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TABLE OF CONTENTS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Table of Contents

As filed with the Securities and Exchange Commission on October 17, 2016.

Registration No. 333-213917


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



Amendment No. 2 to

FORM S-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933



RA PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)



Delaware
(State or other jurisdiction of
incorporation or organization)
  2834
(Primary Standard Industrial
Classification Code Number)
  26-2908274
(I.R.S. Employer
Identification Number)



87 Cambridge Park Drive
Cambridge, MA 02140
(617) 401-4060
(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)



Douglas A. Treco, Ph.D.
President and Chief Executive Officer
87 Cambridge Park Drive
Cambridge, MA 02140
(617) 401-4060
(Name, address, including zip code, and telephone number, including area code, of agent for service)



Copies to:

Kingsley L. Taft, Esq.
Ryan S. Sansom, Esq.
Goodwin Procter LLP
100 Northern Avenue
Boston, Massachusetts 02210
(617) 570-1000

 

David C. Lubner
Executive Vice President
and Chief Financial Officer
Ra Pharmaceuticals, Inc.
87 Cambridge Park Drive
Cambridge, Massachusetts 02140
(617) 401-4060

 

Peter N. Handrinos, Esq.
Brandon J. Bortner, Esq.
Latham & Watkins LLP
John Hancock Tower
200 Clarendon Street
Boston, Massachusetts 02116
(617) 948-6000



Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this registration statement.

           If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended, check the following box.    o

           If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

           If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

           If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

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

Large Accelerated Filer o   Accelerated Filer o   Non-Accelerated Filer ý
(Do not check if a
smaller reporting company)
  Smaller Reporting Company o



           The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment that specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

CALCULATION OF REGISTRATION FEE

               
 
Title of Each Class of Securities
to be Registered

  Amount to be
Registered(1)

  Proposed Maximum
Offering Price Per
Share

  Proposed Maximum
Aggregate Offering
Price(2)

  Amount of
Registration Fee(3)

 

Common Stock, par value $0.0001 per share

  6,670,000   $14.00   $93,380,000   $9,513

 

(1)
Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(a) under the Securities Act. Includes the offering price of shares that the underwriters have the option to purchase to cover over-allotments, if any.

(2)
Calculated pursuant to Rule 457(a) under the Securities Act based on an estimate of the proposed maximum aggregate offering price.

(3)
$8,686 of this registration fee was previously paid by the Registrant to register securities in the proposed maximum aggregate offering price of $86,250,000 on September 30, 2016.

   


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The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED OCTOBER 17, 2016

5,800,000 Shares

LOGO

Ra Pharmaceuticals, Inc.

Common Stock



        This is the initial public offering of shares of our common stock. Prior to this offering, there has been no public market for our common stock. We are selling 5,800,000 shares of our common stock. The initial public offering price of our common stock is expected to be between $12.00 and $14.00 per share.

        We intend to apply to list our common stock on The NASDAQ Global Market under the symbol "RARX."

        The underwriters have an option to purchase a maximum of 870,000 additional shares of common stock from us.

        We are an "emerging growth company" as that term is used in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and, as such, we have elected to comply with certain reduced public company reporting requirements for this prospectus and future filings.

        Investing in our common stock involves risks. See "Risk Factors" on page 13.

 
  Price to
Public
  Underwriting
Discounts and
Commissions
  Proceeds to
Ra Pharmaceuticals, Inc.
 
Per Share   $                      $                      $                     
Total   $     $     $    

(1)
See "Underwriting" beginning on page 162 of this prospectus for additional information regarding underwriting compensation.

        Certain of our existing stockholders, including certain affiliates of our directors, have indicated an interest in purchasing an aggregate of approximately $30.0 million of shares of our common stock in this offering at the initial public offering price. However, because indications of interest are not binding agreements or commitments to purchase, the underwriters may determine to sell more, less or no shares in this offering to any of these stockholders, or any of these stockholders may determine to purchase more, less or no shares in this offering.

        Delivery of the shares of common stock will be made on or about                           , 2016.

        Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

Credit Suisse   Jefferies   BMO Capital Markets

SunTrust Robinson Humphrey

   

The date of this prospectus is                           , 2016


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TABLE OF CONTENTS

 
  Page  

PROSPECTUS SUMMARY

    1  

RISK FACTORS

    13  

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

    64  

USE OF PROCEEDS

    66  

DIVIDEND POLICY

    67  

CAPITALIZATION

    68  

DILUTION

    70  

SELECTED CONSOLIDATED FINANCIAL DATA

    73  

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

    75  

BUSINESS

    91  

MANAGEMENT

    130  

EXECUTIVE COMPENSATION

    137  

DIRECTOR COMPENSATION

    144  

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

    145  

PRINCIPAL STOCKHOLDERS

    148  

DESCRIPTION OF CAPITAL STOCK

    151  

SHARES ELIGIBLE FOR FUTURE SALE

    156  

MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS FOR NON-U.S. HOLDERS OF COMMON STOCK

    158  

UNDERWRITING

    162  

LEGAL MATTERS

    170  

EXPERTS

    170  

WHERE YOU CAN FIND MORE INFORMATION

    170  

INDEX TO FINANCIAL STATEMENTS

    F-1  

        You should rely only on the information contained in this prospectus or in any free writing prospectus we file with the Securities and Exchange Commission. Neither we nor the underwriters have authorized anyone to provide you with information other than that contained in this prospectus or any free writing prospectus prepared by or on behalf of us or to which we have referred you. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We and the underwriters are offering to sell, and seeking offers to buy, common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date on the front cover page of this prospectus, or other earlier date stated in this prospectus, regardless of the time of delivery of this prospectus or of any sale of our common stock.

        Through and including                    , 2016 (25 days after the commencement of this offering), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This delivery requirement is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.



        The market data and certain other statistical information used throughout this prospectus are based on independent industry publications, governmental publications, reports by market research firms or other independent sources that we believe to be reliable sources. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. We are responsible for all of the disclosure contained in this prospectus, and we believe these industry publications and third-party research, surveys and studies are reliable. While we are not aware of any misstatements regarding any third-party information presented in this prospectus, their estimates, in particular, as they relate to projections, involve numerous assumptions, are subject to risks and uncertainties, and are subject to change based on various factors, including those discussed under the section entitled "Risk Factors" and elsewhere in this prospectus. Some data are also based on our good faith estimates.

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PROSPECTUS SUMMARY

        This summary highlights information contained elsewhere in this prospectus. Before investing in our common stock, you should carefully read this entire prospectus, including our consolidated financial statements and the related notes included elsewhere in this prospectus, "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." As used in this prospectus, unless the context otherwise requires, references to the "company," "we," "us" and "our" refer to Ra Pharmaceuticals, Inc. together with its subsidiaries.

Overview

        We are a clinical-stage biopharmaceutical company using our proprietary peptide chemistry platform to develop novel therapeutics for the treatment of serious diseases that are caused by excessive or uncontrolled activation of the complement system, a critical component of the immune system. Inappropriate activation of the complement system can quickly turn it from a beneficial defense system to an aggressor that plays a major role in immune and inflammatory diseases. We are developing our lead product candidate, RA101495, a convenient self-administered subcutaneous, or SC, injection, which is an injection into the tissue under the skin, for the treatment of paroxysmal nocturnal hemoglobinuria, or PNH. PNH is a rare, chronic, life-threatening, blood disorder where red blood cells are mistakenly attacked and destroyed by the complement system. We expect to initiate our Phase 2 clinical program for RA101495 in PNH patients in the first quarter of 2017 and release data in the second half of 2017. We are also developing RA101495, administered SC, to treat other debilitating complement-mediated diseases such as refractory generalized myasthenia gravis, or rMG, and lupus nephritis, or LN. We expect to initiate a Phase 2 clinical trial with RA101495 for rMG and a Phase 1b clinical trial in LN in the second half of 2017.

        RA101495 is a synthetic macrocyclic peptide, a ring-shaped chain of amino acids, which is a potent inhibitor of complement component 5, or C5. C5 plays a key role in the rupture and destruction of red blood cells, or hemolysis, associated with PNH. Inhibition of C5 is a clinically validated target for the control and suppression of complement-induced hemolysis in patients with PNH. Currently the only drug approved to treat PNH is eculizumab (Soliris), a humanized monoclonal antibody that acts as a C5 inhibitor and is administered biweekly by intravenous, or IV, infusion by healthcare professionals. Eculizumab had reported annual sales of $2.6 billion in 2015 for its two approved indications, PNH and aHUS. However, loss of hemolysis control, or breakthrough hemolysis, has been observed in patients treated with eculizumab, particularly towards the end of its two-week administration cycle. If approved for PNH, we believe RA101495 when self-administered SC on a more frequent basis, will provide sustained and improved disease control, which reduces the risk of breakthrough hemolysis, and offers PNH patients more convenience and flexibility compared with eculizumab.

        The complement system, which consists of approximately 30 interacting proteins, offers a target-rich opportunity for us to leverage our Extreme Diversity platform technology that was pioneered by Nobel Laureate Dr. Jack Szostak and allows us to inhibit certain uncontrolled complement pathway factors involved in complement-mediated diseases. Our platform allows us to produce synthetic macrocyclic peptides that combine the diversity and specificity of antibodies with the pharmacological properties of small molecules. The highly specific and stable peptide-like molecules generated are much smaller than monoclonal antibodies and other biologics, enabling more convenient routes of administration while still offering the opportunity to target protein-protein interactions, a type of molecular interaction that historically has been difficult to address with other small molecules. We believe our technology will allow us to pursue challenging targets for which only monoclonal antibodies have been developed. Our platform has been externally validated in a collaboration with Merck & Co., Inc., or Merck, when we successfully identified and delivered to Merck orally-available cyclic peptides for a non-complement cardiovascular target with a large market opportunity.

        We are developing a portfolio of drug candidates designed to treat a variety of complement-mediated diseases, including rare blood, neurologic, ophthalmologic, renal and inflammatory diseases. We also have preclinical programs targeting selective inhibition of other complement factors for diseases with no approved therapies, including Factor D for ophthalmologic and renal diseases, an oral, small molecule C5 inhibitor and C1s for certain autoimmune and central nervous system, or CNS, diseases.

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Our Pipeline

        The following table summarizes key information about our lead program and other pipeline programs. We hold worldwide commercialization rights to all of our product candidates, except for our non-complement cardiovascular target with a large market opportunity, which is subject to our collaboration with Merck.

Program
  Indication(1)   Description   Status

RA101495 for C5 Inhibition

  PNH (SC)   Phase 1 with single ascending dose and multiple dose in healthy volunteers   Completed Phase 1 second quarter 2016

     

Phase 2 with eculizumab-naïve patients, patients switched from eculizumab, and eculizumab inadequate responders

 

Planned Phase 2 commencing first quarter of 2017, and data by second half of 2017

 

rMG (SC)

 

Phase 2 with rMG patients

 

Program to be initiated with planned Phase 2 commencing second half of 2017,(2)

 

LN (SC)

 

Phase 1b with LN patients

 

Program to be initiated with planned Phase 1b commencing second half of 2017,(2)

Factor D Inhibition

 

Dry AMD/GA (intravitreal, or injection into the eye)

 

Preclinical program

 

Preclinical activities in process

 

Orphan renal diseases DDD and C3GN

 

Preclinical program

 

Preclinical activities in process

Oral C5 Inhibitor

 

PNH, rMG, LN and CNS Diseases

 

Preclinical program

 

Preclinical activities in process

C1s Inhibition

 

Autoimmune/CNS Diseases

 

Preclinical program

 

Discovery activities in process

Merck Collaboration(3)

 

Non-complement cardiovascular target with large market opportunity

 

Collaboration agreement

 

Lead oral peptide class selected June 2016; Merck's preclinical activities in process


(1)
In the table above, we refer to various indications as follows: PNH: paroxysmal nocturnal hemoglobinuria; rMG: refractory generalized myasthenia gravis; LN: lupus nephritis; AMD: age-related macular degeneration; GA: geographic atrophy; DDD: dense deposit disease; C3GN: C3 glomerulonephritis; and CNS: central nervous system.

(2)
We intend to leverage our work in PNH, including the chemistry, manufacturing and controls, or CMC, and preclinical data packages, to advance our programs for RA101495 for rMG and LN, which have not yet been initiated.

(3)
For additional information about our collaboration with Merck, see the section titled "Management's Discussion and Analysis of Financial Conditions and Results of Operations—Financial Overview."

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Our Programs

        Our lead product candidate, RA101495, is a potent synthetic macrocyclic peptide inhibitor of C5 formulated for daily SC administration that we are initially developing for the treatment of PNH. We expect to initiate our Phase 2 clinical program for RA101495 in PNH patients in the first quarter of 2017 and to release data in the second half of 2017.

        In addition to developing RA101495 for PNH, we are also developing RA101495, administered SC, to treat other serious complement-mediated diseases such as rMG and LN. In the second half of 2017, we expect to initiate a Phase 2 clinical trial with RA101495 for rMG and a Phase 1b clinical trial in LN. In addition to RA101495 and our collaboration with Merck, we have discovery and preclinical programs targeting selective inhibition of other complement factors, including Factor D administered by intravitreal injection for dry AMD, Factor D administered SC for DDD and C3GN, an oral, small molecule C5 inhibitor, and C1s inhibitors for certain autoimmune and CNS diseases.

RA101495 for Paroxysmal Nocturnal Hemoglobinuria

        PNH is a rare, chronic, debilitating, acquired blood disorder that is most frequently diagnosed in early adulthood and usually continues throughout the life of the patient. Some of the prominent symptoms of PNH include severe anemia, a condition that results from having too few healthy red blood cells, severe abdominal pain, severe headaches, back pain, excessive weakness and fatigue. If not treated, PNH results in the death of approximately 35% of affected individuals within five years of diagnosis, and 50% of affected individuals within 10 years of diagnosis, primarily due to the formation of life-threatening blood clots inside the blood vessels, or thrombosis. We estimate that there are approximately 16,000 PNH patients worldwide.

        Eculizumab, the only drug currently approved to treat PNH, had reported worldwide sales of approximately $2.6 billion in 2015 for its two approved indications. A third-party study estimated that, as of 2015, the cost per year for treatment with eculizumab was approximately $543,000 in adults. Eculizumab is administered intravenously by healthcare professionals at biweekly intervals. RA101495 is designed to bind C5 and reduce hemolysis in humans to similar levels as eculizumab. However, RA101495 binds to a site on C5 that is distinct from that of eculizumab, potentially conferring additional benefits, including the treatment of patients with R885H/C mutations, a population of PNH patients that does not respond to eculizumab. We are developing RA101495 as a SC formulation packaged as a convenient, self-administered product that can be administered in a small daily, or less frequent, such as weekly, dose. We believe this approach will facilitate sustained hemolysis suppression, greatly reducing the possibility of breakthrough hemolysis.

        In our recently completed Phase 1 randomized, double-blind, placebo controlled clinical trial of RA101495 in single-ascending dose cohorts and a multiple-dose cohort, in healthy volunteers, we observed the following in subjects treated with RA101495, as compared to those receiving placebo:

    highly predictable, dose dependent pharmacokinetics after single and multiple dose SC injections;

    maintenance of robust ex vivo hemolysis suppression and complement inhibition with daily SC dosing;

    near-complete suppression of ex vivo hemolysis and complement activity after a single SC dose; and

    an acceptable safety and tolerability profile with no serious adverse events reported.

        We expect to initiate our Phase 2 clinical program in PNH patients in the first quarter of 2017 and to release data from this program in the second half of 2017.

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RA101495 for Refractory Generalized Myasthenia Gravis

        Myasthenia gravis, or MG, is a rare complement-mediated autoimmune disease characterized by the production of autoantibodies targeting proteins that are critical for the normal transmission of electrical signals from nerves to muscles. Patients present with muscle weakness that characteristically becomes more severe with repeated use, and recovers with rest. Muscle weakness can be localized to specific muscles, such as those responsible for eye movements, but often progresses to more diffuse muscle weakness. Although the prognosis of MG is generally benign, in 10% to 15% of patients disease control either cannot be achieved with current therapies, or results in severe side effects of immunosuppressive therapy. This severe form of MG is known as rMG, and affects approximately 9,000 individuals in the United States. Current therapies focus on either boosting the acetylcholine receptor signal or suppressing the immune response, and none of these treatments targets the injury to the post-synaptic muscle endplate caused by complement attack.

        We believe that inhibiting terminal complement activity with our C5 inhibitor RA101495 may block complement-mediated damage to the motor endplate, thereby preserving responsiveness to signaling and potentially preventing muscle weakness. We plan to leverage our work in PNH to efficiently advance clinical development of RA101495 for rMG and intend to initiate a Phase 2 clinical trial of RA101495 in patients with rMG in the second half of 2017.

RA101495 for Lupus Nephritis

        Systemic lupus erythematosus, or SLE, is a serious, potentially lethal autoimmune disorder characterized by multi-organ involvement and a chronic relapsing clinical course. LN refers to the specific involvement of the kidney that is seen in approximately 20% of SLE patients. It is estimated that approximately 63,000 individuals in the United States have LN. Although immunosuppressive therapy has improved prognosis for patients with LN, approximately 10% to 15% of these patients will develop end-stage renal disease, requiring a kidney transplant or initiation of dialysis. These immunosuppressive treatments have significant toxicities associated with long-term use, and do not address complement-mediated tissue injury. As such, LN is associated with an approximately six-fold increase in the rate of mortality compared with the general population.

        We believe that RA101495, by binding C5, may prevent progression of kidney disease in LN by blocking complement-mediated damage to kidney cells. By inhibiting renal injury, we believe that RA101495 may reduce dependence on steroids and other immunosuppresive agents, thereby potentially improving the long-term outcome for patients. We plan to leverage our work in PNH to efficiently advance clinical development of RA101495 for LN and intend to initiate a Phase 1b clinical trial of RA101495 in LN in the second half of 2017.

Our Discovery Programs

        We also have preclinical programs targeting selective inhibition of other complement factors for diseases with no approved therapies. These include:

    a Factor D inhibitor program for intravitreal administration designed to prevent or reduce progression of geographic atrophy, the most advanced form of dry AMD, for which there is an estimated 1,000,000 patients in the United States, thereby potentially preventing further vision loss and preserving sight;

    a Factor D inhibitor program designed to block certain complement activity to prevent renal injury in order to treat C3 Glomerulonephritis and dense deposit disease, which cause compromised renal function and high blood pressure and for which there are combined approximately 1,000 patients in the United States;

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    an oral, small molecule C5 inhibitor designed to treat PNH, rMG and LN in pill form; and

    a C1s inhibitor program with potential applications in a range of autoimmune and CNS diseases.

Our Team

        We were founded by Dr. Douglas A. Treco, an experienced rare disease drug developer and our chief executive officer and president, and by Dr. Jack Szostak, a pioneer in the field of mRNA display from the Massachusetts General Hospital, an affiliate of Harvard University, and Howard Hughes Medical Institute. Dr. Szostak currently serves as the chairman of our scientific advisory board and a consultant to us. Our management team consists of drug discovery, development and commercialization experts with experience in translating scientific discoveries into innovative approved products for rare diseases, including Replagal for Fabry disease, Elaprase for Hunter syndrome, and Vpriv for Gaucher's disease, as well as Dynepo for chronic kidney disease, and immunology products, including Rituxan and Actemra.

        Our progress has been supported by several leading biopharmaceutical investors, including New Enterprise Associates, Novartis Bioventures, Morgenthaler Venture Partners, RA Capital, Novo A/S, Amgen Ventures, Lightstone Ventures, Rock Springs Capital, and Limulus Venture Partners.

Our Strategy

        Our goal is to become a leading biopharmaceutical company that transforms the lives of patients with serious complement-mediated diseases by combining our expertise in complement with our leadership in macrocyclic peptide technology. To achieve this goal, we are executing on the following strategy:

    Advance our lead program, RA101495 subcutaneous, through clinical development.  In our Phase 2 clinical program, we intend to establish clinical proof-of-concept by using convenient SC self-administration in PNH patients. We believe RA101495 will provide improved control of hemolysis, reduce the risk of breakthrough hemolysis, and offer PNH patients greater convenience and flexibility. We expect to initiate our Phase 2 clinical program in PNH patients in the first quarter of 2017 and to release data in the second half of 2017.

    Efficiently advance clinical development of RA101495 for other serious complement-mediated diseases, such as rMG and LN.  We intend to leverage our work in PNH, including the CMC and preclinical data packages, to advance RA101495 for other complement-mediated diseases, initially including rMG and LN. There is strong mechanistic and clinical evidence for a beneficial effect of C5 inhibition in patients with rMG, and in LN. We expect to initiate a Phase 2 clinical trial with RA101495 for rMG and a Phase 1b clinical trial in LN in the second half of 2017.

    If approved, commercialize RA101495 globally either independently or by collaborating selectively in certain geographies.  We have worldwide development and commercialization rights to RA101495. We intend to independently pursue the approval and commercialization of RA101495 in PNH patients in the United States and Europe. Outside of the United States and Europe, we may pursue the approval and commercialization of RA101495 for PNH patients either independently or in collaboration with others. We intend to develop and commercialize RA101495 for other indications independently or through collaborations with third parties.

    Pursue clinical development of our pipeline programs targeting additional serious complement-mediated diseases with limited treatment options.  In addition to developing RA101495 for PNH, rMG and LN, we are also leveraging our structural knowledge of C5 to develop traditional, oral C5 inhibitors for follow on, next generation products to RA101495 and a broader spectrum of diseases of complement dysfunction such as diabetes, autoimmune diseases and neurodegeneration. Other programs in our complement pipeline include Factor D administered

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      by intravitreal injection, a clinically validated approach for dry AMD, Factor D administered SC for orphan renal diseases, DDD and C3GN, and C1s inhibitors for certain autoimmune and CNS diseases.

    Enhance our leadership position in the field of macrocyclic peptide technology through continued development of our Extreme Diversity platform.  We have validated our Extreme Diversity platform by successfully identifying and delivering orally-available cyclic peptides for a non-complement cardiovascular target with a large market opportunity in a collaboration with Merck. We intend to enhance our proprietary drug discovery capabilities by expanding the chemical diversity of our peptide libraries to identify molecules with more favorable drug-like properties. We are also using our novel macrocyclic peptides to guide the development of next-generation, orally-available small molecule drugs that bind to and inhibit targets in similar ways as the original peptides.

Our Extreme Diversity Platform

        RA101495 and our pipeline of peptide product candidates were discovered using our Extreme Diversity platform, our proprietary technology that allows us to rapidly and efficiently discover cyclic peptides comprised of natural and non-natural amino acids, with the advantages set forth below.

    High affinity and potency.  Our peptides are cyclic, and therefore are conformationally rigid, thereby "locking" the molecule in the conformation in which it binds optimally to its target and leading to affinity and potency similar to antibodies.

    High specificity.  Our peptides are larger than most drugs taken in pill form, allowing them to have more contact points when bound to their targets, thus affording similar specificity as antibodies.

    Novel mechanisms of interaction.  The use of non-natural amino acids with new chemical functionalities expands the manner in which peptides can interact with target proteins, potentially enabling new mechanisms to modulate protein function in the body.

    High stability.  The backbone modification and relatively rigid, cyclic structure of our peptides are designed to reduce degradation. As a result, we believe our peptides will have higher stability in the body than natural peptides. Further, they will not denature or unfold over time, and have higher stability than antibodies and biologics, potentially allowing for room temperature storage over the entire distribution chain.

    Improved bioavailability.  The relatively small size of our peptides allows them to enter the circulation readily when administered by a variety of potential routes, including subcutaneous injection or oral administration, an advantage over many monoclonal antibody and biologic therapies which require intravenous infusion.

    Half-life modification.  As synthetic products, we can readily modify our cyclic peptides with chemical groups that modify the circulating half-life in the body, including lipids, carbohydrates, and polymers such as polyethylene glycol, providing the potential to optimize dosing by fine-tuning the pharmacokinetic properties.

    Reduced safety risks.  Unlike antibodies and biologics, our peptides are completely synthetic, eliminating the potential for viral and cellular protein contamination, risks to therapeutics produced in mammalian cells, and potentially allowing for administration to patients with hypersensitivity to products produced using mammalian cells.

    Favorable manufacturing processes and costs.  As synthetic products, our peptides do not need complex fermentation facilities, allowing their production to be easily sourced from multiple vendors at lower costs than mammalian cell products.

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Risks Associated with Our Business

        Our business is subject to a number of risks of which you should be aware before making an investment decision. These risks are discussed more fully in the "Risk Factors" section of this prospectus immediately following this prospectus summary. These risks include the following.

    We have a history of significant operating losses, and expect to incur significant and increasing losses for the foreseeable future, and may never achieve or maintain profitability and investors may lose their entire investment.

    Our independent registered public accounting firm has indicated that our financial condition raises substantial doubt as to our ability to continue as a going concern.

    we will need substantial additional funding, and if we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our product discovery and product development programs or commercialization efforts;

    we are at a very early stage in our development efforts, our approach is unproven and we may not be able to successfully develop and commercialize any product and discovery candidates;

    our business depends heavily upon the success of RA101495, which is still under development. If we are unable to obtain regulatory approval for or successfully commercialize RA101495, our business will be materially harmed;

    if clinical trials of our product candidates fail to satisfactorily demonstrate safety and efficacy to the FDA and other regulators, we, or any future collaborators, may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of these product candidates;

    even if we complete the necessary preclinical studies and clinical trials, the marketing approval process is expensive, time consuming and uncertain and may prevent us or any future collaborators from obtaining approvals for the commercialization of some or all of our product candidates;

    we rely on third parties to conduct our clinical trials and to manufacture and distribute our product candidates for our clinical trials. If these third parties do not perform satisfactorily, our development or commercialization efforts could be delayed or impaired;

    we expect to seek to establish collaborations and, if we are not able to establish them on commercially reasonable terms, we may have to alter our development and commercialization plans; and

    if we fail to comply with our obligations under our existing and any future intellectual property licenses with third parties, we could lose license rights that are important to our business.

Corporate History

        We were incorporated under the laws of the State of Delaware in June 2008 under the name Ra Pharmaceuticals, Inc. Our executive offices are located at 87 Cambridge Park Drive, Cambridge, Massachusetts 02140, and our telephone number is (617) 401-4060. Our website address is www.rapharma.com. We do not incorporate the information on or accessible through our website into this prospectus, and you should not consider any information on, or that can be accessed through, our website as part of this prospectus.

        We own various U.S. federal trademark applications and unregistered trademarks, including our company name, Ra Pharmaceuticals, Ra Pharma and our logo. All other trademarks or trade names referred to in this prospectus are the property of their respective owners. Solely for convenience, the

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trademarks and trade names in this prospectus are referred to without the symbols ® and ™, but such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto.

Implications of Being an Emerging Growth Company

        We qualify as an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012, as amended, or the JOBS Act. As an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies. These provisions include:

    only two years of audited financial statements in addition to any required unaudited interim financial statements with correspondingly reduced "Management's Discussion and Analysis of Financial Condition and Results of Operations" disclosure;

    reduced disclosure about our executive compensation arrangements;

    no non-binding advisory votes on executive compensation or golden parachute arrangements;

    exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting; and

    an exemption from new or revised financial accounting standards until they would apply to private companies and from compliance with any new requirements adopted by the Public Company Accounting Oversight Board requiring mandatory audit firm rotation.

        We may take advantage of these exemptions for up to five years or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company on the date that is the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1 billion or more; (ii) the last day of our fiscal year following the fifth anniversary of the date of the completion of this offering; (iii) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the Securities and Exchange Commission, or SEC. We may choose to take advantage of some but not all of these exemptions. We have taken advantage of reduced reporting requirements in this prospectus. Accordingly, the information contained herein may be different from the information you receive from other public companies in which you hold stock. We have irrevocably elected to "opt out" of the exemption for the delayed adoption of certain 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.

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THE OFFERING

Common stock offered in this offering

  5,800,000 shares

Common stock to be outstanding immediately after this offering

 


20,239,550 shares (21,109,550 shares if the underwriters exercise their option to purchase additional shares in full)

Underwriters' option to purchase additional shares

 

We have granted a 30-day option to the underwriters to purchase up to an aggregate of 870,000 additional shares of common stock from us at the public offering price, less underwriting discounts and commissions on the same terms as set forth in this prospectus.

Use of proceeds

 

We estimate that we will receive net proceeds from the sale of shares of our common stock in this offering of approximately $68.4 million, or $78.9 million if the underwriters exercise their option to purchase additional shares in full, assuming an initial public offering price of $13.00 per share, the midpoint of the price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We intend to use the net proceeds from this offering, together with our existing cash and cash equivalents, to fund development of RA101495 through Phase 2 clinical trials in PNH patients and rMG patients, and through our Phase 1b clinical trial in LN patients, advance our pipeline programs and for working capital and other general corporate purposes. For a more complete description of our intended use of the proceeds from this offering, see "Use of Proceeds."

Risk factors

 

You should carefully read the "Risk Factors" section of this prospectus for a discussion of factors that you should consider before deciding to invest in our common stock.

Proposed NASDAQ Global Market symbol

 

"RARX"

        Certain of our existing stockholders, including certain affiliates of our directors, have indicated an interest in purchasing an aggregate of approximately $30.0 million of shares of our common stock in this offering at the initial public offering price. However, because indications of interest are not binding agreements or commitments to purchase, the underwriters may determine to sell more, less or no shares in this offering to any of these stockholders, or any of these stockholders may determine to purchase more, less or no shares in this offering.

        The number of shares of our common stock to be outstanding after this offering is based on 594,044 shares of our common stock outstanding as of September 30, 2016, and gives effect to (i) the conversion of all of our outstanding preferred stock into 13,623,933 shares of our common stock and (ii) the net exercise, in accordance with their terms, of outstanding warrants to purchase 222,775 shares of common stock into 221,573 shares of common stock, at an assumed exercise price of $13.00 per

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share, which is the midpoint of the price range set forth on the cover of this prospectus, in each case upon the closing of this offering, and excludes:

    2,095,494 shares of common stock issuable upon the exercise of stock options outstanding as of September 30, 2016 under our 2010 Stock Option and Grant Plan, or the 2010 Plan, at a weighted average exercise price of $3.96 per share;

    an additional 101,109 shares of common stock available for future issuance under our 2010 Plan as of September 30, 2016;

    an additional 1,300,000 shares of common stock that will be made available for future issuance under our 2016 Stock Award and Incentive Plan upon the effectiveness of the registration statement of which this prospectus forms a part, 72,856 of which will be issued in connection with this offering; and

    an additional 175,000 shares of common stock that will be made available for future issuance under our 2016 Employee Stock Purchase Plan upon the effectiveness of the registration statement of which this prospectus forms a part.

        Unless otherwise indicated, all information in this prospectus reflects or assumes the following:

    the filing of our amended and restated certificate of incorporation and the effectiveness of our amended and restated by-laws upon the closing of this offering;

    the conversion of all of our outstanding shares of preferred stock into an aggregate of 13,623,933 shares of common stock upon the closing of this offering;

    the net exercise, in accordance with their terms, of outstanding warrants to purchase 222,775 shares of common stock into 221,573 shares of common stock, at an assumed exercise price of $13.00 per share, which is the midpoint of the price range set forth on the cover of this prospectus, upon the closing of this offering;

    no exercise of outstanding options after September 30, 2016;

    a 1-for-seven reverse split of our common stock effected on October 14, 2016; and

    no exercise by the underwriters of their option to purchase up to 870,000 additional shares of common stock in this offering.

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SUMMARY CONSOLIDATED FINANCIAL DATA

        The following tables summarize our historical consolidated financial data as of, and for the periods ended on, the dates indicated. We have derived the summary consolidated statement of operations data for the years ended December 31, 2014 and 2015 from our audited consolidated financial statements included elsewhere in this prospectus. We have derived the summary consolidated statement of operations data for the six months ended June 30, 2015 and 2016 and balance sheet data as of June 30, 2016 from our unaudited consolidated financial statements included elsewhere in this prospectus. The unaudited consolidated financial statements have been prepared on a basis consistent with our audited consolidated financial statements included in this prospectus and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, necessary to fairly state our financial position as of June 30, 2016 and results of operations for the six months ended June 30, 2015 and 2016. Our historical results are not necessarily indicative of the results that may be expected in the future, and our interim period results are not necessarily indicative of results to be expected for a full year or any other interim period. The summary consolidated financial data set forth below should be read together with the consolidated financial statements and the related notes to those statements, as well as the sections of this prospectus entitled "Selected Consolidated Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations."

 
  Year Ended December 31,   Six Months Ended June 30,  
 
  2014   2015   2015   2016  
 
  (In thousands, except share and per share data)
 

Consolidated Statement of Operations Data:

                         

Revenue

  $ 4,830   $ 4,094   $ 2,177   $ 4,928  

Operating expenses:

                         

Research & development

    10,016     15,217     6,566     11,462  

General & administrative

    1,924     2,233     1,010     2,376  

Total operating expenses

    11,940     17,450     7,576     13,838  

Loss from operations

    (7,110 )   (13,356 )   (5,399 )   (8,910 )

Other income (expense), net

    1,607     (606 )   (49 )   (952 )

Loss from operations before benefit from income taxes

    (5,503 )   (13,962 )   (5,448 )   (9,862 )

Benefit from income taxes

    27     19          

Net loss

    (5,476 )   (13,943 )   (5,448 )   (9,862 )

Gain on extinguishment of redeemable convertible preferred shares

        1,673          

Net loss attributable to common shareholders

  $ (5,476 ) $ (12,270 ) $ (5,448 ) $ (9,862 )

Net loss per share attributable to common stockholders—basic and diluted(1)

  $ (12.46 ) $ (24.68 ) $ (11.29 ) $ (18.32 )

Weighted-average common shares used in net loss per share attributable to common stockholders—basic and diluted(1)

    439,597     497,073     482,502     538,310  

Pro forma net loss per share attributable to common stockholders—basic and diluted (unaudited)(1)

        $ (1.39 )       $ (0.85 )

Pro forma weighted-average common shares used in net loss per share attributable to common stockholders—basic and diluted (unaudited)(1)

          7,720,519           10,504,917  

(1)
See Note 2 to our notes to consolidated financial statements included elsewhere in this prospectus for an explanation of the method used to calculate the historical and pro forma basic and diluted net loss per common share and the number of shares used in the computation of the per share amounts.

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  As of June 30, 2016  
 
  Actual   Pro Forma(1)   Pro Forma
As Adjusted(2)(4)
 
 
  (In thousands)
 

Consolidated Balance Sheet Data:

                   

Cash and cash equivalents

  $ 40,246   $ 40,246   $ 108,735  

Working capital(3)

    34,975     34,975     103,464  

Total assets

    49,312     49,245     117,734  

Redeemable convertible preferred stock

    86,484          

Accumulated deficit

    (49,762 )   (49,762 )   (49,762 )

Total stockholders' (deficit) equity

    (46,747 )   39,670     108,159  

(1)
Pro forma amounts give effect to (i) the automatic conversion of all of our outstanding shares of preferred stock into an aggregate of 13,623,933 shares of common stock and (ii) the net exercise, in accordance with their terms, of outstanding warrants to purchase 222,775 shares of common stock into 221,573 shares of common stock, at an assumed exercise price of $13.00 per share, which is the midpoint of the price range set forth on the cover of this prospectus, in each case upon the closing of this offering.

(2)
Pro forma as adjusted amounts reflect pro forma adjustments described in footnote (1) as well as the sale of 5,800,000 shares of our common stock in this offering at the assumed initial public offering price of $13.00 per share, the midpoint of the price range set forth on the cover page of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

(3)
We define working capital as current assets less current liabilities.

(4)
A $1.00 increase (decrease) in the assumed initial public offering price of $13.00 per share, the midpoint of the price range set forth on the cover of this prospectus, would increase (decrease) the pro forma as adjusted amount of each of cash and cash equivalents, working capital, total assets and total stockholders' equity by approximately $5.4 million, assuming that the number of shares offered by us, as set forth on the cover of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each increase (decrease) of 1.0 million shares offered by us in this offering would increase (decrease) the net proceeds to us from this offering by approximately $12.1 million, assuming the assumed initial public offering price remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

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RISK FACTORS

        Investing in our common stock involves a high degree of risk. You should carefully consider the following risks and uncertainties, together with all other information in this prospectus, including our consolidated financial statements and related notes and "Management's Discussion and Analysis of Results of Operations and Financial Condition," before investing in our common stock. Any of the risk factors we describe below could adversely affect our business, financial condition or results of operations. The market price of our common stock could decline if one or more of these risks or uncertainties actually occur, causing you to lose all or part of the money you paid to buy our common stock. Additional risks that we currently do not know about or that we currently believe to be immaterial may also impair our business. Certain statements below are forward-looking statements. See "Special Note Regarding Forward-Looking Statements" in this prospectus.

Risks Related to Our Financial Position and Need for Additional Capital

We have a history of significant operating losses and expect to incur significant and increasing losses for the foreseeable future; we may never achieve or maintain profitability and investors may lose their entire investment.

        We do not expect to generate revenue or profitability that is necessary to finance our operations in the short term. We incurred net losses of $5.5 million and $13.9 million for the years ended December 31, 2014 and 2015, respectively, and $5.4 and $9.9 million for the six months ended June 30, 2015 and 2016, respectively. In addition, our accumulated deficit as of December 31, 2014 and 2015 was $26.0 million and $39.9 million, respectively, and $49.8 million as of June 30, 2016. To date, we have not commercialized any products or generated any revenues from the sale of products, and absent the realization of sufficient revenues from product sales, we may never attain profitability in the future. We have devoted substantially all of our financial resources and efforts to research and development, including preclinical studies and our clinical trials. Our net losses may fluctuate significantly from quarter to quarter and year to year. Net losses and negative cash flows have had, and will continue to have, an adverse effect on our stockholders' equity and working capital.

        We anticipate that our expenses will increase substantially if and as we:

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        Our ability to become and remain profitable depends on our ability to generate revenue. We do not expect to generate significant revenue unless and until we are, or any future collaborator is, able to obtain marketing approval for, and successfully commercialize, one or more of our product candidates. Successful commercialization will require achievement of key milestones, including completing clinical trials of our product candidates, obtaining marketing approval for these product candidates, manufacturing, marketing and selling those products for which we, or any of our future collaborators, may obtain marketing approval, satisfying any post-marketing requirements and obtaining reimbursement for our products from private insurance or government payors. Because of the uncertainties and risks associated with these activities, we are unable to accurately predict the timing and amount of revenues, and if or when we might achieve profitability. We and any future collaborators may never succeed in these activities and, even if we do, or any future collaborators do, we may never generate revenues that are large enough for us to achieve profitability. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis.

        Because our only source of revenue to date, our research collaboration with Merck & Co., or Merck, has reached the end of its research term and identified a product candidate, to the extent we continue to receive revenue from this collaboration, we must rely on Merck's efforts to develop and commercialize that target candidate, which we do not control.

        Our failure to become and remain profitable would depress the market price of our common stock and could impair our ability to raise capital, expand our business, diversify our product offerings or continue our operations. If we continue to suffer losses as we have in the past, investors may not receive any return on their investment and may lose their entire investment.

Our independent registered public accounting firm has indicated that our financial condition raises substantial doubt as to our ability to continue as a going concern.

        Our financial statements have been prepared assuming that we will continue to operate as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. However, our independent registered public accounting firm has included in its audit opinion for the year ended December 31, 2015 a statement that there is substantial doubt as to our ability to continue as a going concern as a result of our recurring losses and financial condition on December 31, 2015. Our ability to continue as a going concern will require us to generate positive cash flow from operations, obtain additional financing, enter into strategic alliances and/or sell assets. The reaction of investors to the inclusion of a going concern statement by our auditors, our current lack of cash resources and our potential inability to continue as a going concern may materially adversely affect our share price and our ability to raise new capital or enter into strategic alliances. If we become unable to continue as a going concern, we may have to liquidate our assets and the values we receive for our assets in liquidation or dissolution could be significantly lower than the values reflected in our financial statements.

We will need substantial additional funding, and if we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our product discovery and development programs or commercialization efforts.

        Developing pharmaceutical products, including conducting preclinical studies and clinical trials, is a very time-consuming, expensive and uncertain process that takes years to complete. For example, in the years ended December 31, 2014 and December 31, 2015, we used $7.6 million and $12.0 million, respectively, in net cash for our operating activities, and in the six months ended June 30, 2016, we used $5.3 million in net cash for our operating activities, substantially all of which related to research and development activities. We expect our expenses to increase in connection with our ongoing

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activities, particularly as we initiate new clinical trials of, initiate new research and preclinical development efforts for and seek marketing approval for, our current product candidates or any product candidates that we acquire, if any. In addition, if we obtain marketing approval for any of our product candidates, we may incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution to the extent that such sales, marketing, manufacturing and distribution are not the responsibility of a future collaborator. Furthermore, following the completion of this offering, we expect to incur significant additional costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms, we may be forced to delay, reduce or eliminate our research and development programs or any future commercialization efforts.

        We plan to use the net proceeds of this offering primarily to fund clinical development of RA101495 and our planned early development of other product candidates in our pipeline, and for working capital and other general corporate purposes. We will be required to expend significant funds in order to advance the development of RA101495, as well as other product candidates we may seek to develop. In addition, while we may seek one or more collaborators for future development of our product candidates for one or more indications, we may not be able to enter into a collaboration for any of our product candidates for such indications on suitable terms, on a timely basis or at all. In any event, the net proceeds of this offering and our existing cash and cash equivalents will not be sufficient to fund all of the efforts that we plan to undertake or to fund the completion of development of any of our product candidates. Accordingly, we will be required to obtain further funding through public or private equity offerings, debt financings, collaborations and licensing arrangements or other sources. We do not have any committed external source of funds. Adequate additional financing may not be available to us on acceptable terms, or at all. Our failure to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy.

        We believe that the net proceeds from this offering, together with our existing cash and cash equivalents as of June 30, 2016, will enable us to fund our operating expenses and capital expenditure requirements through the first half of 2018. Our estimate may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Further, changing circumstances, some of which may be beyond our control, could cause us to consume capital significantly faster than we currently anticipate, and we may need to seek additional funds sooner than planned. Our future funding requirements, both short-term and long-term, will depend on many factors, including:

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Raising additional capital may cause dilution to our stockholders, including purchasers of common stock in this offering, restrict our operations or require us to relinquish rights to our technologies or product candidates.

        We expect our expenses to increase in connection with our planned operations. To the extent that we raise additional capital through the sale of common stock, convertible securities or other equity securities, your ownership interest may be diluted, and the terms of these securities could include liquidation or other preferences and anti-dilution protections that could adversely affect your rights as a common stockholder. In addition, debt financing, if available, may result in fixed payment obligations and may involve agreements that include restrictive covenants that limit our ability to take specific actions, such as incurring additional debt, making capital expenditures, creating liens, redeeming stock or declaring dividends, that could adversely impact our ability to conduct our business. In addition, securing financing could require a substantial amount of time and attention from our management and may divert a disproportionate amount of their attention away from day-to-day activities, which may adversely affect our management's ability to oversee the development of our product candidates.

        If we raise additional funds through collaborations or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

We have a limited operating history and no history of commercializing pharmaceutical products, which may make it difficult to evaluate the prospects for our future viability.

        We commenced operations in 2008. Our operations to date have been limited to financing and staffing our company, developing our technology and conducting preclinical research and early-stage clinical trials for our product candidates. We have not yet demonstrated an ability to successfully conduct late-stage clinical trials, 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 product commercialization. Accordingly, you should consider our prospects in light of the costs, uncertainties, delays and difficulties frequently encountered by companies in the early stages of development, especially clinical-stage biopharmaceutical companies such as ours. Any predictions you make about our future success or viability may not be as accurate as they could be if we had a longer operating history or a history of successfully developing and commercializing pharmaceutical products.

        We may encounter unforeseen expenses, difficulties, complications, delays and other known or unknown factors in achieving our business objectives. We will eventually need to transition from a company with a development focus to a company capable of supporting commercial activities. We may not be successful in such a transition.

        We expect our financial condition and operating results to continue to fluctuate significantly from quarter to quarter and year to year due to a variety of factors, many of which are beyond our control. Accordingly, you should not rely upon the results of any quarterly or annual periods as indications of future operating performance.

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Risks Related to the Discovery, Development and Commercialization of Our Product Candidates

We are at a very early stage in our development efforts, our approach is unproven and we may not be able to successfully develop and commercialize any product candidates.

        RA101495 is a novel therapeutic compound and its potential therapeutic benefit is unproven. There is only one approved therapy inhibiting C5. Our product candidates may not demonstrate in patients any or all of the pharmacological benefits we believe they may possess or compare favorably to the approved C5 inhibitor therapy. We have not yet succeeded and may never succeed in demonstrating efficacy and safety for these or any other product candidates in clinical trials or in obtaining marketing approval thereafter. For example, although we have evaluated RA101495 in preclinical studies and have evaluated RA101495 in an early-stage clinical trial, we have not yet advanced RA101495 into Phase 2 or Phase 3 clinical development, nor have we obtained regulatory approval to sell any product based on our therapeutic approaches.

        Our development plans include exploring the potential of complement inhibition, including C5 inhibition, to treat complement-mediated diseases for which complement inhibition has not been fully validated. This is an unproven approach to the treatment of diseases such as refractory generalized myasthenia gravis, or rMG, and lupus nephritis, or LN. The scientific evidence to support the feasibility of developing products to treat such disease by C5 inhibition is both preliminary and limited. Accordingly, our focus on treating these diseases may not result in the discovery and development of commercially viable products.

        If we are unsuccessful in our development efforts, we may not be able to advance the development of our product candidates, commercialize products, raise capital, expand our business or continue our operations.

Our business depends heavily upon the success of RA101495, which is still under development. If we are unable to obtain regulatory approval for or successfully commercialize RA101495, our business will be materially harmed.

        We currently have no products approved for sale and are investing a significant portion of our efforts and financial resources in the development of our lead product candidate, RA101495. Successful continued development and ultimate regulatory approval of RA101495 for paroxysmal nocturnal hemoglobinuria, or PNH, and, in the future, a range of debilitating autoimmune diseases including rMG and LN is critical to the future success of our business. We will need to raise sufficient funds for, and successfully enroll and complete, our clinical development program for RA101495 in PNH. The future regulatory and commercial success of this product candidate is subject to a number of risks, including the following:

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        Of the large number of drugs in development in the pharmaceutical industry, only a small percentage result in the submission of a new drug application, or NDA, to the FDA and even fewer are approved for commercialization. Furthermore, even if we do receive regulatory approval to market RA101495, any such approval may be subject to limitations on the indicated uses or patient populations for which we may market the product. Accordingly, even if we are able to obtain the requisite financing to continue to fund our development programs, we cannot assure you that RA101495 will be successfully developed or commercialized. If we or any of our future development partners are unable to develop, or obtain regulatory approval for, or, if approved, successfully commercialize RA101495, we may not be able to generate sufficient revenue to continue our business.

We face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully than we do, and reducing or eliminating our commercial opportunity.

        The development and commercialization of new products is highly competitive. We expect that we, and any future collaborators, will face significant competition from major pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies worldwide with respect to any of our product candidates that we, or any future collaborators, may seek to develop or commercialize in the future, including from drugs that act through the complement system and drugs that use different approaches. The principal competitor for our program in PNH is eculizumab, a C5 inhibitor, which is marketed as Soliris by Alexion Pharmaceuticals and is the only drug approved for the treatment of PNH. Alexion Pharmaceuticals is also developing a next-generation C5 inhibitor named ALXN 1210 that is designed to use a less frequent intravenous dosing schedule of at least monthly. We are also aware that there are a number of other companies that are actively developing product candidates for the treatment of PNH, including a product candidate directed at complement component 3, or C3, inhibition that is currently in preclinical development by Amyndas Pharmaceuticals, a product candidate directed at C3 inhibition such as APL-2 that is currently in clinical development by Apellis Pharmaceuticals, product candidates directed at C5 inhibition such as ALN-CC5, an RNAi therapeutic targeting the production of C5 being developed by Alnylam that is in early clinical trials, Coversin, a small protein inhibitor of C5 being developed by Akari Pharmaceuticals that is in early clinical trials, LFG316, a monoclonal antibody inhibitor of C5 being developed by Novartis Pharma, and other product candidates directed at other mechanisms of complement inhibition such as TNT009, an

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antibody against C1s, being developed by True North Therapeutics in early clinical trials, and ACH-4471, an orally available small molecule inhibitor of complement Factor D, that is currently in preclinical development by Achillion Pharmaceuticals. In addition, we are aware that there are a number of companies that are actively developing product candidates that are in clinical development for the treatment of geographic atrophy, or GA, a more severe form of AMD to which dry AMD progresses, including lampalizumab, a Factor D complement inhibitor for the treatment of GA being developed by Roche that is in Phase 3 clinical trials, LFG316, an anti-C5 monoclonal antibody being developed by Novartis Pharma that is in Phase 2 clinical trials, Zimura, a C5 inhibitor being developed by Ophthotech that is entering Phase 2/3 clinical trials, and other product candidates that do not target the complement system that are in Phase 2 or Phase 3 clinical trials, including compounds being developed by Acucela, Allergan, GlaxoSmithKline and Novartis Pharma.

        Our competitors may succeed in developing, acquiring or licensing technologies and products that are more effective, have fewer side effects or more tolerable side effects or are less costly than any product candidates that we are currently developing or that we may develop, which could render our product candidates obsolete and noncompetitive.

        Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than any products that we, or any future collaborators, may develop. Our competitors also may obtain FDA or other marketing approval for their products before we, or any future collaborators, are able to obtain approval for ours, which could result in our competitors establishing a strong market position before we, or any future collaborators, are able to enter the market.

        Many of our existing and potential future competitors have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining marketing approvals and marketing approved products than we do, and may be able to reduce the price at which they sell their products. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, the development of our product candidates.

If clinical trials of our product candidates fail to satisfactorily demonstrate safety and efficacy to the FDA and other regulators, we, or any future collaborators, may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of these product candidates.

        We, and any future collaborators, are not permitted to commercialize, market, promote or sell any product candidate in the United States without obtaining marketing approval from the FDA. Foreign regulatory authorities, such as the EMA, impose similar requirements. We have not previously submitted a NDA to the FDA or similar drug approval filings to comparable foreign regulatory authorities for any of our product candidates. We, and any future collaborators, must complete extensive preclinical development and clinical trials to demonstrate the safety and efficacy of our product candidates in humans before we will be able to obtain these approvals.

        Clinical testing is expensive, is difficult to design and implement, can take many years to complete and is inherently uncertain as to outcome. We cannot guarantee that any clinical trials will be conducted as planned or completed on schedule, if at all. The clinical development of our product candidates is susceptible to the risk of failure inherent at any stage of product development, including

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failure to demonstrate efficacy in a clinical trial or across a broad population of patients, the occurrence of adverse events that are severe or medically or commercially unacceptable, failure to comply with protocols or applicable regulatory requirements and determination by the FDA or any comparable foreign regulatory authority that a product candidate may not continue development or is not approvable. It is possible that even if one or more of our product candidates has a beneficial effect, that effect will not be detected during clinical evaluation as a result of one or more of a variety of factors, including the size, duration, design, measurements, conduct or analysis of our clinical trials. Conversely, as a result of the same factors, our clinical trials may indicate an apparent positive effect of a product candidate that is greater than the actual positive effect, if any. Similarly, in our clinical trials we may fail to detect toxicity of or intolerability caused by our product candidates, or mistakenly believe that our product candidates are toxic or not well tolerated when that is not in fact the case.

        Any inability to successfully complete preclinical and clinical development could result in additional costs to us, or any future collaborators, and impair our ability to generate revenues from product sales, regulatory and commercialization milestones and royalties. Moreover, if we, or any future collaborators, are required to conduct additional clinical trials or other testing of our product candidates beyond the trials and testing that we or they contemplate, if we or they are unable to successfully complete clinical trials of our product candidates or other testing or the results of these trials or tests are unfavorable, uncertain or are only modestly favorable, or there are unacceptable safety concerns associated with our product candidates, we, or any future collaborators may:

        Our failure to successfully complete clinical trials of our product candidates and to demonstrate the efficacy and safety necessary to obtain regulatory approval to market any of our product candidates would significantly harm our business.

Our product candidates may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval, limit the commercial profile of an approved label, or result in significant negative consequences following marketing approval, if any.

        Undesirable side effects caused by our product candidates could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or comparable foreign regulatory authorities. Results of our clinical trials could reveal a high and unacceptable severity and prevalence of side effects or unexpected characteristics. To date, subjects exposed to our product candidate RA101495 in our Phase 1 clinical trial have experienced drug-related side effects including injection site erythema, which was reported in patients receiving the highest dose, fatigue, headache, dizziness, rash and upper respiratory tract infection.

        If unacceptable side effects arise in the development of our product candidates, we, the FDA or comparable foreign regulatory authorities, the Institutional Review Boards, or IRBs, or independent

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ethics committees at the institutions in which our studies are conducted, or the Data Safety Monitoring Board, or DSMB, could suspend or terminate our clinical trials or the FDA or comparable foreign regulatory authorities could order us to cease clinical trials or deny approval of our product candidates for any or all targeted indications. Treatment-related side effects could also affect patient recruitment or the ability of enrolled patients to complete the trial or result in potential product liability claims. In addition, these side effects may not be appropriately recognized or managed by the treating medical staff. We expect to have to train medical personnel using our product candidates to understand the side effect profiles for our clinical trials and upon any commercialization of any of our product candidates. Inadequate training in recognizing or managing the potential side effects of our product candidates could result in patient injury or death. Any of these occurrences may harm our business, financial condition and prospects significantly.

        Moreover, clinical trials of our product candidates are conducted in carefully defined sets of patients who have agreed to enter into clinical trials. Consequently, it is possible that our clinical trials, or those of any future collaborator, may indicate an apparent positive effect of a product candidate that is greater than the actual positive effect, if any, or alternatively fail to identify undesirable side effects. If, following approval of a product candidate, we, or others, discover that the product is less effective than previously believed or causes undesirable side effects that were not previously identified, any of the following adverse events could occur:

        Any of these events could harm our business and operations, and could negatively impact our stock price.

If we fail to develop and commercialize other product candidates, we may be unable to grow our business.

        Although the development and commercialization of RA101495 is our primary focus, as part of our longer-term growth strategy, we plan to evaluate the development and commercialization of other therapies for complement-mediated diseases, including rare blood, neurologic, ophthalmologic, renal and inflammatory diseases. We will evaluate internal opportunities from our current product candidates, and also may choose to in-license or acquire other product candidates as well as commercial products to treat patients suffering from immune-mediated or orphan or other disorders with high unmet medical needs and limited treatment options. These other product candidates will require additional, time-consuming development efforts prior to commercial sale, including preclinical studies, clinical trials and approval by the FDA and/or applicable foreign regulatory authorities. All product candidates are prone to the risks of failure that are inherent in pharmaceutical product development, including the

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possibility that the product candidate will not be shown to be sufficiently safe and effective for approval by regulatory authorities. In addition, we cannot assure you that any such products that are approved will be manufactured or produced economically, successfully commercialized or widely accepted in the marketplace or be more effective than other commercially available alternatives.

Our preclinical programs may not produce product candidates that are suitable for clinical trials or that can be successfully commercialized or generate revenue through partnerships.

        We must successfully complete preclinical testing for RA101495 and our other programs, which may include demonstrating activity and comprehensive studies to show the lack of toxicity and other adverse effects in established animal models, before commencing clinical trials for any product candidate. Many pharmaceutical and biological products do not successfully complete preclinical testing and, even if preclinical testing is successfully completed, may fail in clinical trials. In addition, there can be no assurance that positive results from preclinical studies will be predictive of results obtained from subsequent preclinical studies or clinical trials. We also cannot be certain that any product candidates that do advance into clinical trials will successfully demonstrate safety and efficacy in clinical trials. Even if we achieve positive results in early clinical trials, they may not be predictive of the results in later trials.

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.

        Because we have limited financial and managerial resources, we intend to focus on developing product candidates for specific indications that we identify as most likely to succeed, in terms of both their potential for marketing approval and commercialization. As a result, we may forego or delay pursuit of opportunities with other product candidates or for other indications that may prove to have greater commercial potential.

        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 product candidates. 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 the product candidate.

If the FDA or comparable foreign regulatory authorities approve generic versions of any of our product candidates that receive marketing approval, or such authorities do not grant such products appropriate periods of data exclusivity before approving generic versions of such products, the sales of such products could be adversely affected.

        Once a NDA is approved, the product covered thereby becomes a "reference-listed drug" in the FDA's publication, "Approved Drug Products with Therapeutic Equivalence Evaluations," or the Orange Book. Manufacturers may seek approval of generic versions of reference-listed drugs through submission of abbreviated new drug applications, or ANDAs, in the United States. In support of an ANDA, a generic manufacturer generally must show that its product has the same active ingredient(s), dosage form, strength, route of administration and conditions of use or labeling as the reference-listed drug and that the generic version is bioequivalent to the reference-listed drug, meaning, in part, that it is absorbed in the body at the same rate and to the same extent. Generic products may be significantly less costly to bring to market than the reference-listed drug and companies that produce generic products are generally able to offer them at lower prices. Thus, following the introduction of a generic

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drug, a significant percentage of the sales of any branded product or reference-listed drug may be typically lost to the generic product.

        The FDA may not approve an ANDA for a generic product until any applicable period of non-patent exclusivity for the reference-listed drug has expired. The Federal Food, Drug, and Cosmetic Act, or FDCA, provides a period of five years of non-patent exclusivity for a new drug containing a new chemical entity, or NCE. Specifically, in cases where such exclusivity has been granted, an ANDA may not be filed with the FDA until the expiration of five years unless the submission is accompanied by a Paragraph IV certification that a patent covering the reference-listed drug is either invalid or will not be infringed by the generic product, in which case the applicant may submit its application four years following approval of the reference-listed drug. It is unclear whether the FDA will treat the active ingredients in our product candidates as NCEs and, therefore, afford them five years of NCE data exclusivity if they are approved. If any product we develop does not receive five years of NCE exclusivity, the FDA may approve generic versions of such product three years after its date of approval, subject to the requirement that the ANDA applicant certifies to any patents listed for our products in the Orange Book. Three year exclusivity is given to a drug if the NDA includes reports of one or more new clinical investigations, other than bioavailability or bioequivalence studies, that were conducted by or for the applicant and are essential to the approval of the NDA. Manufacturers may seek to launch these generic products following the expiration of the applicable marketing exclusivity period, even if we still have patent protection for our product.

        Competition that our products may face from generic versions of our products could negatively impact our future revenue, profitability and cash flows and substantially limit our ability to obtain a return on our investments in those product candidates.

Even if we complete the necessary preclinical studies and clinical trials, the marketing approval process is expensive, time consuming and uncertain and may prevent us or any future collaborators from obtaining approvals for the commercialization of some or all of our product candidates. As a result, we cannot predict when or if, and in which territories, we, or any future collaborators, will obtain marketing approval to commercialize a product candidate.

        The research, testing, manufacturing, labeling, approval, selling, marketing, promotion and distribution of products are subject to extensive regulation by the FDA and comparable foreign regulatory authorities. We, and any future collaborators, are not permitted to market our product candidates in the United States or in other countries until we, or they, receive approval of a NDA from the FDA or marketing approval from applicable regulatory authorities outside the United States. Our product candidates are in various stages of development and are subject to the risks of failure inherent in drug development. We have not submitted an application for or received marketing approval for any of our product candidates in the United States or in any other jurisdiction. We have limited experience in conducting and managing the clinical trials necessary to obtain marketing approvals, including FDA approval of a NDA.

        The process of obtaining marketing approvals, both in the United States and abroad, is lengthy, expensive and uncertain. It may take many years, if approval is obtained at all, and can vary substantially based upon a variety of factors, including the type, complexity and novelty of the product candidates involved. Securing marketing approval requires the submission of extensive preclinical and clinical data and supporting information to regulatory authorities for each therapeutic indication to establish the product candidate's safety and efficacy. Securing marketing approval also requires the submission of information about the product manufacturing process to, and inspection of manufacturing facilities by, the regulatory authorities. The FDA or other regulatory authorities may determine that our product candidates are not safe and effective, only moderately effective or have undesirable or unintended side effects, toxicities or other characteristics that preclude our obtaining marketing approval or prevent or limit commercial use. 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.

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

        Moreover, principal investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and receive compensation in connection with such services. Under certain circumstances, we may be required to report some of these relationships to the FDA or other regulatory authority. The FDA or other regulatory authority may conclude that a financial relationship between us and a principal investigator has created a conflict of interest or otherwise affected interpretation of the study. The FDA or other regulatory authority may therefore question the integrity of the data generated at the applicable clinical trial site and the utility of the clinical trial itself may be jeopardized. This could result in a delay in approval, or rejection, of our marketing applications by the FDA or other regulatory authority, as the case may be, and may ultimately lead to the denial of marketing approval of one or more of our product candidates.

        Any delay in obtaining or failure to obtain required approvals could negatively impact our ability or that of any future collaborators to generate revenue from the particular product candidate, which likely would result in significant harm to our financial position and adversely impact our stock price.

If we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed or otherwise adversely affected.

        We may not be able to initiate or continue clinical trials required by the FDA, EMA or other foreign regulatory agencies for RA101495 if we are unable to locate and enroll a sufficient number of eligible patients to participate in these clinical trials. We will be required to identify and enroll a sufficient number of patients with PNH, rMG and LN for each of our planned clinical trials of RA101495 in these indications. Each of these is a rare disease or indication with relatively small patient populations, which could result in slow enrollment of clinical trial participants. For example, we estimate that there are approximately 16,000 PNH patients worldwide, approximately 9,000 rMG patients in the United States and approximately 63,000 LN patients in the United States.

        Patient enrollment is affected by other factors, including:

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        Further, there are only a limited number of specialist physicians who treat patients with these diseases, and major clinical centers are concentrated in a few geographic regions. We also may encounter difficulties in identifying and enrolling such patients with a stage of disease appropriate for our ongoing or future clinical trials. In addition, the process of finding and diagnosing patients may prove costly. Our inability to enroll a sufficient number of patients for any of our clinical trials would result in significant delays or may require us to abandon one or more clinical trials.

Ingredients, excipients and other materials necessary to manufacture RA101495 may not be available on commercially reasonable terms, or at all, which may adversely affect the development and commercialization of RA101495.

        We and our third-party manufacturers must obtain from third-party suppliers the active pharmaceutical ingredients, excipients and primary and secondary packaging materials necessary for our contract manufacturers to produce RA101495 for our clinical trials and, to the extent approved or commercialized, for commercial distribution. There is no guarantee that we would be able to enter into all the necessary agreements with third-party suppliers that we require for the supply of such materials on commercially reasonable terms or at all. Even if we were able to secure such agreements or guarantees, our suppliers may be unable or choose not to provide us the ingredients, excipients or materials in a timely manner or in the quantities required. If we or our third-party manufacturers are unable to obtain the quantities of these ingredients, excipients or materials that are necessary for the manufacture of commercial supplies of RA101495, our ability to generate revenue from the sale of RA101495 would be materially and adversely affected. Further, if we or our third-party manufacturers are unable to obtain active pharmaceutical ingredients, excipients and materials as necessary for our clinical trials or for the manufacture of commercial supplies of our product candidates, if approved, potential regulatory approval or commercialization would be delayed, which would materially and adversely affect our ability to generate revenue from the sale of our product candidates.

Even if one of our product candidates receives marketing approval, it may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success, in which case we may not generate significant revenues or become profitable.

        We have never commercialized a product, and even if one of our product candidates is approved by the appropriate regulatory authorities for marketing and sale, it may nonetheless fail to gain sufficient market acceptance by physicians, patients, third-party payors and others in the medical community. Physicians are often reluctant to switch their patients from existing therapies even when new and potentially more effective or convenient treatments enter the market. Further, patients often acclimate to the therapy that they are currently taking and do not want to switch unless their physicians recommend switching products or they are required to switch therapies due to lack of reimbursement for existing therapies. Eculizumab is the only drug approved for the treatment of PNH, and even if we are able to obtain marketing approval of RA101495 for the treatment of PNH, we may not be able to successfully convince physicians or patients to switch from eculizumab to RA101495. In addition, even if we are able to demonstrate our product candidates' safety and efficacy to the FDA and other regulators, safety concerns in the medical community may hinder market acceptance.

        Efforts to educate the medical community and third-party payors on the benefits of our product candidates may require significant resources, including management time and financial resources, and may not be successful. If any of our product candidates is approved but does not achieve an adequate level of market acceptance, we may not generate significant revenues and we may not become

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profitable. The degree of market acceptance of our product candidates, if approved for commercial sale, will depend on a number of factors, including:

Even if we, or any future collaborators, are able to commercialize any product candidate that we, or they, develop, the product may become subject to unfavorable pricing regulations or third-party payor coverage and reimbursement policies, any of which could harm our business.

        Patients who are provided medical treatment for their conditions generally rely on third party payors to reimburse all or part of the costs associated with their treatment. Therefore, our ability, and the ability of any future collaborators to commercialize any of our product candidates will depend in part on the extent to which coverage and reimbursement for these products and related treatments will be available from third party payors including government health administration authorities and private health coverage insurers. Third-party payors decide which medications they will cover and establish reimbursement levels. We cannot be certain that reimbursement will be available for RA101495 or any of our product candidates. Also, we cannot be certain that reimbursement policies will not reduce the demand for, or the price paid for, our products. The insurance coverage and reimbursement status of newly-approved products for orphan diseases is particularly uncertain, and failure to obtain or maintain adequate coverage and reimbursement for RA101495 or any other product candidates could limit our ability to generate revenue.

        If coverage and reimbursement are not available, or reimbursement is available only to limited levels, we, or any future collaborators, may not be able to successfully commercialize our product candidates. Even if coverage is provided, the approved reimbursement amount may not be high enough to allow us, or any future collaborators, to establish or maintain pricing sufficient to realize a sufficient return on our or their investments. In the United States, no uniform policy of coverage and reimbursement for products exists among third-party payors and coverage and reimbursement for products can differ significantly from payor to payor. As a result, the coverage determination process is often a time-consuming and costly process that will require us to provide scientific and clinical support for the use of our products to each payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance.

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        There is significant uncertainty related to third-party payor coverage and reimbursement of newly approved drugs. Marketing approvals, pricing and reimbursement for new drug products vary widely from country to country. 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 approval is granted. As a result, we, or any future collaborators, might obtain marketing approval for a product in a particular country, but then be subject to price regulations that delay commercial launch of the product, possibly for lengthy time periods, which may negatively impact the revenues we are able to generate from the sale of the product in that country. Adverse pricing limitations may hinder our ability or the ability of any future collaborators to recoup our or their investment in one or more product candidates, even if our product candidates obtain marketing approval.

        The healthcare industry is acutely focused on cost containment, both in the United States and elsewhere. Government authorities and other third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications, which could affect our ability or that of any future collaborators to sell our product candidates profitably. These payors may not view our products, if any, as cost-effective, and coverage and reimbursement may not be available to our customers, or those of any future collaborators, or may not be sufficient to allow our products, if any, to be marketed on a competitive basis. Cost-control initiatives could cause us, or any future collaborators, to decrease the price we, or they, might establish for products, which could result in lower than anticipated product revenues. If the prices for our products, if any, decrease or if governmental and other third-party payors do not provide coverage or adequate reimbursement, our prospects for revenue and profitability will suffer.

        There may also be delays in obtaining coverage and reimbursement for newly approved drugs, and coverage may be more limited than the indications for which the drug is approved by the FDA or comparable foreign regulatory authorities. Moreover, eligibility for reimbursement does not imply that any drug will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution. Reimbursement rates may vary, by way of example, according to the use of the product and the clinical setting in which it is used. Reimbursement rates may also be based on reimbursement levels already set for lower cost drugs or may be incorporated into existing payments for other services.

        In addition, increasingly, third-party payors are requiring higher levels of evidence of the benefits and clinical outcomes of new technologies and are challenging the prices charged. We cannot be sure that coverage will be available for any product candidate that we, or any future collaborator, commercialize and, if available, that the reimbursement rates will be adequate. Further, the net reimbursement for drug products may be subject to additional reductions if there are changes to laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the United States. An inability to promptly obtain coverage and adequate payment rates from both government-funded and private payors for any of our product candidates for which we, or any future collaborator, obtain marketing approval could significantly harm our operating results, our ability to raise capital needed to commercialize products and our overall financial condition.

If any product liability lawsuits are successfully brought against us or any of our collaborative partners, we may incur substantial liabilities and may be required to limit commercialization of our product candidates.

        We face an inherent risk of product liability lawsuits related to the testing of our product candidates in seriously ill patients and will face an even greater risk if product candidates are approved by regulatory authorities and introduced commercially. Product liability claims may be brought against us or our partners by participants enrolled in our clinical trials, patients, health care providers or others

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using, administering or selling any of our future approved products. If we cannot successfully defend ourselves against any such claims, we may incur substantial liabilities, which may result in:

        If any of our product candidates are approved for commercial sale, we will be highly dependent upon consumer perceptions of us and the safety and quality of our products. We could be adversely affected if we are subject to negative publicity associated with illness or other adverse effects resulting from patients' use or misuse of our products or any similar products distributed by other companies.

        Although we maintain product liability insurance coverage in the amount of up to $5.0 million in the aggregate and clinical trial liability insurance of $5.0 million in the aggregate, this insurance may not fully cover potential liabilities that we may incur. The cost of any product liability litigation or other proceeding, even if resolved in our favor, could be substantial. We will need to increase our insurance coverage if we commercialize any product that receives marketing approval. In addition, insurance coverage is becoming increasingly expensive. If we are unable to maintain sufficient insurance coverage at an acceptable cost or to otherwise protect against potential product liability claims, it could prevent or inhibit the development and commercial production and sale of our product candidates, which could harm our business, financial condition, results of operations and prospects.

We currently have no marketing, sales or distribution infrastructure with respect to our product candidates. If we are unable to develop our sales, marketing and distribution capability on our own or through collaborations with marketing partners, we will not be successful in commercializing our product candidates.

        We currently have no marketing, sales or distribution capabilities and have limited sales or marketing experience within our organization. If our product candidate RA101495 is approved, we intend either to establish a sales and marketing organization with technical expertise and supporting distribution capabilities to commercialize RA101495, or to outsource this function to a third party. Either of these options would be expensive and time consuming. Some or all of these costs may be incurred in advance of any approval of RA101495. In addition, we may not be able to hire a sales force in the United States or other target market that is sufficient in size or has adequate expertise in the medical markets that we intend to target. These risks may be particularly pronounced due to our focus on our lead indications of PNH, rMG and LN, each of which is a rare disease with relatively small patient populations. Any failure or delay in the development of our or third parties' internal sales, marketing and distribution capabilities would adversely impact the commercialization of RA101495 and other future product candidates.

        With respect to our existing and future product candidates, we may choose to collaborate with third parties that have direct sales forces and established distribution systems, either to augment or to serve as an alternative to our own sales force and distribution systems. Our product revenue may be lower than if it directly marketed or sold any approved products. In addition, any revenue we receive

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will depend in whole or in part upon the efforts of these third parties, which may not be successful and are generally not within our control. If we are unable to enter into these arrangements on acceptable terms or at all, we may not be able to successfully commercialize any approved products. If we are not successful in commercializing any approved products, our future product revenue will suffer and we may incur significant additional losses.

The route of administration, formulation or dose for RA101495, which we are currently developing for SC self-administration, may be inadequate.

        We are currently developing RA101495 for SC self-administration. Unsatisfactory drug availability due to problems relating to this route of administration or the ability of the drug to bind to its target is another potential cause of lack of efficacy of RA101495 if and when it is commercialized. C5, the target of RA101495 is predominantly found in blood. For PNH, RA101495 will be administered subcutaneously. In our recently completed Phase 1 study of RA101495 in single-ascending dose cohorts and a multiple-dose cohort, single and repeat SC doses of RA101495 were safe and well tolerated in healthy volunteers. However, if daily subcutaneous administration proves to be unfeasible, then we may need to research additional doses, formulations or routes of administration, which could delay commercialization of RA101495 and result in significant additional costs to us. Additionally, while we may offer training in SC injections, reliance on patient self-administration may lead to higher rates of user error due to poor administration procedure by patients and reduced patient compliance as compared with administration by healthcare professionals.

If we, or any future collaborators, experience any of a number of possible unforeseen events in connection with clinical trials of our product candidates, potential clinical development, marketing approval or commercialization of our product candidates could be delayed or prevented.

        We, or any future collaborators, may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent clinical development, marketing approval or commercialization of our product candidates, including:

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        We or any future collaborators could also encounter delays if a clinical trial is suspended or terminated by us or our collaborators, by the IRBs or independent ethics committees of the institutions in which such trials are being conducted, by the DSMB for such trial or by the FDA or other regulatory authorities. Such authorities may suspend or terminate a clinical trial due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a drug, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial.

        Further, conducting clinical trials in foreign countries, as we plan to do for our product candidates, presents additional risks that may delay completion of our clinical trials. These risks include the failure of enrolled patients in foreign countries to adhere to clinical protocol as a result of differences in healthcare services or cultural customs, managing additional administrative burdens associated with foreign regulatory schemes, as well as political and economic risks relevant to such foreign countries.

        Product development costs for us, or any future collaborators, will increase if we, or they, experience delays in testing or pursuing marketing approvals and we, or they, may be required to obtain additional funds to complete clinical trials and prepare for possible commercialization of our product candidates. We do not know whether any preclinical tests or clinical trials will begin as planned, will need to be restructured, or will be completed on schedule or at all. Significant preclinical study or clinical trial delays also could shorten any periods during which we, or any future collaborators, may have the exclusive right to commercialize our product candidates or allow our competitors, or the competitors of any future collaborators, to bring products to market before we, or any future collaborators, do and impair our ability, or the ability of any future collaborators, to successfully commercialize our product candidates and may harm our business and results of

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operations. In addition, many of the factors that lead to clinical trial delays may ultimately lead to the denial of marketing approval of any of our product candidates.

Results of preclinical studies and early clinical trials may not be predictive of results of future clinical trials.

        The outcome of preclinical studies and early clinical trials may not be predictive of the success of later clinical trials, and interim results of clinical trials do not necessarily predict success in the results of completed clinical trials. Many companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late-stage clinical trials after achieving positive results in earlier development, and we could face similar setbacks. The design of a clinical trial can determine whether its results will support approval of a product and flaws in the design of a clinical trial may not become apparent until the clinical trial is well advanced. We have limited experience in designing clinical trials and may be unable to design and execute a clinical trial to support marketing approval. In addition, preclinical and clinical data are often susceptible to varying interpretations and analyses. Many companies that believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval for the product candidates. Even if we, or any future collaborators, believe that the results of clinical trials for our product candidates warrant marketing approval, the FDA or comparable foreign regulatory authorities may disagree and may not grant marketing approval of our product candidates.

        In some instances, there can be significant variability in safety or efficacy results between different clinical trials of the same product candidate due to numerous factors, including changes in trial procedures set forth in protocols, differences in the size and type of the patient populations, changes in and adherence to the dosing regimen and other clinical trial protocols and the rate of dropout among clinical trial participants. If we fail to receive positive results in clinical trials of our product candidates, the development timeline and regulatory approval and commercialization prospects for our most advanced product candidates, and, correspondingly, our business and financial prospects would be negatively impacted.

Chronic dosing of patients with RA101495 could lead to an immune response that causes adverse reactions or impairs the activity and/or efficacy of the drug, or causes other side effects.

        There is a risk that chronic dosing of patients with RA101495 may lead to an immune response that causes adverse reactions or impairs the activity and/or efficacy of the drug. Patients may develop an allergic reaction to the drug and/or develop antibodies directed at the drug. Impaired drug activity could be caused by neutralization of the drug's inhibitory activity or by an increased rate of clearance of the drug from circulation. For example, one potential side effect of RA101495 that has occurred in patients receiving eculizumab, a humanized antibody against C5, is an increased incidence of meningococcal infections as a result of inhibition of the terminal complement system in a manner similar to RA101495. As a result, patients receiving RA101495 may also require immunization with a meningococcal vaccine and prophylactic antibiotics.

        Any immune response that causes adverse reactions or impairs the activity of the drug could cause a delay in or termination of our development of RA101495, which would have a material adverse effect on our financial condition and results of operation.

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

We plan to seek orphan drug designation for RA101495, but we may be unable to obtain such designation or to maintain the benefits associated with orphan drug status, including market exclusivity, even if that designation is granted.

        We plan to seek orphan drug designation for RA101495 in specific orphan indications in which there is a medically plausible basis for its use and may seek orphan drug designation for other preclinical product candidates in our pipeline or that we may develop. In the United States, orphan

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drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical trial costs, tax advantages, and user-fee waivers. After the FDA grants orphan drug designation, the generic identity of the drug and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process. Although we intend to seek orphan drug designation for RA101495, we may never receive such designation. Moreover, obtaining orphan drug designation for one indication for RA101495 does not mean we will be able to obtain such designation for another indication.

        If a product that has orphan drug designation subsequently receives the first FDA approval for a particular active ingredient for the disease for which it has such designation, the product is entitled to orphan drug exclusivity, which means that the FDA may not approve any other applications, including a NDA, to market the same drug for the same indication for seven years, except in limited circumstances such as if the FDA finds that the holder of the orphan drug exclusivity has not shown that it can assure the availability of sufficient quantities of the orphan drug to meet the needs of patients with the disease or condition for which the drug was designated. Similarly, the FDA can subsequently approve a drug with the same active moiety for the same condition during the exclusivity period if the FDA concludes that the later drug is clinically superior, meaning the later drug is safer, more effective, or makes a major contribution to patient care. Even if we were to obtain orphan drug designation for RA101495, we may not be the first to obtain marketing approval for any particular orphan indication due to the uncertainties associated with developing pharmaceutical products, and thus approval of RA101495 could be blocked for seven years if another company previously obtained approval and orphan drug exclusivity for the same drug and same condition. If we do obtain exclusive marketing rights in the United States, they may be limited if we seek approval for an indication broader than the orphan designated indication and may be lost if the FDA later determines that the request for designation was materially defective or if we are unable to assure sufficient quantities of the product to meet the needs of the relevant patients. Further, exclusivity may not effectively protect the product from competition because different drugs with different active moieties can be approved for the same condition, the same drugs can be approved for different indications and might then be used off-label in our approved indication, and different drugs for the same condition may already be approved and commercially available.

        In Europe, the period of orphan drug exclusivity is ten years, although it may be reduced to six years if, at the end of the fifth year, it is established that the criteria for orphan drug designation are no longer met, in other words, when it is shown on the basis of available evidence that the product is sufficiently profitable not to justify maintenance of market exclusivity. In September 2016, the EMA's Committee for Orphan Medicinal Products adopted a positive opinion recommending RA101495 for the treatment of PNH for designation as an orphan medicinal product to the European Commission, which will decide whether to grant an orphan designation.

Laws and regulations governing any international operations we may have in the future may preclude us from developing, manufacturing and selling certain products outside of the United States and require us to develop and implement costly compliance programs.

        If we further expand our operations outside of the United States, we must dedicate additional resources to comply with numerous laws and regulations in each jurisdiction in which we plan to operate. The Foreign Corrupt Practices Act, or FCPA, prohibits any U.S. individual or business from paying, offering, authorizing payment or offering of anything of value, directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or decision of the foreign entity in order to assist the individual or business in obtaining or retaining business. The FCPA also obligates companies whose securities are listed in the United States to comply with certain accounting provisions requiring the company to maintain books and records that accurately and fairly reflect all transactions of the corporation, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international operations.

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        Compliance with the FCPA is expensive and difficult, particularly in countries in which corruption is a recognized problem. In addition, the FCPA presents particular challenges in the pharmaceutical industry, because, in many countries, hospitals are operated by the government, and doctors and other hospital employees are considered foreign officials. Certain payments to hospitals in connection with clinical trials and other work have been deemed to be improper payments to government officials and have led to FCPA enforcement actions.

        Various laws, regulations and executive orders also restrict the use and dissemination outside of the United States, or the sharing with certain non-U.S. nationals, of information classified for national security purposes, as well as certain products and technical data relating to those products. If we expand our presence outside of the United States, it will require us to dedicate additional resources to comply with these laws, and these laws may preclude us from developing, manufacturing, or selling certain products and product candidates outside of the United States, which could limit our growth potential and increase our development costs.

        The failure to comply with laws governing international business practices may result in substantial civil and criminal penalties and suspension or debarment from government contracting. The Securities and Exchange Commission, or SEC, also may suspend or bar issuers from trading securities on U.S. exchanges for violations of the FCPA's accounting provisions.

Governments outside the United States tend to impose strict price controls, which may adversely affect our revenues, if any.

        In some countries, such as the countries of the European Union, the pricing of prescription pharmaceuticals is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product. To obtain reimbursement or pricing approval in some countries, we, or any future collaborators, may be required to conduct a clinical trial that compares the cost-effectiveness of our product to other available therapies. If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our business could be harmed.

We are subject to extensive government regulation and the failure to comply with these regulations may have a material adverse effect on our operations and business.

        Both before and after approval of any product, we and our suppliers, contract manufacturers and clinical investigators are subject to extensive regulation by governmental authorities in the United States and other countries, covering, among other things, testing, manufacturing, quality control, clinical trials, post-marketing studies, labeling, advertising, promotion, distribution, import and export, governmental pricing, price reporting and rebate requirements. Failure to comply with applicable requirements could result in one or more of the following actions: warning letters; unanticipated expenditures; delays in approval or refusal to approve a product candidate; product recall or seizure; interruption of manufacturing or clinical trials; operating or marketing restrictions; injunctions; criminal prosecution and civil or criminal penalties including fines and other monetary penalties; adverse publicity; and disruptions to our business. Further, government investigations into potential violations of these laws would require us to expend considerable resources and face adverse publicity and the potential disruption of our business even if we are ultimately found not to have committed a violation.

        Obtaining FDA approval of our product candidates requires substantial time, effort and financial resources and may be subject to both expected and unforeseen delays, and there can be no assurance that any approval will be granted on any of our product candidates on a timely basis, if at all. The FDA may decide that our data are insufficient for approval of our product candidates and require additional preclinical, clinical or other studies or additional work related to chemistry, manufacturing and controls. In addition, we, the FDA, IRBs or independent ethics committees may suspend or terminate human clinical trials at any time on various grounds, including a finding that the patients are or would be exposed to an unacceptable health risk or because of the way in which the investigators on

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which we rely carry out the trials. If we are required to conduct additional trials or to conduct other testing of our product candidates beyond that which we currently contemplate for regulatory approval, if we are unable to complete successfully our clinical trials or other testing, or if the results of these and other trials or tests fail to demonstrate efficacy or raise safety concerns, we may face substantial additional expenses, be delayed in obtaining marketing approval for our product candidates or may never obtain marketing approval.

        We are also required to comply with extensive governmental regulatory requirements after a product has received marketing authorization. Governing regulatory authorities may require post-marketing studies that may negatively impact the commercial viability of a product. Once on the market, a product may become associated with previously undetected adverse effects and/or may develop manufacturing difficulties. As a result of any of these or other problems, a product's regulatory approval could be withdrawn, which could harm our business and operating results.

Even if we obtain FDA approval of RA101495 or any of our other product candidates, we or our partners may never obtain approval or commercialize our products outside of the United States.

        In order to market any products outside of the United States, we must establish and comply with numerous and varying regulatory requirements of other countries regarding clinical trial design, safety and efficacy. Clinical trials conducted in one country may not be accepted by regulatory authorities in other countries, and regulatory approval in one country does not mean that regulatory approval will be obtained in any other country. Approval procedures vary among countries and can involve additional product testing and validation and additional administrative review periods. Seeking foreign regulatory approvals could result in significant delays, difficulties and costs for us and may require additional preclinical studies or clinical trials which would be costly and time consuming and could delay or prevent introduction of RA101495 or any of our other product candidates in those countries. We do not have experience in obtaining regulatory approval in international markets. If we or our partners fail to comply with regulatory requirements or to obtain and maintain required approvals, our target market will be reduced and our ability to realize the full market potential of our product candidates will be harmed.

Current and future legislation may increase the difficulty and cost for us and any future collaborators to obtain marketing approval of and commercialize our product candidates and affect the prices we, or they, may 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, among other things, prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities and affect our ability, or the ability of any future collaborators, to profitably sell any products for which we, or they, obtain marketing approval. We expect that current laws, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that we, or any future collaborators, may receive for any approved products.

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

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        In addition, other legislative changes have been proposed and adopted since the ACA was enacted. These changes include the Budget Control Act of 2011, which, among other things, led to aggregate reductions to Medicare payments to providers of 2% per fiscal year, which went into effect on April 1, 2013 and will remain in effect through 2025 unless additional Congressional action is taken. On January 2, 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, further reduced Medicare payments to several providers and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. These new laws may result in additional reductions in Medicare and other healthcare funding. We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our product candidates or additional pricing pressures.

        Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products. We cannot be sure whether additional legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of our product candidates, if any, may be. In addition, increased scrutiny by the United States Congress of the FDA's approval process may significantly delay or prevent marketing approval, as well as subject us and any future collaborators to more stringent product labeling and post-marketing testing and other requirements.

        Our relationships with customers and third-party payors, among others, will be subject to applicable anti-kickback, fraud and abuse and other healthcare laws and regulations, which could expose us to penalties, including criminal sanctions, civil penalties, contractual damages, reputational harm, fines, disgorgement, exclusion from participation in government healthcare programs, curtailment or restricting of our operations, and diminished profits and future earnings.

        Healthcare providers, physicians and third party-payors will play a primary role in the recommendation and prescription of any products for which we obtain marketing approval. Our future arrangements with third-party payors and customers, if any, will subject us to broadly applicable fraud and abuse and other healthcare laws and regulations. The laws and regulations may constrain the business or financial arrangements and relationships through which we market, sell and distribute any products for which we obtain marketing approval. These include the following:

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        Efforts to ensure that our business arrangements with third parties, and our business generally, will comply with applicable healthcare laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, imprisonment, exclusion of products from government funded healthcare programs, such as Medicare and Medicaid, disgorgement, contractual damages, reputational harm, and the curtailment or restructuring of our operations. Defending against any such actions can be costly, time-consuming and may require significant financial and personnel resources. Therefore, even if we are successful in defending against any such actions that may be brought against us, our business may be impaired. Further, if any of the physicians or other healthcare providers or entities with whom we expect to do business is found to be not in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.

Even if we, or any future collaborators, obtain marketing approvals for our product candidates, the terms of approvals and ongoing regulation of our products may limit how we manufacture and market our products, which could impair our ability to generate revenue.

        Once marketing approval has been granted, an approved product and its manufacturer and marketer are subject to ongoing review and extensive regulation. We, and any future collaborators, must therefore comply with requirements concerning advertising and promotion for any of our product candidates for which we or they obtain marketing approval. Promotional communications with respect to prescription drugs are subject to a variety of legal and regulatory restrictions and must be consistent with the information in the product's approved labeling. Thus, we and any future collaborators will not be able to promote any products we develop for indications or uses for which they are not approved.

        In addition, manufacturers of approved products and those manufacturers' facilities are required to comply with extensive FDA requirements, including ensuring that quality control and manufacturing procedures conform to current Good Manufacturing Practices, or cGMPs, which include requirements relating to quality control and quality assurance as well as the corresponding maintenance of records and documentation and reporting requirements. We, our contract manufacturers, any future collaborators and their contract manufacturers could be subject to periodic unannounced inspections by the FDA to monitor and ensure compliance with cGMPs.

        Accordingly, assuming we, or any future collaborators, receive marketing approval for one or more of our product candidates, we, and any future collaborators, and our and their contract manufacturers will continue to expend time, money and effort in all areas of regulatory compliance, including manufacturing, production, product surveillance and quality control.

        If we, and any future collaborators, are not able to comply with post-approval regulatory requirements, we, and any future collaborators, could have the marketing approvals for our products withdrawn by regulatory authorities and our, or any future collaborators', ability to market any future products could be limited, which could adversely affect our ability to achieve or sustain profitability. Further, the cost of compliance with post-approval regulations may have a negative effect on our operating results and financial condition.

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Any of our product candidates for which we, or any future collaborators, obtain marketing approval in the future could be subject to post-marketing restrictions or withdrawal from the market and we, or any future collaborators, may be subject to substantial penalties if we, or they, fail to comply with regulatory requirements or if we, or they, experience unanticipated problems with our products following approval.

        Any of our product candidates for which we, or any future collaborators, obtain marketing approval, as well as the manufacturing processes, post-approval studies and measures, labeling, advertising and promotional activities for such product, among other things, will be subject to ongoing requirements of and review by the FDA, the EMA and other regulatory authorities. These requirements include submissions of safety and other post-marketing information and reports, registration and listing requirements, requirements relating to manufacturing, quality control, quality assurance and corresponding maintenance of records and documents, requirements regarding the distribution of samples to physicians and recordkeeping. Even if marketing approval of a product candidate is granted, the approval may be subject to limitations on the indicated uses for which the product may be marketed or to the conditions of approval, including the requirement to implement a Risk Evaluation and Mitigation Strategy.

        The FDA, the EMA and other regulatory authorities may also impose requirements for costly post-marketing studies or clinical trials and surveillance to monitor the safety or efficacy of a product. The FDA and other agencies, including the Department of Justice, closely regulate and monitor the post-approval marketing and promotion of products to ensure that they are manufactured, marketed and distributed 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, or any future collaborators, do not market any of our product candidates for which we, or they, receive marketing approval for only their approved indications, we, or they, may be subject to warnings or enforcement action for off-label marketing. Violation of the FDCA and other statutes relating to the promotion and advertising of prescription drugs may lead to investigations or allegations of violations of federal and state health care fraud and abuse laws and state consumer protection laws, including the False Claims Act.

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

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Additional time may be required to obtain regulatory approval for our product candidates because they are combination products.

        Because certain of our product candidates are designed to be self-administered SC by patients and may be packaged as pre-filled cartridges or pens, they may be regulated as drug/device combination products that require coordination within the FDA and similar foreign regulatory agencies for review of their device and drug components. Although the FDA and similar foreign regulatory agencies have systems in place for the review and approval of combination products such as ours, we may experience delays in the development and commercialization of our product candidates due to regulatory timing constraints and uncertainties in the product development and approval process.

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. From time to time and in the future, our operations may involve the use of hazardous and flammable materials, including chemicals and biological materials, and may also produce hazardous waste products. Even if we contract with third parties for the disposal of these materials and waste products, we cannot completely eliminate the risk of contamination or injury resulting from these materials. In the event of contamination or injury resulting from the use or disposal of our 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 for failure to comply with such laws and regulations.

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

        In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. Current or future environmental laws and regulations may impair our research, development or production efforts. In addition, failure to comply with these laws and regulations may result in substantial fines, penalties or other sanctions.

Risks Related to Our Dependence on Third Parties

We rely on third parties to conduct our clinical trials. If they do not perform satisfactorily, our business could be harmed.

        We do not independently conduct clinical trials of any of our product candidates. We rely on third parties, such as contract research organizations, or CROs, clinical data management organizations, medical institutions and clinical investigators, to conduct these clinical trials and expect to rely on these third parties to conduct clinical trials of any other product candidate that we develop. Any of these third parties may terminate their engagements with us under certain circumstances. We may not be able to enter into alternative arrangements or do so on commercially reasonable terms. In addition, there is a natural transition period when a new contract research organization begins work. As a result, delays would likely occur, which could negatively impact our ability to meet our expected clinical development timelines and harm our business, financial condition and prospects.

        Further, although our reliance on these third parties for clinical development activities limits our control over these activities, we remain responsible for ensuring that each of our trials is conducted in accordance with the applicable protocol, legal and regulatory requirements and scientific standards. For example, notwithstanding the obligations of a CRO for a trial of one of our product candidates, we remain responsible for ensuring that each of our clinical trials is conducted in accordance with the

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general investigational plan and protocols for the trial. Moreover, the FDA requires us to comply with requirements, commonly referred to as Good Clinical Practices, or GCPs, for conducting, recording and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of trial participants are protected. The FDA enforces these GCPs through periodic inspections of trial sponsors, principal investigators, clinical trial sites and IRBs. If we or our third-party contractors fail to comply with applicable GCPs, the clinical data generated in our clinical trials may be deemed unreliable and the FDA may require us to perform additional clinical trials before approving our product candidates, which would delay the marketing approval process. We cannot be certain that, upon inspection, the FDA will determine that any of our clinical trials comply with GCPs. We are also required to register clinical trials and post the results of completed clinical trials on a government-sponsored database, ClinicalTrials.gov, within certain timeframes. Failure to do so can result in fines, adverse publicity and civil and criminal sanctions.

        Furthermore, the third parties conducting clinical trials on our behalf are not our employees, and except for remedies available to us under our agreements with such contractors, we cannot control whether or not they devote sufficient time, skill and resources to our ongoing development programs. These contractors may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical trials or other drug development activities, which could impede their ability to devote appropriate time to our clinical programs. If these third parties, including clinical investigators, do not successfully carry out their contractual duties, meet expected deadlines or conduct our clinical trials in accordance with regulatory requirements or our stated protocols, we may not be able to obtain, or may be delayed in obtaining, marketing approvals for our product candidates. If that occurs, we will not be able to, or may be delayed in our efforts to, successfully commercialize our product candidates. In such an event, our financial results and the commercial prospects for any product candidates that we seek to develop could be harmed, our costs could increase and our ability to generate revenues could be delayed, impaired or foreclosed.

Use of third parties to manufacture our product candidates may increase the risk that we will not have sufficient quantities of our product candidates, products, or necessary quantities at an acceptable cost.

        We do not own or operate manufacturing facilities for the production of clinical or commercial quantities of our product candidates, and we lack the resources and the capabilities to do so. As a result, we currently rely on third parties for supply of the active pharmaceutical ingredients, or API, in our product candidates. Our current strategy is to outsource all manufacturing of our product candidates and products to third parties.

        We currently engage third-party manufacturers to provide the API, and other third parties to provide services for the final drug product formulation of RA101495 that is being used in our clinical trials. Although we believe that there are several potential alternative manufacturers who could manufacture RA101495, we may incur added costs and delays in identifying and qualifying any such replacement. In addition, we have not yet concluded a commercial supply contract with any commercial manufacturer. There is no assurance that we will be able to timely secure needed supply arrangements on satisfactory terms, or at all. Our failure to secure these arrangements as needed could have a material adverse effect on our ability to complete the development of our product candidates or, to commercialize them, if approved. We may be unable to conclude agreements for commercial supply with third-party manufacturers, or may be unable to do so on acceptable terms. There may be difficulties in scaling up to commercial quantities and formulation of RA101495 and the costs of manufacturing could be prohibitive.

        Even if we are able to establish and maintain arrangements with third-party manufacturers, reliance on third-party manufacturers entails additional risks, including:

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        If we do not maintain our key manufacturing relationships, we may fail to find replacement manufacturers or develop our own manufacturing capabilities, which could delay or impair our ability to obtain regulatory approval for our products. If we do find replacement manufacturers, we may not be able to enter into agreements with them on terms and conditions favorable to us and there could be a substantial delay before new facilities could be qualified and registered with the FDA and other foreign regulatory authorities.

        Our lead product candidate may ultimately be regulated as a drug/device combination product. Third-party manufacturers may not be able to comply with the cGMP regulatory requirements applicable to drugs and drug/device combination products, including applicable provisions of the FDA's drug cGMP regulations, device cGMP requirements embodied in the Quality System Regulation, or QSR, or similar regulatory requirements outside the United States. Our failure, or the failure of our third-party manufacturers, to comply with applicable regulations could result in sanctions being imposed on us, including clinical holds, fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, seizures or voluntary recalls of product candidates, operating restrictions and criminal prosecutions, any of which could significantly affect supplies of our product candidates. The facilities used by our contract manufacturers to manufacture our product candidates must be evaluated by the FDA pursuant to inspections that will be conducted after we submit our NDA to the FDA. We do not control the manufacturing process of, and are completely dependent on, our contract manufacturing partners for compliance with cGMPs. If our contract manufacturers cannot successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA or others, we may not be able to secure and/or maintain regulatory approval for our product manufactured at these facilities. In addition, we have no control over the ability of our contract manufacturers to maintain adequate quality control, quality assurance and qualified personnel. If the FDA finds deficiencies or a comparable foreign regulatory authority does not approve these facilities for the manufacture of our product candidates or if it withdraws any such approval in the future, we may need to find alternative manufacturing facilities, which would significantly impact our ability to develop, obtain regulatory approval for or market our product candidates, if approved. Contract manufacturers may face manufacturing or quality control problems causing drug substance production and shipment delays or a situation where the contractor may not be able to maintain compliance with the applicable cGMP requirements. Any failure to comply with cGMP requirements or other FDA, EMA and comparable foreign regulatory requirements could adversely affect our clinical research activities and our ability to develop our product candidates and market our products following approval.

        The FDA and other foreign regulatory authorities require manufacturers to register manufacturing facilities. The FDA and corresponding foreign regulators also inspect these facilities to confirm compliance with cGMPs. Contract manufacturers may face manufacturing or quality control problems causing drug substance production and shipment delays or a situation where the contractor may not be able to maintain compliance with the applicable cGMP requirements. Any failure to comply with cGMP requirements or other FDA, EMA and comparable foreign regulatory requirements could adversely affect our clinical research activities and our ability to develop our product candidates and market our products following approval.

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If our third-party manufacturer of our product candidates is unable to increase the scale of its production of our product candidates, and/or increase the product yield of its manufacturing, then our costs to manufacture the product may increase and commercialization may be delayed.

        In order to produce sufficient quantities to meet the demand for clinical trials and, if approved, subsequent commercialization of RA101495 or any of our other product candidates in our pipeline or that we may develop, our third party manufacturer will be required to increase its production and optimize its manufacturing processes while maintaining the quality of the product. The transition to larger scale production could prove difficult. In addition, if our third party manufacturer is not able to optimize its manufacturing process to increase the product yield for our product candidates, or if it is unable to produce increased amounts of our product candidates while maintaining the quality of the product, then we may not be able to meet the demands of clinical trials or market demands, which could decrease our ability to generate profits and have a material adverse impact on our business and results of operation.

We may need to maintain licenses for active ingredients from third parties to develop and commercialize some of our product candidates, which could increase our development costs and delay our ability to commercialize those product candidates.

        Should we decide to use active pharmaceutical ingredients in any of our product candidates that are proprietary to one or more third parties, we would need to maintain licenses to those active ingredients from those third parties. If we are unable to gain or continue to access rights to these active ingredients prior to conducting preclinical toxicology studies intended to support clinical trials, we may need to develop alternate product candidates from these programs by either accessing or developing alternate active ingredients, resulting in increased development costs and delays in commercialization of these product candidates. If we are unable to gain or maintain continued access rights to the desired active ingredients on commercially reasonable terms or develop suitable alternate active ingredients, we may not be able to commercialize product candidates from these programs.

We enter into various contracts in the normal course of our business in which we indemnify the other party to the contract. In the event we have to perform under these indemnification provisions, it could have a material adverse effect on our business, financial condition and results of operations.

        In the normal course of business, we periodically enter into academic, commercial, service, collaboration, licensing, consulting and other agreements that contain indemnification provisions. With respect to our academic and other research agreements, we typically indemnify the institution and related parties from losses arising from claims relating to the products, processes or services made, used, sold or performed pursuant to the agreements for which we have secured licenses, and from claims arising from our or our sublicensees' exercise of rights under the agreement. With respect to our commercial agreements, we indemnify our vendors from any third-party product liability claims that could result from the production, use or consumption of the product, as well as for alleged infringements of any patent or other intellectual property right by a third party.

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

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We expect to seek to establish collaborations and, if we are not able to establish them on commercially reasonable terms, we may have to alter our development and commercialization plans.

        We expect to seek one or more collaborators for the development and commercialization of one or more of our product candidates. For example, we started collaborating with Merck in 2013. Likely collaborators may include large and mid-size pharmaceutical companies, regional and national pharmaceutical companies and biotechnology companies. In addition, if we are able to obtain marketing approval for product candidates from foreign regulatory authorities, we intend to enter into strategic relationships with international biotechnology or pharmaceutical companies for the commercialization of such product candidates outside of the United States.

        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 potential differentiation of our product candidate from competing product candidates, design or results of clinical trials, the likelihood of approval by the FDA, the EMA or comparable foreign regulatory authorities and the regulatory pathway for any such approval, the potential market for the product candidate, the costs and complexities of manufacturing and delivering the product to patients and the potential of competing products. The collaborator may also consider alternative product candidates or technologies for similar indications that may be available for collaboration and whether such a collaboration could be more attractive than the one with us for our product candidate. If we elect to increase our expenditures to fund development or commercialization activities on our own, we may need to obtain additional capital, which may not be available to us on acceptable terms or at all. If we do not have sufficient funds, we may not be able to further develop our product candidates or bring them to market and generate product revenue.

        Collaborations are complex and time-consuming to negotiate and document. Further, there have been a significant number of recent business combinations among large pharmaceutical companies that have resulted in a reduced number of potential future collaborators. Any collaboration agreements that we enter into in the future may contain restrictions on our ability to enter into potential collaborations or to otherwise develop specified product candidates. We may not be able to negotiate collaborations on a timely basis, on acceptable terms, or at all. If we are unable to do so, we may have to curtail the development of the product candidate for which we are seeking to collaborate, reduce or delay its development program or one or more of our other development programs, delay its potential commercialization or reduce the scope of any sales or marketing activities, or increase our expenditures and undertake development or commercialization activities at our own expense.

If we enter into collaborations with third parties for the development and commercialization of our product candidates, our prospects with respect to those product candidates will depend in significant part on the success of those collaborations.

        We expect to enter into additional collaborations for the development and commercialization of certain of our product candidates. If we enter into such collaborations, we will have limited control over the amount and timing of resources that our collaborators will dedicate to the development or commercialization of our product candidates. Our ability to generate revenues from these arrangements will depend on any future collaborators' abilities to successfully perform the functions assigned to them in these arrangements. In addition, any future collaborators may have the right to abandon research or development projects and terminate applicable agreements, including funding obligations, prior to or upon the expiration of the agreed upon terms.

        Collaborations involving our product candidates pose a number of risks, including the following:

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        Collaboration agreements may not lead to development or commercialization of product candidates in the most efficient manner or at all. If any future collaborator of ours is involved in a business combination, it could decide to delay, diminish or terminate the development or commercialization of any product candidate licensed to it by us.

Risks Related to Our Intellectual Property

Our success depends on our ability to protect our intellectual property and proprietary technology.

        Our success depends in large part on our ability to obtain and maintain patent protection and trade secret protection in the United States and other countries with respect to our proprietary product candidates. If we do not adequately protect our intellectual property rights, competitors may be able to erode, negate or preempt any competitive advantage we may have, which could harm our business and ability to achieve profitability. To protect our proprietary position, we file patent applications in the United States and abroad related to our novel product candidates that are important to our business; we also license or purchase patent applications filed by others. The patent application and approval process is expensive and time-consuming. We may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner.

        Agreements through which we license patent rights may not give us control over patent prosecution or maintenance, so that we may not be able to control which claims or arguments are presented and may not be able to secure, maintain, or successfully enforce necessary or desirable patent protection from those patent rights. We have not had and do not have primary control over

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patent prosecution and maintenance for certain of the patents and patent applications we license, and therefore cannot guarantee that these patents and applications will be prosecuted or maintained in a manner consistent with the best interests of our business. We cannot be certain that patent prosecution and maintenance activities by our licensors have been or will be conducted in compliance with applicable laws and regulations or will result in valid and enforceable patents.

        If the scope of the patent protection we or our licensors obtain is not sufficiently broad, we may not be able to prevent others from developing and commercialize technology and products similar or identical to ours. The degree of patent protection we require to successfully compete in the marketplace may be unavailable or severely limited in some cases and may not adequately protect our rights or permit us to gain or keep any competitive advantage. We cannot provide any assurances that any of our licensed patents have, or that any of our pending licensed patent applications that mature into issued patents will include, claims with a scope sufficient to protect our proprietary platform or otherwise provide any competitive advantage, nor can we assure you that our licenses are or will remain in force. In addition, the laws of foreign countries may not protect our rights to the same extent as the laws of the United States. Furthermore, patents have a limited lifespan. In the United States, the natural expiration of a patent is generally twenty years after it is filed. Various extensions may be available; however, the life of a patent, and the protection it affords, is limited. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our licensed patent portfolio may not provide us with adequate and continuing patent protection sufficient to exclude others from commercializing products similar to our product candidates. In addition, the patent portfolio licensed to us is, or may be, licensed to third parties, such as outside our field, and such third parties may have certain enforcement rights. Thus, patents licensed to us could be put at risk of being invalidated or interpreted narrowly in litigation filed by or against another licensee or in administrative proceedings brought by or against another licensee in response to such litigation or for other reasons.

        Even if they are unchallenged, our licensed patents and pending patent applications, if issued, may not provide us with any meaningful protection or prevent competitors from designing around our patent claims to circumvent our licensed patents by developing similar or alternative technologies or therapeutics in a non-infringing manner. For example, a third party may develop a competitive therapy that provides benefits similar to one or more of our product candidates but that uses a vector or an expression construct that falls outside the scope of our patent protection or license rights. If the patent protection provided by the patents and patent applications we hold or pursue with respect to our product candidates is not sufficiently broad to impede such competition, our ability to successfully commercialize our product candidates could be negatively affected, which would harm our business. Although currently all of our patents and patent applications are in-licensed, similar risks would apply to any patents or patent applications that we may own or in-license in the future.

        We, or any future partners, collaborators, or licensees, may fail to identify patentable aspects of inventions made in the course of development and commercialization activities before it is too late to obtain patent protection on them. Therefore, we may miss potential opportunities to strengthen our patent position.

        It is possible that defects of form in the preparation or filing of our patents or patent applications may exist, or may arise in the future, for example with respect to proper priority claims, inventorship, claim scope, or requests for patent term adjustments. If we or our partners, collaborators, licensees, or licensors, whether current or future, fail to establish, maintain or protect such patents and other intellectual property rights, such rights may be reduced or eliminated. If our partners, collaborators, licensees, or licensors, are not fully cooperative or disagree with us as to the prosecution, maintenance or enforcement of any patent rights, such patent rights could be compromised. If there are material defects in the form, preparation, prosecution, or enforcement of our patents or patent applications,

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such patents may be invalid and/or unenforceable, and such applications may never result in valid, enforceable patents. Any of these outcomes could impair our ability to prevent competition from third parties, which may have an adverse impact on our business.

        The patent position of biotechnology and pharmaceutical companies generally is highly uncertain. No consistent policy regarding the breadth of claims allowed in biotechnology and pharmaceutical patents has emerged to date in the United States or in many foreign jurisdictions. In addition, the determination of patent rights with respect to pharmaceutical compounds commonly involves complex legal and factual questions, which has in recent years been the subject of much litigation. As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain.

        Pending patent applications cannot be enforced against third parties practicing the technology claimed in such applications unless and until a patent issues from such applications. Assuming the other requirements for patentability are met, currently, the first to file a patent application is generally entitled to the patent. However, prior to March 16, 2013, in the United States, the first to invent was entitled to the patent. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are not published until 18 months after filing, or in some cases not at all. Therefore, we cannot be certain that we were the first to make the inventions claimed in our patents or pending patent applications, or that we were the first to file for patent protection of such inventions. Similarly, we cannot be certain that parties from whom we do or may license or purchase patent rights were the first to make relevant claimed inventions, or were the first to file for patent protection for them. If third parties have filed patent applications on inventions claimed in our patents or applications on or before March 15, 2013, an interference proceeding in the United States can be initiated by such third parties to determine who was the first to invent any of the subject matter covered by the patent claims of our applications. If third parties have filed such applications after March 15, 2013, a derivation proceeding in the United States can be initiated by such third parties to determine whether our invention was derived from theirs.

        Moreover, because the issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, our patents or pending patent applications may be challenged in the courts or patent offices in the United States and abroad. There is no assurance that all of the potentially relevant prior art relating to our patents and patent applications has been found. If such prior art exists, it may be used to invalidate a patent, or may prevent a patent from issuing from a pending patent application. For example, such patent filings may be subject to a third-party preissuance submission of prior art to the U.S. Patent and Trademark Office, or USPTO, to other patent offices around the world. Alternately or additionally, we may become involved in post-grant review procedures, oppositions, derivations, proceedings, reexaminations, inter partes review or interference proceedings, in the United States or elsewhere, challenging patents or patent applications in which we have rights, including patents on which we rely to protect our business. An adverse determination in any such challenges may result in loss of exclusivity or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our ability to stop others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of our technology and products. In addition, given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized.

        Pending and future patent applications may not result in patents being issued that protect our business, in whole or in part, or which effectively prevent others from commercializing competitive products. Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our patents or narrow the scope of our patent protection. In addition, the laws of foreign countries may not protect our rights to the same extent or

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in the same manner as the laws of the United States. For example, patent laws in various jurisdictions, including significant commercial markets such as Europe, restrict the patentability of methods of treatment of the human body more than United States law does.

        The patent application process is subject to numerous risks and uncertainties, and there can be no assurance that we or any of our future development partners will be successful in protecting our product candidates by obtaining and defending patents. These risks and uncertainties include the following:

        Issued patents that we have or may obtain or license may not provide us with any meaningful protection, prevent competitors from competing with us or otherwise provide us with any competitive advantage. Our competitors may be able to circumvent our patents by developing similar or alternative technologies or products in a non-infringing manner. Our competitors may also seek approval to market their own products similar to or otherwise competitive with our products. Alternatively, our competitors may seek to market generic versions of any approved products by submitting ANDAs to the FDA in which they claim that patents owned or licensed by us are invalid, unenforceable or not infringed. In these circumstances, we may need to defend or assert our patents, or both, including by filing lawsuits alleging patent infringement. In any of these types of proceedings, a court or other agency with jurisdiction may find our patents invalid or unenforceable, or that our competitors are competing in a non-infringing manner. Thus, even if we have valid and enforceable patents, these patents still may not provide protection against competing products or processes sufficient to achieve our business objectives.

        Pursuant to the terms of some of our license agreements with third parties, some of our third party licensors have the right, but not the obligation in certain circumstances to control enforcement of our licensed patents or defense of any claims asserting the invalidity of these patents. Even if we are permitted to pursue such enforcement or defense, we will require the cooperation of our licensors, and cannot guarantee that we would receive it and on what terms. We cannot be certain that our licensors will allocate sufficient resources or prioritize their or our enforcement of such patents or defense of

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such claims to protect our interests in the licensed patents. If we cannot obtain patent protection, or enforce existing or future patents against third parties, our competitive position and our financial condition could suffer.

        In addition, we rely on the protection of our trade secrets and proprietary know-how. Although we have taken steps to protect our trade secrets and unpatented know-how, including entering into confidentiality agreements with third parties, and confidential information and inventions agreements with employees, consultants and advisors, we cannot provide any assurances that all such agreements have been duly executed, and third parties may still obtain this information or may come upon this or similar information independently. Additionally, if the steps taken to maintain our trade secrets are deemed inadequate, we may have insufficient recourse against third parties for misappropriating its trade secrets. If any of these events occurs or if we otherwise lose protection for our trade secrets or proprietary know-how, our business may be harmed.

It is difficult and costly to protect our intellectual property and our proprietary technologies, and we may not be able to ensure their protection.

        Our commercial success will depend in part on obtaining and maintaining patent protection and trade secret protection for the use, formulation and structure of our products and product candidates, the methods used to manufacture them, the related therapeutic targets and associated methods of treatment as well as on successfully defending these patents against potential third-party challenges. Our ability to protect our products and product candidates from unauthorized making, using, selling, offering to sell or importing by third parties is dependent on the extent to which we have rights under valid and enforceable patents that cover these activities.

        The patent positions of pharmaceutical, biotechnology and other life sciences companies can be highly uncertain and involve complex legal and factual questions for which important legal principles remain unresolved. Changes in either the patent laws or in interpretations of patent laws in the United States and other countries may diminish the value of our intellectual property. Further, the determination that a patent application or patent claim meets all of the requirements for patentability is a subjective determination based on the application of law and jurisprudence. The ultimate determination by the USPTO or by a court or other trier of fact in the United States, or corresponding foreign national patent offices or courts, on whether a claim meets all requirements of patentability cannot be assured. For example, our C5 inhibitor portfolio consists of three families of patent applications that we own directed to C5 inhibitors and related methods of use. Although we have conducted searches for third-party publications, patents and other information that may affect the patentability of claims in our various patent applications and patents, we cannot be certain that all relevant information has been identified. Accordingly, we cannot predict the breadth of claims that may be allowed or enforced in our patents or patent applications, in our licensed patents or patent applications or in third-party patents.

        We cannot provide assurances that any of our patent applications will be found to be patentable, including over our own prior art patents, or will issue as patents. Neither can we make assurances as to the scope of any claims that may issue from our pending and future patent applications nor to the outcome of any proceedings by any potential third parties that could challenge the patentability, validity or enforceability of our patents and patent applications in the United States or foreign jurisdictions. Any such challenge, if successful, could limit patent protection for our products and product candidates and/or materially harm our business.

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

        In addition, to the extent that we are unable to obtain and maintain patent protection for one of our products or product candidates or in the event that such patent protection expires, it may no longer be cost-effective to extend our portfolio by pursuing additional development of a product or product candidate for follow-on indications.

        We also may rely on trade secrets to protect our technologies or products, especially where we do not believe patent protection is appropriate or obtainable. For example, the patents underlying our proprietary peptide chemistry technology, which we license from third parties on a non-exclusive basis in some cases, expire by 2022. As a result, we anticipate that trade secrets will serve as the primary protection for the know-how behind our proprietary platform. Also, we cannot provide any assurances that any of our licensed patents have claims with a scope sufficient to protect our proprietary platform or otherwise provide any competitive advantage, nor can we assure you that our licenses are or will remain in full force or effect, in which case we would similarly rely on trade secrets. However, trade secrets are difficult to protect. Although we use reasonable efforts to protect our trade secrets, our employees, consultants, contractors, outside scientific collaborators and other advisers may unintentionally or willfully disclose our information to competitors. Enforcing a claim that a third-party entity illegally obtained and is using any of our trade secrets is expensive and time-consuming, and the outcome is unpredictable. In addition, courts outside the United States are sometimes less willing to protect trade secrets. Moreover, our competitors may independently develop equivalent knowledge, methods and know-how. Notably, proprietary technology protected by a trade secret does not preempt the patent of independently developed equivalent technology, even if such equivalent technology is invented subsequent to the technology protected by a trade secret.

Obtaining and maintaining 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 applications are required to be paid to the USPTO and various governmental patent agencies outside of the United States in several stages over the lifetime of the patents and applications. The USPTO and various non-U.S. governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process and after a patent has issued. There are situations in which non-compliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Under the terms of some of our licenses, we do not have the ability to maintain or prosecute patents in the portfolio, and must therefore rely on third parties to comply with these requirements.

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Patent terms may be inadequate to protect our competitive position on our products for an adequate amount of time.

        Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. We expect to seek extensions of patent terms in the United States and, if available, in other countries where we are prosecuting patents. In the United States, the Drug Price Competition and Patent Term Restoration Act of 1984 permits a patent term extension of up to five years beyond the normal expiration of the patent, which is limited to the approved indication (or any additional indications approved during the period of extension). However, the applicable authorities, including the FDA and the USPTO in the United States, and any equivalent regulatory authority in other countries, may not agree with our assessment of whether such extensions are available, and may refuse to grant extensions to our patents, or may grant more limited extensions than we request. If this occurs, our competitors may be able to take advantage of our investment in development and clinical trials by referencing our clinical and preclinical data and launch their product earlier than might otherwise be the case.

Changes to the patent law in the United States and other jurisdictions could diminish the value of patents in general, thereby impairing our ability to protect our products.

        As is the case with other biopharmaceutical companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the biopharmaceutical industry involves both technological and legal complexity and is therefore costly, time consuming and inherently uncertain. Recent patent reform legislation in the United States, including the Leahy-Smith America Invents Act, or the America Invents Act, could increase those uncertainties and costs. The America Invents Act was signed into law on September 16, 2011, and many of the substantive changes became effective on March 16, 2013. The America Invents Act reforms United States patent law in part by changing the U.S. patent system from a "first to invent" system to a "first inventor to file" system , expanding the definition of prior art, and developing a post-grant review system. This legislation changes United States patent law in a way that may weaken our ability to obtain patent protection in the United States for those applications filed after March 16, 2013.

        Further, the America Invents Act created new procedures to challenge the validity of issued patents in the United States, including post-grant review and inter partes review proceedings, which some third parties have been using to cause the cancellation of selected or all claims of issued patents of competitors. For a patent with an effective filing date of March 16, 2013 or later, a petition for post-grant review can be filed by a third party in a nine month window from issuance of the patent. A petition for inter partes review can be filed immediately following the issuance of a patent if the patent has an effective filing date prior to March 16, 2013. A petition for inter partes review can be filed after the nine month period for filing a post-grant review petition has expired for a patent with an effective filing date of March 16, 2013 or later. Post-grant review proceedings can be brought on any ground of invalidity, whereas inter partes review proceedings can only raise an invalidity challenge based on published prior art and patents. These adversarial actions at the USPTO review patent claims without the presumption of validity afforded to U.S. patents in lawsuits in U.S. federal courts, and use a lower burden of proof than used in litigation in U.S. federal courts. Therefore, it is generally considered easier for a competitor or third party to have a U.S. patent invalidated in a USPTO post-grant review or inter partes review proceeding than invalidated in a litigation in a U.S. federal court. If any of our patents are challenged by a third party in such a USPTO proceeding, there is no guarantee that we or our licensors or collaborators will be successful in defending the patent, which would result in a loss of the challenged patent right to us.

        In addition, recent court rulings in cases such as Association for Molecular Pathology v. Myriad Genetics, Inc., BRCA1- & BRCA2-Based Hereditary Cancer Test Patent Litigation, and Promega Corp. v.

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Life Technologies Corp. 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 future actions by the U.S. Congress, the U.S. courts, the USPTO and the relevant law-making bodies in other countries, 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.

We may not be able to enforce our intellectual property rights throughout the world.

        Filing, prosecuting, enforcing and defending patents on our 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. The requirements for patentability may differ in certain countries, particularly in developing countries; thus, even in countries where we do pursue patent protection, there can be no assurance that any patents will issue with claims that cover our products.

        Moreover, our ability to protect and enforce our intellectual property rights may be adversely affected by unforeseen changes in foreign intellectual property laws. Additionally, laws of some countries outside of the United States and Europe do not afford intellectual property protection to the same extent as the laws of the United States and Europe. Many companies have encountered significant problems in protecting and defending intellectual property rights in certain foreign jurisdictions. The legal systems of some countries, including India, China and other developing countries, do not favor the enforcement of patents and other intellectual property rights. This could make it difficult for us to stop the infringement of our patents or the misappropriation of our other intellectual property rights. For example, many foreign countries have compulsory licensing laws under which a patent owner must grant licenses to third parties. Consequently, we may not be able to prevent third parties from practicing our inventions in certain countries outside the United States and Europe. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop and market their own products and, further, may export otherwise infringing products to territories where we have patent protection, if our ability to enforce our patents to stop infringing activities is inadequate. 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.

        Agreements through which we license patent rights may not give us sufficient rights to permit us to pursue enforcement of our licensed patents or defense of any claims asserting the invalidity of these patents (or control of enforcement or defense) of such patent rights in all relevant jurisdictions as requirements may vary.

        Proceedings to enforce our patent rights in foreign jurisdictions, whether or not successful, could result in substantial costs and divert our efforts and resources from other aspects of our business. Moreover, such proceedings could put 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 awarded, if any, may not be commercially meaningful. Furthermore, while we intend to protect our intellectual property rights in major markets for our products, we cannot ensure that we will be able to initiate or maintain similar efforts in all jurisdictions in which we may wish to market our products. Accordingly, our efforts to protect our intellectual property rights in such countries may be inadequate.

Others may claim an ownership interest in our intellectual property which could expose it to litigation and have a significant adverse effect on its prospects.

        A third party may claim an ownership interest in one or more of our or our licensors' patents or other proprietary or intellectual property rights. A third party could bring legal actions against us and

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seek monetary damages and/or enjoin clinical testing, manufacturing and marketing of the affected product or products. While we are presently unaware of any claims or assertions by third-parties with respect to our patents or other intellectual property, we cannot guarantee that a third-party will not assert a claim or an interest in any of such patents or intellectual property. If we become involved in any litigation, it could consume a substantial portion of our resources, and cause a significant diversion of effort by our technical and management personnel. If any of these actions are successful, in addition to any potential liability for damages, we could be required to obtain a license to continue to manufacture or market the affected product, in which case we may be required to pay substantial royalties or grant cross-licenses to our patents. We cannot, however, assure you that any such license will be available on acceptable terms, if at all. Ultimately, we could be prevented from commercializing a product, or be forced to cease some aspect of our business operations as a result of claims of patent infringement or violation of other intellectual property rights, Further, the outcome of intellectual property litigation is subject to uncertainties that cannot be adequately quantified in advance, including the demeanor and credibility of witnesses and the identity of any adverse party. This is especially true in intellectual property cases that may turn on the testimony of experts as to technical facts upon which experts may reasonably disagree.

If we are sued for infringing intellectual property rights of third parties, such litigation could be costly and time consuming and could prevent or delay us from developing or commercializing our product candidates.

        Our commercial success depends, in part, on our ability to develop, manufacture, market and sell our product candidates without infringing the intellectual property and other proprietary rights of third parties. Third parties may have U.S. and non-U.S. issued patents and pending patent applications relating to compounds, methods of manufacturing compounds and/or methods of use for the treatment of the disease indications for which we are developing our product candidates or relating to the use of complement inhibition that may cover our product candidates or approach to complement inhibition. If any third-party patents or patent applications are found to cover our product candidates or their methods of use or manufacture or our approach to complement inhibition, we may not be free to manufacture or market our product candidates as planned without obtaining a license, which may not be available on commercially reasonable terms, or at all.

        There is a substantial amount of intellectual property litigation in the biotechnology and pharmaceutical industries, and we may become party to, or threatened with, litigation or other adversarial proceedings regarding intellectual property rights with respect to our products candidates, including interference and post-grant proceedings before the USPTO. There may be third-party patents or patent applications with claims to materials, formulations, methods of manufacture or methods for treatment related to the composition, use or manufacture of our product candidates. We cannot guarantee that any of our patent searches or analyses including, but not limited to, the identification of relevant patents, the scope of patent claims or the expiration of relevant patents are complete or thorough, nor can we be certain that we have identified each and every patent and pending application in the United States and abroad that is relevant to or necessary for the commercialization of our product candidates in any jurisdiction. Because patent applications can take many years to issue, there may be currently pending patent applications which may later result in issued patents that our product candidates may be accused of infringing. In addition, third parties may obtain patents in the future and claim that use of our technologies infringes upon these patents. Accordingly, third parties may assert infringement claims against us based intellectual property rights that exist now or arise in the future. The outcome of intellectual property litigation is subject to uncertainties that cannot be adequately quantified in advance. The pharmaceutical and biotechnology industries have produced a significant number of patents, and it may not always be clear to industry participants, including us, which patents cover various types of products or methods of use or manufacture. The scope of protection afforded by a patent is subject to interpretation by the courts, and the interpretation is not always uniform. If we were sued for patent infringement, we would need to demonstrate that our product candidates,

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products or methods either do not infringe the patent claims of the relevant patent or that the patent claims are invalid or unenforceable, and we may not be able to do this. Proving invalidity is difficult. For example, in the United States, proving invalidity requires a showing of clear and convincing evidence to overcome the presumption of validity enjoyed by issued patents. Even if we are successful in these proceedings, we may incur substantial costs and the time and attention of our management and scientific personnel could be diverted in pursuing these proceedings, which could significantly harm our business and operating results. In addition, we may not have sufficient resources to bring these actions to a successful conclusion.

        If we are found to infringe a third party's intellectual property rights, we could be forced, including by court order, to cease developing, manufacturing or commercializing the infringing product candidate or product. Alternatively, we may be required to obtain a license from such third party in order to use the infringing technology and continue developing, manufacturing or marketing the infringing product candidate or product. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to us; alternatively or additionally it could include terms that impede or destroy our ability to compete successfully in the commercial marketplace. In addition, we could be found liable for monetary damages, including treble damages and attorneys' fees if we are found to have willfully infringed a patent. A finding of infringement could prevent us from commercializing our product candidates or force us to cease some of our business operations, which could harm our business. Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on our business.

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

        Many of our current and former employees and our licensors' current and former employees, including our senior management, were previously employed at universities or at other biotechnology or pharmaceutical companies, including some which may be competitors or potential competitors. Some of these employees, including each member of our senior management, executed proprietary rights, non-disclosure and non-competition agreements, or similar agreements, in connection with such previous employment. Although we try to ensure that our employees do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or these employees have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such third party. Litigation may be necessary to defend against such claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel or sustain damages. Such intellectual property rights could be awarded to a third party, and we could be required to obtain a license from such third party to commercialize our technology or products. Such a license may not be available on commercially reasonable terms or at all. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management.

        In addition, while we typically require our employees, consultants and contractors who may be involved in the development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who in fact develops intellectual property that we regard as our own, which may result in claims by or against us related to the ownership of such intellectual property. If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights. Even if we are successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to our senior management and scientific personnel.

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

        Competitors may infringe our patents, trademarks, copyrights or other intellectual property. To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time consuming and divert the time and attention of our management and scientific personnel. Any claims we assert against perceived infringers could provoke these parties to assert counterclaims against us alleging that we infringe their patents, in addition to counterclaims asserting that our patents are invalid or unenforceable, or both. In any patent infringement proceeding, there is a risk that a court will decide that a patent of ours is invalid or unenforceable, in whole or in part, and that we do not have the right to stop the other party from using the invention at issue. There is also a risk that, even if the validity of such patents is upheld, the court will construe the patent's claims narrowly or decide that we do not have the right to stop the other party from using the invention at issue on the grounds that our patent claims do not cover the invention. An adverse outcome in a litigation or proceeding involving one or more of our patents could limit our ability to assert those patents against those parties or other competitors, and may curtail or preclude our ability to exclude third parties from making and selling similar or competitive products. Similarly, if we assert trademark infringement claims, a court may determine that the marks we have asserted are invalid or unenforceable, or that the party against whom we have asserted trademark infringement has superior rights to the marks in question. In this case, we could ultimately be forced to cease use of such trademarks.

        Even if we establish infringement, the court may decide not to grant an injunction against further infringing activity and instead award only monetary damages, which may or may not be an adequate remedy. 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 litigation. There could also 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 adversely affect the price of shares of our common stock. Moreover, there can be no assurance that we will have sufficient financial or other resources to file and pursue such infringement claims, which typically last for years before they are concluded. Even if we ultimately prevail in such claims, the monetary cost of such litigation and the diversion of the attention of our management and scientific personnel could outweigh any benefit we receive as a result of the proceedings.

        Additionally, for certain of our in-licensed patent rights, we do not have the right to bring suit for infringement and must rely on third parties to enforce these rights for us. If we cannot or choose not to take action against those we believe infringe our intellectual property rights, we may have difficulty competing in certain markets where such potential infringers conduct their business, and our commercialization efforts may suffer as a result.

If we fail to comply with our obligations under our existing and any future intellectual property licenses with third parties, we could lose license rights that are important to our business.

        We are a party to a collaboration and license agreement with Merck Sharp & Dohme Corp., under which we license patent rights relating to peptides that modulate the activity of a Merck-designated non-complement cardiovascular product candidate. We are party to several other license agreements, under which we license patent rights related to our proprietary technology and other product candidates. We may enter into additional license agreements in the future. Our license agreement with Merck imposes, and we expect that future license agreements will impose, various diligence, milestone payment, royalty, insurance and other obligations on us. If we fail to comply with our obligations under these licenses, our licensors may have the right to terminate these license agreements, in which event we might not be able to market any product that is covered by these agreements, or our licensors may

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convert the license to a non-exclusive license, which could negatively impact the value of the product candidate being developed under the license agreement. Termination of these license agreements or reduction or elimination of our licensed rights may also result in our having to negotiate new or reinstated licenses with less favorable terms.

If we are unable to protect the confidentiality of our trade secrets, the value of our technology could be negatively impacted and our business would be harmed.

        In addition to the protection afforded by patents, we also rely on trade secret protection for certain aspects of our intellectual property. For example, the patents underlying our proprietary peptide chemistry technology expire by 2022. As a result, we anticipate that we will rely on trade secrets as the primary protection for the know-how behind our proprietary platform. We seek to protect these trade secrets, in part, by entering into non-disclosure and confidentiality agreements with parties who have access to them, such as our employees, consultants, independent contractors, advisors, contract manufacturers, suppliers and other third parties. We also enter into confidentiality and invention or patent assignment agreements with employees and certain consultants. Any party with whom we have executed such an agreement may breach that agreement and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. Additionally, if the steps taken to maintain our trade secrets are deemed inadequate, we may have insufficient recourse against third parties for misappropriating the trade secret. Further, if any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent such third party, or those to whom they communicate such technology or information, from using that technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor, our business and competitive position could be harmed.

If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our marks 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 rely on both registration and common law protection for our trademarks. 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. During trademark registration proceedings, we may receive rejections. Although we would be given an opportunity to respond to those rejections, we may be unable to overcome such rejections. In addition, in the USPTO and in comparable agencies in many foreign jurisdictions, third parties are given an opportunity to oppose pending trademark applications and to seek to cancel registered trademarks. Opposition or cancellation proceedings may be filed against our trademarks, and our trademarks may not survive such proceedings. 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.

Risks Related to Employee Matters and Managing Growth

We only have a limited number of employees to manage and operate our business.

        As of June 30, 2016, we had 40 full-time or part-time employees. Our focus on the development of RA101495 requires us to optimize cash utilization and to manage and operate our business in a highly efficient manner. We cannot assure you that we will be able to hire and/or retain adequate staffing levels to develop RA101495 or run our operations and/or to accomplish all of the objectives that we otherwise would seek to accomplish.

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Cyber-attacks or other failures in telecommunications or information technology systems could result in information theft, data corruption and significant disruption of our business operations.

        We utilize information technology, or IT, systems and networks to process, transmit and store electronic information in connection with our business activities. As use of digital technologies has increased, cyber incidents, including deliberate attacks and attempts to gain unauthorized access to computer systems and networks, have increased in frequency and sophistication. These threats pose a risk to the security of our systems and networks, the confidentiality and the availability and integrity of our data. There can be no assurance that we will be successful in preventing cyber-attacks or successfully mitigating their effects. Similarly, there can be no assurance that our collaborators, CROs, third-party logistics providers, distributors and other contractors and consultants will be successful in protecting our clinical and other data that is stored on their systems. Any cyber-attack or destruction or loss of data could have a material adverse effect on our business and prospects. In addition, we may suffer reputational harm or face litigation or adverse regulatory action as a result of cyber-attacks or other data security breaches and may incur significant additional expense to implement further data protection measures.

We depend heavily on our executive officers, directors, and principal consultants and the loss of their services would materially harm our business.

        Our success depends, and will likely continue to depend, upon our ability to hire, retain the services of our current executive officers, directors, principal consultants and others. In addition, we have established relationships with universities and research institutions which have historically provided, and continue to provide, us with access to research laboratories, clinical trials, facilities and patients. Our ability to compete in the biotechnology and pharmaceuticals industries depends upon our ability to attract and retain highly qualified managerial, scientific and medical personnel.

        Our industry has experienced a high rate of turnover of management personnel in recent years. Any of our personnel may terminate their employment at will. If we lose one or more of our executive officers or other key employees, our ability to implement our business strategy successfully could be seriously harmed. Furthermore, replacing executive officers or other key employees may be difficult and may take an extended period of time because of the limited number of individuals in our industry with the breadth of skills and experience required to develop, gain marketing approval of and commercialize products successfully.

        Competition to hire from this limited pool is intense, and we may be unable to hire, train, retain or motivate these additional key employees 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.

        We rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and development and commercialization strategy. Our consultants and advisors may be employed by other entities and may have commitments under consulting or advisory contracts with those entities that may limit their availability to us. If we are unable to continue to attract and retain highly qualified personnel, our ability to develop and commercialize our product candidates will be limited.

Our employees, independent contractors, consultants, collaborators and contract research organizations may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements, which could cause significant liability for us and harm our reputation.

        We are exposed to the risk that our employees, independent contractors, consultants, collaborators and contract research organizations may engage in fraudulent conduct or other illegal activity. Misconduct by those parties could include intentional, reckless and/or negligent conduct or disclosure

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of unauthorized activities to us that violates: (1) FDA regulations or similar regulations of comparable non-U.S. regulatory authorities, including those laws requiring the reporting of true, complete and accurate information to such authorities, (2) manufacturing standards, (3) federal and state healthcare fraud and abuse laws and regulations and similar laws and regulations established and enforced by comparable non-U.S. regulatory authorities, and (4) laws that require the reporting of financial information or data accurately. Activities subject to these laws also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. It is not always possible to identify and deter misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws, standards or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business and results of operations, including the imposition of civil, criminal and administrative penalties, damages, monetary fines, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, and curtailment of our operations, any of which could have a material adverse effect on our ability to operate our business and our results of operations.

We expect to expand our organization, and as a result, we may encounter difficulties in managing our growth, which could disrupt our operations.

        We expect to experience significant growth in the number of our employees and the scope of our operations, particularly in the areas of drug manufacturing, regulatory affairs and sales, marketing and distribution, as well as to support our public company operations. To manage these growth activities, 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. Our management may need to devote a significant amount of its attention to managing these growth activities. Moreover, our expected growth could require us to relocate to a different geographic area of the country. Due to our limited financial resources and the limited experience of our management team in managing a company with such anticipated growth, we may not be able to effectively manage the expansion or relocation of our operations, retain key employees, or identify, recruit and train additional qualified personnel. Our inability to manage the expansion or relocation of our operations effectively may result in weaknesses in our infrastructure, give rise to operational mistakes, loss of business opportunities, loss of employees and reduced productivity among remaining employees. Our expected growth could also require significant capital expenditures and may divert financial resources from other projects, such as the development of additional product candidates. If we are unable to effectively manage our expected growth, our expenses may increase more than expected, our ability to generate revenues could be reduced and we may not be able to implement our business strategy, including the successful commercialization of our product candidates.

Risks Related to Our Common Stock and this Offering

An active trading market for our common stock may not develop or be sustainable. If an active trading market does not develop, investors may not be able to resell their shares at or above the initial public offering price and our ability to raise capital in the future may be impaired.

        Prior to this offering, there has been no public market for our common stock. The initial public offering price for our common stock will be determined through negotiations with the underwriters. This price may not reflect the price at which investors in the market will be willing to buy and sell our shares following this offering. Although we intend to list our common stock on the NASDAQ Global Market, an active trading market for our shares may never develop or, if developed, be maintained following this offering. If an active market for our common stock does not develop or is not

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maintained, it may be difficult for you to sell shares you purchase in this offering without depressing the market price for the shares or at all. An inactive trading market may also impair our ability to raise capital to continue to fund operations by selling shares and may impair our ability to acquire other companies or technologies by using our shares as consideration.

If you purchase shares of common stock in this offering, you will suffer immediate dilution in the net tangible book value of your investment.

        The initial public offering price of our common stock is substantially higher than the net tangible book value per share of our common stock. Therefore, if you purchase shares of our common stock in this offering, you will pay a price per share that substantially exceeds our net tangible book value per share after this offering. Based on the assumed initial public offering price of $13.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, you will experience immediate dilution of $7.67 per share, representing the difference between our pro forma net tangible book value per share after giving effect to this offering and the assumed initial public offering price. Purchasers of common stock in this offering will have contributed approximately 46.6% of the aggregate price paid by all purchasers of our stock and will own approximately 28.7% of our common stock outstanding after this offering, excluding any shares of our common stock that they may have acquired prior to this offering. Furthermore, if the underwriters exercise their over-allotment option or our previously issued options to acquire common stock at prices below the assumed initial public offering price are exercised, you will experience further dilution. For additional information on the dilution that you will experience immediately after this offering, see the section titled "Dilution."

The trading price of our common stock is likely to be highly volatile, which could result in substantial losses for purchasers of our common stock in this offering. Securities class action or other litigation involving our company or members of our management team could also substantially harm our business, financial condition and results of operations.

        Our stock price is likely to be highly volatile. The stock market in general and the market for smaller pharmaceutical and biotechnology companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, you may not be able to sell your common stock at or above the initial public offering price and you may lose some or all of your investment. The market price for our common stock may be influenced by many factors, including:

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        In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities. This risk is especially relevant for biopharmaceutical companies, which have experienced significant stock price volatility in recent years. For example, in early 2016, securities class action lawsuits were filed in the United States District Court for the District of Massachusetts against Tetraphase Pharmaceuticals, Inc., or Tetraphase, its chief executive officer, its former chief operating officer and Mr. Lubner, its former and our current chief financial officer. The complaint generally alleges that the executives, including Mr. Lubner, violated the federal securities laws by making material misstatements or omissions concerning the efficacy and prospects of Tetraphase's lead drug candidate and that these executives profited from the sale of Tetraphase's stock prior to announcement of the related clinical trial's failure to meet its endpoint. Mr. Lubner believes he has valid defenses against these claims and intends to engage in a vigorous defense of such litigation. However, the results of this litigation and other legal proceedings are inherently uncertain and, regardless of the ultimate outcome or the merits, require substantial time and other resources to defend. Accordingly, this litigation and any similar litigation that we could face may result in substantial costs to us, divert management's attention and resources from our company as well as harm our reputation with analysts and investors, which could substantially harm our business, financial condition and results of operations.

We have broad discretion in the use of the net proceeds from this offering and may invest or spend the proceeds in ways with which you do not agree and in ways that may not yield a return on your investment.

        Although we currently intend to use the net proceeds from this offering in the manner described in the section titled "Use of Proceeds" in this prospectus, our management will have broad discretion in the application of the net proceeds from this offering and could spend the proceeds in ways that do not improve our results of operations or enhance the value of our common stock. You will not have the opportunity to influence our decisions on how to use our net proceeds from this offering. The failure by our management to apply these funds effectively could result in financial losses that could harm our business, cause the price of our common stock to decline and delay the development of our product candidates. Pending their use, we may invest the net proceeds from this offering in a manner that does not produce income or that loses value.

We are an "emerging growth company," and the reduced disclosure requirements applicable to emerging growth companies may make our common stock less attractive to investors.

        We are an "emerging growth company," as defined in the JOBS Act, and may remain an emerging growth company for up to five years. For so long as we remain an emerging growth company, we are

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permitted and plan to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies. These exemptions include not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or SOX Section 404, not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements, reduced disclosure obligations regarding executive compensation and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. In this prospectus, we have provided only two years of audited financial statements and have not included all of the executive compensation related information that would be required if we were not an emerging growth company. We cannot predict whether investors will find our common stock less attractive if we rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

        In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

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

        As a public company, and particularly after we are no longer an "emerging growth company," we will incur significant legal, accounting and other expenses that we did not incur as a private company, which we anticipate could amount to between $1.0 million and $2.0 million annually. The Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of the NASDAQ Global Market and other applicable securities rules and regulations impose various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. We expect that we will need to hire additional accounting, finance and other personnel in connection with our becoming, and our efforts to comply with the requirements of being, a public company and our management and other personnel will need to devote a substantial amount of time towards maintaining compliance with these requirements. These requirements will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. For example, we expect that the rules and regulations applicable to us as a public company may make it more difficult and more expensive for us to obtain director and officer liability insurance, which could make it more difficult for us to attract and retain qualified members of our board of directors. We are currently evaluating these rules and regulations, and cannot predict or estimate the amount of additional costs we may incur or the timing of such costs. These rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.

        Pursuant to SOX Section 404 we will be required to furnish a report by our management on our internal control over financial reporting beginning with our second filing of an Annual Report on Form 10-K with the SEC after we become a public company. However, while we remain an emerging growth company, we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. To achieve compliance with SOX Section 404 within the prescribed period, we will be engaged in a process to document and

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evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we will need to continue to dedicate internal resources, potentially engage outside consultants and adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting. Despite our efforts, there is a risk that we will not be able to conclude, within the prescribed timeframe or at all, that our internal control over financial reporting is effective. If we identify one or more material weaknesses, it could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.

A significant portion of our total outstanding shares is restricted from immediate resale but may be sold into the market in the near future, which could cause the market price of our common stock to decline significantly, even if our business is doing well.

        Sales of a substantial number of shares of our common stock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares of common stock intend to sell shares, could reduce the market price of our common stock. Following this offering, we will have 20,239,550 shares of common stock outstanding based on the 594,044 shares of our common stock outstanding as of September 30, 2016 and after giving effect to (i) the conversion of all outstanding shares of our preferred stock into 13,623,933 shares of our common stock and (ii) the net exercise, in accordance with their terms, of outstanding warrants to purchase 222,775 shares of common stock into 221,573 shares of common stock, at an assumed exercise price of $13.00 per share, which is the midpoint of the price range set forth on the cover of this prospectus, in each case upon the closing of this offering. Of these shares, the 5,800,000 shares sold by us in this offering may be resold in the public market immediately, unless purchased by our affiliates. The remaining 14,439,550 shares are currently restricted under securities laws or as a result of lock-up or other agreements, but will be able to be sold after this offering as described in the "Shares Eligible for Future Sale" section of this prospectus. The representatives of the underwriters may release these stockholders from their lock-up agreements with the underwriters at any time and without notice, which would allow for earlier sales of shares in the public market.

        Moreover, after this offering, holders of an aggregate of 13,852,369 shares of our common stock will have rights, subject to conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders. We also plan to register all shares of common stock that we may issue under our equity compensation plans. Once we register these shares, they can be freely sold in the public market upon issuance and once vested, subject to volume limitations applicable to affiliates and the lock-up agreements. If these additional shares 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.

We might not be able to utilize a significant portion of our net operating loss carryforwards and research and development tax credit carryforwards.

        As of December 31, 2015, we had federal and state net operating loss carryforwards of $22.8 million and $20.5 million, respectively, and federal research and development tax credit carryforwards of $1.5 million and state research and development tax credit carryforwards of $1.0 million. If not utilized, the net operating loss carryforwards will begin to expire in 2029. If not utilized, the research and development credits will begin to expire in 2030. These net operating loss and tax credit carryforwards could expire unused and be unavailable to offset future income tax liabilities. In addition, under Section 382 of the Internal Revenue Code of 1986, as amended, and corresponding provisions of state law, if a corporation undergoes an "ownership change," which is generally defined as a greater than 50% change, by value, in its equity ownership over a three-year period, the corporation's

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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. We have not determined if we have experienced Section 382 ownership changes in the past and if a portion of our net operating loss and tax credit carryforwards are subject to an annual limitation under Section 382. In addition, we may experience ownership changes in the future as a result of subsequent shifts in our stock ownership, including this offering, some of which may be outside of our control. We have not conducted a detailed study to document whether our historical activities qualify to support the research and development credit carryforwards. A detailed study could result in adjustment to our research and development credit carryforwards. If we determine that an ownership change has occurred and our ability to use our historical net operating loss and tax credit carryforwards is materially limited, or if our research and development carryforwards are adjusted, it would harm our future operating results by effectively increasing our future tax obligations.

We do not anticipate paying any cash dividends on our capital stock in the foreseeable future. Accordingly, stockholders must rely on capital appreciation, if any, for any return on their investment.

        We have never declared nor paid cash dividends on our capital stock. We currently plan to retain all of our future earnings, if any, to finance the operation, development and growth of our business. In addition, the terms of any future debt or credit agreements may preclude us from paying dividends. As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.

Concentration of ownership of our common stock among our existing executive officers, directors and principal stockholders may prevent new investors from influencing significant corporate decisions.

        Based upon shares outstanding as of September 30, 2016, and after giving effect to the conversion of all outstanding shares of preferred stock into (i) 13,623,933 shares of our common stock and (ii) the net exercise, in accordance with their terms, of outstanding warrants to purchase 222,775 shares of common stock into 221,573 shares of common stock, at an assumed exercise price of $13.00 per share, which is the midpoint of the price range set forth on the cover of this prospectus, our executive officers and directors, combined with our stockholders who owned more than 5% of our outstanding common stock before this offering and their affiliates, will, in the aggregate, beneficially own shares representing approximately 62.0% of our common stock. As a result, if these stockholders were to choose to act together, they would be able to control all matters submitted to our stockholders for approval, as well as our management and affairs. For example, these persons, if they choose to act together, would control the election of directors and approval of any merger, consolidation or sale of all or substantially all of our assets. This concentration of ownership control may:

        Some of these persons or entities may have interests different than yours. For example, because many of these stockholders purchased their shares at prices substantially below the price at which shares are being sold in this offering and have held their shares for a longer period, they may be more interested in selling our company to an acquirer than other investors or they may want us to pursue strategies that deviate from the interests of other stockholders.

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Provisions in our corporate charter documents and under Delaware law may prevent or frustrate attempts by our stockholders to change our management or hinder efforts to acquire a controlling interest in us.

        Provisions in our corporate charter and our bylaws that will become effective upon the closing of this offering may discourage, delay or prevent a merger, acquisition or other change in control of us that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares. These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock. In addition, because our board of directors is responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors. Among other things, these provisions:

        Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the General Corporation Law of the State of Delaware, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner. This could discourage, delay or prevent someone from acquiring us or merging with us, whether or not it is desired by, or beneficial to, our stockholders. This could also have the effect of discouraging others from making tender offers for our common stock, including transactions that may be in your best interests. These provisions may also prevent changes in our management or limit the price that investors are willing to pay for our stock.

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our share price and trading volume could decline.

        The trading market for our common stock will likely depend in part on the research and reports that securities or industry analysts publish about us or our business. We do not have any control over these analysts. We do not currently have research coverage, and there can be no assurance that analysts will cover us, or provide favorable coverage. Securities or industry analysts may elect not to provide research coverage of our common stock after this offering, and such lack of research coverage may negatively impact the market price of our common stock. In the event we do have analyst coverage, if one or more analysts downgrade our stock or change their opinion of our stock, our share price would likely decline. In addition, if one or more analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

        This prospectus, including the sections entitled "Prospectus Summary," "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business," contains express or implied forward-looking statements that are based on our management's belief and assumptions and on information currently available to our management. Although we believe that the expectations reflected in these forward-looking statements are reasonable, these statements relate to future events or our future operational or financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Forward-looking statements in this prospectus include, but are not limited to, statements about:

        In some cases, forward-looking statements can be identified by terminology such as "may," "should," "expects," "intends," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "continue" or the negative of these terms or other comparable terminology. These statements are only predictions. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which are, in some cases, beyond our control and which could materially affect results. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under the section entitled "Risk Factors" and elsewhere in this prospectus. If one or more of these risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual events or results may vary significantly from those implied or projected by the forward-looking statements. No forward-looking statement is a guarantee of future performance. You should read this prospectus and the documents that we reference in this prospectus and have filed with the Securities and Exchange Commission as exhibits to the

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registration statement, of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from any future results expressed or implied by these forward-looking statements.

        The forward-looking statements in this prospectus represent our views as of the date of this prospectus. We anticipate that subsequent events and developments will cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so except to the extent required by applicable law. You should therefore not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this prospectus.

        This prospectus includes statistical and other industry and market data that we obtained from industry publications and research, surveys and studies conducted by third parties. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. We are responsible for all of the disclosure contained in this prospectus, and we believe these industry publications and third-party research, surveys and studies are reliable.

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USE OF PROCEEDS

        We estimate that our net proceeds from the sale of shares of our common stock in this offering will be approximately $68.4 million, or $78.9 million if the underwriters exercise in full their option to purchase additional shares, assuming an initial public offering price of $13.00 per share, the midpoint of the price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

        A $1.00 increase (decrease) in the assumed initial public offering price of $13.00 per share, the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) the net proceeds to us from this offering by $5.4 million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. A 1.0 million share increase (decrease) in the number of shares offered by us, as set forth on the cover page of this prospectus, would increase (decrease) our net proceeds from this offering by $12.1 million, assuming no change in the assumed initial public offering price per share and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We do not expect that a change in the offering price or the number of shares by these amounts would have a material effect on our intended uses of the net proceeds from this offering, although it may impact the amount of time prior to which we may need to seek additional capital.

        We currently intend to use the net proceeds from this offering, together with our existing cash and cash equivalents, as follows:

        Based on our current plans, we believe our existing cash and cash equivalents, together with the net proceeds from this offering, will be sufficient to fund our operations into the third quarter of 2018.

        This expected use of the net proceeds from this offering represents our intentions based upon our current plans and business conditions. For example, we may use a portion of the net proceeds for the acquisition of businesses or technologies to continue to build our pipeline, our research and development capabilities and our intellectual property position, although we currently have no agreements, commitments or understandings with respect to any such transaction. We cannot predict with certainty all of the particular uses for the net proceeds to be received upon the completion of this offering or the amounts that we will actually spend on the uses set forth above. The amounts and timing of our actual expenditures may vary significantly depending on numerous factors, including the progress of our research and development, the status of and results from non-clinical studies or clinical trials we may commence in the future, as well as any collaborations that we may enter into with third parties for our product candidates or strategic opportunities that become available to us, and any unforeseen cash needs. Moreover, we are unable to estimate the allocation of proceeds between our rMG program and our LN program at this time because we have not conducted separate clinical trials for these indications and have not received FDA feedback on trial design for our planned clinical trials in these indications. Likewise, we are unable to forecast future expenditures in our pipeline programs in Factor D, oral C5 inhibition and C1s on a program by program basis at this time because we have not conducted clinical trials or received FDA feedback for these programs. As a result, our management will retain broad discretion over the allocation of the net proceeds from this offering.

        Pending our use of proceeds from this offering, we intend to invest the net proceeds in a variety of capital preservation instruments, including short-term, investment-grade, interest-bearing instruments and U.S. government securities.

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DIVIDEND POLICY

        We have never declared or paid cash dividends on our capital stock. We intend to retain all available funds and any future earnings to fund the growth and development of our business. We do not intend to pay cash dividends to our stockholders in the foreseeable future.

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CAPITALIZATION

        The following table sets forth our cash and cash equivalents and our capitalization as of June 30, 2016:

        The pro forma as adjusted information below is illustrative only, and our capitalization following the completion of this offering will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing.

        The following table should be read together with "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Description of Capital Stock," and the consolidated financial statements and related notes appearing elsewhere in this prospectus.

 
  As of June 30, 2016  
 
  Actual(1)   Pro Forma   Pro Forma
As Adjusted
 
 
  (In thousands, except share and per
share data)

 
 
  (unaudited)
 

Cash and cash equivalents

  $ 40,246   $ 40,246   $ 108,735  

Convertible preferred stock, $0.001 par value; 95,367,647 shares authorized, 95,367,647 shares issued and outstanding, actual; no shares authorized, issued or outstanding, pro forma and pro forma as adjusted

  $ 86,484   $   $  

Stockholders' (deficit) equity:

                   

Preferred stock, $0.001 par value; no shares authorized, issued or outstanding, actual; 5,000,000 shares authorized, no shares issued or outstanding, pro forma and pro forma as adjusted

             

Common stock, $0.001 par value; 125,000,000 shares authorized, 554,759 shares issued and outstanding, actual; 150,000,000 shares authorized, 14,400,265 shares issued and outstanding, pro forma; 150,000,000 shares authorized, 20,200,265 shares issued and outstanding, pro forma as adjusted

    1     14     20  

Additional paid-in capital

    3,014     89,418     157,901  

Accumulated deficit

    (49,762 )   (49,762 )   (49,762 )

Total stockholders' (deficit) equity

    (46,747 )   39,670     108,159  

Total capitalization

  $ 39,737   $ 39,670   $ 108,159  

(1)
Excludes 222,775 shares of our common stock issuable upon the exercise of warrants outstanding as of June 30, 2016.

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        A $1.00 increase (decrease) in the assumed initial public offering price of $13.00 per share, the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) the pro forma as adjusted amount of cash, additional paid-in capital, total stockholders' equity and total capitalization by approximately $5.4 million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each increase (decrease) of 1.0 million shares in the number of shares offered by us in this offering would increase (decrease) the pro forma as adjusted amount of cash and cash equivalents, additional paid-in capital, total stockholders' equity and total capitalization by approximately $12.1 million, assuming the assumed initial public offering price of $13.00 per share, the midpoint of the price range set forth on the cover page of this prospectus, remains the same, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. The pro forma as adjusted information is illustrative only, and our capitalization following the completion of this offering will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing.

        The actual, pro forma and pro forma as adjusted information set forth in the table excludes:

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DILUTION

        If you invest in our common stock in this offering, your ownership interest will be diluted immediately to the extent of the difference between the initial public offering price per share of our common stock and the pro forma as adjusted net tangible book value per share of our common stock immediately after this offering.

        Our historical net tangible book value (deficit) as of June 30, 2016 was $(47.2) million, or $(85.13) per share of our common stock. Our historical net tangible book value (deficit) is the amount of our total tangible assets less our total liabilities and redeemable convertible preferred stock. Historical net tangible book value (deficit) per share represents historical net tangible book value divided by the 554,759 shares of our common stock outstanding as of June 30, 2016.

        Our pro forma net tangible book value as of June 30, 2016 was $39.2 million, or $2.72 per share of our common stock. Pro forma net tangible book value per share represents historical net tangible book value divided by the total number of shares of common stock outstanding as of June 30, 2016, after giving effect to (i) the conversion of all shares of our preferred stock then outstanding into 13,623,933 shares of common stock and (ii) the net exercise, in accordance with their terms, of outstanding warrants to purchase 222,775 shares of common stock into 221,573 shares of common stock, at an assumed exercise price of $13.00 per share, which is the midpoint of the price range set forth on the cover of this prospectus, in each case upon the closing of this offering.

        After giving further effect to the sale of shares of 5,800,000 common stock that we are offering at the assumed initial public offering price of $13.00 per share, the midpoint of the price range set forth on the cover page of this prospectus, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of June 30, 2016 would have been approximately $107.7 million, or approximately $5.33 per share. This amount represents an immediate increase in pro forma net tangible book value of $2.61 per share to our existing stockholders and an immediate dilution in pro forma net tangible book value of approximately $7.67 per share to investors participating in this offering.

        Dilution per share to investors participating in this offering is determined by subtracting pro forma as adjusted net tangible book value per share after this offering from the initial public offering price per share paid by investors participating in this offering. The following table illustrates this dilution (without giving effect to any exercise by the underwriters of their over-allotment option):

Assumed initial public offering price per share

        $ 13.00  

Historical net tangible book value (deficit) per share as of June 30, 2016

  $ (85.13 )      

Increase in historical net tangible book value per share attributable to pro forma adjustments described in preceding paragraphs

    87.85        

Pro forma net tangible book value per share as of June 30, 2016

    2.72        

Increase in pro forma net tangible book value per share attributable to investors participating in this offering

    2.61        

Pro forma as adjusted net tangible book value per share after this offering

        $ 5.33  

Dilution per share to new investors participating in this offering

        $ 7.67  

        If the underwriters exercise their option to purchase additional shares of common stock in this offering in full at the assumed initial public offering price of $13.00 per share, the midpoint of the price range set forth on the cover of this prospectus and assuming the number of shares offered by us,

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as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, the pro forma as adjusted net tangible book value would be $5.61 per share, and the dilution in pro forma net tangible book value per share to investors in this offering would be $7.39 per share.

        A $1.00 increase (decrease) in the assumed initial public offering price of $13.00 per share, the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) the pro forma as adjusted net tangible book value by $0.27 per share and the dilution to investors participating in this offering by $0.73 per share, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting estimated underwriting discounts and commissions and estimated expenses payable by us. Similarly, each increase of 1.0 million shares in the number of shares offered by us in this offering would increase the pro forma as adjusted net tangible book value by $0.32 per share and decrease the dilution to investors participating in this offering by $0.32 per share, assuming the assumed initial public offering price of $13.00 per share, the midpoint of the price range set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated expenses payable by us. Conversely, each decrease of 1.0 million shares in the number of shares offered by us in this offering would decrease the pro forma as adjusted net tangible book value by $0.35 per share and increase the dilution to investors participating in this offering by $0.35 per share, assuming the assumed initial public offering price of $13.00 per share, the midpoint of the price range set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated expenses payable by us.

        The following table summarizes, on a pro forma as adjusted basis, as of June 30, 2016, the difference between the number of shares of common stock purchased from us, the total consideration paid to us and the average price per share paid by existing stockholders and by investors in this offering at an assumed initial public offering price of $13.00 per share, the midpoint of the price range set forth on the cover page of this prospectus, before deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

 
   
   
  Total
Consideration
   
 
 
  Shares Purchased    
 
 
  Average Price
Per Share
 
 
  Number   Percent   Amount   Percent  
 
  (in thousands except per share data)
   
 

Existing stockholders(1)

    14,400,265     71.3 % $ 86,279,057     53.4 % $ 5.99  

Investors in this offering

    5,800,000     28.7     75,400,000     46.6     13.00  

Total

    20,200,265     100.0 % $ 161,679,057     100.0 %      

(1)
Certain of our existing stockholders, including certain affiliates of our directors, have indicated an interest in purchasing an aggregate of approximately $30.0 million of shares of our common stock in this offering at the initial public offering price. However, because indications of interest are not binding agreements or commitments to purchase, the underwriters may determine to sell more, less or no shares in this offering to any of these stockholders, or any of these stockholders may determine to purchase more, less or no shares in this offering.

        The above discussion and tables are based on shares of common stock issued and outstanding as of June 30, 2016 and (i) includes 13,623,933 additional shares of our common stock issuable upon the conversion of all outstanding shares of our preferred stock into shares of common stock and (ii) the net exercise, in accordance with their terms, of outstanding warrants to purchase 222,775 shares of common stock into 221,573 shares of common stock, at an assumed exercise price of $13.00 per share,

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which is the midpoint of the price range set forth on the cover of this prospectus, in each case upon the closing of this offering, and excludes:

        A $1.00 increase (decrease) in the assumed initial public offering price of $13.00 per share, the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) the total consideration paid by investors in this offering by approximately $5.4 million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each increase (decrease) of 1.0 million shares in the number of shares offered by us in this offering would increase (decrease) the total consideration paid by investors in this offering by approximately $12.1 million, assuming the assumed initial public offering price of $13.00 per share, the midpoint of the price range set forth on the cover page of this prospectus, remains the same, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

        To the extent that outstanding options are exercised or shares are issued under our equity incentive plans, you will experience further dilution. In addition, we may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that additional capital is raised through the sale of equity or convertible debt securities, the issuance of these securities may result in further dilution to our stockholders.

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SELECTED CONSOLIDATED FINANCIAL DATA

        The following selected historical consolidated financial data should be read together with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements, related notes and other financial information included elsewhere in this prospectus. The selected consolidated financial data in this section are not intended to replace the consolidated financial statements and are qualified in their entirety by the consolidated financial statements and related notes included elsewhere in this prospectus.

        We have derived the selected consolidated statement of operations data for the years ended December 31, 2014 and 2015, and the selected consolidated balance sheet data as of December 31, 2014 and 2015 from our audited consolidated financial statements included elsewhere in this prospectus. We have derived the selected consolidated statement of operations data for the six months ended June 30, 2015 and 2016 and balance sheet data as of June 30, 2016 from our unaudited consolidated financial statements included elsewhere in this prospectus. The unaudited consolidated financial statements have been prepared on a basis consistent with our audited consolidated financial statements included in this prospectus and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, necessary to fairly state our financial position as of June 30, 2016 and results of operations for the six months ended June 30, 2015 and 2016. Our historical results are not necessarily indicative of the results that may be expected in the future, and our interim period results are not necessarily indicative of results to be expected for a full year or any other interim period.

 
  Year Ended December 31,   Six Months Ended June 30,  
 
  2014   2015   2015   2016  
 
  (In thousands, except share and per share data)
 

Consolidated Statement of Operations Data:

                         

Revenue

  $ 4,830   $ 4,094   $ 2,177   $ 4,928  

Operating expenses:

                         

Research & development

    10,016     15,217     6,566     11,462  

General & administrative

    1,924     2,233     1,010     2,376  

Total operating expenses

    11,940     17,450     7,576     13,838  

Loss from operations

    (7,110 )   (13,356 )   (5,399 )   (8,910 )

Other income (expense), net                  

    1,607     (606 )   (49 )   (952 )

Loss from before benefit from income taxes

    (5,503 )   (13,962 )   (5,448 )   (9,862 )

Benefit from income taxes

    27     19          

Net loss

    (5,476 )   (13,943 )   (5,448 )   (9,862 )

Gain on extinguishment of redeemable convertible preferred shares

        1,673          

Net loss attributable to common shareholders

  $ (5,476 ) $ (12,270 ) $ (5,448 ) $ (9,862 )

Net loss per share attributable to common stockholders—basic and diluted(1)

  $ (12.46 ) $ (24.68 ) $ (11.29 ) $ (18.32 )

Weighted-average common shares used in net loss per share attributable to common stockholders—basic and diluted(1)

    439,597     497,073     482,502     538,310  

Pro forma net loss per share attributable to common stockholders—basic and diluted (unaudited)(1)

        $ (1.39 )       $ (0.85 )

Pro forma weighted-average common shares used in net loss per share attributable to common stockholders—basic and diluted (unaudited)(1)

          7,720,519           10,504,917  

(1)
See Note 2 to our notes to consolidated financial statements included elsewhere in this prospectus for an explanation of the method used to calculate the historical and pro forma basic and diluted net loss per common share and the number of shares used in the computation of the per share amounts.

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  As of December 31,    
 
 
  As of
June 30,
2016
 
 
  2014   2015  
 
  (In thousands)
 

Consolidated Balance Sheet Data:

                   

Cash and cash equivalents

  $ 4,039   $ 19,386   $ 40,246  

Working capital(1)

    1,642     13,248     34,975  

Total assets

    7,315     24,342     49,312  

Redeemable convertible preferred stock

    28,984     53,675     86,484  

Accumulated deficit

    (25,957 )   (39,900 )   (49,762 )

Total stockholders' deficit

    (25,714 )   (37,199 )   (46,747 )

(1)
We define working capital as current assets less current liabilities.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

        The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and related notes and other financial information appearing elsewhere in this prospectus. Some of the information contained in this discussion and analysis or set forth elsewhere in this prospectus, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the "Risk Factors" section of this prospectus, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

        We are a clinical-stage biopharmaceutical company using our proprietary peptide chemistry platform to develop novel therapeutics for the treatment of serious diseases that are caused by excessive or uncontrolled activation of the complement system, a critical component of the immune system. The complement system, which consists of approximately 30 interacting proteins, offers a target-rich opportunity for us to leverage our proprietary peptide chemistry platform, which was pioneered by Nobel Laureate Dr. Jack Szostak and allows us to inhibit certain uncontrolled complement pathway factors involved in complement-mediated diseases. Known as our Extreme Diversity platform, our proprietary macrocyclic peptide chemistry technology allows us to produce synthetic macrocyclic peptides that combine the diversity and specificity of antibodies with the pharmacological properties of small molecules. We believe this chemistry technology will allow us to pursue challenging targets for which only monoclonal antibodies have been developed.

        We are developing our lead product candidate, RA101495, a convenient self-administered subcutaneous, or SC, injection, which is an injection into the tissue under the skin, for the treatment of paroxysmal nocturnal hemoglobinuria, or PNH. PNH is a rare, chronic, life-threatening, blood disorder where red blood cells are mistakenly attacked and destroyed by the complement system. We expect to initiate our Phase 2 clinical program for RA101495 in PNH patients in the first quarter of 2017 and release data in the second half of 2017. We are also developing RA101495, administered SC, to treat other debilitating complement-mediated diseases such as refractory generalized myasthenia gravis, or rMG, and lupus nephritis, or LN. We expect to initiate a Phase 2 clinical trial with RA101495 for rMG and a Phase 1b clinical trial in LN in the second half of 2017. We also have preclinical programs targeting selective inhibition of other complement factors for diseases with no approved therapies, including a Factor D program for ophthalmologic and renal diseases, an oral, small molecule C5 inhibitor and a C1s program for certain autoimmune and central nervous system, or CNS, diseases. In addition to our focus on developing novel therapeutics to treat complement-mediated diseases, we have validated our Extreme Diversity platform by successfully identifying and delivering orally-available cyclic peptides for a non-complement cardiovascular target with a large market opportunity in a collaboration with Merck & Co., Inc., or Merck.

        Since our inception in June 2008, we have devoted substantially all of our resources to organizing and staffing our company, business planning, raising capital, acquiring and developing our proprietary chemistry technology, identifying potential product candidates and conducting preclinical studies of our product candidates and a clinical trial of our lead product candidate, RA101495. To date, we have not generated any product revenue and have financed our operations primarily through the private placement of our securities and revenue from our collaboration with Merck. As of June 30, 2016, we had raised an aggregate of $103.5 million comprised of $86.0 million gross proceeds from private placements of our securities and $17.5 million in payments in connection with our collaboration and license agreement with Merck, or the Merck Agreement. As of June 30, 2016, our principal source of liquidity was cash and cash equivalents, which totaled $40.2 million.

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        As of June 30, 2016, we had an accumulated deficit of $49.8 million. Our net losses were $5.5 million and $13.9 million for the years ended December 31, 2014 and 2015, respectively, and, $9.9 million for the six-month period ended June 30, 2016. We have incurred significant net operating losses in every year since our inception and expect to continue to incur increasing net operating losses and significant expenses 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 significantly as we:

        We believe that our available funds subsequent to this offering will be sufficient to fund our operations into the third quarter of 2018. We do not expect to generate revenue from product sales unless and until we successfully complete development and obtain regulatory approval for a product candidate, which we expect will take a number of years and is subject to significant uncertainty. Additionally, we currently use contract research organizations, or CROs, and contract manufacturing organizations, or CMOs, to carry out our preclinical and clinical development activities and we do not yet have a sales organization. If we obtain regulatory approval for our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. Accordingly, we may seek to fund our operations through public or private equity or debt financings or other sources, including strategic collaborations. We may, however, be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into such other arrangements as and when needed would have a negative impact on our financial condition and our ability to develop our current product candidates, or any additional product candidates, if developed.

Financial Overview

Revenue

        We have derived all of our revenue to date from our collaboration and license agreement with Merck, or the Merck Agreement, which we entered into in April 2013. Under the Merck Agreement, we collaborated with Merck and used our proprietary drug discovery technology platform to identify orally available cyclic peptides for non-complement targets nominated by Merck and provided specific research and development services. At the signing, Merck paid us an upfront, non-refundable, license fee payment of $4.5 million. In addition, during the research term, which ended in April 2016, Merck reimbursed us for research and development services provided by us in accordance with a pre-specified number of our full-time equivalent employees, or FTEs, working under the Merck Agreement. At the conclusion of the research term, Merck elected to continue the development of a non-complement cardiovascular program target with a large market opportunity, for which we had received $3.5 million in preclinical milestone payments as of June 30, 2016. We are also entitled to receive future aggregate milestone payments of up to $61.5 million and low-to-mid single digit percentage royalties on any future sales for this program target. For additional information about the Merck Agreement, see the section entitled "—Revenue Recognition—Merck Collaboration and License Agreement." For

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additional information about our revenue recognition policy, see the section entitled "—Critical Accounting Policies and Significant Judgments and Estimates—Revenue."

        To date, we have not generated any revenue from product sales and do not expect to do so in the near future. We expect that our revenue will be less than our expenses for the foreseeable future and that we will experience increasing losses as we continue our development of, and seek regulatory approvals for, our product candidates and begin to commercialize any approved products. Our ability to generate revenue for each product candidate for which we receive regulatory approval will depend on numerous factors, including competition, commercial manufacturing capability and market acceptance of our products.

Research and Development Expenses

        Research and development expenses consist primarily of costs incurred for our research activities, including development of our proprietary chemistry technology platform, and our preclinical and clinical candidates, which include:

        We expense research and development costs as incurred. We recognize costs for certain development activities, such as preclinical studies and clinical trials, based on an evaluation of the progress to completion of specific tasks using information provided to us by our vendors such as patient enrollment or clinical site activations for services received and efforts expended.

        Research and development activities are central to our business model. We expect research and development costs to increase significantly for the foreseeable future as our current development programs progress and new programs are added.

        We have not provided program costs since inception because historically we have not tracked or recorded our research and development expenses on a program-by-program basis. We use our employee and infrastructure resources across multiple research and development programs directed toward developing our Extreme Diversity platform and for identifying and developing product candidates. We manage certain activities such as contract research and manufacturing of RA101495 and our discovery programs through our third-party vendors, and do not track the costs of these activities on a program-by-program basis.

        Because of the numerous risks and uncertainties associated with product development, we cannot determine with certainty the duration and completion costs of the current or future preclinical studies and clinical trials or if, when, or to what extent we will generate revenues from the commercialization and sale of our product candidates. We may never succeed in achieving regulatory approval for our product candidates. The duration, costs and timing of preclinical studies and clinical trials and development of our product candidates will depend on a variety of factors, including:

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        A change in the outcome of any of these factors could mean a significant change in the costs and timing associated with the development of our current and future preclinical and clinical product candidates. For example, if the FDA, or another regulatory authority were to require us to conduct clinical trials beyond those that we currently anticipate will be required for the completion of clinical development, or if we experience significant delays in execution of or enrollment in any of our preclinical studies or clinical trials, we could be required to expend significant additional financial resources and time on the completion of preclinical and clinical development. We expect our research and development expenses to increase for the foreseeable future as we continue the development of product candidates.

General and Administrative Expenses

        General and administrative expenses consist primarily of employee related expenses, including salaries, benefits, and stock-based compensation, for personnel in executive, finance, facility operations and administrative functions. Other significant costs include facility costs not otherwise included in research and development expenses, legal fees relating to patent and corporate matters, and fees for accounting, tax and consulting services.

        We anticipate that our general and administrative expenses will increase in the future to support continued research and development activities, potential commercialization of our product candidates and increased costs of operating as a public company. These increases will likely include increased costs related to the hiring of additional personnel and fees to outside consultants, lawyers and accountants, among other expenses. Additionally, we anticipate increased costs associated with being a public company, including expenses related to services associated with maintaining compliance with exchange listing and Securities and Exchange Commission, or the SEC, requirements, director and officer insurance costs and investor and public relations costs.

Other Income (Expense), Net

        Other income (expense), net, primarily consists of interest expense incurred on debt instruments, amortized debt discount, interest income earned on our cash and cash equivalents, non-cash changes in fair value of the derivative liability associated with our convertible notes, loss on debt extinguishment and the increase in fair value of preferred stock tranche rights, or Preferred Stock Tranche Rights. The debt discount primarily consisted of the relative fair value of warrants and the fair value of bifurcated features embedded in our convertible notes issued in April 2015. The debt discount has been amortized to interest expense over the life of the convertible note and was recorded at fair value upon issuance.

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Critical Accounting Policies and Significant Judgments and Estimates

        Our management's discussion and analysis of our financial condition and results of operations is based on our financial statements, which we have prepared in accordance with U.S. generally accepted accounting principles. We believe that several accounting policies are important to understanding our historical and future performance. We refer to these policies as critical because these specific areas generally require us to make judgments and estimates about matters that are uncertain at the time we make the estimate, and different estimates—which also would have been reasonable—could have been used. On an ongoing basis, we evaluate our estimates and judgments, including those described in greater detail below. We base our estimates on historical experience and other market-specific or other relevant assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

        While our significant accounting policies are described in more detail in the notes to our financial statements appearing elsewhere in this prospectus, we believe the following accounting policies to be most critical to the judgments and estimates used in the preparation of our financial statements.

Revenue Recognition

        We have derived all of our revenue to date from our Merck Agreement. The terms of the Merck Agreement contain multiple elements, including:

        Multiple element or deliverable arrangements, such as the Merck Agreement, are analyzed to determine whether the deliverables can be separated or whether they must be accounted for as a single unit of accounting. When deliverables are separable, payments received are allocated to the separate units of accounting based on the relative selling price method and the appropriate revenue recognition principles are applied to each unit. When we determine that an arrangement should be accounted for as a single unit of accounting, we must determine the period over which the performance obligations will be performed and revenue will be recognized.

        We recognize revenue for each element or deliverable under the Merck Agreement when all of the following criteria are met:

        Revenue in connection with:

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        Amounts received prior to satisfying the revenue recognition criteria are recorded as deferred revenue in our consolidated balance sheets.

Accrued Research and Development Expenses

        As part of the process of preparing our financial statements, we are required to estimate our accrued expenses. This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed for us and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost. The majority of our service providers invoice us monthly in arrears for services performed or when contractual milestones are met. We make estimates of our accrued expenses as of each balance sheet date in our financial statements based on facts and circumstances known to us at that time. We periodically confirm the accuracy of our estimates with the service providers and make adjustments if necessary. Examples of estimated accrued research and development expenses include fees paid to:

        We base our expenses related to clinical trials on our estimates of the services received and efforts expended pursuant to contracts with multiple CROs that conduct and manage clinical trials on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the clinical expense. Payments under some of these contracts depend on factors such as the successful enrollment of subjects and the completion of clinical trial milestones. In accruing service fees, we estimate the time period over which services will be performed, enrollment of subjects and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or prepaid expense accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, if our estimates of the status and timing of services performed differs from the actual status and timing of services performed we may report amounts that are too high or too low in any particular period. To date, there have been no material differences from our estimates to the amounts actually incurred.

Stock-Based Compensation

        We account for stock-based compensation awards to employees and directors in accordance with FASB ASC Topic 718, Compensation-Stock Compensation, or ASC 718. ASC 718 applies to any awards granted, modified, repurchased, or canceled after December 31, 2005, and requires the measurement and recognition of costs for all stock-based awards made to employees and directors, including stock options, stock appreciation rights, stock units, and discounted employee stock purchases. We recognize compensation costs related to employees based on the estimated fair value of the awards on the date of grant and over the associated service periods, using the straight-line method. The options vest periodically over various schedules and all options expire no later than 10 years after the date of grant.

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        We have applied the fair value recognition provisions of ASC 718 and FASB ASC 505, Equity, or ASC 505, to account for stock-based compensation for non-employees. Stock-based compensation related to non-employee awards is re-measured at each reporting period until the awards are vested and is estimated using an expected term equal to the remaining contractual term of the award. Compensation expense is recognized for the fair value of the consideration received, or the equity instruments issued, whichever is more reliably measurable. We recorded compensation expense for non-employee awards with graded vesting using an accelerated recognition model.

        We estimate the fair value of our stock-based awards to employees and non-employees using the Black-Scholes option pricing model, which requires the input of highly subjective assumptions, including:

        Due to the lack of a public market for the trading of our common stock and a lack of company specific historical and implied volatility data, we have based our estimate of expected volatility on the historical volatility of a group of comparable companies that are publicly traded. For these analyses, we selected representative companies from the life sciences industry with characteristics similar to ours, including enterprise value, risk profiles, position within the industry and historical share price information, sufficient to meet the expected life of the stock-based awards. We compute the historical volatility data using the daily closing prices for the selected companies' shares during the equivalent period of the calculated expected term of our stock-based awards. We will continue to apply this process until a sufficient amount of historical information regarding the volatility of our own stock price becomes available. We use a dividend yield of zero based on the fact that we have never declared cash dividends and have no current intention of paying cash dividends over the expected term of the option.

        As we do not have sufficient historical stock option activity data to provide a reasonable basis upon which to estimate the expected term of stock options granted to employees, we have estimated the expected life of our employee stock options using the "simplified" method, whereby the expected life equals the average of the vesting term and the original contractual term of the option. For non-employee options, we have determined the expected life based on the respective contractual life. The risk-free interest rates for periods within the expected life of the option are based on the U.S. Treasury yield curve in effect during the period the options were granted and with maturity dates equivalent to the expected term of the option.

        The fair value of each stock option granted to employees and directors was estimated on the date of grant using the Black-Scholes option-pricing model, with the following range of assumptions for the years ended December 31, 2014 and 2015, and the six months ended June 30, 2015 and 2016:

 
  Year Ended December 31,   Six Months Ended June 30,
 
  2014   2015   2015   2016

Risk free interest rate

  1.76% - 1.88%   1.76% - 1.86%     1.76 % 1.23% - 1.59%

Expected dividend yield

         

Expected term (in years)

  5.9 - 6.1   5.9 - 6.1     6.0   6.0 - 6.4

Expected volatility

  76.4% - 79.9%   72.3% - 74.7%     72.3 % 74.1% - 77.3%

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        The fair value of each non-qualified stock option granted to non-employees was estimated on the date of grant and at each revaluation date using the Black-Scholes option-pricing model, with the following range of assumptions, excluding performance-based awards, during the years ended December 31, 2014 and 2015, and six months ended June 30, 2015 and 2016:

 
  Year Ended December 31,   Six Months Ended June 30,
 
  2014   2015   2015   2016

Risk free interest rate

  2.15% - 2.18%   1.93% - 2.31%   1.93% - 2.31%   1.46% - 1.76%

Expected dividend yield

       

Expected term (in years)

  9.9 - 10.0   9.2 - 10.0   9.2 - 10.0   9.7 - 10.0

Expected volatility

  75.1% - 75.3%   75.1% - 79.9%   75.3% - 79.9%   78.4% - 81.0%

        We are also required to estimate forfeitures at the time of grant, and revise those estimates in subsequent periods if actual forfeitures differ from its estimates. The estimation of the number of awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from our current estimates, such amounts will be recorded as a cumulative adjustment in the period in which estimates are revised.

        The following table presents the grant dates of shares subject to awards from January 1, 2015 through the date of this prospectus, along with the corresponding exercise price for each option grant and our current estimate of the fair value per share of our common stock on each grant date, which we utilize to calculate stock-based compensation expense:

Date of Grant
  Number of Shares
Underlying Options
Granted
  Exercise Price
Per Share
  Fair Value of
Common Stock
on Grant Date
  Per Share
Estimated
Fair Value of
Award(1)
 

March 13, 2015

    53,141   $ 2.87   $ 2.87   $ 1.96  

December 10, 2015

    603,151   $ 2.87   $ 2.87   $ 1.89  

February 29, 2016

    379,996   $ 2.87   $ 2.87   $ 1.75  

March 10, 2016

    45,714   $ 2.87   $ 2.87   $ 1.89  

June 16, 2016

    156,427   $ 2.87   $ 3.92 (2) $ 2.80  

August 16, 2016

    882,835   $ 5.60   $ 5.60   $ 4.07  

(1)
The Per Share Estimated Fair Value of Award reflects the fair value of options as estimated at the date of grant using the Black-Scholes option-pricing model.

(2)
The fair value of common stock used for financial reporting purposes was determined based on a fair value assessment as of June 30, 2016.

        Stock-based compensation totaled approximately $0.1 million, $0.2 million, $0.1 million and $0.3 million for the years ended December 31, 2014 and 2015, and the six months ended June 30, 2015 and 2016. As of December 31, 2014, and 2015, and as of June 30, 2016, the total unrecognized compensation expense related to non-vested employee and non-employee stock options, net of related forfeiture estimates, was $0.2 million, $1.2 million, and $2.0 million, respectively. We expect to recognize our remaining stock based compensation expense over a weighted-average remaining vesting period of approximately three years. We expect our stock-based compensation expense for stock options granted to employees and non-employees to increase in future periods due to the potential increase in the value of our common stock and future option grants to new and current employees and consultants.

Determination of the Fair Value of Common Stock on Grant Dates

        Following the consummation of this offering, the fair value of our common stock will be determined based on the quoted market price of our common stock. We have historically granted stock options at exercise prices not less than the fair value of our common stock. Our board of directors

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determined the fair value of our common stock considering, in part, the work of an independent third-party valuation specialist. The board determined the estimated per share fair value of our common stock at various dates considering contemporaneous valuations performed in accordance with the guidance outlined in the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation, or Practice Aid.

        Our common and incentive security valuations were prepared using either an option-pricing method, or OPM, a probability-weighted expected return method, or PWERM, which used a combination of market approaches and an income approach to estimate our enterprise value or a hybrid method, which employs the concepts of the OPM and the PWERM merged into a single framework. The OPM treats common securities and preferred securities as call options on the total equity value of a company, with exercise prices based on the value thresholds at which the allocation among the various holders of a company's securities changes. Under this method, the common stock has value only if the funds available for distribution to equityholders exceeded the value of the preferred security liquidation preference at the time of the liquidity event, such as a strategic sale or a merger. The PWERM is a scenario-based methodology that estimates the fair value of common stock based upon an analysis of future values for the company, assuming various outcomes. The common stock values are based on the probability-weighted present value of expected future investment returns considering each of the possible outcomes available as well as the rights of each class of common, incentive and preferred securities. The future value of the common stock under each outcome is discounted back to the valuation date at an appropriate risk-adjusted discount rate and probability weighted to arrive at an indication of value for the common stock. The hybrid method is a PWERM where the equity value in one of the scenarios is calculated using an OPM. The foregoing valuation methodologies are not the only methodologies available and they will not be used to value our common stock once this offering is complete. We cannot make assurances as to any particular valuation for our common stock. Accordingly, investors are cautioned not to place undue reliance on the foregoing valuation methodologies as an indicator of future stock prices. We performed common stock valuations, with the assistance of an independent third-party valuation specialist, as of September 30, 2014, July 10, 2015 and December 31, 2015, which resulted in valuations of our common stock of $2.87 as of each of those dates and June 30, 2016, which resulted in a valuation of our common stock of $3.92. In addition, we performed a common stock valuation, with the assistance of an independent third-party valuation specialist, as of August 1, 2016, which resulted in a valuation of our common stock of $5.60 as of such date. In conducting the valuations, the independent third-party valuation specialist considered all objective and subjective factors that it believed to be relevant for each valuation conducted in accordance with the Practice Aid, including our best estimate of our business condition, prospects and operating performance at each valuation date. Other significant factors included:

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        The dates of our contemporaneous valuations have not always coincided with the dates of our stock option grants. In determining the exercise prices of the stock options set forth in the table above, our board of directors considered, among other things, the most recent valuation of our common stock and their assessment of additional objective and subjective factors that were relevant as of the grant dates. The additional factors considered when determining whether any changes in the fair value of our common stock had occurred between the most recent valuation and the grant dates included our stage of research and development, our operating and financial performance and current business conditions.

        The estimates of fair value of our common stock are highly complex and subjective. There are significant judgments and estimates inherent in the determination of the fair value of our common stock. These judgments and estimates include assumptions regarding our future operating performance, the time to completing an IPO or other liquidity event, the related valuations associated with these events, and the determinations of the appropriate valuation methods at each valuation date. The assumptions underlying these valuations represent management's best estimates, which involve inherent uncertainties and the application of management judgment. If we had made different assumptions, our stock-based compensation expense, net loss and net loss per share applicable to common stockholders could have been materially different.

Determination of Estimated Offering Price

        In July 2016, we selected underwriters for this offering. The midpoint of the range of the initial public offering price listed on the cover page of this prospectus as determined by us and the underwriters was $13.00 per share. In comparison, our estimate of the fair value of our common stock was $5.60 per share as of the August 16, 2016 valuation. We note that, as typical in initial public offerings, the range of the initial public offering price listed on the cover page of this prospectus was not derived using a formal determination of fair value, but was determined based upon discussions between us and the underwriters. Among the factors that were considered in setting this range were our prospects and the recent market prices of, and the demand for, publicly traded common stock of comparable companies.

        We believe that the difference between the fair value of our common stock as of                        and the midpoint of the range of the initial public offering price listed on the cover page of this prospectus is the result of these factors as well as the facts that we have continued to advance our lead product candidate and expand our pipeline of product candidates, we have received a positive opinion from the European Medicines Agency recommending orphan drug designation for RA101495 for the treatment of PNH in the European Union, we have received feedback from the Food and Drug Administration on our Phase 2 clinical program for RA101495, and we have received a $3.0 million milestone payment from Merck for our delivery to Merck of a set of orally-available molecules for a non-complement target with a large market opportunity in connection with our collaboration with Merck. In addition, the range of the initial public offering price listed on the cover page of this prospectus necessarily assumes that the initial public offering has occurred, a public market for our common stock has been created and our convertible preferred stock has converted into common stock in connection with the initial public offering. The range of the initial public offering price listed on the cover page of this prospectus therefore excludes any discount for lack of marketability of our common stock and any consideration of the preferences of our convertible preferred stock, which we factored into the August 16, 2016 contemporaneous valuation.

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Results of Operations

Comparison of the Six Months Ended June 30, 2015 and 2016

        The following table summarizes our results of operations for the six months ended June 30, 2015 and 2016, together with the dollar change in those items:

 
  Six Months Ended
June 30,
   
 
 
  Period-to-Period
Change
 
 
  2015   2016  
 
  (In thousands)
 

Revenue

  $ 2,177   $ 4,928   $ 2,751  

Operating expenses:

                   

Research & development

    6,566     11,462     4,896  

General & administrative

    1,010     2,376     1,366  

Total operating expenses

    7,576     13,838     6,262  

Loss from operations

    (5,399 )   (8,910 )   (3,511 )

Other expense, net

    (49 )   (952 )   (903 )

Net loss

  $ (5,448 ) $ (9,862 ) $ (4,414 )

        Revenue increased by $2.8 million to $4.9 million for the six months ended June 30, 2016, from $2.2 million for the six months ended June 30, 2015. This increase is primarily attributable to the recognition of a $3.0 million milestone payment from Merck in June 2016 and an increase of $0.7 million in connection with recognition of the remaining deferred revenue related to the upfront non-refundable, license fee earned at the expiration of the research term of the Merck Agreement, on March 31, 2016. These increases were offset in part by $0.8 million decrease in FTE revenue related to a decrease in the number of FTEs providing research and development services under the Merck Agreement and $0.1 million decrease related to lower reimbursable lab supply and reagent expenses for the six months ended June 30, 2016.

        Research and development expenses increased by $4.9 million to $11.5 million for the six months ended June 30, 2016, from $6.6 million for the six months ended June 30, 2015. This increase is primarily attributable to $2.2 million increase in CRO and CMO expenses in connection with our pre-clinical studies and clinical trials for RA101495, $1.1 million increase in employee-related costs associated with salaries, bonus, benefits and non-cash stock-based compensation including costs for additional personnel to support our increased research and development activities, $0.9 million increase in facilities costs including rent, moving expenses related to our new facility, and depreciation expense, $0.4 million increase in consulting expenses and $0.3 million increase in lab-supply and reagent expenses.

        General and administrative expenses increased by $1.4 million to $2.4 million for the six months ended June 30, 2016, from $1.0 million for the six months ended June 30, 2015. The increase in general and administrative expenses was primarily attributable to $0.7 million increase in consulting and professional fees, including increased market research, accounting and audit fees, $0.5 million increase in employee-related costs, including salary, bonus, benefits and non-cash stock-based compensation for

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executive and administrative personnel including for additional personnel to support our increased activities, and approximately $0.2 million in increased facilities related costs and other related expenses.

        During the six months ended June 30, 2016, other expense, net, increased by $0.9 million to $1.0 million from $0.05 million for the six months ended June 30, 2015. This increase was primarily attributable to the increase in the fair value of the Series B-2 Preferred Stock Tranche Rights of $1.0 million recognized in the six months ended June 30, 2016 partially offset by a decrease of $0.1 million in interest expense that was recognized in the six months ended June 30, 2015 in connection with our convertible notes that were outstanding from April 2015 until the cancellation upon conversion into Series B-1 preferred stock in July 2015.

Comparison of the Years Ended December 31, 2014 and 2015

        The following table summarizes our results of operations for the years ended December 31, 2014 and 2015, together with the dollar change in those items:

 
  Year Ended
December 31,
   
 
 
  Period-to-Period
Change
 
 
  2014   2015  
 
  (In thousands)
 

Revenue

  $ 4,830   $ 4,094   $ (736 )

Operating expenses:

                   

Research & development

    10,016     15,217     5,201  

General & administrative

    1,924     2,233     309  

Total operating expenses

    11,940     17,450     5,510  

Loss from operations

    (7,110 )   (13,356 )   (6,246 )

Other income (expense), net

    1,607     (606 )   (2,213 )

Net loss before benefit from income taxes

    (5,503 )   (13,962 )   (8,459 )

Benefit from income taxes

    27     19     (8 )

Net loss

  $ (5,476 ) $ (13,943 ) $ (8,467 )

        Revenue decreased by $0.7 million to $4.1 million for the year ended December 31, 2015, from $4.8 million for the year ended December 31, 2014. This decrease was primarily attributable to a decrease of $0.4 million in FTE revenue related to a decrease in the number of FTEs providing research and development services under the Merck Agreement during 2015. In addition, recognition of deferred revenue related to the upfront non-refundable, technology license fee decreased $0.2 million due to the extension in an April 2015 amendment of the Merck Agreement. Revenue related to reimbursable lab supply and reagent also decreased by $0.1 million.

        Research and development expenses increased by $5.2 million to $15.2 million for the year ended December 31, 2015, from $10.0 million for the year ended December 31, 2014. This increase was primarily due to $3.7 million increase in CRO and CMO expenses for our ongoing pre-clinical studies and a Phase 1 clinical trial for RA101495, $1.1 million increase in employee-related costs including increased salary, bonus, benefits and non-cash stock-based compensation for additional personnel to

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support our increased activities and $0.4 million in increased facilities-related costs and depreciation expense.

        General and administrative expenses increased by $0.3 million to $2.2 million for the year ended December 31, 2015 from $1.9 million for the year ended December 31, 2014. The increase in general and administrative expenses was primarily attributable to an increase of $0.3 million in consulting and professional fees associated with general corporate activities.

        Other income (expense), net decreased by $2.2 million to $0.6 million in other expense, net for the year ended December 31, 2015 from $1.6 million in other income, net for the year ended December 31, 2014. This decrease was primarily attributable to a decrease of $1.5 million in other income recognized in the year ended December 31, 2014 related to the increase in fair value of the Series A Preferred Stock Tranche Rights, an increase of $0.1 million in interest expense due to convertible notes that were outstanding from April 2015 until the conversion into Series B-1 preferred stock in July 2015, and an increase of $0.6 million in other expense related to the loss upon debt extinguishment of convertible notes.

Liquidity and Capital Resources

Overview

        We have funded our operations from inception through June 30, 2016 primarily through gross proceeds of $86.0 million from the sale of our preferred stock and the issuance of convertible notes that subsequently converted into preferred stock and $17.5 million from payments from Merck in connection with the Merck Agreement. As of June 30, 2016, we had cash and cash equivalents of $40.2 million.

Cash Flows

        The following table provides information regarding our cash flows for the years ended December 31, 2014 and 2015 and the six months ended June 30, 2015 and 2016:

 
  Years Ended
December 31,
  Six Months Ended
June 30,
 
 
  2014   2015   2015   2016  
 
  (In thousands)
 

Net cash (used in) provided by:

                         

Operating activities

  $ (7,551 ) $ (12,017 ) $ (5,257 ) $ (5,324 )

Investing activities

    (825 )   (1,664 )   (22 )   (3,088 )

Financing activities

    8,644     29,028     4,894     29,272  

Net increase (decrease) in cash

  $ 268   $ 15,347   $ (385 ) $ 20,860  

        The use of cash in all periods resulted primarily from our net losses adjusted for non-cash charges and changes in components of working capital.

        Net cash used in operating activities of $5.3 million during the six months ended June 30, 2016 increased by $67,000 compared to the six months ended June 30, 2015. The $67,000 increase in net cash used in operations was primarily due to an increase in our net loss of $4.4 million for the six

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months ended June 30, 2016, as compared to the six months ended June 30, 2015 due to an increase in our operating expenses in connection with our lead program RA101495 and other research and development pipeline programs, partially offset by an increase in accrued expenses, accounts payable, deferred rent and other non-current liabilities of $4.9 million and a decrease in prepaid expenses and other assets of approximately $0.5 million.

        Net cash used in operating activities was $12.0 million during the year ended December 31, 2015 compared to $7.6 million during the year ended December 31, 2014. The increase in net cash used in operations was primarily due to an increase in our net loss of $8.5 million for the year ended December 31, 2015, as compared to the year ended December 31, 2014 due to an increase in our operating expenses in connection with our lead program RA101495 and other research and development pipeline.

        Net cash used in investing activities was $3.1 million for the six months ended June 30, 2016 compared to $22,000 during the six months ended June 30, 2015. The increase in cash used in investing activities was primarily due to increased purchases of property and equipment related to the cost of new leasehold improvements in our new leased facility in Cambridge, Massachusetts.

        Net cash used in investing activities was $1.7 million during the year ended December 31, 2015 compared to $0.8 million during the year ended December 31, 2014. The increase in cash used in investing activities was primarily due to the security deposit for our new lease in Cambridge, Massachusetts.

        Net cash provided by financing activities was $29.3 million during the six months ended June 30, 2016 compared to $4.9 million during the six months ended June 30, 2015. The increase in cash provided by financing activities was due to net proceeds of $29.2 million related to the issuance of Series B-2 preferred stock and proceeds of $43,000 from the exercise of stock options during the six months ended June 30, 2016.

        Net cash provided by financing activities was $29.0 million during the year ended December 31, 2015 compared to $8.6 million during the year ended December 31, 2014. The increase in cash provided by financing activities was attributable to net proceeds of $28.9 million related to the issuance of convertible notes and Series B-1 preferred stock during the year ended December 31, 2015.

Funding Requirements

        We expect our expenses to increase in connection with our ongoing activities, particularly as we initiate Phase 2 clinical trials of RA101495 in PNH, initiate clinical trial of RA101495 in additional indications rMG and LN, advance the development of pipeline programs, initiate new research and preclinical development efforts and seek marketing approval for any product candidates that we successfully develop. In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to establishing sales, marketing, distribution and other commercial infrastructure to commercialize such products. Furthermore, upon the closing of this offering, we expect to incur additional costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts.

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        We believe that the anticipated net proceeds from this offering, together with our existing cash and cash equivalents as of June 30, 2016, will enable us to fund our operating expenses and capital expenditure requirements into the third quarter of 2018.

        We have based our projections of operating capital requirements on assumptions that may prove to be incorrect and we may use all of our available capital resources sooner than we expect. Because of the numerous risks and uncertainties associated with the development and commercialization of RA101495 and the research, development and commercialization of other potential product candidates, we are unable to estimate the exact amount of our operating capital requirements. Our future capital requirements will depend on many factors, including:

        Identifying potential product candidates and conducting preclinical studies and clinical trials is a time-consuming, expensive and uncertain process that takes many years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all.

        Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt 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.

        If we raise funds through additional 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

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favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Contractual Obligations

        The following table summarizes our outstanding contractual obligations as of payment due date by period at December 31, 2015:

 
  Total   Less than
1 Year
  1 to 3 Years   3 to 5 Years   More than
5 Years
 
 
  (in thousands)
 

Operating Leases

  $ 9,781   $ 868   $ 2,580   $ 2,831   $ 3,502  

Total

  $ 9,781   $ 868   $ 2,580   $ 2,831   $ 3,502  

        We enter into contracts in the normal course of business with CROs and clinical sites for the conduct of clinical trials, professional consultants for expert advice and other vendors for clinical supply manufacturing or other services. These contracts are not included in the table above as they provide for termination on notice, and therefore are cancelable contracts and do not include any minimum purchase commitments.

Off-Balance Sheet Arrangements

        We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under the applicable regulations of the SEC.

Recent Accounting Pronouncements

        Refer to Note 2, "Summary of Significant Accounting Policies," in the accompanying notes to the consolidated financial statements for a discussion of recent accounting pronouncements. There were no new accounting pronouncements adopted during 2015 and the six months ended June 30, 2016 that had a material effect on our financial statements.

The JOBS Act

        The Jumpstart our Business Startups Act of 2012, or the JOBS Act, permits an "emerging growth company" such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We have chosen to "opt out" of this provision and will comply with new or revised accounting standards as required when they are adopted. This decision to opt out of the extended transition period under the JOBS Act is irrevocable.

Qualitative and Quantitative Disclosures about Market Risk

        We are exposed to market risk related to changes in interest rates. As of December 31, 2015 and June 30, 2016, we had cash and cash equivalents of $19.4 million and $40.2 million, respectively, consisting primarily of money market funds. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly because our cash equivalents are in held in short-term money market funds. Due to short-term duration of our investment portfolio and the low risk profile of our investments, an immediate 100 basis point change in interest rates would not have a material effect on the fair market value of our portfolio.

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BUSINESS

        We are a clinical-stage biopharmaceutical company using our proprietary peptide chemistry platform to develop novel therapeutics for the treatment of serious diseases that are caused by excessive or uncontrolled activation of the complement system, a critical component of the immune system. Inappropriate activation of the complement system can quickly turn it from a beneficial defense system to an aggressor that plays a major role in immune and inflammatory diseases. We are developing our lead product candidate, RA101495, a convenient self-administered subcutaneous, or SC, injection, which is an injection into the tissue under the skin, for the treatment of paroxysmal nocturnal hemoglobinuria, or PNH. PNH is a rare, chronic, life-threatening, blood disorder where red blood cells are mistakenly attacked and destroyed by the complement system. We expect to initiate our Phase 2 clinical program for RA101495 in PNH patients in the first quarter of 2017 and release data in the second half of 2017. We are also developing RA101495, administered SC, to treat other debilitating complement-mediated diseases such as refractory generalized myasthenia gravis, or rMG, and lupus nephritis, or LN. We expect to initiate a Phase 2 clinical trial with RA101495 for rMG and a Phase 1b clinical trial in LN in the second half of 2017.

        RA101495 is a potent synthetic macrocyclic peptide inhibitor of complement component 5, or C5. C5 plays a key role in the rupture and destruction of red blood cells, or hemolysis, associated with PNH. Inhibition of C5 is a clinically validated target for the control and suppression of complement-induced hemolysis in patients with PNH. Currently the only drug approved to treat PNH is eculizumab (Soliris), a humanized monoclonal antibody that acts as a C5 inhibitor and is administered biweekly by intravenous, or IV, infusion by healthcare professionals. Eculizumab had reported annual sales of $2.6 billion in 2015 for its two approved indications, PNH and aHUS. However, loss of hemolysis control, or breakthrough hemolysis, has been observed in patients treated with eculizumab, particularly towards the end of its two-week administration cycle. If approved for PNH, we believe RA101495, when self-administered SC on a more frequent basis, will provide sustained and improved disease control, which reduces the risk of breakthrough hemolysis, and offers PNH patients more convenience and flexibility compared with eculizumab.

        The complement system, which consists of approximately 30 interacting proteins, offers a target-rich opportunity for us to leverage our Extreme Diversity platform technology that was pioneered by Nobel Laureate Dr. Jack Szostak and allows us to inhibit certain uncontrolled complement pathway factors involved in complement-mediated diseases. Our platform allows us to produce synthetic macrocyclic peptides that combine the diversity and specificity of antibodies with the pharmacological properties of small molecules. The highly specific and stable peptide-like molecules generated are much smaller than monoclonal antibodies and other biologics, enabling more convenient routes of administration while still offering the opportunity to target protein-protein interactions, a type of molecular interaction that historically has been difficult to address with other small molecules. We believe our technology will allow us to pursue challenging targets for which only monoclonal antibodies have been developed.

        We are developing a portfolio of drug candidates designed to treat a variety of complement-mediated diseases, including rare blood, neurologic, ophthalmologic, renal and inflammatory diseases. We also have preclinical programs targeting selective inhibition of other complement factors for diseases with no approved therapies, including Factor D for ophthalmologic and renal diseases, an oral, small molecule C5 inhibitor and C1s for certain autoimmune and central nervous system, or CNS, diseases. In addition to our focus on developing novel therapeutics to treat complement-mediated diseases, we have validated our Extreme Diversity platform by successfully identifying and delivering orally-available cyclic peptides for a non-complement cardiovascular target with a large market opportunity in a collaboration with Merck & Co., Inc., or Merck.

        We were founded by Dr. Douglas A. Treco, an experienced rare disease drug developer and our chief executive officer and president, and by Dr. Jack Szostak, a pioneer in the field of mRNA display

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from the Massachusetts General Hospital, an affiliate of Harvard University, and Howard Hughes Medical Institute. Dr. Szostak currently serves as the chairman of our scientific advisory board and a consultant to us. Our management team consists of drug discovery, development and commercialization experts with experience in translating scientific discoveries into innovative approved products for rare diseases, including Replagal for Fabry disease, Elaprase for Hunter syndrome, and Vpriv for Gaucher's disease, as well as Dynepo for chronic kidney disease, and immunology products, including Rituxan and Actemra.

Our Pipeline

        The following table summarizes key information about our lead program and other pipeline programs. We hold worldwide commercialization rights to all of our product candidates, except for our non-complement cardiovascular target with a large market opportunity, which is subject to our collaboration with Merck.

Program
  Indication(1)   Description   Status
RA101495 for C5 Inhibition   PNH (SC)   Phase 1 with single ascending dose and multiple dose in healthy volunteers   Completed Phase 1 second quarter 2016

 

 

 

 

Phase 2 with eculizumab-naïve patients, patients switched from eculizumab, and eculizumab inadequate responders

 

Planned Phase 2 commencing first quarter of 2017, and data by second half of 2017

 

 

rMG (SC)

 

Phase 2 with rMG patients

 

Program to be initiated with planned Phase 2 commencing second half of 2017,(2)

 

 

LN (SC)

 

Phase 1b with LN patients

 

Program to be initiated with planned Phase 1b commencing second half of 2017,(2)

Factor D Inhibition

 

Dry AMD/GA (intravitreal, or injection into the eye)

 

Preclinical program

 

Preclinical activities in process

 

 

Orphan renal diseases DDD and C3GN

 

Preclinical program

 

Preclinical activities in process

Oral C5 Inhibitor

 

PNH, rMG, LN and CNS Diseases

 

Preclinical program

 

Preclinical activities in process

C1s Inhibition

 

Autoimmune/CNS Diseases

 

Preclinical program

 

Discovery activities in process

Merck Collaboration(3)

 

Non-complement cardiovascular target with large market opportunity

 

Collaboration agreement

 

Lead oral peptide class selected June 2016; Merck's preclinical activities in process

(1)
In the table above, we refer to various indications as follows: PNH: paroxysmal nocturnal hemoglobinuria; rMG: refractory generalized myasthenia gravis; LN: lupus nephritis; AMD: age-related macular degeneration; GA: geographic atrophy; DDD: dense deposit disease; C3GN: C3 glomerulonephritis; and CNS: central nervous system.

(2)
We intend to leverage our work in PNH, including the chemistry, manufacturing and controls, or CMC, and preclinical data packages, to advance our programs for RA101495 for rMG and LN, which have not yet been initiated.

(3)
For additional information about our collaboration with Merck, see the section titled "Management's Discussion and Analysis of Financial Conditions and Results of Operations—Financial Overview."

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Our Strategy

        Our goal is to become a leading biopharmaceutical company that transforms the lives of patients with serious complement-mediated diseases by combining our expertise in complement with our leadership in macrocyclic peptide technology. To achieve this goal, we are executing on the following strategy:

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The Complement System

        The complement system is a critical component of the immune system. The immune system protects the body by recognizing and removing bacteria, viruses and other infectious agents, collectively referred to as pathogens. The complement system consists of approximately 30 interacting proteins that are produced primarily by the liver and circulate in the blood and through the body's tissues. Activation of the complement system leads to a series of enzyme reactions that produce factors that both directly kill pathogens and recruit immune cells to sites of infection. The complement system is activated in three distinct pathways, referred to as the classical pathway, the lectin pathway and the alternative pathway. Each pathway is activated by different triggers associated with the presence of an abnormal cell or pathogen. Irrespective of the activation event, these pathways converge on C5, triggering a series of enzyme reactions that leads to the formation of a pore in the target cell, which is known as the membrane attack complex, or MAC. In its physiological role, this is an extremely potent agent causing the rupture and destruction of bacterial cell walls.

        Normally the complement system is tightly regulated to restrict activation to the site of infection and avoid injury to host tissues, or "self" cell surfaces. Under conditions of excessive or uncontrolled activation, the complement system plays a key role in a range of debilitating autoimmune and inflammatory diseases. In these conditions, the complement system causes damage:

        The following figure depicts the key elements, proteins and factors within the complement system cascade. Many of these proteins are abbreviated with a "C" followed by a number. For example, C5 denotes complement component 5. Others are called "Factor" followed by a letter, such as Factor B. As depicted in Figure 1 below, irrespective of the activation event, these pathways converge on C5, triggering a series of enzyme reactions that lead to the cleavage of C5 into C5a and C5b. C5b then binds to C6, C7, C8 and C9 to form a MAC.

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Figure 1. Schematic diagram of the complement system cascade.

GRAPHIC

Our Approach

        There are numerous potential therapeutic targets in the complement cascade, and inhibiting the cascade at different points may be beneficial to treat different conditions depending on the disease biology. Inhibition of C5 cleavage effectively blocks generation of C5a and MAC regardless of the specific pathway involved in complement activation. This approach of inhibiting C5 cleavage is most relevant to diseases with significant MAC deposition resulting in tissue injury, as is the case for PNH, rMG, and LN. In other conditions, the tissue injury is related to activation of a specific pathway of complement, such as kidney diseases like C3 glomerulopathies, in which tissue injury may be mediated by deposition of complement component C3 following uncontrolled activation of the alternative pathway. In this case, selective inhibition of the alternative pathway by targeting a key enzyme in the alternative pathway, Factor D, may block C3 deposition while preserving the capacity of the classical and lectin pathways of complement to continue to fight infection. The classical pathway is activated when an antibody binds to the surface of a pathogen, and recruits a complex of C1q, C1r, and C1s, and we believe that inhibition of C1s may be efficacious for treatment of certain autoimmune and CNS diseases.

        Our pipeline of product candidates was discovered using our Extreme Diversity platform, a proprietary macrocyclic peptide chemistry technology pioneered by Nobel Laureate Dr. Jack Szostak. Our platform allows us to produce synthetic macrocyclic peptides that combine the diversity and specificity of antibodies with the pharmacological properties of small molecules. This platform allows us to generate highly specific and stable cyclic peptides that are much smaller than monoclonal antibodies and other biologics. Traditional peptides have been difficult to develop into drugs due to their susceptibility to degradation, limiting their circulating half-life, and lack of structural rigidity, limiting their potency and specificity. We have developed our Extreme Diversity platform to efficiently discover synthetic macrocyclic peptides that have greater structural rigidity and are less prone to degradation.

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We believe our synthetic macrocyclic peptides will be deliverable through more convenient routes of administration than monoclonal antibodies due to much greater bioavailability.

        The complement system offers a number of particularly attractive targets where we can apply our platform technology to disrupt protein-protein interactions or produce highly specific enzyme inhibitors. We are initially developing a portfolio of drug candidates to treat a variety of complement-mediated diseases, including rare blood, neurologic, ophthalmologic, renal and inflammatory diseases.

Our Programs

        Our lead product candidate, RA101495, is a potent synthetic macrocyclic peptide inhibitor of C5 formulated for daily SC administration that we are initially developing for the treatment of PNH. We expect to initiate our Phase 2 clinical program for RA101495 in PNH patients in the first quarter of 2017 and to release data in the second half of 2017.

        In addition to developing RA101495 for PNH, we are also developing RA101495, administered SC, to treat other serious complement-mediated diseases such as rMG and LN. In the second half of 2017, we expect to initiate a Phase 2 clinical trial with RA101495 for rMG and a Phase 1b clinical trial in LN. In addition to RA101495 and our collaboration with Merck, we have discovery and preclinical programs targeting selective inhibition of other complement factors, including Factor D administered by intravitreal injection for dry AMD, Factor D administered SC for DDD and C3GN, an oral, small molecule C5 inhibitor, and C1s inhibitors for certain autoimmune and CNS diseases.

RA101495 for Paroxysmal Nocturnal Hemoglobinuria

Background

        PNH is a rare, chronic, debilitating, acquired blood disorder that is most frequently diagnosed in early adulthood and usually continues throughout the life of the patient. Some of the prominent symptoms of PNH include severe anemia, a condition that results from having too few healthy red blood cells, severe abdominal pain, severe headaches, back pain, excessive weakness and fatigue. If not treated, PNH results in the death of approximately 35% of affected individuals within five years of diagnosis, and 50% of affected individuals within 10 years of diagnosis, primarily due to the formation of life-threatening blood clots inside the blood vessels, or thrombosis. We estimate that there are approximately 16,000 PNH patients worldwide. Eculizumab, the only drug currently approved to treat PNH, had reported worldwide sales of approximately $2.6 billion in 2015 for its two approved indications. A third-party study estimated that, as of 2015, the cost per year for treatment with eculizumab was approximately $543,000 in adults.

        Certain PNH patients acquire a genetic mutation that prevents the normal attachment of complement regulatory proteins to the membranes of blood cells. On normal cells, these proteins are critical inhibitors of complement activity and provide one means of distinguishing host cells from invading pathogens. The absence of these proteins results in the accumulation of a complement protein called C3b, which leads to cleavage of C5 and the deposition of the MAC on essentially all blood cells, including red blood cells and platelets. Red blood cells are particularly susceptible to lysis by MAC, resulting in their destruction and release of hemoglobin, leading to anemia. Uncontrolled activation of complement on platelets can promote thrombosis which is the most common cause of death in PNH patients. Other serious and potentially life-threatening complications of PNH include high blood pressure in the lungs and damage to the kidneys.

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Current Therapies and Their Limitations

        The only approved disease-modifying therapy is eculizumab, marketed under the name Soliris by Alexion Pharmaceuticals. Eculizumab is a monoclonal antibody that binds C5 and prevents its cleavage to C5a and C5b, thus blocking a key step in the complement activation pathway. Eculizumab prevents hemolysis, reduces the risk of thrombosis, and reduces the overall mortality rate in PNH patients to less than 3% over three years. Eculizumab is administered intravenously by healthcare professionals at biweekly intervals. Treatment duration is indefinite as the management of PNH requires ongoing chronic treatment. While eculizumab has demonstrated that inhibition of C5 cleavage results in improved clinical outcomes, breakthrough hemolysis has been observed to occur in a subset of patients in the last few days of each bi-monthly eculizumab treatment period. Such breakthrough hemolysis episodes are associated with worsening anemia and other symptoms of PNH. Furthermore, the recommended dosing regimen of eculizumab for PNH is 600 mg weekly for four weeks, followed by 900 mg on week five and 900 mg every two weeks thereafter. However, to address breakthrough hemolysis, a proportion of patients require higher off-label doses or more frequent dosing, leading to higher costs or further inconvenience.

Potential Benefits of Our Approach

        RA101495 is a potent synthetic macrocyclic peptide inhibitor of C5, which is a clinically validated target for patients with PNH. We are developing RA101495 as a SC formulation packaged as a convenient, self-administered product that can be administered in a small daily, or less frequent, such as weekly, dose. We believe this approach will facilitate sustained hemolysis suppression, greatly reducing the possibility of breakthrough hemolysis. In addition, we believe self-administration will alleviate the significant time and cost burden associated with regular intravenous infusions by healthcare professionals, as well as reduce complications associated with IV infusions, including infections, thrombosis, and loss of venous access.

        RA101495 is designed to bind C5 and block generation of C5a, C5b and MAC, potentially reducing hemolysis in humans to similar levels as eculizumab and allowing physicians to treat PNH with the same therapeutic rationale as the approved monoclonal antibody. Also, RA101495 binds to a site on C5 that is distinct from that of eculizumab, potentially conferring additional benefits, including the treatment of patients with R885H/C mutations, a population of PNH patients that does not respond to eculizumab. Importantly, RA101495 also blocks interaction of C5b with C6 and the formation of the MAC. For more information, see the figure in the section titled "—The Complement System." We believe this feature of directly blocking MAC assembly would be a differentiating property of RA101495 that may be beneficial to patients in hypercoagulative and inflammatory states, such as infection, sepsis and trauma.

        In addition, RA101495 is a synthetic product, and we expect that it can be produced at commercial scale at lower cost than biologics and monoclonal antibodies. As a synthetic, non-biologic product, RA101495 has essentially no risk for contamination by viruses and animal cell products.

Clinical Development

        We have completed a Phase 1 clinical trial of RA101495 in healthy volunteers in Australia. We expect to initiate our Phase 2 clinical program in PNH patients in the first quarter of 2017, and to release data in the second half of 2017.

Phase 1 Clinical Trial in Healthy Volunteers

        We have completed a Phase 1 randomized, double-blind, placebo controlled clinical trial of RA101495 in healthy volunteers to assess the safety, tolerability, pharmacokinetics, or PK (the activity of a drug after it enters the body of the patient), and pharmacodynamics, or PD (the effect of a drug on the target of interest and the patient), of RA101495 following single- and multiple-dose SC

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administration. In the Phase 1 trial, PK assessment focused on the concentration of drug in the plasma, and PD assessment focused on the suppression of hemolysis and complement activity. The results from this trial were presented at the European Hematology Association meeting on June 10, 2016.

Results from the Phase 1 Trial

        In healthy volunteers, we observed the following in subjects treated with RA101495, as compared to placebo:

Single Ascending Dose

        We conducted a randomized, placebo-controlled, double-blind, Phase 1 clinical trial in healthy volunteer subjects to assess safety, tolerability, PK, and PD following a single administration of RA101495 at 0.05, 0.1, 0.2, or 0.4 mg/kg. Twenty-two subjects were enrolled into four dose cohorts. Within each dose cohort, subjects were randomized to RA101495 or placebo. The trial design schematic is shown in Figure 2.

        Since complement inhibition is recognized to increase the risk for infection with Neisseria meningitides, all subjects received ciprofloxacin prophylactically during the trial. Subjects in the highest dose cohort, cohort 4, also received vaccination against Neisseria meningitides. Blood samples were taken at pre-dose, and post-dose at 15 minutes, one hour, three hours, six hours, 12 hours, 24 hours and 48 hours in clinic and at each follow-up visit for PK and PD assessments.

Figure 2. Trial design of single-ascending dose cohorts in healthy volunteers.

GRAPHIC

        As shown in Figure 3, the maximum concentrations, or Cmax, of RA101495 achieved in subjects were highly consistent with the predicted values from a simulated model. We observed a linear relationship between the measured Cmax and dose, confirming dose-dependent exposure to the

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compound. The approximate terminal half-life across all subject cohorts was seven days, which we believe will allow for daily, or less frequent, dosing.

Figure 3. Pharmacokinetics of RA101495 following single SC administration in healthy volunteers.

GRAPHIC

        Plasma concentrations of RA101495 were predicted by computer modeling, as shown in the left panel of Figure 3, and measured directly by Liquid Chromatography-High-Resolution Mass Spectrometry, or LC-HRMS, as shown in the right panel of Figure 3.

        After a single dose, we observed that RA101495 achieved rapid, dose-dependent inhibition of ex vivo hemolysis and complement activity in all subjects, as measured in the three assays shown in Figure 4.

        We observed the maximum inhibitory effect of RA101495 on hemolysis and complement activity within three to six hours of dosing across all cohorts, and greater than 90% suppression of hemolysis was maintained over four days in some subjects who received a single dose of 0.4 mg/kg RA101495.

Figure 4. Evaluation of hemolysis and complement activity in plasma samples from healthy volunteers following a single administration of RA101495.

GRAPHIC

        Red blood cells from healthy volunteers do not induce C5 activation due to protective factors normally expressed on their surface. To test the ability of RA101495 to suppress hemolysis, plasma from healthy volunteers was tested using two assays to evaluate hemolysis of antibody-sensitized sheep red blood cells, or sRBC. The first measured direct hemolysis of sRBCs in 1% plasma from subjects, as shown in the left panel of Figure 4. The second assay measured the concentration of plasma required

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to hemolyse 50% of the sRBCs in the assay, a value called CH50, as shown in the middle panel of Figure 4. The third assay measured complement activity by measuring MAC deposition when plasma samples were exposed to a surface known to activate the alternative pathway of complement, as shown in the right panel of Figure 4.

        In all dose groups, we observed that single SC doses of RA101495 were well tolerated in healthy volunteers. Injection site erythema, or ISE, was observed in three subjects at the highest dose and was mild (grade 1) with no pain, induration, tenderness or swelling and resolved spontaneously within two to five hours post-injection. No clinically significant changes were observed in vital signs, physical examination or clinical laboratory parameters, including hematology, blood chemistry, coagulation, urinalysis and ECGs.

Multiple Dose

        In the second part of our randomized, placebo-controlled, double-blind, Phase 1 clinical trial, we assessed the safety, tolerability, PK and PD of RA101495 following daily administration at a dose of 0.2 mg/kg for seven days. Six subjects were enrolled and randomized to receive 0.2 mg/kg of RA101495 daily for seven days (four subjects), or placebo (two subjects), and were followed for four weeks to assess safety and collect PK and PD data.

        As in the highest single ascending dose cohort, subjects receiving RA101495 received ciprofloxacin for seven days and were vaccinated to prevent Neisseria meningitides infection. Blood samples were taken at pre-dose, and post-dose at three hours and six hours on each dosing day and at each follow-up visit for PK and PD assessments.

        As shown in Figure 5, measured drug levels were consistent with predicted values from a PK model generated using data from non-human primate studies and single- and multi-dose data from the Phase 1 clinical trial. Plasma levels commenced with the PK model across all subjects, with minimal variability in exposure. At a dose of 0.2 mg/kg, RA101495 concentrations in plasma are expected to reach steady-state by day 11 (without a loading dose).

Figure 5. Pharmacokinetics of RA101495 in healthy volunteers following daily SC administration of 0.2mg/kg dose of RA101495 for seven days

GRAPHIC

        Plasma concentrations of RA101495 were measured directly by LC-HRMS, as shown in the right panel of Figure 5.

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        RA101495 exhibited rapid and sustained inhibition of both classical and alternative pathways of complement. We observed that inhibition of hemolysis was maintained at greater than or equal to 95% across the seven-day dosing period in all subjects and at greater than or equal to 97% at 24 hours after the last dose, as shown in the left panel of Figure 6. Hemolysis activity returned to pre-dose levels within two weeks following the last dose. Similarly, inhibition of alternative pathway complement activity as measured by MAC deposition was rapid and sustained at greater than or equal to 90% across the dosing period in all subjects. Complement activity returned to pre-dose levels within two weeks following the last dose.

Figure 6. Mean inhibition of ex vivo hemolysis in plasma samples from healthy volunteers dosed with 0.2 mg/kg RA101495 (n = 4) or placebo (n = 2) by daily SC administration for seven days

GRAPHIC

        Complement activity was assessed by detecting destruction of antibody-sensitized sRBC by classical complement activity in 1% plasma samples from subjects, as shown in Figure 6.

        We observed that repeat dosing of RA101495 was well-tolerated in healthy volunteers. ISE was observed in three of six subjects. All three subjects were in the RA101495 dose group, and ISE was observed after one out of seven injections in two subjects, and after four out of seven injections in a third subject). All ISEs were mild (grade 1) with no pain, induration, tenderness or swelling and all resolved spontaneously within 23 hours post-dosing. No clinically significant changes were observed in vital signs, physical examination, or clinical laboratory parameters, including hematology, blood chemistry, coagulation, urinalysis, and ECGs.

Planned Phase 2 Clinical Trial(s)

        The global Phase 2 program is designed to evaluate the safety, tolerability, efficacy, pharmacokinetics, and pharmacodynamics of RA101495 in patients with PNH. We expect that the program will consist of two open-label Phase 2 trials, one conducted in the United States, and one conducted outside the United States. We expect that these trials will enroll three distinct populations of PNH patients based on their treatment history as follows.

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        Based on feedback we received from the FDA to date, we anticipate enrolling eight to 12 eculizumab naive patients, six to eight eculizumab switch patients, and six to eight eculizumab inadequate responders. Each patient will be dosed with a 0.3mg/kg loading dose of RA101495 followed by 0.1 mg/kg daily thereafter. After two weeks of treatment, and based on review of safety and efficacy data, patients will continue with 0.1 mg/kg daily or be up-titrated to 0.3 mg/kg daily if needed to achieve adequate control of hemolysis. Patients will be eligible for long-term extension following the completion of the initial 12 weeks. The primary efficacy endpoint will be change in lactate dehydrogenase from baseline to the mean of six through 12 weeks.

        The design of the Phase 2 trials has not been finalized, and is currently under discussion with FDA, and pending review by other regulatory agencies.

Preclinical Studies

        We have completed numerous preclinical studies with RA101495 in laboratory animals and in vitro experiments. RA101495 is designed to be a potent inhibitor of primate complement and a poor inhibitor in most other species, therefore in vivo evaluation of PK and PD was conducted in cynomolgus monkeys. Data shown in Figure 7 demonstrate the strong correlation between plasma levels of drug and inhibition of complement activity in cynomolgus monkeys. These data show that plasma concentrations greater than or equal to 2.5 µg/ml are sufficient to inhibit greater than 90% of complement activity in cynomolgus monkey.

        Data in Figure 8 are representative of multiple studies conducted in cynomolgus monkeys, and show plasma levels of RA101495 and complement activity as measured by hemolysis of sRBCs following seven daily SC doses of 0.21 mg/kg and for 11 days following the last dose.

Figure 7. Correlation between plasma levels of RA101495 and inhibition of complement activity as measured by hemolysis of antibody sensitized sheep red blood cells.   Figure 8. Plasma concentrations of RA101495 and suppression of hemolysis following daily SC administration of 0.21 mg/kg for 7 days and for 11 days following the last dose.

GRAPHIC

        We have evaluated the effects of RA101495 in a combination of efficacy and standard in vitro and in vivo toxicology assays to identify what we believe to be the appropriate first-in-human dose and dose-limiting toxicity for RA101495.

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RA101495 for Refractory Generalized Myasthenia Gravis

Background

        Myasthenia gravis, or MG, is a rare complement-mediated autoimmune disease characterized by the production of autoantibodies targeting proteins that are critical for the normal transmission of electrical signals from nerves to muscles. Although the prognosis of MG is generally benign, in 10% to 15% of patients disease control either cannot be achieved with current therapies, or results in severe side effects of immunosuppressive therapy. This severe form of MG is known as rMG, and affects approximately 9,000 individuals in the United States

        Patients present with muscle weakness that characteristically becomes more severe with repeated use, and recovers with rest. Muscle weakness can be localized to specific muscles, such as those responsible for eye movements, but often progresses to more diffuse muscle weakness. rMG may even become life-threatening when muscle weakness involves the diaphragm and the other chest wall muscles responsible for breathing. This is the most feared complication of rMG, known as myasthenic crisis, and requires hospitalization, intubation, and mechanical ventilation. Approximately 15% to 20% of patients experience a myasthenic crisis within two years of diagnosis.

        The most common target of autoantibodies in rMG is the acetylcholine receptor, or AchR, located at the neuromuscular junction, the point at which a motor neuron transmits signals to a skeletal muscle fiber. Binding of anti-AchR autoantibodies to the muscle endplate results in activation of the classical complement cascade; deposition of MAC on the post-synaptic muscle fiber leads to local damage to the muscle membrane, and reduced responsiveness of the muscle to stimulation by the neuron.

        Inhibition of terminal complement activity at the level of C5 or C6 has been demonstrated to prevent development of disease pathology in experimental animal models of rMG. Additionally, inhibition of C5 by eculizumab has been shown to improve clinical symptoms in patients with rMG. A recently-completed Phase 3 trial of eculizumab for patients with rMG showed a positive trend towards improvement in quality of life measures, although the primary endpoint did not reach statistical significance.

Current Therapies and Their Limitations

        Current therapies focus on either boosting the AchR signal or suppressing the immune response, and none of these treatments targets the injury to the post-synaptic muscle endplate caused by complement attack. First-line therapy for mild symptomatic rMG is with inhibitors of acetylcholinesterase, the enzyme that breaks down the neurotransmitter acetylcholine, such as pyridostigmine bromide, marketed as Mestinon by Valeant Pharmaceuticals. If remission is not achieved with acetylcholinesterase inhibitors, a course of systemic immunosuppressive therapy may be initiated. These agents have inconsistent evidence of efficacy, and all have long-term toxicities. They include corticosteroids, azathioprine, mycophenylate mofetil, and rituximab. Surgical removal of the thymus is sometimes performed in patients with moderate to severe rMG to try to switch off the production of autoantibodies. Intravenous immunoglobulin and plasma exchange may be needed in patients with myasthenic crisis.

Potential Benefits of Our Approach

        We believe that inhibiting terminal complement activity with our C5 inhibitor RA101495 may block complement-mediated damage to the motor endplate thereby preserving responsiveness to signaling and potentially preventing muscle weakness.

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Clinical Development Plan

        We plan to leverage our work in PNH to efficiently advance clinical development of RA101495 for rMG and intend to initiate a Phase 2 clinical trial of RA101495 in patients with rMG in the second half of 2017.

RA101495 for Lupus Nephritis

Background

        Systemic lupus erythematosus, or SLE, is a serious, potentially lethal autoimmune disorder characterized by multi-organ involvement and a chronic relapsing clinical course. LN refers to the specific involvement of the kidney that is seen in approximately 20% of SLE patients. It is estimated that approximately 63,000 individuals in the United States have LN. Although LN is a chronic disease, its course is characterized by intermittent periods of acute kidney inflammation and high disease activity, which are known as nephritic flares. The cumulative impact of these flares over time can cause irreversible damage to the kidneys. Although immunosuppressive therapy has improved prognosis for patients with LN, approximately 10% to 15% of these patients will develop end-stage renal disease, requiring a kidney transplant or initiation of dialysis. As such, LN is associated with an approximately six-fold increase in the rate of mortality compared with the general population.

        The pathophysiology of LN involves the inappropriate production of autoantibodies which recognize self or "host" antigens, such as double-stranded DNA. The deposition of autoantibody-antigen complexes in the kidney activates the classical pathway of complement, resulting in generation of C5a, deposition of MAC, and subsequent tissue injury. Levels of the circulating complement components C3 and C4 are depleted in patients during LN flares, due to accelerated consumption of classical complement pathway proteins. Deposition of MAC has been observed in kidney biopsy samples from patients with LN. In a recent case report, MAC deposition, as measured by the presence of C9 in kidney tissue, was significantly reduced following treatment with eculizumab, and was accompanied by corresponding improvement in kidney function and clinical status. There have been several other case reports of improved kidney function in LN patients treated with eculizumab, suggesting that inhibition of C5 may be disease modifying. Additionally, inhibition of C5a activity has been shown to improve renal function and histopathological features associated with LN in animal models of the disease.

Current Treatments and Limitations

        Treatment of LN flares varies according to disease severity and the type of lesions seen on kidney biopsy. Generally, inhibitors of angiotensin converting enzyme are used to reduce proteinuria and hypertension, while corticosteroids, cyclophosphamide, mycophenolate mofetil, or azathioprine are used to suppress the immune system. These immunosuppressive treatments have significant toxicities associated with long-term use, and do not address complement-mediated tissue injury.

Potential Benefits of Our Approach

        We believe that RA101495, by binding C5 and inhibiting generation of both C5a and MAC, may prevent progression of kidney disease in LN by blocking complement-mediated damage to kidney cells. By inhibiting renal injury, we believe that RA101495 may reduce dependence on steroids and other immunosuppresive agents, thereby potentially improving the long-term outcome for patients.

Clinical Development Plan

        We plan to leverage our work in PNH to efficiently advance clinical development of RA101495 for LN and intend to initiate a Phase 1b clinical trial of RA101495 in LN in the second half of 2017.

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Our Discovery Programs

Dry Age-Related Macular Degeneration/Geographic Atrophy

        AMD is the most common cause of blindness in older adults, and has an estimated worldwide prevalence of 8.7% among all individuals aged 45 to 85. AMD is subdivided into two forms based on the underlying pathophysiologic process. These are known as dry AMD and wet AMD. Dry AMD comprises 90% of all AMD cases, and is characterized by deterioration of the retina associated with the appearance of small deposits of debris, called drusen, under the macula. The remaining 10% of AMD cases are wet AMD , which is caused by abnormal growth of blood vessels in the retina. Whereas visual loss in patients with wet AMD occurs rapidly, within months to a year, dry AMD progresses much more slowly, over the course of decades. In dry AMD, patients experience progressive blurriness and blank spots in the center of their field of vision. It is estimated that approximately 1,000,000 individuals in the United States have GA.

        The alternative pathway of the complement system is implicated in dry AMD by the presence of almost all alternative pathway complement components in drusen deposits. Moreover, specific variations in the genes encoding the alternative pathway complement regulatory proteins Factor H or Factor I, resulting in increased complement activity, are associated with increased risk of developing dry AMD. Variations in the genes encoding the alternative cascade proteins Factor B and C3 are also associated with risk for dry AMD.

        Although several therapeutics targeting vascular endothelial growth factor, or VEGF, to block growth of abnormal blood vessels are approved to treat wet AMD, such as Avastin, Lucentis and Eylea, there are no approved therapies for dry AMD or GA. Lampalizumab, an antibody to complement Factor D being developed by Roche, has demonstrated clinical activity for dry AMD. In Phase 2 clinical trials, lampalizumab reduced progression of GA in patients with a specific gene variant in complement Factor I.

        We are developing inhibitors of complement Factor D for intravitreal administration, designed to prevent or reduce progression of GA in patients with dry AMD, thereby potentially preventing further vision loss and preserving sight.

C3 Glomerulonephritis/Dense Deposit Disease

        C3GN and DDD are closely-related but distinct alternative pathway complement-mediated diseases characterized by C3 deposition in the kidney, with absent or minimal immunoglobulin deposition. The two diseases can be distinguished from each other by electron microscopy, based on the precise location and pattern of C3 deposits within the kidney. The combined prevalence of C3GN and DDD is 1-3 per million individuals, with an estimate of approximately 1,000 patients in the United States. The clinical features of C3GN and DDD include compromised renal function and high blood pressure. The pathophysiology of C3GN and DDD involves both genetic factors and acquired triggers. Patients typically present in adolescence or early adulthood, following an infectious episode which, in susceptible individuals results in uncontrolled activation of C3. Susceptibility to C3GN and DDD may be inherited on the basis of mutations in proteins that regulate the alternative pathway of complement activation.

        There are no approved therapies for C3GN or DDD. Patients are usually treated with angiotensin converting enzyme inhibitors and angiotensin II receptor blockers to modulate proteinuria, and with nonspecific immunosuppressants, including corticosteroids, when kidney inflammation is present.

        We are developing specific inhibitors of Factor D, a critical component of the alternative pathway of complement, as targeted drug candidates for C3GN. By blocking the alternative pathway upstream of C3, we believe that this mechanism may prevent C3 deposition and subsequent renal injury.

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Oral C5 Inhibitor

        We are actively pursuing the identification of orally-bioavailable inhibitors of C5 that bind to and inhibit targets in similar ways as our peptides, but are traditional small molecules with the benefit of oral bioavailability. Leveraging our structural knowledge of C5 we have identified two series of molecules. Both series have demonstrated oral bioavailability in rat DMPK and low nanomolar potency has been observed in vitro in a red blood cell hemolysis assay. Furthermore, one of these series bind to a previously unrecognized site on C5, inhibiting cleavage and activation of C5.

        These series are being further optimized by structural understanding of crystals obtained with full length C5 in stabilized tertiary co-complex. It is expected that this could yield a pipeline of orally available products for a broader set of systemic indications including metabolic diseases (e.g., diabetes). We have also identified early evidence of CNS penetration in one series, offering the possibility of treating complement dysfunction in complex CNS disorders such as neuroinflammatory (e.g., stroke, multiple sclerosis) and neurodegenerative disease (e.g., Huntington's disease, Alzheimer's disease).

Complement Component 1s (C1s)

        We are also engaged in discovery efforts to identify inhibitors of C1s with potential applications in a range of autoimmune and CNS diseases. C1s is involved in the classical complement pathway. A complex comprised of C1s, along with complement components 1q and 1r (C1r and C1q) bind to antigen-antibody complexes, and the serine protease domain of C1s cleaves C4 to generate C4b as an initial step in forming the classical pathway C5 convertase, C4bC2bC3b, where C4b, C2b, and C3b are domains of complement components 4, 2, and 3, respectively. In cases of inappropriate production of self-reactive antibodies in autoimmune disease, or production of anti-tissue antibodies in organ transplantation setting, C1s activity can lead to pathologic C5 activation, producing C5b9 (MAC) and the inflammatory mediator C5a.

        Thus, inappropriate C1s and classical complement convertase activity is linked to a variety of immune complex-mediated indications, including cold agglutinin disease, warm autoimmune hemolytic anemia, systemic lupus erythematosus, antibody-mediated rejection (such as with kidney transplant), Guillain-Barre Syndrome, neuromyelitis optica, rMG, multiple sclerosis, bullous pemphigoid (a rare and debilitating skin disease), and other diseases. Furthermore, inappropriate activity of the C1q-C1r-C1s complex and C4 levels has been implicated in a variety of neurologic conditions, including Alzheimer's disease, Huntington's disease, spinal muscular atrophy, frontal temporal dementia, glaucoma, and schizophrenia. We estimate that the incidence rates of these indications include approximately one in 80,000 people for cold aggluthin disease, approximately one in 100,000 people for warm autoimmune hemolytic anemia, and an aggregate of approximately 5.4 million total patients in the United States with Alzheimer's disease. Other neurodegenerative diseases include Huntington's disease, amyotrophic lateral sclerosis and Guillain-Barre syndrome.

        We have used our platform technology to generate cyclic peptides that bind C1s and inhibit the protease activity of C1s, C4b production, and red blood cell lysis in an in vitro assay. C1q has a number of non-complement functions, including targeting apoptotic cells and immunogenic debris for clearance, induction of dendritic cell tolerance, anti-proliferative effect on T-cells, and inhibition of B-cell signaling. We are developing C1s specific and dual C1s/C1r binding peptides to potentially avoid broad non-complement effects of C1q inhibition that could block the above functions and potentially promote autoimmune disease. We expect C1s inhibitors to have broad utility in a number of disease areas.

        In addition to the programs described above, we also have discovery and preclinial programs targeting selective inhibition of various complement factors for other indications. For example, we are also a developing a Factor D inhibitor program designed to reduce C3 fragment coating on PNH red blood cells and subsequent spleen phagocytosis, which could potentially increase the risk of infection

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and limit investigator interest, but which we also believe has the potential to serve as an efficacious treatment method.

Our Extreme Diversity Platform

        Known as our Extreme Diversity platform, our proprietary macrocyclic peptide chemistry technology allows us to produce synthetic macrocyclic peptides that combine the diversity and specificity of antibodies with the pharmacological properties of small molecules.

        We utilize a process called "mRNA display" to produce extremely large and diverse libraries of peptides from which to screen for potential product candidates. Figure 9 illustrates the step-by-step process of mRNA display.

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Figure 9. A diagram illustrating our Extreme Diversity platform.

GRAPHIC

        RA101495 and our pipeline of peptide product candidates were discovered using our Extreme Diversity platform, our proprietary technology that allows us to rapidly and efficiently discover cyclic peptides comprised of natural and non-natural amino acids, with the advantages set forth below.

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        We are driving the development of the next generation of orally available drugs. Certain of our cyclic peptides are being developed into orally available drugs, as exemplified by our high value target developed in our collaboration with Merck. We can also use our platform to develop novel macrocycle peptides to guide the development of orally-available, traditional small molecule drugs such as our oral C5 inhibitors.

        We protect our intellectual property rights related to the Extreme Diversity program through a combination of licensed patents, trade secrets and know-how. For more information, see the section "—Intellectual Property."

Our Merck Collaboration and License Agreement

        In April 2013, we entered into a multi-target collaboration and license agreement with Merck to use our proprietary drug discovery technology platform to identify orally available cyclic peptides for non-complement program targets nominated by Merck and provide specific research and development services. Under the agreement, we granted Merck licenses under certain of our intellectual property rights to manufacture, develop and commercialize compounds and products directed to selected program targets. The agreement consists of a research phase, where we and Merck collaborated on identifying and pre-clinically developing orally available cyclic peptides suitable for further development by Merck, and a development and commercialization phase pursuant to which Merck has sole discretion and responsibility, including financial responsibility, for further development and commercialization of these peptides, on a program-by-program basis, from the collaboration. In April 2015, the agreement was amended to extend the research term of the collaboration to April 2016.

        At the signing of the agreement, Merck made an upfront non-refundable, technology license fee of $4.5 million to us. In addition, during the research term, which ended in April 2016, the agreement provided for reimbursement of research and development services provided by us in accordance with pre-specified limits for the number of our full-time equivalent employees ("FTEs") working under the agreement. At the conclusion of the research term, Merck elected to continue the development of a non-complement cardiovascular target with a large market opportunity, for which we had received $3.5 million in preclinical milestone payments as of June 30, 2016.

        We are entitled to receive future aggregate milestone payments of up to $61.5 million for the non-complement cardiovascular target selected, consisting of remaining preclinical and clinical milestones of $16.5 million, regulatory milestones of $19.0 million and commercial milestones of $26.0 million, and low-to-mid single digit percentage royalties on future sales, if any. Royalties will be payable from the first commercial sale in a country until the later of the last to expire valid claim in such country and a specified number of years from the date of such first commercial sale. The agreement expires on a country-by-country basis upon expiration of Merck's royalty obligations. Merck may terminate the agreement in its entirety upon prior written notice to us. Either party may terminate the agreement in the event of bankruptcy of the other party or uncured material breach. We may terminate the agreement if Merck challenges any of our patent rights covered by the agreement.

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Intellectual Property

Overview

        We strive to protect and enhance the proprietary technology, inventions, and improvements that are commercially important to the development of our business, including our Extreme Diversity platform. This includes seeking, maintaining, and defending patent rights, whether developed internally or licensed from third parties. We also rely on trade secrets and know-how that may be important for the development of our business. This includes aspects of our proprietary technology platform; our continuing technological innovation; and on in-licensing opportunities used to develop, maintain, and strengthen our position in the field of peptide, peptidomimetic, and small molecule-based therapeutics. We additionally may rely on regulatory protection afforded through data exclusivity, market exclusivity and patent term extensions where available.

        Our commercial success may depend in part on our ability to obtain and maintain patent and other proprietary protection for our product candidates, technology and know-how, defend and enforce our patents; prevent others from infringing our proprietary rights, preserve the confidentiality of our trade secrets, and to operate without infringing the proprietary rights of others.

        Our ability to stop third parties from making, having made, using, selling, offering to sell or importing our products may depend on the extent to which we have rights under valid and enforceable licenses, patents or trade secrets that cover these activities. In some cases, these rights may need to be enforced by third party licensors. With respect to both licensed and company-owned intellectual property, we cannot be sure that patents will be granted with respect to any of our pending patent applications or with respect to any patent applications filed by us in the future, nor can we be sure that any of our existing patents or any patents that may be granted to us in the future will be commercially useful in protecting our commercial products and methods of manufacturing the same. For more information, please see "Risk Factors—Risks Related to Our Intellectual Property."

        We seek to protect our proprietary position in a variety of ways, including by pursuing patent protection in certain jurisdictions where it is available. For example, we file U.S. and certain foreign patent applications related to our proprietary technology, inventions and improvements that are important to the development of our business. We also intend to seek patent protection or rely upon trade secret rights to protect other technologies that may be used to discover and validate targets and that may be used to identify and develop novel products. We seek protection, in part, through confidentiality and proprietary information agreements. We are a party to various other license agreements that give us rights to use specific technologies in our research and development.

        The term of individual patents depends upon the legal term of the patents in the countries in which they are obtained. In most countries in which we file, the patent term is 20 years from the earliest date of filing a non-provisional patent application related to the patent. A U.S. patent also may be accorded a patent term adjustment, or PTA, under certain circumstances to compensate for delays in obtaining the patent caused by the United States Patent and Trademark Office. In some instances, such a PTA may result in a U.S. patent term extending beyond 20 years from the earliest date of filing a non-provisional patent application related to the U.S. patent. In addition, in the United States, the term of a U.S. patent that covers an FDA-approved drug may also be eligible for patent term extension, which permits patent term restoration as compensation for the patent term lost during the FDA regulatory review process. The Hatch-Waxman Act permits a patent term extension of up to five years beyond the expiration of the patent. The length of the patent term extension is related to the length of time the drug is under regulatory review. Patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval and only one patent applicable to an approved drug may be extended. Similar provisions are available in Europe and other foreign jurisdictions to extend the term of a patent that covers an approved drug. In the future, if and when our products receive FDA approval, we expect to apply for patent term extensions on patents

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covering those products. We plan to seek patent term extensions to any of our issued patents in any jurisdiction where these are available, however there is no guarantee that the applicable authorities, including the FDA in the United States, will agree with our assessment of whether such extensions should be granted, and if granted, the length of such extensions.

Company-Owned Intellectual Property

        Our C5 inhibitor portfolio includes three families of United States patent applications directed to C5 inhibitors and related methods of use. Any patents that may grant from these patent applications are generally expected to expire between 2035 and 2036, subject to possible patent term extensions.

        We also own one United States patent and various patent applications directed to other technologies. The United States patent is expected to expire in 2034, and any patents granted on the pending applications are expected to expire between 2034 and 2037, subject to possible patent term extensions.

Licensed Intellectual Property

        We have exclusively licensed one patent family directed to an in vitro translation system for incorporating unnatural amino acids from Dr. A. C. Forster. This family, which covers certain rights related to our Extreme Diversity platform, includes five granted patents, including one in the United States and four in foreign jurisdictions including Australia, Canada, Europe and Japan. Patents in this family are generally expected to expire in 2022, subject to possible patent term extensions. This license may be terminated if we fail to make payments thereunder, if we commit a material breach of our obligations thereunder, or if we make an assignment for benefit of creditors or have a petition in bankruptcy filed; also, we may terminate the license for any reason upon 30 days' prior written notice. As of the date of this prospectus, we have paid an aggregate amount of approximately $250,000 under this license. In connection with the execution of this license, we paid an issue fee of approximately $175,000, and annual maintenance fees are approximately $15,000. In addition, we issued equity in the amount of approximately 8,500 shares of common stock in connection with this license. The license provides for running royalties equal to 0.25% of net sales of licensed products thereunder, payable on a country-by-country and licensed product-by-licensed product basis until the expiration of the last valid claim covering such product in such country.

        We also have a fully paid-up, non-exclusive license to more than 20 United States and more than 50 foreign granted patents directed to various display library technologies as a result of our acquisition of Cosmix, which covers other rights related to our Extreme Diversity platform. These include patents that have been granted in the United States, Canada, China, Europe, India, Israel, Japan, Korea, New Zealand, Russia, South Africa, and Taiwan. These patents are generally expected to expire between 2018 and 2022, subject to possible patent term extensions. We paid an aggregate amount of approximately $1.4 million and approximately 123,456 shares of common stock in connection with the Cosmix acquisition that includes this fully paid-up license, though no breakdown of amounts specifically attributable to this license is available.

Trademark Protection

        As of August 1, 2016, our trademark applications for RA PHARMACEUTICALS and RA PHARMA have been allowed and our trademark application for the GRAPHIC mark is pending in the United States. We have nine pending trademark applications for the same three marks in foreign jurisdictions, including Europe, Australia and Canada.

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Trade Secret Protection

        Finally, we may rely, in some circumstances, on trade secrets to protect our technology. In particular, with the underlying patents expiring by 2022, we anticipate relying on trade secrets to protect the know-how behind our proprietary peptide chemistry platform. However, trade secrets can be difficult to protect. We seek to protect our proprietary technology and processes, in part, by entering into confidentiality agreements with our employees, consultants, scientific advisors and contractors. We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security of our premises and physical and electronic security of our information technology systems. While we have confidence in these individuals, organizations and systems, agreements or security measures may be breached, and we may not have adequate remedies for any breach. In addition, our trade secrets may otherwise become known or be independently discovered by competitors. To the extent that our consultants, contractors or collaborators use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions. For further information, please see "Risk Factors—Risks Related to Our Intellectual Property."

Competition

        The biotechnology and pharmaceutical industries are characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products. While we believe that our technologies, knowledge, experience and scientific resources provide us with competitive advantages, we face potential competition from many different sources, including major pharmaceutical, specialty pharmaceutical and biotechnology companies, academic institutions and governmental agencies and public and private research institutions. Any product candidates that we successfully develop and commercialize will compete with existing therapies and new therapies that may become available in the future.

        There are a number of currently marketed products and product candidates in preclinical research and clinical development by third parties to treat the various diseases that we are targeting. In general, these products and product candidates can be categorized based on their proposed mechanisms of action. The mechanisms of action for these product candidates include inflammation suppression by agents such as complement inhibitors and corticosteroids, as well as immune modulators, visual cycle modulators, anti-amyloid agents, antioxidants, neuroprotectants, cell and gene therapies and vascular and interstitial tissue remodeling agents.

        If our lead product candidates are approved for the indications for which we are currently undertaking clinical trials, they will compete with the products and product candidates discussed below.

        PNH.    The principal competitor for our program in PNH is eculizumab, a C5 inhibitor, which is marketed as Soliris by Alexion Pharmaceuticals and is the only drug approved for the treatment of PNH. Alexion Pharmaceuticals is also developing a next-generation C5 inhibitor named ALXN 1210 that has a less frequent intravenous dosing schedule of at least monthly. In addition, we are aware that there are a number of other companies that are actively developing product candidates for the treatment of PNH, including the following:

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        Certain of our competitors are developing product candidates intended to be administered SC, IV or orally, with dosing frequencies ranging from twice daily to monthly, and with varying dose strengths and half-lives. We believe that the combination of SC administration, dose frequency and dose strength will allow RA101495 to provide improved control of hemolysis and suppression of breakthrough hemolysis.

        LN.    There are no specific therapies for LN. Although approved for patients with active, autoantibody-positive, systemic lupus erythematosus who are receiving standard therapy, belimumab, which is marketed under the name Benlysta by GlaxoSmithKline, has not been evaluated in patients with LN. There are numerous phase 2 and later stage clinical studies on non-specific immunosuppressive agents, including agents currently used as standard of care in LN, with tacrolimus, mycophenolate, bortezomib, cyclophosphamide, azothioprim, laquinimod, and ACTHAR Gel being tested. In addition, a number of agents are being tested as targeted monoclonal antibody therapies, such as anti-CD40, anti-IL6, rituximab (anti-CD20), anti-TWEAK (an antibody directed against the TNF-like weak inducer of apoptosis), and belimumab (anti BLys), as well as B7 antagonists such as CTLA4-Ig. The only complement pathway inhibitors proposed as targeted, disease-modifying agents in LN are OMS721, which is in Phase 2 development by Omeros, an anti-MASP-2 antibody that inhibits the mannose-binding lectin arm of the complement system, and eculizumab, where the antibody has shown benefit in a small number of published case report studies. There are no ongoing studies of eculizumab or any other C5 inhibitor in LN.

        rMG.    rMG is currently treated with cholinesterase inhibitors and non-specific immunosuppressive agents, including azathioprine, cyclophosphamide, cyclosporine, IV IG, mycophenolate, prednisone, and tacrolimus. Approximately 20% of patients are refractory to these therapies. Alexion Pharmaceuticals has recently presented Phase 3 data with eculizumab in rMG patients. While both Phase 2 and Phase 3 data were highly supportive of a treatment effect with eculizumab, the Phase 3 data narrowly missed the primary efficacy endpoint. Nonetheless, the data show promise for C5 inhibitor therapy in rMG. Both rituximab, marketed by Roche, and belimumab, marketed by GlaxoSmithKline, which target B cell activity, are in clinical development for rMG. Anti-CD40, being developed as CFZ533 by Novartis, bortezomib, and a small molecule activator of the muscle protein troponin being developed as Cytokinetics by Tirasemtiv, are being tested in clinical trials in rMG. A therapeutic vaccine targeting B-and T-cell receptors (CV-MG-01) is in early clinical testing for rMG.

        AMD.    There are currently no approved treatments for dry AMD or GA. We are aware that there are a number of companies that are actively developing product candidates for the treatment of GA, including the following product candidates that are in clinical development: lampalizumab, a Factor D complement inhibitor for the treatment of GA being developed by Roche that is in Phase 3 clinical trials; LFG316, an anti-C5 monoclonal antibody being developed by Novartis Pharma that is in Phase 2 clinical trials; Zimura, a C5 inhibitor being developed by Ophthotech Corporation that is entering Phase 2/3 clinical trials; and other product candidates that do not target the complement system that are in Phase 2 or Phase 3 clinical trials, including compounds being developed by Acucela, Allergan, GlaxoSmithKline and Novartis Pharma. There are no currently available treatments for intermediate AMD.

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        C1s.    Many of our competitors are developing product candidates targeting C1s or indications that we may target with our C1s program. These include Soliris by Alexion Pharmaceuticals, which completed a Phase 2 trial targeting cold agglutinin disease; TNT-009, a C1s inhibitor being developed by True North Therapeutics that is in Phase 1 trials for cold aggluthinin disease and warm autoimmune hemolytic anemia; Fostamatinib, an oral Syk inhibitor being developed by Rigel Pharmaceuticals that is in Phase 2 trials for warm autoimmune hemolytic anemia; rituximab, a monoclonal antibody marketed under the name Rituxan by Roche that is currently in Phase 3 trials for warm autoimmune hemolytic anemia; and a C1q inhibitor being developed by Annexon that is in a preclinical phase for neurodegenerative diseases.

Sales and Marketing

        We hold worldwide commercialization rights to all of our complement-mediated product candidates. Subject to receiving marketing approval, we intend to independently pursue the commercialization of RA101495 in PNH patients in the United States and Europe by building a focused sales and marketing organization in these geographies. We believe that such an organization will be able to address the community of physicians who are key specialists in treating the patient populations for which our product candidates are being developed.

        We also plan to build a marketing and sales management organization to create and implement marketing strategies for any products that we market through our own sales organization and to oversee and support our sales force. The responsibilities of the marketing organization would include developing educational initiatives with respect to approved products and establishing relationships with researchers and practitioners in relevant fields of medicine.

        Outside of the United States and Europe, we may pursue the approval and commercialization of RA101495 for PNH patients either independently or in collaboration with others. We intend to develop and commercialize RA101495 for other indications independently or through collaborations with third parties.

Manufacturing

        We do not currently own or operate manufacturing facilities for the production of clinical or commercial quantities of our product candidates. We intend to rely on third-party contract manufacturers to produce our products and have recruited personnel with experience to manage the third-party contract manufacturers producing our product candidates and other product candidates or products that we may develop in the future.

        The process for manufacturing our product candidates consists of a multiple-stage-chemical synthesis, purification using liquid chromatography, and freeze drying into a powder form. The initial chemical synthesis process is similar to other cyclic peptide synthetic processes. For some of our products, the peptide is modified after cyclization using a common synthetic processes to attach bio-distribution modifying chemical moieties. We expect the costs associated with manufacturing drug substance f