retroviral or lentiviral and non-viral based vectors, or gene editing approaches, may prove to be safer and more effective.

Although we believe gene therapy is a promising area for retinal drug development, our gene therapy research and development experience is limited to only a few personnel hired to supervise our outside service providers. In pursuing this new technology, we have begun to establish our own gene therapy technical capabilities, but we will need to continue to build those capabilities by either hiring internally or seeking assistance from outside service providers. We believe that gene therapy is an area of significant investment by biotechnology and pharmaceutical companies and that there may be a scarcity of talent available to us in these areas. If we are not able to expand our gene therapy capabilities, we may not be able to develop in the way we intend or desire, IC-100, IC-200 or any promising product candidates that emerge from our miniCEP290 program or our other collaborative gene therapy sponsored research programs, which would limit our prospects for future growth.

For a further discussion of the risks associated with the manufacturing of gene therapy products, see the risk factor herein entitled " The manufacture of gene therapy products is complex with a number of scientific and technical risks, some of which are common to the manufacture of drugs and biologics and others are unique to the manufacture of gene therapies. We have limited experience with gene therapy manufacturing and are dependent on our third-party contract manufacturers and sole source suppliers ".

Our development of Zimura is based on a novel mechanism of action that is unproven and poses a number of scientific and other risks, and we may not be successful in developing Zimura in the indications we are pursuing. Our ongoing and any future clinical trials for Zimura may not provide sufficient safety and efficacy data to support future development efforts or seeking and obtaining marketing approval.

We are targeting GA, an advanced form of dry AMD, and STGD1 with Zimura. The causes of AMD are not completely understood. In addition to advanced age, there are environmental and genetic risk factors that contribute to the development of AMD including ocular pigmentation, dietary factors, a positive family history for AMD, high blood pressure and smoking. Although we believe there is a scientific rationale for pursuing the development of inhibitors for selective molecular targets, including complement C5, as potential pharmaceutical treatments for AMD, this approach may not prove successful for treating AMD in a clinically meaningful way. Similarly, although there is non-clinical scientific literature supporting the potential use of inhibitors of the complement system for the treatment of STGD1, this approach may not prove clinically successful as well.

Zimura is designed to inhibit complement C5. There are no FDA or EMA approved products that utilize C5 inhibition as a mechanism of action to treat GA or STGD1, and this mechanism of action may not prove safe and effective for these diseases. Moreover, the failure of prior clinical trials evaluating complement inhibition in GA, including a competitor's two Phase 3 clinical trials evaluating an investigational anti-complement factor D antibody administered via intravitreal injections, a

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second competitor's Phase 2 clinical trial evaluating an investigational anti-C5 antibody administered via intravitreal injections and a third competitor's Phase 2 clinical trial evaluating an anti-C5 antibody administered systemically, may call into question the hypothesis underlying the use of a complement inhibitor as a method for treating GA.

We have only very limited data from a small, uncontrolled clinical trial regarding the safety and efficacy of Zimura as a monotherapy for the treatment of GA, and we have no human clinical data regarding the safety and efficacy of Zimura as a treatment for STGD1. Our prior Zimura trials were not powered to demonstrate the efficacy of Zimura therapy with statistical significance. Our ongoing and any future clinical trials for Zimura that we or a potential future partner may undertake may fail to demonstrate sufficient safety or efficacy to justify further development or to ultimately seek or obtain marketing approval. Any negative results from our ongoing or any future clinical trials for Zimura, including from our OPH2003 trial for which we expect initial top-line data to be available during the fourth quarter of 2019, could adversely affect our business and the value of your investment in our company.

The statistical analysis of a clinical trial outcome is primarily determined based on three factors: variability in the measured endpoint among the patient population, the magnitude of the drug effect observed in relation to that variability and the number of patients from whom data is collected in the clinical trial. Given that we have limited data regarding the effect of Zimura in GA, we determined the size of the OPH2003 trial in GA based on our best estimates of the size of trial required to demonstrate a potential clinical benefit for Zimura. This estimate incorporates our assumptions regarding the potential performance of Zimura in this indication based in part on available third-party clinical trial data and our statistical analysis of this data, as well as our assumptions regarding the number of patients that will continue to participate in the trial and from whom we will be able to collect data through the 12-month timepoint. In addition, although we initially determined the size of the OPH2005 trial in STGD1 based on the number of patients with STGD1 that we believed could potentially be enrolled within a reasonable period of time, we decided to cease patient enrollment during the first quarter of 2019 in light of the 18-month endpoint and our goal of providing initial top-line data from this trial by the end of 2020. As STGD1 is an orphan indication, to our knowledge there is only very limited natural history data currently available regarding the variability for our planned primary efficacy endpoint in the STGD1 patient population we enrolled in this trial. Moreover, because both GA and Stargardt disease are degenerative diseases, and in many cases, the rate of degeneration is slow, and because we are seeking to slow the progression of degeneration with Zimura, and not necessarily to reverse prior degeneration or restore visual function, patients participating in our trials may not perceive a benefit from continuing to participate and therefore may drop out of the trial. Although we and the investigators participating in our trials and their staff take efforts to encourage continued patient participation, the drop-out rate for our Zimura trials may exceed our expectations. A higher than expected drop-out rate would reduce the number of patients from whom data is available for analyzing the primary endpoint for these trials. Given the information above, these trials could be underpowered to demonstrate a potential clinical benefit for Zimura in these indications.

Furthermore, our ongoing Zimura clinical trials are evaluating Zimura dosing levels and regimens that we have studied previously only in a small number of patients, and this approach may increase the risk that patients in our ongoing trials experience adverse events and/or serious adverse events (either ocular, systemic or both) that we have not observed or at rates that we have not observed in prior trials. Although we did not observe adverse events or serious adverse events attributable to the drug product in our recently completed OPH2007 trial, previously unobserved adverse events and/or serious adverse events may manifest in our current Zimura clinical trials. For a further discussion of the safety risks in our trials, see the risk factor herein entitled " If serious adverse or unacceptable side effects are identified during the development of our product candidates, we may need to abandon or limit our development of such product candidates. "

Our development of our HtrA1 inhibitor program is also based on a novel mechanism of action that is unproven and poses a number of scientific and other risks. We may not be able to successfully formulate a product candidate from our HtrA1 inhibitors.

Our HtrA1 inhibitor program is in preclinical development. There are no FDA or EMA approved products that utilize HtrA1 inhibition as a mechanism of action for treating ophthalmic diseases, including GA and other age-related retinal diseases for which we may develop our HtrA1 inhibitor program, and this mechanism of action may not prove safe and effective for these diseases. We made the decision to acquire this program based on our interpretation of the scientific literature and rationale for this potential target that suggest an association between HtrA1 and the risk for AMD, as well as a limited set of preclinical data generated by Inception 4 prior to the acquisition. We note, however, the HtrA1 gene is in the same region of the 10q26 chromosome as the age-related maculopathy susceptibility 2 , or ARMS2 , gene. The ARMS2 and HtrA1 genes are linked, and variants in, or expression of, the ARMS2 gene may also be associated with the risk for AMD. The risk for AMD associated with ARMS2 may ultimately prove to be greater than the risk associated with HtrA1 . In addition, even though genetic and histologic findings correlate HtrA1 with AMD, the development and progression of AMD may not be affected by HtrA1. Our assumption that targeting inhibition of HtrA1 as a method of treating AMD may be incorrect, which would likely adversely affect the value of our HtrA1 inhibitor program and its continued development.

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Before we can commence IND-enabling studies for our HtrA1 inhibitor program, we need to conduct pre-formulation and formulation studies with our lead compounds in this program to determine whether we can formulate a product candidate for intravitreal administration that is safe to advance into preclinical studies and, depending on the outcome of such studies, into clinical trials. As part of this work, we need to determine which inactive formulation components should be used in the preparation of the product candidate, and derive a preparation that includes an adequate amount of drug substance with the necessary inactive ingredients to achieve the desired safety profile for intravitreal injection into the eye while providing for sufficient pharmacological activity. Formulation development is inherently uncertain, and it is possible we may not be able to formulate any of our lead compounds into a preparation that is safe to advance into preclinical studies or clinical trials in the eye or that provides sufficient pharmacological activity, which would hinder our ability to pursue development of this program. Formulation development can be time-consuming and our anticipated timelines for the development of this program may be delayed.

If serious adverse or unacceptable side effects are identified during the development of our product candidates, we may need to abandon or limit our development of such product candidates.

If any of our product candidates are associated with serious adverse events or undesirable side effects in preclinical studies or clinical trials or have characteristics that are unexpected, we may need to abandon their development or limit development to certain uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective. Many compounds that initially showed promise in clinical or earlier stage testing have later been found to cause side effects that prevented further development of the compound.

In particular, we have limited data regarding the safety, tolerability and efficacy of Zimura administered for the treatment of GA and no data regarding the safety, tolerability and efficacy of Zimura administered for the treatment of STGD1. In our completed clinical trials for Zimura, we have observed only a single adverse event, mild subcapsular cataract, from our OPH2000 trial, assessed to be drug-related by participating investigators. We have no human data regarding IC-100, IC-200 or any of our HtrA1 inhibitors.

Our clinical trials for Zimura involve dosing regimens that we have not studied extensively, which may increase the risk that patients in these trials experience adverse events and/or serious adverse events (either ocular, systemic or both) that we have not observed or at rates that we have not observed in prior trials. In addition, our clinical trials for Zimura involve multiple intravitreal injections over an extended period of time and, as such, may involve risks regarding multiple and chronic intravitreal injections. For these reasons, there may be, among others, an increase in the rates of intraocular infections, or endophthalmitis, intraocular pressure, glaucoma, retinal tears, cataracts, retinal detachment, intraocular inflammation, retinal and/or choroidal circulation compromise, or hospitalizations in patients who receive Zimura. Because we currently have only one product candidate in clinical development, it is possible that a safety issue in any of our ongoing clinical trials for Zimura could impact all of our then-ongoing clinical trials.

As HtrA1 inhibition is a novel treatment approach for treating ocular disease, this treatment modality may present potentially unknown safety risks when tested in clinical trials that could not have been anticipated based on preclinical toxicology studies. In addition, if we are successful in formulating an HtrA1 product candidate, we intend to administer the product candidate by intravitreal injection, which poses the same safety risks outlined above with respect to intravitreal injections of Zimura.

In addition, there are several known safety risks specific to gene therapy, including inflammation resulting from a patient's immune response to the administration of viral vectors and the potential for toxicity as a result of chronic exposure to the expressed protein. Managing a host body's immune response to introduced viral vectors has been and remains a challenge for gene therapies. For AAV gene therapy, "vector shedding," or the dispersal of AAV vectors away from the target tissue to other parts of the body, which can trigger a more serious and extensive immune response, is a known safety issue. Although subretinal injection, which is the method often used to administer ocular gene therapies, helps to control vector shedding beyond the eye, subretinal injection is a surgical procedure that requires significant skill and training for the administering surgeon and involves its own risks separate from the gene therapy vectors, including the risk of retinal detachment. In order to avoid accelerating damage to a subject's retina, subretinal injection for RHO-adRP patients in particular must be conducted under extremely low light levels using infrared technology, further complicating the surgical procedure. The margin for error with subretinal injections is extremely low and there are a limited number of retinal surgeons with experience in performing subretinal injections in the eye. In the event that we progress into clinical development with IC-100, IC-200 or any other gene therapy product candidate we may in-license or acquire, we may experience delays or other challenges for our gene therapy development programs as a result of safety issues. For example, in order to generate useful clinical data for any of those gene therapy clinical trials, a retinal surgeon must repeat the same subretinal injection process multiple times and with consistency.

In addition to the currently known safety risks, there may be unknown risks to human health from gene therapies. Because gene therapy involves the introduction of concentrated quantities of AAV, as well as the introduction of persistent

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foreign genetic material into the human body, any safety risks may not manifest until much later, if at all. Gene therapies have only recently been used in the treatment of human diseases and the scientific and medical understandings of safety or other risks to humans continue to evolve. The safety profile of minigenes and their associated proteins in humans remains largely unknown. If gene therapies prove to be unsafe for humans, we likely will need to curtail or eliminate our gene therapy development programs or gene therapy products in development or commercialization, if any.

We do not have any internal manufacturing capabilities and use third parties to manufacture our product candidates on a contract or purchase order basis. Manufacturing issues, including technical or quality issues or issues with scaling up and building our capabilities for later-stage clinical manufacturing or for commercial manufacturing, may arise that could cause delays in our development programs or increase costs. We may experience delays in regulatory approval of our product candidates if we or our contract manufacturers do not satisfy applicable manufacturing regulatory requirements.

We do not have internal manufacturing facilities and use or plan to use outside contract manufacturers to manufacture IC-100, IC-200, Zimura, our HtrA1 inhibitors and any other product candidates that we may acquire or in-license. We have a limited number of personnel hired to supervise these outside vendors. Manufacturing for these product candidates could be complicated or present novel technical challenges. Problems with the manufacturing process, even minor deviations from the established process, could result in product defects or manufacturing failures that result in lot failures, product recalls, product liability claims or insufficient inventory. We may encounter problems achieving adequate quantities and quality of clinical-grade materials that meet FDA, EMA or other applicable standards or specifications with consistent and acceptable production yields and costs.

In addition, in order to manufacture and supply any of our product candidates for later-stage clinical trials or on a commercial scale in the future, we will need to increase our manufacturing personnel and bolster our quality control and quality assurance capabilities. We may encounter problems hiring and retaining scientific and manufacturing personnel needed to oversee our manufacturing process, which could result in delays in our production or difficulties in maintaining compliance with applicable regulatory requirements. As we or any manufacturer we engage scales up manufacturing of any product candidate, we may encounter unexpected issues relating to the manufacturing processes or the quality, purity or stability of the product, and we may be required to refine or alter our manufacturing processes to address these issues. Resolving these issues could result in significant delays and may result in significantly increased costs. If we underestimate the demand for an approved product, given the long lead times required to manufacture or obtain regulatory approvals for our products, we could potentially face commercial drug product supply shortages. If we experience significant delays or other obstacles in producing any approved product at commercial scale, our ability to market and sell any approved products may be adversely affected and our business could suffer.

The manufacturing processes and the facilities of our third-party manufacturers are subject to inspection and approval by the FDA, referred to as a pre-approval inspection, before we can commence the commercial sale of any approved product candidate, and thereafter on an ongoing basis. Our third-party drug substance manufacturer for Zimura has undergone only two pre-approval inspections by the FDA, and has not yet gone through a pre-approval inspection for Zimura. Failure by our third-party manufacturers to pass such inspections and otherwise satisfactorily complete the FDA approval regimen with respect to our product candidates may result in delays in the approval of our applications for marketing approval, as well as regulatory actions such as the issuance of FDA Form 483 notices of observations, warning letters or injunctions or the loss of operating licenses. If any of our third-party manufacturers are found to have delayed, denied, limited or refused a drug inspection, our drug substance or drug product could be deemed adulterated. Based on the severity of the regulatory action, our clinical or commercial supply of drug substance or drug product could be interrupted or limited, which could have a material adverse effect on our business.

Any problems in our manufacturing process or our third-party contract manufacturers’ facilities could make us a less attractive collaborator for potential partners, including larger pharmaceutical companies and academic research institutions, which could limit our access to additional attractive development programs. Problems in our manufacturing process or facilities also could restrict our ability to meet market demand for our products.

For a further discussion of the risks associated with our reliance on third-party manufacturers, see the risk factor herein entitled, " We contract with third parties for the manufacture of and for providing starting materials for our product candidates for preclinical development activities and clinical trials and expect to continue to do so in the future. This reliance on third parties increases the risk that we will not have sufficient quantities of our product candidates or products, which could delay, prevent or impair our development or commercialization efforts."

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The manufacture of gene therapy products is complex with a number of scientific and technical risks, some of which are common to the manufacture of drugs and biologics and others of which are unique to the manufacture of gene therapies. We have limited experience with gene therapy manufacturing and are dependent on our third-party contract manufacturers and sole source suppliers.

Gene therapy drug products are complex and difficult to manufacture. We believe that the high demand for clinical gene therapy material and a scarcity of potential contract manufacturers may cause long lead times for establishing manufacturing capabilities for gene therapy drug development activities. Even after a manufacturer is engaged, any problems that arise during manufacturing process development may result in unanticipated delays to our timelines, including delays attributable to securing additional manufacturing slots. There may also be long lead times to manufacture or procure starting materials such as plasmids and cell lines, especially for high-quality starting materials that are cGMP compliant. In particular, plasmids, cell lines and other starting materials for gene therapy manufacture are usually sole sourced, as there are a limited number of qualified suppliers. The progress of our gene therapy programs is highly dependent on these suppliers providing us or our contract manufacturers with the necessary starting materials that meet our requirements in a timely manner. A failure to procure or a shortage of necessary starting materials likely would delay our manufacturing and development timelines.

A number of factors common to the manufacturing of biologics and drugs could also cause production issues or interruptions for gene therapies, including raw material or starting material variability in terms of quality, cell line viability, productivity or stability issues, shortages of any kind, shipping, distribution and supply chain failures, growth media contamination, equipment malfunctions, facility contamination, labor problems, natural disasters, disruption in utility services, terrorist activities, or acts of god that are beyond our or our contract manufacturer's control. It is often the case that early stage process development is conducted with materials that are not manufactured using cGMP starting materials, techniques or processes and which are not subject to the same level of analysis that would be required for clinical grade material. We may encounter difficulties in translating the manufacturing processes used to produce research grade materials to cGMP compliant processes, and any changes in the manufacturing process may affect the safety and efficacy profile of our product candidates. In particular, we and our contract manufacturers are developing our own manufacturing processes, which differ from those originally used by our university collaborators, for example, by using different starting materials. We may not be able to successfully translate the manufacturing process and our manufactured materials may not match the safety and efficacy profile of those used by the universities.

An important part of manufacturing drug products is performing analytical testing. Analytical testing of gene therapies involves tests that are more numerous, more complex in scope and take a longer time to develop and to conduct as compared to traditional drugs. We and our contract manufacturers need to expend considerable time and resources to develop assays and other analytical tests for our gene therapy product candidates. Some assays need to be outsourced to specialized testing laboratories. Even when assays are developed, they need to be further tested, qualified and validated, which may take substantial time and resources. Because of the lagging nature of analytical testing, we may proceed with additional manufacturing and other development activities without having first fully characterized our manufactured materials. If the results of the testing fail to meet our expectations, we may need to delay or repeat certain manufacturing and development activities.

In addition, because manufacturing for early stage research is often done under different conditions, using different starting materials and on a smaller scale than what is required for manufacturing for clinical supplies, we may face challenges in adapting the manufacturing processes that were used by our licensors and other academic collaborators and scaling up these processes as necessary to support supply for clinical trials. In order to progress the development of IC-100, IC-200 or any other gene therapy product candidate we may in-license or acquire, we will need to devote significant time and financial resources to establishing manufacturing processes that are sufficient for IND-enabling preclinical toxicology studies as well as clinical supplies. If we are not able to establish gene therapy manufacturing or related processes in a manner required for further development of our gene therapy product candidates, our development plans may be delayed or stalled and our business may be materially harmed.

Our experience manufacturing Zimura is limited. We and our third-party contract manufacturers have not scaled up or validated the manufacturing process for Zimura for later-stage clinical or commercial manufacturing. We are only in the early stages of establishing manufacturing capabilities for our HtrA1 inhibitor program.

We currently use a single third-party manufacturer, Agilent Technologies, to supply us with the chemically synthesized drug substance for Zimura and a different, single third-party manufacturer, Ajinomoto Bio-Pharma Services, to provide fill/finish services for Zimura. In order to obtain and maintain regulatory approval for Zimura, our third-party manufacturers will be required to consistently produce the drug substance used in Zimura in commercial quantities and of specified quality and to execute fill/finish services on a repeated basis and document their ability to do so. If the third-party manufacturers are unable to satisfy this requirement, our business would be materially and adversely affected. To date, we have not yet scaled up the

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manufacturing process for Zimura beyond the scale used for developmental clinical batches, nor have we validated the manufacturing process.

Some of the standards of the International Conference on Harmonization of Technical Requirements for Registration of Pharmaceuticals for Human Use, which establishes basic guidelines and standards for drug development in the United States, the European Union, Japan and certain other countries, do not apply to oligonucleotides, including aptamers. As a result, there are no established generally accepted manufacturing or quality standards for the production of Zimura. The lack of uniform manufacturing and quality standards among regulatory agencies may delay regulatory approval of Zimura.

For our HtrA1 inhibitor program, we have engaged a CDMO to produce small quantities of the active pharmaceutical ingredient, or API, of our HtrA1 inhibitors for preclinical development purposes. The time and efforts required for us to fully establish manufacturing capabilities for our HtrA1 inhibitor program may delay or impair our ability to develop this program in accordance with our expected timelines.

We face substantial competition, which may result in others developing or commercializing products before or more successfully than we do.

The development and commercialization of new drug products is highly competitive. We face competition with respect to our product candidates from major pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies, as well as generic and biosimilar companies, worldwide. There are a number of pharmaceutical and biotechnology companies that are currently developing product candidates for the treatment of RHO-adRP, LCA10, Stargardt disease, USH2A -related IRDs and GA, and there is at least one biotechnology company that is currently developing a product candidate for the treatment of BEST1- related IRDs. Potential competitors also include academic institutions, government agencies and other public and private research organizations that conduct research, seek patent protection and establish collaborative arrangements for research, development, manufacturing and commercialization. Some of these competitive products and therapies are based on scientific approaches that are the same as or similar to our approach, and others are based on entirely different approaches. We also will face similar competition with respect to any product candidates that we may seek to develop or commercialize in the future. In particular, many companies are pursuing gene therapy approaches for orphan and age-related retinal diseases.

Our commercial opportunity could be reduced or eliminated if one or more of our competitors develop and commercialize products that are more effective, safer, have fewer or less severe side effects, are more convenient to use or are less expensive than our product candidates. For example, the method of administration of Zimura, intravitreal injection, is commonly used to administer ophthalmic drugs for the treatment of severe diseases and is generally accepted by patients facing the prospect of severe visual loss or blindness. A therapy that offers a less invasive method of administration, however, might have a competitive advantage over one administered by intravitreal injection, depending on the relative safety of the other method of administration.

Our competitors also may obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the relevant market. Furthermore, our ability to compete may be affected in many cases by insurers or other third-party payors, particularly Medicare, seeking to encourage the use of less expensive or more convenient products.

In the case of orphan diseases such as the IRDs for which we are researching and developing potential treatments, should we be successful in development, our commercialization efforts may rely on non-patent market exclusivity periods under the Orphan Drug Act and the Hatch-Waxman Act. The Orphan Drug Act only provides exclusivity periods for the specific drug granted orphan drug designation for a specific indication. In addition, there are limited circumstances under each of the Orphan Drug Act and the Hatch-Waxman Act that could result in our loss of data and marketing exclusivity, which could allow a competitor to enter the market. Failure to maintain either data or market exclusivity period could have a material adverse effect on our ability to commercialize our product candidates.

Many of our competitors have significantly greater financial and human resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. 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 us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient enrollment for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our development programs.

Based on publicly available information, we are aware of the following research and development programs that may be competitive with programs we are pursuing. Other competitive programs may exist of which we are not aware.

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Competitive considerations for RHO-adRP:

•

There are a number of products in preclinical research by third parties to treat RHO-adRP. We are aware that multiple academic institutions have early stage gene therapy development programs in RHO-adRP. In addition, prior to its acquisition by Biogen Inc., Nightstar Therapeutics plc had a preclinical AAV gene therapy program in RHO-adRP. ProQR Therapeutics N.V. is developing an early stage RNA-based therapeutic for RHO-adRP. Editas Medicine, Inc. is also exploring a potential program in this disease.

Competitive considerations for BEST1-related IRDs:


•	We are aware that, prior to its acquisition by Biogen, Nightstar Therapeutics plc had a preclinical AAV gene therapy program for one or more BEST1 -related IRDs.

Competitive considerations for LCA10:

•

We are aware that Editas Medicine has a CRISPR gene editing program for LCA10, an IND for which was submitted in late 2018, ProQR Therapeutics N.V. is developing an RNA-based therapeutic for LCA10 that is currently in clinical development, Generation Bio Co. has a preclinical program that utilizes ceDNA technology to target LCA10 and Oxford Biomedica plc is developing a lentiviral gene therapy program for LCA10 that is in preclinical development. In addition, several academic institutions have preclinical programs in LCA10.

Competitive considerations for Stargardt disease:

•

There are a number of products in preclinical research and clinical development by third parties to treat Stargardt disease. We are aware that Sanofi, Acucela Inc., Alkeus Pharmaceuticals, Inc., Lin BioScience, Inc., Nightstar Therapeutics plc (prior to its acquisition by Biogen), ProQR Therapeutics N.V., Spark Therapeutics and Generation Bio Co. each have research or development programs in Stargardt disease. Three of these programs, Acucela, Alkeus and Lin BioScience, are exploring the use of oral therapeutics, while Sanofi, with technology provided by Oxford BioMedica plc, Nightstar and Spark are each using a gene therapy approach and ProQR is using an RNA based approach. Acucela’s product candidate is in Phase 3 development while Alkeus’s and Sanofi’s product candidates are each in Phase 2 development. Spark's program is in the research phase. In addition, several academic organizations have early stage programs in Stargardt disease.

Competitive considerations for USH2A- related IRDs :

•

There are a number of products in preclinical research and clinical development by third parties to treat USH2A -related IRDs. We are aware that ProQR Therapeutics N.V. is pursuing two RNA based approaches for different mutations causing Usher 2A, one of which is currently in Phase 1/2 clinical development and the other of which is in preclinical development. We are also aware that Editas Medicine, Inc. and Odylia Therapeutics are exploring potential programs in USH2A -related IRDs.

Competitive considerations for Dry AMD and GA:

•

There are a number of products in preclinical research and clinical development by third parties to treat dry AMD, including several that are in development for GA secondary to dry AMD. In general, these product candidates can be categorized based on their proposed mechanisms of action. The mechanisms of action for these product candidates include inflammation suppression, such as complement system inhibitors and corticosteroids, visual cycle modulators, antioxidants and neuroprotectants, cell and gene therapies and vascular perfusion enhancers. We are aware that Apellis Pharmaceuticals, Inc., Roche AG, Novartis AG and MorphoSys AG, Hemera Biosciences, Inc., Gyroscope Therapeutics, Achillion Pharmaceuticals, Inc., and Catalyst Biosciences, Inc. each have complement inhibitors in development for dry AMD. We believe that the most advanced of these programs is Apellis's pegylated, synthetic peptide targeting complement protein C3. Following positive Phase 2 results for its C3 complement inhibitor product candidate, Apellis announced in September 2018 that it had dosed the first patient in a Phase 3 program for this product candidate. If Apellis's Phase 3 program for its C3 complement inhibitor product candidate is successful, it is likely that Apellis may obtain marketing approval for its product candidate in advance of when we could reasonably expect marketing approval for Zimura in GA or a product candidate from our HtrA1 inhibitor program in GA, if at all. Moreover, we are aware that several other companies have announced development programs for the treatment of dry AMD or GA targeting different mechanisms of action outside of the complement system.

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If we are unable to establish sales, marketing and distribution capabilities or enter into sales, marketing and distribution agreements with third parties, we may not be successful in commercializing any of our product candidates that we develop if and when any such product candidate is approved.

As a company, we have no experience in the sale, marketing or distribution of pharmaceutical products. We currently do not have any sales, marketing or distribution infrastructure. To achieve commercial success for any approved product, we must either develop a sales, marketing and distribution organization or outsource those functions to third parties. We expect that our commercial strategy for any of our product candidates, including whether to retain commercial rights and market and sell the product candidate ourselves or to utilize collaboration, distribution or other marketing arrangements with third parties, would be determined based on a variety of factors, including the size and nature of the patient population, the disease area, the particular indications for which the product candidate is approved, the territories in which the product candidate may be marketed and the commercial potential for such product candidate. Our gene therapy programs are currently being developed for orphan IRDs with a limited number of affected individuals. In contrast, we are developing Zimura and our HtrA1 inhibitor program for GA secondary to dry AMD, which is a condition affecting a relatively large number of individuals. If any of our product candidates are approved, the size and nature of the affected patient population will be an important factor in our commercial strategy. In addition, our commercial strategy would vary depending on whether the disease is typically treated by general ophthalmology practitioners, specialists, such as retinal specialists, or sub-specialists, such as retinal specialists with particular expertise in IRDs.

There are risks involved with establishing our own sales, marketing and distribution capabilities and entering into arrangements with third parties to perform these services. For example, recruiting and training a sales force is expensive and time consuming and could delay any product launch. If the commercial launch of a product candidate for which we recruit a sales force and establish marketing and distribution capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. This may be costly, and our investment would be lost if we cannot retain or reposition our sales and marketing personnel.

Factors that may inhibit our efforts to commercialize our products on our own include:


•	our inability to recruit and retain adequate numbers of effective sales and marketing personnel;


•	the inability of sales personnel to obtain access to adequate numbers of physicians who may prescribe our products;


•	the lack of complementary products to be offered by our sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product lines; and


•	unforeseen costs and expenses associated with creating an independent sales and marketing organization.

If we enter into arrangements with third parties to perform sales, marketing and distribution services, our product revenues and our profitability, if any, are likely to be lower than if we were to market, sell and distribute ourselves any products that we develop. In addition, we may not be successful in entering into arrangements with third parties to sell, market and distribute our product candidates or may be unable to do so on terms that are favorable to us. We likely will have little control over such third parties, and any of them may fail to devote the necessary resources and attention to sell and market our products effectively. If we do not establish sales, marketing and distribution capabilities successfully, either on our own or in collaboration with third parties, we would not be successful in commercializing our product candidates.

Even if any of our product candidates receives marketing approval, such product candidate may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success and the market opportunity for any of our products and product candidates may be smaller than we estimate.

The degree of market acceptance of any product candidate that we are developing or we may develop, if approved for commercial sale, will depend on a number of factors, including:


•	efficacy and potential advantages compared to alternative treatments, including the existing standard of care;


•	any restrictions in the label on the use of our products in combination with other medications or with certain devices;


•	any restrictions in the label on the use of our products by a subgroup of patients;


•	restrictions in the label imposing a waiting period in between intravitreal or subretinal injections;


•	our and any commercialization partner’s ability to offer our products at competitive prices;

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•	availability of governmental and third-party payor coverage and adequate reimbursement;


•	increasing reimbursement pressures on treating physicians due to the formation of accountable care organizations and the shift away from traditional fee-for-service reimbursement models to reimbursement based on quality of care and patient outcomes;


•	willingness of the target patient population to try new therapies and of physicians to prescribe these therapies, particularly in light of the existing available standard of care or to the extent our product candidates require invasive procedures for administration, such as subretinal surgery;


•	prevalence and severity of any side effects or perceived safety concerns, especially for new therapeutic modalities such as gene therapy; and


•	whether competing products or other alternatives are more convenient or easier to administer, including whether co-formulated alternatives, alternatives that can be co-administered in a single syringe or alternatives that offer a less invasive method of administration than intravitreal injection or subretinal injection come to market.

For each of our Zimura trials where patients will receive multiple intravitreal injections on the same day, we have provided for a delay in the second intravitreal injection to minimize the risk of an unacceptable increase in intraocular pressure as a result of the volume of the multiple injections. In addition, certain of the Zimura dosing regimens we are evaluating require injections more frequently than once per month. If Zimura receives marketing approval for a particular indication and the approved label requires a waiting period between injections administered on the same day or a dosing regimen that requires multiple office visits per month, the potential market opportunity for Zimura may be limited to the extent that physicians and patients find such a waiting period or dosing regimen unacceptable.

In addition, the potential market opportunity for any product candidate is difficult to estimate precisely. Our estimates of the potential market opportunity for our product candidates include several key assumptions based on our expectations of the safety and effectiveness of the relevant product candidate, our industry knowledge, industry publications, market response to Spark Therapeutics's Luxturna®, Novartis AG's Zolgensma® and anti-VEGF agents currently approved for treatment of wet AMD, third-party research reports and other surveys. While we believe that our internal assumptions are reasonable, no independent source has verified such assumptions and any of these assumptions could prove to be inaccurate, and the actual market for such product candidates could be smaller than our estimates of our potential market opportunity.

There are several factors that could contribute to the actual number of patients who receive an approved therapy being less than our current estimate of the potentially addressable market. With respect to our programs for orphan diseases, our understanding of both the number of people who have these diseases, as well as the subset of people with these diseases who have the potential to benefit from treatment with our product candidates, are based on estimates. These estimates may prove to be incorrect and new studies may reduce the estimated incidence or prevalence of these diseases. Further, the severity of the progression of a disease up to the time of treatment, especially in certain degenerative conditions such as IRDs, likely will diminish the therapeutic benefit conferred by a gene therapy due to irreversible cell death. Certain patients’ immune systems and prior exposure to the virus used to deliver a gene therapy might inhibit the successful delivery of certain gene therapy products to the target tissue, thereby limiting eligibility for treatment or limiting treatment outcomes. If the number of patients that may benefit from the treatments we are seeking to develop is lower than we expect, our business, financial condition, results of operations and prospects may be adversely affected.

Even if we are able to commercialize any of the product candidates that we may develop, the product may become subject to unfavorable pricing regulations, pricing dynamics, third-party reimbursement practices or healthcare reform initiatives, which would harm our business.

The regulations that govern marketing approvals, pricing and reimbursement for new drug products vary widely from country to country. Health care reform, including increasing scrutiny of drug prices, is an issue of intense political focus, particularly in the United States. Current and future legislation may significantly change the approval requirements in ways that could involve additional costs and cause delays in obtaining approvals or in ways that could alter the mechanism by which pharmaceutical prices are negotiated or otherwise determined. Many countries outside the United States require approval of the sale price of a drug before it can be marketed, and to apply for and obtain such an approval in certain countries, we or a commercialization partner may be required to conduct a clinical trial that compares the cost-effectiveness of our product candidate to other available therapies. In many countries, the pricing review period begins after marketing or product licensing approval is granted. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control or negotiation even after initial approval is granted. As a result, we might obtain marketing approval for a product in a particular country, but then be subject to price regulations that delay our or any commercialization partner’s commercial launch of the product, possibly for lengthy time periods, which would negatively impact the revenues we are able to generate from the sale of the product in that country. Adverse pricing limitations may hinder our ability to recoup our investment in one or more

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product candidates, even if our product candidates obtain marketing approval and are widely accepted and prescribed or used by physicians.

In addition, even in countries where pharmaceuticals are not subject to strict pricing regulations through a governmental review and approval process, we may nonetheless face an unfavorable pricing environment as a result of political pressure or market dynamics. Because there are only two FDA-approved gene replacement therapy products, one of which began commercial sales in 2018 and the other of which was only recently launched in the United States, the pricing environment for gene therapies is in the very early stages of its development. Gene therapies are generally intended to be one-time treatments or, at a minimum, to provide a benefit over an extended period lasting several years. If we are successful in obtaining marketing approval for any of our gene therapy product candidates, we will need to convince third-party payors of the value that our gene therapy product offers. Third-party payors may be unwilling to accept substantial upfront costs for a therapy where the benefits may not be realized or are realized over a period of years during which the patient may no longer be enrolled in the payor's plan. Although payors and manufacturers may be incentivized to agree to outcomes-based payment structures for gene therapies, where manufacturers provide rebates or a portion of the contract price is forgiven if an efficacy or durability threshold is not met for an individual patient, market dynamics in the United States currently do not facilitate these types of outcome-based payments, in particular because of rules that require that government payors, such as Medicaid, receive the “best price” for a drug, regardless of outcome. The perceived high cost for pharmaceutical products to treat orphan diseases, where manufacturers seek to recoup development costs and earn a profit for a therapy intended to treat a relatively small patient population, may attract increased political and public scrutiny. Moreover, if we obtain marketing approval for a product candidate, such as Zimura, in more than one indication, including, for example in an orphan indication such as STGD1 and a non-orphan indication such as GA secondary to dry AMD, such a product candidate likely would only be sold at one price in any given country, regardless of the indications for which it is prescribed. This dynamic may result in our charging a price that does not generate profits in each indication for which the product is approved.

Our ability and the ability of any commercialization partner to commercialize a product candidate successfully also will depend in part on the extent to which reimbursement for these products and related treatments will be available from government health authorities, private health insurers and other organizations. Government authorities and third-party payors, such as private health insurers and health maintenance organizations, decide which medications they will pay for and establish reimbursement levels. A major trend in the U.S. healthcare industry and elsewhere is cost containment. Government authorities and third-party payors, particularly Medicare, have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications and encouraging the substitution of lower cost or generic products. Pricing pressures recently experienced by the pharmaceutical industry may be further exacerbated by legislative and policy changes under consideration by the Trump Administration and many states. For example, the Trump Administration, through the Center for Medicare & Medicaid Service, or CMS, announced in late 2018 an advance notice of proposed rulemaking describing a potential mandatory reference pricing model for Medicare Part B drugs under which the prices paid for these drugs will be adjusted in relation to an international pricing index that includes prevailing prices from other countries with strict price controls. CMS is considering issuing a proposed rule that would describe the model in more detail, with the goal of starting the model in spring 2020. The Trump Administration has also expressed an interest in authorizing and/or directing CMS or other agencies of the U.S. government to negotiate prices for drugs covered by Medicare directly with pharmaceutical companies. If this were to occur, especially for AMD drugs where a large portion of the patient population is over the age of 65 and is therefore covered by Medicare, there could be significant downward pressure on prices charged, not only for patients covered by Medicare, but also for patients covered by private insurers who may follow the government’s lead on price. Moreover, increasingly, third-party payors are requiring that drug companies provide them with predetermined discounts from list prices and are challenging the prices charged for pharmaceutical products. We cannot be sure that coverage and reimbursement will be available for any product that we commercialize or any commercialization partner commercializes on our behalf, and, even if these are available, the level of reimbursement may not be satisfactory.

Reimbursement may affect the demand for, or the price of, any product candidate for which we obtain marketing approval. Obtaining and maintaining adequate reimbursement for our products may be particularly difficult because of the higher prices often associated with drugs administered under the supervision of a physician. We or any commercialization partner may be required to conduct expensive pharmacoeconomic studies to justify coverage and reimbursement or the level of reimbursement relative to other therapies that may be on the market. If coverage and adequate reimbursement are not available or reimbursement is available only at limited levels, we may not be able to successfully commercialize any product candidate for which we obtain marketing approval.

There may be significant delays in obtaining reimbursement for newly approved drugs, and coverage may be more limited than the purposes for which the drug is approved by the FDA or similar regulatory authorities outside the United States. Moreover, eligibility for reimbursement does not imply that any drug will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution. Interim reimbursement levels for new drugs, if applicable, may also not be sufficient to cover our costs and may not be made permanent. Reimbursement rates may vary

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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, a policy that President Trump and certain members of the U.S. Congress have expressed interest in pursuing. Third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own reimbursement policies. Our and any commercialization partner’s inability to promptly obtain coverage and profitable payment rates from both government-funded and private payors for any approved products that we develop could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize products and our overall financial condition.

For a further discussion of health care reform and other political factors affecting drug prices, see the risk factor herein entitled " Current and future legislation and regulations may increase the difficulty and cost for us and any future collaborators to obtain marketing approval of and commercialize our product candidates and affect the prices we or they may charge for such products, when and if approved. "

Ethical, legal and social issues related to genetic testing may reduce demand for any gene therapy product candidates we develop and for which we seek marketing approval.

We anticipate that prior to receiving certain gene therapies, including as part of a clinical trial, patients would be required to undergo genetic testing. Genetic testing has raised concerns regarding the appropriate utilization and the confidentiality of information provided by genetic testing. Genetic tests for assessing a person’s likelihood of developing a chronic disease have focused public attention on the need to protect the privacy of genetic information. For example, concerns have been expressed that insurance carriers and employers may use these tests to discriminate on the basis of genetic information, resulting in barriers to the acceptance of genetic tests by consumers. This dynamic could lead to governmental authorities restricting genetic testing or calling for limits on or regulating the use of genetic testing, particularly for diseases for which there is no known cure. Any of these scenarios could decrease the pool of patients willing to participate in a clinical trial for a gene therapy and the demand for a gene therapy once it is approved.

Product liability lawsuits against us or any future commercialization partner could divert resources, cause us to incur substantial liabilities and limit commercialization of any products that we may develop or in-license.

We face an inherent risk of product liability exposure related to the testing of any product candidate that we develop in human clinical trials, and we and any future commercialization partner will face an even greater risk if we commercially sell any products that we develop. If we become subject to or otherwise cannot successfully defend ourselves against claims that our product candidates or our products caused injuries, we will incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:


•	decreased demand for any product candidates or products that we may develop or in-license;


•	injury to our reputation and significant negative media attention;


•	withdrawal of clinical trial participants;


•	significant costs to defend the related litigation;


•	substantial monetary awards to trial participants or patients;


•	loss of revenue;


•	reduced time and attention of our management to pursue our business strategy; and


•	the inability to commercialize any products that we may develop or in-license.

We currently hold $10.0 million in product liability insurance coverage in the aggregate, with a per incident limit of $10.0 million, which may not be adequate to cover all liabilities that we may incur. We will need to increase our insurance coverage when and if we begin commercializing an approved product. Insurance coverage is increasingly expensive. We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise. In addition, if a commercialization or collaboration partner were to become subject to product liability claims or were unable to successfully defend themselves against such claims, any such commercialization or collaboration partners could be more likely to terminate such relationship with us and therefore substantially limit the commercial potential of our products.

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Risks Related to Our Dependence on Third Parties

We contract with third parties for the manufacture of and for providing starting materials for our product candidates for preclinical development activities and clinical trials and expect to continue to do so in the future. This reliance on third parties increases the risk that we will not have sufficient quantities of our product candidates or products, which could delay, prevent or impair our development or commercialization efforts.

We do not currently own or operate manufacturing facilities for the production of clinical or commercial quantities of any of our product candidates and have a limited number of personnel hired to supervise outside contract manufacturers. We currently rely upon and expect to continue to rely upon third-party contract manufacturers to manufacture preclinical and clinical supplies of product candidates we are developing or may develop and commercial supplies of products if and when approved for marketing by applicable regulatory authorities. Furthermore, we and our contract manufacturers currently rely upon, and for the foreseeable future expect to continue to rely upon, sole-source suppliers of certain raw materials, plasmids and other specialized components of production used in the manufacture and fill/finish of our product candidates.

We have engaged a gene therapy CDMO for preclinical and Phase 1/2 clinical supply of IC-100 and IC-200. For our HtrA1 inhibitor program, we have engaged a CDMO to produce small quantities of the API for our HtrA1 inhibitors for preclinical development purposes.

We currently rely exclusively upon, and purchase on a purchase order basis, a single third-party manufacturer to provide Zimura drug substance and a different single third-party manufacturer to provide fill/finish services for Zimura. We do not currently have any contractual commitments for the supply of Zimura drug substance. We also do not currently have arrangements in place for redundant supply or a second source for drug substance for Zimura or a second source for fill/finish services for Zimura. We purchase the polyethylene glycol, or PEG, reagent used to modify the chemically synthesized aptamer in Zimura on a purchase order basis from a single third-party supplier. We do not currently have any contractual commitments for supply of the PEG reagent we use for Zimura. The prices for manufacturing activities that are not yet contractually committed may vary substantially over time and adversely affect our financial results.

Our current and anticipated future dependence upon others for the manufacture of the product candidates that we are developing or may develop may adversely affect our business plan and future growth. For example, any performance failure or differing priorities on the part of our existing or future manufacturers could delay preclinical or clinical development or marketing approval of our product candidates. Our dependence on third party manufacturers may limit our ability to commercialize on a timely and competitive basis any products that receive marketing approval.

If any of our third-party manufacturers, fill/finish providers or sole-source suppliers fail to fulfill our purchase orders, or if any of these manufacturers or suppliers should become unavailable to us for any reason, including as a result of capacity constraints, differing priorities, regulatory compliance issues, financial difficulties or insolvency, we believe that there are a limited number of potential replacement manufacturers or sole source suppliers, and we likely would incur added costs and delays in identifying or qualifying such replacements. We may be unable to establish agreements with such replacement manufacturers, fill/finish providers or sole-source suppliers or to do so on acceptable terms.

In addition, to the extent that we or our third party manufacturers rely on materials that are sourced outside the United States, our supplier relationships could be interrupted due to international supply disruptions, including those caused by geopolitical and other issues. For example, trade disputes, trade negotiations or the imposition of tariffs between the United States and its trading partners could cause delays or disruptions in our supply of starting materials for our product candidates.

Reliance on third-party manufacturers entails additional risks, including:


•	our product candidates may compete with other product candidates and products for access to a limited number of suitable manufacturing facilities that operate under cGMP conditions;


•	reliance on the third party for regulatory compliance, quality assurance and quality control;


•	the possible breach of the manufacturing agreement by the third party;


•	the possible misappropriation of our proprietary information, including our trade secrets and know-how; and


•	the possible termination or nonrenewal of the agreement by the third party at a time that is costly or inconvenient for us.

Third-party manufacturers may not be able to comply with cGMP regulations or similar regulatory requirements outside the United States. Our failure, or the failure of our third-party manufacturers, to comply with applicable regulations could result in sanctions being imposed on us, including clinical holds, fines, injunctions, civil penalties, delays, suspension or

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withdrawal of approvals, license revocation, seizures or recalls of product candidates or products, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of our products and harm our business and results of operations.

We rely upon third parties in conducting our preclinical development activities and clinical trials, and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such activities.

We have in the past and expect in the future to rely upon third parties, such as contract research organizations, or CROs, clinical data management organizations, biostatisticians, academic research collaborators, medical institutions (including reading centers) and clinical investigators, in conducting our preclinical testing and clinical trials for our product candidates. We or these third parties may terminate their engagements with us at any time for a variety of reasons, including a failure to perform by the third parties. If we need to enter into alternative arrangements, our product development activities could potentially be delayed and could potentially be very costly.

Our reliance on these third parties for preclinical testing and clinical development activities reduces our control over these activities but does not relieve us of our responsibilities. For example, we remain responsible for ensuring that each of our clinical trials is conducted in accordance with the general investigational plan and protocols for the trial. Moreover, the FDA requires us to comply with GCPs for conducting, recording and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of trial participants are protected. We also are required to register ongoing clinical trials and post the results of completed clinical trials on a government-sponsored database within specified timeframes. Failure to do so can result in fines, adverse publicity and civil and criminal sanctions.

If these third parties do not successfully carry out their contractual duties, meet expected deadlines or conduct our clinical trials in accordance with regulatory requirements or our stated protocols, we would not be able to obtain, or may be delayed in obtaining, marketing approvals for our product candidates and would not be able to, or may be delayed in our efforts to, successfully commercialize our product candidates. Furthermore, these third parties may also have relationships with other entities, some of which may be our competitors.

We also rely upon other third parties to store, package, label and distribute drug supplies for our clinical trials and to store materials and drug substance for our preclinical development activities. Any performance failure on the part of these third parties could delay preclinical development, clinical development or marketing approval of our product candidates or commercialization of our products and adversely affect our results of operations.

We rely upon third-party researchers to advance our sponsored research programs. These arrangements may not ultimately yield any promising product candidates for preclinical or clinical development. We may not be able to fully realize the benefits of any intellectual property generated by these arrangements.

Part of our strategy involves collaborative sponsored research to be performed by third-party research institutions. Although we seek to direct this research and advise on the design of these projects as well as critical development decisions, this research is being performed by individuals who are not our employees and the timeline and quality of the research efforts are outside of our direct control. Academic investigators and other researchers may have different priorities than we do as a biopharmaceutical drug development company. The sponsored research agreements we enter into for these programs generally provide that any inventions resulting from the research will be owned by the research institution performing the research, and that we have an option to negotiate for a license to develop and commercialize any such inventions. Confidential information and new inventions derived from these research efforts may be disclosed through publications or other means prior to our third-party research partners being able to protect such intellectual property through the filing of patent applications. Our third-party research partners may not be able to obtain or maintain full ownership of inventions that are derived from the research or associated rights, which may limit their ability to provide us with a license to all relevant intellectual property on terms and conditions that are acceptable to us. Even if our collaborative research efforts yield promising results or new technological advances, they may not ultimately result in our being able to protect, develop or exploit the resulting intellectual property.

If we are not able to establish collaborations to advance our development programs, we may have to alter our development and commercialization plans.

The development and potential commercialization of our product candidates is likely to require substantial additional cash to fund expenses. In addition, the commercialization of a product candidate in markets outside of the United States requires regulatory expertise and commercial capabilities that are specific to the local market. For some of our product candidates, we may seek to collaborate with pharmaceutical and biotechnology companies for the development and potential commercialization of those product candidates. In particular, if data from either of our Zimura clinical trials are positive, we plan to seek partnering opportunities for further clinical development of Zimura.

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We face significant competition in seeking appropriate collaborators. Whether we reach a definitive agreement for a collaboration will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of a number of factors. Those factors may include the design or results of clinical trials, the likelihood of approval by the FDA or similar regulatory authorities outside the United States, the potential market for the subject product candidate, the costs and complexities of manufacturing and delivering such product candidate to patients, the potential of competing products, the existence of uncertainty with respect to our ownership of technology, which can exist if there is a challenge to such ownership without regard to the merits of the challenge, and industry and market conditions generally. The collaborator may also consider alternative product candidates or technologies for similar indications that may be available to collaborate on and whether such collaboration could be more attractive than the one with us for our product candidate. We may also be restricted under future license agreements from entering into agreements on certain terms with potential collaborators. Collaborations are complex and time-consuming to negotiate and document. In addition, there have been a significant number of recent business combinations among pharmaceutical and biotechnology companies that have resulted in a reduced number of potential future collaborators.

If we are unable to reach agreements with suitable collaborators on a timely basis, on acceptable terms, or at all, we may have to curtail the development of a product candidate, reduce or delay its development program or one or more of our other development programs, delay its potential commercialization or reduce the scope of any sales or marketing activities, or increase our expenditures and undertake development or commercialization activities at our own expense. If we elect to fund and undertake development or commercialization activities on our own, we may need to obtain additional expertise and additional capital, which may not be available to us on acceptable terms or at all. If we fail to enter into collaborations and do not have sufficient funds or expertise to undertake the necessary development and commercialization activities, we may not be able to further develop those product candidates or bring them to market and generate product revenue.

We may enter into collaborations with third parties for the development or commercialization of our product candidates. These collaborations carry numerous risks. If any of our collaborations are not successful, we may not be able to capitalize on the market potential of these product candidates.

We may utilize a variety of types of collaboration, distribution and other marketing arrangements with third parties to develop or commercialize our product candidates, either in the United States, or in markets outside the United States. We also may seek third-party collaborators for development and commercialization of other product candidates we may develop. Our likely collaborators for any sales, marketing, distribution, development, licensing or broader collaboration arrangements include large and mid-size pharmaceutical companies, regional and national pharmaceutical companies and biotechnology companies. If we do enter into any additional arrangements with third parties in the future, we would likely have limited control over the amount and timing of resources that our collaborators dedicate to the development or commercialization of our product candidates. Our ability to generate revenues from these arrangements will depend on our collaborators’ abilities and efforts to successfully perform the functions assigned to them in these arrangements.

Collaborations involving our product candidates could pose numerous risks to us, including the following:


•	collaborators, including marketing and distribution collaborators, have significant discretion in determining the efforts and resources that they will apply to these collaborations and may not perform their obligations as expected;

•

collaborators may deemphasize or not pursue development and commercialization of our product candidates or may elect not to continue or renew development or commercialization programs based on clinical trial results, changes in the collaborators’ strategic focus, changes in product candidate priorities or available funding or changes in priorities as a result of a merger, acquisition or other corporate restructuring or transaction;


•	collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing;


•	collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our products or product candidates if the collaborators believe that competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours;


•	we could grant exclusive rights to our collaborators, which would prevent us from collaborating with others;


•	disagreements or disputes with collaborators, including disagreements or disputes over proprietary rights, contract interpretation or the preferred course of development, might cause delays or termination of the research, development or commercialization of products or product candidates, might lead to additional responsibilities for

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us with respect to product candidates or might result in litigation or arbitration, any of which would divert management attention and resources, be time-consuming and be expensive;

•

collaborators may not properly maintain or defend our intellectual property rights, may infringe the intellectual property rights of third parties, may misappropriate our trade secrets or may use our proprietary information in such a way as to invite litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to litigation and potential liability; and


•	collaborations may be terminated for the convenience of the collaborator, our breach of the terms of the collaboration or other reasons and, if terminated, we may need to raise additional capital to pursue further development or commercialization of the applicable product candidates.

If a collaborator of ours were to be involved in a business combination or other transaction, the foregoing risks would be heightened, and the business combination or transaction may divert attention or resources or create competing priorities. The collaborator may delay or terminate our product development or commercialization program. If one of our collaborators terminates its agreement with us, we could find it more difficult to attract new collaborators and the perception of our company could be adversely affected.

Collaboration agreements may not lead to development or commercialization of product candidates in the most efficient manner or at all.

We depend on licenses and sublicenses for development and commercialization rights to IC-100, IC-200, our miniCEP290 program and Zimura. These license arrangements, as well as the Inception 4 Merger Agreement, impose diligence obligations on us. We may enter into similar arrangements with respect to future product candidates or technologies. Termination of licenses or the failure by us or our licensees, including our potential future commercialization or collaboration partners, to comply with obligations under these or other agreements could materially harm our business and prevent us from developing or commercializing our products and product candidates.

We are party to two different license agreements, each with UFRF and Penn, on which we depend for rights to IC-100 and IC-200. We are also party to a license agreement with UMMS for our miniCEP290 program and to a license agreement with Archemix on which we depend for rights to Zimura. These agreements generally impose diligence, development and commercialization timelines, milestone payment, royalty, insurance and other obligations on us. Generally, the diligence obligations contained in these agreements require us to use commercially reasonable efforts to develop, seek regulatory approval for and commercialize the applicable product candidate in the United States and certain territories outside of the United States, including the European Union, Japan and such other markets where it would be commercially reasonable to do so. Under the license agreements for our product candidates, we would not be able to avoid our payment obligations even if we believed a licensed patent right was invalid or unenforceable because the license agreements provide that our licenses to all licensed patent rights would terminate if we challenge the validity or enforceability of any licensed patent right. The Inception 4 Merger Agreement, pursuant to which we acquired our HtrA1 inhibitor program, also imposes specified diligence and milestone payment obligations on us. We may enter into acquisition or licensing agreements in the future that would impose similar obligations on us.

If we fail to comply with our obligations under current or future acquisition and licensing agreements, or otherwise breach an acquisition or licensing agreement as a result of our own actions or inaction or the actions or inactions of our commercialization or collaboration partners, our counterparties may have the right to terminate these agreements, in which event we might not have the rights or the financial resources to develop, manufacture or market any product that is covered by these agreements. Our counterparties also may have the right to convert an exclusive license to non-exclusive in the territory in which we fail to satisfy our diligence obligations, which could materially adversely affect the value of the product candidate being developed under any such agreement. Termination of these agreements or reduction or elimination of our rights under these agreements may result in our having to negotiate new or restated agreements with less favorable terms, seek alternative sources of financing or cause us to lose our rights under these agreements, including our rights to IC-100, IC-200, our miniCEP290 program, Zimura and other important intellectual property or technology. Any of the foregoing could prevent us from commercializing our product candidates, which could have a material adverse effect on our operating results and overall financial condition. In the case of our limited diligence obligation under the Inception 4 Merger Agreement, a potential breach of our obligation to use commercially reasonable efforts to develop an HtrA1 inhibitor could lead to a lawsuit with the former equityholders of Inception 4 and result in potential liability to us of up to $5 million.

In addition to the above risks, certain of our intellectual property rights are sublicenses under intellectual property owned by third parties, in some cases through multiple tiers. The actions of our licensors may therefore affect our rights to use our sublicensed intellectual property, even if we are in compliance with all of the obligations under our license agreements. Should our licensors or any of their upstream licensors fail to comply with their obligations under the agreements pursuant to

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which they obtain the rights that are sublicensed to us, or should such agreements be terminated or amended, our ability to develop and commercialize the relevant product candidates may be materially harmed. While the applicable agreements may contain contractual provisions that would in many instances protect our rights as a sublicensee in these circumstances, these provisions may not be enforceable and may not protect our rights in all instances. Further, we do not have the right to control the prosecution, maintenance and enforcement of all of our licensed and sublicensed intellectual property, and even when we do have such rights, we may require the cooperation of our licensors and their upstream licensors, which may not be forthcoming. Our business could be materially adversely affected if we are unable to prosecute, maintain and enforce our licensed and sublicensed intellectual property effectively.

Moreover, the license agreements for IC-100, IC-200 and our miniCEP290 program reserve for the licensing academic institutions the right to continue to practice for research purposes, the inventions covered by the intellectual property rights that we have in-licensed. These licensing institutions or their collaborators may generate scientific, preclinical or clinical data with respect to our product candidates, separate from our research and development efforts, that is inconsistent with other data for such product candidates, including additional preclinical and clinical data that we develop. Investigators at these institutions may publish, present, or otherwise publicly disclose this data, which may have an adverse impact on the prospects of the development of our product candidates and may harm our business. In addition, these institutions may use these data to support new patent applications which could result in the issuance of patents that may limit our freedom to operate without our obtaining additional licenses to these newly developed inventions.

Risks Related to Our Intellectual Property

If we are unable to obtain and maintain or do not maintain patent protection for our technology and products during the period of their commercialization, or if the scope of the patent protection is not sufficiently broad, our competitors could develop and commercialize technology and products similar or identical to ours, and our ability to successfully commercialize our technology and products may be adversely affected.

We currently rely and expect to continue to rely on patent rights to protect our competitive position. Once our patents expire, we may not be able to exclude competitors from commercializing products similar or identical to ours. The U.S. patent rights covering Zimura as a composition of matter are expected to expire in 2025. The U.S. patent rights covering methods of treating certain complement protein mediated disorders with Zimura are expected to expire in 2026. The European patent rights covering the composition of matter of Zimura and methods of treating certain complement protein mediated disorders with Zimura are expected to expire in 2025. If data from ongoing clinical trials are positive, we expect the clinical development of Zimura to continue for at least the next several years. If so, the patents covering Zimura may expire before the date by which we or a potential commercial partner would be able to commercialize Zimura in the United States or Europe if we seek and obtain marketing approval. Even if we are able to obtain marketing approval for and commercially launch Zimura prior to the expiration of these patents, the remaining term of those patents may be shorter than we anticipate. Although the patent rights under existing patent applications for IC-100, our miniCEP290 program and our HtrA1 inhibitors are not expected to expire until 2037 or after, we face the same risk with those product candidates and programs and any future product candidates that we may develop.

Our product candidate IC-200 is not currently covered by a patent or pending patent application. In developing and advancing this product candidate, we may seek to rely on the prospect of generating new intellectual property during development of the product candidate or the potential for non-patent market exclusivity, including regulatory exclusivity as a result of the Orphan Drug Act. If we, together with Penn and UFRF, are unable to generate data to support a patent or patent application to cover this product candidate or if we are unable to obtain non-patent market exclusivity, we may not be able to exclude competitors from marketing an identical or substantially similar product.

For our sponsored research agreements with UMMS and Penn, we are generally relying on our university collaborators to generate research and data to support new patent applications. The results of any sponsored research are uncertain and the interests of the universities and university researchers are not necessarily aligned with our interests as a commercial entity. The research may generate limited patentable results or data, or none at all. Furthermore, the universities generally control the filing, prosecution and maintenance of any patents or patent applications resulting from the sponsored research. Therefore, we may not be able to obtain any patent or other exclusivity protections as a result of our collaborative gene therapy sponsored research programs, which could materially diminish or eliminate the value of these programs.

Certain of our licensed patent rights for Zimura are method-of-treatment patents. Method-of-treatment patents are more difficult to enforce than composition-of-matter patents because of the risk of off-label sale or use of a drug for the patented method. The FDA does not prohibit physicians from prescribing an approved product for uses that are not described in the product’s labeling. Although use of a product directed by off-label prescriptions may infringe our method-of-treatment patents, the practice is common across medical specialties, particularly in the United States, and such infringement is difficult to detect, prevent or prosecute. Off-label sales of other products having the same drug substance as Zimura or any other product

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candidates we may develop would limit our ability to generate revenue from the sale of Zimura or such other product candidates, if approved for commercial sale. In addition, European patent law generally makes the issuance and enforcement of patents that cover methods of treatment of the human body difficult. Further, once the composition-of-matter patents relating to Zimura or any other product candidate in a particular jurisdiction, if any, expire, competitors will be able to make, offer and sell products containing the same drug substance as Zimura or such other product candidate in that jurisdiction so long as these competitors do not infringe any of our other patents covering Zimura’s composition of matter or method of use or manufacture, do not violate the terms of any marketing or data exclusivity that may be granted to us by regulatory authorities and they obtain any necessary marketing approvals from applicable regulatory authorities. In such circumstances, we also may not be able to detect, prevent or prosecute off-label use of such competitors’ products containing the same drug substance as Zimura, even if such use infringes any of our method-of-treatment patents.

Depending on potential delays in the regulatory review process for any of our product candidates, we may be able to obtain patent term extension for one of our patents in the United States under the Hatch-Waxman Act, which permits a patent extension term of up to five years as partial compensation for patent term effectively lost during product development and the FDA regulatory review process occurring after the issuance of a patent, but we can provide no assurances that such an extension term will be obtained. Similar to the patent term extension available in the United States, the regulatory framework in the European Union and certain other foreign jurisdictions provides the opportunity to extend the term of a patent that covers an approved drug in certain circumstances. Notwithstanding the availability of patent term extension provisions, we may not be granted patent term extensions because of, for example, failing to apply within applicable deadlines, failing to apply prior to expiration of relevant patents or otherwise failing to satisfy applicable requirements, such as using diligent efforts to develop a drug candidate. Moreover, the applicable time period or the scope of patent protection afforded could be less than we request. If we are unable to obtain patent term extension or the term or scope of any such extension is less than we request, any period during which we have the right to exclusively market our product would be shorter than we would otherwise expect, and our competitors may commercialize competing products following our patent expiration, and our revenue could be reduced, possibly materially.

The Hatch-Waxman Act also permits the manufacture, use, offer for sale, sale or importation of a patented invention other than a new animal drug or veterinary biological product, if the manufacture, use, offer for sale, sale or importation is solely for uses that are reasonably related to development of information that could be submitted to the FDA. For this reason, our competitors might be able under certain circumstances to perform activities within the scope of the U.S. patents that we own or under which we are licensed without infringing such patents. This might enable our competitors to develop during the lifetime of these patents drugs that compete with our product candidates.

Our issued patents may not be sufficient to provide us with a competitive advantage. For example, competitors may be able to circumvent our owned or licensed patents by developing similar or alternative technologies or products in a non-infringing manner. Even if our owned or licensed patent applications issue as patents, they may not issue with a scope broad enough to provide us with any meaningful protection, prevent competitors from competing with us or otherwise provide us with any competitive advantage. We could also fail to take the required actions and pay the necessary governmental fees to maintain our patents.

The issuance of a patent is not conclusive as to its inventorship, ownership, scope, term, validity or enforceability, and our owned and licensed patents may be challenged in the courts or patent offices in the United States and abroad. For example, if we receive marketing approval for our product candidates, other pharmaceutical companies may seek approval of generic or biosimilar versions of our products with the FDA or regulatory authorities in other jurisdictions. We may then be required to initiate proceedings against such companies in order to enforce our intellectual property rights. The risk of being involved in such proceedings is likely to increase if our products are commercially successful. In any such proceedings, the inventorship, ownership, scope, term, validity and enforceability of our patents may be challenged. These and other challenges may result in loss of exclusivity or freedom to operate or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our ability to prevent others from using or commercializing similar or identical technology and products or from launching generic or biosimilar versions of our products, or could limit the duration of the patent protection of our technology and products. The launch of a generic version of one of our products in particular would be likely to result in an immediate and substantial reduction in the demand for our product, which could have a material adverse effect on our business. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.

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The patent prosecution process is expensive and time-consuming, is highly uncertain and involves complex legal and factual questions. Patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents.

Our success depends in large part on our ability to obtain and maintain patent protection in the United States and other countries with respect to our proprietary technology and products. We seek to protect our proprietary position by filing in the United States and in certain foreign jurisdictions patent applications related to our novel technologies and product candidates that are important to our business.

The patent prosecution process is expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. In addition, we may not pursue or obtain patent protection in all major markets. Moreover, in some circumstances, we do not have the right to control the preparation, filing or prosecution of patent applications, or to maintain the patents, covering technology that we license from third parties or covering technology that a collaboration or commercialization partner may develop, the eventual commercialization of which could potentially entitle us to royalty payments. In some circumstances, our licensors may have the right to enforce the licensed patents without our involvement or consent, or to decide not to enforce or to allow us to enforce the licensed patents. Therefore, these patents and applications may not be prosecuted and enforced in a manner consistent with the best interests of our business. If any such licensors fail to maintain such patents, or lose rights to those patents, the rights that we have licensed may be reduced or eliminated and our ability to develop and commercialize any of our products that are the subject of such licensed rights could be adversely affected.

The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions and has in recent years been the subject of much litigation. In addition, the laws of foreign jurisdictions may not protect our rights to the same extent as the laws of the United States. For example, European patent law restricts the patentability of methods of treatment of the human body more than United States law does. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. Therefore, we cannot be certain that we or our licensors were the first to make the inventions claimed in our owned or licensed patents or pending patent applications, or that we or our licensors were the first to file for patent protection of such inventions. Moreover, the U.S. Patent and Trademark Office, or USPTO, might require that the term of a patent issuing from a pending patent application be disclaimed and limited to the term of another patent that is commonly owned or names a common inventor. As a result, the issuance, scope, validity, term, enforceability and commercial value of our patent rights are highly uncertain.

Our pending and future patent applications, and any collaboration or commercialization partner’s pending and future patent applications, may not result in patents being issued which protect our technology or products, in whole or in part, or which effectively prevent others from commercializing competitive technologies and products. In particular, during prosecution of any patent application, the issuance of any patents based on the application may depend upon our or their ability to generate additional preclinical or clinical data that support the patentability of our proposed claims. We or any collaboration or commercialization partner may not be able to generate sufficient additional data on a timely basis, or at all. Moreover, changes in either the patent laws or interpretation of the patent laws in the United States or other countries may diminish the value of our or a collaboration or commercialization partner’s patents or narrow the scope of our or their patent protection.

Patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents. The Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law in September 2011, and many of the substantive changes became effective in March 2013. The Leahy-Smith Act revised United States patent law in part by changing the standard for patent approval from a “first to invent” standard to a “first to file” standard and developing a post-grant review system. This legislation changed United States patent law in a way that may weaken our ability to obtain patent protection in the United States for those applications filed after March 2013. For example, if we are the first to invent a new product or its use, but another party is the first to file a patent application on this invention, under the new law the other party may be entitled to the patent rights on the invention.

Moreover, we may be subject to a third-party preissuance submission of prior art to the USPTO, or become involved in opposition, derivation, reexamination, inter partes review, post-grant review, interference proceedings or other patent office proceedings or litigation, in the United States or elsewhere, challenging our patent rights or the patent rights of others. The Leahy-Smith Act expanded the ability of third parties to challenge the patents held by patentees through administrative reviews at the USPTO, which may facilitate others to challenge our patents. Based on available information, we believe that inter partes review proceedings, brought by financial investors who may be selling short the stock of the patent holder, are becoming more prevalent. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our patent rights; allow third parties to commercialize our technology or products and compete directly with us, without payment to us; or result in our inability to manufacture or commercialize products without infringing third-party patent rights.

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In addition, if the breadth or strength of protection provided by our patents and patent applications is threatened, it could dissuade companies from collaborating with us to develop or commercialize current or future product candidates.

We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, time consuming and unsuccessful.

Competitors may infringe or otherwise violate our patents, trademarks, copyrights or other intellectual property. To counter infringement or other violations, we may be required to file claims, which can be expensive and time consuming. Any such claims could provoke these parties to assert counterclaims against us, including claims alleging that we infringe their patents or other intellectual property rights. In addition, in a patent infringement proceeding, a court may decide that one or more of the patents we assert is invalid or unenforceable, in whole or in part, construe the patent’s claims narrowly or refuse to prevent the other party from using the technology at issue on the grounds that our patents do not cover the technology. Similarly, if we assert trademark infringement claims, a court may determine that the marks we have asserted are invalid or unenforceable or that the party against whom we have asserted trademark infringement has superior rights to the marks in question. In such a case, we could ultimately be forced to cease use of such marks. In any intellectual property litigation, even if we are successful, any award of monetary damages or other remedy we receive may not be commercially valuable. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation.

Third parties may initiate legal proceedings or take other actions alleging that we are infringing or otherwise violating their intellectual property rights, the outcome of which would be uncertain and could have a material adverse effect on the success of our business.

Our commercial success depends upon our ability and the ability of any future collaboration and commercialization partners to develop, manufacture, market and sell our product candidates and products and use our proprietary technologies without infringing or otherwise violating the intellectual property and other proprietary rights of third parties. New patent applications in the field of biotechnology and pharmaceuticals, and gene therapies in particular, are being filed at a rapid pace.

There is considerable intellectual property litigation in the biotechnology and pharmaceutical industries. We or any future collaboration and commercialization partners may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to our products and technology, including interference, derivation, re-examination, post-grant review, inter partes review, opposition, cancellation or similar proceedings before the USPTO or its foreign counterparts. The risks of being involved in such litigation and proceedings may increase as our product candidates near commercialization.

Third parties may assert infringement claims against us or our collaboration or commercialization partners based on existing or future intellectual property rights. We or they may not be aware of all such intellectual property rights potentially relating to our product candidates and their manufacture and uses. There is a lag between the filing of a patent application, which generally establishes the priority date of a patent claim, and the publication of such patent application. During the period between filing of a patent application and publication of the application, we would not otherwise have a means of discovering the existence or extent of the claimed inventions contained in a filed but unpublished patent application. Patent applications are often drafted broadly, and the scope of patent claims that may ultimately issue may not be known until several years after a patent application is filed and published. We may make development or pipeline decisions based on our belief that our product candidates can be distinguished from patent claims contained in published patent applications or issued patents, that patent claims contained in published patent applications are unlikely to issue as drafted, or that claims contained in issued patents are invalid. These positions regarding third-party intellectual property may not ultimately be successful in litigation. Thus, we do not know with certainty that our product candidates, or our intended commercialization thereof, does not and will not infringe or otherwise violate any third party’s intellectual property.

If we are or any of our future collaboration or commercialization partners is found to infringe or otherwise violate a third party’s intellectual property rights, we or they could be required to obtain a license from such third party to continue developing and marketing our product candidates or products or to continue using a trademark. However, we or our future collaboration and commercialization partners may not be able to obtain any required license on commercially reasonable terms or at all. Even if we or they were able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to us or our collaboration and commercialization partners and could require us or them to make substantial licensing and royalty payments. We or our future collaboration and commercialization partners could be forced, including by court order, to cease commercializing the infringing technology or product. In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees, if we are found to have willfully infringed a patent or other intellectual property right. A finding of infringement could prevent us or our future collaboration and commercialization partners from commercializing our product candidates or force us or them to cease some of our business operations, which could materially harm our business. Claims that we or our future collaboration and commercialization partners have

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misappropriated the confidential information or trade secrets of third parties could expose us or them to similar liabilities and have a similar negative impact on our business.

We may be subject to claims by third parties asserting that we or our employees have misappropriated their intellectual property, or claiming ownership of what we regard as our own intellectual property.

Many of our employees and contractors were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although we try to ensure that our employees and contractors do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or these employees or contractors have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such employee’s or contractor’s former employer. Litigation may be necessary to defend against these claims.

In addition, while it is our policy to require our employees and contractors who may be involved in the conception or development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who in fact conceives or develops intellectual property that we regard as our own. Moreover, because we acquired rights to our product candidates from third parties, we must rely upon these third parties and their successors' practices, and those of their predecessors, with regard to the assignment of intellectual property therein, including the intellectual property rights protecting the HtrA1 inhibitors we acquired in the Inception 4 acquisition transaction. Our and their assignment agreements may not be self-executing or may be breached, and we may be forced to bring claims against third parties, or defend claims they may bring against us, to determine the ownership of what we regard as our intellectual property.

If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel.

Intellectual property litigation could cause us to spend substantial resources and could distract our personnel from their normal responsibilities.

Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses and could distract our technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments, and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing or distribution activities. We may not have sufficient financial or other resources to conduct such litigation or proceedings adequately. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.

Obtaining and maintaining our patent protection depends on compliance with various procedural, documentary, fee payment and other requirements imposed by governmental patent offices, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

Periodic maintenance fees on any issued patent are due to be paid to the USPTO and patent offices in foreign countries in several stages over the lifetime of the patent. The USPTO and patent offices in foreign countries require compliance with a number of procedural, documentary, fee payment and other requirements 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 non-compliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of a patent or patent rights in the relevant jurisdiction. Non-compliance events that could result in abandonment or lapse of a patent or patent application include, but are not limited to, failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. In such an event, our competitors might be able to enter the market sooner than we expect, which would have a material adverse effect on our business.

If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.

In addition to seeking patents for some of our technology and products, we also rely upon trade secrets, including unpatented know-how, technology and other proprietary information, to maintain our competitive position. We seek to protect these trade secrets, in part, by entering into non-disclosure and confidentiality agreements with parties who have access to them, such as our outside scientific collaborators, contract manufacturers, advisors and other third parties. We also enter into confidentiality and invention or patent assignment agreements with our employees and consultants. We cannot guarantee that

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we have executed such agreements with each party that may have or have had access to our trade secrets. Moreover, because we acquired our HtrA1 inhibitor program through the acquisition of Inception 4, we are relying upon Inception 4's, and its prior owner's, practices with regard to the protection of trade secrets and intellectual property rights for the period prior to our acquisition of Inception 4. Any party with whom we or they have executed a non-disclosure and confidentiality agreement may breach that agreement and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Our proprietary information may also be obtained by third parties by other means, such as breaches of our physical or computer security systems.

Detecting the disclosure or misappropriation of a trade secret and enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts inside and outside the United States are less willing or unwilling to protect trade secrets. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them, or those to whom they communicate it, from using that technology or information to compete with us and our competitive position would be harmed.

Risks Related to Information Technology

We rely significantly upon information technology systems and any failure, inadequacy, interruption or security lapse of these systems could harm our ability to operate our business effectively.

In the ordinary course of our business, we and our third-party contractors maintain personal and other sensitive data on our and their respective networks, including our intellectual property and proprietary or confidential information relating to our business and that of our clinical trial participants, business partners and employees. In particular, we rely on contract research organizations and other third parties to store and manage data generated from our preclinical research and development activities and information from our clinical trials. The secure maintenance of this sensitive information is critical to our business and reputation.

We have implemented a number of measures to protect our information technology systems. These measures include, among others, creation of a cyber-security governance team and standard operating procedures for responding to any cyber-security breaches, mandatory cyber-security training for our employees and consultants with access to our information technology systems and engagement of a third-party vendor to assess our informational technology systems and potential vulnerabilities.

Despite the implementation of security measures, our internal computer systems and those of our third-party contractors are vulnerable to compromise, damage, loss or exfiltration from cyber-attacks, computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. In particular, companies and other entities and individuals have been increasingly subject to a wide variety of security incidents, cyber-attacks, phishing scams and other attempts to gain unauthorized access to systems and information, including through social engineering. The number and complexity of these threats continue to increase over time. These threats can come from a variety of sources, ranging in sophistication from individual hackers to state-sponsored attacks. Cyber threats may be broadly targeted, or they may be custom-crafted against our information systems or those of our third-party contractors.

For information stored with our third-party contractors, we rely upon, and the integrity and confidentiality of such information is dependent upon, the risk mitigation efforts such third-party contractors have in place. In the recent past, cyber-attacks have become more prevalent and much harder to detect and defend against. Our and our third-party contractors’ respective network and storage applications may be subject to unauthorized access by hackers or breached due to operator error, malfeasance or other system disruptions. We might not anticipate or immediately detect such incidents and the damage caused by such incidents. System failures, data breaches and any unauthorized access or disclosure of our information or intellectual property could compromise our intellectual property and expose sensitive business information. System failures or accidents or security breaches could cause interruptions in our operations, and could result in a material disruption of our research and development activities and business operations, in addition to possibly requiring substantial expenditures of resources to remedy. Moreover, if a breach of our security or that of our vendors occurs, the market perception of the effectiveness of our security measures could be harmed and our reputation and credibility could be damaged.

A data security breach could also lead to public or unauthorized exposure of personal information of our clinical trial patients, our employees or others. Cyber-attacks and the measures we implement to prevent, detect, and respond to them could cause us to incur significant remediation costs, result in product development delays, disrupt key business operations, expose us to contractual damages and/or regulatory liability, require us to make certain breach notifications, divert the attention of our management and key information technology resources, harm our reputation and deter patients, clinical investigators or other business partners from participating in our clinical trials or otherwise working with us. Any loss of preclinical data or clinical trial data could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the

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data. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate public disclosure of confidential or proprietary information, we could incur liability and our product development and commercialization efforts could be delayed. In addition, we may not have adequate insurance coverage to provide compensation for any losses associated with such events.

Compliance with global privacy and data security requirements could result in additional costs and liabilities to us or inhibit our ability to collect and process data globally, and the failure to comply with such requirements could have a material adverse effect on our business, financial condition or results of operations.

The regulatory framework for the collection, use, safeguarding, sharing, transfer and other processing of information worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future. Globally, virtually every jurisdiction in which we operate has established its own data security and privacy frameworks with which we must comply. For example, the collection, use, disclosure, transfer, or other processing of personal data regarding individuals in the European Union, including personal health data, is subject to the EU General Data Protection Regulation, or GDPR, which became effective on May 25, 2018. The GDPR is wide-ranging in scope and imposes numerous requirements on companies that process personal data, including requirements relating to processing health and other sensitive data, obtaining consent of the individuals to whom the personal data relates, providing information to individuals regarding data processing activities, implementing safeguards to protect the security and confidentiality of personal data, providing notification of data breaches, and taking certain measures when engaging third-party data processors. The GDPR also imposes strict rules on the transfer of personal data to countries outside the European Union, including the United States, and permits data protection authorities to impose large penalties for violations of the GDPR, including potential fines of up to €20 million or 4% of annual global revenues, whichever is greater. The GDPR also confers a private right of action on data subjects and consumer associations to lodge complaints with supervisory authorities, seek judicial remedies, and obtain compensation for damages resulting from violations of the GDPR. Given the breadth and depth of changes in data protection obligations, preparing for and complying with the GDPR’s requirements has required and will continue to require significant time, resources and a review of our technologies, systems and practices, as well as those of any third-party collaborators, service providers, contractors or consultants that process or transfer personal data collected in the European Union. We are aware that several states have enacted or are considering legislation similar to the GDPR. The GDPR and other changes in laws or regulations associated with the enhanced protection of certain types of sensitive data, such as healthcare data or other personal information from our clinical trials, could require us to change our business practices, and any non-compliance by us or our employees, consultants or contractors could lead to government enforcement actions, private litigation, significant fines and penalties, or reputational harm and could have a material adverse effect on our business, financial condition or results of operations.

Risks Related to Regulatory Approval and Marketing of our Product Candidates and Other Legal Compliance Matters

Even if we complete the necessary preclinical studies and clinical trials, the marketing approval process is expensive, time-consuming and uncertain and may prevent us from obtaining approvals for the commercialization of some or all of our product candidates. If we are not able to obtain, or if there are delays in obtaining, required regulatory approvals, we will not be able to commercialize our product candidates, and our ability to generate revenue would be materially impaired.

Our product candidates and the activities associated with their development and commercialization, including their design, testing, manufacture, safety, efficacy, recordkeeping, labeling, storage, approval, advertising, promotion, sale and distribution and import and export, are subject to comprehensive regulation by the FDA, the EMA and comparable regulatory agencies in other countries.

In general, the FDA and similar regulatory authorities outside the United States require two adequate and well-controlled clinical trials demonstrating safety and effectiveness for marketing approval for an ophthalmic pharmaceutical product. Failure to obtain marketing approval for a product candidate will prevent us from commercializing the product candidate. We have not received approval to market any of our product candidates from regulatory authorities in any jurisdiction. We have only limited experience in filing and supporting the applications necessary to gain marketing approvals and expect to rely upon third-party CROs to assist us in this process. Securing marketing approval requires obtaining positive safety and efficacy data from required clinical trials, as well as the submission of extensive preclinical and clinical data and supporting information to regulatory authorities for each indication to establish the product candidate’s safety and efficacy. Securing marketing approval also requires the submission of information about the product manufacturing processes to, and inspection of manufacturing facilities by, the relevant regulatory authorities. The FDA or other regulatory authorities may determine that a product candidate that we may develop is not effective, is only moderately effective or has undesirable or unintended side effects, toxicities or other characteristics that preclude our obtaining marketing approval or prevent or limit commercial use.

The process of obtaining marketing approvals, both in the United States and abroad, is expensive, may take many years, if approval is obtained at all, and can vary substantially based upon a variety of factors, including the type, complexity

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and novelty of the product candidates involved. Changes in marketing approval policies during the development period, changes in or the enactment of additional statutes or regulations, or changes in regulatory review for each submitted product application, may cause delays in the approval or rejection of an application. Regulatory authorities have substantial discretion in the approval process and may refuse to accept any application or may decide that our data are insufficient for approval and require additional preclinical, clinical or other studies. In addition, varying interpretations of the data obtained from preclinical and clinical testing could delay, limit or prevent marketing approval of a product candidate. Any marketing approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render the approved product not commercially viable.

Marketing approval of novel product candidates such as Zimura and our gene therapy product candidates manufactured using novel manufacturing processes can be more expensive and take longer than for other, more well-known or extensively studied pharmaceutical or biopharmaceutical products, due to regulatory agencies’ lack of experience with them. We believe that the FDA has only granted marketing approval for one aptamer product and two gene replacement products to date. This lack of experience may lengthen the regulatory review process, require us to conduct additional studies or clinical trials, increase our development costs, lead to changes in regulatory positions and interpretations, delay or prevent approval and commercialization of these product candidates or lead to significant post-approval limitations or restrictions.

Accordingly, if we or our collaborators experience delays in obtaining approval or if we fail to obtain approval of our product candidates, the commercial prospects for such product candidate may be harmed and our ability to generate revenues would be materially impaired.

Failure to obtain marketing approval in foreign jurisdictions would prevent our product candidates from being marketed in such jurisdictions. The approval requirements in foreign jurisdictions may differ significantly from those in the United States.

In order to market and sell our product candidates in the European Union and many other jurisdictions, we or our third-party commercialization partners must obtain separate marketing approvals and comply with numerous and varying regulatory requirements. The approval procedure varies among countries and can involve additional preclinical or clinical 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. In addition, in many countries outside the United States, it is required that the product be approved for reimbursement before the product can be approved for sale in that country. We or our third-party commercialization partners may not obtain marketing and/or reimbursement 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. We and our third-party commercialization partners may not be able to file for marketing approvals and may not receive necessary approvals to commercialize our products in any market.

Additionally, in June 2016 the electorate in the United Kingdom voted in favor of leaving the European Union, commonly referred to as Brexit. The process for withdrawal has been and remains uncertain and convoluted, with the United Kingdom currently scheduled to withdraw from the European Union on October 31, 2019, and currently, no effective withdrawal agreement has been concluded between the European Union and the United Kingdom. Since a significant proportion of the regulatory framework in the United Kingdom is derived from European Union directives and regulations, Brexit could materially impact the regulatory regime with respect to the approval of our product candidates in the United Kingdom or the European Union. Any delay in obtaining, or an inability to obtain, any marketing approvals, as a result of Brexit or otherwise, would prevent us from commercializing our product candidates in the United Kingdom and/or the European Union and restrict our ability to generate revenue and achieve and sustain profitability. If any of these outcomes occur, we may be forced to restrict or delay efforts to seek regulatory approval in the United Kingdom and/or European Union for our product candidates, which could significantly and materially harm our business. It remains to be seen how, if at all, Brexit will actually occur and how, if at all, Brexit will impact regulatory requirements for the approval of pharmaceutical product candidates and the sale of pharmaceutical products in the United Kingdom and the European Union.

We currently do not have orphan drug designations or orphan drug exclusivity for any product candidate. If our competitors are able to obtain orphan drug exclusivity for products that constitute the same drug and treat the same indications as our product candidates, we may not be able to have our product candidates approved by the applicable regulatory authority for a significant period of time.

Regulatory authorities in some jurisdictions, including the United States and the European Union, may designate drugs for relatively small patient populations as orphan drugs. Under the Orphan Drug Act, the FDA may designate a product candidate as an orphan drug if it is intended to treat a rare disease or condition, which is generally defined as having a patient population of fewer than 200,000 individuals in the United States, or a patient population greater than 200,000 in the United

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States where there is no reasonable expectation that the cost of developing the drug will be recovered from sales in the United States. In the European Union, the EMA’s Committee for Orphan Medicinal Products grants orphan drug designation to promote the development of products that are intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition affecting not more than 5 in 10,000 persons in the European Union. Additionally, orphan designation is granted for products intended for the diagnosis, prevention or treatment of a life-threatening, seriously debilitating or serious and chronic condition and when, without incentives, it is unlikely that sales of the drug in the European Union would be sufficient to justify the necessary investment in developing the drug or biologic product.

If we request orphan drug designation for any of our product candidates in one or more indications, there can be no assurances that the FDA or the European Commission will grant any of our product candidates such designation. Additionally, the designation of any of our product candidates as an orphan product does not guarantee that any regulatory agency will accelerate regulatory review of, or ultimately approve, that product candidate, nor does it limit the ability of any regulatory agency to grant orphan drug designation to product candidates of other companies that treat the same indications as our product candidates prior to our product candidates receiving exclusive marketing approval.

Generally, if a product candidate with an orphan drug designation receives the first marketing approval for the indication for which it has such designation, the product is entitled to a period of marketing exclusivity, which precludes the FDA or the European Commission during that marketing exclusivity period from approving another marketing application for a product that constitutes the same drug treating the same indication, except in limited circumstances. If another sponsor receives such approval before we do, regardless of our orphan drug designation, we will be precluded from receiving marketing approval for our product candidate during the applicable exclusivity period. The applicable period is seven years in the United States and 10 years in the European Union. The exclusivity period in the United States can be extended by six months if the sponsor submits pediatric data that fairly respond to a written request from the FDA for such data. The exclusivity period in the European Union can be reduced to six years if a product no longer meets the criteria for orphan drug designation or if the product is sufficiently profitable so that market exclusivity is no longer justified. Orphan drug exclusivity may be revoked if any regulatory agency determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the product to meet the needs of patients with the rare disease or condition.

Even if we obtain orphan drug exclusivity for a product candidate, that exclusivity may not effectively protect the product candidate from competition because different drugs can be approved for the same condition. In the United States, even after an orphan drug is approved, the FDA may subsequently approve another drug for the same condition if the FDA concludes that the later drug is not the same drug or is clinically superior in that it is shown to be safer, more effective or makes a major contribution to patient care. In particular, the concept of what constitutes the "same drug" for purposes of orphan drug exclusivity is unclear in the context of gene therapies, and the FDA has issued draft guidance suggesting minor variations in the construct of a gene therapy that lead to improvements in safety or efficacy may result in the determination that a drug is a "different drug". In the European Union, marketing authorization may be granted to a similar medicinal product for the same orphan indication if:


•	the second applicant can establish in its application that its medicinal product, although similar to the orphan medicinal product already authorized, is safer, more effective or otherwise clinically superior;


•	the holder of the marketing authorization for the original orphan medicinal product consents to a second orphan medicinal product application; or


•	the holder of the marketing authorization for the original orphan medicinal product cannot supply sufficient quantities of the orphan medicinal product.

A fast track designation or grant of priority review status by the FDA may not actually lead to a faster development or regulatory review or approval process. The FDA may withdraw fast track designation if it believes that the designation is no longer supported by data from our clinical development program.

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

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The FDA has broad discretion whether or not to grant fast track designation or priority review status, so even if we believe a particular product candidate is eligible for such designation or status the FDA could decide not to grant it. Even though a product has received fast track designation and may be eligible for priority review status, a sponsor may not ultimately experience a faster development process, review or approval compared to conventional FDA procedures.

A breakthrough therapy designation by the FDA for our product candidates may not lead to a faster development or regulatory review or approval process, and it does not increase the likelihood that our product candidates would receive marketing approval.

In 2012, Congress enacted the Food and Drug Administration Safety and Innovation Act, or FDASIA. This law established a new regulatory scheme allowing for expedited review of products designated as “breakthrough therapies.” A product may be designated as a breakthrough therapy if it is intended, either alone or in combination with one or more other products, to treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the product may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. The FDA may take certain actions with respect to breakthrough therapies, including holding meetings with the sponsor throughout the development process; providing timely advice to the product sponsor regarding development and approval; involving more senior staff in the review process; assigning a cross-disciplinary project lead for the review team; and taking other steps to design the clinical trials in an efficient manner.

Designation as a breakthrough therapy is within the discretion of the FDA. Accordingly, even if we believe one of our product candidates meets the criteria for designation as a breakthrough therapy, the FDA may disagree and instead decide not to make such designation. In any event, the receipt of a breakthrough therapy designation for a product candidate may not result in a faster development process, review or approval compared to drugs considered for approval under conventional FDA procedures and does not ensure ultimate approval by the FDA. In addition, even if one or more of our product candidates qualify as breakthrough therapies, the FDA may later decide that the products no longer meet the conditions for qualification or that the time period for FDA review or approval will not be shortened.

Any product candidate for which we obtain marketing approval could be subject to post-marketing restrictions or withdrawal from the market and we or our third-party commercialization partners may be subject to penalties if we or our third-party commercialization partners or our or their manufacturers fail to comply with regulatory requirements or if we or our third-party commercialization partners or our or their manufacturers experience unanticipated problems with our products, when and if any of them are approved.

Any product candidate for which we or our commercialization partners obtain marketing approval, along with the manufacturing processes, post-approval clinical data, labeling, advertising and promotional activities for such product, will be subject to the continued requirements of and review by the FDA and other regulatory authorities. These requirements include submissions of safety and other post-marketing information and reports, registration and listing requirements, cGMP requirements relating to manufacturing, quality control and quality assurance, complaints and corresponding maintenance of records and documents, requirements regarding the distribution of samples to physicians and recordkeeping. Even if marketing approval of a product candidate is granted, the approval may be subject to limitations on the indicated uses for which the product may be marketed or may be subject to significant conditions of approval or contain requirements for costly post-marketing testing and surveillance to monitor the safety or efficacy of the medicine, including the requirement to implement a risk evaluation and mitigation strategy.

The FDA and other agencies, including the Department of Justice, or the DOJ, closely regulate and monitor the post-approval marketing and promotion of products to ensure that they are marketed and distributed only for the approved indications and in accordance with the provisions of the approved labeling. The FDA and DOJ impose stringent restrictions on manufacturers' communications regarding off-label use and if we do not market our products for their approved indications, we may be subject to enforcement action for off-label marketing. Violations of the FDCA and other statutes, including the False Claims Act, relating to the promotion and advertising of prescription drugs may lead to investigations and enforcement actions alleging violations of federal and state health care fraud and abuse laws, as well as state consumer protection laws.

In addition, later discovery of previously unknown adverse events or other problems with our products, manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may yield various results, including:


•	restrictions on such products, manufacturers or manufacturing processes;


•	restrictions on the labeling or marketing of a product;


•	restrictions on distribution or use of a product;


•	requirements to conduct post-marketing studies or clinical trials;

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•	warning letters or untitled letters;


•	refusal to approve pending applications or supplements to approved applications that we submit;


•	recall of products;


•	damage to relationships with any potential collaborators;


•	unfavorable press coverage and damage to our reputation;


•	fines, restitution or disgorgement of profits or revenues;


•	suspension or withdrawal of marketing approvals;


•	refusal to permit the import or export of our products;


•	product seizure;


•	injunctions or the imposition of civil or criminal penalties; and


•	litigation involving patients using our products.

Non-compliance with European Union requirements regarding safety monitoring or pharmacovigilance, and with requirements related to the development of products for the pediatric population, can also result in significant financial penalties. Similarly, failure to comply with the European Union’s requirements regarding the protection of personal information, such as the GDPR, can also lead to significant penalties and sanctions.

Our and our potential commercialization partners’ 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 us and our commercialization partners to criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings.

Healthcare providers, physicians and third-party payors play a primary role in the recommendation and prescription of any product candidates for which we obtain marketing approval. Our future arrangements with healthcare providers, physicians and third-party payors may expose us and our commercialization partners to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we and our commercialization partners market, sell and distribute any products for which we or they obtain marketing approval. Restrictions under applicable federal and state healthcare laws and regulations include the following:

•

the federal Anti-Kickback Statute prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order or recommendation or arranging of, any good or service, for which payment may be made under a federal healthcare program such as Medicare and Medicaid;

•

the federal False Claims Act imposes criminal and civil penalties, including through civil whistleblower or qui tam actions, against individuals or entities for, among other things, knowingly presenting, or causing to be presented, false or fraudulent claims for payment by a federal healthcare program or making a false statement or record material to payment of a false claim or avoiding, decreasing or concealing an obligation to pay money to the federal government, with potential liability including mandatory treble damages and significant per-claim penalties, currently set at a minimum of $10,781 and a maximum of $20,563 per false claim;


•	the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters;


•	HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and its implementing regulations, also imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information;


•	the federal Physician Payments Sunshine Act requires certain manufacturers of drugs, medical devices and biological products covered by federal healthcare benefit programs to report payments and other transfers of value to physicians and teaching hospitals; and

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•	analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws and transparency statutes, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by governmental and non-governmental third-party payors, including private insurers.

Some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government and may require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures. State and foreign laws also govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.

If our operations are found to be in violation of any of the laws described above or any governmental regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines and the curtailment or restructuring of our operations. Any penalties, damages, fines, curtailment or restructuring of our operations could adversely affect our financial results. As our product candidates advance in clinical development, we plan to develop and implement a corporate compliance program to ensure that we will market and sell any future products that we successfully develop in compliance with all applicable laws and regulations, but we cannot guarantee that any such program will protect us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws and regulations. If any such actions are instituted against us and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or other sanctions.

Efforts to ensure that our 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 our 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 our or our commercialization partners’ operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us or them, we or they may be subject to significant civil, criminal and administrative penalties, including damages, fines, exclusion of products from government funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our or their operations. If any of the physicians or other healthcare providers or entities with whom we expect to do business is found to be not in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.

Our operations may be dependent on the normal function of the FDA, the SEC and other government agencies. The inability of those agencies to obtain necessary funding and other effects from the political process could prevent those agencies from performing normal functions on which the operation of our business may rely, which could negatively impact our business.

The ability of the FDA to review and approve new product applications such as INDs, new drug applications and biologics license applications can be affected by a variety of factors, including government funding levels, ability to hire and retain key personnel and to accept the payment of user fees, and statutory, regulatory, and policy changes. Government funding of the FDA, the SEC and other government agencies on which our operations may rely is subject to the political process, which is inherently fluid and unpredictable. For example, over the last several years, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA and the SEC, have had to furlough critical employees and stop critical activities. If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business. Further, in our operations as a public company, future government shutdowns could impact our ability to access the public markets and obtain necessary capital in order to properly capitalize and continue our operations. In addition, the Trump Administration has taken several executive actions, including the issuance of a number of executive orders, that could affect federal agencies, including the FDA. Those executive actions, some of which are still being implemented, may impose significant burdens on, or otherwise materially delay, the FDA’s ability to engage in routine regulatory and oversight activities, which could negatively impact our business.

Current and future legislation and regulations may increase the difficulty and cost for us and any future collaborators to obtain marketing approval of and commercialize our product candidates and affect the prices we or they may charge for such products, when and if approved.

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, among other things, prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities and affect our ability, or the ability of any collaborators, to profitably sell any products for which we, or they, obtain marketing approval. We expect that current laws, as well as other

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healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that we, or any future collaborators, may charge for any approved products.

In March 2010, President Barack H. Obama signed into law the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively the ACA. Among the provisions of the ACA of potential importance to our business and our product candidates are the following:


•	an annual, non-deductible fee on any entity that manufactures or imports specified branded prescription products and biologic agents;


•	an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program;


•	expansion of healthcare fraud and abuse laws, including the civil False Claims Act and the federal Anti-Kickback Statute, new government investigative powers and enhanced penalties for noncompliance;


•	a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer, originally 50% and as of 2019, 70%, point-of-sale discounts off negotiated prices;


•	extension of manufacturers’ Medicaid rebate liability;


•	expansion of eligibility criteria for Medicaid programs;


•	expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program;


•	new requirements to report certain financial arrangements with physicians and teaching hospitals;


•	a new requirement to annually report product samples that manufacturers and distributors provide to physicians; and


•	a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research.

In addition, other legislative changes have been proposed and adopted since the ACA was enacted. These changes include the Budget Control Act of 2011, which, among other things, led to aggregate reductions to Medicare payments to providers of up to 2% per fiscal year that started in 2013 and, due to subsequent legislative amendments to the statute, will stay in effect through 2025 unless additional congressional action is taken, and the American Taxpayer Relief Act of 2012, which, among other things, reduced Medicare payments to several types of providers and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. These new laws may result in additional reductions in Medicare and other healthcare funding and otherwise affect the prices we may obtain for any of our product candidates for which we may obtain regulatory approval or the frequency with which any such product candidate is prescribed or used. Further, there have been several recent U.S. congressional inquiries and proposed state and federal legislation designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, reduce the costs of drugs under Medicare and reform government program reimbursement methodologies for drug products.

Since enactment of the ACA, there have been numerous legal challenges and congressional actions to repeal and replace provisions of the law. For example, with enactment of the Tax Cuts and Jobs Act of 2017, Congress repealed the “individual mandate.” The repeal of this provision, which required most Americans to carry a minimal level of health insurance, became effective in 2019. According to the Congressional Budget Office, the repeal of the individual mandate will cause 13 million fewer Americans to be insured in 2027 and premiums in insurance markets may rise. Further, the Bipartisan Budget Act of 2018, among other things, amended the ACA, effective January 1, 2019, to increase from 50 percent to 70 percent the point-of-sale discount that is owed by pharmaceutical manufacturers who participate in Medicare Part D and to close the coverage gap in most Medicare drug plans, commonly referred to as the “donut hole.” Congress may consider other legislation to amend or replace elements of the ACA during the current congressional session.

The Trump Administration has also taken executive actions to undermine or delay implementation of the ACA, which has lead to numerous legal challenges to the ACA and the Trump Administration's actions. Since January 2017, President Trump has signed at least two executive orders designed to delay the implementation of certain provisions of the ACA or otherwise circumvent some of the requirements for health insurance mandated by the ACA. One executive order directs federal agencies with authorities and responsibilities under the ACA to waive, defer, grant exemptions from, or delay the implementation of any provision of the ACA that would impose a fiscal or regulatory burden on states, individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices. A second executive order terminated the cost-sharing subsidies that reimburse insurers under the ACA, which has lead some states attorneys general and some insurers

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to sue the Trump Administration for such payments and a number of those lawsuits remain pending. Further, in June 2018, the U.S. Court of Appeals for the Federal Circuit ruled that the federal government was not required to pay more than $12 billion in ACA risk corridor payments to third-party payors who argued the payments were owed to them, which the U.S. Supreme Court plans to review in its next term. In addition, in October 2018 CMS promulgated regulations that would give states greater flexibility in setting benchmarks for insurers in the individual and small group marketplaces, which may have the effect of relaxing the essential health benefits required under the ACA for plans sold through such marketplaces.

We will continue to evaluate the effect that the ACA, its possible amendment or repeal and the actions of the Trump Administration in relation to the ACA could have on our business. It is possible that amendment or repeal initiatives, if enacted into law, could ultimately result in fewer individuals having health insurance coverage or in individuals having insurance coverage with less generous benefits. Accordingly, such reforms, if enacted, could have an adverse effect on anticipated revenue from product candidates that we may successfully develop and for which we may obtain marketing approval and may affect our overall financial condition and ability to develop or commercialize product candidates. While the timing and scope of any potential future legislation to amend or repeal ACA provisions is highly uncertain in many respects, including the possibility that any such amendment or repeal is brought about by a court ruling rather than legislative action, it is also possible that some of the ACA provisions that generally are not favorable for the research-based pharmaceutical industry could also be amended or repealed.

The costs of prescription pharmaceuticals in the United States has also been the subject of considerable discussion in the United States, and members of Congress and the Trump Administration have stated that they will address such costs through new legislative and administrative measures. In May 2018, the Trump Administration announced a plan that would include several initiatives designed to lower drug prices and additional similar proposals from HHS and CMS have followed. At the state level, individual states are increasingly passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing. Additionally, third party payors, regional health care authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other health care programs. We expect additional measures addressing pharmaceutical pricing to be proposed and may be adopted in the future, which could reduce the ultimate demand for our products, once approved, or put pressure on our product pricing.

The pricing of prescription pharmaceuticals is also subject to governmental control outside the United States. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost effectiveness of our product candidates to other available therapies. If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our ability to generate revenues and become profitable could be impaired. In the European Union, similar political, economic and regulatory developments as those in the United States may affect our ability to profitably commercialize our products, if approved.

Finally, legislative and regulatory proposals have also been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products. We 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 commercialization of our product candidates, if any, may be.

We are subject to U.S. and foreign anti-corruption and anti-money laundering laws with respect to our operations and non-compliance with such laws can subject us to criminal and/or civil liability and harm our business.

We are subject to the U.S. Foreign Corrupt Practices Act of 1977, as amended, or the FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. International Travel Act of 1961, the USA PATRIOT Act, and possibly other state and national anti-bribery and anti-money laundering laws in countries in which we conduct activities. Anti-corruption laws are interpreted broadly and prohibit companies and their employees, agents, third-party intermediaries, joint venture partners and collaborators from authorizing, promising, offering, or providing, directly or indirectly, improper payments or benefits to recipients in the public or private sector. We may have direct or indirect interactions with officials and employees of government agencies or government-affiliated hospitals, universities, and other organizations. In addition, we may engage third party intermediaries to promote our clinical research activities abroad and/or to obtain necessary permits, licenses, and other regulatory approvals. We can be held liable for the corrupt or other illegal activities of these third-party intermediaries, our employees, representatives, contractors, partners, and agents, even if we do not explicitly authorize or have actual knowledge of such activities.

Noncompliance with anti-corruption and anti-money laundering laws could subject us to whistleblower complaints, investigations, sanctions, settlements, prosecution, other enforcement actions, disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions, suspension and/or debarment from contracting with certain persons, the loss of export privileges, reputational harm, adverse media coverage, and other collateral consequences. If any subpoenas,

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investigations, or other enforcement actions are launched, or governmental or other sanctions are imposed, or if we do not prevail in any possible civil or criminal litigation, our business, results of operations and financial condition could be materially harmed. In addition, responding to any action will likely result in a materially significant diversion of management’s attention and resources and significant defense and compliance costs and other professional fees. In certain cases, enforcement authorities may even cause us to appoint an independent compliance monitor which can result in added costs and administrative burdens.

If we or our third-party manufacturers fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could harm our business.

We and our 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. From time to time and in the future, our operations may involve the use of hazardous and flammable materials, including chemicals and biological materials, and produce hazardous waste products. We cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources and any coverage provided by our insurance. We also could incur significant costs associated with civil or criminal fines and penalties for failure to comply with such laws and regulations.

Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of hazardous materials, this insurance may not provide adequate coverage against potential liabilities. We do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us.

In addition, we 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 our research, development or production efforts. Our failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.

Further, with respect to the operations of our third-party contract manufacturers, it is possible that if they fail to operate in compliance with applicable environmental, health and safety laws and regulations or properly dispose of wastes associated with our product candidates or products, we could be held liable for any resulting damages, suffer reputational harm or experience a disruption in the manufacture and supply of our product candidates or products.

Risks Related to Employee Matters and Managing Our Operations

We are a development-stage company with a limited number of employees and we may experience difficulties in retaining key employees and consultants.

We are a development-stage company with a total of 33 full-time employees as of July 29, 2019. These employees support key areas of our business and operations, including clinical operations, regulatory affairs, drug safety, data management, outsourced manufacturing and supply chain management, analytical development and quality assurance, as well as all of our general and administrative functions and public company infrastructure.

We remain highly dependent on David R. Guyer, M.D., our executive chairman, and Glenn P. Sblendorio, our chief executive officer and president, as well as the other principal members of our management, scientific and clinical teams. We do not maintain “key person” insurance for any of our executives or other employees. Although we have entered into letter agreements with our executive officers, each of them and our non-executive employees may terminate their employment with us at any time. As a result, key employees that we expect to retain to assist with the growth of our business may choose not to remain employees. In addition, we may experience difficulties in retaining key employees for any number of reasons. The loss of the services of our executive officers or other key employees could impede the achievement of our research, development and commercialization objectives and seriously harm our ability to successfully implement our business plan.

Furthermore, replacing any such executive officers and key employees may be difficult and may take an extended period of time because of the limited number of individuals in our industry with the breadth of skills and experience required to successfully develop, gain marketing approval of and commercialize products. Competition to hire from this limited pool is intense, and we may be unable to hire, train, retain or motivate these key personnel on acceptable terms, if at all, given the competition among numerous pharmaceutical and biotechnology companies for similar personnel, including, in particular, personnel with gene therapy experience. We also experience competition for the hiring of scientific and clinical personnel from universities and research institutions. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and development, pipeline expansion and commercialization strategies, including engaging and retaining key consultants with gene therapy experience. Our consultants and advisors may be employed by employers other than us and may have commitments under consulting or advisory contracts with other entities that may limit

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their availability to us. If we are unable to attract or retain high quality personnel as we implement our business plan, our ability to pursue our strategy would be limited.

If we fail to establish and maintain effective internal control over financial reporting, our ability to accurately report our financial results could be adversely affected.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements would not be prevented or detected on a timely basis. If any material weakness in our internal control over financial reporting is discovered or occurs in the future, our financial statements may contain material misstatements and we could be required to restate our financial results. As previously disclosed in July 2015, our management concluded that we experienced a material weakness in internal controls related to technical accounting expertise over the accounting for deferred tax assets and income tax accounting in general during certain prior financial reporting periods. The deficiency in the application of our controls relating to technical accounting expertise over the accounting for deferred tax assets and income tax accounting in general resulted in the audit committee of our board of directors concluding that the relevant financial statements should not be relied upon, and our subsequent restatement of the relevant financial statements.

During the year ended December 31, 2015, we took the following steps to remediate the identified material weakness: we added staffing within our finance department and engaged a nationally recognized accounting firm, in each case, with technical expertise in the area of tax accounting and financial reporting. Our management concluded that the identified material weakness in internal control over financial reporting was fully remediated as of December 31, 2015. Although we have remediated this deficiency in internal control over financial reporting, we cannot be certain that the remedial measures that we took in the past or other measures we take in the future, especially in light of our decreased size as a result of the implementation of our reduction in personnel during the year ended on December 31, 2017, and the associated decrease in staffing in our accounting and finance areas, will ensure that we maintain adequate controls over our financial reporting going forward and, accordingly, additional material weaknesses could occur or be identified. Any additional material weaknesses or combination of deficiencies could materially and adversely affect our ability to provide timely and accurate financial information, and any future deficiencies may impact investors’ confidence in our internal controls and our company, which could cause our stock price to decline.

Risks Related to Our Common Stock

Provisions in our corporate charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove members of our board of directors and management.

Provisions in our certificate of incorporation and our by-laws may discourage, delay or prevent a merger, acquisition or other change in control of our company that stockholders may consider favorable, including transactions in which our stockholders might otherwise receive a premium for their shares. These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock. In addition, because our board of directors is responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors. Among other things, these provisions:


•	provide for a classified board of directors such that only one of three classes of directors is elected each year;


•	allow the authorized number of our directors to be changed only by resolution of our board of directors;


•	limit the manner in which stockholders can remove directors from our board of directors;


•	provide for advance notice requirements for stockholder proposals that can be acted on at stockholder meetings and nominations to our board of directors;


•	require that stockholder actions must be effected at a duly called stockholder meeting and prohibit actions by our stockholders by written consent;


•	limit who may call stockholder meetings;


•	authorize our board of directors to issue preferred stock without stockholder approval, which could be used to institute a “poison pill” that would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved by our board of directors; and

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•	require the approval of the holders of at least 75% of the votes that all our stockholders would be entitled to cast to amend or repeal certain provisions of our certificate of incorporation or by-laws.

Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.

The price of our common stock may be volatile and fluctuate substantially, which could result in substantial losses for stockholders.

Our stock price may be volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control. The stock market in general, and the market for smaller pharmaceutical and biotechnology companies in particular, have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, our stockholders may not be able to sell their shares of common stock at or above the price at which they purchased their shares. The market price for our common stock may be influenced by many factors, including:


•	results of research, preclinical development activities and clinical trials for our product candidates and the timing of the receipt of such results;


•	the success of products or technologies that compete with our product candidates, including results of clinical trials of product candidates of our competitors;


•	the results of our efforts to in-license or acquire the rights to other product candidates and technologies for the treatment of retinal diseases;


•	developments or disputes concerning patent applications, issued patents or other proprietary rights;


•	the recruitment or departure of key personnel;


•	the level of expenses related to any of our product candidates or development programs;


•	actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities analysts;


•	variations in our financial results or those of companies that are perceived to be similar to us;


•	changes in the structure of healthcare payment systems;


•	market conditions in the pharmaceutical and biotechnology sectors;


•	general economic, industry and market conditions;


•	political, regulatory or legal developments in the United States and other countries; and


•	the other factors described in this “Risk Factors” section.

For example, following our announcement of initial, top-line results from our OPH2007 Phase 2a clinical trial for Zimura in combination with the anti-VEGF agent Lucentis for the treatment of wet AMD, the closing price of our common stock declined from $2.22 on November 9, 2018 to $1.92 on November 14, 2018 and declined further thereafter. The closing price of our common stock was $1.17 on July 29, 2019. Following periods of volatility in the market price of a company’s stock, securities class-action litigation has often been instituted against that company. For example, we and certain of our current and former executive officers have been named as defendants in purported class action lawsuits following our announcement in December 2016 of the initial, top-line results from the first two of our Phase 3 Fovista trials for the treatment of wet AMD. See Part II, Item 1 of this Quarterly Report on Form 10-Q and in this "Risk Factors" section, “ Risks Related to Our Business Plan, Financial Position and Need for Additional Capital—We and certain of our current and former executive officers have been named as defendants in lawsuits that could result in substantial costs and divert management’s attention .” These proceedings and other similar litigation, if instituted against us, could cause us to incur substantial costs to defend such claims and divert management’s attention and resources, which could seriously harm our business.

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If a significant portion of our total outstanding shares are sold into the market, the market price of our common stock could drop significantly, even if our business is doing well.

Sales of a substantial number of shares of our common stock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock. For example, we issued 5,174,727 shares of our common stock to the former equityholders of Inception 4 as upfront consideration for our acquisition of Inception 4. These shares are subject to lock-up restrictions, which expired at the end of April 2019 with respect to 50% of such shares, and will expire at the end of October 2019 with respect to the remaining 50% of such shares, following which such shares may be freely sold and traded pursuant to a registration statement on Form S-3 (File No. 333-229978) that was declared effective by the Securities and Exchange Commission on April 25, 2019. If the holders of these shares sell, or the market perceives that these holders will sell, the shares currently held by them, the price of our common stock may decline.

Moreover, we have filed, and expect to continue to file, registration statements on Form S-8 registering all shares of common stock that we may issue under our equity compensation plans. Once registered on Form S-8, shares underlying these equity awards can be freely sold in the public market upon issuance, subject to volume, notice and manner of sale limitations applicable to affiliates.

We incur increased costs as a result of operating as a public company, and our management is required to devote substantial time to compliance initiatives and corporate governance practices.

As a public company, we incur and will continue to incur significant legal, accounting and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of The Nasdaq Global Select Market and other applicable securities rules and regulations impose various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our management and other personnel devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations have increased our legal and financial compliance costs and have made some activities more time-consuming and costly.

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, we are required to furnish with our periodic Exchange Act reports a report by our management on our internal control over financial reporting. We are also required to include with our annual report an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. To achieve compliance with Section 404, we must document and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we will need to continue to dedicate internal resources and engage outside consultants to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting. There is a risk that our internal control over financial reporting may, in the future, be found to be ineffective under Section 404. Our identification of one or more material weaknesses could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.

Because we do not anticipate paying any cash dividends on our common stock in the foreseeable future, capital appreciation, if any, will be our stockholders’ sole source of gain.

We have never declared or paid cash dividends on our common stock. We currently intend to retain all of our future earnings, if any, to finance the growth of our business. In addition, the terms of any future debt agreements that we may enter into may preclude us from paying dividends. As a result, capital appreciation, if any, of our common stock will be our stockholders’ sole source of gain for the foreseeable future.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Recent Sales of Unregistered Securities

We did not sell any unregistered equity securities during the period covered by this Quarterly Report on Form 10-Q.

Purchase of Equity Securities

We did not purchase any of our registered equity securities during the period covered by this Quarterly Report on Form 10-Q.

Item 5. Other Information

None.

PART IV

Item 6. Exhibits and Financial Statement Schedules

The exhibits filed as part of this Quarterly Report on Form 10-Q are set forth on the Exhibit Index, which is incorporated herein by reference.

(2) Financial Statement Schedules

No financial statement schedules have been filed as part of this Quarterly Report on Form 10-Q because they are not applicable, not required or because the information is otherwise included in our financial statements or notes thereto.

(3) Exhibits



Exhibit Number		Description of Exhibit
3.1		Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.3 to Amendment No. 2 of the Registrant's Registration Statement on Form S-1 (File No. 333-190643) filed with the SEC on September 9, 2013)
3.2		Certificate of Amendment to Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 of the Registrant's Current Report on Form 8-K filed with the SEC on April 16, 2019)
3.3		Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.4 to Amendment No. 2 of the Registrant's Registration Statement on Form S-1 (File No. 333-190643) filed with the SEC on September 9, 2013)
10.1	†	Exclusive License Agreement with Know-How, by and among The Trustees of the University of Pennsylvania, The University of Florida Research Foundation, Incorporated, acting as a single party, and Registrant, dated April 10, 2019
10.2	†	Master Sponsored Research Agreement, by and between The Trustees of the University of Pennsylvania and Registrant, dated October 30, 2018
10.3	*	Non-Employee Director Compensation Policy of the Registrant
31.1		Certification of principal executive officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended
31.2		Certification of principal financial officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended
32.1		Certification of principal executive officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification of principal financial officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*		XBRL Instance Document
101.SCH*		XBRL Taxonomy Extension Schema Document
101.CAL*		XBRL Taxonomy Calculation Linkbase Document
101.DEF*		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*		XBRL Taxonomy Label Linkbase Document
101.PRE*		XBRL Taxonomy Presentation Linkbase Document



*		Submitted electronically herewith.
†		Portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K.

Attached as Exhibit 101 to this report are the following formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets at June 30, 2019 (unaudited) and December 31, 2018, (ii) Consolidated Statements of Operations and Comprehensive Loss (unaudited) for the three and six month periods ended June 30, 2019 and 2018, (iii) Consolidated

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Statements of Stockholders' Equity (unaudited) for the three and six month periods ended June 30, 2019 and 2018, (iv) Consolidated Statements of Cash Flows (unaudited) for six month periods ended June 30, 2019 and 2018 and (v) Notes to Financial Statements (unaudited).

SIGNATURES

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



	IVERIC bio, Inc.


Date: August 1, 2019	By:	/s/ David F. Carroll
		David F. Carroll
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

Certain identified information has been excluded from the exhibit because it is both (i) not material and (ii) would likely cause competitive harm to the Company, if publicly disclosed. Double asterisks denote omissions.

EXCLUSIVE LICENSE AGREEMENT WITH KNOW-HOW
Agreement No: L2011

By and among

The Trustees of the University of Pennsylvania

and

The University of Florida Research Foundation, Incorporated, acting as a single party

(the “Licensors”)

and

Ophthotech Corporation

(the “Licensee”)

Dated: April 10, 2019

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Section 1	Definitions	3
Section 2	Grant	8
Section 3	Diligence Obligations	12
Section 4	Payments	13
Section 5	Representations and Disclaimers of Licensors and Licensee.	20
Section 6	Record Keeping; Accounting	21
Section 7	Patent Prosecution	23
Section 8	Infringement and Invalidity	25
Section 9	Term and Termination	27
Section 10	No Discrimintion	30
Section 11	Assignability	30
Section 12	Dispute Resolution	31
Section 13	Indemnification; Liability; Insurance	32
Section 14	Use of Names	34
Section 15	Miscellaneous	34
Section 16	Notices	36
Section 17	United States Government Interests; Foundation Fighting Blindness Rights	37
Section 18	Confidentiality	38
Section 19	University Rules and Regulations	39
Section 20	Contract Formation and Authority	39

Appendix A	Patent Rights and Know-How	41
Appendix B	Licensed Information	42
Appendix C	Initial Development Plan	46
Appendix D	Development Report	49
Appendix E	Royalty Report	50
Appendix F	Milestones	51
Appendix G	Subsequently Added Intellectual Property	52
Appendix H	Certain Obligations Under [**] Policy	53

This Agreement is effective as of April 10, 2019 (the “ Effective Date ”) among the Trustees of the University of Pennsylvania, a Pennsylvania nonprofit corporation, with offices located at Penn Center for Innovation, 3160 Chestnut Street, Suite 200, Philadelphia, PA 19104-6283 (hereinafter called “ Penn ”) and the University of Florida Research Foundation, Incorporated, a nonstock, nonprofit Florida corporation with offices located at 223 Grinter Hall, Gainesville, Florida 32611 (hereinafter called “ UFRF ” together with Penn, the “ Licensors ”), and Ophthotech Corporation, a Delaware corporation, having a place of business at One Penn Plaza, Suite 3520, New York, NY 10119 (hereinafter called “ Licensee ”).

WHEREAS, Licensee is engaged in business relating to the development and commercialization of products that can use or incorporate the Patent Rights (as defined below), Know-How (as defined below), Licensed Information (as defined below), and Subsequently Added Intellectual Property (as defined below) that is added to this Agreement pursuant to Section 2.7, and has the capability of developing commercial applications of such intellectual property;

WHEREAS, Penn and UFRF have developed gene therapy technology for treating bestrophinopathies, which are diseases associated with mutations in the BEST1 gene, owned and/or controlled, either wholly or jointly, by Penn and/or UFRF as described in Licensed Information and the [**] Patent (as defined below) and other Patent Rights, and embodied in the Know-How and Subsequently Added Intellectual Property;

WHEREAS, Penn, UFRF and Licensee entered into an option agreement, dated as of October 30, 2018 (the “ Option Agreement ”), pursuant to which Penn and UFRF granted to Licensee an exclusive option to negotiate to acquire a license to the foregoing BEST1 gene therapy technology; and

WHEREAS, Penn and UFRF are willing to grant a license to Licensee under the Patent Rights, Licensed Information, Know-How and Subsequently Added Intellectual Property; and Licensee desires a license under them.

THEREFORE, Licensee and Licensors agree as follows:

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Section 1 Definitions

1.1 “ Affiliate ” means, with respect to a party, (a) any entity which controls at least fifty percent (50%) of the equity or voting stock of such party, (b) any entity fifty percent (50%) of whose equity or voting stock is owned or controlled by such party or (c) any entity of which at least fifty percent (50%) of the equity or voting stock is owned or controlled by the same person or entity owning or controlling at least fifty percent (50%) of such party. A “wholly-owned” Affiliate means with respect to a party, (1) an Affiliate which controls one hundred percent (100%) of the equity or voting stock of such party, (2) any Affiliate one hundred percent (100%) of whose equity or voting stock is owned or controlled by such party or (3) any Affiliate of which one hundred (100%) of the equity or voting stock is owned or controlled by the same person or entity owning or controlling one hundred percent (100%) of such party.

1.2 “ Biosimilar ” means any biological product that receives Regulatory Approval (a) under the biosimilarity standard set forth under 42 U.S.C. §§ 262(i)(2) and (k) for the United States, and under any foreign equivalent biosimilarity standards, on a country-by-country basis, and (b) for which the reference product (as defined in 42 U.S.C. § 262(i)(4) and any foreign equivalent thereof, on a country-by-country basis) is a Licensed Product.

1.3 “ BLA ” means (a) a Biologics License Application (as defined in Title 21 of the United States Code of Federal Regulations, as amended from time to time) filed with the FDA, or any successor application or procedure, and any foreign counterpart of a United States Biologics License Application, and (b) all supplements and amendments, including supplemental Biologics License Applications (and any foreign counterparts), that may be filed with respect to the foregoing.

1.4 “ Category ” means a category consisting of either (a) any and all [**] Products, taken as a whole, or (b) any and all [**] Products, taken as whole.

1.5 “ Commercially Reasonable Efforts ” means the efforts, level of activity and resources a reasonably prudent and diligent company, similarly situated as at the relevant date, would normally use to accomplish a similar objective under similar circumstances, and in addition, not less than a level of effort made by Licensee with respect to other products, product candidates from their own research efforts or other in-licensed products, at a similar stage of development or in a similar stage of product life, with similar developmental risk profiles and of similar market and commercial potential.

1.6 “ Controlled ” means, with respect to any intellectual property right, the possession by a party (whether by ownership, license from an Affiliate or a Third Party, or control over an Affiliate having such possession by ownership or license) of the ability to grant to the other party access or a license (or sublicense, as the case may be) as provided herein.

1.7 “ Covered ” means, with respect to a product, technology, process or method, that in the absence of ownership of or a license granted under a Valid Claim, the manufacture, use, offer for sale, sale or importation of such product or the practice of such technology, process or

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method would infringe such Valid Claim (or, in the case of a Valid Claim that has not yet issued, would infringe such Valid Claim if it were to issue).

1.8 “ Development Plan ” means the [**] written development plan summarizing the development activities, including regulatory activities, that are to be undertaken by or on behalf of the Licensee to bring Licensed Products to market in at least the United States and two of the Major European Countries, as it may be updated from time to time pursuant to this Agreement. The initial Development Plan for the [**] Products is attached as Appendix C.

1.9 “ Development Report ” means a written account of Licensee’s progress under the Development Plan for a certain period of time, and that includes at least the information specified on Appendix D.

1.10 “ European Union ” means, collectively, the member states of the European Union, as it may be constituted from time to time. For purposes of this Agreement, the European Union includes the United Kingdom.

1.11 “ FDA ” means the United States Food and Drug Administration, or any successor agency thereof.

1.12 “ First Commercial Sale ” means the first transfer or sale by Licensee, its Affiliates or a Sublicensee, whether at retail, wholesale or otherwise, of any Licensed Product, following the grant of a valid and enforceable Regulatory Approval, to a Third Party that is not an Affiliate or a Sublicensee.

1.13 “ IND ” means an investigational new drug application filed with the FDA, or the equivalent application in any foreign jurisdiction filed with another Regulatory Authority.

1.14 “[**] Patent ” means the provisional U.S. patent application with filing number [**].

1.15 “ [**] Products ” has the meaning set forth in Section 1.42.

1.16 “ Know-How ” means, in each case, to the extent the same are Controlled, whether wholly or jointly, by Penn or UFRF, the information, results, capsid plasmid sequence information, protocols, descriptions, methodologies, methods and standard operating procedures set forth on Appendix A and in existence prior to the Effective Date.

1.17 “ Licensed Field ” means therapies for the prevention, treatment, control and palliation of human diseases associated with mutations in the BEST1 gene.

1.18 “Licensed Information ” means, in each case, to the extent the same are Controlled, whether wholly or jointly, by Penn or UFRF, the information, results, vector sequence information (as a composite of elements and not the individual elements), and data set forth on Appendix B and in existence prior to the Effective Date.

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1.19 “ Licensed Product ” means any product or part thereof that (i) incorporates, consists of, utilizes, or was developed utilizing Know-How, Licensed Information or any modifications or derivatives of Know-How or Licensed Information, (ii) is manufactured using Know-How, Licensed Information or any modifications or derivatives of Know-How or Licensed Information, or is manufactured using a process that is claimed or otherwise Covered by any of the Patent Rights, or (iii) is otherwise claimed or Covered by any of the Patent Rights. For clarity, [**] Products and [**] Products are considered Licensed Products.

1.20 “ Licensed Territory ” means worldwide.

1.21 “ Loss of Market Exclusivity ” means an event where, with respect to a Licensed Product in any country: (a) one or more Biosimilars are being sold in such country; and (b) aggregate Net Sales of the Licensed Product sold in that country during any calendar quarter following introduction of such Biosimilar have fallen by at least [**] percent ([**]%) in that country as compared to the average quarterly aggregate Net Sales of the Licensed Product sold in such country during the last four full calendar quarters immediately prior to the calendar quarter in which such Biosimilar was first introduced in such country. The Loss of Market Exclusivity shall take effect as of the first day of such subsequent calendar quarter.

1.22 “ Major European Countries ” means [**].

1.23 “ Net Sales ” means, with respect to a Licensed Product, the gross sales invoiced or received, whichever occurs first, by Licensee and Sublicensees in respect of Sales of such Licensed Product by Licensee and Sublicensees to unrelated Third Parties, less deductions actually taken or applied, in the case of both gross sales and deductions as determined in accordance with U.S. generally accepted accounting principles as consistently applied across Licensee’s and Sublicensees’ pharmaceutical products generally (the “ Accounting Principles ”), which deductions may include the following:

(a) Trade, cash and/or quantity discounts actually allowed and taken with respect to such sales;

(b) Tariffs, duties, excises, sales taxes or other taxes (except for value added taxes capable of reimbursement) imposed upon and paid with respect to the production, sale, delivery or use of the Licensed Product (excluding national, state or local taxes based on income);

(c) Amounts repaid or credited by reason of rejections, defects, recalls or returns or because of chargebacks, refunds, rebates or retroactive price reductions; and

(d) Freight, insurance and other transportation charges incurred in shipping a Licensed Product to Third Parties.

Notwithstanding the foregoing, Net Sales shall not include transfers of Licensed Products, as applicable, (a) for use in clinical trials or non-clinical development activities with respect to Licensed Products by or on behalf of Licensee or Sublicensees, or (b) for “expanded access for

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individual patients” under the Federal Food, Drug, and Cosmetic Act 21 C.F.R. § 312.310 (or its foreign equivalent for ex-U.S. sales) provided to a patient at or below cost. For clarity, transfers by Licensee to or from its Affiliate(s) or Sublicensee(s) for resale shall not be treated as Net Sales, unless the Affiliate or the Sublicensee is an end user.

1.24 “ Patent Challenge ” means a challenge to the validity, scope, patentability, and/or enforceability of any of the Patent Rights or otherwise opposing any of the Patent Rights.

1.25 “ Patent Rights ” means, in each case, to the extent the same are Controlled, whether wholly or jointly, by Penn or UFRF:

(a) the [**] Patent identified on Appendix A and the patent(s)/patent application(s) claiming the Licensed Information and/or Subsequently Added Intellectual Property and identified on Appendix G;

(b) all United States and foreign patent applications claiming priority to any of the patent(s) and patent application(s) identified in Appendix A or Appendix G including divisionals, reissues, re-examinations, substitutions, continuations, and continuations-in-part (only to the extent of claims that are entitled under 35 U.S.C. Section 112 to the priority date of the patent(s)/patent application(s) identified on Appendix A or Appendix G); and

(c) all United States and foreign patents issuing from the patent applications identified in Sections 1.25(a) and 1.25(b) (but in the case of patents issuing on continuations-in-part applications identified in Section 1.25(b), only to the extent of claims that are entitled under 35 U.S.C. Section 112 to the priority date of the patent(s)/patent application(s) identified on Appendix A or Appendix G), including, letters patent, patents of addition, extensions, restorations, registration or confirmation patents, patents resulting from post-grant proceedings, and supplementary protection certificates.

1.26 “ Penn Principal Investigators ” means the Penn employees who have agreed to participate in a statement of work under the Penn SRA.

1.27 “ Penn SRA ” means the Master Sponsored Research Agreement entered into on October 30, 2018 for the conduct of preclinical animal studies with [**] gene therapy (the “ [**] Products ”), and clinical natural history studies on human BEST1-associated maculopathies.

1.28 “ Phase I Clinical Trial ” means any first-in-human clinical trial of a Licensed Product, a principal purpose of which is to determine metabolism and pharmacologic actions of a product and the side effects associated with increasing doses in humans and that would satisfy the requirements under 21 C.F.R. § 312.21(a) for the United States, as amended from time to time, or the corresponding foreign regulations of a comparable Regulatory Authority.

1.29 “ Phase III Clinical Trial ” means a human clinical trial of a Licensed Product intended to be a pivotal trial for obtaining Regulatory Approval or to otherwise establish safety and efficacy in patients with the disease or condition being studied for purposes of filing a Biologics License Application and that would satisfy the requirements under 21 C.F.R. §

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312.21(c), as amended from time to time, or the corresponding foreign regulations for a comparable filing with a comparable Regulatory Authority.

1.30 “ Rare Pediatric Disease Priority Review Voucher ” or “ PRV ” means a voucher issued by the United States Secretary of Health and Human Services to the sponsor of a rare pediatric disease product application at the time of a marketing application approval, which entitles the holder of the voucher to designate a single human drug application submitted under Section 505(b)(1) of the FD&C Act or Section 351(a) of the United States Public Health Service Act as qualifying for a priority review, as further defined in 21 U.S.C. 360ff or any subsequent or superseding statute conferring similar rights.

1.31 “ Regulatory Approval ” means the approvals (excluding pricing and reimbursement approvals), licenses, registrations or authorizations of any Regulatory Authority, necessary to commercially distribute, sell or market a product in a country.

1.32 “ Regulatory Authority ” means any national, supranational, regional, state or local regulatory agency, department, bureau, commission, council or other governmental entity and any other agencies in any country involved in the granting or receipt of Regulatory Approvals.

1.33 “ Regulatory Exclusivity ” means any exclusive marketing rights or data exclusivity rights conferred by any governmental authority with respect to a Licensed Product other than a patent right, including rights conferred in the U.S. under the Section 351(k) of the Public Health Service Act (42 U.S.C. 262(k)), the Orphan Drug Act (21 U.S.C. 360bb(a)(2)(A)), or the FDA Modernization Act of 1997 (21 U.S.C. 355a(b)), or rights similar thereto outside the United States, including without limitation, in the European Union, European Commission Regulation (EC) No 726/2004 and European Commission Directive 2001/83/EC (as amended).

1.34 “ Sale ” means any transaction for which consideration is received or booked by Licensee, its Affiliates or Sublicensees for sale, use, lease, transfer or other disposition of a Licensed Product to or for the benefit of a Third Party. For clarity, sale, use, lease, transfer or other disposition of a Licensed Product by Licensee or any of its Affiliates or Sublicensees to another of these entities for resale by such entity to a Third Party shall not be deemed a Sale.

1.35 “ SRA ” means, as applicable, the Penn SRA, the Three-Party SRA or the UFSRA.

1.36 “ Sublicense ” means the agreement to grant or not to assert any right licensed to Licensee under Section 2.1, Section 2.2 or Section 2.3, including, any agreement that permits any use of all or part of the Patent Rights, Licensed Information or Know-How for research, development, or the manufacture, marketing, distribution, commercialization, sale, offer for sale, import or export of Licensed Products. An agreement that is described in this definition is a Sublicense whether or not it is called a “sublicense” and whether or not it is included in a stand-alone document or is part of a broader collaboration, development, or joint venture agreement or arrangement.

1.37 “ Sublicensee ” means any Third Party or Licensee Affiliate granted a Sublicense. “Sublicensee” also includes any Third Party or Licensee Affiliate to which Licensee sells a

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Licensed Product and from which Licensee receives a royalty based on sales of the Licensed Product by the Third Party.

1.38 “ Subsequently Added Intellectual Property ” shall mean any Related Intellectual Property, Related Joint Intellectual Property, Related Penn Intellectual Property or Related UF Intellectual Property (as defined in the Penn SRA, Three-Party SRA and UFSRA) to which Licensee has exercised its option under Section 5.5 of the applicable SRA to have such Related Intellectual Property, Related Joint Intellectual Property, Related Penn Intellectual Property or Related UF Intellectual Property added to this Agreement, and which is further described on Appendix G, as such Appendix G may be updated in accordance with Section 2.8.

1.39 “ Third Party ” means any natural person or any corporation, company, partnership, joint venture, firm or other entity, or any government or agency or political subdivision thereof, in each case other than Licensee, either Licensor, or any Affiliate of Licensee or either Licensor.

1.40 “Three-Party SRA” means the mutually agreeable Sponsored Research Agreement to be entered into by Licensee, Penn and UFRF for the conduct of preclinical animal studies with the [**] Products and any other preclinical animal studies agreed to by the parties.

1.41 “ UF Principal Investigators ” means [**].

1.42 “ UF SRA” means the mutually agreeable Sponsored Research Agreement to be entered into by Licensee and UFRF for the conduct of studies to finalize a vector construct for “[**]” BEST1 gene therapy (the “ [**] Products ”) and to test such construct in cells in vitro.

1.43 “ Valid Claim ” means (a) a claim of an issued patent that has not expired or been dedicated to the public, abandoned, disclaimed or rendered unenforceable through disclaimer or otherwise, nor been held invalid, unpatentable or unenforceable or revoked by a patent office, court or other governmental agency of competent jurisdiction in a final and non-appealable judgment (or judgment from which no appeal was taken within the allowable time period), or (b) a claim within a patent application which application has not been pending for more than [**] from the date of its priority filing date and which claim has not been irretrievably revoked, irretrievably cancelled, irretrievably withdrawn, held invalid or irretrievably abandoned by a patent office, court or other governmental agency of competent jurisdiction in a final and non-appealable judgment (or judgment from which no appeal was taken within the allowable time period), or finally determined to be unallowable in a decision from which an appeal cannot or can no longer be taken.

1.44 “ [**] Products ” has the meaning set forth in Section 1.27.

Section 2 Grant

2.1 Patent Rights . In return for the royalties and other payments described in Section 4, Licensors grant to Licensee a royalty-bearing, exclusive license under the Patent Rights in the Licensed Field and Licensed Territory to make, have made, use, have used, sell, offer to sell, have offered to sell, import, have imported, develop, have developed, research, have researched,

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commercialize and have commercialized Licensed Products. For clarity, Licensee shall be permitted to seek the right to export and have exported Licensed Products under this Agreement.

2.2 Know-How . In return for the royalties and other payments described in Section 4, Licensors grant to Licensee a royalty-bearing, non-exclusive license under the Know-How in the Licensed Field and Licensed Territory to make, have made, use, have used, sell, offer to sell, have offered to sell, import, have imported, develop, have developed, research, have researched, commercialize and have commercialized Licensed Products. For clarity, Licensee shall be permitted to seek the right to export and have exported Licensed Products under this Agreement.

2.3 Licensed Information . In return for the royalties and other payments described in Section 4, Licensors grant to Licensee a royalty-bearing, exclusive license under the Licensed Information in the Licensed Field and Licensed Territory to make, have made, use, have used, sell, offer to sell, have offered to sell, import, have imported, develop, have developed, research, have researched, commercialize and have commercialized Licensed Products. For clarity, Licensee shall be permitted to seek the right to export and have exported Licensed Products under this Agreement.

2.4 Sublicense Rights .

(a) Licensee may grant written Sublicenses to Third Parties with the prior written consent of Licensors not to be unreasonably withheld; provided that, Licensee may grant written Sublicenses, with the right to further sublicense, without the prior written consent of Licensors (i) to its Affiliates that are not owned or controlled in part by a Third Party Sublicensee or a Third Party distributor of Licensed Products (without regard to market capitalization) and (ii) to biopharmaceutical companies with a market capitalization of at least [**] Dollars (US$[**]). Any agreement granting a Sublicense shall state that the Sublicense is subject and subordinate to the terms of this Agreement, including termination. Licensee shall also include provisions in all Sublicenses to provide that in the event Sublicensee or its Affiliate brings a Patent Challenge against Licensors or assists another party in bringing a Patent Challenge against Licensors (except as required under a court order or subpoena or as part of proceedings initiated by a patent office and not provoked by Sublicensee or its Affiliate) then Licensee may terminate the Sublicense within [**]. Sublicenses granted hereunder shall (i) be issued in writing, (ii) to the extent applicable, include or incorporate all of the rights of Licensors and require the performance of obligations due to Licensors (and, if applicable, the U.S. Government under 35 U.S.C. §§200-212) contained in this Agreement and (iii) include or incorporate no less than the following terms and conditions:

(i)

Reasonable record keeping, audit and reporting obligations sufficient to enable Licensors and Licensee to reasonably verify the payments due to Licensee and to Licensors under such Sublicense and to reasonably monitor such Sublicensee’s progress in developing and/or commercializing Licensed Products, provided that such obligations shall be no less stringent that those provided in this Agreement for Licensee.

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(ii)	Infringement and enforcement provisions that do not conflict with the restrictions and procedural requirements imposed on Licensee hereunder and do not provide greater rights to Sublicensee than as provided in Section 8.


(iii)	Confidentiality provisions with respect to Confidential Information of Penn consistent with the restrictions on Licensee in Section 18 of this Agreement.


(iv)	A requirement of indemnification of Licensors by Sublicensee that is equivalent to the indemnification of Licensors by Licensee under Section 13 of this Agreement.


(v)	A requirement of obtaining and maintaining insurance by Sublicensee that is equivalent to the insurance requirements of Licensee under Section 13.3 of this Agreement, including coverage under such insurance of Penn and UFRF as provided in Section 13.3.


(vi)	Restriction on use of Licensors’ names etc. consistent with Section 14 of this Agreement.

Any Sublicense that does not include all of the terms and conditions set forth in this Section 2.4(a), or which is not issued in accordance with the terms and conditions set forth in this Section 2.4, shall be null and void.

(b) Licensee shall provide Licensors with a final copy, with reasonable redactions (provided that the information reasonably necessary for Licensors to verify Licensee’s compliance with its obligations to Licensors under this Agreement shall not be redacted), within [**] after execution, of any Sublicense that grants any right (including, for the avoidance of doubt, an option) to commercialize a Licensed Product and/or under which Licensee has the right to receive payments related to the sublicensed rights or to commercialization of Licensed Product.

2.5 Patent Challenge . If Licensee (or any of its Affiliates) or Sublicensees (or any of their Affiliates) brings a Patent Challenge against Licensors, or Licensee (or any of its Affiliates) or Sublicensees (or any of their Affiliates) assists another party in bringing a Patent Challenge against Licensors (except as required under a court order or subpoena or as part of proceedings initiated by a patent office and not provoked by Licensee or its Affiliate or Sublicensee or its Affiliate), and Licensors do not terminate this Agreement pursuant to Section 9.4, then, if the Patent Challenge is successful, Licensee may not recoup any consideration, including royalties, paid to Licensors during the period of challenge. If a Patent Challenge is unsuccessful, Licensee shall reimburse Licensors for all reasonable legal fees and expenses incurred in its defense against the Patent Challenge.

2.6 Retained Rights . Penn reserves to itself and any of its non-commercial collaborators (subject to applicable confidentiality obligations), and UFRF reserves to itself and the University of Florida and any of its or their non-commercial collaborators (subject to applicable confidentiality obligations), the right under the Patent Rights, Licensed Information and Know-How to make, have made, develop, import, use and transfer to non-commercial collaborators Licensed Products solely for its and their internal research [**], clinical (including, but not limited to patient care at Shands Teaching Hospital and University of Florida patient care

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facilities and the Hospital of the University of Pennsylvania and Penn), and educational purposes; provided that Penn, UFRF and the University of Florida do not grant any rights under the Patent Rights or Licensed Information to commercialize or to manufacture any Licensed Product to any Third Party commercial entity. The right set forth in this Section 2.6 is subject in all cases to the confidentiality obligations of Section 18.

2.7 Un-Addressed Markets or Territories . If, after Licensee obtains Regulatory Approval in at least the United States and two of the Major European Countries, (i) Licensors receive a request from a Third Party to develop and commercialize a Licensed Product in a territory outside the United States and outside countries in the European Union and (ii) Licensee is not developing or commercializing a Licensed Product in such territory and has no current plans to do so, Licensors may refer such Third Party to Licensee and Licensee agrees to consider in good faith any proposal from such Third Party to develop and commercialize a Licensed Product in such territory and to consider in good faith whether to grant a Sublicense on commercially reasonable terms to such Third Party. For the avoidance of doubt, the determination of whether to grant such Sublicense shall be in Licensee’s sole, reasonable business discretion.

2.8 Related IP . If Licensee exercises its right pursuant to the applicable SRA to have Related Intellectual Property, Related Joint Intellectual Property, Related Penn Intellectual Property, or Related UF Intellectual Property (as defined in the Penn SRA, Three-Party SRA or UF SRA) added to the intellectual property licensed under this Agreement, then (i) Licensee shall prepare an amendment to this Agreement in a form reasonably acceptable to Penn and UFRF to include such Related Intellectual Property, Related Joint Intellectual Property, Related Penn Intellectual Property, or Related UF Intellectual Property on Appendix G hereto and (ii) [**], Penn and UFRF shall promptly execute such amendment to add such Related Intellectual Property, Related Joint Intellectual Property, Related Penn Intellectual Property or Related UF Intellectual Property to Appendix G and such rights shall be deemed to be “Subsequently Added Intellectual Property” hereunder by virtue of such amendment.

2.9 Exclusivity of [**] . During the term of this Agreement, UFRF shall use reasonable efforts to ensure that [**], to create a product candidate in or for the Licensed Field on behalf of [**], including in connection with the performance of sponsored research for or on behalf of [**].

2.10 Data Package Delivery . Licensee, from time to time, and solely in connection with the development of a Licensed Product, may make reasonable requests of Licensors for additional Licensed Information or Know How that is possessed by Licensors but that has not been previously delivered to Licensee. To the extent that such Licensed Information or Know How is readily available and is not subject to other restrictions or limitations, Licensors will make a reasonable effort to comply with such requests from Licensee and will each deliver to Licensee such requested Licensed Information or Know How. Licensee shall be responsible for Licensors’ reasonable out-of-pocket costs and expenses incurred in furtherance of the foregoing.

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Section 3 Diligence Obligations

3.1 Development . Licensee agrees that:

(a) it will use Commercially Reasonable Efforts to pursue the Development Plan with the intent to provide at least one Licensed Product for sale within at least the United States and two of the Major European Countries within the Licensed Field;

(b) following Regulatory Approval, it will use Commercially Reasonable Efforts to commercialize at least one Licensed Product within at least the United States and two of the Major European Countries;

(c) until such time as a Licensed Product receives Regulatory Approval in the United States and two of the Major European Countries, it will supply Penn, on behalf of both Licensors, with a written Development Report for each calendar year annually within [**] after the end of such calendar year; and

(d) Licensee and Sublicensee(s) shall apply patent markings that meet all requirements of 35 U.S.C. §287 with respect to all Licensed Products.

3.2 First Commercial Sale; Milestones .

(a) Milestone Obligations .

(i) [**] Products . Licensee agrees that the First Commercial Sale of a [**] Product to a customer shall occur on or before [**]. In addition, if Licensee fails to achieve such First Commercial Sale within such timeframe or if Licensee fails to meet the milestones shown in Appendix F-1 (as such due dates or milestones may be extended in accordance with Section 3.2(b)) by their respective due dates, Licensors may terminate this Agreement pursuant to Section 9.3(b) but solely with respect to Licensee’s rights and licenses to the Category of [**] Products. For clarity, the foregoing diligence obligations shall be deemed satisfied if met by one [**] Product, and Licensee shall not be obligated to meet such diligence obligations with respect to any subsequent [**] Product.

(ii) [**] Products . [**], the parties shall mutually agree in good faith on (x) a date for Licensee to achieve the First Commercial Sale to a customer of a [**] Product, which shall be set forth in this Section 3.2(a)(ii), (y) an update to the Development Plan to include the pertinent information for the [**] Products, and (z) the diligence milestones for the [**] Products and the dates for Licensee to achieve such milestones, which shall be set forth in Appendix F-2. If Licensee fails to achieve such agreed upon First Commercial Sale within the agreed upon timeframe or if Licensee fails to meet the agreed upon milestones set forth in Appendix F-2 (as such due dates or milestones may be extended in accordance with Section 3.2(b)) by their respective due dates, Licensors may terminate this Agreement pursuant to Section 9.3(b) but solely with respect to Licensee’s rights and licenses to the Category of [**] Products. For clarity, the foregoing diligence obligations shall be deemed satisfied if met by one

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[**] Product, and Licensee shall not be obligated to meet such diligence obligations with respect to any subsequent [**] Product.

(b) Licensee shall notify Licensors in writing as each milestone set forth in Section 3.2(a) is met. If Licensee requires an extension of any milestones or due dates set forth in Section 3.2(a) or Appendix F, Licensee shall inform Penn of such extension in writing at least [**] prior to the required due dates, fully describing Licensee’s diligent efforts to achieve the milestone or due date to date, establishing the new due date, and describing Licensee’s plan to meet such new due date. Later-in-time milestone due dates shall automatically be deemed to have been extended by the same amount of time. However, if Penn reasonably objects to such extension within [**] after receipt of Licensee’s extension notice, the terms of such extension (including whether to grant such extension) shall be negotiated by the parties in good faith, unless Licensee sends to Penn documentation demonstrating that Licensee has spent the below amounts in respect of the Licensed Product whose milestones Licensee is seeking to extend, in which case Penn’s objection as to whether to grant an extension shall be deemed to have been overcome, and the parties shall agree on reasonable extension dates; however, Licensee may only use such justification for an extension two times per milestone.



Timing of Extension Request	Amount Spent by Licensee under this Agreement in the [**] Prior to Extension Request
[**]	[**]
[**]	[**]
[**]	[**]

3.3 Clinical Trials . University of Florida or Penn policies may require approval of clinical trials at the University of Florida or Penn (as applicable) involving technology invented at the University of Florida or at Penn (as applicable). Accordingly, Licensee will notify the applicable Licensor prior to commencing any clinical trials involving a Licensed Product at such Licensor or its affiliated medical facilities.

Section 4 Payments

4.1 License Issue Fee . Licensee shall pay to Penn, on behalf of both Licensors, a non-refundable license issue fee of two hundred thousand dollars ($200,000) within thirty (30) days after the Effective Date.

4.2 Annual License Maintenance Fee . Starting with the first anniversary of the Effective Date, Licensee shall pay to Penn, on behalf of both Licensors, an annual license maintenance fee of [**] dollars ($[**]) each year, to be paid within [**] after each anniversary of the Effective Date of this Agreement. The annual license maintenance fee is payable until the First Commercial Sale of a Licensed Product, after which time the royalties set forth in Section 4.4, instead of the annual license maintenance fee, shall become due and payable to Penn on

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behalf of both Licensors. The annual license maintenance fees paid by Licensee are not creditable against any royalties that become due and payable under this Agreement.

4.3 Patent Application Grant Fee . In the event that a U.S. patent that claims inventions that are disclosed in the Licensed Information, [**] Patent, and/or inventions generated under the Penn SRA, Three-Party SRA or UF SRA is issued and is exclusively licensed to Licensee under this Agreement, Licensee shall pay Penn a one-time, non-refundable and non-creditable patent grant fee of [**] dollars ($[**]) within [**] of the later of the date of the issuance of such patent or the date when such patent is exclusively licensed to Licensee under this Agreement. This fee shall be payable no more than once. Notwithstanding the foregoing, patents issued from patent applications filed prior to the Effective Date are excluded, other than the [**] Patent.

4.4 Royalty on Licensed Products . Licensee shall pay Penn, on behalf of both Licensors, earned royalties calculated as a percentage of Net Sales. Earned royalties are earned as of the earlier of (i) the date the Licensed Product is actually sold and paid for and (ii) the date an invoice is sent by Licensee, its Affiliates and/or its Sublicensee(s), or as of the date a Licensed Product is transferred to a Third Party for promotional reasons. Licensee shall pay to Penn royalties as follows, on a country-by-country basis:

(a) [**] percent ([**]%) for Net Sales of Licensed Products that are Covered by a Valid Claim of the Patent Rights in the country in which such Licensed Product is sold, which royalty obligation under this Section 4.4(a) shall terminate, on a country-by-country basis, when the Licensed Product is no longer Covered by a Valid Claim of the Patent Rights in the country in which such Licensed Product is sold. In the event of Loss of Market Exclusivity with respect to a Licensed Product in a particular country, the royalty due under this clause Section 4.4(a), if applicable, shall, starting with the calendar quarter following such Loss of Market Exclusivity, be reduced for the remainder of the Royalty Term for such Licensed Product or the period of time that a Loss of Market Exclusivity for such Licensed Product exists in such country, whichever is shorter, to [**] percent ([**]%) for Net Sales of such Licensed Product in such country. For the avoidance of confusion, in each case with respect to sales of a Licensed Product in a particular country, if a royalty reduction for Loss of Market Exclusivity has been applied pursuant to the previous sentence, then a royalty reduction for royalty payments to third parties pursuant to Section 4.4(d) may not be applied.

(b) [**] percent ([**]%) for Net Sales of Licensed Products that are not subject to Section 4.4(a) above, but are sold during a period of Regulatory Exclusivity for such Licensed Product in the country in which such Licensed Product is sold, which royalty obligation under this Section 4.4(b) shall terminate, on a country-by-country basis, when the Licensed Product is no longer sold during a period of Regulatory Exclusivity for such Licensed Product in the country in which such Licensed Product is sold. In the event of Loss of Market Exclusivity with respect to a Licensed Product in a particular country, the royalty due under this clause Section 4.4(b), if applicable, shall, starting with the calendar quarter following such Loss of Market Exclusivity, be reduced for the remainder of the Royalty Term for such Licensed Product or the period of time that a Loss of Market Exclusivity for such Licensed Product exists in such

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country, whichever is shorter, to [**] percent ([**]%) for Net Sales of such Licensed Product in such country.

(c) [**] percent ([**]%) for Net Sales of Licensed Products that are not subject to either of Sections 4.4(a) or 4.4(b) above, which royalty obligation under this Section 4.4(c) shall terminate on the date that is ten (10) years after the First Commercial Sale of a Licensed Product.

(d) If Licensee has or obtains a license(s) from a Third Party(ies) to patent rights or other intellectual property rights that are necessary to research, develop, make, have made, use, have used, offer to sell, sell, import, export or commercialize a Licensed Product(s), Licensee, subject to the proviso to this sentence, may offset [**]%) of any royalty payments actually paid by Licensee to such Third Party(ies) under such license(s) with respect to sales of such Licensed Product(s) in a country against the royalty payments that are due to Penn with respect to Net Sales of such Licensed Products in such country under Section 4.4(a); provided that in no event shall the royalty payments under Section 4.4(a) to Penn with respect to Net Sales of such Licensed Products in such country be reduced as a result of the application of this Section 4.4(d) by more than [**]%) of the amount otherwise due under Section 4.4(a). For clarity, the royalty due under Section 4.4(a) shall not be reduced beyond a floor of [**] percent ([**]%) during the period such royalty is applicable to the Licensed Product in the applicable country. Any amounts that are not offset during a reporting period shall be creditable against payments arising in subsequent reporting periods. For clarity, Licensee shall be responsible for making all payments to Third Parties in respect of any such necessary intellectual property rights.

(e) Within [**] after the end of each calendar quarter ending on March 31, June 30, September 30 or December 31, Licensee shall pay amounts owing to Penn under this Section 4.4 for such calendar quarter. Royalties are not additive, but are payable based on the highest applicable rate that is calculated according to this Section 4.4. Royalties shall be payable, on a country-by-country and Licensed Product-by-Licensed Product basis, until the latest of (i) the expiration of the last-to-expire Patent Rights if the making, having made, using, offering to sell, selling or importing of such Licensed Product by Licensee, its Affiliates or its Sublicensees (or the distributors of any of them) is Covered by a Valid Claim of the Patent Rights in the country in which the Licensed Product is sold, (ii) the expiration of Regulatory Exclusivity in the country in which such Licensed Product is sold or (iii) ten (10) years from the First Commercial Sale of such Licensed Product in the country in which the Licensed Product is sold (the “ Royalty Term ”).

4.5 Minimum Royalty .

(a) Licensee shall pay Penn a minimum annual royalty (“Minimum Annual Royalty”) of $[**] during the period set forth in Section 4.5(b).

(b) Beginning on the earlier of (i) the calendar year following the First Commercial Sale of a Licensed Product or (ii) calendar year [**], the Minimum Annual Royalty shall be due on January 15 of each calendar year. The Minimum Annual Royalty paid to Penn

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for a given calendar year shall be credited toward earned royalties payable to Penn, but only for royalties based on Net Sales made in such given calendar year.

4.6 Milestone Payments .

(a) Licensee shall pay Penn, on behalf of both Licensors, the below milestone payments within [**] after Licensee, or any Affiliate or Sublicensee, first (and only the first time) achieves the corresponding milestone for a first Licensed Product:

Event Milestone Payment

One-Time Clinical or Regulatory Milestones

[**] [**]

One-Time Worldwide Commercial Milestones on Net Sales

First instance of calendar year Net Sales of $[**] $[**]

Each time a Clinical or Regulatory Milestone set forth above for a first Licensed Product is achieved, then any Clinical or Regulatory Milestone Payments with respect to earlier Clinical or Regulatory Milestones set forth above for the same Licensed Product shall, to the extent not previously paid, be due and payable together with the achieved Clinical or Regulatory Milestone irrespective of whether such earlier Clinical or Regulatory Milestone(s) was actually achieved; provided, however, that a Regulatory Approval or reimbursement approval Clinical or Regulatory Milestone in one territory shall not be deemed to be a Clinical or Regulatory Milestone that is earlier than any other Regulatory Approval or reimbursement approval Clinical or Regulatory Milestone in another territory.

For the purpose of clarification, if calendar year worldwide Net Sales for the first Licensed Product are $[**] in Year 1 and $[**] in Year 2, a sales milestone of $[**] is payable on account of Year 1 and a sales milestone of $[**] is payable on account of Year 2. If calendar year worldwide Net Sales for the first Licensed Product are $[**] in Year 1 and $[**] in Year 2, a sales milestone of $[**] is payable on account of Year 1 and a sales milestone of $[**] is payable on account of Year 2.

(b) In the event that Licensee pursues both Categories of Licensed Products, then Licensee shall pay Penn, on behalf of both Licensors, the following one-time, non-

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refundable and non-creditable Milestone Payments within [**] after Licensee, or any Affiliate or Sublicensee, first (and only the first time) achieves the corresponding milestone for a Licensed Product from a different Category than the Licensed Product that first achieves the same milestone event under Section 4.6(a) above:

Event Milestone Payment

One-Time Clinical or Regulatory Milestones

[**] [**]

One-Time Worldwide Commercial Milestones on Net Sales

First instance of calendar year Net Sales of $[**] $[**]

Each time a Clinical or Regulatory Milestone set forth above for a subsequent Licensed Product is achieved, then any Clinical or Regulatory Milestone Payments with respect to earlier Clinical or Regulatory Milestones set forth above for the same Licensed Product shall, to the extent not previously paid, be due and payable together with the achieved Clinical or Regulatory Milestone irrespective of whether such earlier Clinical or Regulatory Milestone(s) was actually achieved; provided, however, that a Regulatory Approval or reimbursement approval Clinical or Regulatory Milestone in one territory shall not be deemed to be a Clinical or Regulatory Milestone that is earlier than any other Regulatory Approval or reimbursement approval Clinical or Regulatory Milestone in another territory. For the avoidance of doubt, if the subsequent Licensed Product that achieves any of the foregoing milestone events is in the same Category as the first Licensed Product to achieve the same milestone event, then the milestones for such subsequent Product will not be due.

4.7 Sublicense Fees .

(a) For purposes of this Section 4.7, the following defined terms shall have the following meanings:

(i) “ Sublicense Income ” shall mean any consideration such as fees, minimum royalties, milestone payments or other payments received by Licensee or any of its Affiliates from a Third Party based on an agreement or series of related agreements involving a Sublicense of the Patent Rights to a Third Party other than (A) payments for running royalties

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based on Net Sales or profit-share payments, (B) payments for research or development conducted by Licensee or its Affiliates or services or goods provided by Licensee or its Affiliates pursuant to the Sublicense or related agreements, (C) payments for the fair market value of debt or equity securities of Licensee or its Affiliates and (D) payments that are specifically allocated to products that are not Licensed Products;

(ii) “ Third Party Allocated Sublicense Income ” shall mean the portion of any Sublicense Income reasonably allocable to Third Party intellectual property rights that are necessary to research, develop, make, have made, use, have used, offer to sell, sell, import, export or commercialize a Licensed Product and that have been in-licensed or acquired by Licensee and included with the Sublicense of the Patent Rights to a Third Party, which portion shall not exceed [**]%) of the total amount of Sublicense Income received by Licensee and any of its Affiliates, as further adjusted by the proviso immediately following the table in Section 4.7(b) below; and

(iii) “ Licensor Allocated Sublicense Income ” shall mean (A) the total amount of Sublicense Income received by Licensee and any of its Affiliates less (B) any Third Party Allocated Sublicense Income.

(b) If Licensee or any of its Affiliates receives any Sublicense Income then Licensee shall pay Penn, on behalf of both Licensors, within [**] of receipt of such Sublicense Income, the following percentages of the portion of such Sublicense Income constituting the Licensor Allocated Sublicense Income, based upon on the status, at the time of entering into the Sublicense, of clinical development of each Licensed Product which is the subject of the particular Sublicense:



Time period	Percentage (%) of Licensor Allocated Sublicense Income payable to Penn, on behalf of both Licensors
[**]	[**]
[**]	[**]
[**]	[**]
[**]	[**]

Provided that, in the event that the amount that would otherwise be payable by Licensee to Penn, on behalf of both Licensors, pursuant to this Section 4.7(b) is less than [**] percent ([**]%) of the total Sublicense Income received by Licensee and any of its Affiliates (the “ Minimum Sublicense Share ”), Licensee shall pay an additional amount to Penn, on behalf of both Licensors, such that the total amount paid by Licensee to Penn, on behalf of both Licensors, pursuant to this Section 4.7(b) equals the Minimum Sublicense Share.

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If under the Sublicense the Licensee receives Sublicense Income that is not attributable to any particular Licensed Product (e.g., an upfront payment), then the percentage applied to such payment will be based upon the status of the most advanced Licensed Product licensed under the Sublicense. By way of example and not limitation, (i) assuming [**].

(c) If Licensee receives consideration other than cash, Licensee and Penn will cooperate in good faith to perform a valuation of the non-cash consideration portion received in exchange for the Sublicense and such valuation shall be deemed to be the fair value thereof for calculating the Sublicense fee of the non-cash consideration portion to be paid to Penn. Licensee agrees to provide to Penn under terms of confidentiality the executed documentation related to the Sublicense resulting in the non-cash consideration including all terms without redaction that are necessary to perform a valuation of the non-cash consideration and the parties shall in good faith determine the value of such non-cash consideration by mutual agreement.

4.8 FDA Priority Review Voucher . In the event Licensee or its Affiliate receives an FDA Rare Pediatric Disease Priority Review Voucher based on a Regulatory Approval of a Licensed Product, then Licensee shall promptly provide written confirmation to Penn that it or its Affiliate received such PRV. In addition, if and when the conditions of either 4.8(a) or 4.8(b) are met, Licensee shall pay Penn (on behalf of Licensors) the amounts set forth in either 4.8(a) or 4.8(b), as applicable:

(a) In the event Licensee or its Affiliate sells the PRV to a Third Party, then Licensee will pay to Penn (on behalf of Licensors) [**] percent ([**] %) of all consideration, including fees, minimum royalties, milestone payments or other payments Licensee or its Affiliate receives for the sale of the PRV within [**] of receipt of such consideration. If Licensee or its Affiliate receives consideration other than cash, Licensee and Penn (on behalf of Licensors) will cooperate in good faith to perform a valuation of the non-cash consideration portion received in exchange for the PRV and such valuation shall be deemed to be the fair value thereof for calculating the fee for the non-cash consideration portion to be paid to Penn (on behalf of Licensors). Licensee agrees to provide to Penn (on behalf of Licensors) under terms of confidentiality the executed documentation related to the transaction resulting in the non-cash consideration including all terms without redaction that are necessary for Penn (on behalf of Licensors), by itself or through an auditor reasonably acceptable to Licensee, to perform a valuation of the non-cash consideration.

(b) In the event Licensee or its Affiliate uses the PRV for a Licensee product or Licensee’s Affiliate product (other than a Licensed Product), then Licensee will pay Penn (on behalf of Licensors):

(i) [**] dollars ($[**]) within [**]; and

(ii) [**] dollars ($[**]) as a one-time sales milestone, payable within [**] after the end of the calendar year when the aggregate calendar year net sales throughout the world of such product by Licensee, its Affiliate(s) and its sublicensee(s) have reached [**] dollars ($[**]), provided that

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(iii) in the event that Licensee or its Affiliate uses the PRV for a Licensee product or a Licensee’s Affiliate product (other than a Licensed Product), Licensee shall identify the product to Penn (on behalf of Licensors) within [**] of use of the PRV and, starting in the calendar year of the first commercial sale of such product, provide a report [**] of the end of each calendar year setting forth the annual net sales of the product for such calendar year by Licensee, its Affiliate(s) and its sublicensees and the aggregate net sales of the product from the first commercial sale of the product. Licensee shall have no obligation to report annual net sales of the product after Licensee has paid the one-time sales milestone per Section 4.7(b)(ii).

Section 5 Representations and Disclaimers of Licensors and Licensee.

5.1 Representations of Licensors . Each of Penn and UFRF (on behalf of itself and with respect to the University of Florida), as applicable and as of the Effective Date, represents to Licensee that (a) in the case of Penn, its employees have assigned or are obligated to assign to such party their entire right, title, and interest in the applicable Patent Rights, Licensed Information and Know-How, and in the case of UFRF, the University of Florida’s employees have assigned or are obligated to assign to the University of Florida their entire right, title and interest in the applicable Patent Rights, Licensed Information and Know-How, and in turn, the University of Florida has assigned its entire right, title and interest in the applicable Patent Rights, Licensed Information and Know-How to UFRF; (b) it is duly authorized, by all requisite governance action, to execute and deliver this Agreement and the execution, delivery and performance of this Agreement by such party does not require any stakeholder action or approval, and the person executing this Agreement on behalf of such party is duly authorized to do so by all requisite governance action; (c) to the actual knowledge of the individuals currently in UFRF’s licensing office and involved with the Patent Rights, all inventors of the inventions set forth in the Patent Rights are correctly identified in the patent filings; (d) in the case of UFRF, to the actual knowledge of the individuals currently in the UFRF licensing office, the granting of the licenses to the Patent Rights, Licensed Information and Know How, in each case Controlled by UFRF, pursuant to this Agreement does not violate any agreement with a Third Party binding UFRF; and (e) in the case of UFRF, to the actual knowledge of the individuals currently in the UFRF licensing office, with respect to the [**] Patent and any related Patent Rights, it is in compliance with The Patent and Trademark Law Amendments Act of 1980 (Public Law 96-517; 35 U.S.C. §§ 200-212), including any amendments thereto and all regulations promulgated thereunder.

5.2 Representations of Licensee . Licensee, as of the Effective Date, represents that (a) it is a corporation duly organized, validly existing and in good standing under the laws of the state or other jurisdiction of incorporation or formation and has full corporate power and authority to enter into this Agreement and to carry out the provisions hereof, (b) it is duly authorized, by all requisite corporate action, to execute and deliver this Agreement and the execution, delivery and performance of this Agreement by Licensee does not require any shareholder action or approval, and the person executing this Agreement on behalf of Licensee is duly authorized to do so by all requisite corporate action and (c) no consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal,

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state or local governmental authority is required on the part of Licensee in connection with the valid execution, delivery and performance of this Agreement.

5.3 Disclaimers .

(a) Nothing in this Agreement is:

(i) a warranty or representation by Licensors of the scope of any right included in the Patent Rights;

(ii) a warranty or representation that anything made, used, sold or otherwise disposed of under the license granted in this Agreement does not infringe patents or other rights of Third Parties;

(iii) an obligation to bring or prosecute actions or suits against Third Parties for infringement of Patent Rights;

(iv) an obligation to furnish know-how or services other than those specified in this Agreement; or

(v) a warranty or representation by Licensors that they will not grant licenses to others to make, use or sell products not covered by the claims of the Patent Rights which may be similar to or compete with products made or sold by Licensee.

(b) EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, NEITHER LICENSEE NOR LICENSORS MAKE ANY REPRESENTATIONS AND EXTEND NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND VALIDITY OF PATENT RIGHTS CLAIMS, ISSUED OR PENDING.

(c) LICENSORS ASSUME NO RESPONSIBILITIES WHATSOEVER WITH RESPECT TO USE, SALE, OR OTHER DISPOSITION BY LICENSEE, ITS SUBLICENSEE(S), ITS AFFILIATE(S) OR THEIR VENDEES OR OTHER TRANSFEREES OF PRODUCTS INCORPORATING OR MADE BY USE OF PATENT RIGHTS, LICENSED INFORMATION OR KNOW-HOW LICENSED UNDER THIS AGREEMENT.

Section 6 Record Keeping; Accounting

6.1 Books and Records . Licensee and its Sublicensee(s) shall keep books and records related to its and their payment and diligence obligations regarding Licensed Products under this Agreement sufficiently to verify the accuracy and completeness of Licensee’s and its Sublicensee(s)’s accounting and reporting relating to such obligations, including without limitation, applicable inventory, purchase and invoice records, manufacturing records, sales analysis, general ledgers, financial statements, and tax returns. Licensee and its Sublicensee(s) shall preserve these books and records for at least [**] after they are created or as required by federal law, both during and after the term of this Agreement.

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6.2 Audit Rights . Licensee and its Sublicensee(s) shall take steps to permit Penn to, on behalf of both Licensors and within [**] after its written request therefor, audit and review all of such books and records maintained for purposes of compliance with Section 6.1, up to a maximum of [**], at a single United States location of Licensee’s choice to verify the accuracy of Licensee’s and its Sublicensee(s)’s accounting relating to Licensed Products and Sublicense consideration. The review may be performed by any authorized employees of Penn as well as by any attorneys or accountants designated by Penn upon reasonable notice and during regular business hours. If a deficiency with regard to any payment is determined, Licensee and its Sublicensee(s) shall pay the deficiency along with applicable interest as described in Section 6.3(a) within [**] of receiving notice. If a payment deficiency for a calendar year exceeds [**] percent ([**]%) of amounts paid for that year, then Licensee or its Sublicensee(s) shall pay Penn’s out-of-pocket expenses incurred with respect to the review, and Penn shall have the right to conduct a second audit within the same calendar year. If an overpayment with regard to any payment is determined, Licensee shall have the right to credit the amount of such overpayment against any future payments under this Agreement. The rights of Penn under this Section 6.2 are subject to the execution and delivery by Penn, its attorneys or accountants participating in such audit of a nondisclosure agreement on terms reasonably satisfactory to Licensee pursuant to which Penn, its attorneys and accountants agree not to disclose or use for any purpose other than as contemplated under this Section 6.2 any of the information reviewed pursuant to such audit.

6.3 Accounting for Payments .

(a) Any undisputed, overdue amount under this Section 6, Section 7 or any other provision of this Agreement shall accrue interest from the due date at the rate of [**] percent ([**]%) per month. This interest provision is not a grant of permission for any payment delays, and shall not accrue on the portions of any overdue amounts that are disputed in good faith. Licensee is responsible for repayment to Penn of any reasonable attorney, collection agency, or other out-of-pocket expenses to collect overdue payments.

(b) Except as otherwise directed or with respect to the instructions for reimbursements set forth in Sections 7.2 and 7.3, Licensee shall pay all amounts owing to Penn or UFRF under this Agreement in United States dollars at any one of the following address:



By ACH/Wire:	By Check (lockbox):
[**]	The Trustees of the
ABA #[**] (domestic wires)	University of Pennsylvania
SWIFT CODE: [**]	c/o Penn Center for Innovation
(international wires only)	PO Box 785546
Account Number: [**]	Philadelphia, PA 19178-5546

Licensee shall convert all monies owing in currencies other than United States dollars in accordance with Licensee’s reasonable then-current standard exchange rate methodology as applied in its external reporting for the conversion of foreign currency sales into U.S. Dollars.

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Licensee shall give Penn prompt written notice of any changes to Licensee’s customary and usual procedures for currency conversion.

(c) Prior to the First Commercial Sale, on an annual basis concurrently with delivery of Development Reports pursuant to Section 3.1(c), and following the First Commercial Sale, on a quarterly basis concurrently with payment of royalties pursuant to Section 4.4(e), Licensee shall submit a completed royalty report in the form shown in Appendix E–Royalty Report showing how any amounts payable to Penn have been calculated. Such royalty report shall provide accounting on a per-country and Licensed Product-by-Licensed Product basis. In addition, Licensee shall include with all such reports a written representation signed by an officer of Licensee on behalf of Licensee that (i) the Net Sales amounts used to prepare such statements have been prepared in accordance with the Accounting Principles and (ii) the amounts payable to Penn reflected in such statements have been calculated in accordance with this Agreement.

(d) Following the First Commercial Sale, if no payment is owed to Penn, Licensee shall supply an accounting demonstrating that fact to Penn.

(e) Licensee shall make all payments due under this Agreement without deduction for taxes, assessments, or other charges of any kind which may be imposed on Penn by any government or political subdivision with respect to any amounts payable to Penn pursuant to this Agreement. All such taxes, assessments, or other charges, if any, shall be assumed by Licensee. Licensee is responsible for all wire/bank fees associated with all payments due to Penn pursuant to this Agreement.

Section 7 Patent Prosecution

7.1 Prosecution of the [**] Patent . UFRF shall file, prosecute, and maintain the Patent Rights related to the [**] Patent using counsel of its choice reasonably acceptable to Licensee. Licensee acknowledges that [**] is acceptable. UFRF shall promptly provide Licensee with copies of all documents sent to and received from the United States Patent and Trademark Office and foreign patent offices relating to the [**] Patent. Licensee shall keep those documents confidential.

7.2 Reimbursement . Licensee shall pay UFRF $18, 367.00 within thirty (30) days after the Effective Date to reimburse expenses associated with preparation, filing, prosecution, issuance, maintenance, and reporting of the Patent Rights relating to the [**] Patent prior to the Effective Date. (UFRF NOTE: the above referenced dollar amount in this Section 7.2 is subject to change, as UFRF may not have received all related patent prosecution expense invoices from the law firm at the time of license negotiation.). Licensee shall pay all amounts owing to UFRF at the following:

University of Florida Research Foundation, Incorporated
223 Grinter Hall, PO Box 115500
Gainesville, Florida 32611-5500
Attention: Business Manager

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Wiring Instructions: www.research.ufl.edu/ufrf/wiring.html

7.3 Consultation and Maintenance .

(a) UFRF will solicit input from Licensee regarding (a) actions to be taken and material decisions in connection with prosecution and maintenance of the Patent Rights related to the [**] Patent, and (b) fees, annuities, costs and expenses to be incurred in connection therewith. UFRF will submit, or will cause to be submitted to Licensee (or its designated counsel) all correspondence or other materials related to the preparation, filing, prosecution (including interferences and oppositions), issuance, maintenance and reporting of the Patent Rights related to the [**] Patent for Licensee’s review and comment prior to any filing or other submission thereof, and UFRF will give due consideration to comments provided by Licensee or Licensee’s counsel. If Licensee fails to provide comments regarding actions to be taken, submissions or payment of fees, annuities, or other costs or expenses within [**] of the date of UFRF’s submission thereof to Licensee, then UFRF will assume Licensee has no comments.

(b) UFRF shall maintain the Patent Rights related to the [**] Patent in at least the following countries: [**]. Licensee shall pay all costs and expenses incurred by UFRF related to the preparation, filing, prosecution (including interferences and oppositions), issuance, maintenance and reporting of the Patent Rights related to the [**] Patent in such countries and in any additional countries or jurisdictions in which UFRF and Licensee mutually agree to pursue such preparation, filing, prosecution (including interferences and oppositions), issuance, maintenance and reporting, in each case that were not previously reimbursed pursuant to Section 7.2 within [**] of receipt of an invoice from UFRF. Licensee shall keep UFRF fully apprised of the entity status of Licensee and all Sublicensees with respect to United States and applicable foreign patent laws. Licensee shall inform UFRF of any changes in writing of the entity status from “small entity” to “large entity” or vice versa with respect to United States and applicable foreign patent laws within [**] of any change.

(c) UFRF shall, with respect to the [**] Patent and any related Patent Rights, remain in compliance with The Patent and Trademark Law Amendments Act of 1980 (Public Law 96-517; 35 U.S.C. §§ 200-212), including any amendments thereto and all regulations promulgated thereunder, and shall reasonably assist Licensee in complying with Licensee’s obligations under such law, including, as applicable, that set forth in Section 17.1.

(d) Licensee shall have the sole right in electing which of the Patent Rights related to the [**] Patent shall receive any patent term extension under 35 U.S.C. § 156 in the United States, supplemental protection certificate in the European Union and similar rights in foreign jurisdictions. UFRF and Licensee shall cooperate in timely filing and obtaining the patent term extension, supplemental protection certificate and similar rights for such Patent Right(s) elected by Licensee.

7.4 Licensee may elect upon [**] prior written notice to decline to reimburse UFRF for patent expenses for any Patent Right related to the [**] Patent in any particular country or jurisdiction, provided that if Licensee elects to decline to reimburse UFRF for such patent expenses in any of [**], then upon such election, the license granted to Licensee by this

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Agreement terminates after the [**] with respect to the applicable Patent Right in that country or jurisdiction.

7.5 Patent prosecution of any Patent Rights other than Patent Rights related to the [**] Patent shall be subject to a separate written agreement between the parties, which will provide Licensee with information, review and consultation rights substantially similar to those set forth in this Article 7.

Section 8 Infringement and Invalidity

8.1 Information . Each party shall inform the other parties promptly in writing of any (i) alleged infringement of the Patent Rights by a Third Party and of any available evidence of the alleged infringement or (ii) declaratory judgment action or post grant challenge (e.g., a post-grant review or inter partes review) brought against Licensors or Licensee with respect to the Patent Rights. None of the parties shall charge a Third Party with infringement of the Patent Rights without first consulting with the other parties regarding such proposed action; provided that Licensee, upon prior written notification to Licensors, shall be entitled to take such actions (including notifying Third Parties of infringement or instituting a lawsuit) as are reasonably necessary to timely comply with and preserve all rights under the Biologics Price Competition and Innovation Act in the United States and comparable laws in other applicable countries.

8.2 Infringement Enforcement . During the term of this Agreement:

(a) Licensee shall prosecute any infringement of the Patent Rights at its own expense. If Licensee prosecutes any infringement, Licensors agree that Licensee may include either or both Licensors as co-plaintiffs in any infringement suit in all cases without expense to Licensors; provided Licensee must provide prior, written reasonable notice to Licensors and obtain prior consent from Licensors, such consent not to be unreasonably withheld, prior to their inclusion as a party plaintiff and prior to the filing of the infringement action; provided further that Licensors shall consent to being included as a co-plaintiff in any infringement suit if the infringement is by a Third Party product of commercial significance that is competitive with a Licensed Product and (i) Licensors have received prior written notification from Licensee, (ii) Licensors being named as a party plaintiff is required for matters of standing, and (iii) Licensee has provided Licensors with (a) a written estimate from an outside law firm of the expenses that would be reasonably incurred in connection with such action and (b) documentation of financial records reasonably sufficient to reasonably demonstrate that Licensee has the financial wherewithal to pay such expenses as they fall due through the conclusion of such suit by means of judgement or other non-appealable decision. Licensee may not enter any settlement, consent judgment, or other voluntary final disposition of the suit without the prior, written consent of Licensors, which consent may not be unreasonably withheld. Licensee shall indemnify Licensors against any order for costs that may be made against Licensors in any proceeding undertaken pursuant to Section 8.1 and this Section 8.2(a).

(b) If, within [**] after receiving notice of, or otherwise becoming aware of, an alleged infringement, Licensee is unsuccessful in persuading the alleged infringer to desist, has not brought an infringement action against the alleged infringer, or notifies Penn or UFRF, as

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applicable, of its intention not to bring suit against the alleged infringer, then, and in those events only, Licensors may but are not obligated to prosecute at their own expense the alleged infringement of the Patent Rights. Licensors may use the name of Licensee as party plaintiff in the infringement action (in which case the applicable Licensor must provide reasonable notice to Licensee of its inclusion as party plaintiff prior to the filing of the infringement action). Licensors may not enter any settlement, consent judgment, or other voluntary final disposition of the suit without the prior, written consent of Licensee, which consent may not be unreasonably withheld. Licensors shall indemnify Licensee against any order for costs that may be made against Licensee in any proceedings undertaken pursuant to this Section 8.2(b).

(c) If a declaratory judgment action or post grant challenge (e.g., a post-grant review or inter partes review) is brought against Licensors or Licensee by a Third Party alleging invalidity, unpatentability, unenforceability, or non-infringement of the Patent Rights, Licensee, if it is the sole licensee of the Patent Rights, shall be responsible for the sole defense of the action. Such defense shall be at Licensee’s sole expense, subject to Sections 8.3 and 8.4. If Licensee does not defend such action if brought in [**], then Licensors, at their option, may within [**] after commencement of the action take over the sole defense of the action at their own expense and terminate the license in respect of the applicable Patent Rights.

8.3 Voluntary Joinder . If Licensee undertakes the enforcement or defense of the Patent Rights by litigation, either or both Licensors may voluntarily join the litigation, represented by its own counsel at its own expense.

8.4 Recovery . Licensee shall apply any recovery of damages first in satisfaction of any unreimbursed expenses and legal fees of Licensee relating to the suit and next toward reimbursement of Licensors for any legal fees and unreimbursed expenses. Licensee and Licensors shall divide the balance remaining from any recovery as follows. If Licensee conducts the litigation and Licensors have not co-funded the cost of the action, then the balance remaining shall be divided by allocating [**] percent ([**]%) of such balance to Licensee, on the one hand, and [**] percent ([**]%) of such balance to Licensors, on the other hand. If Licensors have co-funded at least fifty percent (50%) of the cost of the action, then the balance remaining shall be divided by allocating fifty percent (50%) of such balance to Licensee, on the one hand, and fifty percent (50%) to Licensors, on the other hand. In the event that the Licensors [**] percent ([**]%) of the cost of such action, the Parties shall implement an equitable allocation of any remaining balance between the Licensee, on the one hand, and the Licensors, on the other hand based upon such co-funding percentage and the allocations provided under this Section 8.4.

8.5 Cooperation . In any suit in which Licensee or either Licensor is involved to enforce or defend the Patent Rights pursuant to this Agreement, the other parties shall, at the request and expense of the party initiating the suit, cooperate in all respects and, to the extent possible, have its employees testify when requested and make available relevant records, papers, information, samples, specimens, and the like.

8.6 Patent Challenge . If Licensee (or its Affiliate) or any Sublicensee (or its Affiliate) brings a Patent Challenge against any Patent Rights, unless Licensors terminate this Agreement pursuant to Section 9.4, Licensee shall continue to pay royalties and make other payments

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pursuant to this Agreement with respect to that patent as if the contest were not underway until the patent is adjudicated invalid or unenforceable by a court of last resort. If Licensee does not continue to pay royalties and make other payments pursuant to this Agreement with respect to the applicable Patent Rights as if the contest were not underway, and if at the end of such contest Patent Rights covering Licensed Products remain valid, then all royalties and other payments due under this Agreement with respect to such Patent Rights will be increased by [**] percent ([**]%).

Section 9 Term and Termination

9.1 Term . The term of this Agreement begins on the Effective Date and continues until the latest to end of each of the royalty obligations set forth in Section 4.4(a), (b) and (c), unless earlier terminated pursuant to this Section 9.

9.2 Licensee Termination .

(a) Before the Effectiveness of IND . Licensee may terminate this Agreement in its entirety or with respect to a particular Category of Licensed Products at any time prior to an IND for a Licensed Product in such Category becoming effective by giving at least sixty (60) days’ prior written notice to Penn, on behalf of both Licensors. Licensee shall include a statement of the reasons for termination, if any, in the notice. For clarity, Licensee may terminate pursuant to this subsection (a) with respect to the Category of [**] Products only, or with respect to the Category of [**] Products only, without affecting its rights or obligations to the other Category of Licensed Products.

(b) After the Effectiveness of IND. If an IND for a Licensed Product in a particular Category becomes effective, then this Agreement shall be non-cancellable under Section 9.2 with respect to such Category, except that Licensee shall have the right to terminate this Agreement with respect to such Category by providing Penn written notice, certified by an officer of the Licensee, that Licensee is ceasing all use, research and development of, manufacture of, sales, importation of, or any commercialization of all Licensed Products in such Category (other than any further use that is necessary to comply with any applicable regulatory requirements arising from studies and trials initiated prior to notice of termination of this Agreement with respect to such Category, for which Licensee shall provide Penn with a semiannual written summary of any ongoing uses of the Licensed Products, in such Category including the purpose of such ongoing uses and the expected duration of such uses, and shall confirm in writing when such use has ceased). For clarity, Licensee may terminate pursuant to this subsection (b) with respect to the Category of [**] Products only, or with respect to the Category of [**] Products only, without affecting its rights or obligations to the other Category of Licensed Products.

(c) Material Breach by Penn or UFRF . If Penn or UFRF commits a material breach of this Agreement at any time, then Licensee may give Penn, on behalf of both Licensors, written notice specifying the nature of the default, requiring Penn or UFRF, as applicable, to cure such breach, and stating its intention to terminate this Agreement. If such breach is not cured within [**] of such notice and Penn fails to provide Licensee with a plan to cure such breach that

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is reasonably acceptable to Licensee, such termination shall become effective upon a notice of termination by Licensee thereafter to Penn.

9.3 Licensors’ Termination . If Licensee commits a material breach of this Agreement, Penn, on behalf of both Licensors, may give to Licensee written notice specifying the nature of the default, requiring it to cure such breach, and stating its intention to terminate this Agreement. If such breach is not cured within [**] in the case of payment breaches, provided that in the case of good faith payment disputes, such cure period shall be tolled in respect of, and only to the extent of, amounts actually being disputed during the pendency of any dispute resolution proceeding in which the amount due is being disputed in good faith, until the resolution of the disputed amount due, in which case Licensee may cure such payment breach by paying the amount determined to be due, if any, within [**] after such resolution) of such notice and Licensee fails to provide Licensors with a plan to cure such breach that is reasonably acceptable to either Licensor, such termination shall become effective upon a notice of termination by Licensors thereafter. For clarity, a material breach includes but is not limited to:

(a) Licensee being delinquent in timely providing any report, payment or required documents as specified in any section of this Agreement or provides a materially deficient report, payment or required document as specified in any section of this Agreement;

(b) Licensee being in breach of its obligations under Section 3.1(a), 3.1(b) or 3.2(a); provided that, Licensee’s failure to satisfy its obligations under Sections 3.1(a), 3.1(b) or 3.2(a) with respect to only one Category of Licensed Products (e.g., [**] Products or [**] Products) shall only permit Penn and UFRF to terminate the licenses and rights granted to Licensee under this Agreement with respect to such Category and shall not affect Licensee’s rights or obligations with respect to the other Category; provided, further that, Licensee’s failure to meet the milestones set forth in Section 3.2(a)(i) and Appendix F-1 shall only permit Penn and UFRF to terminate the licenses and rights granted to Licensee under this Agreement with respect to the Category of [**] Products and shall not affect Licensee’s rights or obligations with respect to the [**] Products, and similarly, Licensee’s failure to meet the milestones set forth in Section 3.2(a)(ii) and Appendix F-2 shall only permit Penn and UFRF to terminate the licenses and rights granted to Licensee under this Agreement with respect to the Category of [**] Products and shall not affect Licensee’s rights or obligations with respect to the [**] Products;

(c) Licensee violating any laws or regulations in a manner that is material to the development or commercialization of Licensed Products; and

(d) Licensee providing any report to either or both Licensors containing intentionally false or misleading information.

Penn, on behalf of both Licensors, may also terminate this Agreement upon thirty (30) days’ notice to Licensee in the event that (i) Licensee goes into bankruptcy, liquidation or proposes having a receiver control any of its assets (unless such action is dismissed within thirty (30) days); (ii) Licensee ceases to carry on the entirety of its business pertaining to Patent Rights or Licensed Information; or (iii) Licensee ceases for more than four (4) consecutive calendar

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quarters to make any payment of earned royalties under Section 4.4 once begun, unless such cessation is based on safety concerns that Licensee is actively attempting to address.

9.4 If Licensee or any of its Affiliates brings a Patent Challenge against Licensors or assists others in bringing a Patent Challenge against Licensors (except as required under a court order or subpoena or as part of proceedings initiated by a patent office and not provoked by Licensee or its Affiliate), then Penn, on behalf of both Licensors, may immediately terminate this Agreement. If a Sublicensee or any Sublicensee Affiliate brings a Patent Challenge or assists another party in bringing a Patent Challenge (except as required under a court order or subpoena or as part of proceedings initiated by a patent office and not provoked by Sublicensee or its Affiliate), then Penn, on behalf of both Licensors, may send a written demand to Licensee to terminate the Sublicense. If Licensee fails to terminate the Sublicense within forty five (45) days after Licensors’ demand, Penn, on behalf of both Licensors, may immediately terminate this Agreement.

9.5 License Survival . Upon any expiration of this Agreement under Section 9.1 (but not earlier termination), the licenses granted to Licensee under Sections 2.1, 2.2 and 2.3 shall become fully paid-up and perpetual, on a country-by-country basis or with respect to the Licensed Territory, as applicable.

9.6 Licensee Payment Defaults . Licensee’s cure period under Section 9.3 shall be decreased to [**] upon the occurrence of the second separate failure by Licensee within any consecutive two-year period to pay at least [**] percent ([**]%) of any monies due under this Agreement when due.

9.7 Effects of Certain Terminations . In the event of termination of this Agreement pursuant to Section 9.2, 9.3, or 9.4, the licenses granted to Licensee under Sections 2.1, 2.2 and 2.3 shall terminate, but Licensee may elect to have any then-existing Sublicenses survive as direct licenses from Licensors (provided that the applicable Sublicensees are in good standing thereunder and are not in material breach of any material obligation or term under this Agreement including Section 2.4) and such survival will be accepted by Licensors. Each Sublicense surviving as a direct license as set forth herein will remain in full force and effect with Licensors as the licensor or sublicensor instead of Licensee, but the duties and obligations of Licensors under such surviving Sublicenses will not be greater than the duties of Licensors under this Agreement, and the rights of Licensors under such surviving Sublicenses will not be less than the rights of Licensors under this Agreement.

9.8 Accrued Obligations . Termination of this Agreement for any reason does not release either Licensee or Licensors from any obligation that matured prior to the effective date of termination. Licensee remains obligated to provide an accounting for and to pay royalties earned as well as pay any other amounts due including patent expenses incurred during the term of the Agreement. Licensee may prorate any minimum royalties that are due as of the date of termination by the number of days elapsed in the applicable calendar year. Licensee and its Sublicensees may, however, during the [**] after the effective date of termination, sell any Licensed Products that are in inventory and complete and sell Licensed Products that are in the process of manufacture, provided that Licensee provides an accounting for and pays all earned

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royalties and other payments that are due under the terms of the Agreement for such sales of Licensed Products.

9.9 Survival . Upon termination of the Agreement for any reason, defined terms and the following sections of the License Agreement remain in force as non-cancelable obligations: 4.8, 5.3, 6 (except 6.3(c) and 6.3(d)), 8.5, 9.7-9.11, 11, 12, 13 (except 13.3), 14, 15.1, 15.2, 15.3, 15.5(a), 15.6, 15.7, 15.8, 15.10, 15.11, 15.12, 15.13, 16, 18 and 20.

9.10 Upon early termination (but not expiration) of the Agreement for any reason, Licensee shall, at its option, return to Penn and UFRF or destroy (followed by written certification by Licensee of such destruction) all Licensed Information and Know-How Controlled by Licensee, its Affiliates or Sublicensees as the date of termination, and shall cease using all Licensed Information and Know-How for any purpose (other than any further use that is necessary to comply with any applicable regulatory requirements arising from studies and trials initiated prior to notice of termination of this Agreement, for which Licensee shall provide Penn with a semiannual written summary of any ongoing uses of the Licensed Information and Know-How, including the purpose of such ongoing uses and the expected duration of such uses, and shall confirm in writing when such use has ceased).

9.11 In the event of termination of this Agreement pursuant to Section 9.2, Licensee agrees to promptly meet with Licensors and consider Licensors’ interest in obtaining, on commercially reasonable terms, a license to or assignment of Licensee’s right, title and interest in any Licensed Product in the possession or control of Licensee and in any intellectual property developed by or on behalf of Licensee relating to this Agreement, including, whether or not patentable, (i) data (including but not limited to preclinical data and clinical data), (ii) reports including, but not limited to, study reports, (iii) manufacturing data, batch records, and reports, (iv) inventions, and (v) documents submitted to and received from regulatory agencies and documents relied on in support of regulatory filings, in each case generated by or on behalf of the Licensee and in the possession or control of the Licensee. For the avoidance of doubt, Licensee has sole discretion as to whether to enter into such a license or an assignment with Licensors.

Section 10 No Discrimination Neither Licensors nor Licensee will discriminate against any employee or applicant for employment because of race, color, sex, sexual or affectional preference, age, religion, national or ethnic origin, handicap, or veteran status. However, a breach of this Section 10 by any party shall not entitle any other party(ies) to terminate this Agreement so long as the breaching party is taking good faith efforts to investigate, and if applicable, remediate (including via discipline) such discrimination in compliance with applicable discrimination laws. For the avoidance of doubt, an alleged discrimination shall not constitute a breach of this Section 10.

Section 11 Assignability

(a) This Agreement may not be transferred or assigned by Licensee except with the prior written consent of Licensors, except that Licensee may assign this Agreement without prior written consent of Licensors (i) to a wholly-owned Affiliate, (ii) to an Affiliate that

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is not wholly-owned if Licensee (or its successor following an assignment pursuant to this Section 11) has a market capitalization of at least [**] Dollars ($[**]) at the time of such assignment, and in the case of (i) and (ii) provided that Licensee remains liable for any breach of this Agreement by the Affiliate, or (iii) in connection with sale or transfer of all or substantially all of the business or the assets, as applicable, of the business to which this Agreement relates, including by way of sale of assets, merger or consolidation, and in each case of (i), (ii) and (iii) provided that (A) there exists no uncured financial breach by the Licensee or its Affiliates of any material term of this Agreement, including those caused by a Sublicensee at the time of the assignment; (B) within [**] of the consummation of such transaction, Licensee shall give notice of the transaction to Licensors; and (C) the assignee agrees in writing to (x) be legally bound by this Agreement; (y) assume responsibility for any and all liabilities that arose under this Agreement prior to the effective date of the proposed assignment of this Agreement, and (z) deliver to Licensors an updated Development Plan within [**] after the closing of the proposed transaction.

(b) This Agreement may not be transferred or assigned by any of the Licensors except with the prior written consent of Licensee, except that any Licensor may assign this Agreement (i) to an Affiliate or (ii) in connection with sale or transfer of all or substantially all of the business and assets of such party to which this Agreement relates, including by way of sale of assets, merger or consolidation, in each case ((i) or (ii)) without prior written consent of Licensee, provided that such Licensor shall provide prompt written notice to the other parties following such assignment. Licensors shall not assign any Patent Right or their rights in the Licensed Information or Know-How licensed hereunder to any Third Party other than in connection with a permitted assignment of this Agreement.

(c) Any attempted assignment in contravention of this Section 11 is void and constitutes a material breach of this Agreement. Any new permitted assignee shall assume all responsibilities under this Agreement and agree in writing to the non-assigning parties to be bound by this Agreement.

Section 12 Dispute Resolution

12.1 Mandatory Procedures . Before either Licensee or Licensors intend to file a lawsuit against the other(s) with respect to any matter in connection with this Agreement, except with regard to any payments made or due under this Agreement, it shall first comply with the procedures set forth in this Section 12, other than for injunctive relief to enforce the provisions of this Section 12.

(a) When a party intends to invoke the procedures set forth in this Section 12, it shall provide written notice to the other parties. Within [**] after the date of that notice, senior representatives of the Licensee and of the Licensors shall engage in good faith negotiations at a mutually convenient location to resolve the dispute. In the case of Licensors, that representative is the Managing Director of the Penn Center for Innovation, who may act as the representative for both Licensors if UFRF has given its prior written consent for Penn to represent UFRF in the dispute resolution process, otherwise UFRF shall designate a representative to represent UFRF.

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In the case of Licensee, that representative is the Chief Financial Officer, General Counsel or individual of equivalent authority.

(b) If such representatives fail to meet within the time period set forth in Section 12(a) or if either Licensee or Licensors subsequently determine that negotiations between the representatives are at an impasse, the party declaring that the negotiations are at an impasse shall give notice to the other parties stating with particularity the issues that remain in dispute.

(c) Not more than [**] after the notice of issues, the Managing Director of the Penn Center for Innovation of Penn and UFRF’s designated representative (or Penn acting on behalf of both Licensors if UFRF has given its prior written consent for Penn to represent UFRF in the dispute resolution process) and the Chief Executive Officer of the Licensee shall meet and engage in good faith negotiations at a mutually convenient location to resolve the dispute.

12.2 Failure to Resolve Dispute . If (a) any issue is not resolved within [**] after the first meeting pursuant to Section 12.1(c) or (b) there is a dispute regarding payments made or due under this Agreement, either Licensee or Licensors may file appropriate administrative or judicial proceedings with respect to the issue in dispute. The parties agree to consider in good faith any proposals to address issues through alternative dispute resolution.

Section 13 Indemnification; Liability; Insurance

13.1 Indemnity .

(a) Licensee and Sublicensee(s) shall, at all times during the term of this Agreement and thereafter, indemnify, defend and hold Penn, the University of Pennsylvania, UFRF, the Florida Board of Governors, the University of Florida Board of Trustees, the University of Florida and each of their directors, trustees, officers, employees, and agents, the inventors of the Patent Rights, and the creators of the Licensed Information, regardless of whether the inventors are employed by the University of Florida or the University of Pennsylvania at the time of the claim (each individually, an “ Indemnitee ” and collectively, the “ Indemnitees ”), harmless against any and all claims and liabilities, damages, costs and expenses, including legal expenses and reasonable attorneys’ fees, arising from a Third Party claim (or resulting from UFRF’s or Penn’s enforcing this indemnification clause against Licensee or a Sublicensee with respect to such a Third Party claim), arising out of (i) death of or injury to any person or persons or out of any damage to property, including product liability claims, or any other claim, proceeding, demand, expense or liability resulting from the development, production, manufacture, sale, use, consumption, marketing, or advertisement of Licensed Products by Licensee or any Sublicensee(s) or arising from (ii) any exercise of a right or the performance of any obligation of Licensee or any Sublicensee(s) under this Agreement, (iii) any enforcement action or suit brought by Licensee or a Sublicensee against a Third Party for infringement of Patent Rights and (iv) any claim by a Third Party that the practice of the Patent Rights or the design, composition, manufacture, use, sale, or other disposition of any Licensed Product infringes or violates any patent, copyright, trade secret, trademark, or other intellectual

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property right of such Third Party; provided that a Sublicensee’s obligations pursuant to this Section 13.1 shall only apply with respect to actions or omissions of such Sublicensee.

(b) Licensee’s and any Sublicensee’s obligations under Section 13.1(a) are conditioned upon the applicable Indemnitee (i) providing written notice to the indemnifying party of any claim, demand or action arising out of the indemnified activities within [**] after the Indemnitee has knowledge of such claim, demand or action; (ii) permitting the indemnifying party to assume full responsibility to investigate, prepare for and defend against any such claim or demand; and (iii) assisting the indemnifying party, at the indemnifying party’s expense, in the investigation of, preparation of and defense of any such claim or demand; provided that, if the Indemnitee fails to notify the indemnifying party without undue delay pursuant to the foregoing clause, the indemnifying party shall only be relieved of its indemnification obligation to the extent it is prejudiced by such failure. Notwithstanding the foregoing, if in the reasonable judgment of the Indemnitee, such suit or claim involves an issue or matter which could have a materially adverse effect on the business, operations or assets of the Indemnitee, the Indemnitee may waive its rights under Section 13.1(a) and control the defense or settlement thereof. The indemnifying party may compromise or settle any indemnified claim or demand without the applicable Indemnitee’s prior written consent, provided that such compromise or settlement includes (i) an unconditional and complete release of the applicable Indemnitee from any and all liability in respect of such claim or demand (other than any financial liability assumed by the indemnifying party), (ii) does not commit any Indemnitee to take, or forbear to take, any action, and (iii) does not grant any rights under the Patent Rights or Licensed Information except for Sublicenses permitted under Section 2.4. Notwithstanding the above, the Licensors at all times reserve the right to retain counsel of their own to defend the interests of UFRF and Penn, the Florida Board of Governors, the University of Florida Board of Trustees, the University of Florida, the University of Pennsylvania and the inventor(s); provided that any such counsel shall be at the applicable Licensor’s expense unless an actual conflict of interest between the indemnifying party and the applicable Indemnitee(s) exist, in which case, the indemnifying party shall be liable for reasonable attorneys’ fees of up to one law firm for each Licensor taken together with its associated Indemnitees.

(c) Licensee’s and Sublicensee(s)’ obligations under this Section 13.1 shall not apply to the extent that the Third Party claim arises out of the gross negligence or intentional misconduct of UFRF or Penn, the Florida Board of Governors, the University of Florida Board of Trustees, the University of Florida, the University of Pennsylvania or inventor(s) employed by any of them, as determined by a court of law, in which case, as between the Licensors, the party to which the gross negligence or intentional misconduct is attributable (i.e., UFRF or Penn) is responsible for their own liability.

13.2 Limitation of Liability . EXCEPT WITH RESPECT TO THE INDEMNIFICATION RIGHTS OR OBLIGATIONS OF LICENSEE UNDER THIS AGREEMENT, NEITHER LICENSEE NOR LICENSORS WILL BE LIABLE FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL, EXEMPLARY OR PUNITIVE DAMAGES, INCLUDING LOST PROFITS, ARISING FROM OR RELATING TO THIS AGREEMENT, REGARDLESS OF ANY NOTICE OF SUCH DAMAGES.

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13.3 Insurance . Licensee warrants that it now maintains and will continue to maintain and that it will procure that its Sublicensee(s) will maintain, liability insurance coverage (which, in the event that Licensee or a Sublicensee has a market capitalization of at least [**] Dollars ($[**]), may consist of self-insurance) appropriate to the risk involved in developing, producing, manufacturing, conducting clinical trials for, selling, marketing, using, leasing, consuming, or advertising Licensed Products (the “ Required Insurance Coverage ”). The Required Insurance Coverage shall list UFRF, Penn, the Florida Board of Governors, the University of Florida Board of Trustees, the University of Florida, the University of Pennsylvania, the inventors of the Patent Rights and the creators of the Licensed Information as additional insureds. Within [**] after the execution of this Agreement and thereafter annually between [**] of each year, Licensee will present evidence to Licensors that the Required Insurance Coverage is being maintained. In addition, Licensee shall provide Penn with at least [**] prior written notice of any cancellation of the Required Insurance Coverage.

Section 14 Use of Names

Licensee and its Sublicensee(s) may not use the names or logos of Penn, the University of Pennsylvania, UFRF or the University of Florida, nor of any of the foregoing institution’s employees, agents, or affiliates, nor the name of any inventor of Patent Rights, Licensed Information or Know-How, nor any adaptation of those names, in any promotional, advertising or marketing materials or any other form of publicity, or to suggest any endorsement by these entities or individuals, without the prior written approval of the applicable party in each case.

Section 15 Miscellaneous

15.1 Governing Law . This Agreement shall be governed by and interpreted in accordance with the laws of the Commonwealth of Pennsylvania, excluding application of any conflict of laws principles that would require application of the law of a jurisdiction outside of the Commonwealth of Pennsylvania.

15.2 Independent Contractors . Licensee and Licensors are independent contractors and not joint venturers or partners.

15.3 Integration; Amendments . This Agreement constitutes the full understanding between the parties with reference to its subject matter, and no prior statements or agreements by the parties, whether oral or in writing, including the Option Agreement, may modify the terms of this Agreement. However, the Penn SRA and any confidentiality agreements entered into by or among the parties before the Effective Date relating to the subject matter hereof shall each survive in accordance with their terms. Neither Licensee nor Licensors may claim any amendment, modification, or release from any provisions of this Agreement, unless the mutual agreement is in writing and signed by Licensee and the applicable Licensors.

15.4 No Security Interest . Licensee may not encumber or otherwise grant a security interest in any of the rights granted under this Agreement to any Third Party.

15.5 Laws and Regulations . Licensee shall comply with all local, state, federal, and international laws and regulations that are applicable to the development, manufacture, use, and sale of Licensed Products, including:

(a) Licensee acknowledges that it is subject to and agrees to abide by United States laws and regulations (including the Export Administration Act of 1979 and Arms Export Control Act) controlling the export of technical data, computer software, laboratory prototypes, biological material, and other commodities. The transfer of those items may require a license from the cognizant agency of the United States Government or written assurances by Licensee that it will not export items to certain foreign countries or persons without prior approval by that agency. Licensors neither represent that a license is or is not required nor represent that, if required, it will be issued.

(b) Licensee shall obtain all necessary approvals from the United States Food & Drug Administration, Environmental Protection Agency, Department of Agriculture and any similar governmental authorities of foreign jurisdictions in which Licensee intends to make, use, or sell Licensed Products.

15.6 Force Majeure . Neither Licensee nor Licensors are responsible for default, delay, or failure to perform, if such default, delay or failure to perform is due to causes beyond the party’s reasonable control, including, but not limited to, strikes, lockouts, inactions of governmental authorities, war, fire, hurricane or other natural disaster, provided that the nonperforming party uses commercially reasonable efforts to avoid or remove those causes of nonperformance and continues performance under this Agreement with reasonable dispatch when the causes are removed. In the event of a default, delay or failure to perform described in this Section 15.6, any date or times by which Licensee or Licensors are scheduled to perform is extended automatically for a time equal to the time lost by reason of the excused default, delay or failure to perform.

15.7 Severability . If any provision hereof should be held invalid, illegal or unenforceable in any respect in any jurisdiction, the parties hereto shall substitute, by mutual consent, valid provisions for such invalid, illegal or unenforceable provisions which valid provisions in their economic effect are sufficiently similar to the invalid, illegal or unenforceable provisions that it can be reasonably assumed that the parties would have entered into this Agreement with such valid provisions. In case such valid provisions cannot be agreed upon, the invalidity, illegality or unenforceability of one or several provisions of this Agreement shall not affect the validity of this Agreement as a whole, unless the invalid, illegal or unenforceable provisions are of such essential importance to this Agreement that it is to be reasonably assumed that the parties would not have entered into this Agreement without the invalid, illegal or unenforceable provisions.

15.8 No Other Rights to Licensor Intellectual Property . Except as expressly provided herein, nothing in this Agreement shall be construed as granting to Licensee any additional ownership interest, license, express or implied, or other right, in or to any technology or intellectual property of Licensors, including know-how, patents, patent applications, trade secrets, products, formulations, delivery devices and chemical or biological materials.

15.9 Compliance with Export Regulations . None of Licensee, its Affiliates, and Sublicensees shall export any technology licensed to it under this Agreement except in compliance with United States export laws and regulations.

15.10 Waiver . No provision of this Agreement shall be waived by any act, omission or knowledge of a party or its agents or employees except by an instrument in writing expressly waiving such provision and signed by a duly authorized officer of the waiving party.

15.11 Descriptive Headings . The descriptive headings of this Agreement are for convenience only, and shall be of no force or effect in construing or interpreting any of the provisions of this Agreement.

15.12 No Strict Construction; No Prior Drafts . The parties and their respective counsel have had an opportunity to fully negotiate this Agreement. If any ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement. No prior draft of this Agreement shall be used in the interpretation or construction of this Agreement.

15.13 Interpretation . Unless context otherwise clearly requires, whenever used in this Agreement: (a) the words “include” or “including” shall be construed as incorporating, also, “but not limited to” or “without limitation;” (b) the word “day” or “year” means a calendar day or year unless otherwise specified; (c) the word “notice” shall mean notice in writing (whether or not specifically stated) and shall include notices, consents, approvals and other written communications contemplated under this Agreement; (d) the words “hereof,” “herein,” “hereby” and derivative or similar words refer to this Agreement (including any Appendices); (e) the word “or” shall be construed as the inclusive meaning identified with the phrase “and/or;” (f) provisions that require that a party or the parties hereunder “agree,” “consent” or “approve” or the like shall require that such agreement, consent or approval be specific and in writing, whether by written agreement, letter or otherwise; (g) words of any gender include the other gender; (h) words using the singular or plural number also include the plural or singular number, respectively; and (i) the word “law” (or “laws”) when used herein means any applicable, legally binding statute, ordinance, resolution, regulation, code, guideline, rule, order, decree, judgment, injunction, mandate or other legally binding requirement of a government entity, together with any then-current modification, amendment and re-enactment thereof, and any legislative provision substituted therefor.

Section 16 Notices

The parties shall provide any notice required to be given pursuant to this Agreement in writing to the addresses listed in this Section 16, except that any notice to be provided by Licensee to Licensors shall be deemed to be properly provided and effective if delivered to Penn. Notice is effective on the day it is delivered personally with written receipt from an authorized signatory and on the second day after the day on which the notice has been sent for next day delivery prepaid to a nationally recognized courier service.



If to UFRF: President University of Florida Research Foundation, Incorporated 223 Grinter Hall University of Florida P. O. Box 115500 Gainesville, FL 32611-5500 with a copy to: Office of Technology Licensing University of Florida Attn: Director (Rm. 112) 747 SW 2nd Avenue Post Office Box 115575 Gainesville, Florida 32611-5575	If to Licensee: Ophthotech Corporation One Penn Plaza, Suite 3520 New York, NY 10119 Attention: Legal Department with a copy to: WilmerHale LLP 60 State Street Boston, MA 02109 Attention: Steven D. Barrett, Esq. (steven.barrett@wilmerhale.com)
If to Penn: Penn Center for Innovation University of Pennsylvania 3160 Chestnut Street, Suite 200 Philadelphia, PA 19104-6283 Attention: Managing Director with a copy to: University of Pennsylvania Office of General Counsel 2929 Walnut Street, Suite 400 Philadelphia, PA 19104-5509 Attention: General Counsel

Section 17 United States Government Interests; [**] Rights

17.1 The United States Government has funded Grant No. EY021721 during the course of or under which any of the inventions of the Patent Rights was conceived or reduced to practice. The United States Government is entitled under the provisions of 35 U.S.C. §202-212 and applicable regulations to a non-exclusive, nontransferable, irrevocable, paid-up license to practice or have practiced those inventions for or on behalf of the United States throughout the world. Any license granted to Licensee in this Agreement is subject to that license. If any invention claimed in the Patent Rights or described in Licensed Information was funded by the United States Government, Licensee agrees that Licensed Products that are used or sold in the United States will be manufactured substantially in the United States unless a waiver is obtained, at Licensee’s expense, from the appropriate Untied States Government agency with respect to the requirement of United States manufacturing preference.

17.2 This Agreement is subject to the obligations to the [**] with respect to patient assistance programs set forth in Appendix H.

Section 18 Confidentiality

18.1 Unless required by Pennsylvania law or other applicable law, the parties (a) may only use one another’s Confidential Information (as defined below) as necessary to perform the obligations or exercise the rights set forth in this Agreement, (b) may not disclose any other party’s Confidential Information to any Third Party, and (c) shall protect one another’s Confidential Information with the same degree of care that they exercise with their own Confidential Information but in no event less than a reasonable degree of care. Notwithstanding the foregoing, the parties may disclose this Agreement and Confidential Information to their authorized Affiliates, directors, officers, employees, consultants, attorneys, accountants, subcontractors, Sublicensees, potential Sublicensees, investors, potential investors, lenders, potential lenders, acquirers, potential acquirers or agents who are bound by similar confidentiality provisions. For the purposes of this Agreement, “ Confidential Information ” means the terms of this Agreement and information disclosed by one party to another in connection with this Agreement that is marked “confidential” by the disclosing party or that is confirmed in writing within [**] after verbal disclosure. Confidential Information does not include information that (i) is publicly known; (ii) is already known or independently developed without use of the Confidential Information as shown by written records; (iii) is disclosed by a Third Party having no known obligation of confidentiality with respect to the Confidential Information; or (iv) is required to be disclosed to comply with applicable laws or regulations or with a court or administrative order, including to comply with applicable disclosure requirements under United States securities regulations and rules of any stock exchange on which shares of the disclosing party are listed. These confidentiality obligations remain effective for (x) in the case of the terms of this Agreement, the period during which this Agreement remains in effect plus [**] and (y) in the case of other Confidential Information, [**] after disclosure of the Confidential Information.

18.2 Notwithstanding Section 18.1, a party may disclose Confidential Information of another party to the extent such disclosure is reasonably necessary in the following instances:

(a) Prosecuting patent rights in accordance with this Agreement; provided that the non-filing party whose Confidential Information is being disclosed is given a reasonable opportunity to review the proposed disclosure of such Confidential Information;

(b) making filings with Regulatory Authorities or otherwise complying with applicable laws or submitting information to tax or other governmental authorities;

(d) to the extent mutually agreed to in writing by the parties.

18.3 In the event that UFRF receives a request for Confidential Information pursuant to the Florida Public Records Act, Fla. Stat. §119.07, it is the parties’ intent that UFRF will rely on

the exemption set forth in paragraph (2) of Florida Education Code, Fla. Stat. § 1004.22 to avoid disclosure of Confidential Information in connection with such request. In the event that UFRF determines in good faith that such exception is not applicable, UFRF shall provide Licensee or Penn, as applicable, with advance written notice prior to making any disclosures of such party’s Confidential Information pursuant to any such public records request.

18.4 During the term of this Agreement, neither the Penn Principal Investigators nor UF Principal Investigators will publicly disclose the [**] Products [**], and in such case, if Penn Principal Investigators or UF Principal Investigators wish to publish, Penn or UFRF, as applicable, will promptly notify Licensee of the applicable disclosure requirement and in any event prior to submission for publication.

Section 19 University Rules and Regulations

Licensee understands and agrees that University of Florida personnel who are engaged by Licensee, whether as consultants, employees, or otherwise or who possess a material financial interest in Licensee are subject to the University of Florida’s rules regarding outside activities and financial interests set forth in University of Florida Regulation 1.011, the University of Florida’s Intellectual Property Policy, and an associated monitoring plan which addresses conflicts of interests. Any term of an agreement between Licensee and such University of Florida personnel which seeks to vary or override the personnel’s obligations to the University of Florida may not be enforced without the express written consent of an individual authorized to vary or waive such obligations on behalf of the University of Florida Board of Trustees and UFRF. Furthermore, should an interest of Licensee conflict with the interests of the University of Florida, such University of Florida personnel are obligated to resolve those conflicts according to the rules, guidelines, and policies of the University of Florida.

Section 20 Contract Formation and Authority

20.1 The submission of this Agreement is not an offer, and this document is effective and binding only upon the execution by duly authorized representatives of Licensee and each Licensor. Copies of this Agreement that have not been executed and delivered by UFRF, Penn and Licensee do not evidence an agreement among the parties. Penn, on behalf of Licensors, may terminate this Agreement without the requirement of any notice to Licensee, if Penn, on behalf of Licensors, does not receive the license issuance fee pursuant to this Agreement within thirty (30) days after the Effective Date.

20.2 Each Licensor and Licensee hereby warrant and represent that the persons signing this Agreement have authority to execute this Agreement on behalf of the party for whom they have signed.

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The parties have duly executed this Agreement on the dates indicated below.



THE TRUSTEES OF THE UNIVERSITY OF PENNSYLVANIA By: /s/ Benjamin Dibling ________________ Name: Benjamin Dibling, Ph.D. Title: Executive Director of Licensing, Penn Center for Innovation Date: April 11, 2019	OPHTHOTECH CORPORATION By: _/s/ Glenn Sblendorio________________ Name: Glenn P. Sblendorio Title: Chief Executive Officer & President Date: April 11, 2019
UNIVERSITY OF FLORIDA RESEARCH FOUNDATION, INCORPORATED By: _ /s/ Jim O’Connell ________________ Name: Jim O’Connell Title: Director of Technology Licensing Date: April 11, 2019

MASTER SPONSORED RESEARCH AGREEMENT

This Master Sponsored Research Agreement (“ Agreement ”) is dated as of October 30, 2018 (the “ Effective Date ”) by and between The Trustees of the University of Pennsylvania, a Pennsylvania nonprofit corporation (“ Penn ”), with offices located at Penn Center for Innovation, 3160 Chestnut Street, Suite 200, Philadelphia, PA 19104-6283, and Ophthotech Corporation, a Delaware corporation (“ Sponsor ”), having a place of business at One Penn Plaza, Suite 3520, New York, NY 10119. Penn and Sponsor may be referred to herein as a “ Party ” or, collectively, as “ Parties ”.

RECITALS:

WHEREAS, Penn and the University of Florida Research Foundation, Inc (“ UFRF ”) have developed gene therapy technology for treating BEST1-associated maculopathies jointly owned and/or controlled by Penn and UFRF, which technology is the subject of a separate option agreement among Penn, UFRF and Sponsor of even date hereof (the “ Option Agreement ”);

WHEREAS , Penn and Sponsor are entering into this Agreement since Sponsor desires to fund, among other projects, the research of a project to be conducted by [**] of Penn’s School of Veterinary Medicine relating to the study of BEST1-associated maculopathies;

WHEREAS , Sponsor desires to support such research conducted by Penn in accordance with the terms and conditions of this Agreement;

WHEREAS , the research program contemplated by this Agreement is of mutual interest to Sponsor and Penn and furthers the educational, scholarship and research objectives of Penn as a nonprofit, tax-exempt, educational institution, and may benefit both Sponsor and Penn through the creation or discovery of new inventions, which the Parties may invent solely or jointly in the conduct of the research program; and

WHEREAS , this Agreement is the “Penn Sponsored Research Agreement” referenced in the Option Agreement.

NOW, THEREFORE, in consideration of the various promises and undertakings set forth herein, the Parties agree as follows:

ARTICLE 1

DEFINITIONS


1.1	“ [] Model ” means [] models.


1.2	“ Field ” means gene therapies for the prevention, treatment, control and palliation of BEST1-associated maculopathies in humans and canines.


1.3	“ Investigator Group ” means the Penn employees who have agreed to participate in the Sponsored Research as identified in the applicable SOWs.


1.4	“ Penn Intellectual Property ” means all inventions, whether patentable or not, that are (a) conceived or (b) conceived and reduced to practice, in either case ((a) or (b)) in the conduct of the Sponsored

Research during the term of this Agreement, including all United States and foreign patent applications claiming said patentable inventions, including any divisional, continuation, continuation-in-part (to the extent that the claims are directed to said patentable inventions), and foreign equivalents thereof, as well as any patents issued thereon and reissues, reexaminations and supplemental examinations thereof and extensions of any of the foregoing. For clarity, Penn Intellectual Property also includes all software created in the conduct of the Sponsored Research during the term of the applicable SOW.


1.5	“ Principal Investigator ” means the Penn employee who has agreed to serve as faculty investigator for the Sponsored Research as identified in the applicable SOW and shall be responsible for the conduct, supervision and administration of the Sponsored Research under that SOW.


1.6	“ Product ” means the AAV gene therapy product candidate for BEST1-associated maculopathies.


1.7	“ Research Results ” means all data and information which are generated in the performance of the Sponsored Research during the term of the applicable SOW. Research Results expressly exclude Penn Intellectual Property.


1.8	“ Sponsor Option ” means the options described in Section 5.5(i) and Section 5.5(ii) of this Agreement.


1.9	“ Sponsored Research ” means the research program described in the applicable SOWs.

1.10

“ Statement of Work ” or “ SOW ” means any Statement of Work in substantially the form attached hereto as Attachment A that is entered into as of the Effective Date or in the future by Penn and Sponsor specifying the effective date of the SOW and fully detailing the activities and responsibilities to be undertaken with respect to each applicable research program in addition to any other obligations set forth in this Agreement.


1.11	Other Terms . The definition of each of the following terms is set forth in the section of the Agreement indicated below:



Defined Term	Section
Agreement	Preamble
Confidential Informatioin	6.1
Effective Date	Preamble
License Agreement	5.5(i)
Option Agreement	Preamble
Option Exercise Notice	5.5(iii)
Option Period	5.5(iii)
Party or Parties	Preamble
Penn	Preamble
Penn Indemnitees	8.2(i)
Publication	6.3
Related Penn Intellectual Property	5.5
Sponsor	Preamble
Term	7.1
UFRF	Preamble

ARTICLE 2
SPONSORED RESEARCH

2.1

Conduct . Penn shall promptly commence the Sponsored Research under an applicable SOW after the SOW Effective Date (as defined therein) and upon payment by Sponsor of any funds owed thereunder, and shall use good faith efforts to conduct such Sponsored Research substantially in accordance with the terms and conditions of this Agreement and the applicable SOW, including the timelines, if any, set forth therein. Sponsor acknowledges that Penn and the Principal Investigator shall have the freedom to conduct and supervise the Sponsored Research in a manner consistent with Penn’s educational and research missions.

2.2

Principal Investigator . If the services of the Principal Investigator become unavailable to Penn in connection with an applicable SOW for any reason, Penn shall be entitled to designate another member of its faculty who is acceptable to Sponsor to serve as the Principal Investigator of the Sponsored Research thereunder. If an acceptable substitute Principal Investigator has not been designated within [**] after the original Principal Investigator ceases his or her services under the applicable SOW, either Party may terminate the SOW upon written notice thereof to the other Party, subject to the provisions of Article 7.

ARTICLE 3
REIMBURSEMENT OF COSTS & PAYMENT

3.1

Reimbursement . Sponsor shall reimburse Penn for an amount equal to its expenditures and reasonable overhead incurred in the conduct of the Sponsored Research as set forth in the applicable SOW. Sponsor acknowledges that this amount is a good faith estimate only and not a guarantee of the cost to conduct the Sponsored Research. If at any time Penn determines that it will require additional funds for the Sponsored Research, it shall notify Sponsor and provide an estimate of the additional amount. Sponsor shall not be liable for any costs in excess of the amount set forth in the applicable SOW unless it has agreed in writing to provide additional funds.


3.2	Equipment . Title to any equipment, laboratory animals, or any other materials made or acquired with funds provided under this Agreement shall vest in Penn, and such equipment, animals, or materials shall remain the property of Penn following termination of the applicable SOW.

ARTICLE 4
RESEARCH RESULTS; RECORDS AND REPORTS

4.1

Research Results . Sponsor shall have the right to use, copy and distribute and have used, copied and distributed Research Results disclosed to Sponsor in records and reports for any reasonable purpose including for making IND and other regulatory filings with respect to the Product. The foregoing rights shall not grant Sponsor any rights under other copyrights or claims of patent applications or issued patents owned by Penn.

4.2

Records . Principal Investigator shall maintain accurate and complete records of the results of the Sponsored Research and shall provide Sponsor with (a) reports of the progress and results of the Sponsored Research in accordance with the applicable SOW, and (b) ongoing informal updates on the progress and results of the Sponsored Research. Penn shall maintain accurate and complete records of the use of the funds provided by Sponsor and shall make such records available to Sponsor upon reasonable notice during Penn’s normal business hours, but not more frequently than [**] of the SOW Effective Date (as defined in the applicable SOW).

4.3

Research Reports . Penn hereby grants Sponsor a royalty-free, nontransferable, non-exclusive right to copy, reproduce and distribute any research reports furnished to Sponsor under this Agreement. Sponsor may not charge fees for said research reports, use said research reports for advertising or promotional activities, or alter or modify said research reports without the prior written permission of Penn.

ARTICLE 5
INTELLECTUAL PROPERTY


5.1	Penn Intellectual Property . Except as otherwise set forth in this Agreement or in any other agreement between the Parties, Penn shall retain all right, title and interest in and to Penn Intellectual Property and any patents, copyrights, software and tangible research materials and other intellectual property related thereto.

5.2

Disclosure . Principal Investigator shall promptly provide Penn and Sponsor a written disclosure of any Penn Intellectual Property. Sponsor shall advise Penn in writing, no later than [**] after receipt of such disclosure, whether it requests Penn to file and prosecute patent applications related to such Penn Intellectual Property. If Sponsor does not request Penn to file and prosecute such patent applications, Penn may proceed with such preparation and prosecution at its own cost and expense; but such patent applications shall be excluded from Sponsor’s option under Section 5.5 hereof.

5.3

Prosecution . Penn shall control the preparation and prosecution of all patent applications and the maintenance of all patents related to Penn Intellectual Property. Penn will reasonably consider Sponsor’s requests for Penn to file patent applications encompassing Penn Intellectual Property. With regard to any patent applications filed at the request and expense of Sponsor, Penn will consult with Sponsor on patent preparation, filing, prosecution and maintenance, including by providing Sponsor with a reasonable opportunity to provide suggestions or comments regarding the same, such suggestions or comments to be reasonably considered for inclusion by Penn in good faith. Sponsor shall reimburse Penn within [**] after receipt of invoice for all documented expenses incurred in connection with the filing and prosecution of the patent applications and maintenance of the patents that Sponsor has requested Penn to prosecute under Section 5.2 hereof.


5.4	Software . Principal Investigator shall provide Penn and Sponsor a written disclosure of any copyrightable software created in the conduct of the Sponsored Research during the term of this Agreement that Principal Investigator reasonably considers to be scientifically valuable, provided that Principal Investigator shall have no obligation to provide the source code for such software.


5.5	Option . In consideration of Sponsor’s funding of the Sponsored Research and payment for intellectual property expenses as provided for in Section 5.3, Penn shall grant Sponsor:


(i)	An exclusive first option to amend the Option Agreement (or any license agreement entered into pursuant to such Option Agreement (a “ License Agreement ”) to include Related Penn Intellectual Property (as defined below), [**]. “Related Penn Intellectual Property”, as used herein, means Penn Intellectual Property that is “full-funded” by Sponsor.

(ii)

An exclusive first option to negotiate to acquire an exclusive license on commercially reasonable terms to all or any portion of Penn Intellectual Property that is not Related Intellectual Property (“ Unrelated Intellectual Property ”). Penn and Sponsor will negotiate in good faith, for a period not to exceed [**] from the date of Penn’s receipt of the Option Exercise Notice, to determine the terms of a license agreement as to each item

of Unrelated Intellectual Property for which Sponsor has agreed to make payment for intellectual property expenses as provided for in Section 5.3, if any.


(iii)	With respect to any and all Penn Intellectual Property, the Sponsor Option shall be exercisable at any time from the Effective Date through the time period that ends [**] after the receipt of the Final Report by Sponsor for the final SOW (the “ Option Period ”) by delivery of written notice (the “ Option Exercise Notice ”) from Sponsor to Penn.


(iv)	If Sponsor fails to exercise its option within the Option Period, or if Sponsor fails to make payment for intellectual property expenses as provided for in Section 5.3, Penn shall be free to license the applicable Penn Intellectual Property to any party upon such terms as Penn deems appropriate, without any further obligation to Sponsor.


(v)	[] until [] following the expiration of the Term of this Agreement, members of the Investigator Group identified in the applicable SOW shall agree by signature thereto that they will not [**].

5.6

Government Rights . Any license granted to Sponsor pursuant to Section 5.5 hereof shall be subject to Penn’s right to use and permit other non-profit organizations to use Penn Intellectual Property for educational and academic research purposes and, if applicable, to the rights of the United States government reserved under Public Laws 96-517, 97-256 and 98-620, codified at 35 U.S.C. 200-212, and any regulations issued thereunder.

ARTICLE 6
CONFIDENTIALITY& PUBLICATION

6.1

Confidential Information . Sponsor shall not disclose confidential information to Penn unless it is related to the Product or necessary to the performance of the Sponsored Research. Any confidential information provided by Sponsor will be in writing and clearly marked by Sponsor as “Confidential” or, if disclosed orally, written notice will be provided within [**] of disclosure (“ Confidential Information ”). Penn shall protect Confidential Information with the same degree of care as Penn’s own confidential information. Penn’s and the Principal Investigator’s obligations of confidentiality will exist during the performance of the applicable SOW and for [**] following termination or expiration of the applicable SOW, unless disclosure is required by law or regulation.

The confidentiality obligations contained herein shall not apply to Confidential Information that is:


(i)	Known by Penn or Principal Investigator without restriction prior to disclosure under this Agreement;


(ii)	Disclosed to Penn or Principal Investigator by a third party that is not under an obligation of confidentiality;


(iii)	Available to the public not through a breach of this Agreement by Penn;


(iv)	Independently developed by Penn or Principal Investigator without knowledge or use of Confidential Information disclosed by Sponsor under this Agreement;


(v)	Published or disclosed in accordance with the terms of this Agreement; or


(vi)	Required to be produced in litigation or a public investigation. To the extent feasible and permitted by law, Penn will give reasonable notice to Sponsor to allow Sponsor to offer its objections to the production of Confidential Information.

6.2

Penn Intellectual Property . In order to preserve the patentability of Penn Intellectual Property and to preserve Penn’s publication rights, Sponsor shall maintain Penn Intellectual Property, Research Results and information provided by Penn pursuant to the Sponsored Research (whether oral or written) as confidential and shall not disclose such information to any third party until the publication of such information by the Principal Investigator or until Penn provides Sponsor with written verification that all desirable patentable inventions have been protected, whichever occurs sooner. In the event that Sponsor wishes to disclose Research Results or any other information provided by Penn pursuant to the Sponsored Research to a third party prior to the publication of such information by the Principal Investigator or such time as Penn provides Sponsor with written verification that all desirable patentable inventions have been protected, whichever occurs sooner, Sponsor shall obtain Penn’s written permission for such disclosure pursuant to a confidentiality agreement with such third party (provided that no Confidentiality Agreement is required for disclosure to a regulatory agency in connection with any IND or other regulatory filing with respect to the Product), which permission shall not be unreasonably withheld delayed or conditioned; provided that, such permission shall not be required with respect to disclosure of information to a regulatory agency in connection with any IND or other regulatory filing with respect to the Product that occurs [**] or more after the termination or expiration of the applicable SOW. For the sake of clarity, once permission has been granted for a disclosure in connection with any IND or other regulatory filing with respect to the Product, no additional permission shall be required for subsequent disclosures in connection with additional IND or other regulatory filings with respect to the Product.

6.3

Publications . Penn shall have the first right to publish, present or otherwise disclose (each a “ Publication ”) Research Results or other information and material resulting from the Sponsored Research for any academic purpose. Penn shall furnish the Sponsor with a copy of any proposed Publication at least [**] in advance of the date of the submission of said proposed Publication in order for Sponsor to review and comment on said proposed Publication to (a) determine whether such contains any Confidential Information and (b) enable Sponsor to identify any Penn Intellectual Property that it wishes Penn to file patent applications on or to seek other intellectual property protection for. If within the [**] review period (i) Sponsor notifies Penn that the Sponsor requires deletion from the publication or presentation of Confidential Information, the Parties will cooperate to modify the disclosure to ensure Confidential Information is not disclosed or (ii) if Sponsor requests that publication or presentation be delayed to allow for patent filings or other intellectual property protection on certain items in the proposed publication or presentation, Penn shall delay the Publication for up to an additional [**] to allow for the filing of patent applications or other intellectual property protection.

ARTICLE 7
TERM & TERMINATION


7.1	Term . The initial term of this Agreement shall begin on the Effective Date of this Agreement and shall end three (3) years from the Effective Date unless terminated sooner pursuant to Sections 2.2 or 7.2 hereof (“ Term”) . This Agreement may be extended or renewed only by mutual written agreement executed by duly authorized representatives of the Parties.


7.2	Termination . In addition to the termination right set forth in Section 2.2 hereof:

(i)

either Party may terminate this Agreement or any SOW effective upon written notice to the other Party, if the other Party breaches any of the terms or conditions of this Agreement or the applicable SOW and fails to cure such breach within [**] after receiving written notice thereof. In the event of an incurable breach, the non-breaching Party may terminate this Agreement or the applicable SOW effective immediately upon written notice to the breaching Party; and


(ii)	if Sponsor, Penn and UFRF fail to enter into a License Agreement in accordance with the Option Agreement by the end of Term (as defined in the Option Agreement), then Sponsor may terminate this Agreement upon thirty (30) days written notice of such termination to Penn.


7.3	Effects of Termination .

(i)

In the event of termination of any SOW prior to its stated term, Penn shall be entitled to payment for the work in progress up to the date of termination, and for allowable costs. Allowable costs include, without limitation, all costs or non-cancellable commitments incurred prior to the receipt, or issuance, by Penn of the notice of termination, and the full cost of each employee, student and faculty member supported hereunder through the end of such commitments to the extent they cannot be transferred to other projects, each to the extent incurred in accordance with the terms and conditions of this Agreement and in any event, in the case of costs for employees, students and faculty members, for a period not in excess of [**] from the SOW Effective Date (as defined in the applicable SOW). In the event of termination, Penn shall submit a final report of all costs incurred and all funds received under the applicable SOW within [**] after the effective termination date. The report shall be accompanied by a check in the amount of any excess of funds advanced over costs and allowable commitments incurred. In case of a deficit of funds, Sponsor shall pay Penn the amount needed to cover costs and allowable commitments incurred by Penn under the applicable SOW.


(ii)	In the event of termination of this Agreement, any SOW(s) in effect at the time of such termination shall continue in effect until expiration or termination of such SOW(s) and the terms of this Agreement shall remain applicable to such SOW(s) unless otherwise specified in the notice of termination by the terminating Party.


(iii)	Termination of any individual SOW will not result in termination of this Agreement or any other SOW unless the Parties specify such intention in the termination notice.


(iv)	Termination of this Agreement shall not affect the rights and obligations of the Parties accrued prior to termination hereof. The provisions of ARTICLE 3; ARTICLE 4; ARTICLE 5; ARTICLE 6; ARTICLE 7; ARTICLE 8; and ARTICLE 9, shall survive such termination.

ARTICLE 8
DISCLAIMER OF WARRANTIES, INDEMNIFICATION

8.1

Both Parties represent that its execution of this Agreement and its performance of its obligations hereunder do not conflict with any agreement with or obligation to any third party. Penn further represents that the Principal Investigator and any other Penn personnel assisting the Principal Investigator with performance of the Sponsored Research on behalf of Penn shall be under a duty to assign their entire right, title and interest in and to Penn Intellectual Property to Penn. Without limiting Sponsor’s remedies with respect to any breach of Penn’s representations and covenants

hereunder, if at any time the staff of the Penn Center for Innovation becomes aware of any inaccuracy in, noncompliance with, or change in the foregoing representations and covenants of Penn, it will provide Sponsor with prompt written notice thereof. EXCEPT FOR THE FOREGOING REPRESENTATIONS AND COVENANTS, PENN MAKES NO WARRANTIES, EXPRESS OR IMPLIED, AS TO ANY MATTER WHATSOEVER, INCLUDING, WITHOUT LIMITATION, WARRANTIES WITH RESPECT TO THE CONDUCT, COMPLETION, SUCCESS OR PARTICULAR RESULTS OF THE SPONSORED RESEARCH, OR THE CONDITION, OWNERSHIP, MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE OF THE SPONSORED RESEARCH OR ANY PENN INTELLECTUAL PROPERTY OR RESEARCH RESULTS OR THAT USE OF PENN INTELLECTUAL PROPERTY OR RESEARCH RESULTS WILL NOT INFRINGE ANY PATENT, COPYRIGHT, TRADEMARK OR OTHER INTELLECTUAL PROPERTY RIGHT OF A THIRD PARTY. WITHOUT LIMITING PENN’S OBLIGATIONS TO PERFORM THE SPONSORED RESEARCH IN ACCORDANCE WITH THIS AGREEMENT, PENN SHALL NOT BE LIABLE FOR ANY DIRECT, INDIRECT, CONSEQUENTIAL, PUNITIVE OR OTHER DAMAGES SUFFERED BY SPONSOR OR ANY OTHER PERSON RESULTING FROM THE SPONSORED RESEARCH OR THE USE OF ANY PENN INTELLECTUAL PROPERTY, ANY RESEARCH RESULTS OR ANY PRODUCTS RESULTING THEREFROM. NOTWITHSTANDING THE FOREGOING, ABSENT SPONSOR’S NEGLIGENCE OR WILLFUL MISCONDUCT, PENN SHALL BE RESPONSIBLE FOR ANY PERSONAL INJURY OR DEATH RESULTING FROM THE CONDUCT OF THE SPONSORED RESEARCH EXCEPT AS SET FORTH IN SECTION 8.2 HERETO.


8.2	I ndemnification .

(i)

Sponsor shall indemnify, defend and hold harmless Penn and its respective trustees, officers, faculty, students, employees, contractors and agents (the “ Penn Indemnitees ”) from and against any and all liability, damage, loss, cost or expense (including reasonable attorneys’ fees), which the Penn Indemnitees may hereafter incur, or be required to pay as a result of third party claims based on Sponsor's use of the results of Sponsored Research or any Penn Intellectual Property or Research Results or as a result of any third party claims based on a breach of this Agreement or any act or omission of Sponsor, its employees, affiliates, contractors, licensees or agents, provided that Sponsor’s obligations pursuant to this Section 8.2(i) shall not apply to the extent such claims or suits result from the negligence or willful misconduct of any of Penn Indemnitees as determined by a court of law.

(ii)

As a condition to a Penn Indemnitee’s right to receive indemnification under this Section 8.2, Penn shall: (a) promptly notify Sponsor when it becomes aware of a claim or suit for which indemnification may be sought pursuant hereto; (b) cooperate with Sponsor in the defense, settlement or compromise of such claim or suit; and (c) permit the Sponsor to control the defense, settlement or compromise of such claim or suit, including the right to select defense counsel. In no event, however, may Sponsor compromise or settle any claim or suit in a manner which (a) admits fault or negligence on the part of Penn or any other Penn Indemnitee; or (b) commits Penn or any other Penn Indemnitee to take, or forbear to take, any action, without the prior written consent of Penn. Penn shall reasonably cooperate with Sponsor and its counsel in the course of the defense of any such suit, claim or demand.

ARTICLE 9
ADDITIONAL PROVISIONS

9.1

Force Majeure . Neither Party shall be liable for any failure to perform as required by this Agreement to the extent such failure to perform is due to circumstances reasonably beyond such Party’s control, including, without limitation, labor disturbances or labor disputes of any kind, accidents, failure of any governmental approval required for full performance, civil disorders or commotions, terrorism, acts of aggression, acts of God, energy or other conservation measures imposed by law or regulation, explosions, failure of utilities, mechanical breakdowns, material shortages, disease, or other such occurrences.


9.2	Relationship of the Parties . Nothing in this Agreement is intended or shall be deemed, for financial, tax, legal or other purposes, to constitute a partnership, agency, joint venture or employer-employee relationship between the Parties. The Parties are independent contractors and at no time will either Party make commitments or incur any charges or expenses for or on behalf of the other Party.


9.3	Expenses . Except as otherwise provided in this Agreement, each Party shall pay its own expenses and costs incidental to the preparation of this Agreement and to the consummation of the transactions contemplated hereby


9.4	Third Party Beneficiary . No party, other than Penn or Sponsor shall be entitled to any rights whatsoever by virtue of the relationships created by or arising under this Agreement, including, without limitation, rights as a third party beneficiary

9.5

Use of Names . Except as otherwise agreed in writing, Sponsor and its affiliates may not use the name, logo, seal, trademark, or service mark (including any adaptation of them) of Penn or any Penn school, organization, employee, student or representative, without the prior written consent of Penn. Notwithstanding the foregoing, Sponsor may use the name of Penn in a non-misleading and factual manner solely to state Sponsor’s funding of this Sponsored Research. Penn shall not use Sponsor’s name without Sponsor’s prior written consent except that Penn may acknowledge Sponsor’s funding of this Sponsored Research and any scientific contributions in scientific publications, in listings of sponsored research projects and for other academic purposes.


9.6	No Discrimination . Neither Penn nor Sponsor will discriminate against any employee or applicant for employment because of race, color, sex, sexual or affectional preference, age, religion, national or ethnic origin, handicap, or veteran status


9.7	Successors and Assignment .


(i)	The terms and provisions hereof shall inure to the benefit of, and be binding upon, the Parties and their respective successors and permitted assigns.

(ii)

Sponsor may not assign or transfer this Agreement, any of Sponsor’s rights or obligations created hereunder, any SOW, or any of Sponsor’s rights or obligations thereunder, by operation of law or otherwise, without the prior written consent of Penn, except to an affiliate or in connection with the sale or transfer of all or substantially all of Sponsor’s business or assets relating to the subject matter of this Agreement, whether by merger, sale of assets or otherwise provided, that, in either case, (a) there exists no material breach by Sponsor of any material term of this Agreement and/or the applicable SOW; (b) Sponsor provides prompt written notice of the affiliate assignment or transaction to Penn; and (c) the assignee agrees in writing to be legally bound by this Agreement and/or the applicable SOW. Any permitted assignment will not relieve Sponsor of any obligation of Sponsor that has accrued at the time of assignment.


(iii)	Any assignment not in accordance with this Section 9.7 shall be void.


9.8	Further Actions . Each Party agrees to execute, acknowledge and deliver such further instruments and to do all such other acts as may be necessary or appropriate in order to carry out the purposes and intent of this Agreement.

9.9

Entire Agreement of the Parties; Amendments . This Agreement and the Schedules and Attachments hereto constitute and contain the entire understanding and agreement of the Parties respecting the subject matter hereof and cancel and supersede any and all prior negotiations, correspondence, understandings and agreements between the Parties, whether oral or written, regarding such subject matter. No waiver, modification or amendment of any provision of this Agreement shall be valid or effective unless made in a writing referencing this Agreement and signed by a duly authorized officer of each Party.


9.10	Governing Law . This Agreement shall be governed by and interpreted in accordance with the laws of the Commonwealth of Pennsylvania, excluding application of any conflict of laws principles that would require application of the law of a jurisdiction outside of the Commonwealth of Pennsylvania.


9.11	Dispute Resolution . If a dispute arises between the Parties concerning this Agreement, then the Parties will confer, as soon as practicable, in an attempt to resolve the dispute. If the Parties are unable to resolve such dispute amicably, then the Parties will submit to the exclusive jurisdiction of, and venue in, the state and Federal courts located in the Eastern District of Pennsylvania.

9.12

Notices and Deliveries . Any notice, request, approval or consent required or permitted to be given under this Agreement shall be in writing and directed to a Party at its address shown below or such other address as such Party shall have last given by notice to the other Party. A notice will be deemed received: if delivered personally, on the date of delivery; if mailed, five (5) days after deposit in the United States mail; if sent via courier, one (1) business day after deposit with the courier service.



For Penn	with a copy to:

Office of Research Services	Penn Center for Innovation
University of Pennsylvania	3160 Chestnut Street, Suite 200
P221 Franklin Building	Philadelphia, PA 19104-6283
3451 Walnut Street	Attn: Managing Director
Philadelphia, PA 19104-6283	Penn Institution #: [**]
Attention: Executive Director
Penn Institution #: [**]

For Sponsor:	with a copy to:

Ophthotech Corporation	WilmerHale LLP
One Penn Plaza, Suite 3520	60 State Street
New York, NY 10119	Boston, MA 02109
Attention: Legal Department	Attention: Steven D. Barrett, Esq.
	(steven.barrett@wilmerhale.com)

Any invoice for Sponsor shall be sent by electronic mail to [**] , with a manual copy to the address for Sponsor set forth above.

9.13

Waiver . A waiver by either Party of any of the terms and conditions of this Agreement in any instance shall not be deemed or construed to be a waiver of such term or condition for the future, or of any other term or condition hereof. All rights, remedies, undertakings, obligations and agreements contained in this Agreement shall be cumulative and none of them shall be in limitation of any other remedy, right, undertaking, obligation or agreement of either Party.

9.14

Severability . When possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under law, but if any provision of this Agreement is held to be prohibited by or invalid under law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement. The Parties shall make a good faith effort to replace the invalid or unenforceable provision with a valid one which in its economic effect is most consistent with the invalid or unenforceable provision.


9.15	Interpretation . The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” All references herein to Articles, Sections, and Schedules shall be deemed references to Articles and Sections of, and Schedules to, this Agreement unless the context shall otherwise require.


9.16	Counterparts . This Agreement may be executed in counterparts, each of which will be deemed an original, and all of which together will be deemed to be one and the same instrument. A portable document format (PDF) or electronic copy of this Agreement, including the signature pages, will be deemed an original.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF , the duly authorized representatives of the Parties hereby execute this Agreement as of the date first written above.



THE TRUSTEES OF THE UNIVERSITY OF PENNSYLVANIA By: /s/ Christine Baxter Name: Christine Baxter Title: Senior Associate Director Corporate Contracts Penn Center for Innovation	OPHTHOTECH CORPORATION By: /s/ Glenn Sblendorio Name: Glenn Sblendorio Title: CEO & President

[Signature Page to Sponsored Research Agreement]

IVERIC BIO, INC.

NON-EMPLOYEE DIRECTOR COMPENSATION POLICY

The purpose of this Non-Employee Director Compensation Policy (this “Policy”) of IVERIC bio, Inc. (the “Company”) is to set forth the total compensation payable to non-employee directors of the Company for their service as members of the Company’s Board of Directors (the “Board”). In furtherance of this purpose, effective as of the Effective Date (as defined below), all non-employee directors shall be entitled to receive the compensation described in, and subject to the terms and conditions of, this Policy.

General Compensation Limits

Subject to the provisions of this Policy, commencing in calendar year 2019, the following limits shall be in effect for compensation to be paid to each non-employee director of the Company:

•

Compensation Limits for Incumbent Non-Employee Directors : The total annual base compensation, including cash and equity components (based on grant date fair value for financial reporting purposes), for each non-employee director who served as a director of the Company for any amount of time during the prior calendar year (each, an “Incumbent Non-Employee Director”) will be no more than $275,000 per calendar year.

•

Compensation Limits for Newly-Elected or Appointed Non-Employee Directors : The total annual base compensation, including cash and equity components (based on grant date fair value for financial reporting purposes), for each non-employee director who did not serve as a director of the Company for any amount of time during the prior calendar year (each, a “New Non-Employee Director”) will be no more than $550,000 within his or her first calendar year of election or appointment.

Non-Employee Director Compensation

Each non-employee director shall be entitled to receive the compensation described below while serving as a director of the Company. The form of equity compensation and amounts of equity compensation and cash compensation described below may be modified for years after 2019 by the Board in its discretion, subject to compliance with the compensation limits set forth in this Policy under the heading “General Compensation Limits” and the other provisions of this Policy.

Equity Compensation

Initial Stock Option Grant. Upon his or her initial election or appointment to the Board, each New Non-Employee Director shall automatically, and without the need for any further action by the Board, be granted an option under the Company’s 2013 Stock Incentive Plan, as amended from time to time, or any successor or other new stock or equity incentive plan (the “Plan”) to purchase 32,000 shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”). Unless otherwise provided at the time of grant, subject to each such person’s continued service with the Company, the option will vest with respect to 1/36th of the shares subject to such option at the end of each successive one-month period following the grant date until the third anniversary of the grant date and, in the event of a “Change in Control Event” of the Company (as defined in the Plan), the option shall immediately become fully vested and exercisable.

Annual Stock Option Grant. On the date of each annual meeting of stockholders of the Company, each non-employee director who has served on the Board for at least four months, and is both serving as a director of the Company immediately prior to and immediately following such annual meeting, shall automatically, and without the need for any further action by the Board, be granted an option under the Plan to purchase 16,000 shares of

Common Stock. Unless otherwise provided at the time of grant, subject to the non-employee director’s continued service with the Company, the option will vest with respect to 1/12th of the shares subject to such option at the end of each successive one-month period following the grant date until the earlier of (a) the day that is one business day prior to the date of the next annual meeting and (b) the first anniversary of the grant date, at which time such option shall be fully vested and exercisable, and, in the event of a “Change in Control Event” of the Company (as defined in the Plan), the option shall immediately become fully vested and exercisable.

General. Each initial option grant award and each annual option grant award to the non-employee directors shall have a term of ten years from the date of the award. The exercise price of each option will be equal to the closing sale price (for the primary trading session) of the Common Stock on the national securities exchange on which the Common Stock is then traded on the date of grant (or if the date of grant is not a trading day on such exchange, the trading day immediately prior to the date of grant) or if the Common Stock is not then traded on a national securities exchange, the fair market value of the Common Stock on such date as determined by the Board.

The foregoing share amounts with respect to option grants to the non-employee directors shall be automatically adjusted in the event of any stock split, combination, recapitalization and other similar event affecting the Common Stock, all as provided for under the terms of the Plan.

The initial option grant awards and the annual option grant awards to the non-employee directors shall be subject to the terms and conditions of the Plan and the terms of any option agreements entered into with each director in connection with such awards.

Cash Compensation

The cash fees to be paid to non-employee directors for service on the Board, for service on each committee of the Board on which the director is then a member and for service in such additional Board positions as are described below shall be as follows:


•	each non-employee director is eligible to receive an annual fee of $45,000;


•	the chairman of the audit committee is eligible to receive an additional annual fee of $20,000, and the other members of the audit committee are eligible to receive an additional annual fee of $10,000;


•	the chairman of the compensation committee is eligible to receive an additional annual fee of $15,000, and the other members of the compensation committee are eligible to receive an additional annual fee of $7,500;


•	the chairman of the nominating and corporate governance committee is eligible to receive an additional annual fee of $10,000, and the other members of the nominating and corporate governance committee are eligible to receive an additional annual fee of $5,000;


•	the chairman of the R&D committee is eligible to receive an additional annual fee of $10,000, and the other members of the R&D Committee are eligible to receive an additional annual fee of $5,000; and


•	the Independent Lead Director is eligible to receive an additional annual fee of $25,000.

The foregoing fees are payable in arrears in four equal quarterly installments on the last day of each quarter, with such installments to be paid for any quarter during which the director served on the Board, on such committee or in such position.

In addition to the above fees, the Board may determine that additional committee fees are appropriate and should be payable for any newly created committee of the Board. The Board also may determine that an additional

fee is appropriate and shall be payable to a non-employee Chairman of the Board, if one is then appointed. Consistent with this Policy, in determining any such additional fees, the Board will be guided by compensation paid to non-employee directors of a peer group of companies as well as current best practices.

Expenses

Upon presentation of documentation of such expenses reasonably satisfactory to the Company, each non-employee director is entitled to be reimbursed for reasonable travel and other expenses incurred in connection with attending meetings of the Board and any committee of the Board on which he or she serves. The amount of such reimbursed expenses shall not apply toward or otherwise be subject to the compensation limits set forth in this Policy under the heading “General Compensation Limits.”

Additional Compensation

The Company will not provide additional compensation to non-employee directors, directly or indirectly, other than as disclosed in this Policy or the Company’s filings with the U.S. Securities and Exchange Commission.

Effective Date

This Policy was adopted by the Board on February 22, 2019 and shall become effective on the date on which it is approved by the Company’s stockholders (the “Effective Date”).

Amendments; Termination

This Policy may be amended or terminated upon the adoption of a resolution of the Board; provided that no such amendment to the provisions of this Policy set forth under the headings “General Compensation Limits,” “Additional Compensation” or “Amendments; Terminations” shall be effective prior to the 2022 annual meeting of stockholders without stockholder approval.

Notwithstanding the foregoing, the Board may adjust the compensation limits set forth in this Policy under the heading “General Compensation Limits,” without stockholder approval, in the event of a material change in the Company’s market capitalization.

As is the Company’s current practice, in enacting or proposing any amendments to the Policy, including any amendment of the annual retainers for Board and committee service, and fees for Board and committee service, the Board (or a committee of the Board) will be guided by compensation paid to non-employee directors of a peer group of companies as well as current best practices. The Board (or a committee of the Board) shall review this non-employee director compensation peer group on an annual basis.

Exhibit 31.1

CERTIFICATIONS

I, Glenn P. Sblendorio, certify that:


1.	I have reviewed this Quarterly Report on Form 10-Q for the quarter ended June 30, 2019 of IVERIC bio, Inc.;


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


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


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

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

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

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

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


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

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

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



Date: August 1, 2019	By:	/s/ Glenn P. Sblendorio
		Glenn P. Sblendorio Chief Executive Officer (Principal Executive Officer)

Exhibit 31.2

CERTIFICATIONS

I, David F. Carroll, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended June 30, 2019 of IVERIC bio, Inc.;

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

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

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

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

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



Date: August 1, 2019	By:	/s/ David F. Carroll
		David F. Carroll Chief Financial Officer (Principal Financial Officer)

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of IVERIC bio, Inc. (the "Company") for the period ended June 30, 2019 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, Glenn P. Sblendorio, Chief Executive Officer of the Company, hereby certifies, pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

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

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



Date: August 1, 2019	By:	/s/ Glenn P. Sblendorio
		Glenn P. Sblendorio Chief Executive Officer (Principal Executive Officer)

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of IVERIC bio, Inc. (the "Company") for the period ended June 30, 2019 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, David F. Carroll, Chief Financial Officer of the Company, hereby certifies, pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

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

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



Date: August 1, 2019	By:	/s/ David F. Carroll
		David F. Carroll Chief Financial Officer (Principal Financial Officer)