UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
 
FORM 10-Q
 
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2017
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM             TO
Commission file number: 001-36912
 
CIDARA THERAPEUTICS, INC.
(Exact name of registrant as specified in its charter)
 
Delaware
 
46-1537286
(State or Other Jurisdiction of
Incorporation or Organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
6310 Nancy Ridge Drive, Suite 101
San Diego, CA  92121
 
(858) 752-6170
(Address of Principal Executive Offices)
 
(Registrant’s Telephone Number, Including Area Code)
 
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes    x    No    o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes    x    No    o
Indicate by check mark whether registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
o
 
Accelerated filer
x
 
 
 
 
 
Non-accelerated filer
o
(Do not check if a smaller reporting company)
Smaller reporting company
o
 
 
 
 
 
 
 
 
Emerging growth company
x
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. x
Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes    o    No    x
As of April 30, 2017 , the registrant had 16,806,042 shares of Common Stock ($ 0.0001 par value) outstanding.
 


CIDARA THERAPEUTICS, INC.
TABLE OF CONTENTS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


2

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CIDARA THERAPEUTICS, INC.
Condensed Consolidated Balance Sheets  
  
 
March 31, 2017
 
December 31, 2016
(In thousands, except share and per share data)
(unaudited)
 
 
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
82,198

 
$
85,367

Short-term investments
7,888

 
19,252

Prepaid expenses and other current assets
1,195

 
779

Total current assets
91,281

 
105,398

Property and equipment, net
1,292

 
1,374

Other assets
190

 
190

Total assets
$
92,763

 
$
106,962

 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
1,912

 
$
2,909

Accrued liabilities
3,440

 
3,338

Accrued compensation and benefits
1,534

 
2,662

Total current liabilities
6,886

 
8,909

Term loan, less debt issuance costs
9,813

 
9,794

Other long-term liabilities
75

 
80

Total liabilities
16,774

 
18,783

Commitments and contingencies


 


Stockholders' equity:
 
 
 
Preferred stock, $0.0001 par value; 10,000,000 shares authorized and no shares issued or outstanding at March 31, 2017 and December 31, 2016, respectively
—

 
—

Common stock, $0.0001 par value; 200,000,000 shares authorized at March 31, 2017 and December 31, 2016; 16,825,918 and 16,804,721 shares issued and outstanding, respectively, at March 31, 2017; 16,837,126 and 16,773,232 shares issued and outstanding, respectively, at December 31, 2016
2

 
2

Additional paid-in capital
183,051

 
181,840

Accumulated other comprehensive loss
(4
)
 
(1
)
Accumulated deficit
(107,060
)
 
(93,662
)
Total stockholders' equity
75,989

 
88,179

Total liabilities and stockholders' equity
$
92,763

 
$
106,962

 
See accompanying notes.


3

CIDARA THERAPEUTICS, INC.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(unaudited)
 

Three Months Ended
March 31,
(In thousands, except share and per share data)
2017

2016
Operating expenses:



Research and development
$
10,243


$
7,189

General and administrative
3,155


2,696

Total operating expenses
13,398


9,885

Loss from operations
(13,398
)

(9,885
)
Other income (expense):





Interest income (expense), net
—


96

Total other income (expense)
—


96

Net loss
$
(13,398
)

$
(9,789
)
Other comprehensive loss:





Unrealized gain (loss) on short-term investments
(3
)

6

Comprehensive loss
$
(13,401
)

$
(9,783
)
Basic and diluted net loss per share
$
(0.80
)

$
(0.71
)
Shares used to compute basic and diluted net loss per share
16,795,366


13,807,825

 
See accompanying notes.


4

CIDARA THERAPEUTICS, INC.
Condensed Consolidated Statements of Cash Flows
(unaudited)
 
 
Three Months Ended
March 31,
(In thousands)
2017
 
2016
Operating activities:
 
 
 
Net loss
$
(13,398
)
 
$
(9,789
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
Depreciation and amortization
198

 
179

Stock-based compensation
1,051

 
833

Non-cash interest expense
19

 
—

Amortization of discount or premium on short-term investments
(39
)
 
(37
)
Deferred rent
(5
)
 
1

Changes in assets and liabilities:
 
 
 
Prepaid expenses and other current assets
(416
)
 
(155
)
Accounts payable and accrued liabilities
(799
)
 
(1,699
)
Accrued compensation
(1,129
)
 
(219
)
Net cash used in operating activities
(14,518
)
 
(10,886
)
 
 
 
 
Investing activities:
 
 
 
Purchases of short-term investments
—

 
(9,959
)
Maturities of short-term investments
11,400

 
10,000

Purchases of property and equipment
(116
)
 
(54
)
Net cash provided by (used in) investing activities
11,284

 
(13
)
 
 
 
 
Financing activities:
 
 
 
Proceeds from exercise of stock options
144

 
41

Repurchase of unvested restricted stock
(79
)
 
—

Net cash provided by financing activities
65

 
41

Net decrease in cash and cash equivalents
(3,169
)
 
(10,858
)
Cash and cash equivalents at beginning of period
85,367

 
62,562

Cash and cash equivalents at end of period
$
82,198

 
$
51,704

 
 
 
 
Supplemental disclosure of cash flows:
 
 
 
Interest paid
$
118

 
$
—

Non-cash investing activities:
 
 
 
Property and equipment acquired but not yet paid
$
—

 
$
74

Non-cash financing activities:
 
 
 
Vesting of early exercised stock options
$
16

 
$
75

 
See accompanying notes.

5

CIDARA THERAPEUTICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. THE COMPANY AND BASIS OF PRESENTATION
Description of Business
Cidara Therapeutics, Inc., or the Company, was originally incorporated in Delaware in December 2012 as K2 Therapeutics, Inc., and its name was changed to Cidara Therapeutics, Inc. in July 2014. The Company is a biotechnology company focused on the discovery, development and commercialization of novel anti-infectives. The Company’s product portfolio is comprised of proprietary product candidates for the treatment of serious fungal and bacterial infections. In March 2016, the Company formed a wholly-owned subsidiary, Cidara Therapeutics UK Limited, in England for the purpose of developing its product candidates in Europe.
Basis of Presentation
The Company has a limited operating history and the sales and income potential of the Company’s business and market are unproven. The accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has experienced net losses and negative cash flows from operating activities since its inception. At March 31, 2017 , the Company had an accumulated deficit of $107.1 million . The Company expects to continue to incur net losses into the foreseeable future. Successful transition to attaining profitable operations is dependent upon achieving a level of revenues adequate to support the Company’s cost structure. The Company has prepared cash flow forecasts which indicate, based on its current cash resources available, that it will have sufficient resources to fund its business, including its ongoing clinical trials, for at least the next 12 months from the date of this filing. The Company will need to raise additional capital to fund its losses from operations. It anticipates raising capital through debt and equity financing, through government funding or through collaborations or partnerships with other entities. Debt or equity financing or collaborations and partnerships with other entities may not be available on a timely basis on terms acceptable to the Company, or at all. If the Company is not able to secure adequate additional funding, the Company may be forced to delay, reduce or eliminate its research and development programs or future commercialization efforts, or to make reductions in spending, extend payment terms with suppliers, liquidate or grant rights to assets where possible, or suspend or curtail planned programs. Any of these actions could materially harm the Company’s business, results of operations and future prospects.
Unaudited Interim Financial Data —The accompanying condensed consolidated financial statements are unaudited and have been prepared by the Company in accordance with U.S. generally accepted accounting principles, or GAAP, as found in the Accounting Standards Codification, or ASC, of the Financial Accounting Standards Board, or FASB.  Certain information and footnote disclosures normally included in the Company’s annual financial statements have been condensed or omitted. These interim condensed consolidated financial statements, in the opinion of management, reflect all normal recurring adjustments necessary for a fair presentation of the Company’s financial position and results of operations for the interim periods ended March 31, 2017 and 2016 .
Basis of Consolidation —The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All significant intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates —The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. The Company evaluates its estimates and assumptions on an ongoing basis. The most significant estimates in the Company’s consolidated financial statements relate to estimating the fair value of the Company’s common shares used to account for share-based compensation and certain accruals, including those related to preclinical and clinical activities. Although the estimates are based on the Company’s knowledge of current events, comparable companies, and actions it may undertake in the future, actual results may ultimately materially differ from these estimates and assumptions.
Segment Information —Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, the Chief Executive Officer, in making decisions regarding resource allocation and assessing performance. The Company views its operations and manages its business as one operating segment.

6

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents —The Company considers all short-term investments purchased with a maturity of three months or less when acquired to be cash equivalents.
Investments Available-for-Sale — Available-for-sale securities are carried at fair value, with the unrealized gains and losses reported in accumulated other comprehensive income (loss). The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. The amortization of premiums and accretion of discounts is included in interest income. Realized gains and losses and declines in value judged to be other-than-temporary, if any, on available-for-sale securities are included in other income (expense). The cost of securities sold is based on the specific identification method. Interest and dividends on securities classified as available-for-sale are included in interest income. Securities with maturity dates of 12 months or less from the date of purchase are classified as short-term investments and securities with maturity dates of more than 12 months are classified as long-term investments.
Concentration of Credit Risk —The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents and short-term investments. Periodically, the Company maintains deposits in government insured financial institutions in excess of government insured limits. The Company invests its cash balances in financial institutions that it believes have high credit quality, has not experienced any losses on such accounts and does not believe it is exposed to significant credit risk.
Patent Costs —The Company expenses all costs as incurred in connection with patent applications (including direct application fees, and the legal and consulting expenses related to making such applications) and such costs are included in general and administrative expenses in the accompanying statements of operations.
Income Taxes —The Company follows the FASB's ASC 740, Income Taxes , in reporting deferred income taxes. ASC 740 requires a company to recognize deferred tax assets and liabilities for expected future income tax consequences of events that have been recognized in the Company’s consolidated financial statements. Under this method, deferred tax assets and liabilities are determined based on temporary differences between financial statement carrying amounts and the tax basis of assets and liabilities using enacted tax rates in the years in which the temporary differences are expected to reverse. Valuation allowances are provided if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.
The Company accounts for uncertain tax positions pursuant to ASC 740, which prescribes a recognition threshold and measurement process for financial statement recognition of uncertain tax positions taken or expected to be taken in a tax return. If the tax position meets this threshold, the benefit to be recognized is measured as the tax benefit having the highest likelihood of being realized upon ultimate settlement with the taxing authority. The Company recognizes interest accrued related to unrecognized tax benefits and penalties in the provision for income taxes.
Revenue Recognition —The Company recognizes revenues when all four of the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery of the products and/or services has occurred; (3) the selling price is fixed or determinable; and (4) collectability is reasonably assured.
While the Company has not recognized any revenue to date, the Company will begin to recognize revenue in the second quarter of 2017 under its Combating Antibiotic Resistant Bacteria Accelerator (CARB-X) Subaward Agreement (see Note 8). Revenue will be recognized under this best-efforts, cost-reimbursable contract as services are performed so long as a contract has been executed and the fees for these services are fixed or determinable and reasonably assured of collection. Revenue will not be recognized under this arrangement for amounts related to contract periods where funding is not yet committed as amounts above committed funding thresholds would not be considered fixed or determinable or reasonably assured of collection.
Research and Development Costs —Research and development expenses consist of wages, benefits and stock-based compensation charges for research and development employees, scientific consultant fees, facilities and overhead expenses, laboratory supplies, manufacturing expenses, and preclinical and clinical trial costs.  The Company accrues clinical trial expenses based on work performed, which relies on estimates of total costs incurred based on patient enrollment, completion of studies, and other events.
Costs incurred in purchasing technology assets and intellectual property are charged to research and development expense if the technology has not been conclusively proven to be feasible and has no alternative future use.
Comprehensive Loss —Comprehensive loss is defined as the change in equity during a period from transactions and other events and/or circumstances from non-owner sources. The Company’s only component of other comprehensive loss

7

is unrealized gains (losses) on short-term marketable securities. Comprehensive gains (losses) have been reflected in the condensed consolidated statements of operations and comprehensive loss and as a separate component of the statements of convertible preferred stock and stockholders’ equity (deficit) for all periods presented.
Stock-based Compensation —The Company accounts for stock-based compensation expense related to employee stock options, restricted stock grants, and employee stock purchase plan rights by estimating the fair value on the date of grant using the Black-Scholes option pricing model.  For awards subject to time-based vesting conditions, stock-based compensation expense is recognized ratably over the requisite service period of the awards. The Company accounts for stock options and restricted stock units granted to non-employees using the fair value approach. These option grants and restricted stock units are subject to periodic revaluation over their vesting terms.
Net Loss Per Share —Basic net loss per share is computed by dividing the net loss by the weighted-average number of common shares outstanding for the period, without consideration for potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of common shares and dilutive common stock equivalents outstanding for the period determined using the treasury-stock and if-converted methods. Dilutive common stock equivalents are comprised of convertible preferred stock, unvested restricted common stock subject to repurchase, warrants, and restricted stock units and options outstanding under the Company’s stock option plan. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding.
The following table sets forth the outstanding potentially dilutive securities that have been excluded in the calculation of diluted net loss per share because to do so would be anti-dilutive (in common stock equivalent shares):
 
March 31,
 
2017
 
2016
Common stock options and restricted stock units issued and outstanding
3,130,426

 
2,295,393

Common stock warrants
17,331

 
—

Common stock subject to repurchase
21,197

 
63,894

Total
3,168,954

 
2,359,287

 
Fair Value of Financial Instruments —The Company follows authoritative guidance with respect to fair value reporting issued by the FASB for financial assets and liabilities, which defines fair value, provides guidance for measuring fair value and requires certain disclosures. The guidance does not apply to measurements related to share-based payments. The guidance discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels.
The Company’s financial instruments consist of cash and cash equivalents, marketable securities, and long-term debt. Fair value estimates of these instruments are made at a specific point in time based on relevant market information. These estimates may be subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. The carrying amount of cash and cash equivalents, prepaid expenses, accounts payable, and accrued liabilities are generally considered to be representative of their respective fair values because of the short-term nature of those instruments. The fair value of short-term investments is based upon market prices quoted on the last day of the fiscal period or other observable market inputs. The Company believes that the fair value of long-term debt approximates its carrying value.
Recently Issued Accounting Standards —During 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers," which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. ASU 2014-09 outlines a five-step process for revenue recognition that focuses on transfer of control, as opposed to transfer of risk and rewards, and also requires enhanced disclosures regarding the nature, amount, timing, and uncertainty of revenues and cash flows from contracts with customers. Numerous ASUs were issued in 2016 to require additional disclosures, to provide clarification on a number of specific issues pertaining to ASU 2014-09, and to defer the effective date for ASU 2014-09 to interim and annual periods beginning after December 31, 2017. The Company is currently evaluating the impact of the new standard on its CARB-X Subaward Agreement. Given the timing of the signing of the contract the Company elected not to early adopt the guidance.  The Company’s evaluation of the new guidance is ongoing as well as the assessment of the adoption method and the ultimate impact the adoption of this standard will have on its consolidated financial statements.


8

3. SHORT-TERM INVESTMENTS
The following table summarizes the available-for-sale securities held at March 31, 2017 and December 31, 2016 (in thousands):
As of March 31, 2017
Amortized Cost
 
Unrealized Gains
 
Unrealized Losses
 
Fair Value
Commercial paper
$
7,888

 
$
—

 
$
—

 
$
7,888

Total
$
7,888

 
$
—

 
$
—

 
$
7,888

As of December 31, 2016
Amortized Cost
 
Unrealized Gains
 
Unrealized Losses
 
Fair Value
Commercial paper
$
19,253

 
$
1

 
$
(2
)
 
$
19,252

Total
$
19,253

 
$
1

 
$
(2
)
 
$
19,252

All available-for-sale securities held at March 31, 2017 and December 31, 2016 had maturities of less than one year . Unrealized gains and losses on available-for-sale securities are included as a component of other comprehensive loss. The securities in unrealized loss positions have not been in a continuous unrealized loss position for 12 months or longer. The Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be at maturity. The Company reviews its investments to identify and evaluate investments that have an indication of possible other-than-temporary impairment. Factors considered in determining whether a loss is other-than-temporary include the length of time and extent to which fair value has been less than the cost basis, the financial condition and near-term prospects of the investee, and the Company’s intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value.
4. FAIR VALUE MEASUREMENTS
The Company follows ASC 820-10, Fair Value Measurements and Disclosures , which among other things, defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability.
As a basis for considering such assumptions, a three-tier fair value hierarchy has been established, which prioritizes the inputs used in measuring fair value as follows:
Level 1 : Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 : Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
Level 3 : Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions, and which reflect those that a market participant would use.
At March 31, 2017 and December 31, 2016 , the Company held commercial paper, which is valued using observable market inputs including reported trades, broker/dealer quotes, bids and/or offers, and securities of money market funds, which invest in short-term U.S. Treasury securities, the prices of which are available from quoted prices in active markets.
None of the Company’s non-financial assets or liabilities are recorded at fair value on a non-recurring basis. No transfers between levels have occurred during the periods presented.

9

The following tables summarize the Company’s financial instruments measured at fair value on a recurring basis (in thousands):
 
TOTAL
 
LEVEL 1
 
LEVEL 2
 
LEVEL 3
March 31, 2017
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
Money market funds
$
81,979

 
$
81,979

 
$
—

 
$
—

Commercial paper
7,888

 
—

 
7,888

 
—

Total assets at fair value
$
89,867

 
$
81,979

 
$
7,888

 
$
—

December 31, 2016
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
Money market funds
$
84,830

 
$
84,830

 
$
—

 
$
—

Commercial paper
19,252

 
—

 
19,252

 
—

Total assets at fair value
$
104,082

 
$
84,830

 
$
19,252

 
$
—

5. DEBT
Term Loans — On October 3, 2016, the Company entered into a loan and security agreement, (the "Loan Agreement"), with Pacific Western Bank, as the collateral agent and a lender (the "Lender"), pursuant to which the Lender agreed to lend to the Company up to  $20.0 million  in a series of term loans. Contemporaneously, the Company borrowed  $10.0 million  from the Lender (the "Term A Loan").
Under the terms of the Loan Agreement and subject to the achievement of positive Phase 2 clinical results from the STRIVE study (the "Milestone"), the Company may, at its sole discretion through April 3, 2018, borrow from the Lender up to an additional  $10.0 million  (the "Term B Loan", and together with Term A Loan, the "Term Loans"). The Loan Agreement also includes an operating covenant which requires the Company to achieve the Milestone on or before March 31, 2018.
The Company’s obligations under the Loan Agreement are secured by a first priority security interest in substantially all of the Company’s current and future assets, other than its intellectual property, which is subject to a double negative pledge. 
The Term Loans mature on October 3, 2020 (the "Maturity Date").  Payments under the Term Loans will be interest-only through April 2, 2018, which will be extended by  six months  if the Milestone event is achieved. The interest-only period will be followed by  30  equal monthly payments of principal and interest; provided that there will be  24  equal monthly payments if the Milestone amount is achieved. The Term Loans will bear interest at a variable annual rate equal to the greater of (i)  4.5%  or (ii) the Lender’s prime interest rate plus  1.0% . At March 31, 2017, the Term Loans bear interest at 5.0 %.
As of March 31, 2017 , future principal payments due under the Term A Loan are as follows (in thousands):
Year ended:
 
December 31, 2017
$
—

December 31, 2018
2,667

December 31, 2019
4,000

December 31, 2020
3,333

Total future principal payments due under the Term A Loan
$
10,000

6. STOCKHOLDERS’ EQUITY
Preferred Stock — Under the amended and restated certificate of incorporation, the Company’s board of directors has the authority, without further action by the stockholders, to issue up to  10,000,000  shares of preferred stock in one or more series, to establish from time to time the number of shares to be included in each such series, to fix the rights, preferences and privileges of the shares of each wholly unissued series and any qualifications, limitations or restrictions thereon and to increase or decrease the number of shares of any such series, but not below the number of shares of such series then outstanding. The Company had  10,000,000  shares of preferred stock authorized and  no shares of preferred stock issued or outstanding at  March 31, 2017 .
Common Stock —The Company had  200,000,000  shares of common stock authorized as of  March 31, 2017 . Holders of outstanding shares of common stock are entitled to  one  vote for each share held of record on all matters submitted to a

10

vote of the holders of common stock. Subject to the rights of the holders of any class of the Company’s capital stock having any preference or priority over common stock, the holders of common stock are entitled to receive dividends that are declared by the Company’s board of directors out of legally available funds. In the event of a liquidation, dissolution or winding-up, the holders of common stock are entitled to share ratably in the net assets remaining after payment of liabilities, subject to prior rights of preferred stock, if any, then outstanding. The common stock has no preemptive rights, conversion rights, redemption rights or sinking fund provisions, and there are  no dividends in arrears or default. All shares of common stock have equal distribution, liquidation and voting rights, and have no preferences or exchange rights.
Common Stock Reserved for Future Issuance — Common stock reserved for future issuance is as follows (in common stock equivalent shares):
 
March 31, 2017
 
December 31, 2016
Common stock warrants
17,331

 
17,331

Stock options and restricted stock units issued and outstanding
3,130,426

 
2,295,393

Authorized for future stock awards under the Company's option plans
1,217,142

 
1,404,933

Authorized for future issuance under the ESPP
475,184

 
306,813

Total
4,840,083

 
4,024,470

7. STOCK INCENTIVE PLANS
2015 Equity Incentive Plan
In March 2015, the Company’s board of directors and stockholders approved and adopted the 2015 Equity Incentive Plan (“2015 EIP”).  Under the 2015 EIP, the Company may grant stock options, stock appreciation rights, restricted stock, restricted stock units, and other awards to individuals who are employees, officers, directors, or consultants of the Company.  The number of shares of stock available for issuance under the 2015 EIP will be automatically increased each January 1 by  4%  of the outstanding number of shares of the Company’s common stock on the immediately preceding December 31 or such lesser number as determined by the Company’s board of directors.
Terms of stock award agreements, including vesting requirements, are determined by the board of directors, subject to the provisions of the 2015 EIP. Stock options granted by the Company generally vest over a  three - or four -year year period. Certain stock options are subject to acceleration of vesting in the event of certain change of control transactions. The stock options may be granted for a term of up to 10 years from the date of grant. The exercise price for stock options granted under the 2015 EIP must be at a price no less than  100%  of the estimated fair value of the shares on the date of grant as determined by the board of directors, provided that for an incentive stock option granted to an employee who at the time of grant owns stock representing more than  10%  of the voting power of all classes of stock of the Company, the exercise price shall be no less than  110%  of the estimated value on the date of grant.
2015 Employee Stock Purchase Plan
In March 2015, the Company’s board of directors and stockholders approved and adopted the 2015 Employee Stock Purchase Plan, or the ESPP.  In addition, the number of shares of stock available for issuance under the ESPP will be automatically increased each January 1 by the least of (i)  1%  of the outstanding number of shares of the Company’s common stock on the immediately preceding December 31, (ii)  490,336  shares, or (iii) such lesser number as determined by the Company’s board of directors.
The ESPP allows substantially all employees to purchase the Company’s common stock through a payroll deduction at a price equal to 85% of the lower of the fair market value of the stock as of the beginning or the end of each purchase period.  An employee’s payroll deductions under the ESPP are limited to 15% of the employee’s eligible compensation. During the three months ended  March 31, 2017 ,  no  shares were issued pursuant to the ESPP.
Restricted Stock
The Company permits exercise of certain stock options prior to vesting.  Any such unvested shares are restricted and subject to repurchase by the Company until the conditions for vesting are met.  At March 31, 2017 and December 31, 2016 , the liabilities for the cash received from the early exercise of stock options were $49,000 and $144,000 , respectively, and were classified in accrued liabilities on the balance sheet. The Company reduces the liability as the underlying shares vest in accordance with the vesting terms outlined in the stock option agreements, which are generally 4 years . At March 31, 2017 , 21,197 unvested shares were subject to repurchase by the Company.

11

Performance-based Restricted Stock Units
During the three months ended March 31, 2017, the Company granted 30,000 performance-based restricted stock units (PRSUs) to consultants and that vest based on the achievement of certain pre-defined Company-specific performance criteria. The fair value of the PRSUs is estimated based on the closing sale price of the Company’s common stock on the date of grant. Expense for the PRSUs will be recognized over the estimated performance period with remeasurements at each reporting date using the lowest aggregate amount within the range of potential values. The Company did not recognize any compensation expense related to the PRSUs during the three months ended March 31, 2017. At March 31, 2017, there was no unrecognized estimated compensation expense related to these PRSUs.
Stock Options
The following table summarizes stock option activity during the three months ended March 31, 2017 :
 
Number of
Shares
 
Weighted
Average
Exercise Price
 
Weighted
Average
Remaining
Contractual Life
in Years
 
Total Aggregate
Intrinsic Value (in thousands)
Outstanding at December 31, 2016
2,295,393

 
$
7.82

 
8.20
 
$
6,774

Options granted
919,451

 
7.86

 
 
 
 
Options exercised
(26,244
)
 
5.66

 
 
 
 
Options canceled
(88,174
)
 
8.84

 
 
 
 
Outstanding at March 31, 2017
3,100,426

 
$
7.82

 
8.80
 
$
3,351

Vested and expected to vest at March 31, 2017
3,100,426

 
$
7.82

 
8.80
 
$
3,351

Exercisable at March 31, 2017
1,001,207

 
$
7.14

 
8.02
 
$
1,963

The intrinsic value of a stock option is the difference between the market price of the common stock at the measurement date and the exercise price of the option.
Stock-based compensation expense recognized for restricted shares, performance-based restricted stock units, stock options, and the ESPP has been reported in the statements of operations as follows (in thousands):
 
Three Months Ended
March 31,
 
2017
 
2016
Research and development
$
432

 
$
356

General and administrative
619

 
477

Total
$
1,051

 
$
833

The weighted-average grant date fair value of stock options granted by the Company during the three months ended March 31, 2017 was $5.63 per share. The total grant date fair value of stock options that vested during the three months ended March 31, 2017 was $0.8 million . As of March 31, 2017 , total unrecognized share-based compensation expense related to unvested stock options of the Company was approximately $11.3 million . This unrecognized compensation cost is expected to be recognized over a weighted-average period of approximately 2.4 years .
As of March 31, 2017 , total unrecognized compensation expense related to the ESPP was approximately $0.4 million . This unrecognized compensation cost is expected to be recognized over approximately 1.6 years .
8. SIGNIFICANT AGREEMENTS AND CONTRACTS
Combating Antibiotic Resistant Bacteria Accelerator (CARB-X) Subaward Agreement
On March 30, 2017, the Company entered into a Cost Reimbursement Research Subaward Agreement (the "Subaward Agreement") with the Trustees of Boston University. Under the Subaward Agreement, the Company is a subawardee under the CARB-X program. CARB-X is a public-private partnership focused on antibacterials, created by the U.S. Department of Health and Human Services (HHS), Biomedical Advanced Research and Development Authority (BARDA),

12

and National Institute of Allergy and Infectious Diseases (NIAID). CARB-X is funded by BARDA and the London-based Wellcome Trust, a global charitable foundation (Wellcome), and administered by the Boston University School of Law.
The subaward supports development of the Company's CD201 product candidate. Under the Subaward Agreement, during an initial phase that began on April 1, 2017 and ends upon acceptance by the U.S. Food and Drug Administration of an initial new drug application for CD201, CARB-X will reimburse up to $3.9 million of qualifying development expenses. Once all of the milestones in such initial phase have been met, the CARB-X Joint Oversight Committee will evaluate the progress made in such initial phase and determine whether to exercise its option to fund a second stage. During the second stage, CARB-X would reimburse up to $3.0 million of qualifying development expenses through a Phase 1 clinical trial of CD201. Such second stage would be subject to a new subaward agreement.
The Subaward Agreement can be terminated upon the delivery of 30 days written notice to the Company for default or convenience. Upon receipt of a notice of termination, the Company must discontinue contract activities and CARB-X must pay the Company a final settlement based on eligible expenses incurred under the Subaward Agreement. 
Revenue under the Subaward Agreement is earned under a cost-reimbursable arrangement in which the Company is reimbursed for direct costs incurred plus allowable indirect costs which consist of fringe benefits and allowable general and administrative expenses. No revenues have been recognized to date.
9. COMMITMENTS AND CONTINGENCIES
Litigation —From time to time, the Company may be involved in various lawsuits, legal proceedings, or claims that arise in the ordinary course of business. Management believes there are no claims or actions pending against the Company as of March 31, 2017 which will have, individually or in the aggregate, a material adverse effect on its business, liquidity, financial position, or results of operations. Litigation, however, is subject to inherent uncertainties, and an adverse result in such matters may arise from time to time that may harm the Company’s business.
Lease Obligations —In June 2014, the Company entered into an operating lease agreement for laboratory and office space in San Diego, California. Amendments for additional space were entered into in February 2015, March 2015, and August 2015.  The lease expires in December 2018 with options for two individual two -year extensions. The lease is subject to charges for common area maintenance and other costs, and base rent is subject to 3% annual increases every July. Rent expense is being recorded on a straight-line basis over the life of the lease.
Future minimum payments required under the lease as of March 31, 2017 are summarized as follows (in thousands):
2017
$
545

2018
746

Total minimum lease payments
$
1,291

 
Rent expense was $179,000 and $179,000 for the three months ended March 31, 2017 and 2016 , respectively.
Contractual Obligations —The Company enters into contracts in the normal course of business with vendors for research and development activities, manufacturing, and professional services. These contracts generally provide for termination either on notice or within 30 days of notice.


13

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis together with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report, and our Annual Report on Form 10-K, or our Annual Report, for the year ended December 31, 2016 , filed with the Securities and Exchange Commission, or the SEC, on March 16, 2017.
Forward-Looking Statements
The information in this discussion contains forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, which are subject to the “safe harbor” created by those sections. These forward-looking statements include, but are not limited to, statements concerning our strategy, future operations, future financial position, future revenues, projected costs, prospects, and plans and objectives of management. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation, the risks set forth in Part II, Item 1A, “Risk Factors” in this Quarterly Report and in our other filings with the SEC. The forward-looking statements are applicable only as of the date on which they are made, and we do not assume any obligation to update any forward-looking statements.
Overview
We are a biotechnology company focused on the discovery, development and commercialization of novel anti-infectives for the treatment of diseases that are inadequately addressed by current standard of care therapies. We are developing a balanced pipeline of product and development candidates, with an initial focus on serious fungal and bacterial infections. Our lead product candidate is CD101 IV, an intravenous formulation of a novel echinocandin. CD101 IV has improved pharmacokinetics compared to existing echinocandins and has the potential for expanded utility across patient settings. CD101 IV is the only once-weekly product candidate in development intended for the treatment and prevention of life-threatening invasive fungal infections.
In addition, we are developing CD201, our bispecific antimicrobial immunotherapy, for the treatment of multidrug-resistant bacterial infections. CD201 is the first development candidate selected from our proprietary Cloudbreak™ platform, which is designed to create compounds that direct a patient’s immune system to attack and eliminate bacterial, fungal or viral pathogens.
CD101 IV
CD101 IV is a novel molecule in the echinocandin class of antifungals. We are developing CD101 IV for the treatment and prevention of systemic  Candida  infections. These infections include candidemia and invasive candidiasis, fungal infections associated with high mortality rates. We are currently conducting a Phase 2 clinical trial of CD101 IV called the STRIVE study. We plan to enroll at least 90 patients with  Candida  bloodstream infections and invasive forms of candidiasis and expect topline results from this trial in the fourth quarter of 2017.
Cloudbreak Immunotherapy Platform and CD201
We continue to advance our Cloudbreak immunotherapy platform, which we believe has broad potential applications across a wide spectrum of infectious diseases, including bacterial, fungal and viral infections. We believe that our Cloudbreak immunotherapy platform is a fundamentally new approach for the treatment of infectious disease. To date, we have generated preclinical, in vivo proof of concept data in both our Cloudbreak antibacterial program and our Cloudbreak antifungal program. In September 2016, we selected a lead Cloudbreak development candidate, CD201.
CD201 is a novel, bispecific antimicrobial immunotherapy being developed for the treatment of multidrug-resistant Gram-negative bacterial infections, including those caused by pathogens harboring the mcr-1 plasmid.



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Recent Developments
On March 30, 2017, we entered into a Cost Reimbursement Research Subaward Agreement, or the Subaward Agreement, with the Trustees of Boston University. Under the Subaward Agreement, we are a subawardee under the Combating Antibiotic Resistant Bacteria Accelerator, or CARB-X, program. The subaward supports development of our CD201 product candidate. CARB-X is a public-private partnership focused on antibacterials, created by the U.S. Department of Health and Human Services, or HHS, Biomedical Advanced Research and Development Authority, or BARDA, and National Institute of Allergy and Infectious Diseases, or NIAID. CARB-X is funded by BARDA and the London-based Wellcome Trust, a global charitable foundation, and administered by the Boston University School of Law. Under the Subaward Agreement, during an initial phase that began April 1, 2017 and ends upon acceptance by the U.S. Food and Drug Administration, or the FDA, of an initial new drug application, or IND, for CD201, CARB-X will reimburse up to $3.9 million of qualifying development expenses. Once all of the milestones in such initial phase have been met, the CARB-X Joint Oversight Committee will evaluate the progress made in such initial phase and determine whether to exercise its option to fund a second stage. During the second stage, CARB-X would reimburse up to $3.0 million of qualifying development expenses through a Phase 1 clinical trial of CD201. Such second stage would be subject to a new subaward agreement.
FINANCIAL OPERATIONS OVERVIEW
Revenues
To date, we have not generated any revenues.  In the future, we expect to generate revenues from our CARB-X cost reimbursement research agreement and we may generate revenue from a combination of license fees and other upfront payments, other funded research and development agreements, milestone payments, product sales, government and other third-party funding, and royalties in connection with strategic alliances. We expect that any revenue we generate will fluctuate from quarter-to-quarter as a result of the timing of qualifying reimbursable expenses. In addition, future revenues could fluctuate based on the timing of our achievement of preclinical, clinical, regulatory and commercialization milestones, if at all, the timing and amount of payments relating to such milestones and the extent to which any of our products are approved and successfully commercialized. If we are unable to fund our development costs, or we are unable to develop product candidates in a timely manner or obtain regulatory approval for them, our ability to generate future revenues and our results of operations and financial position would be adversely affected.
Research and development expenses
To date, our research and development expenses have related primarily to preclinical development of our CD101 and CD201 product candidates and our Cloudbreak immunotherapy technology platform, as well as clinical development of CD101 IV and CD101 topical. Research and development expenses consist of wages, benefits and stock-based compensation for research and development employees, as well as the cost of scientific consultants, facilities and overhead expenses, laboratory supplies, manufacturing expenses, and preclinical and clinical trial costs.  We accrue clinical trial expenses based on work performed, which relies on estimates of total costs incurred based on patient enrollment, completion of studies or activities within studies and other events.
Research and development costs are expensed as incurred and costs incurred by third parties are expensed as the contracted work is performed. We accrue for costs incurred as the services are being provided by monitoring the status of the study or project and the invoices received from our external service providers. We adjust our accruals as actual costs become known.
Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of development, primarily due to the increased size and duration of later-stage clinical trials. We expect our research and development expenses to increase over the next several years as we continue to conduct preclinical and clinical studies, expand our research and development pipeline and progress our product candidates through clinical trials. However, it is difficult to determine with certainty the duration, costs and timing to complete our current or future preclinical programs and clinical trials of our product candidates.
The duration, costs and timing of clinical trials and development of our product candidates will depend on a variety of factors that include, but are not limited to, the following:
•
per patient trial costs;
•
the number of patients that participate in the trials;
•
the number of sites included in the trials;
•
the countries in which the trials are conducted;
•
the length of time required to enroll eligible patients;

15

•
the number of doses that patients receive;
•
the drop-out or discontinuation rates of patients;
•
potential additional safety monitoring or other studies requested by regulatory agencies;
•
the duration of patient follow-up;
•
the phase of development of the product candidates; and
•
the efficacy and safety profile of the product candidates.
Research and development expenses by major program or category were as follows (in thousands):
 
Three Months Ended
March 31,
 
2017
 
2016
CD101 IV
$
4,838

 
$
2,170

CD101 topical
840

 
1,164

Cloudbreak immunotherapy platform
938

 
600

Personnel costs
2,805

 
2,486

Other research and development expenses
822

 
769

Total research and development expenses
$
10,243

 
$
7,189

 
We typically deploy our employees, consultants and infrastructure resources across our programs. Thus, some of our research and development expenses are not attributable to an individual program but are included in other research and development expenses as shown above.
In addition, the probability of success for each product candidate will depend on numerous factors, including competition, manufacturing capability and commercial viability. We will determine which programs to pursue and how much to fund each program in response to the scientific and clinical success of each product candidate, as well as an assessment of each product candidate’s commercial potential.
In February 2017, we reported results from our Phase 2 clinical trial of CD101 topical, which was designed to evaluate gel and ointment topical formulations of CD101 in women with moderate-to-severe vulvovaginal candidiasis, or VVC. The study found that while the gel and ointment topical formulations of CD101 tested in the study were well tolerated, both formulations were similar in efficacy to each other but lower in clinical and mycological cure rates compared to oral fluconazole. As a result, we discontinued the CD101 topical development program for VVC.
General and administrative expenses
General and administrative expenses consist primarily of salaries and related benefits, including stock-based compensation, related to our executive, finance, legal, business development, commercial planning, and support functions. Other general and administrative expenses include facility and overhead costs not otherwise included in research and development expenses, consultant expenses, travel expenses and professional fees for auditing, tax, legal, and other services. We expect that general and administrative expenses will increase in the future as we expand our operating activities and incur additional costs associated with operating as a publicly traded company. These increases will likely include legal fees, accounting fees, directors’ and officers’ liability insurance premiums and costs associated with investor relations.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
In March 2017, we entered into a Subaward Agreement with CARB-X, under which CARB-X will reimburse us op to $3.9 million of qualifying development expenses for CD201. Accordingly, we instituted a revenue recognition policy in accordance with ASC 605, Revenue Recognition. Under this policy, we recognize revenue when all four of the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery of the products and/or services has occurred; (3) the selling price is fixed or determinable; and (4) collectability is reasonably assured. See Note 2 to our financial statements for additional information.
The preparation of our unaudited financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements, and the revenues and expenses incurred during the reported periods. We believe that the estimates,

16

assumptions and judgments involved in the accounting policies described in Management’s Discussion and Analysis of Financial Condition and Results of Operations and under Note 2 to our financial statements contained in our Annual Report have the greatest potential impact on our financial statements, so we consider them to be our critical accounting policies and estimates. Other than our revenue recognition policy discussed above, there were no material changes to our critical accounting policies and estimates during the three months ended March 31, 2017 .
RESULTS OF OPERATIONS
Comparison of the three months ended March 31, 2017 and 2016
The following table summarizes our results of operations for the three months ended March 31, 2017 and 2016 (in thousands):
 
Three Months Ended
March 31,
 
 
 
2017
 
2016
 
Change
Research and development
$
10,243

 
$
7,189

 
$
3,054

General and administrative
3,155

 
2,696

 
459

Other income (expense), net
—

 
96

 
(96
)
Research and development expenses
Research and development expenses were $10.2 million for the three months ended March 31, 2017 compared to $7.2 million for the three months ended March 31, 2016 . Increased clinical and non-clinical expenses for CD101 IV were offset by decreased expenses for the CD101 topical program due to its discontinuation in February 2017. In addition, we expanded early-stage research and preclinical development for our CD201 candidate and our Cloudbreak program. Personnel costs were greater than they were in the comparable quarter in the prior year due to increases in headcount to support these activities.
General and administrative expenses
General and administrative expenses were $3.2 million for the three months ended March 31, 2017 compared to $2.7 million for the three months ended March 31, 2016 . The increase in general and administrative expenses was primarily related to personnel costs.
Other Income (Expense)
Other income during the three month period ended March 31, 2017 relates to income generated from cash held in interest-bearing investments, offset by interest expense incurred in connection with our loan from Pacific Western Bank.   Other income during the three month period ended March 31, 2016 relates to income generated from cash held in interest-bearing investments.  
LIQUIDITY AND CAPITAL RESOURCES
Since our inception, we have received $188.8 million in gross proceeds to fund our operations, primarily through private placements of convertible preferred stock, convertible notes, our initial public offering, our entry into a debt facility in October 2016 with Pacific Western Bank, and our October 2016 public offering of common stock.
As of March 31, 2017 , we had $82.2 million in cash and cash equivalents and $7.9 million in short-term investments. The following table shows a summary of our cash flows for the three months ended March 31, 2017 and 2016 (in thousands):
 
Three Months Ended
March 31,
 
2017
 
2016
Net cash provided by (used in):
 
 
 
Operating activities
$
(14,518
)
 
$
(10,886
)
Investing activities
11,284

 
(13
)
Financing activities
65

 
41

Net decrease in cash and cash equivalents
$
(3,169
)
 
$
(10,858
)

17

Operating activities
Net cash used in operating activities was $14.5 million for the three months ended March 31, 2017 compared to $10.9 million for the three months ended March 31, 2016 . The increase in net cash used in operating activities was attributable primarily to our net loss of $13.4 million for the three months ended March 31, 2017 compared to a net loss of $9.8 million for the three months ended March 31, 2016 . For all periods presented, the primary use of cash was to fund research and development activities for our product candidates, which activities and uses of cash we expect to continue to increase for the foreseeable future.
Investing activities
Our primary investing activities during the three months ended March 31, 2017 and 2016 consisted of purchases and maturities of short-term investments. For the three months ended March 31, 2017 and 2016 , we received proceeds of $11.4 million and $10.0 million , respectively, from the maturity of short-term investments. We purchased approximately $10.0 million of short-term investments during the three months ended March 31, 2016 .
Financing activities
Net cash provided by financing activities during the three months ended March 31, 2017 and 2016 consisted of cash received from the exercise of stock options.
Operating Capital Requirements
To continue to fund operations, we will need to raise additional capital. We may obtain additional financing in the future through the issuance of our common stock, through other equity or debt financings, through government funding or through collaborations or partnerships with other companies. We may not be able to raise additional capital on terms acceptable to us, or at all, and any failure to raise capital as and when needed could compromise our ability to execute on our business plan. If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts, or to make reductions in spending, extend payment terms with suppliers, or liquidate or grant rights to assets where possible, or suspend or curtail planned programs. Any of these actions could materially harm our business, results of operations and future prospects.  Management performed an analysis of the Company's ability to continue as a going concern. We believe, based on our current operating plans, that our existing cash, cash equivalents and marketable securities, access to capital under our Loan Agreement with Pacific Western Bank, reimbursements under our CARB-X Subaward Agreement and anticipated interest income will be sufficient to fund our operating expenses and capital expenditure requirements through at least the next twelve months. However, our ability to successfully transition to profitability will be dependent upon achieving a level of product sales adequate to support our cost structure. We cannot assure you that we will ever be profitable or generate positive cash flow from operating activities.
CONTRACTUAL OBLIGATIONS AND COMMITMENTS
There have been no material changes, outside of the ordinary course of business, in our outstanding contractual obligations from those disclosed within “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as contained in our Annual Report.
Off -Balance Sheet Arrangements
As of March 31, 2017 , we did not have any off-balance sheet arrangements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The primary objectives of our investment activities are to ensure liquidity and to preserve principal while at the same time maximizing the income we receive from our cash and cash equivalents without significantly increasing risk. Additionally, we established guidelines regarding approved investments and maturities of investments, which are designed to maintain safety and liquidity.
The market risk inherent in our financial instruments and in our financial position is the potential loss arising from adverse changes in interest rates.  We generally hold our cash in checking and savings accounts and invest excess capital in money market funds, certificates of deposit, corporate debt, and commercial paper. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates. To minimize our exposure to adverse shifts in interest rates, we invest in short-term securities and ensure that the maximum average maturity of our investments does not exceeded 12 months.  If a 10% change in interest rates had occurred on  March 31, 2017 , this change would not have had a significant impact on the fair value of our investment portfolio as of that date.

18

ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our periodic and current reports that we file with the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable and not absolute assurance of achieving the desired control objectives. In reaching a reasonable level of assurance, management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. In addition, the design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, control may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
As of March 31, 2017 , we carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2017 .
Changes in Internal Control over Financial Reporting
An evaluation was also performed under the supervision and with the participation of our management, including our principal executive officer and our principal financial officer, of any change in our internal control over financial reporting that occurred during our last fiscal quarter and that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. That evaluation did not identify any change in our internal control over financial reporting that occurred during our latest fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

19

PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 1A. RISK FACTORS
You should carefully consider the following risk factors, as well as the other information in this report, before deciding whether to purchase, hold or sell shares of our common stock. The occurrence of any of the following risks could harm our business, financial condition, results of operations and/or growth prospects or cause our actual results to differ materially from those contained in forward-looking statements we have made in this report and those we may make from time to time. When evaluating our business, you should consider all of the factors described as well as the other information in our Annual Report, including our financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The risk factors set forth below that are marked with an asterisk (*) contain changes to the similarly titled risk factors included in Item 1A of our Annual Report. If any of the following risks actually occurs, our business, financial condition, results of operations and future growth prospects would likely be materially and adversely affected. In these circumstances, the market price of our common stock would likely decline and you may lose all or part of your investment.  Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations.
Risks Related to Drug Discovery, Development and Commercialization
*We are very early in our development efforts, which may not be successful.
We have completed two Phase 1 clinical trials of CD101 IV, and we are currently enrolling a Phase 2 clinical trial of CD101 IV in candidemia and invasive candidiasis.  We are also conducting IND enabling studies of CD201, our Cloudbreak development candidate to treat infections caused by multidrug-resistant Gram-negative pathogens. Because of the early stage of our development efforts, we are still in the process of determining the overall clinical development path for our current and future product candidates. As a result, the timing and costs of the regulatory paths we will follow and marketing approvals remain uncertain. Our ability to generate product revenue, which we do not expect will occur for many years, if ever, will depend heavily on the successful development and eventual commercialization of our early-stage product candidates. The success of CD101 IV, CD201, and any other product candidates we may develop will depend on many factors, including the following:
•
successful completion of preclinical studies;
•
successful enrollment in, and completion of, clinical trials;
•
demonstrating safety and efficacy;
•
receipt of marketing approvals from applicable regulatory authorities;
•
establishing clinical and commercial manufacturing capabilities or making arrangements with third-party manufacturers;
•
obtaining and maintaining patent and trade secret protection and non-patent exclusivity for our product candidates and technologies;
•
launching commercial sales of the product candidates, if and when approved, whether alone or selectively in collaboration with others;
•
acceptance of the product candidates, if and when approved, by patients, the medical community and third-party payers;
•
effectively competing with other therapies;
•
a continued acceptable safety profile of the products following approval; and
•
enforcing and defending intellectual property rights and claims.
If we do not accomplish one or more of these goals in a timely manner, or at all, we could experience significant delays or an inability to successfully commercialize our product candidates, which would harm our business.


20

*If clinical trials of our product candidates fail to demonstrate safety and efficacy to the satisfaction of regulatory authorities or do not otherwise produce positive results, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our product candidates.
Before obtaining marketing approval from regulatory authorities for the sale of our product candidates, we must complete preclinical development and then conduct extensive clinical trials to demonstrate the safety and efficacy of our product candidates in humans. Clinical testing is expensive, difficult to design and implement, can take many years to complete and is uncertain as to outcome. A failure of one or more clinical trials could occur at any stage of testing. The outcome of preclinical testing and early clinical trials may not be predictive of the success of later clinical trials, and interim results of a particular clinical trial do not necessarily predict final results of that trial. For example, in February 2017 we announced that the efficacy results of our Phase 2 clinical trial of CD101 topical were not sufficiently positive to continue development of that program.
Moreover, preclinical and clinical data are often susceptible to multiple interpretations and analyses. Many companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their products. For example, the historically observed high rate of correlation for clinical efficacy for antifungals, antibacterials and other anti-infectives based on preclinical data may not apply for our current or future product candidates, and any of the potential benefits that we anticipate for human clinical use may not be realized.
We may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to receive marketing approval or commercialize our product candidates, including that:
•
regulators or institutional review boards may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site or in a given country;
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regulators may require that trials or studies be conducted that were unforeseen in order to obtain marketing authorization;
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we may have delays in reaching or fail to reach agreement on acceptable clinical trial contracts or clinical trial protocols with prospective trial sites;
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clinical trials of our product candidates may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials, modify planned clinical trial designs or abandon product development programs;
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the number of patients required for clinical trials of our product candidates may be larger than we anticipate;
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enrollment in these clinical trials may be slower than we anticipate, clinical sites may drop out of our clinical trials or participants may drop out of these clinical trials at a higher rate than we anticipate;
•
our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all;
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regulators or institutional review boards may require that we or our investigators suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements or a finding that the participants are being exposed to unacceptable health risks due to serious and unexpected side effects;
•
the cost of clinical trials of our product candidates may be greater than we anticipate;
•
the FDA or comparable foreign regulatory authorities could require that we perform more studies than, or evaluate clinical endpoints other than, those that we currently expect; and
•
the supply of our product candidates or other materials necessary to conduct clinical trials of our product candidates may be delayed or insufficient, or the quality of such materials may be inadequate.
If we are required to conduct additional clinical trials or other tests of our product candidates beyond those that we currently contemplate, if we are unable to complete clinical trials of our product candidates or other tests successfully or in a timely manner, if the results of these trials or tests are not positive or are only modestly positive or if there are safety concerns, we may:
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be delayed in obtaining marketing approval for our product candidates;
•
not obtain marketing approval at all;
•
obtain approval for indications or patient populations that are not as broad as intended or desired;
•
obtain approval with labeling that includes significant use or distribution restrictions or safety warnings, including boxed warnings;

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•
be subject to additional post-marketing testing requirements;
•
be subject to significant restrictions on reimbursement from public and/or private payers; or
•
have the product removed from the market after obtaining marketing approval.
Product development costs will also increase if we experience delays in testing or in receiving marketing approvals. We do not know whether any clinical trials will begin as planned, will need to be restructured or will be completed on schedule, or at all. Significant clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize our product candidates, could allow our competitors to bring products to market before we do, could increase competition from generics of the same class, and could impair our ability to successfully commercialize our product candidates, any of which may harm our business and results of operations.
*We may not be successful in our efforts to use and expand our Cloudbreak immunotherapy platform to build a pipeline of product candidates.
A key element of our strategy is to use and expand our Cloudbreak immunotherapy platform to build a pipeline of development candidates and progress these through clinical development for the treatment of a wide variety of infectious diseases, including bacterial, fungal and/or viral infections.  In September 2016, we selected a lead Cloudbreak development candidate, CD201, which is a novel, bispecific antimicrobial immunotherapy being developed for the treatment of multidrug-resistant Gram-negative bacterial infections, including those caused by pathogens harboring the mcr-1 gene. We have not yet identified any other development candidates from the Cloudbreak platform. CD201, antibody-drug conjugates we are working on and other potential development candidates that we identify may not be suitable for clinical development, including as a result of being shown to have harmful side effects or other characteristics that indicate that they are unlikely to receive marketing approval and achieve market acceptance. If we do not continue to successfully develop and eventually commercialize products based on our Cloudbreak immunotherapy platform, our ability to obtain product revenues in future periods could be limited, which could result in significant harm to our financial position and adversely affect our stock price.
If we experience delays or difficulties in enrolling patients in clinical trials, our receipt of necessary regulatory approvals could be delayed or prevented.
We may not be able to initiate or continue clinical trials for our product candidates if we are unable to identify and enroll a sufficient number of eligible patients to participate in these trials as required by the FDA or analogous regulatory authorities outside the United States. In addition, some of our competitors may have ongoing or new clinical trials for product candidates that would treat the same indications as our product candidates or be used in the same patients, and therefore patients who would otherwise be eligible for our clinical trials may instead enroll in clinical trials of our competitors’ product candidates. Patient enrollment is also affected by other factors, including:
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severity of the disease under investigation;
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availability, safety and efficacy of approved medications or other investigational medications being studied clinically for the disease under investigation;
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eligibility criteria for the trial in question;
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perceived risks and benefits of the product candidate under study;
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efforts to facilitate timely enrollment in clinical trials;
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reluctance of physicians to encourage patient participation in clinical trials;
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the ability to monitor patients adequately during and after treatment;
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proximity and availability of clinical trial sites for prospective patients;
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delays or failures in maintaining an adequate supply of quality drug product for use in clinical trials; and
•
changing treatment patterns that may reduce the burden of disease which our product candidates address.
Our inability to enroll a sufficient number of patients for our clinical trials would result in significant delays or may require us to abandon one or more clinical trials altogether. Enrollment delays in our clinical trials may result in increased development costs for our product candidates, which would cause the value of our company to decline and limit our ability to obtain additional financing.
If serious adverse effects or unexpected characteristics of our product candidates are identified during development, we may need to abandon or limit our development of some or all of our product candidates.
All of our programs are in preclinical development or are in early stages of clinical development and their risk of failure is high. It is impossible to predict when or if any of our product candidates will prove effective or safe in humans or will receive marketing approval. If our product candidates are associated with undesirable side effects or have characteristics

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that are unexpected, we may need to abandon their development or limit development to certain uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective. For example, the pharmacokinetic properties, such as a longer half-life or less frequent dosing regimen, that differentiate CD101 IV from other echinocandins could have side effects that we have not anticipated and the consequences of such side effects could be more severe than have been seen with other echinocandins that have shorter half-lives or, or more frequent dosing regimens, or are dosed at lower concentrations than we expect for CD101 IV. Further, the treatment advantages that we are predicting for CD101 IV, such as lower healthcare costs resulting from an ability to administer CD101 IV once-weekly or the predicted ability of CD101 IV to be effective against resistant strains of fungal pathogens, may not be realized. For CD201, the bispecific mechanism of action, including the use of the immune system, may lead to side effects that are not anticipated based on the preclinical work we have conducted to date.
In the biotechnology industry, many agents that initially show promise in early stage testing may later be found to cause side effects that prevent further development of the agents. In addition, fungal and bacterial infections can occur in patients with co-morbidities and weakened immune systems, and there may be adverse events and deaths in our clinical trials that are attributable to factors other than investigational use of our product candidates.
We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success.
We have limited financial resources. As a result, we may forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential than opportunities we pursue. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and future research and development programs and product candidates for specific indications may not yield any commercially viable products. If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate.
*Even if any of our product candidates receive marketing approval, they may fail to achieve the degree of market acceptance by physicians, patients, third-party payers and others in the medical community necessary for commercial success.
If any of our product candidates receive marketing approval, they may nonetheless fail to gain sufficient market acceptance by physicians, patients, third-party payers and others in the medical community for us to achieve commercial success. If our product candidates do not achieve an adequate level of acceptance, we may not generate sufficient product revenue to become profitable. The degree of market acceptance of our product candidates, if approved for commercial sale, will depend on a number of factors, including:
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the efficacy and potential advantages compared to alternative treatments;
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the size of the markets in the countries in which approvals are obtained;
•
terms, limitations or warnings contained in any labeling approved by the FDA or other regulatory agency;
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our ability to offer any approved products for sale at competitive prices;
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convenience and ease of administration compared to alternative treatments;
•
the willingness of the target patient population to try new therapies or dosing regimens;
•
the willingness of physicians to prescribe these therapies and, in the case of CD101 IV, transition to a once-weekly dosing regimen from traditional once-daily dosing;
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the strength of marketing and distribution support;
•
the success of competing products and the marketing efforts of our competitors;
•
sufficient third-party coverage and adequate reimbursement; and
•
the prevalence and severity of any side effects.
If, in the future, we are unable to establish sales and marketing capabilities or to selectively enter into agreements with third parties to sell and market our product candidates, we may not be successful in commercializing our product candidates, if and when they are approved.
We do not have a sales or marketing infrastructure and have no experience in the sale, marketing or distribution of pharmaceutical products. To achieve commercial success for any approved product for which we retain sales and

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marketing responsibilities, we must either develop a sales and marketing organization or outsource these functions to third parties.
There are risks involved both with establishing our own sales and marketing capabilities and with entering into arrangements with third parties to perform these services. For example, recruiting and training a sales force is expensive and time consuming and could delay any product launch. If the commercial launch of a product candidate for which we recruit a sales force and establish marketing capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. This may be costly, and our investment would be lost if we cannot reposition our sales and marketing personnel.
Factors that may inhibit our efforts to commercialize our product candidates on our own include:
•
our inability to recruit and retain adequate numbers of effective sales and marketing personnel;
•
the inability of sales personnel to obtain access to physicians or to achieve adequate numbers of prescriptions for any future products; and
•
unforeseen costs and expenses associated with creating an independent sales and marketing organization.
If we enter into arrangements with third parties to perform sales, marketing and distribution services, our product revenue or the profitability of these product revenues to us may be lower than if we were to market and sell any products that we develop ourselves. In addition, we may not be successful in entering into arrangements with third parties to sell and market our product candidates or may be unable to do so on terms that are favorable to us. We may have little control over such third parties, and any of them may fail to market and sell our products effectively, including by failing to devote the necessary resources and attention. If we do not establish sales and marketing capabilities successfully, either on our own or in collaboration with third parties, we will not be successful in commercializing our product candidates.
We face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully than we do.
The development and commercialization of new drug products is highly competitive. We face competition with respect to our current product candidates, and will face competition with respect to any product candidates that we may seek to develop or commercialize in the future, from major pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies worldwide. Regulatory incentives to develop drugs for treatment of infectious diseases have increased interest and activity in this area and will lead to increased competition for clinical investigators and clinical trial subjects, as well as for future prescriptions, if any of our product candidates are successfully developed and approved. There are a number of large pharmaceutical and biotechnology companies that currently market and sell products or are pursuing the development of products for the treatment of the indications on which we are focusing our product development efforts. Some of these competitive products and therapies are based on scientific approaches that are the same as or similar to our approach, and others are based on entirely different approaches. Potential competitors also include academic institutions, government agencies and other public and private research organizations that conduct research, seek patent protection and establish collaborative arrangements for research, development, manufacturing and commercialization.
CD101 IV will primarily compete with antifungal classes for the treatment of systemic fungal infections such as candidemia and invasive candidiasis, which include polyenes, azoles and echinocandins. The approved branded therapies for this indication include Cancidas (caspofungin, marketed by Merck & Co.), Eraxis (anidulafungin, marketed by Pfizer, Inc.) and Mycamine (micafungin, marketed by Astellas Pharma US, Inc.). There may be generics of the current echinocandins available at the time of CD101 market approval, which will create added competition.  In addition, there are other generic products approved for candidemia, marketed by companies such as Baxter Healthcare Corporation, Mylan Inc. and Glenmark Generics Inc., among others. In addition to approved therapies, we expect that CD101 IV will compete with product candidates that we are aware of in clinical development by third parties, such as SCY-078 (being developed by Scynexis, Inc.).
CD201 will compete against approved and investigational agents for the treatment of bacterial infections. We intend to develop other product candidates from our Cloudbreak immunotherapy platform for the treatment of invasive bacterial, fungal or viral infections.  We are aware of a number of approved and investigational therapies in these areas.
Our competitors may develop products that are more effective, safer, more convenient or less costly than any that we are developing or that would render our product candidates obsolete or non-competitive. Our competitors may also obtain marketing approval from the FDA or other regulatory authorities for their products sooner than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market.
Many of our competitors have significantly greater name recognition, financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in

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even more resources being concentrated among a smaller number of our competitors. Smaller and other early stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These same competitors may invent technology that competes with our CD101 program or our Cloudbreak immunotherapy platform.
These third parties may compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient enrollment for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.
Even if we are able to commercialize any product candidates, these products may become subject to unfavorable pricing regulations, third-party reimbursement practices or healthcare reform initiatives, which would harm our business.
The regulations that govern marketing approvals, pricing and reimbursement for new drugs vary widely from country to country. In the United States, new and future legislation may significantly change the approval requirements in ways that could involve additional costs and cause delays in obtaining approvals. Some countries require approval of the sale price of a drug before it can be marketed. In many countries, the pricing review period begins after marketing or product-licensing approval is granted. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial marketing approval is granted. As a result, we might obtain marketing approval for a drug in a particular country, but then be subject to price regulations that delay its commercial launch, possibly for lengthy time periods, and negatively impact the revenue we are able to generate from the sale of the drug in that country. Adverse pricing limitations may hinder our ability to commercialize and generate revenue from one or more product candidates, even if our product candidates obtain marketing approval.
Our ability to commercialize any product candidates successfully also will depend in part on the extent to which coverage and adequate reimbursement for these products and related treatments will be available from government health programs, private health insurers, integrated delivery networks, and other third-party payers. Third-party payers decide which medications they will pay for and establish reimbursement levels. A significant trend in the U.S. healthcare industry and elsewhere is cost containment. Government authorities and third-party payers have attempted to control costs by limiting coverage and the amount of payment for particular medications. Increasingly, third-party payers are requiring that drug companies provide predetermined discounts from list prices and are challenging the prices charged for medical products. Coverage and reimbursement may not be available for any product that we commercialize and, if reimbursement is available, the level of reimbursement may not be sufficient. Coverage and reimbursement may impact the demand for, or the price of, any product candidate for which we obtain marketing approval. If coverage and reimbursement is not available or is available only to limited levels, we may not be able to successfully commercialize any product candidate for which we obtain marketing approval.
There may be significant delays in obtaining coverage and adequate reimbursement for newly approved products, and coverage may be more limited than the purposes for which the product is approved by the FDA or similar regulatory authorities outside the United States. Moreover, eligibility for coverage and reimbursement does not imply that any product will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution. Interim reimbursement levels for new drugs, if applicable, may also not be sufficient to cover our costs and may not be made permanent. Coverage and reimbursement rates may vary according to the use of the drug and the medical circumstances under which it is used, may be based on reimbursement levels already set for lower cost products or procedures or may be incorporated into existing payments for other services. Net prices for drugs may be reduced by mandatory discounts or rebates required by government healthcare programs or private payers and by any future relaxation of laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the United States. Commercial third-party payers often rely upon Medicare coverage policies and payment limitations in setting their own reimbursement policies. Our inability to promptly obtain coverage and profitable payment rates from both government-funded programs and private payers for any approved products that we develop could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize our approved products and our overall financial condition.
Product liability lawsuits against us could cause us to incur substantial liabilities and could limit the commercialization of any product candidates we may develop.
We face an inherent risk of product liability exposure related to the testing of our product candidates in human clinical trials, and we will face an even greater risk if we commercially sell any products that receive marketing approval. If we cannot successfully defend ourselves against claims that our product candidates caused injuries, we could incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:
•
decreased demand for any product candidates that we may develop;

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•
injury to our reputation and significant negative media attention;
•
withdrawal of clinical trial participants;
•
significant costs and distraction of management to defend any related litigation;
•
the initiation of investigations by regulatory bodies;
•
substantial monetary awards to trial participants or patients;
•
loss of revenue;
•
product recalls, withdrawals or labeling, marketing or promotional restrictions; and
•
the inability to commercialize any products we may develop.
Although we have product liability insurance for our clinical trials, such insurance may not be adequate to cover all liabilities that we may incur. We anticipate that we will need to increase our insurance coverage as we continue or expand our clinical trials and if we successfully commercialize any products. Insurance coverage is increasingly expensive. We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise.
If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could harm our business.
We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. Our operations involve the use of hazardous and flammable materials, including chemicals and biological and radioactive materials. Our operations also produce hazardous waste products. We generally contract with third parties for the disposal of these materials and wastes. We cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties.
Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees in our workplace, including those resulting from the use of hazardous materials, this insurance may not provide adequate coverage against potential liabilities. We do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us in connection with our storage or disposal of biological, chemical, hazardous or radioactive materials.
In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. These current or future laws and regulations may impair our research, development or production efforts. Failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.
*We may not be successful in our efforts to identify, discover, in-license or acquire potential product candidates.
In September 2016, we selected a lead Cloudbreak development candidate, CD201, which is a novel, bispecific antimicrobial immunotherapy being developed for the treatment of multidrug-resistant bacterial infections, including those caused by pathogens harboring the mcr-1 gene. We are also working on antibody-drug conjugate approaches, but we have not yet identified any other development candidates from the Cloudbreak platform. Our Cloudbreak immunotherapy platform and other drug discovery efforts may not be successful in identifying additional molecules that could be developed as drug therapies. Our research programs may initially show promise in identifying such potential product candidates, yet fail to yield product candidates for clinical development for a number of reasons. In particular, our research methodology used may not be successful in identifying compounds with sufficient potency, bioavailability or efficacy to be potential product candidates. In addition, our potential product candidates may, on further study, be shown to have harmful side effects or other negative characteristics.
Research programs to identify new product candidates require substantial technical, financial and human resources. We may choose to focus our efforts and resources on potential product candidates that ultimately prove to be unsuccessful. If we are unable to identify, in-license or acquire suitable compounds for preclinical and clinical development, we will not be able to generate product revenue, which would harm our financial position and adversely impact our stock price. To date, we have not in-licensed any such compounds.



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Risks Related to Our Dependence on Third Parties
We intend to continue to rely on third parties to conduct our clinical trials and to conduct some aspects of our research and preclinical testing, and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such trials, research or testing.
We currently rely and expect to continue to rely on third parties, such as contract research organizations, contract manufacturers of clinical supplies, clinical data management organizations, medical institutions and clinical investigators, to conduct our clinical trials and to conduct some aspects of our research and preclinical testing. Any of these third parties may terminate their engagements with us at any time. If these third parties do not successfully carry out their contractual duties, meet expected deadlines or conduct our studies in accordance with regulatory requirements or our stated protocols, we will not be able to obtain, or may be delayed in obtaining, marketing approvals for our product candidates and will not be able to, or may be delayed in our efforts to, successfully commercialize our product candidates. Furthermore, these third parties may also have relationships with other entities, some of which may be our competitors. If we need to enter into alternative arrangements, it would delay our product development activities.
Our reliance on these third parties for research and development activities will reduce our control over these activities but will not relieve us of our responsibilities. For example, we will remain responsible for ensuring that each of our clinical trials is conducted in accordance with the general investigational plan and protocols for the trial. Moreover, the FDA and other international regulatory agencies require us to comply with standards, commonly referred to as Good Clinical Practices, for conducting, recording and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of trial participants are protected. We also are required to register ongoing clinical trials and post the results of completed clinical trials on a government-sponsored database, available at www.clinicaltrials.gov, within certain timeframes. Failure to do so can result in fines, adverse publicity and civil and criminal sanctions.
*We have no experience manufacturing product candidates on a clinical or commercial scale and will be dependent on third parties for the manufacture of our product candidates. If we experience problems with any of these third parties, they could delay clinical development or marketing approval of our product candidates or our ability to sell any approved products.
We do not have any manufacturing facilities. We currently rely, and expect to continue to rely, on third-party manufacturers for the manufacture of our product candidates for preclinical studies and clinical trials and for commercial supply of any of these product candidates for which we obtain marketing approval.
We may be unable to establish agreements with third-party manufacturers for preclinical, clinical or commercial supply on terms favorable to us, or at all. Even if we are able to establish agreements with third-party manufacturers, reliance on third-party manufacturers entails additional risks, including:
•
reliance on the third party for regulatory compliance and quality assurance;
•
the possible breach of the manufacturing agreement by the third party, including the inability to supply sufficient quantities or to meet quality standards or timelines; and
•
the possible termination or nonrenewal of the agreement by the third party at a time that is costly or inconvenient for us.
Third-party manufacturers may not be able to comply with current U.S. Good Manufacturing Practice requirements, or cGMPs, or similar regulatory requirements outside the United States. Our failure, or the failure of our third-party manufacturers, to comply with cGMPs or other applicable regulations, even if such failures do not relate specifically to our product candidates or approved products, could result in sanctions being imposed on us, including fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of product candidates, operating restrictions and criminal prosecutions, any of which could adversely affect supplies of our product candidates and harm our business and results of operations.
Any product that we may develop may compete with other product candidates and products for access to these manufacturing facilities. There are a limited number of manufacturers that operate under cGMPs and that might be capable of manufacturing for us.
Any performance failure on the part of our existing or future manufacturers, including a failure that may not relate specifically to our product candidate or approved product, could delay clinical development or marketing approval or adversely impact our ability to generate commercial sales. If any one of our current contract manufacturers cannot perform as agreed, we may be required to replace that manufacturer.

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Our current and anticipated future dependence upon others for the manufacture of our product candidates or products may adversely affect our future profit margins and our ability to commercialize any product candidates that receive marketing approval on a timely and competitive basis.
We currently rely, and expect to continue to rely, on third parties to release, label, store and distribute drug supplies for our clinical trials. Any performance failure on the part of these third parties, including a failure that may not relate specifically to our product candidate or approved product, could delay or otherwise adversely impact clinical development or marketing approval of our product candidates or commercialization of our drugs, producing additional losses and depriving us of potential revenue.
Moreover, our manufacturers and suppliers may experience difficulties related to their overall businesses and financial stability, which could result in delays or interruptions of supply of our product candidates or approved products.
We do not have alternate manufacturing plans in place at this time. If we need to change to other manufacturers, the FDA and comparable foreign regulators may have to approve these manufacturers’ facilities and processes prior to our use, which would require new testing and compliance inspections. In addition, the new manufacturers would have to be educated in or independently develop the processes necessary for production. This would result in delays and costs, and in the case of approved products, the potential loss of revenue.
We may seek to selectively establish collaborations, and, if we are unable to establish them on commercially reasonable terms or at all, we may have to alter our development and commercialization plans.
Our drug development programs and the potential commercialization of our product candidates will require substantial additional cash to fund expenses. For some of our product candidates, we may decide to collaborate with other pharmaceutical and biotechnology companies for the development and potential commercialization of those product candidates. We do not currently have any such collaborations.
We face significant competition in seeking appropriate collaborators. Whether we reach a definitive agreement for a collaboration will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of a number of factors.
Those factors may include:
•
the design or results of preclinical studies or clinical trials;
•
the likelihood of approval by the FDA or similar regulatory authorities outside the United States;
•
the potential market for the subject product candidate;
•
the costs and complexities of manufacturing and delivering such product candidate to patients;
•
the potential of competing products;
•
the existence of uncertainty with respect to our ownership of technology, which can exist if there is a challenge to such ownership without regard to the merits of the challenge; and
•
industry and market conditions generally.
The collaborator may also consider alternative product candidates for similar indications that may be available to collaborate on and whether such a collaboration could be more attractive than the one with us for our product candidate.
To the extent we enter into any collaborations, we may depend on collaborators for the development and commercialization of our product candidates. If those collaborations are not successful, we may not be able to capitalize on the market potential of our product candidates.
We may selectively seek third-party collaborators for the development and commercialization of our product candidates. Our likely potential collaborators include large and mid-size pharmaceutical companies, regional and national pharmaceutical companies and biotechnology companies. We do not currently have any such arrangements and if we enter into any such arrangements with any third parties in the future, we will likely have limited control over the amount and timing of resources that our collaborators dedicate to the development or commercialization of our product candidates. Our ability to generate revenue from these arrangements will depend on our collaborators’ abilities to successfully perform the functions assigned to them in these arrangements.
Collaborations involving our product candidates pose many risks to us, including that:
•
collaborators have significant discretion in determining the efforts and resources that they will apply to these collaborations;

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•
collaborators may not pursue development and commercialization of our product candidates or may elect not to continue or renew development or commercialization programs based on clinical trial results, changes in the collaborator’s strategic focus or available funding or external factors such as an acquisition that diverts resources or creates competing priorities;
•
collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing;
•
collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our product candidates or products if the collaborators believe that competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours;
•
a collaborator with marketing and distribution rights to one or more product candidates or products may not commit sufficient resources to the marketing and distribution of such drugs;
•
collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as to invite litigation that could jeopardize or invalidate our intellectual property rights or proprietary information or expose us to potential litigation;
•
disputes may arise between the collaborators and us that result in the delay or termination of the research, development or commercialization of our product candidates or products or that result in costly litigation or arbitration that diverts management attention and resources;
•
we may lose certain valuable rights under circumstances identified in our collaboration agreements if we undergo a change of control;
•
collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable product candidates;
•
collaboration agreements may not lead to development or commercialization of product candidates in the most efficient manner, or at all; and 
•
if a future collaborator of ours were to be involved in a business combination, the continued pursuit and emphasis on our product development or commercialization program under such collaboration could be delayed, diminished or terminated.
If our ability to generate revenue under any of our collaboration agreements is adversely impacted by any of these risks, our share of the revenues generated by the product, if approved, under the terms of the collaboration could be insufficient to allow us to achieve or maintain profitability, or the product may be less valuable to us than if we had not entered into the collaboration.
Risks Related to Regulatory Approval of Our Product Candidates and Other Legal Compliance Matters
If we are unable to take full advantage of regulatory programs designed to expedite drug development or provide other incentives, our development programs may be adversely impacted.    
There are a number of incentive programs administered by the FDA and other regulatory bodies to facilitate development of drugs in areas of unmet medical need. CD101 IV received the designations as a Qualified Infectious Disease Product, or QIDP, a fast track product, and an orphan drug in the U.S.  Our product candidates may not qualify for or maintain designations under additional incentive programs under any of the FDA’s existing or future programs to expedite drug development in areas of unmet medical need. Our inability to fully take advantage of these incentive programs may require us to run larger trials, incur delays, lose marketing exclusivity for which we would otherwise be eligible, and incur greater expense in the development of our product candidates.
If we are not able to obtain, or if there are delays in obtaining, required regulatory approvals, we will not be able to commercialize, or will be delayed in commercializing, our product candidates, and our ability to generate revenue will be impaired.
Our product candidates and the activities associated with their development and commercialization, including their design, testing, manufacture, release, safety, efficacy, regulatory filings, recordkeeping, labeling, storage, approval, advertising, promotion, sale and distribution, are subject to comprehensive regulation by the FDA and other regulatory agencies in the United States and by comparable authorities in other countries. For example, in order to commence clinical trials of our

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product candidates in the United States, we must file an IND and obtain FDA agreement to proceed. The FDA may place our development program on clinical hold and require further preclinical testing prior to allowing our clinical trials to proceed.
We must obtain marketing approval in each jurisdiction in which we market our products. Failure to obtain marketing approval for a product candidate will prevent us from commercializing the product candidate. We have not submitted a marketing application or received approval to market any of our product candidates from regulatory authorities in any jurisdiction. We have only limited experience in filing and supporting the applications necessary to gain marketing approvals and expect to rely on third-party contract research organizations to assist us in this process. Securing regulatory approval requires the submission of extensive preclinical and clinical data and supporting information to the various regulatory authorities for each therapeutic indication to establish the product candidate’s safety and efficacy. Securing regulatory approval also requires the submission of information about the product manufacturing process, testing and release, and inspection of manufacturing facilities and personnel by the relevant regulatory authority. Our product candidates may not be effective, may be only moderately effective or may prove to have undesirable or unintended side effects, toxicities or other characteristics that may preclude our obtaining marketing approval or prevent or limit commercial use.
The process of obtaining marketing approvals, both in the United States and elsewhere, is expensive, may take many years and can vary substantially based upon a variety of factors, including the type, complexity and novelty of the product candidates involved. We cannot assure you that we will ever obtain any marketing approvals in any jurisdiction. Changes in marketing approval policies during the development period, changes in or the enactment of additional statutes or regulations or changes in regulatory review for each submitted product application may cause delays in the approval or rejection of an application. The FDA and comparable authorities in other countries have substantial discretion in the approval process and may refuse to accept any application or may decide that our data is insufficient for approval and require additional preclinical or other studies, changes in the manufacturing process or facilities, and clinical trials. Moreover, approval by the FDA or an equivalent foreign authority does not ensure approval by regulatory authorities in any other countries or jurisdictions, but a failure to obtain marketing approval in one jurisdiction may adversely impact the likelihood of approval in other jurisdictions. In addition, varying interpretations of the data obtained from preclinical testing, manufacturing and product testing and clinical trials could delay, limit or prevent marketing approval of a product candidate. Additionally, any marketing approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render the approved product not commercially viable.
*Any product candidate for which we obtain marketing approval could be subject to marketing restrictions or withdrawal from the market, and we may be subject to penalties if we fail to comply with regulatory requirements or if we experience unanticipated problems with our products.
Any product candidate for which we obtain marketing approval, along with the manufacturing processes and facilities, post-approval clinical data, labeling, advertising and promotional activities for such product, will be subject to continual requirements of and review by the FDA and other regulatory authorities. These requirements include submissions of promotional materials and safety and other post-marketing information and reports, registration and listing requirements, cGMP requirements for product facilities, quality assurance and corresponding maintenance of records and documents and requirements regarding the distribution of samples to physicians and related recordkeeping. Even if marketing approval of a product candidate is granted, the approval may be subject to limitations on the indicated uses for which the product may be marketed or to the conditions of approval, or contain requirements for costly post-marketing testing and surveillance to monitor the safety or efficacy of the medicine. The FDA closely regulates the post-approval marketing and promotion of drugs to ensure that they are marketed only for the approved indications and in accordance with the provisions of the approved labeling. The FDA imposes stringent restrictions on manufacturers’ communications regarding off-label use and if we do not comply with these restrictions, we may be subject to enforcement actions.
In addition, later discovery of previously unknown problems with our products, manufacturers or manufacturing processes and facilities, or failure to comply with regulatory requirements, may result in, among other things:
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restrictions on such products, manufacturers or manufacturing processes or facilities;
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restrictions on the labeling, marketing, distribution or use of a product;
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requirements to conduct post-approval clinical trials, other studies, or other post-approval commitments;
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warning or untitled letters;
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withdrawal of the products from the market;
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refusal to approve pending applications or supplements to approved applications that we submit;
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recall of products;

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•
fines, restitution or disgorgement of profits or revenue;
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suspension or withdrawal of marketing approvals;
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refusal to permit the import or export of our products;
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product seizure; and
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injunctions or the imposition of civil or criminal penalties.
*Our relationships with customers, health care professionals and third-party payers will be subject to applicable healthcare laws, which could expose us to penalties, including administrative, civil or criminal penalties, damages, fines, imprisonment, exclusion from participation in federal healthcare programs such as Medicare and Medicaid, reputational harm, the curtailment or restructuring of our operations and diminished future profits and earnings.
Healthcare professionals and third-party payers will play a primary role in the recommendation and prescription of any product candidates for which we obtain marketing approval. Our future arrangements with customers, healthcare professionals and third-party payers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell and distribute our medicines for which we obtain marketing approval. Restrictions under applicable federal and state healthcare laws and regulations include the following, among others:
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the federal healthcare anti-kickback statute, which prohibits persons and entities from, among other things, knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, lease, order or recommendation of, any good, facility, item or service, for which payment may be made under federal and state healthcare programs such as Medicare and Medicaid;
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the federal false claims laws, which impose criminal and civil penalties, including civil whistleblower or qui tam actions under the federal Civil False Claims Act, against individuals or entities for, among other things, knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government;
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HIPAA, as amended by HITECH, which imposes criminal and civil liability for, among other things, executing a scheme to defraud any healthcare benefit program and also imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information; 
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the federal false statements statute enacted under HIPAA, which prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement in connection with the delivery of or payment for healthcare benefits, items or services;
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the federal transparency requirements under the Affordable Care Act, which require, among other things, certain manufacturers of drugs, devices, biologics and medical supplies to report annually to the Department of Health and Human Services information related to physician payments and other transfers of value and physician ownership and investment interests; and
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analogous state laws and regulations, such as state anti-kickback and false claims laws, which may apply to our business activities, including sales or marketing arrangements and claims involving healthcare items or services including, in some states, those reimbursed by non-governmental third-party payers, including private insurers, and some state laws which 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 to requiring drug manufacturers to report information related to payments or other transfers of value provided to physicians and other health care providers and entities or marketing expenditures.
Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs.  Interpretations of standards of compliance under these laws and regulations are rapidly changing and subject to varying interpretations, and it is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other laws that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, exclusion from government funded healthcare programs, such as Medicare and Medicaid, reputational harm, imprisonment and the curtailment or restructuring of our operations, any of which could diminish our future profits or earnings. If any of the physicians or other providers or entities with whom we expect to do business are found to be not in

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compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.
Recently enacted and future legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize our product candidates and affect the prices we may obtain.
In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities and affect our ability to profitably sell any product candidates for which we obtain marketing approval.
For example, in March 2010, President Obama signed into law the Affordable Care Act, a sweeping law intended to, among other things, broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for health care and health insurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms. The Affordable Care Act and subsequent regulations revised the definition of “average manufacturer price” for reporting purposes, which could increase the amount of Medicaid drug rebates to states. Further, the law imposes a significant annual fee on companies that manufacture or import branded prescription drug products. Substantial new provisions affecting compliance have also been enacted, which may affect our business practices with healthcare practitioners. Since its enactment there have been judicial and Congressional challenges to certain aspects of the Affordable Care Act, and we expect there will be additional challenges and amendments to it in the future. Although the full effect of the Affordable Care Act remains uncertain, the law appears likely to continue the pressure on pharmaceutical pricing, especially under the Medicare program, and may also increase our regulatory burdens and operating costs.
Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products. In addition, there have been several recent Congressional inquiries and proposed bills designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products. We cannot be sure whether additional legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of our product candidates, if any, may be. In addition, increased scrutiny by the U.S. Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us to more stringent product labeling and post-marketing testing and other requirements.
We expect that additional healthcare reform measures will be adopted within and outside the United States in the future, any of which could limit the amounts that governments will pay for healthcare products and services, which could result in reduced demand for our product candidates or additional pricing pressures. The continuing efforts of third-party payors to contain or reduce costs of healthcare may adversely affect the demand for any drug products for which we may obtain regulatory approval, our ability to set a price that we believe is fair for our products, our ability to obtain coverage and reimbursement approval for a product, our ability to generate revenues and achieve or maintain profitability, and the level of taxes that we are required to pay.
Risks Related to Our Intellectual Property
If our efforts to protect the proprietary nature of the intellectual property related to CD101 IV, CD201 or our other product candidates are not adequate, we may not be able to compete effectively in our market.
We rely upon a combination of patents, trademarks, trade secret protection and confidentiality agreements to protect the intellectual property related to CD101 IV, CD201 and our other product candidates. Any involuntary disclosure to or misappropriation by third parties of our proprietary information could enable competitors to quickly duplicate or surpass our technological achievements, thus eroding our competitive position in our market.
The strength of patents in the biotechnology and pharmaceutical field involves complex legal and scientific questions and can be uncertain, and our commercial success will depend on our ability to obtain patents and maintain adequate protection for CD101 IV, CD201 and other product candidates in the United States and other countries. We currently hold issued U.S. utility and foreign patents, and multiple pending U.S. utility patent applications, pending U.S. provisional patent applications, and pending international, foreign national and regional counterpart patent applications covering various aspects of CD101 IV, CD201, our Cloudbreak immunotherapy platform, and other technology. The patent applications may fail to result in issued patents in the United States or in foreign countries or jurisdictions. Even if the applications do successfully issue, third parties may challenge the patents.
Further, the existing and/or future patents, if any, may be too narrow to prevent third parties from developing or designing around these patents. If the sufficiency of the breadth or strength of protection provided by the patent and patent

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applications we own with respect to CD101 IV or CD201 or the patents we pursue related to any of our other product candidates is threatened, it could dissuade companies from collaborating with us to develop, and threaten our ability to commercialize CD101 IV, CD201 and our other product candidates. Further, if we encounter delays in our clinical trials, the period of time during which we could market our product candidates under patent protection would be reduced, although a patent term extension or supplementary protection certificate having varied scope may be available in certain jurisdictions to compensate for some of the lost patent term. In addition, we do not know whether:
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we were the first to make the inventions covered by each of our pending patent applications or our issued patents;
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we were the first to file patent applications for these inventions;
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others will independently develop similar or alternative technologies or duplicate any of our technologies;
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any of our pending patent applications will result in issued patents;
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any of our patents, once issued, will be valid or enforceable or will issue with claims sufficient to protect our products, or will be challenged by third parties;
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any patents issued to us will provide us with any competitive advantages;
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we will develop additional proprietary technologies that are patentable; or
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the patents of others will have an adverse effect on our business.
In addition, patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents. In September 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law. The Leahy-Smith Act includes a number of significant changes to U.S. patent law. These include provisions that affect the way patent applications are prosecuted and may also affect patent litigation. The United States Patent and Trademark Office, or USPTO, recently developed new regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the first to file provisions, only became effective in March 2013. The Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business, financial condition and prospects.
In addition to the protection afforded by patents, we rely on trade secret protection and confidentiality agreements to protect proprietary know-how that is not patentable in one or more jurisdictions, processes for which patents are difficult to enforce and any other elements of our drug discovery program that involve proprietary know-how, information and technology that is not covered by patents. Although we require all of our employees, consultants, advisers and third parties who have access to our proprietary know-how, information and technology to enter into confidentiality agreements, we cannot be certain that this know-how, information and technology will not be disclosed or used in an unauthorized manner or that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques.
There also may be challenges or other disputes concerning the inventorship, ownership, or right to use our intellectual property. For example, our consultants and advisors may have obligations to assign certain inventions and/or know-how that they develop to third-party entities in certain instances, and these third parties may challenge our ownership or other rights to our intellectual property, which would adversely affect our business.
An inability to obtain, enforce and defend patents covering our proprietary technologies would materially and adversely affect our business prospects and financial condition. Further, the laws of some foreign countries do not protect proprietary rights to the same extent as the laws of the United States. We may encounter significant problems in protecting, enforcing, and defending our intellectual property both in the United States and abroad. If we are unable to prevent unauthorized material disclosure of the intellectual property related to our technologies to third parties, or are otherwise unable to protect, enforce or defend our intellectual property, we will not be able to establish or, if established, maintain a competitive advantage in our markets, which could materially adversely affect our business, operating results and financial condition.
Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.
Periodic maintenance fees, renewal fees, annuity fees and various other governmental fees on patents and/or applications will be due to be paid to the USPTO and various foreign or jurisdictional governmental patent agencies in several stages over the lifetime of the patents and/or applications. We have systems in place to remind us to pay these fees, and we employ an outside firm to pay these fees due to foreign patent agencies. The USPTO and various foreign

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governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process.
We employ reputable law firms and other professionals to help us comply, and in many cases, an inadvertent lapse can be cured by payment of a late fee or by other means in accordance with the applicable rules. However, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of a patent or patent application include, but are not limited to, failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. Such noncompliance events are outside of our direct control for (1) non-U.S. patents and patent applications owned by us, and (2) if applicable in the future, patents and patent applications licensed to us by another entity. In such an event, our competitors might be able to enter the market, which would have a material adverse effect on our business.
*Third-party claims of intellectual property infringement may prevent or delay our drug discovery and development efforts.
Our commercial success depends in part on our avoiding infringement of the patents and proprietary rights of third parties. Third parties may assert that we are employing their proprietary technology without authorization. There may be third-party patents with claims to materials, methods of manufacture or methods for treatment related to the use or manufacture of CD101 IV, CD201 and/or our other product candidates. Our commercial success depends in part on our avoiding infringement of the patents and proprietary rights of third parties. If any third-party patents were held by a court of competent jurisdiction to cover the CD101 or CD201 manufacturing process, any molecules formed during the CD101 or CD201 manufacturing process or the final CD101 or CD201 products or any use thereof, the holders of any such patents may be able to block our ability to commercialize CD101 IV or CD201, as applicable, unless we obtained a license under the applicable patent or patents, or until such patents expire. These same issues and risks arise in connection with any other product candidates we develop as well. We cannot predict whether we would be able to obtain a license on commercially reasonable terms, or at all. Any inability to obtain such a license under the applicable patents on commercially reasonable terms, or at all, would have a material adverse effect on our ability to commercialize CD101 IV, CD201 or any of our other product candidates until such patents expire.
In addition, third parties may obtain patents in the future and claim that our product candidates and/or the use of our technologies infringes upon these patents. Furthermore, parties making claims against us may obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize one or more of our product candidates. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of management and other employee resources from our business. In the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys’ fees in the case of willful infringement, obtain one or more licenses from third parties, pay royalties and/or redesign our infringing products, which may be impossible and/or require substantial time and monetary expenditure. In addition, even in the absence of litigation, we may need to obtain licenses from third parties to advance our research or allow commercialization of CD101 IV, CD201 or any of our other product candidates. We may fail to obtain any of these licenses at a reasonable cost or on reasonable terms, or at all. In that event, we would not be able to further develop and commercialize such product candidates, which could harm our business significantly.
We may be required to file lawsuits or take other actions to protect or enforce our patents, which could be expensive, time consuming and unsuccessful.
Competitors may infringe our current or future patents. To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time-consuming. In addition, in an infringement proceeding, a court may decide that one or more of our asserted patents is not valid or is unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation or defense proceedings could put one or more of our patents at risk of being invalidated, held unenforceable, or interpreted narrowly and could put our patent applications at risk of not issuing. Pursuit of these claims would involve substantial litigation expense and would be a substantial diversion of management and other employee resources from our business.
Interference proceedings or derivative proceedings provoked by third parties or brought by the USPTO may be necessary to determine the entitlement to patent protection with respect to our patents or patent applications. An unfavorable outcome could result in a loss of our patent rights and could require us to cease using the related technology or to attempt to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms, or at all. Litigation or patent office proceedings may result in a decision adverse to our interests and, even if we are successful, may result in substantial costs and distract our management and other employees. We may not be able to prevent misappropriation of our trade secrets or confidential information, particularly in countries where the laws may not protect those rights as fully as in the United States.

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Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock.
Issued patents covering our product candidates and technologies could be found invalid or unenforceable if challenged in court or the USPTO.
If we initiate legal proceedings against a third party to enforce a patent covering one of our product candidates or our technologies, the defendant could counterclaim that the patent covering our product candidate or our technology, as applicable, is invalid and/or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity and/or unenforceability are commonplace, and there are numerous grounds upon which a third party can assert invalidity or unenforceability of a patent. Third parties may also raise similar claims before administrative bodies in the United States or abroad, even outside the context of litigation. Such mechanisms include re-examination, post grant review, and equivalent proceedings in foreign jurisdictions (e.g., opposition proceedings). Such proceedings could result in revocation or amendment to our patents in such a way that they no longer cover our product candidates or our technologies. The outcome following legal assertions of invalidity and/or unenforceability is unpredictable. With respect to the validity question, for example, we cannot be certain that there is no invalidating prior art and that prior art that was cited during prosecution, but not relied on by the patent examiner, will not be revisited. If a defendant were to prevail on a legal assertion of invalidity and/or unenforceability, we would lose at least part, and perhaps all, of the patent protection directed to our product candidates or technologies. Such a loss of patent rights could have a material adverse impact on our business.
Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our products.
As is the case with other pharmaceutical companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the pharmaceutical industry involve both technological and legal complexity, and are therefore costly, time-consuming and inherently uncertain. In addition, the United States has implemented wide-ranging patent reform legislation, including patent office administrative proceedings that offer broad opportunities to third parties to challenge issued patents. Recent U.S. Supreme Court rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisions by the U.S. Congress, the federal courts, the USPTO, and foreign governmental bodies and tribunals, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future. For example, in Assoc. for Molecular Pathology v. Myriad Genetics, Inc., the U.S. Supreme Court held in 2013 that certain claims to DNA molecules are not patentable, and lower courts have since been applying this case in the context of other types of biological subject matter. We cannot predict how future decisions by the courts, the U.S. Congress, the USPTO, or foreign governmental bodies or tribunals may impact the value of our patent rights.
We have limited foreign intellectual property rights and may not be able to protect our intellectual property rights throughout the world.
We have limited intellectual property rights outside the United States. Filing, prosecuting and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States can be less extensive than those in the United States. In addition, the laws of some foreign countries do not protect intellectual property to the same extent as federal and state laws in the United States. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing products made using our inventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patents to develop their own products and further, may export otherwise infringing products to territories where we have patents but enforcement is not as strong as that in the United States. These products may compete with our products, and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.
Many companies have encountered significant problems in protecting and defending intellectual property in foreign jurisdictions. The legal systems of certain countries, particularly China and certain other developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property, particularly those relating to pharmaceutical products, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put any of our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing, and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies

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awarded, if any, may not be commercially meaningful. The requirements for patentability may differ in certain countries, particularly developing countries. Furthermore, generic drug manufacturers or other competitors may challenge the scope, validity or enforceability of any of our current or future patents, requiring us to engage in complex, lengthy and costly litigation or other proceedings. Certain countries in Europe and developing countries, including China and India, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In those countries, we may have limited remedies if any of our patents are infringed or if we are compelled to grant a license to a third party, which could materially diminish the value of those patents. This could limit our potential revenue opportunities. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.
If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and our business may be adversely affected.
Our trademarks or trade names may be challenged, infringed, circumvented or declared generic or determined to be infringing on other marks. We may not be able to protect our rights to these trademarks and trade names or may be forced to stop using these names, which we need for name recognition by potential partners or customers in our markets of interest. If we are unable to establish name recognition based on our trademarks and trade names, we may not be able to compete effectively and our business may be adversely affected.
We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed confidential information of third parties.
We have received confidential and proprietary information from third parties. In addition, we employ individuals who were previously employed at other biotechnology or pharmaceutical companies, including our competitors or potential competitors, and academic or research institutions. We may be subject to claims that we or our employees, consultants or independent contractors have inadvertently or otherwise used or disclosed confidential information of these third parties or our employees’ former employers. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantial cost and be a distraction to our management and employees.
*Provisions in our contract with the Trustees of Boston University, or BU, relating to the Combating Antibiotic Resistant Bacteria Accelerator, or CARB-X, program, may affect our intellectual property rights.
Certain of our activities relating to our CD201 program are subject to reimbursement under our Cost Reimbursement Research Subaward Agreement, or the CARB-X Subaward Agreement, with the Trustees of Boston University. CARB-X is funded by the U.S. Biomedical Advanced Research and Development Authority, or BARDA, and the Wellcome Trust, or Wellcome, a global charitable foundation. When new technologies are developed with U.S. government funding, the government obtains certain rights in any resulting patents, including the right to a nonexclusive license authorizing the government to use the invention. These rights may permit the government to disclose our confidential information to third parties and to exercise “march-in” rights to use or allow third parties to use our patented technology. The government can exercise its march-in rights if it determines that action is necessary because we fail to achieve practical application of the U.S. government-funded technology, because action is necessary to alleviate health or safety needs, to meet requirements of federal regulations, or to give preference to U.S. industry. In addition, U.S. government-funded inventions must be reported to the government, U.S. government funding must be disclosed in any resulting patent applications, and our rights in such inventions may be subject to certain requirements to manufacture products in the U.S.
In addition, subject to such march-in rights, if we have not exploited or further developed intellectual property rights relating to CD201 by the date that is five years after the end of the activities funded by CARB-X under the CARB-X Subaward Agreement in any country, Wellcome will have the option to take responsibility for the exclusive commercialization and exploitation of such intellectual property rights in such country. In such event, such intellectual property rights relating to such country will be assigned to Wellcome, and Wellcome will share revenues and equity holdings relating to such exploitation with us on a 50%/50% basis, net of Wellcome’s related costs. In the event we license such intellectual property rights to a third party prior to the exercise of such option rights by Wellcome, such option rights shall terminate, provided that the third party license agreement contains a requirement for the licensee to use diligent efforts to exploit such intellectual property rights, with a reversion right to us in the event of a violation of such diligence requirement, and provided that Wellcome has approved such third party license agreement in writing.
If the U.S. government or Wellcome takes any of these actions with respect to our intellectual property rights, we may be unable to obtain a significant commercial advantage from our intellectual property, and our potential revenue opportunities could be limited substantially.


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Risks Related to U.S. Government Contracts and Grants
*Our use of government funding adds uncertainty to our research and commercialization efforts and may impose requirements that increase our costs.
Contracts funded by the U.S. government and its agencies, including our CARB-X Subaward Agreement, include provisions that reflect the government’s substantial rights and remedies, many of which are not typically found in commercial contracts, including powers of the government to:
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terminate agreements, in whole or in part, for any reason or no reason;
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reduce or modify the government’s obligations under such agreements without the consent of the other party;
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claim rights, including intellectual property rights, in products and data developed under such agreements;
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audit contract-related costs and fees, including allocated indirect costs;
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suspend the contractor from receiving new contracts pending resolution of alleged violations of procurement laws or regulations;
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impose U.S. manufacturing requirements for products that embody inventions conceived or first reduced to practice under such agreements;
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suspend or debar the contractor from doing future business with the government;
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control and potentially prohibit the export of products; and
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pursue criminal or civil remedies under the Federal Civil Monetary Penalties Act and the Federal Civil False Claims Act and similar remedy provisions specific to government agreements.
In addition, government contracts contain additional requirements that may increase our costs of doing business, reduce our profits, and expose us to liability for failure to comply with these terms and conditions. These requirements include, for example:
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specialized accounting systems unique to government contracts;
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mandatory financial audits and potential liability for price adjustments or recoupment of government funds after such funds have been spent;
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public disclosures of certain contract information, which may enable competitors to gain insights into our research program; and
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mandatory socioeconomic compliance requirements, including labor standards, anti-human-trafficking, non-discrimination, and affirmative action programs and environmental compliance requirements.
If we fail to maintain compliance with these requirements, we may be subject to potential liability and to termination of our contracts.
*If we do not receive all of the funds under our CARB-X Subaward Agreement or are unable to generate additional revenues from additional contracts, we may be forced to suspend or terminate one or more of our preclinical programs.
A substantial amount of our ongoing development activities relating to our CD201 development program is expected to be derived from our CARB-X Subaward Agreement. There can be no assurances that this contract will continue or that we will be able to enter into new contracts with the United States government or other sources of funding to support this program, or any other program resulting from our Cloudbreak platform. The process of obtaining government contracts is lengthy and uncertain and we will have to compete with other companies and institutions for each contract. Further, changes in government budgets and agendas may result in a decreased and de-prioritized emphasis on supporting the discovery and development of anti-infective products. If we cannot obtain or maintain government or other funding for our programs, we may be forced to discontinue those programs.
*Our business is subject to audit by the U.S. government under our CARB-X Subaward Agreement, and a negative audit could adversely affect our business.
United States government agencies routinely audit and investigate government contractors and recipients of Federal grants. These agencies review a contractor’s performance under its contracts, cost structure and compliance with applicable laws, regulations and standards. BU also has the right to audit our activities under our CARB-X Subaward Agreement.
Government agencies also review the adequacy of, and a contractor’s compliance with, its internal control systems and policies, including the contractor’s purchasing, property, estimating, compensation and management information systems.

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Any costs found to be improperly allocated to a specific contract will not be reimbursed, while such costs already reimbursed must be refunded.
If an audit uncovers improper or illegal activities, we may be subject to civil and criminal penalties and administrative sanctions, including:
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Termination of contracts;
•
Forfeiture of profits;
•
Suspension of payments;
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Fines; and
•
Suspension or prohibition from conducting business with the United States government.
In addition, we could suffer serious reputational harm if allegations of impropriety were made against us, which could cause our stock price to decrease.
*Laws and regulations affecting government contracts make it more expensive and difficult for us to successfully conduct our business.
We must comply with numerous laws and regulations relating to the formation, administration and performance of government contracts, which can make it more difficult for us to retain our rights under our CARB-X Subaward Agreement. These laws and regulations affect how we conduct business with government agencies. Among the most significant government contracting regulations that affect our business are:
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the Federal Acquisition Regulations, or FAR, and agency-specific regulations supplemental to the FAR, which comprehensively regulate the procurement, formation, administration and performance of government contracts;
•
business ethics and public integrity obligations, which govern conflicts of interest and the hiring of former government employees, restrict the granting of gratuities and funding of lobbying activities and include other requirements such as the Anti-Kickback Statute and Foreign Corrupt Practices Act;
•
export and import control laws and regulations; and
•
laws, regulations and executive orders restricting the use and dissemination of information classified for national security purposes and the exportation of certain products and technical data.
Any changes in applicable laws and regulations could restrict our ability to maintain our existing CARB-X Subaward Agreement and obtain new contracts, which could limit our ability to conduct our business and materially adversely affect our results of operations.
Risks Related to Our Financial Position and Need for Additional Capital
*We are an early stage biotechnology company that has incurred significant operating losses since our inception and anticipate that we will continue to incur substantial operating losses for the foreseeable future. We may never achieve or maintain profitability.
Since our inception, we have incurred significant operating losses. Our net loss was $13.4 million and $9.8 million for the three month periods ended March 31, 2017 and 2016 , respectively. As of March 31, 2017 , we had an accumulated deficit of $107.1 million . To date, we have financed our operations primarily through private placements of convertible preferred stock and convertible notes, our initial public offering of our common stock, or our IPO, our October 2016 term loan facility with Pacific Western Bank, or Pacific Western, and our October 2016 follow-on public offering of common stock. We have devoted substantially all of our financial resources and efforts to research and development. We are currently enrolling a Phase 2 clinical trial of CD101 IV and IND enabling studies of CD201.  We expect that it will be many years, if ever, before we receive regulatory approval and have a product candidate available for commercialization. We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. Our net losses may fluctuate significantly from quarter to quarter and year to year. We anticipate that our expenses will increase substantially if and as we:
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submit INDs to the FDA and equivalent filings to other regulatory authorities, and seek approval of our clinical protocols by institutional review boards, or IRBs, at clinical trial sites;
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advance CD101 IV through clinical development;
•
continue the preclinical development of CD201, our antibody-drug conjugates or any other product candidates from our Cloudbreak immunotherapy platform or otherwise, and advance one or more of such product candidates into clinical trials;
•
seek marketing approvals for our product candidates that successfully complete clinical trials;
•
establish or contract for a sales, marketing and distribution infrastructure to commercialize any product candidates for which we obtain marketing approval;
•
maintain, expand and enforce our intellectual property portfolio;
•
hire additional manufacturing, clinical, regulatory, quality assurance and scientific personnel;
•
add operational, financial and management information systems and personnel, including personnel to support product development; and
•
acquire or in-license other product candidates and technologies.
To become and remain profitable, we must develop and eventually commercialize one or more products with significant market potential. This will require us to be successful in a range of challenging activities, including completing preclinical

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studies and clinical trials of our product candidates, obtaining marketing approval for these product candidates, manufacturing, marketing and selling those product candidates for which we may obtain marketing approval, and satisfying any post-marketing requirements. We may never succeed in these activities and, even if we do, may never generate revenue that is significant or large enough to achieve profitability.  Our failure to become and remain profitable would decrease the value of the company and could impair our ability to raise capital, maintain our research and development efforts, expand our business or continue our operations. A decline in the value of our company could also cause you to lose all or part of your investment.
*We will need substantial additional funding to advance the development of our product candidates. If we are unable to raise capital when needed, we would be forced to delay, reduce or eliminate our drug development and discovery programs or commercialization efforts.
We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the research and development of, initiate clinical trials of and seek marketing approval for our product candidates, initially CD101 IV and CD201, and any other product candidates that we seek to develop. In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution of the approved product. Furthermore, we expect to incur additional costs associated with operating as a public company. Our future capital requirements will depend on many factors, including:
•
the scope, progress, results and costs of drug discovery, preclinical development, laboratory testing and clinical trials for our product candidates and Cloudbreak platform;
•
the costs, timing and outcome of any regulatory review of our product candidates;
•
the costs and timing of commercialization activities, including manufacturing, marketing, sales and distribution, for any product candidates that receive marketing approval;
•
the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;
•
our ability to establish and maintain collaborations, when and if necessary, on favorable terms, if at all; and
•
the extent to which we acquire or in-license other product candidates and technologies.
Identifying potential development candidates and conducting preclinical studies and clinical trials are time consuming, expensive and uncertain processes that take years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales for any of our current or future product candidates. In addition, our product candidates, if approved, may not achieve commercial success.
Our commercial revenue, if any, will be derived from sales of products that we do not expect to be commercially available for many years, if at all.
Accordingly, we will need substantial additional funding in connection with our continuing operations and to achieve our goals. Since December 6, 2012 (inception) through March 31, 2017, our operations have been financed primarily by gross proceeds of approximately $188.8 million from the issuance of convertible debt securities, the sale of shares of convertible preferred stock, the sale of shares of our common stock in our IPO, our October 2016 term loan facility with Pacific Western, and our October 2016 follow-on public offering of common stock. As of March 31, 2017 , we had cash, cash equivalents, and short-term investments of $90.1 million . Based on our current operating plans, we expect that our existing cash, cash equivalents and marketable securities and anticipated interest income will enable us to fund our operating expenses and capital expenditure requirements through at least the next twelve months. If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts, or to make reductions in spending, extend payment terms with suppliers, or liquidate or grant rights to assets where possible.  Any of these actions could materially harm our business, results of operations and future prospects. Adequate additional financing may not be available to us on acceptable terms, or at all. In addition, we may seek additional financing due to favorable market conditions or strategic considerations, even if we believe we have sufficient funds for our operating plans.
*Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our technologies or product candidates.
Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity and debt financings, as well as potentially entering into collaborations, strategic alliances and licensing arrangements or receiving government and/or charitable grants or contracts. Other than our controlled equity sales agreement with Cantor Fitzgerald & Co., our term loan facility with Pacific Western and our CARB-X Subaward Agreement, each of which is subject to the fulfillment of specified conditions, we do not currently have any committed external source of funds. To the extent that we raise additional capital through the sale of equity or convertible debt

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securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, and may be secured by all or a portion of our assets. There can be no assurances that we will be able to enter into contracts with or receive grants from the United States government or charitable organizations to support our programs. The process of obtaining grants and contracts is lengthy and uncertain and we will have to compete with other companies and institutions for each grant or contract. United States government grants and contracts typically contain unfavorable termination provisions and are subject to audit and modification by the government at its sole discretion, which will subject us to additional risks. If we receive a United States government grant or contract, we would be required to comply with numerous laws and regulations relating to the formation, administration and performance of the grant or contract, which can make it more difficult for us to retain our rights under such grant or contract and result in increased costs. If we raise funds by entering into collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or through collaborations, strategic alliances, licensing arrangements or government or charitable programs when needed, we may be required to delay, limit, reduce or terminate our drug development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Our short operating history may make it difficult for you to evaluate the success of our business to date and assess our future viability.
We were founded in December 2012 and our operations to date have been limited to organizing and staffing our company, business planning, raising capital, developing our technology, identifying potential development and product candidates, undertaking preclinical studies and conducting clinical trials. We have not yet demonstrated our ability to successfully complete large-scale, pivotal clinical trials required for regulatory approval of our product candidates, obtain marketing approvals, manufacture a commercial scale product, or arrange for a third party to do so on our behalf, or conduct sales and marketing activities necessary for successful commercialization. Typically, it takes many years to develop one new product from the time it is discovered to when it is commercially available. Consequently, any predictions made about our future success or viability may not be as accurate as they could be if we had a longer operating history or if we had product candidates in advanced clinical trials.
In addition, as a new business, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors that may alter or delay our plans. We will need to continue to transition from a company with a research focus to a company capable of supporting development activities and, if a product candidate is approved, a company with commercial activities. We may not be successful in any step of such a transition.
The terms of our term loan facility place restrictions on our operating and financial flexibility, and failure to comply with covenants or to satisfy certain conditions of the agreement governing the debt facility may result in acceleration of our repayment obligations and foreclosure on our pledged assets, which could significantly harm our liquidity, financial condition, operating results, business and prospects and cause the price of our common stock to decline.
In October 2016, we entered into a loan and security agreement with Pacific Western, or the loan agreement, under which we borrowed $10.0 million and may borrow up to an additional $10.0 million on or prior to April 3, 2018, subject to certain terms and conditions set forth therein, including our achievement of certain milestones.
The outstanding principal balance under the loan agreement is secured by a security interest in substantially all of our assets, other than intellectual property, which is subject to a double negative pledge. The loan agreement requires us to comply with a number of customary affirmative and restrictive covenants, including covenants that limit our ability to, among other things: transfer any part of our business or property; merge or consolidate with another entity or otherwise experience a change in control; incur additional indebtedness; encumber the collateral securing the loan; declare or pay any cash dividend or make distributions on our capital stock; repurchase or redeem any class of stock or other equity interest; acquire, own or make investments; and make certain capitalized expenditures over a specified threshold, in each case subject to exceptions. In addition, the loan agreement contains an operating covenant, which requires us to achieve positive data from a Phase 2 clinical trial of CD101 Topical or CD101 IV on or before March 31, 2018. Subsequent operating covenants will be reset in 2018. The loan agreement also includes standard events of default, including a provision that Pacific Western could declare an event of default upon the occurrence of any event that it interprets as having a material adverse effect on (i) our operations, business or financial condition and subsidiaries taken as a whole; (ii) our ability to perform or pay the secured obligations under the loan agreement and related agreements; or (iii) the collateral pledged to Pacific Western under the loan agreement. Upon such determination, Pacific Western could declare all obligations under the loan agreement immediately due and payable. Although, in and of itself, the occurrence of adverse results or delays in any clinical study or the denial, delay or limitation of approval of or taking of any other regulatory action by the FDA or another governmental entity will not constitute a material adverse effect under the loan

40

agreement, Pacific Western may determine that such an event together with contemporaneous events or circumstances constitutes a material adverse effect upon our business, operations, properties, assets, or financial condition or upon our ability to perform or pay the secured obligations under the loan agreement. If we default under the facility, Pacific Western may accelerate all of our repayment obligations. At such time, we may not have enough available cash or be able to raise additional funds on satisfactory terms, if at all, through equity or debt financings to repay our indebtedness at the time any such repayment is required. If we are unable to access funds to meet those obligations or to renegotiate the loan agreement, Pacific Western could take control of and may sell our pledged assets. In such an event, we may be required to delay, limit, reduce or terminate our product development or commercialization efforts or grant to others rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. If our assets were liquidated, Pacific Western’s right to repayment would be senior to the rights of our stockholders to receive any proceeds from the liquidation. Any declaration by Pacific Western of an event of default could significantly harm our liquidity, financial condition, operating results, business, and prospects and cause the price of our common stock to decline.
We may incur additional indebtedness in the future. The debt instruments governing such indebtedness may contain provisions that are as, or more, restrictive than the provisions governing our existing indebtedness under the loan agreement. If we are unable to repay, refinance or restructure our indebtedness when payment is due, the lenders could proceed against the collateral or force us into bankruptcy or liquidation.
Risks Related to Employee Matters and Managing Growth
Our future success depends on our ability to retain our senior management team and to attract, retain and motivate qualified personnel.
We are highly dependent upon our senior management team, as well as the other principal members of our research and development teams. All of our executive officers are employed “at will,” meaning we or they may terminate the employment relationship at any time. We maintain “key person” insurance for our Chief Executive Officer but not for any of our other executives or employees. The loss of the services of any of these persons could impede the achievement of our research, development and commercialization objectives.
Recruiting and retaining qualified scientific, clinical, manufacturing, regulatory, quality assurance, and sales and marketing personnel will also be critical to our success. We may not be able to attract and retain these personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. We also experience competition for the hiring of scientific and clinical personnel from universities and research institutions. In addition, we rely on consultants and advisers, including scientific, regulatory, quality assurance, and clinical advisers, to assist us in formulating our research and development and commercialization strategy. Our consultants and advisers may be employed by employers other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us.
We expect to expand our operations, and may encounter difficulties in managing our growth, which could disrupt our business.
We expect to expand the scope of our operations, particularly in the areas of drug development, manufacturing, clinical, regulatory affairs, quality assurance, and sales and marketing. To manage our anticipated future growth, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualified personnel. We may not be able to effectively manage the expected expansion of our operations or recruit and train additional qualified personnel. Moreover, the expected expansion of our operations may lead to significant costs and may divert our management and business development resources. Any inability to manage growth could delay the execution of our business plans or disrupt our operations.
We may engage in acquisitions that could disrupt our business, cause dilution to our stockholders or reduce our financial resources.
In the future, we may enter into transactions to acquire other businesses, products or technologies and our ability to do so successfully is unproven. If we do identify suitable candidates, we may not be able to make such acquisitions on favorable terms, or at all. Any acquisitions we make may fail to strengthen our competitive position, and these transactions may be viewed negatively by customers or investors. We may decide to incur debt in connection with an acquisition or issue our common stock or other equity securities to the stockholders of the acquired company, which would reduce the percentage ownership of our existing stockholders. We could incur losses resulting from undiscovered liabilities of the acquired business that are not covered by the indemnification we may obtain from the seller. In addition, we may not be able to successfully integrate the acquired personnel, technologies and operations into our existing business in an effective, timely and non-disruptive manner. Acquisitions may also divert management attention from day-to-day responsibilities,

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increase our expenses and reduce our cash available for operations and other uses. We cannot predict the number, timing or size of future acquisitions or the effect that any such transactions might have on our operating results.
Risks Related to Ownership of our Common Stock
*The price of our stock may be volatile, and you could lose all or part of your investment.
The trading price of our common stock is likely to be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control, including limited trading volume. In addition to the factors discussed in this “Risk Factors” section and elsewhere in this report, these factors include:
•
the commencement, timing, enrollment or results of the current and planned clinical trials of our product candidates or any future clinical trials we may conduct, or changes in the development status of our product candidates;
•
any delay in our regulatory filings for our product candidates and any adverse development or perceived adverse development with respect to the applicable regulatory authority’s review of such filings, including without limitation the FDA’s issuance of a “refusal to file” letter, "complete response" letter, or a request for additional information;
•
adverse results, suspensions, terminations, or delays in pre-clinical or clinical trials;
•
our decision to initiate a clinical trial, not to initiate a clinical trial or to terminate an existing clinical trial;
•
adverse regulatory decisions, including failure to receive regulatory approval of our product candidates;
•
changes in laws or regulations applicable to our products, including but not limited to clinical trial requirements for approvals;
•
adverse developments concerning our contract manufacturers;
•
our inability to obtain adequate product supply for any approved product or inability to do so at acceptable prices or acceptable quality;
•
our inability to establish collaborations if needed;
•
our failure to commercialize our product candidates;
•
additions or departures of key scientific or management personnel;
•
unanticipated serious safety concerns related to the use of our product candidates;
•
introduction of new products or services offered by us or our competitors;
•
announcements of significant acquisitions, strategic partnerships, joint ventures, government grants or contracts or capital commitments by us or our competitors;
•
our ability to effectively manage our growth; 
•
the size and growth of our initial fungal infection, bacterial infection or other target markets;
•
our ability to successfully enter new markets or develop additional product candidates;
•
actual or anticipated variations in quarterly operating results;
•
our cash position and our ability to raise additional capital and the manner and terms on which we raise it;
•
our failure to meet the estimates and projections of the investment community or that we may otherwise provide to the public;
•
publication of research reports or other media coverage about us or our industry, or our therapeutic approaches in particular, or positive or negative recommendations or withdrawal of research coverage by securities analysts;
•
changes in the market valuations of similar companies;
•
overall performance of the equity markets;
•
sales of our common stock by us or our stockholders in the future;
•
trading volume of our common stock;
•
changes in accounting practices;
•
ineffectiveness of our internal controls;

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•
disputes or other developments relating to proprietary rights, including patent rights, litigation matters and our ability to obtain patent protection for our technologies;
•
significant lawsuits, including patent or stockholder litigation;
•
general political and economic conditions; and
•
other events or factors, many of which are beyond our control.
In addition, the stock market in general, and The NASDAQ Global Market and pharmaceutical companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors may negatively affect the market price of our common stock, regardless of our actual operating performance. You may not realize any return on your investment in us and may lose some or all of your investment. In the past, securities class action litigation has often been instituted against companies following periods of volatility in the market price of a company’s securities. This type of litigation, if instituted, could result in substantial costs and a diversion of management’s attention and resources, which would harm our business, operating results or financial condition.
We do not intend to pay dividends on our common stock so any returns will be limited to the value of our stock.
We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. Any return to stockholders will therefore be limited to the appreciation of their stock.
Our principal stockholders and management own a significant percentage of our stock and are able to exert significant control over matters subject to stockholder approval.
Our executive officers, directors, and 5% stockholders and their affiliates currently beneficially own a significant percentage of our outstanding voting stock. These stockholders have the ability to influence us through this ownership position. These stockholders may be able to determine all matters requiring stockholder approval. For example, these stockholders may be able to control elections of directors, amendments of our organizational documents, or approval of any merger, sale of assets, or other major corporate transaction. This may prevent or discourage unsolicited acquisition proposals or offers for our common stock that you may feel are in your best interest as one of our stockholders.
We are an emerging growth company, and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our common stock less attractive to investors.
We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act, or the JOBS Act, enacted in April 2012. For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended, or the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding nonbinding advisory votes on executive compensation and stockholder approval of any golden parachute payments not previously approved. We could be an emerging growth company through 2020, although circumstances could cause us to lose that status earlier. We will remain an emerging growth company until the earlier of (a) December 31, 2020, (b) the last day of the fiscal year in which we have total annual gross revenue of at least $1 billion, (c) the last day of the fiscal year in which we are deemed to be a large accelerated filer, which requires the market value of our common stock that is held by non-affiliates to exceed $700 million as of the prior June 30th, and (d) the date on which we have issued more than $1 billion in non-convertible debt during the prior three-year period.
Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. As a result, changes in rules of U.S. generally accepted accounting principles or their interpretation, the adoption of new guidance or the application of existing guidance to changes in our business could significantly affect our financial position and results of operations.
We will incur significant costs as a result of operating as a public company, and our management will be required to devote substantial time to compliance initiatives.
As a public company, we incur significant legal, accounting and other expenses that we did not incur as a private company. We are subject to the reporting requirements of the Securities Exchange Act of 1934, which require, among other things, that we file with the Securities and Exchange Commission, or the SEC, annual, quarterly and current reports

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with respect to our business and financial condition. In addition, the Sarbanes-Oxley Act, as well as rules subsequently adopted by the SEC and The NASDAQ Global Market to implement provisions of the Sarbanes-Oxley Act, impose significant requirements on public companies, including requiring establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices. Further, in July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, was enacted. There are significant corporate governance and executive compensation related provisions in the Dodd-Frank Act that require the SEC to adopt additional rules and regulations in these areas such as “say on pay” and proxy access. Recent legislation permits emerging growth companies to implement many of these requirements over a longer period and up to five years from the pricing of our IPO. We intend to take advantage of this legislation but cannot guarantee that we will not be required to implement these requirements sooner than budgeted or planned and thereby incur unexpected expenses. Stockholder activism, the current political environment and the current level of government intervention and regulatory reform may lead to substantial new regulations and disclosure obligations, which may lead to additional compliance costs and impact the manner in which we operate our business in ways we cannot currently anticipate.
We expect the rules and regulations applicable to public companies to continue to result in substantial legal and financial compliance costs and to make some activities more time-consuming and costly. If these requirements divert the attention of our management and personnel from other business concerns, they could have a material adverse effect on our business, financial condition and results of operations. These costs could decrease our net income or increase our net loss, and may require us to reduce costs in other areas of our business or increase the prices of our products or services. For example, these rules and regulations could make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to incur substantial costs to maintain the same or similar coverage. We cannot predict or estimate the amount or timing of additional costs we may incur to respond to these requirements. The impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers.
*Sales of a substantial number of shares of our common stock by our existing stockholders in the public market could cause our stock price to fall.
If our existing stockholders sell, or indicate an intention to sell, substantial amounts of our common stock in the public market, the trading price of our common stock could decline. We had 16,804,721 shares of common stock outstanding as of March 31, 2017 . We are unable to predict the effect that sales may have on the prevailing market price of our common stock.
Sales of our common stock by current stockholders may make it more difficult for us to sell equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate, and make it more difficult for you to sell shares of our common stock. In addition, shares of common stock that are either issuable upon the exercise of outstanding options or reserved for future issuance under our employee benefit plans will become eligible for sale in the public market to the extent permitted by the provisions of various vesting schedules and Rule 144 and Rule 701 under the Securities Act. If these additional shares of common stock are sold, or if it is perceived that they will be sold, in the public market, the trading price of our common stock could decline.
Certain holders of our securities are entitled to rights with respect to the registration of their shares under the Securities Act. Registration of these shares under the Securities Act would result in the shares becoming freely tradable without restriction under the Securities Act, except for shares held by affiliates, as defined in Rule 144 under the Securities Act.  Any sales of securities by these stockholders could have a material adverse effect on the trading price of our common stock.
Future sales and issuances of our common stock or rights to purchase common stock, including pursuant to our equity incentive plans, could result in additional dilution of the percentage ownership of our stockholders and could cause our stock price to fall.
We expect that significant additional capital may be needed in the future to continue our planned operations, including conducting clinical trials, commercialization efforts, expanded research and development activities and costs associated with operating as a public company. To raise capital, we may sell common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time. If we sell common stock, convertible securities or other equity securities, investors may be materially diluted by subsequent sales, and new investors could gain rights, preferences and privileges senior to our existing stockholders.
Pursuant to our 2015 Equity Incentive Plan, or the 2015 EIP, our management is authorized to grant stock options to our employees, directors and consultants. The number of shares of our common stock reserved for issuance under the 2015 EIP will automatically increase on January 1 of each year through and including January 1, 2025, by 4% of the total number of shares of our capital stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares determined by our board of directors. Additionally, the number of shares of our common stock reserved for issuance under our 2015 Employee Stock Purchase Plan, or the ESPP, will automatically increase on January 1 of each

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year through and including January 1, 2025, by the lesser of 1% of the total number of shares of our capital stock outstanding on December 31 of the preceding calendar year, or 490,336 shares. Unless our board of directors elects not to increase the number of shares available for future grant each year under the 2015 EIP and the ESPP, our stockholders may experience additional dilution, which could cause our stock price to fall.
We have broad discretion in the use of working capital and may not use it effectively.
Our management will have broad discretion in the application of our working capital. Because of the number and variability of factors that will determine our use of our working capital, its ultimate use may vary substantially from its currently intended use. Our management might not apply our working capital in ways that ultimately increase the value of your investment. We expect to use our working capital to fund research and development activities and general operating expenses. The failure by our management to apply this working capital effectively could harm our business. Pending its use, we may invest our working capital in short-term, investment-grade, interest-bearing securities. These investments may not yield a favorable return to our stockholders. If we do not invest or apply our working capital in ways that enhance stockholder value, we may fail to achieve expected financial results, which could cause our stock price to decline.
Anti -takeover provisions under our charter documents and Delaware law could delay or prevent a change of control which could limit the market price of our common stock and may prevent or frustrate attempts by our stockholders to replace or remove our current management.
Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that could delay or prevent a change of control of our company or changes in our board of directors that our stockholders might consider favorable. Some of these provisions include:
•
a board of directors divided into three classes serving staggered three-year terms, such that not all members of the board will be elected at one time;
•
a prohibition on stockholder action through written consent, which requires that all stockholder actions be taken at a meeting of our stockholders;
•
a requirement that special meetings of stockholders be called only by the chairman of the board of directors, the chief executive officer, or by a majority of the total number of authorized directors;
•
advance notice requirements for stockholder proposals and nominations for election to our board of directors;
•
a requirement that no member of our board of directors may be removed from office by our stockholders except for cause and, in addition to any other vote required by law, upon the approval of not less than two-thirds of all outstanding shares of our voting stock then entitled to vote in the election of directors;
•
a requirement of approval of not less than two-thirds of all outstanding shares of our voting stock to amend any bylaws by stockholder action or to amend specific provisions of our certificate of incorporation; and 
•
the authority of the board of directors to issue preferred stock on terms determined by the board of directors without stockholder approval and which preferred stock may include rights superior to the rights of the holders of common stock.
In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporate Law, which may prohibit certain business combinations with stockholders owning 15% or more of our outstanding voting stock. These anti-takeover provisions and other provisions in our amended and restated certificate of incorporation and amended and restated bylaws could make it more difficult for stockholders or potential acquirers to obtain control of our board of directors or initiate actions that are opposed by the then-current board of directors and could also delay or impede a merger, tender offer or proxy contest involving our company. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing or cause us to take other corporate actions you desire. Any delay or prevention of a change of control transaction or changes in our board of directors could cause the market price of our common stock to decline.
Because we have an even number of members of our board of directors, deadlocks may occur in our board of directors’ decision-making process, which may delay or prevent critical decisions from being made.
Since we currently have an even number of directors, deadlocks may occur when such directors disagree on a particular decision or course of action. Our amended and restated certificate of incorporation and amended and restated bylaws do not contain any mechanisms for resolving potential deadlocks. While our directors are under a duty to act in the best interest of our company, any deadlocks may impede the further development of our business in that such deadlocks may delay or prevent critical decisions regarding our development.

45

Our amended and restated bylaws provide that the Court of Chancery of the State of Delaware will be the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
Our amended and restated bylaws provide that the Court of Chancery of the State of Delaware is the exclusive forum for any derivative action or proceeding brought on our behalf; any action asserting a breach of fiduciary duty; any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our certificate of incorporation or our bylaws; or any action asserting a claim against us that is governed by the internal affairs doctrine. The choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and other employees. Alternatively, if a court were to find the choice of forum provision contained in our amended and restated bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business and financial condition.
If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.
The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. If one or more of the analysts who covers us downgrades our stock or publishes inaccurate or unfavorable research about our business, our stock price may decline. If one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly, demand for our stock could decrease, which might cause our stock price and trading volume to decline.
Our ability to utilize our net operating loss carryforwards and certain other tax attributes may be limited.
Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, if a corporation undergoes an “ownership change” (generally defined as a greater than 50% change (by value) in its equity ownership over a three-year period), the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change income may be limited. As a result of our most recent private placements, our IPO, our October 2016 follow-on public offering of common stock and other transactions that have occurred since our inception in 2012, we may or may not have experienced an “ownership change.” We may also experience ownership changes in the future as a result of subsequent shifts in our stock ownership. As of December 31, 2016, we had U.S. net operating loss carryforwards of approximately $79.5 million, which begin to expire in 2033, which could be limited if we experience an “ownership change.”
Our business and operations would suffer in the event of system failures.
Despite the implementation of security measures, our internal computer systems and those of our contractors and consultants are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. While we have not experienced any such system failure, accident or security breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our drug development programs. For example, the loss of clinical trial data from completed or ongoing or planned clinical trials could result in delays in our regulatory approval efforts and we may incur substantial costs to attempt to recover or reproduce the data. If any disruption or security breach resulted in a loss of or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and/or the further development of our product candidates could be delayed.
Our operations are vulnerable to interruption by natural disasters, power loss, terrorist activity and other events beyond our control, the occurrence of which could materially harm our business.
Businesses located in California have, in the past, been subject to electrical blackouts as a result of a shortage of available electrical power, and any future blackouts could disrupt our operations. We are vulnerable to a major earthquake, wildfire, inclement weather and other natural and man-made disasters, and we have not undertaken a systematic analysis of the potential consequences to our business as a result of any such natural disaster and do not have an applicable recovery plan in place. We carry only limited business interruption insurance that would compensate us for actual losses from interruption of our business that may occur, and any losses or damages incurred by us in excess of insured amounts could cause our business to materially suffer.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

46

Use of Proceeds
On April 14, 2015, our Registration Statements on Form S-1 (file Nos. 333-202740 and 333-203414) were declared effective by the SEC for our initial public offering of common stock, which was completed on April 20, 2015.
There has been no material change in the expected use of the net proceeds from our initial public offering as described in our final prospectus filed with the SEC. Through March 31, 2017 , we used $15.8 million of the net proceeds from the offering to fund ongoing research and development activities. We intend to use the remaining proceeds to fund our ongoing and future clinical development of CD101 IV; the preclinical development, IND-enabling studies and early clinical trials of CD201 and/or any other Cloudbreak development candidates; research and discovery efforts related to the expansion of our Cloudbreak immunotherapy platform; and working capital, including general operating expenses. Pending such uses, we plan to continue investing the unused proceeds from this offering in short- and intermediate-term, interest-bearing obligations, investment-grade instruments, certificates of deposit or direct or guaranteed obligations of the U.S. government.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURE
Not applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
For a list of exhibits filed with this Quarterly Report, refer to the exhibit index.



47

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
Cidara Therapeutics, Inc.
 
 
 
Date: May 10, 2017
By:
/s/ Jeffrey Stein, Ph.D.
 
 
Jeffrey Stein, Ph.D.
 
 
President and Chief Executive Officer
 
 
(Principal Executive Officer)
 
 
 
Date: May 10, 2017
By:
/s/ Matthew Onaitis
 
 
Matthew Onaitis
 
 
Chief Financial Officer and General Counsel
 
 
(Principal Financial Officer)

48

EXHIBIT INDEX
Exhibit
 
Description
 
 
 
3.1(1)
 
Amended and Restated Certificate of Incorporation of the Registrant, as currently in effect
 
 
 
3.2(1)
 
Amended and Restated Bylaws of the Registrant, as currently in effect.
 
 
4.1(2)
 
Form of Common stock Certificate of the Registrant.
 
 
 
4.2(2)
 
Second Amended and Restated Investor Rights Agreement, by and among the Registrant and certain of its stockholders, dated February 10, 2015
 
 
 
 
 
 
10.1#
 
Cost Reimbursement Research Subaward Agreement, dated as of March 30, 2017, by and between the Registrant and the Trustees of Boston University
 
 
 
 
10.2
 
Form of Restricted Stock Unit Award Grant Notice and Restricted Stock Unit Award Agreement under the Registrant's 2015 Equity Incentive Plan
 
 
 
 
 
 
 
31.1
 
Certification of the Principal Executive Officer pursuant to Rule 13a-14(A) promulgated under the Securities Exchange Act of 1934.
 
 
 
31.2
 
Certification of the Principal Financial Officer pursuant to Rule 13a-14(A) promulgated under the Securities Exchange Act of 1934.
 
 
 
32.1
 
Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350 and Rule 13a-14(B) promulgated under the Securities Exchange Act of 1934.
 
 
 
32.2
 
Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350 and Rule 13a-14(B) promulgated under the Securities Exchange Act of 1934.
 
 
 
101.INS
 
XBRL Instance Document.
 
 
 
101.SCH
 
XBRL Taxonomy Extension Schema Document.
 
 
 
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase Document.
 
 
 
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase Document.
 
 
 
101.LAB
 
XBRL Taxonomy Extension Label Linkbase Document.
 
 
 
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase Document.
(1)
Incorporated by reference to the Registrant’s Current Report on Form 8-K, filed on April 24, 2015.
(2)
Incorporated by reference to the Registrant’s Registration Statement on Form S-1 (File No. 333-202740), as amended, originally filed with the SEC on March 13, 2015.
#
Confidential treatment has been requested with respect to certain portions of this exhibit. Omitted portions have been filed separately with the Securities and Exchange Commission.


49
Exhibit 10.1 ***Text Omitted and Filed Separately with the Securities and Exchange Commission. Confidential Treatment Requested Under 17 C.F.R. Sections 200.80(b)(4) and 240.24b-2 Cost Reimbursement Research Subaward Agreement Pass-Through Entity (PIE) Trustees of Boston University Subrecipient: Cidara Therapeutics, Inc. PTE Principal Investigator (PI): Levin Outterson Subrecipient Principal Investigator: James Balkovec PTE Federal Award No: 1 IDSEP160030-01-02 PTE non-Federal Award No: FAIN: IDSEP160030 Federal Awarding Agency: HHS/ASPR non-Federal Sponsor: The Wellcome Trust Federal Award Issue Date: 07/27/2016, 09/16/2016, 1/12/2017 Total Amount of Federal Award to PTE: $30,000,000.00 Total Amount of non-Federal Award to PTE: $18,660,000.00 CFDA No. 93 360 CFDA Title see Attachment 2a Project Title: A Novel, Bifunctional Immunotherapy Effective against Multidrug-Resistant Gram-Negative (MDRGN) Infections Subaward Period of Performance Start 04/01/2017 End 04/30/2018 Amount Funded this Action: Total: $ 3,853,576.00 Federal Award: $2,312,146.00 non-Federal Award $1,541,430.00 Subaward No 4500002324 Estimated Project Period (if incrementally funded) Start 04/01/2017 End: 04/30/2018 Is this award R&D  Yes or  No Check all that apply:  Subject to FFATA (Attachment 3B)  Cost Sharing (Attachment 5) Terms and Conditions 1) PTE hereby awards a cost reimbursable subaward, as described above, to Subrecipient. The statement of work and budget for this subaward are (check one)  as specified in Subrecipient’s proposal dated or  as shown in Attachment 5. In this performance of subaward work, Subrecipient shall be an independent entity and not an employee or agent of PTE. 2) PTE shall reimburse Subrecipient not more often than monthly for allowable costs. All invoices shall be submitted using Subrecipient’s standard invoice, but at a minimum shall include current and cumulative costs (including cost sharing), subaward number, and certification, as required in 2 CFR 200.415(a). See Attachment 2/Special Terms and Conditions #21 for required certification. Invoices that do not reference PTE Subaward number shall be returned to Subrecipient. Invoice and questions concerning invoice receipt or payments should be directed to the appropriate party’s Financial Contact, as shown i Attachment 3. All costs and financials must be expressed in U.S. dollars using an exchange rate applicable at the time the invoice is submitted and including documentation of conversion rate used. All payments will be in U.S. dollars. Documentation with applicable translation in English to support claimed expenses must be submitted with all invoices. Supporting documentation includes, but is not limited to, payroll distribution records, time sheets, time and effort reports for subject personnel, general ledger support, vouchers, expense reports, requisitions and receipts for non-personnel expenditures and contracts issued for services. All invoices and reports shall be submitted in English. 3) A final statement of cumulative costs incurred, including cost sharing, marked “FINAL” moat he submitted to FTE’s Financial Contact, as shown in Attachment 3A. NOT LATER THAN 45 days after subaward end date. The final statement of costs shall constitute Subrecipient’s final financial report. 4) All payments shall be considered provisional and subject to adjustment within the total estimated cost in the event such adjustment is necessary as a result of an adverse audit finding against the Subrecipient. PTE reserves the right to reject an invoice, in accordance with 2 CFR 203 305. 5) Matters concerning the technical performance of this subaward should be directed to the appropriate party’s Principal Investigator as shown in Attachments 3A and 3B. Technical reports are required as shown in Attachment 4. 6) Matters concerning the request or negotiation of any changes in the terms, conditions, or amounts cited in this Subaward Agreement and airy changes requiring prior approval, should he directed to the appropriate party’s Administrative Contact, as shown in Attachments 3A and 3B. Any such changes made to this Subaward Agreement require the written approval of each party’s Authorized Official, as shown in Attachments 3A and 3B. 7) Substantive changes made to this Subaward Agreement require the written approval of each party’s Authorized Official as shown in Attachments 3A and 3B. The PTE may issue non-substantive changes to the Period of Performance (check one)  Bilaterally, or  Unilaterally 8) Each party shall be responsible for its negligent acts or omissions and the negligent acts or omissions of its employees, officers or directors, to the extent allowed by law. 9) PTE may terminate this subaward with thirty days written notice to the Subrecipient’s Administrative Contact, as shown in Attachment 3B. If Federal Awarding Agency or non-Federal Sponsor terminate PTE award, PTE will terminate this subaward. PTE shall pay Subrecipient for termination costs as allowable under Subpart 31.2 of the Federal Acquisition Regulations (48 CFR Subpart 31 2) applicable to commercial organizations. 10) No-cost extensions require the approval of the PTE. Any requests for a no-cost extension should be addressed to and received by the Administrative Contact, as shown in Attachments 3A, not less than 30 days prior to the desired effective date of the requested change. 11) The Subaward Agreement is subject to the terms and conditions of the PTE Award (Attachment 2A) and other special terms and conditions, as identified in Attachments 2 and 6, as applicable. 12) By signing this Subaward Agreement, Subrecipient makes the certifications and assurances shown in Attachments 1 and 2. This Subaward Agreement is not final, binding or enforceable until countersigned below by PTE. By and Authorized Official of PTE /s/ Dolores Markey 3/30/2017 Dolores Markey Date Director, Special Projects, Policy and Process By and Authorized Official of Subrecipient /s/ Matthew Onaitis March 27, 2017 Matthew Onaitis Date

 
Attachment 1 Research Subaward Agreement Certifications and Assurances By signing the Subaward Agreement, the Authorized Official of Subrecipient certifies, to the best of his/her knowledge and belief, that: Certification Regarding Lobbying 1) No Federal appropriated funds have been paid or will be paid, by or on behalf of the Subrecipient, to any person for influencing or attempting to influence an officer or employee of any agency, a Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress in connection with the awarding of any Federal contract, the making of any Federal grant, the making of any Federal loan, the entering into of any cooperative agreement, and the extension, continuation, renewal, amendment, or modification of any Federal contract, grant, loan, or cooperative agreement. 2) If any funds other than Federal appropriated funds have been paid or will be paid to any person for influencing or intending to influence an officer or employee of any agency, a Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress in connection with this Federal contract, grant, loan, or cooperative agreement, the Subrecipient shall complete and submit Standard Form -LLL, “Disclosure Form to Report Lobbying,” to the PTE. The form may be found at https://www.gsa.gov/portal/forms/download/116430 3) The Subrecipient shall require that the language of this certification be included in the award documents for all subawards at all tiers (including subcontracts, subgrants, and contracts under grants, loans, and cooperative agreements) and that all subrecipients shall certify and disclose accordingly. This certification is a material representation of fact upon which reliance was placed when this transaction was made or entered into. Submission of this certification is a prerequisite for making or entering into this transaction imposed by section 1352, title 31, U. S. Code. Any person who fails to file the required certification shall be subject to a civil penalty of not less than $10,000 and not more than $100,000 for each such failure. Debarment, Suspension, and Other Responsibility Matters Subrecipient certifies by signing this Subaward Agreement that neither it nor its principals are presently debarred, suspended, proposed for debarment, declared ineligible or voluntarily excluded from participation in this transaction by any federal department or agency. Subrecipients that are foreign governments or governmental entities, public international organizations, or foreign-owner or - controlled (in whole or in part) entities are not subject to the debarment or suspension certification requirement or to debarment or suspension under 2 CFR 376. All other foreign organizations and international organizations are subject to these requirements. Audit and Access to Records Subrecipient certifies by signing this Subaward Agreement that it complies with the Uniform Administrative Requirements (2 CFR Part 200), will provide notice of the completion of required audits and any adverse findings which impact this subaward as required by parts 200.501- 200.521, and HHS implementation 45 CFR parts 75.501-75.521, and will provide access to records as required by parts 200.336, 200.337, and 200.201, and HHS implementation 45 CFR parts 75.364, 75 .365, and 75.50 1, as applicable. In accordance with 45 CFR §75.50 1, subrecipients that are commercial organizations (including for-profit hospitals) have two options regarding audits: (1) A financial related audit (as defined in the Government Auditing Standards, GPO Stock #020-000-00-265-4) of a particular award in accordance with Government Auditing Standards, in those cases where the recipient receives awards under only one HHS program; or, if awards are received under multiple HHS programs, a financial related audit of all HHS awards in accordance with Government Auditing Standards; or (2) An audit that meets the requirements contained in this subpart. Commercial organizations that receive annual HHS awards totaling less than $750,000 are exempt from requirements for a non- Federal audit for that year, but records must be available for review by appropriate officials of Federal agencies. PTE (or a third party designated by PTE) reserves the right to inspect, upon PTE’s reasonable advance notice and during normal business hours, Subrecipient’s physical facilities, all aspects of the Statement of Work undertaken under this Subagreement, and all books, records. and documents of any kind pertaining to the Subagreement. Subrecipient agrees to provide copies of any records, receipts, accounts or other documentation to PTE in a timely fashion as reasonably requested by PTE.

 
Subrecipient will keep all usual and proper records and books of accounts in accordance with Generally Accepted Accounting Principles (GAAP) relating to performance of the Statement of Work for a minimum period of three (3) years after completion of closeout of the Subaward Agreement and after the final Report has been submitted to PTE and approved. During this period, PTE or an authorized representative shall have the right to audit, at its own expense, all financial books, accounts, and records of funds received and costs and commitments incurred under this Subaward Agreement. If any audit reveals a material discrepancy or error in reporting, Subrecipient will repay the unallowable cost(s). Subrecipient expressly acknowledges its understanding that its activities pursuant to this Subaward Agreement and all financial books, records, and accounts pertaining thereto may be subject to audit by the Sponsor, and Subrecipient agrees to cooperate fully in the performance of any such audit.

 
Attachment 2 Subaward Agreement Prime Award Terms and Conditions HHS Agency-Specific Certifications/Assurances In addition to all applicable public policy requirement included in Part I and Part II of the HHS Grants Policy Statement, by signing this Subaward Agreement, the authorized official of Subrecipient assures compliance with the following, as applicable: 1. Research Misconduct. The research misconduct requirements included in “Public Policy Requirements,” HHS Grants Policy Statement Revised 1/1/07, http://www.hhs.gov/grants/grants/grants-policies-regulations/, Part II-13. 2. Animal Welfare. U.S. Federal and home country requirements. The animal welfare requirements contained in “Public Policy Requirements,” HHS Grants Policy Statement Revised 1/1/07, http://www.hhs.gov/grants/grants/grants-policies-regulations/, Part II-12, including the requirement to file a written Animal Welfare Assurance with the Office of Laboratory Animal Welfare (OLAW) as detailed at https://grants.nih.gov/grants/olaw/sampledoc/foreign.htm, and PTE Award (Attachment 2a, p13-14). See also Attachment 6, section 503 “Additional Research Standards.” 3. Human Subjects. U.S. Federal and home country requirements. The human subjects requirements contained in “Public Policy Requirements,” HHS Grants Policy Statement Revised 1/1/07, http ://www.hhs.gov/grants/grants/grants-policies- regulations/, Part II-9), including the requirement for an assurance (Section 4.1.15.1), as detailed at http://www.hhs.gov/ohrp/register-irbs-and-obtain-fwas/fwas/index.html, and PTE Award (Attachment 2a, p22-23). See also Attachment 6, section 503 “Additional Research Standards.” 4. Research Involving Recombinant DNA and Human Gene Transfer Research. The requirements for recombinant DNA and Human Gene Transfer Research included in “Public Policy Requirements,” HHS Grants Policy Statement Rev 1/1/07, http://www.hhs.gov/grants/grants/grants-policies-reeulations/, Part II-15, which are under the current NIH Guidelines for Research Involving Recombinant or Synthetic Nucleic Acid Molecules (NIH Guidelines), http://osp.od.nih.gov/officebiotechnology-activities/biosafety/nih-guidelines. 5. Inclusion of Women, Minorities and Children in Clinical Research. The requirements contained in PTE Award (Attachment 2a, pgs 13, 28-29, 33) and HHS Grants Policy Statement Rev 1/1/07, http://www.hhs.gov/grants/grants/grants- policies-regulations/, Part I-18, I-19, Part II-9, II-10. General terms and conditions (as of the effective date of this Subaward Agreement): 1. Conditions on activities and restrictions on expenditure of federal funds in appropriations acts are applicable to this Subaward Agreement to the extent those restrictions are pertinent http://grants/nih.gov/grants/policy/appropriations_info.htm. 2. 2 CFR 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), http://www.ecfr.gov/cgi-bin/text-idx?tpl=/ecfrbrowse/Title02/2cfr200_main_02.tpl 3. 45 CFR Part 75, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for HHS Award (HHS Implementation of Uniform Guidance), http://www.ecfr.gov/cgi-bin/text-idx?node=pt45.1.75 4. The HHS Grants Policy Statement, including addenda in effect as of the beginning date of the period of performance. See HHS website, http://www.hhs.gov/grants/grants/get-ready-for-grants-management/index.html, for agency-specific grant management guidance. The following is excepted from the HHS Grants Policy Statement: a. The right to initiate an automatic one-time extension of the end date is replaced by the need to obtain prior written approval from the PTE. b. Any prior approvals are to be sought from the PTE and not the Federal Awarding Agency. 5. Equipment title and accountability: For-profit subrecipients of HHS grants are non-exempt and subject to the requirements of 45 CFR 75.320, as well as the conditions set forth in 45 CFR 75.316 6 – 75.323 (Property Standards), and 45 CFR 75.327 – 75.335 (Procurement Standards). 6. Treatment of Program Income:  Additive  Other, Pass-through Entity specify alternative from HHS Agreement 7. Travel shall be in accordance with Federal Travel Regulation (http://www.gsa.gov/federaltravelregulation) and HHS Grants Policy Statement Parts II-42, II-43 (Cost Considerations, Allowable Costs and Activities), and the Fly America Act (49 USC 40118) and Open Skies Agreements as detailed at http://www.gsa.gov/portal/content/103191.

 
PHS-Specific Requirements Promoting Objectivity in Research Applicable to Subrecipients (42 CFR Par 50 Subpart F) a) 42 CFR Part 50. 604 requires that institutions conducting PHS-funded research “Maintain an up-to-date, written, enforced policy on financial conflicts of interest.” Further, “If the Institution carries out the PHS-funded research through a subrecipient (e.g., subcontractors or consortium members), the Institution (awardee Institution) must take reasonable steps to ensure that any subrecipient Investigator complies with this subpart by incorporating as part of a written agreement with the subrecipient terms that establish whether the financial conflicts of interest policy of the awardee Institution or that of the subrecipient will apply to the subrecipient’s Investigators.” Subrecipient must designate herein whether the financial conflicts of interest policy of x Pass-through Entity Institution, or ____________ Subrecipient Institution (check one) will apply. If applying its own financial conflicts of interest policy, by execution of this Subaward Agreement, Subrecipient Institution certifies that its policy complies with 42 CFR Part 50. b) Subrecipient shall report any financial conflict of interest to Pass-through Entity’s Administrative Representative, as designated on Attachment 3A. Any financial conflicts of interest identified shall subsequently be reported to HHS. Such report shall be made before expenditure of funds authorized in this Subaward Agreement and within 45 days of any subsequently identified financial conflict of interest. Special terms and conditions: 1. Automatic Carry Forward: [ ] Yes [ x ] No (If No, Carry Forward requests must be sent to Pass-through Entity’s Administrative contact, as shown in Attachment 3.) 2. In accordance with 48 CFR 3.908 Pilot Program for Enhancement of Contractor Employee Protections, Subrecipient is hereby notified that they are required to: a. Inform their employees working on any Federal award that they are subject to the whistleblower rights and remedies of the pilot program; b. Inform their employees in writing of employee whistleblower protections under 41 U.S.C §4712 in the predominant native language of the workforce; and c. Contractors and grantees will include such requirements in any agreement made with a subcontractor or subgrantee. 3. Rebudgeting: a. Rebudgeting of any direct cost budget line ≥10% requires PTE prior approval. b. Addition of any new contracted service ≥%50,000 not included in the approved budget that represents a <10% change in the direct cost category (contracted services) requires contemporaneous notification to PTE. c. Addition of any new contracted service ≥$50,000 not included in the approved budget that represents a ≥10% change in the direct cost category (contracted services) requires PTE prior approval per 3.a above. 4. Trafficking in Persons - Required flow-down in full text: a. Provisions applicable to a recipient that is a private entity. 1. You as the recipient, your employees, subrecipients under this award, and subrecipients’ employees may not – i. Engage in severe forms of trafficking in persons during the period of time that the award is in effect; ii. Procure a commercial sex act during the period of time that the award is in effect; or iii. Use forced labor in the performance of the award or subawards under the award. See Att 2a (PTE NOA), General Terms and Conditions #16 for the complete clause on Trafficking in Persons. 5. Publications: See Att 2a/General Terms and Conditions #18 for required acknowledgment and disclaimer. See also Attachment 6, “Publication and Open Access.” Abstracts or manuscripts from any CARB-X partner involving CARB-X data must be coordinated with PTE PI at the beginning of the writing process. Subrecipient will provide the PTE with advance copies of all manuscripts related to the Project when they are submitted or re-submitted for publication. PI will have no role in the preparation, editing or approval of the manuscript.

 
6. Press Releases: See also Attachment 6, “Publication and Open Access.” Any press release directly relating to CARB-X will be coordinated in advance with the PTE PI. Subrecipient will provide the PTE PI with advance copies of all press releases related to the Project at least five (5) days before release. 7. Funding Restrictions: All salaries paid under the Subaward Agreement (including cost-sharing) are capped at the rate of Executive Level II. Pre-award costs are not allowed. See Att 2a, CARB-X Terms and Conditions/Other Terms for complete list. Facilities and Administrative Costs (F&A) are unallowable for any foreign Subrecipient. 8. Copyrights Subrecipient x grants / shall grant (check one) to PTE an irrevocable, royalty-free, non-transferable, non-exclusive right and license to use, reproduce, make derivative works, display, and perform publicly any copyrights or copyrighted material (including any computer software and its documentation and/or databases) first developed and delivered under this Subaward Agreement solely for the purpose of and only to the extent required to meet PTE’s obligations to the Federal Government under its Prime Award. Per 45 CFR 75 .322(b), the subrecipient may copyright any work that is subject to copyright and was developed, or for which ownership was acquired, under a Federal award. HHS/ASPR reserves a royalty-free, non-exclusive and irrevocable right to reproduce, publish, or otherwise use the work for Federal purposes, and to authorize others to do so. 9. Data Rights Subrecipient grants to PTE the right to use data created in the performance of this Subaward Agreement solely for the purpose of and only to the extent required to meet PTE’s obligations to the Federal Government under its Prime Award. Per 45 CFR 75.322(d), the Federal Government has the right to: (1) obtain, reproduce, publish, or otherwise use the data produced under a Federal award; and (2) authorize others to receive, reproduce, publish, or otherwise use such data for Federal purposes. 10. Cost Principles Subrecipient must operate the Subaward Agreement under the Federal Cost Principles set forth in Subpart 31.2 of the Federal Acquisition Regulations (48 CFR Subpart 31.2) applicable to commercial organizations, found at https://www.acquisition.gov/far/html/Subpart%2031_2 html. 11. Intellectual Property See Att 2a (PTE NOA), CARB-X Terms & Conditions/Other Terms, “Intellectual Property.” 12. Lower-Tier Subawards Subrecipient may not issue any Subawards under this Subaward Agreement without the express prior written consent of PTE. The requirement for prior approval does not include contracted services. 13. Other Research-Related Activities This Subaward Agreement does not include research involving human embryonic stem cell research and cloning or research on transplantation of human fetal tissue. 14. CARB-X Special Terms & Conditions This Subaward Agreement is subject to the provisions set forth in the CARB-X Special Terms and Conditions, incorporated herein as Attachment 6. 15. Fringe Benefits If Subrecipient does not have federally negotiated rate agreement including fringe benefits rates, invoices must reflect actual fringe benefits costs. 16. Disputes (this clause applicable to foreign subrecipients only) The parties shall attempt to resolve disputes through good faith negotiations. Any dispute arising under or related to this Subaward Agreement shall be resolved to the maximum possible extent through informal dispute resolution. Unresolved issues shall be arbitrated in accordance with the International Arbitration Rules of the American Arbitration Association. 17. Governing Language In the event that a translation of this Subaward Agreement is prepared and signed by the parties, this English language version shall be the official version and shall govern if there is a conflict between this English language version and the translation. All disputes under this Subaward Agreement shall be resolved and conducted, regardless of the means or authority, in the English language. 18. Governing Law

 
This Agreement shall be governed, construed and enforced for all purposes in accordance with the laws of The Commonwealth of Massachusetts, without regard to such laws governing choice of law. Subrecipient acknowledges that PTE is subject to the laws of the United States and PTE will not be obligated to take any action that is violative of such laws. 19. Export Control It is understood that PTE is subject to United States laws and regulations controlling the export of technical data, computer software, laboratory prototypes and other commodities, and that its obligations hereunder are contingent on compliance with applicable U.S. export laws and regulations (including the International Traffic in Arms Regulations (ITAR) and Export Administration Regulations (EAR) in activities under this Subaward Agreement. In the event that Subrecipient intends to provide any technical information, computer software, laboratory prototypes. or other items controlled under the applicable U.S. export control laws, the Subrecipient shall first notify PTE of its intent to provide such export-controlled items or information and shall not transfer the export-controlled items or information until PTE’s Authorized Representative agrees in writing to accept. Prior to the transfer of any export-controlled items or information (excluding items or information designated as EAR99 under the EAR), recipient shall conspicuously designate such items or information as “Export Controlled” and identify the applicable export control category under the United States Munitions List (ITAR) or ECCN under the Commerce Control List (EAR). The transfer of any such items may require a license or authorization from the cognizant agency of the United States Government, and/or may require written assurances by the receiving party that it shall not re- export such items to certain foreign destinations and/or to certain recipients without prior approval of the cognizant government agency, and/or may require the involved individuals and entities comply with certain conditions. PTE cannot guarantee that such licenses will be granted. 20. Anti-terrorist Compliance Subrecipient hereby agrees that all funds, including subawards to subrecipients, will be used in compliance with all applicable United States anti-terrorist financing and asset control laws, regulations, rules and executive orders. 21. Required Certification for Invoices (see face page Article 2) “By signing this report. I certify to the best of my knowledge and belief that the report is true, complete, and accurate, and the expenditures, disbursements and cash receipts are for the purposes and objectives set forth in the terms and conditions of the Federal award. I am aware that any false, fictitious, or fraudulent information, or the omission of any material fact, may subject me to criminal, civil or administrative penalties for fraud, false statements, false claims or otherwise. (U.S. Code Title 18, Section 1001 and Title 31, Sections 3729-3730 and 3801-3812).”

 
Attachment 2a Subaward Agreement PTE Federal Award from BARDA (HHS/ASPR)

 
Att 2a, Page 1 of 44 Attachment 2a 1. DATE ISSUED MM/DD/YYYY 07/27/2016 2. CFDA NO. 93.360 3. ASSISTANCE TYPE Cooperative Agreement DEPARTMENT OF HEALTH AND HUMAN SERVICES ASSISTANT SECRETARY FOR PREPAREDNESS & RESPONSE ASPR Acquisition Management Contracts and Grants 200 C Street, SW Washington, DC 20024 NOTICE OF AWARD AUTHORIZATION (Legislation/Regulations) Pub. L. 109-148 119 Stat. 2680, 2786 (2005) 1a. SUPERSEDES AWARD NOTICE dated except that any additions or restrictions previously imposed remain in effect unless specifically rescinded 4. GRANT NO. 1 IDSEP160030-01-00 Formerly 5. ACTION TYPE New 6. PROJECT PERIOD MM/DD/YY From 08/01/2016 MM/DD/YY Through 07/31/2021 7. BUDGET PERIOD MM/DD/YY From 08/01/2016 MM/DD/YY Through 07/31/2017 8. TITLE OF PROJECT (OR PROGRAM) CARB-X 9a. GRANTEE NAME AND ADDRESS Trustees of Boston University 881 Commonwealth Ave Boston Univ School of Law Boston, MA 02215-1390 9b. GRANTEE PROJECT DIRECTOR Prof. Michael Kevin Outterson 881 Commonwealth Avenue Boston, MA 02215-1300 Phone: 617-935-6517 10a. GRANTEE AUTHORIZING OFFICIAL Mrs. Diane Baldwin 881 Commonwealth Avenue Boston, MA 02215-1300 Phone: 617-638-4600 10b. FEDERAL PROJECT OFFICER Tyler Merkeley 200 Independence Ave., S.W. Room 638-G Washington, DC 20201 Phone: 202-679-9539 ALL AMOUNTS ARE SHOWN IN USD 11. APPROVED BUDGET (Excludes Direct Assistance) 12. AWARD COMPUTATION I Financial Assitance from the Federal Awarding Agency Only II Total project costs including grant funds and all other financial participation a. Amount of Federal Financial Assistance (from item 11m) 30,000,000.00 a. Salaries and Wages ................... 327,261.00 b. Less Unobligated Balance From Prior Budget Periods 0.00 b. Fringe Benefits ................... 86,860.00 c. Less Cumulative Prior Award(s) This Budget Period 0.00 c. Total Personnel Costs .................... 414,121.00 d. AMOUNT OF FINANCIAL ASSISTANCE THIS ACTION 30,000,000.00 d. Equipment ........................................... 0.00 13. Total Federal Funds Awarded to Date for Project Period 30,000,000.00 e. Supplies ........................................... 5,000.00 14. RECOMMENDED FUTURE SUPPORT (Subject to the availability of funds and satisfactory progress of the pojrect): f. Travel ........................................... 51,004.00 g. Construction ........................................... 0.00 YEAR TOTAL DIRECT COSTS YEAR TOTAL DIRECT COSTS h. Other ........................................... 158,600.00 a. 2 55,000,000.00 d. 5 55,000,000.00 i. Contractual ........................................... 69,734,943.00 b. 3 55,000,000.00 e. 6 j. TOTAL DIRECT COSTS 70,363,668.00 c. 4 55,000,000.00 f. 7 k. INDIRECT COSTS 776,403.00 15. PROGRAM INCOME SHALL BE USED IN ACCORD OF THE FOLLOWING ALTERNATIVES a. DEDUCTION b. ADDITIONAL COSTS c. MATCHING d. OTHER RESEARCH (Add / Deduct Option) e. OTHER (See REMARKS) l. TOTAL APPROVED BUDGET 71,140,071.00 m. Federal Share 30,000,000.00 16. THIS AWARD IS BASED ON AN APPLICATION SUBMITTED TO, AND AS APPROVED BY, THE FEDERAL AWARDING AGENCY ON THE ABOVE TITLED PROJECT AND IS SUBJECT TO THE TERMS AND CONDITIONS INCORPORATED EITHER DIRETLY OR BY REFERENCE IN THE FOLLOWING: a. The grant program legislation b. The grant program regulations. c. This award notice including terms and conditions, if any, noted below under REMARKS d. Federal administrative requirements, cost principles and audit requirements applicable to this grant In the event there are conflicting or otherwise inconsistent policies applicable to the grant, the above order of precedence shall prevail. Acceptance of the grant terms and conditions is acknowledged by the grantee when funds are drawn or otherwise obtained from the grant payment system. n. Non-Federal Share 41,140,071.00 REMARKS (Other Terms and Conditions Attached –  Yes  No) GRANTS MANAGEMENT OFFICIAL Virginia Simmons, Chief Grants Management Officer 17. OBJ CLASS 41.22 18a. VENDOR CODE 1042103547C9 18b. EIN 042103547 19. DUNS 049435266 20. CONG. DIST. 07 FY-ACCOUNT NO. DOCUMENT NO. ADMINISTRATIVE CODE AMT ACTION FIN ASST APPROPRIATION 21. a. 6-1992016 b. IDESEP0030A c. HEP-ID d. $30,000,000.00 e. 75-1617-0140 22. a. b. c. d. e. 23. a. b. c. d. e.

 
Att 2a, Page 2 of 44 1. DATE ISSUED MM/DD/YYYY 09/16/2016 2. CFDA NO. 93.360 3. ASSISTANCE TYPE Cooperative Agreement DEPARTMENT OF HEALTH AND HUMAN SERVICES ASSISTANT SECRETARY FOR PREPAREDNESS & RESPONSE ASPR Acquisition Management Contracts and Grants 200 C Street, SW Washington, DC 20024 NOTICE OF AWARD AUTHORIZATION (Legislation/Regulations) Pub. L. 109-148 119 Stat. 2680, 2786 (2005) 1a. SUPERSEDES AWARD NOTICE dated 07/28/2016 except that any additions or restrictions previously imposed remain in effect unless specifically rescinded 4. GRANT NO. 6 IDSEP160030-01-01 Formerly 5. ACTION TYPE Post Award Amendment 6. PROJECT PERIOD MM/DD/YY From 08/01/2016 MM/DD/YY Through 07/31/2021 7. BUDGET PERIOD MM/DD/YY From 08/01/2016 MM/DD/YY Through 07/31/2017 8. TITLE OF PROJECT (OR PROGRAM) CARB-X 9a. GRANTEE NAME AND ADDRESS Trustees of Boston University 881 Commonwealth Ave Boston Univ School of Law Boston, MA 02215-1390 9b. GRANTEE PROJECT DIRECTOR Prof. Michael Kevin Outterson 881 Commonwealth Avenue Boston, MA 02215-1300 Phone: 617-935-6517 10a. GRANTEE AUTHORIZING OFFICIAL Mrs. Diane Baldwin 881 Commonwealth Avenue Boston, MA 02215-1300 Phone: 617-638-4600 10b. FEDERAL PROJECT OFFICER Tyler Merkeley 200 Independence Ave., S.W. Room 638-G Washington, DC 20201 Phone: 202-679-9539 ALL AMOUNTS ARE SHOWN IN USD 11. APPROVED BUDGET (Excludes Direct Assistance) 12. AWARD COMPUTATION I Financial Assitance from the Federal Awarding Agency Only II Total project costs including grant funds and all other financial participation a. Amount of Federal Financial Assistance (from item 11m) 30,000,000.00 a. Salaries and Wages ................... 327,261.00 b. Less Unobligated Balance From Prior Budget Periods 0.00 b. Fringe Benefits ................... 86,860.00 c. Less Cumulative Prior Award(s) This Budget Period 0.00 c. Total Personnel Costs .................... 414,121.00 d. AMOUNT OF FINANCIAL ASSISTANCE THIS ACTION 30,000,000.00 d. Equipment ........................................... 0.00 13. Total Federal Funds Awarded to Date for Project Period 30,000,000.00 e. Supplies ........................................... 5,000.00 14. RECOMMENDED FUTURE SUPPORT (Subject to the availability of funds and satisfactory progress of the pojrect): f. Travel ........................................... 51,004.00 g. Construction ........................................... 0.00 YEAR TOTAL DIRECT COSTS YEAR TOTAL DIRECT COSTS h. Other ........................................... 158,600.00 a. 2 55,000,000.00 d. 5 55,000,000.00 i. Contractual ........................................... 69,734,943.00 b. 3 55,000,000.00 e. 6 j. TOTAL DIRECT COSTS 70,363,668.00 c. 4 55,000,000.00 f. 7 k. INDIRECT COSTS 776,403.00 15. PROGRAM INCOME SHALL BE USED IN ACCORD OF THE FOLLOWING ALTERNATIVES a. DEDUCTION b. ADDITIONAL COSTS c. MATCHING d. OTHER RESEARCH (Add / Deduct Option) e. OTHER (See REMARKS) l. TOTAL APPROVED BUDGET 71,140,071.00 m. Federal Share 30,000,000.00 16. THIS AWARD IS BASED ON AN APPLICATION SUBMITTED TO, AND AS APPROVED BY, THE FEDERAL AWARDING AGENCY ON THE ABOVE TITLED PROJECT AND IS SUBJECT TO THE TERMS AND CONDITIONS INCORPORATED EITHER DIRETLY OR BY REFERENCE IN THE FOLLOWING: a. The grant program legislation b. The grant program regulations. c. This award notice including terms and conditions, if any, noted below under REMARKS d. Federal administrative requirements, cost principles and audit requirements applicable to this grant In the event there are conflicting or otherwise inconsistent policies applicable to the grant, the above order of precedence shall prevail. Acceptance of the grant terms and conditions is acknowledged by the grantee when funds are drawn or otherwise obtained from the grant payment system. n. Non-Federal Share 41,140,071.00 REMARKS (Other Terms and Conditions Attached –  Yes  No) This amendment reflects changes to the administrative and programmatic terms and conditions. GRANTS MANAGEMENT OFFICIAL Virginia Simmons, Chief Grants Management Officer 17. OBJ CLASS 41.15 18a. VENDOR CODE 1042103547C9 18b. EIN 042103547 19. DUNS 049435266 20. CONG. DIST. 07 FY-ACCOUNT NO. DOCUMENT NO. ADMINISTRATIVE CODE AMT ACTION FIN ASST APPROPRIATION 21. a. 6-1992016 b. IDESEP0030A c. HEP-ID d. $0.00 e. 75-1617-0140 22. a. b. c. d. e. 23. a. b. c. d. e.

 
Att 2a, Page 3 of 44 1. DATE ISSUED MM/DD/YYYY 01/12/2017 2. CFDA NO. 93.360 3. ASSISTANCE TYPE Cooperative Agreement DEPARTMENT OF HEALTH AND HUMAN SERVICES ASSISTANT SECRETARY FOR PREPAREDNESS & RESPONSE ASPR Acquisition Management Contracts and Grants 200 C Street, SW Washington, DC 20024 NOTICE OF AWARD AUTHORIZATION (Legislation/Regulations) Pub. L. 109-148 119 Stat. 2680, 2786 (2005) 1a. SUPERSEDES AWARD NOTICE dated 09/16/2016 except that any additions or restrictions previously imposed remain in effect unless specifically rescinded 4. GRANT NO. 6 IDSEP160030-01-02 Formerly 5. ACTION TYPE Post Award Amendment 6. PROJECT PERIOD MM/DD/YY From 08/01/2016 MM/DD/YY Through 07/31/2021 7. BUDGET PERIOD MM/DD/YY From 08/01/2016 MM/DD/YY Through 07/31/2017 8. TITLE OF PROJECT (OR PROGRAM) CARB-X 9a. GRANTEE NAME AND ADDRESS Trustees of Boston University 881 Commonwealth Ave Boston Univ School of Law Boston, MA 02215-1390 9b. GRANTEE PROJECT DIRECTOR Prof. Michael Kevin Outterson 881 Commonwealth Avenue Boston, MA 02215-1300 Phone: 617-935-6517 10a. GRANTEE AUTHORIZING OFFICIAL Mrs. Diane Baldwin 881 Commonwealth Avenue Boston, MA 02215-1300 Phone: 617-638-4600 10b. FEDERAL PROJECT OFFICER Tyler Merkeley 200 Independence Ave., S.W. Room 638-G Washington, DC 20201 Phone: 202-679-9539 ALL AMOUNTS ARE SHOWN IN USD 11. APPROVED BUDGET (Excludes Direct Assistance) 12. AWARD COMPUTATION I Financial Assitance from the Federal Awarding Agency Only II Total project costs including grant funds and all other financial participation a. Amount of Federal Financial Assistance (from item 11m) 30,000,000.00 a. Salaries and Wages ................... 463,195.00 b. Less Unobligated Balance From Prior Budget Periods 0.00 b. Fringe Benefits ................... 116,058.00 c. Less Cumulative Prior Award(s) This Budget Period 0.00 c. Total Personnel Costs .................... 579,253.00 d. AMOUNT OF FINANCIAL ASSISTANCE THIS ACTION 30,000,000.00 d. Equipment ........................................... 0.00 13. Total Federal Funds Awarded to Date for Project Period 30,000,000.00 e. Supplies ........................................... 9,000.00 14. RECOMMENDED FUTURE SUPPORT (Subject to the availability of funds and satisfactory progress of the pojrect): f. Travel ........................................... 75,764.00 g. Construction ........................................... 0.00 YEAR TOTAL DIRECT COSTS YEAR TOTAL DIRECT COSTS h. Other ........................................... 396,800.00 a. 2 55,000,000.00 d. 5 55,000,000.00 i. Contractual ........................................... 65,693,536.00 b. 3 55,000,000.00 e. 6 j. TOTAL DIRECT COSTS 66,754,353.00 c. 4 55,000,000.00 f. 7 k. INDIRECT COSTS 958,352.00 15. PROGRAM INCOME SHALL BE USED IN ACCORD OF THE FOLLOWING ALTERNATIVES a. DEDUCTION b. ADDITIONAL COSTS c. MATCHING d. OTHER RESEARCH (Add / Deduct Option) e. OTHER (See REMARKS) l. TOTAL APPROVED BUDGET 67,712,705.00 m. Federal Share 30,000,000.00 16. THIS AWARD IS BASED ON AN APPLICATION SUBMITTED TO, AND AS APPROVED BY, THE FEDERAL AWARDING AGENCY ON THE ABOVE TITLED PROJECT AND IS SUBJECT TO THE TERMS AND CONDITIONS INCORPORATED EITHER DIRETLY OR BY REFERENCE IN THE FOLLOWING: a. The grant program legislation b. The grant program regulations. c. This award notice including terms and conditions, if any, noted below under REMARKS d. Federal administrative requirements, cost principles and audit requirements applicable to this grant In the event there are conflicting or otherwise inconsistent policies applicable to the grant, the above order of precedence shall prevail. Acceptance of the grant terms and conditions is acknowledged by the grantee when funds are drawn or otherwise obtained from the grant payment system. n. Non-Federal Share 37,712,705.00 REMARKS (Other Terms and Conditions Attached –  Yes  No) This amendment provides a revised budget. All previous terms and conditions remain the same. GRANTS MANAGEMENT OFFICIAL Virginia Simmons, Chief Grants Management Officer 17. OBJ CLASS 41.15 18a. VENDOR CODE 1042103547C9 18b. EIN 042103547 19. DUNS 049435266 20. CONG. DIST. 07 FY-ACCOUNT NO. DOCUMENT NO. ADMINISTRATIVE CODE AMT ACTION FIN ASST APPROPRIATION 21. a. 6-1992016 b. IDESEP0030A c. HEP-ID d. $0.00 e. 75-1617-0140 22. a. b. c. d. e. 23. a. b. c. d. e.

 
Att 2a, Page 4 of 44 NOTICE OF AWARD (Continuation Sheet) PAGE 2 of 2 DATE ISSUED 01/12/2017 GRANT NO. 6 IDSEP160030-01-02 Federal Financial Report Cycle Reporting Period Start Date Reporting Period End Date Reporting Type Reporting Period Due Date 08/01/2016 07/31/2017 Annual 10/29/2017 08/01/2017 07/31/2018 Annual 10/29/2018 08/01/2018 07/31/2019 Annual 10/29/2019 08/01/2019 07/31/2020 Annual 10/29/2020 08/01/2020 07/31/2021 Annual 10/29/2021

 
Att 2a, Page 5 of 44 AWARD ATTACHMENTS Trustees of Boston University 6 IDSEP160030-01-02 1. CARB-X Terms and Conditions

 
***Confidential Treatment Requested PROGRAM OVERVIEW Authority This cooperative agreement is issued under the authority of Section 301 of the Public Health Service (PHS) Act (42 U.S.C. 241), “Research and Investigations”; Section 319L of the PHS Act (42 U.S.C. 247d-7e), “Biomedical Advanced Research and Development Authority”; 14Section 405 of the PHS Act (42 U.S.C. 284), “Authority of the Directors of the National Research Institutes”; Section 446 of the PHS Act (42 U.S.C. 285f), “National Institute of Allergy and Infectious Diseases, Purpose of Institute.” By receiving funds under this award, the recipient assures that it will carry out the project/program as authorized and will comply with the terms and conditions and other requirements of this award. Project Objective: The current pipeline of candidate antimicrobial products is insufficient to counter the threat of antimicrobial resistance1. A novel collaborative model is needed to spur innovation and investment towards new antimicrobial products to repopulate the early development pipeline. In 2014, the United States Government released the National Strategy for Combating Antimicrobial Resistant Bacteria. A component of the National Strategy is to establish a Biopharmaceutical Accelerator2 for Combating Antibiotic-Resistant Bacteria [Accelerator] to fund Research and Development (R&D) activities to help progress candidate products from the proof-of-concept stage through pre-clinical development. Candidates that graduate from the Accelerator will be better positioned for R&D investment and clinical development. There are various Accelerator3 models in the marketplace. The Biomedical Advanced Research and Development Authority (BARDA) and the National Institute of Allergy and Infectious Diseases (NIAID) designed the Accelerator to will be a non-equity accelerator4 that provides non- dilutive 1 Antimicrobial Resistance: A microbial internal mechanism(s) that confers resistance or ineffectiveness to an antimicrobial product(s). 2 The 2014 National Strategy for Combating Antimicrobial Resistant Bacteria discusses a "biopharmaceutical incubator." Following market research and discussion with key stakeholders the program was renamed the biopharmaceutical accelerator as referred to in this document. 3 The use of the word "Accelerator" in this FOA implies an entity that provides unique and highly flexible combination of technical support, business development processes, infrastructure, and people designed to nurture new and small businesses grow through the difficult and vulnerable early stages of development. The term implies capabilities typical of both Accelerators and Incubators. Both types of existing organizations may have the ability to augment their existing capabilities and acquire remaining capabilities discussed in this FOA to respond to this announcement. 4 An accelerator that does not take an equity position in the companies it supports through its partnership with NIAID and BARDA.

 
Att 2a, Page 7 of 44 funding5 to product developers for R&D activities and enables the product developers to retain full ownership and control of their company. The initiative will be focusing only on antibacterial products. BARDA and NIAID stimulate public good through establishment of a public-private partnership with the Trustees of Boston University. Under this notice of award, Trustees of Boston University will assemble an international collaboration bringing together four separate life science accelerators to form a global antibacterial innovation initiative to accelerate the pace of preclinical product development antibacterial products to combat resistant bacteria. The partnership unknown as Combatting Antibiotic-Resistant Bacteria Biopharmaceutical Accelerator (CARB-X) will be led by the Trustees of Boston University, a non-profit research university and a member in the Association of American Universities. The Principal Investigator is Professor Kevin Outterson, Boston University School of Law. Trustees of Boston University and brings together four accelerators, Wellcome Trust and AMRC (U.K.), MassBio and the California Life Sciences Institute (CLSI). CARB-X will focus on rejuvenating the antibacterial pipeline by providing nondilutive financing, Research and Development (R&D) support, and business mentoring services to innovative product developers worldwide to accelerate the pace of preclinical antibacterial product development to combat resistant bacteria. Product developers retain full ownership and control of their company. These services are provided through several Accelerators (described below in Section 2). BARDA will provide direct funding and NIAID will provide in-kind services (e.g. preclinical services, technical expertise) to CARB-X [the cooperative agreement recipient]. CARB-X will manage a portfolio of investments of early stage antimicrobial product6 candidates. Antimicrobial products may enter the CARB-X at proof of concept, optimization, pre-clinical development stages or after IND filing. CARB-X will assist/expedite the development of these products through IND filing such that they are poised for clinical development outside the accelerator. The CARB-X will fund products across a broad technology landscape (e.g. bacterial vaccines, therapeutics, devices and diagnostics) to align with BARDA and NIAID’s strategic goals. CARB-X will focus on:  Funding development of antimicrobial products to further enhance the pipeline,  Offering a suite of capabilities to rapidly shuttle successful product candidates through early development,  Provide business and drug development guidance,  Decrease the risks and barriers that impact further R&D investment by pharmaceutical companies, private investors and government partners. 5 Non-dilutive funding is financing that does not require the sale of your company's shares, and hence does not cause dilution of the existing shareholders. 6 Antimicrobial Products: A product that supports the treatment, prevention, or detection of a microbial infection across various technology landscapes including but not limited to therapies, preventions, vaccines, diagnostics, devices, and other innovations.

 
Att 2a, Page 8 of 44 CARB-X has the opportunity to leverage four existing life science accelerators, a consortium of academic, biotechnology, and pharmaceutical companies to fund R&D activities to help progress antimicrobial candidate products and aid these developers in overcoming business hurdles that smaller companies and academic start-ups currently face. By leveraging an industry Accelerator model, CARB-X will rapidly fund product candidates, support technical milestone driven management, and efficient down selection of less promising candidates. The focus of CARB-X will be the support of activities that incentivize development in the field and rapidly assess whether a proof-of-concept or prototype technology will lead to an antimicrobial product candidate. Since there are various Accelerator models it is important to define the specific Accelerator model issued under the award of this cooperative agreement. CARB-X will be a non-equity non-government entity that provides non- dilutive funding to product developers for R&D activities and enables the product developers to retain full ownership and control of their company. CARB-X or any of its Alliance or Partner accelerators may not take an equity position in any companies the entity funds supported by this cooperative agreement. Accelerators ICARB-X] Capabilities Under this award, CARB-X must at maintain the below qualifications, experience and capability and/or have the ability to provide the following: Ability to provide functions typical of a Life Science Accelerator  CARB-X will leverage four existing life science accelerators, a consortium of academic, biotechnology, and pharmaceutical companies to fund R&D activities to help progress antimicrobial candidate products and aid these developers in overcoming business hurdles that smaller companies and academic start-ups currently face.  Ability to manage an extensive portfolio (15-20) antimicrobial product candidates. An accelerator’s ability to provide Directed Research:  Conduct research and development on new therapeutics and vaccines, first-in class drugs, and new combination therapies for the treatment or prevention of resistant bacterial infections.  Develop non-traditional therapeutics and innovative strategies to treat or prevent resistant bacterial infections. Examples could include: targeting bacterial virulence factors, resistance genes, using phage or phage derived lysins, development of monoclonal or polyclonal antibodies, developing products that restore or preserve beneficial bacteria in humans (e.g. probiotics, prebiotics, or synthetic [sense and respond] microbiota), and new natural products and synthetic scaffolds with antibiotic activity.  Conduct research and development on new diagnostics, including tests that rapidly distinguish between viral and bacterial pathogens and tests that detect presence of specific antibiotic resistance determinants such that targeted antimicrobials can be used to reduce misuse of antibiotics. These diagnostics can then be implemented in a wide range of settings.

 
Att 2a, Page 9 of 44 An accelerator’s ability to provide Internal Capabilities;  Provide industry standard services and capabilities commensurate with the stage of candidate development.  Leverage a scientific advisory board comprised of subject matter experts in antimicrobial product development, diagnostics for antibiotic resistance bacteria, and vaccines against bacterial pathogens.  Provide scientific and technical expertise in the area of medicinal chemistry, preclinical testing, pharmacokinetics, toxicology, and manufacturing (e.g. for IND enabling studies and clinical trial material).  Business consulting services that function to aid early stage entrepreneurs in establishing a business plan/model and position the company for external opportunities. The accelerator should provide business, financial, strategic consulting services while also linking entrepreneurs with key stakeholders developing products and technologies to combat antimicrobial resistance. These services should help accelerate innovation and mitigate corporate and business development risks inherent to startup companies.  A physical and virtual environment that is programmed to increase collaboration and spur  antimicrobial product innovation by leveraging the best practices from incubators,  accelerators, technical hubs, co-working sites.  Access to translational partners for advanced development including venture capital (VC)  firms, other product development partnerships, large pharmaceutical companies, etc.  Incentivizing strategies to bring in new researchers and candidates to work with VC and Pharma.  Mechanisms to incentivize innovation and identify early potential research through workshops, hosted challenges, tech days, seminars, etc. An accelerator’s ability to provide External Capabilities:  A robust and extensive R&D network of subcontractors to support preclinical studies, toxicology studies, pharmacokinetic studies, ADME studies, and animal efficacy and challenge studies.  A robust and extensive R&D network of subcontractors to conduct medicinal chemistry for lead optimization, small scale chemical synthesis, cGMP chemical manufacturing, cGMP fermentation/production, biologic and vaccine manufacturing.  A robust R&D network of subcontractors that are capable of diagnostic development and engineering, including characterization and feasibility demonstration of diagnostic targets, test system development and critical design requirements, reagent development, non- GLP prototype development, and pilot scale manufacturing.  A robust and extensive R&D network of subcontractors capable of developing analytical methods and assays suitable to support process control.  Regulatory support to assist in the preparation of regulatory submissions [e.g. Investigational New Drug (IND) or Investigational Device Exemption (IDE) applications].

 
Att 2a, Page 10 of 44  Access to innovators and industry partners and the ability to leverage partnerships and resources to successfully advance promising products for follow-on R&D investment, including business capital and USG funding. Portfolio Priorities The overall scope of this project for cooperative agreement is to stimulate public good by providing funding to accelerate antimicrobial product development. On an annual basis, BARDA and NIAID will outline the gaps to the CARB-X that the agencies seek to address with their funding and provide recommendations towards focus areas and potential technology types that may fulfill those gaps. BARDA and NIAID will not identify specific candidates but, rather, strategic priorities. The priorities may adjust from year to year. BARDA and NIAID provide the Year 1 priorities below for planning and consideration. Year 1 Portfolio Priorities:  Antimicrobial products to target gram negative infections on the “Urgent” and “Serious” list as defined in the CDC report [CDC Antibiotic Resistance Threats in the US, 2013 ]  Non-traditional products to target and prevent antimicrobial infections on the “Urgent” and “Serious” list as defined in the CDC report [CDC Antibiotic Resistance Threats in the US, 2013 ] Budget and Cost Sharing: As part of the FOA, BARDA encouraged Applicants to propose innovative ways to leverage federal funding to attract additional capabilities/incentives to bolster the Accelerator’s portfolio and success. This may include identification of external opportunities or leveraging funding at the state or local level (e.g. public, private, etc.) BARDA envisioned that every $1 of BARDA funding would be matched by up to $2 of non-dilutive funding contributed by Alliance members of the Accelerator.7 In response to the FOA, CARB-X proposed a $295 Million cost share match as part of their proposal over the 5 years of the program. Year #1 match is proposed at $41M by CARB-X which is a 1.44 leveraged investment. In Year #1 for every $1.00 spent by CARB-X to stimulate antibacterial product development, BARDA will reimburse $0.42. All CARB-X submissions for reimbursement will align to the costs share outline in the below table and leverage the exchange rate on day of submission by the CARB-X or dates invoice was submitted to CARB-X by a partner or alliance accelerator. 7 In-kind support may be used for match. In-kind support includes the value of goods and services donated to the operation of the Accelerator, including but not limited to office space, volunteer secretarial services, pro bono accounting services, and other volunteer services to support the organization's/entity's work. All matches must follow the federal cost principles Applicants cannot submit match that would not be an allowable purchase with ASPR funds. A match level over the ideal amount will not result in a higher peer review score. All proposed match is an obligation on the part of the applicant. The HHS Grants Policy Statement provides information on allowable costs, volunteer rates, and conflict of interest issues. This document is http://www.hhs.gov/asfriogapa/aboutog/hhsgps107.pdf Federal funds, including those passed through a state or local government cannot be used toward the required match.

 
Att 2a, Page 11 of 44 Year # BARDA CARB-X Total BARDA & CARB-X Fundng CARB-X to BARDA match BARDA Reimbursement for every $1.00 Spent Y1 $ 30,000,000 $ 41,140,071 $ 71,140,071 1.37 $ 0.42 Y2 $ 55,000,000 $ 56,902,817 $ 111,902,817 1.03 $ 0.49 Y3 $ 55,000,000 $ 64,902,817 $ 119,902,817 1.18 $ 0.46 Y4 $ 55,000,000 $ 67,402,817 $ 122,402,817 1.23 $ 0.45 Y5 $ 55,000,000 $ 66,102,817 $ 121,102,817 1.20 $ 0.45 $ 250,000,000 $ 296,451,339 $ 546,451,339 1.19 $ 0.46 Funding beyond the first year is dependent on availability of appropriated funds in subsequent fiscal years, satisfactory awardee performance, endorsement at the Continuation Application Review Presentation and a decision that continued funding is in the best interest of the Federal Government CARB-X will be responsible for tracking and reporting on cost sharing/matching funding expenditures and reporting this quarterly. All cost sharing/matching funding expenditures reported to the government must be allocable to the agreement By August 26, 2016 CARB-X will submit to BARDA a revised budget to reflect additional consulting hours, travel, breakdown of BARDA funding across the four accelerators and other items to be discussed at the initial teleconference. Other Terms Conflicts of Interest CARB-X shall implement a plan to address, identify, avoid and/or mitigate, any actual and/or perceived organizational Conflict of Interests (C01) associated with managing the BARDA and NIAID initiative. The Plan should provide CARB-X with the necessary policies and procedures to identify, avoid, and/or mitigate any actual and/or perceived organizational COI. The plan should be included as an appendix. Of special note, the COI plan should also extend to include intellectual property. COI may arise in the Accelerator as a result of the early stage of development. The COI plan should include necessary policies and procedures to ensure the sub-recipients (product developers) maintain all intellectual property associated with their products for work supported under CARB-X to ensure there are no barriers to sub-recipients engaging CARB-X for support. CARB-X shall propose necessary policies and procedures to ensure their role in leading CARB-X does not result in unequal access of information, impaired objectivity, or biased ground rules. CARB-X will identify a third party entity to conduct an annual Conflict of Interests (C01) review of their plan, implementation of that plan and the ability to identify, avoid, and/or mitigate any actual and/or perceived organizational COI. This plan will be submitted to BARDA and NIAID, as a supplement to the Continuation Application Review Presentation (CARP).

 
Att 2a, Page 12 of 44 Intergovernmental Review This funding opportunity announcement is not subject to the requirements of Executive Order 12372, “Intergovernmental Review of Federal Programs.” Funding Restrictions The following activities are not fundable:  Cost of money is not allowed even if it’s in your negotiated rate agreement  All salaries are capped at the rate of Executive Level II.  Construction is not allowed.  To carry out any program of distributing sterile needles or syringes for the hypodermic injection of any illegal drug.  To advocate or promote gun control.  Funds cannot be used to lobby.  Pre-award costs are not allowed.  Lobbying Restrictions: http://www.hhs.gov/grants/grants/grants-policies- regulations/lobbying-restrictions.html In addition to the restrictions listed above the following funding restriction apply to all foreign entities applying under this application:  Continuation of existing projects without expansion or new and innovative approaches  Alteration and Renovation (A&R). Major A&R or construction costs are unallowable under foreign grants and domestic grants with foreign components. (unless specifically authorized in legislation)  Customs and import duties. These costs, which include consular fees, customs surtax, value-added taxes, and other related charges, are unallowable under foreign grants and domestic grants with foreign components.  Indirect costs. Indirect costs will not be reimbursed, With the exception of the American University of Beirut, which is not considered a foreign organization, and the World Health Organization. Research patient care costs. Research patient care costs are allowable only in exceptional circumstances as determined by the OPDIV. Document Review Upon request, the CARB-X shall provide BARDA sufficient opportunity to review key documents for programs supported under the portfolio associated with sub-recipients. These documents may include but not limited to study protocols, reports, and FDA submissions and correspondences. Sharing of agreement reports within United States Government (USG) In an effort to build a robust medical countermeasure pipeline through increased collaboration, BARDA and NIAID may share technical reports with Government entities responsible for Medical Countermeasure Development. This provision applies to all reports and data developed during performance including reports and data paid for by the CARB-X under the matching and cost sharing arrangements.

 
Att 2a, Page 13 of 44 Funding beyond the first year is dependent on availability of appropriated funds in subsequent fiscal years, satisfactory awardee performance, endorsement at the Continuation Application Review Presentation and a decision that continued funding is in the best interest of the Federal Government Inclusion of Women, Minorities, and Children When the proposed project involves clinical research, the CARB-X will evaluate the proposed plans for inclusion of minorities and members of both genders, as well as the inclusion of children. Intellectual Property It is ASPR policy that the results and accomplishments of the activities that it funds should bemade available to the public. PD/Pls and grantee organizations are expected to make the results and accomplishments of their activities available to the research community and to the public at large. If the outcomes of the research result in inventions, the provisions of the Bayh-Dole 5 Act of 1980, as implemented in 37 CFR Part 401, apply. The guidelines listed in the HHS Grants Policy Statement and applicable regulations regarding Rights in Data, Access to Research Data, Patents and Inventions, Royalties and Licensing Fees, etc. apply to this award. Inventions: Acceptance of grant funds obligates recipients to comply with the standard patent rights clause in 37 CFR 401. Publications: Publications, journal articles, etc. produced under a grant support project must bear an acknowledgment and disclaimer, as appropriate, for example:  This publication (journal article, etc.) was supported by the Cooperative Agreement Number above from Biomedical Advanced Research and Development Authority (BARDA). Its contents are solely the responsibility of the authors and do not necessarily represent the official views of The Assistant Secretary for Preparedness and Response. Vertebrate Animals If applicable, this award is subject to the following special condition: Under governing policy, Federal funds administered by the Public Health Service (PHS) shall not be expended for research involving live vertebrate animals without prior approval by the Office of Laboratory Animal Welfare (OLAW) of an assurance to comply with the PHS Policy on Human Care and Use of Laboratory Animals. This restriction applies to all performance sites (e.g., collaborating institutions, subcontractors, subgrantees) without OLAW-approved assurances, whether domestic or foreign. Only activities that do not involve live vertebrate animals may be conducted at any performance site until OLAW has approved an Animal Welfare Assurance of Compliance for that site. The Assurance documents must be submitted to OLAW not less than 60 days prior to the involvement of animals in the research. In addition, the grantee must provide ASPR with a copy of the approved Assurance. No funds may be drawn down from the payment system and no obligations may be made against federal funds for any research involving live vertebrate animals at any site that does not have an OLAW- approved Assurance.

 
Att 2a, Page 14 of 44 Failure to submit the assurance to OLAW within the required timeframe or to otherwise comply with the above requirements can result in suspension and/or termination of this award, withholding of support, audit disallowances, and/or other appropriate action. Biohazards CARB-X should propose a plan for how CARB-X will assess whether materials or procedures proposed are potentially hazardous to research personnel and/or the environment, and if needed, determine whether adequate protection is proposed. Post award, BARDA and NIAID will require CARB-X to complete this assessment. Cooperative Agreement Award and Substantial Involvement The Federal Grant and Cooperative Agreement Act of 1977, 31 U.S.C. 6305, defines the cooperative agreement as similar to a grant in that a thing of value is transferred to a recipient to carry out a public purpose. However, a cooperative agreement is used whenever substantial federal involvement with the recipient during performance is anticipated. The difference between grants and cooperative agreements is the degree of federal programmatic involvement rather than the type of administrative requirements imposed. The administrative and funding mechanism used for this program will be the cooperative agreement for which substantial NIAID and BARDA programmatic involvement with awardees is anticipated during the performance period. This award is subject to the awardee(s) and collaborative requirements and responsibilities set forth in the Cooperative Agreement outlined in the program announcement under this funding opportunity and are hereby incorporated by reference as terms and conditions of this award. Example of Substantial involvement:  Provide funding to the CARB-X and/or in-kind services to product developers supported by the CARB-X,  Share pertinent information related to the performance of CARB-X between agencies on a regular basis.  NIAID and BARDA staff will participate in all technical meetings at the portfolio level with the CARB-X,  Identify and release strategic priorities to the CARB-X on an annual basis that identify focus areas and potential technology types to address strategic gaps  Serve as members of the Joint Oversight Committee (JOC) for the CARB-X. The JOC will provide strategic guidance and direction to the CARB-X. The JOC will mutually interrogate risks and progress of assets, concur on potential new assets and confer on allocation of funding across assets in the CARB-X portfolio. The JOC will also jointly evaluate achievement of Portfolio Progress Milestones. BARDA and MAID Activities: BARDA and NIAID staff collaborator(s) and/or designee(s) activities for this program are as follows:  Participate in orientation and/or summary update meetings with CARB-X on expectations, regulations and key management requirements, as well as reporting requirements, formats and contents.

 
Att 2a, Page 15 of 44  Participate in every two week teleconferences, Face to Face Technical Quarterly Review meetings, as discussed in “M anagem ent o f the Agreem ent” section of this FOA.  Serve as members of the Joint Oversight Committee (JOC) for the CARB-X. The JOC will provide strategic guidance and direction to CARB-X. The JOC will mutually interrogate risks and progress of assets, concur on potential new assets and confer on allocation of funding across assets in the CARB-X portfolio. The JOC will also jointly evaluate achievement of Portfolio Progress Milestones.  Identify and release strategic priorities to the CARB-X on an annual basis that identify focus areas and potential technology types to address strategic gaps  Participate in the development, review and approval of the CARB-X’s quarterly work plan, detailed budget, and monitoring and evaluation plan.  Provide awardee with technical assistance and consultation in identification of appropriate resources outside of both the CARB-X and HHS to support CARB-X activities.  Coordinate activities and synergies with the CARB-X for this FOA with other BARDA & NIAID stakeholders.  Work cooperatively with the CARB-X to assure that all necessary information and progress resulting from this agreement is provided to BARDA in a format that will allow the Department of Health and Human Services to assess the continuing benefits and communicate the successes of the agreement to the general public. BARDA Responsibilities BARDA will be responsible for the review and approval of program activities including, but not limited to, the proposed use of funds and activities to meet the terms and conditions of the award. BARDA will also approve timelines and review progress of the program as well as monitor reporting requirements. Progress evaluation will include the development of timelines and milestones and the oversight of proposed activities through quarterly reports and on-site joint visits with principal investigator / program managers and others in the United States Government (USG) as needed. Accelerator’s Responsibilities CARB-X has the primary responsibility for defining objectives and approaches for planning, conducting, identifying, selecting, fostering, advancing R&D product development and ultimately transitioning the products for follow-on clinical development. The CARB-X and/or sub-recipients [product developers] will retain custody of and primary rights to any data developed under this award, subject to US Government rights of access consistent with U.S. law and current Department of Health and Human Services (HHS) and Public Health Service (PHS) regulations and policies. CARB-X will be responsible for coordinating activities approved under the award. CARB-X will be responsible for developing achievable program plans. CARB-X will also be responsible for tracking that all activities and processes, follow terms and conditions of the agreement, and satisfactorily adhere to budget and Monitoring and Evaluation (M&E) reporting plans. CARB-X will compile program results from sub-recipient (contract and sub-awards, if any) affiliates into consolidated quarterly and annual reports. CARB-X will be responsible for planning and participating collaboratively with BARDA and NIAID under this agreement. Through participation in every two week teleconferences, Face to Face Technical Quarterly Review meetings, and JOC meetings as outlined in the “ Management of t he Agreement” section of, CARB-X will work with BARDA and NIAID in order to make progress toward its goal of executing CARB-X annual work plans.

 
Att 2a, Page 16 of 44 The following is a summary of the annual program requirements for CARB-X:  Submit required technical reports, progress reports and program and financial data.  Ensure that technical data from both the awardee and any possible “sub-recipients” necessary to evaluate the progress of the program are available to BARDA.  Have in place fiscal and programmatic systems to document accountability and performance. Project Meetings  Every Two Week Teleconferences. A conference call between BARDA, NIAID and the CARB-X shall occur every two weeks or as directed by the BARDA program officer. During this call, the CARB-X will discuss the activities during the reporting period, any problems that have arisen and the activities planned for the ensuing reporting period. The principal investigator may choose to include other key personnel on the conference call to give detailed updates on specific projects or the program officer may make this request. CARB-X will maintain a table of expected activities, an actions log an identified risk log as well as a decisions log as a means of managing and conducting these teleconferences. These meeting will review data as well as status and budgetary items.  Kick-off and Quarterly Meetings. CARB-X and the Government shall participate in Project Meetings to coordinate the performance of the Agreement. These meetings may include face-to- face meetings with BARDA/NIAID/AMCG at CARB-X site. Such meetings may include, but are not limited to, meetings of the CARB-X to discuss technical approach, operational capability and initial portfolio that CARB-X proposes to manage. Site visits to the CARB-X and subcontractor’s facilities, and meetings with the CARB-X and HHS officials to discuss the technical, regulatory, and ethical aspects of the program. These meetings will also formulate and agree on the activities for the subsequent three months. In order to facilitate review of agreement activities, it is expected that CARB-X will provide data, reports, and presentations to groups of outside experts (subject to appropriate agreements to protect CARB-X’s and sub-recipients confidential or proprietary data) and USG personnel as requested by the program officer.  Continuation Application Review Presentation (CARP): On an annual base prior to the allocation of additional continuation funding, the Government will invite the CARB-X to give a presentation at a CARP meeting attended by BARDA, NIAID, AMCG, and select, invited interagency representatives. CARB-X will present progress of their portfolio under the Agreement over the corresponding period of time. CARB-X will discuss successes and challenges of the programs and portfolio and present their action plan for the coming year to align with the issued BARDA and NIAID portfolio priorities. The CARP will evaluate progress against portfolio progress milestones and make a recommendation on the action plan, budget allocation and whether the agreement should continue and/or receive additional funding. Table 3.1 Technical and Portfolio Review Meeting Schedule Meeting Frequency Method Members Action

 
Att 2a, Page 17 of 44 Portfolio & Technical Meeting Every two weeks  Teleconference  BARDA & NIAID Program Staff & Technical Experts  CARB-X Staff  Agenda and Meeting minutes Face to Face Technical Quarterly Review Quarterly (prior JOC)  Face to Face at CARB-X Site  BARDA & NIAID Program Staff & Technical Experts  CARB-X Staff & invited product developers  Agenda and Meeting minutes  Quarterly Technical Progress Report JOC Quarterly  Video Teleconference  Three (3) senior level members from CARB-X  Two (2) senior level Alliance  Five (5) senior level NIAID, BARDA or designee members  Agenda and Meeting minutes  Quarterly Portfolio and Technical  Progress Report Funding and Product Asset Allocation Management of the Agreement: CARB-X/BARDA Joint Oversight Committee (JOC) Membership. The CARB X /BARDA Joint Oversight Committee (JOC) is comprised of a total of 10 positions. The break down includes:  Three (3) senior level members from the Accelerator,  Kevin Outterson,  John Rex,  Barry Eisenstein (starting 1/1/2017)  Two (2) senior level Alliance8 members  Tim Jinks appointed by Wellcome Trust  Pete Jackson appointed by AMRC  Five (5) senior level NIAID, BARDA or designee members  Joseph Larsen (BARDA)  Tyler Merkeley (BARDA)  Christopher Houchens (BARDA)  Michael Kurilla (NIAID)  Dennis Dixon (NIAID)  External advisors may also be included in this body on an ad hoc basis, pending the consensus of committee members. In the event this Agreement is amended to add 8 Alliance members are third party external stakeholders focused on combating antibiotic resistant bacteria that will contribute non-dilutive funding to the CARB-X to enhance the technical and financial resources available to CARB-X to support product candidate development.

 
Att 2a, Page 18 of 44 additional parties, representatives of such parties will also be represented on the JOC as appropriate. JOC’s Responsibility: The responsibility of the CARB-X /BARDA Joint Oversight Committee is to mutually evaluate risks and progress of assets covered under this Agreement, concur on potential new assets into the CARB-X and confer on allocation of R&D funding across activities covered under the Agreement. This Committee will also jointly evaluate achievements of Portfolio Progress Milestones Frequency and Process: The CARB-X/BARDA Joint Oversight Committee will meet every quarter or as needed to review progress. The Committee will recommend the strategy to be covered under this Agreement during the subsequent funding period, as well as how Government funding will be allocated across these activities. CARB-X will be responsible for performing all technical and business due diligence on potential new assets prior to submitting their recommendation to the JOC for funding. This may include evaluating, submitting, to the relevant governance board(s) for endorsement prior to a recommendation to the JOC. After concurrence on the product strategic alignment to the priorities, in a majority manner by the JOC, the CARB-X will incorporate the new asset into the portfolio. This enables the CARB-X/Recipient to issue a funding opportunity to the Sub-recipient. The JOC process, funding selection is further discussed in the CARB-X Charter The CARB-X’s internal stage gate process9 will first evaluate any Sub-recipients request for supplemental funding to support follow-on R&D development. Prior to issuing additional funding, beyond the funding approved in consultation with the JOC, the CARB-X will recommend to the JOC additional funding at a JOC meeting. After concurrence on the product in a majority manner by the JOC, and approval by BARDA, CARB-X can issue an additional funding opportunity to the Sub- recipient. Metrics NIAID and BARDA have developed Key Performance Parameters (KPP) to define the metrics for the Accelerator. Meeting all threshold objectives is required to ensure a successful program. The six KPPs summarized in Table 1 below are deemed essential for the successful implementation of the Accelerator. Table: CARB-X Key Performance Parameters KPP Top-Level Metrics Threshold (Minimally Acceptable Performance) Objective (Optimal or Ideal Level of Performance) Ability to populate a diverse R&D CARB-X possesses the ability to aggressively target, incentivize and CARB-X is partially populated with an array of at least 15 R&D candidate CARB-X is fully populated with a diverse array of 20 R&D candidate 9 A stage gate process in product development consists of a set of information gathering phases, which are divided into stages of product development which have a Go/No decision point between each stage

 
Att 2a, Page 19 of 44 KPP Top-Level Metrics Threshold (Minimally Acceptable Performance) Objective (Optimal or Ideal Level of Performance) portfolio of antimicrobial candidates partner with innovators conducting research on antimicrobial products. This may require innovative methods to recruit innovators to work with CARB-X. antimicrobial products over 5 years. While the overall investment risk is lower, the portfolio could benefit from additional diversity. Enhancements to the partnering approach may be needed. antimicrobial products (therapies, preventions, vaccines, non-traditional therapies, diagnostics, devices, and other innovations) over 5 years. A clear visionary strategic approach in developing and maintaining the R&D portfolio is evident. A Network of R&D capabilities and Technical Support The ability of CARB-X to select, foster, advance and transition product candidates requires sufficient network of internal and external R&D capabilities (e.g. preclinical, CMO, CRO,) CARB-X must maintain minimal R&D capabilities of pay for services to ensure access to reputable vendors to facilitate product development A diversified network of R&D vendors (e.g. CRO, Academic laboratories, government entities, and Industry resources) readily accessible as needed with Material Service Agreements, etc. who are collaborating to provide quality R&D product development services while concurrently contributing [as force multiplier] and fostering a products development. Perform the functions of an Accelerator CARB-X must have the structure, policies and experience to function in the role of a traditional accelerator but with specific expertise in Antimicrobial Product Development. An established entity (augmented by technical staff with AMR expertise) operating under an accelerator model with a track record of successfully transitioning R&D products from “Proof of Concept,” prototype, product candidate selection and finally An established accelerator with existing AMR expertise with a track record of successfully transitioning R&D Antimicrobial the products from “Proof of Concept,” prototype, product candidate selection and finally transitioning [graduating] the Innovator for external product

 
Att 2a, Page 20 of 44 KPP Top-Level Metrics Threshold (Minimally Acceptable Performance) Objective (Optimal or Ideal Level of Performance) transitioning [graduating] the Innovator for external product development. development. Ability to progress R&D candidate antimicrobial products in preclinical development The ability of CARB-X to identify 15-20 R&D antimicrobial product targets over 5 years, engage these innovators, support proof of concept, prototype and transition these products out of the CARB-X for follow-on investment. CARB-X provides the minimal R&D capabilities to achieve two IND candidates within the 5 year timeframe of the program and has previously demonstrated development of a product to an IND stage. CARB-X possesses the R&D capabilities and has previously demonstrated development of a product to an IND stage, which will allow it to exceed the required two IND candidates’ goal within the 5 year timeframe of the program. Supporting the Business Needs of Innovators The ability of CARB-X to provide wrap-around support capabilities and services (e.g. technical, strategic, business, access to stakeholders.) to ensure innovators have access to the necessary resources to foster success. CARB-X to provide strategic, regulatory and business development support services to innovators after selection through graduation. / CARB-X will provide introductions to follow-on support and/or R&D transition partner prior to graduation from CARB-X. CARB-X to provide strategic, regulatory and business development and support services to innovators after selection through graduation. / The Innovator will secure follow- on support and/or R&D transition partner prior to graduation from CARB-X. Accelerator Portfolio Metrics: On a quarterly basis BARDA and NIAID will conduct a performance evaluation of CARB-X. CARB-X will be measured on several different parameters. First, the ability of CARB-X to attract and partner with innovators will be measured. CARB-X will also be responsible for tracking the progress and success of each project within the four Accelerators. This data will be helpful in assessing how the CARB-X is progressing technically with the R&D candidate products, but also how well they are operating (i.e. within cost and schedule parameters). The effectiveness of the strategic, regulatory and business development support services of the CARB-X alliance and partner accelerators will also be regularly assessed. This may include a review of external services provided through the CARB-X for the Innovators to determine if the services are helpful in maturing the business and product development strategy.

 
Att 2a, Page 21 of 44 Additional performance benchmarks are related to the overall progression of the portfolio. CARB-X will be evaluated on its ability to identify at least 15 antimicrobial product targets over 5 years, engage these innovators, support proof of concept, prototype and transition these products out of the accelerator for follow-on investment. In the first year of the program, a minimum of five antimicrobials should be identified and supported by CARB-X. Longer term benchmarks are related to the establishment of a robust and diverse pipeline of antimicrobial products. Each project within CARB-X will be required to propose specific performance benchmarks that will be set on a project-by-project basis. Commonly used R&D portfolio management systems will be applied to the CARB-X portfolio of projects/companies. Contacts: The Grants Management Specialist, Nancy Brown, reached at Nancy.Brown@hhs.gov, is responsible for the negotiation, award and administration of this project and for interpretation of grants administration policies and provisions. The Program Officer at BARDA is Tyler Merkeley, at 202-260-0315 and Tyler.Merkeley@hhs.gov is responsible for the programmatic and technical aspects of this project.

 
Att 2a, Page 22 of 44 Attachment A: Research and Related Project Information Awardee will provide the following information to the related questions when a clinical study or Vertebrate Animals studies are identified within CARB-X If activities involving human subjects are planned at any time during the proposed project at any performance site, check yes. Check yes even if the proposed project is exempt from Regulations for the Protection of Human Subjects. If activities involving human subjects are not planned at any time during the proposed project at any performance site, select no. Applications proposing human subjects research may be required to submit additional information, forms, or attachments with the application, in accordance with policies covering human subjects research. 1. Are Human Subjects Involved? YES NO 1.a. If YES to Human Subjects Is the Project Exempt from Federal Regulations? YES NO Yes: If the project is exempt from Federal regulations, check Yes. No: If the project is not exempt from Federal regulations, check No. If yes, Select the appropriate exemption number from 1, 2, 3, 4, 5, 6. If human subject activities are exempt from Federal regulations, provide the exemption numbers corresponding to one or more of the exemption categories. The six categories of research that qualify for exemption from coverage by the regulations are defined in the Common Rule for the Protection of Human Subjects. These regulations can be found at http://www.hhs.gov/ohrp/humansubjects/guidance/45cfr46.html. OHPR guidance states that appropriate use of Exemptions described in 45 CFR 46 should be determined by an authority independent from the investigators (http://answers.hhs.gov/ohrp/categories/1564). Institutions often designate their IRB to make this determination. Since IRB approval is not required at the time of application, the exemptions designated often represent the opinion of the PD/PI, and the justification provided for the exemption by the PD/PI is evaluated during peer review. Human subjects research should be designated as exempt if the proposed research meets the criteria for one or more of the six exemptions. If no, is the IRB review Pending? YES NO Enter the latest Institutional Review Board (IRB) approval date. Leave blank if Pending. Applicants should check “Yes” to the question “Is the IRB review Pending?” even if the IRB review/approval process has not yet begun at the time of submission. Also note that an IRB Approval Date is not required at the time of submission. This may be requested later in the pre-award cycle. If IRB is still pending at time of award then affected components of the award will be restricted. Failure to obtain IRB approval within the agreed upon time frame may result in the termination of an award.

 
Att 2a, Page 23 of 44 Human Subject Assurance Number Enter the approved Federal Wide Assurance (FWA) that the applicant has on file with the Office for Human Research Protections, if available. If the applicant has a FWA number, enter the 8-digit number. Insert “None” if the applicant organization does not have an approved assurance on file with OHRP. In this case, the applicant organization, by the signature in item 21 on the SF424 declaring that it will comply with 45 CFR part 46 and proceed to obtain a human subjects assurances (see http://www.hhs.gov/ohrp). Do not insert the human subjects assurance number of any collaborating institution in the space provided. 2. Are Vertebrate Animals Used? YES NO If activities involving vertebrate animals are planned at any time during the proposed project at any performance site, check yes. If no, skip the rest of block 2. Note that the generation of custom antibodies constitutes an activity involving vertebrate animals. 2.a. If YES to Vertebrate Animals Is the Institutional Animal Care and Use Committee (IACUC) review Pending? YES NO IACUC Approval Date: Enter the latest IACUC approval date (if available). Leave blank if Pending. Animal Welfare Assurance Number: Enter the Federally approved assurance number, if available. To determine if your organization holds an Animal Welfare Assurance, see http://grants.nih.gov/grants/olaw/olaw.htm#assur. Applicants should check “Yes” to the question “Is the IACUC review Pending?” even if the IACUC review/approval process has not yet begun at the time of submission. Also note that an IACUC Approval Date is not required at the time of submission. However, the approval date and other data may be requested later in the pre-award cycle. If the applicant organization does not have an approved Animal Welfare Assurance on file with the Office of Laboratory Animal Welfare (OLAW), NIH, enter “None” in the Animal Welfare Assurance Number field. Do not enter the Animal Welfare Assurance number of any collaborating institution. By inserting “None” at the time of submission, the applicant organization is essentially declaring that it will comply with the PHS Policy on Humane Care and Use of Laboratory Animals by submitting an Animal Welfare Assurance and verification of IACUC approval when requested to do so by OLAW. If IACC approval is still pending at time of award then affected components of the award will be restricted. Failure to obtain IACC approval within the agreed upon time frame may result in the termination of an award. 3. Is proprietary/privileged information included in the application? YES NO Patentable ideas, trade secrets, privileged or confidential commercial or financial information, disclosure of which may harm the applicant, should be included in applications only when such information is necessary to convey an understanding of the proposed project. If the application includes such information, check yes and clearly mark each line or paragraph on the pages containing the proprietary/privileged information with a legend similar to: “The following contains proprietary/privileged information that (name of applicant) requests not be released to persons outside the Government, except for purposes of review and evaluation. “

 
Att 2a, Page 24 of 44 4. Environmental Questions Most research grants are not expected to individually or cumulatively have a significant effect on the environment, and there are several categorical exclusions allowing most applicants to answer ‘No’ to this question unless a specific FOA indicates that the National Environmental Policy Act (NEPA) applies. However, if an applicant expects that the proposed project will have an actual or potential impact on the environment, or if any part of the proposed research and/or project includes one or more of the following categorical exclusions listed below, the line marked “Yes” should be checked and an explanation provided in field 4.b. 1. The potential environmental impacts of the proposed research may be of greater scope or size than other actions included within a category. 2. The proposed research threatens to violate a Federal, State, or local law established for the protection of the environment or for public health and safety. 3. Potential effects of the proposed research are unique or highly uncertain. 4. Use of especially hazardous substances or processes is proposed for which adequate and accepted controls and safeguards are unknown or not available. 5. The proposed research may overload existing waste treatment plants due to new loads (volume, chemicals, toxicity, additional hazardous wasted, etc.) 6. The proposed research may have a possible impact on endangered or threatened species. 7. The proposed research may introduce new sources of hazardous/toxic wastes or require storage of wastes pending new technology for safe disposal. 8. The proposed research may introduce new sources of radiation or radioactive materials. 9. Substantial and reasonable controversy exists about the environmental effects of the proposed research. 4.a. Does this project have an actual or potential impact on the environment? YES NO 4.b. If yes, please explain Explanation of the actual or potential impact on the environment. 4.c. If this project has an actual or potential impact on the environment, has an exemption been authorized or an Environmental Assessment (EA) or an Environmental Impact Statement (EIS) been performed? YES NO 4.d. If yes, please explain Enter additional details about the EA or EIS. If desired, you can provide the information in a separate file, and attach by clicking Add Attachments located to the right of Step 11- Other Attachments. 5. Is the research performance site designated, or eligible to be designated, as a historic place? YES NO If any research performance site is designated, or eligible to be designated, as a historic place, if Yes, check the Yes and then provide an explanation. Otherwise, check the No.

 
Att 2a, Page 25 of 44 5.a. If yes, please explain: If you checked the Yes box indicating any performance site is designated, or eligible to be designated, as a historic place, provide the explanation here. 6. Does this project involve activities outside of the United States or partnerships with International Collaborators? YES NO Indicate whether this project involves activities outside of the United States or partnerships with international collaborators. Check yes or no.. Applicants to PHS agencies must check “Yes” if the applicant organization is a foreign institution or if the project includes a foreign component. 6.a. If yes, identify countries Enter the countries with which international cooperative activities are involved.

 
***Confidential Treatment Requested Attachment B: Reporting Table

 
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Att 2a, Page 30 of 44 Attachment C: Quarterly Monitoring and Evaluation Plan at the Portfolio and the Product Level

 
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***Confidential Treatment Requested Standard Terms and Conditions of award: This cooperative agreement is issued under the authority of Section 301 of the Public Health Service (PHS) Act (42 U.S.C. 241), “Research and Investigations”; Section 319L of the PHS Act (42 U.S.C. 247d-7e), “Biomedical Advanced Research and Development Authority”; Section 405 of the PHS Act (42 U.S.C. 284), “Authority of the Directors of the National Research Institutes”; Section 446 of the PHS Act (42 U.S.C. 2850, “National Institute of Allergy and Infectious Diseases, Purpose of Institute.” By receiving funds under this award, the recipient assures that it will carry out the project/program as authorized and will comply with the terms and conditions and other requirements of this award. This grant is subject to the applicable requirements of the Uniform Administrative Requirements for Awards and Subawards to Institutions of Higher Education, Hospitals, Other Nonprofit Organizations, and Commercial Organizations under Title 45 Code of Federal Regulations, Part 75. Any applicable statutory or regulatory requirements, including 45 CFR Part 75 and 2 CFR Part 200, directly apply to this award apart from any coverage in the HHS GPS The terms and conditions of this Notice of Award and other requirements have the following order of precedence if there is any conflict in what they require: (1) Public Health Service Act, Section 311 (42 U.S.C. 243).(2) terms and conditions of the award (3) CFR Part 75; (4) HHS Grants Policy Statement. Requests that require prior approval from the awarding office must be submitted in writing to the Grants Management Specialist via GrantSolutions. Only responses signed by the Grants Management Specialist or Grants Management Officer are to be considered valid. Grantees who take action on the basis of responses from other ASPR officials do so at their own risk. Such responses will not be considered binding by or upon ASPR. Subaward Equal Treatment The recipient must comply with 45 CFR 75, including the provision that no State or local government recipient nor any intermediate organization with the same duties as a governmental entity shall, in the selection of service providers, discriminate for or against an organization’s religious character or affiliation.

 
Att 2a, Page 33 of 44 Public Policy Requirements All public policy requirements included in “Public Policy Requirements” in Part I and Part II (pages 11-2 throughll-24) of the HHS GPS apply as appropriate. See FOA under which this award was issued for more information. Title VI in Division G of the “Consolidated Appropriation Act, 2015” Consistent with the Consolidated and Further Continuing Appropriations Act, 2015 (Public Law 113-235), Division G, Title VI, Sec. 603, the grantee agrees to comply with existing and future guidance from the Secretary regarding control of the spread of the Ebola virus. GENERAL TERMS AND CONDITIONS: 1) As required by the Federal Funding Accountability and Transparency Act of 2006, this new award is subject to the subaward and executive compensation reporting requirement of 2 CFR Part 170. Although the full text of this regulation is attached, you may access the language online at https://www.fsrs.gov/. Reporting Subawards and Executive Compensation a. Reporting of first-tier subawards. 1. Applicability. Unless you are exempt as provided in paragraph d. of this award term, you must report each action that obligates $25,000 or more in Federal funds that does not include Recovery funds (as defined in section 1512(a)(2) of the American Recovery and Reinvestment Act of 2009, Pub. L. 111-5) for a subaward to an entity (see definitions in paragraph e. of this award term). 2. Where and when to report. i. You must report each obligating action described in paragraph a.1. of this award term to http://www.fsrs.gov. ii. For subaward information, report no later than the end of the month following the month in which the obligation was made. (For example, if the obligation was made on November 7, 2010, the obligation must be reported by no later than December 31, 2010.)

 
Att 2a, Page 34 of 44 3. What to report. You must report the information about each obligating action that the submission instructions posted at http://www-Ssrs.gov specify b. Reporting Total Compensation of Recipient Executives. 1. Applicability and what to report. You must report total compensation for each of your five most highly compensated executives for the preceding completed fiscal year, if i. the total Federal funding authorized to date under this award is $25,000 or more; ii. in the preceding fiscal year, you received (A) 0 percent or more of your annual gross revenues from Federal procurement contracts (and subcontracts) and Federal financial assistance subject to the Transparency Act, as defined at 2 CFR 170.320 (and subawards); and (B) 25,000,000 or more in annual gross revenues from Federal procurement contracts (and subcontracts) and Federal financial assistance subject to the Transparency Act, as defined at 2 CFR 170.320 (and subawards); and iii. The public does not have access to information about the compensation of the executives through periodic reports filed under section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a), 78o(d)) or section 6104 of the Internal Revenue Code of 1986. (To determine if the public has access to the compensation information, see the U.S. Security and Exchange Commission total compensation filings at http://www.sec.gov/answers/execomp.htm.) 2. Where and when to report. You must report executive total compensation described in paragraph b.1. of this award term: i. As part of your registration profile, you must access the System for Award Management (SAM) at: https://ww•.sam.gov/portal/public/SAM/ . ii. By the end of the month following the month in which this award is made, and annually thereafter. c. Reporting of Total Compensation of Subrecipient Executives. 1. Applicability and what to report. Unless you are exempt as provided in paragraph d. of this award term, for each first-tier subrecipient under this award, you shall report the names and total compensation of each of the subrecipient’s five most highly compensated executives for the subrecipient’s preceding completed fiscal year, if i. in the subrecipient’s preceding fiscal year, the subrecipient received (A) 0 percent or more of its annual gross revenues from Federal procurement contracts (and subcontracts) and Federal financial assistance subject to the Transparency Act, as defined at 2 CFR 170.320 (and subawards); and (B) 25,000,000 or more in annual gross revenues from Federal procurement contracts (and subcontracts), and Federal financial assistance subject to the Transparency Act (and subawards); and ii. The public does not have access to information about the compensation of the executives through 3

 
Att 2a, Page 35 of 44 periodic reports filed under section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a), 78o(d)) or section 6104 of the Internal Revenue Code of 1986. (To determine if the public has access to the compensation information, see the U.S. Security and Exchange Commission total compensation filings at http://www.sec.gov/answers/execomp.httri.) 2. Where and when to report. You must report subrecipient executive total compensation described in paragraph c.1. of this award term: i. To the recipient. ii. By the end of the month following the month during which you make the subaward. For example, if a subaward is obligated on any date during the month of October of a given year (i.e., between October 1 and 31), you must report any required compensation information of the subrecipient by November 30 of that year. d. Exemptions If, in the previous tax year, you had gross income, from all sources, under $300,000. you are exempt from the requirements to report: i. Subawards, and ii. The total compensation of the five most highly compensated executives of any subrecipient. e. Definitions. For purposes of this award term: 1. Entity means all of the following, as defined in 2 CFR part 25: i. A Governmental organization, which is a State, local government, or Indian tribe; ii. A foreign public entity; iii. A domestic or foreign nonprofit organization; iv. A domestic or foreign for-profit organization; v. A Federal agency, but only as a subrecipient under an award or subaward to a non- Federal entity. 2. Executive means officers, managing partners, or any other employees in management positions. 3. Subaward: i. This term means a legal instrument to provide support for the performance of any portion of the substantive project or program for which you received this award and that you as the recipient award to an eligible subrecipient. ii. The term does not include your procurement of property and services needed to carry out the project or program (for further explanation, see Sec. 11.210 of the attachment to OMB Circular A¬133. “Audits of States, Local Governments, and Non-Profit Organizations”). iii. A subaward may be provided through any legal agreement, including an agreement that you or a 4

 
Att 2a, Page 36 of 44 subrecipient considers a contract. 4. Subrecipient means an entity that: i. Receives a subaward from you (the recipient) under this award; and ii. Is accountable to you for the use of the Federal funds provided by the subaward. 5. Total compensation means the cash and noncash dollar value earned by the executive during the recipient’s or subrecipient’s preceding fiscal year and includes the following (for more information see 17 CFR 229.402(c)(2)): i. Salary and bonus. ii. Awards of stock, stock options, and stock appreciation rights. Use the dollar amount recognized for financial statement reporting purposes with respect to the fiscal year in accordance with the Statement of Financial Accounting Standards No. 123 (Revised 2004) (FAS 123R), Shared Based Payments. iii. Earnings for services under non-equity incentive plans. This does not include group life, health, hospitalization or medical reimbursement plans that do not discriminate in favor of executives, and are available generally to all salaried employees. iv. Change in pension value. This is the change in present value of defined benefit and actuarial pension plans. v. Above-market earnings on deferred compensation which is not tax-qualified. vi. Other compensation, if the aggregate value of all such other compensation (e.g. severance, termination payments, value of life insurance paid on behalf of the employee, perquisites or property) for the executive exceeds $10,000. 2) Indirect Cost Rates: §200.414/§75.414(f) In addition to the procedures outlined in the appendices in paragraph (e) of this section, any non-Federal entity that has never received a negotiated indirect cost rate, except for those non-Federal entities described in Appendix VII to Part 200/Appendix VII to part 75 —States and Local Government and Indian Tribe Indirect Cost Proposals. paragraph D.1.b, may elect to charge a de minimis rate of 10% of modified total direct costs (MTDC) which may be used indefinitely. As described in §200.403/§75.403 Factors affecting allowability of costs, costs must be consistently charged as either indirect or direct costs, but may not be double charged or inconsistently charged as both. If chosen, this methodology once elected must be used consistently for all Federal awards until such time as a non-Federal entity chooses to negotiate for a rate, which the non-Federal entity may apply to do at any time. (g) Any non-Federal entity that has a current federally negotiated indirect cost rate may apply for a one-time extension of the rates in that agreement for a period of up to four years. This extension will be subject to the review and approval of the cognizant agency for indirect costs. If an extension is granted the non-Federal entity may not request a rate review until the extension period ends. At the end of the 4-year extension, the non-Federal entity must re-apply to negotiate a rate. Subsequent one-time extensions (up to four years) are permitted if a renegotiation is completed between each extension request. 3) Mandatory disclosures.

 
Att 2a, Page 37 of 44 The non-Federal entity or applicant for a Federal award must disclose, in a timely manner, in writing to the Federal awarding agency or pass-through entity all violations of Federal criminal law involving fraud, bribery, or gratuity violations potentially affecting the Federal award. Failure to make required disclosures can result in any of the remedies described in §200.338 Remedies for noncompliance, including suspension or debarment. (See also 2 CFR part 180 and 31 U.S.C. 3321). 4) English Language All Federal financial assistance announcements and Federal award information must be in the English language. Applications must be submitted in the English language and must be in the terms of U.S. dollars. If the Federal awarding agency receives applications in another currency, the Federal awarding agency will evaluate the application by converting the foreign currency to United States currency using the date specified for receipt of the application. Non-Federal entities may translate the Federal award and other documents into another language. In the event of inconsistency between any terms and conditions of the Federal award and any translation into another language, the English language meaning will control. Where a significant portion of the non-Federal entity’s employees who are working on the Federal award are not fluent in English, the non-Federal entity must provide the Federal award in English and the language(s) with which employees are more familiar. 5) As the recipient organization, you acknowledge acceptance of the grant terms and conditions by drawing down or otherwise obtaining funds from the Payment Management System. In doing so, your organization must ensure that you exercise prudent stewardship over Federal funds and that all costs are allowable, allocable and reasonable. 6) This grant is subject to the terms and conditions as stated in Section III (Terms and Conditions) of the NoA. Refer to the “order of precedence” that explains the laws and regulations that govern the award. 7) Legal and Financial Responsibility-The recipient organization is legally and financially responsible for all aspects of this grant, including funds provided to sub-recipients. 8) Executive Level II Salary Cap For FY 2016, the Consolidated Appropriations Act, 2015 (Public Law 113-76) signed into law on January 10, 2016, restricts the amount of direct salary to Executive Level II of the Federal Executive Pay scale. The Executive Level II salary is $185,100 annually. Funds made available by this award shall not be used by the grantee or subrecipient to pay the salary and bonuses of an individual, either as direct costs or indirect costs, at a rate in excess of current Executive Level II compensation requirements. 9) Gun Control None of the funds made available through this award may be used, in whole or in part, to advocate or promote gun control.

 
Att 2a, Page 38 of 44 10) Pornography None of the funds made available through this award may be used to maintain or establish a computer network unless such network blocks the viewing, downloading, and exchanging of pornography. 11) Lobby Restrictions The grantee must comply with 45 CFR Part 93. None of the funds made available through this award shall be used to pay any person for influencing or attempting to influence an officer or employee of any agency, a Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress in connection with any of the following covered Federal actions: the awarding of any Federal contract, grant or cooperative agreement, the making of any Federal loan, and the extension, continuation, renewal, amendment, or modification of any Federal contract, grant, loan, or cooperative agreement. Influencing or attempting to influence means making, with the intent to influence, any communication to or appearance before an officer or employee of any agency, a Member of Congress, an officer or employee of Congress, or an employee of a Member of congress in connection with any covered action. 12) Sterile Needle Distribution No funds made available through this award shall be used to carry out any program of distributing sterile needles or syringes for the hypodermic injection of any illegal drug. 13) Accounting Records and Disclosure - Awardees and sub-recipients must maintain records which adequately identify the source and application of funds provided for financially assisted activities. These records must contain information pertaining to grant or subgrant awards and authorizations,

 
Att 2a, Page 39 of 44 obligations, unobligated balances, assets, liabilities, outlays or expenditures, and income. The awardee, and all its sub-recipients, should expect that A, or its designee, may conduct a financial compliance audit and on-site program review of grants with significant amounts of Federal funding. 14) Procurement When procuring equipment, the recipient must comply with the procurement standards at 45 CFR Part 75.329 Procurement procedures, which requires the performance and documentation of some form of cost or price analysis with every procurement action. 15) DUNS Number Annual Update The DUNS number recipients use on their application must be registered and active in the System for Award Management (SAM) which can be accessed at https://www.sam.gov. Recipients must update their SAM information at least every 12 months to maintain an active account. 16) Trafficking In Persons a. Provisions applicable to a recipient that is a private entity. 1. You as the recipient, your employees, subrecipients under this award, and subrecipients’ employees may not i. Engage in severe forms of trafficking in persons during the period of time that the award is in effect; ii. Procure a commercial sex act during the period of time that the award is in effect; or iii. Use forced labor in the performance of the award or subawards under the award. 2. We as the Federal awarding agency may unilaterally terminate this award, without penalty, if you or a subrecipient that is a private entity — i. Is determined to have violated a prohibition in paragraph a.1 of this award term; or ii. Has an employee who is determined by the agency official authorized to terminate the award to have violated a prohibition in paragraph a.1 of this award term through conduct that is either— A. Associated with performance under this award; or B. Imputed to you or the subrecipient using the standards and due process for imputing the conduct of an individual to an organization that are provided in 2 CFR part 180, “OMB Guidelines to Agencies on Governmentwide Debarmentand Suspension (Nonprocurement),” as implemented by our agency at 2 CFR part 376. b. Provision applicable to a recipient other than a private entity. We as the Federal awarding agency may unilaterally terminate this award, without penalty, if a subrecipient that is a private entity 1. Is determined to have violated an applicable prohibition in paragraph a.1 of this award term; or 2. Has an employee who is determined by the agency official authorized to terminate the award to have violated an applicable prohibition in paragraph a.1 of this award term through conduct that is either i. Associated with performance under this award; or ii. Imputed to the subrecipient using the standards and due process for imputing the conduct of an individual to an organization that are provided in 2 CFR part 180, “OMB Guidelines to

 
Att 2a, Page 40 of 44 Agencies on Government wide Debarment and Suspension (Non-procurement),” as implemented by our agency at 2 CFR part 376 c. Provisions applicable to any recipient. 1. You must inform us immediately of any information you receive from any source alleging a violation of a prohibition in paragraph a.1 of this award term 2. Our right to terminate unilaterally that is described in paragraph a.2 or b of this section: i. Implements section 106(g) of the Trafficking Victims Protection Act of 2000 (TVPA), as amended (22 U.S.C. 7104(g)), and ii. Is in addition to all other remedies for noncompliance that are available to us under this award. 3. You must include the requirements of paragraph a.1 of this award term in any subaward you make to a private entity. 17) Reducing Text Messaging While Driving In accordance with Executive Order 13513, Federal Leadership On Reducing Text Messaging While Driving, dated October 1, 2009, contractors, subcontractors, and recipients and subrecipients are encouraged “to adopt and enforce policies that ban text messaging while driving company-owned or -rented vehicles or GOV, or while driving POV when on official Government business or when performing any work for or on behalf of the Government. Agencies should also encourage Federal contractors, subcontractors, and grant recipients and subrecipients as described in this section to conduct initiatives of the type described in section 3(a) of this order.” 18) Publications: All grantee publications, including: research publications press releases other publications or documents about research that is funded by ASPR must include the following two statements: A specific acknowledgment of ASPR grant support, such as: “Research reported in this [publication/press release] was supported by [name of the program office(s), or other ASPR offices] the Department of Health and Human Services Office of the Assistant Secretary for Preparedness and Response under award number [specific ASPR grant number(s)].” A disclaimer that says: “The content is solely the responsibility of the authors and does not necessarily represent the official views of the Department of Health and Human Services Office of the Assistant Secretary for Preparedness and Response.” 19) Federal Information Security Management Act (FISMA): If applicable, all information systems, electronic or hard copy which contain federal data need to be protected from unauthorized access. This also applies to information associated with ASPR grants. Congress and the OMB have instituted laws, policies and directives that govern the creation and implementation of federal information security practices that pertain specifically to grants and contracts. The current regulations are pursuant to the Federal Information Security Management Act (FISMA), Title III of the E-Government Act of 2002 Pub. L. No. 107-347. 20) Health and Safety Regulations and Guidelines Grantees are responsible for meeting applicable Federal, State, and local health and safety standards and for establishing and implementing necessary measures to minimize their employees’ risk of injury or illness in activities related to ASPR grants. In addition to applicable

 
Att 2a, Page 41 of 44 Federal, State, and local laws and regulations, the following regulations must be followed when developing and implementing health and safety operating procedures and practices for both personnel and facilities:  29 CFR 1910.1030, Blood borne pathogens; 29 CFR 1910.1450. Occupational exposure to hazardous chemicals in laboratories; and other applicable occupational health and safety standards issued by the Occupational Health and Safety Administration (OSHA) and included in 29 CFR 1910. These regulations are available at http://www.osha.gov/p1s/oshaweb/owastand.displav_standard_group?p_toc_level=l&p_j.)art_nu mber=1910.  Nuclear Regulatory Commission Standards and Regulations, pursuant to the Energy Reorganization Act of 1974 (42 U.S.C. 5801 et seq.). Copies may be obtained from the U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001. The following guidelines are recommended for use in developing and implementing health and safety operating procedures and practices for both personnel and facilities:  Biosafety in Microbiological and Biomedical Laboratories, CDC and NIH, HHS. This publication is available at http://www.cdc.wv/OD/ohs/biosftv/bmb15/BMBL 5th_Edition.pdf.  Prudent Practices for Safety in Laboratories (1995), National Research Council, National Academy Press, 500 Fifth Street, NW, Lockbox 285, Washington, DC 20055 (ISBN 0-309- 05229-7). This publication can be obtained by telephoning 800-624-8373. It also is available at http://www.nap.eclu/catalog/4911.html. Grantee organizations are not required to submit documented assurance of their compliance with or implementation of these regulations and guidelines. However, if requested by ASPR, grantees should be able to provide evidence that applicable Federal, State, and local health and safety standards have been considered and have been put into practice. Reporting Requirements: 1) Federal Financial Report (FFR) — Awardees are required to electronically submit a semi- annual (due months from date of award w/ 30 day grace period) and annual (due 90 days after the end of budget period) Federal Financial Report (Standard Form 425) via grantsolutions. 2) Progress Reporting: Awardees are required to electronically submit monthly and annual program progress reports via GrantSolutions. As part of the progress report. financial information will be reported both per major category of expense, and by objectives. Grantees will include sub- recipient monitoring activities that were completed during each quarter. 3) Cash Transaction Reporting: Recipients must report cash transaction data using the Federal Financial Report (FFR), SF-425. Recipients will utilize the SF-425 lines 10.a through 10.c to

 
Att 2a, Page 42 of 44 report cash transaction data to the Division of Payment Management. The FFR SF-425 (lines 10.a through 10.c) is due to the Payment Management System 30 days after the end of each calendar quarter. The FFR SF-425 electronic submission and dates for the new quarters will be announced through the Payment Management/SmartLink Payment System’s bulletin board. Funds will be frozen if the report is not filed on or before the due date. 4) Subaward and Executive Compensation Reporting: Awardees must ensure that they have the necessary processes and systems in place to comply with the sub-award and executive total compensation reporting requirements established under OMB guidance at 2 CFR Part 170, unless they qualify for an exception from the requirements, should they be selected for funding. CFDA number is to be included on all Subawards, including contracts and consultant agreements, so ASPR staff may track compliance. 5) Tangible Property Report: Awardees will be required to submit an annual (after each 12 month period) Tangible Property Report (SF 428). Final SF 428 reports are due 90 days after the end of the project period. 6) Audit requirements for Federal award recipients are detailed at http://www.whitehouse.govisites/default/files/omb/assets/a133_revised_2007.pdf. Specifically, non-Federal entities that expend a total of $750,000 or more in Federal awards, during each Fiscal Year, are required to have an audit completed in accordance with OMB Circular A-133. The Circular defines Federal awards as Federal financial assistance (grants) and Federal cost-reimbursement (contracts) received both directly from a Federal awarding agency as well as indirectly from a pass-through entity and requires entities submit, to the Federal Audit Clearinghouse (FAC), a completed Data Collection Form (SF-SAC) along with the Audit Report, within the earlier of 30 days after receipt of the report or 9 months after the fiscal year end. The Data Collection Forms and Audit Reports MUST be submitted to the FAC electronically at http://harvester.census.gov/fac/collect/ddeindex.html . For questions and information concerning the submission process, please visit http://harvester.census.gov/sac/ or call the FAC 1-800- 253¬0696. 7) Reporting of Matters Related to Recipient Integrity and Performance 1. General Reporting Requirement If the total value of your currently active grants, cooperative agreements, and procurement contracts from all Federal awarding agencies exceeds $10,000,000 for any period of time during the period of performance of this Federal award, then you as the recipient during that period of time must maintain the currency of information reported to the System for Award Management (SAM) that is made available in the designated integrity and performance system (currently the Federal Awardee Performance and Integrity Information System (FAPIIS)) about civil, criminal, or administrative proceedings described in paragraph 2 of this award term and condition. This is a statutory requirement under section 872 of Public Law 110-417, as amended (41 U.S.C. 2313). As required by section 3010 of Public Law 111-212, all information posted in the designated

 
Att 2a, Page 43 of 44 integrity and performance system on or after April 15, 2011, except past performance reviews required for Federal procurement contracts, will be publicly available. 2. Proceedings About Which You Must Report Submit the information required about each proceeding that: a. Is in connection with the award or performance of a grant, cooperative agreement, or procurement contract from the Federal Government; b. Reached its final disposition during the most recent five year period; and c. If one of the following: (1) A criminal proceeding that resulted in a conviction, as defined in paragraph 5 of this award term and condition; (2) A civil proceeding that resulted in a finding of fault and liability and payment of a monetary fine, penalty, reimbursement, restitution, or damages of $5,000 or more; (3) An administrative proceeding, as defined in paragraph 5 of this award term and condition, that resulted in a finding of fault and liability and your payment of either a monetary fine or penalty of $5,000 or more or reimbursement, restitution, or damages in excess of $100,000; or (4) Any other criminal, civil, or administrative proceeding if: (i) It could have led to an outcome described in paragraph 2.c.(1), (2), or (3) of this award term and condition; (ii) It had a different disposition arrived at by consent or compromise with an acknowledgement of fault on your part; and (iii) The requirement in this award term and condition to disclose information about the proceeding does not conflict with applicable laws and regulations. 3. Reporting Procedures Enter in the SAM Entity Management area the information that SAM requires about each proceeding described in paragraph 2 of this award term and condition. You do not need to submit the information a second time under assistance awards that you received if you already provided the information through SAM because you were required to do so under Federal procurement contracts that you were awarded. 4. Reporting Frequency During any period of time when you are subject to this requirement in paragraph 1 of this award term and condition, you must report proceedings information through SAM for the most recent five year period, either to report new information about any proceeding(s) that you have not reported previously or affirm that there is no new information to report. Recipients that have Federal contract, grant, and cooperative agreement awards with a cumulative total value greater than $10,000,000 must disclose semiannually any information about the criminal, civil, and administrative proceedings. 5. Definitions For purposes of this award term and condition: a. Administrative proceeding means a nonjudicial process that is adjudicatory in nature in order to make a determination of fault or liability (e.g., Securities and Exchange Commission Administrative proceedings. Civilian Board of Contract Appeals

 
Att 2a, Page 44 of 44 proceedings, and Armed Services Board of Contract Appeals proceedings). This includes proceedings at the Federal and State level but only in connection with performance of a Federal contract or grant. It does not include audits, site visits, corrective plans, or inspection of deliverables. b. Conviction, for purposes of this award term and condition, means a judgment or conviction of a criminal offense by any court of competent jurisdiction, whether entered upon a verdict or a plea, and includes a conviction entered upon a plea of nolo contendere. c. Total value of currently active grants, cooperative agreements, and procurement contracts includes— (1) Only the Federal share of the funding under any Federal award with a recipient cost share or match; and (2) The value of all expected funding increments under a Federal award and options, even if not yet exercised Failure to comply with the above stated terms and conditions may result in suspension, classification as High Risk status, termination of this award or denial of funding in the future. All previous terms and conditions remain in effect until specifically approved and removed by the Grants Management Officer. All responses to special terms and conditions of award and postaward requests must be electronically mailed to the ASPR Grants Management Specialist and to the Program Official as identified on your Notice of Award. CLOSEOUT All required closeout documents are due within 90 days of the end of the project period. At a minimum those documents will include the final progress report, final financial reports. final equipment and supply reports and invention reports. ASPR will convey final instructions. Remarks: Payment under this award will be made available through the HHS Departmental Payment Management System (PMS). PMS provides instructions for making withdrawals of Federal funds. Inquiries regarding payments should be directed to Program Support Center/Division of Payment Management (PSC/DPM), DHHS; Post Office Box 6021; Rockville, MD 20852; 1¬877- 614-5533; PMSSupport@psc.gov Contacts: The Grants Management Specialist Nancy.Brown@hhs.gov is responsible for the negotiation, award and administration of this project and for interpretation of grants administration policies and provisions. The Project Officer, Tyler.Merkeley@hhs.gov is responsible for the programmatic and technical aspects.

 
***Confidential Treatment Requested Research Subaward Attachment 3A Subaward No. Pass-Through Entity Contacts […***…]

 
***Confidential Treatment Requested Attachment 3B Research Subaward Agreement Subrecipient Contacts […***…] Subaward Number:

 
***Confidential Treatment Requested Attachment 3B Page 2 Research Subaward Agreement Highest Compensated Officers […***…] Subaward Number:

 
Attachment 4 Research Subaward Agreement Reporting Requirements Subrecipient agrees to the following: A final technical/progress report will be submitted to PTE PI within 30 days after the end of the period of performance. Monthly technical/progress reports will be submitted to PTE PI within 7 days of the end of each month. Report should include programmatic and financial (sponsored and cost-share) components as detailed in PTE Prime Award Attachment B/Reporting Table (Subaward Attachment 2a, p26), as applicable to Subrecipient. See Attachment 6, Article III for additional information to be included on a quarterly basis in the monthly report. Negative reports are required. Monthly progress reports are not required for the periods when the Annual Report is due. Annual technical/progress reports will submitted to PTE PI within 7 days after the end of each reporting period. Report should include programmatic and financial (sponsored and cost-share) components as detailed in PTE Prime Award Attachment B/Reporting Table (Subaward Attachment 2a, p26), as applicable to Subrecipient. In accordance with 37 CFR 401.14, Subrecipient agrees to notify PTE’s Administrative Contact within 30 days after Subrecipient’s inventor discloses invention(s) in writing to Subrecipient’s personnel responsible for patent matters. The Subrecipient will submit a final invention report using Awarding Agency specific forms to the PTE PI within 30 days of the end of the period of performance to that it may be included with the PTE’s final invention report to the Awarding Agency. A negative report is required. Annual property inventory reports will be submitted to PTE’s Administrative contact within 7 days after the end of each 12- month period. A final report is due 30 days after the project end date. The Subrecipient will submit property inventory reports using Tangible Property Report (SF 428). Subrecipient shall provide PTE PI with a status update of clinical studies that are actively enrolling patients to include by study site: cumulative enrollment; new enrollments; screen failures; patients dropped from study; AE and SAEs; activation or inactivation of study sites; investigator appointments or changes; and status of IRB/IEC review/approval/renewal. Subrecipient shall include such status updates with the submission of the monthly programmatic report. Other Special Reporting Requirements: It is anticipated that Subrecipient invoices and monthly financial reports will be submitted through the CARB-X Digital Resources system. See also Att 4a (Adhoc Reporting Requirements). All reports shall be in English. All information provided to PTE under this Subaward Agreement may be shared with members of the CARB-X Joint Oversight Committee, which includes representatives from the Wellcome Trust, BARDA, and NIAID for non-proprietary purposes relating to oversight under this Subaward Agreement.

 
Attachment 4a Research Subaward Agreement Ad hoc Reporting Requirements The below section includes non-routine (Ad hoc) reporting requirements. These reports are event driven and are due contingent upon such events occurring. 1. Incident Report Subrecipient shall communicate and document all critical program concerns, risks, or potential risks with PTE. ○ Due within 24 hours of activity or incident or within 12 hours for a security activity or incident. ○ Email or telephone with written follow-up. ○ Additional updates within 24 hours of additional developments. ○ Subrecipient shall submit within 3 business days a Corrective Action Plan (if deemed necessary by either party) to address any potential issues. ○ If corrective action is deemed necessary, Subrecipient must address in writing, its consideration of concerns raised by PTE within 3 business days of receiving such concerns in writing. 2. FDA or EMA Audits In the event of an FDA or EMA inspection which occurs that relates to products under this Subaward Agreement, or for any other FDA or EMA inspection that has the reasonable potential to impact the performance of this Subaward Agreement, Subrecipient shall provide PTE with an exact copy (non-redacted) of the FDA Form 483 and the Establishment Inspection Report (EIR) (or the corresponding forms from the EMA). Subrecipient shall provide PTE with copies of the plan for addressing areas of non- conformance to FDA or EMA regulations for GLP, GMP, or GCP guidelines as identified in the audit report, status updates during the plan’s execution and a copy of all final responses to the FDA or EMA. ○ Subrecipient shall notify PTE within 5 business days of a scheduled FDA or EMA audit or within 12 hours of an ad hoc site visit/audit if the FDA or EMA does not provide advanced notice. ○ Subrecipient shall provide copies of any FDA or EMA audit report received from sub-recipients that occur as a result of this agreement or for products funded hereunder within three (3) business days of receiving correspondence from the FDA or EMA. ○ Within five (5) business days of audit report, Subrecipient shall provide PTE with a plan for addressing areas of nonconformance, if any are identified. ○ For the purposes of this Attachment 4a, “EMA” includes all constituent national drug regulatory authorities. The below section includes PTE Initiated non-routine [Ad hoc] reporting requirements. These reports are due three (3) business days after request. 1. Final Reports for Clinical, Non-Clinical Studies, Manufacturing Campaigns PTE may request that Subrecipient provide Clinical, Non-Clinical Studies, Manufacturing Campaigns, and other product development final reports to PTE for review and comment. 2. Standard Operating Procedures PTE may request that Subrecipient shall make internal and subcontractor Standard Operating Procedures (SOPs) available for review electronically. 3. Regulatory Correspondence and Submissions PTE may request that Subrecipient provide any regulatory correspondence (FDA, EMA, etc.) for products supported under this agreement. 4. QA Audits and Reports PTE reserves the right to participate in QA audits at the Subrecipient. Upon completion of the audit/site visit the Subrecipient shall provide a report capturing the findings, results and next steps in proceeding. If action is requested of the Subrecipient, detailed concerns for addressing areas of non-conformance to FDA or EMA regulations for GLP, GMP, or GCP guidelines, as identified in the audit report, must be provided to PTE. The Subrecipient shall provide responses from the site to address these concerns and plans for corrective action execution. 5. Technical Documents

 
PTE may request that Subrecipient provide PTE with reports from the following agreement funded activities: Process Development Reports, Assay Qualification Plan/Report, Assay Validation Plan/Report, Assay Technology Transfer Report, Batch Records, SOPs, Master Production Records, Certificate of Analysis, Clinical Studies Data or Reports, Toxicology Reports or any other reasonably requested Technical Documents. 6. Animal Model or Other Technology Transfer Package PTE may request that Subrecipient provide Animal Model or Other Technology Transfer Package relevant data. 7. Post-completion Reporting Subrecipient shall report to the PTE during the 24-month period following the completion of the Subaward Agreement any significant funding, regulatory events, or major transactions involving the Project, including new equity funding, outlicensing or collaboration agreements, regulatory approvals, and litigation involving the Project, as well as the Ad Hoc reporting specified above as reasonably requested by the PTE. Subrecipient shall also annually report to the PTE the Subrecipients Stewardship and Access Plan (as defined in Attachment 6, Article V) after the termination of the Subaward Agreement.

 
***Confidential Treatment Requested Attachment 5 Cost Reimbursement Research Subaward Agreement Statement of Work, Cost Sharing, Indirect & Budget […***…] Subaward Number:

 
***Confidential Treatment Requested […***…]

 
***Confidential Treatment Requested […***…]

 
***Confidential Treatment Requested Project Milestones GO/NO GO PROJECT MILESTONES Mstn # GO/NO GO Contract Milestone Go Criteria No Go Criteria Technical Report SOW/WBS # Stage […***…]

 
***Confidential Treatment Requested […***…]

 
***Confidential Treatment Requested CIDARA THERAPEUTICS Risk Mitigation RISK MITIGATION MATRIX (RMM) Prior to Risk Mitigation Strategy Post Risk Mitigation Strategy WBS Risks Probability of Occurrence Risk to Project (Severity) Risk to Cost Risk to Schedule Risk to Tech Performance Risk Mitigation Effort Probability of Occurrence Risk to Project (Severity) Risk to Cost Risk to Schedule Risk to Tech Performance […***…] 7 Confidential

 
Attachment 6 Research SubawardAgreement CARB-X Special Terms and Conditions Article I. The Project Subrecipient has applied for funding from the PTE in support of the project described above and led by the principal investigator named above, which aims to conduct research and development (R&D) to reduce the threat to human health from antimicrobial resistance (the “Project”). The Subrecipient shall furnish or arrange for the provision of all the necessary services, qualified personnel, material, equipment, and facilities as needed to perform the Project to completion. Section 1.01 The Project will begin with an initial phase of work, the Base Stage, and may include one or more Option Stage(s). Section 1.02 Work performed during the Base Stage and during each exercised Option Stage each constitute independent, non-severable, discrete work segments that cannot be subdivided for separate performance and are each necessary for the Project. Each non-severable, work segment constitutes a discrete requirement, which shall contain multiple R&D activities that, when reviewed in total, shall result in a defined end product. Section 1.03 Statement of Work. (a) The Statement of Work in Attachment 5 of this Subaward describes the Budget and Milestones for this Subaward Agreement. (b) This Subaward Agreement requires the Subrecipient to provide the PTE certain information regarding monitoring and reporting contained in this Attachment 6 and in Attachments 4 and 5 (“Deliverables”). (c) The PTE is providing Subrecipient with funding for the Project. The Subrecipient’s success in completing the required Project tasks under each Stage (Base Stage and any exercised Option Stage) must be demonstrated to the satisfaction of the PTE through completion of the Statement of Work and Deliverables for that Stage.

 
(d) This Statement of Work in Attachment 5 may be extended, modified or terminated only as provided for in this Subaward. Article II. Option Stages Section 2.01 No Automatic Option Stages. (a) Unless an Option Stage is exercised in writing by the PTE as described herein, the Project consists only of the Base Stage. Section 2.02 Option Stages (a) The PTE will evaluate Milestones and Deliverables at the completion of the Base Stage, and at each subsequent exercised Option Stage. (b) The PTE has no obligation to exercise any Option Stage and has no obligation to pay for any work under any Option Stage, unless: (i) all of the specified Milestones and Deliverables are fully satisfied by the intended dates, to the satisfaction of the PTE; (ii) the CARB-X Joint Oversight Committee, in its sole discretion, chooses to fund the Option Stage; and (iii)the Subrecipient and the PTE agree on a Statement of Work to be incorporated as Attachment 5 for the Option Stage, evidenced in a fully-executed, new Subaward Agreement. (c) Notice of intent to exercise an Option Stage shall be provided in the following manner: (i) The PTE shall give written notice to the Subrecipient, signed by the PTE PI, of intent to exercise an Option Stage; (ii) The PTE will endeavor to give the Subrecipient provisional notice at least thirty (30) days before the Subaward Agreement expires; and (iii)The Subrecipient has ten (10) business days to provide written notice to the PTE to accept or decline the Option. Nonacceptance is presumed if the Subrecipient fails to respond in writing within the ten (10) business days.

 
Article III. Monitoring Section 3.01 The Subrecipient’s progress in furtherance of Milestones and Deliverables will be monitored: (a) By the Subrecipient’s Scientific Advisory Board (the “SAB”), with progress incorporated on a quarterly basis in the monthly written reports by the Subrecipient as detailed in Attachment 4 (Reporting) submitted to PTE; (b) In the course of regularly scheduled meetings with the company support team provided by the PTE (the “Company Support Team”); (c) In monthly reports provided by the Subrecipient on the CARB-X Digital Resources as detailed in Attachment 4 (Reporting), or as otherwise requested by the PTE; (d) Subrecipient ad hoc reports reasonably requested by the PTE or as detailed in Attachment 4a; and (e) A written Subrecipient report provided to the PTE when the Subrecipient considers it has completed a Milestone. Section 3.02 Subrecipient SAB. (a) The Subrecipient shall establish (or shall demonstrate that it has already established) a SAB. The Subrecipient will inform the PTE of SAB membership, including changes to the SAB membership. (b) If the PTE reasonably believes that the Milestones and Deliverables are not being met, the PTE may designate an independent expert advisor with relevant experience to attend SAB meetings related to this Project. Article IV. Subrecipient Representations and Warranties Section 4.01 The Subrecipient makes the following representations and warranties to the best of its knowledge: (a) The Subrecipient has all requisite power and authority to execute, deliver, and perform this Subaward Agreement and to deliver the Project. (b) The Subrecipient has obtained or will obtain all third-party approvals and consents required for the Subrecipient to execute, deliver, and perform this Subaward Agreement where failure to obtain such

 
approvals and consents would have a material adverse effect on Subrecipient’s ability to perform its obligations under the Subaward Agreement. (c) The execution and performance of this Subaward Agreement by the Subrecipient does not and will not violate or conflict with, as applicable, the Subrecipient’s charter documents, contract(s) or intellectual property agreements to which Subrecipient is a party, which violation or conflict would have a material adverse effect on Subrecipient’s ability to perform its obligations under the Subaward Agreement. (d) Subrecipient will perform the Subaward Agreement and the Project in compliance with all applicable laws. (e) All written statements made by the Subrecipient to the PTE during the application process, including Expressions of Interest, Short Form and Long Form Applications, Presentations to the CARB-X Advisory Board, and written responses to the Funding Award - Due Diligence Form, and all other communications relating to this Subaward Agreement, are true and correct as of the time each such statement was made. (f) For each representation and warranty above, the statements are made: (a) as of the date of this Subaward Agreement; (b) as of the date any Option Stage is exercised; and (c) as of the date the Subrecipient provides any Deliverable to the PTE. Article V. Additional Subrecipient Obligations Section 5.01 Access, Not Excess. (a) The purpose of CARB-X is to protect human health from threats related to antibiotic resistant bacteria. CARB-X supports R&D efforts through this Subaward to improve the pipeline of products to protect human health. These efforts must be sustainable, transparent and enforceable in order to protect human health from antibiotic resistant bacteria. Over the long term, new products and technologies must be sustainably managed and used to promote “Access, Not Excess,” including:

 
(i) Thoughtful and effective stewardship of new antibacterial products to prevent inappropriate use and therefore premature resistance, in line with the Global Action Plan on Antimicrobial Resistance developed by the World Health Organization; (ii) Reasonable plans for appropriate access to and stewardship of developed antibiotic products and technologies , especially in low- and middle-income countries; and (iii) Avoidance of misaligned commercial incentives, which go against the above-stated goals. (b) Therefore, the Subrecipient agrees that any products or technologies resulting from the Project (the “Product”) will be manufactured, marketed, and sold in compliance with (at minimum) the principles the Industry Roadmap for Progress on Combatting Antimicrobial Resistance - September 2016; (c) Wellcome Trust Reporting Requirement. As the last Deliverable at the end of each Stage, the Subrecipient shall create a plan reasonably describing how it intends to meet the above stewardship and access obligations for the Product, (the “Stewardship and Access Plan”). The Stewardship and Access Plan shall include: (i) identifying obstacles and constraints to access, pricing and stewardship delivery; (ii) identifying strategy to ensure access, pricing and stewardship delivery (e.g. proposed reliable production with sufficient capacity, supply systems and pricing policies); (iii) exploitation strategy for IP Rights; (iv) global registration strategy; (v) strategy for monitoring effectiveness of access, pricing and stewardship delivery and proposed metrics to measure success; and (vi) target pricing policies with a view to ensuring equitable access. (d) The Subrecipient shall update the Stewardship and Access Plan and provide it to the PTE when the Product enters Phase III trials, files a New Drug Application, or is approved by the FDA or EMA. After marketing approval, the Stewardship and Access Plan shall be updated every other year. The Subrecipient shall use best reasonable efforts to comply with its Plan at all times.

 
(e) The Stewardship and Access Plan will be a non-confidential document and will be publicly posted on the PTE website. (f) Obligations Follow the Product (i) If ownership of the Subrecipient’s IP Rights resulting from the Project changes, whether through sale, transfer, license, assignment or otherwise, the Subrecipient will require the above Stewardship and Access Plan commitments to follow the Product and be incorporated into any such sale, transfer, license, assignment or otherwise to the new company (the “Acquirer”). Prompt notice will be provided by the Subrecipient to the PTE of any such event. If the Acquirer accepts obligations under this Section 5.01, the Subrecipient is discharged from further obligations from this Section 5.01. (ii) If the Subrecipient fails to provide the Stewardship and Access Plan as provided in Section 5.01, the PTE can demand the same in writing. If the Subrecipient fails to provide such plan within sixty (60) days of such written demand, then Subrecipient will be deemed to be in breach of this Section 5.01 and without limiting any other claims, damages or remedies, shall repay to the PTE, as stipulated damages, the sum of $10,000 and the Subrecipient will not be deemed to be in good standing with CARB-X. (iii)The obligations of this Section 5.01 survive the termination of this Subaward Agreement and shall continue in force until the expiration of the last period of patent or exclusivity periods in the United States or the European Union for any IP Rights related to the Project. Section 5.02 Open Science. (a) CARB-X supports the unrestricted access to the published research resulting from the Project and the public dissemination of the results of any clinical trial, including positive and negative results, which may include clinical trial data. (b) Therefore, the Subrecipient will endeavor, to the greatest extent possible, consistent with timely filing of patents, to publish results from the Project (whether positive or negative), so that the results of this

 
Project are placed in the peer-reviewed literature as soon as practical, consistent with the protection of the Subrecipient’s patents. (c) CARB-X Awardees will make available any publications of research funded by CARB-X through PubMed Central (PMC) and Europe PubMed Central as soon as possible and no later than six months from the date of final publication (in accordance with Wellcome’s Open Access policy: https://wellcome.ac.uk/funding/managing-grant/open-access-policy). (d) The Subrecipient will provide the PTE with advance copies of all manuscripts related to the Project when they are submitted or re-submitted for publication. The PTE will have no role in the preparation, editing or approval of the manuscript. Section 5.03 Additional Research Standards. Subject in all cases to item 2 in the Agency Specific Certifications & Assurances included in Attachment 2 (describing minimum US government mandated standards for research with animals): (a) Where the Subrecipient is undertaking research using non-human primates, cats, dogs or horses, the Subrecipient must also comply with the Wellcome Trust policies on research involving animals and the use of animals in medical and veterinary research. (b) Where the Subrecipient is undertaking research involving human participants, the Subrecipient is required to have the relevant regulatory and ethical approvals and appropriate governance mechanism in place before such research begins and comply with item 3 in the Agency Specific Certifications & Assurances included in Attachment 2 (describing US government regulations on human subjects research). It is the responsibility of the Subrecipient (not the PTE) to ensure that appropriate compensation arrangements (including insurance or indemnity cover, where available) are in place to cover research participants or their dependents against injuries or damage caused as a result of their participation in research, in accordance with local law and best practices. The PTE will not fund the costs of such insurance or indemnity cover, and will not be liable for any such compensation. (c) Where a healthcare intervention is being examined as part of research, the standard of healthcare provided to a control group member must be at least equivalent to the best local, currently available and

 
affordable standard of care. The Subrecipient’s research protocol shall include proposals for any necessary post-research health monitoring related to a volunteer’s participation. Article VI. Intellectual Property Section 6.01 Subrecipient Use of the Powered by CARB-X Logo. (a) For the limited purposes of your participation in CARB-X relating to the Project, your use of the following logo: shall be permitted for the Term, subject to: (i) your full performance of the terms and conditions of your Subaward Agreement with the PTE, (ii) The PTE’s determination, in its sole discretion, that use of the term is either no longer accurate or appropriate, in any way misrepresents Subrecipient participation, or for any reason reflects negatively on the PTE or the PTE’s other partners, collaborators, sponsors or grantees, or (iii)discontinuation of the trademark at the order or request of BARDA, NIAID or the Wellcome Trust. (b) Subrecipient use of the term “Powered by CARB-X” shall be subject to CARB-X Brand Guidelines, as set forth in Attachment 6a. (c) Any other use of the CARB-X name, its servicemarks or trademarks, or any of its other distinguishable marks, whether registered or not, shall be limited to those granted by the express, written permission of the PTE. Those to whom such permission is granted must agree that the PTE shall remain the final arbiter of the use of the mark. Section 6.02 PTE Use of Subrecipient Logo. The Subrecipient hereby grants the PTE and the institutions represented on the CARB-X Joint Oversight Committee permission and the right to use the Subrecipient logo artwork for presentations, the PTE internal and external websites, and other reasonable promotional and reporting uses relating to the Project. Section 6.03 Other IP Rights.

 
(a) In addition to the reporting requirements detailed in Attachment 4 of this Subaward, the Subrecipient shall provide written notice to PTE of any material: (i) filing or re-filing, prosecution, defense or enforcement activities including any litigation or threatened litigation of any IP Rights during the Term; and (ii) completed transactions between the Company and third parties to sublicense, transfer, or otherwise exploit the IP Rights. (b) Subrecipient shall use its best commercial efforts to include provisions in its contracts with its subcontractors performing service(s) requiring the subcontractors to assign to the Subrecipient the entire right, title, and interest throughout the world to any inventions arising out of the services performed that are specifically related to the asset under development in the Project. Section 6.04 License to Wellcome Trust of Unexploited Intellectual Property (a) Subject in all cases to the provisions of the PTE NOA, applicable Federal laws and regulations governing patents and inventions, including government-wide regulations at 37 CFR part 401 (per 45 CFR 75.322(c)) and, in particular, and without limitation, to U.S. Government march-in rights set forth in 37 CFR Sect. 401.6 and 401.14(j), and further subject to Section 6.04(e), if any IP Rights remain unexploited or not further developed by the Subrecipient and/or its licensees in any country as of the date that is five (5) years following the end date of the Project, the Wellcome Trust Limited as trustee of the Wellcome Trust (“Wellcome”) shall have the option in its sole discretion by giving written notice to the Subrecipient, to take responsibility on behalf of the Subrecipient for the commercialization and exploitation of such IP Rights in that country, which includes discretion to make any and all decisions regarding the negotiation, acceptance, and conclusion of terms for any agreement regarding the commercial development and exploitation of such unexploited IP Rights (including development and exploitation by way of license, sale, assignment, materials transfer or other transfer of rights, as well as any transaction which involves placing such unexploited IP Rights into a separate corporate vehicle) in such country.

 
(b) If Wellcome exercises its right to exploit on behalf of the Subrecipient under Section 6.04(a), the Subrecipient will license or assign the IP Rights to Wellcome or its nominee and provide Wellcome with access to any associated data, documents, materials, regulatory approvals or information as required for Wellcome to exploit such rights. (c) If Wellcome exercises its right to exploit on behalf of the Subrecipient under Section 6.04(a), the Subrecipient agrees that it shall pass to Wellcome promptly any or all exploitation opportunities in the applicable country that it becomes aware of from time to time in connection with the IP Rights. The Subrecipient further undertakes that it shall not engage in any activities that could reasonably lead to the loss of an exploitation opportunity in the applicable country without the prior written consent of Wellcome. (d) If Wellcome exercises its right to exploit under Section 6.04(a), the Trust shall share revenues and equity holdings received in respect of exploitation of the IP Rights at a 50:50 ratio between Wellcome and the Subrecipient after reimbursement of costs that Wellcome directly incurs in exploiting the Project IP Rights. (e) Notwithstanding anything to the contrary set forth in this Section 6.04, in the event that the Subrecipient licenses a third party to exploit the IP Rights (whether alone or together with other IP Rights of the Subrecipient) in any country, then Wellcome shall have no rights under this Section 6.04 with respect to such IP Rights in such country, provided that either: (a) under a written agreement with the Subrecipient, such licensee is required to use diligent efforts to exploit the licensed IP Rights in such country, and such written agreement provides for a reversion to the Subrecipient of the IP Rights in such country if the licensee materially breaches this diligence obligation; or (b) Wellcome has approved such license in writing. (f) For purposes of this Section 6.04 only, Wellcome is a third party beneficiary of this Subaward Agreement, able to enforce the right to exploit in any country any unexploited IP Rights derived from the Project as described herein.

 
(g) The rights and obligations of this Section 6.04 survive the termination of this Subaward Agreement and shall continue in force until ten (10) years following the end date of this Subaward Agreement. Article VII. Budget. Section 7.01 Cost Share Principles. (a) The Subrecipient will meet their full amount of cost share obligation as stated in Attachment 5 (the “Cost Share Obligation”). (b) The Cost Share Obligation must meet the requirements described in this Subaward Agreement. (c) The Subrecipient shall use best efforts to reach an agreement with NIAID so that the Subrecipient utilizes an amount of NIAID Preclinical Services (“PCS”) valued at no less than 15% of the budget amount stated in Attachment 5 for the Base Stage (the “NIAID PCS Target Amount”). Section 7.02 Budget Reconciliation. (a) At the end of the Base Stage and at the end of any exercised Option Stage(s), the Subrecipient and PTE will perform a budget reconciliation to determine: (i) Whether the Subrecipient fully met their Cost Share Obligation; and (ii) Whether the Subrecipient fully met their NIAID PCS Target Amount. (b) If the Subrecipient does not meet the Cost Share Obligation in full, the PTE may withhold payment or request a refund to recover the unmet Cost Share Obligation. Article VIII. Definitions All other capitalized terms are defined as described in the text of this Subrecipient Agreement. Section 8.01 Base Stage means the initial scope of work contracted for in this Subaward Agreement as detailed in Subaward Attachment 5 and further described in Article I of this Attachment 6. Section 8.02 CARB-X Funders means HHS/ASPR/BARDA, the Wellcome Trust, and HHS/NIH/NIAID. Section 8.03 IP Rights means all legally protectable patents, know-how, and trade secret rights that cover the making, use, or sale of the specific asset under development in the Project.

 
Section 8.04 Milestones means a reference point that marks a specified task and is used to monitor the Project’s progress. Section 8.05 Option Stage means additional, optional, segment of work that builds upon Base Stage or previously exercised Option Stage as described in Article II of this Attachment 6. Section 8.06 Subaward Agreement means this Cost Reimbursement Research Subaward Agreement.

 
Attachment 6a Research Subaward Agreement Powered by CARB-X Logo and Brand Guidelines We encourage the use of the Powered by CARB-X Logo in all communications that serve to raise the profile of CARB-X in a positive manner and to raise awareness about its mission. Any use of the Powered by CARB-X Logo must be in accordance with the Sub-Award Agreement between the Company and Boston University. The following are guidelines to assist in the graphic design of communications materials in which you would like to use the Powered by CARB-X Logo. 1. Display: In order to preserve the integrity of the Powered by CARB-X Logos, it is important that no other logos, type or other graphic elements infringe on its space. The minimum “clear space” around the Logo in all uses is equivalent to ½ the height of the Logo. 2. Background Color: The Powered by CARB-X Logo should always be used in color for online use, fully visible and displayed on a white background. The Powered by CARB-X Logo should be used in color for print applications unless the color version is not practical, in which case the Powered by CARB-X Logo can be reproduced in solid black on a white background. For all other uses, such as in videos and digital communications, please consult with your CARB-X liaison for guidance prior to distribution or publication. 3. The Powered by CARB-X Logo should be displayed in high resolution as appropriate to the medium. 4. Do not use the Powered by CARB-X Logo in a manner that might create confusion as to the CARB-X brand or imply that CARB-X is the source of your products or services. 5. The Powered by CARB-X Logo must not be used as your own product names, service names, trademarks, logos, company names, domain names, website title, application icon, favicon, or the like.

 
Exhibit 10.2

CIDARA THERAPEUTICS, INC.
RESTRICTED STOCK UNIT GRANT NOTICE
(2015 EQUITY INCENTIVE PLAN)
Cidara Therapeutics, Inc. (the “ Company ”), pursuant to its 2015 Equity Incentive Plan (the “ Plan ”), hereby awards to Participant a Restricted Stock Unit Award for the number of shares of the Company’s Common Stock set forth below (the “ Award ”). The Award is subject to all of the terms and conditions as set forth herein and in the Plan and the Restricted Stock Unit Award Agreement, both of which are attached hereto and incorporated herein in their entirety. Capitalized terms not otherwise defined herein will have the meanings set forth in the Plan or the Restricted Stock Unit Award Agreement. In the event of any conflict between the terms in the Award or the prospectus for the Plan (the “ Plan Prospectus ”) and the Plan, the terms of the Plan will control.
Participant:         
Date of Grant:         
Vesting Commencement Date:         
Number of Units/Shares Subject to Award:         

Vesting Schedule :
[_____________] Notwithstanding the foregoing, vesting will terminate upon the Participant’s termination of Continuous Service.

Issuance Schedule:
The shares will be issued in accordance with the issuance schedule set forth in Section 6 of the Restricted Stock Unit Award Agreement.
Additional Terms/Acknowledgements: Participant acknowledges receipt of, and understands and agrees to, this Restricted Stock Unit Grant Notice, the Restricted Stock Unit Award Agreement and the Plan. Participant also acknowledges receipt of the Plan Prospectus. Participant further acknowledges that as of the Date of Grant, this Restricted Stock Unit Grant Notice, the Restricted Stock Unit Award Agreement and the Plan set forth the entire understanding between Participant and the Company regarding this Award and supersede all prior oral and written agreements, promises and/or representations on that subject with the exception of (i) equity awards previously granted and delivered to Participant, (ii) any compensation recovery policy that is adopted by the Company or is otherwise required by applicable law and (iii) any written employment or severance arrangement that would provide for vesting acceleration of this award upon the terms and conditions set forth therein.
By accepting the Award, Participant acknowledges having received and read the Restricted Stock Unit Grant Notice, the Restricted Stock Unit Award Agreement and the Plan (the “ Grant Documents ”) and agrees to all of the terms and conditions set forth in these documents. Furthermore, by accepting the Award, Participant consents to receive such documents by electronic delivery and to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company.

1
113473740 v1
Exhibit 10.2

Notwithstanding the above, if Participant has not actively accepted the Award within 90 days of the first vesting date set forth in this Restricted Stock Unit Grant Notice, Participant is deemed to have accepted the Award, subject to all of the terms and conditions of the Grant Documents.

CIDARA THERAPEUTICS, INC.
By:     ____________________________________
Signature
Title:     ____________________________________
Date:     ____________________________________
PARTICIPANT:
   ____________________________________
Signature
Date:     ____________________________________
ATTACHMENTS :
Restricted Stock Unit Award Agreement, 2015 Equity Incentive Plan, Plan Prospectus



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113473740 v1


Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO RULE 13a-14(a) and 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Jeffrey Stein, Ph.D., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Cidara Therapeutics, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;
b. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
Date: May 10, 2017
 
/s/ Jeffrey Stein, Ph.D.
 
 
Jeffrey Stein, Ph.D.
 
 
President and Chief Executive Officer
 
 
(Principal Executive Officer)





Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO RULE 13a-14(a) and 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Matthew Onaitis, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Cidara Therapeutics, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;
b. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
Date: May 10, 2017
 
/s/ Matthew Onaitis
 
 
Matthew Onaitis
 
 
Chief Financial Officer and General Counsel
 
 
(Principal Financial Officer)





Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of Cidara Therapeutics, Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jeffrey Stein, Ph.D., President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
Date: May 10, 2017
 
/s/ Jeffrey Stein, Ph.D.
 
 
Jeffrey Stein, Ph.D.
 
 
President and Chief Executive Officer
 
 
(Principal Executive Officer)
The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure document.





Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of Cidara Therapeutics, Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Matthew Onaitis, Chief Financial Officer and General Counsel of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
Date: May 10, 2017
 
/s/ Matthew Onaitis
 
 
Matthew Onaitis
 
 
Chief Financial Officer and General Counsel
 
 
(Principal Financial Officer)
The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure document.