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TABLE OF CONTENTS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Table of Contents

As filed with the Securities and Exchange Commission on April 18, 2017

Registration No. 333-217124


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



Amendment No. 1
to
Form F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933



VERONA PHARMA PLC
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

Not Applicable
(Translation of Registrant's Name into English)

United Kingdom
(State or other Jurisdiction of
Incorporation or Organization)
  2834
(Primary Standard Industrial
Classification Code Number)
  Not Applicable
(I.R.S. Employer
Identification Number)

3 More London Riverside
London SE1 2RE UK
Tel: +44 203 283 4200
(Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices)



National Corporate Research, Ltd.
10 East 40th Street, 10th Floor
New York, New York 10016
+1 800 221-0102

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

Copies of all communications, including communications sent to agent for service, should be sent to:

Peter N. Handrinos
Nathan Ajiashvili
Latham & Watkins LLP
200 Clarendon Street
Boston, Massachusetts 02116
+1 617 948-6000

 

Claire A. Keast-Butler
Latham & Watkins LLP
99 Bishopsgate
London EC2M 3XF
United Kingdom
+44 20 7710-1000

 

Jonathan Parry
White & Case LLP
5 Old Broad Street
London EC2N 1DW
United Kingdom
+44 20 7532-1000

 

Divakar Gupta
Brent B. Siler
Charles S. Kim
Cooley LLP
1114 Avenue of the Americas
New York, New York 10036
+1 212 479-6000

Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective.

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, 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 an emerging growth company as defined in Rule 405 of the Securities Act of 1933.

    Emerging growth company    ý

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 7(a)(2)(B) of the Securities Act.    o



CALCULATION OF REGISTRATION FEE

             
   
TITLE OF EACH CLASS OF SECURITIES
TO BE REGISTERED

  PROPOSED MAXIMUM
AGGREGATE OFFERING
PRICE
(2)(3)
  AMOUNT OF
REGISTRATION FEE
(4)
 
   

Ordinary shares, nominal value £0.05 per share(1)

  $ 86,256,944   $ 9,998  

 

 
(1)
In the U.S. offering, all ordinary shares are in the form of American Depositary Shares, or ADSs, with each ADS representing eight ordinary shares. ADSs issuable upon deposit of the ordinary shares registered hereby are registered pursuant to a separate registration statement on Form F-6.

(2)
Estimated solely for the purpose of calculating the amount of the registration fee pursuant to Rule 457(o) of the Securities Act of 1933, as amended.

(3)
Includes (a) additional ordinary shares which the underwriters have the option to purchase and (b) ordinary shares which are being offered in a private placement in Europe and other countries outside of the United States and Canada but which may be resold from time to time in the United States in transactions requiring registration under the Securities Act or exemption therefrom. The total number of ordinary shares in the U.S. offering and the European private placement is subject to reallocation between them. All or part of the ordinary shares may be in the form of ADSs in the U.S. offering.

(4)
Of this amount, $9,997 has been previously paid.



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 which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.


   

The term "new or revised financial accounting standard" refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.


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The information in this preliminary prospectus is not complete and may be changed. This preliminary prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state or jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION, Dated April 18, 2017

PRELIMINARY PROSPECTUS

44,481,617 Ordinary Shares

(including Ordinary Shares in the form of American Depositary Shares)

LOGO

£                    per Ordinary Share
$               per American Depositary Share



We are offering 44,481,617 of our ordinary shares in a global offering.

We are offering 4,448,162 American Depositary Shares, or ADSs, through the underwriters named in this prospectus, or the U.S. offering. Each ADS represents eight ordinary shares. This is our initial public offering of our ADSs, and no public market currently exists for our ADSs. We have applied to list our ADSs on The NASDAQ Global Market under the symbol "VRNA."

We are offering 8,896,321 ordinary shares through the underwriters named in this prospectus in Europe and countries outside of the United States and Canada in a concurrent private placement, or the European private placement.

The closing of each of the U.S. offering and the European private placement, together referred to as the global offering, will be conditioned upon the other. The total number of ordinary shares in the U.S. offering and the European private placement is subject to reallocation between them.

Our ordinary shares trade on AIM, a market of the London Stock Exchange, under the symbol "VRP." On April 13, 2017, the last reported sale price of our ordinary shares on AIM was £1.36 per ordinary share (equivalent to $13.49 per ADS based on an assumed exchange rate of £1.00 to $1.2398).

Investing in our ordinary shares and ADSs involves risks. See "Risk Factors" beginning on page 12 of this prospectus.

We are an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012 and, as such, will be eligible for reduced public company disclosure requirements. Please see "Prospectus Summary—Implications of Being an Emerging Growth Company and a Foreign Private Issuer" for additional information.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed on the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.


 
  PER SHARE   PER ADS   TOTAL  

Public offering price

  £     $     $    

Underwriting discounts and commissions(1)

  £     $     $    

Proceeds to Verona Pharma plc, before expenses

  £     $     $    

(1)
See "Underwriting" for additional information regarding underwriting compensation.

Our existing institutional investors affiliated with certain of our directors have indicated an interest in purchasing securities offered in the global offering on the same terms as the other purchasers in the global offering. However, because indications of interest are not binding agreements or commitments to purchase, the underwriters may determine to sell more, less or no securities offered in the global offering to any of these investors, or any of these investors may determine to purchase more, less or no securities offered in the global offering. See "Prospectus Summary—The Global Offering."

In addition, our chairman of the board of directors and an existing shareholder have indicated an interest in purchasing up to an aggregate of approximately £335,400 (or the U.S. dollar equivalent) of our ordinary shares in a private placement separate from the global offering, or the shareholder private placement, contingent on and concurrent with the completion of the global offering at a price per share equal to the offering price per ordinary share in the European private placement. However, because indications of interest are not binding agreements or commitments to purchase, these shareholders may determine to purchase more, less or no shares in the proposed shareholder private placement. The underwriters will serve as placement agents for such shareholder private placement and receive a placement agent fee equal to a percentage of the total purchase price of the private placement shares, which percentage will be equal to the percentage discount the underwriters will receive on shares sold in this global offering. The closing of this global offering is not conditioned upon the closing of such shareholder private placement.

Delivery of our ADSs in the U.S. offering is expected to be made on or about                         , 2017. Delivery of our ordinary shares in the European private placement is expected to be made on or about                              , 2017. We have granted the underwriters an option for a period of 30 days to purchase an additional 667,224 ADSs in the U.S. offering and 1,334,448 ordinary shares in the European private placement. If the underwriters exercise these options in full, the total underwriting discounts and commissions payable by us will be $               , and the total proceeds to us, before expenses, will be $               .

Jefferies   Stifel

Wedbush PacGrow

SunTrust Robinson Humphrey

   

Prospectus dated                             , 2017


Table of Contents


TABLE OF CONTENTS

About This Prospectus

    ii  

Presentation of Financial Information

    ii  

Prospectus Summary

    1  

Risk Factors

    12  

Cautionary Statement Regarding Forward-Looking Statements

    56  

Market and Industry Data

    57  

Trademarks, Service Marks and Tradenames

    57  

Exchange Rate Information

    58  

Price Range of Our Ordinary Shares

    59  

Use of Proceeds

    60  

Dividend Policy

    62  

Capitalization

    63  

Dilution

    65  

Selected Consolidated Financial Data

    68  

Management's Discussion and Analysis of Financial Condition and Results of Operations

    69  

Business

    80  

Management

    123  

Principal Shareholders

    139  

Related Party Transactions

    143  

Description of Share Capital and Articles of Association

    146  

Description of American Depositary Shares

    164  

Ordinary Shares and ADSs Eligible for Future Sale

    174  

Material Tax Considerations

    176  

Underwriting

    184  

Expenses of The Global Offering

    193  

Legal Matters

    194  

Auditors

    194  

Experts

    194  

Service of Process and Enforcement of Liabilities

    194  

Where You Can Find More Information

    197  

Index to Consolidated Financial Statements

    F-1  

We are responsible for the information contained in this prospectus and any free-writing prospectus we prepare or authorize. We have not, and the underwriters have not, authorized anyone to provide you with different information, and we and the underwriters take no responsibility for any other information others may give you. We are not, and the underwriters are not, making an offer to sell our ADSs or ordinary shares in any jurisdiction where the offer or sale is not permitted. You should not assume that the information contained in this prospectus is accurate as of any date other than the date on the front cover of this prospectus, regardless of the time of delivery of this prospectus or the sale of any ADSs or ordinary shares.

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

We are a public limited company incorporated under the laws of England and Wales and a majority of our outstanding securities are owned by non-U.S. residents. Under the rules of the U.S. Securities and Exchange Commission, or the SEC, we are currently eligible for treatment as a "foreign private issuer." As a foreign private issuer, we will not be required to file periodic reports and financial statements with the SEC as frequently or as promptly as domestic registrants whose securities are registered under the Securities Exchange Act of 1934, as amended.

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ABOUT THIS PROSPECTUS

Unless otherwise indicated or the context otherwise requires, all references in this prospectus to the terms "Verona," the "Company," "we," "us" and "our" refer to Verona Pharma plc and our wholly owned subsidiaries Verona Pharma, Inc. and Rhinopharma Limited.


PRESENTATION OF FINANCIAL INFORMATION

This prospectus includes our audited consolidated financial statements as of and for the years ended December 31, 2015 and 2016 prepared in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB. We refer to these consolidated financial statements collectively as the "Annual Consolidated Financial Statements." None of our financial statements were prepared in accordance with U.S. GAAP.

Our financial information is presented in pounds sterling. For the convenience of the reader, in this prospectus, unless otherwise indicated, translations from pounds sterling into U.S. dollars were made at the rate of £1.00 to $1.2398, which was the noon buying rate of the Federal Reserve Bank of New York on April 7, 2017. However, where indicated, we have translated some of our historical financial information from pounds sterling into U.S. dollars at the rate of £1.00 to $1.2337, which was the noon buying rate of the Federal Reserve Bank of New York on December 30, 2016. Such U.S. dollar amounts are not necessarily indicative of the amounts of U.S. dollars that could actually have been purchased upon exchange of pounds sterling at the dates indicated. All references in this prospectus to "$" mean U.S. dollars and all references to "£" and "GBP" mean pounds sterling.

We have made rounding adjustments to some of the figures included in this prospectus. Accordingly, numerical figures shown as totals in some tables may not be an arithmetic aggregation of the figures that preceded them.

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PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus. This summary may not contain all the information that may be important to you, and we urge you to read this entire prospectus carefully, including "Risk Factors," "Business," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements, including the notes thereto, before deciding to invest in our ADSs or ordinary shares.

Overview

We are a clinical-stage biopharmaceutical company focused on developing and commercializing innovative therapeutics for the treatment of respiratory diseases with significant unmet medical needs. Our product candidate, RPL554, is a first-in-class, inhaled, dual inhibitor of the enzymes phosphodiesterase 3 and 4, or PDE3 and PDE4, that acts as both a bronchodilator and an anti-inflammatory agent in a single compound. We believe RPL554 has the potential to be the first novel class of bronchodilator in over 40 years. We have completed eight Phase 1 and 2a clinical trials for RPL554, with 282 subjects enrolled. In our clinical trials, treatment with RPL554 has been observed to result in statistically significant improvements in lung function as compared to placebo and has shown clinically meaningful and statistically significant improvements in lung function when added to two commonly used bronchodilators as compared to either bronchodilator administered as a single agent. Statistically significant means that there is a low statistical probability, typically less than 5%, that the observed results occurred by chance alone. RPL554 also has shown anti-inflammatory effects and been well tolerated in our clinical trials, and has not been observed to result in the gastrointestinal or other side effects commonly associated with roflumilast, the only PDE4 inhibitor currently on the market for the treatment of chronic obstructive pulmonary disease, or COPD.

We are developing RPL554 for the treatment of patients with COPD. We believe there is an urgent and unmet medical need for new and more effective treatments for COPD to reduce the number and burden of symptoms, reduce acute periods of worsening symptoms, or exacerbations, and establish a consistent and durable treatment response. We are also developing RPL554 for the treatment of cystic fibrosis, or CF, a fatal inherited disease where we believe the bronchodilatory and anti-inflammatory effects of RPL554 may be beneficial. We believe RPL554, if approved, has the potential to become an important and novel treatment and standard of care for COPD and CF patients. We may also explore, alone or with a collaborator, the development of RPL554 to treat asthma and other respiratory diseases.

We are developing RPL554 in a nebulized formulation for the maintenance treatment of COPD patients as a single agent and add-on therapy and for the treatment of CF. We also are developing RPL554 in a nebulized formulation as an add-on therapy to short-acting bronchodilators and other commonly used therapies for the treatment of hospitalized patients with acute exacerbations of COPD.

We plan to commence a four-week Phase 2b dose ranging clinical trial to evaluate RPL554 for the maintenance treatment of COPD in the second half of 2017. In this trial, we plan to compare the use of RPL554 in a nebulized formulation to placebo in approximately 400 patients. We expect to report top-line data from this trial in the second half of 2018. In February 2017, we commenced a Phase 2a clinical trial of RPL554 for the maintenance treatment of COPD in the United Kingdom. This trial is evaluating RPL554 as an add-on therapy to tiotropium, a commonly used long-acting bronchodilator, in approximately 30 patients. We expect to report top-line data from this trial in the fourth quarter of 2017. We also plan to commence a single-dose pharmacokinetic, or PK, trial of RPL554 in approximately 12 healthy volunteers in the United States in mid-2017. We expect to report top-line data from this trial in the fourth quarter of 2017. A PK trial involves the study of the process of bodily absorption, distribution, metabolism and excretion of a drug. In addition, we plan to commence a 12-week Phase 2b dose-ranging clinical trial of RPL554 for the maintenance treatment of COPD in the second half of 2018. In this trial, we plan to evaluate RPL554 as an add-on therapy to a long-acting bronchodilator in approximately 400 patients.

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We plan to commence a Phase 2 trial of RPL554 for the treatment of acute exacerbations of COPD in hospitalized patients in the second half of 2018. In this trial, we plan to evaluate RPL554 in a nebulized formulation as an add-on therapy in approximately 150 patients.

In March 2017, we commenced a Phase 2a single-dose PK and pharmacodynamics, or PD, trial in the United Kingdom evaluating RPL554 in up to ten CF patients and expect to report top-line data from this trial in the first half of 2018. A PD trial involves the study of the biochemical and physiological effects of a drug and its mechanisms of action, including the correlation of the drug's actions and effects with its mechanism of action. The results of this clinical trial are expected to support dose selection for a proof-of-concept Phase 2b trial in approximately 100 patients with CF, which we plan to commence in 2018.

In addition to our nebulized formulation of RPL554, we are developing RPL554 in both dry powder inhaler, or DPI, and metered dose inhaler, or MDI, formulations for the maintenance treatment of COPD. We may explore the development of RPL554 in these formulations for the treatment of asthma and other respiratory diseases.

According to the World Health Organization, over one billion people suffer from chronic respiratory diseases. Among the most common of these afflictions is COPD, which is a progressive respiratory disease for which there is no cure. COPD damages the airways and the lungs and leads to shortness of breath, impacting a person's ability to perform daily activities. In some cases, patients experience acute exacerbations, which are estimated to cause approximately 1.5 million emergency department visits, 687,000 hospitalizations and 129,000 deaths per year in the United States alone. According to the World Health Organization, COPD is the third leading cause of death globally, with 210 million people worldwide suffering from the disease. Global sales of drugs currently indicated for COPD were $10.6 billion in 2016 and are expected to grow to $15.6 billion in 2019.

According to the Cystic Fibrosis Foundation, more than 30,000 people in the United States and more than 70,000 people worldwide are living with CF and approximately 1,000 new cases of CF are diagnosed each year. CF is the most common fatal inherited disease in the United States and Europe. CF causes impaired lung function and is commonly associated with repeat and persistent lung infections due to the inability to clear thickened phlegm, or mucus, from the lung. This condition often results in frequent exacerbations and hospitalizations. There is no cure for CF and the median age of death for CF patients is 37 years. CF is considered a rare, or orphan, disease by both the U.S. Food and Drug Administration, or FDA, and the European Medicines Agency, or EMA.

By inhibiting PDE3 and PDE4, RPL554 increases the levels of two critical intracellular messengers, resulting in bronchodilator and anti-inflammatory effects. RPL554 also stimulates the cystic fibrosis transmembrane conductance regulator, or CFTR, which is an ion channel in the epithelial cells lining the airways. Mutations in the CFTR protein result in poorly or non-functioning ion channels, which cause CF and are potentially important in COPD. Dual inhibition of PDE3 and PDE4 has been observed to be more effective than inhibition of either PDE alone at relaxing airway smooth muscle cells and suppressing the activation and functions of pro-inflammatory cells residing in the lung, both of which are recognized to play a significant role in COPD and CF.

In our clinical trials, RPL554 has shown rapid onset and durable bronchodilation in healthy subjects and patients with COPD when inhaled from a nebulizer. In addition, RPL554 has been observed to be complementary and additive when administered as an add-on therapy to other currently marketed bronchodilators. Our most recent clinical trial of RPL554 was a Phase 2a clinical trial in 36 patients with COPD. Our primary objective in this clinical trial was to evaluate the improvement in lung function, as measured by the maximal volume of air a person can forcefully exhale in one second, or FEV1, and the duration of action of RPL554. We evaluated RPL554 administered as a single agent as compared to placebo and two commonly used bronchodilators, albuterol, also known as salbutamol and marketed as

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Ventolin, and ipratropium, marketed as Atrovent. We also evaluated RPL554 administered as an add-on therapy to either albuterol or ipratropium, in each case as compared to albuterol or ipratropium alone.

We have worldwide commercialization rights for RPL554. We have raised £74.6 million in gross proceeds from investors since our listing on AIM in 2006, of which £44.7 million was raised in our most recent private placement of equity securities in July 2016 with a number of European and U.S.-based healthcare specialist investment firms. Members of our management team and board of directors have extensive experience in large pharmaceutical and biotechnology companies in respiratory product development from drug discovery through commercialization and have played important roles in the development and commercialization of several approved respiratory treatments, including Symbicort, Daliresp/Daxas, Spiriva and Flutiform.

Product Candidate Pipeline

The following table depicts the potential indications for RPL554 and their current development status:

GRAPHIC

Our Strategy

We intend to become a leading biopharmaceutical company focused on the treatment of respiratory diseases with significant unmet medical needs. The key elements of our strategy to achieve this goal include:

    §
    Rapidly advance the development of nebulized RPL554 for the maintenance treatment of COPD.  We are developing RPL554 for the maintenance treatment of COPD. We plan to commence a four-week Phase 2b dose ranging clinical trial to evaluate RPL554 for the maintenance treatment of COPD in the second half of 2017. In this trial, we plan to compare the use of RPL554 in a nebulized formulation to placebo in approximately 400 patients. We expect to report top-line data from this trial in the second half of 2018. In February 2017, we commenced a Phase 2a clinical trial of RPL554 for the maintenance treatment of COPD in the United Kingdom. This trial is evaluating RPL554 as an add-on therapy to tiotropium in approximately 30 patients. We expect to report top-line data from this trial in the fourth quarter of 2017. We also plan to commence a PK trial of

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      RPL554 in approximately 12 healthy volunteers in the United States in mid-2017. We expect to report top-line data from this trial in the fourth quarter of 2017. In addition, we plan to commence a 12-week Phase 2b dose-ranging clinical trial of RPL554 for the maintenance treatment of COPD in the second half of 2018. In this trial, we plan to evaluate RPL554 as an add-on therapy to a long-acting bronchodilator in approximately 400 patients.

    §
    Rapidly advance the development of nebulized RPL554 for the treatment of acute exacerbations of COPD.  We also are developing RPL554 as an add-on therapy to short-acting bronchodilators and other commonly used therapies for the treatment of hospitalized patients with acute exacerbations of COPD. We plan to commence a Phase 2 clinical trial in the United States for RPL554 in this indication in approximately 150 patients in the second half of 2018.

    §
    Develop RPL554 for the treatment of CF.  In March 2017, we commenced a Phase 2a single-dose trial in the United Kingdom evaluating RPL554 in up to ten CF patients to evaluate the PK and PD profile and tolerability of RPL554, as well as examine the effect on lung function. We expect to report top-line data from this trial in the first half of 2018. The results of this clinical trial are expected to support dose selection for a proof-of-concept Phase 2b trial in approximately 100 patients with CF, which we plan to commence in 2018.

    §
    Develop DPI and MDI formulations of RPL554.  In addition to our nebulized formulation of RPL554, we are developing RPL554 in both DPI and MDI formulations for the maintenance treatment of COPD. We believe the development of DPI and MDI formulations has the potential to significantly increase the market opportunity for RPL554, if approved, for the maintenance treatment of COPD. In addition, we may explore the development of RPL554 in these formulations for the treatment of asthma. Following the completion of our DPI and MDI formulation process, we plan to commence pre-clinical studies for RPL554 in these formulations in 2018.

    §
    Pursue development of RPL554 in other forms of respiratory disease.  We believe that RPL554's properties as an inhaled, dual inhibitor of PDE3 and PDE4 give it broad potential applicability in the treatment of other respiratory diseases. We may explore development of RPL554 to treat other forms of respiratory disease following development of RPL554 for the treatment of COPD and CF.

    §
    Seek strategic collaborative relationships.  We may seek strategic collaborations with market-leading biopharmaceutical companies to develop and commercialize RPL554. We believe these collaborations could provide significant funding to advance the development of RPL554 while allowing us to benefit from the development or commercialization expertise of our collaborators.

    §
    Acquire or in-license product candidates for the treatment of respiratory diseases.  We plan to leverage our respiratory disease expertise to identify and in-license or acquire additional clinical-stage product candidates that we believe have the potential to become novel treatments for respiratory diseases with significant unmet medical needs.

Corporate Information

We were incorporated in February 2005 under the laws of England and Wales with the Registrar of Companies of England and Wales under the name Isis Resources plc. In September 2006, we acquired Rhinopharma Limited, or Rhinopharma, a private company incorporated in Canada, and changed our name to Verona Pharma plc. Our principal office is located at 3 More London Riverside, London SE1 2RE, United Kingdom, and our telephone number is +(44) 203 283 4200. Since September 2006, our ordinary shares have traded on AIM, a market of the London Stock Exchange, under the symbol "VRP." Our website address is www.veronapharma.com. The information contained on, or that can be accessed from, our website does not form part of this prospectus. Our agent for service of process in the United States is National Corporate Research, Ltd.

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Risks Associated with Our Business

Our business is subject to a number of risks of which you should be aware before making an investment decision. You should carefully consider all of the information set forth in this prospectus and, in particular, should evaluate the specific factors set forth under "Risk Factors" in deciding whether to invest in our ADSs or ordinary shares. Among these important risks are the following:

    §
    We have a limited operating history, have never generated any product revenue, have incurred significant operating losses since our inception, expect to incur significant operating losses for the foreseeable future and may never achieve or maintain profitability.

    §
    We will need additional funding to complete the development and commercialization of RPL554, if approved, and if we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our product development programs or commercialization efforts.

    §
    We depend heavily on the success of RPL554, our only product candidate, and we cannot give any assurance that RPL554 will receive regulatory approval for any indication, which is necessary before it can be commercialized.

    §
    We may encounter regulatory changes that delay or impede our development and commercialization efforts.

    §
    We rely, and expect to continue to rely, on third parties to conduct our clinical trials and to manufacture our product candidates for pre-clinical and clinical testing, and those third parties may not perform satisfactorily, which could delay our product development activities.

    §
    If we are unable to adequately protect our technology, or to secure and maintain freedom to operate or issued patents protecting our product candidates, others could preclude us from commercializing our technology and products or compete against us more directly.

    §
    We face significant competition from other biotechnology and pharmaceutical companies.

    §
    Our future growth and ability to compete depends on retaining our key personnel and recruiting additional qualified personnel.

    §
    If we are classified as a passive foreign investment company in any taxable year, it may result in adverse U.S. federal income tax consequences to U.S. holders of our ADSs or ordinary shares.

    §
    As a foreign private issuer, we are exempt from a number of rules under the U.S. securities laws and NASDAQ Stock Market corporate governance rules and are permitted to file less information with the Securities and Exchange Commission, or the SEC, than U.S. companies, which may limit the information available to holders of our ADSs and ordinary shares.

Implications of Being an Emerging Growth Company and a Foreign Private Issuer

Emerging Growth Company

We are an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As such, we may take advantage of certain exemptions from various reporting requirements that are applicable to other publicly traded entities that are not emerging growth companies. These exemptions include:

    §
    the option 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 this prospectus;

    §
    not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002;

    §
    not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board, or PCAOB, regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis);

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    §
    not being required to submit certain executive compensation matters to stockholder advisory votes, such as "say-on-pay," "say-on-frequency" and "say-on-golden parachutes;" and

    §
    not being required to disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the chief executive officer's compensation to median employee compensation.

As a result, we do not know if some investors will find our ADSs or ordinary shares less attractive. The result may be a less active trading market for our ADSs and ordinary shares, and the price of our ADSs and ordinary shares may become more volatile.

Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 13(a) of the Securities Exchange Act of 1934, as amended, or the Exchange 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 are choosing to irrevocably opt out of this extended transition period and as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Under federal securities laws, our decision to opt out of the extended transition period is irrevocable.

We will remain an emerging growth company until the earliest of: (i) the last day of the first fiscal year in which our annual gross revenues exceed $1 billion; (ii) the last day of the fiscal year following the fifth anniversary of the completion of the global offering; (iii) the date that we become a "large accelerated filer" as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common equity held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter; or (iv) the date on which we have issued more than $1 billion in non-convertible debt securities during any three-year period.

Foreign Private Issuer

Upon the completion of the global offering, we will report under the Exchange Act as a non-U.S. company with foreign private issuer status. Even after we no longer qualify as an emerging growth company, as long as we qualify as a foreign private issuer under the Exchange Act we will be exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including:

    §
    the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act;

    §
    the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and

    §
    the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specific information, or current reports on Form 8-K, upon the occurrence of specified significant events.

Both foreign private issuers and emerging growth companies also are exempt from certain more stringent executive compensation disclosure rules. Thus, even if we no longer qualify as an emerging growth company, but remain a foreign private issuer, we will continue to be exempt from the more stringent compensation disclosures required of companies that are neither an emerging growth company nor a foreign private issuer.

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The Global Offering

Global offering

  44,481,617 ordinary shares offered by us, consisting of ordinary shares in the form of ADSs offered in the U.S. offering and ordinary shares offered in the European private placement. The closing of each of the U.S. offering and the European private placement is conditioned upon the other. The total number of ordinary shares in the U.S. offering and European private placement is subject to reallocation between these offerings as permitted under the applicable laws and regulations.

U.S. offering

 

4,448,162 ADSs, each ADS representing eight ordinary shares

European private placement

 

8,896,321 ordinary shares

Ordinary shares to be outstanding immediately after the global offering and the shareholder private placement

 

96,089,306 ordinary shares (including 246,625 ordinary shares to be issued in the shareholder private placement based on the assumed offering price of £1.36 per ordinary share)

Option to purchase additional ADSs in the U.S. offering

 

We have granted the underwriters an option to purchase up to an additional 667,224 ADSs from us within 30 days of the date of this prospectus.

Option to purchase additional ordinary shares in the European private placement

 

We have granted the underwriters an option to purchase up to an additional 1,334,448 ordinary shares from us within 30 days of the date of this prospectus.

Assumed offering price

 

On April 13, 2017, the last reported sale price of our ordinary shares on AIM was £1.36 per ordinary share (equivalent to $13.49 per ADS). For a discussion of the factors considered in determining the initial public offering price of our ADSs and ordinary shares, see "Underwriting" in this prospectus.

American Depositary Shares

 

Each ADS represents eight ordinary shares, nominal value £0.05 per share. As an ADS holder you will not be treated as one of our shareholders and you will not have shareholder rights. You will have the rights of an ADS holder or beneficial owner (as applicable) as provided in the deposit agreement among us, the depositary and holders and beneficial owners of ADSs from time to time. To better understand the terms of our ADSs, see "Description of American Depositary Shares." We also encourage you to read the deposit agreement, the form of which is filed as an exhibit to the registration statement of which this prospectus forms a part.

Depositary

 

Citibank, N.A.

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Use of proceeds

 

We estimate that the net proceeds to us from the global offering and shareholder private placement will be approximately $66.6 million (or approximately $77.1 million if the underwriters exercise in full their options to purchase an additional 667,224 ADSs and 1,334,448 ordinary shares), based on an assumed initial public offering price of $13.49 per ADS in the U.S. offering and an assumed offering price of £1.36 per ordinary share in the European private placement and shareholder private placement, which reflects the last reported sale price of our ordinary shares on AIM, after deducting the estimated underwriting discounts and commissions, estimated placement agent fees and estimated offering expenses payable by us. We intend to use the net proceeds from the global offering and shareholder private placement, together with our cash and cash equivalents, to fund our planned clinical trials of RPL554 for the treatment of COPD and CF, current and future research and development activities and for working capital and other general corporate purposes. See "Use of Proceeds."

Risk factors

 

See "Risk Factors" and the other information included in this prospectus for a discussion of factors you should consider before deciding to invest in our ADSs or ordinary shares.

Proposed NASDAQ trading symbol for ADSs

 

"VRNA"

AIM trading symbol

 

"VRP"

The number of our ordinary shares to be outstanding after the global offering and the shareholder private placement is based on 51,361,064 ordinary shares outstanding as of March 31, 2017 and excludes:

    §
    2,804,000 ordinary shares issuable upon the exercise of share options outstanding as of March 31, 2017 at a weighted average exercise price of £1.90 per share;

    §
    6,333,000 ordinary shares that may be issued under our 2017 Incentive Award Plan, or the New Incentive Plan, which will become effective upon the pricing of the global offering, including ordinary shares underlying restricted share units and options that we intend to grant in connection with this global offering to each of our executive officers and a director, as more fully described in "Management—Equity Compensation Arrangements—2017 Incentive Award Plan—2017 Grants," as well as ordinary shares that may be issued pursuant to provisions in our New Incentive Plan that automatically increase the share reserve under our New Incentive Plan;

    §
    2,332,106 ordinary shares that may be issued under our existing equity incentive plans as of March 31, 2017; and

    §
    12,646,370 ordinary shares issuable upon the exercise of warrants outstanding as of March 31, 2017 at a weighted average exercise price of £1.7174 per share.

Unless otherwise indicated, all information contained in this prospectus assumes or gives effect to:

    §
    a 50-for-one share consolidation in which we consolidated every 50 existing ordinary shares, nominal value £0.001 per share, in our issued share capital into one ordinary share, nominal value £0.05 per share, effected February 10, 2017;

    §
    no exercise of the outstanding options or warrants described above after March 31, 2017; and

    §
    no exercise by the underwriters of their options to purchase additional ADSs and ordinary shares.

Participation in the Global Offering

Our existing institutional investors affiliated with certain of our directors have indicated an interest in purchasing up to an aggregate of approximately $23 million (or the pounds sterling equivalent) of the

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securities offered in the global offering on the same terms as the other purchasers in the global offering. However, because indications of interest are not binding agreements or commitments to purchase, the underwriters may determine to sell more, less or no securities offered in the global offering to any of these investors, or any of these investors may determine to purchase more, less or no securities offered in the global offering. The underwriters will receive the same underwriting discount on any securities purchased by these investors as they will on any other securities sold to the public in the global offering.

Shareholder Private Placement

Our chairman of the board of directors and an existing shareholder have indicated an interest in purchasing up to an aggregate of approximately £335,400 (or the U.S. dollar equivalent) of our ordinary shares in a private placement separate from the global offering, contingent on and concurrent with the completion of the global offering, at a price per share equal to the offering price per ordinary share in the European private placement. However, because indications of interest are not binding agreements or commitments to purchase, these shareholders may determine to purchase more, less or no shares in the proposed shareholder private placement. The underwriters will serve as placement agents for such shareholder private placement and receive a placement agent fee equal to a percentage of the total purchase price of the private placement shares, which percentage will be equal to the percentage discount the underwriters will receive on shares sold in this global offering. The closing of this global offering is not conditioned upon the closing of such shareholder private placement. There can be no assurance that the shareholder private placement will take place or that the terms of the shareholder private placement will be consistent with those assumed in this prospectus.

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Summary Consolidated Financial Data

The following tables set forth our summary consolidated financial data for the periods indicated. We have derived the consolidated statement of comprehensive income data for the years ended December 31, 2015 and 2016 and the consolidated statement of financial position data as of December 31, 2016 from our Annual Consolidated Financial Statements included elsewhere in this prospectus.

Our historical results are not necessarily indicative of the results that should be expected for any future period. You should read the following summary consolidated financial data together with the Annual Consolidated Financial Statements included elsewhere in this prospectus and the sections titled "Exchange Rate Information" and "Management's Discussion and Analysis of Financial Condition and Results of Operations."

We maintain our books and records in pounds sterling, and we prepare our financial statements in accordance with IFRS as issued by the IASB. We report our financial results in pounds sterling. For the convenience of the reader, we have translated pound sterling amounts in the tables below as of December 31, 2016 and for the years ended December 31, 2015 and 2016 into U.S. dollars at the noon buying rate of the Federal Reserve Bank of New York on December 30, 2016, which was £1.00 to $1.2337. These translations should not be considered representations that any such amounts have been, could have been or could be converted into U.S. dollars at that or any other exchange rate as of that or any other date.

 
  Year Ended December 31,  
 
  2015   2016  
 
  (£)   ($)   (£)   ($)  
 
  (in thousands, except per ordinary share data)
 

Consolidated statement of comprehensive income data:

                         

Research and development costs

    (7,269 )   (8,968 )   (4,522 )   (5,579 )

General and administrative costs

    (1,706 )   (2,105 )   (2,498 )   (3,082 )

Operating loss

    (8,975 )   (11,072 )   (7,020 )   (8,661 )

Finance income

    45     55     1,841     2,272  

Finance expense

    (72 )   (89 )   (794 )   (979 )

Loss before taxation

    (9,002 )   (11,106 )   (5,973 )   (7,368 )

Taxation — credit

    1,509     1,862     954     1,177  

Loss for the year

    (7,493 )   (9,244 )   (5,018 )   (6,191 )

Other comprehensive income:

                         

Exchange differences on translating foreign operations

    4     5     43     53  

Total comprehensive loss attributable to owners of the company

    (7,489 )   (9,239 )   (4,976 )   (6,139 )

Loss per ordinary share — basic and diluted

    (0.37 )   (0.46 )   (0.15 )   (0.19 )

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  As of December 31, 2016,  
 
  Actual   As Adjusted(1)(2)  
 
  (£)   ($)   (£)   ($)  
 
  (in thousands)
 

Consolidated statement of financial position data:

                         

Cash and cash equivalents

    39,785     49,083     93,539     115,399  

Total assets

    46,143     56,926     99,897     123,242  

Share premium

    58,527     72,204     110,044     135,761  

Total liabilities

    11,674     14,402     11,674     14,402  

Accumulated loss

    (28,728 )   (35,442 )   (28,728 )   (35,442 )

Total equity

    34,468     42,524     88,222     108,839  

(1)
The as adjusted statement of financial position data give effect to the sale by us of (i) 44,481,617 ordinary shares (including 35,585,296 ordinary shares in the form of ADSs) in the global offering at an assumed public offering price of $13.49 per ADS in the U.S. offering and £1.36 per ordinary share in the European private placement, which reflects the last reported sale price of our ordinary shares on AIM on April 13, 2017, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us and (ii) £335,400 (or the U.S. dollar equivalent) of ordinary shares in the shareholder private placement, after deducting the estimated placement agent fees. There can be no assurance that the shareholder private placement will take place or that the terms of the shareholder private placement will be consistent with those assumed in this prospectus.

(2)
This as adjusted information is illustrative only and will depend on the actual offering price and other terms of the global offering determined at pricing. Each £0.101 ($0.125) increase or decrease in the assumed offering price of £1.36 per ordinary share, which reflects the last reported sale price of our ordinary shares on AIM on April 13, 2017, would increase or decrease the as adjusted amount of each of cash and cash equivalents, total assets and total equity by £4.2 million ($5.2 million), assuming that the number of ordinary shares (including ordinary shares in the form of ADSs) offered by us in the global offering, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions. An increase or decrease of 5,000,000 in the number of ordinary shares (including ordinary shares in the form of ADSs) offered by us, as set forth on the cover page of this prospectus, would increase or decrease the as adjusted amount of each of cash and cash equivalents, total assets and total equity by £6.3 million ($7.8 million), assuming no change in the assumed public offering price per ADS or in the assumed offering price per ordinary share and after deducting the estimated underwriting discounts and commissions.

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RISK FACTORS

You should carefully consider the risks and uncertainties described below and the other information in this prospectus before making an investment in our ADSs or ordinary shares. Our business, financial condition, results of operations, or prospects could be materially and adversely affected if any of these risks occurs, and as a result, the market price of our ADSs or ordinary shares could decline and you could lose all or part of your investment. This prospectus also contains forward-looking statements that involve risks and uncertainties. See "Cautionary Statement Regarding Forward-Looking Statements." Our actual results could differ materially and adversely from those anticipated in these forward-looking statements as a result of certain factors.

Risks Related to Our Business and Industry

We have a limited operating history and have never generated any product revenue.

We are a clinical-stage biopharmaceutical company with a limited operating history, and have incurred significant operating losses since our inception. We had net losses of £7.5 million and £5.0 million for the years ended December 31, 2015 and 2016, respectively. As of December 31, 2016, we had an accumulated loss of £28.7 million. Our losses have resulted principally from expenses incurred in research and development of RPL554, our only product candidate, and from general and administrative costs that we have incurred while building our business infrastructure. We expect to continue to incur significant operating losses for the foreseeable future as we expand our research and development efforts and seek to obtain regulatory approval and commercialization for RPL554. We anticipate that our expenses will increase substantially as we:

    §
    conduct our ongoing Phase 2a clinical trial and initiate and conduct our planned Phase 2b and PK clinical trials and any other future clinical trials of RPL554 for the treatment of COPD;

    §
    develop RPL554 as DPI and MDI formulations for maintenance treatment of COPD, asthma and other respiratory diseases;

    §
    conduct our ongoing Phase 2a clinical trial and any future clinical trials of RPL554 for the treatment of CF;

    §
    seek to discover and develop or in-license additional respiratory product candidates;

    §
    seek regulatory approvals of RPL554;

    §
    potentially establish a sales, marketing and distribution infrastructure and scale-up manufacturing capabilities to commercialize RPL554, if approved;

    §
    maintain, expand and protect our intellectual property portfolio;

    §
    secure, maintain or obtain freedom to operate for our in-licensed technologies and products;

    §
    add clinical, scientific, operational, financial and management information systems and personnel, including personnel to support our product development and potential future commercialization efforts; and

    §
    expand our operations in the United States and the United Kingdom.

Our expenses may also increase substantially if we experience any delays or encounter any issues with any of the above, including, but not limited to, failed pre-clinical studies or clinical trials, complex results, safety issues or other regulatory challenges or an increase in the cost of manufacturing clinical and commercial supplies of RPL554 and related inhalation devices.

We have devoted substantially all of our financial resources and efforts to the research and development and pre-clinical studies and clinical trials of RPL554. We are in the early stages of development of RPL554, and we have not completed development of any product candidate or any drugs.

To become and remain profitable, we must succeed in developing, and eventually commercializing, products that generate significant revenue. This will require us to be successful in a range of challenging activities, including completing clinical trials of RPL554, discovering and developing additional product candidates,

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obtaining regulatory approval for RPL554 and any future product candidates that successfully complete clinical trials, establishing manufacturing and marketing capabilities and ultimately selling any products for which we may obtain regulatory approval. We are only in the preliminary stages of most of these activities. We may never succeed in these activities and, even if we do, we may never generate revenue that is significant enough to achieve profitability.

Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve profitability. If we are required by the FDA, the EMA, or other regulatory authorities to perform studies in addition to those we currently anticipate, or if there are any delays in completing our clinical trials or the development of RPL554 or any other product candidates, our expenses could increase and revenue could be further delayed.

Even if we do generate product royalties or product sales, we may never achieve or sustain profitability on a quarterly or annual basis. Our failure to sustain profitability would depress the market price of our ADSs and ordinary shares and could impair our ability to raise capital, expand our business, diversify our product offerings or continue our operations. A decline in the market price of our ADSs or ordinary shares also could cause you to lose all or a part of your investment.

We will need additional funding to complete development of RPL554 and any future product candidates, and to commercialize our products, if approved. If we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our product development programs or commercialization efforts.

We expect our expenses to increase in connection with our ongoing activities, particularly as we conduct our planned Phase 2 clinical trials and any other future clinical trials of RPL554 and develop RPL554 for other indications. In addition, if we obtain regulatory approval for RPL554 or any other product candidates, we expect to incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution. Furthermore, upon the closing of the global offering, we expect to incur additional costs associated with operating as a public company in the United Kingdom and the United States and maintaining a listing on both AIM and NASDAQ. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce or eliminate our research and development programs or any future commercialization efforts.

We expect that our existing cash, cash equivalents and investments, together with anticipated net proceeds from the global offering and the shareholder private placement, will enable us to fund our operating expenses and capital expenditure requirements for at least the next 12 months. We anticipate these funds will be sufficient for the completion of (i) our two planned Phase 2b clinical trials, our planned PK clinical trial and our ongoing Phase 2a clinical trial of RPL554 for the maintenance treatment of COPD, (ii) our planned Phase 2 clinical trial of RPL554 for the treatment of acute exacerbations of COPD and (iii) our ongoing Phase 2a clinical trial and our planned Phase 2b proof-of-concept trial of RPL554 for the treatment of CF. We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect, or our operating plan may change as a result of many factors unknown to us. These factors, among others, may necessitate that we seek additional capital sooner than currently planned. In addition, we may seek additional capital due to favorable market conditions or strategic considerations, even if we believe we have sufficient funds for our current or future operating plans.

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

    §
    the cost, progress and results of our ongoing Phase 2a clinical trials, our planned Phase 2b and PK clinical trials and any other future clinical trials of RPL554 for the treatment of COPD and CF;

    §
    the cost of manufacturing clinical and commercial supplies of RPL554 and related inhalation devices;

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    §
    the scope, progress, results and costs of pre-clinical development, laboratory testing and clinical trials for RPL554 in other indications and for the development of DPI and MDI formulations of RPL554 for maintenance treatment of COPD and potentially asthma and other respiratory diseases;

    §
    the costs, timing and outcome of regulatory review of RPL554, including post-marketing studies that could be required by regulatory authorities;

    §
    the costs, timing and outcome of potential future commercialization activities, including manufacturing, marketing, sales and distribution, for RPL554;

    §
    the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims, including any claims by third parties that we are infringing upon their intellectual property rights;

    §
    the timing and amount of revenue, if any, received from commercial sales of RPL554;

    §
    the sales price and availability of adequate third-party coverage and reimbursement for RPL554;

    §
    the effect of competing technological and market developments; and

    §
    the extent to which we acquire or invest in businesses, products and technologies, including entering into licensing or collaboration arrangements for RPL554, although we currently have no commitments or agreements to complete any such transactions.

Any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize RPL554. In addition, we cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all. Moreover, the terms of any financing may adversely affect our business, the holdings or the rights of our shareholders, or the value of our ordinary shares or ADSs.

If we are unable to obtain funding on a timely basis, we may be required to significantly curtail, delay or discontinue our research and development programs relating to RPL554 or any commercialization efforts, be unable to expand our operations, or be unable to otherwise capitalize on our business opportunities, as desired, which could harm our business and potentially cause us to discontinue operations.

We depend heavily on the success of RPL554, our only product candidate under development. We cannot give any assurance that RPL554 will receive regulatory approval for any indication, which is necessary before it can be commercialized. If we, and any collaborators with whom we may enter into agreements for the development and commercialization of RPL554, are unable to commercialize RPL554, or experience significant delays in doing so, our ability to generate revenue and our financial condition will be adversely affected.

We do not currently generate any revenues from sales of any products, and we may never be able to develop or commercialize a marketable product. We have invested substantially all of our efforts and financial resources in the development of RPL554, and we do not have any other product candidate currently under development. Our ability to generate royalty and product revenues, which we do not expect will occur for at least the next several years, if ever, will depend heavily on the successful development and eventual commercialization of RPL554, if approved, which may never occur. RPL554 will require additional clinical development, management of clinical, pre-clinical and manufacturing activities, regulatory approval in multiple jurisdictions, procurement of manufacturing supply, commercialization, substantial additional investment and significant marketing efforts before we generate any revenues from product sales. We are not permitted to market or promote RPL554 or any product candidates in the United States, Europe or other countries before we receive regulatory approval from the FDA, the EMA or comparable foreign regulatory authorities, and we may never receive such regulatory approval for RPL554 or any future product candidate. We have not submitted a New Drug Application, or NDA, to the FDA, a Marketing Authorization Application, or MAA, to the EMA or comparable applications to other regulatory authorities and do not expect to be in a position to do so in the foreseeable future. The success of RPL554 will depend on many factors, including the following:

    §
    we may not be able to demonstrate that RPL554 is safe and effective as a treatment for our targeted indications to the satisfaction of the applicable regulatory authorities;

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    §
    the applicable regulatory authorities may require additional pre-clinical or clinical trials of RPL554 for the treatment of COPD, including for inhalation devices used in the development of RPL554, which would increase our costs and prolong our development;

    §
    the results of clinical trials of RPL554 may not meet the level of statistical or clinical significance required by the applicable regulatory authorities for marketing approval;

    §
    the applicable regulatory authorities may disagree with the number, design, size, conduct or implementation of our planned clinical trials;

    §
    the contract research organizations, or CROs, that we retain to conduct clinical trials may take actions outside of our control that materially adversely impact our clinical trials;

    §
    the applicable regulatory authorities may not find the data from pre-clinical studies and clinical trials sufficient to demonstrate that the clinical and other benefits of RPL554 outweigh its safety risks;

    §
    the applicable regulatory authorities may disagree with our interpretation of data from our pre-clinical studies and clinical trials or may require that we conduct additional studies;

    §
    the applicable regulatory authorities may not accept data generated at our clinical trial sites;

    §
    if we submit an NDA to the FDA, and it is reviewed by an advisory committee, the FDA may have difficulties scheduling an advisory committee meeting in a timely manner or the advisory committee may recommend against approval of our application or may recommend that the FDA require, as a condition of approval, additional pre-clinical studies or clinical trials, limitations on approved labeling or distribution and use restrictions;

    §
    the applicable regulatory authorities may require development of a risk evaluation and mitigation strategy, or REMS, as a condition of approval;

    §
    the applicable regulatory authorities may identify deficiencies in the manufacturing processes or facilities of our third-party manufacturers;

    §
    the applicable regulatory authorities may change its approval policies or adopt new regulations;

    §
    if we license RPL554 to others, the efforts of those parties in completing clinical trials of, receiving regulatory approval for and commercializing, RPL554;

    §
    through our clinical trials, we may discover factors that limit the commercial viability of RPL554 or make the commercialization of RPL554 unfeasible;

    §
    if we retain rights under a collaboration agreement for RPL554, our efforts in completing pre-clinical studies and clinical trials of, receiving marketing approvals for, establishing commercial manufacturing capabilities for and commercializing, RPL554; and

    §
    if approved, acceptance of RPL554 by patients, the medical community and third-party payors, effectively competing with other therapies, a continued acceptable safety profile following approval and qualifying for, maintaining, enforcing and defending our intellectual property rights and claims.

If we or our collaborators, as applicable, do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully commercialize RPL554.

We cannot be certain that RPL554 or any future product candidates will be successful in clinical trials or receive regulatory approval. Further, RPL554 or any future product candidates may not receive regulatory approval even if they are successful in clinical trials. If we do not receive regulatory approvals for RPL554 or any future product candidates, we may not be able to continue our operations. Even if we successfully obtain regulatory approvals to manufacture and market RPL554 or any future product candidates, our revenues will be dependent, in part, upon the size of the markets in the territories for which we gain regulatory approval and have commercial rights. If the markets for patient subsets that we are targeting are not as significant as we estimate, we may not generate significant revenues from sales of such products, if approved.

We plan to seek regulatory approval to commercialize RPL554 both in the United States and the EU, and potentially in additional foreign countries. While the scope of regulatory approval is similar in many countries, to obtain separate regulatory approval in multiple countries requires us to comply with the numerous and varying regulatory requirements of such countries regarding safety and efficacy and

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governing, among other things, clinical trials and commercial sales, pricing and distribution of RPL554, and we cannot predict success in these jurisdictions.

Our limited operating history may make it difficult for you to evaluate the success of our business to date and to assess our future viability.

Since our inception in 2005, we have devoted substantially all of our resources to developing RPL554, building our intellectual property portfolio, developing our supply chain, planning our business, raising capital and providing general and administrative support for these operations. We have completed multiple Phase 1 and 2 clinical trials for RPL554, but we have not yet demonstrated our ability to successfully complete any Phase 3 or other pivotal clinical trials, obtain regulatory approvals, manufacture a commercial scale product or arrange for a third party to do so on our behalf or conduct sales and marketing activities necessary for successful product commercialization. Additionally, we are not profitable and have incurred losses in each year since our inception, and we expect our financial condition and operating results to continue to fluctuate significantly from quarter to quarter and year to year due to a variety of factors, many of which are beyond our control. Consequently, any predictions you make about our future success or viability may not be as accurate as they could be if we had a longer operating history.

Raising additional capital may cause dilution to our holders, including purchasers of our ADSs or ordinary shares in the global offering, restrict our operations or require us to relinquish rights to our technologies or product candidates.

Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of securities offerings, debt financings, license and collaboration agreements and research grants. If we raise capital through securities offerings, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a holder of our ADSs or ordinary shares. Debt financing, if available, could result in fixed payment obligations, and we may be required to agree to certain restrictive covenants, such as limitations on our ability to incur additional debt, to acquire, sell or license intellectual property rights, to make capital expenditures, or to declare dividends, or other operating restrictions. If we raise additional funds through collaboration or licensing agreements, we may have to relinquish valuable rights to our technologies, future revenue streams or product candidates or grant licenses on terms that may not be favorable to us. In addition, we could also be required to seek funds through arrangements with collaborators or others at an earlier stage than otherwise would be desirable. If we raise funds through research grants, we may be subject to certain requirements, which may limit our ability to use the funds or require us to share information from our research and development. Raising additional capital through any of these or other means could adversely affect our business and the holdings or rights of our shareholders, and may cause the market price of our ADSs or ordinary shares to decline.

Our business may become subject to economic, political, regulatory and other risks associated with international operations.

As a company based in the United Kingdom, our business is subject to risks associated with conducting business internationally. Almost all of our suppliers and collaborative and clinical trial relationships are located outside the United States. Accordingly, our future results could be harmed by a variety of factors, including:

    §
    economic weakness, including inflation, or political instability in particular non-U.S. economies and markets;

    §
    differing and changing regulatory requirements for drug approvals in non-U.S. countries;

    §
    differing jurisdictions could present different issues for securing, maintaining or obtaining freedom to operate in such jurisdictions;

    §
    potentially reduced protection for intellectual property rights;

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    difficulties in compliance with non-U.S. laws and regulations;

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    changes in non-U.S. regulations and customs, tariffs and trade barriers;

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    §
    changes in non-U.S. currency exchange rates of the euro and currency controls;

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    changes in a specific country's or region's political or economic environment, including the implications of the recent decision of the eligible members of the U.K. electorate for the United Kingdom to withdraw from the EU;

    §
    trade protection measures, import or export licensing requirements or other restrictive actions by U.S. or non-U.S. governments;

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    differing reimbursement regimes and price controls in certain non-U.S. markets;

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    negative consequences from changes in tax laws;

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    compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;

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    workforce uncertainty in countries where labor unrest is more common than in the United States;

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    difficulties associated with staffing and managing international operations, including differing labor relations;

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    production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and

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    business interruptions resulting from geo-political actions, including war and terrorism, or natural disasters including earthquakes, typhoons, floods and fires.

The United Kingdom's withdrawal from the EU may have a negative effect on global economic conditions, financial markets and our business, which could reduce the price of our ADSs and ordinary shares.

Following the vote of a majority of the eligible members of the electorate in the United Kingdom to withdraw from the EU in a national referendum held on June 23, 2016, the U.K. government served notice under Article 50 of the Treaty of the European Union on March 29, 2017 to formally initiate a withdrawal process. The United Kingdom and the EU have a two-year period under Article 50 to negotiate the terms for withdrawal. Any extension of the negotiation period for withdrawal will require the consent of all of the remaining 27 member states.

The referendum and withdrawal have created significant uncertainty about the future relationship between the United Kingdom and the EU. Lack of clarity about future U.K. laws and regulations as the United Kingdom determines which EU-derived laws and regulations to replace or replicate as part of a withdrawal, including financial laws and regulations, tax and free trade agreements, intellectual property rights, supply chain logistics, environmental, health and safety laws and regulations, immigration laws and employment laws, could decrease foreign direct investment in the United Kingdom, increase costs, depress economic activity and restrict our access to capital. If the United Kingdom and the EU are unable to negotiate acceptable withdrawal terms or if other EU member states pursue withdrawal, barrier-free access between the United Kingdom and other EU member states or among the European economic area overall could be diminished or eliminated. These developments, or the perception that any of them could occur, have had and may continue to have a significant adverse effect on global economic conditions and the stability of global financial markets, and could significantly reduce global market liquidity and restrict the ability of key market participants to operate in certain financial markets. Asset valuations, currency exchange rates and credit ratings may be especially subject to increased market volatility. Any of these factors could have a significant adverse effect on our business, financial condition, results of operations and prospects.

Exchange rate fluctuations may materially affect our results of operations and financial condition.

Owing to the international scope of our operations, fluctuations in exchange rates, particularly between the pound sterling and the U.S. dollar, may adversely affect us. Although we are based in the United Kingdom, we source research and development, manufacturing, consulting and other services from the United States and the EU. Further, potential future revenue may be derived from abroad, particularly from the United States. As a result, our business and the price of our ADSs and ordinary shares may be affected by fluctuations in foreign exchange rates not only between the pound sterling and the U.S. dollar, but also the

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currencies of other countries, which may have a significant impact on our results of operations and cash flows from period to period. Currently, we do not have any exchange rate hedging arrangements in place.

Risks Related to Development, Clinical Testing and Regulatory Approval

Our only product candidate, RPL554, is in early-stage clinical development. Clinical drug development is a lengthy and expensive process with uncertain timelines and uncertain outcomes. If clinical trials of RPL554 are prolonged or delayed, or if RPL554 in later stage clinical trials fails to show the desired safety and efficacy, we or our collaborators may be unable to obtain required regulatory approvals and be unable to commercialize RPL554 on a timely basis, or at all.

To obtain the requisite regulatory approvals to market and sell RPL554, we or any collaborator for RPL554 must demonstrate through extensive pre-clinical studies and clinical trials that RPL554 is safe and effective in humans. 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 pre-clinical studies and early-stage clinical trials of RPL554 may not be predictive of the results of later-stage clinical trials. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through pre-clinical studies and initial clinical trials. A number of companies in the biopharmaceutical 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 trial results may not be successful.

We may experience delays in our ongoing clinical trials and we do not know whether planned clinical trials will begin on time, need to be redesigned, enroll patients on time or be completed on schedule, if at all. Our clinical trials can be delayed, suspended, or terminated for a variety of reasons, including the following:

    §
    delays in or failure to obtain regulatory approval to commence a trial;

    §
    delays in or failure to reach agreement on acceptable terms with prospective 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;

    §
    delays in or failure to obtain institutional review board, or IRB, approval at each site;

    §
    delays in or failure to recruit suitable patients to participate in a trial;

    §
    failure to have patients complete a trial or return for post-treatment follow-up;

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    clinical sites deviating from trial protocol or dropping out of a trial or committing gross misconduct or fraud;

    §
    adding new clinical trial sites;

    §
    unexpected technical issues during manufacture of RPL554 and the corresponding drug product;

    §
    inability to manufacture sufficient quantities of RPL554 for use in clinical trials, including failure or delay in obtaining regulatory approval for excipients used in the drug product, or inhalation devices used in the development of RPL554;

    §
    third-party actions claiming infringement by RPL554 in clinical trials inside or outside of the United States and obtaining injunctions interfering with our progress;

    §
    business interruptions resulting from geo-political actions, including war and terrorism, or natural disasters including earthquakes, typhoons, floods and fires;

    §
    safety or tolerability concerns causing us or our collaborators, as applicable, to suspend or terminate a trial if we or our collaborators find that the participants are being exposed to unacceptable health risks;

    §
    changes in regulatory requirements, policies and guidelines;

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    lower than anticipated retention rates of patients and volunteers in clinical trials;

    §
    our third-party research contractors failing to comply with regulatory requirements or to meet their contractual obligations to us in a timely manner, or at all;

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    delays in establishing the appropriate dosage levels or frequency of dosing or treatment in clinical trials;

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    §
    difficulty in certain countries in identifying the sub-populations that we are trying to treat in a particular trial, which may delay enrollment and reduce the power of a clinical trial to detect statistically significant results;

    §
    the quality or stability of RPL554 falling below acceptable standards for either safety or efficacy; and

    §
    discoveries that may reduce the commercial viability of RPL554.

We could encounter delays if a clinical trial is suspended or terminated by us, by the IRBs of the institutions in which such trials are being conducted, by the Data Review Committee or Data Safety Monitoring Board for such trial or by the FDA or other regulatory authorities. Such authorities may impose such a suspension or termination due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a drug, failure of our clinical trials to demonstrate adequate efficacy and safety, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial.

Moreover, principal investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and receive compensation in connection with such services. Under certain circumstances, we may be required to report some of these relationships to the FDA or other regulatory authority. The FDA or other regulatory authority may conclude that a financial relationship between us and a principal investigator has created a conflict of interest or otherwise affected interpretation of the study. The FDA or other regulatory authority may therefore question the integrity of the data generated at the applicable clinical trial site and the utility of the clinical trial itself may be jeopardized. This could result in a delay in approval, or rejection, of our marketing applications by the FDA or other regulatory authority, as the case may be, and may ultimately lead to the denial of marketing approval of RPL554.

If we experience delays in the completion of any clinical trial of RPL554 or any clinical trial of RPL554 is terminated, the commercial prospects of RPL554 may be harmed, and our ability to generate product revenues from RPL554, if any, will be delayed. Moreover, any delays in completing our clinical trials will increase our costs, slow down the development and approval process of RPL554 and jeopardize our ability to commence product sales and generate revenue, if any. Significant clinical trial delays could also allow our competitors to bring products to market before we do or shorten any periods during which we have the exclusive right to commercialize RPL554 and could impair our ability to commercialize RPL554. 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 RPL554.

Clinical trials must be conducted in accordance with the laws and regulations of the FDA, EU rules and regulations and other applicable regulatory authorities' legal requirements, regulations or guidelines, and are subject to oversight by these governmental agencies and IRBs at the medical institutions where the clinical trials are conducted. In addition, clinical trials must be conducted with supplies of RPL554 produced under current good manufacturing practice, or cGMP, requirements and other regulations. Furthermore, we rely on CROs and clinical trial sites to 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. We depend on our collaborators and on medical institutions and CROs to conduct our clinical trials in compliance with good clinical practice, or GCP, requirements. To the extent our collaborators or the CROs fail to enroll participants for our clinical trials, fail to conduct the study to GCP standards or are delayed for a significant time in the execution of trials, including achieving full enrollment, we may be affected by increased costs, program delays or both. In addition, clinical trials that are conducted in countries outside the EU and the United States may subject us to further delays and expenses as a result of increased shipment costs, additional regulatory requirements and the engagement of non-EU and non-U.S. CROs, as well as expose us to risks associated with clinical investigators who are unknown to the FDA or the EMA, and different standards of diagnosis, screening and medical care.

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RPL554 may have serious adverse, undesirable or unacceptable side effects which may delay or prevent marketing approval. If such side effects are identified during the development of RPL554 or following approval, if any, we may need to abandon our development of RPL554, the commercial profile of any approved label may be limited, or we may be subject to other significant negative consequences following marketing approval, if any.

Undesirable side effects that may be caused by RPL554 could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA, EMA or other comparable foreign authorities. We have completed eight Phase 1 and 2a clinical trials of RPL554. In these trials, some patients have experienced mild to moderate adverse reactions, including headache, dizziness, cough, heart palpitation, nausea, dry mouth, throat irritation, paresthesia (tingling) and rash. Results of our future clinical trials could reveal a high and unacceptable severity and prevalence of adverse side effects. In such an event, our trials could be suspended or terminated and the FDA, EMA or other comparable foreign regulatory authorities could order us to cease further development of or deny approval of RPL554 for any or all targeted indications. The 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. Additionally, if RPL554 receives marketing approval and we or others later identify undesirable or unacceptable side effects caused by RPL554, a number of potentially significant negative consequences could result, including:

    §
    regulatory authorities may withdraw approvals of such products and require us to take RPL554 off the market;

    §
    regulatory authorities may require the addition of labeling statements, specific warnings, a contraindication or field alerts to physicians and pharmacies;

    §
    regulatory authorities may require a medication guide outlining the risks of such side effects for distribution to patients, or that we implement a REMS plan to ensure that the benefits of RPL554 outweigh its risks;

    §
    we may be required to change the way RPL554 is administered, conduct additional clinical trials or change the labeling of RPL554;

    §
    we may be subject to limitations on how we may promote RPL554;

    §
    sales of RPL554 may decrease significantly;

    §
    we may be subject to litigation or product liability claims; and

    §
    our reputation may suffer.

Any of these events could prevent us or any collaborators from achieving or maintaining market acceptance of RPL554 or could substantially increase commercialization costs and expenses, which in turn could delay or prevent us from generating significant revenue from the sale of RPL554.

We depend on enrollment of patients in our clinical trials for RPL554. If we are unable to enroll patients in our clinical trials, or enrollment is slower than anticipated, our research and development efforts could be adversely affected.

Successful and timely completion of clinical trials for RPL554 will require that we enroll a sufficient number of patient candidates. Trials may be subject to delays as a result of patient enrollment taking longer than anticipated or patient withdrawal. Patient enrollment depends on many factors, including the size and nature of the patient population, eligibility criteria for the trial, the proximity of patients to clinical sites, the design of the clinical protocol, the availability of competing clinical trials, the availability of new drugs approved for the indication the clinical trial is investigating and clinicians' and patients' perceptions as to the potential advantages of the drug being studied in relation to other available therapies. These factors may make it difficult for us to enroll enough patients to complete our clinical trials in a timely and cost-effective manner. Delays in the completion of any clinical trial of RPL554 will increase our costs, slow down our development and approval of RPL554 and delay or potentially jeopardize our ability to commence product sales and generate revenue. In addition, some of the factors that cause, or lead to, a delay in the

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commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of RPL554.

We may become exposed to costly and damaging liability claims, either when testing RPL554 in the clinic or at the commercial stage, and our product liability insurance may not cover all damages from such claims.

We are exposed to potential product liability and professional indemnity risks that are inherent in the research, development, manufacturing, marketing and use of pharmaceutical products. Currently, we have no products that have been approved for commercial sale; however, the current and future use of RPL554 by us and any collaborators in clinical trials, and the sale of RPL554, if approved, in the future, may expose us to liability claims. These claims might be made by patients that use the product, healthcare providers, pharmaceutical companies, our collaborators or others selling RPL554. Any claims against us, regardless of their merit, could be difficult and costly to defend and could adversely affect the market for RPL554 or any prospects for commercialization of RPL554. In addition, regardless of the merits or eventual outcome, liability claims may result in:

    §
    decreased demand for RPL554;

    §
    injury to our reputation;

    §
    withdrawal of clinical trial participants;

    §
    costs to defend related litigation;

    §
    diversion of management's time and our resources;

    §
    substantial monetary awards to trial participants or patients;

    §
    regulatory investigation, product recalls or withdrawals, or labeling, marketing or promotional restrictions;

    §
    loss of revenue; and

    §
    the inability to commercialize or promote RPL554.

Although the clinical trial process is designed to identify and assess potential side effects, it is always possible that a drug, even after regulatory approval, may exhibit unforeseen side effects. If RPL554 were to cause adverse side effects during clinical trials or after approval, we may be exposed to substantial liabilities. Physicians and patients may not comply with any warnings that identify known potential adverse effects and patients who should not use RPL554.

Although we maintain product liability insurance for RPL554, it is possible that our liabilities could exceed our insurance coverage. We intend to expand our insurance coverage to include the sale of commercial products if we obtain marketing approval for RPL554. However, we may not be able to maintain insurance coverage at a reasonable cost or obtain insurance coverage that will be adequate to satisfy any liability that may arise. If a successful product liability claim or series of claims is brought against us for uninsured liabilities or in excess of insured liabilities, our assets may not be sufficient to cover such claims and our business operations could be impaired.

The regulatory approval processes of the FDA, the EMA and comparable foreign authorities are lengthy, time consuming and inherently unpredictable, and if we are ultimately unable to obtain regulatory approval for RPL554, our business will be substantially harmed.

The time required to obtain approval by the FDA, the EMA and comparable foreign authorities is unpredictable, but typically takes many years following the commencement of clinical trials and depends upon numerous factors, including substantial discretion of the regulatory authorities. In addition, approval policies, regulations, or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate's clinical development and may vary among jurisdictions. We have not obtained regulatory approval for RPL554 and it is possible that RPL554 or any product candidates we may develop in the future will never obtain regulatory approval.

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RPL554 could fail to receive regulatory approval for many reasons, including the following:

    §
    the FDA, the EMA or comparable foreign regulatory authorities may disagree with the design or implementation of our clinical trials;

    §
    we may be unable to demonstrate to the satisfaction of the FDA, the EMA or comparable foreign regulatory authorities that RPL554 is safe and effective for its proposed indication;

    §
    the results of clinical trials may not meet the level of statistical significance required by the FDA, the EMA or comparable foreign regulatory authorities for approval;

    §
    we may be unable to demonstrate that RPL554's clinical and other benefits outweigh its safety risks;

    §
    the FDA, the EMA or comparable foreign regulatory authorities may disagree with our interpretation of data from pre-clinical studies or clinical trials or may find the data to be unacceptable;

    §
    the data collected from clinical trials of RPL554 may not be sufficient to support the submission of an NDA in the United States, an MMA in the EU, or other comparable submission to obtain regulatory approval in other countries;

    §
    the FDA, the EMA or comparable foreign regulatory authorities may fail to approve the composition of the final drug product or the manufacturing processes or facilities of third-party manufacturers with which we contract for clinical and commercial supplies;

    §
    the FDA, the EMA or comparable foreign regulatory authorities may fail to approve RPL554 in the delivery device we choose to use for the development of RPL554; and

    §
    the approval policies or regulations of the FDA, the EMA or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval.

This lengthy approval process as well as the unpredictability of future clinical trial results may result in our failing to obtain regulatory approval to market RPL554. The FDA, the EMA and other regulatory authorities have substantial discretion in the approval process, and determining when or whether regulatory approval will be obtained for RPL554. Even if we believe the data collected from clinical trials of RPL554 are promising, such data may not be sufficient to support approval by the FDA, the EMA or any other regulatory authority.

In addition, even if we were to obtain approval for any jurisdiction, regulatory authorities may approve RPL554 for fewer or more limited indications than we request, may not approve the price we intend to charge for RPL554, may grant approval contingent on the performance of costly post-marketing clinical trials, or may approve RPL554 with a label that does not include the labeling claims necessary or desirable for the successful commercialization of RPL554. Any of the foregoing scenarios could materially harm the commercial prospects for RPL554.

Even if RPL554 obtains regulatory approval, we will be subject to ongoing obligations and continued regulatory review, which may result in significant additional expense. Additionally, RPL554, if approved, could be subject to labeling and other restrictions and market withdrawal and we may be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated problems with RPL554.

If the FDA, the EMA or a comparable foreign regulatory authority approves RPL554, the manufacturing processes, labeling, packaging, distribution, adverse event reporting, storage, advertising, promotion and recordkeeping for RPL554 will be subject to extensive and ongoing regulatory requirements. These requirements include submissions of safety and other post-marketing information and reports, facility registration and drug listing, as well as continued compliance with cGMP requirements for the manufacture of RPL554 and GCP requirements for any clinical trials that we conduct post-approval, all of which may result in significant expense and limit our ability to commercialize RPL554. We and our contract manufacturers will also be subject to user fees and periodic inspection by the FDA, the EMA and other regulatory authorities to monitor compliance with these requirements and the terms of any product approval we may obtain. In addition, any regulatory approvals that we receive for RPL554 may also be subject to limitations on the approved indicated uses for which RPL554 may be marketed or to the conditions of

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approval, or contain requirements for potentially costly post-marketing testing, including Phase 4 clinical trials, and surveillance to monitor the safety and efficacy of RPL554.

If there are changes in the application of legislation or regulatory policies, or if problems are discovered with a product or the manufacture of RPL554, or if we or one of our distributors, licensees or co-marketers fails to comply with regulatory requirements, the regulators could take various actions. These include imposing fines on us, imposing restrictions on RPL554 or its manufacture and requiring us to recall or remove RPL554 from the market. The regulators could also suspend or withdraw our marketing authorizations, or require us to conduct additional clinical trials, change our product labeling or submit additional applications for marketing authorization. If any of these events occurs, our ability to sell RPL554 may be impaired, and we may incur substantial additional expense to comply with regulatory requirements.

We may not be successful in our efforts to develop RPL554 for multiple indications, including CF or other respiratory diseases.

Part of our strategy is to continue to develop RPL554 in indications other than COPD such as CF. Although our research and development efforts to date have suggested that RPL554 has the potential to treat CF, we may not be able to develop RPL554 in CF or any other disease, or development may not be successful. In addition, the potential use of RPL554 in other diseases may not be suitable for clinical development, including as a result of difficulties enrolling patients in any clinical studies we plan to initiate or the potential for harmful side effects or other characteristics that might suggest marketing approval and market acceptance are unlikely. If we do not continue to successfully develop and begin to commercialize RPL554 for multiple indications, we will face difficulty in obtaining product revenues in future periods, which could significantly harm our financial position.

Even if we obtain marketing approval of RPL554 for any indication in a major pharmaceutical market such as the United States or EU, we may never obtain approval or commercialize RPL554 in other major markets, which would limit our ability to realize its full market potential.

In order to market any products in a country or territory, we must establish and comply with numerous and varying regulatory requirements of such countries or territories regarding safety and efficacy. Clinical trials conducted in one country may not be accepted by regulatory authorities in other countries, and regulatory approval in one country does not mean that regulatory approval will be obtained in any other country. Approval procedures vary among countries and can involve additional product testing and validation and additional administrative review periods. Seeking regulatory approvals in all major markets could result in significant delays, difficulties and costs for us and may require additional pre-clinical studies or clinical trials which would be costly and time consuming. Regulatory requirements can vary widely from country to country and could delay or prevent the introduction of RPL554 in those countries. Satisfying these and other regulatory requirements is costly, time consuming, uncertain and subject to unanticipated delays. In addition, our failure to obtain regulatory approval in any country may delay or have negative effects on the process for regulatory approval in other countries. We currently do not have any product candidates approved for sale in any jurisdiction, whether in the EU, the United States or any other international markets, and we do not have experience in obtaining regulatory approval in international markets. If we fail to comply with regulatory requirements in international markets or to obtain and maintain required approvals, our target market will be reduced and our ability to realize the full market potential of RPL554 will be compromised.

Our employees and independent contractors, including principal investigators, consultants, vendors and collaboration partners may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.

We are exposed to the risk that our employees and independent contractors, including principal investigators, consultants, vendors and collaboration partners may engage in fraudulent conduct or other illegal activities. Misconduct by these parties could include intentional, reckless or negligent conduct or unauthorized activities that violate: (i) the laws and regulations of the FDA, EU rules and regulations and

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other similar regulatory requirements, including those laws that require the reporting of true, complete and accurate information to such authorities; (ii) manufacturing standards; (iii) federal and state data privacy, security, fraud and abuse and other healthcare laws and regulations in the United States and abroad; or (iv) laws that require the reporting of true, complete and accurate financial information and data. Specifically, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, 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. Activities subject to these laws could also involve the improper use or misrepresentation of information obtained in the course of clinical trials, creating fraudulent data in our pre-clinical studies or clinical trials or illegal misappropriation of drug product, which could result in regulatory sanctions and cause serious harm to our reputation. It is not always possible to identify and deter misconduct by employees and other third parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with such laws or regulations. Additionally, we are subject to the risk that a person or government could allege such fraud or other misconduct, even if none occurred. 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 civil, criminal and administrative penalties, damages, monetary fines, disgorgements, possible exclusion from participation in Medicare, Medicaid and other U.S. federal healthcare programs, individual imprisonment, other sanctions, contractual damages, reputational harm, diminished profits and future earnings, and curtailment of our operations.

Interim "top-line" and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.

From time to time, we may publish interim "top-line" or preliminary data from our clinical studies. Interim data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available. Preliminary or "top-line" data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. As a result, interim and preliminary data should be viewed with caution until the final data are available. Adverse differences between preliminary or interim data and final data could significantly harm our business prospects.

Risks Related to Healthcare Laws and Other Legal Compliance Matters

Enacted and future legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize RPL554 and may affect the prices we may set.

In the United States, the EU and other foreign jurisdictions, there have been, and we expect there will continue to be, a number of legislative and regulatory changes and proposed changes to the healthcare system that could affect our future results of operations. In particular, there have been and continue to be a number of initiatives at the United States federal and state levels that seek to reduce healthcare costs and improve the quality of healthcare. For example, in March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively the ACA, was enacted, which substantially changes the way healthcare is financed by both governmental and private insurers. Among the provisions of the ACA, those of greatest importance to the pharmaceutical and biotechnology industries include the following:

    §
    an annual, non-deductible fee payable by any entity that manufactures or imports certain branded prescription drugs and biologic agents, which is apportioned among these entities according to their market share in certain government healthcare programs;

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    §
    a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer's outpatient drugs to be covered under Medicare Part D;

    §
    new requirements to report certain financial arrangements with physicians and certain others, including reporting "transfers of value" made or distributed to prescribers and other healthcare providers and reporting investment interests held by physicians and their immediate family members;

    §
    an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and 13.0% of the average manufacturer price for branded and generic drugs, respectively;

    §
    a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected;

    §
    extension of a manufacturer's Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations;

    §
    expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to certain individuals with income at or below 133% of the federal poverty level, thereby potentially increasing a manufacturer's Medicaid rebate liability;

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

    §
    creation of the Independent Payment Advisory Board, which, once empaneled, will have the authority to recommend certain changes to the Medicare program that could result in reduced payments for prescription drugs and those recommendations could have the effect of law unless overruled by a supermajority vote of Congress; and

    §
    establishment of a Center for Medicare Innovation at the Centers for Medicare & Medicaid Services, or CMS, to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending.

Since its enactment, there have been judicial and Congressional challenges to certain aspects of the ACA, and we expect there will be additional challenges and amendments to the ACA in the future. The new Presidential Administration and U.S. Congress will likely continue to seek to modify, repeal, or otherwise invalidate all, or certain provisions of, the ACA. It is uncertain the extent to which any such changes may impact our business or financial condition.

In addition, other legislative changes have been proposed and adopted in the United States since the ACA was enacted. On August 2, 2011, the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation's automatic reduction to several government programs. This includes aggregate reductions of Medicare payments to providers of 2% per fiscal year. These reductions went into effect on April 1, 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2025 unless additional action is taken by Congress. On January 2, 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, further reduced Medicare payments to several types of providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. These new laws may result in additional reductions in Medicare and other health care funding, which could have a material adverse effect on our customers and accordingly, our financial operations.

Moreover, payment methodologies may be subject to changes in healthcare legislation and regulatory initiatives. For example, CMS may develop new payment and delivery models, such as bundled payment models. The U.S. Department of Health and Human Services, or HHS, has set a goal of moving 30% of Medicare payments to alternative payment models by 2016 and 50% of Medicare payments into these alternative payment models by the end of 2018. In addition, recently there has been heightened

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governmental scrutiny over the manner in which manufacturers set prices for their marketed products. We expect that additional U.S. federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that the U.S. federal government will pay for healthcare products and services, which could result in reduced demand for RPL554 or additional pricing pressures.

Individual states in the United States have also become increasingly aggressive in passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. Legally mandated price controls on payment amounts by third-party payors or other restrictions could harm our business, results of operations, financial condition and prospects. In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs. This could reduce the ultimate demand for RPL554 or put pressure on our product pricing.

In the EU, similar political, economic and regulatory developments may affect our ability to profitably commercialize RPL554, if approved. In addition to continuing pressure on prices and cost containment measures, legislative developments at the EU or member state level may result in significant additional requirements or obstacles that may increase our operating costs. The delivery of healthcare in the EU, including the establishment and operation of health services and the pricing and reimbursement of medicines, is almost exclusively a matter for national, rather than EU, law and policy. National governments and health service providers have different priorities and approaches to the delivery of health care and the pricing and reimbursement of products in that context. In general, however, the healthcare budgetary constraints in most EU member states have resulted in restrictions on the pricing and reimbursement of medicines by relevant health service providers. Coupled with ever-increasing EU and national regulatory burdens on those wishing to develop and market products, this could prevent or delay marketing approval of RPL554, restrict or regulate post-approval activities and affect our ability to commercialize RPL554, if approved. In international markets, reimbursement and healthcare payment systems vary significantly by country, and many countries have instituted price ceilings on specific products and therapies.

We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or abroad. If we or our collaborators are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we or our collaborators are not able to maintain regulatory compliance, RPL554 may lose any regulatory approval that may have been obtained and we may not achieve or sustain profitability.

Our business operations and current and future relationships with investigators, health care professionals, consultants, third-party payors and customers will be subject to applicable healthcare regulatory laws, which could expose us to penalties.

Our business operations and current and future arrangements with investigators, healthcare professionals, consultants, third-party payors and customers, may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations. These laws may constrain the business or financial arrangements and relationships through which we conduct our operations, including how we research, market, sell and distribute RPL554, if approved. Such laws include:

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    the U.S. federal Anti-Kickback Statute, which prohibits, among other things, persons or entities from knowingly and willfully soliciting, offering, receiving or providing any remuneration (including any kickback, bribe, or certain rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, lease, order or recommendation of, any good, facility, item or service, for which payment may be made, in whole or in part, under U.S. federal and state healthcare programs such as Medicare and Medicaid. A person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;

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    §
    the U.S. federal false claims and civil monetary penalties laws, including the civil False Claims Act, which, among other things, 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 U.S. federal government, claims for payment or approval that are false or fraudulent, knowingly making, using or causing to be made or used, a false record or statement material to a false or fraudulent claim, or from knowingly making a false statement to avoid, decrease or conceal an obligation to pay money to the U.S. federal government. In addition, the government may assert that a claim including items and services resulting from a violation of the U.S. federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act;

    §
    the U.S. federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which imposes criminal and civil liability for, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, or knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement, in connection with the delivery of, or payment for, healthcare benefits, items or services; similar to the U.S. federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;

    §
    HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, and its implementing regulations, which also imposes certain obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information without appropriate authorization by covered entities subject to the rule, such as health plans, healthcare clearinghouses and healthcare providers as well as their business associates that perform certain services involving the use or disclosure of individually identifiable health information;

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    the U.S. federal Food, Drug and Cosmetic Act, or FDCA, which prohibits, among other things, the adulteration or misbranding of drugs, biologics and medical devices;

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    the U.S. federal legislation commonly referred to as Physician Payments Sunshine Act, enacted as part of the ACA, and its implementing regulations, which requires certain manufacturers of drugs, devices, biologics and medical supplies that are reimbursable under Medicare, Medicaid, or the Children's Health Insurance Program to report annually to the government information related to certain payments and other transfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, as well as ownership and investment interests held by the physicians described above and their immediate family members;

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    analogous state laws and regulations, including: state anti-kickback and false claims laws, which may apply to our business practices, including but not limited to, research, distribution, sales and marketing arrangements and claims involving healthcare items or services reimbursed by any third-party payor, including private insurers; state laws that require pharmaceutical companies to comply with the pharmaceutical industry's voluntary compliance guidelines and the relevant compliance guidance promulgated by the U.S. federal government, or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state laws and regulations that require drug manufacturers to file reports relating to pricing and marketing information, which requires tracking gifts and other remuneration and items of value provided to healthcare professionals and entities; and state laws governing the privacy 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; and

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    European and other foreign law equivalents of each of the laws, including reporting requirements detailing interactions with and payments to healthcare providers.

Ensuring that our internal operations and future business arrangements with third parties comply with applicable healthcare laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude that our business practices do not comply with current or future statutes, regulations, agency guidance 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 the laws described above or any other

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governmental laws and regulations that may apply to us, we may be subject to significant penalties, including civil, criminal and administrative penalties, damages, fines, exclusion from U.S. government funded healthcare programs, such as Medicare and Medicaid, or similar programs in other countries or jurisdictions, disgorgement, individual imprisonment, contractual damages, reputational harm, diminished profits and the curtailment or restructuring of our operations. If any of the physicians or other 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 and imprisonment, which could affect our ability to operate our business. Further, defending against any such actions can be costly, time-consuming and may require significant personnel resources. Therefore, even if we are successful in defending against any such actions that may be brought against us, our business may be impaired.

We are subject to environmental, health and safety laws and regulations, and we may become exposed to liability and substantial expenses in connection with environmental compliance or remediation activities.

Our operations, including our research, development, testing and manufacturing activities, are subject to numerous environmental, health and safety laws and regulations. These laws and regulations govern, among other things, the controlled use, handling, release and disposal of and the maintenance of a registry for, hazardous materials and biological materials, such as chemical solvents, human cells, carcinogenic compounds, mutagenic compounds and compounds that have a toxic effect on reproduction, laboratory procedures and exposure to blood-borne pathogens. If we fail to comply with such laws and regulations, we could be subject to fines or other sanctions.

As with other companies engaged in activities similar to ours, we face a risk of environmental liability inherent in our current and historical activities, including liability relating to releases of or exposure to hazardous or biological materials. Environmental, health and safety laws and regulations are becoming more stringent. We may be required to incur substantial expenses in connection with future environmental compliance or remediation activities, in which case, our production and development efforts may be interrupted or delayed.

We are subject to anti-corruption laws, as well as export control laws, customs laws, sanctions laws and other laws governing our operations. If we fail to comply with these laws, we could be subject to civil or criminal penalties, other remedial measures and legal expenses.

Our operations are subject to anti-corruption laws, including the U.K. Bribery Act 2010, or Bribery Act, the U.S. Foreign Corrupt Practices Act, or FCPA, and other anti-corruption laws that apply in countries where we do business and may do business in the future. The Bribery Act, FCPA and these other laws generally prohibit us, our officers and our employees and intermediaries from bribing, being bribed or making other prohibited payments to government officials or other persons to obtain or retain business or gain some other business advantage. We may in the future operate in jurisdictions that pose a high risk of potential Bribery Act or FCPA violations, and we may participate in collaborations and relationships with third parties whose actions could potentially subject us to liability under the Bribery Act, FCPA or local anti-corruption laws. In addition, we cannot predict the nature, scope or effect of future regulatory requirements to which any of our international operations might be subject or the manner in which existing laws might be administered or interpreted.

We also are subject to other laws and regulations governing any international operations, including regulations administered by the governments of the United Kingdom and the United States, and authorities in the EU, including applicable export control regulations, economic sanctions on countries and persons, customs requirements and currency exchange regulations, or, collectively, the Trade Control laws.

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There is no assurance that we will be completely effective in ensuring our compliance with all applicable anti-corruption laws, including the Bribery Act, the FCPA or other legal requirements, including Trade Control laws. If we are not in compliance with the Bribery Act, the FCPA and other anti-corruption laws or Trade Control laws, we may be subject to criminal and civil penalties, disgorgement and other sanctions and remedial measures and legal expenses. Any investigation of any potential violations of the Bribery Act, the FCPA, other anti-corruption laws or Trade Control laws by U.K., U.S. or other authorities, even if it is ultimately determined that we did not violate such laws, could be costly and time-consuming, require significant personnel resources and harm our reputation.

We will seek to build and continuously improve our systems of internal controls and to remedy any weaknesses identified. There can be no assurance, however, that the policies and procedures will be followed at all times or effectively detect and prevent violations of the applicable laws by one or more of our employees, consultants, agents or collaborators and, as a result, we could be subject to fines, penalties or prosecution.

Risks Related to Commercialization

We operate in a highly competitive and rapidly changing industry, which may result in others discovering, developing or commercializing competing products before or more successfully than we do.

The biopharmaceutical and pharmaceutical industries are highly competitive and subject to significant and rapid technological change. Our success is highly dependent on our ability to discover, develop and obtain marketing approval for new products on a cost-effective basis and to market them successfully. If RPL554 is approved for any indication, we will face intense competition from a variety of businesses, including large, fully integrated pharmaceutical companies, specialty pharmaceutical companies and biopharmaceutical companies, academic institutions, government agencies and other private and public research institutions in Europe, the United States and other jurisdictions. These organizations may have significantly greater resources than we do and conduct similar research, seek patent protection and establish collaborative arrangements for research, development, manufacturing and marketing of products that may compete with RPL554.

Given the number of products already on the market to treat COPD and CF, we expect to face intense competition if RPL554 is approved for these indications. Boehringer Ingelheim, GlaxoSmithKline, AstraZeneca, Mylan, Novartis, Vertex and Sunovion currently have treatments on the market for COPD and CF, and we anticipate that new companies will enter these markets in the future. If we successfully develop and commercialize RPL554, it will compete with existing therapies and new therapies that may become available in the future. The highly competitive nature of and rapid technological changes in the biopharmaceutical and pharmaceutical industries could render RPL554 obsolete, less competitive or uneconomical. Our competitors may, among other things:

    §
    have significantly greater name recognition, financial, manufacturing, marketing, drug development, technical and human resources than we do, and future mergers and acquisitions in the biopharmaceutical and pharmaceutical industries may result in even more resources being concentrated in our competitors;

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    develop and commercialize products that are safer, more effective, less expensive, more convenient or easier to administer, or have fewer or less severe effects;

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    obtain quicker regulatory approval;

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    establish superior proprietary positions covering our products and technologies;

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    implement more effective approaches to sales and marketing; or

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    form more advantageous strategic alliances.

Smaller and other early stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These third parties compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient registration and competing for other customers, for clinical trials, as well as in acquiring

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technologies complementary to, or necessary for, our programs. In addition, our collaborators, if any, may decide to market and sell products that compete with RPL554. Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are more effective, have fewer or less severe side effects, are more convenient or are less expensive than RPL554. Our competitors may also obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing or strengthening their market position before we are able to enter the market.

We may be unable to obtain orphan drug designation from the FDA for RPL554 for the treatment of CF, and even if we do obtain such designations, we may be unable to obtain or maintain the benefits associated with orphan drug designation, including the potential for orphan drug exclusivity.

Under the Orphan Drug Act, the FDA may designate a product as an orphan drug if it is intended to treat a rare disease or condition, defined as one occurring in a patient population of fewer than 200,000 in the United States, or a patient population greater than 200,000 in the United States where there is no reasonable expectation that the cost of developing the drug will be recovered from sales in the United States. In the EU, the EMA's Committee for Orphan Medicinal Products, or COMP, grants orphan drug designation to promote the development of products that are intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition affecting not more than five in 10,000 persons in the EU. Additionally, designation is granted for products intended for the diagnosis, prevention or treatment of a life-threatening, seriously debilitating or serious and chronic condition when, without incentives, it is unlikely that sales of the drug in the EU would be sufficient to justify the necessary investment in developing the drug or biological product or where there is no satisfactory method of diagnosis, prevention or treatment, or, if such a method exists, the medicine must be of significant benefit to those affected by the condition.

In the United States, orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical trial costs, tax credits for qualified clinical testing and user-fee waivers. In addition, if a product receives the first FDA approval of that drug for the indication for which it has orphan designation, the product is entitled to orphan drug exclusivity, which means the FDA may not approve any other application to market the same drug for the same indication for a period of seven years, except in limited circumstances, such as a showing of clinical superiority over the product with orphan exclusivity or where the manufacturer is unable to assure the availability of sufficient quantities of the orphan drug to meet the needs of patients with the rare disease or condition. Under the FDA's regulations, the FDA will deny orphan drug exclusivity to a designated drug upon approval if the FDA has already approved another drug with the same active ingredient for the same indication, unless the drug is demonstrated to be clinically superior to the previously approved drug. In the EU, orphan drug designation entitles a party to financial incentives such as reduction of fees or fee waivers and ten years of market exclusivity following approval. This period may be reduced to six years if the orphan drug designation criteria are no longer met, including where it is shown that the product is sufficiently profitable not to justify maintenance of market exclusivity.

We plan to seek orphan drug designation from the FDA and the EMA for RPL554 for the treatment of CF. Even if we are able to obtain orphan designation for RPL554 in the United States and/or the EU, we may not be the first to obtain marketing approval for any particular orphan indication due to the uncertainties associated with developing pharmaceutical products, which could prevent us from marketing RPL554 if another company is able to obtain orphan drug exclusivity before we do. In addition, exclusive marketing rights in the United States may be unavailable if we seek approval for an indication broader than the orphan-designated indication or may be lost if the FDA later determines that the request for designation was materially defective or if we are unable to assure sufficient quantities of the product to meet the needs of patients with the rare disease or condition following approval. Further, even if we obtain orphan drug exclusivity for RPL554, that exclusivity may not effectively protect RPL554 from competition because different drugs with different active moieties can be approved for the same condition. In addition, the FDA

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or the EMA can subsequently approve products with the same active moiety for the same condition if the FDA or the EMA concludes that the later drug is safer, more effective, or makes a major contribution to patient care. Orphan drug designation neither shortens the development time or regulatory review time of a drug nor gives the drug any advantage in the regulatory review or approval process. In addition, while we intend to seek orphan drug designation for RPL554 for the treatment of CF, we may never receive such designations.

There have been legal challenges to aspects of the FDA's regulations and policies concerning the exclusivity provisions of the Orphan Drug Act, and future challenges could lead to changes that affect the protections afforded our products in ways that are difficult to predict. In 2014, a U.S. district court invalidated the FDA's denial of orphan exclusivity to an orphan designated drug, which the FDA had based on its determination that the drug was not proven to be clinically superior to a previously approved "same drug." In response to the decision, the FDA released a policy statement stating that the court's decision is limited just to the facts of that particular case and that the FDA will continue to deny orphan drug exclusivity to a designated drug upon approval if the drug is the "same" as a previously approved drug, unless the drug is demonstrated to be clinically superior to that previously approved drug. In April 2016, another similar legal challenge was initiated against the FDA for its denial of orphan drug exclusivity to another designated drug. In the future, there is the potential for additional legal challenges to the FDA's orphan drug regulations and policies, and it is uncertain how ongoing and future challenges might affect our business.

The successful commercialization of RPL554 will depend in part on the extent to which governmental authorities and health insurers establish adequate coverage, reimbursement levels and pricing policies. Failure to obtain or maintain adequate coverage and reimbursement for RPL554, if approved, could limit our ability to market those products and decrease our ability to generate revenue.

The availability and adequacy of coverage and reimbursement by governmental healthcare programs such as Medicare and Medicaid, private health insurers and other third-party payors are essential for most patients to be able to afford prescription medications such as RPL554, assuming approval. Our ability to achieve acceptable levels of coverage and reimbursement for products by governmental authorities, private health insurers and other organizations will have an effect on our ability to successfully commercialize RPL554. Assuming we obtain coverage for RPL554 by a third-party payor, the resulting reimbursement payment rates may not be adequate or may require co-payments that patients find unacceptably high. We cannot be sure that coverage and reimbursement in the United States, the EU or elsewhere will be available for RPL554 or any product that we may develop, and any reimbursement that may become available may be decreased or eliminated in the future.

Third-party payors increasingly are challenging prices charged for pharmaceutical products and services, and many third-party payors may refuse to provide coverage and reimbursement for particular drugs when an equivalent generic drug or a less expensive therapy is available. It is possible that a third-party payor may consider RPL554 as substitutable and only offer to reimburse patients for the less expensive product. Even if we show improved efficacy or improved convenience of administration with RPL554, pricing of existing drugs may limit the amount we will be able to charge for RPL554. These payors may deny or revoke the reimbursement status of a given product or establish prices for new or existing marketed products at levels that are too low to enable us to realize an appropriate return on our investment in RPL554. If reimbursement is not available or is available only at limited levels, we may not be able to successfully commercialize RPL554, and may not be able to obtain a satisfactory financial return on RPL554.

There is significant uncertainty related to the insurance coverage and reimbursement of newly approved products. In the United States, third-party payors, including private and governmental payors, such as the Medicare and Medicaid programs, play an important role in determining the extent to which new drugs and biologics will be covered. The Medicare and Medicaid programs increasingly are used as models for how private payors and other governmental payors develop their coverage and reimbursement policies for drugs and biologics. Some third-party payors may require pre-approval of coverage for new or innovative devices or

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drug therapies before they will reimburse health care providers who use such therapies. It is difficult to predict at this time what third-party payors will decide with respect to the coverage and reimbursement for RPL554.

Obtaining and maintaining reimbursement status is time-consuming and costly. No uniform policy for coverage and reimbursement for products exists among third-party payors in the United States. Therefore, coverage and reimbursement for products can differ significantly from payor to payor. As a result, the coverage determination process is often a time-consuming and costly process that will require us to provide scientific and clinical support for the use of RPL554 to each payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance. Furthermore, rules and regulations regarding reimbursement change frequently, in some cases at short notice, and we believe that changes in these rules and regulations are likely.

Outside the United States, international operations are generally subject to extensive governmental price controls and other market regulations, and we believe the increasing emphasis on cost-containment initiatives in Europe and other countries has and will continue to put pressure on the pricing and usage of RPL554. In many countries, the prices of medical products are subject to varying price control mechanisms as part of national health systems. Other countries allow companies to fix their own prices for medical products, but monitor and control company profits. Additional foreign price controls or other changes in pricing regulation could restrict the amount that we are able to charge for RPL554. Accordingly, in markets outside the United States, the reimbursement for RPL554 may be reduced compared with the United States and may be insufficient to generate commercially reasonable revenue and profits.

Moreover, increasing efforts by governmental and third-party payors in the United States and abroad to cap or reduce healthcare costs may cause such organizations to limit both coverage and the level of reimbursement for newly approved products and, as a result, they may not cover or provide adequate payment for RPL554. We expect to experience pricing pressures in connection with the sale of RPL554 due to the trend toward managed healthcare, the increasing influence of health maintenance organizations and additional legislative changes. The downward pressure on healthcare costs in general, particularly prescription drugs and surgical procedures and other treatments, has become very intense. As a result, increasingly high barriers are being erected to the entry of new products.

RPL554 may not gain market acceptance, in which case our ability to generate product revenues will be compromised.

Even if the FDA, the EMA or any other regulatory authority approves the marketing of RPL554, whether developed on our own or with a collaborator, physicians, healthcare providers, patients or the medical community may not accept or use RPL554. If RPL554 does not achieve an adequate level of acceptance, we may not generate significant product revenues or any profits from operations. The degree of market acceptance of RPL554 will depend on a variety of factors, including:

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    the timing of market introduction;

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    the number and clinical profile of competing products;

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    the clinical indications for which RPL554 is approved;

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    our ability to provide acceptable evidence of safety and efficacy;

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    the prevalence and severity of any side effects;

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    relative convenience and ease of administration;

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    the availability of inhalation devices, such as nebulizers, used to administer RPL554;

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    cost-effectiveness;

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    marketing and distribution support;

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    availability of adequate coverage, reimbursement and adequate payment from health maintenance organizations and other insurers, both public and private; and

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    other potential advantages over alternative treatment methods.

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If RPL554 fails to gain market acceptance, this will adversely impact on our ability to generate revenues. Even if RPL554 achieves market acceptance, the market may prove not to be large enough to allow us to generate significant revenues.

We currently have no marketing, sales or distribution infrastructure. If we are unable to develop sales, marketing and distribution capabilities on our own or through collaborations, we may not be successful in commercializing RPL554.

We have no marketing, sales or distribution capabilities and we have no experience with marketing, selling or distributing pharmaceutical products. If RPL554 is approved, we intend either to establish a sales and marketing organization with technical expertise and supporting distribution capabilities to commercialize RPL554, or to outsource this function to a third party. Either of these options would be expensive and time-consuming. Some or all of these costs may be incurred in advance of any approval of RPL554. In addition, we may not be able to hire a sales force that is sufficient in size or has adequate expertise in the medical markets that we intend to target. Any failure or delay in the development of our internal sales, marketing and distribution capabilities would adversely impact the commercialization of RPL554.

To the extent that we enter into collaboration agreements with respect to marketing, sales or distribution, our product revenue may be lower than if we directly marketed or sold RPL554, if approved. In addition, any revenue we receive will depend in whole or in part upon the efforts of these third-party collaborators, which may not be successful and are generally not within our control. If we are unable to enter into these arrangements on acceptable terms or at all, we may not be able to successfully commercialize RPL554. If we are not successful in commercializing RPL554, either on our own or through collaborations with one or more third parties, our future product revenue will suffer and we may incur significant additional losses.

Risks Related to Our Dependence on Third Parties

We rely, and expect to continue to rely, on third parties, including independent clinical investigators and CROs, to conduct our pre-clinical 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 RPL554 and our business could be substantially harmed.

We have relied upon and plan to continue to rely upon third parties, including independent clinical investigators and third-party CROs, to conduct our pre-clinical studies and clinical trials and to monitor and manage data for our ongoing pre-clinical and clinical programs. We rely on these parties for execution of our pre-clinical studies and clinical trials, and control only certain aspects of their activities. Nevertheless, we are responsible for ensuring that each of our studies and trials is conducted in accordance with the applicable protocol and legal, regulatory and scientific standards, and our reliance on these third parties does not relieve us of our regulatory responsibilities. We and our third-party contractors and CROs are required to comply with GCP requirements, which are regulations and guidelines enforced by the FDA, the Competent Authorities of the Member States of the European Economic Area, or EEA, and comparable foreign regulatory authorities for all of our products in clinical development. Regulatory authorities enforce these GCP requirements through periodic inspections of trial sponsors, principal investigators and trial sites. If we fail to exercise adequate oversight over any of our CROs or if we or any of our CROs fail to comply with applicable GCP requirements, the clinical data generated in our clinical trials may be deemed unreliable and the FDA, the EMA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. We cannot assure you that upon a regulatory inspection of us or our CROs or other third parties performing services in connection with our clinical trials, such regulatory authority will determine that any of our clinical trials complies with GCP regulations. In addition, our clinical trials must be conducted with product produced under applicable cGMP regulations. Our failure to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process.

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Further, these investigators and CROs are not our employees and we will not be able to control, other than by contract, the amount of resources, including time, which they devote to RPL554 and clinical trials. If independent investigators or CROs fail to devote sufficient resources to the development of RPL554, or if their performance is substandard, it may delay or compromise the prospects for approval and commercialization of RPL554. 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.

Our existing and future CROs have or may 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 subjects participating in our clinical trials warrants such termination, if we make a general assignment for the benefit of our creditors or if we are liquidated.

If any of our relationships with these third-party CROs terminate, we may not be able to enter into arrangements with alternative CROs or to do so on commercially reasonable terms. If CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the clinical data they obtain is compromised due to the failure 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 RPL554. As a result, our results of operations and the commercial prospects for RPL554 would be harmed, our costs could increase and our ability to generate revenues could be delayed.

Switching or adding additional CROs involves additional cost and requires management time and focus. In addition, there is a natural transition period when a new CRO commences work. As a result, delays could occur, which could materially impact our ability to meet our desired clinical development timelines.

If we fail to enter into new strategic relationships for RPL554, our business, research and development and commercialization prospects could be adversely affected.

Our development program for RPL554 and the potential commercialization of RPL554 will require substantial additional cash to fund expenses. Therefore, we may decide to enter into collaborations with pharmaceutical or biopharmaceutical companies for the development and potential commercialization of RPL554. For example, we may seek a collaborator for development of a DPI or MDI formulation of RPL554 for the maintenance treatment of COPD and potentially asthma and other respiratory diseases.

We face significant competition in seeking appropriate collaborators. Collaborations are complex and time-consuming to negotiate and document. We may also be restricted under existing and future collaboration agreements from entering into agreements on certain terms with other potential collaborators. We may not be able to negotiate collaborations on acceptable terms, or at all. If that were to occur, we may have to curtail the development of RPL554, reduce or delay its development program, delay its potential commercialization or reduce the scope of our sales or marketing activities, or increase our expenditures and undertake development or commercialization activities at our own expense. If we elect to increase our expenditures to fund development or commercialization activities on our own, we may need to obtain additional capital, which may not be available to us on acceptable terms or at all. If we do not have sufficient funds, we will not be able to bring RPL554 to market and generate product revenue. If we do enter into a collaboration agreement, we could be subject to the following risks, among others:

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    we may not be able to control the amount and timing of resources that the collaborator devotes to the development of RPL554;

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    the collaborator may experience financial difficulties;

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    we may be required to relinquish important rights such as marketing, distribution and intellectual property rights;

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    §
    a collaborator could move forward with a competing product developed either independently or in collaboration with third parties, including our competitors;

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    business combinations or significant changes in a collaborator's business strategy may adversely affect our willingness to complete our obligations under any arrangement; or

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    the collaboration may not provide sufficient funds to be profitable for us after we fulfill our payment obligations under our agreement with Vernalis Development Limited, or Vernalis.

We currently rely on third-party manufacturers and suppliers for the production, storage and distribution of RPL554. Our dependence on these third parties may impair the advancement of our research and development programs and the development of RPL554. Moreover, we intend to rely on third parties to produce commercial supplies of RPL554, if approved, and commercialization could be stopped, delayed or made less profitable if those third parties fail to obtain approval of the FDA or comparable regulatory authorities, fail to provide us with sufficient quantities of product or fail to do so at acceptable quality levels or prices or fail to otherwise complete their duties in compliance with their obligations to us or other parties.

We have limited personnel with experience in manufacturing, and we do not own facilities for manufacturing RPL554. Instead, we rely on and expect to continue to rely on third-party contract manufacturing organizations, or CMOs, for the supply, storage and distribution of cGMP-grade clinical trial materials and commercial quantities of RPL554, if approved. While we may contract with other CMOs in the future, we currently contract with only one pharmaceuticals CMO for the manufacture of RPL554 drug substance. For RPL554 drug product in our new nebulized suspension formulation, we currently have two CMOs. Reliance on third-party suppliers for RPL554 may expose us to more risk than if we were to manufacture RPL554 ourselves. The facilities used to manufacture RPL554 must be approved by the FDA pursuant to inspections that will be conducted after we submit an NDA to the FDA, and by comparable foreign regulatory authorities for approvals outside the United States. While we provide sponsor oversight of manufacturing activities, we do not and will not control the manufacturing process of, and are or will be essentially dependent on, our CMOs for compliance with cGMP requirements for the manufacture of RPL554. If a CMO cannot successfully manufacture material that conforms to our specifications and the regulatory requirements of the FDA or a comparable foreign regulatory authority, it will not be able to secure or maintain regulatory approval for its manufacturing facilities. In addition, we have very little control over the ability of a CMO to maintain adequate quality control, quality assurance and qualified personnel. If the FDA or a comparable foreign regulatory authority does not approve these facilities for the manufacture of RPL554 or if it withdraws any such approval in the future, we may need to find alternative manufacturing facilities, which would delay our development program and significantly impact our ability to develop, obtain regulatory approval for or market RPL554, if approved. In addition, any failure to achieve and maintain compliance with these laws, regulations and standards could subject us to the risk that we may have to suspend the manufacturing of RPL554 or that obtained approvals could be revoked. Furthermore, third-party providers may breach existing agreements they have with us because of factors beyond our control. They may also terminate or refuse to renew their agreement because of their own financial difficulties or business priorities, at a time that is costly or otherwise inconvenient for us. If we were unable to find an adequate replacement or another acceptable solution in time, our clinical trials could be delayed or our commercial activities could be harmed. In addition, the fact that we are dependent on our suppliers, CMOs and other third parties for the manufacture, storage and distribution of RPL554 means that we are subject to the risk that RPL554 may have manufacturing defects that we have limited ability to prevent or control. Any natural or other disasters, acts of war or terrorism, shipping embargoes, labor unrest or political instability or similar events at our third-party manufacturers' facilities that causes a loss of manufacturing capacity could also heighten the risks we face.

We rely on and will continue to rely on CMOs to purchase from third-party suppliers the materials necessary to produce RPL554 for our clinical trials. There are a limited number of suppliers for raw materials that we may use to manufacture RPL554 and there may be a need to assess alternate suppliers to prevent a

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possible disruption of the manufacture of the materials necessary to produce RPL554 for our clinical trials, and if approved, ultimately for commercial sale. Any disruption in our relationship with our current CMOs could have a material impact on our ability to continue our clinical development of RPL554. We do not and will not have any control over the process or timing of the acquisition of these raw materials by any CMO. Moreover, we currently do not have any agreements for the commercial production of these raw materials. Supplies of raw material could be interrupted from time to time and, if interrupted, we cannot be certain that alternative supplies could be obtained within a reasonable timeframe, at an acceptable cost, or at all. Although we generally do not begin a clinical trial unless we believe we have on hand, or will be able to obtain, a sufficient supply of RPL554 to complete the clinical trial, any significant delay in the supply of RPL554, or the raw material components needed to produce RPL554, for an ongoing clinical trial due to the need to replace our CMO or a third-party supplier could considerably delay completion of our clinical trials, product testing and potential regulatory approval of RPL554. If our CMO or we are unable to purchase these raw materials after regulatory approval has been obtained for RPL554, the commercial launch of RPL554 would be delayed or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of RPL554. In addition, growth in the costs and expenses of raw materials may impair our ability to cost-effectively manufacture RPL554.

We rely and will rely on CMOs and third-party suppliers to comply with and respect the proprietary rights of others in conducting their contractual obligations for us. If a CMO or third-party suppliers fail to acquire the proper licenses or otherwise infringe third-party proprietary rights in the course of providing services to us, we may have to find alternative CMOs or third-party suppliers, or defend against claims of infringement, either of which would significantly impact our ability to develop, obtain regulatory approval for or market RPL554, if approved.

Risks Related to Intellectual Property and Information Technology

We rely on patents and other intellectual property rights to protect RPL554, the enforcement, defense and maintenance of which may be challenging and costly. Failure to enforce or protect these rights adequately could harm our ability to compete and impair our business.

Our commercial success depends in part on obtaining and maintaining patents and other forms of intellectual property rights for RPL554, formulations of RPL554, polymorphs, salts and analogs of RPL554, methods used to manufacture RPL554, methods for manufacturing of final drug product for different inhalation devices such as nebulizer, DPI, MDI, and the methods for treating patients with respiratory diseases using RPL554 alone or in combination with other available products, or on in-licensing such rights. Our RPL554 development program relies on the patents and patent applications assigned and know-how licensed from Vernalis Development Limited, or Vernalis. The registrations of the assignment of each of these patents and patent applications with the relevant authorities in certain jurisdictions in which the patent and patent applications are registered have been granted, but there is no assurance that any additional registrations will be effected in a timely manner or at all. Failure to protect or to obtain, maintain or extend adequate patent and other intellectual property rights could adversely affect our ability to develop and market RPL554.

The patent prosecution process is expensive and time-consuming, and we or our licensors, licensees or collaborators may not be able to prepare, file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner or in all jurisdictions. It is also possible that we or our licensors, licensees or collaborators will fail to identify patentable aspects of inventions made in the course of development and commercialization activities before it is too late to obtain patent protection on them. Moreover, depending on the terms of any future in-licenses to which we may become a party, in some circumstances we may not have the right to control the preparation, filing and prosecution of patent applications, or to maintain the patents, covering technology in-licensed from third parties. Therefore, these patents and applications may not be prosecuted and enforced in a manner consistent with the best interests of our business. Further, the issuance, scope, validity, enforceability and commercial value of our and our current or future licensors', licensees' or collaborators' patent rights are highly uncertain. Our and our

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licensors' pending and future patent applications may not result in patents being issued which protect our technology or products, in whole or in part, or which effectively prevent others from commercializing competitive technologies and products. The patent examination process may require us or our licensors, licensees or collaborators to narrow the scope of the claims of our or our licensors', licensees' or collaborators' pending and future patent applications, which may limit the scope of patent protection that may be obtained. We cannot assure you that all of the potentially relevant prior art relating to our patents and patent applications has been found. If such prior art exists, it can invalidate a patent or prevent a patent from issuing from a pending patent application. Even if patents do successfully issue and even if such patents cover our RPL554, third parties may initiate an opposition, interference, re-examination, post-grant review, inter partes review, nullification or derivation action in court or before patent offices, or similar proceedings challenging the validity, enforceability or scope of such patents, which may result in the patent claims being narrowed or invalidated. Our and our licensors', licensees' or collaborators' patent applications cannot be enforced against third parties practicing the technology claimed in such applications unless and until a patent issues from such applications, and then only to the extent the issued claims cover the technology.

Because patent applications are confidential for a period of time after filing, and some remain so until issued, we cannot be certain that we or our licensors were the first to file any patent application related to RPL554. Furthermore, if third parties have filed such patent applications on or before March 15, 2013, the date on which the U.S. patent filing system changed from a first-to-invent to a first-to-file standard, an interference proceeding can be initiated by such third parties to determine who was the first to invent any of the subject matter covered by the patent claims of our applications. If third parties have filed such applications after March 15, 2013, a derivation proceeding can be initiated by such third parties to determine whether our invention was derived from theirs. Even where we have a valid and enforceable patent, we may not be able to exclude others from practicing our invention where the other party can show that they used the invention in commerce before our filing date or the other party benefits from a compulsory license.

We may not identify relevant third-party patents or may incorrectly interpret the relevance, scope or expiration of a third-party patent which might adversely affect our ability to develop, manufacture and market RPL554.

We cannot guarantee that any of our or our licensors' patent searches or analyses, including but not limited to the identification of relevant patents, the scope of patent claims or the expiration of relevant patents, are complete or thorough, nor can we be certain that we have identified each and every third-party patent and pending application in the United States and abroad that is relevant to or necessary for the commercialization of RPL554 in any jurisdiction. For example, U.S. applications filed before November 29, 2000 and certain U.S. applications filed after that date that will not be filed outside the United States remain confidential until patents issue. Patent applications in the United States and elsewhere are published approximately 18 months after the earliest filing for which priority is claimed, with such earliest filing date being commonly referred to as the priority date. Therefore, patent applications covering RPL554 could have been filed by others without our knowledge. Additionally, pending patent applications that have been published can, subject to certain limitations, be later amended in a manner that could cover RPL554 or the use of RPL554. The scope of a patent claim is determined by an interpretation of the law, the written disclosure in a patent and the patent's prosecution history. Our interpretation of the relevance or the scope of a patent or a pending application may be incorrect, which may negatively impact our ability to market RPL554. We may incorrectly determine that RPL554 is not covered by a third-party patent or may incorrectly predict whether a third party's pending application will issue with claims of relevant scope. Our determination of the expiration date of any patent in the United States or abroad that we consider relevant may be incorrect, which may negatively impact our ability to develop and market RPL554. Our failure to identify and correctly interpret relevant patents may negatively impact our ability to develop and market RPL554.

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If we fail to identify and correctly interpret relevant patents, we may be subject to infringement claims. We cannot guarantee that we will be able to successfully settle or otherwise resolve such infringement claims. If we fail in any such dispute, in addition to being forced to pay damages, we may be temporarily or permanently prohibited from commercializing RPL554. We might, if possible, also be forced to redesign RPL554 so that we no longer infringe the third-party intellectual property rights. Any of these events, even if we were ultimately to prevail, could require us to divert substantial financial and management resources that we would otherwise be able to devote to our business.

We may be involved in lawsuits to protect or enforce patents covering RPL554, which could be expensive, time-consuming and unsuccessful, and issued patents could be found invalid or unenforceable if challenged in court.

To protect our competitive position, we may from time to time need to resort to litigation in order to enforce or defend any patents or other intellectual property rights owned by or licensed to us, or to determine or challenge the scope or validity of patents or other intellectual property rights of third parties. As enforcement of intellectual property rights is difficult, unpredictable, time-consuming and expensive, we may fail in enforcing our rights — in which case our competitors may be permitted to use our technology without being required to pay us any license fees. In addition, however, litigation involving our patents carries the risk that one or more of our patents will be held invalid (in whole or in part, on a claim-by-claim basis) or held unenforceable. Such an adverse court ruling could allow third parties to commercialize RPL554, and then compete directly with us, without payment to us. If we in-license intellectual property rights, our agreements may give our licensors the first right to control claims of third-party infringement, or to defend validity challenges. Therefore, these patents and patent applications may not be enforced or defended in a manner consistent with the best interests of our business.

If we were to initiate legal proceedings against a third party to enforce a patent covering one of our products, the defendant could counterclaim that our patent is invalid or unenforceable. In patent litigation in the United States or in Europe, defendant counterclaims alleging invalidity or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, for example, lack of novelty, obviousness or non-enablement. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant information from the U.S. Patent and Trademark Office, or made a misleading statement, during prosecution. The outcome following legal assertions of invalidity and unenforceability during patent litigation is unpredictable. With respect to the validity question, for example, we cannot be certain that there is no invalidating prior art, of which we and the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of the patent protection on RPL554. Patents and other intellectual property rights also will not protect our technology if competitors design around our protected technology without infringing our patents or other intellectual property rights.

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. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have an adverse effect on the price of our ADSs and ordinary shares.

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 negative impact on the success of our business.

Our commercial success depends, in part, upon our ability, and the ability of our future collaborators, to develop, manufacture, market and sell our product candidates without alleged or actual infringement, misappropriation or other violation of the patents and proprietary rights of third parties. There have been many lawsuits and other proceedings involving patent and other intellectual property rights in the

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biotechnology and pharmaceutical industries, including patent infringement lawsuits, interferences, oppositions and reexamination proceedings before the U.S. Patent and Trademark Office, or USPTO, and corresponding foreign patent offices. The various markets in which we plan to operate are subject to frequent and extensive litigation regarding patents and other intellectual property rights. In addition, many companies in intellectual property-dependent industries, including the biopharmaceutical and pharmaceutical industries, have employed intellectual property litigation as a means to gain an advantage over their competitors. Numerous U.S. and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we are developing product candidates. Some claimants may have substantially greater resources than we do and may be able to sustain the costs of complex intellectual property litigation to a greater degree and for longer periods of time than we could. In addition, patent holding companies that focus solely on extracting royalties and settlements by enforcing patent rights may target us. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that RPL554 may be subject to claims of infringement of the intellectual property rights of third parties.

We may in the future become party to, or be threatened with, adversarial proceedings or litigation regarding intellectual property rights with respect to our current and future product candidates, including interference or derivation proceedings, post grant review and inter partes review before the USPTO or similar adversarial proceedings or litigation in other jurisdictions. Similarly, we or our licensors or collaborators may initiate such proceedings or litigation against third parties, for example, to challenge the validity or scope of intellectual property rights controlled by third parties. Third parties may assert infringement claims against us based on existing patents or patents that may be granted in the future, regardless of their merit. There is a risk that third parties may choose to engage in litigation with us to enforce or to otherwise assert their patent rights against us. Even if we believe such claims are without merit, a court of competent jurisdiction could hold that these third-party patents are valid, enforceable and infringed, and the holders of any such patents may be able to block our ability to commercialize such product candidate unless we obtained a license under the applicable patents, or until such patents expire or are finally determined to be invalid or unenforceable. Similarly, if any third-party patents were held by a court of competent jurisdiction to cover aspects of our compositions, formulations, or methods of treatment, prevention or use, the holders of any such patents may be able to block our ability to develop and commercialize the applicable product candidate unless we obtained a license or until such patent expires or is finally determined to be invalid or unenforceable. Such licenses may not be available on reasonable terms, or at all, or may be non-exclusive thereby giving our competitors access to the same technologies licensed to us.

If we fail in any such dispute, we may be forced to pay damages, including the possibility of treble damages in a patent case if a court finds us to have willfully infringed certain intellectual property rights. We or our licensees may be temporarily or permanently prohibited from commercializing RPL554 or from selling, incorporating, manufacturing or using our products in the United States and/or other jurisdictions that use the subject intellectual property. We might, if possible, also be forced to redesign RPL554 so that we no longer infringe the third-party intellectual property rights, which may result in significant cost or delay to us, or which redesign could be technically infeasible. Any of these events, even if we were ultimately to prevail, could require us to divert substantial financial and management resources that we would otherwise be able to devote to our business.

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

We may be subject to claims challenging the inventorship of our patents and other intellectual property.

Although we are not currently experiencing any claims challenging the inventorship of our patents or ownership of our intellectual property, we may in the future be subject to claims that former employees, collaborators or other third parties have an interest in our patents or other intellectual property as an

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inventor or co-inventor. While it is our policy to require our employees and contractors who may be involved in the conception or development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who, in fact, conceives or develops intellectual property that we regard as our own. For example, the assignment of intellectual property rights may not be self-executing or the assignment agreements may be breached, or we may have inventorship disputes arise from conflicting obligations of consultants or others who are involved in developing RPL554. Litigation may be necessary to defend against these and other claims challenging inventorship. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

Intellectual property litigation 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 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, we could have a substantial adverse effect on the price of our ordinary shares or ADSs. Such litigation or proceedings could substantially increase our operating losses and reduce our resources available for development 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 substantially greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have an adverse effect on our ability to compete in the marketplace.

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

We are party to a license agreement with Vernalis, under which we in-license certain intellectual property and were assigned certain patents and patent applications related to our business. We may enter into additional license agreements in the future. We expect that any future license agreements would impose various diligence, milestone payment, royalty, insurance and other obligations on us. Any uncured, material breach under these license agreements could result in our loss of rights to practice the patent rights and other intellectual property licensed to us under these agreements, and could compromise our development and commercialization efforts for any current or future product candidates. Under our agreement with Vernalis, we may not abandon any of the assigned patents or allow any of the assigned patents to lapse without consent from Vernalis, which is not to be unreasonably delayed or withheld. If we do not obtain such consent in a timely manner or at all and such assigned patent rights lapse or are abandoned, our agreement with Vernalis may be terminated in its entirety. For example, if we decide for commercial reasons to let an assigned patent lapse in a country of little commercial importance, but Vernalis does not provide consent and such patent rights lapse, we may lose all intellectual property rights covering RPL554 in multiple markets. Moreover, our future licensors may own or control intellectual property that has not been licensed to us and, as a result, we may be subject to claims, regardless of their merit, that we are infringing or otherwise violating the licensor's rights.

We may not be successful in maintaining necessary rights to RPL554 or obtaining other intellectual property rights important to our business through acquisitions and in-licenses.

We currently own and have in-licensed rights to intellectual property, including patents, patent applications and know-how, relating to RPL554, and our success will likely depend on maintaining these rights. Because our programs may require the use of proprietary rights held by third parties, the growth of our business will

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likely depend in part on our ability to acquire, in-license, maintain or use these proprietary rights. In addition, RPL554 may require specific formulations to work effectively and the rights to these formulations may be held by others. We may be unable to acquire or in-license any compositions, methods of use, processes, or other third-party intellectual property rights from third parties that we identify as necessary for RPL554. The licensing and acquisition of third-party intellectual property rights is a competitive area, and a number of more established companies also are pursuing strategies to license or acquire third-party intellectual property rights that we may consider attractive. These established companies may have a competitive advantage over us due to their size, cash resources and greater clinical development and commercialization capabilities.

In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We may also be unable to license or acquire third-party intellectual property rights on a timely basis, on terms that would allow us to make an appropriate return on our investment, or at all. Even if we are able to obtain a license to intellectual property of interest, we may not be able to secure exclusive rights, in which case others could use the same rights and compete with us. If we are unable to successfully obtain a license to third-party intellectual property rights necessary for the development of RPL554 or a development program on acceptable terms, we may have to abandon development of RPL554 or that development program.

If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and our competitive position may be adversely affected.

We do not currently own any registered trademarks. We may not be able to obtain trademark protection in territories that we consider of significant importance to us. If we register trademarks, our trademark applications may be rejected during trademark registration proceedings. Although we will be given an opportunity to respond to those rejections, we may be unable to overcome such rejections. In addition, any of our trademarks or trade names, whether registered or unregistered, may be challenged, opposed, infringed, cancelled, circumvented or declared generic or determined to be infringing on other marks. We may not be able to protect our rights to these trademarks and trade names, which we need to build name recognition by potential collaborators or customers in our markets of interest. Over the long term, if we are unable to establish name recognition based on our trademarks and trade names, then we may not be able to compete effectively and our business may be adversely affected. If other entities use trademarks similar to ours in different jurisdictions, or have senior rights to ours, it could interfere with our use of our current trademarks throughout the world.

If we do not obtain protection under the Hatch-Waxman Amendments and similar non-U.S. legislation for extending the term of patents covering RPL554 and any other product candidates, our ability to compete effectively could be impaired.

Patents have a limited lifespan. In the United States, if all maintenance fees are timely paid, the natural expiration of a patent is generally 20 years from its earliest U.S. non-provisional filing date. The issued patents covering the composition of matter for RPL554 expire in 2020, and our other issued patents will expire in 2031, subject to any patent extensions that may be available for such patents. If patents are issued on our pending patent applications, the resulting patents are projected to expire on dates ranging from 2031 to 2036. Various extensions may be available, but the life of a patent, and the protection it affords, is limited. Even if patents covering RPL554 are obtained, once the patent life has expired for a product, we may be open to competition from competitive medications, including generic medications. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.

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Depending upon the timing, duration and conditions of FDA marketing approval of RPL554, one or more of our U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the Hatch-Waxman Amendments and similar legislation in the EU. The Hatch-Waxman Amendments permit a patent term extension of up to five years for a patent covering an approved product as compensation for effective patent term lost during product development and the FDA regulatory review process. However, we may not receive an extension if we fail to apply within applicable deadlines, fail to apply prior to expiration of relevant patents or otherwise fail to satisfy applicable requirements. Moreover, the length of the extension could be less than we request. If we are unable to obtain patent term extension or the term of any such extension is less than we request, the period during which we can enforce our patent rights for that product will be shortened and our competitors may obtain approval to market competing products sooner. As a result, our revenue from applicable products could be reduced, possibly materially.

We enjoy only limited geographical protection with respect to certain patents and may face difficulties in certain jurisdictions, which may diminish the value of intellectual property rights in those jurisdictions.

We generally file our first patent application, or priority filing, at the United Kingdom Intellectual Property Office. International applications under the Patent Cooperation Treaty, or PCT, are usually filed within twelve months after the priority filing. Based on the PCT filing, national and regional patent applications may be filed in additional jurisdictions where we believe RPL554 may be marketed or manufactured. We have so far not filed for patent protection in all national and regional jurisdictions where such protection may be available. Filing, prosecuting and defending patents covering RPL554 in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States can be less extensive than those in the United States. In addition, we may decide to abandon national and regional patent applications before grant. The grant proceeding of each national or regional patent is an independent proceeding which may lead to situations in which applications might in some jurisdictions be refused by the relevant patent offices, while granted by others. For example, unlike other countries, China has a heightened requirement for patentability, and specifically requires a detailed description of medical uses of a claimed drug. Furthermore, generic drug manufacturers or other competitors may challenge the scope, validity or enforceability of our or our licensors' patents, requiring us or our licensors to engage in complex, lengthy and costly litigation or other proceedings. Generic drug manufacturers may develop, seek approval for and launch generic versions of our products. It is also quite common that depending on the country, the scope of patent protection may vary for the same product candidate or technology.

Competitors may use our and our licensors' or collaborators' technologies in jurisdictions where we have not obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we and our licensors or collaborators have patent protection, but enforcement is not as strong as that in the United States. These products may compete with RPL554, and our and our licensors' or collaborators' patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

The laws of some jurisdictions do not protect intellectual property rights to the same extent as the laws or rules and regulations in the United States and the EU, and many companies have encountered significant difficulties in protecting and defending such rights in such jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property protection, 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, whether or not successful, could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing, and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the

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damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license. Furthermore, while we intend to protect our intellectual property rights in our expected significant markets, we cannot ensure that we will be able to initiate or maintain similar efforts in all jurisdictions in which we may wish to market RPL554. Accordingly, our efforts to protect our intellectual property rights in such countries may be inadequate, which may have an adverse effect on our ability to successfully commercialize RPL554 in all of our expected significant foreign markets. If we or our licensors encounter difficulties in protecting, or are otherwise precluded from effectively protecting, the intellectual property rights important for our business in such jurisdictions, the value of these rights may be diminished and we may face additional competition from others in those jurisdictions.

Some countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In addition, some countries limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of such patent. If we or any of our licensors is forced to grant a license to third parties with respect to any patents relevant to our business, our competitive position may be impaired.

Intellectual property rights do not necessarily address all potential threats to our competitive advantage.

The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may not adequately protect our business, or permit us to maintain our competitive advantage. The following examples are illustrative:

    §
    Others may be able to make compounds that are the same as or similar to RPL554 but that are not covered by the claims of the patents that we own or have exclusively licensed.

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    The patents of third parties may impair our ability to develop or commercialize RPL554.

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    We or our licensors or any future strategic collaborators might not have been the first to conceive or reduce to practice the inventions covered by the issued patent or pending patent application that we own or have exclusively licensed.

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    We or our licensors or any future strategic collaborators might not have been the first to file patent applications covering certain of our inventions.

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    Others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights.

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    It is possible that our pending patent applications will not lead to issued patents.

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    Issued patents that we own or have exclusively licensed may not provide us with any competitive advantage, or may be held invalid or unenforceable, as a result of legal challenges by our competitors.

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    Our competitors might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets.

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    Third parties performing manufacturing or testing for us using our products or technologies could use the intellectual property of others without obtaining a proper license.

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    We may not develop additional technologies that are patentable.

Changes in patent laws or patent jurisprudence could diminish the value of patents in general, thereby impairing our ability to protect RPL554 or any future product candidates.

As is the case with other biopharmaceutical companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the biopharmaceutical industry involve both technological complexity and legal complexity. Therefore, obtaining and enforcing biopharmaceutical

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patents is costly, time-consuming and inherently uncertain. In addition, the America Invents Act, or the AIA, which was passed in September 16, 2011, resulted in significant changes to the U.S. patent system.

An important change introduced by the AIA is that, as of March 16, 2013, the United States transitioned to a "first-to-file" system for deciding which party should be granted a patent when two or more patent applications are filed by different parties claiming the same invention. A third party that files a patent application in the United States Patent and Trademark Office, or USPTO, after that date but before us could therefore be awarded a patent covering an invention of ours even if we had made the invention before it was made by the third party. This will require us to be cognizant going forward of the time from invention to filing of a patent application, but circumstances could prevent us from promptly filing patent applications on our inventions.

Among some of the other changes introduced by the AIA are changes that limit where a patentee may file a patent infringement suit and providing opportunities for third parties to challenge any issued patent in the USPTO. This applies to all of our U.S. patents, even those issued before March 16, 2013. Because of a lower evidentiary standard in USPTO proceedings compared to the evidentiary standard in U.S. federal courts necessary to invalidate a patent claim, a third party could potentially provide evidence in a USPTO proceeding sufficient for the USPTO to hold a claim invalid even though the same evidence would be insufficient to invalidate the claim if first presented in a district court action.

Accordingly, a third party may attempt to use the USPTO procedures to invalidate our patent claims that would not have been invalidated if first challenged by the third party as a defendant in a district court action. It is not clear what, if any, impact the AIA will have on the operation of our business. However, the AIA and its implementation could increase the uncertainties and costs surrounding the prosecution of our or our licensors' or collaboration partners' patent applications and the enforcement or defense of our or our licensors' or collaboration partners' issued patents.

Additionally, the U.S. Supreme Court has ruled on several patent cases in recent years either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisions by the U.S. Congress, the federal courts and the USPTO, the laws and regulations governing patents could change in unpredictable ways that could weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future. Similarly, the complexity and uncertainty of European patent laws has also increased in recent years. In addition, the European patent system is relatively stringent in the type of amendments that are allowed during prosecution. Complying with these laws and regulations could limit our ability to obtain new patents in the future that may be important for our business.

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

We consider proprietary trade secrets and confidential know-how and unpatented know-how to be important to our business. We may rely on trade secrets or confidential know-how to protect our technology, especially where patent protection is believed to be of limited value. However, trade secrets and confidential know-how are difficult to maintain as confidential.

To protect this type of information against disclosure or appropriation by competitors, our policy is to require our employees, consultants, contractors and advisors to enter into confidentiality agreements with us. We also seek to preserve the integrity and confidentiality of our data, trade secrets and know-how by maintaining physical security of our premises and physical and electronic security of our information technology systems. Monitoring unauthorized uses and disclosures is difficult, and we do not know whether the steps we have taken to protect our proprietary technologies will be effective. We cannot guarantee that

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our trade secrets and other proprietary and confidential information will not be disclosed or that competitors will not otherwise gain access to our trade secrets. However, current or former employees, consultants, contractors and advisers may unintentionally or willfully disclose our confidential information to competitors, and confidentiality agreements may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. Enforcing a claim that a third party obtained illegally and is using trade secrets and/or confidential know-how is expensive, time consuming and unpredictable. The enforceability of confidentiality agreements may vary from jurisdiction to jurisdiction. Furthermore, if a competitor lawfully obtained or independently developed any of our trade secrets, we would have no right to prevent such competitor from using that technology or information to compete with us, which could harm our competitive position. Additionally, if the steps taken to maintain our trade secrets are deemed inadequate, we may have insufficient recourse against third parties for misappropriating the trade secret.

Failure to obtain or maintain trade secrets and confidential know-how trade protection could adversely affect our competitive position. Moreover, our competitors may independently develop substantially equivalent proprietary information and may even apply for patent protection in respect of the same. If successful in obtaining such patent protection, our competitors could limit our use of our trade secrets and/or confidential know-how.

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

Many of our employees, including our senior management, were previously employed at universities or at other biopharmaceutical companies, including our competitors or potential competitors. Some of these employees 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 confidential information or intellectual property, including trade secrets or other proprietary information, of any such employee's former employer. Litigation may be necessary to defend against these claims.

If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel or sustain damages. Such intellectual property rights could be awarded to a third party, and we could be required to obtain a license from such third party to commercialize our technology or products. Such a license may not be available on commercially reasonable terms or at all. Even if we successfully prosecute or defend against such claims, litigation could result in substantial costs and distract management.

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

Periodic maintenance and annuity fees on any issued patent are due to be paid to the USPTO and foreign patent agencies in several stages over the lifetime of the patent. The USPTO 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 failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. If we or our licensors or collaboration partners fail to maintain the patents and patent applications covering RPL554, our competitors might be able to enter the market, which would hurt our competitive position and could impair our ability to successfully commercialize RPL554 in any indication for which it is approved.

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Our proprietary information, or that of our suppliers and any future collaborators, may be lost or we may suffer security breaches.

In the ordinary course of our business, we collect and store sensitive data, including intellectual property, clinical trial data, proprietary business information and personally identifiable information of our clinical trial subjects and employees, in our data centers and on our networks. The secure processing, maintenance and transmission of this information is critical to our operations. Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions. Although to our knowledge we have not experienced any such material security breach to date, any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, regulatory penalties, disrupt our operations, damage our reputation, and cause a loss of confidence in us and our ability to conduct clinical trials, which could adversely affect our reputation and delay our clinical development of RPL554.

Our information technology systems could experience serious disruptions that could distract our operations and cause delays in our research and development work.

Our information technology and other internal infrastructure systems, including corporate firewalls, servers, leased lines and connection to the Internet, face the risk of systemic failure that could disrupt our operations. A significant disruption in the availability of our information technology and other internal infrastructure systems could cause interruptions in our collaborations and delays in our research and development work.

Risks Related to Employee Matters and Managing Growth

Our future growth and ability to compete depends on retaining our key personnel and recruiting additional qualified personnel.

Our success depends upon the continued contributions of our key management, scientific and technical personnel, many of whom have been instrumental for us and have substantial experience with RPL554 and related technologies. These key management individuals include our chief executive officer, Jan-Anders Karlsson, our chief medical officer, Kenneth Newman, our chief financial officer, Piers Morgan, our legal counsel, Claire Poll, and our senior vice president, chemistry manufacturing and controls, Peter Spargo.

The loss of key managers and senior scientists could delay our research and development activities. In addition, the competition for qualified personnel in the biopharmaceutical and pharmaceutical field is intense, and our future success depends upon our ability to attract, retain and motivate highly skilled scientific, technical and managerial employees. We face competition for personnel from other companies, universities, public and private research institutions and other organizations. If our recruitment and retention efforts are unsuccessful in the future, it may be difficult for us to achieve our product candidate development objectives, raise additional capital and implement our business strategy.

We expect to expand our development, regulatory and sales and marketing capabilities, and as a result, we may encounter difficulties in managing our growth, which could disrupt our operations.

We expect to experience significant growth in the number of our employees and the scope of our operations, particularly in the areas of drug development, regulatory affairs and sales and marketing. To manage our anticipated future growth, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualified personnel. Due to our limited financial resources and the limited experience of our management team in managing a company with such anticipated growth, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel. The expansion of our operations may lead to significant costs and may divert our management and business development resources. Any inability to manage growth could delay the execution of our business plans or disrupt our operations.

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Risks Related to the Global Offering and Our ADSs and Ordinary Shares

The price of our ADSs and ordinary shares may be volatile and may fluctuate due to factors beyond our control.

The trading market for publicly traded emerging biopharmaceutical and drug discovery and development companies has been highly volatile and is likely to remain highly volatile in the future. The market price of our ADSs and ordinary shares may fluctuate significantly due to a variety of factors, including:

    §
    positive or negative results from, or delays in, testing and clinical trials by us, collaborators or competitors;
    §
    delays in entering into collaborations and strategic relationships with respect to development or commercialization of RPL554 or entry into collaborations and strategic relationships on terms that are not deemed to be favorable to us;
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    technological innovations or commercial product introductions by us or competitors;
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    changes in government regulations;
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    developments concerning proprietary rights, including patents and litigation matters;
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    public concern relating to the commercial value or safety of RPL554;
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    financing or other corporate transactions;
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    publication of research reports or comments by securities or industry analysts;
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    general market conditions in the pharmaceutical industry or in the economy as a whole;
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    the loss of any of our key scientific or senior management personnel;
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    sales of our ADSs or ordinary shares by us, our senior management and board members, holders of our ADSs or our shareholders in the future; or
    §
    other events and factors, many of which are beyond our control.

These and other market and industry factors may cause the market price and demand for our ADSs and ordinary shares to fluctuate substantially, regardless of our actual operating performance, which may limit or prevent investors from readily selling their ADSs or ordinary shares and may otherwise negatively affect the liquidity of our ADSs and ordinary shares. In addition, the stock market in general, and biopharmaceutical companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. In the past, when the market price of a stock has been volatile, holders of that stock have sometimes instituted securities class action litigation against the issuer. If any of the holders of our ADSs or ordinary shares were to bring such a lawsuit against us, we could incur substantial costs defending the lawsuit and the attention of our senior management would be diverted from the operation of our business. Any adverse determination in litigation could also subject us to significant liabilities.

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

As a U.S. public company, and particularly after we no longer qualify as an emerging growth company, we will incur significant legal, accounting and other expenses that we did not incur previously. The Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of NASDAQ and other applicable securities rules and regulations impose various requirements on non-U.S. reporting public companies, including the establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our senior management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. For example, we expect that these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance, which in turn could make it more difficult for us to attract and retain qualified senior management personnel or members for our board of directors.

However, these rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is

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provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, we will be required to furnish a report by our senior management on our internal control over financial reporting. However, while we remain an emerging growth company, or EGC, we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. To prepare for eventual compliance with Section 404, once we no longer qualify as an EGC, we will be engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we will need to continue to dedicate internal resources, potentially engage outside consultants and adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting. Despite our efforts, there is a risk that we will not be able to conclude, within the prescribed timeframe or at all, that our internal control over financial reporting is effective as required by Section 404. If we identify one or more material weaknesses, it could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.

There has been no public market for our ADSs prior to the U.S. offering, and an active market may not develop in which investors can resell our ADSs.

Prior to the U.S. offering, there has been no public market for our ADSs, although our ordinary shares have traded on AIM. We cannot predict the extent to which an active market for our ADSs will develop or be sustained after the U.S. offering, or how the development of such a market might affect the market price for our ADSs. The initial public offering price of our ADSs in the U.S. offering will be agreed upon between us and the underwriters based on a number of factors, including market conditions in effect at the time of the offering, which may not be indicative of the price at which our ADSs will trade following completion of the offering. Investors may not be able to sell their ADSs at or above the initial public offering price.

The dual listing of our ordinary shares and our ADSs following the U.S. offering may adversely affect the liquidity and value of our ordinary shares and ADSs.

Following the U.S. offering and after our ADSs begin trading on NASDAQ, our ordinary shares will continue to be admitted to trading on AIM. We cannot predict the effect of this dual listing on the value of our ADSs and ordinary shares. However, the dual listing of our ADSs and ordinary shares may dilute the liquidity of these securities in one or both markets and may adversely affect the development of an active trading market for our ADSs in the United States. The price of our ADSs could also be adversely affected by trading in our ordinary shares on AIM. Although our ordinary shares are currently admitted to trading on AIM, following the global offering, we may decide to cancel the admission of our ordinary shares to trading on AIM. Cancellation of the admission of our ordinary shares to trading on AIM would require the requisite consent of shareholders in a general meeting prescribed by AIM Rules for Companies, unless the London Stock Exchange agrees otherwise. We cannot predict the effect such cancellation would have on the market price of our ADSs or ordinary shares.

Certain of our existing shareholders, members of our board of directors, and senior management will maintain the ability to exercise significant control over us. Your interests may conflict with the interests of these existing shareholders.

As of March 31, 2017, after giving effect to the closing of the global offering and the shareholder private placement, our senior management, board of directors and greater than 5% shareholders and their respective affiliates, in the aggregate, will own 38.3% of our ordinary shares (including ordinary shares in the form of ADSs) assuming no exercise of outstanding options or warrants, and 51.6% of our ordinary shares, assuming exercise of all outstanding warrants, which become exercisable upon the completion of the global offering. Based on the assumed public offering price of $13.49 per ADS in the U.S. offering and the

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assumed offering price £1.36 per share in the European private placement and the shareholder private placement, if our existing institutional investors that are affiliated with certain of our directors purchase all of the securities they have indicated an interest in purchasing in the global offering and all of the securities for which there are indications of interest are sold in the shareholder private placement, and assuming exercise of all outstanding warrants, the number of ordinary shares beneficially owned by our senior management, board of directors and greater than 5% shareholders and their respective affiliates, in the aggregate, will be 62.6% of our ordinary shares (including ordinary shares in the form of ADSs). Depending on the level of attendance at our general meetings of shareholders, these shareholders either alone or voting together as a group may be in a position to determine or significantly influence the outcome of decisions taken at any such general meeting. Any shareholder or group of shareholders controlling more than 50% of the share capital present and voting at our general meetings of shareholders may control any shareholder resolution requiring a simple majority, including the appointment of board members, certain decisions relating to our capital structure, the approval of certain significant corporate transactions and amendments to our Articles of Association. Among other consequences, this concentration of ownership may have the effect of delaying or preventing a change in control and might therefore negatively affect the market price of our ADSs and ordinary shares.

Future sales, or the possibility of future sales, of a substantial number of our ADSs or ordinary shares could adversely affect the price of our ADSs and ordinary shares.

Future sales of a substantial number of our ADSs or ordinary shares, or the perception that such sales will occur, could cause a decline in the market price of our ADSs and ordinary shares. Based upon the number of shares outstanding as of March 31, 2017, after giving effect to the closing of the global offering and the shareholder private placement, we will have 96,089,306 ordinary shares outstanding, assuming no exercise of outstanding options or warrants. ADSs and ordinary shares issued and sold in the global offering may be resold in the public market immediately without restriction, unless purchased by our affiliates. A significant portion of these ordinary shares and ADSs will be subject to the lock-up agreements described in the "Ordinary Shares and ADSs Eligible for Future Sale" and "Underwriting." If, after the end of such lock-up agreements, these shareholders sell substantial amounts of ordinary shares or ADSs in the public market, or the market perceives that such sales may occur, the market price of our ADSs or ordinary shares and our ability to raise capital through an issue of equity securities in the future could be adversely affected. We have also entered into a registration rights agreement pursuant to which we agreed under certain circumstances to file a registration statement to register the resale of the ordinary shares held by certain of our existing shareholders, as well as to cooperate in certain public offerings of such shares.

If you purchase ordinary shares or ADSs in the global offering, you will suffer immediate dilution of your investment.

We expect the initial public offering price of our ADSs in the U.S. offering and the offering price of our ordinary shares in the European private placement to be substantially higher than the net tangible book value per ADS and per ordinary share prior to the global offering. Therefore, if you purchase ADSs or ordinary shares in the global offering, you will pay a price per ADSs and per ordinary share that substantially exceeds our net tangible book value per ADS and per ordinary share after the global offering. To the extent outstanding options or warrants are exercised for ordinary shares, you may experience further dilution. Based on the assumed initial public offering price of $13.49 per ADS and assumed offering price of £1.36 per ordinary share, which reflects the last reported sale price of our ordinary shares on AIM on April 13, 2017, you will experience immediate dilution of $4.62 per ADS and £0.47 per ordinary share, representing the difference between our net tangible book value per ADS and per ordinary share after giving effect to the global offering and the assumed offering price. See "Dilution."

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Because we do not anticipate paying any cash dividends on our ADSs or ordinary shares in the foreseeable future, capital appreciation, if any, will be your sole source of gains and you may never receive a return on your investment.

     Under current U.K. law, a company's accumulated realized profits must exceed its accumulated realized losses (on a non-consolidated basis) before dividends can be paid. Therefore, we must have distributable profits before issuing a dividend. We have not paid dividends in the past on our ordinary shares. We intend to retain earnings, if any, for use in our business and do not anticipate paying any cash dividends in the foreseeable future. As a result, capital appreciation, if any, on our ADSs or ordinary shares will be your sole source of gains for the foreseeable future, and you will suffer a loss on your investment if you are unable to sell your ADSs or ordinary shares at or above the offering price. Investors seeking cash dividends should not purchase our ADSs or ordinary shares in the global offering.

We have broad discretion in the use of the net proceeds from the global offering and the shareholder private placement and may not use them effectively.

Our senior management will have broad discretion in the application of the net proceeds from the global offering and the shareholder private placement and could spend the proceeds in ways that do not improve our results of operations or enhance the value of our ordinary shares or ADSs. The failure by our senior management to apply these funds effectively could result in financial losses, cause the price of our ADSs or ordinary shares to decline and delay the development of RPL554. Pending their use, we may invest the net proceeds from the global offering and the shareholder private placement in a manner that does not produce income or that loses value.

Securities traded on AIM may carry a higher risk than securities traded on other exchanges, which may impact the value of your investment.

Our ordinary shares are currently traded on AIM. Investment in equities traded on AIM is sometimes perceived to carry a higher risk than an investment in equities quoted on exchanges with more stringent listing requirements, such as the main market of the London Stock Exchange, New York Stock Exchange or NASDAQ. This is because AIM imposes less stringent corporate governance and ongoing reporting requirements than those other exchanges. In addition, AIM requires only half-yearly, rather than quarterly, financial reporting. You should be aware that the value of our ordinary shares may be influenced by many factors, some of which may be specific to us and some of which may affect AIM-quoted companies generally, including the depth and liquidity of the market, our performance, a large or small volume of trading in our ordinary shares, legislative changes and general economic, political or regulatory conditions, and that the prices may be volatile and subject to extensive fluctuations. Therefore, the market price of our ordinary shares, our ADSs, or of the ordinary shares underlying our ADSs, may not reflect the underlying value of our company.

Purchasers of ADSs in the U.S. offering may not have the same voting rights as the holders of our ordinary shares and may not receive voting materials in time to be able to exercise their right to vote.

Except as described in this prospectus, holders of our ADSs will not be able to exercise voting rights attaching to the ordinary shares evidenced by our ADSs on an individual basis. Holders of our ADSs will appoint the depositary or its nominee as their representative to exercise the voting rights attaching to the ordinary shares in the form of ADSs. Purchasers of ADSs in the U.S. offering may not receive voting materials in time to instruct the depositary to vote, and it is possible that they, or persons who hold their ADSs through brokers, dealers or other third parties, will not have the opportunity to exercise a right to vote. Furthermore, the depositary will not be liable for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the effect of any such vote. As a result, purchasers of ADSs in the U.S. offering may not be able to exercise voting rights and may lack recourse if their ADSs are not voted as requested. In addition, in their capacity as ADS holders, purchasers of ADSs in the U.S. offering will not be able to call a shareholders' meeting.

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Purchasers of ADSs in the U.S. offering may not receive distributions on our ordinary shares in the form of ADSs or any value for them if it is illegal or impractical to make them available to holders of ADSs.

The depositary for our ADSs has agreed to pay to purchasers of ADSs in the U.S. offering the cash dividends or other distributions it or the custodian receives on our ordinary shares or other deposited securities after deducting its fees and expenses. Purchasers of our ADSs will receive these distributions in proportion to the number of our ordinary shares their ADSs represent. However, in accordance with the limitations set forth in the deposit agreement, it may be unlawful or impractical to make a distribution available to holders of ADSs. We have no obligation to take any other action to permit the distribution of our ADSs, ordinary shares, rights or anything else to holders of our ADSs. This means that purchasers of ADSs in the U.S. offering may not receive the distributions we make on our ordinary shares or any value from them if it is unlawful or impractical to make them available to them. These restrictions may have a material adverse effect on the value of a purchaser's ADSs.

Purchasers of ADSs in the U.S. offering may be subject to limitations on transfer of their ADSs.

ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when it deems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary deems it advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason in accordance with the terms of the deposit agreement.

The rights of our shareholders may differ from the rights typically offered to shareholders of a U.S. corporation.

We are incorporated under English law. The rights of holders of ordinary shares and, therefore, certain of the rights of holders of ADSs, are governed by English law, including the provisions of the Companies Act 2006, and by our Articles of Association. These rights differ in certain respects from the rights of shareholders in typical U.S. corporations. See "Description of Share Capital and Articles of Association — Differences in Corporate Law" in this prospectus for a description of the principal differences between the provisions of the Companies Act 2006 applicable to us and, for example, the Delaware General Corporation Law relating to shareholders' rights and protections.

Claims of U.S. civil liabilities may not be enforceable against us.

We are incorporated under English law. Substantially all of our assets are located outside the United States. The majority of our senior management and board of directors reside outside the United States. As a result, it may not be possible for investors to effect service of process within the United States upon such persons or to enforce judgments obtained in U.S. courts against them or us, including judgments predicated upon the civil liability provisions of the U.S. federal securities laws.

The United States and the United Kingdom do not currently have a treaty providing for recognition and enforcement of judgments (other than arbitration awards) in civil and commercial matters. Consequently, a final judgment for payment given by a court in the United States, whether or not predicated solely upon U.S. securities laws, would not automatically be recognized or enforceable in the United Kingdom. In addition, uncertainty exists as to whether U.K. courts would entertain original actions brought in the United Kingdom against us or our directors or senior management predicated upon the securities laws of the United States or any state in the United States. Any final and conclusive monetary judgment for a definite sum obtained against us in U.S. courts would be treated by the courts of the United Kingdom as a cause of action in itself and sued upon as a debt at common law so that no retrial of the issues would be necessary, provided that certain requirements are met. Whether these requirements are met in respect of a judgment based upon the civil liability provisions of the U.S. securities laws, including whether the award of monetary damages under such laws would constitute a penalty, is an issue for the court making such decision. If an English court gives judgment for the sum payable under a U.S. judgment, the English judgment will be enforceable by methods generally available for this purpose. These methods generally permit the English court discretion to prescribe the manner of enforcement.

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As a result, U.S. investors may not be able to enforce against us or our senior management, board of directors or certain experts named herein who are residents of the United Kingdom or countries other than the United States any judgments obtained in U.S. courts in civil and commercial matters, including judgments under the U.S. federal securities laws.

We qualify as a foreign private issuer and, as a result, we will not be subject to U.S. proxy rules and will be subject to Exchange Act reporting obligations that, to some extent, are more lenient and less frequent than those of a U.S. domestic public company.

Upon the closing of the U.S. offering, we will report under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as a non-U.S. company with foreign private issuer status. Because we qualify as a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including (i) the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act; (ii) the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and (iii) the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified information, or current reports on Form 8-K, upon the occurrence of specified significant events. Although it is not required because we are a foreign private issuer, we intend to furnish quarterly unaudited financial information to the SEC on Form 6-K. In addition, foreign private issuers are not required to file their annual report on Form 20-F until 120 days after the end of each fiscal year, while U.S. domestic issuers that are accelerated filers are required to file their annual report on Form 10-K within 75 days after the end of each fiscal year. Foreign private issuers also are exempt from Regulation Fair Disclosure, aimed at preventing issuers from making selective disclosures of material information. As a result of the above, you may not have the same protections afforded to shareholders of companies that are not foreign private issuers.

As a foreign private issuer, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from NASDAQ corporate governance listing standards. These practices may afford less protection to shareholders than they would enjoy if we complied fully with NASDAQ corporate governance listing standards.

As a foreign private issuer listed on NASDAQ, we will be subject to corporate governance listing standards. However, NASDAQ rules permit a foreign private issuer like us to follow the corporate governance practices of its home country in lieu of certain NASDAQ corporate governance listing standards. Certain corporate governance practices in the United Kingdom, which is our home country, may differ significantly from NASDAQ corporate governance listing standards. For example, neither the corporate laws of the United Kingdom nor our Articles of Association require a majority of our directors to be independent; we could include non-independent directors as members of our nomination and remuneration committee; and our independent directors would not necessarily hold regularly scheduled meetings at which only independent directors are present. Therefore, our shareholders may be afforded less protection than they otherwise would have under NASDAQ corporate governance listing standards applicable to U.S. domestic issuers. See "Management—Foreign Private Issuer Exemption."

We may lose our foreign private issuer status, which would then require us to comply with the Exchange Act's domestic reporting regime and cause us to incur significant legal, accounting and other expenses.

As a foreign private issuer, we are not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act applicable to U.S. domestic issuers. We may no longer be a foreign private issuer as of June 30, 2018 (the end of our second fiscal quarter in the fiscal year after the global offering), which would require us to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act applicable to U.S. domestic issuers as of January 1, 2019. In order to maintain our current status as a foreign private issuer, either (a) a majority of our ADSs must be either directly or indirectly owned of record by non-residents of the United States or (b)(i) a majority of our

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executive officers or directors cannot be U.S. citizens or residents, (ii) more than 50 percent of our assets must be located outside the United States and (iii) our business must be administered principally outside the United States. If we lose our status as a foreign private issuer, we would be required to comply with the Exchange Act reporting and other requirements applicable to U.S. domestic issuers, which are more detailed and extensive than the requirements for foreign private issuers. We may also be required to make changes in our corporate governance practices in accordance with various SEC and NASDAQ rules. The regulatory and compliance costs to us under U.S. securities laws if we are required to comply with the reporting requirements applicable to a U.S. domestic issuer may be significantly higher than the cost we would incur as a foreign private issuer. As a result, we expect that a loss of foreign private issuer status would increase our legal and financial compliance costs and would make some activities highly time consuming and costly. We also expect that if we were required to comply with the rules and regulations applicable to U.S. domestic issuers, it would make it more difficult and expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These rules and regulations could also make it more difficult for us to attract and retain qualified members of our board of directors.

We are an "emerging growth company," and we cannot be certain if the reduced reporting requirements applicable to "emerging growth companies" will make our ADSs or ordinary shares less attractive to investors.

We are an "emerging growth company," as defined in the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404, exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. As an emerging growth company, we are required to report only two years of financial results and selected financial data compared to three and five years, respectively, for comparable data reported by other public companies. We may take advantage of these exemptions until we are no longer an emerging growth company. We could be an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier, including if the aggregate market value of our ADSs and ordinary shares held by non-affiliates exceeds $700 million as of any June 30 (the end of our second fiscal quarter) before that time, in which case we would no longer be an emerging growth company as of the following December 31 (our fiscal year-end). We cannot predict if investors will find our ADSs or ordinary shares less attractive because we may rely on these exemptions. If some investors find our ADSs or ordinary shares less attractive as a result, there may be a less active trading market for our ADSs or ordinary shares and the price of our ADSs or ordinary shares may be more volatile.

If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, shareholders could lose confidence in our financial and other public reporting, which would harm our business and the trading price of our ADSs or ordinary shares.

Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations. In addition, any testing by us conducted in connection with Section 404, or any subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement. Inadequate internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our ADSs or ordinary shares.

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In connection with the preparation for this initial public offering, we reassessed our critical accounting policies to ensure compliance with IFRS. As part of this reassessment, we identified errors relating to the recognition of assumed liabilities and goodwill in connection with the acquisition of Rhinopharma in September 2006. We concluded that a lack of adequate controls surrounding our historic accounting for business combinations constituted a material weakness in our internal control over financial reporting, as defined in the standards established by the U.S. Public Accounting Oversight Board, or PCAOB. The PCAOB defines a material weakness as a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected in a timely basis. We are currently in the process of remediating this material weakness and have taken steps that we believe will address the underlying causes of the material weakness by the hiring of our new chief financial officer and enhancing our financial reporting team's technical accounting knowledge associated with the accounting rules for business combinations. However, we cannot be certain that these efforts will be sufficient to remediate this material weakness or prevent future material weaknesses or significant deficiencies from occurring.

Management will be required to assess the effectiveness of our internal controls annually. However, for as long as we are an "emerging growth company" under the JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal controls over financial reporting pursuant to Section 404. An independent assessment of the effectiveness of our internal controls could detect problems that our management's assessment might not. Undetected material weaknesses in our internal controls could lead to financial statement restatements requiring us to incur the expense of remediation and could also result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.

If securities or industry analysts do not publish research, or publish inaccurate or unfavorable research, about our business, the price of our ADSs and ordinary shares and our trading volume could decline.

The trading market for our ADSs and ordinary shares 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 us. If no or too few securities or industry analysts commence coverage on us, the trading price for our ADSs and ordinary shares would likely be negatively affected. In the event securities or industry analysts initiate coverage, if one or more of the analysts who cover us downgrade our ADSs or ordinary shares or publish inaccurate or unfavorable research about our business, the price of our ADSs and ordinary shares would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our ADSs or ordinary shares could decrease, which might cause the price of our ADSs and ordinary shares and trading volume to decline.

We believe we will likely be classified as a passive foreign investment company for U.S. federal income tax purposes for the current year, which could result in adverse U.S. federal income tax consequences to U.S. investors in our ordinary shares or ADSs.

Because we do not expect to earn revenue from our business operations during the current taxable year, and because our sole source of income currently is interest on bank accounts held by us, we believe we will likely be classified as a "passive foreign investment company," or PFIC, for the current taxable year. A non-U.S. company will be considered a PFIC for any taxable year if (i) at least 75% of its gross income is passive income (including interest income), or (ii) at least 50% of the value of its assets (based on an average of the quarterly values of the assets during a taxable year) is attributable to assets that produce or are held for the production of passive income. If we are classified as a PFIC in any year with respect to which a U.S. Holder (as defined below under "Material Tax Considerations — Material U.S. Federal Income Tax Considerations for U.S. Holders") owns the ordinary shares or ADSs, we will continue to be treated as a PFIC with respect to such U.S. Holder in all succeeding years during which the U.S. Holder owns the ordinary shares or ADSs, regardless of whether we continue to meet the PFIC test described above, unless the U.S. Holder makes a specified election once we cease to be a PFIC. If we are classified as a PFIC for any taxable year during which a U.S. Holder holds our ordinary shares or ADSs, certain adverse U.S. federal

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income tax consequences could apply to such U.S. Holder, including (i) the treatment of all or a portion of any gain on disposition as ordinary income, (ii) the application of a deferred interest charge on such gain and the receipt of certain dividends and (iii) the obligation to comply with certain reporting requirements. See "Material Tax Considerations — Material U.S. Federal Income Tax Considerations for U.S. Holders — Passive Foreign Investment Company Rules."

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains statements that constitute forward-looking statements. Many of the forward-looking statements contained in this prospectus can be identified by the use of forward-looking words such as "anticipate," "believe," "could," "estimate," "expect," "intend," "plan," "potential" and "should," among others.

Forward-looking statements appear in a number of places in this prospectus and include, but are not limited to, statements regarding our intent, belief or current expectations. Forward-looking statements are based on our management's beliefs and assumptions and on information currently available to our management. Such statements are subject to substantial risks and uncertainties, and actual results may differ materially from those expressed or implied in the forward-looking statements due to various important factors, including, but not limited to, those identified under "Risk Factors." In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a guarantee by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all.

Forward-looking statements include, but are not limited to, statements about:

    §
    the development of RPL554, including statements regarding the expected initiation, timing, progress and availability of data from our clinical trials;

    §
    the potential attributes and benefit of RPL554 and its competitive position;

    §
    our ability to successfully commercialize RPL554, if approved;

    §
    our expectations regarding the use of proceeds from the global offering and the shareholder private placement;

    §
    our estimates regarding expenses, future revenues, capital requirements and our need for additional financing;

    §
    our ability to acquire or in-license new product candidates;

    §
    potential collaborations; and

    §
    the duration of our patent portfolio.

Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update them in light of new information or future developments or to release publicly any revisions to these statements in order to reflect later events or circumstances or to reflect the occurrence of unanticipated events.

You should read this prospectus and the documents that we reference in this prospectus and have filed as exhibits to the registration statement, of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

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MARKET AND INDUSTRY DATA

Certain industry data and market data included in this prospectus were obtained from independent third-party surveys, market research, publicly available information, reports of governmental agencies and industry publications and surveys. All of the market data used in this prospectus involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. We believe that the information from these industry publications and surveys included in this prospectus is reliable. The industry in which we operate is subject to a high degree of uncertainty and risk due to a variety of factors, including those described in "Risk Factors." These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us.


TRADEMARKS, SERVICE MARKS AND TRADENAMES

Solely for convenience, the trademarks, service marks, logos and trade names referred to in this prospectus are without the ® and ™ symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensors to these trademarks, service marks and trade names. This prospectus contains additional trademarks, service marks and trade names of others, which are the property of their respective owners. All trademarks, service marks and trade names appearing in this prospectus are, to our knowledge, the property of their respective owners. We do not intend our use or display of other companies' trademarks, service marks, copyrights or trade names to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

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EXCHANGE RATE INFORMATION

Our business is primarily conducted in the United Kingdom, and we maintain our books and records in pounds sterling. In this prospectus, unless otherwise indicated, translations from pounds sterling into U.S. dollars were made at the rate of £1.00 to $1.2398, which was the noon buying rate of the Federal Reserve Bank of New York on April 7, 2017. Such U.S. dollar amounts are not necessarily indicative of the amounts of U.S. dollars that could actually have been purchased upon exchange of pounds sterling at the dates indicated.

The following table presents information on the exchange rates between the pound sterling and the U.S. dollar for the periods indicated:


 
  Period-end(1)   Average for
period(2)
  Low   High  
 
  (U.S. dollars per pound sterling)
 

Year Ended December 31:

                         

2012

    1.6262     1.5853     1.5301     1.6275  

2013

    1.6574     1.5641     1.4837     1.6574  

2014

    1.5578     1.6484     1.5517     1.7165  

2015

    1.4746     1.5284     1.4648     1.5882  

2016

    1.2337     1.3555     1.2155     1.4800  

2017 (through April 7)

    1.2398     1.2404     1.2118     1.2643  

(1)
In the event that the period end fell on a day for which data are not available, the exchange rate on the prior most recent business day is given.

(2)
The average of the noon buying rate for pounds sterling on the last day of each full month during the relevant year or each business day during the relevant month indicated.



 
  Low   High  
 
  (U.S. dollars per pound
sterling)

 

Month Ended:

             

October 31, 2016

    1.2155     1.2840  

November 30, 2016

    1.2218     1.2546  

December 31, 2016

    1.2222     1.2708  

January 31, 2017

    1.2118     1.2620  

February 28, 2017

    1.2427     1.2643  

March 31, 2017

    1.2152     1.2583  

April 2017 (through April 7)

    1.2398     1.2488  

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PRICE RANGE OF OUR ORDINARY SHARES

Our ordinary shares have been trading on AIM under the symbol "VRP" since September 19, 2006.

The following table presents, for the periods indicated, the reported high and low sale prices of our ordinary shares on AIM in pounds sterling and U.S. dollars. The price information below has been adjusted to reflect the 50-for-one share consolidation effected February 10, 2017. Price per ordinary share in U.S. dollars amounts below have been translated into U.S. dollars at the noon buying rate of the Federal Reserve Bank of New York on April 7, 2017 of £1.00 to $1.2398.


 
  Price Per Ordinary
Share £
  Price Per Ordinary
Share $
 
 
  High   Low   High   Low  

Year Ended December 31:

                         

2012

    2.8550     1.2500     3.5396     1.5498  

2013

    2.8750     0.8350     3.5644     1.0352  

2014

    2.2500     0.5000     2.7896     0.6199  

2015

    3.3530     0.5750     4.1570     0.7129  

2016

    2.1700     1.1500     2.6904     1.4258  

2017 (through April 13)

    1.4400     1.3021     1.7853     1.6143  

Quarterly:

   
 
   
 
   
 
   
 
 

First Quarter 2014

    2.2500     1.0750     2.7896     1.3328  

Second Quarter 2014

    1.1900     0.5950     1.4754     0.7377  

Third Quarter 2014

    0.6950     0.5000     0.8617     0.6199  

Fourth Quarter 2014

    0.8600     0.5000     1.0662     0.6199  

First Quarter 2015

    1.4700     0.5750     1.8225     0.7129  

Second Quarter 2015

    3.3530     1.2380     4.1570     1.5349  

Third Quarter 2015

    2.6750     2.0000     3.3165     2.4796  

Fourth Quarter 2015

    2.2950     1.3000     2.8453     1.6117  

First Quarter 2016

    2.1700     1.1500     2.6904     1.4258  

Second Quarter 2016

    1.8885     1.3938     2.3414     1.7280  

Third Quarter 2016

    1.7000     1.4665     2.1077     1.8182  

Fourth Quarter 2016

    2.0450     1.5250     2.5354     1.8907  

First Quarter 2017

    1.7055     1.2400     2.1145     1.5374  

Second Quarter 2017 (through April 13)

    1.4400     1.3021     1.7853     1.6143  

Most Recent Six Months:

   
 
   
 
   
 
   
 
 

October 2016

    2.0450     1.5800     2.5354     1.9589  

November 2016

    2.0000     1.7500     2.4796     2.1697  

December 2016

    1.7245     1.5250     2.1380     1.8907  

January 2017

    1.7055     1.5000     2.1145     1.8597  

February 2017

    1.5000     1.2400     1.8597     1.5374  

March 2017

    1.5080     1.3820     1.8696     1.7134  

April 2017 (through April 13)

    1.4400     1.3021     1.7853     1.6143  

On April 13, 2017, the last reported sale price of our ordinary shares on AIM was £1.36 per ordinary share ($1.69 per ordinary share based on the exchange rate set forth above).

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USE OF PROCEEDS

We estimate that the net proceeds to us from the global offering will be approximately $66.3 million (or approximately $76.7 million if the underwriters exercise in full their options to purchase an additional 667,224 ADSs and 1,334,448 ordinary shares), assuming an initial public offering price of $13.49 per ADS in the U.S. offering and an assumed offering price of £1.36 per ordinary share in the European private placement, which reflects the last reported sale price of our ordinary shares on AIM on April 13, 2017, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. In addition, we expect to receive net proceeds of approximately $386,700 from the sale by us of ordinary shares in the shareholder private placement, after deducting estimated placement agent fees and expenses payable by us.

Each £0.101 ($0.125) increase or decrease in the assumed offering price of £1.36 per ordinary share would increase or decrease our net proceeds from the global offering by £4.2 million ($5.2 million) after deducting the estimated underwriting discounts and commissions and assuming that the number of ordinary shares (including ordinary shares in the form of ADSs) offered by us, as set forth on the cover of this prospectus, remains the same. An increase or decrease of 5,000,000 ordinary shares (including ordinary shares in the form of ADSs) in the number of ordinary shares (including ordinary shares in the form of ADSs) offered by us in the global offering, as set forth on the cover page of this prospectus, would increase or decrease our net proceeds by approximately £6.3 million ($7.8 million) after deducting the estimated underwriting discounts and commissions and assuming no change in the assumed initial public offering price per ADS or in the assumed offering price per ordinary share.

We intend to use the net proceeds from the global offering and the shareholder private placement, together with our existing cash and cash equivalents, as follows:

    §
    approximately $49.0 million to advance clinical development of RPL554 for the maintenance treatment of COPD;

    §
    approximately $13.0 million to advance clinical development of RPL554 for the treatment of acute exacerbations of COPD;

    §
    approximately $14.0 million to advance clinical development of RPL554 for the treatment of CF; and

    §
    the remainder to fund our other current and future research and development activities and for working capital and other general corporate purposes.

This expected use of the net proceeds from the global offering and the shareholder private placement represents our intentions based upon our current plans and business conditions. We may also use a portion of the net proceeds to in-license, acquire or invest in additional businesses, technologies, products or assets, although currently we have no specific agreements, commitments or understandings in this regard. As of the date of this prospectus, we cannot predict with certainty all of the particular uses for the net proceeds to be received upon the closing of the global offering and the shareholder private placement or the amounts that we will actually spend on the uses set forth above. Predicting the costs necessary to develop RPL554 and other product candidates can be difficult. The amounts and timing of our actual expenditures and the extent of clinical development may vary significantly depending on numerous factors, including the progress of our development efforts, the status of and results from pre-clinical studies and any ongoing clinical trials or clinical trials we may commence in the future, as well as any collaborations that we may enter into with third parties for RPL554 or other product candidates and any unforeseen cash needs. As a result, our management will retain broad discretion over the allocation of the net proceeds from the global offering and the shareholder private placement.

Based on our planned use of the net proceeds of the global offering, the shareholder private placement and our current cash and cash equivalents, we estimate that such funds will be sufficient to enable us to fund our operating expenses and capital expenditure requirements for at least the next 12 months. We anticipate

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these funds will be sufficient for the completion of (i) our two planned Phase 2b clinical trials, our planned PK clinical trial and our ongoing Phase 2a clinical trial of RPL554 for the maintenance treatment of COPD, (ii) our planned Phase 2 clinical trial of RPL554 for the treatment of acute exacerbations of COPD and (iii) our ongoing Phase 2a clinical trial and our planned Phase 2b proof-of-concept trial of RPL554 for the treatment of CF. We have based this estimate on assumptions that may prove to be incorrect, and we could use our available capital resources sooner than we currently expect.

Pending their use, we plan to invest the net proceeds from the global offering and the shareholder private placement in short- and intermediate-term interest-bearing obligations and certificates of deposit.

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DIVIDEND POLICY

We have never paid or declared any cash dividends on our ordinary shares, and we do not anticipate paying any cash dividends on our ordinary shares in the foreseeable future. We intend to retain all available funds and any future earnings to fund the development and expansion of our business. Under English law, among other things, we may only pay dividends if we have sufficient distributable reserves (on a non-consolidated basis), which are our accumulated realized profits that have not been previously distributed or capitalized less our accumulated realized losses, so far as such losses have not been previously written off in a reduction or reorganization of capital.

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CAPITALIZATION

The table below sets forth our cash and cash equivalents and capitalization as of December 31, 2016 derived from our Annual Consolidated Financial Statements included elsewhere in this prospectus:

    §
    on an actual basis; and

    §
    on an as adjusted basis to give effect to our sale of (i) 44,481,617 ordinary shares (including 35,585,296 ordinary shares in the form of ADSs) in the global offering at an assumed public offering price of $13.49 per ADS in the U.S. offering and £1.36 per ordinary share in the European private placement, which reflects the last reported sale price of our ordinary shares on AIM on April 13, 2017, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us and (ii) £335,400 (or the U.S. dollar equivalent) of ordinary shares at a price per share equal to the offering price in the European private placement, after deducting the estimated placement agent fees. There can be no assurance that the shareholder private placement will take place or that the terms of the shareholder private placement will be consistent with those assumed in this prospectus.

You should read this table in conjunction with our Annual Consolidated Financial Statements included elsewhere in this prospectus and "Exchange Rate Information," "Use of Proceeds," "Selected Consolidated Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." For the convenience of the reader, we have translated pound sterling amounts in the table below as of December 31, 2016 into U.S. dollars at the noon buying rate of the Federal Reserve Bank of New York on December 30, 2016, which was £1.00 to $1.2337. These translations should not be considered representations that any such amounts have been, could have been or could be converted into U.S. dollars at that or any other exchange rate as of that or any other date.


 
  As of December 31, 2016  
 
  Actual   As Adjusted(1)  
 
  (in thousands)
 

Cash and cash equivalents

  £ 39,785   $ 49,083   £ 93,539   $ 115,399  

Derivative financial instrument

  £ 7,923   $ 9,774   £ 7,923   $ 9,774  

Equity:

                         

Share capital

    2,568     3,168     4,804     5,927  

Share premium

    58,527     72,204     110,044     135,761  

Share-based payments reserve

    2,102     2,593     2,102     2,593  

Accumulated loss

    (28,728 )   (35,442 )   (28,728 )   (35,442 )

Total equity

    34,468     42,524     88,222     108,839  

Total capitalization

  £ 42,391   $ 52,298   £ 96,144   $ 118,613  

(1)
Each £0.101 ($0.125) increase or decrease in the assumed offering price of £1.36 per ordinary share, which reflects the last reported sale price of our ordinary shares on AIM on April 13, 2017, would increase or decrease the as adjusted amount of each of cash and cash equivalents, total equity and total capitalization by £4.2 million ($5.2 million), assuming the number of ordinary shares (including ordinary shares in the form of ADSs) offered by us in the global offering, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions. An increase or decrease of 5,000,000 in the number of ordinary shares (including ordinary shares in the form of ADSs) offered by us, as set forth on the cover page of this prospectus, would increase or decrease the as adjusted amount of each of cash and cash equivalents, total equity and total capitalization by £6.3 million ($7.8 million), assuming no change in the assumed initial public offering price per ADS or in the assumed offering price per ordinary share and after deducting the estimated underwriting discounts and commissions.

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The table above excludes:

    §
    2,837,333 ordinary shares issuable upon the exercise of share options outstanding as of December 31, 2016 at a weighted average exercise price of £1.87 per share;

    §
    6,333,000 ordinary that may be issued under the New Incentive Plan, which will become effective upon the pricing of the global offering, including ordinary shares underlying restricted share units and options that we intend to grant in connection with this global offering to each of our executive officers and a director, as more fully described in "Management—Equity Compensation Arrangements—2017 Incentive Award Plan—2017 Grants," as well as ordinary shares that may be issued pursuant to provisions in our New Incentive Plan that automatically increase the share reserve under our New Incentive Plan;

    §
    2,298,773 ordinary shares that may be issued under our existing equity incentive plans as of December 31, 2016; and

    §
    12,646,370 ordinary shares issuable upon the exercise of warrants outstanding as of December 31, 2016 at a weighted average exercise price of £1.7174 per share.

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DILUTION

If you invest in our ADSs or ordinary shares, your interest will be diluted to the extent of the difference between the offering price per ADS or ordinary share paid by purchasers in the global offering and our as adjusted net tangible book value per ADS or ordinary share after completion of the global offering.

At December 31, 2016, we had a historical net tangible book value of £32.2 million ($39.9 million), corresponding to a net tangible book value of £0.63 per ordinary share (equivalent to $6.21 per ADS). Net tangible book value per ordinary share represents the amount of our total assets less our total liabilities, excluding goodwill and other intangible assets, divided by the total number of our ordinary shares outstanding as of December 31, 2016.

After giving effect to the sale by us of (i) 44,481,617 ordinary shares (including 35,585,296 ordinary shares in the form of ADSs) in the global offering at an assumed public offering price of $13.49 per ADS in the U.S. offering and £1.36 per ordinary share in the European private placement, which reflects the last reported sale price of our ordinary shares on AIM on April 13, 2017, after deducting the estimated underwriting discounts and commissions and (ii) £335,400 (or the U.S. dollar equivalent) of ordinary shares at a price per share equal to the offering price in the European private placement, after deducting the estimated placement agent fees and estimated expenses payable by us, our as adjusted net tangible book value as of December 31, 2016 would have been £85.9 million ($106.5 million), representing an as adjusted net tangible book value of £0.89 per ordinary share and $8.87 per ADS. This represents an immediate increase in net tangible book value of £0.26 per ordinary share ($2.66 per ADS) to existing shareholders and an immediate dilution of £0.47 per ordinary share and $4.62 per ADS, to new investors purchasing ordinary shares or ADSs in the global offering or the shareholder private placement. Dilution per ADS or ordinary share to new investors is determined by subtracting the as adjusted net tangible book value per ADS or ordinary share after the global offering and the shareholder private placement from the assumed initial public offering price per ADS or the assumed offering price per ordinary share, as applicable, paid by new investors.

The following table illustrates this dilution to new investors purchasing ADSs or ordinary shares in the global offering and the shareholder private placement.


 
  As of December 31, 2016  
 
  Ordinary Shares   ADSs  
 
   
   
   
   
 

Assumed offering price

        £ 1.36         $ 13.49  

Net tangible book value per ordinary share or ADS

  £ 0.63         $ 6.21        

Increase in net tangible book value per ordinary share or ADS attributable to the global offering and the shareholder private placement

    0.26           2.66        

As adjusted net tangible book value per ordinary share or ADS after the global offering and the shareholder private placement

          0.89           8.87  

Dilution per ADS or ordinary share to new investors in the global offering and the shareholder private placement

        £ 0.47         $ 4.62  

If the underwriters exercise in full their options to purchase an additional 667,224 ADSs and 1,334,448 ordinary shares, our as adjusted net tangible book value after the global offering and the shareholder private placement would be £0.92 per ordinary share ($9.13 per ADS), representing an immediate increase in as adjusted net tangible book value of £0.29 per ordinary share ($2.92 per ADS), to existing shareholders and

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immediate dilution of £0.44 per ordinary share and $4.36 per ADS to new investors participating in the global offering or shareholder private placement, based on the assumed initial public offering price of $13.49 per ADS in the U.S. offering and the assumed offering price of £1.36 per ordinary share in the European private placement and shareholder private placement, which reflects the last reported sale price of our ordinary shares on AIM on April 13, 2017.

Each £0.101 ($0.125) increase or decrease in the assumed offering price of £1.36 per our ordinary share, which reflects the last reported sale price of our ordinary shares on AIM on April 13, 2017, would increase or decrease the as adjusted net tangible book value after the global offering and shareholder private placement by £0.04 per ordinary share and $0.43 per ADS and the dilution to new investors in the global offering and shareholder private placement by £0.04 per ordinary share and $0.43 per ADS, after deducting the estimated underwriting discounts and commissions and assuming that the number of ordinary shares (including ordinary shares in the form of ADSs) offered by us, as set forth on the cover page of this prospectus, remains the same. An increase of 5,000,000 in the number of ordinary shares (including ordinary shares in the form of ADSs) offered by us in the global offering, as set forth on the cover page of this prospectus, would increase the as adjusted net tangible book value after this offering by $0.18 per ADS and £0.02 per ordinary share and decrease the dilution to new investors participating in the global offering or shareholder private placement by $0.18 per ADS and £0.02 per ordinary share, assuming no change in the assumed initial public offering price per ADS or in the assumed offering price per ordinary share and after deducting the estimated underwriting discounts and commissions. A decrease of 5,000,000 in the number of ordinary shares (including ordinary shares in the form of ADSs) offered by us in the global offering, as set forth on the cover page of this prospectus, would decrease the as adjusted net tangible book value after the global offering and shareholder private placement by $0.20 per ADS and £0.02 per ordinary share, and increase the dilution to new investors participating in the global offering or shareholder private placement by $0.20 per ADS and £0.02 per ordinary share, assuming no change in the assumed initial public offering price per ADS or in the assumed offering price per ordinary share and after deducting the estimated underwriting discounts and commissions.

The following table summarizes, as of December 31, 2016, on the as adjusted basis described above, the number of ordinary shares purchased from us (including ordinary shares in the form of ADSs) the total consideration paid to us and the average price per ordinary share and per ADS paid by existing shareholders and by new investors purchasing ADSs or ordinary shares in the global offering and shareholder private placement. The table below is based on an assumed initial public offering price of $13.49 per ADS in the U.S. offering and an assumed offering price of £1.36 per ordinary share in the European private placement and shareholder private placement, which reflects the last reported sale price of our ordinary shares on AIM on April 13, 2017, before deducting the estimated underwriting discounts and commissions, estimated placement agent fees and estimated offering expenses payable by us:


 
  Ordinary Shares
Purchased(1)
  Total
Consideration
   
   
 
 
  Average
Price per
Ordinary
Share
   
 
 
  Average
Price per
ADS
 
 
  Number   Percent   Amount   Percent  

Existing shareholders

    51,361,063     53.5 % $ 95,190,863     55.8 % $ 1.85   $ 14.83  

New investors

    44,728,242     46.5     75,421,538     44.2     1.69     13.49  

Total

    96,089,305     100.0 % $ 170,612,401     100.0 %                                        

(1)
Including ordinary shares in the form of ADSs.

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Each £0.101 ($0.125) increase or decrease in the assumed offering price of £1.36 per ordinary share, which reflects the last reported sale price of our ordinary shares on AIM on April 13, 2017, would increase or decrease the total consideration paid by new investors by £4.5 million ($5.6 million) and would increase or decrease the percentage of total consideration paid by new investors by 3.3 percentage points, assuming that the number of ordinary shares (including ordinary shares in the form of ADSs) offered by us in the global offering, as set forth on the cover page of this prospectus, remains the same. An increase or decrease of 5,000,000 in the number of ordinary shares (including ordinary shares in the form of ADSs) offered by us, as set forth on the cover page of this prospectus, would increase or decrease the total consideration paid by new investors by $8.4 million (£6.8 million) and would increase or decrease the percentage of total consideration paid by new investors by 4.9 percentage points, assuming no change in the assumed initial public offering price per ADS or in the assumed offering price per ordinary share.

If the underwriters exercise in full their options to purchase an additional 667,224 ADSs and 1,334,448 ordinary shares, the following will occur:

    §
    the percentage of our ordinary shares held by existing shareholders will decrease to 50.0% of the total number of our ordinary shares outstanding after the global offering and shareholder private placement; and

    §
    the percentage of our ordinary shares held by new investors will increase to approximately 50.0% of the total number of our ordinary shares outstanding after the global offering.

The tables above are based on 51,361,063 ordinary shares outstanding as of December 31, 2016. The tables above exclude:

    §
    2,837,333 ordinary shares issuable upon the exercise of share options outstanding as of December 31, 2016 at a weighted average exercise price of £1.87 per share;

    §
    6,330,000 ordinary shares that may be issued under the New Incentive Plan, which will become effective upon the pricing of the global offering, including ordinary shares underlying restricted share units and options that we intend to grant in connection with this global offering to each of our executive officers and a director, as more fully described in "Management—Equity Compensation Arrangements—2017 Incentive Award Plan—2017 Grants," as well as ordinary shares that may be issued pursuant to provisions in our New Incentive Plan that automatically increase the share reserve under our New Incentive Plan;

    §
    2,298,773 ordinary shares that may be issued under our existing equity incentive plans as of December 31, 2016; and

    §
    12,646,370 ordinary shares issuable upon the exercise of warrants outstanding as of December 31, 2016 at a weighted average exercise price of £1.7174 per share.

Our existing institutional investors affiliated with certain of our directors have indicated an interest in purchasing up to an aggregate of approximately $23 million (or the pounds sterling equivalent) in the global offering on the same terms as the other purchasers in the global offering. However, because indications of interest are not binding agreements or commitments to purchase, the underwriters may determine to sell more, less or no securities offered in the global offering to any of these investors or any of these investors may determine to purchase more, less or no securities offered in the global offering. The underwriters will receive the same underwriting discount on any securities purchased by these investors as they will on any other securities sold to the public in the global offering.

To the extent that stock options or warrants are exercised or we issue additional ADSs or ordinary shares in the future, there will be further dilution to investors participating in the global offering. In addition, we may choose to raise additional capital because of market conditions or strategic considerations, even if we believe that we have sufficient funds for our current or future operating plans. If we raise additional capital through the sale of equity or convertible debt securities, the issuance of these securities could result in further dilution to our stockholders.

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SELECTED CONSOLIDATED FINANCIAL DATA

You should read the following selected consolidated financial data together with the Annual Consolidated Financial Statements and the sections titled "Exchange Rate Information" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." We have derived the consolidated statement of comprehensive income data for the years ended December 31, 2015 and 2016 and the consolidated statement of financial position as of December 31, 2015 and 2016 from our Annual Consolidated Financial Statements included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results that should be expected in any future period.

We maintain our books and records in pounds sterling, and we prepare our financial statements in accordance with IFRS as issued by the IASB. We report our financial results in pounds sterling. For the convenience of the reader, we have translated pound sterling amounts as of and for the years ended December 31, 2015 and 2016 into U.S. dollars at the noon buying rate of the Federal Reserve Bank of New York on December 30, 2016, which was £1.00 to $1.2337. These translations should not be considered representations that any such amounts have been, could have been or could be converted into U.S. dollars at that or any other exchange rate as of that or any other date.


 
  Year Ended December 31,  
 
  2015   2016  
 
  (£)   ($)   (£)   ($)  
 
  (in thousands, except per ordinary share data)
 

Consolidated statement of comprehensive income data:

                         

Research and development costs

    (7,269 )   (8,968 )   (4,522 )   (5,579 )

General and administrative costs

    (1,706 )   (2,105 )   (2,498 )   (3,082 )

Operating loss

    (8,975 )   (11,072 )   (7,020 )   (8,661 )

Finance income

    45     55     1,841     2,272  

Finance expense

    (72 )   (89 )   (794 )   (979 )

Loss before taxation

    (9,002 )   (11,106 )   (5,973 )   (7,368 )

Taxation — credit

    1,509     1,862     954     1,177  

Loss for the year

    (7,493 )   (9,244 )   (5,018 )   (6,191 )

Other comprehensive income:

                         

Exchange differences on translating foreign operations

    4     5     43     53  

Total comprehensive loss attributable to owners of the company

    (7,489 )   (9,239 )   (4,976 )   (6,139 )

Loss per ordinary share — basic and diluted

    (0.37 )   (0.46 )   (0.15 )   (0.19 )


 
  Year Ended December 31,  
 
  2015   2016  
 
  (£)   ($)   (£)   ($)  
 
  (in thousands)
 

Consolidated statement of financial position data:

                         

Cash and cash equivalents

    3,524     4,348     39,785     49,083  

Total assets

    7,840     9,673     46,143     56,926  

Share premium

    26,650     32,878     58,527     72,204  

Total liabilities

    2,407     2,969     11,674     14,402  

Accumulated loss

    (23,752 )   (29,303 )   (28,728 )   (35,442 )

Total equity

    5,434     6,704     34,468     42,524  

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

You should read the following discussion and analysis of our financial condition and results of operations together with the information in "Selected Consolidated Financial Data" and our Annual Consolidated Financial Statements, including the notes thereto. The following discussion is based on our financial information prepared in accordance with IFRS as issued by the IASB, which may differ in material respects from generally accepted accounting principles in other jurisdictions, including generally accepted accounting principles in the United States, or U.S. GAAP. The following discussion includes forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including but not limited to those described under "Risk Factors" and elsewhere in this prospectus.

For the convenience of the reader, we have translated some pound sterling amounts as of and for the years ended December 31, 2015 and 2016 and into U.S. dollars at the noon buying rate of the Federal Reserve Bank of New York on December 30, 2016, which was £1.00 to $1.2337. These translations should not be considered representations that any such amounts have been, could have been or could be converted into U.S. dollars at that or any other exchange rate as of that or any other date.

Overview

We are a clinical-stage biopharmaceutical company focused on developing and commercializing innovative therapeutics for the treatment of respiratory diseases with significant unmet medical needs. Our product candidate, RPL554, is a first-in-class, inhaled, dual inhibitor of PDE3 and PDE4, that acts as both a bronchodilator and an anti-inflammatory agent in a single compound. We are not aware of any therapy in a single compound approved by the FDA or the EMA for the treatment of respiratory diseases that acts as both a bronchodilator and anti-inflammatory agent. We believe RPL554 has the potential to be the first novel class of bronchodilator in over 40 years. We have completed eight Phase 1 and 2a clinical trials for RPL554, with 282 subjects enrolled. In our clinical trials, treatment with RPL554 has been observed to result in statistically significant improvements in lung function as compared to placebo. Our clinical trials also have shown clinically meaningful and statistically significant improvements in lung function when RPL554 is added to two commonly used bronchodilators as compared to either bronchodilator administered as a single agent. RPL554 also has shown anti-inflammatory effects and has been well tolerated in our clinical trials, and has not been observed to result in the gastrointestinal or other side effects commonly associated with roflumilast, the only PDE4 inhibitor currently on the market for the treatment of COPD. We are developing RPL554 for the treatment of patients with COPD and for the treatment of patients with CF. We believe RPL554, if approved, has the potential to become an important and novel treatment and standard of care for COPD and CF patients. We may also explore, alone or with a collaborator, development of RPL554 to treat asthma and other respiratory diseases.

We plan to commence a four-week Phase 2b dose ranging clinical trial to evaluate RPL554 for the maintenance treatment of COPD in the second half of 2017. In this trial, we plan to compare the use of RPL554 in a nebulized formulation to placebo in approximately 400 patients. We expect to report top-line data from this trial in the second half of 2018. In February 2017, we commenced a Phase 2a clinical trial of RPL554 for the maintenance treatment of COPD in the United Kingdom. This trial is evaluating RPL554 as an add-on therapy to tiotropium in approximately 30 patients. We expect to report top-line data from this trial in the fourth quarter of 2017. We also plan to commence a single-dose PK trial of RPL554 in approximately 12 healthy volunteers in the United States in mid-2017. We expect to report top-line data from this trial in the fourth quarter of 2017. In addition, we plan to commence a 12-week Phase 2b dose-ranging clinical trial of RPL554 for the maintenance treatment of COPD in the second half of 2018. In this trial, we plan to evaluate RPL554 as an add-on therapy to a long-acting bronchodilator in approximately 400 patients.

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We plan to commence a Phase 2 trial of RPL554 for the treatment of acute exacerbations of COPD in hospitalized patients in the second half of 2018. In this trial, we plan to evaluate RPL554 in a nebulized formulation as an add-on therapy in approximately 150 patients.

In March 2017, we commenced a Phase 2a single-dose PK and PD trial in the United Kingdom evaluating RPL554 in up to ten CF patients and expect to report top-line data from this trial in the first half of 2018. The results of this clinical trial are expected to support dose selection for a proof-of-concept Phase 2b trial in approximately 100 patients with CF, which we plan to commence in 2018.

We do not have any approved products and, as a result, have not generated any revenue from product sales or otherwise. RPL554 is our only current product candidate and our ability to generate revenue sufficient to achieve profitability will depend on our successful development and eventual commercialization of RPL554, if approved, for one or more of its targeted indications. Since our inception, we have incurred significant operating losses. For the years ended December 31, 2015 and 2016 we incurred net losses of £7.5 million and £5.0 million, respectively. As of December 31, 2016, we had an accumulated loss of £28.7 million.

We expect to incur significant expenses and operating losses for the foreseeable future as we advance the clinical development of RPL554, and seek regulatory approval and pursue commercialization of RPL554, if approved. In addition, if we obtain regulatory approval for RPL554, we expect to incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution. In addition, we may incur expenses in connection with the in-license or acquisition of additional product candidates and the potential clinical development of any such product candidates. Furthermore, upon the closing of the global offering, we expect to incur additional costs associated with operating as a U.S. public company listed on the NASDAQ in addition to operating as a U.K. public company listed on AIM, including significant legal, accounting, investor relations and other expenses that we did not previously incur.

As a result of these anticipated expenditures, we will need additional financing to support our continuing operations. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of public or private equity or debt financings or other sources, which may include collaborations with third parties. Adequate additional financing may not be available to us on acceptable terms, or at all. Our inability to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy. We will need to generate significant revenue to achieve profitability, and we may never do so.

We were incorporated in 2005 and are headquartered in the United Kingdom. Since 2006, our ordinary shares have traded on AIM, a market of the London Stock Exchange, under the symbol "VRP". We have raised £74.6 million in gross proceeds from investors since such listing, of which £44.7 million was raised in our most recent private placement of equity securities in July 2016 with a number of European and U.S.-based healthcare specialist investment firms.

License Agreement with Vernalis

In February 2005, Rhinopharma entered into an assignment and license agreement with Vernalis, which we refer to as the Vernalis Agreement. In 2006, we acquired Rhinopharma and all of its rights and obligations under the Vernalis Agreement. Pursuant to the Vernalis Agreement, Vernalis assigned to us all of its rights to certain patents and patent applications relating to RPL554 and related compounds, or the Vernalis Patents. Vernalis also granted to us an exclusive, worldwide, royalty-bearing license to certain Vernalis know-how to develop, manufacture and commercialize products, or the Licensed Products, based on PDE inhibitors developed using Vernalis Patents, Vernalis know-how and the physical stock of certain compounds, including RPL554, in the treatment of human or animal allergic or inflammatory disorders.

Under the Vernalis Agreement, we are obligated to pay Vernalis a milestone payment of £5.0 million upon the first approval of any regulatory authority for the commercialization of any Licensed Product, and a portion equal to a percentage in the mid twenties of any consideration received from any of our

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sublicensees for Vernalis Patents or Vernalis know-how, excluding royalties. We must also pay Vernalis, on a Licensed Product-by-Product and country-by-country basis, a low to mid-single digit percentage royalty based on net sales of each Licensed Product. See "Business — Vernalis Agreement" for further information regarding this agreement.

We have recorded a liability in our statement of financial position reflecting the contingent obligation we assumed from Rhinopharma to make payments to Vernalis under the Vernalis Agreement. Any change in the carrying value of this assumed contingent obligation in any reporting period is recorded as finance expense or finance income in our statement of comprehensive income. See "— Financial Operations Overview — Finance Income and Expense" and Note 2.13 of our Annual Consolidated Financial Statements.

Financial Operations Overview

Revenue

We do not have any approved products. Accordingly, we have not generated any revenue, and we do not expect to generate any revenue from the sale of any products unless or until we obtain regulatory approvals of and commercialize RPL554 or any other product candidate we may develop in the future, which may never occur.

Research and Development Costs

Research and development costs include:

    §
    employee-related expenses, such as salaries, share-based compensation, benefits and travel expense, for our research and development personnel;

    §
    costs for production of drug substance by CMOs;

    §
    fees and other costs paid to CROs and consultants to conduct our clinical trials and pre-clinical and non-clinical studies;

    §
    costs of related facilities, materials and equipment;

    §
    costs associated with obtaining and maintaining patents and other intellectual property; and

    §
    amortization and depreciation of intangible and tangible fixed assets used to develop RPL554.

Research and development activities will continue to be central to our business model. Product candidates in later stages of clinical development, such as RPL554 for the treatment of COPD, generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect our research and development costs to be significant over the next several years as we hire additional research and development personnel and increase compensation costs, advance the clinical development of RPL554, develop new formulations of RPL554 for the treatment of COPD, commence the clinical development of RPL554 for the treatment of CF and potentially pursue the development of RPL554 for other forms of respiratory disease, including asthma.

The successful development and commercialization of RPL554 is highly uncertain. At this time, we cannot reasonably estimate the nature, timing and estimated costs of the efforts that will be necessary to complete the development of, or the period, if any, in which material net cash inflows may commence from, RPL554 or any future product candidates. This is due to numerous risks and uncertainties associated with developing drugs, including the uncertainty of:

    §
    the scope, rate of progress and expense of our research and development activities;

    §
    the progress and results of clinical trials and pre-clinical and non-clinical studies;

    §
    the terms and timing of regulatory approvals;

    §
    the expense of filing, prosecuting, defending and enforcing patent claims and other intellectual property rights; and

    §
    the ability to market, commercialize and achieve market acceptance for RPL554 or any other future product candidate, if approved.

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Any of these variables with respect to the development of RPL554 or any other future candidate that we may develop could result in a significant change in the costs and timing associated with the development of RPL554 or such future product candidate. For example, if the FDA, the EMA or other regulatory authority were to require us to conduct pre-clinical studies and clinical trials beyond those we currently anticipate will be required for the completion of clinical development or if we experience significant delays in enrollment in any clinical trials, we could be required to expend significant additional financial resources and time on the completion of our clinical development programs.

General and Administrative Costs

Our general and administrative costs principally consist of salaries and related benefits, including share-based compensation, for personnel in our executive, finance and other administrative functions. Other general and administrative costs include facility-related costs and professional services fees for auditing, tax and general legal services, as well as expenses associated with the requirements of being a listed public company on AIM. We expect that our general and administrative costs will increase in the future as our business expands and we increase our headcount to support the expected growth in our operating activities. These increases will likely include increased costs related to the hiring of additional personnel and fees to outside consultants, lawyers and accountants, among other expenses. Additionally, we anticipate increased costs associated with being a U.S. public company, including expenses related to services associated with maintaining compliance with NASDAQ rules and SEC requirements, director compensation, insurance and investor relation costs. If RPL554 obtains regulatory approval for marketing, we expect that we will incur expenses associated with building a sales and marketing team. In addition, we expect to continue to grant share-based compensation awards to key management personnel and other employees.

Finance Income and Expense

Finance income consists of interest earned on our cash and cash equivalents and any decrease in the carrying value resulting from the remeasurement of the assumed contingent obligation under the Vernalis Agreement and any decrease in the fair value of the derivative financial liability related to the 31,115,926 units issued by us to new and existing institutional and other investors in July 2016, or the July Placement.

Finance expense consists of any increase in the carrying value resulting from the remeasurement of the assumed contingent obligation under the Vernalis Agreement and any increase in the fair value of the derivative financial liability related to the July Placement. See "— License Agreement with Vernalis" and "Business — Vernalis Agreement" for further information regarding the Vernalis Agreement and see "Related Party Transactions — Ordinary Share and Warrant Placement" for further information regarding the July Placement.

Taxation

As a U.K. resident trading entity, we are subject to U.K. corporate taxation. Due to the nature of our business, we have generated losses since inception. As a company that carries out extensive research and development activities, we benefit from the U.K. research and development tax credit regime and are able to surrender some of our trading losses that arise from our research and development activities for a cash rebate of up to 33.35% of eligible research and development expenditure. Qualifying expenditures largely comprise employment costs for research staff, consumables and certain internal overhead costs incurred as part of research projects. In the event we generate revenues in the future, we may benefit from the new "patent box" initiative that allows profits attributable to revenues from patents or patented products to be taxed at a lower rate than other revenue. This relief applies to profits earned from April 1, 2013 and following the transitional arrangements that will phase in the relief, the rate of tax for relevant streams of revenue for companies receiving this relief will be 10%.

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Results of Operations

The following table sets forth our results of operations for the periods indicated.


 
  Year Ended December 31,  
 
  2015   2016  
 
  (in thousands)
 

Research and development costs

  £ (7,269 ) $ (8,968 ) £ (4,522 ) $ (5,579 )

General and administrative costs

    (1,706 )   (2,105 )   (2,498 )   (3,082 )

Operating loss

    (8,975 )   (11,072 )   (7,020 )   (8,661 )

Finance income

    45     55     1,841     2,272  

Finance expense

    (72 )   (89 )   (794 )   (979 )

Loss before taxation

    (9,002 )   (11,106 )   (5,973 )   (7,368 )

Taxation — credit

    1,509     1,862     954     1,177  

Loss for the year

    (7,493 )   (9,244 )   (5,018 )   (6,191 )

Other comprehensive income:

                         

Exchange differences on translating foreign operations

    4     5     43     53  

Total comprehensive loss attributable to owners of the company

  £ (7,489 ) $ (9,239 ) £ (4,976 ) $ (6,139 )

Comparison of Operations for the Years ended December 31, 2015 and 2016

Research and Development Costs

Research and development costs were £4.5 million for the year ended December 31, 2016 as compared to £7.3 million for the year ended December 31, 2015, a decrease of £2.8 million. The decrease was attributable to a £3.6 million decrease in clinical trial expenses related to the completion of our Phase 2a clinical trials of RPL554 in late 2015 and early 2016, which were partially offset by a £0.7 million increase in research and development personnel costs and a £0.1 million increase in pre-clinical research, contract manufacturing, patent and other costs.

General and Administrative Costs

General and administrative costs were £2.5 million for the year ended December 31, 2016 as compared to £1.7 million for the year ended December 31, 2015, an increase of £0.8 million. The increase was attributable to a £0.2 million increase in personnel costs, a £0.3 million increase in professional service fees and expenses, and a £0.2 million increase in other facility and office related costs.

Finance Income and Expense

Finance income was £1.8 million for the year ended December 31, 2016 and £45 thousand for the year ended December 31, 2015. The increase in finance income was primarily due to a decrease in the fair value of the warrant liability of £1.1 million caused by changes in the underlying assumptions for measuring the liability of the warrants issued in the July Placement, including the price and volatility of our ordinary shares and the unwinding of the expected life of the warrants.

Finance expense was £0.8 million for the year ended December 31, 2016 as compared to £0.1 million for the year ended December 31, 2015. The increase was primarily due to the inclusion of the proportion of expenses incurred in connection with the July Placement which related to the issue of warrants, and which were recorded as a finance expense (the remainder of the July Placement expenses related to the equity issued and were recorded as a charge against share premium), as well as an increase in the calculated value of the assumed contingent obligation resulting from the Vernalis Agreement.

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Taxation

Taxation for the year ended December 31, 2016 amounted to a credit of £1.0 million as compared to a credit of £1.5 million for the year ended December 31, 2015, a decrease in the credit amount of £0.5 million. The credits are obtained at a rate of 14.5% of 230% of our qualifying research and development expenditure, and the decrease in the credit amount was primarily attributable to our decreased expenditure on research and development.

Liquidity and Capital Resources

Overview

Since our inception, we have incurred significant operating losses. We anticipate that we will continue to incur losses for at least the next several years. We expect that our research and development and general and administrative costs will increase in connection with conducting clinical trials for RPL554 and seeking marketing approval for RPL554 in the United States and Europe as well as other jurisdictions. As a result, we will need additional capital to fund our operations, which we may obtain from additional financings, research funding, collaborations, contract and grant revenue or other sources.

We do not currently have any approved products and have never generated any revenue from product sales or otherwise. To date, we have financed our operations primarily through the issuances of our equity securities, including warrants. Since our inception, we raised gross proceeds of £74.6 million from private placements of equity securities. As of December 31, 2016, we had cash and cash equivalents of £39.8 million.

We have no ongoing material financing commitments, such as lines of credit or guarantees, that are expected to affect our liquidity over the next five years, other than leases.

Cash Flows

The table below summaries our cash flows for each of the periods presented.


 
  (in thousands)
 
 
  Year Ended December 31,  
 
  2015   2016  

Net cash used in operating activities

  £ (6,357 ) $ (7,842 ) £ (5,588 ) $ (6,894 )

Net cash used in investing activities

    (92 )   (114 )   (41 )   (51 )

Net cash from financing activities

            41,203     50,833  

Net (decrease) increase in cash and cash equivalents

    £(6,449 ) $ (7,956 ) £ 35,574   $ 43,888  

The decrease in net cash used in operating activities to £5.6 million for the year ended December 31, 2016 from £6.4 million for the year ended December 31, 2015 was primarily due to a decrease in loss before taxation driven by lower research and development costs.

The decrease in net cash used in investing activities to £41 thousand for the year ended December 31, 2016 from £92 thousand for the year ended December 31, 2015 was primarily due to an increase in interest income received on the company cash balances during 2016.

The increase in net cash from financing activities to £41.2 million for the year ended December 31, 2016 from £nil for the year ended December 31, 2015 was due to the cash received from the sale of our equity securities and warrants in connection with the July Placement.

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Operating and Capital Expenditure Requirements

As of December 31, 2016, we had an accumulated loss of £28.7 million. We expect to continue to incur significant operating losses for the foreseeable future as we continue our research and development efforts and seek to obtain regulatory approval and commercialization of RPL554 and any future product candidate we develop.

We expect our expenses to increase substantially in connection with our ongoing development activities related to RPL554 and any future product candidates. In addition, upon the closing of the global offering, we expect to incur additional costs associated with operating as a U.S. public company listed on NASDAQ in addition to operating as a U.K. public company listed on AIM. We anticipate that our expenses will increase substantially if and as we:

    §
    initiate and conduct our planned clinical trials for RPL554 for the maintenance treatment of COPD and as a treatment for acute COPD;

    §
    initiate and conduct our planned clinical trials for RPL554 for the treatment of CF;

    §
    continue the research and development of other formulations of RPL554, including developing our DPI and MDI formulations of RPL554;

    §
    initiate and progress pre-clinical studies relating to other potential indications of RPL554;

    §
    seek to discover and develop additional product candidates;

    §
    seek regulatory approvals for any of our product candidates that successfully completes clinical trials;

    §
    potentially establish a sales, marketing and distribution infrastructure and scale-up manufacturing capabilities to commercialize any products for which we may obtain regulatory approval;

    §
    maintain, expand and protect our intellectual property portfolio;

    §
    add clinical, scientific, operational, financial and management information systems and personnel, including personnel to support our product development and potential future commercialization efforts and to support our operations as a U.S. public company listed on the NASDAQ; and

    §
    experience any delays or encounter any issues from any of the above, including but not limited to failed studies, complex results, safety issues or other regulatory challenges.

We expect that our existing cash and cash equivalents, together with anticipated net proceeds from the global offering and shareholder private placement, will enable us to fund our operating expenses and capital expenditure requirements for at least the next 12 months. We anticipate these funds will be sufficient for the completion of (i) our two planned Phase 2b clinical trials, our planned PK clinical trial and our ongoing Phase 2a clinical trial of RPL554 for the maintenance treatment of COPD, (ii) our planned Phase 2 clinical trial of RPL554 for the treatment of acute exacerbations of COPD and (iii) our ongoing Phase 2a clinical trial and our planned Phase 2b proof-of-concept trial of RPL554 for the treatment of CF. We have based this estimate on assumptions that may prove to be wrong, and we may use our available capital resources sooner than we currently expect. Because of the numerous risks and uncertainties associated with the development of RPL554 and any future product candidates and because the extent to which we may enter into collaborations with third parties for development of RPL554 is unknown, we are unable to estimate the amounts of increased capital outlays and operating expenses associated with completing the research and development of RPL554. Our future capital requirements for RPL554 or any future product candidates will depend on many factors, including:

    §
    the progress, timing and completion of pre-clinical testing and clinical trials for RPL554 or any future product candidates and the potential that we may be required to conduct additional clinical trials for RPL554;

    §
    the number of potential new product candidates we decide to in-license and develop;

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    the costs involved in growing our organization to the size needed to allow for the research, development and potential commercialization of RPL554 or any future product candidates;

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    §
    the costs involved in filing patent applications and maintaining and enforcing patents or defending against claims or infringements raised by third parties;

    §
    the time and costs involved in obtaining regulatory approvals for RPL554 or any future product candidate we develop and any delays we may encounter as a result of evolving regulatory requirements or adverse results with respect to RPL554 any future product candidates;

    §
    any licensing or milestone fees we might have to pay during future development of RPL554 or any future product candidates;

    §
    selling and marketing activities undertaken in connection with the anticipated commercialization of RPL554 or any future product candidates, if approved, and costs involved in the creation of an effective sales and marketing organization; and

    §
    the amount of revenues, if any, we may derive either directly or in the form of royalty payments from future sales of RPL554 or any future product candidates, if approved.

Our commercial revenues, if any, will be derived from sales of products that we do not expect to be commercially available for many years, if ever. Accordingly, we will need to obtain substantial additional funds to achieve our business objective.

Adequate additional funds may not be available to us on acceptable terms, or at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a shareholder. Any future debt financing or preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends and may require the issuance of warrants, which could potentially dilute your ownership interests.

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

Contractual Obligations and Commitments

The table below summarizes our contractual obligations at December 31, 2016.


 
  Payments Due by Period  
 
  Total   Less than
1 year
  1 - 3
years
  3 - 5
years
  More than
5 years
 
 
  (in thousands)
 

Operating lease obligations

    £270     £270     £—     £—     £—  

Total

    £270     £270     £—     £—     £—  

The table above does not include assumed contingent obligation payments we may be required to make under the Vernalis Agreement because the amount, timing and likelihood of payment are not known. Such additional payment obligations may be material. See sections titled "— License Agreement with Vernalis" and "Business — Vernalis Agreement."

In addition, we enter into contracts in the ordinary course of business with CROs to assist in the performance of our research and development activities and other services and products for operating

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purposes. These contracts generally provide for termination on notice, and therefore are cancelable contracts and not included in the table of contractual obligations and commitments.

Internal Control Over Financial Reporting

In connection with the preparation for this initial public offering, we reassessed our critical accounting policies to ensure compliance with IFRS. As part of this reassessment, we identified errors relating to the recognition of assumed liabilities and goodwill in connection with the acquisition of Rhinopharma in September 2006. These errors are discussed further in the notes to our Annual Consolidated Financial Statements included elsewhere in this prospectus. The correction of these errors is reflected within our consolidated financial statements included elsewhere in this prospectus and is reflected in our financial statements prepared for U.K. reporting requirements for the year ended December 31, 2016.

We concluded that a lack of adequate controls surrounding our historic accounting for business combinations constituted a material weakness in our internal control over financial reporting, as defined in the standards established by the U.S. Public Accounting Oversight Board, or the PCAOB. The PCAOB defines a material weakness as a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected in a timely basis. We are currently in the process of remediating this material weakness and are taking steps that we believe will address the underlying causes of the material weakness by the hiring of our new chief financial officer and enhancing our financial reporting team's technical accounting knowledge associated with the accounting rules for business combinations. However, we cannot be certain that these efforts will be sufficient to remediate this material weakness or prevent future material weaknesses or significant deficiencies from occurring.

Off-Balance Sheet Arrangements

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

Quantitative and Qualitative Disclosures About Market Risk

We are exposed to a variety of financial risks. Our overall risk management program seeks to minimize potential adverse effects of these financial risks on our financial performance.

Credit Risk

We consider all of our material counterparties to be creditworthy. We consider the credit risk for each of our counterparties to be low and do not have a significant concentration of credit risk at any of our counterparties.

Liquidity Risk

We manage our liquidity risk by maintaining adequate cash reserves at banking facilities, and by continuously monitoring our cash forecasts, our actual cash flows and by matching the maturity profiles of financial assets and liabilities.

Market Risk

Foreign currency risk reflects the risk that the value of a financial commitment or recognized asset or liability will fluctuate due to changes in foreign currency rates. Our financial position, as expressed in pounds sterling, are exposed to movements in foreign exchange rates against the U.S. dollar and the euro. Our main trading currencies are pounds sterling, the U.S. dollar and the euro. We are exposed to foreign currency risk as a result of operating transactions and the translation for foreign bank accounts. We monitor our exposure to foreign exchange risk. We have not entered into foreign exchange contracts to hedge against gains or losses from foreign exchange fluctuations.

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Interest rate risk reflects the risk that the value of a financial instrument will fluctuate as a result of change in market interest rates on classes of financial assets and financial liabilities. We do not hold any derivative instruments to manage interest rate risk.

Critical Accounting Judgments and Estimates

Our management's discussion and analysis of our financial condition and results of operations is based on our financial statements, which we have prepared in accordance with IFRS as issued by the IASB. 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 reported revenues and expenses during the reporting periods. Actual results may differ from these estimates under different assumptions or conditions. There have been no material adjustments to prior period estimates for any of the periods included in this prospectus.

Our significant accounting policies are more fully described in the notes to our financial statements appearing elsewhere in this prospectus. We believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating our financial condition and results of operations.

Assumed Contingent Obligation

A significant management estimate relates to the probability, amount and timing of any payment relating to the assumed contingent obligation under the Vernalis Agreement, a provision for which is recorded in our statement of financial position. See "— License Agreement with Vernalis," "Business — Vernalis Agreement" and Note 21 to our Annual Consolidated Financial Statements included elsewhere in this prospectus. A change in the probability and timing of any payment relating to the assumed contingent obligation could result in a significant fluctuation in our financial results in future periods.

Share-Based Compensation

We measure share options at fair value at their grant date in accordance with IFRS 2, "Share-based Payment." We calculate the fair value of the share options using either the Black-Scholes model, or for options with performance conditions, a simulation model. We charge the fair value to the statement of comprehensive income over the expected vesting period.

Impairment of Intangible Assets

Determining whether an intangible asset is impaired requires an estimation of whether there are any indications that its carrying value is not recoverable.

At each reporting date, we review the carrying value of our tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset's fair value less costs to sell and value in use, is compared to the asset's carrying value. Any excess of the asset's carrying value over its recoverable amount is expensed to the income statement.

Valuation of Derivative Financial Liability

In connection with the July Placement, we issued 31,115,926 warrants to new and existing institutional and other investors. Each warrant is entitled to purchase 0.4 of an ordinary share at a price of £1.7238. Each warrant is exercisable beginning upon the closing of the global offering and will expire on the fifth anniversary of the closing of the global offering.

We classify these warrants as a derivative financial liability to be presented on our consolidated statement of financial position. The fair value of these warrants is determined by applying the Black-Scholes model. Assumptions are made on inputs such as time to maturity, the share price, volatility and risk free rate, in order to determine the fair value per warrant. For valuation purposes at recognition of the liability, we used the closing share price of our ordinary shares as reported on AIM on July 29, 2016, the date of issuance of the warrants.

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At the date of issuance of the warrants we calculated a fair value and recorded a derivative financial liability, which on initial recognition was offset against the share premium in relation to the funds received in connection with the July Placement. Subsequent updates to the fair value of the derivative financial liability will not result in changes to share premium, but will result in an adjusting entry in the consolidated derivative financial liability statement of comprehensive income. We will continue to adjust the derivative financial liability until the earlier of the exercise of the warrants or expiration of the warrants occurs.

Recent Accounting Pronouncements

We refer to Note 2 to our Annual Consolidated Financial Statements for the year ended December 31, 2016 included elsewhere in this prospectus for a discussion of new standards and interpretations not yet adopted by us.

JOBS Act

In April 2012, the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, was enacted. Section 107(b) of the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this 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.

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BUSINESS

Overview

We are a clinical-stage biopharmaceutical company focused on developing and commercializing innovative therapeutics for the treatment of respiratory diseases with significant unmet medical needs. Our product candidate, RPL554, is a first-in-class, inhaled, dual inhibitor of the enzymes phosphodiesterase 3 and 4, or PDE3 and PDE4, that acts as both a bronchodilator and an anti-inflammatory agent in a single compound. We are not aware of any therapy in a single compound in clinical development or approved by the U.S. Food and Drug Administration, or FDA, or the European Medicines Agency, or EMA, for the treatment of respiratory diseases that acts as both a bronchodilator and anti-inflammatory agent. We believe RPL554 has the potential to be the first novel class of bronchodilator in over 40 years. We have completed eight Phase 1 and 2a clinical trials for RPL554, with 282 subjects enrolled. In our clinical trials, treatment with RPL554 has been observed to result in statistically significant improvements in lung function as compared to placebo. Statistically significant means that there is a low statistical probability, typically less than 5%, that the observed results occurred by chance alone. Our clinical trials also have shown clinically meaningful and statistically significant improvements in lung function when RPL554 is added to two commonly used bronchodilators as compared to either bronchodilator administered as a single agent. RPL554 also has shown anti-inflammatory effects and been well tolerated in our clinical trials, and has not been observed to result in the gastrointestinal or other side effects commonly associated with roflumilast, the only PDE4 inhibitor currently on the market for the treatment of COPD. We are developing RPL554 for the treatment of patients with chronic obstructive pulmonary disease, or COPD, and for the treatment of patients with cystic fibrosis, or CF. We believe RPL554, if approved, has the potential to become an important and novel treatment and standard of care for these patients. We may also explore, alone or with a collaborator, the development of RPL554 to treat asthma and other respiratory diseases.

We are developing RPL554 in a nebulized formulation for the maintenance treatment of COPD patients. We also are developing RPL554 in a nebulized formulation as an add-on therapy to short-acting bronchodilators and other commonly used therapies for the treatment of hospitalized patients with acute exacerbations of COPD. Patients with more severe COPD, who tend to suffer more frequent exacerbations, generally prefer treatment with a nebulizer as they view its perceived benefits, including greater confidence in effective drug administration and a reduced need to visit health care providers, as outweighing its perceived disadvantages, which include length of treatment administration and required cleaning. In addition, use of a nebulizer is generally preferred when administering larger doses in the hospital setting. We also are developing our nebulized formulation of RPL554 for CF, which is a disease commonly treated with a nebulizer.

We plan to commence a four-week Phase 2b dose ranging clinical trial to evaluate RPL554 for the maintenance treatment of COPD in the second half of 2017. In this trial, we plan to compare the use of RPL554 in a nebulized formulation to placebo in approximately 400 patients. We expect to report top-line data from this trial in the second half of 2018. In February 2017, we commenced a Phase 2a clinical trial of RPL554 for the maintenance treatment of COPD in the United Kingdom. This trial is evaluating RPL554 as an add-on therapy to tiotropium, a commonly used long-acting bronchodilator, in approximately 30 patients. We expect to report top-line data from this trial in the fourth quarter of 2017. We also plan to commence a single-dose pharmacokinetic, or PK, trial of RPL554 in approximately 12 healthy volunteers in the United States in mid-2017. We expect to report top-line data from this trial in the fourth quarter of 2017. A PK trial involves the study of the process of bodily absorption, distribution, metabolism and excretion of a drug. In addition, we plan to commence a 12-week Phase 2b dose-ranging clinical trial of RPL554 for the maintenance treatment of COPD in the second half of 2018. In this trial, we plan to evaluate RPL554 as an add-on therapy to a long-acting bronchodilator in approximately 400 patients. Our planned clinical trials for RPL554 for the maintenance treatment of COPD will be designed to evaluate the effect on lung function, as measured by the maximal volume of air a person can forcefully exhale in one second, or FEV1, and duration of action of the product candidate. These clinical endpoints are commonly

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used in clinical trials for respiratory diseases and have been used by other companies in obtaining FDA approval of drugs addressing respiratory diseases.

We plan to commence a Phase 2 trial of RPL554 for the treatment of acute exacerbations of COPD in hospitalized patients in the second half of 2018. In this trial, we plan to evaluate RPL554 in a nebulized formulation as an add-on therapy in approximately 150 patients.

In March 2017, we commenced a Phase 2a single-dose PK and pharmacodynamics, or PD, trial in the United Kingdom evaluating RPL554 in up to ten CF patients and expect to report top-line data from this trial in the first half of 2018. A PD trial involves the study of the biochemical and physiological effects of a drug and its mechanisms of action, including the correlation of the drug's actions and effects with its mechanism of action. The results of this clinical trial are expected to support dose selection for a proof-of-concept Phase 2b trial in approximately 100 patients with CF, which we plan to commence in 2018.

We also are developing RPL554 in both dry powder inhaler, or DPI, and metered dose inhaler, or MDI, formulations for the maintenance treatment of COPD. Handheld DPI and MDI devices are the most common forms of drug delivery in non-hospitalized patients with COPD and are well suited for maintenance therapy. We believe the development of DPI and MDI formulations has the potential to significantly increase the market opportunity for RPL554, if approved, for the maintenance treatment of COPD. In addition, we may explore the development of RPL554 in these formulations for the treatment of asthma and other respiratory diseases. Following the completion of our DPI and MDI formulation process, we plan to commence pre-clinical studies for RPL554 in these formulations in 2018.

According to the World Health Organization, over one billion people suffer from chronic respiratory diseases. Among the most common of these afflictions is COPD, which is a progressive respiratory disease for which there is no cure. COPD damages the airways and the lungs and leads to shortness of breath, impacting a person's ability to perform daily activities. Chronic inflammation plays a central role in the pathology of the disease, and is particularly prominent in the airways of COPD patients. COPD includes chronic bronchitis, which refers to the inflammation of the lung and airways that results in coughing and sputum production, and emphysema, which refers to a destruction of distal lung tissue, or air sacs. In some cases, patients with COPD experience exacerbations, which are estimated to cause approximately 1.5 million emergency department visits, 687,000 hospitalizations and 129,000 deaths per year in the United States alone. According to the World Health Organization, COPD is the third leading cause of death globally, with 210 million people worldwide suffering from the disease. It is estimated that there are 24 million people with COPD in the United States, only half of whom have been diagnosed. Of those diagnosed with COPD in the United States, approximately 2 million suffer from severe or very severe forms of the disease. Total annual medical costs relating to COPD in the United States were estimated to be $32 billion in 2010 and are projected to rise to $49 billion in 2020. Global sales of drugs currently indicated for COPD were $10.6 billion in 2016 and are expected to grow to $15.6 billion in 2019.

COPD patients are commonly treated with bronchodilators, which seek to relieve airway constriction and make it easier to breathe, and corticosteroids, which seek to reduce lung inflammation. For patients with more severe disease who experience recurrent exacerbations, and for whom inhaled corticosteroids are not effective, an oral formulation of a PDE4 inhibitor, which is an anti-inflammatory agent, may also be used as treatment. Despite the wide availability of these therapies, many COPD patients continue to suffer exacerbations and have continued respiratory symptoms, which limit their daily activities. Furthermore, current therapies have not demonstrated an ability to change the progressive decline in lung function or reduce the mortality associated with COPD. We believe there is an urgent and unmet medical need for new and more effective treatments for COPD to reduce the number and burden of symptoms, reduce exacerbations and establish a consistent and durable treatment response.

Cystic fibrosis is the most common fatal inherited disease in the United States and Europe. CF causes impaired lung function and is commonly associated with repeat and persistent lung infections due to the

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inability to clear thickened phlegm, or mucus, from the lung. This condition often results in frequent exacerbations and hospitalizations. There is no cure for CF and the median age of death for CF patients is 37 years. CF is considered a rare, or orphan, disease by both the FDA and the EMA. According to the Cystic Fibrosis Foundation, more than 30,000 people in the United States and more than 70,000 people worldwide are living with CF and approximately 1,000 new cases of CF are diagnosed each year. The FDA and the EMA provide incentives for sponsors to develop products for orphan diseases, and we plan to seek orphan drug designation for RPL554 in treating CF. CF patients require lifelong treatment with multiple daily medications, frequent hospitalizations and, ultimately, lung transplants in some end-stage patients. The quality of life for CF patients is compromised as a result of spending significant time on self-care every day and frequent outpatient doctor visits and hospitalizations. CF patients take an average of seven medications daily. In the 12-month period ended June 30, 2016, global sales of drugs currently indicated for CF totaled $4.1 billion. The global market for CF drugs is expected to increase to $7.0 billion in 2020.

RPL554 is a first-in-class, inhaled, dual inhibitor of PDE3 and PDE4. Phosodiesterases, or PDEs, are well known and validated therapeutic targets, and many PDE inhibitors, with different specificities, are currently available in the market for other indications. PDE3 is present in airways and the lung, and inhibition of this enzyme is primarily responsible for the bronchodilatory action of RPL554. PDE4 is found in inflammatory and epithelial cells, and inhibition of this enzyme contributes to RPL554's anti-inflammatory activity. PDEs metabolize the critical signaling molecules, cyclic adenosine monophosphate, or cAMP, and cyclic guanosine monophosphate, or cGMP. By inhibiting PDE3 and PDE4, RPL554 increases the levels of cAMP and cGMP, resulting in bronchodilator and anti-inflammatory effects. RPL554 also stimulates the cystic fibrosis transmembrane conductance regulator, or CFTR, which is an ion channel in the epithelial cells lining the airways. Mutations in the CFTR protein result in poorly or non-functioning ion channels, which cause CF and are potentially important in COPD. CFTR stimulation leads to improved electrolyte balance in the lung and thinning of the mucus, which facilitates mucociliary clearance and leads to improved lung function and potentially a reduction in lung infections. Dual inhibition of PDE3 and PDE4 has been observed to be more effective than inhibition of either PDE alone at relaxing airway smooth muscle cells and suppressing the activation and functions of pro-inflammatory cells residing in the lung, both of which are commonly understood to play a significant role in COPD and CF.

The figure below illustrates the three key mechanisms of action of RPL554 in respiratory diseases:

GRAPHIC

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In our clinical trials, RPL554 has shown rapid onset and durable bronchodilation in healthy subjects and patients with COPD when inhaled from a nebulizer. In addition, RPL554 has been observed to be complementary and additive when administered as an add-on therapy to other currently marketed bronchodilators. Our most recent clinical trial of RPL554 was a Phase 2a clinical trial in 36 patients with COPD. Our primary objective in this clinical trial was to evaluate the improvement in lung function, as measured by FEV1, and the duration of action of RPL554. We evaluated RPL554 administered as a single agent as compared to placebo and two commonly used bronchodilators, albuterol, also known as salbutamol and marketed as Ventolin, and ipratropium, marketed as Atrovent. We also evaluated RPL554 administered as an add-on therapy to either albuterol or ipratropium, in each case as compared to albuterol or ipratropium alone. We observed that RPL554 administered as a single agent produced statistically significant improvements in lung function, as measured by FEV1, as compared to placebo, with a p-value of less than 0.001. P-value is a conventional statistical method for measuring the statistical significance of clinical results. A p-value of 0.05 or less represents statistical significance, meaning that there is a less than 1-in-20 likelihood that the observed results occurred by chance. We also observed clinically meaningful and statistically significant improvement in lung function, as measured by FEV1, when RPL554 was administered as an add-on therapy to standard doses of albuterol and ipratropium as compared to standard doses of either bronchodilator alone. In this clinical trial, we observed the effect size, or peak improvement minus placebo improvement, was 51% higher for the add-on-therapy of RPL554 with albuterol as compared to albuterol alone, and 66% higher for the add-on-therapy of RPL554 with ipratropium as compared to ipratropium alone. In addition, RPL554 administered as an add-on therapy to either albuterol or ipratropium resulted in a statistically significant reduction in time of onset of bronchodilation as compared to albuterol or ipratropium alone.

RPL554 also has shown anti-inflammatory effects. In a Phase 1 clinical trial, 21 healthy evaluable subjects were treated with either RPL554 or placebo once daily for six days before airway challenge with aerosolized lipopolysaccharide, or LPS. LPS challenge induces an inflammatory response in the lung with a large proportion of neutrophils, which is a common type of white blood cell widely recognized as the most important inflammatory cell in COPD. LPS challenge is a well-validated and commonly used measure to assess the anti-inflammatory effects of novel compounds and is of particular relevance to drugs used in the treatment of COPD. Subjects treated with RPL554 were observed to have significantly lower absolute numbers of neutrophils in sputum collected six hours after LPS challenge, and a significant reduction in the absolute numbers of other inflammatory cells, including lymphocytes, macrophages and eosinophils, at the same time point. Eosinophils are prevalent in the lungs of some patients with COPD and in the vast majority of patients with asthma. These observations suggest that RPL554 also has the potential to target the chronic inflammatory processes in COPD, CF and other respiratory diseases, including asthma.

In addition, based on our pre-clinical studies, we believe that RPL554 has the potential to reduce the deleterious inflammation in CF patients, which is largely driven by neutrophils, reduce airway obstruction through bronchodilation and enhance mucociliary clearance through stimulation of the CFTR on airway epithelial cells. We believe the bronchodilator and anti-inflammatory properties of RPL554, combined with its ability to decrease mucus viscosity thereby improving mucociliary clearance, suggest that inhibition of PDE3 and PDE4 is an attractive therapeutic strategy to treat CF.

We have worldwide commercialization rights for RPL554. Our intellectual property portfolio includes five issued U.S. patents, four pending U.S. patent applications, 16 issued foreign patents in countries including China, Canada, Brazil, Japan, Mexico and Australia, and also including two issued European patents that have been validated in many European countries, including Germany, Italy, Spain, France and the United Kingdom, and 49 pending foreign applications in regions including Canada, Mexico, Asia and Europe, and also including two patent applications made under the Patent Cooperation Treaty, or PCT. These patents and patent applications include claims directed to RPL554 composition of matter, new dosage formulations and a crystalline polymorph, as well as methods of making and using RPL554 in the treatment of respiratory diseases, with expected expiry dates not earlier than between 2020 and 2037.

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We were incorporated in February 2005 and are headquartered in the United Kingdom. Since September 2006, our ordinary shares have traded on AIM, a market of the London Stock Exchange, under the symbol "VRP". We have raised £74.6 million in gross proceeds from investors since such listing, of which £44.7 million was raised in our most recent private placement of equity securities in July 2016 with a number of European and U.S.-based healthcare specialist investment firms. Members of our management team and board of directors have extensive experience in large pharmaceutical and biotechnology companies in respiratory product development from drug discovery through commercialization and have played important roles in the development and commercialization of several approved respiratory treatments, including Symbicort, Daliresp/Daxas, Spiriva and Flutiform.

Our Product Candidate Pipeline

The following table depicts the potential indications for RPL554 and their current development status:

GRAPHIC

Our Strengths

We believe that our company has the following key distinguishing characteristics:

    §
    Potential for multiple targeted indications, formulations and add-on therapies.  We are developing RPL554 in a nebulized formulation for the maintenance treatment of COPD patients, as an add-on therapy to short-acting bronchodilators and other commonly used therapies for the treatment of hospitalized patients with acute exacerbations of COPD and the treatment of CF. We also are developing RPL554 in both DPI and MDI formulations for the maintenance treatment of COPD. In addition, we may explore the development of RPL554 in these formulations for the treatment of asthma and other respiratory diseases. Based on the favorable properties of RPL554 that we have observed in our clinical trials, we believe RPL554 has broad potential applicability in the treatment of other respiratory diseases, either as a single agent or as an add-on therapy.

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    §
    Observed clinical benefit as a single agent and as an add-on therapy with a favorable safety profile.  We have completed eight Phase 1 and 2a clinical trials for RPL554 with 282 subjects enrolled. We have observed statistically significant improvements in lung function as compared to placebo, as well as clinically meaningful and statistically significant improvements in lung function when RPL554 is added to two commonly used bronchodilators as compared to either bronchodilator administered as a single agent. In addition, we observed a more rapid time of onset of bronchodilation when RPL554 was administered as an add-on therapy to albuterol or ipratropium. RPL554 also has shown anti-inflammatory effects and been well tolerated in our clinical trials, and has not been observed to result in the gastrointestinal or other side effects commonly associated with roflumilast, the only PDE4 inhibitor currently on the market approved for treatment of COPD. In addition, RPL554 has not been observed to result in any cardiovascular effects, other than a small increase in heart rate at the highest doses tested.

    §
    Differentiated mechanism of action in a single compound.  RPL554 is a first-in-class, inhaled, dual inhibitor of PDE3 and PDE4 that acts as both a bronchodilator and an anti-inflammatory agent in a single compound and stimulates the CFTR. Dual inhibition of PDE3 and PDE4 has been shown to be more effective than inhibition of either PDE alone at relaxing airway smooth muscle cells and suppressing the activation and functions of pro-inflammatory cells residing in the lung, both of which are commonly understood to play a significant role in COPD and CF. In addition, through this dual mechanism, RPL554 also stimulates the CFTR, which is important in the treatment of CF and potentially COPD. We believe that RPL554 has the potential to be a more effective and better tolerated treatment of COPD than existing treatments for COPD, including the approved PDE4 inhibitor.

    §
    Established regulatory pathway and well-defined clinical endpoints.  Our planned clinical trials for RPL554 for the maintenance treatment of COPD will be designed to evaluate the effect on FEV1 and duration of action of our product candidate. These clinical endpoints are commonly used in clinical trials for respiratory diseases and have been used by other companies in obtaining FDA approval of drugs addressing respiratory diseases.

    §
    Addressing significant market opportunities.  Despite the availability of bronchodilators and anti-inflammatory corticosteroid or PDE4 inhibitor treatments for COPD, many patients continue to suffer from significant symptoms and may experience acute exacerbations leading to hospitalization. Furthermore, current therapies have not demonstrated an ability to change the progressive decline in lung function or reduce the mortality associated with COPD. We believe a large market opportunity with significant unmet medical need exists in COPD. We believe the properties of RPL554 make it attractive as an important and novel potential treatment of patients with COPD, as well as for patients with CF and asthma. We plan to seek orphan drug designation of RPL554 for the treatment of CF.

    §
    Experienced management team.  Members of our management team and board of directors have extensive experience in large pharmaceutical and biotechnology companies in respiratory product development from drug discovery through commercialization and have played important roles in the development and commercialization of several approved respiratory treatments. We believe that the experience of our management team and our network of relationships within the industry and medical community provides us with insight into product development and identification of other opportunities in the respiratory field.

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Our Strategy

We intend to become a leading biopharmaceutical company focused on the treatment of respiratory diseases with significant unmet medical needs. The key elements of our strategy to achieve this goal include:

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    Rapidly advance the development of nebulized RPL554 for the maintenance treatment of COPD.  We intend to develop RPL554 for the maintenance treatment of COPD. We plan to commence a four-week Phase 2b dose ranging clinical trial to evaluate RPL554 for the maintenance treatment of COPD in the second half of 2017. In this trial, we plan to compare the use of RPL554 in a nebulized formulation to placebo in approximately 400 patients. We expect to report top-line data from this trial in the second half of 2018. In February 2017, we commenced a Phase 2a clinical trial of RPL554 for the maintenance treatment of COPD in the United Kingdom. This trial is evaluating RPL554 as an add-on therapy to tiotropium in approximately 30 patients. We expect to report top-line data from this trial in the fourth quarter of 2017. We also plan to commence a PK trial of RPL554 in approximately 12 healthy volunteers in the United States in mid-2017. We expect to report top-line data from this trial in the fourth quarter of 2017. In addition, we plan to commence a 12-week Phase 2b dose-ranging clinical trial of RPL554 for the maintenance treatment of COPD in the second half of 2018. In this trial, we plan to evaluate RPL554 as an add-on therapy to a long-acting bronchodilator in approximately 400 patients.

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    Rapidly advance the development of nebulized RPL554 for the treatment of acute exacerbations of COPD.  We also are developing RPL554 as an add-on therapy to short-acting bronchodilators and other commonly used therapies for the treatment of hospitalized patients with acute exacerbations of COPD. We plan to commence a Phase 2 clinical trial in the United States for RPL554 for this indication in approximately 150 patients in the second half of 2018.

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    Develop RPL554 for the treatment of CF.  In March 2017, we commenced a Phase 2a single-dose trial in the United Kingdom of RPL554 in up to ten CF patients to evaluate the PK and PD profile and tolerability of RPL554, as well as examine the effect on lung function. We expect to report top-line data from this trial in the first half of 2018. The results of this trial are expected to support dose selection for a proof-of-concept Phase 2b trial in Europe in approximately 100 patients with CF, which we plan to commence in 2018.

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    Develop DPI and MDI formulations of RPL554.  In addition to our nebulized formulation of RPL554, we are developing RPL554 in both DPI and MDI formulations for the maintenance treatment of COPD. We believe the development of DPI and MDI formulations has the potential to significantly increase the market opportunity for RPL554, if approved, for the maintenance treatment of COPD. In addition, we may explore the development of RPL554 in these formulations for the treatment of asthma and other respiratory diseases. Following the completion of our DPI and MDI formulation process, we plan to commence pre-clinical studies for RPL554 in these formulations in 2018.

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    Pursue development of RPL554 in other forms of respiratory disease.  We believe that RPL554's properties as an inhaled, dual inhibitor of PDE3 and PDE4 give it broad potential applicability in the treatment of other respiratory diseases. We may explore development of RPL554 to treat other forms of respiratory disease following development of RPL554 for the treatment of COPD and CF.

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    Seek strategic collaborative relationships.  We may seek strategic collaborations with market-leading biopharmaceutical companies to develop and commercialize RPL554. We believe these collaborations could provide significant funding to advance the development of RPL554 while allowing us to benefit from the development or commercialization expertise of our collaborators.

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    Acquire or in-license product candidates for the treatment of respiratory diseases.  We plan to leverage our respiratory disease expertise to identify and in-license or acquire additional clinical-stage

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      product candidates that we believe have the potential to become novel treatments for respiratory diseases with significant unmet medical needs.

RPL554 for the Treatment of COPD

Overview

Our product candidate, RPL554, is a first-in-class, inhaled, dual inhibitor of PDE3 and PDE4 that acts as both a bronchodilator and an anti-inflammatory agent in a single compound. We are not aware of any therapy in a single compound in clinical development or approved by the FDA or the EMA, for the treatment of respiratory diseases that acts as both a bronchodilator and anti-inflammatory agent. We believe RPL554 has the potential to be the first novel class of bronchodilator in over 40 years.

COPD Background

COPD is a progressive respiratory disease for which there is no cure. COPD damages the airways and the lungs and leads to shortness of breath, impacting a person's ability to work, exercise, sleep and perform other daily activities. Part of the pathology of the disease is chronic airway inflammation and constriction of airway muscles. Airflow limitation in COPD patients results from mucosal and airway inflammation and edema, or excess fluid in the airway walls, bronchoconstriction, increased secretions in the airways and loss of elastic recoil, or the ease with which the lung rebounds after having been stretched by inhalation. COPD includes chronic bronchitis, which refers to the inflammation of the lung and airways that results in coughing and sputum production, and emphysema, which refers to a destruction of distal lung tissue, or air sacs. In some cases, hospitalized patients with COPD experience acute exacerbations, which include rapid and prolonged worsening of symptoms.

According to the World Health Organization, COPD is the third leading cause of death globally, with 210 million people worldwide suffering from the disease. The U.S. Centers for Disease Control and Prevention, or CDC, estimates that there are 24 million people with COPD in the United States, only half of whom have been diagnosed. Of those diagnosed with COPD in the United States, approximately 2 million suffer from severe or very severe forms of the disease. Acute exacerbations or COPD are estimated to cause approximately 1.5 million emergency department visits, 687,000 hospitalizations and 129,000 deaths per year in the United States alone. According to the CDC, total annual medical costs relating to COPD in the United States were estimated to be $32 billion in 2010, and are projected to rise to $49 billion in 2020. An estimated 16.4 million days of work were lost due to COPD each year in the United States. Global sales of drugs currently indicated for COPD were $10.6 billion in 2016 and are expected to grow to $15.6 billion in 2019.

Current Treatment Landscape of COPD

There are no approved therapies for COPD that alter the progression, rate of decline of lung function or mortality of the disease. The goal of current COPD treatments is to alleviate symptoms, decrease the frequency and severity of exacerbations, and reduce limitations on daily activities. COPD patients are commonly treated with bronchodilators, which seek to relieve airway constriction and make it easier to breathe, and corticosteroids, which seek to reduce lung inflammation. For patients with more severe disease who experience recurrent exacerbations, and for whom inhaled corticosteroids are not effective, an oral formulation of a PDE4 inhibitor, which is an anti-inflammatory agent, is available and may be used as treatment. Antibiotic therapy has also been shown to have a small but important effect on clinical recovery and outcome in hospitalized patients with bacterial infections that resulted in an acute exacerbation of COPD.

Despite the availability of bronchodilators, anti-inflammatory corticosteroids, an anti-inflammatory PDE4 inhibitor and antibiotics for treatment of COPD, many patients continue to suffer from significant symptoms and may experience acute exacerbations leading to increased doses of medication and hospitalization. Following an acute exacerbation of COPD and subsequent hospitalization, it may take many weeks for a

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patient's lung function to recover to pre-exacerbation levels. In addition, the rate of mortality of COPD patients within one year of hospitalization is approximately 20%, and patients with a need for hospital readmission have only a 20% five-year survival rate. Retrospective studies have demonstrated that more than 20% of patients discharged from hospital after an exacerbation of their COPD require readmission within 30 days of discharge. This has medical implications for the patient and is a financial burden for the healthcare system. We believe that increasing awareness of the problem of COPD patients returning for hospital treatment within 30 days of discharge has triggered a strong interest from industry, regulators and healthcare administrators and payors in optimizing the treatment of acute COPD exacerbations, both in the hospital setting and after patients are discharged.

For many COPD patients, a better and more effective maintenance treatment is required that can control their symptoms and reduce the risk of acute exacerbations. For patients that require hospitalization, essentially the same treatment modalities are used as in non-hospitalized patient treatment, however, they are often treated with higher doses, including with corticosteroids that are administered systemically rather than locally by inhalation. Acute medical treatment of COPD exacerbations has not changed in decades, with older, short-acting nebulized bronchodilators still used as a mainstay bronchodilator treatment in the acute hospital setting. This is despite hospitalizations for COPD being long, at about five days, expensive, and with a high mortality rate and high probability of hospital readmission. We believe there is an unmet medical need for an improved treatment approach.

Bronchodilators

Bronchodilators are the first-line therapy for the treatment of COPD patients. There are two existing classes of bronchodilators: beta2-agonists and anti-muscarinics. Long-acting versions of these bronchodilators, lasting 12 to 24 hours, are commonly used in the maintenance therapy of patients with COPD. Long-acting beta2-agonists, or LABAs, which are commonly used in combination with inhaled corticosteroids, include Advair (salmeterol and fluticasone), which had $2.4 billion in global sales in 2015, and Symbicort (formoterol and budesonide), which had $1.6 billion in global sales in 2015. Long-acting anti-muscarinics, or LAMAs, include Spiriva (tiotropium), which had $3.9 billion in global sales in 2015. In the United States, nebulized LABAs, which are only indicated for COPD, generated sales of $601 million in the 12-month period ending June 30, 2016. In addition to producing bronchodilation, beta2-agonists have been shown to improve mucociliary clearance in COPD patients, thereby potentially reducing mucus in the airways. LAMAs have a different mechanism of action and effect bronchodilation via different cell-surface receptors and through different intracellular pathways than LABAs. Studies with twice-daily LABAs indicate that clinically relevant improvements in dyspnea or health-related quality of life are only achieved by a minority of patients. Clinical data suggest that inhaled LAMAs may be somewhat more effective than LABAs in improving lung function of COPD patients. However, LAMAs have a relatively slow onset of action and both LABAs and LAMAs are contraindicated for acute use in the United States. Another limitation is a diminished effectiveness of beta2-agonists that can be experienced by some COPD patients over time. Some patients also have adrenergic side effects such as tremor or increased heart rate from existing beta2-agonists.

Short-acting versions of bronchodilators, lasting up to eight hours, are most commonly used to treat hospitalized patients who experience a worsening airway obstruction, including as a result of acute exacerbations of COPD. A short-acting beta2-agonist, or SABA, such as Ventolin (albuterol), which had $820 million in global sales in 2015, and a short-acting anti-muscarinic, or SAMA, such as Atrovent (ipratropium), which had $590 million in global sales in 2015, are typically used for relief of acute exacerbations of COPD. However, the response to bronchodilators can be highly variable in individual patients over time, and patients who are non-responders at one office visit may respond at a different visit. In addition, the frequent use of beta2-agonists can lead to reduced effectiveness of the drug due to the development of tolerance. As a consequence of this variability in responsiveness, a significant number of COPD patients are classified as non-responders to albuterol, the standard SABA used in the market. Based on screening visits in a large recent clinical trial conducted by GlaxoSmithKline, in which patients were

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treated with albuterol once every three months over a 12-month period, the rate of classification of patients as responders per treatment was 24% as measured by American Thoracic Society, or ATS, criteria. Classification as a responder pursuant to ATS criteria requires at least a 12% and 200 ml increase in FEV1. In addition, the rate of classification of patients as consistent responders, or responders at least three out of four times over the 12-month treatment period, was 14% as measured by ATS criteria. In another large study conducted by Boehringer Ingelheim, even when albuterol was combined with ipratropium, the rate of classification of patients as responders pursuant to the ATS criteria was just over 50%.

Bronchodilators can be delivered in a nebulized form or by a DPI or MDI if patients are able to use proper technique, which may be difficult during an exacerbation. As a result, acute COPD exacerbations are often treated with a nebulizer. A nebulizer is both convenient and effective in delivering a large dose. Use of a nebulizer to provide bronchodilation enhances delivery of the therapeutic to the airways of the patient. Patients with more severe COPD, who tend to suffer more frequent exacerbations, generally prefer treatment with a nebulizer as they view its perceived benefits, including greater confidence in effective drug administration and a reduced need to visit health care providers, as outweighing its perceived disadvantages, which include length of treatment administration and required cleaning. In addition, use of a nebulizer is generally preferred when administering larger doses in the hospital setting.

Beta2-agonists and anti-muscarinics can be used as single agents for the treatment of COPD, but studies have shown that their combined use leads to greater bronchodilation than each used as a single agent because these classes of bronchodilators have different mechanisms of action to improve lung function. Based on these findings, novel drugs combining a LABA and a LAMA in one inhaler device are being brought to market, such as Novartis' Utibro Breezhaler (indacaterol and glycopyrrolate), which had $260 million in global sales in 2015. However, many patients, and especially those with more severe disease, still need more effective bronchodilation to improve their symptoms. Additionally, LABAs and LAMAs, acting alone or in combination, do not treat the underlying inflammation present in COPD.

Corticosteroids

Corticosteroids are used for treatment in a range of diseases for their anti-inflammatory effect. However, corticosteroids do not affect neutrophils, which are widely recognized as the most important inflammatory cells in COPD. Corticosteroids have shown limited efficacy and are not approved as a stand-alone treatment for COPD. Inhaled corticosteroids are commonly administered together with LABAs for the maintenance treatment of COPD. When administered with LABAs, corticosteroids have been shown to improve lung function and reduce exacerbation rates. However, recent studies have shown that removing inhaled corticosteroids from this treatment regimen does not lead to increases in exacerbations in a majority of patients, implying that the combination is not effective in all patients. In addition, inhaled corticosteroids have been shown to decrease the immune response in some patients, which results in an increased incidence of pneumonia.

In the treatment of acute COPD exacerbations, corticosteroids are often administered systemically, either through injection or orally, in addition to high-dose bronchodilators. In this setting, corticosteroids may be effective in improving symptoms and lung function, reducing the rate of treatment failure and shortening the length of hospital stay. However, when given systemically, corticosteroids are known to be associated with side effects such as compromised adrenal gland function and reduced bone density.

PDE4 Inhibitors

PDE4 inhibitors have attracted recent attention for the treatment of COPD because PDE4 is broadly expressed in airways and in the lung. PDEs are well known and validated therapeutic targets, and many PDE inhibitors, with different specificities, are currently available in the market for other indications. PDE4 is found in inflammatory and epithelial cells, and inhibition of this enzyme contributes to RPL554's anti-inflammatory activity. PDE4 is the primary cAMP-hydrolyzing enzyme in inflammatory and immune cells, especially neutrophils, lymphocytes, macrophages and eosinophils, all of which are found in the lungs

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of COPD patients. Inhibition of PDE4 leads to elevated cAMP levels in these cells, which results in anti-inflammatory effects due to the down-regulation of the inflammatory response.

The recently approved oral PDE4 inhibitor, roflumilast, has shown clinical efficacy as an oral therapeutic in the reduction of COPD exacerbations in patients with severe COPD associated with chronic bronchitis and a history of exacerbations. The drug is an anti-inflammatory compound that decreases inflammation in a different manner than corticosteroids. However, roflumilast has only shown a modest improvement in lung function in COPD patients as compared to commonly used bronchodilators as it is not a direct bronchodilator. In addition, because of roflumilast's systemic exposure as an oral PDE4 inhibitor, its use has been limited due to frequent adverse side effects such as back pain, decreased appetite, diarrhea, dizziness, flu-like symptoms, headache, weight loss, nausea and vomiting.

Antibiotics

Antibiotic therapy has been shown to have a small but important effect on clinical recovery and outcome in patients with bacterial infections that resulted in an acute exacerbation of COPD. As a result, antibiotic therapy is often considered at the beginning of treatment of acute exacerbations of COPD. Hospitalized patients commonly receive intravenous treatment with an antibiotic and initial outpatient management of COPD may include oral antibiotics. However, the limited efficacy of and patient resistance to antibiotics represent significant drawbacks of this form of therapy for COPD patients.

Our Solution

We believe that RPL554, as a first-in-class, inhaled, dual inhibitor of PDE3 and PDE4, which acts as both a bronchodilator and an anti-inflammatory in a single compound, if approved, has the potential to become an important and novel treatment and standard of care for patients with COPD. We are not aware of any therapy in a single compound in clinical development or approved by the FDA or the EMA, for the treatment of COPD that acts as both a bronchodilator and anti-inflammatory agent. Based on our clinical trials, we believe RPL554 has the potential to be a best-in-class bronchodilator for the treatment of COPD, both as a monotherapy and as an add-on therapy to existing bronchodilators.

PDEs are a family of over ten intracellular enzymes that regulate important cellular pathways in many different cell types. PDEs metabolize the critical signaling molecules cAMP and cGMP. By inhibiting PDE3 and PDE4, RPL554 increases the levels of these intracellular messengers resulting in bronchodilator and anti-inflammatory effects. Dual inhibition of PDE3 and PDE4 has been shown to be more effective than inhibition of either PDE alone at relaxing airway smooth muscle cells and suppressing the activation and functions of pro-inflammatory cells residing in the lung, both of which are commonly understood to play a significant role in COPD.

The figure below illustrates the mechanism of action of RPL554's dual inhibition of PDE3 and PDE4 in the treatment of COPD.

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Mechanism of Action of RPL554 from PDE3 and PDE4 lnhibition

GRAPHIC

Previous attempts to develop PDE4 inhibitors for COPD, asthma and other indications have been limited by the resulting side effects, particularly to the gastrointestinal system, such as nausea, vomiting and weight loss. RPL554 is designed to maximize effectiveness and reduce the occurrence of adverse events by:

    §
    relying on a chemical structure that is distinct from other PDE4 inhibitors and avoids gastrointestinal and other side effects typically associated with PDE4 inhibition;

    §
    having high selectivity for PDE3 and PDE4 over other enzymes, including other PDE enzymes, and receptors to minimize off-target effects; and

    §
    enabling delivery directly to the lung by inhalation, thereby maximizing pulmonary exposure to RPL554 while minimizing systemic distribution and related adverse events.

We believe RPL554 may offer significant advantages over currently approved therapies for COPD based on the following:

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    Clinical benefit as an add-on therapy and as a single agent with a favorable safety profile.  RPL554 has been evaluated in multiple randomized, controlled Phase 1 and Phase 2a clinical trials involving 282 subjects. In these trials, RPL554 has been observed to result in statistically significant improvements in lung function as compared to placebo. Our clinical trials also have shown clinically meaningful and statistically significant improvements in lung function when RPL554 is added to two commonly used bronchodilators as compared to either bronchodilator administered as a single agent. RPL554 has been well tolerated in our clinical trials, and has not been observed to result in the gastrointestinal or other side effects commonly associated with roflumilast, the only PDE4 inhibitor currently on the market approved for the treatment of COPD. In addition, RPL554 has not been observed to result in any cardiovascular effects, other than a small increase in heart rate at the highest doses tested.

    §
    Bronchodilator and anti-inflammatory effects in one compound.  RPL554 utilizes a novel mechanism of action that inhibits PDE3 and PDE4 to act as both a bronchodilator and an anti-inflammatory agent in a single compound. We are not aware of any therapy in a single compound in clinical development or approved by the FDA or the EMA, for the treatment of COPD that acts as both a bronchodilator and anti-inflammatory agent. Inhibition of PDE3 is largely responsible for the bronchodilatory effects of RPL554, while the inhibition of PDE4 is largely responsible for the

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      anti-inflammatory effects. By simultaneously targeting PDE3 and PDE4, we believe that RPL554 results in a more profound effect that addresses both airway constriction and chronic inflammation, which are the hallmarks of COPD. As a result, we believe RPL554, if approved, has the potential to become an important and novel treatment and standard of care for patients with COPD.

    §
    Inhaled administration.  We are developing RPL554 as an inhaled therapy, which we believe is advantageous for the treatment of COPD patients because it delivers high concentrations of RPL554 directly to the patient's airways, thereby potentially improving efficacy while minimizing some of the side effects resulting from the systemic exposure associated with orally administered bronchodilators and anti-inflammatory drugs. For example, roflumilast, the only currently marketed PDE4 inhibitor approved for the treatment of COPD, is administered orally and has been associated with adverse side effects such as back pain, decreased appetite, diarrhea, dizziness, flu-like symptoms, headache, weight loss, nausea and vomiting. In our clinical trials, RPL554 has been well tolerated and has not been associated with many of the adverse effects associated with roflumilast. In this inhaled form, we believe RPL554, if approved, would provide significant advantages over orally administered therapies and potentially lead to better and more effective treatment of COPD.

    §
    Rapid onset of action.  In our Phase 2a clinical trial for RPL554 completed in February 2016, we observed a rapid onset of bronchodilation when RPL554 was administered as an add-on therapy to each of ipratropium and albuterol, two currently marketed short-acting bronchodilators. The time of onset of action of ipratropium was approximately 20 minutes, while the time of onset of action for RPL554 was approximately 15 minutes. When RPL554 was administered as an add-on therapy to ipratropium, the time of onset was reduced by 75% to approximately five minutes as compared to ipratropium alone, which is similar to albuterol alone. When RPL554 was administered as an add-on therapy to albuterol, the time to onset was more rapid than with albuterol alone. We believe RPL554 has the potential to provide significant benefits as an add-on therapy to short-acting bronchodilators in the treatment of acute exacerbations of COPD due to its effect on time of onset of action.

We are developing RPL554 in a nebulized formulation for the maintenance treatment of COPD patients and as an add-on therapy to short-acting bronchodilators and other current standard-of-care therapies for the treatment of hospitalized patients with acute exacerbations of COPD. In our planned clinical trials, we intend to explore the possibility that treatment with RPL554, when used for the maintenance treatment, has the potential to improve recovery rates as measured by improved lung function and, when used for the treatment of acute exacerbations of COPD, has the potential to reduce symptoms concomitantly with a reduction of the 30-day hospital readmission rates. No current medication has been shown to reduce this re-hospitalization rate and currently marketed long-acting bronchodilators are contraindicated for acute use in the United States. Furthermore, current therapies have not demonstrated an ability to change the progressive decline in lung function or reduce the mortality associated with COPD. We intend to explore opportunities for RPL554 for the maintenance treatment and in the hospital setting for acute exacerbations in our planned clinical trials.

In addition to our nebulized formulation of RPL554, we are developing RPL554 in both DPI and MDI formulations for the maintenance treatment of COPD. We may also explore the development of RPL554 in these formulations for the treatment of asthma and other respiratory diseases. DPI and MDI devices are the most common forms of drug delivery in non-hospitalized patients with COPD and are well-suited for the maintenance therapy of COPD patients. We believe the development of DPI and MDI formulations has the potential to significantly increase the market opportunity for RPL554, if approved, for the maintenance treatment of COPD. Following the completion of our DPI and MDI formulation process, we plan to commence pre-clinical studies for RPL554 in these formulations in 2018.

Clinical Development

We have completed five Phase 1 and Phase 2a trials for RPL554 outside the United States, dosing 105 subjects with an initial proof-of-concept formulation. Data from the single and multiple dose trials using our initial proof-of-concept formulation suggest that RPL554, when inhaled across a range of doses, has the

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potential to be an effective bronchodilator in patients with COPD and other respiratory diseases, including asthma, and has broncho-protective properties, such as reducing the hypersensitivity of asthmatic airways to inhaled irritants. In these trials, we observed RPL554 having a rapid onset of action and the magnitude of improvement in lung function, as measured by FEV1, seemed to be at least as profound as that of other commonly used and approved bronchodilator drugs. We also observed that RPL554 had a potent anti-inflammatory effect in a number of pre-clinical studies and a clinical trial.

In 2014, we developed a new nebulized formulation of RPL554 for our ongoing development programs. We designed this formulation to have a broader dose range, improved PK profile and dosing regimen and neutral pH, as compared to the initial proof-of-concept formulation. This nebulized formulation of RPL554 is also stable and would be suitable for commercial use, if approved. We initiated the first Phase 1 clinical trial with this nebulized formulation in December 2014 and completed the trial in September 2015. The following table summarizes the Phase 1 and 2a clinical trials we have completed with our new nebulized formulation of RPL554, all of which have been conducted outside of the United States:

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Summary of Completed RPL554 Clinical Trials with New Nebulized Formulation
Trial Description   Patient Population   RPL554 Dosage   Key Findings

Phase 2a trial to
assess the improvement in lung function, as measured by FEV1, of RPL554 as an add-on treatment to each of albuterol and ipratropium
Completion date: February 2016

 

36 moderate-to-severe COPD patients, males and females, age 52 - 70

1 location; United Kingdom

 

Single dose of RPL554 of 6 mg alone and as an add-on treatment to albuterol or ipratropium

 

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Well tolerated following single dose of 6 mg of RPL554 alone and as add-on treatment

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RPL554 alone was as effective a bronchodilator as either albuterol (200 mg) or ipratropium (40 mg) and was statistically significant as compared to placebo

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RPL554 produced significant additive bronchodilation (>50% increase) when dosed with either albuterol (200 mg) or ipratropium (40 mg) as compared to albuterol or ipratropium, respectively, alone, and caused an additive and significant reduction in lung volumes and airway resistance

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The time to onset of RPL554 when dosed with either albuterol (200 mg) or ipratropium (40 mg) was more rapid than with albuterol or ipratropium, respectively, alone

Phase 2a trial to
assess the effect of single doses of RPL554 compared to albuterol and placebo on lung function, as measured by FEV1, of patients with chronic asthma
Completion date: January 2016

 

29 chronic asthmatic patients, males and females, age 20 - 62

2 locations; United Kingdom and Sweden

 

Single dose of 0.4 mg to 24 mg

 

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Well tolerated following single dose of 0.4 mg to 24 mg

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Improvement in lung function, as measured by FEV1, observed with a magnitude that was comparable to the maximum effect observed with a dose of 7.5 mg of nebulized albuterol, or three times the recommended dose of albuterol

Phase 1 trial to
assess the safety, tolerability and PK profile of single and multiple inhaled doses of RPL554 in healthy volunteers and stable COPD subjects

Completion date: September 2015

 

Part A: 50 (35 RPL554 / 15 placebo) healthy subjects, males, age 19 - 48

Part B: 30 (21 RPL554 / 9 placebo) healthy subjects, males, age 19 - 46

Part C: 32 (23 RPL554 / 9 placebo) moderate COPD patients, males and females, age 49 - 73

1 location; United Kingdom

 

Part A: Single dose of 1.5 mg to 24 mg

Part B: Multiple dose (twice daily for 5.5 days) of 6 mg to 24 mg

Part C: Multiple dose (twice daily for 5.5 days) of 1.5 mg to 12 mg

 

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Improvement in lung function, as measured by FEV1, observed in healthy subjects and COPD patients

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Part A: RPL554 was well tolerated and there was a dose dependent increase in lung function, as measured by FEV1, of up to 360 mL (9%) from baseline

§

Part B: RPL554 was well tolerated and there was a sustained increase in FEV1

§

Part C: RPL554 was well tolerated and there was a significant increase in lung function, as measured by FEV1, of up to 360 mL (24%) from baseline, with a duration of action of 12 hours


Phase 2a Clinical Trials

We have completed two Phase 2a clinical trials using our new nebulized formulation of RPL554.

In February 2016, we completed a single-dose, double-blinded, placebo-controlled, six-way cross-over Phase 2a clinical trial for RPL554 conducted in the United Kingdom. A total of 36 patients were randomized to receive each of the six treatments, which were albuterol, ipratropium, RPL554, placebo,

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RPL554 as an add-on therapy to albuterol and RPL554 as an add-on therapy to ipratropium. The primary objective of this trial was to establish the improvement in lung function, as measured by FEV1, of RPL554 as an add-on therapy to albuterol (200 mg), as an add-on therapy to ipratropium (40 mg) and as a single agent, each as compared to standard doses of each of albuterol and ipratropium alone and to placebo. The testing dose level for RPL554 was 6 mg. The secondary objective of this trial was to measure the change in residual lung volume, a measure of the volume of air trapped in the lung, airway conductance, a measure of the ease with which air moves down the airways, time of onset of action and safety and tolerability of RPL554.

In this clinical trial, RPL554 produced clinically meaningful and statistically significant improvement in lung function, as measured by FEV1, as an add-on therapy to standard doses of each of albuterol and ipratropium as compared to standard doses of either bronchodilator alone. In this clinical trial, we observed the effect size, or peak improvement minus placebo improvement, was 51% higher for the add-on therapy of RPL554 with albuterol as compared to albuterol alone, and 66% higher for the add-on therapy of RPL554 with ipratropium as compared to ipratropium alone. We also observed in this trial that RPL554 as a single agent produced numerically greater improvements in lung function, as measured by FEV1, as compared to albuterol or ipratropium alone, and statistically significant improvements as compared to placebo. These results are illustrated by the figure below.


Improvement in Lung Function

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In addition, patients treated with RPL554 as a single agent experienced numerically greater improvements in residual lung volume as compared to albuterol or ipratropium alone, and statistically significant improvements as compared to placebo. The add-on therapy of RPL554 with albuterol or ipratropium caused a statistically significant reduction in residual lung volume as compared to albuterol or ipratropium alone, suggesting that RPL554 treatment may reduce dyspnea, or shortness of breath, a major debilitating symptom of COPD. This reduction in residual lung volume as measured in liters is illustrated in the figure below.


Reduction in Residual Lung Volume (Air Trapping)

GRAPHIC

Another important parameter in COPD is the resistance of the airways to airflow. The inverse of this is airway conductance. Similar to the effect on residual lung volume, patients treated with RPL554 as a single agent experienced numerically greater increases in airway conductance as compared to each of albuterol and ipratropium, and statistically significant improvements as compared to placebo. We also observed, that the administration of RPL554 as an add-on therapy to either albuterol or ipratropium resulted in a statistically significant increase in airway conductance as compared to albuterol or ipratropium alone, as illustrated in the figure below.


Improvement in Airway Conductance

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In this trial, the time of onset of action of ipratropium was approximately 20 minutes. The time of onset of action for RPL554 alone was approximately 15 minutes. When RPL554 was administered as an add-on therapy to ipratropium, the time of onset was reduced to approximately 5 minutes, which is similar to albuterol. In both cases, RPL554 as an add-on therapy resulted in a statistically significant reduction in time of onset as compared to ipratropium or albuterol alone. The time of onset in minutes is shown in the figure below.


Time of Onset of Bronchodilator Effect

GRAPHIC

Consistent with prior trials, RPL554 was well tolerated both alone and as an add-on therapy and was not observed to increase the incidence of any adverse event over standard bronchodilators when used alone. In addition, we did not observe the gastrointestinal or other side effects associated with roflumilast, the only PDE4 inhibitor currently on the market approved for the treatment of COPD. In this trial, RPL554 had no observed effect on cardiac function as measured by electrocardiograms, including QT intervals, a measure of time between certain waves in the heart's electrical cycle and measure of a potential cardiovascular adverse event. Finally, the serum levels of RPL554 were not affected by use of albuterol or ipratropium.

In January 2016, we completed a single-dose, double-blind, placebo-controlled, seven-way cross-over Phase 2a dose-finding trial of RPL554 in 29 male and female chronic asthma patients conducted in Sweden and the United Kingdom. The testing dose levels of RPL554 ranged from 0.4 mg to 24 mg, a sixty-fold range. The primary objective of this trial was to establish the improvement in lung function, as measured by FEV1, of RPL554 as compared to albuterol and placebo. The secondary objective of this study was to assess the safety and tolerability of RPL554.

In this trial, all doses of RPL554 showed a dose-dependent and statistically significant improvement in lung function, as measured by FEV1, with a p-value of less than 0.001, as compared to placebo. The maximum improvement in lung function, as measured by FEV1, of RPL554 observed in this trial was comparable to the maximum effect observed with a dose of 7.5 mg, or three times the recommended dose, of nebulized albuterol. In this trial, RPL554 was well tolerated and there were no serious adverse events or adverse events of concern at any dose. RPL554 treatment resulted in no gastrointestinal adverse events or cardiovascular events of concern. The figure below illustrates improvement in lung function, as measured by FEV1, as compared to albuterol and placebo.

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Improvement in Lung Function Over a Sixty-fold Dose Range in Asthma Patients

GRAPHIC

Phase 1 Clinical Trials

In September 2015, we completed a Phase 1 clinical trial that had three parts consisting of a single ascending dose, or SAD, trial in 50 healthy male subjects, a multiple ascending dose, or MAD, trial in 30 healthy male subjects and a MAD trial in 32 male and female patients with COPD. Doses in the SAD trial and the MAD trial with healthy subjects ranged from 6 mg to 24 mg, and doses in the MAD trial with COPD patients ranged from 1.5 mg to 12 mg. Each of the MAD trials continued for five and a half days with twice-daily dosing.

The primary objective of the SAD and MAD trials in healthy subjects was to assess the safety and tolerability of single and multiple doses of RPL554. The secondary objective of these trials was to measure the improvement in lung function, as measured by FEV1, in healthy subjects receiving RPL554 as compared to placebo.

In the SAD and MAD trials in healthy subjects, RPL554 was well tolerated. In these trials, we also observed a longer residence time in the lung, lower peak plasma concentrations and a longer plasma half-life (10 to 12 hours) than our initial proof-of-concept formulation of RPL554, suggesting that twice-daily dosing is appropriate. The lung function testing in the SAD trial showed a dose-dependent improvement in lung

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function, as measured by FEV1, in these healthy individuals, despite none of them having asthma or COPD, as illustrated in the figure below.


Improvement in Lung Function (FEV1) in Healthy Subjects (SAD part)

GRAPHIC

Similarly, in the MAD trial in 30 healthy male subjects, RPL554 continued to show an increase in lung function compared to baseline on each day of the study, as measured by FEV1, in these healthy individuals, despite none of them having asthma or COPD.

The primary objective of the third part of the trial, which was a MAD trial in 32 patients with moderate COPD, was to assess safety and tolerability and measure the PK profile of RPL554 in COPD patients receiving RPL554 as compared to placebo. The secondary objective was to assess the improvement in lung function, as measured by FEV1, in these patients. In this clinical trial, RPL554 was well tolerated at all doses with no reports of serious adverse events or adverse events of concern. Specifically, we did not observe the gastrointestinal or other side effects associated with roflumilast, the only PDE4 inhibitor currently on the market approved for the treatment of COPD, and RPL554 was not observed to have any effect on cardiac function as measured by electrocardiograms, including QT intervals, and Holter monitoring, which uses a portable device that continuously measures and records the heart's activity for at least 24 hours. We also observed a statistically significant increase in lung function, as measured by FEV1, with a p-value of less than 0.05, in patients receiving RPL554 in all dose groups as compared to placebo. The figure below illustrates a consistent increase in lung function compared to baseline with no evidence of reduction in effect level, as measured by FEV1, on each day of the study.

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Improvement in Lung Function (FEV1) over Six Days of Dosing

GRAPHIC

The figure below, which represents the effects of the final dose after five and a half days of treatment with RPL554, shows that patients with moderate COPD that were administered RPL554 experienced an improvement in lung function, as measured by FEV1, and that the improvement peaked at two hours and continued through the 12-hour measurement period.


Improvement in Lung Function (FEV1) over 12 Hours in COPD Patients

GRAPHIC

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In May 2013, we completed a Phase 1 clinical trial in which 21 healthy evaluable subjects were treated with either our initial proof-of-concept formulation of RPL554 or placebo once daily for six days before airway challenge with aerosolized LPS. Subjects that were administered RPL554 had significantly lower absolute numbers of neutrophils in sputum collected six hours after LPS challenge, and a significant reduction in the absolute numbers of other inflammatory cells, including lymphocytes, macrophages and eosinophils, at the same time point. These observations suggest that RPL554 also has the potential to target the chronic inflammatory processes in COPD. The figure below illustrates the reduction in inflammatory cells observed in this trial as measured by absolute cell counts.


Reduction in Inflammatory Cells

GRAPHIC

Summary of Safety Results

RPL554 was well tolerated in each of our eight Phase 1 and 2a clinical trials at dose levels ranging from 0.4 mg to 24 mg. RPL554 was well tolerated both when administered alone and as an add-on therapy to commonly used bronchodilators. In our completed clinical trials, we did not observe any gastrointestinal adverse events or cardiovascular effects, other than a small increase in heart rate at the highest doses tested. RPL554 had no observed effect on cardiac function as measured by electrocardiograms, including QT intervals, a measure of time between certain waves in the heart's electrical cycle and measure of a potential cardiovascular adverse event. In addition, we did not observe an increase in incidence of any adverse event over commonly used bronchodilators when RPL554 was used alone. In these trials, some subjects experienced mild to moderate adverse reactions, including headache, dizziness, cough, heart palpitation, nausea, dry mouth, parenthesis (tingling), nasopharyngitis (throat irritation) and rash, which occurred with comparable frequency to placebo. No subjects had a serious adverse event.

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The figure below illustrates the effects of RPL554 and albuterol on serum levels of potassium:


Effect on Serum Levels of Potassium

GRAPHIC

Clinical Development Plans

We plan to conduct several trials to support our plans to develop RPL554 in a nebulized formulation for the maintenance treatment of COPD and as an add-on therapy to short-acting bronchodilators and other commonly used therapies for the treatment of hospitalized patients with acute exacerbations of COPD. We also are developing RPL554 in both DPI and MDI formulations for the maintenance treatment of COPD. In addition, we may explore the development of RPL554 in these formulations for the treatment of asthma and other respiratory diseases.

    §
    Maintenance treatment of COPD.  We plan to commence a Phase 2b dose-ranging clinical trial for RPL554 for the maintenance treatment in approximately 400 patients with COPD in Europe in the second half of 2017. The Phase 2b clinical trial will be a four-week double-blind, placebo-controlled, parallel group trial. The primary endpoint is improvement in lung function, as measured by FEV1, after dosing with RPL554 or placebo. We expect to report top-line data from the Phase 2b trial in the second half of 2018.

      We also plan to commence a Phase 2b dose-ranging clinical trial for RPL554 as an add-on therapy to a long-acting bronchodilator for maintenance treatment in approximately 400 patients with COPD in the second half of 2018. This Phase 2b clinical trial will be a 12-week double-blind, placebo-controlled trial. The primary endpoint is improvement in lung function, as measured by FEV1, after dosing with RPL554 as an add-on treatment to tiotropium.

      We also plan to commence a single-dose PK trial of RPL554 in mid-2017 in approximately 12 healthy volunteers in the United States. The primary endpoint is to determine the amount of drug that is swallowed which makes it into systematic circulation, or oral bioavailability. We expect to report top-line data from the PK trial in the fourth quarter of 2017.

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      In February 2017, we commenced a Phase 2a clinical trial in the United Kingdom evaluating RPL554 in patients with COPD as an add-on therapy to tiotropium, an approved and widely used LAMA bronchodilator. Our Phase 2a clinical trial is a three day trial in approximately 30 COPD patients. In this trial, we plan to evaluate the improvement in lung function, as measured by FEV1, and duration of effect of RPL554 or placebo as an add-on therapy to tiotropium. We expect to report top-line data from this trial in the fourth quarter of 2017. The data from these trials will also help inform the clinical development of RPL554 in the acute setting.

    §
    Treatment of hospitalized patients with acute exacerbations of COPD.  We plan to commence a Phase 2 clinical trial in the United States for RPL554 for the treatment of acute COPD patients requiring hospitalization in 2018. We plan to enroll approximately 150 patients in this Phase 2 clinical trial, which will be a double-blind, placebo-controlled, parallel group trial starting during the patients' hospitalization for COPD exacerbation and continuing for 30 days after discharge. RPL554 will be added to the standard-of-care treatment these patients receive. This trial will be designed to evaluate the efficacy and safety of RPL554 when administered for patients experiencing a COPD exacerbation requiring hospitalization.

The table below summarizes our planned clinical trial designs for RPL554 for the treatment of COPD.


Trial Description
  Trial Design   Patient
Population
  Primary
Endpoint
  Secondary
Endpoints
  Anticipated
Milestones

Phase 2a trial to determine efficacy and safety of RPL554 administered as add-on therapy to tiotropium for maintenance treatment of COPD

 

Double-blind, placebo-controlled, three-way cross-over, three-day trial

Dosing: Two doses (twice-daily)


 

Approximately 30 stable COPD patients, age 40 - 75, with FEV1 between 40% and 80% of predicted normal levels

 


§

FEV1: peak and AUC over 12 hours


 


§

PK profile

§

Safety

§

Plethysmography measuring the volume of air in the lungs

§

Cardiovascular effects


 

Commenced in February 2017, with top-line data expected in the fourth quarter of 2017

Phase 1 PK trial to determine oral bioavailability of the compound

 

Dosing: Single dose

 

Approximately 12 healthy volunteers

 

§

Oral bioavailability

 

§

Tolerability

§

Safety

 

Planned commencement in mid-2017, with top-line data expected in the fourth quarter of 2017

Phase 2b trial to determine efficacy, safety and dose-response of RPL554 for maintenance treatment of COPD

 

Double-blind, placebo-controlled, parallel group, four-week trial

Dosing: Four doses (twice-daily)

 

Approximately 400 COPD patients, age 40 - 75, with FEV1 of 40% to 80% of predicted normal levels. All long-acting bronchodilators will be withheld

 

§

FEV1: peak and AUC over 12 hours

 

§

FEV1 24 hours after the previous dose, or FEV1 trough

§

COPD daily symptoms

§

St George's Respiratory Questionnaire (SGRQ), a COPD health status score

§

Dyspnea scale

§

Safety

 

Planned commencement in the second half of 2017, with top-line data expected in the second half of 2018

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Trial Description
  Trial Design   Patient
Population
  Primary
Endpoint
  Secondary
Endpoints
  Anticipated
Milestones

Phase 2b trial to determine efficacy, safety and dose-response of RPL554 administered as add-on therapy to a long-acting bronchodilator for maintenance treatment of COPD

 

Double-blind, placebo-controlled, 12-week trial

Dosing: Two to three doses (twice-daily)

 

Approximately 400 COPD patients, age 40 - 75, with moderate to very severe COPD

 

§

FEV1 24 hours after the previous dose, or FEV1 trough

§

FEV1: peak

 

§

FEV1: AUC over 12 hours

§

COPD daily symptoms

§

St George's Respiratory Questionnaire (SGRQ), a COPD health status score

§

Dyspnea scale

§

Safety

 

Planned commencement in the second half of 2018

Phase 2 trial to determine efficacy and safety of RPL554 for acute COPD exacerbation requiring hospitalization

 

Double-blind, placebo-controlled, parallel group trial starting during hospitalization and continuing for 30 days after discharge

Dosing: Two doses (twice-daily)

 

Approximately 150 patients,
age 40 - 80

 

§

FEV1: peak

 

§

COPD symptoms

§

Length of stay in hospital

§

30-day hospital re-admission rate

 

Planned commencement in the second half of 2018


Additional Development Programs

In addition to our nebulized formulation of RPL554, we are developing RPL554 in both DPI and MDI formulations for the maintenance treatment of COPD. In addition, we may explore the development of RPL554 in these formulations for the treatment of asthma and other respiratory diseases. DPI and MDI inhaler devices are the most common forms of drug delivery in non-hospitalized patients with COPD and are well-suited for the maintenance therapy of COPD patients. We believe the development of DPI and MDI formulations has the potential to significantly increase the market opportunity for RPL554, if approved, for the maintenance treatment of COPD. Following the completion of our DPI and MDI formulation process, we plan to commence pre-clinical studies for RPL554 in these formulations in 2018.

RPL554 for the Treatment of Cystic Fibrosis

Overview

We plan to evaluate RPL554 for the treatment of CF. We believe RPL554, if approved, has the potential to be an important and novel treatment and standard of care for patients with CF based on its favorable properties observed to date.

CF Background

CF is the most common fatal inherited disease in the United States and Europe. CF causes impaired lung function and is commonly associated with repeat and persistent lung infections due to the inability to clear thickened mucus from the lung. This condition often results in frequent exacerbations and hospitalizations. There is no cure for CF and the median age of death for CF patients is 37 years. CF is considered a rare, or orphan, disease by both the FDA and the EMA. According to the Cystic Fibrosis Foundation, more than 30,000 people in the United States and more than 70,000 people worldwide are living with CF and approximately 1,000 new cases of CF are diagnosed each year. We plan to seek orphan drug designation for RPL554 in treating CF. CF patients require lifelong treatment with multiple daily medications, frequent hospitalizations and, ultimately, lung transplants in some end-stage patients. The quality of life for CF patients is compromised as a result of spending significant time on self-care every day and frequent

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outpatient doctor visits and hospitalizations. CF patients take an average of seven medications daily. In the 12-month period ended June 30, 2016, global sales of drugs currently indicated for CF totaled $4.1 billion. The global market for CF drugs is expected to increase to $7.0 billion in 2020.

CF is caused by mutations in a gene that encodes the CFTR protein. The CFTR protein channel regulates the movement, or efflux, of specific ions such as chloride in and out of the cells of organs like the lungs, pancreas and gastrointestinal tract. Through regulation of these ions, the amount of salts in the fluid both inside and outside the cell remains balanced. In CF patients, however, the CFTR protein is defective and cannot perform its normal function of transporting ions across the cell membrane, resulting in an environment characterized by thick mucus in vital organs such as the lung, the pancreas and the gastrointestinal tract.

The lack of functional CFTR in CF patients is particularly problematic in the lungs, where the build-up of thick mucus obstructs parts of the lung, allows bacteria to grow unfettered and impairs the functionality of the local immune system. Of all the manifestations of CF, chronic pulmonary disease is the most critical and is characterized by a combination of airway obstruction, infection and inflammation such that more than 90% of all CF patients die of respiratory failure, and thus have a shortened life expectancy.

Current Treatment Landscape of CF

Until recently, approved therapies to treat CF patients have been designed to treat the symptoms of CF, by preventing and controlling infections that occur in the lungs, rather than address the underlying cause. Accordingly, antibiotics are frequently used along with mucus-thinning drugs. A significant portion of CF patients are prescribed bronchodilators, although no bronchodilator is currently approved by the FDA for the treatment of patients with CF. For patients with certain gene mutations, a new medication called ivacaftor, or Kalydeco, which is a CFTR potentiator, is used to improve CFTR function and thereby improve lung function. A combination drug consisting of ivacaftor and lumacaftor, or Orkambi, which is a CFTR corrector, can be used in a somewhat broader group of CF patients with partly different gene mutations. While not indicated specifically for CF, high doses of ibuprofen also have been studied in CF patients and have demonstrated some anti-inflammatory efficacy resulting in a beneficial effect on the annual rate of decline of FEV1. However, CF patients commonly experience adverse events from ibuprofen, including gastrointestinal and liver side effects, and as a result it is infrequently used. However, it demonstrates that an anti-inflammatory medication in CF might change the course of the disease. There is currently no anti-inflammatory medication which is approved to treat the underlying inflammation in CF.

Despite the recent approval of the two novel targeted therapies, Kalydeco and Orkambi, for patients with CF, only a subset of CF patients is indicated for treatment with these two therapies. As a result, we believe CF remains a significant unmet medical need. If we obtain orphan drug designation and FDA approval for this indication, RPL554 may be entitled to orphan drug exclusivity, which means the FDA may not approve any other application to market the same drug for this indication for a period of seven years, except in limited circumstances.

Our Solution

By inhibiting PDE3 and PDE4, RPL554 increases the levels of cAMP and CGMP, resulting in bronchodilator and anti-inflammatory effects, and stimulates the CFTR. CFTR stimulation leads to improved electrolyte balance in the lung and thinning of the mucus, which facilitates mucociliary clearance and leads to improved lung function and potentially a reduction in lung infections. Dual inhibition of PDE3 and PDE4 has been observed to be more effective than inhibition of either PDE alone at relaxing airway smooth muscle cells and suppressing the activation and functions of pro-inflammatory cells residing in the lung, both of which are commonly understood to play a significant role in CF.

In our pre-clinical studies, RPL554 has been observed to stimulate the CFTR, as well as increase ciliary beat frequency, a key parameter determining the rate of mucus clearance, in primary airway cells and to

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improve electrolyte balance in the lung. Based on available data, we believe that RPL554 has the potential to inhibit deleterious inflammation, reduce airway obstruction through bronchodilation and enhance mucociliary clearance through stimulation of the CFTR on airway epithelial cells, thereby making it an attractive therapy for the treatment of CF.

Pre-clinical Studies

In a series of pre-clinical studies we conducted, RPL554 was observed to stimulate the CFTR. As shown in the figure below, administration of increasing concentrations of RPL554 resulted in improvement in CFTR function, as measured by ion currents in a human bronchial-epithelial cell line.


Stimulation of CFTR

GRAPHIC

Furthermore, in a pre-clinical study comparing RPL554 to Kalydeco, both compounds increased CFTR activity in cells from a CF patient with the mutation that is appropriate for treatment with Kalydeco. When RPL554 was administered before Kalydeco, it had an additive effect, which was smaller when the

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compounds were delivered in the reverse order. This stimulatory effect on the CFTR, as measured by ion currents, is shown in the figure below.


Stimulation of CFTR

GRAPHIC

In addition, in a pre-clinical study RPL554 was observed to increase ciliary beat frequency in primary human airway cells at similar levels to the PDE4 inhibitor, roflumilast. We believe RPL554 may increase

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ciliary beat frequency and therefore promote mucociliary clearance in CF patients. This is illustrated in the figure below.


Increased Ciliary Beat Frequency

GRAPHIC

We believe this pre-clinical data, combined with the anti-inflammatory and bronchodilator effects of RPL554, suggest that RPL554 is appropriate for clinical trials for, and may prove effective in the treatment of, CF patients.

Clinical Development Plans

In March 2017, we commenced a Phase 2a single-dose trial in the United Kingdom evaluating RPL554 in up to ten CF patients in the United Kingdom. This trial is evaluating the PK and PD profile and tolerability of RPL554 in patients with CF, as well as the effect on lung function. We expect to report top-line data from this trial in the first half of 2018. The results of this trial are expected to support dose selection for a proof-of-concept Phase 2b trial in Europe in approximately 100 patients with CF, which we plan to commence in 2018.

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The table below summarizes our planned clinical trials for RPL554 for the treatment of CF.


Trial Description
  Trial
Design
  Patient
Population
  Primary
Endpoints
  Secondary
Endpoints
  Anticipated
Milestones

Phase 2a PK and PD trial to evaluate tolerability in CF patients and examine effect on lung function and inflammatory biomarkers

 

Double-blind, placebo-controlled, cross-over trial

Dosing: Single dose


 

Up to 10 CF patients, age 18 years and older, with FEV1 between 40% and 80% of predicted normal levels

 


§

PK profile

§

Safety


 


§

FEV1: peak and AUC


 

Commenced in March 2017, with top-line data expected in the first half of 2018

Phase 2b proof-of-concept trial to determine the efficacy and safety of RPL554 in CF patients

 

Double-blind, placebo-controlled, three way, parallel group trial

Dosing: Multiple dose (twice-daily)

 

Approximately 100 CF patients, age 18 and older, with FEV1 between 40% and 90% of predicted normal levels

All CFTR mutations

 

§

FEV1: peak

 

§

FEV1 trough

§

Inflammation biomarkers

§

Exacerbations

§

Safety

 

Planned commencement in 2018


Vernalis Agreement

In February 2005, Rhinopharma Limited, or Rhinopharma, entered into an assignment and license agreement with Vernalis Development Limited, or Vernalis, which we refer to as the Vernalis Agreement. In 2006, we acquired Rhinopharma and all of its rights and obligations under the Vernalis Agreement. Pursuant to the Vernalis Agreement, Vernalis assigned to us all of its rights to certain patents and patent applications relating to RPL554 and related compounds, or the Vernalis Patents. We cannot further assign the Vernalis Patents to a third party without Vernalis' prior consent. Vernalis also granted to us an exclusive, worldwide, royalty-bearing license under certain Vernalis know-how to develop, manufacture and commercialize products, or the Licensed Products, based on PDE inhibitors developed using Vernalis Patents, Vernalis know-how and the physical stock of certain compounds, including RPL554, which we refer to as the Program IP, in the treatment of human or animal allergic or inflammatory disorders. Pursuant to the Vernalis Agreement, we must maintain the Vernalis Patents and use commercially reasonable and diligent efforts to develop and commercialize the Licensed Products.

Under the Vernalis Agreement, we are obligated to pay Vernalis a milestone payment of £5.0 million upon the first approval of any regulatory authority for the commercialization of any Licensed Product, and a portion equal to a percentage in the mid twenties of any consideration received from any of our sublicensees for Vernalis Patents or Vernalis know-how, excluding royalties. We must also pay Vernalis, on a Licensed Product-by-Licensed Product and country-by-country basis, a low to mid-single digit percentage royalty based on net sales of each Licensed Product for a period beginning with the first commercial sale of such Licensed Product in a country and ending on the later of the expiration of a certain number of years after such first commercial sale and if applicable the expiration of the last to expire valid claim in the Vernalis Patents covering the development, manufacture or commercialization of such Licensed Product in such country. Prior to the first commercial sale of each Licensed Product, such royalties also are due in the same percentages for any named patient sales.

The Vernalis Agreement continues until terminated by either party in accordance with its terms. Either party may terminate the Vernalis Agreement for an uncured material breach, bankruptcy or insolvency of the other party. We may terminate the Vernalis Agreement upon 90 days' prior written notice. Vernalis may terminate

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the Vernalis Agreement if we notify Vernalis of our intention to abandon any Vernalis Patents or allow any Vernalis Patents to lapse. Upon termination of the Vernalis Agreement, we must cease use of any Program IP and assign the Vernalis Patents and any improvements thereto back to Vernalis.

Manufacturing

We have no experience in product candidate formulation or manufacturing. We rely on, and expect to continue to rely, on third-party contract manufacturing organizations, or CMOs, for the supply of current good manufacturing practices specified by the FDA, or cGMP, clinical trial materials of RPL554 and any future product candidates, as well as for commercial quantities of RPL554 and any future product candidates, if approved. We currently do not have any agreements for the commercial production of raw materials. While we may contract with other CMOs in the future, we currently contract with only one pharmaceuticals CMO for the manufacture of RPL554 drug substance. For RPL554 drug product in our nebulized formulation, we currently have two CMOs. We believe that the RPL554 manufacturing process can be transferred to a number of other CMOs for the production of clinical and commercial supplies of RPL554 in the ordinary course of business.

Manufacturing of any product candidate is subject to extensive regulations that impose various procedural and documentation requirements governing recordkeeping, manufacturing processes and controls, personnel, quality control and quality assurance, among others. We expect that all of our CMOs will manufacture RPL554 under cGMP conditions. cGMP is a regulatory standard for the production of pharmaceuticals to be used in humans.

Commercialization, Sales and Marketing

We have not yet defined our sales, marketing or commercialization strategy for RPL554. Our commercial strategy may include the use of strategic collaborators, distributors, a contract sales force, or the establishment of our own commercial and specialty sales force. We plan to further evaluate these alternatives as we continue the clinical development of RPL554.

Competition

We consider RPL554's current closest potential competitors in the nebulized maintenance treatment of COPD in the U.S. market to be Brovana, a long-acting beta2-agonist bronchodilator marketed by Sunovion, and Perforomist, a long-acting beta2-agonist bronchodilator marketed by Mylan. Neither drug, however, provides an anti-inflammatory effect. We consider RPL554's current closest potential competitors in the DPI/MDI maintenance treatment of COPD to be Symbicort, a combination of a long-acting beta2-agonist bronchodilator and inhaled corticosteroid marketed by AstraZeneca, Spiriva, a long-acting anti-muscarinic bronchodilator marketed by Boehringer Ingelheim, Advair, a combination of a long-acting beta2-agonist bronchodilator and inhaled corticosteroid marketed by GlaxoSmithKline, Utibron Neohaler, a combination of a long-acting beta2-agonist and long-acting anti-muscarinic bronchodilator marketed by Novartis, Breo, a combination of a long-acting beta2-agonist bronchodilator and inhaled corticosteroid marketed by GlaxoSmithKline, and Anoro, a combination of a long-acting beta2-agonist bronchodilator and long-acting anti-muscarinic bronchodilator marketed by GlaxoSmithKline.

We compete directly with biotechnology and pharmaceutical companies that focus on the treatment of respiratory diseases. We also face competition from academic research institutions, governmental agencies and other various public and private research institutions. We expect to face increasingly intense competition as new technologies become available. Any product candidates, including RPL554, that we successfully develop and commercialize will compete with existing therapies and new therapies that may become available in the future.

Many of our competitors have significantly greater financial, manufacturing, marketing, drug development, technical and human resources than we do. Mergers and acquisitions in the pharmaceutical and

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biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These competitors also compete with us in recruiting and retaining top qualified scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.

The key competitive factors affecting the success of RPL554, if approved, are likely to be its efficacy, safety, dosing convenience, price, the effectiveness of companion diagnostics in guiding the use of related therapeutics, the level of generic competition and the availability of reimbursement from government and other third-party payors.

Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, less expensive, more convenient or easier to administer, or have fewer or less severe effects than any products that we may develop. Our competitors may also obtain FDA, EMA or other regulatory approval for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market. Even if RPL554 achieves marketing approval, it may be priced at a significant premium over competitive products if any have been approved by then.

Intellectual Property

We strive to protect and enhance the proprietary technologies, inventions and improvements that we believe are important to our business, including seeking, maintaining and defending patent rights, whether developed internally or licensed from third parties. Our policy is to seek to protect our proprietary position by, among other methods, pursuing and obtaining patent protection in the United States and in jurisdictions outside of the United States related to our proprietary technology, inventions, improvements, platforms and our product candidates that are important to the development and implementation of our business.

As of March 31, 2017, our patent portfolio consisted of five issued U.S. patents, four pending U.S. patent applications, 16  issued foreign patents and 49 pending foreign applications including two patent applications made under the PCT. These patents and patent applications include claims directed to RPL554 composition of matter, new dosage formulations and a crystalline polymorph, as well as methods of making and using RPL554 in the treatment of respiratory diseases, with expected expiry dates not earlier than between 2020 and 2037.

The patent portfolio relating to RPL554 includes eight patent families:

    §
    The first of these patent families relates to RPL554 per se. As of March 31, 2017, this patent family includes granted patents in Australia, Brazil, Canada, China, Europe, Japan, Mexico as well as four granted patents in the United States. We expect patents in this family to expire in March 2020.
    §
    The second of these patent families relates to a crystalline polymorph of RPL554. As of March 31, 2017, this patent family included granted patents in Australia, China, Europe, Indonesia, Japan, Malaysia, Mexico, Russia, the United States and Taiwan and patent applications in Canada, Israel, Japan, South Korea, Philippines, Thailand and the Gulf Cooperation Council. We expect patents in this family to expire in August 2031.
    §
    The third of these patent families relates to the combination of RPL554 with a beta-adrenergic receptor agonist. As of March 31, 2017, this patent family included patent applications in Canada, Europe and the United States. We expect patents in this family to expire in March 2034.
    §
    The fourth of these patent families relates to the combination of RPL554 with an M3-muscarinic receptor antagonist. As of March 31, 2017, this patent family included patent applications in Australia, Canada, China, Europe, Israel, India, Japan, South Korea, Mexico, Russia, Thailand and the United States. We expect patents in this family to expire in March 2034.
    §
    The fifth of these patent families relates to certain specific salts of RPL554. As of March 31, 2017, this patent family included a pending PCT application designating all contracting states. We expect patents in this family to expire in February 2036.

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    §
    The sixth of these patent families relates to use of RPL554 to treat certain diseases associated with the function of CFTR (including CF). As of March 31, 2017, this patent family included patent applications in Australia, Canada, Europe, Israel, Mexico, Russia, the United States and South Africa. We expect patents in this family to expire in May 2035.

    §
    The seventh of these patent families relates to an inhalable formulation of RPL554. As of March 31, 2017, this patent family included patent applications in Australia, Brazil, Canada, China, Europe Indonesia, Israel, India, Japan, South Korea, Mexico, Malaysia, New Zealand, the Philippines, Singapore, South Africa, Thailand, and the United States. We expect patents in this family to expire in September 2035.

    §
    The eighth of these patent families relates to a new compound related to RPL554 and to processes useful for the production of RPL554 and related compounds. As of March 31, 2017, this patent family included an unpublished Great Britain priority application. We expect patents in this family to expire in July 2037.

Individual patents extend for varying periods depending on the date of filing of the patent application or the date of patent issuance and the legal term of patents in the countries in which they are obtained. Generally, patents issued for regularly filed applications in the United States are granted a term of 20 years from the earliest effective non-provisional filing date. In addition, in certain instances, a patent term can be extended to recapture a portion of the U.S. Patent and Trademark Office, or the USPTO, delay in issuing the patent as well as a portion of the term effectively lost as a result of the FDA regulatory review period. However, as to the FDA component, the restoration period cannot be longer than five years and the total patent term including the restoration period must not exceed 14 years following FDA approval. The duration of foreign patents varies in accordance with provisions of applicable local law, but typically is also 20 years from the earliest effective filing date. However, the actual protection afforded by a patent varies on a product by product basis, from country to country and depends upon many factors, including the type of patent, the scope of its coverage, the availability of regulatory-related extensions, the availability of legal remedies in a particular country and the validity and enforceability of the patent.

Furthermore, we rely upon trade secrets and know-how and continuing technological innovation to develop and maintain our competitive position. We seek to protect our proprietary information, in part, using confidentiality agreements with our collaborators, employees and consultants and invention assignment agreements with our employees. We also have confidentiality agreements or invention assignment agreements with our collaborators and selected consultants. These agreements are designed to protect our proprietary information and, in the case of the invention assignment agreements, to grant us ownership of technologies that are developed through a relationship with a third party. These agreements may be breached, and we may not have adequate remedies for any breach. In addition, our trade secrets may otherwise become known or be independently discovered by competitors. To the extent that our collaborators, employees and consultants use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.

Our commercial success will also depend in part on not infringing upon the proprietary rights of third parties. It is uncertain whether the issuance of any third-party patent would require us to alter our development or commercial strategies, or our drugs or processes, obtain licenses or cease certain activities. Our breach of any license agreements or failure to obtain a license to proprietary rights that we may require to develop or commercialize our future drugs may have an adverse impact on us. If third parties have prepared and filed patent applications prior to March 16, 2013 in the United States that also claim technology to which we have rights, we may have to participate in interference proceedings in the USPTO, to determine priority of invention. For more information, please see "Risk Factors — Risks Related to Intellectual Property and Information Technology."

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Government Regulation

The FDA and comparable regulatory authorities in state and local jurisdictions and in other countries impose substantial and burdensome requirements upon companies involved in the clinical development, manufacture, marketing and distribution of drug such as those we are developing. These agencies and