PART I

Antibiotic resistance is a growing global health threat and occurs when bacteria develop mechanisms to reduce or eliminate antibiotic effectiveness. When bacteria develop resistance to at least one drug in three or more antibiotic classes, they are commonly referred to as multidrug-resistant. Antibiotic-resistant infections often result in high morbidity and, in many cases, mortality. According to the Review on Antimicrobial Resistance, over 700,000 people worldwide die each year from antibiotic-resistant infections and up to 10 million lives per year could be at risk by 2050. In the United States alone, antibiotic-resistant infections are estimated to add $20 billion per year to healthcare costs. Due to the limitations of current treatment options and growing antibiotic resistance rates, the pathogens targeted by our current product candidates are all identified as high priority targets by the U.S. Centers for Disease Control and Prevention, or CDC, the World Health Organization and the Infectious Diseases Society of America.

Our Pipeline

The following table summarizes the status of our product candidates and preclinical program, which have all been developed using our targeted-design platform:

Our Product Candidates

To address the problem of growing antibiotic resistance, we are developing a portfolio of novel product candidates, including:

ETX2514 in combination with sulbactam for the treatment of multidrug-resistant Acinetobacter infections

We are developing ETX2514 as a fixed-dose combination with sulbactam, which we refer to as ETX2514SUL, for the treatment of infections caused by multidrug-resistant Acinetobacter. Acinetobacter can cause severe pneumonia, as well as bloodstream, urinary tract and wound infections. Pneumonia and bloodstream infections caused by drug-resistant Acinetobacter can have mortality rates approaching 50%. Resistance rates of Acinetobacter to current standard-of-care treatments are some of the highest reported, between 50% and 60% in the United States and greater than 80% in

parts of Europe and Asia. There are four classes of β-lactamases, known as Classes A, B, C and D. Acinetobacter resistance to β-lactams is primarily driven by the expression of Class D β-lactamases, often in combination with Class A and/or Class C β-lactamases. To our knowledge, unlike currently marketed BLIs, ETX2514 is the first clinical-stage BLI with broad-spectrum activity across these three classes, most importantly Class D. We believe this broad coverage gives ETX2514 the potential to restore the efficacy of β-lactam antibiotics against Acinetobacter .

We selected sulbactam as the β-lactam antibiotic to combine with ETX2514 based on in vitro and in vivo analyses in which we observed sulbactam’s superior microbiological potency compared to other β-lactam antibiotics we studied. Physicians have used sulbactam, either alone or in combination with ampicillin, to treat Acinetobacter infections; however, β-lactamase mediated resistance has rendered sulbactam largely ineffective. We believe ETX2514 effectively restores the activity of sulbactam against drug-resistant strains of Acinetobacter .

We have completed a four-part Phase 1 clinical trial in 124 healthy volunteers and a Phase 1 clinical trial evaluating penetration of ETX2514SUL into the lung in 30 healthy volunteers, where in both, ETX2514SUL was generally well tolerated. In addition, we have completed an additional Phase 1 clinical trial to assess pharmacokinetics in renally impaired patients, which has provided data to enable the development of a dose-adjustment protocol for patients with varying degrees of renal impairment.

To optimize our Phase 3 clinical trial, we completed a Phase 2 clinical trial in adult patients with complicated UTIs, including acute pyelonephritis (kidney infection) to provide additional safety and pharmacokinetic data. Eighty patients were randomized to receive either a dose of ETX2514SUL (ETX2514 1 g plus sulbactam 1 g) or placebo every six hours for seven days. Patients in both arms also received background therapy, which is current standard-of-care, with 500 mg of IMI administered through IV every six hours. ETX2514SUL was generally well tolerated. There were no serious adverse events reported and the adverse event profile of ETX2514SUL plus IMI, was similar to that of the IMI plus placebo comparator arm. Pharmacokinetic data observed in the Phase 2 trial was consistent with the pharmacokinetic data observed in the Phase 1 clinical trial in healthy volunteers. ETX2514SUL plus IMI showed similar microbiological success in the microbiologically evaluable population as placebo plus IMI (80% vs. 81%) and both treatment groups achieved 100% clinical success in the clinically evaluable population.

In an exploratory analysis of the Phase 2 clinical trial, we evaluated the efficacy of ETX2514SUL plus IMI against complicated UTIs caused by imipenem-non-susceptible pathogens. Eight patients had a complicated UTI caused by imipenem-non-susceptible pathogens (three in the treatment arm and five in the placebo arm). ETX2514SUL plus IMI eradicated isolates in all patients (100% [3/3]) compared to 60% (3/5) in patients receiving placebo plus IMI.

Based on a series of discussions with the FDA, including an end-of-Phase-2 meeting, we are in the process of initiating a single Phase 3 clinical trial of ETX2514SUL and expect to receive data from the trial in the second half of 2020. We believe the data from our Phase 1 and Phase 2 clinical trials, combined with the data from a single Phase 3 clinical trial, if positive, will be sufficient to support the submission of a new drug application, or NDA, to the FDA.

Throughout our clinical trials, we plan to collect data on the activity of ETX2514SUL in combination with IMI against a range of Gram-negative pathogens in addition to Acinetobacter . Based on the results of our preclinical studies and clinical trials, we believe that ETX2514 has the potential to restore the activity of imipenem against multiple bacterial pathogens, such as CRE and carbapenem-resistant Pseudomonas. We believe this may allow us to expand the clinical utility of ETX2514SUL.

In April 2018, we entered into a license and collaboration agreement with Zai Lab (Shanghai) Co., Ltd., or Zai Lab, pursuant to which Zai Lab licensed exclusive rights to ETX2514 and ETX2514SUL in the Asia-Pacific region. Under the terms of the agreement, Zai Lab will fund most of our clinical trial costs in China for ETX2514SUL, including all costs in China for our planned Phase 3 clinical trial of ETX2514SUL, apart from patient drug supply. Zai Lab will take the lead in China by conducting the screening, enrollment and treatment of patients, and will coordinate development, registration and commercialization of ETX2514SUL in China. See the section titled “Business—Commercial Agreements—License and Collaboration Agreement with Zai Lab” for additional information.

Zoliflodacin for the treatment of uncomplicated gonorrhea

We are developing zoliflodacin as an oral antibiotic monotherapy for the treatment of uncomplicated gonorrhea. Uncomplicated gonorrhea is N. gonorrhoeae infections of the urethra, cervix, pharynx or rectum, and are more common than complicated gonorrhea. N. gonorrhoeae is the bacterial pathogen responsible for gonorrhea, an extremely prevalent sexually transmitted disease that affects an estimated 78 million people worldwide each year. In the United States, the CDC estimates an annual incidence of 820,000 infections caused by N. gonorrhoeae . Ciprofloxacin and other oral fluoroquinolone antibiotics were widely used for the treatment of gonorrhea. Fluoroquinolones bind to and inhibit bacterial gyrase, an essential bacterial enzyme, effectively disrupting the process of DNA synthesis in the bacteria and its ability to reproduce. However, their widespread use led to mutations in the gyrase, which resulted in the emergence of fluoroquinolone resistance, making these antibiotics increasingly ineffective. As a result, fluoroquinolone antibiotics are rarely used to treat gonorrhea today in the United States and have been largely replaced by extended-spectrum cephalosporins, or ESCs. Intramuscular ceftriaxone, an ESC, now represents the last-resort treatment option for gonorrhea, although resistant strains are beginning to emerge. Cefixime, an ESC closely related to ceftriaxone, was the last oral monotherapy recommended for first-line treatment in the CDC’s gonorrhea treatment guidelines, but the CDC removed it in 2012 after 0.1% of isolates exhibited resistance and 1.4% exhibited decreased susceptibility. This action was taken in part to delay the emergence of resistant strains of ceftriaxone and to prolong its effectiveness as a last-resort treatment. Historically, to reduce the risk of spreading drug-resistant pathogens in gonorrhea, the CDC has changed treatment guidelines when resistance rates to recommended first-line treatments reach 5%.

Like fluoroquinolones, zoliflodacin targets bacterial gyrase, but in a different manner to avoid existing fluoroquinolone resistance as well as ESC resistance. We have observed potent in vitro activity by zoliflodacin against N. gonorrhoeae strains, including those with high-level resistance to fluoroquinolones or to ESCs.

In our Phase 2 clinical trial, a single 3.0 g oral dose of zoliflodacin exhibited a 100% cure rate of urogenital and rectal gonorrhea in the per-protocol population. To our knowledge, zoliflodacin is the only novel treatment in active development with the potential to provide an oral alternative to intramuscular injections of ceftriaxone for the treatment of drug-resistant gonorrhea. If approved, we believe zoliflodacin has the potential to become the recommended first-line treatment of uncomplicated gonorrhea, especially as resistance to ceftriaxone increases. In addition, we believe patients would choose oral zoliflodacin over one or more intramuscular injections of ceftriaxone, which can be painful and require patient monitoring by a healthcare administrator.

We have entered into a collaboration with GARDP to co-develop zoliflodacin in a Phase 3 clinical trial. GARDP will fund all the Phase 3 development costs and will receive commercial rights for zoliflodacin in low-income and specified middle-income countries. We have retained commercial rights in all other countries, including the major markets in North America, Europe and Asia-Pacific. We anticipate initiating the Phase 3 clinical trial in mid-2019 with data expected in 2021.

ETX0282 in combination with cefpodoxime for the oral treatment of complicated UTIs

We are initially developing ETX0282 in combination with the β-lactam cefpodoxime proxetil, or cefpodoxime, which combination we refer to as ETX0282CPDP, for the oral treatment of complicated UTIs, including those caused by bacterial strains producing extended-spectrum β-lactamase, or ESBL, or by CRE. Oral antibiotics are commonly used in the community setting as first-line treatment for UTIs, which, if left unresolved, can have serious consequences, including life-threatening kidney infections. We believe that approximately 15 million UTIs occur annually in the United States, of which we estimate that 4.0 million are complicated. A complicated UTI is one associated with an underlying condition that increases the risk of failing therapy. Compared to uncomplicated UTIs, complicated UTIs are typically more difficult to treat due to higher rates of resistance. Almost all complicated UTIs require hospital-based therapy, accounting for most of the 3 million to 4 million UTIs treated in the hospital setting on an annual basis. There is a significant unmet need for an effective oral treatment option for drug-resistant complicated UTIs, and we believe that ETX0282CPDP has the potential to be used in the hospital setting as an oral stepdown from a short course of IV therapy or to avoid hospital admission in the first place.

ETX0282 is a potential best-in-class oral BLI, which we designed to have both high oral bioavailability and broad Class A and Class C β-lactamase inhibition. To our knowledge, no other orally bioavailable treatment has a microbiological profile with coverage against both Class A and Class C β-lactamase-producing bacteria, including ESBL-producing bacterial strains and CRE. We chose to combine ETX0282 with cefpodoxime, an orally administered β-lactam that was used for the treatment of UTIs before its clinical utility was limited by β-lactamase-mediated resistance. In in vitro and in vivo analyses, we observed that ETX0282 potently restored the efficacy of cefpodoxime to be comparable or superior to existing standard-of-care IV antibiotics. We initiated a multi-part Phase 1 clinical trial of ETX0282CPDP in Australia in the second quarter of 2018. We expect to receive data from the Phase 1 trial in mid-2019.

NBPs for the treatment of multidrug-resistant Gram-negative infections

Leveraging our targeted-design platform, we are also developing a potential new class of antibiotics that are NBPs. PBPs are proteins that play an important role in bacterial cell wall synthesis, which is essential for growth and reproduction of bacteria. PBPs are a validated target for β-lactam antibiotics. NBPs are structurally distinct from β-lactams, and therefore unaffected by all four classes of β-lactamases.

This program is in the lead-optimization stage of development. In our preclinical studies, we observed anti-bacterial activity of several of our NBP inhibitors against multiple Gram-negative pathogens. Based on the results of those studies, our initial focus is on infections caused by Pseudomonas. We plan to generate additional microbiology, pharmacology and toxicology data to guide the design and enable selection of an initial clinical candidate in 2019. If successful in development, we believe our NBPs would be the first novel broad-spectrum Gram-negative antibiotic class developed since the carbapenems were introduced in 1985.

Our Scientific Platform

Our targeted-design platform was initially developed by AstraZeneca to address the limitations of traditional approaches to the research and development of novel antimicrobial agents. This platform has been further refined by our team at Entasis, which has significant experience in research and development at global pharmaceutical companies. All our product candidates and our preclinical program have been developed using our targeted-design platform. AstraZeneca has not retained any rights to the targeted-design platform or to any product candidates developed with the platform.

Historically, antibiotic discovery efforts have focused on screening high volumes of natural and synthetic compounds for activity against bacterial pathogens and advancing these molecules toward clinical development, providing limited predictability of safety and efficacy profiles. Such approaches have produced few effective new antibiotics in recent years. In contrast, our platform adopts a rational approach to the discovery and development of new molecules based upon four principles. First, we select clinically validated mechanisms that are well understood and for which we understand the way pathogens develop resistance. Clinically validated mechanisms are those for which prior drugs have been developed to target precedent mechanisms of antibiotic resistance, have demonstrated sufficient clinical efficacy and safety data to be approved by a regulatory agency such as the FDA, and are well established and widely used in the clinical setting. We believe this selection process reduces the risk of failure in clinical trials because we are not adopting novel, untested modalities, while our understanding of antibacterial resistance enables us to design molecules that retain activity against pathogens that have become resistant to older antibiotics. Second, to design such molecules with activity against resistant strains, we utilize bacterial genomics and state-of-the-art molecular and dynamic models, which allow us to understand and predict the way in which our molecules attach themselves to their target, as well as the way in which they penetrate the Gram-negative envelope. Third, throughout the design process we incorporate knowledge gained from preclinical pharmacokinetic and safety studies, as well as pharmacodynamic modeling, to select molecules that we believe will be safe and well tolerated in the clinic at doses that would be efficacious against the target pathogens. Fourth, we focus our clinical development on selected pathogens with high unmet medical need, rather than broad indications that can be served by other antibiotics. We believe this enables us to optimize the potency of our product candidates and define the appropriate dosing regimen against those specific pathogens, as well as leverage the streamlined development and regulatory pathways available for first-in-class or best-in-class antibiotics.

We seek to protect our proprietary and intellectual property position for our product candidates, our core technologies, and other know-how through U.S. and foreign patent protection. To the extent that our targeted-design platform is not patentable, we rely on trade secret protection and confidentiality agreements to protect our interests. For more information, see the section titled “Business—Intellectual Property.”

Our Strategy

Our goal is to be a leader in the discovery, development and commercialization of novel antibacterial agents for the treatment of multidrug-resistant Gram-negative infections. Our pathogen-directed strategy includes the following key components:

Antibiotics Background

The introduction of antibiotics for the treatment of bacterial infections is recognized as one of the most transformative events in medicine. After penicillin entered the market in the early 1940s, antibiotics became one of the most commonly prescribed drugs in history.

There are two main varieties of bacteria, Gram-positive and Gram-negative, which are identified using a common laboratory staining test known as the “Gram stain.” Gram-positive bacteria are surrounded by a single membrane, while Gram-negative bacteria have both an inner membrane and an outer membrane. Due to this increased complexity, it has historically been more challenging to develop products that target Gram-negative bacteria, such as Pseudomonas ,   Acinetobacter and Enterobacteriaceae , a family of related organisms that includes Escherichia coli, Klebsiella pneumonia , or Klebsiella , and Enterobacter species. Of the estimated 25 million annual infections in the United States, approximately 8.2 million are treated in hospital. Approximately 60% of hospital-treated infections are Gram-negative, and over 200,000 patients treated in hospital for Gram-negative infections die annually in the United States.

Antibiotics are assessed by the following criteria:

β-lactam Antibiotics

β-lactams are one of the most widely used antibiotic classes due to their attractive safety and efficacy profile. β-lactams work by inhibiting PBPs, proteins that play an important role in bacterial cell wall synthesis and are essential for the growth and reproduction of bacteria. β-lactam antibiotics were initially narrowly focused against Gram-positive bacteria but have since been developed to broadly cover both Gram-positive and Gram-negative bacteria. β-lactam antibiotics consist of all antibiotic agents that contain a β-lactam ring in their molecular structures. Among β-lactam antibiotics, penicillin derivatives and cephalosporins are the most commonly used. Carbapenems, another class of β-lactam antibiotics, are generally more effective against resistant pathogens, but to preserve their activity, they are often limited for use as a last resort.

Bacteria often develop resistance to β-lactam antibiotics by synthesizing β-lactamases, enzymes that attack the β-lactam ring. β-lactamases are widely prevalent, with over 2,800 known to date, and are classified into four classes, Classes A, B, C and D. In 1976, researchers discovered the first BLI, clavulanic acid. By inhibiting the activity of the β-lactamases, clavulanic acid could restore the potency of β-lactam agents. One of the most commercially successful antibiotics, Augmentin TM , is a combination of amoxicillin, a β-lactam antibiotic, and clavulanic acid.

While additional BLIs followed clavulanic acid, bacterial pathogens continuously develop resistance by modifying or replacing the PBPs and acquiring new β-lactamases, including Class C β-lactamases and Class A carbapenemases. In response to the increasing number of β-lactamases, biopharmaceutical companies developed additional IV BLIs that inhibit a broad spectrum of Class A and Class C β-lactamases, enabling the restoration of the antibacterial activity of the β-lactam antibiotics with which they are combined. While these newer BLIs represent a significant step forward, they do not broadly inhibit Class D β-lactamases, which are a concern in infections caused by multidrug-resistant Acinetobacter and cannot be administered orally.

The following figure outlines the evolution of BLIs and their coverage across the β-lactamase classes.

Antibiotic Resistance

Antibiotic resistance is an increasingly serious threat to global public health that requires action across all government sectors and society. Antibiotic-resistant infections often result in high morbidity and, in many cases, mortality. According to the Review on Antimicrobial Resistance, over 700,000 people worldwide die each year from antibiotic-resistant infections and up to 10 million lives per year could be at risk by 2050. In the United States alone, antibiotic-resistant infections are estimated to add $20 billion per year to healthcare costs.

The evolution of bacterial resistance has outpaced the development of novel antibiotics. The Center for Disease Dynamics, Economics and Policy reported that in the United States, E. coli resistance to fluoroquinolones more than doubled from 2004 to 2016, surpassing 31%. E. coli resistance to cephalosporins quadrupled over the same period, reaching 15% in 2016. Klebsiella reached carbapenem and cephalosporin-resistance of 3% and 12%, respectively, in 2016. At least 10% of Pseudomonas infections are resistant to carbapenems, third-generation cephalosporins or fluoroquinolones in the United States. While the overall use of antibiotics in the United States and European Union dropped 1% annually from 2004 to 2015, the use of the last-resort antibiotics, carbapenems and polymyxins, increased annually 6% and 8%, respectively, over the same time period. The CDC, World Health Organization and Infectious Diseases Society of America report priority pathogens based on current treatment options and resistance rates. All three sources identify the pathogens targeted by our current product candidates, Acinetobacter, Pseudomonas, CRE and N. gonorrhoeae , as high priority.

Rising antimicrobial resistance has catalyzed a global call to action. Funding from government and nonprofit agencies for antibiotic research and development and an improved regulatory environment support the efficient development of novel antibiotics targeted at unmet need areas. NIAID, Biomedical Advanced Research and

Development Authority, Defense Advanced Research Projects Agency, the U.S. Department of Defense, GARDP and the Innovative Medicines Initiative all offer funding for the research and development of novel antibiotics.

Changes in the legal landscape in the United States have also highlighted the growing importance of addressing antimicrobial resistance. In July 2012, the Generating Antibiotic Incentives Now Act, or the GAIN Act, was adopted, which provides regulatory incentives for the development of new antibacterial or antifungal drugs intended to treat serious or life-threatening infections that are resistant to existing treatment. Legislative initiatives have recently been approved as part of the 21st Century Cures Act, including the limited-population regulatory pathways for patients with few or no suitable treatment options. Other legislation still pending includes the Developing an Innovative Strategy for Antimicrobial Resistant Microorganisms Act, which would designate certain novel antibiotics used to treat serious bacterial infections to receive higher Medicare reimbursement, and an amendment to the GAIN Act, which would allow successful qualified infectious disease product, or QIDP, sponsors to transfer up to one year of exclusivity to another product, including products marketed by other companies.

Our Product Candidates

ETX2514SUL

Overview

We are developing ETX2514SUL, a fixed-dose combination of ETX2514 with sulbactam, as a novel IV antibiotic with broad-spectrum β-lactamase coverage for the treatment of infections caused by multidrug-resistant  Acinetobacter. Using our targeted-design platform, we engineered ETX2514 to expand the β-lactamase coverage beyond that of currently marketed BLIs. To our knowledge, unlike currently marketed BLIs, ETX2514 is the first clinical-stage BLI with broad-spectrum activity against Classes A, C and D β-lactamases.

We selected sulbactam as the β-lactam antibiotic to combine with ETX2514 based on in vitro and in vivo analyses in which we observed sulbactam’s superior microbiological potency compared to other β-lactam antibiotics we studied. While sulbactam is commonly used as a BLI, it also has excellent standalone bactericidal activity against susceptible strains of Acinetobacter, with a long-appreciated safety and efficacy profile. Unasyn TM , the fixed-dose combination of sulbactam and ampicillin, a penicillin-derived antibiotic, was frequently prescribed for the treatment of Acinetobacter infections until β-lactamase-mediated resistance rendered sulbactam generally ineffective. We believe that ETX2514’s expanded coverage against Classes A, C and D β-lactamases gives it the potential to restore the efficacy of sulbactam against multidrug-resistant Acinetobacter .

Because patients with Acinetobacter infections may be coinfected with other bacterial pathogens, we plan to administer ETX2514SUL in combination with IMI in our clinical trials to provide broad coverage for these other pathogens. This will also provide us with clinical data on the activity of ETX2514SUL in combination with imipenem against a range of Gram-negative pathogens in addition to Acinetobacter . Based on the results of our preclinical studies and clinical trials, we believe that ETX2514 has the potential to restore the activity of imipenem against multiple bacterial pathogens, such as CRE and carbapenem-resistant Pseudomonas. We believe this may allow us to expand the clinical utility of ETX2514SUL.

Limitations of Current Treatment Options

Acinetobacter is a hospital-associated Gram-negative pathogen most commonly found in severe pneumonia, as well as bloodstream, urinary tract and wound infections. In the United States, approximately 63% of Acinetobacter bacteria are considered multidrug-resistant and, in 2016, select hospital antibiogram data indicate Acinetobacter strains tested were resistant to carbapenem antibiotics in excess of 60%. Carbapenem resistance in some European and Asian countries is reported to be even higher, surpassing 80% in some cases. Given the lack of effective treatment options, Acinetobacter infections can result in mortality rates approaching 50% for patients with pneumonia and bacteremia. For these reasons, the Infectious Diseases Society of America has included Acinetobacter baumannii among the six most threatening resistant pathogens responsible for high morbidity and mortality in patients, the CDC has classified A.

baumannii as a serious public health threat, and the World Health Organization included Acinetobacter as one of three critical pathogens on their Priority Pathogens List.

There are few treatment options available to effectively treat patients with multidrug-resistant Acinetobacter infections. β-lactamases are the main cause of resistance to β-lactam antibiotics, such as sulbactam, which had been widely used for the treatment of Acinetobacter infections prior to resistance emerging. Multiple other mechanisms of resistance, together with β-lactamases, have contributed to the emergence of Acinetobacter strains that are resistant to other commonly used classes of antibiotics and have made it challenging to develop new antibiotics to treat this pathogen. Consequently, multidrug-resistant Acinetobacter infections are now routinely treated with broad-spectrum antibiotics such as colistin, a polymyxin class antibiotic, or tigecycline, a tetracycline class antibiotic. Agents such as colistin and tigecycline show in vitro potency against multidrug-resistant Acinetobacter , but colistin can be toxic to the kidney and nervous system and tigecycline can cause gastrointestinal tolerability issues. This toxicity and intolerability can limit effective dosing, and when combined with poor tissue penetration, particularly in the lung, contribute to reduced clinical efficacy. As a result, overall mortality of patients with multidrug-resistant Acinetobacter infections is close to 50%, and there is an emerging threat of Acinetobacter strains reported to be resistant to all available antibiotic therapies, including colistin, which is currently reserved as a last-resort treatment option.

Our Solution

Data generated with ETX2514SUL suggest that our product candidate has the potential to overcome the limitations of current antibiotics for the treatment of patients with multidrug-resistant Acinetobacter .   Acinetobacter resistance to β-lactams is primarily driven by the expression of Class D β-lactamases, often in combination with Class A and/or Class C β-lactamases. In our preclinical studies, we observed that ETX2514 potently inhibited Classes A, C and D β-lactamases. We believe ETX2514 is the first clinical-stage β-lactamase inhibitor with this broad spectrum of inhibition and may restore the activity of sulbactam, an antibiotic with excellent standalone bactericidal activity against susceptible strains of Acinetobacter, with a longstanding safety and efficacy profile. We believe ETX2514SUL may have a favorable safety profile at therapeutically active doses. Preclinical toxicology studies did not identify a dose-limiting toxicity, and ETX2514SUL was generally well tolerated in our three Phase 1 and our Phase 2 clinical trials, including at doses that are well in excess of our planned Phase 3 clinical trial dose. Based on the preclinical efficacy evaluation and preclinical and clinical tolerability profile of ETX2514SUL observed to date, we believe it has the potential to improve outcomes of patients with multidrug-resistant Acinetobacter infections, reducing their overall mortality and accelerating their recovery and hospital discharge, as well as to contain outbreaks of Acinetobacter in critical care units, leading to reduced healthcare costs.

Market Opportunity

We estimate that there are 60,000 to 100,000 hospital-treated Acinetobacter infections annually in the United States and as many as 120,000 annually across the major markets in Europe. Based on current carbapenem resistance rates, we estimate there are between 90,000 and 120,000 hospital-treated carbapenem-resistant Acinetobacter infections annually in these countries, which we regard as our initial target markets for ETX2514SUL. We also believe there could be a significant market opportunity in Asia-Pacific, given resistance rates as high as 80% in some countries. If approved, we believe ETX2514SUL has the potential to overcome the issues of resistance and tolerability limiting the effectiveness of carbapenems as well as regimens containing colistin.

Clinical Development Plan

Based on a series of discussions with the FDA, including an end-of-Phase-2 meeting, we believe that the efficacy data from the single Phase 3 clinical trial, if positive, will be sufficient to support the submission of an NDA to the FDA. We are in the process of initiating a single Phase 3 clinical trial of ETX2514SUL. The Phase 3 clinical trial will evaluate approximately 130 patients with confirmed carbapenem-resistant Acinetobacter hospital-acquired pneumonia, ventilator-acquired pneumonia or bloodstream infections, or a combination of these. We anticipate that this will require us to enroll approximately 220 patients with Acinetobacter infection, regardless of carbapenem resistance. All patients will be randomized on a 1:1 basis to receive either ETX2514SUL plus IMI or colistin plus IMI over a period of up to 14 days. The primary endpoint will be 28‑day all-cause mortality, with a 19% noninferiority margin, in the

approximately 130 patients with confirmed carbapenem-resistant Acinetobacter infections. Noninferiority margins are used in the statistical analysis comparing two treatment arms in a trial to distinguish the degree of potential difference between the antibiotics being evaluated, with a lower margin being more difficult to achieve. Secondary endpoints will include 28‑day all-cause mortality in the total enrolled patient population as well as 14 day all-cause mortality and clinical and microbiologic efficacy assessed 7 to 14 days after the end of therapy. In addition, we will evaluate the clinical and microbiologic efficacy of ETX2514SUL in combination with IMI in patients coinfected with other imipenem-resistant pathogens.

A second part of the Phase 3 clinical trial will seek to enroll approximately 80 additional patients with confirmed Acinetobacter infections who are not otherwise eligible for the randomized comparison, including those with infections at body sites other than the lung or bloodstream. All these patients will receive ETX2514SUL plus IMI. Data from this part of the trial will not be included in the primary endpoint efficacy analysis but may provide evidence of the effectiveness of ETX2514SUL in Acinetobacter infections at other body sites, such as the skin and urinary tract.

We estimate an 18-month enrollment period using 75 to 100 clinical sites for our planned Phase 3 clinical trial. To help meet our enrollment projection timeline, we have undertaken a detailed feasibility/implementation assessment to preferentially select clinical trial sites that can identify and enroll patients with high rates of carbapenem-resistant Acinetobacter pneumonia and bloodstream infections. Pursuant to our license and collaboration agreement with Zai Lab, Zai Lab will fund most of our clinical trial costs in China for ETX2514SUL, including all costs in China for our planned Phase 3 clinical trial of ETX2514SUL, except for patient drug supply. Zai Lab will take the lead in China by conducting the screening, enrollment and treatment of patients, and will coordinate development, registration and commercialization of ETX2514SUL in China. We are in the process of initiating the Phase 3 clinical trial and expect to receive data in the second half of 2020.

As we have done for each of our other clinical candidates, we have employed rigorous pharmacokinetic and pharmacodynamic modeling to project the efficacious ETX2514SUL dosing regimen, combining static and dynamic pharmacodynamic in vitro data, data from in vivo experiments, as well as pharmacokinetic data from preclinical studies and our Phase 1 and Phase 2 clinical trials. Our analyses suggest a 1.0 g dose of ETX2514 combined with 1.0 g sulbactam infused over three hours every six hours will deliver a therapeutically active dose in patients.

Completed Clinical Trials

We have completed three Phase 1 clinical trials including the first-in-human study, one evaluating the penetration of ETX2514SUL into the lung and one to assess pharmacokinetics in renally impaired patients. In addition, we have completed a Phase 2 clinical trial in patients with complicated UTIs. In these clinical trials, ETX2514SUL was generally well tolerated.

Our four-part Phase 1 first-in-human clinical trial was conducted in Australia in 124 healthy volunteers. ETX2514 was generally well tolerated, with no dose-related systemic adverse events or drug-related serious adverse events reported. ETX2514 also exhibited linear dose-dependent increases in exposure and pharmacokinetic parameters across the dose range studied.

Key takeaways from the four-part trial include the following:

There were two drug-related discontinuations in this Phase 1 clinical trial, one mild/moderate adverse event (transient drowsiness and nausea) in the 0.5 g ETX2514 multiple ascending dose escalation cohort and one moderate adverse event (transient allergic reaction symptoms) in the 1.0 g ETX2514 multiple ascending dose escalation cohort. There was also one nondrug-related serious adverse event (nut allergic reaction) during the trial, which resulted in the patient’s discontinuation of the trial.

Our Phase 1 lung trial assessed the concentration of ETX2514SUL in lung fluid, an important metric to understand because the Phase 3 clinical trial will enroll patients with pneumonia and lack of appropriate lung tissue penetration has been found to contribute to reduced efficacy. ETX2514SUL was generally well tolerated, and we observed good distribution in urine and plasma as well as penetration into the lung. We believe that the levels of ETX2514SUL in the lung fluid achieved in this trial support exploring it as a potential treatment for pneumonia caused by Acinetobacter .

Our Phase 1 renal trial analyzed serum levels in renally impaired patients, which provided data to enable the development of a dose adjustment protocol for this type of patient, which is also the type likely to be enrolled in the Phase 3 clinical trial.

We recently completed a Phase 2 clinical trial in complicated UTI patients to provide additional safety and pharmacokinetic data as well as efficacy data against carbapenem-resistant pathogens. Eighty patients were randomized to receive either a dose of ETX2514SUL (ETX2514 1 g plus sulbactam 1 g) or placebo every six hours for seven days. Patients in both arms also received background therapy, which is current standard-of-care, with 500 mg of IMI administered through IV every six hours. ETX2514SUL was generally well tolerated. There were no serious adverse events reported and the adverse event profile of ETX2514SUL plus IMI was similar to that of the IMI comparator arm. Pharmacokinetic data observed in the Phase 2 trial was consistent with the pharmacokinetic data observed in the Phase 1 clinical trial in healthy volunteers. ETX2514SUL plus IMI showed similar microbiological success in the microbiologically evaluable population as placebo plus IMI (80% vs. 81%) and both treatment groups achieved 100% clinical success in the clinically evaluable population.

In an exploratory analysis of the Phase 2 clinical trial, we evaluated the efficacy of ETX2514SUL plus IMI against complicated UTIs caused by imipenem-non-susceptible pathogens. Eight patients had a complicated UTI caused by imipenem-non-susceptible pathogens (three in the treatment arm and five in the placebo arm). ETX2514SUL plus IMI eradicated isolates in all patients (100% [3/3]) compared to 60% (3/5) in patients receiving placebo plus IMI.

The safety data from this Phase 2 clinical trial will be used in combination with our other clinical trials to support the submission of an NDA to the FDA. We are in the process of initiating a single Phase 3 clinical trial of ETX2514SUL and expect to receive data from the trial in the second half of 2020. In addition, the efficacy data against carbapenem-resistant pathogens may inform the potential of ETX2514SUL to restore the activity of imipenem against multiple other bacterial pathogens, such as CRE and carbapenem-resistant Pseudomonas. We believe this may allow us to expand the clinical utility of ETX2514SUL.

We submitted an investigational new drug application, or IND, for ETX2514SUL to the FDA in June 2017, and the FDA notified us in July 2017 that we may proceed with this program. The FDA granted Fast Track designation and qualified infectious disease product, or QIDP, designation for ETX2514SUL in September 2017 for the treatment of hospital-acquired and ventilator-acquired bacterial pneumonia and bloodstream infections due to Acinetobacter . 

Preclinical Data

We designed ETX2514 to achieve broad activity against a wide range of β-lactamases, including Classes A, C and D, unlike currently marketed BLIs that primarily cover only Class A and Class C β-lactamases. To our knowledge, ETX2514 is the first BLI in clinical development with such a broad spectrum of in vitro activity. We have generated

biochemical, microbiological and in vivo preclinical data on ETX2514SUL. For example, mice infected with an extensively multidrug-resistant Acinetobacter strain in either a lung infection model or thigh infection model exhibited significant bacterial load reduction when treated with clinically relevant doses of ETX2514SUL, as shown in the figures below. Bacterial load in these figures is shown on a logarithmic scale, with each “Log” representing a 10-fold change. Accordingly, a 2-Log decrease in bacterial load represents a 100-fold decrease. A decrease of 1-Log in bacterial load is a commonly used benchmark in in vivo antibacterial studies to suggest that a compound may have therapeutic activity in humans. We have used this data in our pharmacokinetic and pharmacodynamic modeling to project the efficacious ETX2514SUL dosing regimen of 1.0 g ETX2514 combined with 1.0 g sulbactam infused over three hours every six hours.

In Vivo Activity of ETX2514 + Sulbactam in Mouse Thigh Infection Model

In Vivo Activity of ETX2514 + Sulbactam in Mouse Lung Infection Model (1)

ETX2514SUL has also exhibited potent microbiological activity against Acinetobacter strains in vitro. In one set of studies, we compared the effectiveness of ETX2514SUL, sulbactam alone and several marketed antibiotics in inhibiting 3,658 recent strains of Acinetobacter . We tested sulbactam, ETX2514SUL, imipenem and meropenem against these strains, and amikacin and colistin against 3,050 of the 3,658 strains. The plot in the figure below presents the cumulative percentage of these strains inhibited by increasing concentrations of each of the tested compounds. Sulbactam alone, as well as most of the other marketed antibiotics, had very high MIC ₉₀ values of 64 mg/L or higher, meaning that concentrations of 64 mg/L or greater were required to inhibit 90% of the strains. The corresponding CLSI breakpoints, which are the specified concentrations for each antibiotic that define whether a strain is considered resistant, are significantly lower than their MIC ₉₀ values. If the MIC ₉₀ of a drug is lower than its CLSI breakpoint, then that drug would be expected to be effective against more than 90% of the strains. If a drug’s MIC ₉₀ is higher than its breakpoint, the drug would not be expected to have broad efficacy against those strains. The data in this study suggests that these recent strains of Acinetobacter are resistant to all the comparator antibiotics other than colistin, reflecting their significantly diminished clinical utility against Acinetobacter infections. In contrast, ETX2514SUL had very potent activity, with a much lower MIC ₉₀ of 2 mg/L. This is lower than the CLSI breakpoint for sulbactam, which is 4 mg/L (in Unasyn), suggesting that our chosen target exposure levels of ETX2514SUL may be effective against more than 90% of Acinetobacter strains.

In Vitro Activity of ETX2514SUL Against 3,658 Acinetobacter Strains

In this study, the 2 mg/L MIC ₉₀ of ETX2514SUL was equivalent to colistin, which also had a 2 mg/L MIC ₉₀ against 3,050 of these Acinetobacter strains. However, despite its microbiological activity, colistin can be toxic to the kidney and nervous system. This toxicity can limit effective dosing, and when combined with poor tissue penetration, especially in the lung, contribute to reduced clinical efficacy, consistent with the lack of efficacy observed in the mouse lung infection model above.

In addition, we have evaluated ETX2514 in 14-day toxicology studies complying with FDA good laboratory practices, or GLP, in rats and dogs, which showed no dose-limiting toxicities at doses up to 2,000 mg/kg, the upper limit dose set by the FDA.

Potential for ETX2514 to address additional Gram-negative pathogens

Classes A, C and D β-lactamases have spread not only to Acinetobacter but also to other Gram-negative pathogens, such as E. coli ,   Klebsiella and Pseudomonas , allowing these pathogens to develop resistance to carbapenems and cephalosporins. To target these other key pathogens, we measured their susceptibility to ETX2514 combined with imipenem. In our preclinical studies, ETX2514 improved the overall potency of imipenem across hundreds of strains of E. coli ,   Klebsiella and Pseudomonas . The figure below shows the MIC ₉₀ values of imipenem alone and in combination with ETX2514 for these three key pathogens. Based on this preclinical data, we believe that ETX2514SUL in combination with IMI has the potential to be a novel and potent broad-spectrum agent for treating infections caused by

E. coli ,   Klebsiella and Pseudomonas . To further evaluate our preclinical observations, microbiological data against these pathogens will be collected throughout our Phase 2 and Phase 3 clinical trials.

Zoliflodacin

Overview

We are collaborating with GARDP to co-develop zoliflodacin in a Phase 3 clinical trial for the treatment of uncomplicated gonorrhea. Uncomplicated gonorrhea is N. gonorrhoeae infections of the urethra, cervix, pharynx or rectum, and are more common than complicated gonorrhea. GARDP will fund all the Phase 3 development costs and will receive commercial rights for zoliflodacin in low-income and specified middle-income countries. We have retained commercial rights in all other countries, including the major markets in North America, Europe and Asia-Pacific.

Using our targeted-design platform, we are developing zoliflodacin, which is designed to utilize the same mechanism of action as fluoroquinolones while avoiding existing fluoroquinolone resistance. Fluoroquinolones bind to and inhibit bacterial gyrase, an essential bacterial enzyme, effectively disrupting the process of DNA synthesis in the bacteria and its ability to reproduce. Their widespread use against gonorrhea as well as other bacterial infections has led to gyrase mutations, resulting in the emergence of fluoroquinolone resistance. We developed zoliflodacin to target bacterial gyrase in a different manner, avoiding existing fluoroquinolone resistance while retaining potent activity against drug-resistant N. gonorrhoeae strains, including ESC-resistant strains. Zoliflodacin is, to our knowledge, the only novel treatment in development that provides a potential oral alternative to intramuscular injections of ceftriaxone for the treatment of drug-resistant gonorrhea.

Limitations of Current Treatment Options

N. gonorrhoeae is the bacterial pathogen responsible for gonorrhea, an extremely prevalent sexually transmitted disease that affects an estimated 78 million people worldwide each year. Gonorrhea can be associated with serious complications, including pelvic inflammatory disease, ectopic pregnancy and infertility, as well as an increased risk of HIV. Fluoroquinolone antibiotics, notably ciprofloxacin and cephalosporin antibiotics, notably cefixime, had been widely used for the treatment of gonorrhea due to their oral administration along with a favorable efficacy and safety profile. However, widespread use of these antibiotics drove the emergence of resistant N. gonorrhoeae strains, and as a result, treatment guidelines were amended. Ceftriaxone, an ESC, is currently the only recommended treatment option for the treatment of gonorrhea and is commonly administered with azithromycin, a broad-spectrum antibiotic, to provide coverage against other sexually transmitted diseases that tend to occur concurrently with gonorrhea. Ceftriaxone is administered by intramuscular injection, which can be painful and may require patient monitoring by a healthcare administrator. Ceftriaxone remains effective in most of the United States; however, in Hawaii as well as in several countries, including China, Japan, France and Spain, N. gonorrhoeae strains with decreased susceptibility to ceftriaxone have been reported, prompting concerns that multidrug-resistant gonorrhea may become a major community health issue.

Our Solution

We believe zoliflodacin has the potential to address emerging resistance issues and treat drug-resistant gonorrhea. Our oral product candidate targets the well-validated mechanism of action of the fluoroquinolone class of antibiotics but does so in a novel manner that avoids existing resistance. In our Phase 2 clinical trial, we observed a 100% cure rate of urogenital and rectal infections in the per-protocol population with a single 3.0 g oral dose of zoliflodacin. We believe a convenient single oral dosing option would be the preferred treatment option by patients, and has the potential to facilitate expedited partner therapy, which is the clinical practice of treating sexual partners of patients diagnosed with gonorrhea by providing prescriptions or medications to the patient to take to his or her partner without the healthcare provider first examining the partner. We believe zoliflodacin has the potential to reduce the spread of this highly communicable disease and, in doing so, reduce overall health care costs, including costs associated with serious complications associated with gonorrhea.

Market Opportunity

In 2012, the incidence of gonorrhea in the United States and major European countries exceeded 2.2 million cases. The CDC estimates that over 820,000 new gonorrhea infections occur annually in the United States. In a study based on data from the World Health Organization, it was estimated that in 2012 there were approximately 1.4 million gonorrhea infections in Europe and nearly 11.4 million gonorrhea infections in the Western Pacific region, which includes China and Australia. Historically, to reduce the risk of spreading drug-resistant pathogens in gonorrhea, the CDC has changed treatment guidelines when resistance rates to recommended first-line treatments reach 5%. As resistance to ceftriaxone increases, we believe zoliflodacin, if approved, could be the next product recommended for the treatment of uncomplicated gonorrhea.

Clinical Development Plan

In July 2017, we announced a collaboration with GARDP to co-develop zoliflodacin in a multi-national Phase 3 clinical trial, which we anticipate initiating in mid-2019 with data expected in 2021. GARDP will conduct the Phase 3 clinical trial and will fund all the Phase 3 development costs. GARDP will receive commercial rights for zoliflodacin in low-income and specified middle-income countries. We have retained commercial rights in all other countries, including the major markets in North America, Europe and Asia-Pacific.

Based on our discussions with the FDA at our end-of-Phase-2 meeting, the Phase 3 clinical trial will be a multi-center, open-label, noninferiority trial in approximately 600 evaluable patients with uncomplicated gonorrhea who will be randomized on a 2:1 basis to receive either a single oral dose of zoliflodacin or a regimen of intramuscular ceftriaxone plus oral azithromycin. The primary endpoint will be the proportion of patients with microbiological cure at urethral or cervical sites, approximately six days after treatment. The noninferiority margin for the primary efficacy endpoint in this trial will be 10%. Secondary endpoints include the proportion of patients with microbiological cure at rectal or pharyngeal sites and the proportion of all patients with clinical cure, each measured when tested on a date that will be between four and eight days after receiving treatment. Based on our discussions with the FDA, we believe that the efficacy data from this single Phase 3 clinical trial, if positive, along with the data from our other clinical trials of zoliflodacin, will be sufficient to support the submission of an NDA to the FDA.

Phase 2 Clinical Proof-of-Concept and Phase 1 Clinical Trials

We have completed a multi-center, randomized, open-labeled Phase 2 clinical trial comparing a single oral dose of 2.0 g or 3.0 g of zoliflodacin to 500 mg intramuscular ceftriaxone for the treatment of uncomplicated gonorrhea. In this trial, zoliflodacin was generally well tolerated, with efficacy outcomes comparable to ceftriaxone. In this clinical trial, 179 randomized patients received treatment. Microbiological eradication and clinical cure in urogenital infections with a single dose of zoliflodacin, the primary endpoint of the trial, was comparable to ceftriaxone, with 100% cure in both the 3.0 g zoliflodacin and ceftriaxone groups in the per-protocol population. We also studied several exploratory endpoints, including cure rates in rectal and pharyngeal infections. In the per-protocol population, in rectal infections, six out of six patients were cured in the 3.0 g zoliflodacin group compared with three out of three patients cured in the

ceftriaxone group, and in pharyngeal infections, seven out of nine patients were cured in the 3.0 g zoliflodacin group compared with four out of four patients cured in the ceftriaxone group.

Prior to advancing to the Phase 2 clinical trial, we evaluated zoliflodacin in two Phase 1 clinical trials studying 72 healthy volunteers in total. In one trial, we evaluated pharmacokinetics and tolerability in 48 subjects and food effects in 18 subjects, and in the second trial, we evaluated absorption, distribution, metabolism and excretion in six subjects. Zoliflodacin as a single dose was generally well tolerated in these trials at doses, we would expect to be clinically active for treating uncomplicated gonorrhea. Administration of a high-fat meal was associated with an increase in zoliflodacin plasma concentration, suggesting that zoliflodacin could be administered with or without food.

Our zoliflodacin granule formulation was evaluated in eight subjects to assess its relative bioavailability and tolerability to the prior formulation. This study demonstrated pharmacokinetic and tolerability comparable to the dosage form used in the Phase 1 single-ascending dose trial. The trial was sponsored and conducted by NIAID. This study was followed by a formal Thorough QT, or TQT study, which is a typical requirement for approval of a new chemical entity by the FDA. The purpose of a TQT study is to determine whether a drug influences cardiac rhythm. Patient enrollment is complete in the TQT study and we anticipate a full data set in the second quarter of 2019. The TQT study was also sponsored and conducted NIAID. The remaining Phase 1 trial is evaluating the administration of a high-fat meal on zoliflodacin plasma concentrations and tolerability in healthy volunteers. Enrollment is complete in the study and we anticipate a full data set in the second quarter of 2019. The clinical trial was sponsored and conducted by GARDP.

The completed Phase 1 clinical trials were conducted pursuant to an IND submitted to the FDA in August 2013 by AstraZeneca. The completed Phase 2 clinical trial was conducted under a NIAID-sponsored IND which cross referenced the original AstraZeneca IND submitted in 2013. The AstraZeneca IND was transferred to Entasis in 2015. The planned Phase 3 clinical trial is expected to be conducted pursuant to an IND submitted by GARDP.

Preclinical Data

We have generated biochemical, microbiological and in vivo data on zoliflodacin. In the figure below, we show a summary of in vitro MIC data for zoliflodacin and currently marketed antibiotics against 250 recent strains of N. gonorrhoeae from North America, Europe and Asia-Pacific that were selected based on their resistance phenotype. The plot in the figure below presents the cumulative percentage of these 250 strains inhibited by increasing concentrations of each of the tested compounds. The data suggest that zoliflodacin retains activity against bacterial strains that are resistant to other antibiotic classes, which was expected given its novel mechanism of action. In addition, the data show significant resistance against two of the four standard antibiotics indicated for gonorrhea, ciprofloxacin, a fluoroquinolone, and azithromycin, a macrolide, as the MIC ₉₀ values are much higher than the susceptibility breakpoints for each.

In Vitro Activity of Oral Zoliflodacin Against 250 N. Gonorrhoeae Strains

ETX0282CPDP

Overview

We are developing ETX0282CPDP, an oral fixed-dose combination of ETX0282 with cefpodoxime, a generic cephalosporin, for the treatment of complicated UTIs, including those caused by ESBL-producing bacterial strains or CRE. Using our targeted-design platform, we engineered ETX0282 to inhibit Class A and Class C β-lactamases, which are the primary mechanisms of resistance associated with multidrug-resistant Enterobacteriaceae infections. We selected cefpodoxime as the β-lactam antibiotic to combine with ETX0282 following in vitro studies in which cefpodoxime exhibited superior activity against multidrug-resistant Enterobacteriaceae compared to other existing oral β-lactams. Cefpodoxime was once used to treat UTIs, among other indications, but its clinical utility is currently limited by β-lactamase-mediated resistance. We believe ETX0282 has the potential to restore the efficacy of cefpodoxime against multidrug-resistant Enterobacteriaceae.

While other combinations of β-lactam/BLI covering Class A and Class C β-lactamases have recently been approved for the treatment of complicated UTIs, they are only administered intravenously. We believe the oral formulation of ETX0282CPDP has the potential to be used in the hospital setting as an oral stepdown from a short course of IV therapy or to avoid hospital admission in the first place. We initiated a multi-part Phase 1 clinical trial of ETX0282CPDP in Australia in the second quarter of 2018.

Limitations of Current Treatment Options

UTIs are one of the most common bacterial infections in the United States, with up to 15 million cases occurring annually, of which we estimate that 4.0 million are complicated. Enterobacteriaceae species cause approximately 85% of UTIs. E. coli is the primary UTI pathogen, causing approximately 75% of infections. Most UTIs are treated with existing oral therapies in the community setting. However, the emergence of multidrug-resistant  bacteria, including ESBL-producing bacterial strains and CRE, has reduced the efficacy of commonly used oral antibiotics such as levofloxacin and ciprofloxacin, both fluoroquinolones, and trimethoprim/sulfamethoxazole. In the United States, approximately 31% of UTIs caused by E. coli and 10% of UTIs caused by Klebsiella are resistant to fluoroquinolones. Patients with UTIs caused by bacteria resistant to existing oral treatment options frequently require hospital admission for treatment with IV antibiotics, even when they are otherwise healthy and fit to be treated outside the hospital setting. Hospital admission not only leads to inconvenience for the patient and to high treatment cost for the healthcare system, but it also increases the risk of transmitting drug-resistant bacterial strains to other hospitalized patients and exposing UTI patients to more serious hospital-acquired infections.

The unmet medical need for an oral treatment of drug-resistant UTIs has led to significant efforts to discover and develop new agents. However, to our knowledge, most of these efforts consist of redevelopment or reformulation of older oral antibiotics that lack activity against a broad spectrum of ESBL-producing bacterial strains and CRE.

Our Solution

We believe ETX0282CPDP has the potential to be the first oral therapeutic option for the treatment of complicated UTIs with broad coverage of Gram-negative bacteria, including ESBL-producing Enterobacteriaceae and CRE. Cefpodoxime is a well-known β-lactam antibiotic approved in 1992 for UTIs and other indications, and clinicians have an extensive history of using this antibiotic successfully until resistance emerged due to Class A and Class C β-lactamases. ETX0282 is an orally bioavailable BLI, which has the potential to protect cefpodoxime from degradation, effectively restoring its activity against drug-resistant pathogens, including ESBL-producing Enterobacteriaceae and CRE. If approved, we believe ETX0282CPDP will provide clinicians a convenient, oral option to treat patients suffering from complicated UTIs caused by these multidrug-resistant pathogens, which could enable early hospital discharge following a short course of IV antibiotics or the avoidance of hospital admission in the first place.

Market Opportunity

The only approved oral β-lactam/BLI combination is amoxicillin/clavulanate, which has been marketed as Augmentin TM since 1981 for treatment of UTIs and several other infections. Augmentin is one of the most commercially successful antibiotics ever launched, achieving peak worldwide sales above $2.0 billion in 2001. Augmentin demonstrated the utility of an oral β-lactam/BLI combination, but it is not effective against ESBL- and carbapenemase-producing bacterial strains, which are growing in prevalence.

We are initially developing ETX0282CPDP for the treatment of complicated UTIs which are typically more difficult to treat than uncomplicated UTIs due to higher rates of resistance. We believe that approximately 15 million UTIs occur annually in the United States, of which we estimate that 4.0 million are complicated. Almost all complicated UTIs require hospital-based therapy, accounting for most of the 3 million to 4 million UTIs treated in the hospital setting on an annual basis. We view these hospital-treated UTI patients as our initial target market for ETX0282CPDP, with potential expansion into the broader community setting as bacterial resistance grows. We believe ETX0282CPDP also has the potential for use beyond UTIs in other indications where multidrug-resistant Enterobacteriaceae are commonly found.

Clinical Development Plan

We initiated a multi-part Phase 1 clinical trial of ETX0282CPDP in Australia in the second quarter of 2018. The Phase 1 clinical trial is randomized, double-blind and placebo-controlled and will be conducted in five parts. The trial design is similar to that of the completed Phase 1 clinical trial of ETX2514, comprising single-ascending dose escalation, multiple-ascending dose escalation, drug-drug interaction between ETX0282 and cefpodoxime, and combination therapy

safety cohorts, but will also include a cohort to evaluate the effect of food on ETX0282CPDP’s oral bioavailability. In the single-ascending dose portion of the trial, 4 out of 36 subjects experienced mild to moderate emesis (vomiting). We are in the process of analyzing data from these healthy volunteers as well as exploring options to mitigate this effect, including co-administration with food and modified release formulations. If successful, data from the Phase 1 trial will support dose selection for our subsequent clinical trials. We expect to receive data from the Phase 1 trial in mid-2019. We held a pre-IND meeting with the FDA in March 2018 and are incorporating the FDA’s feedback into our clinical development plan for ETX0282CPDP.

Preclinical Data

Using biochemical analysis, structure-assisted drug design and medicinal chemistry, we engineered ETX1317, a potent, broad-spectrum Class A and Class C BLI, and ETX0282, its orally bioavailable prodrug. When the prodrug, ETX0282, is taken orally, its active molecule, ETX1317, is released in the body. Similarly, cefpodoxime proxetil is the prodrug of cefpodoxime, the active form of the drug, as shown in the following table:

We have generated microbiological and in vivo preclinical data on ETX0282CPDP as well as on ETX1317 in combination with CPD. In one set of studies, we compared the activity of ETX1317 in combination with CPD, CPD alone and four marketed oral antibiotics in inhibiting 910 strains of Enterobacteriaceae , including ESBL- and carbapenemase-producing bacterial strains, collected from patients with complicated UTIs between 2013 and 2015 from a variety of countries around the world, including the United States and in Europe. We believe this collection of bacterial strains is representative of the type of pathogens found in complicated UTI patients who are likely to have failed standard-of-care oral antibiotic therapy. Approximately 90% of these bacterial strains were cefpodoxime-resistant and approximately 55% of these cefpodoxime-resistant strains were also resistant to both levofloxacin and trimethoprim/sulfamethoxazole. Approximately 70% of the bacterial strains produced ESBLs and 7% were carbapenem-resistant. We compared ETX1317 in combination with CPD to levofloxacin, an approved oral fluoroquinolone, to fosfomycin and trimethoprim/sulfamethoxazole, other commonly used oral antibiotics, and to ertapenem, a carbapenem antibiotic that is administered either intramuscularly or intravenously. The plot in the figure below presents the cumulative percentage of these 910 strains inhibited by increasing concentrations of each of the tested compounds. CPD alone and the other marketed antibiotics have MIC ₉₀ values that are higher than their CLSI breakpoints, indicating limited usefulness as treatment options for multidrug-resistant complicated UTIs. In contrast, ETX1317 in combination with CPD had very potent activity, with a much lower MIC ₉₀ of 0.5 mg/L. This study suggests that ETX0282CPDP has microbiological potency superior to the other oral antibiotics evaluated and has the potential to provide an oral alternative to IV antibiotics for patients who have failed these other therapies.

In Vitro Activity of ETX0282CPDP (1)  Against 910 Enterobacteriaceae Strains, Including ESBL-Producing Bacterial Strains and CRE

In another study, we compared the activity of ETX1317 in combination with CPD and four other antibiotics, two of which are oral agents in clinical development and two of which are marketed IV antibiotics, Vabomere TM and Avycaz TM , in inhibiting 54 strains of multidrug-resistant Enterobacteriaceae , including CRE, collected from complicated UTI patients between 2007 and 2016. Approximately 37% of these bacterial strains were CRE. We believe this collection of strains is representative of the type of pathogens found in complicated UTI patients who are likely to have failed initial IV antibiotic therapy. The plot in the figure below presents the cumulative percentage of these 54 CRE clinical isolates inhibited by increasing concentrations of each of the tested compounds. Both oral in-development antibiotics had MIC ₉₀ values of 32 mg/L or higher. In contrast, ETX1317 in combination with CPD had a MIC ₉₀ value of 1 mg/L, similar to those of the two marketed IV antibiotics.

In Vitro Activity of ETX0282CPDP    Against 54 Enterobacteriaceae Strains, Including CRE

An important step in developing agents for oral administration is to measure oral bioavailability in preclinical studies. In our preclinical studies, the oral prodrug ETX0282 had high oral bioavailability across three species, rats, dogs and monkeys, with bioavailability of 98%, 97% and 78%, respectively. The oral bioavailability of cefpodoxime, which we are combining with ETX0282, is well established through extensive clinical use. Importantly, the active molecule, ETX1317, has pharmacokinetic properties in both rats and dogs that are compatible with the pharmacokinetic properties of cefpodoxime, which is important as ETX1317 acts by protecting cefpodoxime against degradation by β-lactamases. In a thigh infection model of mice infected with an E. coli strain known to be resistant to fluoroquinolones and cephalosporins, orally administered ETX0282CPDP exhibited in vivo bactericidal activity comparable to that of the study control, meropenem, a carbapenem antibiotic that is administered intravenously.

In Vivo Activity of Oral ETX0282 in Mouse Thigh Model

Based on the data from multiple similar in vivo experiments, we believe that ETX0282CPDP can achieve clinically efficacious exposures with a 500 mg dose of ETX0282 and a 400 mg dose of cefpodoxime, administered orally twice daily.

In addition, we have evaluated ETX0282 in a range of in vitro and in vivo preclinical safety studies, including two 14 day GLP toxicology studies conducted in rats and dogs. These studies were supportive of progression of ETX0282 to the clinic.

NBP Program

Overview

Leveraging our targeted-design platform, we are developing a potential new class of antibiotics that are NBPs. NBPs are structurally distinct from β-lactams and therefore unaffected by all four classes of β lactamases. In our preclinical studies, we observed activity of several of our NBP molecules against multiple Gram-negative pathogens. Based on the results of those studies, our initial focus is on infections caused by Pseudomonas and we plan to generate additional microbiology, pharmacology and toxicology data to enable design and selection of an initial clinical candidate in 2019. Subsequently, we intend to evaluate further candidates directed against additional serious Gram-negative pathogens. If successful in development, we believe our NBPs would be the first novel, broad-spectrum Gram-negative antibiotic class since the carbapenems were introduced in 1985.

Limitations of Current Treatment Options

Infections caused by multidrug-resistant Pseudomonas are some of the most difficult to treat bacterial infections today. Carbapenems and cephalosporins are commonly used to treat susceptible cases of Pseudomonas. However, in the United States, approximately 20% of Pseudomonas strains are resistant to both classes of antibiotics. Some recently approved antibiotics demonstrate improved efficacy against Pseudomonas but are still prone to multiple mechanisms of resistance. In many cases, the only treatment option for multidrug-resistant Pseudomonas is colistin or other antibiotics of the same class. While these antibiotics are potent in preclinical models, in practice, clinicians tend to reserve their use

as last resort treatment options due to their toxicity in the kidney and nervous system, which limits dosing and therefore, clinical efficacy.

Our Solution

Our NBPs are a novel class of PBP inhibitors that are chemically distinct from β-lactam antibiotics. While their mode of action is through PBPs, the well validated target of β-lactams, our NBPs are designed to retain activity against pathogens with pre-existing resistance from β-lactamases. If successfully developed, our NBPs could potentially be used as a monotherapy to effectively treat infections caused by multidrug-resistant Pseudomonas and other Gram-negative pathogens. While we believe our novel NBP class may have broad antibacterial activity against several Gram-negative pathogens, we expect the initial clinical candidate that we select from this program will aim to address the serious medical need of multidrug-resistant Pseudomonas infections.

Market Opportunity

Pseudomonas causes a variety of infections, including intra-abdominal infections, surgical site infections, UTIs and nosocomial pneumonia. Pseudomonas is the most common Gram-negative pathogen associated with ventilator-acquired pneumonia and tends to have higher resistance rates than other Gram-negative pathogens commonly causing ventilator-acquired pneumonia. Pseudomonas infections are on the rise with an estimated 600,000 to 750,000 cases occurring annually in the United States. In 2014, approximately 20% of Pseudomonas infections were resistant to each of carbapenems, cephalosporins and fluoroquinolones and 14% were resistant to at least three classes of antibiotics. We believe our novel class of NBPs has the potential to be used as monotherapy against infections caused by multidrug-resistant Pseudomonas .

Preclinical Data

Our NBP program is in the lead-optimization stage of development in which we are designing molecules for optimal activity against the PBP enzymes, potency against bacterial strains, as well as other desirable properties such as safety and pharmacokinetics, with the goal of selecting an initial clinical candidate for development. Our targeted-design platform has enabled us to develop several lead molecules with activity against the PBPs in vitro , as well as good Gram-negative pathogen permeability. In preclinical studies, including animal models of Pseudomonas infections, we have observed that some of our NBPs are unaffected by β-lactamases from all four Ambler classes and have shown activity against multidrug-resistant Gram-negative bacteria, in particular, Pseudomonas.

Commercial Strategy

We intend to directly commercialize our product candidates in the hospital setting in the United States through a targeted specialty sales force. Our commercial strategy will be to target hospitals with the greatest incidence of serious and life-threatening multidrug-resistant bacterial infections. We intend to establish ETX2514SUL, if approved, as the standard of care for carbapenem-resistant Acinetobacter infections and ETX0282CPDP, if approved, as the primary oral option for multidrug-resistant complicated UTIs. We designed our clinical development strategies to differentiate these product candidates from both approved and current development stage antibacterial products.

Outside the United States, we plan to work with multi-national pharmaceutical companies to leverage their commercialization capabilities. We also plan to seek collaborators to commercialize zoliflodacin in the community setting in the territories where we have retained commercial rights, including the major markets in North America, Europe and Asia-Pacific.

Supply and Manufacturing

We do not own or operate manufacturing facilities for the production of any of our product candidates, nor do we have plans to develop our own manufacturing operations in the foreseeable future. We currently rely on a limited number of third-party contract manufacturers for all our required raw materials, drug substance, and finished drug product for our preclinical research and clinical trials. We do not have long-term agreements with these third parties. We

also do not have any current contractual relationships for the manufacture of commercial supplies of any of our product candidates after they are approved. If any of our products are approved by any regulatory agency, we intend to enter into agreements with third-party contract manufacturers for the commercial production of those products. We currently employ internal resources to manage our manufacturing.

Government and Nonprofit Awards

Through December 31, 2018, we have received aggregate financial commitments of up to $17.5 million from the Trustees of Boston University through the CARB-X program and the U.S. Army Medical Research Acquisition Activity, a division of the U.S. Department of Defense, in support of our ETX0282, NBP and discovery research programs. The CARB-X awards commit funding of $10.1 million, with the possibility of up to a total of $16.4 million in funding based on the successful completion of prespecified milestones. These specified milestones include the completion of important steps for a development-stage project such as preclinical studies or clinical trials, manufacture and formulation work, submission of regulatory applications and regulatory meetings with the FDA or comparable foreign regulator. We expect the CARB-X awards to partially fund the forecasted expenses for the development of ETX0282 through Phase 1 clinical development and the forecasted expenses for our NBP program from lead-optimization through Phase 1 clinical trials for an initial clinical candidate. The funding from the U.S. Department of Defense is structured as a single, $1.1 million award and supports the development of anti-infective agents to combat Gram-negative bacteria.

NIAID fully funded the Phase 2 clinical trial of zoliflodacin for the treatment of uncomplicated gonorrhea and has provided funding commitments for the Phase 3 clinical trial preparatory activities, including the granule formulation bioequivalence Phase 1 trial and the TQT cardiovascular clinical trial.

Commercial Agreements

Business Transfer and Subscription Agreement with AstraZeneca

In May 2015, we entered into a Business Transfer and Subscription Agreement, or the AstraZeneca Agreement, with AstraZeneca, AstraZeneca UK Limited and AstraZeneca Pharmaceuticals LP, which was amended and restated in March 2016 and further amended in August 2017, pursuant to which we obtained, among other things, worldwide rights to ETX2514, ETX0282 and zoliflodacin.

Pursuant to the terms of the AstraZeneca Agreement, we sold 33,499,900 A preference shares to AstraZeneca in consideration for property and equipment, clinical materials, intellectual property and net cash proceeds of $23.3 million. Pursuant to our corporate reorganization, the A preference shares were exchanged for Series A preferred stock. The Series A preferred stock was automatically converted into 1,616,166 shares of our common stock upon completion of our IPO. We also agreed to pay AstraZeneca a one-time milestone payment of $5.0 million within three months of achieving a specified cumulative net sales milestone for ETX2514. This milestone payment will be automatically waived should our common stock trade on Nasdaq at or above a specified price at the time we achieve such specified cumulative net sales milestone for ETX2514, subject to adjustment for share splits, dividends and other similar events. We are also obligated to pay AstraZeneca a one-time milestone payment of $10.0 million within two years of achieving the first commercial sale of zoliflodacin. Following the achievement of either milestone, we are not permitted to pay dividends or make other distributions to any of our stockholders until the applicable milestone payment has been paid in full. If our board of directors deems the milestone payment obligation related to zoliflodacin to be significantly burdensome, AstraZeneca is required to explore in good faith modifications to the timing of such payment. At our election, either milestone payment may be paid in cash, shares of our common stock, or a combination of cash and stock. Additionally, we are obligated to pay AstraZeneca tiered, single-digit royalties on the annual worldwide net sales of ETX2514 and, and the lesser of tiered, single-digit royalties on the worldwide annual net sales of zoliflodacin and a specified share of the royalties we receive from sublicensees of zoliflodacin. Royalties on sales of zoliflodacin do not include sales by GARDP in low-income and specified middle-income countries as discussed below. Our obligation to make these royalty payments expires with respect to each product on a country-by-country basis upon the later of (i) the 10 year anniversary of the first commercial sale of a product in each such country or (ii) when the last patent right covering a product expires

in each such country. We are required to use diligent efforts to achieve the first commercial sale of zoliflodacin and to commercialize, market, promote and sell zoliflodacin and ETX2514.

Under the AstraZeneca Agreement, we granted AstraZeneca a non-exclusive, non-transferrable license to use the transferred intellectual property solely for internal research and development purposes unrelated to the field of small molecule anti-infectives.

Collaboration Agreement with GARDP

In July 2017, we entered into a collaboration agreement with GARDP for the development and commercialization of a product candidate containing zoliflodacin in certain countries. Under the terms of the collaboration agreement, GARDP will use commercially reasonable endeavors to perform and fully fund the Phase 3 clinical trial, including the manufacture and supply of the product candidate containing zoliflodacin, in uncomplicated gonorrhea. We are obligated to use commercially reasonable efforts to conduct and fund a TQT study on the granule formulation of zoliflodacin in collaboration with NIAID, which has been fully enrolled. We are also obligated to commit reasonably sufficient time and resources to collaborate in the design of the Phase 3 clinical trial and the development of the protocol for the trial and to provide know-how relating to zoliflodacin and any future product candidate. We estimate that we will incur annual expenses of approximately $120,000 related to ongoing costs for active pharmaceutical ingredient stability, drug product storage, intellectual property maintenance and travel. Both parties are responsible for obtaining marketing authorizations for any future product candidate in such parts of their respective territories as they elect.

In addition, under the collaboration agreement, we have granted GARDP a worldwide, fully paid, exclusive and royalty-free license, with the right to sublicense, to use our zoliflodacin technology in connection with GARDP’s development, manufacture and commercialization of zoliflodacin in low-income and specified middle-income countries, which we refer to collectively as the GARDP territory. We have retained commercial rights in all other countries worldwide, including the major markets in North America, Europe and Asia-Pacific. We also have retained the right to use and grant licenses to our zoliflodacin technology to perform our obligations under the collaboration agreement and for any purpose other than gonorrhea or community-acquired indications. GARDP will own all intellectual property developed in its performance under the collaboration agreement regarding formulation development of zoliflodacin. To the extent GARDP does not file patent applications for any such technology it develops under this collaboration agreement within six months of making or conceiving any invention related to such technology or does not use reasonable efforts to prosecute such patent applications and maintain such patents, GARDP shall assign to us the rights to such intellectual property. In the event we undertake and fund additional efforts outside of the current agreed-upon development plan for zoliflodacin in our territory that lead to the creation of new intellectual property, we will have a right to file and maintain this new intellectual property. In addition, we are obligated to maintain the intellectual property in the countries in the GARDP territory where we filed patent rights at the date of the agreement and, under specified conditions, in our territory, and GARDP must reimburse us for costs and expenses for the maintenance of such intellectual property rights in the countries of the GARDP territory. If we believe the results of the planned Phase 3 clinical trial of zoliflodacin would be supportive of an application for marketing approval, we are obligated to use our best efforts to file an application for marketing approval with the FDA within six months of the completion of the trial and to use commercially reasonable endeavors to file an application for marketing approval with the EMA. Each party is responsible for using commercially reasonable efforts to obtain marketing authorizations for the product candidate in their respective territories.

Both parties have the right to terminate the collaboration agreement with 90 days’ written notice if the other party is in material breach or remains in material breach after a cure period, or with immediate effect upon the occurrence of certain specified events of insolvency. The collaboration agreement may also be terminated upon mutual written agreement. Either party may terminate the collaboration agreement at any time after completion or earlier termination of the Phase 3 clinical trial with 12 months’ prior notice. We may terminate the collaboration agreement if GARDP has not achieved certain clinical milestones within a specified time period, unless the nonachievement was due to specified types of delay.

License and Collaboration Agreement with Zai Lab

In April 2018, we entered into a license and collaboration agreement with Zai Lab for the development and commercialization of products containing ETX2514 or ETX2514SUL in the following countries in the Asia Pacific region: China, Hong Kong, Macau, Taiwan, Korea, Vietnam, Thailand, Cambodia, Laos, Malaysia, Indonesia, the Philippines, Singapore, Australia, New Zealand and Japan, which we refer to collectively as the territory. Under the agreement, we granted Zai Lab an exclusive, royalty-bearing license, with the right to sublicense, under our technology to develop, manufacture and sell products containing ETX2514 or ETX2514SUL, or the licensed products, in the territory. Additionally, we granted Zai Lab a non-exclusive, worldwide license to our technology as required for Zai Lab to practice its exclusive license with respect to the licensed products. We retain the right to use our technology to perform our obligations under the agreement and retain the exclusive right to use our technology in all other countries, including North America and Europe.

Under the agreement, Zai Lab will use commercially reasonable efforts to perform and fund costs associated with our planned Phase 3 clinical trial of ETX2514SUL in China. Zai Lab is responsible, at its expense, for developing licensed products in the territory, to be coordinated with our continued global efforts with respect to products containing ETX2514SUL. Zai Lab must use commercially reasonable efforts to conduct development activities described in the agreed-upon written development plan and to obtain regulatory approval in a specified number of countries in the territory beyond China after regulatory approval of a licensed product in China. Zai Lab is also solely responsible for commercializing licensed products in the territory and must use commercially reasonable efforts to commercialize licensed products for which it has obtained regulatory approval. We are obligated to use commercially reasonable efforts to conduct specified development obligations delegated to us pursuant to the agreed-upon development plan for the territory. We are also obligated to supply Zai Lab with the licensed products for clinical development, although Zai Lab may take over manufacturing responsibilities for its own commercialization activities within a specified time period following the effective date of the agreement. Both parties are prohibited from developing and commercializing products in the territory that would compete with the licensed products.

In addition, under the agreement, either party may propose that Zai Lab pursue a combination of imipenem together with ETX2514SUL in the territory. If the parties decide to pursue an imipenem combination, Zai Lab would provide us with limited research and development support for the combination.

We received an upfront payment of $5.0 million and $300,000 in research support, less applicable taxes, from Zai Lab in 2018.  We are eligible to receive up to an aggregate of $98.3 million in additional research and development support payments and development, regulatory and sales milestone payments related to ETX2514SUL, imipenem and other combinations with the licensed products. In the event the China Food and Drug Administration requires a modification or supplement to the trial protocol, and we delay Zai Lab from providing the required information and subsequently from obtaining regulatory approval for the pivotal study of ETX2514SUL in China, then the sales-based milestone payments that become due to us will be reduced by an agreed amount that increases with the length of the delay. Zai Lab will pay us a tiered royalty equal to a high-single digit to low-double digit percentage based on annual net sales of licensed products in the territory, subject to specified reductions for the market entry of competing products, loss of patent coverage of licensed products and for payments owed to third parties for additional rights necessary to commercialize licensed products in the territory.

Each party will own any inventions made by it, and jointly made inventions will be jointly owned, but we will own any inventions that relate to the composition of matter or method of use of licensed products regardless of the party that makes the invention. We will control the prosecution and maintenance of the licensed patents, but Zai Lab will have the ability to take over such prosecution and maintenance if we fail to do so. Zai Lab will have the first right to control any legal action with respect to third-party infringement of the product in the territory, but we may take over such action if Zai Lab fails to act.

Zai Lab may terminate the agreement upon written notice to us at any time and for any reason. Either party may terminate the agreement if the other party is in material breach after a permitted cure period, or with immediate effect upon the occurrence of specified events of insolvency. Further, we can terminate the agreement if Zai Lab ceases to commercialize the licensed products or challenges any of the patents we licensed to it. If Zai Lab has the right to

terminate the agreement due to our uncured material breach, Zai Lab may elect to continue the agreement and we would be obligated to pay Zai Lab a premium on the amount of damages arising from such breach. In the event of any termination of the agreement, Zai Lab will assign or grant a right of reference to any regulatory documentation related to the licensed products to us, all rights and licenses to Zai Lab will terminate, and Zai Lab will grant us a license under Zai Lab’s technology to make and commercialize licensed products in the territory.

Competition

The biopharmaceutical industry is very competitive and subject to rapid innovation. Our potential competitors include major multinational pharmaceutical companies, biotechnology companies, specialty pharmaceutical companies and generic drug companies. Many of our competitors have greater financial, technical, and human resources than we do, as well as greater experience in the discovery and development of product candidates, obtaining FDA and other regulatory approvals of products, and the commercialization of those products. Consequently, these companies may prove more successful in obtaining regulatory approval and in selling and marketing their products. We anticipate intense competition as new drugs enter the market. Our competitors’ drugs may be more effective, or more effectively marketed and sold, than any product candidate we may commercialize and may render our product candidates obsolete or noncompetitive before we can recover the expenses of their development commercialization.

We are initially developing ETX2514SUL for the treatment of multidrug-resistant Acinetobacter infections. Due to rising resistance rates, standard-of-care treatment for multidrug-resistant Acinetobacter often includes a combination of several last-line treatment options, including carbapenems, tetracyclines and polymyxins, all generically available agents. We are aware of other potentially competitive products or product candidates in clinical development that have shown in vitro activity against Acinetobacter : minocycline, marketed by Melinta Therapeutics Inc., eravacycline, recently approved for complicated intra-abdominal infections, and TP6076, currently in a Phase 1 clinical trial, from Tetraphase Pharmaceuticals, Inc. and cefiderocol, currently in a Phase 3 clinical trial, from Shionogi & Co., Ltd.

We are initially developing zoliflodacin for the treatment of gonorrhea. Gonorrhea is commonly treated with combination therapy intramuscular ceftriaxone injection and oral azithromycin, both generically available agents. Additional generic cephalosporins and fluoroquinolones are also prescribed, but not recommended as primary treatment options given current resistance rates. Gepotidacin, currently under development for a variety of infections by GlaxoSmithKline plc, is the only potentially competitive product candidate in clinical development that we are aware of that is being developed for the treatment of gonorrhea.

We are initially developing ETX0282CPDP for the treatment of complicated UTIs. There are a variety of generically available antibiotic classes available for the treatment of such infections, including cephalosporins, carbapenems and fluoroquinolones. Additionally, there are several recently approved and likely to be approved branded agents targeting multidrug-resistant complicated UTIs, including Avycaz, Vabomere and Zemdri TM . We are aware of additional potentially competitive oral product candidates in clinical development that may address a limited breadth of multidrug-resistant Gram-negative pathogens: sulopenem from Iterum Therapeutics Limited, currently in a Phase 3 clinical trial, C-Scape from Achaogen, Inc., currently in a Phase 1 clinical trial, and tebipenem from Spero Therapeutics Inc., currently in a Phase 1 clinical trial.

Intellectual Property

Our commercial success depends in part on our ability to obtain and maintain proprietary or intellectual property protection for our product candidates, our core technologies, and other know-how, to operate without infringing on the proprietary rights of others and to prevent others from infringing our proprietary or intellectual property rights. Our policy is to seek to protect our proprietary and intellectual property position by, among other methods, filing U.S. and foreign patent applications related to our proprietary technology, inventions and improvements that are important to the development and implementation of our business. We also rely on the skills, knowledge and experience of our scientific and technical personnel, as well as that of our advisors, consultants and other contractors. To help protect our proprietary know-how that is not patentable, we rely on trade secret protection and confidentiality agreements to protect our interests. We require our employees, consultants and advisors to enter into confidentiality agreements prohibiting the

disclosure of confidential information and requiring disclosure and assignment to us of the ideas, developments, discoveries and inventions important to our business.

We file patent applications directed to our key product candidates to establish intellectual property positions. These patent applications are intended to protect new chemical entities relating to these product candidates as well as their manufacturing processes, intermediates and uses in the treatment of diseases.

The intellectual property portfolios for our most advanced product candidates are summarized below.

ETX2514

Our intellectual property portfolio for our ETX2514 program contains patent applications directed to compositions of matter for ETX2514 and other chemical analogs, as well as methods of making, referred to as synthetic methods, and methods of use and modes of treatment using ETX2514 in combination with one or more antibiotic compounds. As of December 31, 2018, we owned three issued U.S. patents, 53 issued foreign patents as well as 27 pending foreign patent applications. The issued foreign patents are in several jurisdictions including Australia, the European Union, China, Israel, India, Japan, Mexico, New Zealand, Philippines, Russia, Singapore, South Africa and Taiwan. Issued U.S. and foreign patents and patents issuing from pending U.S. and foreign applications will have expiration dates of April 2033 and November 2035.

Zoliflodacin

Our intellectual property portfolio for zoliflodacin contains patent applications directed to compositions of matter for zoliflodacin and other chemical analogs as well as synthetic methods and methods of use and modes of treatment. As of December 31, 2018, we owned six issued U.S. patents, 19 issued foreign patents as well as 34 pending foreign patent applications. The issued foreign patents are in several jurisdictions, including Australia, Canada, China, Eurasia, the European Union, Hong Kong, Japan, Mexico, New Zealand, Singapore, South Africa, South Korea and Taiwan. Issued U.S. and foreign patents and patents issuing from pending U.S. and foreign applications have expiration dates of October 2029, January 2034 and May 2035.

ETX0282

Our intellectual property portfolio for our ETX0282 program contains patent applications directed to compositions of matter for the prodrug ETX0282, the active molecule, ETX1317, and other chemical analogs, as well as methods of making them, referred to as synthetic methods, and methods of use and modes of treatment using ETX0282 and ETX1317 in combination with one or more antibiotic compounds. As of December 31, 2018, we owned one pending foreign patent application in Taiwan and one published PCT. Issued U.S. and foreign patents and patents issuing from pending U.S. and foreign applications will have expiration dates of September 2037.

Provisional Patents

In addition to the issued and pending patent applications covering our most advanced product candidates, our portfolio also includes one pending foreign patent application in Taiwan and two published PCT applications relating to our early stage discovery projects.

Patent Term and Term Extensions

The term of individual patents depends upon the legal term for patents in the countries in which they are obtained. In most countries, including the United States, the patent term is twenty years from the earliest effective filing date of a non-provisional patent application. In the United States, a patent’s term may be lengthened by patent term adjustment, which compensates a patentee for administrative delays by the U.S. Patent and Trademark Office, or the USPTO, in examining and granting a patent, or may be shortened if a patent is terminally disclaimed over an earlier filed patent. The term of a patent that covers a drug or biological product may also be eligible for patent term extension when FDA approval is granted, provided statutory and regulatory requirements are met. The Drug Price Competition and

Patent Term Restoration Act of 1984, or the Hatch-Waxman Act, permits a patent term extension of up to five years beyond the expiration date of a U.S. patent as partial compensation for the length of time the drug is under regulatory review while the patent is in force. A patent term extension cannot extend the remaining term of a patent beyond a total of fourteen years from the date of product approval, only one patent applicable to each regulatory review period may be extended and only those claims covering the approved drug, a method for using it or a method for manufacturing it may be extended. We cannot provide any assurance that any patent term extension with respect to any U.S. patent will be obtained and, if obtained, the duration of such extension.

Similar provisions are available in the European Union and certain other foreign jurisdictions to extend the term of a patent that covers an approved drug. In the future, if and when our product candidates receive approval by the FDA or foreign regulatory authorities, we expect to apply for patent term extensions on issued patents covering those products, depending upon the length of the clinical trials for each drug and other factors. The expiration dates referred to above are without regard to a potential patent term extension or another market exclusivity that may be available to us. However, we cannot provide any assurances that any such patent term extension of a foreign patent will be obtained and, if obtained, the duration of such extension.

Our patents and patent applications are subject to procedural or legal challenges by others. We may be unable to obtain, maintain and protect the intellectual property rights necessary to conduct our business, and we may be subject to claims that we infringe or otherwise violate the intellectual property rights of others, which could materially harm our business. For more information, see the section titled “Risk Factors—Risks Related to Our Intellectual Property.”

Intellectual Property from the Collaboration with GARDP

In July 2017, we entered into a collaboration agreement with GARDP for the development and commercialization of a product candidate containing zoliflodacin in certain countries. GARDP will own all intellectual property developed in its performance under the collaboration agreement regarding formulation development of zoliflodacin. To the extent GARDP does not file patent applications for any such technology it develops under this collaboration agreement within six months of making or conceiving any invention related to such technology or does not use reasonable efforts to prosecute such patent applications and maintain such patents, GARDP is obligated to assign to us the rights to such intellectual property. In the event we undertake and fund additional efforts outside of the current agreed-upon development plan for zoliflodacin in our territory that lead to the creation of new intellectual property, we will have a right to file and maintain this new intellectual property. In addition, we are obligated to maintain the intellectual property in the countries in the GARDP territory where we had patents or had filed patent applications prior to the agreement and, under specified conditions, in our territory, and GARDP must reimburse us for costs and expenses for the maintenance of such intellectual property rights in the countries of the GARDP territory.

Trademarks, Trade Secrets and Know-How

Our trademark portfolio currently consists of registered trademark and service mark rights for ENTASIS THERAPEUTICS in several jurisdictions, including the United States, the European Union, Japan, Argentina, Australia, Brazil, Canada, India, Norway, the Russian Federation, Switzerland and Taiwan, and pending applications in other jurisdictions. In addition, we have registered trademark rights for ENTASIS THERAPEUTICS (plus design) in the European Union. In connection with the ongoing development and advancement of our products and services in the United States and various international jurisdictions, we routinely seek to create protection for our marks and enhance their value by pursuing trademarks and service marks where available and when appropriate. In addition to patents and trademark protection, we rely upon unpatented trade secrets and know-how and continuing technological innovation to develop and maintain our competitive position. We seek to protect our proprietary information, in part, using confidentiality agreements with our commercial partners, collaborators, employees, and consultants, and invention assignment agreements with our employees. These agreements are designed to protect our proprietary information and, in the case of the invention assignment agreements, to grant us ownership of technologies that are developed through a relationship with a third party. These agreements may be breached, and we may not have adequate remedies for any breach. In addition, our trade secrets may otherwise become known or be independently discovered by competitors. To the extent that our commercial partners, collaborators, employees, and consultants use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.

Government Regulation

Government authorities in the United States, at the federal, state and local level, and in other countries extensively regulate, among other things, the research, development, testing, manufacture, packaging, storage, recordkeeping, labeling, advertising, promotion, distribution, marketing, post-approval monitoring and reporting, import and export of pharmaceutical products. In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, or FDCA, and implementing regulations. To market any product outside of the United States, a sponsor must comply with numerous and varying regulatory requirements of other countries regarding safety and efficacy and governing, among other things, clinical trials, marketing authorization, commercial sales and distribution of our products.

Whether or not we obtain FDA approval for a product candidate, we would need to obtain the necessary approvals by the comparable regulatory authorities of foreign countries before we can commence clinical trials or marketing of the product in those countries. The approval process varies from country to country and can involve additional product testing and additional administrative review periods. The time required to obtain approval in other countries might differ from and be longer than that required to obtain FDA approval. Regulatory approval in one country does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country may negatively impact the regulatory process in others.

Review and Approval of New Drug Products in the United States

In the United States, the process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local statutes and regulations requires the expenditure of substantial time and financial resources. The failure to comply with the applicable requirements at any time during the product development process, approval process or after approval may subject an applicant to a variety of administrative or judicial sanctions, such as the FDA’s refusal to approve pending applications, withdrawal of an approval, imposition of a clinical hold, issuance of warning letters and untitled letters, product recalls, product seizures, total or partial suspension of production or distribution injunctions, fines, refusals of government contracts, restitution, disgorgement of profits or civil or criminal penalties.

The process required by the FDA before a drug may be marketed in the United States generally involves the following:

Preclinical Studies and IND

An IND is an exemption from the FDCA that allows an unapproved drug to be shipped in interstate commerce for use in an investigational clinical trial. In support of a request for an IND, an applicant must submit a protocol for each clinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND. In addition, the results of the preclinical tests, together with manufacturing information, analytical data, any available clinical data or literature and plans for clinical trials, among other things, are submitted to the FDA as part of an IND. Preclinical studies include laboratory evaluation of product chemistry and formulation, as well as in vitro and animal studies to assess the potential for adverse events, and in some cases, to establish a rationale for therapeutic use. The conduct of preclinical studies is subject to federal regulations and requirements, including GLP regulations for safety/toxicology studies. Some long-term preclinical testing, such as animal tests of reproductive adverse events and carcinogenicity, may continue after the IND is submitted.

An IND automatically becomes effective 30 days after receipt by the FDA, unless before that time, the FDA raises concerns or questions related to one or more proposed clinical trials and places the trial on clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. As a result, submission of an IND may not result in the FDA allowing clinical trials to commence. Following commencement of a clinical trial under an IND, the FDA may also place a clinical hold or partial clinical hold on that trial. A clinical hold is an order issued by the FDA to the sponsor to delay a proposed clinical investigation or to suspend an ongoing investigation. A partial clinical hold is a delay or suspension of only part of the clinical work requested under the IND.

A sponsor may choose, but is not required, to conduct a foreign clinical study under an IND. When a foreign clinical study is conducted under an IND, all IND requirements of the FDA must be met unless waived. When the foreign clinical study is not conducted under an IND, the sponsor must ensure that the study complies with certain regulatory requirements of the FDA to use the study as support for an IND or application for marketing approval. The FDA’s regulations are intended to help ensure the protection of human subjects enrolled in non-IND foreign clinical studies, as well as the quality and integrity of the resulting data. They further help ensure that non-IND foreign studies are conducted in a manner comparable to that required for IND studies.

Clinical Trials

Clinical trials involve the administration of the investigational new drug to human subjects under the supervision of qualified investigators in accordance with GCP requirements, which include, among other things, the requirement that all research subjects provide their informed consent in writing before their participation in any clinical trial. Clinical trials are conducted under written study protocols detailing, among other things, the objectives of the study, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. A protocol for each clinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND. In addition, an IRB at each institution participating in the clinical trial must review and approve the plan for any clinical trial before it commences at that institution, and the IRB must conduct continuing review. The IRB must review and approve, among other things, the study protocol and informed consent information to be provided to study subjects. An IRB must operate in compliance with FDA regulations.

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

Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and, more frequently, if serious adverse events occur. Phase 1, Phase 2 and Phase 3 clinical trials may not be completed successfully within any specified period, or at all. Furthermore, the FDA or the sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associated with unexpected serious harm to patients.

Additionally, some trials are overseen by an independent group of qualified experts organized by the trial sponsor, known as a data safety monitoring board or committee or DSMB. This group provides authorization for whether a trial may move forward at designated check points based on access that only the group maintains to available data from the study. Suspension or termination of development during any phase of clinical trials can occur if it is determined that the participants or patients are being exposed to an unacceptable health risk.

Information about certain clinical trials must be submitted within specific timeframes to the National Institutes of Health for public dissemination at www.clinicaltrials.gov.

Combination Rule

The FDA’s Combination Rule governing fixed combination drug products provides that two or more drugs may be combined in a single dosage form when each component contributes to the claimed effects and the dosage of each component (amount, frequency, duration) is such that the combination is safe and effective for a significant patient population requiring such concurrent therapy as defined in the labeling for the drug. The Rule is meant to ensure that any fixed-dose combination drug provides an advantage to the patient over and above that obtained when one of the individual ingredients is used in the usual safe and effective dose.

Marketing Approval

Assuming successful completion of the required clinical testing, the results of the preclinical studies and clinical trials, together with detailed information relating to the product’s chemistry, manufacture, controls and proposed labeling, among other things, are submitted to the FDA as part of an NDA requesting approval to market the product for one or more indications. Under federal law, the submission of most NDAs is subject to an application user fee, and the sponsor of an approved NDA is also subject to an annual program fee. Certain exceptions and waivers are available for some of these fees, such as an exception from the application fee for drugs with orphan designation and a waiver for certain small businesses.

The FDA conducts a preliminary review of all NDAs within the first 60 days after submission before accepting them for filing to determine whether they are sufficiently complete to permit a substantive review. The FDA may request additional information rather than accept an NDA for filing. In this event, the application must be resubmitted with the additional information. The resubmitted application is also subject to review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive review. The FDA has agreed to specified performance goals in the review of NDAs. Under these goals, the FDA has committed to review most such applications for nonpriority products within 10 months from filing, and most applications for priority review products, that is, drugs that the FDA determines represent a significant improvement over existing therapy, within six months from filing. The

review process may be extended by the FDA for three additional months to consider certain information or clarification regarding information already provided in the submission.

The FDA may also refer applications for novel drugs or products that present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.

Before approving an NDA, the FDA typically will inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. Under the FDCA, the FDA must implement a protocol to expedite review of responses to inspection reports pertaining to certain drug applications, including applications for drugs in a shortage or drugs for which approval is dependent on remediation of conditions identified in the inspection report. In addition, before approving an NDA, the FDA will typically inspect one or more clinical sites to assure compliance with GCP and integrity of the clinical data submitted.

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

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

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

Fast Track Designation

The FDA is required to facilitate the development and expedite the review of drugs that are intended for the treatment of a serious or life-threatening condition for which there is no effective treatment, and which demonstrate the potential to address unmet medical needs for the condition. Under the Fast Track program, the sponsor of a new product candidate may request the FDA to designate the product for a specific indication as a Fast Track product concurrent with or after the submission of the IND for the product candidate. The FDA must determine if the product candidate qualifies for Fast Track designation within 60 days after receipt of the sponsor’s request.

For Fast Track products, the sponsor may have more frequent interactions with the FDA and the FDA may initiate a review of sections of a Fast Track product’s NDA before the application is complete. This rolling review is available if the applicant provides and the FDA approves a schedule for the submission of the remaining information and

the applicant pays 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 NDA 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. A Fast Track designated product candidate would ordinarily meet the FDA’s criteria for priority review.

Accelerated Approval

Under the FDA’s accelerated approval regulations, the FDA may approve a drug for a serious or life-threatening illness that provides meaningful therapeutic benefit to patients over existing treatments based upon a surrogate endpoint that is reasonably likely to predict clinical benefit. In clinical trials, a surrogate endpoint is a measurement of laboratory or clinical signs of a disease or condition that substitutes for a direct measurement of how a patient feels, functions or survives. Surrogate endpoints can often be measured more easily or more rapidly than clinical endpoints. A product candidate approved on this basis is subject to rigorous post-marketing compliance requirements, including the completion of Phase 4 or post-approval clinical trials to confirm the effect on the clinical endpoint. Failure to conduct required post-approval trials or confirm a clinical benefit during post-marketing studies, would allow the FDA to withdraw the drug from the market on an expedited basis. All promotional materials for product candidates approved under accelerated regulations are subject to prior review by the FDA.

Breakthrough Therapy Designation

A breakthrough therapy is defined as a drug that is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the product candidate 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.

Section 505(b)(2) NDAs

NDAs for most new drug products are based on two full clinical studies which must contain substantial evidence of the safety and efficacy of the proposed new product. These applications are submitted under Section 505(b)(1) of the FDCA. The FDA is, however, authorized to approve an alternative type of NDA under Section 505(b)(2) of the FDCA. This type of application allows the applicant to rely, in part, on the FDA’s previous findings of safety and efficacy for a similar product or published literature. Specifically, Section 505(b)(2) applies to NDAs for a drug for which the investigations made to show whether or not the drug is safe for use and effective in use and relied upon by the applicant for approval of the application “were not conducted by or for the applicant and for which the applicant has not obtained a right of reference or use from the person by or for whom the investigations were conducted.”

Thus, Section 505(b)(2) authorizes the FDA to approve an NDA based on safety and effectiveness data that were not developed by the applicant. NDAs filed under Section 505(b)(2) may provide an alternate and potentially more expeditious pathway to FDA approval for new or improved formulations or new uses of previously approved products. If the Section 505(b)(2) applicant can establish that reliance on the FDA’s previous approval is scientifically appropriate, the applicant may eliminate the need to conduct certain preclinical or clinical studies of the new product. The FDA may also require companies to perform additional studies or measurements to support the change from the approved product. The FDA may then approve the new drug candidate for all or some of the label indications for which the referenced product has been approved, as well as for any new indication sought by the Section 505(b)(2) applicant.

Abbreviated New Drug Applications for Generic Drugs

In 1984, with the passage of the Hatch-Waxman Amendments to the FDCA, Congress authorized the FDA to approve generic drugs that are the same as drugs previously approved by the FDA under the NDA provisions of the

statute. To obtain approval of a generic drug, an applicant must submit an abbreviated new drug application, or ANDA, to the agency. For an ANDA to be approved, the FDA must find that the generic version is identical to the Reference Listed Drug, or RLD, with respect to the active ingredients, the route of administration, the dosage form, and the strength of the drug. The FDA must also determine that the generic drug is “bioequivalent” to the innovator drug. Under the statute, a generic drug is bioequivalent to a RLD if “the rate and extent of absorption of the drug do not show a significant difference from the rate and extent of absorption of the listed drug...”

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

The FDA may not approve an ANDA until any applicable period of nonpatent exclusivity for the RLD has expired. The FDCA provides a period of five years of nonpatent data exclusivity for a new drug containing a new chemical entity. For the purposes of this provision, a new chemical entity, or NCE, is a drug that contains no active moiety that has previously been approved by the FDA in any other NDA. The FDCA also provides for a period of three years of exclusivity if the NDA includes reports of one or more new clinical investigations, other than bioavailability or bioequivalence studies, that were conducted by or for the applicant and are essential to the approval of the application. This three-year exclusivity period often protects changes to a previously approved drug product, such as a new dosage form, route of administration, combination or indication.

The FDA must establish a priority review track for certain generic drugs, requiring the FDA to review a drug application within eight months for a drug that has three or fewer approved drugs listed in the Orange Book and is no longer protected by any patent or regulatory exclusivities, or is on the FDA’s drug shortage list. The new legislation also authorizes FDA to expedite review of “competitor generic therapies” or drugs with inadequate generic competition, including holding meetings with or providing advice to the drug sponsor prior to submission of the application.

Orphan Drug Designation and Exclusivity

Under the Orphan Drug Act, the FDA may grant orphan drug designation to drugs intended to treat a rare disease or condition, which is generally defined as a disease or condition that affects fewer than 200,000 individuals in the United States. Orphan drug designation must be requested before submitting an NDA. After the FDA grants orphan drug designation, the generic identity of the drug and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not convey any advantage to, or shorten the duration of, the regulatory review and approval process. The first NDA applicant to receive FDA approval for a particular active ingredient to treat a particular disease with FDA orphan drug designation is entitled to a seven-year exclusive marketing period in the United States for that product, for that indication.

During the seven year exclusivity period, the FDA may not approve any other applications to market the same drug for the same orphan indication, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity in that it is shown to have greater efficacy or safety, makes a major contribution to patient care, or if the company with orphan drug exclusivity is not able to meet market demand. Orphan drug exclusivity does not prevent the FDA from approving a different drug for the same disease or condition, or the same drug for a different disease or condition. Among the other benefits of orphan drug designation are tax credits for certain research and a waiver of the NDA application user fee.

Qualified Infectious Disease Products

In response to the growing unmet medical need in the area of serious bacterial infections, the Generating Antibiotic Incentives Now Act, or the GAIN Act, provides incentives including access to expedited FDA review for approval and five years of potential market exclusivity extension, for the development of new, qualified infectious disease products, or QIDP, including antibacterial or antifungal drugs intended to treat serious or life-threatening

infections that are resistant to treatment, or that treat qualifying resistant pathogens identified by the FDA. A sponsor must request QIDP designation for a new drug before an NDA is submitted and, if designated as a QIDP and approved, is eligible for an additional five years of exclusivity beyond any period of exclusivity to which it would have otherwise been entitled. In addition, a QIDP receives NDA priority review and Fast Track designation. QIDP designation does not affect the likelihood of approval by FDA.

Pediatric Exclusivity and Pediatric Use

The Pediatric Research Equity Act, or PREA, requires a sponsor to conduct pediatric studies for most drugs and biologics, for a new active ingredient, new indication, new dosage form, new dosing regimen or new route of administration. Under PREA, original NDAs, biologics license applications and supplements thereto, must contain a pediatric assessment unless the sponsor has received a deferral or waiver. Unless otherwise required by regulation, PREA does not apply to any drug for an indication for which an orphan drug designation has been granted. The required assessment must assess the safety and effectiveness of the product for the claimed indications in all relevant pediatric subpopulations and support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The sponsor or FDA may request a deferral of pediatric studies for some or all the pediatric subpopulations. A deferral may be granted for several reasons, including a finding that the drug or biologic is ready for approval for use in adults before pediatric studies are complete or that additional safety or effectiveness data needs to be collected before the pediatric studies begin.

Pediatric exclusivity is another type of nonpatent marketing exclusivity in the United States and, if granted, provides for the attachment of an additional six months of marketing protection to the term of any existing regulatory exclusivity, including the nonpatent and orphan exclusivity. This six-month exclusivity may be granted if an NDA sponsor submits pediatric data that fairly respond to a written request from the FDA for such data. The data do not need to show the product to be effective in the pediatric population studied; rather, if the clinical trial is deemed to fairly respond to the FDA’s request, the additional protection is granted. If reports of requested pediatric studies are submitted to and accepted by the FDA within the statutory time limits, whatever statutory or regulatory periods of exclusivity or patent protection cover the product are extended by six months.

Post-Approval Regulatory Requirements

Any drug manufactured or distributed by us pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to recordkeeping, periodic reporting, product sampling and distribution, advertising and promotion and reporting of adverse experiences with the product. After approval, most changes to the approved product, such as adding new indications or other labeling claims are subject to prior FDA review and approval.

The FDA may impose several post-approval requirements, including Phase 4 clinical trials and surveillance, to further assess and monitor the product’s safety and effectiveness after commercialization.

In addition, drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and state agencies and are subject to periodic unannounced inspections by the FDA and these state agencies for compliance with cGMP requirements. Changes to the manufacturing process are strictly regulated and often require prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP and impose reporting and documentation requirements upon us and any third-party manufacturers that we may decide to use. Accordingly, manufacturers must continue to expend time, money and effort in the areas of production and quality control to maintain cGMP compliance.

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

imposition of distribution or other restrictions under a REMS program. Other potential consequences include, among other things:

The FDA strictly regulates the marketing, labeling, advertising and promotion of prescription drug products placed on the market. This regulation includes, among other things, standards and regulations for direct-to-consumer advertising, communications regarding unapproved uses, industry-sponsored scientific and educational activities, and promotional activities involving the Internet and social media. Promotional claims about a drug’s safety or effectiveness are prohibited before the drug is approved. After approval, a drug product generally may not be promoted for uses that are not approved by the FDA, as reflected in the product’s prescribing information. In the United States, healthcare professionals are generally permitted to prescribe drugs for such uses not described in the drug’s labeling, known as off-label uses, because the FDA does not regulate the practice of medicine. However, FDA regulations impose rigorous restrictions on manufacturers’ communications, prohibiting the promotion of off-label uses. If a company is found to have promoted off-label uses, it may become subject to adverse public relations and administrative and judicial enforcement by the FDA, the U.S. Department of Justice, or the Office of the Inspector General of the Department of Health and Human Services, as well as state authorities.

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

Pharmaceutical Coverage, Pricing and Reimbursement

Significant uncertainty exists as to the coverage and reimbursement status of products approved by the FDA and other government authorities. Sales of products will depend, in part, on the extent to which third-party payors, including government health programs in the United States such as Medicare and Medicaid, commercial health insurers and managed care organizations, provide coverage, and establish adequate reimbursement levels for, such products. The process for determining whether a payor will provide coverage for a product may be separate from the process for setting the price or reimbursement rate that the payor will pay for the product once coverage is approved. Third-party payors are increasingly challenging the prices charged, examining the medical necessity, and reviewing the cost-effectiveness of medical products and services and imposing controls to manage costs. Third-party payors may limit coverage to specific products on an approved list, or formulary, which might not include all the approved products for a particular indication.

To secure coverage and reimbursement for any product that might be approved for sale, a company may need to conduct expensive pharmacoeconomic studies to demonstrate the medical necessity and cost effectiveness of the product, in addition to the costs required to obtain FDA or other comparable regulatory approvals. Nonetheless, product candidates may not be considered medically necessary or cost effective. Additionally, a payor’s decision to provide coverage for a drug product does not imply that an adequate reimbursement rate will be approved. Further, one payor’s determination to provide coverage for a drug product does not assure that other payors will also provide coverage for the

drug product. Third-party reimbursement may not be sufficient to maintain price levels high enough to realize an appropriate return on investment in product development.

Health Care Laws Governing Interactions with Healthcare Providers

In addition to FDA restrictions on marketing of pharmaceutical products, several other types of state and federal laws restrict our business activities, including certain marketing practices. These laws include, without limitation, anti-kickback laws, false claims laws, data privacy and security laws, as well as transparency laws regarding payments or other items of value provided to healthcare providers.

The federal Anti-Kickback Statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce or in return for purchasing, leasing, ordering or arranging for the purchase, lease or order of any healthcare item, good, facility or service reimbursable under Medicare, Medicaid or other federal healthcare programs. The term “remuneration” has been broadly interpreted to include anything of value. This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers and formulary managers, among others, on the other. Although there are several statutory exceptions and regulatory safe harbors protecting certain common activities from prosecution or other regulatory sanctions, the exceptions and safe harbors are drawn narrowly, and practices that involve remuneration that are alleged to be intended to induce prescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exception or safe harbor. Failure to meet all the requirements of a particular applicable statutory exception or regulatory safe harbor does not make the conduct per se illegal under the federal Anti-Kickback Statute. Instead, the legality of the arrangement will be evaluated on a case-by-case basis based on a cumulative review of all its facts and circumstances. Several courts have interpreted the statute’s intent requirement to mean that if any one purpose of an arrangement involving remuneration is to induce referrals of federal healthcare covered business, the federal Anti-Kickback Statute has been violated. Additionally, the intent standard under the federal Anti-Kickback Statute was amended by the Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act of 2010, collectively the Affordable Care Act, or ACA, to a stricter standard such that a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. In addition, the ACA codified case law that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act.

Federal false claims laws, including the civil False Claims Act, and civil monetary penalties laws, prohibit any person or entity from, among other things, knowingly presenting, or causing to be presented, a false claim for payment to the federal government, or knowingly making, or causing to be made, a false statement to have a false claim paid. Pharmaceutical and other healthcare companies have been prosecuted under these laws for, among other things, allegedly inflating drug prices they report to pricing services, which in turn were used by the government to set Medicare and Medicaid reimbursement rates, and for allegedly providing free product to customers with the expectation that the customers would bill federal programs for the product. In addition, certain marketing practices, including off-label promotion, may also violate false claims laws.

The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, created additional federal criminal and civil statutes that prohibit among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party payors, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. Like the federal Anti-Kickback Statute, the ACA amended the intent standard for certain healthcare fraud under HIPAA such that a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it to have committed a violation.

In addition, we may be subject to data privacy and security regulation by both the federal government and the states in which we conduct our business. HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and its implementing regulations, impose certain requirements on covered entities (i.e., certain healthcare providers, health plans and healthcare clearinghouses) relating to the privacy, security and

transmission of individually identifiable health information. Among other things, HITECH makes HIPAA’s security standards directly applicable to business associates, independent contractors or agents of covered entities that receive or obtain protected health information in connection with providing a service on behalf of a covered entity. HITECH also created four new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions.

Additionally, the federal Physician Payments Sunshine Act, created under the ACA, and its implementing regulations, require certain manufacturers of drugs, devices, biologicals and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to annually report information related to certain payments or other transfers of value provided to physicians and teaching hospitals, or to entities or individuals at the request of, or designated on behalf of, the physicians and teaching hospitals and information related to certain ownership and investment interests held by physicians and their immediate family members.

Finally, the majority of states also have statutes or regulations similar to the aforementioned federal laws, some of which are broader in scope and apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor. 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. In addition, some state laws require drug manufacturers to report information related to payments to clinicians and other healthcare providers or marketing expenditures and drug pricing. Further, some state and local laws require the licensure of pharmaceutical sales representatives. 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.

Healthcare Reform Efforts

A primary trend in the United States healthcare industry and elsewhere is cost containment. Over the last several years, there have been federal and state proposals and legislation enacted regarding the pricing of pharmaceutical and biopharmaceutical products, limiting coverage and reimbursement for drugs and other medical products, and making changes to healthcare financing and the delivery of care in the United States.

In March 2010, the ACA was enacted, which includes measures that have significantly changed health care financing by both governmental and private insurers. The provisions of the ACA of importance to the pharmaceutical and biotechnology industry are, among others, the following:

Since its enactment, there have been judicial and Congressional challenges to certain aspects of the ACA, as well as recent efforts by the Trump administration to repeal or replace certain aspects of the ACA. Since January 2017, President Trump has signed two Executive Orders designed to delay the implementation of any certain provisions of the ACA or otherwise circumvent some of the requirements for health insurance mandated by the ACA. Concurrently, Congress has considered legislation that would repeal or repeal and replace all or part of the ACA. While Congress has not passed comprehensive repeal legislation, two bills affecting the implementation of certain taxes under the ACA have been signed into law. The Tax Cuts and Jobs Act of 2017, or the Tax Act, includes a provision repealing, effective January 1, 2019, the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate.” Additionally, on January 22, 2018, President Trump signed a continuing resolution on appropriations for fiscal year 2018 that delayed the implementation of certain ACA-mandated fees, including the so-called “Cadillac” tax on certain high-cost employer-sponsored insurance plans, the annual fee imposed on certain health insurance providers based on market share, and the medical device excise tax on nonexempt medical devices. Further, the Bipartisan Budget Act of 2018, or the BBA, 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.” In July 2018, CMS published a final rule permitting further collections and payments to and from certain ACA qualified health plans and health insurance issuers under the ACA risk adjustment program in response to the outcome of federal district court litigation regarding the method CMS uses to determine this risk adjustment. On December 14, 2018, a Texas U.S. District Court Judge ruled that ACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress as part of the Tax Act. While the Texas U.S. District Court Judge, as well as the Trump administration and CMS, have stated that the ruling will have no immediate effect pending appeal of the decision, it is unclear how this decision, subsequent appeals, and other efforts to repeal and replace ACA will impact ACA.

In addition, other federal health reform measures have been proposed and adopted in the United States since the ACA was enacted. For example, because of the Budget Control Act of 2011, as amended by subsequent legislation including the BBA, providers are subject to Medicare payment reductions of 2% per fiscal year through 2027 unless additional Congressional action is taken. Further, the American Taxpayer Relief Act of 2012 reduced Medicare payments to several providers and increased the statute of limitations period for the government to recover overpayments from providers from three to five years. The Medicare Access and CHIP Reauthorization Act of 2015 also introduced a quality payment program under which certain individual Medicare providers will be subject to certain incentives or penalties based on new program quality standards. Payment adjustments for the Medicare quality payment program will

begin in 2019. At this time, it is unclear how the introduction of the quality payment program will impact overall physician reimbursement under the Medicare program.

Further, there has been heightened governmental scrutiny over the way manufacturers set prices for their marketed products, which have resulted in several recent Congressional inquiries and enacted federal and state legislation proposed designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for products. At the federal level, the Trump administration’s budget proposal for fiscal year 2019 contains further drug price control measures that could be enacted during the 2019 budget process or in other future legislation, including, for example, measures to permit Medicare Part D plans to negotiate the price of certain drugs under Medicare Part B, to allow some states to negotiate drug prices under Medicaid, and to eliminate cost sharing for generic drugs for low-income patients. T he Trump administration also released a “Blueprint”, or plan, to lower drug prices and reduce out of pocket costs of drugs that contains additional proposals to increase drug manufacturer competition, increase the negotiating power of certain federal healthcare programs, incentivize manufacturers to lower the list price of their products, and reduce the out of pocket costs of drug products paid by consumers. On January 31, 2019, the Department of Health and Human Services, Office of Inspector General, proposed modifications to the federal Anti-Kickback Statute discount safe harbor for the purpose of reducing the cost of drug products to consumers which, among other things, if finalized, will affect discounts paid by manufacturers to Medicare Part D plans, Medicaid managed care organizations and pharmacy benefit managers working with these organizations. While some of these and other proposed measures will require authorization through additional legislation to become effective, Congress and the Trump administration have each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs.

At the state level, legislatures have also become increasingly active in passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. In addition, regional healthcare 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 healthcare programs. These measures could reduce the ultimate demand for our products, once approved, or put pressure on our product pricing.

Foreign Corrupt Practices Act

The Foreign Corrupt Practices Act, or the FCPA, prohibits any U.S. individual or business from paying, offering, or authorizing payment or offering of anything of value, directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or decision of the foreign entity in order to assist the individual or business in obtaining or retaining business. The FCPA also obligates companies whose securities are listed in the United States to comply with accounting provisions requiring the company to maintain books and records that accurately and fairly reflect all transactions of the corporation, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international operations. Activities that violate the FCPA, even if they occur wholly outside the United States, can result in criminal and civil fines, imprisonment, disgorgement, oversight, and debarment from government contracts.

Review and Approval of New Drug Products in the European Union

Pursuant to the European Clinical Trials Directive, a system for the approval of clinical trials in the European Union has been implemented through national legislation of the member states. Under this system, an applicant must obtain approval from the competent national authority of an EU member state in which the clinical trial is to be conducted. Furthermore, the applicant may only start a clinical trial after a competent ethics committee has issued a favorable opinion. Clinical trial applications must be accompanied by an investigational medicinal product dossier with supporting information prescribed by the European Clinical Trials Directive and corresponding national laws of the member states and further detailed in applicable guidance documents.

To obtain marketing approval of a product under EU regulatory systems, an applicant must submit a marketing authorization application, or MAA, either under a centralized or decentralized procedure. The centralized procedure provides for the grant of a single marketing authorization by the European Commission that is valid for all EU member states. The centralized procedure is compulsory for specific products, including for medicines produced by certain biotechnological processes, products designated as orphan medicinal products, advanced therapy products and products with a new active substance indicated for the treatment of certain diseases. For products with a new active substance indicated for the treatment of other diseases and products that are highly innovative or for which a centralized process is in the interest of patients, the centralized procedure may be optional.

Under the centralized procedure, the Committee for Medicinal Products for Human Use, or the CHMP, established at the European Medicines Agency, or EMA, is responsible for conducting the initial assessment of a product. The CHMP is also responsible for several post-authorization and maintenance activities, such as the assessment of modifications or extensions to an existing marketing authorization. Under the centralized procedure in the European Union, the maximum timeframe for the evaluation of an MAA is 210 days, excluding clock stops, by when additional information or written or oral explanation must be provided by the applicant in response to questions of the CHMP. Accelerated evaluation might be granted by the CHMP in exceptional cases, when a medicinal product is of major interest from the point of view of public health and from the viewpoint of therapeutic innovation. In these circumstances, the EMA ensures that the opinion of the CHMP is given within 150 days.

The decentralized procedure is available to applicants who wish to market a product in various EU member states where such product has not previously received marketing approval in any EU member states before. The decentralized procedure provides for approval by one or more other member states (known as concerned member states) of an assessment of an application performed by one member state designated by the applicant, known as the reference member state. Under this procedure, an applicant submits an application based on identical dossiers and related materials, including a draft summary of product characteristics, and draft labeling and package leaflet, to the reference member state and concerned member states. The reference member state prepares a draft assessment report and drafts of the related materials within 210 days after receipt of a valid application. Within 90 days of receiving the reference member state’s assessment report and related materials, each concerned member state must decide whether to approve the assessment report and related materials.

If a member state cannot approve the assessment report and related materials on the grounds of potential serious risk to public health, the disputed points are subject to a dispute resolution mechanism and may, eventually, be referred to the European Commission, whose decision is binding on all member states.

Within this framework, manufacturers may seek approval of hybrid medicinal products under Article 10(3) of Directive 2001/83/EC. Hybrid applications rely, in part, on information and data from a reference product and new data from appropriate preclinical tests and clinical trials. Such applications are necessary when the proposed product does not meet the strict definition of a generic medicinal product, or bioavailability studies cannot be used to demonstrate bioequivalence, or there are changes in the active substance(s), therapeutic indications, strength, pharmaceutical form or route of administration of the generic product compared to the reference medicinal product. In such cases, the results of tests and trials must be consistent with the data content standards required in the Annex to the Directive 2001/83/EC, as amended by Directive 2003/63/EC.

Hybrid medicinal product applications have automatic access to the centralized procedure when the reference product was authorized for marketing via that procedure. Where the reference product was authorized via the decentralized procedure, a hybrid application may be accepted for consideration under the centralized procedure if the applicant shows that the medicinal product constitutes a significant therapeutic, scientific or technical innovation, or the granting of a community authorization for the medicinal product is in the interest of patients at the community level.

Clinical Trial Approval in the European Union

Requirements for the conduct of clinical trials in the European Union, including Good Clinical Practice, or GCP, are set forth in the Clinical Trials Directive 2001/20/EC and the GCP Directive 2005/28/EC. Pursuant to Directive 2001/20/EC and Directive 2005/28/EC, as amended, a system for the approval of clinical trials in the European Union

has been implemented through national legislation of the EU member states. Under this system, approval must be obtained from the competent national authority of each EU member state in which a study is planned to be conducted. To this end, a CTA is submitted, which must be supported by an investigational medicinal product dossier, or IMPD, and further supporting information prescribed by Directive 2001/20/EC and Directive 2005/28/EC and other applicable guidance documents. Furthermore, a clinical trial may only be started after a competent ethics committee has issued a favorable opinion on the clinical trial application in that country.

In April 2014, the European Union passed the new Clinical Trials Regulation, (EU) No 536/2014, which will replace the current Clinical Trials Directive 2001/20/EC. To ensure that the rules for clinical trials are identical throughout the European Union, the new EU clinical trials legislation was passed as a regulation that is directly applicable in all EU member states. All clinical trials performed in the European Union are required to be conducted in accordance with the Clinical Trials Directive 2001/20/EC until the new Clinical Trials Regulation (EU) No 536/2014 becomes applicable. According to the current plans of the EMA, the new Clinical Trials Regulation will become applicable in 2019. The Clinical Trials Directive 2001/20/EC will, however, still apply three years from the date of entry into application of the Clinical Trials Regulation to (i) clinical trials applications submitted before the entry into application and (ii) clinical trials applications submitted within one year after the entry into application if the sponsor opts for old system.

The new Clinical Trials Regulation aims to simplify and streamline the approval of clinical trial in the European Union. The main characteristics of the regulation include: a streamlined application procedure via a single entry point, the EU portal; a single set of documents to be prepared and submitted for the application as well as simplified reporting procedures that will spare sponsors from submitting broadly identical information separately to various bodies and different member states; a harmonized procedure for the assessment of applications for clinical trials, which is divided into two parts (Part I is assessed jointly by all member states concerned, and Part II is assessed separately by each member state concerned); strictly defined deadlines for the assessment of clinical trial applications; and the involvement of the ethics committees in the assessment procedure in accordance with the national law of the member state concerned but within the overall timelines defined by the Clinical Trials Regulation.

Periods of Authorization and Renewals

A marketing authorization is valid for five years in principle and may be renewed after five years based on a reevaluation of the risk-benefit balance by the EMA or by the competent authority of the authorizing member state. To this end, the marketing authorization holder must provide the EMA or the competent authority with a consolidated version of the file in respect of quality, safety and efficacy, including all variations introduced since the marketing authorization was granted, at least six months before the marketing authorization ceases to be valid. Once renewed, the marketing authorization is valid for an unlimited period, unless the European Commission or the competent authority decides, on justified grounds relating to pharmacovigilance, to proceed with one additional five-year renewal. Any authorization which is not followed by the actual placing of the drug on the EU market (in case of centralized procedure) or on the market of the authorizing member state (in the case of the decentralized procedure) within three years after authorization ceases to be valid (the so-called sunset clause).

Data and Market Exclusivity in the European Union

In the European Union, new chemical entities qualify for eight years of data exclusivity upon the grant of a marketing authorization and an additional two years of market exclusivity. This data exclusivity, if granted, prevents regulatory authorities in the European Union from referencing the innovator’s data to assess a generic (abbreviated) application for eight years, after which a generic marketing authorization can be submitted, and the innovator’s data may be referenced, but not approved for two years. The overall ten-year period will be extended to a maximum of eleven years if, during the first eight years of those ten years, the marketing authorization holder obtains an authorization for one or more new therapeutic indications which, during the scientific evaluation prior to their authorization, are held to bring a significant clinical benefit in comparison with existing therapies. Even if a compound is a new chemical entity and the sponsor is able to gain the prescribed period of data exclusivity, another company nevertheless could also market another version of the product if such company can complete a full MAA with a complete database of pharmaceutical test, preclinical tests and clinical trials and obtain marketing approval of its product.

Orphan Drug Designation and Exclusivity

Regulation 141/2000 provides that a drug shall be designated as an orphan drug if its sponsor can establish: that the product is intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition affecting not more than five in ten thousand persons in the European Community when the application is made, or that the product is intended for the diagnosis, prevention or treatment of a life-threatening, seriously debilitating or serious and chronic condition in the European Community and that without incentives it is unlikely that the marketing of the drug in the European Community would generate sufficient return to justify the necessary investment. For either of these conditions, the applicant must demonstrate that there exists no satisfactory method of diagnosis, prevention or treatment of the condition in question that has been authorized in the European Community or, if such method exists, the drug will be of significant benefit to those affected by that condition.

Regulation 847/2000 sets out criteria and procedures governing designation of orphan drugs in the European Union. Specifically, an application for designation as an orphan product can be made any time prior to the filing of an application for approval to market the product. Marketing authorization for an orphan drug leads to a 10year period of market exclusivity. This period may, however, be reduced to six years if, at the end of the fifth year, it is established that the product no longer meets the criteria for orphan drug designation, for example, because the product is sufficiently profitable not to justify market exclusivity. Market exclusivity can be revoked only in very selected cases, such as consent from the marketing authorization holder, inability to supply sufficient quantities of the product, demonstration of “clinically relevant superiority” by a similar medicinal product, or, after a review by the Committee for Orphan Medicinal Products, requested by a member state in the fifth year of the marketing exclusivity period (if the designation criteria are believed to no longer apply). Medicinal products designated as orphan drugs pursuant to Regulation 141/2000 shall be eligible for incentives made available by the European Community and by the member states to support research into, and the development and availability of, orphan drugs.

Regulatory Requirements after Marketing Authorization

As in the United States, both marketing authorization holders and manufacturers of medicinal products are subject to comprehensive regulatory oversight by the EMA and the competent authorities of the individual EU member states both before and after grant of the manufacturing and marketing authorizations. The holder of an EU marketing authorization for a medicinal product must, for example, comply with EU pharmacovigilance legislation and its related regulations and guidelines which entail many requirements for conducting pharmacovigilance, or the assessment and monitoring of the safety of medicinal products. The manufacturing process for medicinal products in the European Union is also highly regulated and regulators may shut down manufacturing facilities that they believe do not comply with regulations. Manufacturing requires a manufacturing authorization, and the manufacturing authorization holder must comply with various requirements set out in the applicable EU laws, including compliance with EU cGMP standards when manufacturing medicinal products and active pharmaceutical ingredients.

In the European Union, the advertising and promotion of approved products are subject to EU member states’ laws governing promotion of medicinal products, interactions with clinicians, misleading and comparative advertising and unfair commercial practices. In addition, other legislation adopted by individual EU member states may apply to the advertising and promotion of medicinal products. These laws require that promotional materials and advertising in relation to medicinal products comply with the product’s Summary of Product Characteristics, or SmPC, as approved by the competent authorities. Promotion of a medicinal product that does SmPC is considered to constitute off-label promotion, in the European Union.

Corporate and Other Information

Entasis Therapeutics Holdings Inc. was incorporated under the laws of the State of Delaware in March 2018. Our shares are listed on the NASDAQ Global Market, where our trading symbol is ETTX. Our principal executive offices are located at 35 Gatehouse Drive, Waltham, Massachusetts 02451 and our telephone number is (781) 810‑0120.

As of March 15, 2019, we had 33 full-time employees, all of whom were located in the United States and employed by our U.S. subsidiary, Entasis Therapeutics Inc. None of our employees are represented by a labor union or covered by a collective bargaining agreement. We consider our relationship with our employees to be good.

We have three subsidiaries: Entasis Therapeutics Limited, which was incorporated under the laws of England and Wales on March 6, 2015; Entasis Therapeutics Inc., which was incorporated under the laws of the State of Delaware on March 11, 2015; and Entasis Therapeutics Security Corporation, which was incorporated under the laws of the State of Massachusetts on October 31, 2018.

Available Information

You may read our SEC filings, including our proxy statements, annual reports on Form 10‑K, quarterly reports on Form 10‑Q, current reports on Form 8‑K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, over the internet at the SEC’s website at www.sec.gov . We also maintain a website at www.entasistx.com , at which you may access these materials free of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. The information contained in, or that can be accessed through, our website is not part of, and is not incorporated into, this Annual Report.