S-1 1 s000911x3_s1.htm FORM S-1

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As filed with the Securities and Exchange Commission on August 14, 2015

Registration No. 333-         

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

FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933

Edge Therapeutics, Inc.
(Exact name of registrant as specified in its charter)

Delaware 2834 26-4231384
(State or other jurisdiction of
incorporation or organization)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer
Identification Number)

200 Connell Drive, Suite 1600
Berkeley Heights, NJ 07922
(800) 208-3343
(Address, including zip code and telephone number, including
area code, of registrant’s principal executive offices)

Brian A. Leuthner
President and Chief Executive Officer
Edge Therapeutics, Inc.
200 Connell Drive, Suite 1600
Berkeley Heights, NJ 07922
(800) 208-3343

(Name, address, including zip code and telephone number, including area code, of agent for service)

Copies to:

David S. Rosenthal, Esq.
Dechert LLP
1095 Avenue of the Americas
New York, New York 10036
(212) 698-3500
Mitchell S. Bloom, Esq.
Arthur R. McGivern, Esq.
Goodwin Procter LLP
53 State Street
Boston, Massachusetts 02109
(617) 570-1000

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 (the “Securities Act”), 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, 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. (Check one):

Large accelerated filer o Accelerated filer o
Non-accelerated filer Smaller reporting company o
(Do not check if a smaller reporting company)

CALCULATION OF REGISTRATION FEE

Title of each class of
securities to be registered(1)
Proposed maximum
aggregate offering price(2)
Amount of
registration fee(3)
Common Stock, $0.00033 par value per share
$
115,000,000
 
$
13,363
 


(1)Pursuant to Rule 416 under the Securities Act, this registration statement shall be deemed to cover the additional securities of the same class as the securities covered by this registration statement issued or issuable prior to completion of the distribution of the securities covered by this registration statement as a result of a split of, or a stock dividend on, the registered securities.
(2)Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act and includes the offering price of shares that the underwriters have the option to purchase to cover over-allotments.
(3)Calculated pursuant to Rule 457(o) under the Securities Act based on an estimate of the proposed maximum aggregate offering price and includes the offering price of shares that the underwriters have the option to purchase to cover over-allotments.

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 the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

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The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

Subject to Completion, Dated August 14, 2015

PRELIMINARY PROSPECTUS

              Shares


Common Stock

We are offering           shares of our common stock. Prior to this offering, there has been no public market for our common stock. The initial public offering price of our common stock is expected to be between $          and $          per share. We have applied to list our common stock on the NASDAQ Global Market under the symbol “EDGE.”

We are an “emerging growth company” under applicable Securities and Exchange Commission rules and will be eligible for reduced public company reporting requirements. See “Prospectus Summary—Implications of Being an Emerging Growth Company.” Investing in our common stock involves risks. See “Risk Factors” beginning on page 12.

Price to
Public
Underwriting
Discounts and
Commissions(1)
Proceeds to
Edge Therapeutics
Per share
$
         
 
$
         
 
$
         
 
Total
$
 
 
$
 
 
$
 
 

(1)We refer you to “Underwriting” beginning on page 133 for additional information regarding underwriting compensation.

We have granted the underwriters an option to purchase up to           additional shares of common stock to cover over-allotments.

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.

Delivery of the shares of common stock will be made on or about          , 2015.

Leerink Partners Credit Suisse
Guggenheim Securities JMP Securities

The date of this prospectus is          , 2015

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Through and including         , 2015 (the 25th day after the date of this prospectus), 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.

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We have not, and the underwriters have not, authorized anyone to provide you with any information other than that contained in this prospectus or in any free writing prospectus we may authorize to be delivered or made available to you. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus may only be used where it is legal to offer and sell shares of our common stock. The information in this prospectus is complete and accurate only as of the date on the front cover of this prospectus, regardless of the time of delivery of this prospectus or any sale of shares of our common stock. Do not assume after the date of this prospectus that the information contained in this prospectus is still correct. Our business, financial condition, results of operations and prospects may have changed since that date. We are not, and the underwriters are not, making an offer of these securities in any jurisdiction where the offer is not permitted.

For investors outside the United States: Neither we nor the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of common stock and the distribution of this prospectus outside the United States.

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PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus and is qualified in its entirety by the more detailed information and financial statements included elsewhere in this prospectus. This summary does not contain all of the information that may be important to you. You should read and carefully consider the following summary together with the entire prospectus, including our financial statements and the notes thereto appearing elsewhere in this prospectus and the matters discussed in the sections in this prospectus entitled “Risk Factors,” “Selected Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” before deciding to invest in our common stock. Some of the statements in this prospectus constitute forward-looking statements that involve risks and uncertainties. See “Special Note Regarding Forward-Looking Statements and Industry Data.” Our actual results could differ materially from those anticipated in such forward-looking statements as a result of certain factors, including those discussed in the “Risk Factors” and other sections of this prospectus.

Except as otherwise indicated herein or as the context otherwise requires, references in this prospectus to “Edge,” “the Company,” “we,” “us” and “our” refer to Edge Therapeutics, Inc.

Overview

We are a clinical-stage biotechnology company that discovers, develops and seeks to commercialize novel, hospital-based therapies capable of transforming treatment paradigms in the management of acute, life-threatening conditions. Our initial product candidates target rare, acute life-threatening neurological conditions for which we believe the approved existing therapies are inadequate.

We believe EG-1962, our lead product candidate, can fundamentally improve patient outcomes and transform the management of aneurysmal subarachnoid hemorrhage, or aSAH, which is bleeding around the brain due to a ruptured brain aneurysm. A single dose of EG-1962 is designed to deliver high concentrations of nimodipine, the current standard of care, directly to the brain with sustained drug exposure over 21 days. EG-1962 utilizes our proprietary, programmable, biodegradable polymer-based development platform, or our Precisa® development platform, a novel delivery mechanism that enables targeted and sustained drug exposure while potentially avoiding the dose-limiting side effects associated with currently available formulations of nimodipine. On May 28, 2015, the U.S. Food and Drug Administration, or the FDA, granted us orphan drug designation for EG-1962 for the treatment of patients with aSAH.

In April 2015, enrollment was completed in our Phase 1/2 trial of EG-1962 in North America, which we refer to as our NEWTON trial. The NEWTON trial met its primary and secondary endpoints of safety, tolerability, defining the maximum tolerated dose (MTD) and pharmacokinetics. The results of the principal exploratory endpoint from the 90-day follow-up available for patients in the NEWTON trial cohorts demonstrated that 60% (27 of 45) of patients treated with EG-1962 experienced a favorable clinical outcome (a score of 6 – 8 on the extended Glasgow Outcome Scale, or GOSE) versus only 28% (5 of 18) of patients treated with the standard of care oral nimodipine. Of the 45 patients treated with EG-1962, 90 days following treatment 27% (12 of 45) of patients across 17 sites achieved the highest clinical outcome score (GOSE = 8, Upper Good Recovery) versus only 6% (1 of 18) patients treated with the standard of care, oral nimodipine.

Based on End-of-Phase 2 correspondence from the FDA received in late July 2015, we have determined the design and key elements of our planned Phase 3 clinical program for EG-1962 for the treatment of aSAH. Subject to submission and review by the FDA of a final protocol for the planned Phase 3 clinical trial, we expect to initiate the Phase 3 trial in mid-2016. Based on the results of the NEWTON trial, for a condition for which there is a substantial unmet medical need for better treatments, and the use of the FDA’s Section 505(b)(2) regulatory pathway, we believe this Phase 3 clinical trial, if successful, could form the basis of a New Drug Application, or NDA, submission to the FDA for EG-1962.

In addition to EG-1962, we are using our Precisa development platform to develop additional product candidates targeting other acute, serious conditions where limited or no current therapies exist. We are developing our second product candidate, EG-1964, as a prophylactic treatment in the management of chronic subdural hematoma, or cSDH, to prevent recurrent bleeding on the surface of the brain. A cSDH is a liquefied hematoma that has accumulated on the surface of the brain in an area referred to as the subdural space and is often caused by minor head trauma. Following neurosurgical intervention to drain the hematoma, bleeding in the subdural space typically recurs in up to 30% of patients at which point another costly and risky neurosurgical intervention is required. EG-1964 contains aprotinin, a pancreatic trypsin inhibitor approved to reduce bleeding

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after cardiac surgery. Aprotinin works by slowing the breakdown of blood clots. By way of a single administration at the time of the initial neurosurgical intervention, we believe EG-1964 will deliver a high concentration of aprotinin directly to the subdural space with sustained drug exposure over 21 to 28 days. If approved, we expect that EG-1964 can become the standard of care as a prophylactic treatment in the management of cSDH to prevent recurrent bleeding. We intend to submit an Investigation New Drug Application, or IND, to the FDA for EG-1964 in 2016 and initiate a Phase 1/2 trial thereafter.

Our Product Candidates

The following table outlines our pipeline of product candidates. 


EG-1962, Our Product Candidate for the Management of Subarachnoid Hemorrhage

Our lead product candidate, EG-1962, a polymer-based microparticle containing nimodipine suspended in a diluent of hyaluronic acid was developed using our Precisa development platform to improve patient outcomes following aSAH. EG-1962 will be administered typically by neurosurgeons or neurointensivists to deliver a single, high and sustained dose of nimodipine directly to the site of the injury in the brain via an existing external ventricular drain, or EVD, while potentially avoiding dose-limiting side effects. As part of the routine course of treatment, we believe approximately 50% of all aSAH patients receive an EVD to monitor pressure and to serve as a pathway to administer drugs. Since current treatment guidelines recommend that all patients receive nimodipine prophylactically after aSAH, we believe that EG-1962, if approved, can become the new standard of care for all patients who receive an EVD after aSAH. In addition, our approach does not materially alter current physician behavior or treatment protocol.

In the United States, approximately 35,000 patients with an average age of 52 are hospitalized in the intensive care unit, or ICU, each year for aSAH, and approximately 75% of these patients die or suffer permanent brain damage within 30 days. This results in overall inpatient charges of more than $5.0 billion per year in the United States. After the ruptured aneurysm is repaired these patients remain at risk for multiple complications that are managed over the course of the patient’s treatment to optimize clinical outcomes. To date, nimodipine administered over a 21-day period either orally every four hours or intravenously, is the only approved drug shown to have efficacy in reducing unfavorable clinical outcomes and neurological deficits after aSAH. EG-1962 delivers high and sustained concentrations of nimodipine directly to the site of injury in the brain in a single administration, while potentially avoiding systemic side effects, primarily hypotension, associated with current formulations of nimodipine, which can exacerbate the complications of aSAH.

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If EG-1962 is approved by the FDA as a therapy that can improve clinical outcome over the standard of care, it could result in significant pharmacoeconomic advantages that we believe can drive adoption and help to justify premium pricing.

EG-1962 Clinical Development Program in aSAH

In April 2015, we completed enrollment of the NEWTON trial in North America. The NEWTON trial is a multicenter, randomized, controlled, open label Phase 1/2 clinical trial of EG-1962. The NEWTON trial was designed as a safety, tolerability, MTD and pharmacokinetics trial of EG-1962 compared to oral nimodipine in up to 96 patients with aSAH. Six different dose cohorts (72 patients) have been evaluated at escalating doses of 100 mg, 200 mg, 400 mg, 600 mg, 800 mg and 1200 mg. Twelve patients in each cohort were randomized in a ratio of 3 to 1 to receive either single dose EG-1962 or standard of care oral nimodipine for 21 days. After 90 days we assessed multiple exploratory endpoints, the principal exploratory endpoint of which was patient clinical outcomes; and other exploratory endpoints included delayed cerebral ischemia, or DCI, and use of rescue therapies, all of which we believe are indicative of the potential efficacy of EG-1962. Seventeen medical centers in North America participated in the NEWTON trial.

The results for the NEWTON trial showed that the primary and secondary study endpoints were met and all of the exploratory endpoints favored the EG-1962 group. Safety and tolerability data are reported for all six cohorts, while efficacy results are reported for only five cohorts, as the sixth cohort (1200 mg) was not a tolerable dose. There were no safety concerns identified after administration of EG-1962 that precluded dose escalation. Further, safety data for the trial showed that 0% of patients (0 of 54) experienced EG-1962 related hypotension in the treated group, while 17% of patients (3 of 18) treated with standard of care oral nimodipine experienced hypotension. The MTD was determined to be 800 mg. Clinical outcome results from the 90-day follow-up for patients demonstrated that 60% (27 of 45) of patients treated with EG-1962 experienced a favorable functional outcome (GOSE score of 6 – 8) versus only 28% (5 of 18) of patients treated with oral nimodipine. In September 2015, we expect to commence enrollment of patients in a single expansion cohort in the Czech Republic and Finland. We expect to announce full trial results and initiate our Phase 3 program in mid- 2016.

Further Development of EG-1962

Since at least 50% of aSAH patients may not require an EVD, market expansion opportunities exist. We intend to explore alternative routes of administration of EG-1962, including intracisternal and lumbar administration to improve outcomes in patients with aSAH who do not receive an EVD, but remain at risk for delayed neurological complications. Intracisternal administration involves placing a single injection of EG-1962 into the basal cisterns of the brain during surgical repair of the aneurysm. Lumbar administration would entail the administration of a single injection of EG-1962 into the cerebral spinal fluid, or CSF, via a catheter in the lumbar region of the back.

If successful, we believe both intracisternal and lumbar administration, together with intraventricular administration, can establish EG-1962 as a prophylactic treatment to improve outcomes in substantially all patients with aSAH.

EG-1964, Our Product Candidate for the Management of Chronic Subdural Hematoma

EG-1964 contains aprotinin, a pancreatic trypsin inhibitor, and is being developed using our Precisa development platform for the management of cSDH as a prophylactic measure to prevent recurrent bleeding. EG-1964 will be administered by neurosurgeons in order to deliver a sustained dose of aprotinin over 21 to 28 days directly to the site of the cSDH. Aprotinin was approved by the FDA in 1993 to prevent rebleeding and reduce the need for blood transfusions following cardiac bypass surgery. Our development strategy leverages aprotinin’s established mechanism of action as a clotting agent and its potential impact in the subdural space for targeted delivery in the brain.

Following a review of our non-clinical data and discussions with the FDA, we plan to submit an IND for EG-1964 to the FDA. The IND submission is expected to be made in 2016.

Our Precisa Development Platform

Precisa is our proprietary, programmable, biodegradable polymer-based development platform that enables us to create therapeutics, such as EG-1962 and EG-1964, and to explore other potential novel therapeutic agents.

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Precisa allows us to create polymer based therapeutics that we believe are capable of delivering medicines directly to the site of injury to potentially avoid serious systemic side effects often associated with oral or intravenous delivery of drugs and to enable high and sustained drug exposure with only a single dose at the initial time of procedural or surgical intervention.

The key principles of our Precisa development platform are:

Rational design.   Once we have identified an unmet clinical condition and identified several potentially effective therapeutics, we systematically vary physical and chemical properties, such as particle size, surface properties, dose level and release profile in order to engineer multiple types of polymer-based formulations. We optimize a product candidate by programming Precisa to achieve a sustained release rate with effective targeting for the particular administration and organ or tissue target.
Targeted delivery.   We use Precisa to design our product candidates based on specific physical and chemical properties (e.g., size, shape, surface area) that allow for one-time administration at or near the targeted injured organ or tissue.
Controlled and sustained drug exposure.   We program Precisa with a specific blend of polymers in order to obtain the desired release profile of the selected therapeutic. This is accomplished by immersing the specified therapeutic in a matrix of clinically-validated, biodegradable and biocompatible polymers.

While we have initially applied our development approach to acute neurological conditions with EG-1962 and EG-1964, we intend to leverage our Precisa platform beyond these product candidates to address other acute care areas, including neurosurgical oncology, cardiac surgery, general surgery and plastic and reconstructive surgery. We believe our Precisa development platform allows us to advance a new product candidate from concept to preclinical testing in an expedited manner. We plan on initiating formulation and development activities on EG-1963, which uses our Precisa platform to reduce bleeding following surgeries outside the brain. We plan on initiating formulation and development work on EG-1963 in 2016.

Other Discovery Programs

We have entered into a multi-year research and discovery collaboration with St. Michael’s Hospital, which is affiliated with the University of Toronto. The collaboration focuses on discovering new therapeutic approaches to treat various acute neurological conditions, such as intracerebral hemorrhages, brain microbleeds and cavernous malformations resulting from neurovascular instability.

Our Team

We are led by a team of executives and directors with significant experience in drug discovery, development and commercialization. Our co-founder and Chief Executive Officer, or CEO, Brian A. Leuthner, has been responsible for developing, launching and selling products in the hospital market for GlaxoWellcome plc, Johnson & Johnson, ESP Pharma, Inc. and The Medicines Company. Our other co-founder and Chief Scientific Officer, Dr. R. Loch Macdonald, is a world-renowned neurosurgeon and expert in the research and management of acute neurological conditions. Other members of our management team have held senior positions at Alpharma, Inc., Amgen Corporation, Celgene Corporation, ESP Pharma, Inc, Johnson & Johnson, MedPointe, Inc., Millennium Pharmaceuticals, Otsuka Pharmaceuticals, Purdue Pharma L.P and Schering Plough Corporation. In addition, our Chairman, Dr. Sol Barer was Chairman and the former CEO of Celgene, and the Chairman of our Scientific Advisory Board, Dr. Robert Langer, is a world-renowned scientist and pioneer in drug-delivery-related inventions.

Our Strategy

Our vision is to become a leading global biotechnology company that discovers, develops and commercializes novel, hospital-based therapies that transform treatment paradigms in the management of acute, life-threatening neurological conditions. We intend to utilize our product development and commercial execution strategies to achieve this vision.

We seek to maintain high barriers to entry around our product candidates and the markets in which they are utilized by using a three-layered approach. Our first layer of defense relates to patent rights. We currently have

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three issued U.S. patents, including composition of matter related to EG-1962, 12 issued foreign patents, one PCT application that will enter the national stage in September 2015 and more than 50 U.S. and foreign pending patent applications. Our second layer of defense involves manufacturing know-how and trade secrets relating to the design and manufacture of products using our Precisa development platform. Our third layer involves the difficulty a competitor may experience in proving bioequivalence. If a competitor were to attempt to prove bioequivalence, we believe the competitor would be required to conduct human clinical trials to demonstrate that direct delivery of a competitive product to the brain would have similar plasma concentrations and efficacy as any of our other product candidates.

Key elements of our execution strategy are as follows:

Rapidly develop our lead product candidate, EG-1962 to improve clinical outcomes following aSAH.
Expand the development of EG-1962 for intracisternal and lumbar administration to improve clinical outcomes in patients with aSAH that do not receive an EVD but remain at risk for delayed neurologic complications.
Develop our second product candidate, EG-1964, to prevent recurrent bleeding after treatment for cSDH.
Develop our third product candidate EG-1963 to prevent rebleeding following surgeries outside the brain.
Evaluate other indications for EG-1962 in therapeutic areas outside of the brain, such as ophthalmology and plastic and reconstructive surgery.
Commercialize our wholly-owned product candidates, including EG-1962 and EG-1964, if approved, through a targeted sales force in the United States, Canada and Europe and with potential strategic partnerships outside of these regions.
Leverage our proprietary, programmable, polymer-based Precisa development platform to develop life-saving therapies in acute care areas such as neurosurgical oncology, cardiothoracic surgery, general surgery, ophthalmology, and plastic and reconstructive surgery.

Risks Associated with Our Business

Our ability to implement our business strategy is subject to numerous risks and uncertainties. As a clinical-stage biotechnology company, we face many risks inherent in our business and the industry in general. You should carefully consider all of the information set forth in this prospectus and, in particular, the information under the heading “Risk Factors,” prior to making an investment in our common stock. These risks include, among others, the following:

We are a clinical-stage biotechnology company with a limited operating history and have not generated any revenue from product sales. We have incurred significant operating losses since our inception, had a net loss of $5.5 million for the six months ended June 30, 2015 and anticipate that we will incur continued losses for the foreseeable future. We will require substantial additional capital in the future. If additional capital is not available, we will have to delay, reduce or cease operations.
We depend almost entirely on the success of one product candidate, EG-1962, which is entering Phase 3 clinical development. We cannot be certain that we will be able to obtain regulatory approval for, or successfully commercialize, EG-1962 or any of our other product candidates.
Positive results from our NEWTON trial are not necessarily predictive of the results of our planned Phase 3 program for EG-1962. If we cannot replicate the positive results from our completed clinical studies and our NEWTON trial, we may be unable to successfully develop, obtain regulatory approval for and commercialize EG-1962.
If serious adverse events or other undesirable side effects are identified during the use of EG-1962 in investigator sponsored clinical trials or exploratory clinical trials of EG-1962 using other routes of administration or other conditions, our development of EG-1962 in aSAH via EVD administration may be adversely affected.

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Failures or delays in the commencement, enrollment or completion of our Phase 3 program of EG-1962 could result in increased costs to us and could delay, prevent or limit our ability to generate revenue and continue our business.
We are subject to regulatory approval processes that are lengthy, time consuming and unpredictable. We may not obtain approval for any of our product candidates from the FDA or foreign regulatory authorities.
We may not be able to obtain approval for our NDA for EG-1962 during the period of marketing exclusivity for Nymalize®, an oral solution of nimodipine, particularly if we fail to demonstrate that EG-1962 is clinically superior to or otherwise not the same drug as Nymalize, for which the FDA granted market exclusivity in 2013 due to its orphan drug designation that will run until May 10, 2020.
We currently have no sales or marketing capabilities and, if we are unable to develop our own sales and marketing capabilities or enter into strategic alliances with marketing partners, we may not be successful in commercializing our product candidates.
We depend on the performance of third parties, including contract research organizations and contract manufacturers to conduct our preclinical studies, clinical trials and to manufacture our product candidates and if they do not successfully carry out their contractual duties or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize our product candidates.
We may be unable to recruit or retain key employees, including our President and CEO, Brian A. Leuthner, and our Chief Scientific Officer, Dr. R. Loch Macdonald.
If we are unable to adequately protect our proprietary technology, maintain our issued patents, or if our pending patent applications do not issue, we may not be able to sufficiently protect EG-1962 and our other product candidates, and others could compete against us more directly, which would have a material adverse impact on our business, results of operations, financial condition and prospects.

Our Corporate Information

We were formed as Edge Therapeutics, Inc., a corporation under the laws of the State of Delaware, on January 22, 2009. Our principal executive offices are located at 200 Connell Drive, Suite 1600, Berkeley Heights, NJ 07922 and our telephone number is (800) 208-3343. Our website address is http://www.edgetherapeutics.com. The information contained in, or that can be accessed through, our website is not part of this prospectus.

“EDGE THERAPEUTICS,” “EDGE THERAPEUTICS, INC.,” “EG-1962,” “EG-1964,” “PRECISA” and our logo are our registered U.S. trademarks. All other trademarks, trade names or service marks referred to in this prospectus are the property of their respective owners.

Implications of Being an Emerging Growth Company

We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, or the Securities Act, as modified by the Jumpstart Our Business Act, or JOBS Act. As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, and the requirement to present only two years of audited financial statements and only two years of related Management’s Discussion and Analysis of Financial Condition and Results of Operations in the registration statement of which this prospectus forms a part. We are currently utilizing or intend to utilize both of these exemptions. We have not made a decision whether to take advantage of any other exemptions available to emerging growth companies. We do not know if some investors will find our shares less attractive as a result of our utilization of these or other exemptions. The result may be a less active trading market for our shares and our share price may be more volatile.

In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We

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have irrevocably elected not to avail ourselves of this extended transition period and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies.

We will remain an “emerging growth company” until the earliest of (a) the last day of the first fiscal year in which our annual gross revenues exceed $1.0 billion, (b) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, or the Exchange Act, which would occur if the market value of our shares that are held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, (c) the date on which we have issued more than $1.0 billion in nonconvertible debt during the preceding three-year period or (d) the last day of our fiscal year containing the fifth anniversary of the date on which shares of our common stock become publicly traded in the United States.

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THE OFFERING

Common stock offered by us
          shares
Over-allotment option
We have granted the underwriters an option for a period of 30 days to purchase up to        additional shares of common stock.
Common stock to be outstanding after this offering
          shares
Use of proceeds
We expect that the net proceeds from this offering will be approximately $       million based on an assumed initial public offering price of $       per share, the midpoint of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We expect to use the proceeds of this offering to fund our planned Phase 3 program for EG-1962 for the management of aSAH through the filing of the NDA and to fund our development work on other routes of administration and other uses of EG-1962, to fund our preclinical studies and the commencement of clinical trials of EG-1964 to prevent recurrent bleeding after cSDH, to fund new and ongoing discovery and development programs, and the remainder for working capital and general corporate purposes, including to fund certain development and regulatory milestone payments related to EG-1962. See “Use of Proceeds” on page 44.
Risk factors
You should read the “Risk Factors” section of, and all of the other information set forth in, this prospectus for a discussion of factors to consider carefully before deciding to invest in shares of our common stock.
Directed share program
At our request, the underwriters have reserved for sale, at the initial public offering price, up to 5% of the common stock offered hereby to persons who are directors, officers, employees, business associates or related persons through a directed share program. We do not know if these persons will choose to purchase all or any portion of these reserved shares, but any purchases they do make will reduce the number of shares available to the general public. Any reserved shares not so purchased will be offered by the underwriters to the general public on the same terms as the other shares of our common stock offered hereby. See “Underwriting.”
Proposed NASDAQ symbol
“EDGE”

The number of our shares of common stock to be outstanding after this offering is based on 26,989,017 shares of common stock outstanding as of June 30, 2015, after giving effect to the conversion of our outstanding shares of preferred stock into 23,938,761 shares of common stock, which will occur upon the consummation of an offering of at least $40,000,000 and at a price per share not less than $5.25 per share, and the issuance of 740,256 shares of common stock issuable upon declaration of accrued dividends on our Series C, Series C-1 and Series C-2 Preferred Stock as of June 30, 2015 immediately prior to the consummation of this offering, and excludes:

1,054,005 shares of our common stock issuable upon exercise of all classes of warrants outstanding as of June 30, 2015 at a weighted average exercise price of $4.21 per share;
1,810,531 shares of common stock issuable upon exercise of stock options outstanding as of June 30, 2015 under our 2010 Equity Incentive Plan at a weighted average exercise price of $2.67 per share;

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1,500,000 shares of common stock issuable upon exercise of stock options outstanding as of June 30, 2015 under our 2012 Equity Incentive Plan at a weighted average exercise price of $1.75 per share;
1,762,000 shares of common stock issuable upon exercise of stock options outstanding as of June 30, 2015 under our 2014 Equity Incentive Plan at a weighted average exercise price of $4.52 per share; and
830,400 shares of common stock reserved for future issuances under our 2014 Equity Incentive Plan.

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

the filing of our eighth amended and restated certificate of incorporation and the adoption of our amended and restated bylaws, which will occur immediately prior to the consummation of this offering;
no exercise by the underwriters of their over-allotment option to purchase additional shares of common stock from us;
no exercise of outstanding options or warrants;
the conversion of all of our outstanding shares of preferred stock into 23,938,761 shares of our common stock immediately prior to the consummation of this offering; and
a 1-for- reverse split of our common stock effected on              , 2015.

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SUMMARY FINANCIAL DATA

The following table summarizes our historical financial data as of, and for the periods ended on, the dates indicated. We have derived the statements of operations data for the years ended December 31, 2014 and 2013 and balance sheet data as of December 31, 2014 and 2013 from our audited financial statements included elsewhere in this prospectus. We have derived the statements of operations data for the six months ended June 30, 2015 and 2014 and balance sheet data as of June 30, 2015 from our unaudited financial statements included elsewhere in this prospectus. The unaudited financial statements have been prepared on a basis consistent with our audited 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, 2015 and results of operations for the six months ended June 30, 2015 and 2014. 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 of our financial data set forth below should be read together with our financial statements and the related notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing elsewhere in this prospectus.

Year Ended December 31,
Six Months Ended June 30,
2014
2013
2015
2014
(unaudited)
Statement of Operations Data:
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
 
Research and development
$
8,473,522
 
$
4,484,367
 
$
6,066,483
 
$
3,217,106
 
General and administrative
 
4,720,661
 
 
2,003,992
 
 
3,076,095
 
 
2,399,370
 
Total operating expenses:
 
13,194,183
 
 
6,488,359
 
 
9,142,578
 
 
5,616,476
 
Loss from operations
 
(13,194,183
)
 
(6,488,359
)
 
(9,142,578
)
 
(5,616,476
)
Other income (expense)
 
402,122
 
 
(853,739
)
 
(846,870
)
 
96,221
 
Loss before income taxes
 
(12,792,061
)
 
(7,342,098
)
 
(9,989,448
)
 
(5,520,255
)
Benefit (provision) for income taxes
 
590,675
 
 
459,018
 
 
 
 
 
Net loss
 
(12,201,386
)
 
(6,883,080
)
 
(9,989,448
)
 
(5,520,255
)
Cumulative dividend on Series C, C-1 and C-2 convertible preferred stock
 
(1,580,701
)
 
(1,076,256
)
 
(2,429,515
)
 
(717,441
)
Net loss attributable to common stockholders
$
(13,782,087
)
$
(7,959,336
)
$
(12,418,963
)
$
(6,237,696
)
Loss per share attributable to common stockholders basic and diluted (1)
$
(5.97
)
$
(3.45
)
$
(5.38
)
$
(2.70
)
Weighted average common shares outstanding basic and diluted (1)
 
2,310,000
 
 
2,310,000
 
 
2,310,000
 
 
2,310,000
 
Unaudited pro forma net loss
 
 
 
 
 
 
 
 
 
 
 
 
Unaudited pro forma net loss per share of common stock basic and diluted (1)
 
 
 
 
 
 
 
 
 
 
 
 
Unaudited pro forma basic and diluted weighted average shares of common stock outstanding (1)
 
 
 
 
 
 
 
 
 
 
 
 

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As of June 30, 2015
Actual
Pro Forma(2)
Pro Forma
As Adjusted(3)(4)
(unaudited)
Balance Sheet Data:
 
 
 
 
 
 
 
 
 
Cash
$
58,465,083
 
$
 
 
$
 
 
Total Assets
 
62,685,415
 
 
 
 
 
 
 
Long Term Debt
 
4,223,708
 
 
 
 
 
 
 
Convertible preferred stock
 
91,437,382
 
 
 
 
 
 
 
Accumulated deficit
 
(42,237,881
)
 
 
 
 
 
 
Total stockholders’ (deficit) equity
 
(39,298,028
)
 
 
 
 
 
 

(1)See Notes 2(K) and (L) to our audited financial statements for an explanation of the method used to calculate net loss per share of common stock, basic and diluted, pro forma net loss per share of common stock, basic and diluted, and diluted pro forma weighted average shares outstanding used to calculate the pro forma per share amounts.
(2)Gives pro forma effect to the conversion of all outstanding shares of our preferred stock into 23,968,761 shares of our common stock, which will occur upon the consummation of an offering of at least $40,000,000 and at a price per share not less than $5.25 per share, and the issuance of           shares of common stock issuable upon declaration of accrued dividends on our Series C, Series C-1 and Series C-2 Preferred Stock immediately prior to the consummation of this offering.
(3)Gives further effect to the sale of           shares of our common stock in this offering, assuming an initial public offering price of $       per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
(4)A $1.00 increase or decrease in the assumed initial public offering price of $       per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase or decrease the pro forma as adjusted amount of each of cash and cash equivalents, total assets and total stockholders' (deficit) equity by $       million, assuming the number of shares of common stock 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. Each increase or decrease of 1.0 million shares in the number of shares of common stock offered by us at the assumed public offering price would increase or decrease the pro forma as adjusted amount of each of cash and cash equivalents, total assets and total stockholders' (deficit) equity by $       million, 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 risks described below, together with the other information contained in this prospectus, including our financial statements and the related notes appearing elsewhere in this prospectus, before making your decision to invest in shares of our common stock. We cannot assure you that any of the events discussed in the risk factors below will not occur. These risks could have a material and adverse impact on our business, results of operations, financial condition and cash flows and our future prospects would likely be materially and adversely affected. If that were to happen, the trading price of our common stock could decline, and you could lose all or part of your investment.

Risks Related to Our Capital Needs and Financial Position and the Development of Our Product Candidates

We will require additional capital to fund our operations and if we fail to obtain necessary financing, we will not be able to complete the development and commercialization of our product candidates, including EG-1962.

Our operations have consumed substantial amounts of cash since inception. We expect to continue to spend substantial amounts to advance the clinical development of our product candidates and to launch and commercialize any product candidates for which we receive regulatory approval, including potentially building our own commercial organization to address the United States and certain other markets. We believe that the net proceeds from this offering, together with existing cash and interest thereon, will be sufficient to meet our anticipated cash requirements through the completion of our current planned Phase 3 program for EG-1962 for the treatment of aSAH. However, we may require additional capital for the further development of our product candidates and, if we conduct additional Phase 3 trials of EG-1962, we may seek to raise additional funds sooner in order to accelerate development of our product candidates and we will need to raise additional funds to commercialize any of our product candidates.

We cannot be certain that additional funding will be available on acceptable terms, or at all. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us we may have to significantly delay, scale back or discontinue the development or commercialization of one or more of our products or product candidates or one or more of our other research and development initiatives. We also could be required to:

seek collaborators for one or more of our current or future product candidates at an earlier stage than otherwise would be desirable or on terms that are less favorable than might otherwise be available; or
relinquish or license on unfavorable terms our rights to technologies or product candidates that we otherwise would seek to develop or commercialize ourselves.

Our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves risks and uncertainties, and actual results could vary as a result of a number of factors, including the factors discussed elsewhere in this “Risk Factors” section. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect. Our future funding requirements, both near and long-term, will depend on many factors, including, but not limited to:

the initiation, progress, timing, costs and results of the clinical trials for our product candidates to obtain regulatory approval, particularly whether the FDA requires us to complete two Phase 3 trials for EG-1962 for the treatment of aSAH or changes to the anticipated design of our Phase 3 program, such as changes in the required control arm of any such trial;
the outcome of planned 2015 interactions with the FDA and other non-U.S. health authorities that may alter our proposed Phase 3 program for EG-1962 to meet the standards for approval of an NDA or for obtaining a marketing authorization in aSAH;
the outcome of our efforts to demonstrate clinical superiority to Nymalize in order to sustain orphan drug status;
the clinical development plans we establish for these product candidates;
the number and characteristics of product candidates that we develop or may in-license;

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the outcome, timing and cost of meeting regulatory requirements established by the FDA and comparable foreign regulatory authorities, including the potential for the FDA or comparable foreign regulatory authorities to require that we perform more studies than those that we currently expect;
the cost of filing, prosecuting, defending and enforcing our patent claims and other intellectual property rights;
the cost of defending intellectual property disputes, including patent infringement actions brought by third parties against us or our product candidates;
the effect of competing technological and market developments;
the cost and timing of completion of commercial-scale outsourced manufacturing activities; and
the cost of establishing sales, marketing and distribution capabilities for any product candidates for which we may receive regulatory approval in regions where we choose to commercialize our products on our own.

Our debt obligations expose us to risks that could adversely affect our business, operating results and financial condition and may result in further dilution to our shareholders.

We have entered into a loan and security agreement with Hercules Technology Growth Capital, Inc., or Hercules, pursuant to which we have borrowed $6,000,000 from Hercules at an initial interest rate of 10.45% per annum. We must repay the indebtedness on or before March 1, 2018 and have paid Hercules an origination fee of $100,000. We must make interest only payments on the amounts borrowed until September 2015, after which we must make 30 equal monthly payments of principal plus interest. To the extent we desire to prepay the indebtedness prior to maturity, we will be obligated to pay a prepayment penalty to Hercules ranging from 1% to 3% of the amounts being prepaid, depending on when such prepayment occurs. In addition, at the time that the loan is either due or prepaid, we must pay Hercules a fee equal to 1.5% of the total amounts funded at such time. Our ability to make payments on this indebtedness depends on our ability to generate cash in the future. We expect to experience negative cash flow for the foreseeable future as we fund our operations and capital expenditures. There can be no assurance that we will be in a position to repay this indebtedness when due or obtain extensions of the maturity date. We anticipate that we will need to secure additional funding in order for us to be able to satisfy our obligations when due. We cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all. If that additional funding involves the sale of equity securities or convertible securities, it would result in the issuance of additional shares of our capital stock, which would result in dilution to our stockholders. The indebtedness is secured by substantially all of our assets other than intellectual property, on which we have given Hercules a negative pledge. In addition, under the loan agreement, we are subject to certain customary covenants that limit or restrict our ability to, among other things, incur additional indebtedness, grant any security interests, pay cash dividends, repurchase our common stock, make loans, or enter into certain transactions without the prior consent of Hercules.

This level of debt could have important consequences to you as an investor in our securities. For example, it could:

limit our flexibility in planning for the development, clinical testing, approval and marketing of our products;
place us at a competitive disadvantage compared to any of our competitors that are less leveraged than we are;
increase our vulnerability to both general and industry-specific adverse economic conditions; and
limit our ability to obtain additional funds.

In addition, as part of this financing with Hercules, we issued a warrant to Hercules to purchase up to 107,526 shares of our Series C-1 Preferred Stock. The warrant will become exercisable for shares of our common stock immediately prior to the consummation of this offering. Such warrant will be exercisable for five years following the consummation of this offering. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” for a more detailed discussion of the transaction with Hercules.

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

We may seek additional capital through a combination of private and public equity offerings, debt financings, strategic partnerships and 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 may include liquidation or other preferences that adversely affect the rights of existing stockholders. Debt financings may be coupled with an equity component, such as warrants to purchase stock, which could also result in dilution of our existing stockholders’ ownership. The incurrence of indebtedness would result in increased fixed payment obligations and could also result in certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business and may result in liens being placed on our assets and intellectual property. If we were to default on such indebtedness, we could lose such assets and intellectual property. If we raise additional funds through strategic partnerships and alliances and licensing arrangements with third parties, we may have to relinquish valuable rights to our product candidates, or grant licenses on terms that are not favorable to us.

We have incurred significant losses since our inception and anticipate that we will continue to incur losses for the foreseeable future.

We are a clinical-stage biotechnology company. Investment in biotechnology product development is highly speculative because it entails substantial upfront capital expenditures and significant risk that a product candidate, such as EG-1962, our lead product candidate, will fail to gain regulatory approval or become commercially viable. We have not generated any revenue from product sales to date, and we continue to incur significant development and other expenses related to our ongoing operations. As a result, we are not profitable and have incurred losses in each period since our inception in 2009. For the year ended December 31, 2014 and the six months ended June 30, 2015, we reported a net loss of $12.2 million and $5.5 million, respectively.

We expect to continue to incur losses for the foreseeable future, and we expect these losses to increase as we continue our development of, and seek regulatory approvals for, our product candidates, and begin to commercialize any approved products. We may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. The size of our future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate revenues. If EG-1962 or any of our other product candidates fail in clinical trials or do not gain regulatory approval, or if approved, fail to achieve market acceptance, we may never become profitable. Even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods. Our prior losses and expected future losses have had and will continue to have an adverse effect on our stockholders’ (deficit) equity and working capital.

We have not generated any revenues since inception and may never become profitable.

To date, we have not generated any revenues since our inception. Our ability to generate revenue and become profitable depends upon our ability to successfully obtain marketing approval and commercialize products, including EG-1962 or other product candidates that we may develop, in-license or acquire in the future. Even if we are able to successfully achieve regulatory approval for these product candidates, we do not know when any of these products will generate revenue for us, if at all. Our ability to generate revenue from EG-1962 or other product candidates also depends on a number of additional factors, including our ability to:

successfully complete development activities, including the necessary clinical trials;
complete and submit marketing authorization applications to the FDA and obtain regulatory approval for an indication for which there is a commercial market;
complete and submit marketing authorization applications to, and obtain regulatory approval from, foreign regulatory authorities;
set a commercially viable price for our products;
develop and obtain commercial quantities of our products at acceptable cost levels;
develop a commercial organization capable of sales, marketing and distribution for the products we intend to sell ourselves in the markets in which we have retained commercialization rights;

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find suitable partners to help us market, sell and distribute our approved products in other markets; and
obtain coverage and adequate reimbursement from third-party, including government, payors.

In addition, because of the numerous risks and uncertainties associated with product development, including that our product candidates may not advance through development or be shown to be safe and effective for their intended uses, the FDA or any other regulatory agency may require additional clinical trials or preclinical studies. We are unable to predict the timing or amount of increased expenses, or when or if we will be able to achieve or maintain profitability. Even if we are able to complete the process described above, we anticipate incurring significant costs associated with commercializing these products.

Even if we are able to generate revenues from the sale of our products, we may not become profitable and may need to obtain additional funding to continue operations. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce our operations.

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

We were formed in January 2009. Our operations to date have been limited to organizing and staffing our company, acquiring or developing product and technology rights, and conducting product development activities for our product candidates, primarily EG-1962. We have not yet obtained regulatory approval for any of our product candidates. Consequently, any predictions about our future success, performance or viability may not be as accurate as they could be if we had a longer operating history or approved products on the market.

We depend almost entirely on the success of one product candidate, EG-1962, which is entering Phase 3 clinical development. We cannot be certain that we will be able to obtain regulatory approval for, or successfully commercialize, EG-1962 or any other product candidate.

We currently have only one product candidate, EG-1962, in clinical development, and our business depends almost entirely on its successful clinical development, regulatory approval and commercialization. We currently have no drug products for sale and may never be able to develop marketable drug products. EG-1962 will require substantial additional clinical development, testing, and regulatory approval before we are permitted to commence its commercialization. Our other product candidates, including EG-1964 and EG-1963, are still in pre-clinical development stages. None of our product candidates have advanced into a Phase 3 trial. The clinical trials of our product candidates are, and the manufacturing and marketing of our product candidates will be, subject to extensive and rigorous review and regulation by numerous government authorities in the United States and in other countries where we intend to test and, if approved, market any product candidate. Before obtaining regulatory approvals for the commercial sale of any product candidate, we must successfully meet a number of critical developmental milestones, including:

demonstrating through Phase 3 clinical trials that the product candidate is safe and effective and shows a significant benefit vs. risk advantage over the active comparator in patients for the intended indication;
developing dosages that will be tolerated, safe and effective;
determining the appropriate delivery mechanism;
demonstrating that the product candidate formulation will be stable for commercially reasonable time periods; and
completing the development and scale-up to permit manufacture of our product candidates in commercial quantities and at acceptable prices.

The time necessary to achieve these developmental milestones for any individual product candidate is long and uncertain, and we may not successfully complete these milestones for EG-1962 or any other product candidates that we may develop. We have not yet completed development of any product. We may not be able to finalize the design or formulation of any product candidate. In addition, we may select components, solvents, excipients or other ingredients to include in our product candidates that have not previously been used in approved pharmaceutical products, which may require us to perform additional studies and may delay clinical testing and regulatory approval of our product candidates.

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We are continuing to test and develop our product candidates and may explore possible design or formulation changes to address safety, efficacy, manufacturing efficiency and performance issues. We may not be able to complete development of any product candidates that will be safe and effective and that will have a commercially reasonable treatment and storage period. If we are unable to complete development of EG-1962, or any other product candidates that we may develop, we will not be able to commercialize and earn revenue from them.

We cannot be certain that our planned Phase 3 clinical trial of EG-1962 will be sufficient to support the submission of an NDA for this product candidate, and in any event we may be required to obtain additional clinical and non-clinical data before an NDA may be submitted.

In general, the FDA requires two pivotal trials to support approval of an NDA, but in certain circumstances, will approve an NDA based on only one pivotal trial. If successful, we believe the results from our planned single Phase 3 clinical trial of EG-1962, together with safety and efficacy data from the EG-1962 development program and other safety data generated from Nimotop®, could form the basis of an NDA submission for EG-1962. However, depending upon the outcome of the current program, the FDA may require that we conduct additional pivotal trials before we can submit and NDA for EG-1962.

While we believe we have determined the design and key elements of our planned Phase 3 clinical trial for EG-1962, before beginning the trial, the FDA must review the final protocol for the trial. If the FDA does not approve the protocol for the planned trial in the form we submit it, the start or continuation of the planned Phase 3 trial may be delayed or the design of the trial may change.

The regulatory approval processes of the FDA and comparable foreign regulatory authorities are inherently unpredictable, and if our product candidates are subject to multiple cycles of review or we are ultimately unable to obtain regulatory approval for our product candidates, including EG-1962, our business will be substantially harmed.

Of the large number of drugs in development in the United States, only a small percentage successfully complete the FDA regulatory approval process and are commercialized. We are not permitted to market EG-1962 in the United States until we receive approval of an NDA from the FDA, or in any foreign countries until we receive the requisite approval from such countries. Prior to submitting an NDA to the FDA for approval of EG-1962 to treat patients with aSAH, we plan to analyze results from our Phase 1/2 clinical trial, or the NEWTON trial, and complete a Phase 3 program, which we intend will consist of a single pivotal trial. We recently completed enrollment in the NEWTON trial in North America, and are about to enter into our Phase 3 program. Successfully completing Phase 3 clinical trials and obtaining approval of an NDA is complex, lengthy, and expensive, even in cases in which the Section 505(b)(2) regulatory pathway is pursued. The FDA or a comparable foreign regulatory authority may delay, limit or deny approval of EG-1962 for many reasons, including, among others:

disagreement with or disapproval of the design or implementation of our clinical trials;
disagreement with the sufficiency of our Phase 3 program, including disagreement with the sufficiency of a single Phase 3 trial;
failure to demonstrate that EG-1962 is safe and effective for its proposed indication;
failure of EG-1962 to demonstrate efficacy at the level of statistical significance required for approval;
EG-1962’s failure to demonstrate clinical superiority to Nymalize, an oral nimodipine solution, for which the FDA granted market exclusivity in 2013 due to its orphan drug designation;
a negative interpretation of the data from our preclinical studies or clinical trials, including our NEWTON trial;
deficiencies in the manufacturing processes or failure of third-party manufacturing facilities with whom we contract for clinical and commercial supplies to effectively manufacture product under current good manufacturing practice, or cGMP; or
insufficient data collected from clinical trials of EG-1962 or changes in the approval policies or regulations that render our preclinical and clinical data insufficient to support the submission and filing of a marketing authorization application or to obtain regulatory approval.

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The FDA or a comparable foreign regulatory authority may require more information, including additional preclinical or clinical data to support approval, which may delay or prevent approval and our commercialization plans, or cause us to abandon the development program. Even if we obtain regulatory approval, our product candidates may be approved for fewer or more limited indications than we request, such approval may be contingent on the performance of costly post-marketing clinical trials, or we may not be allowed to include the labeling claims necessary or desirable for the successful commercialization of such product candidate. For instance, it is possible that EG-1962 could be approved but fail to replace nimodipine as the new standard of care for treating patients with aSAH. In addition, if EG-1962 produces undesirable side effects or safety issues, the FDA may require the establishment of a Risk Evaluation and Mitigation Strategy, or REMS, including Elements to Ensure Safe Use, or ETASU, which are the most extensive elements of a REMS plan. Additionally, a comparable foreign regulatory authority may require the establishment of a similar strategy that may, for instance, restrict distribution of our products and impose burdensome implementation requirements on us.

The results of clinical trials may not support our product candidate claims.

Even if our clinical trials are completed as planned, we cannot be certain that their results will support our proposed product candidate claims, that the FDA or government authorities in other countries will agree with our conclusions regarding such results, or that the FDA or governmental authorities in other countries will not require additional clinical trials. Success in preclinical testing and early clinical trials does not ensure that later clinical trials will be successful and the results of later clinical trials often do not replicate the results of prior clinical trials and preclinical testing. Our early clinical experience with EG-1962 involved a small number of patients. The results in these patients may not be indicative of future results in a larger and more diverse patient population, such as that in our NEWTON trial, for a number of reasons, including the small sample size. In addition, results from individual cohorts may support our claims with respect to EG-1962, but overall results from the trial may not. Furthermore, results from our NEWTON trial, either overall or for particular cohorts, including exploratory efficacy analyses, may not predict results in a larger Phase 3 trial. The clinical trial process may fail to demonstrate that our product candidates are safe for humans and effective for indicated uses. This failure could cause us to abandon a product candidate and may delay development of other product candidates. Any delay in, or termination of, our clinical trials will delay or prevent the filing of our NDAs with the FDA and, ultimately, our ability to commercialize our product candidates and generate product revenues.

Clinical drug development involves a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials may not be predictive of future trial results.

Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical trial process. The results of preclinical studies and early clinical trials of our product candidates may not be predictive of the results of later-stage clinical trials, including with respect to EG-1962. Due to, among other things, the small sample size of the data we have for EG-1962, there can be no assurance that our initial positive results will be indicative of results in future clinical trials. A number of companies in the biotechnology industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier trials. Our future clinical trials may not be successful.

Delays in our clinical trials may slow our approval process and jeopardize our ability to generate revenues from the sale of our products.

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

delay or failure in reaching agreement with the FDA or a comparable foreign regulatory authority on a trial design that we are able to execute;
delay or failure in obtaining authorization to commence a trial or inability to comply with conditions imposed by a regulatory authority regarding the scope or design of a clinical trial;
inability, delay or failure in identifying and maintaining a sufficient number of trial sites, many of which may already be engaged in other clinical trial programs;

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delay or failure in recruiting and enrolling suitable patients to participate in a trial;
delay or failure in having patients complete a trial or return for post-treatment follow-up;
clinical sites and investigators deviating from trial protocol, failing to conduct the trial in accordance with regulatory requirements, or dropping out of a trial;
withdrawal of clinical trial sites from our clinical trials as a result of changing standards of care or the ineligibility of a site to participate in our clinical trials;
delay or failure in reaching agreement on acceptable terms with prospective clinical research organizations, or CROs, and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;
delay or failure in obtaining institutional review board, or IRB, approval or the approval of other reviewing entities, including FDA and comparable foreign regulatory authorities, to conduct a clinical trial at each site;
failure of our third-party clinical trial managers to satisfy their contractual duties or meet expected deadlines;
ambiguous or negative interim results or results that are inconsistent with earlier results;
feedback from the FDA, the IRB, DSMB, or a comparable foreign regulatory authority, or results from earlier stage or concurrent preclinical and clinical studies, that might require modification to the protocol;
decision by the FDA, the IRB, a comparable foreign regulatory authority, or the Company, or recommendation by a DSMB or comparable foreign regulatory authority, to suspend or terminate clinical trials at any time for safety issues or for any other reason;
manufacturing or obtaining from third parties sufficient quantities of a product candidate for use in clinical trials;
lack of adequate funding to continue the clinical trial, including the incurrence of unforeseen costs due to enrollment delays, requirements to conduct additional clinical studies and increased expenses associated with the services of our CROs and other third parties; or
changes in governmental regulations or administrative actions.

Patient enrollment, a significant factor in the timing of clinical trials, is affected by many factors, including the size and nature of the patient population (particularly with respect to orphan drugs because by definition they are intended for a relatively small patient population), the eligibility criteria for the trial, the design of the clinical trial, inability to obtain and maintain patient consents, risk that enrolled patients will drop out before completion, and clinicians’ and patients’ perceptions as to the potential advantages of the therapeutic being studied in relation to other available therapies, including any new therapeutics that may be approved or for which clinical trials are initiated for the indications we are investigating. We rely on CROs and clinical trial sites to help us ensure the proper and timely conduct of our clinical trials and while we have agreements governing their committed activities, we have limited influence over their actual performance.

If we experience delays in the completion of, or termination of, any clinical trial of our product candidates, the commercial prospects of our product candidates will be harmed, and our ability to generate product revenues from any of these product candidates will be delayed. In addition, any delays in completing our clinical trials will increase our costs, slow down our product candidate development and approval process and jeopardize our ability to commence product sales and generate revenues. Any of these occurrences may significantly harm our business, financial condition and prospects. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates.

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We may be required to suspend or discontinue clinical trials for a number of reasons, including as a result of adverse side effects or other safety risks that could preclude approval of any of our product candidates.

Our clinical trials may be suspended at any time for a number of reasons. A clinical trial may be suspended or terminated by us, an IRB, the FDA or other regulatory authorities due to a failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, presentation of unforeseen safety issues, failure to demonstrate a benefit from using the investigational drug, changes in governmental regulations or administrative actions, or lack of adequate funding to continue the clinical trial. In addition, clinical trials for our product candidates could be suspended due to adverse side effects. Although we are primarily concerned with hypotension in our clinical trials for EG-1962, we may also observe inflammation, infection, unacceptable elevated intracranial pressure or hydrocephalus or other unknown effects resulting from the delivery, in a single administration, of sustained concentrations of nimodipine directly to the site of injury in the brain. With respect to EG-1964 and EG-1963, previous studies have shown that, aprotinin, when delivered systemically, can cause serious side effects, such as renal failure, thrombosis and rarely, anaphylaxis. Drug-related side effects could affect patient recruitment or the ability of enrolled patients to complete the trial or result in potential product liability claims. We may also voluntarily suspend or terminate our clinical trials if at any time we believe that they present an unacceptable risk to patients. If we elect or are forced to suspend or terminate any clinical trial of any product candidates that we develop, the commercial prospects of such product candidates will be harmed and our ability to generate product revenues, if at all, from any of these product candidates will be delayed or eliminated. Any of these occurrences may significantly harm our business, financial condition, results of operations and prospects.

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

In order to market and sell our products in the European Union, Canada, and other international jurisdictions, we must obtain separate and distinct marketing approvals and comply with the respective regulatory requirements of each of these jurisdictions. The regulatory approval process outside the United States generally includes all of the risks associated with obtaining FDA approval, but can involve additional testing. In particular, nimodipine, the therapeutic used in EG-1962, has not previously been approved for use in Japan. As a result, the time required to obtain approval for EG-1962 in Japan may differ substantially from the time required to obtain approval for EG-1962 by the FDA. We may need to partner with third parties in order to obtain regulatory approvals outside the United States. Approval by the FDA does not necessarily guarantee approval by regulatory authorities in other countries or jurisdictions. Nor does the approval by one regulatory authority outside the United States ensure approval by regulatory authorities in other countries or jurisdictions or by the FDA. We may not be able to file for marketing approvals and may not receive necessary approvals to commercialize our products in any market. If we are unable to obtain approval of EG-1962 or any of our other product candidates by regulatory authorities in the European Union, Canada, and other international jurisdictions, the commercial prospects of those product candidates may be significantly diminished and our business prospects could decline.

Approval of EG-1962 could be more costly and take longer than anticipated as a result of Nymalize’s existing orphan drug exclusivity.

Regulatory authorities in some jurisdictions, including the United States and European Union, or the EU, may designate drugs for the treatment or prevention of rare diseases or conditions with relatively small patient populations as orphan drugs. Under the Orphan Drug Act of 1983, or the Orphan Drug Act, the FDA may designate a product as an orphan drug if it is a drug intended to treat a rare disease or condition, which is generally defined as a patient population of fewer than 200,000 individuals in the United States. In the European Union/European Economic Area, a drug may be designated as orphan if the product is intended to treat a condition or disease affecting less than 5 in 10,000 individuals in the European Union, and there exists no satisfactory authorized method of treatment of the condition or even if such treatment exists, the product will be of significant benefit to those affected by that condition.

Generally, if a product with an orphan drug designation subsequently receives the first marketing approval for the indication for which it has such designation, the product is entitled to a seven-year period of marketing exclusivity, which precludes the FDA from approving another marketing application for the same drug for the same indication for that time period. A similar provision in European law allows ten years of market exclusivity

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in Europe and European regulators are not permitted to accept another application for a market approval or accept an application for line-extension for the same therapeutic indication in respect of a similar medicinal product.

The European exclusivity period can be reduced to six years if at the end of the fifth year of that period, a drug no longer meets the criteria for orphan drug designation or if the drug is sufficiently profitable so that maintenance of the orphan designation and accordingly the marketing exclusivity is no longer justified. Orphan drug exclusivity may be lost if the FDA or the European Medicines Agency, or EMA, determines that the request for designation was materially defective or if the FDA subsequently finds that the drug in fact had not been eligible for orphan drug designation at the time of submission of the request. In the European Union, the conditions for orphan designation must be confirmed by the EMA and its Committee for Orphan Medicinal Products before the market approval is granted. The designation may be removed from the Community Registry for orphan medicinal products if the conditions are not met.

If a drug is approved for an orphan indication, the FDA will not designate as an orphan another drug deemed the “same drug” for the same use as the approved orphan drug unless the sponsor of the new drug provides a plausible hypothesis that its new drug is clinically superior to the approved orphan drug. For small molecule drugs, FDA defines “same drug” to mean a drug that contains the same active moiety (meaning the molecule or ion of the molecule, responsible for the physiological or pharmacological action of the drug substance) as the previously approved drug, even if the particular ester or salt or other noncovalent derivative has not previously been approved. Clinical superiority means that the drug is shown to provide a significant therapeutic advantage over and above the approved same drug and can be established on the basis of greater safety, greater effectiveness, or, in unusual cases where neither greater safety nor greater effectiveness is shown, on the basis of a major contribution to patient care. Similarly, in the European Union, the orphan market exclusivity may be broken or otherwise derogated in the following circumstances: (a) if the second product is not considered similar; (b) the second applicant can establish in the application that the second similar medicinal product is safer, more effective or otherwise clinically superior including a major contribution to patient care; or (c) the holder of the first authorized orphan drug is unable to supply sufficient quantities of the medicinal product.

Oral nimodipine (in the form of gelatin capsules, or gel caps) was approved for the treatment of aSAH in 1988 as Nimotop® and subsequently was approved in a generic version in 2007. Nimotop® has now been discontinued from marketing, and the FDA has determined that it was not discontinued for safety or effectiveness reasons. In September 2011, the FDA Office of Orphan Product Development, or OOPD, granted Nymalize®, an oral nimodipine solution, orphan drug designation for the treatment of aSAH. Subsequently, in May 2013, the FDA approved Nymalize for the treatment of aSAH, thereby granting the oral nimodipine solution seven years of marketing exclusivity until 2020. In order to obtain designation of EG-1962 as an orphan drug, we provided and the FDA accepted a plausible hypothesis of the clinical superiority of EG-1962 to oral nimodipine solution. However, in order for us to obtain approval of our NDA for EG-1962 for the improvement of neurological outcome in patients with aSAH during the period of marketing exclusivity for Nymalize, we will need to demonstrate the clinical superiority of EG-1962 to the oral nimodipine solution. We intend to demonstrate that EG-1962 is clinically superior to the oral nimodipine solution by demonstrating superiority over oral nimodipine gel caps in a head-to-head comparison in our Phase 3 program. To the extent the OOPD disagrees that we can demonstrate the clinical superiority of EG-1962 to the oral nimodipine solution by demonstrating the superiority of EG-1962 to oral nimodipine gel caps and requires us to include a head-to-head comparison of EG-1962 and the oral nimodipine solution, our Phase 3 program would be more costly and may take longer than is currently anticipated.

Furthermore, even if we obtain orphan drug exclusivity for a product such as EG-1962, that exclusivity may not effectively protect the product from competition because different drugs can be approved for the same condition or another sponsor’s nimodipine drug product may prove clinically superior to EG-1962.

A fast track designation by the FDA may not actually lead to a faster development or regulatory review or approval process.

We may seek fast track designation for some of our product candidates. If a drug is intended for the treatment of a serious or life-threatening condition and the drug demonstrates the potential to address unmet medical needs for this condition, the sponsor may apply for FDA fast track designation. The FDA has broad discretion whether or not to grant this designation, and even if we believe a particular product candidate is

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eligible for this designation, we cannot assure you that the FDA would decide to grant it. Even if we do receive fast track designation, we may not experience a faster development process, review or approval compared to conventional FDA procedures. The FDA may withdraw fast track designation if it believes that the designation is no longer supported by data from our clinical development program.

Even if our product candidates receive regulatory approval, they may still face future development and regulatory difficulties and any approved products will be subject to extensive post-approval regulatory requirements.

If we obtain regulatory approval for a product candidate, it would be subject to extensive ongoing requirements by the FDA and comparable foreign regulatory authorities governing the manufacture, quality control, further development, labeling, packaging, storage, distribution, safety surveillance, import, export, advertising, promotion, recordkeeping and reporting of safety and other post-market information. The safety profile of any product will continue to be closely monitored by the FDA and comparable foreign regulatory authorities after approval. If the FDA or comparable foreign regulatory authorities become aware of new safety information after approval of any of our product candidates, these regulatory authorities may require labeling changes or, depending on the nature of the safety information, establishment of a REMS or similar strategy, impose significant restrictions on a product’s indicated uses or marketing, impose ongoing requirements for potentially costly post-approval studies or post-market surveillance, impose a recall or even move to withdraw the marketing approval for the product.

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

issue warning letters or untitled letters;
mandate modifications to promotional materials or require us to provide corrective information to healthcare practitioners;
require us to enter into a consent decree, which can include imposition of various fines, reimbursements for inspection costs, required due dates for specific actions and penalties for noncompliance;
seek an injunction or impose civil or criminal penalties or monetary fines;
suspend or withdraw regulatory approval;
suspend any ongoing clinical studies;
challenge any pending applications or supplements to applications filed by us;
suspend or impose restrictions on operations, including costly new manufacturing requirements; or
seize or detain products, refuse to permit the import or export of products, or require us to initiate a product recall.

The occurrence of any event or penalty described above may inhibit our ability to commercialize our products and generate revenue.

Advertising and promotion of any product candidate that obtains approval in the United States may be heavily scrutinized by the FDA, including the Office of Prescription Drug Promotion, the Department of Justice, or the DOJ, the Department of Health and Human Services’, or HHS, Office of Inspector General, state attorneys general, members of Congress and the public. Violations, including promotion of our products for unapproved (or off-label) uses, are subject to enforcement letters, inquiries and investigations, and civil and criminal sanctions by the FDA. Additionally, advertising and promotion of any product candidate that obtains approval outside of the United States will be heavily scrutinized by comparable foreign regulatory authorities.

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In the United States, engaging in impermissible promotion of our products for off-label uses can also subject us to false claims litigation under federal and state statutes, which can lead to civil and criminal penalties and fines and agreements that materially restrict the manner in which we promote or distribute those drug products. These false claims statutes include the federal False Claims Act, which allows any individual to bring a lawsuit against a pharmaceutical company on behalf of the federal government alleging submission of false or fraudulent claims, or causing to present such false or fraudulent claims, for payment by a federal program such as Medicare or Medicaid. If the government prevails in the lawsuit, the individual will share in any fines or settlement funds. Since 2004, these False Claims Act lawsuits against pharmaceutical companies have increased significantly in volume and breadth, leading to several substantial civil and criminal settlements based on certain sales practices promoting off-label drug uses. This growth in litigation has increased the risk that a pharmaceutical company will have to defend a false claim action, pay settlement fines or restitution, agree to comply with burdensome reporting and compliance obligations, and be excluded from the Medicare, Medicaid, and other federal and state healthcare programs. If we do not lawfully promote our approved products, we may become subject to such litigation and, if we are not successful in defending against such actions, those actions may have a material adverse effect on our business, financial condition and results of operations.

Risks Related to the Commercialization of Our Product Candidates

If we are unable to establish sales and marketing capabilities to market and sell our product candidates, we may be unable to generate any revenue.

In order to market and sell EG-1962 and our other product candidates in development, we currently intend to build and develop our own sales, marketing and distribution operations in the United States, Canada and Europe. Although our management team has previous experience with such efforts, there can be no assurance that we will be successful in building these operations. If we are unable to establish adequate sales, marketing and distribution capabilities, we may not be able to generate product revenue and may not become profitable. We will also be competing with many companies that currently have extensive and well-funded sales and marketing operations. If any of our product candidates are approved, we may be unable to compete successfully against these more established companies.

Our commercial success depends upon attaining significant market acceptance of our product candidates, if approved, among hospitals, physicians, patients and healthcare payors.

Even if we obtain regulatory approval for any of our product candidates that we may develop or acquire in the future, the product may not gain market acceptance among hospitals, physicians, health care payors, patients and the medical community. Market acceptance of any of our product candidates for which we receive approval depends on a number of factors, including:

the efficacy and safety of such product candidates as demonstrated in clinical trials;
the clinical indications for which the product candidate is approved and any REMS that may be imposed as a condition of approval;
acceptance by major operators of hospitals, physicians and patients of the product candidate as a safe and effective treatment, particularly the ability of EG-1962 and our other product candidates to establish themselves as the new standard of care for the indications that we are pursuing;
the potential and perceived advantages of our product candidates over alternative treatments as compared to the relative costs of the product candidates and alternative treatments;
the safety of our product candidates seen in a broader patient group, including its use outside the approved indications;
the prevalence and severity of any side effects, such as hypotension with respect to EG-1962;
product labeling or product insert requirements of the FDA or other regulatory authorities;
the timing of market introduction of our products as well as competitive products;
the availability of adequate reimbursement and pricing by third party payors and government authorities;

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relative convenience and ease of administration; and
the effectiveness of our sales and marketing efforts and those of our future collaborators.

There may be delays in getting our drugs on hospitals’ local formularies or limitations on coverages which can occur in the early stages of commercialization for newly approved drugs. If any of our product candidates are approved but fail to achieve market acceptance among hospitals, physicians, patients or health care payors, we will not be able to generate significant revenues, which would have a material adverse effect on our business, prospects, financial condition and results of operations.

Even if we are able to commercialize our product candidates, the products may not receive coverage and adequate reimbursement from third-party payors, which could harm our business.

Our ability to commercialize any products successfully will depend, in part, on the extent to which coverage and adequate reimbursement for these products and related treatments will be available from government health administration authorities, private health insurers and other organizations. Government authorities and third-party payors, such as private health insurers and health maintenance organizations, determine which medications they will cover and establish reimbursement levels. A primary trend in the U.S. healthcare industry and elsewhere is cost containment. Government authorities and third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications. Increasingly, third-party payors are requiring that drug companies provide them with predetermined discounts from list prices and are challenging the prices charged for medical products. Third-party payors also may seek additional clinical evidence, beyond the data required to obtain marketing approval, demonstrating clinical benefits and value in specific patient populations before covering our products for those patients. In particular, even if EG-1962 or any other product candidates we develop are established as having superior efficacy compared to the current standard of care, payors may not adequately reimburse for such product candidates. We cannot be sure that coverage and adequate reimbursement will be available for any product that we commercialize and, if reimbursement is available, what the level of reimbursement will be. Coverage and reimbursement may impact the demand for, or the price of, any product candidate for which we obtain marketing approval. If reimbursement is not available or is available only at limited levels, we may not be able to successfully commercialize any product candidate for which we obtain marketing approval.

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

In the European Union, even if the product is approved through the Centralized Procedure, national governments may not approve pricing and reimbursement for the product on grounds relating to cost-effectiveness under the respective national health service systems. This will have an effect of limiting or otherwise restricting access to the products by patients in Member States of the European Union/European Economic Area.

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

In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval of

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our product candidates, restrict or regulate post-approval activities or affect our ability to profitably sell any product candidates for which we obtain marketing approval.

In the United States, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, or the Medicare Modernization Act, established the Medicare Part D program and provided authority for limiting the number of drugs that will be covered in any therapeutic class thereunder. The Medicare Modernization Act, including its cost reduction initiatives, could decrease the coverage and reimbursement rate that we receive for any of our approved products. Furthermore, private payors often follow Medicare coverage policies and payment limitations in setting their own reimbursement rates. Therefore, any reduction in reimbursement that results from the Medicare Modernization Act may result in a similar reduction in payments from private payors.

The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act, or collectively, the Affordable Care Act, among other things, imposes a significant annual fee on companies that manufacture or import branded prescription drug products. It also contains substantial new provisions intended to broaden access to health insurance, reduce or constrain the growth of health care spending, enhance remedies against healthcare fraud and abuse, add new transparency requirements for the healthcare and health insurance industries, impose new taxes and fees on pharmaceutical and medical device manufacturers, and impose additional health policy reforms, any of which could negatively impact our business. A significant number of provisions are not yet, or have only recently become, effective, but the Affordable Care Act is likely to continue the downward pressure on pharmaceutical pricing, especially under the Medicare program, and may also increase our regulatory burdens and operating costs.

We expect that the Affordable Care Act, as well as other healthcare reform measures that have been and may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that we receive for any approved product, and could seriously harm our future revenues. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may compromise our ability to generate revenue, attain profitability or commercialize our products.

Similar austerity measures to contain healthcare costs under national rules may be applied in various EU Member States to limit or restrict market access to the product.

Laws and regulations governing international operations may preclude us from developing, manufacturing and selling certain product candidates outside of the United States and require us to develop and implement costly compliance programs.

As we expand our operations outside of the United States, we must comply with applicable local laws and regulations relating to our business operations in each jurisdiction in which we plan to operate. The creation and implementation of international business practices compliance programs is costly and such programs are difficult to enforce, particularly where reliance on third parties is required.

The Foreign Corrupt Practices Act, or FCPA, prohibits any U.S. individual or business from paying, offering, or authorizing payment or offering of anything of value, directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or decision of the foreign entity in order to assist the individual or business in obtaining or retaining business. The FCPA also obligates companies whose securities are listed in the United States to comply with 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. The anti-bribery provisions of the FCPA are enforced primarily by the DOJ. The SEC is involved with enforcement of the books and records provisions of the FCPA.

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 studies 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

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United States, it will require us to dedicate additional resources to compliance 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 penalties, including suspension or debarment from government contracting. Violation of the FCPA can result in significant civil and criminal penalties. Indictment alone under the FCPA can lead to suspension of the right to do business with the U.S. government until the pending claims are resolved. Conviction of a violation of the FCPA can result in long-term disqualification as a government contractor. The termination of a government contract or relationship as a result of our failure to satisfy any of our obligations under laws governing international business practices would have a negative impact on our operations and harm our reputation and ability to procure government contracts. The SEC also may suspend or bar issuers from trading securities on U.S. exchanges for violations of the FCPA’s accounting provisions.

Similar consequences may accrue from business practices that violate other applicable anti-bribery/anti-corruption statutes in other jurisdictions, such as the United Kingdom Bribery Act.

We intend to market EG-1962 and our other product candidates outside of the United States, and if we do, we will be subject to the risks of doing business outside of the United States.

Because we intend to market EG-1962 and other product candidates, if approved, outside of the United States, our business is subject to risks associated with doing business outside of the United States. Accordingly, our business and financial results in the future could be adversely affected due to a variety of factors, including:

failure to develop an international sales, marketing and distribution system for our products;
changes in a specific country’s or region’s political and cultural climate or economic condition;
unexpected changes in foreign laws and regulatory requirements;
difficulty of effective enforcement of contractual provisions in local jurisdictions;
inadequate intellectual property protection in foreign countries;
inadequate data protection against unfair commercial use;
trade-protection measures, import or export licensing requirements such as Export Administration Regulations promulgated by the United States Department of Commerce and fines, penalties or suspension or revocation of export privileges;
the effects of applicable foreign tax structures and potentially adverse tax consequences; and
significant adverse changes in foreign currency exchange rates.

Risks Related to Our Dependence on Third Parties

We rely completely on third-party suppliers to manufacture our clinical drug supplies for our product candidates, and we intend to rely on third parties to produce non-clinical, clinical and commercial supplies of any future product candidate.

We do not currently have, nor do we plan to acquire, the infrastructure or capability to internally manufacture our clinical drug supply of our product candidates, or any future product candidates, for use in the conduct of our non-clinical studies and clinical trials, and we lack the internal resources and the capability to manufacture any product candidates on a clinical or commercial scale. For example, the active pharmaceutical ingredient for EG-1962 for our Phase 1/2 NEWTON clinical trial was manufactured at a third-party contract manufacturer’s site. Additionally, the diluent of hyaluronic acid was manufactured at a third-party contract manufacturer’s site and the polymer microparticle for EG-1962 as formulated for our Phase 1/2 NEWTON clinical trial was manufactured at another third-party contract manufacturer’s site. While we are currently working with third-party contract manufacturers for the Phase 3 production of EG-1962, in the event that production is delayed, we may not be able to commence our Phase 3 study in a timely manner.

Reliance on third-party manufacturers entails risks to which we would not be subject if we manufactured product candidates or products ourselves. Although we are primarily responsible for regulatory compliance with

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respect to the manufacture of our products, we rely on the third party for regulatory compliance and quality assurance activities. The possibility of breach of the manufacturing agreement by the third party because of factors beyond our control (including a failure to synthesize and manufacture our product candidates or any products we may eventually commercialize in accordance with our specifications), and the possibility of termination or nonrenewal of the agreement by the third party, based on its own business priorities, at a time that could be costly or damaging to us. In addition, although we are not in control of the day to day activities of our third-party manufacturers, we are nonetheless responsible for ensuring that our product candidates and any products that we may eventually commercialize are manufactured according to cGMP and similar foreign standards. Our current manufacturer of nimodipine microparticles has not been inspected by the FDA yet. Any failure by our third-party manufacturers to comply with cGMP or failure to scale up manufacturing processes, including any failure to deliver sufficient quantities of product candidates in a timely manner, could lead to a delay in, or failure to obtain, regulatory approval of any of our product candidates. In addition, such failure could be the basis for the FDA to issue a warning or untitled letter, withdraw approvals for product candidates previously granted to us, or take other regulatory or legal action, including recall or seizure, total or partial suspension of production, suspension of ongoing clinical trials, refusal to approve pending applications or supplemental applications, detention of product, refusal to permit the import or export of products, injunction, or imposing civil and criminal penalties.

Because of the complex nature of our compounds, our current manufacturers and any future manufacturers may not be able to manufacture our compounds at a cost or in quantities or in a timely manner necessary to make commercially successful products. If we successfully commercialize any of our drugs, we may be required to establish large-scale commercial manufacturing capabilities. In addition, as our drug development pipeline increases and matures, we will have a greater need for clinical trial and commercial manufacturing capacity. We have no experience manufacturing pharmaceutical products on a commercial scale and some of these manufacturers will need to increase their scale of production to meet our projected needs for commercial manufacturing, the satisfaction of which may not be met on a timely basis.

We rely on third-party CROs to conduct our preclinical studies and clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize our product candidates and our business could be substantially harmed.

We have relied upon and plan to continue to rely upon third-party CROs to monitor and manage data for our ongoing preclinical and clinical programs. We rely on these parties to assist us in the execution of our preclinical and clinical trials, and control only certain aspects of their activities. Nevertheless, we are responsible for ensuring that each of our studies is conducted in accordance with the applicable protocol and legal, regulatory and scientific standards, and our reliance on the CROs does not relieve us of our regulatory responsibilities. We also rely on third parties to conduct our preclinical studies in accordance with Good Laboratory Practice, or GLP, requirements and the Laboratory Animal Welfare Act of 1966 requirements (and the equivalent requirements outside the United States). We and our CROs are required to comply with regulations and current Good Clinical Practices, or GCPs, which are enforced by the FDA, and EU law requirements governing GCPs to be applied by the Competent Authorities of the Member States of the European Union and European Economic Area, or EEA, and comparable foreign regulatory authorities to ensure that the health, safety and rights of patients are protected in clinical development and clinical trials, and that trial data integrity as well as protection of personal data of the trial subjects is assured. Regulatory authorities ensure compliance with these GCPs through periodic inspections of trial sponsors, principal investigators and trial sites. If we or any of our CROs fail to comply with applicable GCPs, the clinical data generated in our clinical trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. We cannot assure you that upon inspection by a given regulatory authority, such regulatory authority will determine that any of our clinical trials comply with GCP requirements. In addition, our clinical trials must be conducted with products produced under cGMP requirements. Failure to comply with these regulations may require us to repeat preclinical and clinical trials, which would delay the regulatory approval process.

Our CROs are not our employees, and except for remedies available to us under our agreements with such CROs, we cannot control whether or not they devote sufficient time and resources to our ongoing clinical and preclinical programs. If CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines or if the quality or accuracy of the clinical data they obtain is compromised due to the failure

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to adhere to our clinical protocols, regulatory requirements or for other reasons, our clinical trials may be extended, delayed or terminated and we may not be able to obtain regulatory approval for or successfully commercialize our product candidates. As a result, our results of operations and the commercial prospects for our product candidates would be harmed, our costs could increase and our ability to generate revenues could be delayed.

Because we have relied on third parties, our internal capacity to perform these functions is limited. Outsourcing these functions involves risk that third parties may not perform to our standards, may not produce results in a timely manner or may fail to perform at all. In addition, the use of third-party service providers requires us to disclose our proprietary information to these parties, which could increase the risk that this information will be misappropriated. We currently have a small number of employees, which limits the internal resources we have available to identify and monitor our third-party providers. To the extent we are unable to identify and successfully manage the performance of third-party service providers in the future, our business may be adversely affected. Though we carefully manage our relationships with our CROs, there can be no assurance that we will not encounter similar challenges or delays in the future or that these delays or challenges will not have a material adverse impact on our business, financial condition and prospects.

If we lose our relationships with CROs, our drug development efforts could be delayed.

We rely on third-party vendors and CROs for preclinical studies and clinical trials related to our drug development efforts. Switching or adding additional CROs involves additional cost and requires management time and focus. Our CROs have the right to terminate their agreements with us in the event of an uncured material breach. In addition, some of our CROs have an ability to terminate their respective agreements with us if it can be reasonably demonstrated that the safety of the patients participating in our clinical trials warrants such termination. Identifying, qualifying and managing performance of third-party service providers can be difficult, time consuming and cause delays in our development programs. In addition, there is a natural transition period when a new CRO commences work, and the new CRO may not provide the same type or level of services as the original provider. If any of our relationships with our third-party CROs terminate, we may not be able to enter into timely arrangements with alternative CROs or to do so on commercially reasonable terms.

Disruptions in our supply chain could delay the commercial launch of our product candidates.

Any significant disruption in our supplier relationships could harm our business. We currently rely on a single source supplier for the active pharmaceutical ingredient, or API, for nimodipine, as well as a single supplier for the polymer used to make EG-1962 microparticles and the diluent of hyaluronic acid. If either of these single source suppliers suffers a major natural or man-made disaster at its manufacturing facility, we would not be able to manufacture EG-1962 on a commercial scale until a qualified alternative supplier is identified. Although alternative sources of supply exist, the number of third party suppliers with the necessary manufacturing and regulatory expertise and facilities is limited, and it could be expensive and take a significant amount of time to arrange for alternative suppliers. Any significant delay in the supply of a product candidate or its key materials for an ongoing clinical trial could considerably delay completion of our clinical studies, product testing and potential regulatory approval of our product candidates. If our manufacturers or we are unable to purchase these key materials after regulatory approval has been obtained for our product candidates, the commercial launch of our product candidates would be delayed or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of our product candidates.

Our relationships with customers and third-party payors will be subject to applicable anti-kickback, fraud and abuse and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings.

Healthcare providers, physicians and third-party payors play a primary role in the recommendation and prescription of any product candidates for which we obtain marketing approval. Our future arrangements with third-party payors and customers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell and distribute our products for which we obtain marketing approval. As a pharmaceutical company, even though we do not and will not control referrals of healthcare services or bill directly to Medicare, Medicaid or other third-party payors, certain federal and state healthcare laws and regulations pertaining to fraud and abuse

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and patients’ rights are and will be applicable to our business. Restrictions under applicable federal and state healthcare laws and regulations that may affect our ability to operate include, but are not limited to, the following:

the federal healthcare Anti-Kickback Statute constrains our marketing practices, educational programs, pricing policies, and relationships with healthcare providers or other entities, by prohibiting, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under a federal healthcare program such as Medicare and Medicaid;
federal civil and criminal false claims laws and civil monetary penalty laws impose criminal and civil penalties, including through civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, including the Medicare and Medicaid programs, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government;
the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program and also created federal criminal laws that prohibit knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statements in connection with the delivery of or payment for healthcare benefits, items or services;
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, also imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information;
the federal physician sunshine requirements under the Affordable Care Act requires manufacturers of drugs, devices, biologics and medical supplies to report annually to HHS information related to payments and other transfers of value to physicians, certain other healthcare providers, and teaching hospitals, and ownership and investment interests held by physicians and certain other healthcare providers and their immediate family members and applicable group purchasing organizations;
analogous state and foreign laws and regulations, such as measures relating to inducements designed to promote prescription, supply, sale or intake of drugs, including state anti-kickback and false claims laws, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers. Some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government and may require drug manufacturers to report information related to payments and other transfers of value to physicians and certain other healthcare providers or marketing expenditures. Additionally, state and foreign laws govern the privacy or personal data and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.

Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our 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 from government funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations. If any physicians or other healthcare providers or entities with whom we expect to do business are found to not be in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.

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Our employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could have a material adverse effect on our business.

We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with FDA regulations or similar regulations of comparable foreign regulatory authorities, to provide accurate information to the FDA or comparable foreign regulatory authorities, to comply with manufacturing standards we have established, to comply with federal and state healthcare fraud and abuse laws and regulations and similar laws and regulations established and enforced by comparable foreign regulatory authorities, to report financial information or data accurately or to disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. We will adopt, implement and enforce a Code of Business Conduct and Ethics, which will be effective as of the consummation of this offering, but it is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity, such as employee training on enforcement of the Code of Business Conduct and Ethics, 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 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 significant fines or other sanctions.

Risks Related to Our Business and Strategy

Our future success depends on our ability to retain our executive officers and to attract, retain and motivate qualified personnel.

Because of the specialized scientific and managerial nature of our business, we rely heavily on our ability to attract and retain qualified scientific, technical and managerial personnel. We are highly dependent upon current management, especially two of our founders, Brian A. Leuthner and Dr. R. Loch Macdonald, who are the driving force behind the operation and successful implementation of our business strategy. Although we have employment agreements with Mr. Leuthner and Dr. Macdonald and other key employees, these agreements are at-will and do not prevent them from terminating their employment with us at any time and joining one of our competitors. We do not maintain “key person” insurance for any of our executives or other employees. We intend to increase our technical and management staff as needs arise and supporting resources are available, but the loss of one or more of our senior executive officers, including their death, could be detrimental to us if we cannot recruit suitable replacements in a timely manner. The competition for qualified personnel in the pharmaceutical field is intense and as a result, we may be unable to continue to attract and retain qualified personnel necessary for the development of our business or to recruit suitable replacement personnel.

We will need to grow the size of our organization, and we may experience difficulties in managing this growth.

As of August 14, 2015, we had 18 full-time employees. As we become a public company and our development and commercialization plans and strategies develop, or as a result of any future acquisitions, we will need additional managerial, operational, sales, marketing, financial and other resources. Our management, personnel and systems currently in place may not be adequate to support this future growth. Future growth would impose significant added responsibilities on members of management, including:

managing our clinical trials effectively;
identifying, recruiting, maintaining, motivating and integrating additional employees;
managing our internal development efforts effectively while complying with our contractual obligations to licensors, contractors and other third parties;
improving our managerial, development, operational and finance systems; and
expanding our facilities.

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As our operations expand, we will need to manage additional relationships with various strategic partners, suppliers and other third parties. Our future financial performance and our ability to commercialize our product candidates and to compete effectively will depend, in part, on our ability to manage any future growth effectively. To that end, we must be able to manage our development efforts and clinical trials effectively and hire, train and integrate additional management, administrative and sales and marketing personnel. We may not be able to accomplish these tasks, and our failure to accomplish any of them could prevent us from successfully growing our company.

The pharmaceutical industry is highly competitive and is subject to rapid and significant technological change, which could render our technologies and products obsolete or uncompetitive.

The pharmaceutical industry is highly competitive and is subject to rapid and significant technological change that could render certain of our products obsolete or uncompetitive. There is no assurance that our product candidates will be the best, the safest, the first to market, or the most economical to make or use. The introduction of competitive therapies as alternatives to our product candidates could dramatically reduce the value of those development projects or chances of successfully commercializing those product candidates, which could have a material adverse effect on our long-term financial success. Additionally, other technologies may become available that can monitor intracranial pressure without the need for an EVD, which would require physicians to put in place an EVD solely to administer EG-1962 and thereby substantially increasing the additional level of invasiveness needed to deliver EG-1962 through our initial route of administration.

We will compete with companies in North America and internationally, including major pharmaceutical and chemical companies, specialized CROs, research and development firms, universities and other research institutions. In the United States, oral nimodipine is manufactured by generic companies, and there is no brand name drug. In May 2013, the FDA approved Nymalize, an oral nimodipine solution, for the treatment of aSAH, granting it seven years of marketing exclusivity due to its orphan drug designation. In Japan and China, there are two drugs that are used to treat aSAH patients, fasudil and sodium ozagrel. Many of our competitors have greater financial resources and selling and marketing capabilities, greater experience in clinical testing and human clinical trials of pharmaceutical products and greater experience in obtaining FDA and other regulatory approvals than we do. In addition, some of our competitors may have lower development and manufacturing costs.

Our business and operations would suffer in the event of system failures.

Despite the implementation of security measures, the servers of our cloud-based computing providers and other systems, and those of our CROs and other third parties on which we rely, are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our drug development programs. For example, the loss of clinical trial data from completed or ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach was to result in a loss of or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and the further development of our product candidates could be delayed.

Any future collaborators may compete with us or have interests which conflict with ours. This may restrict our research and development efforts and limit the areas of research in which we intend to expand.

Large pharmaceutical companies with whom we may seek to collaborate may have internal programs or enter into collaborations with our competitors for products addressing the same medical conditions targeted by our technologies. Thus, such collaborators may pursue alternative technologies or product candidates in order to develop treatments for the diseases or disorders targeted by our collaborative arrangements. Such collaborators may pursue these alternatives either on their own or in collaboration with others, including our competitors. Depending on how other product candidates advance, a corporate partner may slow down or abandon its work on our product candidates or terminate its collaborative arrangement with us in order to focus on these other prospects.

If any conflicts arise, our future collaborators may act in their own interests, which may be adverse to ours. In addition, in our future collaborations, we may be required to agree not to conduct any research that is competitive with the research conducted under our future collaborations. Our future collaborations may have the

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effect of limiting the areas of research that we may pursue. Our collaborators may be able to develop products in related fields that are competitive with the products or potential products that are the subject of these collaborations.

We may engage in future acquisitions that could disrupt our business, cause dilution to our stockholders and harm our financial condition and operating results.

While we currently have no specific plans to acquire any other businesses, we may, in the future, make acquisitions of, or investments in, companies that we believe have products or capabilities that are a strategic or commercial fit with our current product candidates and business or otherwise offer opportunities for our company. In connection with these acquisitions or investments, we may:

issue stock that would dilute our stockholders’ percentage of ownership;
expend cash;
incur debt and assume liabilities; and
incur amortization expenses related to intangible assets or incur large and immediate write-offs.

We also may be unable to find suitable acquisition candidates and we may not be able to complete acquisitions on favorable terms, if at all. If we do complete an acquisition, we cannot assure you that it will ultimately strengthen our competitive position or that it will not be viewed negatively by customers, financial markets or investors. Further, future acquisitions could also pose numerous additional risks to our operations, including:

problems integrating the purchased business, products or technologies;
increases to our expenses;
the failure to have discovered undisclosed liabilities of the acquired asset or company;
diversion of management’s attention from their day-to-day responsibilities;
harm to our operating results or financial condition;
entrance into markets in which we have limited or no prior experience; and
potential loss of key employees, particularly those of the acquired entity.

We may not be able to complete one or more acquisitions or effectively integrate the operations, products or personnel gained through any such acquisition without a material adverse effect on our business, financial condition and results of operations.

Business disruptions could seriously harm our future revenues and financial condition and increase our costs and expenses.

Our operations could be subject to earthquakes, power shortages, telecommunications failures, water shortages, floods, hurricanes, typhoons, fires, extreme weather conditions, medical epidemics and other natural or manmade disasters or business interruptions, for which we are predominantly self-insured. The occurrence of any of these business disruptions could seriously harm our operations and financial condition and increase our costs and expenses. We rely on third-party manufacturers to produce our product candidates and supply the applicable therapeutic for our product candidates. Our ability to obtain clinical supplies of product candidates could be disrupted, if the operations of these suppliers are affected by a man-made or natural disaster or other business interruption.

Our ability to use our net operating losses to offset future taxable income may be subject to certain limitations.

As of December 31, 2014, we had federal and state net operating loss carryforwards, or NOLs, of $23.9 million and $11.9 million, respectively, due to prior period losses. In general, under Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its NOLs to offset future taxable income. We believe that one or more ownership changes may have already occurred. Moreover, it is possible that this offering may cause an

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additional ownership change to occur. In addition, future changes in our stock ownership, some of which are outside of our control, could result in an ownership change under Section 382 of the Code. Although we have not completed an analysis under Section 382 of the Code, it is likely that the utilization of the NOLs will be substantially limited. There is also a risk that due to regulatory changes, such as suspensions on the use of NOLs, or other unforeseen reasons, our existing NOLs could expire or otherwise be unavailable to offset future income tax liabilities. For these reasons, we may not be able to utilize a material portion of the NOLs reflected on our balance sheet, even if we attain profitability.

Risks Related to Our Intellectual Property

If we are unable to protect our intellectual property rights, our competitive position could be harmed.

We depend on our ability to protect our proprietary technology. We rely on trade secret, patent, copyright and trademark laws, and confidentiality, licensing and other agreements with employees and third parties, all of which offer only limited protection. Our success depends in large part on our ability to obtain and maintain patent protection in the United States and other countries with respect to our proprietary technology and products. Where we have the right to do so under our license agreements, we seek to protect our proprietary position by filing patent applications in the United States and abroad related to our novel technologies and products that are important to our business.

With respect to EG-1962, we co-own together with Evonik Industries, or Evonik, an issued U.S. patent with claims directed to a process for producing microparticles encapsulating a particular polymorphic form of nimodipine, a semisolid delivery system containing microparticles comprising the particular polymorphic form of nimodipine, and to a method of treating a cerebral artery in a subarachnoid space at risk of interruption due to a brain injury using such a delivery system. The patent claims cover the microparticulate formulation comprising a particular polymorphic form of nimodipine that has been used to date. This patent is scheduled to expire in 2033. We also have one issued U.S. patent covering a method of treating cerebral vasospasm in humans by administering a therapeutic composition via surgical injection into the subarachnoid space near the cerebral artery at risk for cerebral vasospasm. This method of treatment patent, assuming all maintenance fees are paid, is scheduled to expire in 2029. With respect to EG-1964 and our other development efforts, we have one issued U.S. patent covering a method of treating hematoma expansion or recurrent bleeding resulting from a hemorrhagic condition, such as cSDH, by administering an anti-fibrinolytic therapeutic agent, such as aprotinin. This patent, assuming all maintenance fees are paid, is scheduled to expire in 2028. However, the patent positions of biotechnology and pharmaceutical companies generally are highly uncertain, involve complex legal and factual questions and have in recent years been the subject of much litigation. As a result, the issuance, scope, validity, enforceability and commercial value of our patents, including those patent rights licensed to us by third parties, are highly uncertain.

The steps we have taken to police and protect our proprietary rights may not be adequate to preclude misappropriation of our proprietary information or infringement of our intellectual property rights, both inside and outside the United States. The rights already granted under any of our currently issued patents and those that may be granted under future issued patents may not provide us with the proprietary protection or competitive advantages we are seeking. If we are unable to obtain and maintain patent protection for our technology and products, or if the scope of the patent protection obtained is not sufficient, our competitors could develop and commercialize technology and products similar or superior to ours, and our ability to successfully commercialize our technology and products may be adversely affected.

With respect to patent rights, we do not know whether any of the pending patent applications for any of our product candidates will result in the issuance of patents that protect our technology or products, or which will effectively prevent others from commercializing competitive technologies and products. Our pending applications cannot be enforced against third parties practicing the technology claimed in such applications unless and until a patent issues from such applications. Further, the examination process may require us, or for in-licensed technology, our licensors to narrow the claims, which may limit the scope of patent protection that may be obtained. Although we have a number of issued patents, the issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and issued patents that we own or have licensed from third parties may be challenged in the courts or patent offices in the United States and abroad. Such challenges may result in the loss of patent protection, the narrowing of claims in such patents, or the invalidity or unenforceability of such patents, 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 for our technology and products.

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Protecting against the unauthorized use of our patented technology, trademarks and other intellectual property rights is expensive, difficult and, may in some cases not be possible. In some cases, it may be difficult or impossible to detect third party infringement or misappropriation of our intellectual property rights, even in relation to issued patent claims, and proving any such infringement may be even more difficult.

We could be required to incur significant expenses to obtain our intellectual property rights, and we cannot ensure that we will obtain meaningful patent protection for our products.

The patent prosecution process is expensive and time-consuming, and we, Evonik or any future licensors may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. In addition, it is also possible that we or our licensors will fail to identify patentable aspects of further inventions made in the course of our development and commercialization activities before they are publicly disclosed, making it too late to obtain patent protection on them. Further, 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 where these are available in any countries where we are prosecuting patents. This includes in the United States under the Drug Price Competition and Patent Term Restoration Act of 1984, which permits a patent term extension of up to five years beyond the expiration date of a patent based only on its earliest filing date plus any patent term adjustments due to patent office delays during prosecution that covers an approved product where the permission for the commercial marketing or use of the product is the first permitted commercial marketing or use, and as long as the remaining term of the patent does not exceed fourteen years. However the applicable authorities, including the FDA 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 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. The laws of foreign countries may not protect our rights to the same extent as the laws of the United States, and these foreign laws may also be subject to change. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing or in some cases not at all. Therefore we cannot be certain that we or our licensors were the first to make the inventions claimed in our owned or licensed patents or pending patent applications, or that we or our licensors were the first to file for patent protection of such inventions.

In March 2013, the United States transitioned to a ‘first to file’ system in which the first inventor to file a patent application that meets the requirements for patent eligibility is entitled to the patent. Third parties are allowed to submit prior art prior to the issuance of a patent by the U.S. Patent and Trademark Office, or U.S. PTO, and may become involved in post-grant proceedings, for example, ex parte reexamination and inter partes review proceedings on patents granted from applications filed before or after March 16, 2013, post-grant review or derivation proceedings for patents granted from applications filed on or after March 16, 2013, or interference proceedings for applications filed before March 16, 2013, challenging our patent rights or the patent rights of others. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our patent rights, which could adversely affect our competitive position with respect to third parties.

Obtaining and maintaining our patent protection depends on compliance with various procedural, document submissions, 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 on any issued patent are due to be paid to the U.S. PTO, and foreign patent agencies in several stages over the lifetime of the patent. The U.S. PTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Non-compliance events that could result in abandonment or lapse of a patent or patent application include, but are not limited to, failure to respond to official actions within prescribed

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time limits, non-payment of fees and failure to properly legalize and submit formal documents. If we or our licensors fail to maintain the patents and patent applications covering our product candidates, our competitors might be able to enter the market, which would have a material adverse effect on our business.

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

Competitors may infringe our patents or misappropriate or otherwise violate our intellectual property rights. To counter infringement or unauthorized use, litigation may be necessary in the future to enforce or defend our intellectual property rights, to protect our trade secrets or to determine the validity and scope of our own intellectual property rights or the proprietary rights of others. This can be expensive and time consuming. Many of our current and potential competitors have the ability to dedicate substantially greater resources to defend their intellectual property rights than we can. Accordingly, despite our efforts, we may not be able to prevent third parties from infringing upon or misappropriating our intellectual property. Litigation could result in substantial costs and diversion of management resources, which could harm our business and financial results. In addition, in an infringement proceeding, a court may decide that a patent owned by, or licensed to, us is invalid or unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of our patents at risk of being invalidated, held unenforceable or interpreted narrowly. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. If any of these occur, our business could be materially and adversely affected.

From time to time we may need to rely on licenses to proprietary technologies, which may be difficult or expensive to obtain or we may lose certain licenses which may be difficult to replace.

We may need to obtain licenses to patents and other proprietary rights held by third parties to develop, manufacture and market our product candidates. For example, EG-1962 requires a microparticulate delivery system to facilitate direct delivery to the brain for which we have licensed certain patent rights and know-how from Evonik. It is possible that the license could be terminated. In that case, we may lose our ability to develop, manufacture or market certain products which rely on Evonik patents and know-how, and may have to obtain a new license from Evonik or some other third party, which licenses may not be available on commercially reasonable terms or at all. If we are unable to timely obtain these licenses on commercially reasonable terms and maintain these licenses, our ability to commercially market our product candidates may be inhibited or prevented, which could have a material adverse effect on our business, results of operations, financial condition and cash flows.

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

Our commercial success depends upon our ability to develop, manufacture, market and sell our product candidates, and to use our proprietary technologies without infringing the proprietary rights of third parties. We may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to our products and technology, including interference and various post grant proceedings before the U.S. PTO, and opposition proceedings at other patent offices. Third parties may assert infringement claims against us based on existing patents or patents that may be granted in the future. We are aware of a third party U.S. patent claiming a method for universally distributing a therapeutic agent to the brain as well as compositions for administration into the cerebrospinal fluid of a subject with a stroke or a traumatic brain injury that expires in 2018. In the event a third party were to assert an infringement claim against us and we were ultimately found to infringe the third party’s intellectual property rights, we could be required to obtain a license from such third party to continue developing and commercializing our products and technology. However, we may not be able to obtain an appropriate license on commercially reasonable terms or at all. Even if we are able to obtain a license, it may be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. We could be forced, including by court order, to cease commercializing the infringing technology or product. In addition, in any such proceeding or litigation, we could be found liable for monetary damages. A finding of infringement could prevent us from commercializing our product candidates or

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force us to cease some of our business operations, which could materially harm our business. Any claims by third parties that we have misappropriated their confidential information or trade secrets could have a similar negative impact on our business.

Our trade secrets are difficult to protect.

Confidentiality agreements with employees and others may not adequately prevent disclosure of our trade secrets and other proprietary information and may not adequately protect our intellectual property.

Our success depends upon the skills, knowledge and experience of our scientific and technical personnel, our consultants and advisors as well as our partners, licensors and contractors. Because we operate in a highly competitive technical field of drug discovery, we rely in part on trade secrets to protect our proprietary technology and processes. However, trade secrets are difficult to protect. We enter into confidentiality and invention assignment agreements with our employees, corporate partners, consultants, sponsored researchers and other advisors. These agreements generally require that the receiving party keep confidential and not disclose to third parties all confidential information developed by the receiving party or made known to the receiving party by us during the course of the receiving party’s relationship with us.

These confidentiality and assignment agreements may be breached and may not effectively assign intellectual property rights to us. Our trade secrets also could be independently discovered by competitors, in which case we would not be able to prevent use of such trade secrets by our competitors. The enforcement of a claim alleging that a party illegally obtained and was using our trade secrets could be difficult, expensive and time consuming and the outcome would be unpredictable. In addition, courts outside the United States may be less willing to protect trade secrets. The failure to obtain or maintain meaningful trade secret protection could adversely affect our competitive position.

We may be subject to claims that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.

Many of our employees, including our senior management, were previously employed at other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Some of these employees, including each member of our senior management, executed proprietary rights, non-disclosure and non-competition 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 employee’s former employer. We are not aware of any threatened or pending claims related to these matters or concerning the agreements with our senior management, but in the future 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. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management.

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

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

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

Filing, prosecuting and defending patents on all of our product candidates throughout the world would be prohibitively expensive. Competitors may use our technologies in jurisdictions where we have not obtained

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patent protection to develop their own products and further, may export otherwise infringing products to territories where we have patent protection, but where enforcement is not as strong as that in the United States. These products may compete with our products in jurisdictions where we do not have any issued patents and our patent claims or other intellectual property rights may not be effective or sufficient to prevent them from so competing.

Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection, particularly those relating to biopharmaceuticals, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial cost and divert our efforts and attention from other aspects of our business.

Risks Related to this Offering and Ownership of Our Common Stock

We do not know whether an active, liquid and orderly trading market will develop for our common stock or what the market price of our common stock will be and as a result it may be difficult for you to sell your shares of our common stock.

Prior to this offering there has been no market for shares of our common stock. An active trading market for our shares may never develop or be sustained following this offering. The initial public offering price for our common stock was determined through negotiations with the underwriters, and the negotiated price may not be indicative of the market price of our common stock after this offering. The market value of our common stock may decrease from the initial public offering price. As a result of these and other factors, you may be unable to resell your shares of our common stock at or above the initial public offering price. The lack of an active market may impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable. The lack of an active market may also reduce the fair market value of your shares. Further, an inactive market may also impair our ability to raise capital by selling shares of our common stock and may impair our ability to enter into strategic partnerships or acquire companies or products by using our shares of common stock as consideration. The market price of our stock may be volatile, and you could lose all or part of your investment.

The trading price of our common stock following this offering is likely to be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control. In addition to the factors discussed in this “Risk Factors” section and elsewhere in this prospectus, these factors include:

announcement of the results of our open label NEWTON trial for EG-1962, our Phase 3 program for EG-1962 or any other future clinical trials of our product candidates, including any delays in enrollment rates or timing of these trials;
regulatory actions with respect to our products or our competitors’ products;
the recruitment or departure of key personnel;
announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures, collaborations or capital commitments;
results of clinical trials of our competitors;
the success of competitive products or technologies;
actual or anticipated changes in our growth rate relative to our competitors;
regulatory or legal developments in the United States and other countries;
developments or disputes concerning patent applications, issued patents or other proprietary rights;
the level of expenses related to any of our product candidates or clinical development programs;
actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities analysts;
variations in our financial results or those of companies that are perceived to be similar to us;

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fluctuations in the valuation of companies perceived by investors to be comparable to us;
share price and volume fluctuations attributable to inconsistent trading volume levels of our shares;
announcement or expectation of additional financing efforts;
sales of our common stock by us, our insiders or our other stockholders;
changes in the structure of healthcare payment systems;
market conditions in the pharmaceutical and biotechnology sectors; and
general economic, industry and market conditions.

In addition, the stock market in general, and pharmaceutical and biotechnology companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors may negatively affect the market price of our common stock, regardless of our actual operating performance. The realization of any of the above risks or any of a broad range of other risks, including those described in these “Risk Factors,” could have a dramatic and material adverse impact on the market price of our common stock.

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

The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. Securities and industry analysts do not currently, and may never, publish research on our company. If no securities or industry analysts commence coverage of our company, the trading price for our stock would likely be negatively impacted. In the event securities or industry analysts initiate coverage, if one or more of the analysts who cover us downgrade our stock, publish inaccurate or unfavorable research about our business, or cease publishing about us, our stock price would likely decline. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, demand for our stock could decrease, which might cause our stock price and trading volume to decline.

Sales of a substantial number of shares of our common stock in the public market could cause our stock price to fall.

Sales of a substantial number of shares of our common stock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock. After this offering, we will have outstanding        shares of common stock based on the number of shares outstanding as of          , 2015, assuming: (i) no exercise of the underwriters’ over-allotment option; (ii) the conversion of all outstanding shares of our preferred stock into 23,938,761 shares of common stock immediately prior to the consummation of this offering; and (iii) the issuance of           shares of common stock issuable upon declaration of accrued dividends on our Series C, Series C-1 and Series C-2 Preferred Stock immediately prior to the consummation of this offering. This includes the shares that we are selling in this offering, which may be resold in the public market immediately without restriction, unless purchased by our affiliates. Of the remaining shares,        shares of our common stock will be restricted as a result of securities laws or lock-up agreements but will be able to be sold after the offering as described in the “Shares Eligible for Future Sale” section of this prospectus. Moreover, after this offering, holders of an aggregate of         shares of our common stock will have rights, subject to certain 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 intend to register all shares of common stock that we may issue under our equity incentive plans. Once we register these shares, they can be freely sold in the public market upon issuance, subject to volume limitations applicable to affiliates and the lock-up agreements described in the “Underwriting” section of this prospectus.

Future issuances of our common stock or rights to purchase common stock, including pursuant to our equity incentive plans, could result in additional dilution of the percentage ownership of our stockholders and could cause our stock price to fall.

We expect that significant additional capital will be needed in the future to continue our planned operations. To raise capital, we may sell substantial amounts of common stock or securities convertible into or exchangeable for common stock. These future issuances of common stock or common stock-related securities, together with the

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exercise of outstanding options to purchase 5,072,531 shares of common stock as of June 30, 2015 and any additional shares issued in connection with acquisitions, if any, may result in material dilution to our investors. Such sales may also result in material dilution to our existing stockholders, and new investors could gain rights, preferences and privileges senior to those of holders of our common stock, including shares of common stock sold in this offering and our outstanding options.

After completion of this offering, we may be at an increased risk of securities litigation, which is expensive and could divert management attention.

The market price of our common stock may be volatile, and in the past companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could seriously harm our business.

Our principal stockholders and management own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval.

Prior to this offering, our executive officers, directors, holders of 5% or more of our capital stock and their respective affiliates beneficially owned approximately 57.5% of our voting stock and, upon the consummation of this offering, that same group will hold approximately        % of our outstanding voting stock (assuming no exercise of the underwriters’ over-allotment option, no exercise of outstanding options and after giving effect to the purchase of shares in this offering, as discussed below) in each case assuming the conversion of all outstanding shares of our preferred stock into shares of our common stock immediately prior to the consummation of this offering. These stockholders may be able to determine the outcome of all matters requiring stockholder approval. For example, these stockholders may be able to control elections of directors, amendments of our organizational documents, or approval of any merger, sale of assets or other major corporate transaction. This may prevent or discourage unsolicited acquisition proposals or offers for our common stock that you may feel are in your best interest as one of our stockholders. The interests of this group of stockholders may not always coincide with your interests or the interests of other stockholders and they may act in a manner that advances their best interests and not necessarily those of other stockholders, including seeking a premium value for their common stock, and might affect the prevailing market price for our common stock.

Some provisions of our charter documents and Delaware law may have anti-takeover effects that could discourage an acquisition of us by others, even if an acquisition would be beneficial to our stockholders and may prevent attempts by our stockholders to replace or remove our current management..

Provisions in our amended and restated certificate of incorporation, or certificate of incorporation, and amended and restated bylaws, or bylaws, that will become effective in connection with the consummation of this offering, as well as provisions of Delaware law, could make it more difficult for a third-party to acquire us or increase the cost of acquiring us, even if doing so would benefit our stockholders, or remove our current management. These provisions include:

authorizing the issuance of “blank check” preferred stock, the terms of which may be established and shares of which may be issued without stockholder approval;
prohibiting cumulative voting in the election of directors, which would otherwise allow for less than a majority of stockholders to elect director candidates;
prohibiting stockholder action by written consent, thereby requiring all stockholder actions to be taken at a meeting of our stockholders;
eliminating the ability of stockholders to call a special meeting of stockholders;
establishing a staggered board of directors; and
establishing advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon at stockholder meetings.

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, who are responsible for appointing the members of our management. Because we are incorporated in Delaware, we are

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governed by the provisions of Section 203 of the Delaware General Corporation Law, which may discourage, delay or prevent someone from acquiring us or merging with us whether or not it is desired by or beneficial to our stockholders. Under Delaware law, a corporation may not, in general, engage in a business combination with any holder of 15% or more of its capital stock unless the holder has held the stock for three years or, among other things, the board of directors has approved the transaction. Any provision of our amended and restated certificate of incorporation or amended and restated bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect the price that some investors are willing to pay for our common stock.

If you purchase our common stock in this offering, you will incur immediate and substantial dilution in the book value of your shares.

The initial public offering price is substantially higher than the net tangible book value per share of our common stock. Investors purchasing common stock in this offering will pay a price per share that substantially exceeds the book value of our tangible assets after subtracting our liabilities. As a result, investors purchasing common stock in this offering will incur immediate dilution of $       per share, based on an assumed initial public offering price of $       per share, which is the midpoint of the price range set forth on the cover page of this prospectus. As a result of the dilution to investors purchasing shares in this offering, investors may receive significantly less than the purchase price paid in this offering, if anything, in the event of our liquidation. Further, investors purchasing common stock in this offering will contribute approximately       % of the total amount invested by stockholders since our inception, but will own, as a result of such investment, only approximately    % of the shares of common stock outstanding immediately following this offering. For a further description of the dilution that you will experience immediately following this offering, see “Dilution.”

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

We have never declared or paid cash dividends on our capital stock. We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business. In addition, the terms of our outstanding indebtedness preclude, and any future debt 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.

We are an “emerging growth company” and we intend to take advantage of reduced disclosure and governance requirements applicable to emerging growth companies, which could result in our common stock being less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act, and we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, 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. We cannot predict if investors will find our common stock less attractive because we will rely on these exemptions. We may take advantage of these reporting exemptions until we are no longer an emerging growth company, which could be for up to five years. See “Prospectus Summary—Implications of Being an Emerging Growth Company.”

If investors find our common stock less attractive as a result of our reduced reporting requirements, there may be a less active trading market for our common stock and our stock price may be more volatile. We may also be unable to raise additional capital as and when we need it.

If we fail to maintain an effective system of internal control over financial reporting in the future, we may not be able to accurately report our financial condition, results of operations or cash flows, which may adversely affect investor confidence in us and, as a result, the value of our common stock.

The Sarbanes-Oxley Act requires, among other things, that we maintain effective internal controls for financial reporting and disclosure controls and procedures. Commencing with our annual report on Form 10-K for the year ending December 31, 2016, we will be required, under Section 404 of the Sarbanes-Oxley Act, to

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furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting. This assessment will need to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting. A material weakness is a control deficiency, or combination of control deficiencies, in internal control over financial reporting that results in more than a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected on a timely basis. Section 404 of the Sarbanes-Oxley Act also generally requires an attestation from our independent registered public accounting firm on the effectiveness of our internal control over financial reporting. However, for as long as we remain an emerging growth company as defined in the JOBS Act, we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirement.

Our compliance with Section 404 will require that we incur substantial accounting expense and expend significant management efforts. We currently do not have an internal audit group, and we will need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge, and compile the system and process documentation necessary to perform the evaluation needed to comply with Section 404. We may not be able to complete our evaluation, testing and any required remediation in a timely fashion. During the evaluation and testing process, if we identify one or more material weaknesses in our internal control over financial reporting, we will be unable to assert that our internal control over financial reporting is effective. We cannot assure you that there will not be material weaknesses or significant deficiencies in our internal control over financial reporting in the future. Any failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report our financial condition, results of operations or cash flows. If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm determines we have a material weakness or significant deficiency in our internal control over financial reporting once that firm begin its Section 404 reviews, we could lose investor confidence in the accuracy and completeness of our financial reports, the market price of our common stock could decline, and we could be subject to sanctions or investigations by NASDAQ, the Securities and Exchange Commission, or the SEC, or other regulatory authorities. Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to the capital markets.

Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.

Upon completion of this offering, we will become subject to the periodic reporting requirements of the Exchange Act. Our disclosure controls and procedures are designed to reasonably assure that information required to be disclosed by us in reports we file or submit under the Exchange Act is accumulated and communicated to management, recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. We believe that any disclosure controls and procedures or internal controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements or insufficient disclosures due to error or fraud may occur and not be detected.

Prior to this offering, we operated as a private company and therefore, have limited experience operating as a public company and complying with public company obligations. Complying with these requirements has increased our costs and requires additional management resources, and we still may fail to meet all of these obligations.

We will face increased legal, accounting, administrative and other costs and expenses as a public company. Compliance with the Sarbanes-Oxley Act of 2002, the Dodd-Frank Act of 2010, as well as rules of the SEC and NASDAQ, for example, will result in significant initial cost to us as well as ongoing increases in our legal, audit and financial compliance costs, particularly after we are no longer an “emerging growth company.” The Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and financial condition. Our board of directors, management and other personnel need to devote a

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substantial amount of time to these compliance initiatives. Moreover, these rules and regulations make it more difficult and more expensive for us to obtain director and officer liability insurance, and require us to incur substantial costs to maintain the same or similar coverage.

We expect to incur significant expense and devote substantial management effort toward ensuring compliance with Section 404 of the Sarbanes-Oxley Act of 2002 once we lose our status as an “emerging growth company.” We currently do not have an internal audit group, and we will need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge. Implementing any appropriate changes to our internal controls may require specific compliance training for our directors, officers and employees, entail substantial costs to modify our existing accounting systems, and take a significant period of time to complete. Such changes may not, however, be effective in maintaining the adequacy of our internal controls, and any failure to maintain that adequacy, or consequent inability to produce accurate financial statements or other reports on a timely basis, could increase our operating costs and could materially impair our ability to operate our business.

We have broad discretion in the use of the net proceeds from this offering and may not use them effectively or may use them in a way investors do not approve.

Although we currently intend to use the net proceeds from this offering in the manner described in “Use of Proceeds” elsewhere 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. The failure by our management to apply these funds effectively could result in financial losses that could have a material adverse effect on our business, cause the market 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. If we do not invest the net proceeds from this offering in ways that enhance stockholder value, we may fail to achieve expected financial results, which could cause the price of our common stock to decline.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA

This prospectus includes forward-looking statements. We may, in some cases, use terms such as “believes,” “estimates,” “anticipates,” “expects,” “plans,” “intends,” “may,” “could,” “might,” “will,” “should,” “approximately” or other words that convey uncertainty of future events or outcomes to identify these forward-looking statements. Forward-looking statements appear in a number of places throughout this prospectus and include statements regarding our intentions, beliefs, projections, outlook, analyses or current expectations concerning, among other things, our ongoing and planned preclinical development and clinical trials, the timing of and our ability to make regulatory filings and obtain and maintain regulatory approvals for our product candidates, our intellectual property position, the degree of clinical utility of our products, particularly in specific patient populations, our ability to develop commercial functions, expectations regarding clinical trial data, our results of operations, cash needs, spending of the proceeds from this offering, financial condition, liquidity, prospects, growth and strategies, the industry in which we operate and the trends that may affect the industry or us.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events, competitive dynamics and industry change, and depend on the economic circumstances that may or may not occur in the future or may occur on longer or shorter timelines than anticipated. Although we believe that we have a reasonable basis for each forward-looking statement contained in this prospectus, we caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from the forward-looking statements contained in this prospectus. In addition, even if our results of operations, financial condition and liquidity and events in the industry in which we operate are consistent with the forward-looking statements contained in this prospectus, they may not be predictive of results or developments in future periods.

Actual results could differ materially from our forward-looking statements due to a number of factors, including risks related to:

our estimates regarding expenses, future revenues, capital requirements and needs for additional financing, particularly the resources we have on hand when we complete our planned Phase 3 program for EG-1962 and if we need to conduct more than a single Phase 3 trial for EG-1962;
the success and timing of our preclinical studies and clinical trials, including if we enroll patients for our planned Phase 3 trial at a slower rate than is anticipated;
the difficulties in obtaining and maintaining regulatory approval of our product candidates, and the labeling under any approval we may obtain, particularly if EG-1962 fails to demonstrate clinical superiority to Nymalize, for which the FDA granted marketing exclusivity in 2013;
our plans and ability to develop and commercialize our product candidates;
our failure to recruit or retain key scientific or management personnel or to retain our executive officers including our President and Chief Executive Officer, Brian A. Leuthner, or our Chief Scientific Officer, Dr. R. Loch Macdonald;
the size and growth of the potential markets for our product candidates and our ability to serve those markets;
regulatory developments in the United States and foreign countries;
the rate and degree of market acceptance of any of our product candidates;
our use of the proceeds from this offering;
obtaining and maintaining intellectual property protection for our product candidates and our proprietary technology;
the successful development of our commercialization capabilities, including sales and marketing capabilities;
recently enacted and future legislation regarding the healthcare system;

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the success of competing therapies and products that are or become available; and
the performance of third parties, including contract research organizations and third-party manufacturers.

Any forward-looking statements that we make in this prospectus speak only as of the date of such statement, and we undertake no obligation to update such statements to reflect events or circumstances after the date of this prospectus or to reflect the occurrence of unanticipated events. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data.

You should also read carefully the factors described in the “Risk Factors” section of this prospectus and elsewhere to better understand the risks and uncertainties inherent in our business and underlying any forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this prospectus will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified timeframe, or at all. The Private Securities Litigation Reform Act of 1995 and Section 27A of the Securities Act do not protect any forward-looking statements that we make in connection with this offering.

We obtained the industry, market and competitive position data in this prospectus from our own internal estimates and research as well as from industry and general publications and research surveys and studies conducted by third parties. In processing this information, we have also made assumptions based on such data and other sources, and our knowledge of, and experience to date in, the markets in which we operate. This information involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. Industry publications and surveys generally state that the information contained therein has been obtained from sources believed to be reliable. We believe this data is accurate in all material respects as of the date of this prospectus.

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USE OF PROCEEDS

We estimate that our net proceeds from the sale of the shares of common stock in this offering will be approximately $       million, assuming an initial public offering price of $       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. If the underwriters exercise in full their over-allotment option, we estimate that our net proceeds from this offering will be approximately $       million, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

We intend to use the net proceeds to us from this offering as follows:

approximately $    million to fund our planned Phase 3 program for EG-1962 for the management of aSAH through the filing of a New Drug Application;
approximately $          million to fund our development work on other routes of administration and other uses of EG-1962;
approximately $       million to fund our preclinical studies and the commencement of clinical trials of EG-1964 for the prevention of recurrent bleeding after cSDH;
approximately $       million to fund new and ongoing discovery and development programs; and
the remainder for working capital and general corporate purposes, including funding certain development and regulatory milestone payments related to EG-1962.

Pending the application of the net proceeds as described above, we intend to invest the net proceeds of the offering in short-term, investment-grade, interest-bearing securities. We believe that the estimated net proceeds from this offering, together with our existing cash and cash equivalents as of June 30, 2015 will be sufficient to meet our anticipated cash requirements through the completion of our current planned Phase 3 trial for EG-1962 for the treatment of aSAH.

The principal reasons for this offering are to create a public market for shares of our common stock and to facilitate our future access to public equity markets. Our management will have broad discretion to allocate the net proceeds to us from this offering and investors will be relying on the judgment of our management regarding the application of the proceeds from this offering.

A $1.00 increase (decrease) in the assumed initial public offering price would increase (decrease) the net proceeds to us from this offering by approximately $       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 the estimated underwriting discounts and commissions and estimated offering expenses payable by us. Each increase (decrease) of 1.0 million shares in the number of shares offered by us at the assumed initial public offering price would increase (decrease) the net proceeds to us in this offering by approximately $       million. 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 anticipated uses of the proceeds from this offering, although it may impact the amount of time prior to which we will need to seek additional capital.

As of the date of this prospectus, we cannot specify with certainty all of the particular uses for the net proceeds from this offering. The amounts and timing of our actual expenditures may vary significantly from our expectations depending upon numerous factors, including the progress of our research and development efforts, the progress of our clinical trials, our operating costs and capital expenditures, the results of our commercialization efforts and any acquisition and investment opportunities and the other factors described under “Risk Factors” in this prospectus. Accordingly, we will retain the discretion to allocate the net proceeds of this offering among the identified uses described above, and we reserve the right to change the allocation of the net proceeds among the uses described above.

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DIVIDEND POLICY

We have never declared or paid any cash dividends on our capital stock. We currently intend to retain all available funds and any future earnings to support our operations and finance the growth and development of our business. We do not intend to pay cash dividends on our common stock for the foreseeable future. In addition, the terms of our outstanding indebtedness restrict our ability to pay dividends, and any future indebtedness that we may incur could preclude us from paying dividends. Any future determination related to dividend policy will be made at the discretion of our board of directors and will depend on then-existing conditions, including our financial condition, operating results, contractual restrictions, capital requirements, business prospects and other factors our board of directors may deem relevant.

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CAPITALIZATION

The following table sets forth our cash and cash equivalents and capitalization as of June 30, 2015:

on an actual basis;
on a pro forma basis to give effect to the conversion of all outstanding shares of our preferred stock into 23,938,761 shares of our common stock, which will occur upon the consummation of an offering of at least $40,000,000 and at a price per share not less than $5.25 per share, the issuance of 740,256 shares of common stock issuable upon declaration of accrued dividends on our Series C, Series C-1 and Series C-2 Preferred Stock immediately prior to the consummation of this offering and the filing and effectiveness of our amended and restated certificate of incorporation, which will occur immediately prior to the consummation of this offering; and
on a pro forma as adjusted basis to additionally give further effect to the sale of        shares of our common stock in this offering, assuming an initial public offering price of $       per share (the midpoint of the price range set forth on the cover page of this prospectus), after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

You should read the information in this table together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Description of Capital Stock” and the financial statements and related notes appearing elsewhere in this prospectus.

As of June 30, 2015
Actual
Pro forma
Pro forma
as adjusted
Cash and cash equivalents
$
58,465,083
 
$
     
 
$
     
 
Long Term Debt
$
4,223,708
 
$
 
 
$
 
 
Convertible Preferred Stock:
 
 
 
 
 
 
 
 
 
Series C-2 Preferred Stock: 12,500,000 shares authorized, 12,043,006 shares issued and outstanding, actual; no shares authorized, issued or outstanding, pro forma and pro forma as adjusted
 
53,272,889
 
 
 
 
 
Series C-1 Preferred Stock: 4,000,000 shares authorized, 3,588,890 shares issued and outstanding, actual; no shares authorized, issued or outstanding, pro forma and pro forma as adjusted
 
15,319,587
 
 
 
 
 
Series C Preferred Stock: 5,500,000 shares authorized, 4,697,314 shares issued and outstanding, actual; no shares authorized, issued or outstanding, pro forma and pro forma as adjusted
 
18,578,517
 
 
 
 
 
Series B-1 Preferred Stock: 500,000 shares authorized, 359,935 shares issued and outstanding, actual; no shares authorized, issued or outstanding, pro forma and pro forma as adjusted
 
477,191
 
 
 
 
 
Series B Preferred Stock: 2,500,000 shares authorized, 2,415,116 shares issued and outstanding, actual; no shares authorized, issued or outstanding, pro forma and pro forma as adjusted
 
2,991,979
 
 
 
 
 
Series A Preferred stock: 1,000,000 shares authorized, 864,500 shares issued and outstanding, actual; no shares authorized, issued or outstanding, pro forma and pro forma as adjusted
 
797,219
 
 
 
 
 
Total convertible preferred stock
 
91,437,382
 
 
 
 
 
Stockholders' (deficit) equity:
 
 
 
 
 
 
 
 
 
Preferred stock, $0.00033 par value per share: no shares authorized, shares issued and outstanding, actual; 5,000,000 shares authorized, no shares issued and outstanding, pro forma and pro forma as adjusted
 
 
 
 
 
 
 
 
Common stock, $0.00033 par value per share: 38,500,000 shares authorized, 2,310,000 shares issued and outstanding, actual; 75,000,000 shares authorized,           shares issued and outstanding, pro forma; and 75,000,000 shares authorized,           shares issued and outstanding, pro forma as adjusted
 
770
 
 
 
 
 
 
 
Additional paid-in capital
 
2,939,083
 
 
 
 
 
 
 
Accumulated deficit
 
(42,237,881
)
 
 
 
 
 
 
Total stockholders’ (deficit) equity
 
(39,298,028
)
 
 
 
 
 
 
Total capitalization
$
56,363,062
 
$
 
 
$
 
 

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The pro forma as adjusted information set forth above is illustrative only and will change based on the actual number of shares issued, the initial public offering price and the other terms of this offering determined at pricing. Each $1.00 increase or decrease in the assumed initial public offering price of $       per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase or decrease pro forma as adjusted cash, additional paid-in capital, total stockholders’ (deficit) equity and total capitalization by approximately $       million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remain the same. Each increase (decrease) of 1.0 million shares in the number of shares of common stock offered by us at the assumed public offering price would increase (decrease) pro forma as adjusted cash, additional paid-in capital, total stockholders’ (deficit) equity and total capitalization by approximately $       million.

The table above excludes:

1,054,005 shares of our common stock issuable upon exercise of warrants outstanding as of June 30, 2015, at a weighted average exercise price of $4.21 per share;
1,810,531 shares of common stock issuable upon exercise of stock options outstanding as of June 30, 2015 under our 2010 Equity Incentive Plan at a weighted average exercise price of $2.67 per share;
1,500,000 shares of common stock issuable upon exercise of stock options outstanding as of June 30, 2015 under our 2012 Equity Incentive Plan at a weighted average exercise price of $1.75 per share;
1,762,000 shares of common stock issuable upon exercise of stock options outstanding as of June 30, 2015 under our 2014 Equity Incentive Plan at a weighted average exercise price of $4.52 per share; and
830,400 shares of common stock reserved for future issuances under our 2014 Equity Incentive Plan.

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DILUTION

If you invest in our common stock in this offering, your ownership interest will be diluted 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 upon completion of this offering. The historical net tangible book value (deficit) of our common stock as of June 30, 2015 was approximately $       million, or approximately $       per share. Historical net tangible book value (deficit) per share is determined by dividing the number of our outstanding shares of common stock into our total tangible assets (total assets less intangible assets) less total liabilities.

On a pro forma basis, after giving effect to the conversion of all outstanding shares of our preferred stock into 23,938,761 shares of our common stock which will occur upon the consummation of an offering of at least $40,000,000 and at a price per share not less than $5.25 per share, and the issuance of 740,256 shares of common stock issuable upon declaration of accrued dividends on our Series C, Series C-1 and Series C-2 Preferred Stock immediately prior to the consummation of this offering, our net tangible book value at June 30, 2015 would have been approximately $       million, or approximately $       per share.

Investors purchasing in this offering will incur immediate and substantial dilution. After giving effect to the sale of common stock offered in this offering, assuming an initial public offering price of $       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, 2015 would have been approximately $       million, or approximately $       per share. This represents an immediate increase in pro forma net tangible book value of $       share to existing stockholders, and an immediate dilution in the pro forma net tangible book value of $       per share to investors purchasing in this offering. The following table illustrates this per share dilution:

Assumed initial public offering price per share
 
 
 
$
         
 
Historical net tangible book value (deficit) per share as of June 30, 2015
 
 
 
$
         
 
Pro forma increase in net tangible book value per share
 
 
 
 
 
 
Pro forma net tangible book value per share as of June 30, 2015
 
 
 
 
 
 
Increase in pro forma net tangible book value per share attributable to investors purchasing in this offering
 
 
 
 
 
 
Pro forma as adjusted net tangible book value per share after giving effect to this offering
 
 
 
 
 
 
Dilution per share to investors purchasing in this offering
 
 
 
$
 
 

The following table summarizes, on the pro forma as adjusted basis described above as of June 30, 2015, the differences between the number of shares of common stock purchased from us, the total consideration paid, and the average price per share paid by existing stockholders and by investors purchasing in this offering at an assumed initial public offering price of $       per share, before deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

Shares Purchased
Total Consideration
Average Price
Number
Percent
Amount
Percent
Per Share
Existing stockholders before this offering
 
      
 
 
 
%
$
            
 
 
 
%
$
            
 
Investors purchasing in this offering
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total
 
 
 
 
100.00
%
 
 
 
 
100.00
%
 
 
 

A $1.00 increase (decrease) in the assumed initial public offering price of $       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 per share by $      , assuming the number of shares of common stock offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. Each increase (decrease) of 1.0 million shares in the number of shares of common stock offered by us at the assumed public offering

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price would increase (decrease) our pro forma as adjusted net tangible book value by approximately $       million, our pro forma as adjusted net tangible book value per share after this offering by $       per share and the dilution in pro forma as adjusted net tangible book value to new investors in this offering by $       per share.

Except as otherwise indicated, the discussion and tables above assume no exercise of the underwriters’ over-allotment option and no exercise of any outstanding options or warrants. If the underwriters’ over-allotment option is exercised in full, the number of shares of common stock held by existing stockholders will be reduced to       % of the total number of shares of common stock to be outstanding upon completion of this offering, the pro forma as adjusted net tangible book value would be $       per share, the dilution in pro forma as adjusted tangible book value would be $       per share to investors in this offering, and the number of shares of common stock held by investors purchasing in this offering will be increased to        shares or       % of the total number of shares of common stock to be outstanding upon the consummation of this offering.

As of June 30, 2015, there were 1,810,531, 1,500,000 and 1,762,000 shares of common stock issuable upon exercise of options under the 2010 Equity Incentive Plan, the 2012 Equity Incentive Plan and the 2014 Equity Incentive Plan, respectively, and an aggregate of 830,400 shares of common stock were reserved for future issuance under our 2014 Equity Incentive Plan. As of June 30, 2015, there were 135,990 shares of common stock issuable upon exercise of warrants and warrants exercisable for shares of Series C and Series C-1 Preferred Stock that upon the consummation of this offering would convert into warrants exercisable for 918,015 shares of common stock, with weighted average exercise prices of $1.47 per share and $4.62 per share, respectively. We may choose to raise additional capital through the sale of equity or convertible debt securities 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 any of these options or warrants are exercised, new options are issued under our 2014 Equity Incentive Plan or we issue additional shares of common stock or other equity securities in the future, there will be further dilution to investors purchasing in this offering.

The tables and calculations set forth above exclude:

1,054,005 shares of our common stock issuable upon exercise of warrants outstanding as of June 30, 2015, at a weighted average exercise price of $4.21 per share;
1,810,531 shares of common stock issuable upon exercise of stock options outstanding as of June 30, 2015 under our 2010 Equity Incentive Plan at a weighted average exercise price of $2.67 per share;
1,500,000 shares of common stock issuable upon exercise of stock options outstanding as of June 30, 2015 under our 2012 Equity Incentive Plan at a weighted average exercise price of $1.75 per share;
1,762,000 shares of common stock issuable upon exercise of stock options outstanding as of June 30, 2015 under our 2014 Equity Incentive Plan at a weighted average exercise price of $4.52 per share; and
830,400 shares of common stock reserved for future issuances under our 2014 Equity Incentive Plan.

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SELECTED FINANCIAL DATA

The following selected financial data should be read together with our financial statements and the related notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing elsewhere in this prospectus.

The following table summarizes our historical financial data as of, and for the periods ended on, the dates indicated. We have derived the statements of operations data for the years ended December 31, 2014 and 2013 and balance sheet data as of December 31, 2014 and 2013 from our audited financial statements included elsewhere in this prospectus. We have derived the statements of operations data for the six months ended June 30, 2015 and 2014 and balance sheet data as of June 30, 2015 from our unaudited financial statements included elsewhere in this prospectus. The unaudited financial statements have been prepared on a basis consistent with our audited 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, 2015 and results of operations for the six months ended June 30, 2015 and 2014. Our historical results are not necessarily indicative of the results that may be expected in the future, and our interim 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
2013
2015
2014
Statement of Operations Data: (unaudited)
Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
 
Research and development
$
8,473,522
 
$
4,484,367
 
$
6,066,483
 
$
3,217,106
 
General and administrative
 
4,720,661
 
 
2,003,992
 
 
3,076,095
 
 
2,399,370
 
Total operating expenses:
 
13,194,183
 
 
6,488,359
 
 
9,142,578
 
 
5,616,476
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss from operations
 
(13,194,183
)
 
(6,488,359
)
 
(9,142,578
)
 
(5,616,476
)
Other income (expense)
 
402,122
 
 
(853,739
)
 
(846,870
)
 
96,221
 
Loss before income taxes
 
(12,792,061
)
 
(7,342,098
)
 
(9,989,448
)
 
(5,520,255
)
Benefit (provision) for income taxes
 
590,675
 
 
459,018
 
 
 
 
 
Net loss
 
(12,201,386
)
 
(6,883,080
)
 
(9,989,448
)
 
(5,520,255
)
Cumulative dividend on Series C, C-1 and C-2 convertible preferred stock
 
(1,580,701
)
 
(1,076,256
)
 
(2,429,515
)
 
(717,441
)
Net loss attributable to common stockholders
$
(13,782,087
)
$
(7,959,336
)
$
(12,418,963
)
$
(6,237,696
)
Loss per share attributable to common stockholders basic and diluted (1)
$
(5.97
)
$
(3.45
)
$
(5.38
)
$
(2.70
)
Weighted average common shares outstanding basic and diluted (1)
 
2,310,000
 
 
2,310,000
 
 
2,310,000
 
 
2,310,000
 
Unaudited pro forma net loss
 
 
 
 
 
 
 
 
 
 
 
 
Unaudited pro forma net loss per share of common stock basic and diluted (1)
 
 
 
 
 
 
 
 
 
 
 
 
Unaudited pro forma basic and diluted weighted average shares of common stock outstanding (1)
 
 
 
 
 
 
 
 
 
 
 
 

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Year Ended December 31,
As of June 30, 2015
2014
2013
Actual
Pro Forma(2)
Pro Forma
As Adjusted(3)(4)
(unaudited)
Balance Sheet Data:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash
$
13,728,972
 
$
7,858,169
 
$
58,465,083
 
$
     
 
$
     
 
Total Assets
 
17,046,661
 
 
8,733,792
 
 
62,685,415
 
 
 
 
 
 
 
Long Term Debt
 
2,527,686
 
 
 
 
4,223,708
 
 
 
 
 
 
 
Convertible preferred stock
 
36,788,409
 
 
20,680,692
 
 
91,437,382
 
 
 
 
 
 
 
Accumulated deficit
 
(29,818,918
)
 
(16,036,831
)
 
(42,237,881
)
 
 
 
 
 
 
Total stockholders’ (deficit) equity
 
(27,833,749
)
 
(15,349,647
)
 
(39,298,028
)
 
 
 
 
 
 

(1)See Notes 2 (K) and (L) to our audited financial statements for an explanation of the method used to calculate net loss per share of common stock, basic and diluted, pro forma net loss per share of common stock, basic and diluted, and diluted pro forma weighted average shares outstanding used to calculate the pro forma per share amounts.
(2)Gives pro forma effect to the conversion of all outstanding shares of our preferred stock into 23,938,761 shares of our common stock, which will occur upon the consummation of an offering of at least $40,000,000 and at a price per share not less than $5.25 per share, and the issuance of           shares of common stock issuable upon declaration of accrued dividends on our Series C, Series C-1 and Series C-2 Preferred Stock immediately prior to the consummation of this offering.
(3)Gives further effect to the sale of        shares of our common stock in this offering, assuming an initial public offering price of $       per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
(4)A $1.00 increase or decrease in the assumed initial public offering price of $       per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase or decrease the pro forma as adjusted amount of each of cash and cash equivalents, total assets and total stockholders' (deficit) equity by $       million, assuming the number of shares of common stock 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. Each increase or decrease of 1.0 million shares in the number of shares of common stock offered by us at the assumed public offering price would increase or decrease the pro forma as adjusted amount of each of cash and cash equivalents, total assets and total stockholders' (deficit) equity by $       million, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

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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 in conjunction with “Selected Financial Data” and our financial statements and related notes appearing elsewhere in this prospectus. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. 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 biotechnology company that discovers, develops and seeks to commercialize novel, hospital-based therapies capable of transforming treatment paradigms in the management of acute, life-threatening conditions. Our initial product candidates target rare, acute, life-threatening neurological conditions for which we believe the approved existing therapies are inadequate.

We believe EG-1962, our lead product candidate, can fundamentally improve patient outcomes and transform the management of aneurysmal subarachnoid hemorrhage, or aSAH, which is bleeding around the brain due to a ruptured brain aneurysm. A single dose of EG-1962 is designed to deliver high concentrations of nimodipine, the current standard of care, directly to the brain with sustained drug exposure over 21 days. EG-1962 utilizes our proprietary, programmable, biodegradable polymer-based development platform, or our Precisa development platform, a novel delivery mechanism that enables targeted and sustained drug exposure while potentially avoiding the dose-limiting side effects associated with currently available formulations of nimodipine. On May 28, 2015, the Office of Orphan Product Development at the US Food and Drug Administration, or the FDA, granted us orphan drug designation for EG-1962 for the treatment of patients with aSAH.

In April 2015, enrollment was completed in our Phase 1/2 clinical trial of EG-1962 in North America, which we refer to as our NEWTON trial. The NEWTON trial met its primary and secondary endpoints of safety, tolerability, defining the maximum tolerated dose (MTD) and pharmacokinetics. The results of the principal exploratory endpoint from the 90-day follow-up available for patients in the NEWTON trial cohorts demonstrated that 60% (27 of 45) of patients treated with EG-1962 experienced a favorable clinical outcome (a score of 6 − 8 on the extended Glasgow Outcome Scale, or GOSE) versus only 28% (5 of 18) of patients treated with the standard of care, oral nimodipine. Of the 45 patients treated with EG-1962, 90 days following treatment 27% (12 of 45) of patients across 17 sites achieved the highest clinical outcome score (GOSE = 8, Upper Good Recovery) versus only 6% (1 of 18) patients treated with the standard of care, oral nimodipine.

Based on End-of-Phase 2 correspondence from the FDA received in late July 2015, we have determined the design and key elements of our planned Phase 3 clinical program for EG-1962 for the treatment of aSAH. Subject to submission and review by the FDA of a final protocol for the planned Phase 3 clinical trial, we expect to initiate the Phase 3 trial in mid-2016. Based on the results of the NEWTON trial, for a condition for which there is a substantial unmet medical need for better treatments, and the use of the FDA’s Section 505(b)(2) regulatory pathway, we believe this Phase 3 clinical trial, if successful, could form the basis of an NDA submission to the FDA for EG-1962.

In addition to EG-1962, we are using our Precisa development platform to develop additional product candidates targeting other acute, serious conditions where limited or no current therapies exist. We are developing our second product candidate, EG-1964, as a prophylactic treatment in the management of chronic subdural hematoma, or cSDH, to prevent recurrent bleeding on the surface of the brain. A cSDH is a liquefied hematoma that has accumulated on the surface of the brain in an area referred to as the subdural space and is often caused by minor head trauma. Following neurosurgical intervention to drain the hematoma, bleeding in the subdural space typically recurs in up to 30% of patients at which point another costly and risky neurosurgical intervention is required. EG-1964 contains aprotinin, a pancreatic trypsin inhibitor approved to reduce bleeding after cardiac surgery. Aprotinin works by slowing the breakdown of blood clots. By way of a single administration at the time of the initial neurosurgical intervention, we believe EG-1964 will deliver a high concentration of aprotinin directly to the subdural space with sustained drug exposure over 21 to 28 days. If approved, we expect that EG-1964 can become the standard of care as a prophylactic treatment in the management of cSDH to prevent recurrent bleeding. We intend to submit an IND to the FDA for EG-1964 in 2016 and initiate a Phase 1/2 trial thereafter.

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From our inception in 2009, we have devoted substantially all of our efforts to business planning, engaging regulatory, manufacturing and other technical consultants, acquiring operating assets, planning and executing clinical trials and raising capital.

We have never been profitable and have incurred net losses in each year since inception. Our net losses were $12.2 million and $6.9 million for the years ended December 31, 2014 and 2013, respectively, and $10.0 million and $5.5 million for the six months ended June 30, 2015 and 2014, respectively. As of December 31, 2014 and June 30, 2015, we had an accumulated deficit of approximately $29.8 million and $42.2 million, respectively. Substantially all of our net losses resulted from costs incurred in connection with our research and development programs and from general and administrative costs associated with our operations. We expect to continue to incur significant expenses and increasing operating losses for at least the next several years. Our net losses may fluctuate significantly from quarter to quarter and year to year. We expect our expenses will increase substantially in connection with our ongoing activities as we:

conduct clinical trials of our initial product candidates, including the commencement of our Phase 3 program for EG-1962;
continue our research and development efforts;
conduct preclinical studies and initiate clinical trials for EG-1964 for the treatment of cSDH;
manufacture preclinical study and clinical trial materials and scale-up for commercial manufacturing capabilities;
hire additional clinical, quality control, technical and scientific personnel to conduct our clinical trials and to support our product development efforts;
seek regulatory approvals for our product candidates that successfully complete clinical trials;
maintain, expand and protect our intellectual property portfolio;
implement operational, financial and management systems; and
hire additional general and administrative personnel to support our operation as a public company.

We do not expect to generate any revenues from product sales until we successfully complete development and obtain regulatory approval for one or more of our product candidates, which we expect will take a number of years. If data from our NEWTON trial are positive, we intend to initiate our Phase 3 program for EG-1962 for the treatment of aSAH in mid-2016. If we obtain regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. Accordingly, we will seek to fund our operations through public or private equity or debt financings or other sources. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all and could be forced to relinquish valuable rights to our product candidates, or grant licenses on terms that are not favorable to us in strategic partnerships and alliances and licensing arrangements. Our failure to raise capital or enter into such other arrangements when needed would have a negative impact on our financial condition and ability to develop our product candidates.

We have raised capital primarily through convertible preferred stock financings and term debt as follows:

During 2009 and 2010, we sold shares of Series A Convertible Preferred Stock with net proceeds of approximately $0.8 million and issued a promissory note to the New Jersey Economic Development Authority, or the NJEDA, for net proceeds of approximately $0.1 million.
During 2011, we sold shares of Series B Convertible Preferred Stock with net proceeds of approximately $3.0 million and converted the NJEDA promissory note.
During 2012, we sold shares of Series B-1 Convertible Preferred Stock and warrants to purchase our common stock, with net proceeds of approximately $0.5 million and issued a convertible promissory note for net proceeds of approximately $0.2 million to a member of our board of directors.
During 2013, we sold shares of Series C Convertible Preferred Stock with net proceeds of approximately $16.1 million, issued a convertible promissory note for net proceeds of approximately $0.1 million to a member of our board of directors and converted promissory notes issued to a member of our board of directors.

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During 2014, we sold shares of Series C-1 Convertible Preferred Stock with net proceeds of approximately $14.9 million.
During 2014, we entered into a loan and security agreement with Hercules Technology Growth Capital, Inc., or Hercules. The first and second term loan tranches were funded in 2014 and early 2015, respectively, in an aggregate amount of $6.0 million.
During April 2015, we sold shares of Series C-2 Convertible Preferred Stock with net proceeds of approximately $52.4 million.

As of December 31, 2014 and June 30, 2015, we had $13.7 million and $58.5 million, respectively, in cash and cash equivalents.

Financial Operations Overview

Revenue

We have not generated any revenues from commercial product sales and do not expect to generate any such revenue in the near future. In the future, if any of our product candidates are approved for commercial sale, we may generate revenue from product sales. We may also generate revenue in the future from a combination of research and development payments, license fees and other upfront payments or milestone payments.

Research and Development Expenses

Research and development expenses include employee-related expenses, licensing fees to use certain technology in our research and development projects, costs of acquiring, developing and manufacturing clinical trial materials, as well as fees paid to consultants and various entities that perform certain research and testing on our behalf. Costs for certain development activities, such as clinical trials, are recognized based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations or information provided by vendors on their actual costs incurred. Payments for these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred, and are reflected in the financial statements as prepaid or accrued expenses. Costs incurred in connection with research and development activities are expensed as incurred.

The following table summarizes our research and development expenses incurred for the periods indicated (in thousands):

Year Ended December 31,
Six Months Ended June 30,
2014
2013
2015
2014
EG-1962 product candidate
$
5,885
 
$
3,886
 
$
3,482
 
$
2,029
 
EG-1964 product candidate
 
434
 
 
 
 
416
 
 
203
 
Pipeline
 
64
 
 
 
 
6
 
 
 
Internal Operating Expenses
 
2,091
 
 
598
 
 
2,162
 
 
985
 
Total
$
8,474
 
$
4,484
 
$
6,066
 
$
3,217
 

We expect our research and development expenses to increase for the foreseeable future as we advance our product candidates through preclinical studies and clinical trials. The process of conducting preclinical studies and clinical trials necessary to obtain regulatory approval is costly and time-consuming. Successful development of future product candidates from our research and development programs is highly uncertain and may not result in approved products. Completion dates and completion costs can vary significantly for each future product candidate and are difficult to predict. We anticipate we will make determinations as to which product candidates to pursue and how much funding to direct to each product candidate on an ongoing basis in response to the scientific and clinical success of each product candidate as well as ongoing assessments as to the commercial potential of our product candidates. We will need to raise additional capital and may seek collaborations in the future in order to advance our various product candidates. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us we may have to significantly delay, scale back or discontinue the development or commercialization of one or more of our product candidates or one or more of our other research and development initiatives. We also could be required to seek collaborators for one or more of our current or future product candidates at an earlier stage than otherwise would be desirable or on terms that are less favorable

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than might otherwise be available or relinquish or license on unfavorable terms our rights to technologies or product candidates that we otherwise would seek to develop or commercialize ourselves. Our failure to raise capital as and when needed would have a material adverse effect on our financial condition and our ability to pursue our business strategy.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and related benefits, including stock-based compensation, related to our executive, finance, legal, business development and support functions. Other general and administrative expenses include travel expenses, professional fees for auditing, tax and legal services and facility-related costs.

The following table summarizes our general and administrative expenses incurred for the periods indicated (in thousands):

Year Ended December 31,
Six Months Ended June 30,
2014
2013
2015
2014
General and administrative expenses
$
4,721
 
$
2,004
 
$
3,076
 
$
2,399
 

We expect that general and administrative expenses will increase in the future as we expand our operating activities and incur additional costs associated with being a publicly-traded company. These increases will likely include legal, accounting and filing fees, directors’ and officers’ liability insurance premiums and fees associated with investor relations.

Warrant Remeasurement

Warrant remeasurement reflects adjustments to fair value of our liability-classified warrants.

Interest Income

Interest income consists of interest income earned on our cash and cash equivalents.

Interest Expense

Interest expense consists of interest expense on our borrowings under the loan agreement with Hercules.

Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of financial condition and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the revenue and expenses incurred during the reported periods. On an ongoing basis, we evaluate our estimates and judgments, including those related to accrued expenses and stock-based compensation. We base our estimates on historical experience and on various other factors that we believe are 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 apparent from other sources. Changes in estimates are reflected in reported results for the period in which they become known. Actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are described in the notes to our financial statements appearing in this prospectus, we believe that the following critical accounting policies are most important to understanding and evaluating our reported financial results.

Stock Warrants

As of June 30, 2015, we had outstanding warrants for the purchase of shares of Series C and Series C-1 Preferred Stock as well as warrants to purchase our common stock. The fair value of all of the warrants issued was calculated utilizing the Black-Scholes option-pricing model. Certain warrants are classified as liabilities and remeasured to fair value each reporting period through the statement of operations.

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Pursuant to the terms of the warrants to purchase shares of Series C Preferred Stock, upon the conversion of the Series C Preferred Stock underlying the warrant, the warrants automatically become exercisable for shares of our common stock based upon the conversion ratio of the underlying Series C Preferred Stock. The Series C Preferred Stock will automatically convert upon the consummation of an initial public offering of our common stock at a price per share no less than the Series C Preferred Stock price of $3.85.

Pursuant to the terms of the warrants to purchase shares of Series C-1 Preferred Stock, upon the conversion of the Series C-1 Preferred Stock underlying the warrant, the warrants automatically become exercisable for shares of our common stock based upon the conversion ratio of the underlying Series C-1 Preferred Stock. The Series C-1 Preferred Stock will automatically convert upon the consummation of an initial public offering of our common stock at a price per share no less than the Series C-1 Preferred Stock price of $4.65.

Income Taxes

We file U.S. federal income tax returns and New Jersey state tax returns. Our deferred tax assets are primarily comprised of federal and state tax net operating losses and tax credit carryforwards and are recorded using enacted tax rates expected to be in effect in the years in which these temporary differences are expected to be utilized. At December 31, 2014, we had federal net operating loss, or NOL, carryforwards of approximately $23.9 million, which expire at various dates between 2029 and 2034. At December 31, 2014, we had federal research and development credits carryforwards of approximately $0.7 million. We may be subject to the net operating loss utilization provisions of Section 382 of the Internal Revenue Code. The effect of an ownership change would be the imposition of an annual limitation on the use of NOL carryforwards attributable to periods before the change. The amount of the annual limitation depends upon our value immediately before the ownership change, changes to our capital during a specified period prior to the change, and the federal published interest rate. Although we have not completed an analysis under Section 382 of the Code, it is likely that the utilization of the NOLs will be substantially limited.

Accrued Clinical Expenses

When preparing our financial statements, we are required to estimate our accrued clinical expenses. This process involves reviewing open contracts and communicating with our personnel to identify services that have been performed on our behalf 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 actual cost. Payments under some of the contracts we have with parties depend on factors, such as successful enrollment of certain numbers of patients, site initiation and the completion of clinical trial milestones.

When accruing clinical expenses, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If possible, we obtain information regarding unbilled services directly from our service providers. However, we may be required to estimate the cost of these services based only on information available to us. If we underestimate or overestimate the cost associated with a trial or service at a given point in time, adjustments to research and development expenses may be necessary in future periods. Historically, our estimated accrued clinical expenses have approximated actual expense incurred.

Stock-based Compensation

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: (1) the expected volatility of our stock, (2) the expected term of the award, (3) the risk-free interest rate and (4) expected dividends. In accordance with FASB ASC 505, we re-measure the fair value of non-employee stock-based compensation as the awards vest, and recognize the resulting value, if any, as expense during the period the related services are rendered. We believe that all stock options issued under our stock option plans meet the criteria of “plain vanilla” stock options. The expected term of the options outstanding was determined using the “simplified” method as prescribed by Staff Accounting Bulletin, No. 107, Share Based Payment. The risk free interest rate is based on U.S. Treasury notes with remaining terms similar to the expected term of the option. The volatility was based on a representative group of small publicly traded drug development companies. The dividend yield assumption is zero since we have never paid cash dividends and have no present intention to pay cash dividends.

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The fair value of options granted for the periods indicated was estimated using the Black-Scholes option valuation model utilizing the following assumptions:

For the Year
Ended December 31,
Six Months
Ended June 30,
2014
2013
2015
2014
Weighted
Average
Weighted
Average
Weighted
Average
Weighted
Average
Volatility
 
75.54
%
 
75.60
%
 
79.80
%
 
75.60
%
Risk-Free Interest Rate
 
1.96
%
 
1.76
%
 
1.79
%
 
1.97
%
Expected Term in Years
 
5.78
 
 
5.87
 
 
6.07
 
 
5.76
 
Dividend Rate
 
0.00
%
 
0.00
%
 
0.00
%
 
0.00
%
Fair Value of Option on Grant Date
$
3.91
 
$
1.66
 
$
3.13
 
$
3.97
 

Stock-based compensation expense amounted to $1.0 million, $0.8 million, $1.3 million and $0.3 million for the six months ended June 30, 2015 and 2014 and for the years ended December 31, 2014 and 2013, respectively. At June 30, 2015, there was approximately $6.6 million of unamortized stock compensation expense, which is expected to be recognized over a remaining average vesting period of 1.63 years.

We expect the impact of our stock-based compensation expense for stock options to employees to grow in future periods due to the potential increases in the value of our common stock and headcount.   

Fair Value of Common Stock

We are required to estimate the fair value of our common stock underlying our stock-based awards when performing the fair value calculations using the Black-Scholes option pricing model. The fair value of our common stock underlying our stock-based awards was determined initially on each grant date by our board of directors, with input from management and adjusted in connection with our reassessment of fair value for financial reporting purposes. All options to purchase shares of our common stock are intended to be granted with an exercise price per share no less than the fair value per share of our common stock underlying those options on the date of grant, based on the information known to us on the date of grant. In the absence of a public trading market for our common stock, on each grant date, we develop an estimate of the fair value of our common stock in order to determine an exercise price for the option grants. We determined the fair value of stock options using methodologies, approaches and assumptions consistent with the American Institute of Certified Public Accountants, or AICPA, Audit and Accounting Practice Aid Series: Valuation of Privately Held Company Equity Securities Issued as Compensation, or the AICPA Practice Guide. In addition, we considered various objective and subjective factors, along with input from management, to determine the fair value of our common stock, including:

independent third party valuations of our common stock;
the prices at which we sold our shares of preferred stock to outside investors in arm’s length transactions and the rights, preferences and privileges of the preferred stock relative to those of our common stock, including the liquidation preferences of the preferred stock;
our results of operations and financial performance;
our hiring of key personnel and the experience of our management, as well as our recruitment of experienced members to our board of directors;
the status of our research and development efforts and our stage of development generally;
risks inherent in the development of our product candidates;
the value of companies we consider peers based on a number of factors including, but not limited to, similarity to us with respect to industry, business model, stage of growth, company size, financial risk or other factors;
external market conditions affecting the biotechnology industry;
trends within the biotechnology industry;

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the lack of an active public market for our capital stock; and
the estimated likelihood of achieving a liquidity event for our shares of common stock, such as an initial public offering or an acquisition of our company, in light of prevailing market conditions.

The following table sets forth information about our stock option grants made since inception through June 30, 2015, including the per share estimated fair value of our common stock as determined by our board of directors after taking into consideration the various objective and subjective factors described above and the per share weighted average fair value of our common stock based on the valuations described below:

Date of Grant
Number of Shares
Underlying Options
Granted
Exercise Price
per Share
Per Share Estimated
Fair Value of
Common Stock on
Grant Date (1)
Per Share Weighted
Average Fair Value of
Common Stock
May 11, 2010
 
29,250
 
$
0.17
 
$
0.17
 
$
0.36
(2)
June 23, 2010
 
9,750
 
 
0.17
 
 
0.17
 
 
0.36
(2)
October 1, 2010
 
48,750
 
 
0.17
 
 
0.17
 
 
0.36
(2)
December 15, 2010
 
9,750
 
 
0.25
 
 
0.25
 
 
0.36
(2)
January 1, 2011
 
36,000
 
 
0.25
 
 
0.25
 
 
0.36
(2)
March 11, 2011
 
27,000
 
 
0.25
 
 
0.25
 
 
0.36
(2)
May 1, 2011
 
60,000
 
 
0.50
 
 
0.50
 
 
0.36
(2)
August 15, 2011
 
180,000
 
 
0.60
 
 
0.60
 
 
0.55
(2)
October 15, 2011
 
30,000
 
 
0.60
 
 
0.60
 
 
0.55
(2)
August 1, 2012
 
30,000
 
 
0.60
 
 
0.60
 
 
0.62
(2)
December 19, 2012
 
1,000,000
 
 
1.75
 
 
1.00
 
 
0.81
(2)
December 20, 2012
 
500,000
 
 
1.75
 
 
1.00
 
 
0.81
(2)
August 28, 2013
 
53,000
 
 
1.49
 
 
1.49
 
 
1.73
(2)
October 11, 2013
 
717,500
 
 
1.49
 
 
1.49
 
 
2.32
(2)
March 27, 2014
 
556,444
 
 
6.05
 
 
6.05
 
 
6.05
(3)
July 18, 2014
 
62,500
 
 
5.19
 
 
5.19
 
 
5.19
(3)(4)
January 5, 2015
 
250,000
 
 
3.75
 
 
3.75
 
 
3.75
(3)(4)
March 11, 2015
 
1,343,500
 
 
4.65
 
 
4.65
 
 
4.65
(5)
April 1, 2015
 
175,000
 
 
4.65
 
 
4.65
 
 
4.65
(5)

(1)The fair value estimates were based on the Board of Director’s assessment of the fair value of our common stock on the relevant date, based on various factors described above.
(2)The fair value estimates were based on a retrospective valuation of our common stock, which was completed in March 2014.
(3)The fair value estimates were based on contemporaneous valuations of our common stock.
(4)Decrease in value attributable to the longer anticipated holding period to an IPO and softening of the biotech market.
(5)The fair value estimates were based on a contemporaneous valuation of our common stock and recent prices of recent sales of our preferred stock sold to new investors.

Based on an assumed initial public offering price of $           per share, the midpoint of the price range set forth on the cover page of this prospectus, the intrinsic value of stock options outstanding as of June 30, 2015 would be $       .

In December 2013, based on our review of overall market conditions and the improving market for biotechnology company initial public offerings, our board of directors determined that a significant shift was occurring with respect to the valuation we could achieve in an initial public offering, or IPO, and directed management to begin preparation for an initial public offering of our common stock. We believe this event increased the probability of an early initial public offering scenario and therefore, in connection with the preparation of our financial statements, we re-assessed the fair value of our common stock for financial reporting purposes at dates where there were stock option grants. For these prior periods, we adjusted the fair value based on market conditions, progress made in our development programs and whether we achieved company milestones. A retrospective valuation was completed in March 2014.

Valuations

Common Stock Valuation Methodologies

The retrospective valuation of our common stock was prepared in accordance with the guidelines in the AICPA Practice Guide, which prescribes several valuation approaches for determining the value of an enterprise,

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such as the cost, market and income approaches, and various methodologies for allocating the value of an enterprise to its capital structure and specifically the common stock.

We considered valuations implied by arm’s length transactions involving the sale of our securities to independent investors, taking into consideration the various rights and preferences of the equity securities transacted. We concluded that the terms of our Convertible Preferred Stock sales were representative of fair value. Using the Preferred Stock pricing, we utilized the back-solve method (a form of the market approach defined in the AICPA Practice Guide) to estimate the implied enterprise value and the resulting common stock fair value at certain dates. We used a market based approach to estimate the equity value of our company after we began to prepare for an IPO. In our December 2013 valuation, we also relied on comparable public company valuations to provide an indication of our enterprise’s fair value.

Methods Used to Allocate our Enterprise Value to Classes of Securities

In accordance with the AICPA Practice Guide, we considered the following methods for allocating the enterprise value across our classes and series of capital stock to determine the fair value of our common stock at each valuation date.

Option pricing method, or OPM. The OPM treats common stock and preferred stock as call options on the enterprise’s value with exercise prices based on the liquidation preference and conversion terms of the preferred stock. Under this method, the common stock has value only if the funds available for distribution to stockholders exceed the value of the liquidation preference at the time of a liquidity event (for example, merger or sale). This method was utilized in the valuations discussed below.
Probability-weighted expected return method, or PWERM. The PWERM is a scenario-based analysis that estimates the value per share based on the probability-weighted present value of expected future investment returns, considering each of the possible outcomes available to us as well as the economic and control rights of each share class. This method was utilized in the valuations at and after December 31, 2013.

In March 2014, we utilized a third party valuation company to determine retrospectively the fair value of our common stock. The followings dates were selected based on significant events: October 1, 2010, August 15, 2011, August 1, 2012, December 19, 2012, March 31, 2013, June 30, 2013, August 28, 2013, October 11, 2013, December 31, 2013 and March 1, 2014.