DRS/A

Confidential Draft Submission No. 2 submitted to the Securities and Exchange Commission on August 2, 2019. This draft registration statement has not been filed publicly with the Securities and Exchange Commission and all information contained herein remains confidential.

Registration No. 333-            

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

Satsuma Pharmaceuticals, Inc.

(Exact name of Registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization) 2834 (Primary Standard Industrial Classification Code Number) 81-3039831 (I.R.S. Employer Identification Number)

400 Oyster Point Boulevard, Suite 221

South San Francisco, CA 94080

(650) 837-0899

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

John Kollins

President and Chief Executive Officer

Satsuma Pharmaceuticals, Inc.

400 Oyster Point Boulevard, Suite 221

South San Francisco, CA 94080

(650) 837-0899

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

Copies to:

Brian J. Cuneo Alan C. Mendelson Miles P. Jennings Latham & Watkins LLP 140 Scott Drive Menlo Park, California 94025 Telephone: (650) 328-4600 Tom O’Neil Chief Financial Officer Satsuma Pharmaceuticals, Inc. 400 Oyster Point Boulevard, Suite 221 South San Francisco, CA 94080 Telephone: (650) 837-0899 Sean Clayton Kenn Guernsey Dave Peinsipp Cooley LLP 101 California Street San Francisco, CA 94111 Telephone: (415) 693-2000

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

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

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

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.  ☐

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.  ☐

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

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒ (Do not check if a smaller reporting company)	Smaller reporting company	☐
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act.  ☐

CALCULATION OF REGISTRATION FEE

Title of each class of securities to be registered	Proposed maximum aggregate offering price(1)	Amount of registration fee
Common Stock, $0.0001 par value per share	$	$

(1) Estimated solely for the purpose of calculating the amount of the registration fee in accordance with Rule 457(o) under the Securities Act of 1933, as amended. Includes shares that the underwriters have the option to purchase.

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

Subject to Completion, dated                     , 2019

Preliminary Prospectus

             Shares

Common Stock

This is the initial public offering of shares of common stock by Satsuma Pharmaceuticals, Inc. Prior to this offering, there has been no public market for our common stock. It is currently estimated that the initial public offering price will be between $             and $             per share. We intend to apply to list our common stock on The Nasdaq Global Market under the symbol “STSA.” We have granted the underwriters a 30-day option to purchase up to              additional shares from us at the initial public offering price, less the underwriting discounts and commissions.

We are an “emerging growth company” as the term is used in the Jumpstart Our Business Startups Act of 2012 and, as such, have elected to comply with certain reduced public company reporting requirements. See “Prospectus Summary—Implications of Being an Emerging Growth Company.”

Investing in our common stock involves risks. See “Risk Factors” on page 10.

	Price to Public	Underwriting Discounts and Commissions(1)	Proceeds to Satsuma Pharmaceuticals, Inc. (before expenses)
Per Share	$	$	$
Total	$	$	$

(1) See “Underwriting” for additional information regarding compensation payable to the underwriters.

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

The underwriters expect to deliver the shares against payment in New York, New York on                     , 2019.

Credit Suisse SVB Leerink Evercore

Prospectus dated                     , 2019

TABLE OF CONTENTS

Prospectus

	Page
PROSPECTUS SUMMARY		1
THE OFFERING		6
RISK FACTORS		10
SPECIAL NOTE REGARDING FORWARD -LOOKING STATEMENTS		61
INDUSTRY AND MARKET DATA		63
USE OF PROCEEDS		64
DIVIDEND POLICY		65
CAPITALIZATION		66
DILUTION		68
SELECTED FINANCIAL DATA		70
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		72
BUSINESS		85
MANAGEMENT		118
EXECUTIVE COMPENSATION		128
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS		139
PRINCIPAL STOCKHOLDERS		142
DESCRIPTION OF CAPITAL STOCK		146
SHARES ELIGIBLE FOR FUTURE SALE		151
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS		154
UNDERWRITING		158
LEGAL MATTERS		163
EXPERTS		163
WHERE YOU CAN FIND MORE INFORMATION		163
INDEX TO FINANCIAL STATEMENTS		F-1

Through and including                    , 2019 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

You should rely only on the information contained in this document or to which we have referred you. Neither we nor the underwriters have authorized anyone to provide you with information that is different. This document may only be used where it is legal to sell these securities. The information in this document may only be accurate on the date of this document. Regardless of the time of delivery of this prospectus or of any sale of shares of our common stock and the information in any free writing prospectus that we may provide you in connection with this offering is accurate only as of the date of that free writing prospectus. Our business, financial condition, results of operations and future growth prospects may have changed since those dates.

For investors outside of the United States: we have not and the underwriters have not done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than the United States. Persons outside of the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of common stock and the distribution of this prospectus outside of the United States.

PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus and does not contain all of the information that you should consider in making your investment decision. Before deciding to invest in our common stock, you should read this entire prospectus carefully, including the sections of this prospectus titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes included elsewhere in this prospectus. Unless the context otherwise requires or as otherwise noted, references in this prospectus to the “company,” “Satsuma Pharmaceuticals,” “Satsuma,” “we,” “us” and “our” refer to Satsuma Pharmaceuticals, Inc.

Overview

We are a clinical-stage biopharmaceutical company developing a novel therapeutic product for the acute treatment of migraine. Our product candidate, STS101, is a drug-device combination of a proprietary dry-powder formulation of dihydroergotamine mesylate, or DHE, which can be quickly and easily self-administered with a proprietary pre-filled, single-use, nasal delivery device. DHE products have long been recommended as a first-line therapeutic option for the acute treatment of migraine and have significant advantages over other therapeutics for many patients. However, broad use has been limited by invasive and burdensome administration and/or sub-optimal clinical performance of available injectable and liquid nasal spray products. STS101 is specifically designed to deliver the advantages of DHE while overcoming these shortcomings. We have completed a Phase 1 clinical trial in 42 healthy volunteers, in which STS101 demonstrated rapid and sustained DHE plasma concentrations, low pharmacokinetic variability, and a favorable safety and tolerability profile. In July 2019, we initiated our Phase 3 EMERGE efficacy trial of STS101 and expect to report topline data in the second half of 2020.

Migraine is a chronic and debilitating neurological disorder characterized by attacks of often severe headache and accompanying neurological symptoms lasting four to 72 hours. Based on reported prevalence data, approximately 39 million individuals in the United States and over 100 million individuals in Europe suffer from migraine. Migraine is most prevalent among adults ages 18 to 44 and disproportionately affects women over men on a three-to-one basis. It has been estimated that migraine results in up to $36 billion in healthcare and lost productivity costs and up to 157 million lost workdays annually in the United States. Despite its high prevalence and burden, migraine remains a highly underdiagnosed and undertreated illness due to lack of awareness, stigma and the inherent limitations of currently available therapies.

Acute treatments are categorized as non-specific therapies, including nonsteroidal anti-inflammatory drugs (NSAIDs) and acetaminophen, and migraine-specific therapies, such as triptans and ergot alkaloids (including DHE-based products). In 2018, more than 15 million prescriptions for migraine-specific acute therapies were written in the United States. This figure excludes prescriptions for non-specific therapies and therefore likely significantly understates the total number of prescriptions written for the acute treatment of migraine. Oral triptans are currently the predominant class of drug for acute treatment of migraine, accounting for over 90% of migraine-specific acute therapy prescriptions. However, triptans have been reported to have a number of shortcomings, including that they have inconsistent efficacy across patients and migraine types, require early treatment, cause various side effects, may cause medication overuse headache, or MOH, and have slow and variable onset of action and short duration of effect that necessitates retreatment. DHE products have long been recommended as a first-line therapeutic option for the acute treatment of migraine and have significant advantages over other therapeutics, including triptans, for many patients. However, approved DHE products have drawbacks that have resulted in limited clinical use. For instance, injectable DHE, while effective, has invasive administration requirements, and in the case of intravenous (IV) delivery, generally must be administered by a healthcare provider, typically in the hospital or clinic setting, requires specialized equipment and may often result

1

in side effects, in particular, nausea and vomiting. Similarly, intramuscular (IM) and subcutaneous (SC) injections are invasive, require administration via injection by the patient, caregiver or healthcare provider and patients typically prefer non-injectable therapies. In addition, DHE liquid nasal sprays have complex, time-consuming and burdensome administration, as well as high variability and slow absorption that may result in inconsistent and sub-optimal clinical performance. Further, due to DHE’s low oral bioavailability, there are no approved oral DHE products in the United States.

STS101 was designed to be a reliable and convenient DHE product capable of delivering the advantages of DHE while overcoming the shortcomings of existing DHE products. STS101 has a number of key attributes that we believe may provide significant advantages over existing acute treatments for migraine and result in robust and consistent clinical performance and thereby facilitate broad adoption and use. These attributes are primarily the result of our proprietary dry-powder formulation, which incorporates a mucoadhesive drug carrier and engineered drug particle technologies, and our proprietary nasal delivery device. Key STS101 attributes include:

• Targeted plasma concentrations rapidly achieved and sustained. In our Phase 1 clinical trial, administration of STS101 resulted in achievement within 10 minutes of a mean DHE plasma concentration of 1.0 ng/ml, which we estimate is the minimum threshold concentration necessary for therapeutic response to DHE. In addition, DHE exposure levels following STS101 administration exceeded or fell within ranges that previously have demonstrated efficacy with other dosage forms of DHE, although such exposure levels did not exceed the peak concentration levels associated with IV or IM delivery of DHE.

• Low variability. In our Phase 1 clinical trial, STS101 demonstrated significantly lower variability in peak DHE plasma concentration and drug exposure (plasma concentration over time expressed as area-under-curve) as compared to Migranal^® DHE mesylate liquid nasal spray, which may lead to more reliable clinical performance.

• Quick and convenient self-administration. STS101 utilizes a convenient, patient-friendly, single-use, nasal delivery device designed to enable self-administration of a full dose of DHE into a single nostril in a matter of seconds.

• Well tolerated. In our Phase 1 clinical trial, all treatments were well tolerated, all adverse events were mild and transient, and no subject withdrew from the trial due to an adverse event. Moreover, STS101 did not exhibit the rapid and high peak concentration associated with IV delivery of DHE, which may often result in side effects, in particular, nausea and vomiting.

We believe the foregoing attributes of STS101 could lead to it having a favorable therapeutic response profile as compared to IV, IM or SC delivery of DHE and Migranal DHE mesylate liquid nasal spray. The faster a DHE product can produce the threshold DHE plasma concentration necessary for a therapeutic response, the more quickly following administration it may be able to achieve a therapeutic response. At the same time, rapid and high peak DHE plasma concentrations that greatly exceed the threshold therapeutic level are believed to be associated with adverse side effects, including nausea and vomiting. Based on published DHE PK and clinical efficacy trial data relating to DHE plasma concentrations and clinical efficacy and safety data of different DHE doses, we estimate that 1.0 ng/ml is the threshold concentration necessary for therapeutic response to DHE. As demonstrated in Part 2 of our Phase 1 clinical trial, administration of STS101 5.2 mg and DHE mesylate IM injection resulted in DHE plasma concentrations rising rapidly, with mean concentrations exceeding 1.0 ng/ml at 10 minutes and 5 minutes after dosing, respectively. However, STS101’s mean maximum DHE plasma concentration did not exceed 2.2 ng/ml at any time following administration, whereas the peak DHE plasma concentration of DHE mesylate IM injection exceeded 3.3 ng/ml. In contrast, the mean maximum DHE plasma concentration after Migranal DHE mesylate liquid nasal spray administration did not reach 1.0 ng/ml. While subjects treated with STS101 5.2 mg reported a higher frequency of nasal adverse events than those treated with DHE mesylate IM injection or Migranal DHE mesylate liquid nasal spray, all adverse events were mild and

2

transient, and subjective nasal symptom severity scores self-reported by subjects were very low, with all nasal symptom severity scores averaging less than five on a zero to one hundred scale in which zero represents absence of the symptom and one hundred represents presence of the symptom with the worst imaginable severity. Subjective nasal symptom severity scores self-reported in Part 1 of our Phase 1 clinical trial by subjects treated with STS101 1.3 mg and 2.6 mg were negligible. As a result, we do not believe the tolerability of STS101 should present a barrier to patient adoption or use, if approved.

In July 2019, we initiated our Phase 3 EMERGE efficacy trial of STS101, a multi-center, single-dose, randomized, double-blind, placebo-controlled, parallel group study in approximately 1,140 migraine patients, and we expect to report topline data in the second half of 2020. In our EMERGE trial, STS101 will be self-administered by patients to treat a single migraine attack and the two co-primary endpoints to be assessed at two hours after STS101 administration are freedom from pain and freedom from most bothersome symptom. In addition, we expect to prospectively evaluate a number of secondary endpoints and the performance of STS101 in a number of patient subgroups that could enhance the differentiated clinical profile of STS101. After the completion of our Phase 3 EMERGE efficacy trial, we plan to initiate a 12-month safety trial of STS101, with a new drug application, or NDA, filing with the U.S. Food and Drug Administration, or FDA, anticipated by the end of 2021.

Our Strategy

Our strategy is to develop and commercialize STS101 and address the significant unmet medical needs of a large number of people with migraine. Key elements of our strategy include:

• Advance STS101 through clinical development and regulatory approval for the acute treatment of migraine. In July 2019, we initiated our Phase 3 EMERGE efficacy trial, with a target enrollment of 1,140 patients. We expect to report topline data from this trial in the second half of 2020. We expect to commence a 12-month safety trial in the second half of 2020, with an NDA filing anticipated by the end of 2021.

• Commercialize STS101 in the United States. If approved, we plan to commercialize STS101 in the United States by building a specialized sales organization focusing on headache specialists, as well as general neurologists and primary care physicians who are high prescribers of migraine therapeutics.

• Pursue market opportunities for STS101 outside the United States with one or more partners. We believe there is a significant market opportunity for STS101 in markets outside the United States. To address these markets, we plan to seek one or more ex-U.S. partners who can commercialize STS101.

• Maximize commercial potential of STS101. We may conduct additional clinical trials and consider additional headache indications for STS101 to maximize its commercial potential.

Our Team

Our management team has extensive pharmaceutical industry experience in drug development, regulatory approval, manufacturing, reimbursement, commercialization and finance from their prior roles at other pharmaceutical and biotechnology companies, including ALZA, AstraZeneca, Athena Neurosciences, Elan Pharmaceuticals, GlaxoSmithKline, Ilypsa, Immunex, Johnson & Johnson, Pearl Therapeutics, Protagonist Therapeutics, Relypsa and Roivant Sciences. Collectively, our management team has materially contributed to the clinical development, registration and/or commercialization of 37 approved drug products, including 15 drug-device combination products, 13 of which are delivered via inhalation.

3

Intellectual Property

For purposes of our development and potential commercialization of STS101, we rely on the licensing and assignment agreement we entered into with Shin Nippon Biomedical Laboratories, Ltd., or SNBL, in June 2016, pursuant to which SNBL assigned to us certain patent rights and know-how that are directed to SNBL’s proprietary nasal drug delivery technology, including its proprietary nasal delivery device and formulation technologies, for use with DHE. From the time we entered into the license and assignment agreement until the consummation of our Series A convertible preferred stock financing in December 2016, we were a subsidiary of SNBL and SNBL continues to hold over 5% of our outstanding capital stock.

Risks Associated with Our Business

Our ability to implement our business strategy is subject to numerous risks that you should be aware of before making an investment decision. These risks are described more fully in the section of this prospectus titled “Risk factors,” immediately following this prospectus summary. These risks include the following, among others:

• We are a clinical-stage biopharmaceutical company with a limited operating history and no products approved for commercial sale. We have incurred significant losses since our inception, and we anticipate that we will continue to incur significant losses for the foreseeable future, which, together with our limited operating history, makes it difficult to assess our prospects.

• We will require substantial additional financing to achieve our goals, and a failure to obtain this capital when needed on acceptable terms, or at all, could force us to delay, limit, reduce or terminate our product development or commercialization efforts.

• Our business is entirely dependent on the successful development, regulatory approval and commercialization of STS101, our only product candidate under development.

• We have only recently begun testing STS101 in patients with migraine to assess its effectiveness, and, while we believe that it will be an effective acute treatment for migraine based on the historical pharmacokinetic profiles and effective usage of DHE products, we are utilizing a novel dry-powder formulation and delivery device which may not achieve better or similar levels of efficacy as other DHE products. Further, the results of earlier studies and trials of other DHE products, including cross-trial comparisons of results that are not derived from head-to-head clinical trials, may not be predictive of future trial results for STS101.

• We may be unable to obtain regulatory approval for STS101 under applicable regulatory requirements. The denial or delay of any such approval would delay commercialization of STS101 and adversely impact our potential to generate revenue, our business and our results of operations.

• Even if STS101 obtains regulatory approval, it may fail to achieve broad market acceptance.

• We rely, and intend to continue to rely, on qualified third parties to supply all components of STS101. As a result, we are dependent on several third parties, most of which are sole source suppliers, for the manufacture of STS101 and our supply chain, and if we experience problems with any of these suppliers, or they fail to comply with applicable regulatory requirements or to supply sufficient quantities at acceptable quality levels or prices, or at all, it would materially and adversely affect our business.

• We rely, and intend to continue to rely, on third parties in the conduct of all of our clinical trials. If these third parties do not successfully carry out their contractual duties, fail to comply with applicable regulatory requirements or meet expected deadlines, we may be unable to obtain regulatory approval for STS101.

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

4

Implications of Being an Emerging Growth Company

We are an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. We will remain an emerging growth company until the earlier of (1) the last day of the year following the fifth anniversary of the consummation of this offering, (2) the last day of the year in which we have total annual gross revenue of at least $1.07 billion, (3) the last day of the year in which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, or the Exchange Act, which would occur if the market value of our common stock held by non-affiliates exceeded $700.0 million as of the last business day of the second fiscal quarter of such year or (4) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period. An emerging growth company may take advantage of specified reduced reporting requirements and is relieved of certain other significant requirements that are otherwise generally applicable to public companies. As an emerging growth company:

• We will present only two years of audited financial statements, plus unaudited condensed financial statements for any interim period, and related management’s discussion and analysis of financial condition and results of operations;

• We will avail ourselves of the exemption from the requirement to obtain an attestation and report from our auditors on the assessment of our internal control over financial reporting pursuant to Sarbanes-Oxley Act of 2002;

• We will provide less extensive disclosure about our executive compensation arrangements;

• We will not require stockholder non-binding advisory votes on executive compensation or golden parachute arrangements; and

• We may take advantage of extended transition periods to comply with new or revised accounting standards, delaying the adoption of these accounting standards until they would apply to private companies.

Corporate Information

We were founded on June 21, 2016 as a Delaware corporation under the name Satsuma Pharmaceuticals, Inc. Our principal executive offices are located at 400 Oyster Point Boulevard, Suite 221, South San Francisco, CA 94080, and our telephone number is (650) 837-0899. Our website address is www.satsumarx.com. The information on, or that can be accessed through, our website is not part of this prospectus. We have included our website address as an inactive textual reference only.

Trademarks

Satsuma Pharmaceuticals, Inc. and our logo are some of our trademarks used in this prospectus. This prospectus also includes trademarks, tradenames and service marks that are the property of other organizations. Solely for convenience, our trademarks and tradenames referred to in this prospectus may appear without the ^® and ^™ symbol, but those 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 right of the applicable licensor to these trademarks and tradenames.

5

THE OFFERING

Issuer Satsuma Pharmaceuticals, Inc.

Common stock offered by us              shares.

Common stock to be outstanding after the offering              shares (or              shares if the underwriters exercise their option to purchase additional shares in full).

Underwriters’ option to purchase additional shares              shares.

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

We currently expect to use the net proceeds from this offering to fund our Phase 3 EMERGE efficacy trial for STS101, our Phase 3 safety trial for STS101 and further development of STS101, including the establishment of commercial-scale manufacturing capabilities, and for working capital and general corporate purposes. See “Use of Proceeds” on page 64 for a more complete description of the intended use of proceeds from this offering.

Risk factors See “Risk Factors” beginning on page 10 and other information included in this prospectus for a discussion of factors that you should consider carefully before deciding to invest in our common stock.

Proposed Nasdaq Global Market symbol “STSA”

The number of shares of common stock to be outstanding after this offering is based on 52,119,757 shares of common stock outstanding as of June 30, 2019 and includes an aggregate of 46,700,842 shares of common stock issuable upon conversion of our outstanding convertible preferred stock as of June 30, 2019, and excludes the following:

• 7,828,000 shares of our common stock issuable upon the exercise of options to purchase common stock that were outstanding as of June 30, 2019, with a weighted average exercise price of $0.57 per share;

• 1,179,809 shares of our common stock reserved for issuance pursuant to future awards under our 2016 Equity Incentive Plan, which will no longer be available for issuance effective on the day prior to the first public trading date of our common stock;

• 48,094 shares of our common stock issuable upon the exercise of outstanding warrants with a weighted average exercise price of $0.22 per share;

•              shares of common stock reserved for issuance pursuant to future awards under our 2019 Incentive Award Plan, as well as any automatic increases in the number of shares of our common stock reserved for

6

future issuance under this plan, which will become effective immediately prior to the consummation of this offering; and

•              shares of common stock reserved for issuance pursuant to future awards under our 2019 Employee Stock Purchase Plan, as well as any automatic increases in the number of shares of our common stock reserved for future issuance under this plan, which will become effective immediately prior to the consummation of this offering.

In addition, unless we specifically state otherwise, all information in this prospectus assumes:

• a             -for-             reverse stock split of our common stock to be effected prior to the effectiveness of the registration statement of which this prospectus is a part;

• the conversion of all shares of our outstanding convertible preferred stock as of June 30, 2019 into an aggregate of 46,700,842 shares of common stock immediately prior to the consummation of this offering;

• the filing and effectiveness of our amended and restated certificate of incorporation in Delaware and the adoption of our amended and restated bylaws, each of which will occur immediately prior to the consummation of this offering;

• no exercise of outstanding stock options or warrants subsequent to June 30, 2019; and

• no exercise of the underwriters’ option to purchase additional shares of common stock.

Unless otherwise specified and unless the context otherwise requires, we refer to our Series A and Series B convertible preferred stock collectively as “convertible preferred stock” or “preferred stock” in this prospectus, as well as for financial reporting purposes and in the financial tables included in this prospectus, as more fully explained in Note 8 to our audited financial statements included in this prospectus.

7

SUMMARY FINANCIAL DATA

The following tables present summary financial data for our business. We derived the statements of operations data for the years ended December 31, 2017 and 2018 from our audited financial statements included elsewhere in this prospectus. The statement of operations data for the six months ended June 30, 2018 and 2019 and the balance sheet data as of June 30, 2019 have been derived from our unaudited interim condensed financial statements included elsewhere in this prospectus and are not necessarily indicative of results to be expected for the full year. The unaudited interim condensed financial statements have been prepared on the same basis as the audited financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly our financial position as of June 30, 2019 and the results of operations for the six months ended June 30, 2018 and 2019. Our historical results are not necessarily indicative of the results that may be expected in the future. You should read this data together with our financial statements and related notes included elsewhere in this prospectus and the information in the sections of this prospectus titled “Selected Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

	Years Ended December 31,						Six Months Ended June 30,
	2017			2018			2018			2019
							(unaudited)
	(in thousands, except share and per share data)
Statements of Operations Data:
Operating expenses:
Research and development	$	4,193		$	6,433		$	3,099		$	7,605
General and administrative		754			1,082			532			1,531
Total operating expenses		4,947			7,515			3,631			9,136
Loss from operations		(4,947	)		(7,515	)		(3,631	)		(9,136	)
Interest income		30			72			33			271
Interest expense		(15	)		(90	)		(2	)		(244	)
Other income (expense), net		(240	)		187			185			3
Net loss and comprehensive loss	$	(5,172	)	$	(7,346	)	$	(3,415	)	$	(9,106	)
Net loss per share attributable to common stockholders, basic and diluted(1)	$	(1.97	)	$	(1.52	)	$	(0.74	)	$	(1.71	)
Weighted average number of shares used in computing net loss per share attributable to common stockholders, basic and diluted(1)		2,625,411			4,826,459			4,595,164			5,316,401
Pro forma net loss per share, basic and diluted(1)				$	(0.40	)				$	(0.28	)
Weighted average number of shares used in computing pro forma net loss per share, basic and diluted(1)					18,529,582						31,970,466

(1) See Notes 1 and 11 to our audited financial statements for an explanation of the calculations of our basic and diluted net loss per common share, pro forma net loss per common share, and the weighted-average number of common shares used in the computation of the per share amounts.

8

The table below presents our balance sheet data as of June 30, 2019:

• on an actual basis;

• on a pro forma basis to give effect to: (i) the conversion of all shares of our outstanding Series A and Series B convertible preferred stock as of June 30, 2019 into an aggregate of 46,700,842 shares of common stock immediately prior to the consummation of this offering; and (ii) the filing and effectiveness of our amended and restated certificate of incorporation, which will occur, in each case, immediately prior to the consummation of this offering; and

• on a pro forma as adjusted basis to give further effect to the sale of              shares of common stock in this offering at an assumed initial public offering price of $             per share, the midpoint of the estimated price range set forth on the cover of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

	As of June 30, 2019
	Actual			Pro Forma			Pro Forma As Adjusted(1)
	(unaudited) (in thousands)
Balance Sheet Data:
Cash, cash equivalents and marketable securities	$	55,041		$	55,041		$
Working capital		54,424			54,424
Total assets		60,574			60,574
Long-term debt		5,028			5,028
Convertible preferred stock		73,138			—
Accumulated deficit		(23,932	)		(23,932	)
Total stockholders’ (deficit) equity		(20,987	)		52,151

(1) Each $1.00 increase (decrease) in the assumed initial public offering price of $             per share (the midpoint of the estimated price range set forth on the cover of this prospectus), would increase (decrease) the amount of cash, cash equivalents and marketable securities, working capital, total assets and total stockholders’ equity by $             million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discount and commissions and estimated offering expenses payable by us. We may also increase (decrease) the number of shares we are offering. An increase (decrease) of 1,000,000 in the number of shares we are offering would increase (decrease) the amount of cash, cash equivalents and marketable securities, working capital, total assets and stockholders’ equity by approximately $             million, assuming the assumed initial public offering price per share of $             (the midpoint of the estimated price range set forth on the cover of this prospectus) remains the same. The pro forma as adjusted information is illustrative only and we will adjust this information based on the actual initial public offering price and other terms of this offering determined at pricing.

9

RISK FACTORS

Investing in our common stock involves a high degree of risk. You should carefully consider the risks described below, as well as the other information in this prospectus, including our financial statements and the related notes and the sections of this prospectus titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before deciding whether to invest in our common stock. The occurrence of any of the events or developments described below could have a material adverse effect on our business, results of operations, financial condition and prospects. In such an event, the market price of our common stock could decline, and you may lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations.

Risks Related to Our Business

We are a clinical-stage biopharmaceutical company with a limited operating history and no products approved for commercial sale. We have incurred significant losses since our inception, and we anticipate that we will continue to incur significant losses for the foreseeable future, which, together with our limited operating history, makes it difficult to assess our prospects.

Biopharmaceutical product development is a highly speculative undertaking and involves a substantial degree of risk. We are a clinical-stage biopharmaceutical company, and we have only a limited operating history upon which you can evaluate our business and prospects. We have no products approved for commercial sale, have not generated any revenue from product sales and have incurred losses in each year since our inception in June 2016. In addition, we have limited experience and have not yet demonstrated an ability to successfully overcome many of the risks and uncertainties frequently encountered by companies in new and rapidly evolving fields, particularly in the pharmaceutical industry. In July 2019, we initiated our Phase 3 EMERGE efficacy trial for our product candidate, STS101. We have no other experience as a company conducting Phase 3 clinical trials, submitting applications for regulatory approvals, such as a new drug application, or NDA, or commercializing any products.

We have had significant operating losses since our inception. Our net losses for the years ended December 31, 2017 and 2018 were approximately $5.2 million and $7.3 million, respectively, and for the six months ended June 30, 2018 and 2019 were approximately $3.4 million and $9.1 million, respectively. As of June 30, 2019, we had an accumulated deficit of $23.9 million. Substantially all of our losses have resulted from expenses incurred in connection with the development of STS101 and general and administrative costs associated with our operations. STS101 will require substantial additional development time and resources before we would be able to apply for or receive regulatory approvals and begin generating revenue from product sales. In addition, upon the completion of this offering we expect to incur additional costs associated with operating as a public company. We also do not yet have a sales organization or commercial infrastructure and, accordingly, we will incur significant expenses to develop a sales organization or commercial infrastructure in advance of generating any commercial product sales. We expect to continue to incur losses for the foreseeable future, and we anticipate these losses will increase as we continue to develop STS101 through clinical trials and regulatory submissions. Even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods. Our prior losses, combined with expected losses, have had and will continue to have an adverse effect on our stockholders’ equity and working capital.

We will require substantial additional financing to achieve our goals, and a failure to obtain this capital when needed on acceptable terms, or at all, could force us to delay, limit, reduce or terminate our product development or commercialization efforts.

Since our inception, we have invested substantially all of our efforts and financial resources in the development of STS101 for the acute treatment of migraine. We believe that we will continue to expend substantial resources for the foreseeable future in connection with the clinical development of STS101, including

10

in connection with our Phase 3 clinical trials. These expenditures will include costs associated with clinical trials, obtaining regulatory approvals, and manufacturing and supply, as well as marketing and selling STS101, if approved for sale. In addition, other unanticipated costs may arise. Because the outcome of any clinical trial is highly uncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of STS101.

As of June 30, 2019, we had resources consisting of cash, cash equivalents and marketable securities of $55.0 million. We believe the net proceeds from this offering, together with our existing cash, cash equivalents and marketable securities, will be sufficient to fund our planned operations for at least 12 months following the date of this offering. However, our operating plans may change as a result of many factors currently unknown to us, and we may need to seek additional funds sooner than 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 depend on many factors, including:

• the scope, timing, rate of progress, results and costs of our clinical trials for STS101;

• the number and scope of clinical programs we decide to pursue;

• the scope and costs of manufacturing development and commercial manufacturing activities;

• the cost, timing and outcome of regulatory review of STS101;

• the cost of building a sales force in anticipation of commercialization of STS101;

• the cost and timing associated with commercializing STS101, if approved;

• the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;

• any product liability or other lawsuits related to STS101;

• our efforts to enhance operational systems and our ability to attract, hire and retain qualified personnel, including personnel to support the development of STS101;

• the extent to which we acquire or in-license other product candidates or technologies;

• the payment of royalty payments owed under our existing license agreement;

• our ability to establish and maintain collaborations on favorable terms, if at all;

• the costs associated with being a public company; and

• the timing, receipt and amount of sales of STS101, if approved.

Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timely basis, we may be required to:

• delay, limit, reduce or terminate clinical studies or other development activities for STS101; or

• delay, limit, reduce or terminate our efforts to establish manufacturing and sales and marketing capabilities or other activities that may be necessary to commercialize STS101, or reduce our flexibility in developing or maintaining our sales and marketing strategy.

We also could be required to seek funds through arrangements with collaborators or others that may require us to relinquish rights to some of our technologies or STS101 that we would otherwise pursue on our own. We do not expect to realize revenue from sales of STS101 in the foreseeable future, if at all, and unless and until STS101 is clinically tested, approved for commercialization and successfully marketed. To date, we have funded our operations through private placements of convertible preferred stock, a convertible promissory note, and

11

long-term debt. We will be required to seek additional funding in the future and currently intend to do so through public or private equity offerings or debt financings, credit or loan facilities or a combination of one or more of these funding sources. Our ability to raise additional funds will depend on financial, economic and other factors, many of which are beyond our control. If we raise additional funds by issuing equity securities, our stockholders will suffer dilution and the terms of any financing may adversely affect the rights of our stockholders. In addition, as a condition to providing additional funds to us, future investors may demand, and may be granted, rights superior to those of existing stockholders. Debt financing, if available, is likely to involve restrictive covenants limiting our flexibility in conducting future business activities, and, in the event of insolvency, debt holders would be repaid before holders of our equity securities received any distribution of our corporate assets.

Our business is entirely dependent on the successful development, regulatory approval and commercialization of STS101, our only product candidate under development.

We have invested substantially all of our efforts and financial resources in the development of STS101 for the acute treatment of migraine, which has not been approved for sale or commercial use. Currently, STS101 is our only product candidate and we have not licensed, acquired, or invented any other product candidates for pre-clinical or clinical evaluation. This may make an investment in our company riskier than similar companies that have multiple product candidates in active development and that therefore may be able to better sustain a failure of a lead candidate. The success of our business, including our ability to finance our company and generate any revenue in the future, will, at this point, depend entirely on the successful development, regulatory approval and commercialization of STS101, which may never occur. We may have inadequate financial or other resources to advance STS101 through the clinical trial process, depending on the requirements of the U.S. Food and Drug Administration, or FDA. In addition, our clinical development program for STS101 may not lead to regulatory approval from the FDA and similar foreign regulatory agencies if we fail to demonstrate that STS101 is safe and effective in our ongoing and planned Phase 3 clinical trials, and we may therefore fail to commercialize STS101. Even if approved, we may fail to obtain differentiated product labeling for STS101 as compared to other available dihydroergotamine mesylate, or DHE, products for migraine and, as a result, our commercial prospects may be impaired. Further, STS101 may not receive regulatory approval even if it is successful in planned and future clinical trials. Any failure to obtain regulatory approval of STS101 would have a material and adverse impact on our business. Even if we successfully obtain regulatory approvals to market STS101, our revenue will be dependent, in part, upon the size of the markets in the territories for which we gain regulatory approval. If the markets or patient subsets that we are targeting are not as significant as we estimate, we may not generate significant revenues from sales of STS101, even if approved.

We plan to seek regulatory approval to commercialize STS101 in the United States and potentially in selected foreign countries. The clinical and commercial success of STS101 will depend on a number of factors, including the following:

• our ability to raise any additional required capital on acceptable terms, or at all;

• timely completion of our clinical trials, which may be significantly slower or cost more than we currently anticipate and will depend substantially upon the performance of third-party contractors;

• whether we are required by the FDA or similar foreign regulatory agencies to conduct additional clinical trials or other studies beyond those planned to support approval of STS101;

• acceptance of our co-primary endpoint assessments relating to the proposed indication of STS101 by the FDA and similar foreign regulatory authorities;

• our ability to consistently manufacture STS101 on a timely basis;

• our ability, and the ability of any third parties with whom we contract, to remain in good standing with regulatory agencies and develop, validate and maintain commercially viable manufacturing processes that are compliant with current good manufacturing practices, or cGMPs;

12

• our ability to demonstrate to the satisfaction of the FDA and similar foreign regulatory authorities the safety, efficacy and acceptable risk-benefit profile of STS101;

• the prevalence, duration and severity of potential side effects or other safety issues experienced with STS101;

• the timely receipt of necessary marketing approvals from the FDA and similar foreign regulatory authorities;

• achieving and maintaining, and, where applicable, ensuring that our third-party contractors achieve and maintain, compliance with our contractual obligations and with all regulatory requirements applicable to STS101;

• the differentiation of STS101 from other available DHE products and other acute treatments of migraine, and the willingness of physicians, operators of hospitals and clinics and patients to adopt and utilize STS101;

• our ability to successfully develop a commercial strategy and thereafter commercialize STS101 in the United States and internationally, if approved for marketing, sale and distribution in such countries and territories, whether alone or in collaboration with others;

• the availability of coverage and adequate reimbursement from managed care plans, private insurers, government payors (such as Medicare and Medicaid and similar foreign authorities) and other third-party payors for STS101;

• patients’ willingness to pay out-of-pocket for STS101 in the absence of coverage and/or adequate reimbursement from third-party payor;

• the convenience of the administration of STS101;

• acceptance by physicians, payors and patients of the benefits, safety and efficacy of STS101, if approved;

• patient demand for STS101, if approved;

• our ability to establish and enforce intellectual property rights in and to STS101; and

• our ability to avoid third-party patent interference, intellectual property challenges or intellectual property infringement claims.

These factors, many of which are beyond our control, could cause us to experience significant delays or an inability to obtain regulatory approvals or commercialize STS101. Even if regulatory approvals are obtained, we may never be able to successfully commercialize STS101. Accordingly, we cannot provide assurances that we will be able to generate sufficient revenue through the sale of STS101 to continue our business or achieve profitability.

While the scope of regulatory approval generally is similar in other countries, in order to obtain separate regulatory approval in other countries we must comply with numerous and varying regulatory requirements of such countries regarding safety and efficacy. For example, European regulatory authorities generally require a trial comparing the efficacy of the new drug to an existing drug prior to granting approval. Other countries also have their own regulations governing, among other things, clinical trials and commercial sales, as well as pricing and distribution of STS101, and we may be required to expend significant resources to obtain regulatory approval and to comply with ongoing regulations in these jurisdictions. Regulatory approval in one country does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country may have a negative effect on the regulatory process in others.

13

We have only recently begun testing STS101 in patients with migraine to assess its effectiveness, and, while we believe that it will be an effective acute treatment for migraine based on the historical pharmacokinetic profiles and effective usage of DHE products, we are utilizing a novel dry-powder formulation and delivery device which may not achieve better or similar levels of efficacy as other DHE products. Further, the results of earlier studies and trials of other DHE products, including cross-trial comparisons of results that are not derived from head-to-head clinical trials, may not be predictive of future trial results for STS101.

STS101 is a drug-device combination of a proprietary dry-powder formulation of DHE, which incorporates novel mucoadhesive drug carrier and engineered drug particle technologies, and our proprietary nasal delivery device. While we have completed a Phase 1 clinical trial for STS101 in 42 healthy volunteers in which STS101 demonstrated rapid and sustained DHE plasma concentrations, low pharmacokinetic variability, and a favorable safety and tolerability profile, STS101 has not yet been tested in any patients with migraine to assess its effectiveness, and there can be no assurance that we will be able to demonstrate to the satisfaction of the FDA the safety, efficacy and acceptable risk-benefit profile of STS101 during our ongoing and planned Phase 3 clinical trials. Success in preclinical studies and early clinical trials does not ensure that later clinical trials will be successful. A number of companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in Phase 3 clinical trials, even after positive results in earlier clinical trials. These setbacks have been caused by, among other things, preclinical findings made while clinical trials were underway and safety or efficacy observations made in clinical trials, including previously unreported adverse events. Notwithstanding any promising results in our preclinical studies and Phase 1 clinical trial, we cannot be certain that we will not face similar setbacks.

In July 2019, we initiated our Phase 3 efficacy trial of STS101 with a target enrollment of 1,140 patients and expect to report topline data from this Phase 3 trial in the second half of 2020. The results of our preclinical testing and Phase 1 clinical trial, as well as preclinical and clinical testing by third parties of other DHE products and product candidates, may not be predictive of the results of our ongoing and planned Phase 3 clinical trials. Product candidates in later stages of clinical trials may fail to show the desired pharmacological properties or safety and efficacy traits despite having progressed through preclinical studies and initial clinical trials. For example, our ongoing and planned Phase 3 clinical trials will involve the administration of STS101 by the patient in the patient’s home or other outpatient settings rather than a clinical setting, and decreased compliance with product instructions for use may negatively impact results. As a further example, based on published DHE pharmacokinetic and clinical trial data relating to DHE plasma concentrations and clinical efficacy of different DHE doses with other DHE products, we estimate that 1.0 ng/ml is the threshold concentration necessary for therapeutic response to DHE. While the administration of STS101 2.6 mg and 5.2 mg during our Phase 1 clinical trial consistently resulted in healthy subjects achieving DHE plasma concentrations in excess of 1.0 ng/ml, our estimation that such threshold may be sufficient for the effective treatment of migraine may be based on invalid assumptions or inferences and may not be correct. As a result, even if STS101 does achieve similar DHE plasma concentrations in our Phase 3 efficacy trial, there can be no assurance that STS101 will exhibit similar or improved efficacy as compared to previously-approved DHE products.

In addition, while DHE products have long been recommended as a first-line therapeutic option for the acute treatment of migraine, STS101 is specifically designed to have a differentiated pharmacokinetic profile and administration procedure as compared to such products, including injectable DHE and DHE liquid nasal spray. As such, even though STS101 demonstrated favorable safety, tolerability and pharmacokinetic profile in our Phase 1 clinical trial, there can be no assurance that STS101 will exhibit comparable or more favorable clinical performance in our Phase 3 clinical trial as compared to other DHE products. Furthermore, while in our Phase 1 clinical trial STS101 demonstrated greater DHE plasma concentration and lower pharmacokinetic variability than Migranal DHE mesylate liquid nasal spray and higher drug exposure and comparable pharmacokinetic variability than certain other DHE products, such results may not be indicative of the comparative efficacy of STS101. The results of clinical trials in one set of patients or disease indications may not be predictive of those obtained in another. In some instances, there can be significant variability in safety or efficacy results between different clinical trials of the same product candidate due to numerous factors, including changes in trial procedures set

14

forth in protocols, differences in the size and type of the patient populations, changes in and adherence to the dosing regimen and other clinical trial protocols and the rate of dropout among clinical trial participants.

Further, certain of our hypotheses regarding the potential clinical and therapeutic benefit of STS101 compared to other DHE products and product candidates are based on cross-trial comparisons of results that were not derived from head-to-head clinical trials. Such clinical trial data may not be directly comparable due to differences in study protocols, conditions and patient populations. Accordingly, these cross-trial comparisons may not be reliable predictors of the relative efficacy or other benefits of STS101 compared to other product candidates that may be approved or that are or were in development for the acute treatment of migraine.

As a result of the foregoing, even if we are able to complete any planned and future clinical trials of STS101, the results may not be sufficient to obtain regulatory approval.

Clinical development involves a lengthy and expensive process with an uncertain outcome, and delays can occur for a variety of reasons outside of our control.

Clinical development 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. In July 2019, we initiated our Phase 3 efficacy trial of STS101 and expect to commence a Phase 3 safety trial in the second half of 2020. The FDA has agreed in principle with the proposed study design of our Phase 3 efficacy trial, dose strengths, statistical analysis and that a single efficacy study could be sufficient to support an NDA. However, changes in regulatory requirements and guidance may occur and we may need to amend our clinical trial protocols to reflect these changes with appropriate regulatory authorities. In addition, we may experience delays in initiating or completing our planned studies and trials of STS101. Furthermore, we cannot be certain that studies or trials for STS101 will begin on time, not require redesign, enroll an adequate number of subjects on time or be completed on schedule, if at all. Clinical trials can be delayed or terminated for a variety of reasons, including delays or failures related to:

• the FDA or comparable foreign regulatory authorities disagreeing as to the design or implementation of our clinical trials;

• delays in obtaining regulatory authorization to commence a trial;

• reaching agreement on acceptable terms with prospective contract research organizations, or CROs, and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;

• obtaining institutional review board, or IRB, approval at each trial site;

• recruiting an adequate number of suitable patients to participate in a trial;

• having subjects complete a trial or return for post-treatment follow-up;

• clinical sites deviating from trial protocol or dropping out of a trial;

• addressing subject safety concerns that arise during the course of a trial;

• adding a sufficient number of clinical trial sites; or

• obtaining sufficient quantities of STS101 for use in clinical trials from third-party suppliers on a timely basis.

We may experience numerous adverse or unforeseen events during, or as a result of, preclinical studies and clinical trials that could delay or prevent our ability to receive marketing approval or commercialize STS101, including:

• we may receive feedback from regulatory authorities that requires us to modify the design of our clinical trials;

15

• clinical trials of STS101 may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials or abandon our development program for STS101;

• the number of patients required for clinical trials of STS101 may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate or participants may drop out of these clinical trials at a higher rate than we anticipate;

• we or our third-party contractors may fail to comply with regulatory requirements, fail to maintain adequate quality controls, or be unable to produce sufficient product supply to conduct and complete clinical trials of STS101 in a timely manner, or at all;

• we or our investigators might have to suspend or terminate clinical trials of STS101 for various reasons, including non-compliance with regulatory requirements, a finding that STS101 has undesirable side effects or other unexpected characteristics, or a finding that the participants are being exposed to unacceptable health risks;

• the cost of clinical trials of STS101 may be greater than we anticipate;

• the quality of STS101 or other materials necessary to conduct clinical trials of STS101 may be insufficient or inadequate;

• regulators may revise the requirements for approving STS101, or such requirements may not be as we anticipate; and

• future collaborators may conduct clinical trials in ways they view as advantageous to them but that are sub-optimal for us.

If we are required to conduct additional clinical trials or other testing of STS101 beyond those that we currently contemplate, if we are unable to successfully complete clinical trials of STS101 or other testing, if the results of these trials or tests are not positive or are only moderately positive or if there are safety concerns, we may:

• incur unplanned costs;

• be delayed in obtaining marketing approval for STS101 or not obtain marketing approval at all;

• obtain marketing approval in some countries and not in others;

• obtain marketing approval for indications or patient populations that are not as broad as intended or desired;

• obtain marketing approval with labeling that includes significant use or distribution restrictions or safety warnings, including boxed warnings;

• be subject to additional post-marketing testing requirements, which could be expensive and time consuming; or

• have the treatment removed from the market after obtaining marketing approval.

We could also 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 or by the FDA or other regulatory authorities. Such authorities may suspend or terminate a clinical trial due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a product candidate, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial.

Further, conducting clinical trials in foreign countries, as we could do for STS101, presents additional risks that may delay completion of our clinical trials. These risks include the failure of enrolled patients in foreign

16

countries to adhere to clinical protocol as a result of differences in healthcare services or cultural customs, managing additional administrative burdens associated with foreign regulatory schemes, as well as political and economic risks relevant to such foreign countries.

Principal investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and may receive cash or equity compensation in connection with such services. If these relationships and any related compensation result in perceived or actual conflicts of interest, or a regulatory authority concludes that the financial relationship may have affected the interpretation of the trial, the integrity of the data generated at the applicable clinical trial site may be questioned and the utility of the clinical trial itself may be jeopardized, which could result in the delay or rejection of the marketing application we submit. Any such delay or rejection could prevent or delay us from commercializing STS101.

If any of our clinical trials of STS101 are unsuccessful, delayed or terminated, its commercial prospects may be harmed, and our ability to generate revenues from sales of STS101 will be delayed or not realized at all. In addition, any delays in completing our clinical trials may increase our costs, slow down our STS101 development and approval process and jeopardize our ability to commence product sales and generate revenues. Any of these occurrences may significantly harm our business, financial condition and prospects. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of STS101. If STS101 generally proves to be ineffective, unsafe or commercially unviable, it would have a material and adverse effect on our business, financial condition, results of operations and prospects.

We may be unable to obtain regulatory approval for STS101 under applicable regulatory requirements. The denial or delay of any such approval would delay commercialization of STS101 and adversely impact our potential to generate revenue, our business and our results of operations.

We have not previously submitted an NDA or any other marketing application to the FDA or similar filings to comparable foreign regulatory authorities. An NDA or other similar regulatory filing requesting approval to market a product candidate must include extensive preclinical and clinical data and supporting information to establish that the product candidate is safe, effective, pure and potent for each desired indication. The NDA or other similar regulatory filing must also include significant information regarding the chemistry, manufacturing and controls for the product.

The research, testing, manufacturing, labeling, approval, sale, marketing and distribution of pharmaceutical products are subject to extensive regulation by the FDA and other regulatory authorities in the United States and other countries, and such regulations differ from country to country. We are not permitted to market STS101 in the United States or in any foreign countries until it receives the requisite approval from the applicable regulatory authorities of such jurisdictions.

The FDA or any foreign regulatory bodies can delay, limit or deny approval of STS101 for many reasons, including:

• our inability to demonstrate to the satisfaction of the FDA or the applicable foreign regulatory body that STS101 is safe and effective for the requested indication;

• the FDA’s or the applicable foreign regulatory agency’s disagreement with our trial protocol or the interpretation of data from preclinical studies or clinical trials;

• our inability to demonstrate that the clinical and other benefits of STS101 outweigh any safety or other perceived risks;

• the FDA’s or the applicable foreign regulatory agency’s requirement for additional preclinical studies or clinical trials;

17

• the FDA’s or the applicable foreign regulatory agency’s non-approval of the formulation, labeling or specifications of STS101;

• the FDA’s or the applicable foreign regulatory agency’s failure to approve our manufacturing processes and facilities or the facilities of third-party manufacturers upon which we rely; or

• the potential for approval policies or regulations of the FDA or the applicable foreign regulatory agencies to significantly change in a manner rendering our clinical data insufficient for approval.

Of the large number of pharmaceutical products in development, only a small percentage successfully complete the FDA or other regulatory bodies’ approval processes and are commercialized.

Even if we eventually complete clinical testing and receive approval from the FDA or applicable foreign agencies for STS101, the FDA or the applicable foreign regulatory agency may grant approval contingent on the performance of costly additional clinical trials which may be required after approval. The FDA or the applicable foreign regulatory agency also may approve STS101 for a more limited indication or a narrower patient population than we originally requested, and the FDA, or applicable foreign regulatory agency, may not approve it with the labeling that we believe is necessary or desirable for the successful commercialization.

Any delay in obtaining, or inability to obtain, applicable regulatory approval would delay or prevent commercialization of STS101 and would materially adversely impact our business and prospects.

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

The timely completion of clinical trials in accordance with their protocols depends, among other things, on our ability to enroll a sufficient number of patients who remain in the study until its conclusion. We may experience difficulties in patient enrollment in our clinical trials for a variety of reasons. In particular, in July 2019, we initiated our Phase 3 efficacy trial of STS101 with a target enrollment of 1,140 patients and we may experience difficulties enrolling patients due to the availability of approved preventive and acute treatments for migraine. The enrollment of patients depends on many additional factors, including:

• the patient eligibility criteria defined in the protocol;

• the general willingness of patients to enroll in the trial;

• the size of the patient population required for analysis of the trial’s primary endpoints;

• the proximity of patients to trial sites;

• the design of the trial;

• our ability to recruit clinical trial investigators with the appropriate competencies and experience;

• clinicians’ and patients’ perceptions as to the potential advantages of the product candidate being studied in relation to other available therapies, including any new therapies that may be approved for the indications we are investigating; and

• the clinical site’s ability to obtain and maintain patient consents.

In addition, our clinical trials may compete with other clinical trials for product candidates that seek to treat migraine, and this competition will reduce the number and types of patients available to us, because some patients who might have opted to enroll in our trials may instead opt to enroll in a trial being conducted by one of our competitors. Since the number of qualified clinical investigators is limited, we may conduct some of our clinical trials at the same clinical trial sites that some of our competitors use, which will reduce the number of patients who are available for our clinical trials in such clinical trial site.

18

Delays in patient enrollment may result in increased costs or may affect the timing or outcome of the planned clinical trials, which could prevent completion of these trials and adversely affect our ability to advance the development of STS101.

STS101 may cause undesirable side effects or have other properties that could delay or prevent its regulatory approval, limit the commercial profile of an approved label, or result in significant negative consequences following marketing approval, if any.

The results of our clinical trials may show that STS101 may cause undesirable side effects, which could interrupt, delay or halt clinical trials, resulting in the denial of regulatory approval by the FDA and other regulatory authorities. In light of widely publicized events concerning the safety risk of certain drug products, regulatory authorities, members of Congress, the Government Accounting Office, medical professionals and the general public have raised concerns about potential drug safety issues. These events have resulted in the withdrawal of drug products, revisions to drug labeling that further limit use of the drug products and establishment of risk management programs that may, for instance, restrict distribution of drug products. The increased attention to drug safety issues may result in a more cautious approach by the FDA to clinical trials. Data from clinical trials may receive greater scrutiny with respect to safety, which may make the FDA or other regulatory authorities more likely to terminate clinical trials before completion, or require longer or additional clinical trials that may result in substantial additional expense and a delay or failure in obtaining approval or approval for a more limited indication than originally sought.

While STS101 was generally well-tolerated in our Phase 1 clinical trial, subjects treated with STS101 5.2 mg reported a higher frequency of nasal adverse events than those treated with DHE mesylate IM injection or Migranal DHE mesylate liquid nasal spray. However, all adverse events were mild and transient, and subjective nasal symptom severity scores self-reported by subjects were very low, with all nasal symptom severity scores averaging less than five on a zero to one hundred scale in which zero represents absence of the symptom and one hundred represents presence of the symptom with the worst imaginable severity. Subjective nasal symptom severity scores self-reported in Part 1 of our Phase 1 clinical trial by subjects treated with STS101 1.3 mg and 2.6 mg were negligible. As a result, we do not believe the tolerability of STS101 should present a barrier to patient adoption or use, if approved. Nevertheless, if unacceptable side effects arise in any of our Phase 3 clinical trials or other trials we may conduct in the future, we, the FDA, or the IRBs at the institutions in which our studies are conducted could suspend or terminate our clinical trials or the FDA or comparable foreign regulatory authorities could order us to cease clinical trials or deny approval of STS101 for its targeted indications.

In addition, if undesirable side effects caused by other available DHE products or DHE products in development, the development and successful commercialization of STS101, if approved, could be negatively affected. Treatment-related side effects in our clinical trials or in the use of approved DHE products could also affect patient recruitment or the ability or willingness of enrolled patients to complete any of our clinical trials, and/or result in potential product liability claims. Due to DHE’s vasoconstrictive effects, DHE products are not recommended for use in patients with cardiovascular risk factors. In addition, approved DHE products carry a “black box” warning in their labels for a risk that the coadministration of DHE and certain other drugs, including specific antivirals and antibiotics, may result in elevated levels of DHE in the blood, potentially causing vasospasm that may result in inadequate blood flow to the extremities or the brain. Unless we can successfully demonstrate by conducting a drug-drug interaction study that the coadministration of DHE and certain other drugs does not result in inhibition of DHE metabolism and elevated DHE levels, the FDA is likely to require the label for STS101, if approved, to include such warning, and this could result in STS101 not achieving its full commercial potential. We are currently evaluating the feasibility of undertaking such drug-drug interaction studies. Treatment-related side effects in our clinical trials or in the use of approved DHE products could also affect patient recruitment or the ability of enrolled patients to complete any of our clinical trials or result in potential product liability claims.

19

If STS101 receives marketing approval and we or others later identify undesirable side effects caused by such product or by other DHE products, a number of potentially significant negative consequences could result, including:

• regulatory authorities may withdraw their approval of the product;

• we may be required to recall a product or change the way such product is administered to patients;

• additional restrictions may be imposed on the marketing of the particular product or the manufacturing processes for the product or any component thereof;

• regulatory authorities may require the addition of labeling statements, such as a “black box” warning or a contraindication similar to those that are currently included with the labels of DHE products;

• we may be required to implement a Risk Evaluation and Mitigation Strategy, or create a Medication Guide outlining the risks of such side effects for distribution to patients;

• we could be sued and held liable for harm caused to patients;

• the product may become less competitive; and

• our reputation may suffer.

Any of the foregoing events could prevent us from achieving or maintaining market acceptance of the particular product candidate, if approved, and result in the loss of significant revenues to us, which would materially and adversely affect our results of operations and business.

We may be unable to rely on Section 505(b)(2) of the Federal Food, Drug and Cosmetic Act, which could result in a longer development program and more costly trials than we anticipate.

We may not be able to seek FDA marketing approval of STS101 under Section 505(b)(2) of the Federal Food, Drug and Cosmetic Act, or FFDCA. Section 505(b)(2), if applicable to us, would allow any NDA we file with the FDA to rely in part on data in the public domain or the FDA’s prior conclusions regarding the safety and effectiveness of approved DHE products, which could expedite the development program for STS101 by potentially decreasing the overall scope of work we must do ourselves. If we are unable to rely on Section 505(b)(2), the development program for STS101 would be longer than we expect, and we would also have to conduct more costly trials than we anticipate, which would harm our business.

STS101 is a drug-device combination product, which may result in additional regulatory risks.

Our finished drug product and nasal delivery device will be regulated as a drug-device combination product. There may be additional regulatory risks for drug-device combination products. We may experience delays in obtaining regulatory approval of STS101 given the increased complexity of the review process when approval of the product and a delivery device is sought under a single marketing application. In the United States, each component of a combination product is subject to the requirements established by the FDA for that type of component, whether a drug, biologic or device. The delivery system device will be subject to FDA device requirements regarding design, performance and validation as well as human factors testing, among other things. Delays in or failure of the studies conducted by us, or failure of our company, our collaborators, if any, or our third-party providers or suppliers to obtain or maintain regulatory approval could result in increased development costs, delays in or failure to obtain regulatory approval, and associated delays in STS101 reaching the market.

Even if STS101 obtains regulatory approval, it may fail to achieve broad market acceptance.

Even if STS101 receives FDA or other regulatory approvals, its commercial success will depend significantly on its broad adoption and use by physicians and patients for approved indications. The degree of market acceptance of STS101, if approved, will depend on a number of factors, including:

• the safety and efficacy of STS101 as compared to other available acute therapies for treatment of migraine;

20

• patient satisfaction with the results and administration of STS101 and overall treatment experience, including, the ease and convenience of administration of STS101;

• the clinical indications for which STS101 is approved and patient demand for approved products that treat those indications;

• our ability to manufacture and release adequate commercial supplies on a timely basis;

• the availability of coverage and adequate reimbursement from managed care plans, private insurers, government payors (such as Medicare and Medicaid) and other third-party payors for STS101;

• the cost of treatment with STS101 in relation to alternative treatments and patients’ willingness to pay out-of-pocket for the product, if approved, in the absence of coverage and/or adequate reimbursement from third-party payors;

• acceptance by physicians, operators of hospitals and clinics and patients of the product as a safe, effective and easy to administer treatment;

• physician and patient willingness to adopt a new therapy over other available preventive and acute therapies for treatment of migraine;

• the prevalence and severity of side effects;

• limitations or warnings contained in the FDA-approved labeling for STS101, such as a “black box” warning or a contraindication similar to those that are currently included with the labels of DHE products;

• the willingness of physicians, operators of hospitals and clinics and patients to utilize or adopt our product as a solution;

• the effectiveness of our sales, marketing and distribution efforts;

• adverse publicity about STS101 or favorable publicity about competitive products;

• patients’ willingness to take a dry-powder intranasal medication; and

• potential product liability claims.

We cannot assure you that STS101, if approved, will achieve broad market acceptance among physicians and patients. Any failure by STS101, if approved, to achieve market acceptance or commercial success would adversely affect our results of operations.

We face, and will continue to face, significant competition in an environment of rapid technological and scientific change and our failure to effectively compete may prevent us from achieving significant market penetration for STS101, if approved. Most of our competitors have significantly greater resources than we do and we may not be able to successfully compete.

The pharmaceutical industry is highly competitive, with a number of established, large pharmaceutical companies, as well as many smaller companies. Many of these companies have greater financial resources, marketing capabilities and experience in obtaining regulatory approvals for product candidates. There are many pharmaceutical companies, biotechnology companies, public and private universities, government agencies and research organizations actively engaged in research and development of products which may target the same markets as STS101. We expect STS101 to compete on the basis of, among other things, product efficacy and safety, time to market, price, extent of adverse side effects experienced and convenience of administration. One or more of our competitors may develop products based upon the principles underlying our proprietary technologies earlier than us, obtain approvals for such products from the FDA more rapidly than us or develop alternative products or therapies that are safer, more effective and/or more cost effective than STS101. We also expect to face competition in our efforts to identify appropriate collaborators or partners to help commercialize STS101 in our target commercial areas.

21

The majority of the prescriptions written for the acute treatment of migraine are for generic triptans. There are seven FDA-approved triptan molecules available in branded and branded generic/generic oral dosage forms, and two of these molecules are also available in injectable and/or liquid nasal spray dosage forms that may have faster onset of action than oral dosage forms.

With respect to DHE products, we will compete with Bausch Health’s Migranal and its authorized generic, both of which are DHE liquid nasal spray products, as well as branded and generic DHE injectable products. In addition, we believe Impel NeuroPharma is developing a DHE liquid nasal spray product utilizing the same liquid formulation as Migranal, but with a different propellant-powered, single-use delivery device for which Impel NeuroPharma has indicated it plans to file an NDA in 2020. In addition, Promius Pharma reports that it is developing a DHE nasal liquid spray product. Impel NeuroPharma in particular, has indicated that it plans to pursue approval of its product on the basis of a clinical development program that includes only a comparative pharmacokinetic study and an open-label, uncontrolled, repeat-dose safety trial (and not a randomized, controlled, double-blind Phase 3 efficacy study which the FDA typically requires to support any product-specific marketing claims relating to efficacy). There can be no assurance that we will be able to successfully bring STS101 to the market faster than these liquid nasal spray candidates or compete against such products, if approved.

We may also face competition from non-DHE acute treatments for migraine currently under development. For instance, modulation of CGRP is a therapeutic avenue being investigated for migraine treatment. CGRP is normally produced in neurons, but elevated levels of CGRP in the trigeminovascular system can have adverse effects on neurovascular and neurological function, leading to symptoms of migraine. Allergan recently submitted an NDA for ubrogepant, which if approved may become the first oral CGRP receptor antagonist marketed for the acute treatment of migraine. In addition, Biohaven is in late-stage development with rimegepant. Furthermore, Eli Lilly is developing and has submitted an NDA for lasmiditan, an oral 5HT_1F agonist, for the acute treatment of migraine. In contrast with triptan and ergot alkaloid (including DHE) products, both CGRP and 5HT_1F product candidates are thought to act by mechanisms other than vasoconstriction, which may result in these new products having reduced potential for cardiovascular adverse effects and thus being indicated for use in a broader population of migraine patients that includes patients with cardiovascular risk factors for whom triptan and ergot alkaloid treatments are not recommended.

Further, preventive treatment of migraine, if broadly adopted and used successfully, could reduce the need and demand for acute treatment options. Injectable formulations of anti-CGRP monoclonal antibodies (e.g. erenumab, fremanezumab, and galcanezumab) have recently been approved for prevention of migraine attacks and Allergan and Biohaven have also reported that they are conducting clinical trials of oral CGRP antagonists for prevention of migraine attacks. In addition, Alder Biopharmaceuticals recently announced it was commencing a study of its intravenously injected monoclonal CGRP antibody, eptinezumab, for which it submitted a Biologics License Application for a migraine prevention indication in February 2019, for an acute treatment of migraine indication.

Many of our competitors have significantly greater financial, technical, manufacturing, marketing, sales and supply resources and experience than we do. If we successfully obtain approval for STS101, we will face competition based on many different factors, including the safety and effectiveness of STS101, the ease with which STS101 can be administered and the extent to which patients accept the nasal route of administration, the timing and scope of regulatory approvals for STS101, the availability and cost of manufacturing, marketing and sales capabilities, price, reimbursement coverage and patent position. Competing products could present superior treatment alternatives, including by being more effective, safer, less expensive or marketed and sold more effectively than STS101. Competitive products may make any products we develop obsolete or noncompetitive before we recover the expense of developing and commercializing STS101. Such competitors could also recruit our employees, which could negatively impact our level of expertise and our ability to execute our business plan. For additional information regarding our competition, see “Business—Competition.”

22

The successful commercialization of STS101 will depend in part on the extent to which governmental authorities, private health insurers, and other third-party payors provide coverage, adequate reimbursement levels and implement pricing policies favorable for it. Failure to obtain or maintain coverage and adequate reimbursement for STS101, if approved, could limit our ability to market our product and decrease our ability to generate revenue.

The availability of coverage and adequacy of reimbursement by managed care plans, 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 medical services and pharmaceutical products that receive FDA approval. Our ability to achieve acceptable levels of coverage and reimbursement for STS101 by third-party payors will have an effect on our ability to successfully commercialize it. A decision by a third-party payor not to cover or separately reimburse for STS101, could reduce physician utilization if approved. Assuming there is coverage for STS101 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 European Union or elsewhere will be available for STS101 and any reimbursement that may become available may not be adequate or may be decreased or eliminated in the future.

Moreover, increasing efforts by governmental and other third-party payors in the United States and abroad to cap or reduce healthcare costs have resulted in increasing challenges to prices charged for pharmaceutical products and services, and many third-party payors may refuse to provide coverage and adequate reimbursement for particular drugs when an equivalent generic drug, biosimilar or a less expensive therapy is available. It is possible that a third-party payor may consider STS101 as substitutable and only offer to reimburse patients for the less expensive product, if any. For example, there are currently generic versions of both DHE liquid nasal spray products and DHE injectable products, with which we may compete. Even if we show improved efficacy or improved convenience of administration with STS101, pricing of existing third-party therapeutics may limit the amount we will be able to charge for it. These third-party payors may deny or revoke the reimbursement status of STS101, if approved, or establish prices for it at levels that are too low to enable us to realize an appropriate return on our investment. If reimbursement is not available or is available only at limited levels, we may not be able to successfully commercialize STS101.

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 may require us to provide scientific and clinical support for the use of STS101 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 on 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 will likely put pressure on the pricing and usage of medical products. 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 STS101. Accordingly, in markets outside the United States, the reimbursement for STS101 may be reduced compared with the United States and may be insufficient to generate commercially-reasonable revenue and profits.

23

We currently have no sales organization. If we are unable to establish sales capabilities on our own or through third parties, we may not be able to market and sell STS101 effectively in the United States and foreign jurisdictions, if approved, or generate product revenue.

We currently do not have a marketing or sales organization. In order to commercialize STS101, if approved, in the United States and foreign jurisdictions, we must build our marketing, sales, distribution, managerial and other non-technical capabilities or make arrangements with third parties to perform these services, and we may not be successful in doing so. If STS101 receives regulatory approval, we expect to establish a sales organization in the United States with technical expertise and supporting marketing and distribution capabilities to commercialize it, which will be expensive and time consuming. We have no prior experience in the marketing, sale and distribution of pharmaceutical products and there are significant risks involved in building and managing a sales organization, including our ability to hire, retain, and incentivize qualified individuals, generate sufficient sales leads, provide adequate training to sales and marketing personnel, and effectively manage a geographically dispersed sales and marketing team. Any failure or delay in the development of our internal sales, marketing and distribution capabilities would adversely impact the commercialization of STS101. We may choose to collaborate with third parties that have direct sales forces and established distribution systems, either to augment our own sales force and distribution systems or in lieu of our own sales force and distribution systems. If we are unable to enter into such arrangements on acceptable terms or at all, we may not be able to successfully commercialize STS101. If we are not successful in commercializing STS101, either on our own or through arrangements with one or more third parties, we may not be able to generate product revenue and we would incur significant additional losses.

We rely, and intend to continue to rely, on qualified third parties to supply all components of STS101. As a result, we are dependent on several third parties, most of which are sole source suppliers, for the manufacture of STS101 and our supply chain, and if we experience problems with any of these suppliers, or they fail to comply with applicable regulatory requirements or to supply sufficient quantities at acceptable quality levels or prices, or at all, it would materially and adversely affect our business.

We do not own or operate manufacturing facilities for clinical or commercial manufacture of either the proprietary dry-powder formulation of DHE component of STS101 or the proprietary pre-filled, single-use, nasal delivery device, including the drug substance and packaging. We have limited personnel with experience in drug-device product manufacturing and we lack the capabilities to manufacture either the drug or device components of STS101 on a clinical or commercial scale. We currently outsource all manufacturing and packaging of STS101 to third parties, and we do not plan to own or operate our own manufacturing and packaging facilities. There can be no assurance that our clinical development product supplies will not be limited, interrupted, or of satisfactory quality or continue to be available at acceptable prices. In particular, any replacement of any of our third-party suppliers could require significant effort and expertise because there may be a limited number of qualified replacements. In addition, we may encounter issues with transferring technology to a new third-party manufacturer, and we may encounter regulatory delays if we need to move the manufacturing of our products from one third-party manufacturer to another. For example, we have initiated the transfer of the STS101 formulation manufacturing process from the supplier responsible for manufacturing the STS101 formulation for our Phase 3 EMERGE efficacy trial to a new supplier, who will be responsible for manufacturing the STS101 formulation for our Phase 3 safety trial and any commercial supplies, if STS101 is approved. There can be no assurance that we will not experience a disruption to the supply of the formulation for STS101 in connection with such transfer or that the transfer will be successful.

In addition, we do not currently have long-term commercial supply agreements with third-party manufacturers for either the formulation or device components of STS101 or the STS101 finished product. We may be unable to enter into agreements for commercial supply with all third-party manufacturers, or may be unable to do so on acceptable terms. Even if we enter into these agreements or, for those agreements that we have already entered into, the various manufacturers utilized for STS101 will likely be single source suppliers to us for a significant period of time. We may not be able to establish additional sources of supply for STS101 prior to

24

commercialization. Certain of such suppliers are subject to regulatory requirements covering manufacturing, testing, quality control and record keeping relating to STS101, and are subject to pre-approval and ongoing inspections by the regulatory agencies. Failure by any of our suppliers to comply with applicable regulations may result in long delays and interruptions to our manufacturing capacity while we seek to secure another supplier that meets all regulatory requirements.

Reliance on third-party manufacturers entails risks to which we would not be subject if we manufactured STS101 ourselves, including:

• reliance on the third parties for regulatory compliance, quality assurance and hazardous materials handling;

• the possible breach of the manufacturing and quality agreements by the third parties because of factors beyond our control;

• the possibility of termination or nonrenewal of the agreements by the third parties because of our breach of the manufacturing agreement or based on their own business priorities; and

• with respect to any manufacturers with which we do not have a long-term agreement, the possibility that the manufacturer decides to stop supplying to us or changes the price or other terms of supply.

Any of these factors could cause the delay of required approvals or commercialization of STS101, could prevent us from commercializing it successfully, could cause the suspension of initiation or completion of clinical trials and regulatory submissions, and could lead to higher product costs.

In addition, the facilities used by our CMOs to manufacture STS101 are subject to various regulatory requirements and may be subject to the inspection of the FDA or other regulatory authorities. We do not directly control manufacturing at our CMOs, and are completely dependent on them for compliance with current regulatory requirements. If our CMOs cannot successfully manufacture components of finished product that conforms to our specifications and the regulatory requirements of the FDA or comparable regulatory authorities in foreign jurisdictions, we may not be able to rely on them for the manufacture of STS101. For example, MAP0004, another company’s orally-inhaled, pulmonary-route DHE product candidate, met all four of its primary efficacy endpoints and demonstrated a favorable safety profile in a large Phase 3 clinical trial, but was later discontinued by Allergan. The discontinuation of MAP0004 (then known by the brand name Semprana) followed multiple requests from the FDA that the developer address certain issues relating to chemistry, manufacturing, and controls, after certain manufacturing deficiencies were identified during the FDA’s inspection of a facility operated by a third-party manufacturer. In addition, we have limited control over the ability of our CMOs to maintain adequate quality control, quality assurance and qualified personnel. If the FDA or a comparable foreign regulatory authority finds our facilities or those of our CMOs inadequate for the manufacture of STS101 or if such facilities are subject to enforcement action in the future or are otherwise inadequate, we may need to find alternative manufacturing facilities, which would significantly impact our ability to develop, obtain regulatory approval for or commercialize STS101 and the timing of any such approval and commercialization.

Additionally, our CMOs may experience manufacturing difficulties due to resource constraints or as a result of labor disputes or unstable political environments. If our CMOs were to encounter any of these difficulties, our ability to provide STS101 to patients in clinical trials, or to provide product for the treatment of patients once approved, would be jeopardized.

We rely, and intend to continue to rely, on third-party suppliers for materials used in the manufacture of STS101, and the loss of third-party suppliers or their inability to supply us with adequate key materials could harm our business.

We rely, and intend to continue to rely, on third-party suppliers, most of which are sole source suppliers, for certain key materials required for the production of the DHE dry-powder formulation of STS101. Our

25

dependence on these third-party suppliers and the challenges we may face in obtaining adequate supplies of these materials involve several risks, including limited control over pricing, availability, quality and delivery schedules. As a small company, our negotiation leverage is limited and we are likely to get lower priority than other companies or purchasers that are larger than we are. We cannot be certain that our suppliers will continue to provide us with the quantities of these key materials that we require or satisfy our anticipated specifications and quality requirements. Any supply interruption in limited or sole sourced key materials could materially harm the manufacture of STS101 until a new source of supply, if any, could be identified and qualified. We may be unable to find a sufficient alternative supplier in a reasonable time or on commercially reasonable terms. Any performance failure on the part of our suppliers could delay the development and potential commercialization of STS101, including limiting supplies necessary for clinical trials and regulatory approvals, which would have a material adverse effect on our business.

We rely, and intend to continue to rely, on third parties in the conduct of all of our clinical trials. If these third parties do not successfully carry out their contractual duties, fail to comply with applicable regulatory requirements or meet expected deadlines, we may be unable to obtain regulatory approval for STS101.

We currently do not have the ability to independently conduct any clinical trials. The FDA and comparable foreign regulatory authorities in other jurisdictions require us to comply with regulations and standards, commonly referred to as good clinical practice, or GCP, requirements for conducting, monitoring, recording and reporting the results of clinical trials, in order to ensure that the data and results are scientifically credible and accurate and that the trial subjects are adequately informed of the potential risks of participating in clinical trials. We rely on medical institutions, clinical investigators, contract laboratories and other third parties, such as CROs, to conduct GCP-compliant clinical trials of STS101 properly and on time. While we have agreements with these third parties, we monitor and control only certain aspects of their activities and have limited influence over their actual performance and the amount or timing of resources that they devote to our programs. Third parties with whom we contract may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical trials or other drug development activities that could harm our competitive position. The third parties with whom we contract for execution of our clinical trials play a significant role in the conduct of these trials and the subsequent collection and analysis of data. Although we rely on these third parties to conduct our clinical trials, we remain responsible for ensuring that each of our clinical trials is conducted in accordance with its investigational plan and protocol and applicable laws and regulations, and our reliance on these third parties does not relieve us of our regulatory responsibilities.

If the third parties conducting our clinical trials do not adequately perform their contractual duties or obligations, experience significant business challenges, disruptions or failures, do not meet expected deadlines, terminate their agreements with us or need to be replaced, or if the quality or accuracy of the data they obtain is compromised due to their failure to adhere to our protocols or to GCPs, or for any other reason, we may need to enter into new arrangements with alternative third parties. This could be difficult, costly or impossible, and clinical trials may need to be extended, delayed, terminated or repeated. As a result, we may not be able to obtain regulatory approval in a timely fashion, or at all, for STS101, our results our business and results of operations and the commercial prospects for STS101 would be harmed, our costs could increase, and our ability to generate revenues could be delayed.

The terms of our loan agreement place restrictions on our operating and financial flexibility.

In October 2018, we entered into a loan and security agreement with Silicon Valley Bank, or the Loan Agreement, that is secured by a lien covering all of our tangible and intangible property. As of June 30, 2019, there was $5.0 million of principal balance outstanding under the Loan Agreement, which was funded in October 2018. An additional $5.0 million term loan may be drawn by us in $1.0 million increments. Under the terms of the Loan Agreement, we are required to make payments on a monthly basis commencing December 1, 2019, and the final maturity date of the loan is May 1, 2022. The Loan Agreement contains customary affirmative and negative covenants and events of default, including covenants and restrictions that among other things, restrict

26

our ability to incur liens, incur additional indebtedness, make loans and investments, engage in mergers and acquisitions, engage in asset sales or sale and leaseback transactions, and declare dividends or redeem or repurchase capital stock. A failure to comply with these covenants could permit the lender under the Loan Agreement to declare the term loans, together with accrued interest and fees, to be immediately due and payable. In addition, if we default under the terms of the Loan Agreement, including failure to satisfy our operating covenants, the lender may accelerate all of our repayment obligations and take control of our pledged assets, potentially requiring us to renegotiate our loan agreement on terms less favorable to us or to immediately cease operations. Further, if we are liquidated, the lender’s right to repayment would be senior to the rights of the holders of our common stock. Any declaration by the lender of an event of default could significantly harm our business and prospects and could cause the price of our common stock to decline.

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

As of June 30, 2019, we had 11 full-time employees. We will need to continue to expand our managerial, operational, finance and other resources in order to manage our operations and clinical trials, continue our development activities and commercialize STS101. Our management and personnel, systems and facilities currently in place may not be adequate to support this future growth. Our need to effectively execute our growth strategy requires that we:

• effectively manage our clinical trials and the development of STS101;

• identify, recruit, retain, incentivize and integrate additional employees, including sales personnel;

• manage our internal development and operational efforts effectively while carrying out our contractual obligations to third parties; and

• continue to improve our operational, financial and management controls, reports systems and procedures.

We may be unable to successfully implement these tasks, which could have a material adverse effect on our business, results of operations, financial condition, prospects and stock price.

If we fail to attract and retain senior management and key scientific personnel, our business may be materially and adversely affected.

Our success depends in part on our continued ability to attract, retain and motivate highly qualified management, clinical and scientific personnel. We are highly dependent upon our senior management, particularly our President and Chief Executive Officer, as well as other members of our senior management team. The loss of services of any of these individuals could delay or prevent the successful development of STS101, initiation or completion of our planned clinical trials or the commercialization of STS101.

Competition for qualified personnel in the pharmaceutical and biotechnology fields is intense due to the limited number of individuals who possess the skills and experience required by our industry. We will need to hire additional personnel as we expand our clinical development and if we initiate commercial activities. We may not be able to attract and retain quality personnel on acceptable terms, or at all. In addition, to the extent we hire personnel from competitors, we may be subject to allegations that they have been improperly solicited or that they have divulged proprietary or other confidential information, or that their former employers own their research output.

If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of STS101.

We face an inherent risk of product liability as a result of the planned clinical testing of STS101 and will face an even greater risk if we commercialize it. For example, we may be sued if STS101 allegedly causes injury. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure

27

to warn of dangers inherent in the product, negligence, strict liability, and a breach of warranty. Claims could also be asserted under state consumer protection acts. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization of STS101. Even successful defense would require significant financial and management resources. Regardless of the merits or eventual outcome, liability claims may result in:

• decreased demand for STS101;

• injury to our reputation;

• withdrawal of clinical trial participants;

• costs to defend the related litigation;

• a diversion of management’s time and our resources;

• substantial monetary awards to trial participants or patients;

• regulatory investigations, product recalls, withdrawals or labeling, marketing or promotional restrictions;

• loss of revenue; and

• the inability to commercialize STS101.

Our inability to obtain and maintain sufficient product liability insurance at an acceptable cost and scope of coverage to protect against potential product liability claims could prevent or inhibit the commercialization of STS101. We currently carry product liability insurance covering our clinical trials in the amount of $5.0 million in the aggregate. Although we maintain such insurance, any claim that may be brought against us could result in a court judgment or settlement in an amount that is not covered, in whole or in part, by our insurance or that is in excess of the limits of our insurance coverage. Our insurance policies also have various exclusions and deductibles, and we may be subject to a product liability claim for which we have no coverage. We will have to pay any amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations or that are not covered by our insurance, and we may not have, or be able to obtain, sufficient funds to pay such amounts. Moreover, in the future, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses. If and when we obtain approval for marketing any dosage of STS101, we intend to expand our insurance coverage to include its sale; however, we may be unable to obtain this liability insurance on commercially reasonable terms or at all.

Our insurance policies may be inadequate and potentially expose us to unrecoverable risks.

We have limited director and officer insurance and product liability insurance policies. Any significant insurance claims would have a material adverse effect on our business, financial condition and results of operations. Insurance availability, coverage terms, including deductibles and pricing, continue to vary with market conditions. We endeavor to obtain appropriate insurance coverage for insurable risks that we identify; however, we may fail to correctly anticipate or quantify insurable risks, we may not be able to obtain appropriate insurance coverage, and insurers may not respond as we intend to cover insurable events that may occur. We have observed rapidly changing conditions in the insurance markets relating to nearly all areas of traditional corporate insurance. Such conditions have resulted in higher premium costs, higher policy deductibles and lower coverage limits. For some risks, we may not have or maintain insurance coverage because of cost or availability.

We may conduct additional clinical trials and consider additional headache indications for STS101 to enhance its commercial potential; however, these trials may not produce results necessary to enable additional commercial potential or enhancement of its label.

Following any initial regulatory approval and successful commercialization of STS101 in the United States, we may conduct additional clinical trials and consider additional headache indications for STS101 to expand its

28

commercial potential. However, any positive results from our ongoing or planned Phase 3 clinical trials of STS101 and results from clinical testing by third parties of other DHE products and product candidates, may not be predictive of the results of any such additional clinical trials. Therefore, there can be no assurance that we will ever be successful enhancing the commercial potential of STS101 or expanding its label.

Any future collaboration arrangements that we may enter into, may not be successful, which could significantly limit the likelihood of receiving the potential economic benefits of the collaboration and adversely affect our ability to develop and commercialize STS101.

To the extent that we pursue collaborations relating to STS101 in the future, we may face significant competition in seeking appropriate collaborators and may not be able to ultimately enter into collaborations. Moreover, any such collaboration arrangements may be complex and time-consuming to negotiate, document, implement and maintain and challenging to manage. We may not be successful in our efforts with any such collaborator and we may never receive any milestone or royalty payments under any such agreements. Further, the terms of any collaborations or other arrangements that we may establish, may not be favorable to us.

The success of any collaboration arrangement will depend heavily on the efforts and activities of our collaborators. Collaborations are subject to numerous risks, which may include risks that:

• collaborators have significant discretion in determining the efforts and resources that they will apply to collaborations;

• collaborators may not pursue development and commercialization of STS101 or may elect not to continue or renew development or commercialization programs based on clinical trial results, changes in their strategic focus due to their acquisition of competitive products or their internal development of competitive products, availability of funding or other external factors, such as a business combination that diverts resources or creates competing priorities;

• collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial, abandon a product candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing;

• collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with STS101;

• we could grant exclusive rights to our collaborators that would prevent us from collaborating with others;

• collaborators may not properly maintain or defend our intellectual property rights or may use our intellectual property or proprietary information in a way that gives rise to actual or threatened litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential liability;

• disputes may arise between us and a collaborator that causes the delay or termination of the development or commercialization of STS101 or that results in costly litigation or arbitration that diverts our management’s attention and resources;

• collaborations may be terminated, and, if terminated, this may result in a need for additional capital to pursue further development or commercialization of STS101;

• disputes may arise with respect to the ownership of any intellectual property developed pursuant to our collaborations; and

• a collaborator’s sales and marketing activities or other operations may not be in compliance with applicable laws, resulting in civil or criminal proceedings.

29

If we engage in future acquisitions or strategic partnerships, this may increase our capital requirements, dilute our stockholders, cause us to incur debt or assume contingent liabilities, and subject us to other risks.

We may evaluate various acquisitions and strategic partnerships, including licensing or acquiring complementary products, intellectual property rights, technologies, or businesses. Any potential acquisition or strategic partnership may entail numerous risks, including:

• increased operating expenses and cash requirements;

• the assumption of additional indebtedness or contingent and unforeseen liabilities;

• the issuance of our equity securities;

• assimilation of operations, intellectual property and products of an acquired company, including difficulties associated with integrating new personnel;

• the diversion of our management’s attention from our existing product programs and initiatives in pursuing such a strategic merger or acquisition;

• retention of key employees, the loss of key personnel, and uncertainties in our ability to maintain key business relationships;

• risks and uncertainties associated with the other party to such a transaction, including the prospects of that party and their existing products or product candidates and regulatory approvals; and

• our inability to generate revenue from acquired technology and/or products sufficient to meet our objectives in undertaking the acquisition or even to offset the associated acquisition and maintenance costs.

In addition, if we undertake acquisitions, we may issue dilutive securities, assume or incur debt obligations, incur large one-time expenses and acquire intangible assets that could result in significant future amortization expense. Moreover, we may not be able to locate suitable acquisition opportunities and this inability could impair our ability to grow or obtain access to technology or products that may be important to the development of our business.

We or the third parties upon which we depend may be adversely affected by earthquakes or other natural disasters and our business continuity and disaster recovery plans may not adequately protect us from a serious disaster.

Our corporate headquarters are located in the San Francisco Bay Area, which in the past has experienced both severe earthquakes and wildfires. We do not carry earthquake insurance. In addition, we have a facility in North Carolina, which in the past has experienced severe hurricanes. Earthquakes, wildfires, hurricanes or other natural disasters could severely disrupt our operations, and have a material adverse effect on our business, results of operations, financial condition and prospects.

If a natural disaster, power outage or other event occurred that prevented us from using all or a significant portion of our headquarters or other facilities, that damaged our critical infrastructure or the critical infrastructure of our third-party suppliers, or that otherwise disrupted operations, it may be difficult or, in certain cases, impossible, for us to continue our business for a substantial period of time. The disaster recovery and business continuity plans we have in place currently are limited and are unlikely to prove adequate in the event of a serious disaster or similar event. We may incur substantial expenses as a result of the limited nature of our disaster recovery and business continuity plans, which, particularly when taken together with our lack of earthquake insurance, could have a material adverse effect on our business.

Furthermore, integral parties in our supply chain are similarly vulnerable to natural disasters or other sudden, unforeseen and severe adverse events. If such an event were to affect our supply chain, it could have a material adverse effect on our business.

30

We depend on our information technology systems, and any failure of these systems could harm our business. Any real or perceived security breaches, loss of data, and other disruptions or incidents could compromise the privacy, security, integrity or confidentiality of sensitive information related to our business or prevent us from accessing critical information and expose us to liability and reputational harm, which could adversely affect our business, results of operations and financial condition.

We collect and maintain data and information that is necessary to conduct our business, and we are increasingly dependent on information technology systems and infrastructure to operate our business, including systems infrastructure operated and maintained by our third party suppliers or providers. In the ordinary course of our business, we collect, store and transmit large amounts of confidential information, including intellectual property, proprietary business information and personal information. It is critical that we do so in a secure manner to maintain the privacy, security, confidentiality and integrity of such confidential information. We have established physical, electronic and organizational measures to safeguard and secure our systems and facilities to prevent an information compromise, and rely on commercially available systems, software, tools, and monitoring to provide security for our information technology systems and the processing, transmission and storage of digital information. We have also outsourced elements of our information technology infrastructure, and as a result a number of third-party vendors may or could have access to our confidential information. Our internal information technology systems and infrastructure, and those of our current and any future collaborators, contractors and consultants and other third parties on which we rely, are vulnerable to damage or unauthorized access or use resulting from computer viruses, malware, natural disasters, terrorism, war, telecommunication and electrical failures, denial-of-service attacks, cyber-attacks or cyber-intrusions over the Internet, hacking, phishing and other social engineering attacks, attachments to emails, persons inside our organization (including employees or contractors), lost or stolen devices, or persons with access to systems inside our organization.

The risk of a security breach or disruption or data loss, particularly through social engineering attacks, cyber-attacks or cyber-intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. In addition, the prevalent use of mobile devices that access confidential information increases the risk of data security breaches, which could lead to the loss of confidential information or other intellectual property. The costs to us to mitigate, investigate and respond to potential security incidents, breaches, disruptions, network security problems, bugs, viruses, worms, malicious software programs and security vulnerabilities could be significant, and while we have implemented security measures to protect our data security and information technology systems, our efforts to address these problems may not be successful, and these problems could result in unexpected interruptions, delays, cessation of service and other harm to our business and our competitive position. If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our product development programs. For example, the loss of clinical trial data from completed or ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. Moreover, if a real or perceived security breach affects our systems (or those of our third party providers or suppliers) or results in the loss of or accidental, unlawful or unauthorized access to, use of, release of or other processing of personally identifiable information or clinical trial data, our reputation could be materially damaged. In addition, such a breach may require notification to governmental agencies, the media or individuals pursuant to various federal and state privacy and security laws, if applicable, including the Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended by the Health Information Technology for Clinical Health Act of 2009, or HITECH, and its implementing rules and regulations, as well as regulations promulgated by the Federal Trade Commission and state breach notification laws. We would also be exposed to a risk of loss, negative publicity, harm to our reputation, governmental investigation and/or enforcement actions, claims or litigation and potential liability, which could materially adversely affect our business, results of operations and financial condition. The global data protection landscape is rapidly evolving, and we may be affected by or subject to new, amended or existing laws and regulations in the future, including as our operations continue to expand or if we begin to operate in foreign jurisdictions.

31

Our employees and independent contractors, including principal investigators, consultants, commercial collaborators, service providers and other vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could have an adverse effect on our results of operations.

We are exposed to the risk that our employees and independent contractors, including principal investigators, consultants, any future commercial collaborators, service providers and other vendors may engage in misconduct or other illegal activity. Misconduct by these parties could include intentional, reckless and/or negligent conduct or other unauthorized activities that violate the laws and regulations of the FDA and other similar regulatory bodies, including those laws that require the reporting of true, complete and accurate information to such regulatory bodies; manufacturing standards; U.S. federal and state fraud and abuse laws, data privacy and security laws and other similar non-U.S. laws; or laws that require the true, complete and accurate reporting of financial information or data. Activities subject to these laws also involve the improper use or misrepresentation of information obtained in the course of clinical trials, the creation of fraudulent data in our preclinical studies or clinical trials, or illegal misappropriation of 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 be in compliance with such laws or regulations. In addition, 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 financial results, including, without limitation, the imposition of significant civil, criminal and administrative penalties, damages, monetary fines, disgorgement, possible exclusion from participation in Medicare, Medicaid and other U.S. federal healthcare programs or healthcare programs in other jurisdictions, integrity oversight and reporting obligations to resolve allegations of non-compliance, imprisonment, other sanctions, contractual damages, reputational harm, diminished profits and future earnings and curtailment of our operations, any of which could adversely affect our ability to operate our business and our results of operations.

Our business involves the use of hazardous materials and we and our third-party manufacturers and suppliers must comply with environmental laws and regulations, which can be expensive and restrict how we do business.

Our third-party manufacturers’ and suppliers’ activities involve the controlled storage, use and disposal of hazardous materials owned by us, including the components of STS101 and other hazardous compounds. We and any third-party manufacturers and suppliers we engage are subject to numerous federal, state and local environmental, health and safety laws, regulations and permitting requirements, including those governing laboratory procedures; the generation, handling, use, storage, treatment, and disposal of hazardous and regulated materials and wastes; the emission and discharge of hazardous materials into the ground, air and water; and employee health and safety. Our operations involve the use of hazardous and flammable materials, including chemicals and biological materials. Our operations also produce hazardous waste. In some cases, these hazardous materials and various wastes resulting from their use are stored our manufacturers’ facilities pending their use and disposal. We generally contract with third parties for the disposal of these materials and wastes. We cannot eliminate the risk of contamination, which could cause an interruption of our commercialization efforts, research and development efforts and business operations, environmental damage resulting in costly clean-up and liabilities under applicable laws and regulations governing the use, storage, handling and disposal of these materials and specified waste products.

Although we believe that the safety procedures utilized by our third-party manufacturers for handling and disposing of these materials generally comply with the standards prescribed by these laws and regulations, we cannot guarantee that this is the case or eliminate the risk of accidental contamination or injury from these materials. Under certain environmental laws, we could be held responsible for costs relating to any

32

contamination at our current or past facilities and at third-party facilities. In such an event, we may be held liable for any resulting damages and such liability could exceed our resources and state or federal or other applicable authorities may curtail our use of certain materials and/or interrupt our business operations. Furthermore, environmental laws and regulations are complex, change frequently and have tended to become more stringent. We cannot predict the impact of such changes and cannot be certain of our future compliance.

Compliance with applicable environmental laws and regulations may be expensive, and current or future environmental laws and regulations may impair our research, product development and manufacturing efforts. In addition, we cannot entirely eliminate the risk of accidental injury or contamination from these materials or wastes.

Unfavorable global economic or political conditions could adversely affect our business, financial condition or results of operations.

Our results of operations could be adversely affected by general conditions in the global economy and in the global financial markets. A global financial crisis or a global or regional political disruption could cause extreme volatility in the capital and credit markets. A severe or prolonged economic downturn or political disruption could result in a variety of risks to our business, including weakened demand for STS101, if approved, and our ability to raise additional capital when needed on acceptable terms, if at all. A weak or declining economy or political disruption could also strain our manufacturers or suppliers, possibly resulting in supply disruption, or cause our customers to delay making payments for our services. Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the political or economic climate and financial market conditions could adversely impact our business.

Risks Related to Intellectual Property

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

Our commercial success depends in part on our ability to obtain and maintain patent protection and trade secret protection for STS101, proprietary technologies and their uses as well as our ability to operate without infringing upon the proprietary rights of others. We generally seek to protect our proprietary position by filing patent applications in the United States and abroad related to STS101, proprietary technologies and their uses that are important to our business. Our patent applications cannot be enforced against third parties practicing the technology claimed in such applications unless, and until, patents issue from such applications, and then only to the extent the issued claims cover the technology in appropriate jurisdictions. There can be no assurance that our patent applications or those of our licensors will result in additional patents being issued or that issued patents will afford sufficient protection against competitors with similar technology, nor can there be any assurance that the patents issued will not be infringed, designed around or invalidated by third parties. Even issued patents may later be found invalid or unenforceable or may be modified or revoked in proceedings instituted by third parties before various patent offices or in courts. The degree of future protection for our proprietary rights is uncertain. Only limited protection may be available and may not adequately protect our rights or permit us to gain or keep any competitive advantage. For example, we do not have a patent covering the composition of matter for DHE, the active ingredient in STS101. If we do not adequately protect our intellectual property and proprietary technology, competitors may be able to use STS101 and proprietary technologies and erode or negate any competitive advantage we may have, which could have a material adverse effect on our financial condition and results of operations.

We have applied, and we intend to continue applying, for patents covering aspects of STS101, proprietary technologies and their uses that we deem appropriate. However, we may not be able to apply for patents on certain aspects of STS101, proprietary technologies and their uses in a timely fashion, at a reasonable cost, in all jurisdictions, or at all, and any potential patent coverage we obtain may not be sufficient to prevent substantial competition. As of May 31, 2019, our solely owned patent portfolio includes pending U.S. patent applications

33

and pending foreign patent applications and issued U.S. patents relating to STS101. We cannot be certain that the claims in any of our patent applications will be considered patentable by the United States Patent and Trademark Office, or USPTO, courts in the United States or by the patent offices and courts in foreign countries, nor can we be certain that the claims in our issued patents will not be found invalid or unenforceable if challenged.

The patent application process is subject to numerous risks and uncertainties, and there can be no assurance that we or any of our actual or potential future collaborators will be successful in protecting STS101, proprietary technologies and their uses by obtaining and defending patents. These risks and uncertainties include the following:

• the USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other provisions during the patent process, the noncompliance with which can result in abandonment or lapse of a patent or patent application, and partial or complete loss of patent rights in the relevant jurisdiction;

• patent applications may not result in any patents being issued;

• patents owned or in-licensed by us may be challenged, invalidated, modified, revoked, circumvented, found to be unenforceable or otherwise may not provide any competitive advantage;

• our competitors, many of whom have substantially greater resources than we do and many of whom have made significant investments in competing technologies, may seek or may have already filed for or obtained patents that will limit, interfere with or eliminate our ability to make, use and sell STS101;

• other parties may have designed around our claims or developed technologies that may be related or competitive to our platform, may have filed or may file patent applications and may have received or may receive patents that overlap or conflict with our patent applications, either by claiming the same compositions, methods or devices or by claiming subject matter that could dominate our patent position;

• any successful opposition or other post-grant challenges to any patents owned by or licensed to us could result in revocation or amendment to our patents so that they no longer cover STS101;

• because patent applications in the United States and most other countries are confidential for a period of time after filing, we cannot be certain that we or our licensors were the first to file any patent application related to STS101, proprietary technologies and their uses;

• an interference proceeding can be provoked by a third party or instituted by the USPTO to determine who was the first to invent any of the subject matter covered by the patent claims of our applications for any application with an effective filing date before March 16, 2013;

• there may be significant pressure on the U.S. government and international governmental bodies to limit the scope of patent protection both inside and outside the United States for disease treatments that prove successful, as a matter of public policy regarding worldwide health concerns; and

• countries other than the United States may have patent laws less favorable to patentees than those upheld by U.S. courts, allowing foreign competitors a better opportunity to create, develop and market competing product candidates.

The patent position of pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions, and has been the subject of much litigation in recent years. Moreover, the patent prosecution process is also expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. Although we enter into non-disclosure and confidentiality agreements with parties who have access to patentable aspects of our research and development output, such as our employees, corporate collaborators, outside scientific collaborators, CROs, contract manufacturers, consultants, advisors and other third parties, any of these parties may breach such agreements and disclose such output before a patent application is filed, thereby jeopardizing our ability to seek patent protection.

34

The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our patents, if issued, or the patent rights that we license from others, may be challenged in the courts or patent offices in the United States and abroad. Once granted, patents may remain open to opposition, interference, re-examination, post-grant review, inter partes review, nullification or derivation action in court or before patent offices or similar proceedings for a given period after allowance or grant, during which time third parties can raise objections against such initial grant. Such challenges may result in loss of exclusivity or in patent claims being narrowed, invalidated or held unenforceable, which could limit our ability to stop others from using or commercializing similar or identical products, or limit the duration of the patent protection of STS101. 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 intellectual property may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.

Our ability to enforce our patent rights depends on our ability to detect infringement. It may be difficult to detect infringers who do not advertise the components or methods that are used in connection with their products and services. Moreover, it may be difficult or impossible to obtain evidence of infringement in a competitor’s or potential competitor’s product or service. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded if we were to prevail may not be commercially meaningful.

In addition, proceedings to enforce or defend our patents could put our patents at risk of being invalidated, held unenforceable or interpreted narrowly. Such proceedings could also provoke third parties to assert claims against us or licensor Shin Nippon Biomedical Laboratories, Ltd., or SNBL, which we have agreed to indemnify under certain circumstances, including that some or all of the claims in one or more of our patents are invalid or otherwise unenforceable. If any of our patents covering STS101 are invalidated or found unenforceable, or if a court found that valid, enforceable patents held by third parties covered STS101, our competitive position could be harmed or we could be required to incur significant expenses to enforce or defend our rights. If we initiate lawsuits to protect or enforce our patents, or litigate against third party claims, such proceedings would be expensive and would divert the attention of our management and technical personnel.

The degree of future protection for our proprietary rights is uncertain, and we cannot ensure that:

• any of our patents, or any of our pending patent applications, if issued, or those of our licensors, will include claims having a scope sufficient to protect STS101;

• any of our pending patent applications or those of our licensors may issue as patents;

• others will not or may not be able to make, use, offer to sell, or sell products that are the same as or similar to our own but that are not covered by the claims of the patents that we own or license;

• we will be able to successfully commercialize STS101 on a substantial scale, if approved, before the relevant patents that we own or license expire;

• we were the first to make the inventions covered by each of the patents and pending patent applications that we own or license;

• we or our licensors were the first to file patent applications for these inventions;

• others will not develop similar or alternative technologies that do not infringe the patents we own or license;

• any of the patents we own or license will be found to ultimately be valid and enforceable;

• any patents issued to us or our licensors will provide a basis for an exclusive market for our commercially viable products or will provide us with any competitive advantages;

• a third party may not challenge the patents we own or license and, if challenged, a court would hold that such patents are valid, enforceable and infringed;

35

• the patents of others will not have an adverse effect on our business;

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

• we will develop additional proprietary technologies or products that are separately patentable; or

• our commercial activities or products will not infringe upon the patents of others.

To the extent we obtain licenses from or collaborate with third parties, 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 that we license from third parties, or such activities, if controlled by us, may require the input of such third parties. We may also require the cooperation of our licensors and collaborators to enforce any licensed patent rights, and such cooperation may not be provided. Therefore, these patents and applications may not be prosecuted and enforced in a manner consistent with the best interests of our business. Moreover, if we do obtain necessary licenses, we will likely have obligations under those licenses, and any failure to satisfy those obligations could give our licensor the right to terminate the license. Termination of a necessary license, or expiration of licensed patents or patent applications, could have a material adverse impact on our business.

The lives of our patents may not be sufficient to effectively protect STS101 and our business.

Patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years after its first effective non-provisional filing date. Although various extensions may be available, the life of a patent, and the protection it affords, is limited. Even if patents covering STS101, proprietary technologies and their uses are obtained, once the patent life has expired, we may be open to competition. In addition, although upon issuance in the United States a patent’s life can be increased based on certain delays caused by the USPTO, this increase can be reduced or eliminated based on certain delays caused by the patent applicant during patent prosecution. Given the amount of time required for the development, testing and regulatory review of STS101, patents protecting it might expire before or shortly after it is commercialized. If we do not have sufficient patent life to protect STS101, proprietary technologies and their uses, our business and results of operations will be adversely affected.

If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.

We rely on the protection of our trade secrets, including unpatented know-how, technology and other proprietary information. We have taken steps to protect our trade secrets and unpatented know-how, including entering into confidentiality agreements with third parties, and confidential information and inventions agreements with employees, consultants and advisors. In addition to contractual measures, we try to protect the confidential nature of our proprietary information using commonly accepted physical and technological security measures. Despite these efforts, we cannot provide any assurances that all such agreements have been duly executed, and any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. In addition, such security measures may not provide adequate protection for our proprietary information, for example, in the case of misappropriation of a trade secret by an employee, consultant, customer or third party with authorized access. Our security measures may not prevent an employee, consultant or customer from misappropriating our trade secrets and providing them to a competitor, and recourse we take against such misconduct may not provide an adequate remedy to protect our interests fully. 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. Unauthorized parties may also attempt to copy or reverse engineer certain aspects of STS101 that we consider proprietary. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret can be difficult, expensive and time-consuming, and the outcome is unpredictable. Even though we use commonly accepted security measures, the criteria for protection of trade secrets can vary among different jurisdictions.

36

Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts inside and outside the United States are less willing or unwilling to protect trade secrets. Moreover, third parties may still obtain this information or may come upon this or similar information independently, and we would have no right to prevent them from using that technology or information to compete with us. Trade secrets will over time be disseminated within the industry through independent development, the publication of journal articles and the movement of personnel skilled in the art from company to company or academic to industry scientific positions. Though our agreements with third parties typically restrict the ability of our advisors, employees, collaborators, licensors, suppliers, third-party contractors and consultants to publish data potentially relating to our trade secrets, our agreements may contain certain limited publication rights. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent such competitor from using that technology or information to compete with us, which could harm our competitive position. Because from time to time we expect to rely on third parties in the development, manufacture, and distribution of STS101, we must, at times, share trade secrets with them. Despite employing the contractual and other security precautions described above, the need to share trade secrets increases the risk that such trade secrets become known by our competitors, are inadvertently incorporated into the technology of others, or are disclosed or used in violation of these agreements. If any of these events occurs or if we otherwise lose protection for our trade secrets, the value of this information may be greatly reduced and our competitive position would be harmed. If we do not apply for patent protection prior to such publication or if we cannot otherwise maintain the confidentiality of our proprietary technology and other confidential information, then our ability to obtain patent protection or to protect our trade secret information may be jeopardized.

Our rights to develop and commercialize STS101 are subject in part to the terms and conditions of a license granted to us by SNBL. The patent protection, prosecution and enforcement for STS101 may be dependent on third parties.

We currently are reliant upon a license of certain patent rights and proprietary technology pursuant to a licensing and assignment agreement we entered with SNBL in June 2016, or the SNBL License. Such rights and technology are important or necessary to the development of STS101. This and other licenses we may enter into in the future may not provide adequate rights to use such intellectual property and technology in all relevant fields of use or in all territories in which we may wish to develop or commercialize our technology and products in the future. As a result, we may not be able to develop and commercialize our technology and products in fields of use and territories for which we are not granted rights pursuant to such licenses.

Licenses to additional third-party technology that may be required for our development programs may not be available in the future or may not be available on commercially reasonable terms, which could have a material adverse effect on our business and financial condition.

In some circumstances, we may not have the right to control the preparation, filing, prosecution and enforcement of patent applications, or to maintain the patents, covering technology that we license from third parties. In addition, in some instances, the SNBL License requires us to negotiate in good faith a strategy with respect to infringement, and in some instances, SNBL retains the sole right to initiate and control some infringing activities, before we can enforce patent rights. Therefore, we cannot be certain that SNBL or any future licensors or collaborators will prosecute, maintain, enforce and defend such intellectual property rights in a manner consistent with the best interests of our business, including by taking reasonable measures to protect the confidentiality of know-how and trade secrets, or by paying all applicable prosecution and maintenance fees related to intellectual property registrations for STS101. We also cannot be certain that our licensors have drafted or prosecuted the patents and patent applications licensed to us in compliance with applicable laws and regulations, which may affect the validity and enforceability of such patents or any patents that may issue from such applications. If they fail to do so, this could cause us to lose rights in any applicable intellectual property that we in-license, and as a result our ability to develop and commercialize STS101 may be adversely affected and we may be unable to prevent competitors from making, using and selling competing products.

37

The SNBL License imposes a low single-digit royalty on net sales of STS101 along with certain other obligations on us, and any future licenses, if required, likely will impose various royalty payments, milestones, and other obligations on us. If we fail to comply with any of these obligations, we may be required to pay damages and the licensor may have the right to terminate the license. Termination by the licensor would cause us to lose valuable rights, and could prevent us from developing and commercializing STS101 and proprietary technologies. Our business would suffer if any current or future licenses terminate, if the licensors fail to abide

by the terms of the license, if the licensors fail to enforce licensed patents against infringing third parties, if the licensed patents or other rights are found to be invalid or unenforceable, or if we are unable to enter into necessary licenses on acceptable terms. Furthermore, if any current or future licenses terminate, or if the underlying patents fail to provide the intended exclusivity, competitors or other third parties may gain the freedom to seek regulatory approval of, and to market, products identical to ours. Moreover, our 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. In addition, while we cannot currently determine the amount of the royalty obligations we would be required to pay on sales of future products, if any, the amounts may be significant. The amount of our future royalty obligations will depend on the technology and intellectual property we use in products that we successfully develop and commercialize, if any. Therefore, even if we successfully develop and commercialize STS101, we may be unable to achieve or maintain profitability.

Litigation or other proceedings or third-party claims of intellectual property infringement could require us to spend significant time and money and could prevent us from selling our products.

Our commercial success depends significantly on our ability to operate without infringing the patents and other proprietary rights of third parties. However, our research, development and commercialization activities may be subject to claims that we infringe or otherwise violate patents or other intellectual property rights owned or controlled by third parties. Claims by third parties that we infringe their proprietary rights may result in liability for damages or prevent or delay our developmental and commercialization efforts. We cannot assure you that our operations do not, or will not in the future, infringe existing or future patents.

Other entities may have or obtain patents or proprietary rights that could limit our ability to make, use, sell, offer for sale or import STS101 or impair our competitive position. There is a substantial amount of litigation, both within and outside the United States, involving patent and other intellectual property rights in the pharmaceutical and biotechnology industries, including patent infringement lawsuits, interferences, oppositions, reexaminations, inter partes review proceedings and post-grant review proceedings before the USPTO and/or corresponding foreign patent offices. Numerous third-party U.S. and foreign issued patents and pending patent applications exist in the fields of STS101. There may be third-party patents or patent applications with claims to materials, formulations, methods of manufacture or methods for treatment related to the use or manufacture of STS101.

Furthermore, 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 and can involve other factors such as expert opinion. Our interpretation of the relevance or the scope of claims in a patent or a pending application may be incorrect, which may negatively impact our ability to market STS101. Further, we may incorrectly determine that our technologies or STS101 are not covered by a third party patent or may incorrectly predict whether a third party’s pending patent 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 STS101.

As the pharmaceutical industry expands and more patents are issued, the risk increases that STS101 may be subject to claims of infringement of the patent rights of third parties. Our competitors in both the United States and abroad, many of which have substantially greater resources and have made substantial investments in patent portfolios and competing technologies, may have applied for or obtained or may in the future apply for and

38

obtain, patents that will prevent, limit or otherwise interfere with our ability to make, use and sell STS101. We do not always conduct independent reviews of pending patent applications of and patents issued to third parties.

Patent applications in the United States and elsewhere are typically 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. Certain U.S. applications that will not be filed outside the United States can remain confidential until patents issue. In addition, patent applications in the United States and elsewhere can be pending for many years before issuance, or unintentionally abandoned patents or applications can be revived. Furthermore, pending patent applications that have been published can, subject to certain limitations, be later amended in a manner that could cover our technologies, STS101 or the use of STS101. As such, there may be applications of others now pending or recently revived patents of which we are unaware. These applications may later result in issued patents, or the revival of previously abandoned patents, that will prevent, limit or otherwise interfere with our ability to make, use or sell STS101. Because patent applications are maintained as confidential for a certain period of time, until the relevant application is published we may be unaware of third-party patents that may be infringed by commercialization of STS101, and cannot be certain that we were the first to file a patent application related to a product candidate or technology. Moreover, because patent applications can take many years to issue, there may be currently-pending patent applications that may later result in issued patents that STS101 may infringe. In addition, identification of third-party patent rights that may be relevant to our technology is difficult because patent searching is imperfect due to differences in terminology among patents, incomplete databases and the difficulty in assessing the meaning of patent claims. Any claims of patent infringement asserted by third parties would be time consuming and could:

• result in costly litigation;

• divert the time and attention of our technical personnel and management;

• cause development delays;

• prevent us from commercializing STS101 until the asserted patent expires or is held finally invalid or not infringed in a court of law;

• require us to develop non-infringing technology, which may not be possible on a cost-effective basis;

• require us to pay damages to the party whose intellectual property rights we may be found to be infringing, which may include treble damages if we are found to have been willfully infringing such intellectual property;

• require us to pay the attorney’s fees and costs of litigation to the party whose intellectual property rights we may be found to be infringing; and/or

• require us to enter into royalty or licensing agreements, which may not be available on commercially reasonable terms, or at all.

Although no third party has asserted a claim of patent infringement against us as of the date of this prospectus, others may hold proprietary rights that could prevent STS101 from being marketed. Any patent-related legal action against us claiming damages and seeking to enjoin commercial activities relating to STS101 or processes could subject us to potential liability for damages, including treble damages if we were determined to willfully infringe, and require us to obtain a license to manufacture or market STS101. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business. We cannot predict whether we would prevail in any such actions or that any license required under any of these patents would be made available on commercially acceptable terms, if at all. Even if such licenses are available, we could incur substantial costs related to royalty payments for licenses obtained from third parties, which could negatively affect our gross margins, and the rights may be non-exclusive, which could give our competitors access to the same technology or intellectual property rights licensed to us. In addition, we cannot be certain that we could redesign STS101 or processes to avoid infringement, if necessary. Accordingly, an adverse determination in a judicial or administrative proceeding, or

39

the failure to obtain necessary licenses, could prevent us from developing and commercializing STS101, which could harm our business, financial condition and operating results. In addition, intellectual property litigation, regardless of its outcome, may cause negative publicity and could prohibit us from marketing or otherwise commercializing STS101.

If we collaborate with third parties in the development of technology in the future, our collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as to invite litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to litigation or potential liability. Further, collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability. Also, we may be obligated under our agreements with our collaborators, licensors, suppliers and others to indemnify and hold them harmless for damages arising from intellectual property infringement by us.

We may be involved in lawsuits to protect or enforce our patents or the patents of our licensors, which could be expensive, time consuming, and unsuccessful. Further, our issued patents could be found invalid or unenforceable if challenged in court.

Competitors may infringe our intellectual property rights or those of our licensors. To prevent infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time-consuming. In addition, in a patent infringement proceeding, a court may decide that a patent we own or in-license is not valid, is unenforceable and/or is not infringed. If we or any of our potential future collaborators were to initiate legal proceedings against a third party to enforce a patent directed at STS101, the defendant could counterclaim that our patent is invalid and/or unenforceable in whole or in part. In patent litigation in the United States, defendant counterclaims alleging invalidity and/or unenforceability are commonplace. Grounds for a validity challenge include an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness or non-enablement. Grounds for an unenforceability assertion could include an allegation that someone connected with prosecution of the patent withheld relevant information from the USPTO or made a misleading statement during prosecution. Third parties may also raise similar claims before the USPTO, even outside the context of litigation. Similar mechanisms for challenging the validity and enforceability of a patent exist in ex-U.S. patent offices and may result in the revocation, cancellation, or amendment of any ex-U.S. patents we hold in the future. The outcome following legal assertions of invalidity and unenforceability is unpredictable, and prior art could render our patents or those of our licensors invalid. If a defendant were to prevail on a legal assertion of invalidity and/or unenforceability, we would lose at least part, and perhaps all, of the patent protection on such product candidate. Such a loss of patent protection would have a material adverse impact on our business.

Interference or derivation proceedings provoked by third parties or brought by us or declared by the USPTO may be necessary to determine the priority of inventions with respect to our patents or patent applications or those of our licensors. An unfavorable outcome could require us to cease using the related technology or to attempt to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms or at all, or if a non-exclusive license is offered and our competitors gain access to the same technology. Our defense of litigation or interference proceedings may fail and, even if successful, may result in substantial costs and distract our management and other employees. In addition, the uncertainties associated with litigation could have a material adverse effect on our ability to raise the funds necessary to continue our clinical trials, continue our research programs, license necessary technology from third parties or enter into development or manufacturing partnerships that would help us bring STS101 to market.

Even if resolved in our favor, litigation or other legal proceedings relating to our intellectual property rights 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

40

negative, it could have a substantial adverse effect on the price of our common stock. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing or distribution activities. We may not have sufficient financial or other resources to conduct such litigation or proceedings adequately. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could compromise our ability to compete in the marketplace.

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 a material adverse effect on the price of our common stock.

We may fail to comply with our obligations under the SNBL License or any future agreements pursuant to which we may license or otherwise acquire intellectual property rights or technology, which could result in the loss of rights or technology that are material to our business.

Our business is dependent on the SNBL License for certain patent rights and know-how that are directed to SNBL’s proprietary nasal drug delivery technology, including its proprietary nasal delivery device and formulation technologies, for use with DHE. Our rights under the SNBL License and any license for intellectual property or technology that we may enter into in the future are and will be subject to the continuation of and our compliance with the terms of these agreements. Disputes may arise regarding our rights to intellectual property licensed to us from a third party, including but not limited to:

• the scope of rights granted under the license agreement and other interpretation-related issues;

• the extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the licensing agreement;

• the sublicensing of patent and other rights;

• our diligence obligations under the license agreement and what activities satisfy those diligence obligations;

• the ownership of inventions and know-how resulting from the creation or use of intellectual property by us, alone or with our licensors and collaborators;

• the scope and duration of our payment obligations;

• our rights upon termination of such agreement; and

• the scope and duration of exclusivity obligations of each party to the agreement.

Any disputes over intellectual property and other rights under the SNBL License could prevent or impair our ability to maintain the license on acceptable terms and our ability to successfully develop and commercialize STS101. In addition, if we fail to comply with our obligations under the SNBL License, it may be terminated or the scope of our rights under it may be reduced and we might be unable to develop, manufacture or market STS101.

We may be subject to claims that we have wrongfully hired an employee from a competitor or that we or our employees have wrongfully used or disclosed alleged confidential information or trade secrets of their former employers.

As is common in the pharmaceutical and biotechnology industries, in addition to our employees, we engage the services of consultants to assist us in the development of STS101. Many of these consultants, and many of

41

our employees, were previously employed at, or may have previously provided or may be currently providing consulting services to, other pharmaceutical or biotechnology companies including our competitors or potential competitors. Although we try to ensure that our employees and consultants do not use the proprietary information or know-how of others in their work for us, we may become subject to claims that we, our employees or a consultant inadvertently or otherwise used or disclosed trade secrets or other information proprietary to their former employers or their former or current clients. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, which could adversely affect our business. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to our management team.

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

We may also be subject to claims that former employees, collaborators or other third parties have an ownership interest in our patents or other intellectual property. In addition, we may face claims by third parties that our agreements with employees, contractors or consultants obligating them to assign intellectual property to us are ineffective or in conflict with prior or competing contractual obligations of assignment, which could result in ownership disputes regarding intellectual property we have developed or will develop and interfere with our ability to capture the commercial value of such intellectual property. Litigation may be necessary to defend against these and other claims challenging inventorship or ownership. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and distraction to management and other employees.

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

Our unregistered trademarks or trade names may be challenged, infringed, circumvented or declared generic or determined to be infringing on other marks. We may not be able to protect our rights to these trademarks and trade names, which we need to build name recognition among potential partners or customers in our markets of interest. At times, competitors may adopt trade names or trademarks similar to ours, thereby impeding our ability to build brand identity and possibly leading to market confusion. In addition, there could be potential trade name or trademark infringement claims brought by owners of other trademarks or trademarks that incorporate variations of our unregistered trademarks or trade names. 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. We may license our trademarks and trade names to third parties, such as distributors. Though these license agreements may provide guidelines for how our trademarks and trade names may be used, a breach of these agreements or misuse of our trademarks and tradenames by our licensees may jeopardize our rights in or diminish the goodwill associated with our trademarks and trade names. Our efforts to enforce or protect our proprietary rights related to trademarks, trade names, trade secrets, domain names, copyrights or other intellectual property may be ineffective and could result in substantial costs and diversion of resources and could adversely affect our financial condition or results of operations.

Changes in patent law in the U.S. or in other countries could diminish the value of patents in general, thereby impairing our ability to protect STS101.

Our patent rights may be affected by developments or uncertainty in U.S. or ex-U.S. patent statutes, patent case laws in USPTO rules and regulations or in the rules and regulations of ex-U.S. patent offices. There are a number of recent changes to the U.S. patent laws that may have a significant impact on our ability to protect our technology and enforce our intellectual property rights. For example, on September 16, 2011, the Leahy-Smith America Invents Act, or Leahy-Smith Act, was signed into law. The Leahy-Smith Act includes a number of significant changes to U.S. patent law. These include provisions that affect the way patent applications will be

42

prosecuted and may also affect patent litigation. In particular, under the Leahy-Smith Act, the United States transitioned in March 2013 to a “first to file” system in which the first inventor to file a patent application will be entitled to the patent. Third parties are allowed to submit prior art before the issuance of a patent by the USPTO, and may become involved in post-grant proceedings including opposition, derivation, reexamination, inter partes review or interference proceedings challenging our patent rights or the patent rights of others. An adverse determination in any such submission, proceeding or litigation could reduce the scope or enforceability of, or invalidate, our patent rights, which could adversely affect our competitive position. This could have a negative impact on some of our intellectual property and could increase uncertainties surrounding obtaining and enforcement or defense of our issued patents. In addition, Congress may pass patent reform legislation that is unfavorable to us. The 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 Congress, the federal courts and the USPTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents we might obtain in the future.

Similarly, statutory or judicial changes to the patent laws of other countries may increase the uncertainties and costs surrounding the prosecution of patent applications and the enforcement or defense of issued patents.

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

Filing, prosecuting and defending all current and future patents in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States can be less extensive than those in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing products made using our inventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we have patent protection but enforcement is not as strong as that in the United States. These products may compete with STS101, and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

The legal systems of many foreign countries do not favor the enforcement of patents 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. For example, some foreign countries have compulsory licensing laws under which a patent owner must grant licenses to third parties. In addition, some countries limit the enforceability of patents against third parties, including government agencies or government contractors. In these countries, patents may provide limited or no benefit. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful. 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.

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

The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other provisions during the patent process. Periodic maintenance fees,

43

renewal fees, annuity fees and various other governmental fees on patents and/or applications will be due to be paid to the USPTO and various governmental patent agencies outside of the U.S. in several stages over the lifetime of the patents and/or applications. We employ reputable professionals and rely on such third parties to help us comply with these requirements and effect payment of these fees with respect to the patents and patent applications that we own, and if we license intellectual property we may have to rely upon our licensors to comply with these requirements and effect payment of these fees with respect to any patents and patent applications that we license. In many cases, an inadvertent lapse can be cured by payment of a late fee or by other means in accordance with the applicable rules. However, there are situations in which noncompliance can result in abandonment or lapse of a patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, competitors might be able to enter the market earlier than would otherwise have been the case.

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. For example:

• others may be able to make therapies that are similar to ours but that are not covered by the claims of the patents that we own or have exclusively licensed;

• we or our licensors or future collaborators might not have been the first to make the inventions covered by the issued patents or pending patent applications that we own or have exclusively licensed;

• we or our licensors or future collaborators might not have been the first to file patent applications covering certain of our inventions;

• others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights;

• it is possible that our pending patent applications will not lead to issued patents;

• issued patents that we own or have exclusively licensed may be held invalid or unenforceable, as a result of legal challenges by our competitors;

• 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;

• we may not develop additional proprietary technologies that are patentable; and

• the patents of others may have an adverse effect on our business.

Should any of these events occur, they could significantly harm our business, results of operations and prospects.

Risks Related to Government Regulation

Even if we obtain regulatory approval for STS101, STS101 will remain subject to regulatory scrutiny.

If STS101 is approved, it will be subject to ongoing regulatory requirements for manufacturing, labeling, packaging, storage, advertising, promotion, sampling, record-keeping, conduct of post-marketing studies, and submission of safety, efficacy, and other post- market information, including both federal and state requirements in the United States and requirements of comparable foreign regulatory authorities.

Manufacturers and manufacturers’ facilities are required to comply with extensive FDA and comparable foreign regulatory authority requirements, including ensuring that quality control and manufacturing procedures

44

conform to cGMP regulations. As such, we and our contract manufacturers will be subject to continual review and inspections to assess compliance with cGMP and adherence to commitments made in any approved marketing application. Accordingly, we and others with whom we work must continue to expend time, money, and effort in all areas of regulatory compliance, including manufacturing, production, and quality control.

We will have to comply with requirements concerning advertising and promotion for STS101. Promotional communications with respect to prescription drugs are subject to a variety of legal and regulatory restrictions and must be consistent with the information in the product’s approved label. As such, we may not promote STS101 for indications or uses for which they do not have approval. However, companies may share truthful and not misleading information that is otherwise consistent with a product’s FDA approved labeling. We also must submit new or supplemental applications and obtain approval for certain changes to STS101, if approved, product labeling, or manufacturing process. We could also be asked to conduct post-marketing clinical studies to verify the safety and efficacy of STS101 in general or in specific patient subsets. An unsuccessful post-marketing study or failure to complete such a study could result in the withdrawal of marketing approval.

If we discover previously unknown problems with STS101, such as adverse events of unanticipated severity or frequency, or problems with the facility where STS101 is manufactured, or if the FDA disagrees with the promotion, marketing or labeling of STS101, the FDA may impose restrictions on it or us, including requiring withdrawal of it from the market. If we fail to comply with applicable regulatory requirements, the FDA and other regulatory authorities may, among other things:

• issue warning letters;

• impose civil or criminal penalties;

• suspend or withdraw regulatory approval;

• suspend any of our ongoing clinical studies;

• refuse to approve pending applications or supplements to approved applications;

• impose restrictions on our operations, including closing our contract manufacturers’ facilities; or

• require a product recall, seizure or detention.

Any government action or investigation of alleged violations of law could require us to expend significant time and resources in response, and could generate negative publicity. Any failure to comply with ongoing regulatory requirements may significantly and adversely affect our ability to commercialize and generate revenue from STS101. If regulatory sanctions are applied or if regulatory approval is withdrawn, the value of our company and our operating results will be adversely affected.

Moreover, the policies of the FDA and of other regulatory authorities may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of STS101. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative or executive action, either in the United States or abroad. For example, certain policies of the Trump administration may impact our business and industry. Namely, the Trump administration has taken several executive actions, including the issuance of a number of Executive Orders, that could impose significant burdens on, or otherwise materially delay, the FDA’s ability to engage in routine oversight activities such as implementing statutes through rulemaking, issuance of guidance, and review and approval of marketing applications. It is difficult to predict how these orders will be implemented, and the extent to which they will impact the FDA’s ability to exercise its regulatory authority. If these executive actions impose restrictions on the FDA’s ability to engage in oversight and implementation activities in the normal course, our business may be negatively impacted. In addition, if we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we could lose any marketing approval that we may have obtained and we may not achieve or sustain profitability.

45

If STS101 obtains regulatory approval, competitors could enter the market with generic versions, which may result in a material decline in sales of affected products.

Under the Hatch-Waxman Amendments, a pharmaceutical manufacturer may file an abbreviated new drug application, or ANDA, seeking approval of a generic version of an approved drug product. A manufacturer may also submit a new drug application, or NDA, under section 505(b)(2) of the Federal Food, Drug, and Cosmetic Act, which may be for a new or improved version of the originally approved drug product. The Hatch-Waxman Amendments also provide for certain periods of regulatory exclusivity, which preclude FDA approval of an ANDA or 505(b)(2) NDA for a specific timeframe. In addition to this non-patent exclusivity, an NDA holder may have patents claiming the active ingredient, product formulation or an approved use of the drug, which would be listed in the FDA publication, “Approved Drug Products with Therapeutic Equivalence Evaluations,” known as the Orange Book. If there are patents listed in the Orange Book for a product, a generic or 505(b)(2) applicant that seeks to market its product before expiration of the patents must include in their applications what is known as a “Paragraph IV” certification, challenging the validity or enforceability of, or claiming non-infringement of, the listed patent or patents. Notice of the certification must be given to the patent owner and NDA holder and if, within 45 days of receiving notice, either the patent owner or NDA holder sues for patent infringement, approval of the ANDA or 505(b)(2) NDA is stayed for up to 30 months.

Accordingly, if STS101 is approved, including through the 505(b)(2) pathway, competitors could file ANDAs for generic versions of STS101. If there are patents listed for STS101 in the Orange Book, those ANDAs would be required to include a certification as to each listed patent indicating whether the ANDA applicant does or does not intend to challenge the patent. We cannot predict which, if any, patents in our current portfolio or patents we may obtain in the future will be eligible for listing in the Orange Book, how any generic competitor would address such patents, whether we would sue on any such patents, or the outcome of any such suit.

We may not be successful in securing or maintaining proprietary patent protection for STS101. Moreover, if any of our owned or in-licensed patents that are listed in the Orange Book are successfully challenged by way of a Paragraph IV certification and subsequent litigation, STS101 could immediately face generic competition and its sales would likely decline rapidly and materially.

The successful commercialization of STS101 will depend in part on the extent to which governmental authorities, private health insurers, managed care plans and other third-party payors provide coverage, adequate reimbursement levels and implement pricing policies favorable for STS101. Failure to obtain or maintain coverage and adequate reimbursement for STS101, if approved, could limit our ability to market those products and decrease our ability to generate revenue.

The availability of coverage and adequacy of reimbursement by governmental healthcare programs, such as Medicare and Medicaid, private health insurers, managed care plans and other third-party payors are essential for most patients to be able to afford medical services and pharmaceutical products such as STS101 that receive FDA approval. Our ability to achieve acceptable levels of coverage and reimbursement by third-party payors for our products will have an effect on our ability to successfully commercialize STS101.

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. The process for determining whether a third-party payor will provide coverage for a product typically is separate from the process for setting the price of such product or for establishing the reimbursement rate that the payor will pay for the product once coverage is approved. Third-party payors may limit coverage to specific products on an approved list, also known as a formulary, which might not include all of the FDA-approved products for a particular indication, or place products at certain formulary levels that result in lower reimbursement levels and higher cost-sharing obligation imposed on patients. One third-party payor’s decision to cover a particular medical product or service does not ensure that other payors will also provide coverage for the medical product or service. As a result, the coverage determination process will often require us to provide scientific and clinical

46

support for the use of our products to each payor separately and can be a time-consuming process, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance. We cannot be sure that coverage will be available for any product that we may develop. A decision by a third-party payor not to cover STS101 could reduce physician utilization of our products once approved and adversely affect our business, financial condition, results of operations and prospects.

Assuming there is coverage for our products by a third-party payor, the resulting reimbursement payment rates may not be adequate or may require co-payments that patients find unacceptably high. Furthermore, rules and regulations regarding reimbursement change frequently, in some cases on short notice, and we believe that changes in these rules and regulations are likely. Third-party payors increasingly are challenging prices charged for pharmaceutical products and services, and many third-party payors may refuse to provide coverage and adequate reimbursement for particular drugs or biologics when an equivalent generic drug, biosimilar or a less expensive therapy is available. It is possible that a third-party payor may consider STS101 as substitutable and only offer to reimburse patients for the less expensive product. For example, there are currently generic versions of both DHE liquid nasal spray products and DHE injectable products, which we may compete with. Even if we show improved efficacy or improved convenience of administration with STS101, pricing of other third-party therapeutics may limit the amount we will be able to charge for our products. These third-party payors may deny or revoke the reimbursement status of our products, if approved, or establish prices for our products at levels that are too low to enable us to realize an appropriate return on our investment. If reimbursement is not available, is decreased or eliminated in the future, or is available only at limited levels, we may not be able to successfully commercialize our products and may not be able to obtain a satisfactory financial return on our products.

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 our products, if any. 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 our products. Accordingly, in markets outside the United States, the reimbursement for our products may be reduced compared with the United States and may be insufficient to generate commercially reasonable revenue and profits.

Our business operations and current and future relationships with investigators, healthcare professionals, consultants, third-party payors, patient organizations 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, patient organizations and customers, may expose us to broadly applicable fraud and abuse and other healthcare laws. 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 STS101, if approved. Such laws include, but are not limited to:

• 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 any U.S. federal healthcare program, 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;

• the U.S. federal civil and criminal false claims and civil monetary penalties laws, including the civil federal False Claims Act, which can be enforced through civil whistleblower or qui tam actions, which

47

prohibit, among other things, individuals or entities from 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. Pharmaceutical manufacturers can cause false claims to be presented to the U.S. federal government by engaging in impermissible marketing practices, such as the off-label promotion of a product for an indication for which it has not received FDA approval. 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 civil False Claims Act;

• 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 healthcare fraud statute implemented under HIPAA or specific intent to violate it in order to have committed a violation;

• HIPAA, as amended by HITECH, and its implementing regulations, which also imposes certain obligations, including mandatory contractual terms, with respect to safeguarding the privacy and security of individually identifiable health information of covered entities subject to the rule, such as health plans, healthcare clearinghouses and certain healthcare providers as well as their business associates, independent contractors of a covered entity that perform certain services involving the use or disclosure of individually identifiable health information on their behalf;

• the Federal Food Drug or Cosmetic Act, or FDCA, which prohibits, among other things, the adulteration or misbranding of drugs, biologics and medical devices;

• the U.S. Physician Payments Sunshine Act 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, with specific exceptions, 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;

• federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers;

• analogous U.S. state laws, 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 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; state and local laws requiring the registration of pharmaceutical sales representatives; and federal and state laws, regulations, standards and codes of conduct governing the privacy and security of personal information and 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;

• the U.S. Foreign Corrupt Practices Act of 1977, as amended, which prohibits, among other things, U.S. companies and their employees and agents from authorizing, promising, offering, or providing, directly or

48

indirectly, corrupt or improper payments or anything else of value to foreign government officials, employees of public international organizations and foreign government owned or affiliated entities, candidates for foreign political office, and foreign political parties or officials thereof; and

• similar healthcare and data protection laws in the European Union and other jurisdictions, including reporting requirements detailing interactions with and payments to healthcare providers and laws governing the privacy and security of certain protected information, such as the General Data Protection Regulation, or GDPR, which imposes obligations and restrictions on the collection and use of personal data relating to individuals located in the European Economic Area, or the EEA and the United Kingdom (including health data).

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. If our operations are found to be in violation of any of the laws described above or any other governmental laws that may apply to us, we may be subject to significant penalties, including civil, criminal and administrative penalties, damages, fines, exclusion from government-funded healthcare programs, such as Medicare and Medicaid or similar programs in other countries or jurisdictions, integrity oversight and reporting obligations to resolve allegations of non-compliance, disgorgement, 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 significant 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.

Enacted and future healthcare legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize STS101 and may affect the prices we may set.

In the United States, the European Union and other 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 U.S. 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 changed the way healthcare is financed by both governmental and private payors. 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 (other than those designated as orphan drugs), which is apportioned among these entities according to their market share in certain government healthcare programs;

• an increase to the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program and an extension the rebate program to individuals enrolled in Medicaid managed care organizations;

• 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;

• 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;

49

• a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 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;

• a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research; 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. For example, the Tax Cuts and Jobs Act of 2017, or the Tax Act, which includes a provision that entered into effect on January 1, 2019, that repeals the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate.” On December 14, 2018, a U.S. District Court Judge in the Northern District of Texas, or Texas District Court Judge, ruled that the individual mandate is a critical and inseverable feature of the ACA, and therefore, because it was repealed as part of the Tax Act, the remaining provisions of the ACA are invalid as well. While the Texas District Court Judge, as well as the Trump Administration and CMS, have stated that the ruling will have no immediate effect, it is unclear how this decision, subsequent appeals, and other efforts to repeal and replace the ACA will impact the ACA and our business.

In addition, other legislative changes have been proposed and adopted in the United States since the ACA was enacted. In August 2011, the Budget Control Act of 2011, among other things, led to aggregate reductions of Medicare payments to providers of 2% per fiscal year. These reductions went into effect in April 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2027 unless additional action is taken by Congress.

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. In addition, recently there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several U.S. Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under government payor programs, and review the relationship between pricing and manufacturer patient programs. The Trump administration’s budget proposal for fiscal year 2019 contains further drug price control measures that could be enacted during the 2019 budget process or in other future legislation, including, for example, measures to permit Medicare Part D plans to negotiate the price of certain drugs under Medicare Part B, to allow some states to negotiate drug prices under Medicaid, and to eliminate cost sharing for generic drugs for low-income patients. While any proposed measures will require authorization through additional legislation to become effective, Congress and the Trump administration have each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs. 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 STS101 or additional pricing pressures.

Individual states in the United States have also increasingly passed legislation and implemented 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

50

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. Furthermore, there has been increased interest by third party payors and governmental authorities in reference pricing systems and publication of discounts and list prices. For example, CMS issued a final rule, effective on July 9, 2019, that requires direct-to-consumer advertisements of prescription drugs and biological products, for which payment is available through Medicare or Medicaid, to include in the advertisement the Wholesale Acquisition Cost, or list price, of the drug or biological product if it is equal to or greater than $35 for a monthly supply or usual course of treatment. Prescription drugs and biological products that are in violation of these requirements will be included on a public list. These reforms could reduce the ultimate demand for STS101 or put pressure on our product pricing.

In the European Union, similar political, economic and regulatory developments may affect our ability to profitably commercialize STS101, if approved. In addition to continuing pressure on prices and cost containment measures, legislative developments at the European Union or member state level may result in significant additional requirements or obstacles that may increase our operating costs. The delivery of healthcare in the European Union, including the establishment and operation of health services and the pricing and reimbursement of medicines, is almost exclusively a matter for national, rather than European Union, 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 European Union member states have resulted in restrictions on the pricing and reimbursement of medicines by relevant health service providers. Coupled with ever-increasing European Union and national regulatory burdens on those wishing to develop and market products, this could prevent or delay marketing approval of STS101, restrict or regulate post-approval activities and affect our ability to commercialize STS101, if approved. In markets outside of the United States and European Union, 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 in the United States, the European Union or any other jurisdiction. If we or any third parties we may engage are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we or such third parties are not able to maintain regulatory compliance, STS101 may lose any regulatory approval that may have been obtained and we may not achieve or sustain profitability.

Risks Related to Our Common Stock and This Offering

Our stock price may be volatile and you may not be able to resell shares of our common stock at or above the price you paid.

The trading price of our common stock following this offering could be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control. These factors include those discussed in this “Risk Factors” section of this prospectus and others such as:

• results from, and any delays in, our clinical trials for STS101;

• results of clinical trials of our competitors’ products;

• competition from existing products or new products that may emerge;

• announcements by academic, guideline publishers or other third parties challenging the fundamental premises underlying our approach to treating migraine;

• announcements of regulatory approval or disapproval of STS101;

• failure or discontinuation of any of our research and development programs;

51

• manufacturing setbacks or delays of or issues with the supply of the materials for STS101;

• announcements relating to future licensing, collaboration or development agreements, including the early termination or failure of an existing strategic collaboration;

• delays in the commercialization of STS101;

• acquisitions and sales of new products, technologies or businesses;

• quarterly variations in our results of operations or those of our future competitors;

• changes in earnings estimates or recommendations by securities analysts;

• announcements by us or our competitors of new products, significant contracts, commercial relationships, acquisitions or capital commitments;

• developments with respect to intellectual property rights;

• our commencement of, or involvement in, litigation;

• changes in financial estimates or guidance, including our ability to meet our future revenue and operating profit or loss estimates or guidance;

• any major changes in our board of directors or management;

• new legislation in the United States or relevant foreign jurisdictions relating to the sale or pricing of pharmaceuticals;

• FDA or other U.S. or foreign regulatory actions affecting us or our industry;

• product liability claims or other litigation or public concern about the safety of STS101 or other DHE products;

• market conditions in the pharmaceutical and biotechnology sectors; and

• general economic conditions in the United States and abroad.

In addition, the stock markets in general, and the markets for pharmaceutical and biotechnology stocks in particular, have experienced extreme volatility that may have been unrelated to the operating performance of the issuer. These broad market fluctuations may adversely affect the trading price or liquidity of our common stock. 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 we were to become involved in securities litigation, we could incur substantial costs and resources and the attention of our management could be diverted from the operation of our business.

There has been no public market for our common stock and an active, liquid and orderly market for our common stock may not develop, and you may not be able to resell your common stock at or above the public offering price.

Prior to this offering, there has been no public market for shares of our common stock, and an active public market for our shares may not develop or be sustained after this offering. We and the representatives of the underwriters will determine the initial public offering price of our common stock through negotiation. This price will not necessarily reflect the price at which investors in the market will be willing to buy and sell our shares following this offering. In addition, an active trading market may not develop following the consummation of this offering or, if it is developed, may not be sustained. The lack of an active market may impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable. An inactive market may also impair our ability to raise capital by selling shares and may impair our ability to acquire other businesses, applications, or technologies using our shares as consideration.

52

If securities or industry analysts do not publish research or reports about our business, or if they issue an adverse or misleading opinion regarding our stock or business, our stock price and trading volume could decline.

The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. We do not currently have and may never obtain research coverage by securities and industry analysts. If no or few securities or industry analysts commence coverage of us, the trading price for our stock would be negatively impacted. In the event we obtain securities or industry analyst coverage, if any of the analysts who cover us issue an adverse or misleading opinion regarding us, our business model, our intellectual property or our stock performance, or if our clinical trials and operating results fail to meet the expectations of analysts, demand for our common stock could decrease and our stock price could decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.

We are an “emerging growth company” and as a result of the reduced disclosure and governance requirements applicable to emerging growth companies, our common stock may be less attractive to investors.

We are an “emerging growth company,” as defined in Jumpstart Our Business Act of 2012, or the JOBS Act, and we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and obtaining stockholder approval of any golden parachute payments not previously approved. In addition, as an “emerging growth company,” the JOBS Act allows us to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. We have elected to use this extended transition period under the JOBS Act. As a result, our financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies, which may make comparison of our financials to those of other public companies more difficult.

We cannot predict if investors will find our common stock less attractive because we will rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile. We may take advantage of these reporting exemptions until we are no longer an emerging growth company. We will remain an emerging growth company until the earlier of (1) the last day of the year following the fifth anniversary of the consummation of this offering, (2) the last day of the year in which we have total annual gross revenue of at least $1.07 billion, (3) the last day of the year in which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock held by non-affiliates exceeded $700.0 million as of the last business day of the second fiscal quarter of such year or (4) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.

We will incur significant costs as a result of operating as a public company, and our management will devote substantial time to new compliance initiatives. We may fail to comply with the rules that apply to public companies, including Section 404, which could result in sanctions or other penalties that would harm our business.

We will incur significant legal, accounting and other expenses as a public company, including costs resulting from public company reporting obligations under the Exchange Act and regulations regarding corporate governance practices. The listing requirements of The Nasdaq Global Market and the rules of the Securities and Exchange Commission, or the SEC, require that we satisfy certain corporate governance requirements relating to director independence, filing annual and interim reports, stockholder meetings, approvals and voting, soliciting

53

proxies, conflicts of interest and a code of conduct. Our management and other personnel will need to devote a substantial amount of time to ensure that we comply with all of these requirements. Moreover, the reporting requirements, rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. Any changes we make to comply with these obligations may not be sufficient to allow us to satisfy our obligations as a public company on a timely basis, or at all. These reporting requirements, rules and regulations, coupled with the increase in potential litigation exposure associated with being a public company, could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors or board committees or to serve as executive officers, or to obtain certain types of insurance, including directors’ and officers’ insurance, on acceptable terms and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage.

After this offering, we will be subject to Section 404 and the related rules of the SEC, which generally require our management and independent registered public accounting firm to report on the effectiveness of our internal control over financial reporting. Beginning with the second annual report that we will be required to file with the SEC, Section 404 requires an annual management assessment of the effectiveness of our internal control over financial reporting. However, for so long as we remain an emerging growth company as defined in the JOBS Act, we intend to take advantage of certain exemptions from various reporting requirements that are applicable to public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404. Once we are no longer an emerging growth company or, if prior to such date, we opt to no longer take advantage of the applicable exemption, we will be required to include an opinion from our independent registered public accounting firm on the effectiveness of our internal controls over financial reporting. We will remain an emerging growth company until the earlier of (1) the last day of the year following the fifth anniversary of the consummation of this offering, (2) the last day of the year in which we have total annual gross revenue of at least $1.07 billion, (3) the last day of the year in which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock held by non-affiliates exceeded $700.0 million as of the last business day of the second fiscal quarter of such year or (4) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.

To date, we have never conducted a review of our internal control for the purpose of providing the reports required by these rules. During the course of our review and testing, we may identify deficiencies and be unable to remediate them before we must provide the required reports. Furthermore, if we have a material weakness in our internal controls over financial reporting, we may not detect errors on a timely basis and our financial statements may be materially misstated. We or our independent registered public accounting firm may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting, which could harm our operating results, cause investors to lose confidence in our reported financial information and cause the trading price of our stock to fall. In addition, as a public company we will be required to file accurate and timely quarterly and annual reports with the SEC under the Exchange Act. In order to report our results of operations and financial statements on an accurate and timely basis, we will depend on CROs to provide timely and accurate notice of their costs to us. Any failure to report our financial results on an accurate and timely basis could result in sanctions, lawsuits, delisting of our shares from The Nasdaq Global Market or other adverse consequences that would materially harm to our business.

We identified a material weakness in our internal control over financial reporting at December 31, 2017 and 2018, and we may identify additional material weaknesses in the future that may cause us to fail to meet our reporting obligations or result in material misstatements of our financial statements. If we fail to remediate any material weaknesses or if we otherwise fail to establish and maintain effective control over financial reporting, our ability to accurately and timely report our financial results could be adversely affected.

In connection with the contemporaneous audits of our financial statements for the years ended December 31, 2017 and 2018, we identified control deficiencies in the design and operation of our internal

54

control over financial reporting that constituted a material weakness. A material weakness is 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 our financial statements will not be prevented or detected on a timely basis.

The material weakness identified in our internal control over financial reporting related to a lack of appropriately designed and implemented controls over the review and approval of manual journal entries and the related supporting journal entry calculations. We have taken certain actions to remediate the material weakness, including engaging SEC compliance and technical accounting consultants. We intend to hire additional finance and accounting personnel to augment accounting staff and to provide more resources for complex accounting matters and financial reporting. However, we cannot assure you that these measures will be sufficient to remediate the material weakness that has been identified or prevent future material weaknesses or significant deficiencies from occurring.

Neither we nor our independent registered public accounting firm has performed an evaluation of our internal control over financial reporting during any period in accordance with the provisions of the Sarbanes-Oxley Act of 2002, or Sarbanes-Oxley. In light of the control deficiencies and the resulting material weakness that were previously identified as a result of the limited procedures performed, we believe that it is possible that, had we and our independent registered public accounting firm performed an evaluation of our internal control over financial reporting in accordance with the provisions of the Sarbanes-Oxley, additional material weaknesses and significant control deficiencies may have been identified.

We may identify future material weaknesses in our internal controls over financial reporting or fail to meet the demands that will be placed upon us as a public company, including the requirements of the Sarbanes-Oxley, and we may be unable to accurately report our financial results, or report them within the timeframes required by law or stock exchange regulations. Under Section 404, we will be required to evaluate and determine the effectiveness of our internal control over financial reporting and, beginning with our second annual report following this offering, provide a management report on internal control over financial reporting. Failure to comply with Section 404 could also potentially subject us to sanctions or investigations by the SEC or other regulatory authorities. We cannot assure that our existing material weakness will be remediated or that additional material weaknesses will not exist or otherwise be discovered, any of which could adversely affect our reputation, financial condition and results of operations.

Purchasers in this offering will experience immediate and substantial dilution in the book value of their investment.

The initial public offering price of our common stock is substantially higher than the pro forma net tangible book value per share of our common stock before giving effect to this offering. Accordingly, if you purchase our common stock in this offering, you will incur immediate and substantial dilution of approximately $             per share, based on the initial public offering price of $             per share, and our pro forma net tangible book value as of June 30, 2019. In addition, following this offering, purchasers in this offering will have contributed approximately             % of the total gross consideration paid by stockholders to us to purchase shares of our common stock, through June 30, 2019, but will own only approximately             % of the shares of common stock outstanding immediately after this offering. Furthermore, if the underwriters exercise their option to purchase additional shares, or outstanding options and warrants are exercised, you could experience further dilution. For a further description of the dilution that you will experience immediately after this offering, see “Dilution.”

If we sell shares of our common stock in future financings, stockholders may experience immediate dilution and, as a result, our stock price may decline.

We may from time to time issue additional shares of common stock at a discount from the current trading price of our common stock, including pursuant to our 2019 Incentive Award Plan and 2019 Employee Stock Purchase Plan. As a result, our stockholders would experience immediate dilution upon the purchase of any

55

shares of our common stock sold at such discount. In addition, as opportunities present themselves, we may enter into financing or similar arrangements in the future, including the issuance of debt securities, preferred stock or common stock. If we issue common stock or securities convertible into common stock, our common stockholders would experience additional dilution and, as a result, our stock price may decline.

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

As of July 1, 2019, our executive officers, directors, holders of 5.0% or more of our capital stock and their respective affiliates held approximately 96.3% of our outstanding voting stock and, upon the closing of this offering, that same group will hold approximately         % of our outstanding voting stock (inclusive of shares purchased in this offering and assuming no exercise of the underwriters’ option to purchase additional shares and no exercise of outstanding options). Therefore, even after this offering these stockholders will have the ability to influence us through this ownership position. These stockholders may be able to determine all matters requiring stockholder approval. For example, these stockholders may be able to control elections of directors, amendments of our organizational documents, or approval of any merger, sale of assets, or other major corporate transaction. This may prevent or discourage unsolicited acquisition proposals or offers for our common stock that you may feel are in your best interest as one of our stockholders.

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

If our existing stockholders sell, or indicate an intention to sell, substantial amounts of our common stock in the public market after the lock-up and other legal restrictions on resale discussed in this prospectus lapse, the trading price of our common stock could decline. Based upon the number of shares outstanding as of June 30, 2019, upon the closing of this offering, we will have outstanding a total of             shares of common stock, assuming no exercise of the underwriters’ option to purchase additional shares of common stock and no exercise of outstanding options or warrants. Of these shares, all of the shares of our common stock sold in this offering (other than shares sold to entities affiliated with certain of our directors), plus any shares sold upon exercise of the underwriters’ option to purchase additional shares, will be freely tradable, without restriction, in the public market immediately following this offering.

The lock-up agreements pertaining to this offering will expire 180 days from the date of this prospectus. After the lock-up agreements expire, as of June 30, 2019, up to approximately 52.1 million additional shares of common stock will be eligible for sale in the public market, approximately 50.2 million of which shares are held by directors, executive officers and other affiliates and will be subject to Rule 144 under the Securities Act of 1933, as amended, or the Securities Act, and applicable vesting schedules. Credit Suisse Securities (USA) LLC, SVB Leerink LLC and Evercore Group L.L.C. may, however, in their sole discretion, permit our officers, directors and other stockholders who are subject to these lock-up agreements to sell shares prior to the expiration of the lock-up agreements.

In addition, as of June 30, 2019, approximately 9.0 million shares of common stock that are either subject to outstanding options or reserved for future issuance under our existing equity incentive plan will become eligible for sale in the public market to the extent permitted by the provisions of various vesting schedules, the lock-up agreements and Rule 144 and Rule 701 under the Securities Act. If these additional shares of common stock are sold, or if it is perceived that they will be sold, in the public market, the trading price of our common stock could decline.

After this offering, the holders of approximately 33.2 million shares of our common stock, or approximately 63.7% of our total outstanding common stock as of June 30, 2019, will be entitled to rights with respect to the registration of their shares under the Securities Act, subject to vesting schedules and to the lock-up agreements described above. Registration of these shares under the Securities Act would result in the shares becoming freely

56

tradable without restriction under the Securities Act, except for shares purchased by affiliates. Any sales of securities by these stockholders could have a material adverse effect on the trading price of our common stock.

We have broad discretion to determine how to use the funds raised in this offering, and may use them in ways that may not enhance our operating results or the price of our common stock.

Our management will have broad discretion over the use of proceeds from this offering, and we could spend the proceeds from this offering in ways our stockholders may not agree with or that do not yield a favorable return, if at all. We currently expect to use the net proceeds of this offering to fund our Phase 3 EMERGE efficacy trial for STS101, our Phase 3 safety trial for STS101 and further development of STS101, including the establishment of commercial scale manufacturing capabilities, and for working capital and general corporate purposes. However, our use of these proceeds may differ substantially from our current plans. If we do not successfully invest or apply the proceeds of this offering, we may fail to achieve expected financial results, which could cause our stock price to decline.

Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.

We have incurred substantial losses during our history and do not expect to become profitable in the near future, and we may never achieve profitability. To the extent that we continue to generate taxable losses, unused losses will carry forward to offset a portion of future taxable income, if any, until such unused losses expire, if ever. Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, if a corporation undergoes an “ownership change,” generally defined as a greater than 50 percentage point change (by value) in its equity ownership by certain stockholders over a three-year period, the corporation’s ability to use its pre-change net operating loss carryforwards, or NOLs, and other pre-change tax attributes (such as research and development tax credits) to offset its post-change income or taxes may be limited. While we do not believe we have experienced ownership changes in the past, it is possible we have done so, and we may experience ownership changes in the future as a result of this offering and/or subsequent shifts in our stock ownership (some of which shifts are outside our control). There is also a risk that due to regulatory changes, such as suspensions on the use of NOLs, or other unforeseen reasons, our existing NOLs could expire or otherwise become unavailable to offset future income tax liabilities. Under the Tax Cuts and Jobs Act, or the Tax Act, the amount of post-2017 NOLs that are permitted to deduct from U.S. federal income taxes in any taxable year is limited to 80% of our taxable income in such year, where taxable income is determined without regard to the NOL deduction itself. The Tax Act generally eliminates the ability to carry back any NOLs to prior taxable years, while allowing post-2017 unused NOLs to be carried forward indefinitely without expiration. Additionally, state NOLs generated in one state cannot be used to offset income generated in another state. For these reasons, even if we attain profitability, we may be unable to use a material portion of our NOLs and other tax attributes.

Recent U.S. tax legislation and future changes to applicable U.S. tax laws and regulations may have a material adverse effect on our business, financial condition and results of operations.

Changes in laws and policy relating to taxes may have an adverse effect on our business, financial condition and results of operations. For example, the U.S. government recently enacted significant tax reform legislation, and certain provisions of the new law may adversely affect us. Changes include, but are not limited to, a federal corporate income tax rate decrease to 21% for tax years beginning after December 31, 2017, a reduction to the maximum deduction allowed for net operating losses generated in tax years after December 31, 2017, eliminating carrybacks of net operating losses, providing for indefinite carryforwards for losses generated in tax years after December 31, 2017, imposing significant additional limitations on the deductibility of interest, allowing for the accelerated expensing of capital expenditures, and putting into effect the migration from a “worldwide” system of taxation to a largely territorial system. The legislation is unclear in many respects and could be subject to potential amendments and technical corrections, and will be subject to interpretations and implementing regulations by the Treasury and Internal Revenue Service, any of which could mitigate or increase certain adverse effects of the legislation. In addition, it is unclear how these U.S. federal income tax changes will affect

57

state and local taxation. Generally, future changes in applicable U.S. tax laws and regulations, or their interpretation and application could have an adverse effect on our business, financial condition and results of operations.

Provisions in our charter documents and under Delaware law could discourage a takeover that stockholders may consider favorable and may lead to entrenchment of management.

Our amended and restated certificate of incorporation and amended and restated bylaws that will be in effect immediately prior to the consummation of this offering will contain provisions that could delay or prevent changes in control or changes in our management without the consent of our board of directors. These provisions will include the following:

• a classified board of directors with three-year staggered terms, which may delay the ability of stockholders to change the membership of a majority of our board of directors;

• no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;

• the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors;

• the ability of our board of directors to authorize the issuance of shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquiror;

• the ability of our board of directors to alter our amended and restated bylaws without obtaining stockholder approval;

• the required approval of at least 66 2/3% of the shares entitled to vote at an election of directors to adopt, amend or repeal our amended and restated bylaws or repeal the provisions of our amended and restated certificate of incorporation regarding the election and removal of directors;

• a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders;

• the requirement that a special meeting of stockholders may be called only by our chief executive officer or president or by the board of directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; and

• advance notice procedures that stockholders must comply with in order to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquiror from conducting a solicitation of proxies to elect the acquiror’s own slate of directors or otherwise attempting to obtain control of us.

We are also subject to the anti-takeover provisions contained in Section 203 of the Delaware General Corporation Law. Under Section 203, a corporation may not, in general, engage in a business combination with any holder of 15% or more of its capital stock unless the holder has held the stock for three years or, among other exceptions, the board of directors has approved the transaction. For a description of our capital stock, see “Description of Capital Stock.”

Claims for indemnification by our directors and officers may reduce our available funds to satisfy successful third-party claims against us and may reduce the amount of money available to us.

Our amended and restated certificate of incorporation and amended and restated bylaws will provide that we will indemnify our directors and officers, in each case, to the fullest extent permitted by Delaware law.

58

In addition, as permitted by Section 145 of the Delaware General Corporation Law, our amended and restated bylaws to be effective immediately prior to the completion of this offering and our indemnification agreements that we have entered into with our directors and officers will provide that:

• We will indemnify our directors and officers for serving us in those capacities or for serving other business enterprises at our request, to the fullest extent permitted by Delaware law. Delaware law provides that a corporation may indemnify such person if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the registrant and, with respect to any criminal proceeding, had no reasonable cause to believe such person’s conduct was unlawful.

• We may, in our discretion, indemnify employees and agents in those circumstances where indemnification is permitted by applicable law.

• We are required to advance expenses, as incurred, to our directors and officers in connection with defending a proceeding, except that such directors or officers shall undertake to repay such advances if it is ultimately determined that such person is not entitled to indemnification.

• We will not be obligated pursuant to our amended and restated bylaws to indemnify a person with respect to proceedings initiated by that person against us or our other indemnitees, except with respect to proceedings authorized by our board of directors or brought to enforce a right to indemnification.

• The rights conferred in our amended and restated bylaws are not exclusive, and we are authorized to enter into indemnification agreements with our directors, officers, employees and agents and to obtain insurance to indemnify such persons.

• We may not retroactively amend our amended and restated bylaw provisions to reduce our indemnification obligations to directors, officers, employees and agents.

Our amended and restated certificate of incorporation and amended and restated bylaws will provide for an exclusive forum in the Court of Chancery of the State of Delaware for certain disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

Our amended and restated certificate of incorporation and amended and restated bylaws will provide that the Court of Chancery of the State of Delaware is the exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a breach of fiduciary duty, any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws, or any action asserting a claim against us that is governed by the internal affairs doctrine; provided that, the exclusive forum provision will not apply to suits brought to enforce any liability or duty created by the Securities Act or the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction; and provided further that, if and only if the Court of Chancery of the State of Delaware dismisses any such action for lack of subject matter jurisdiction, such action may be brought in another state or federal court sitting in the State of Delaware. Nothing in our amended and restated certificate of incorporation or amended and restated bylaws precludes stockholders that assert claims under the Securities Act or the Exchange Act from bringing such claims in state or federal court, subject to applicable law.

We believe these provisions may benefit us by providing increased consistency in the application of Delaware law and federal securities laws by chancellors and judges, as applicable, particularly experienced in resolving corporate disputes, efficient administration of cases on a more expedited schedule relative to other forums and protection against the burdens of multi-forum litigation. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, other employees or stockholders, which may discourage lawsuits with respect to such claims, although our stockholders will not be deemed to have waived our compliance with federal securities laws and the rules and regulations thereunder. If a court were to find the choice of forum provision that will be contained in

59

our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business and financial condition.

We do not currently intend to pay dividends on our common stock, and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.

We do not currently intend to pay any cash dividends on our common stock for the foreseeable future. Further, we are currently subject to covenants under our Loan Agreement that place restrictions on our ability to pay dividends. We currently intend to invest our future earnings, if any, to fund our growth. Therefore, you are not likely to receive any dividends on your common stock for the foreseeable future. Since we do not intend to pay dividends, your ability to receive a return on your investment will depend on any future appreciation in the market value of our common stock. There is no guarantee that our common stock will appreciate or even maintain the price at which our holders have purchased it.

60

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements concerning our business, operations and financial performance and condition, as well as our plans, objectives and expectations for our business operations and financial performance and condition. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “predict,” “potential,” “positioned,” “seek,” “should,” “target,” “will,” “would,” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:

• our expectations regarding the potential market size and size of the potential patient populations for STS101, if approved for commercial use;

• our clinical and regulatory development plans;

• our expectations with regard to the data to be derived from our ongoing and planned Phase 3 clinical trials;

• the timing of commencement of future nonclinical studies and clinical trials and research and development programs;

• our intentions and our ability to establish collaborations and/or partnerships;

• the timing or likelihood of regulatory filings and approvals for STS101;

• our commercialization, marketing and manufacturing plans and expectations;

• the pricing and reimbursement of STS101, if approved;

• the implementation of our business model and strategic plans for our business and STS101;

• the scope of protection we are able to establish and maintain for intellectual property rights covering STS101, including the projected terms of patent protection;

• estimates of our expenses, future revenue, capital requirements, our needs for additional financing and our ability to obtain additional capital;

• our use of proceeds from this offering;

• our future financial performance; and

• developments and projections relating to our competitors and our industry, including competing therapies and procedures.

These forward-looking statements are based on management’s current expectations, estimates, forecasts and projections about our business and the industry in which we operate and management’s beliefs and assumptions and are not guarantees of future performance or development and involve known and unknown risks, uncertainties and other factors that are in some cases beyond our control. As a result, any or all of our forward-looking statements in this prospectus may turn out to be inaccurate and you should not rely upon forward-looking statements as predictions of future events. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under the section of this prospectus titled “Risk Factors” and elsewhere in this prospectus. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time and it is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. Potential investors are urged to consider these factors carefully in evaluating the forward-looking statements. These forward-looking statements speak only as of the date of this prospectus. Except as required by law, we

61

assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future. You should, however, review the factors and risks we describe in the reports we will file from time to time with the SEC after the date of this prospectus. See “Where You Can Find More Information.”

62

INDUSTRY AND MARKET DATA

This prospectus contains estimates, projections and other information concerning our industry, our business, and the markets for STS101, including data regarding the estimated patient population and market size for STS101, as well as data regarding market research, estimates and forecasts prepared by our management. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances that are assumed in this information. Unless otherwise expressly stated, we obtained this industry, business, market, clinical and other data from reports, research surveys, studies and similar data prepared by market research firms and other third parties, industry, medical, clinical and general publications, government data and similar sources. In some cases, we do not expressly refer to the sources from which this data is derived. In that regard, when we refer to one or more sources of this type of data in any paragraph, you should assume that other data of this type appearing in the same paragraph is derived from the same sources, unless otherwise expressly stated or the context otherwise requires.

63

USE OF PROCEEDS

We estimate that the net proceeds from the sale of              shares of common stock in this offering will be approximately $             million at an assumed initial public offering price of $             per share (the midpoint of the estimated price range set forth on the cover of this prospectus), after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. If the underwriters exercise their option to purchase additional shares in full, we estimate that the net proceeds will be approximately $             million at an assumed initial public offering price of $             per share (the midpoint of the estimated price range set forth on the cover of this prospectus) after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

Each $1.00 increase (decrease) in the assumed initial public offering price of $             per share (the midpoint of the estimated price range set forth on the cover of this prospectus) would increase (decrease) the net proceeds to us from this offering, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, by approximately $             million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same. We may also increase or decrease the number of shares we are offering. An increase (decrease) of 1,000,000 in the number of shares we are offering would increase (decrease) the net proceeds to us from this offering, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, by approximately $             million, assuming the assumed initial public offering price of $             (the midpoint of the estimated price range set forth on the cover of this prospectus) stays the same. The estimated net proceeds from this offering is illustrative only, and we will adjust this information based on the actual initial public offering price and other terms of this offering determined at pricing.

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

• approximately $             million to $             million to fund our Phase 3 EMERGE efficacy trial for STS101;

• approximately $             million to $             million to fund our Phase 3 safety trial for STS101; and

• any remaining amounts for further development of STS101, including the establishment of commercial-scale manufacturing capabilities, working capital and general corporate purposes.

We estimate that the net proceeds from this offering, together with our current cash, cash equivalents and marketable securities, will be sufficient for us to fund our operating expenses and capital expenditure requirements through at least the next      months, and including through                  with respect to STS101.

This expected use of the net proceeds from this offering represents our intentions based upon our current plans and business conditions. 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 completion of this offering or the amounts that we will actually spend on the uses set forth above. The amounts and timing of our actual expenditures and the extent of our development activities may vary significantly depending on numerous factors, including the progress of our development efforts, the status of and results from any current clinical trials or clinical trials we may commence in the future, our ability to take advantage of expedited programs or to obtain regulatory approval for STS101, the timing and costs associated with the manufacture and supply of STS101, and any unforeseen cash needs. As a result, our management will retain broad discretion over the allocation of the net proceeds from this offering.

Pending our use of the net proceeds from this offering, we intend to invest the net proceeds in interest-bearing, investment-grade instruments and government securities.

64

DIVIDEND POLICY

We have never declared or paid cash dividends on our capital stock. We intend to retain all available funds and any future earnings, if any, to fund the development and expansion of our business and we do not anticipate paying any cash dividends in the foreseeable future. In addition, we are currently subject to covenants under our loan agreement with Silicon Valley Bank that place restrictions on our ability to pay dividends. Any future determination related to dividend policy will be made at the discretion of our board of directors.

65

CAPITALIZATION

The following table sets forth our cash, cash equivalents and marketable securities and capitalization as of June 30, 2019:

• on an actual basis;

• on a pro forma basis to give effect to: (i) the conversion of all shares of our outstanding Series A and ,Series B convertible preferred stock as of June 30, 2019 into an aggregate of 46,700,842 shares of common stock immediately prior to the consummation of this offering; and (ii) the filing and effectiveness of our amended and restated certificate of incorporation, which will occur immediately prior to the consummation of this offering; and

• on a pro forma as adjusted basis to give further effect to the sale of              shares of common stock in this offering at an assumed initial public offering price of $             per share (the midpoint of the estimated price range set forth on the cover of this prospectus), after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

You should read this information together with our financial statements and related notes included elsewhere in this prospectus and the information set forth in the sections of this prospectus titled “Selected Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

	As of June 30, 2019
	Actual			Pro Forma			Pro Forma As Adjusted(1)
	(In thousands, except share and per share amounts)
Cash, cash equivalents and marketable securities	$	55,041		$	55,041		$
Long-term debt	$	5,028		$	5,028		$
Convertible preferred stock, $0.0001 par value — 46,700,877 shares authorized; 46,700,842 shares issued and outstanding, actual; no shares authorized, issued or outstanding, pro forma or pro forma as adjusted	$	73,138		$	—		$
Stockholders’ (deficit) equity:
Common stock, $0.0001 par value — 61,800,000 shares authorized; 5,418,915 shares issued and outstanding, actual; 300,000,000 shares authorized, pro forma and pro forma as adjusted; 52,119,757 shares issued and outstanding, pro forma;             shares issued and outstanding, pro forma as adjusted		1			5
Preferred stock, $0.0001 par value — no shares authorized, issued and outstanding, actual; 10,000,000 shares authorized, pro forma and pro forma as adjusted; no shares issued and outstanding, pro forma and pro forma as adjusted		—			—
Additional paid-in capital		2,944			76,078
Accumulated other comprehensive loss		—			—
Accumulated deficit		(23,932	)		(23,932	)
Total stockholders’ (deficit) equity		(20,987	)		52,151
Total capitalization	$	57,179		$	57,179		$

(1) A $1.00 increase (decrease) in the assumed initial public offering price of $             per share (the midpoint of the estimated price range set forth on the cover of this prospectus) would increase (decrease) the amount of cash, cash equivalents and marketable securities, additional paid-in capital, total stockholders’ (deficit) equity and total capitalization by approximately $            , assuming the number of shares offered by us, as set forth on the cover of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each increase (decrease) of 1,000,000 in the number of shares offered by us would increase (decrease) cash, cash equivalents and marketable securities, additional paid-in capital, total stockholders’

66

(deficit) equity and total capitalization by approximately $            , assuming the assumed initial public offering price of $             per share (the midpoint of the estimated price range set forth on the cover of this prospectus) remains the same, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. The pro forma as adjusted information discussed above is illustrative only and will be adjusted based on the actual public offering price and other terms of this offering determined at pricing.

The number of shares of common stock issued and outstanding actual, pro forma and pro forma as adjusted in the table above excludes the following:

• 7,828,000 shares of our common stock issuable upon the exercise of options to purchase common stock that were outstanding as of June 30, 2019, with a weighted average exercise price of $0.57 per share;

• 1,179,809 shares of our common stock reserved for issuance pursuant to future awards under our 2016 Equity Incentive Plan, which will no longer be available for issuance effective on the day prior to the first public trading date of our common stock;

• 48,094 shares of our common stock issuable upon the exercise of outstanding warrants with a weighted-average exercise price of $0.22 per share;

•              shares of common stock reserved for issuance pursuant to future awards under our 2019 Equity Incentive Award Plan, as well as any automatic increases in the number of shares of our common stock reserved for future issuance under this plan, which will become effective immediately prior to the consummation of this offering; and

•              shares of common stock reserved for issuance pursuant to future awards under our 2019 Employee Stock Purchase Plan, as well as any automatic increases in the number of shares of our common stock reserved for future issuance under this plan, which will become effective immediately prior to the consummation of this offering.

67

DILUTION

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

As of June 30, 2019, we had a historical net tangible book value (deficit) of $(22.2) million, or $(4.1) per share of common stock. Our net tangible book value represents total tangible assets (total assets less deferred offering costs) less total liabilities and our redeemable convertible preferred stock all divided by the number of shares of common stock outstanding on June 30, 2019. Our pro forma net tangible book value as of June 30, 2019, before giving effect to this offering, was $             million, or $             per share of our common stock. Pro forma net tangible book value, before the issuance and sale of shares in this offering, gives effect to:

• the conversion of all shares of our outstanding Series A and Series B convertible preferred stock as of June 30, 2019 into an aggregate of 52,119,757 shares of common stock immediately prior to the consummation of this offering; and

• the filing and effectiveness of our amended and restated certificate of incorporation, which will occur immediately prior to the consummation of this offering.

Net tangible book value dilution per share to new investors represents the difference between the amount per share paid by purchasers of shares of common stock in this offering and the pro forma as adjusted net tangible book value per share of common stock immediately after completion of this offering. After giving effect to the sale of shares of common stock in this offering at an assumed initial public offering price of $             per share (the midpoint of the estimated price range set forth on the cover of this prospectus) and after deducting the estimated underwriting discounts and commissions and estimated offering expenses, our pro forma as adjusted net tangible book value as of June 30, 2019 would have been approximately $             million, or $             per share. This represents an immediate increase in pro forma as adjusted net tangible book value of $             per share to existing stockholders and an immediate dilution of $             per share to new investors. The following table illustrates this per share dilution:

Assumed initial public offering price per share				$
Historical net tangible book value (deficit) per share as of June 30, 2019	$	(4.10	)
Pro forma increase in net tangible book value per share		5.08
Pro forma net tangible book value per share as of June 30, 2019		0.98
Increase in pro forma net tangible book value per share attributable to new investors
Pro forma as adjusted net tangible book value per share after this offering
Dilution per share to new investors participating in this offering

A $1.00 increase (decrease) in the assumed initial public offering price of $             per share (the midpoint of the estimated price range set forth on the cover of this prospectus) would increase (decrease) our pro forma as adjusted net tangible book value as of June 30, 2019 after this offering by approximately $             million, or approximately $             per share, and would decrease (increase) dilution to investors in this offering by approximately $             per share, assuming that the number of shares offered by us, as set forth on the cover of this prospectus, remains the same, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of shares we are offering. An increase of 1,000,000 in the number of shares we are offering would increase our pro forma as adjusted net tangible book value as of June 30, 2019 after this offering by approximately $             million, or approximately $             per share, and would decrease dilution to investors in this offering by approximately $             per share, assuming the assumed initial public offering price per share remains the same, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. A

68

decrease of 1,000,000 in the number of shares we are offering would decrease our pro forma as adjusted net tangible book value as of June 30, 2019 after this offering by approximately $             million, or approximately $             per share, and would increase dilution to investors in this offering by approximately $             per share, assuming the assumed initial public offering price per share remains the same, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. The pro forma as adjusted information is illustrative only, and we will adjust this information based on the actual initial public offering price and other terms of this offering determined at pricing.

If the underwriters fully exercise their option to purchase additional shares, our pro forma as adjusted net tangible book value after this offering would increase to approximately $             per share, the increase in pro forma as adjusted net tangible book value per share to existing stockholders would be $             per share and the dilution to new investors purchasing shares in this offering would be $             per share.

To the extent that outstanding options or warrants with an exercise price per share that is less than the pro forma as adjusted net tangible book value per share are exercised, new investors will experience further dilution. In addition, we may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that 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.

The following table shows, as of June 30, 2019, on a pro forma as adjusted basis, the number of shares of common stock purchased from us, the total consideration paid to us and the average price paid per share by existing stockholders and by new investors purchasing common stock in this offering at an assumed initial public offering price of $             per share (the midpoint of the estimated price range set forth on the cover of this prospectus), before deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us (in thousands, except share and per share amounts and percentages):

	Shares Purchased				Total Consideration				Average Price Per Share
	Number	Percent			Amount	Percent
Existing stockholders				%	$			%	$
Investors participating in this offering
Total			100	%	$		100	%	$

The number of shares of common stock to be outstanding after this offering is based on the number of shares outstanding as of June 30, 2019 and excludes the following:

• 7,828,000 shares of our common stock issuable upon the exercise of options to purchase common stock that were outstanding as of June 30, 2019, with a weighted average exercise price of $0.57 per share;

• 1,179,809 shares of our common stock reserved for issuance pursuant to future awards under our 2016 Equity Incentive Plan, which will no longer be available for issuance effective on the day prior to the first public trading date of our common stock;

• 48,094 shares of our common stock issuable upon the exercise of outstanding warrants with a weighted average exercise price of $0.22 per share;

•              shares of common stock reserved for issuance pursuant to future awards under our 2019 Incentive Award Plan, as well as any automatic increases in the number of shares of our common stock reserved for future issuance under this plan, which will become effective immediately prior to the consummation of this offering; and

•              shares of common stock reserved for issuance pursuant to future awards under our 2019 Employee Stock Purchase Plan, as well as any automatic increases in the number of shares of our common stock reserved for future issuance under this plan, which will become effective immediately prior to the consummation of this offering.

69

SELECTED FINANCIAL DATA

You should read the following selected historical financial data below together with the sections of this prospectus titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements, related notes and other financial information included elsewhere in this prospectus. The selected financial data in this section are not intended to replace the financial statements and are qualified in their entirety by the financial statements and related notes included elsewhere in this prospectus.

We derived our selected statements of operations data for the years ended December 31, 2017 and 2018 and the balance sheet data as of December 31, 2018 from our audited financial statements included elsewhere in this prospectus. The selected statement of operations data for the six months ended June 30, 2018 and 2019 and the selected balance sheet data as of June 30, 2019 are derived from our unaudited interim condensed financial statements included elsewhere in this prospectus. The unaudited interim condensed financial information has been prepared on the same basis as the annual financial statements and, in the opinion of management, reflects all adjustments, consisting only of normal recurring adjustments that we consider necessary for a fair presentation of the financial information set forth in those statements. Our historical results are not necessarily indicative of the results that may be expected in any future period.

	Year Ended December 31,						Six Months Ended June 30,
	2017			2018			2018			2019
							(unaudited)
	(in thousands, except share and per share data)
Statements of Operations Data:
Operating expenses:
Research and development	$	4,193		$	6,433		$	3,099		$	7,605
General and administrative		754			1,082			532			1,531
Total operating expenses		4,947			7,515			3,631			9,136
Loss from operations		(4,947	)		(7,515	)		(3,631	)		(9,136	)
Interest income		30			72			33			271
Interest expense		(15	)		(90	)		(2	)		(244	)
Other income (expense), net		(240	)		187			185			3
Net loss and comprehensive loss	$	(5,172	)	$	(7,346	)	$	3,415		$	(9,106	)
Net loss per share attributable to common stockholders, basic and diluted(1)	$	(1.97	)	$	(1.52	)	$	(0.74	)	$	(1.71	)
Weighted average number of shares used in computing net loss per share attributable to common stockholders, basic and diluted(1)		2,625,411			4,826,459			4,595,164			5,316,401
Pro forma net loss per share, basic and diluted(1)				$	(0.40	)				$	(0.28	)
Weighted average number of shares used in computing pro forma net loss per share, basic and diluted(1)					18,529,582						31,970,466

70

(1) See Notes 1 and 11 to our audited financial statements for an explanation of the calculations of our basic and diluted net loss per common share, pro forma net loss per common share, and the weighted-average number of common shares used in the computation of the per share amounts.

	December 31,			June 30,
	2018			2019
				(unaudited)
	(in thousands)
Balance Sheet Data:
Cash, cash equivalents and marketable securities	$	5,205		$	55,041
Working capital		3,439			54,424
Total assets		6,381			60,574
Long-term debt		4,965			5,028
Convertible preferred stock		11,648			73,138
Accumulated deficit		(14,826	)		(23,932	)
Total stockholders’ deficit		(12,132	)		(20,987	)

71

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 section of this prospectus titled “Selected Financial Data” and our financial statements and related notes included elsewhere in this prospectus. In addition to the historical financial information, this discussion contains forward-looking statements that involve risk, assumptions and uncertainties, such as statements of our plans, objectives, expectations, intentions, forecasts and projections. Our actual results and the timing of selected events could differ materially from those discussed in these forward-looking statements as a result of several factors, including those set forth under the section of this prospectus titled “Risk Factors” and elsewhere in this prospectus. You should carefully read the section of this prospectus titled “Risk Factors” to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements. Please also see the section of this prospectus titled “Special Note Regarding Forward-Looking Statements.”

Overview

We are a clinical-stage biopharmaceutical company developing a novel therapeutic product for the acute treatment of migraine. Our product candidate, STS101, is a drug-device combination of a proprietary dry-powder formulation of dihydroergotamine mesylate, or DHE, which can be quickly and easily self-administered with a proprietary pre-filled, single-use, nasal delivery device. DHE products have long been recommended as a first-line therapeutic option for the acute treatment of migraine and have significant advantages over other therapeutics for many patients. However, broad use has been limited by invasive and burdensome administration and/or sub-optimal clinical performance of available injectable and liquid nasal spray products. STS101 is specifically designed to deliver the advantages of DHE while overcoming these shortcomings. We have completed a Phase 1 clinical trial in 42 healthy volunteers, in which STS101 demonstrated rapid and sustained DHE plasma concentrations within ranges previously associated with efficacy and safety in controlled studies of other DHE products, low pharmacokinetic variability, and a favorable safety and tolerability profile. In July 2019, we initiated our Phase 3 EMERGE efficacy trial of STS101 and expect to report topline data in the second half of 2020.

Since our inception in June 2016, we have invested substantially all of our efforts and financial resources in the development of STS101 for the acute treatment of migraine. We have incurred significant operating losses to date and expect that our operating expenses will increase significantly as we advance STS101 through clinical development, manufacturing and regulatory approval, and as we prepare for commercialization of STS101, if approved; obtain, maintain, protect and enforce our intellectual property portfolio; and hire additional personnel. In addition, upon the completion of this offering, we expect to incur additional costs associated with operating as a public company.

Our net losses were $5.2 million and $7.3 million for the years ended December 31, 2017 and December 31, 2018, respectively, and $3.4 million and $9.1 million for the six months ended June 30, 2018 and 2019, respectively. As of June 30, 2019, we had an accumulated deficit of $23.9 million.

We do not have any products approved for sale and have not generated any product revenue since our inception. Since our inception through June 30, 2019, we have funded our operations primarily with an aggregate of $78.8 million in gross cash proceeds from the sale and issuance of convertible preferred stock, a convertible promissory note, and long-term debt.

Our ability to generate product revenue will depend on the successful development and eventual commercialization of STS101. Until such time as we can generate significant revenue from sales of STS101, if ever, we expect to finance our operations through the sale of equity, debt financings or other capital sources, including potential collaborations with other companies or other strategic transactions. Adequate funding may

72

not be available to us on acceptable terms, or at all. If we fail to raise capital or enter into such agreements as and when needed, we may have to significantly delay, scale back, or discontinue the development and commercialization of STS101.

As of June 30, 2019, we had cash and cash equivalents of $47.6 million and short-term marketable securities of $7.4 million. In April 2019, we received $61.7 million in gross cash proceeds from the issuance and sale of 32,382,965 shares of Series B convertible preferred stock at $1.9052 per share.

In October 2018, we entered into a Loan and Security Agreement, or the Loan Agreement, with Silicon Valley Bank. The Loan Agreement provides for loan advances of up to $10.0 million. The first advance of $5.0 million was drawn down during the year ended December 31, 2018. The remaining $5.0 million is available to us for draw down in $1.0 million increments.

We believe that current cash, cash equivalents and marketable securities will be sufficient to fund our planned operations for at least 12 months following the date of this offering.

Components of Operating Results

Operating Expenses

Research and Development Expenses

All of our research and development expenses consist of expenses incurred in connection with the development of STS101 for the acute treatment of migraine. These expenses include:

• payroll and personnel-related expenses, including salaries, annual cash bonuses, employee benefit costs and stock-based compensation expenses for our research and product development employees;

• fees paid to third parties to conduct preclinical and clinical studies and other research and development activities, including contract research organizations, or CROs, contract manufacturing organizations, or CMOs, and other service providers; and

• costs for licenses and allocated overhead, including rent, equipment, depreciation, information technology costs and utilities.

We expense both internal and external research and development expenses as they are incurred. We have entered into various agreements with CROs and CMOs. Our research and development accruals are estimated based on the level of services performed, progress of the studies, including the phase or completion of events or tasks, and contracted costs. The estimated costs of research and development provided, but not yet invoiced, are included in accrued liabilities on the balance sheet. If the actual timing of the performance of services or the level of effort varies from the original estimates, we adjust the accrual accordingly. Payments made to CROs and CMOs under these arrangements in advance of the performance of the related services are recorded as prepaid expenses and other current assets until the services are rendered. Nonrefundable payments made prior to the receipt of goods or services that will be used or rendered for future research and development activities are deferred and capitalized as prepaid expenses and other current assets on our balance sheet. The capitalized amounts are recognized as expense as the goods are delivered or the related services are performed.

We expect our research and development expenses to increase substantially following this offering, as we advance STS101 through clinical development, manufacturing and regulatory approval, and as we prepare for commercialization of STS101, if approved. Predicting the timing or the cost to complete our clinical program or validation of our commercial manufacturing and supply processes is difficult and delays may occur because of many factors, including factors outside of our control. For example, if the FDA or other regulatory authorities were to require us to conduct clinical trials beyond those that we currently anticipate, or if we experience significant delays in enrollment in any of our clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development. Furthermore, we are unable to predict when or if STS101 will receive regulatory approval with any certainty.

73

General and Administrative Expenses

General and administrative expenses consist principally of payroll and personnel expenses, including salaries, benefits and stock-based compensation expenses, professional fees for legal, consulting, accounting and tax services, allocated overhead, including rent, debt service, equipment, depreciation, information technology costs, and utilities, and other general operating expenses not otherwise classified as research and development expenses.

We anticipate that our general and administrative expenses will increase as a result of increased personnel costs, including salaries, benefits and stock-based compensation expenses, expanded infrastructure and higher consulting, legal and accounting services associated with maintaining compliance with stock exchange listing and Securities and Exchange Commission, or SEC, requirements, investor relations costs and director and officer insurance premiums associated with being a public company.

Interest Income

Interest income consists primarily of interest earned on our cash, cash equivalents and short-term marketable securities.

Interest Expense

Interest expense consists primarily of interest related to our long-term debt, convertible note, and accretion of debt discount and debt issuance costs.

Other Income (Expense), Net

Other income (expense), net primarily consists of changes in the fair value of convertible preferred stock tranche liability and the obligation to issue additional shares of common stock.

Results of Operations

Comparison of the Six Months Ended June 30, 2018 and 2019

The following table summarizes our results of operations for the periods indicated (in thousands, except percentages):

	Six Months Ended June 30,
	2018			2019			Change			% Change
Operating expenses:
Research and development	$	3,099		$	7,605		$	4,506			145%
General and administrative		532			1,531			999			188%
Loss from operations	$	(3,631	)	$	(9,136	)	$	(5,505	)		152%
Interest income		33			271			238			721%
Interest expense		(2	)		(244	)		(242	)		*%
Other income, net		185			3			(182	)		(98%	)
Net loss	$	(3,415	)	$	(9,106	)	$	(5,691	)		167%

* Not meaningful

Research and Development Expenses

Research and development expenses increased by $4.5 million, or 145%, from the six months ended June 30, 2018 to the six months ended June 30, 2019. The increase in research and development expenses was

74

primarily due to an increase of $3.8 million in fees paid to CROs and CMOs as a result of increased clinical trial activities, an increase of $0.5 million in payroll and personnel expenses, including salaries, benefits and stock-based compensation expenses, due to increases in headcount, and an increase of $0.2 million in allocated overhead, including depreciation and travel expenses.

General and Administrative Expenses

General and administrative expenses increased by $1.0 million, or 188%, from the six months ended June 30, 2018 to the six months ended June 30, 2019. The increase in general and administrative expenses was primarily due to an increase of $0.3 million of payroll and personnel expenses, including salaries, benefits and stock-based compensation expenses, due to increases in headcount, and an increase of $0.7 million of professional fees for legal, consulting, accounting, tax and other services.

Interest Income

Interest income increased by $0.2 million from the six months ended June 30, 2018 to the six months ended June 30, 2019, which was primarily attributable to interest income from cash and cash equivalents and short-term marketable securities.

Interest Expense

Interest expense increased by $0.2 million from the six months ended June 30, 2018 to the six months ended June 30, 2019, which was primarily attributable to interest expense related to our long-term debt, including accretion of debt discount and debt issuance costs.

Other Income, Net

Other income, net decreased by $0.2 million from the six months ended June 30, 2018 to the six months ended June 30, 2019, which was primarily due to a decrease in the fair value of the convertible preferred stock tranche liability of $0.2 million during the six months ended June 30, 2018.

Comparison of the Years Ended December 31, 2017 and 2018

The following table summarizes our results of operations for the periods indicated (in thousands, except percentages):

	Years Ended December 31,
	2017			2018			Change			% Change
Operating expenses:
Research and development	$	4,193		$	6,433		$	2,240			53	%
General and administrative		754			1,082			328			44	%
Loss from operations	$	(4,947	)	$	(7,515	)	$	(2,568	)		52	%
Interest income		30			72			42			140	%
Interest expense		(15	)		(90	)		(75	)		500	%
Other income (expense), net		(240	)		187			427			(178	%)
Net loss	$	(5,172	)	$	(7,346	)	$	(2,174	)		42	%

Research and Development Expenses

Research and development expenses increased by $2.2 million, or 53%, from the year ended December 31, 2017 to the year ended December 31, 2018. The increase in research and development expenses was primarily

75

due to an increase of $1.3 million in fees paid to CROs and CMOs, and an increase of $0.9 million in payroll and personnel expenses, including salaries, benefits and stock-based compensation expenses, due to increases in headcount.

General and Administrative Expenses

General and administrative expenses increased by $0.3 million, or 44%, from the year ended December 31, 2017 to the year ended December 31, 2018. The increase in general and administrative expenses was primarily due to an increase of $0.1 million of payroll and personnel expenses, including salaries, benefits and stock-based compensation expenses, and an increase of $0.1 million of professional fees for legal, consulting, accounting, tax and other services.

Interest Income

Interest income increased by less than $0.1 million from the year ended December 31, 2017 to the year ended December 31, 2018, which was primarily attributable to interest income from cash and cash equivalents.

Interest Expense

Interest expense increased by $0.1 million from the year ended December 31, 2017 to the year ended December 31, 2018, which was primarily attributable to interest expense related to our long-term debt, including accretion of debt discount and debt issuance costs.

Other Income (Expense), Net

Other income (expense), net increased by $0.4 million from the year ended December 31, 2017 to the year ended December 31, 2018, which was primarily due to a decrease in the fair value of the convertible preferred stock tranche liability of $0.3 million during the year ended December 31, 2018.

Liquidity and Capital Resources

Sources of Liquidity

Since our inception, we have funded our operations primarily through private placements of convertible preferred stock, a convertible promissory note, and long-term debt. We do not have any products approved for sale and have never generated any revenue. In August 2016, we received $0.1 million under a convertible promissory note. We received gross cash proceeds of $6.0 million from the sale and issuance of Series A convertible preferred stock during the year ended December 31, 2016, and gross cash proceeds of $6.0 million from the sale and issuance of Series A convertible preferred stock during the year ended December 31, 2018. In April 2019, we received gross cash proceeds of $61.7 million from the sale and issuance of Series B convertible preferred stock. We also entered into the credit facility described below with Silicon Valley Bank.

Credit Facility

In October 2018, we entered into the Loan Agreement with Silicon Valley Bank. The Loan Agreement provides for loan advances of up to $10.0 million. We drew down the first advance of $5.0 million as of the effective date of the Loan Agreement. The remaining $5.0 million is available for draw down in $1.0 million increments. The Loan Agreement contains customary affirmative and negative covenants and events of default, including covenants and restrictions that among other things, restrict our ability to incur liens, incur additional indebtedness, make loans and investments, engage in mergers and acquisitions, engage in asset sales or sale and leaseback transactions, and declare dividends or redeem or repurchase capital stock. Interest on the loan advances is payable monthly at a floating per annum rate equal to the greater of 1.5% above the prime rate and 6.5%. Upon

76

the occurrence of an event of default, interest will increase to 5.0% above the rate that is otherwise applicable. Principal on the outstanding loan advance is repayable commencing on December 1, 2019 in 30 monthly payments through maturity. The maturity date of the loan advances is May 1, 2022.

Future Funding Requirements

We have incurred net losses since our inception. Our net losses were $5.2 million and $7.3 million for the years ended December 31, 2017 and 2018, respectively, and $3.4 million and $9.1 million for the six months ended June 30, 2018 and 2019, respectively, and we expect to incur substantial additional losses in future periods. Based on our current business plan, we believe that our existing cash, cash equivalents and marketable securities, will be sufficient to fund our planned operations for at least 12 months following the date of this offering.

We do not expect to generate any meaningful revenue unless and until we obtain regulatory approval of and commercialize STS101 or enter into collaborative agreements with third parties, and we do not know when, or if, either will occur. We expect to continue to incur significant losses for the foreseeable future, and we expect the losses to increase as we continue the development of, and seek regulatory approvals for, STS101 and begin to commercialize STS101, if approved. We are subject to the risks typically related to the development of new product candidates, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. Moreover, following the completion of this offering, we expect to incur additional costs associated with operating as a public company.

We will continue to require additional capital to develop STS101 and fund operations for the foreseeable future. We may seek to raise capital through private or public equity or debt financings, collaborative or other arrangements with corporate sources, or through other sources of financing. Adequate additional funding may not be available to us on acceptable terms, or at all. Our failure to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue the development and commercialization of STS101. We anticipate that we will need to raise substantial additional capital, the requirements for which will depend on many factors, including:

• the scope, timing, rate of progress, results and costs of our clinical trials for STS101;

• the number and scope of clinical programs we decide to pursue;

• the scope and costs of manufacturing development and commercial manufacturing activities;

• the cost, timing and outcome of regulatory review of STS101;

• the cost of building a sales force in anticipation of commercialization of STS101;

• the cost and timing associated with commercializing STS101, if approved;

• the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;

• any product liability or other lawsuits related to STS101;

• our efforts to enhance operational systems and our ability to attract, hire and retain qualified personnel, including personnel to support the development and commercialization of STS101;

• the extent to which we acquire or in-license other product candidates or technologies;

• the payment of royalty payments owed under our existing license agreement;

• our ability to establish and maintain collaborations on favorable terms, if at all;

• the costs associated with being a public company; and

• the timing, receipt and amount of sales of STS101, if approved.

77

A change in the outcome of any of these or other variables with respect to the development of STS101 could significantly change the costs and timing associated with its development. Furthermore, our operating plans may change in the future, and we will continue to require additional capital to meet operational needs and capital requirements associated with such operating plans. If we raise additional funds by issuing equity securities, our stockholders may experience dilution. Any debt financing into which we enter may impose upon us covenants that restrict our operations, including limitations on our ability to incur liens or additional debt, pay dividends, repurchase our common stock, make certain investments or engage in certain merger, consolidation or asset sale transactions. For example, the Loan Agreement contains many of these restrictions. Any debt financing or additional equity that we raise may contain terms that are not favorable to us or our stockholders. If we are unable to raise additional funds when needed, we may be required to delay, reduce, or terminate our development program and clinical trials. We may also be required to sell or license to others rights to STS101 in certain territories or indications that we would prefer to develop and commercialize ourselves. Adequate additional funding may not be available to us on acceptable terms or at all. See “Risk Factors” for additional risks associated with our substantial capital requirements.

Summary Statement of Cash Flows

The following table sets forth the primary sources and uses of cash and cash equivalents for each of the periods presented below (in thousands):

	Years Ended December 31,						Six Months Ended June 30,
	2017			2018			2018			2019
Net cash (used in) provided by:
Operating activities	$	(4,321	)	$	(6,981	)	$	(3,925	)	$	(11,133	)
Investing activities		(58	)		(402	)		(98	)		(7,885	)
Financing activities		—			10,930			5,986			61,434
Net (decrease) increase in cash and cash equivalents	$	(4,379	)	$	3,547		$	1,963		$	42,416

Cash Flows used in Operating Activities

Net cash used in operating activities was $3.9 million for the six months ended June 30, 2018. Cash used in operating activities was primarily due to the use of funds in our operations to develop STS101, which resulted in a net loss of $3.4 million, adjusted for changes in fair value of convertible preferred stock tranche liability of $0.3 million, an increase in prepaid expenses and other assets of $0.1 million, a decrease in accounts payable of $0.2 million, a decrease in accrued liabilities of $0.1 million, which amounts were partially offset by change in the fair value of the liability for the obligation to issue additional common stock by $0.1 million, and stock-based compensation expense of $0.1 million. The decrease in accounts payable and accrued liabilities resulted from the timing of payments to our service providers.

Net cash used in operating activities was $11.1 million for the six months ended June 30, 2019. Cash used in operating activities was primarily due to the use of funds in our operations to develop STS101, which resulted in a net loss of $9.1 million, adjusted for net amortization of premiums and discounts on marketable securities of $0.1 million, an increase in prepaid expenses and other assets of $2.6 million, a decrease in accrued liabilities of $0.3 million, which amounts were partially offset by depreciation and amortization expense of $0.1 million, non-cash interest expense and amortization of debt discount and issuance costs of $0.1 million, stock-based compensation expense of $0.2 million, and an increase in accounts payable of $0.7 million. The increase in accounts payable and prepaid expenses and other current assets and decrease in accrued and other liabilities resulted from the timing of payments to our service providers.

Net cash used in operating activities was $4.3 million for the year ended December 31, 2017. Cash used in operating activities was primarily due to the use of funds to develop STS101, which resulted in a net loss of

78

$5.2 million, adjusted for an increase in prepaid expenses and other assets of $0.3 million, which amounts were partially offset by a change in the fair value of the liability for obligation to issue additional shares of common stock of $0.2 million, stock-based compensation expense of $0.1 million, an increase in accrued and other liabilities of $0.4 million, and an increase in accounts payable of $0.4 million. The increase in accrued and other liabilities was primarily due to an increase in accrued research and development and accrued compensation. The increase in accounts payable resulted from the timing of payments to our service providers.

Net cash used in operating activities was $7.0 million for the year ended December 31, 2018. Cash used in operating activities was primarily due to the use of funds in our operations to develop STS101, which resulted in a net loss of $7.3 million, adjusted for changes in fair value of convertible preferred stock tranche liability of $0.3 million, an increase in prepaid expenses and other assets of $0.5 million, a decrease in accounts payable of $0.2 million, which amounts were partially offset by depreciation and amortization expense of $0.1 million, change in the fair value of the liability for the obligation to issue additional common stock by $0.1 million, stock-based compensation expense of $0.2 million, and an increase in accrued and other liabilities of $0.9 million. The decrease in accounts payable resulted from the timing of payments to our service providers. The increase in accrued and other liabilities was primarily due to an increase in accrued research and development and accrued compensation.

Cash Flows used in Investing Activities

Net cash used in investing activities was $0.1 million for the six months ended June 30, 2018, which consisted of $0.1 million used to purchase property and equipment.

Net cash used in investing activities was $7.9 million for the six months ended June 30, 2019, which consisted of $7.4 million used to purchase short-term marketable securities and $0.5 million towards advance payments for purchases of property and equipment.

Net cash used in investing activities was $0.1 million for the year ended December 31, 2017, which consisted of $0.1 million used to purchase property and equipment.

Net cash used in investing activities was $0.4 million for the year ended December 31, 2018, which consisted of $0.4 million used to purchase property and equipment.

Cash Flows from Financing Activities

Net cash provided by financing activities was $6.0 million for the six months ended June 30, 2018, which consisted of $6.0 million of net cash proceeds from the issuance of Series A convertible preferred stock.

Net cash provided by financing activities was $61.4 million for the six months ended June 30, 2019, which consisted of $61.5 million of net cash proceeds from the issuance of Series B convertible preferred stock, partially offset by payments of deferred offering costs of $0.1 million.

We did not undertake any financing activities in the year ended December 31, 2017.

Net cash provided by financing activities was $10.9 million for the year ended December 31, 2018, which consisted of $6.0 million of net cash proceeds from the issuance of Series A convertible preferred stock and borrowings of $4.9 million under our long-term debt facility with Silicon Valley Bank.

79

Contractual Obligations and Commitments

The following table summarizes our contractual obligations as of December 31, 2018:

	Payments Due by Period ($ in thousands)
	Less than 1 year		1 to 3 years		3 to 5 years		More than 5 years		Total
Operating lease obligations(1)	$	161	$	218	$	—	$	—	$	379
Long-term debt obligations(2)	$	509	$	4,400	$	1,098	$	—	$	6,007
Total contractual obligations	$	670	$	4,618	$	1,098	$	—	$	6,386

(1) We lease our office facilities in South San Francisco, California under non-cancelable operating leases through April 2021. There is an option to renew for an additional three years. The minimum lease payments above do not include any related common area maintenance charges or real estate taxes.

In December 2018, we entered into an office lease agreement for office space in North Carolina. The initial term of the lease was January 2019 to March 2019. We subsequently extended the term to September 2019 by exercising our options to renew the lease for two additional periods of three months each. In March 2019, we also entered into an amendment to the lease agreement for the office space in North Carolina to lease additional workspace at the same address over the same lease term.

(2) In October 2018, we entered into the Loan Agreement with Silicon Valley Bank. The Loan Agreement provides for loan advances of up to $10.0 million. The first advance of $5.0 million was drawn down during the year ended December 31, 2018. The loan is repayable commencing on December 1, 2019 in 30 monthly payments through maturity. In addition to regular monthly payments, a final payment equal to the original amount of the loan multiplied by 5.0% is due on the earliest to occur of (a) May 1, 2020 or (b) the prepayment in full of the loan.

We enter into contracts in the normal course of business with third-party contract organizations for clinical trials, manufacturing and testing and providing other services and products for operating purposes. These contracts generally provide for termination following a certain period after notice, and therefore we believe that our non-cancelable obligations under these agreements are not material.

Under the terms of our license agreement with Shin Nippon Biomedical Laboratories, Ltd., or SNBL, we have agreed to make royalty payments based on a low single-digit percentage of worldwide net sales of certain products covered thereby, payable on a product-by-product and country-by-country basis until the latest of the expiration of the last-to-expire patent covering such product and the ten-year anniversary of the first commercial sale of such product in such country. No upfront or milestone payments are otherwise owed pursuant to the license agreement.

Off-Balance Sheet Arrangements

Since our inception, we have not engaged in any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

Critical Accounting Policies, Significant Judgments and Estimates

Our financial statements have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates. For more detail on our critical accounting policies, refer to Note 1 to the financial statements included elsewhere in this prospectus.

80

Obligation to Issue Additional Shares of Common Stock

The obligation to issue additional shares of common stock to SNBL pursuant to the Series A convertible preferred stock financing documents, or the SNBL Grant, was accounted and classified for as a liability as it is not indexed to our stock, specifically because the settlement amount of the SNBL Grant can be affected by future issuance of equity shares or potential equity shares. Therefore, the obligation to issue additional shares of common stock to SNBL was initially measured at fair value and subsequently remeasured at fair value at each reporting date until it was extinguished upon issuance of common stock in February 2018, with changes in fair value recognized as a component of other income (expense), net in the statements of operations and comprehensive loss.

Accrued Research and Development

We monitor the activity under its various agreements with CROs, CMOs and other service providers to the extent possible through communication with each service provider, detailed invoice and task completion review, analysis of actual expenses against budget, pre-approval of any changes in scope, and review of contractual terms. Our research and development accruals are estimated based on the level of services performed, progress of the studies, including the phase or completion of events, and contracted costs. These estimates may or may not match the actual services performed by the service providers. The estimated costs of research and development provided, but not yet invoiced, are included in accrued liabilities on the balance sheet. If the actual timing of the performance of services or the level of effort varies from the original estimates, we will adjust the accrual accordingly. Payments made to service providers under these arrangements in advance of the performance of the related services are recorded as prepaid expenses and other current assets until the services are rendered.

Stock-Based Compensation

We use a fair value-based method to account for all stock-based compensation arrangements with employees and non-employees, including stock options and stock awards. Our determination of the fair value of stock options on the date of grant utilizes the Black-Scholes option pricing model.

The fair value of the option granted is recognized on a straight-line basis over the period during which an optionee is required to provide services in exchange for the option award, known as the requisite service period, which usually is the vesting period. We account for forfeitures as they occur.

Estimates of the fair value of equity awards as of the grant date using valuation models such as the Black-Scholes option pricing model are affected by assumptions with a number of complex variables. Changes in the assumptions can materially affect the fair value and ultimately the amount of stock-based compensation expense recognized. These inputs are subjective and generally require significant analysis and judgment to develop. Changes in the following assumptions can materially affect the estimate of the fair value of stock-based compensation:

• Expected Term – The expected term is calculated using the simplified method, which is available where there is insufficient historical data about exercise patterns and post-vesting employment termination behavior. The simplified method is based on the vesting period and the contractual term for each grant, or for each vesting-tranche for awards with graded vesting. The mid-point between the vesting date and the maximum contractual expiration date is used as the expected term under this method. For awards with multiple vesting-tranches, the times from grant until the mid-points for each of the tranches may be averaged to provide an overall expected term.

• Expected Volatility – For all stock options granted to date, the volatility data was estimated based on a study of publicly traded industry peer companies as we did not have any trading history for our common stock. For purposes of identifying these peer companies, we considered the industry, stage of development, size and financial leverage of potential comparable companies. For each grant, we

81

measured historical volatility over a period equivalent to the expected term. We will continue to apply this process until a sufficient amount of historical information regarding the volatility of our own stock price becomes available.

• Expected Dividend – The Black-Scholes valuation model calls for a single expected dividend yield as an input. We currently have no history or expectation of paying cash dividends on our common stock. Accordingly, we have estimated the dividend yield to be zero.

• Risk-Free Interest Rate – The risk-free interest rate is based on the yield available on U.S. Treasury instruments whose term is similar in duration to the expected term of the respective stock option.

Common Stock Valuations

The estimated fair value of the common stock underlying our stock options and stock awards was determined at each grant date by our board of directors, with input from management. All options to purchase shares of our common stock are intended to be exercisable at a price per share not less than the per-share fair value of our common stock underlying those options on the date of grant.

In the absence of a public trading market for our common stock, on each grant date, we develop an estimate of the fair value of our common stock based on the information known to us on the date of grant, upon a review of any recent events and their potential impact on the estimated fair value per share of the common stock, and in part on contemporaneous input from an independent third-party valuation firm.

Our valuations of our common stock were determined in accordance with the guidelines outlined in the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation, or the Practice Aid.

The assumptions used to determine the estimated fair value of our common stock are based on numerous objective and subjective factors, combined with management judgment, including:

• external market conditions affecting the pharmaceutical and biotechnology industry and trends within the industry;

• our stage of development and business strategy;

• the rights, preferences and privileges of our convertible preferred stock relative to those of our common stock;

• the prices at which we sold shares of our convertible preferred stock;

• our financial condition and operating results, including our levels of available capital resources;

• the progress of our research and development efforts;

• equity market conditions affecting comparable public companies; and

• general U.S. market conditions and the lack of marketability of our common stock.

The Practice Aid identifies various available methods for allocating enterprise value across classes and series of capital stock to determine the estimated fair value of common stock at each valuation date. In accordance with the Practice Aid, we considered the following methods:

• Option Pricing Method. Under the option pricing method, or OPM, shares are valued by creating a series of call options with exercise prices based on the liquidation preferences and conversion terms of each equity class. The estimated fair values of the preferred and common stock are inferred by analyzing these options.

• Probability-Weighted Expected Return Method. The probability-weighted expected return method, or PWERM, is a scenario-based analysis that estimates value per share based on the probability-weighted

82

present value of expected future investment returns, considering each of the possible outcomes available to us, as well as the economic and control rights of each share class.

Based on our early stage of development and other relevant factors, we determined that a hybrid approach of the OPM and the PWERM methods was the most appropriate method for allocating our enterprise value to determine the estimated fair value of our common stock. In determining the estimated fair value of our common stock, our board of directors also considered the fact that our stockholders could not freely trade our common stock in the public markets. Accordingly, we applied discounts to reflect the lack of marketability of our common stock based on the weighted-average expected time to liquidity. The estimated fair value of our common stock at each grant date reflected a non-marketability discount partially based on the anticipated likelihood and timing of a future liquidity event.

Following the completion of this offering, our board of directors intends to determine the fair value of our common stock based on the closing sales price of our common stock on the date of grant of equity awards.

The intrinsic value of all outstanding options as of June 30, 2019 was approximately $             million, based on an assumed initial public offering price of $             per share (the midpoint of the estimated price range set forth on the cover of this prospectus), of which approximately $             million is related to vested options and approximately $             million is related to unvested options.

Other Company Information

Income Taxes

As of December 31, 2018, we had federal and state net operating loss carryforwards, or NOLs, of $11.6 million and $0.4 million, respectively. The federal NOLs consists of $4.7 million generated before January 1, 2018, which will begin to expire in 2036 but are able to offset 100% of taxable income and $7.0 million generated after December 31, 2017 that will carryforward indefinitely but are subject to an 80% taxable income limitation. The state NOLs will begin to expire in 2036 if unused. We also have California state tax credit carryforwards of $0.2 million, which do not expire, and federal tax credit carryforwards of $0.2 million which will begin to expire in 2038.

NOLs and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service, or IRS, and may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant stockholders over a three-year period in excess of 50 percentage points under Sections 382 and 383 of the Internal Revenue Code, which could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities. The amount of the annual limitation is determined based on our value immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years. We have determined that no significant limitation would be placed on the utilization of our NOLs and tax credit carryforwards due to prior ownership changes. Subsequent ownership changes may affect the limitation in future years.

On December 22, 2017, the U.S. government enacted comprehensive tax legislation through the Tax Cuts and Jobs Act, or Tax Act. The Tax Act significantly revises the future ongoing U.S. corporate income tax by, among other things, lowering the U.S. corporate income tax rates and implementing a modified territorial tax system. The corporate tax rate was reduced from 34% to 21% for tax years beginning after December 31, 2017. Changes in tax law are accounted for in the period of enactment. As such, our financial statements as of December 31, 2017 reflect the impact of the Tax Act, which primarily consisted of remeasuring our deferred tax assets, deferred tax liabilities and valuation allowance using the newly enacted U.S. corporate tax rate. This rate change resulted in a $0.6 million reduction in our net deferred tax assets from the prior year with a corresponding offset to the valuation allowance. Under the Tax Act, net operating losses arising after December 31, 2017 do not expire and cannot be carried back. However, the Tax Act limits the amount of net operating losses that can be

83

used annually to 80% of taxable income for periods beginning after December 31, 2017. Existing net operating losses arising in years ending on or before December 31, 2017 are not affected by these provisions.

Indemnification Agreements

We enter into standard indemnification arrangements in the ordinary course of business. Pursuant to these arrangements, we indemnify, hold harmless and agree to reimburse the indemnified parties for losses suffered or incurred by the indemnified party, in connection with any trade secret, copyright, patent or other intellectual property infringement claim by any third party with respect to its technology. The term of these indemnification agreements is generally perpetual any time after the execution of the agreement. The maximum potential amount of future payments we could be required to make under these arrangements is not determinable. We have never incurred costs to defend lawsuits or settle claims related to these indemnification agreements. As a result, we believe the fair value of these agreements is minimal.

JOBS Act Accounting Election

The Jumpstart Our Business Startups Act of 2012, or the JOBS Act, permits an “emerging growth company” such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We have elected to use this extended transition period under the JOBS Act. As a result, our financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies, which may make comparison of our financials to those of other public companies more difficult.

Recent Accounting Pronouncements

See “Organization and Summary of Significant Accounting Policies—Recent Accounting Pronouncements” in Note 1 to our financial statements included elsewhere in this prospectus for additional information.

Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Sensitivity

The market risk inherent in our financial instruments and in our financial position represents the potential loss arising from adverse changes in interest rates or exchange rates. As of June 30, 2019, we had cash, cash equivalents and short-term marketable securities of $55.0 million, consisting of interest-bearing money market funds, investments in corporate bonds, overnight repurchase agreements, and asset-backed securities for which the fair value would be affected by changes in the general level of U.S. interest rates. However, due to the short-term maturities and the low-risk profile of our cash equivalents and short-term marketable securities, an immediate 10% change in interest rates would not have a material effect on the fair value of our cash equivalents and short-term marketable securities.

We do not believe that inflation, interest rate changes or exchange rate fluctuations have had a significant impact on our results of operations for any periods presented herein.

84

BUSINESS

Overview

We are a clinical-stage biopharmaceutical company developing a novel therapeutic product for the acute treatment of migraine. Our product candidate, STS101, is a drug-device combination of a proprietary dry-powder formulation of dihydroergotamine mesylate, or DHE, which can be quickly and easily self-administered with a proprietary pre-filled, single-use, nasal delivery device. DHE products have long been recommended as a first-line therapeutic option for the acute treatment of migraine and have significant advantages over other therapeutics for many patients. However, broad use has been limited by invasive and burdensome administration and/or sub-optimal clinical performance of available injectable and liquid nasal spray products. STS101 is specifically designed to deliver the advantages of DHE while overcoming these shortcomings. We have completed a Phase 1 clinical trial in 42 healthy volunteers, in which STS101 demonstrated rapid and sustained DHE plasma concentrations, low pharmacokinetic variability, and a favorable safety and tolerability profile. In July 2019, we initiated our Phase 3 EMERGE efficacy trial of STS101 and expect to report topline data in the second half of 2020.

Migraine is a chronic and debilitating neurological disorder characterized by attacks of often severe headache and accompanying neurological symptoms lasting four to 72 hours. More than 90% of individuals suffering from migraine attacks are unable to work or function normally during a migraine attack, with many experiencing comorbid conditions such as depression, anxiety and insomnia. Failure to effectively treat migraine attacks can lead to disease progression, increased frequency of attacks and greater migraine-related disability.

Based on reported prevalence data, approximately 39 million individuals in the United States and over 100 million individuals in Europe suffer from migraine. Migraine is most prevalent among adults ages 18 to 44 and disproportionately affects women over men on a three-to-one basis. With a global prevalence of greater than one billion, migraine ranks as the world’s third most prevalent illness, the sixth highest specific cause of disability worldwide, and the leading cause of disability in people under 50 years of age. In addition, migraine is the second leading cause of disability worldwide in terms of number of years lost to disability. It has been estimated that migraine results in up to $36 billion in healthcare and lost productivity costs and up to 157 million lost workdays annually in the United States. Despite its high prevalence and burden, migraine remains a highly underdiagnosed and undertreated illness due to lack of awareness, stigma and the inherent limitations of currently available therapies.

Acute treatments are categorized as non-specific therapies, including nonsteroidal anti-inflammatory drugs (NSAIDs) and acetaminophen, and migraine-specific therapies, such as triptans and ergot alkaloids (including DHE-based products). In 2018, more than 15 million prescriptions for migraine-specific acute therapies were written in the United States. This figure excludes prescriptions for non-specific therapies and therefore likely significantly understates the total number of prescriptions written for the acute treatment of migraine. Oral triptans are currently the predominant class of drug for acute treatment of migraine, accounting for over 90% of migraine-specific acute therapy prescriptions. However, triptans have been reported to have a number of shortcomings, including that they have inconsistent efficacy across patients and migraine types, require early treatment, cause various side effects, may cause medication overuse headache, or MOH, and have slow and variable onset of action and short duration of effect that necessitates retreatment. DHE products have long been recommended as a first-line therapeutic option for the acute treatment of migraine and have significant advantages over other therapeutics, including triptans, for many patients. However, approved DHE products have drawbacks that have resulted in limited clinical use. For instance, injectable DHE, while effective, has invasive administration requirements, and in the case of intravenous (IV) delivery, generally must be administered by a healthcare provider, typically in the hospital or clinic setting, requires specialized equipment and may often result in side effects, in particular, nausea and vomiting. Similarly, intramuscular (IM) and or subcutaneous (SC) injections are invasive, require administration via injection by the patient, caregiver or healthcare provider and patients typically prefer non-injectable therapies. In addition, DHE liquid nasal sprays have complex, time-

85

consuming and burdensome administration, as well as high variability and slow absorption that may result in inconsistent and sub-optimal clinical performance. Further, due to DHE’s low oral bioavailability, there are no approved oral DHE products in the United States.

STS101 was designed to be a reliable and convenient DHE product capable of delivering the advantages of DHE while overcoming the shortcomings of existing DHE products. STS101 has a number of key attributes that we believe may provide significant advantages over existing acute treatments for migraine and result in robust and consistent clinical performance and thereby facilitate broad adoption and use. These attributes are primarily the result of our proprietary dry-powder formulation, which incorporates a mucoadhesive drug carrier and engineered drug particle technologies, and our proprietary nasal delivery device. Key STS101 attributes include:

• Targeted plasma concentrations rapidly achieved and sustained. In our Phase 1 clinical trial, administration of STS101 resulted in achievement within 10 minutes of a mean DHE plasma concentration of 1.0 ng/ml, which we estimate is the minimum threshold concentration necessary for therapeutic response to DHE. In addition, DHE exposure levels following STS101 administration exceeded or fell within ranges that previously have demonstrated efficacy with other dosage forms of DHE, although such exposure levels did not exceed the peak concentration levels associated with IV or IM delivery of DHE.

• Low variability. In our Phase 1 clinical trial, STS101 demonstrated significantly lower variability in peak DHE plasma concentration and drug exposure (plasma concentration over time expressed as area-under-curve) as compared to Migranal^® DHE mesylate liquid nasal spray, which may lead to more reliable clinical performance.

• Quick and convenient self-administration. STS101 utilizes a convenient, patient-friendly, single-use, nasal delivery device designed to enable self-administration of a full dose of DHE into a single nostril in a matter of seconds.

• Well tolerated. In our Phase 1 clinical trial, all treatments were well tolerated, all adverse events were mild and transient, and no subject withdrew from the trial due to an adverse event. Moreover, STS101 did not exhibit the rapid and high peak concentration associated with IV delivery of DHE, which may often result in side effects, in particular, nausea and vomiting.

We believe the foregoing attributes of STS101 could lead to it having a favorable therapeutic response profile as compared to IV, IM or SC delivery of DHE and Migranal DHE mesylate liquid nasal spray. The faster a DHE product can produce the threshold DHE plasma concentration necessary for a therapeutic response, the more quickly following administration it may be able to achieve a therapeutic response. At the same time, rapid and high peak DHE plasma concentrations that greatly exceed the threshold therapeutic level are believed to be associated with adverse side effects, including nausea and vomiting. Based on published DHE PK and clinical efficacy trial data relating to DHE plasma concentrations and clinical efficacy and safety data of different DHE doses, we estimate that 1.0 ng/ml is the threshold concentration necessary for therapeutic response to DHE. As demonstrated in Part 2 of our Phase 1 clinical trial, administration of STS101 5.2 mg and DHE mesylate IM injection resulted in DHE plasma concentrations rising rapidly, with mean concentrations exceeding 1.0 ng/ml at 10 minutes and 5 minutes after dosing, respectively. However, STS101’s mean maximum DHE plasma concentration did not exceed 2.2 ng/ml at any time following administration, whereas the peak DHE plasma concentration of DHE mesylate IM injection exceeded 3.3 ng/ml. In contrast, the mean maximum DHE plasma concentration after Migranal DHE mesylate liquid nasal spray administration did not reach 1.0 ng/ml. While subjects treated with STS101 5.2 mg reported a higher frequency of nasal adverse events than those treated with DHE mesylate IM injection or Migranal DHE mesylate liquid nasal spray, all adverse events were mild and transient, and subjective nasal symptom severity scores self-reported by subjects were very low, with all nasal symptom severity scores averaging less than five on a zero to one hundred scale in which zero represents absence of the symptom and one hundred represents presence of the symptom with the worst imaginable severity. Subjective nasal symptom severity scores self-reported in Part 1 of our Phase 1 clinical trial by subjects treated with STS101 1.3 mg and 2.6 mg were negligible. As a result, we do not believe the tolerability of STS101 should present a barrier to patient adoption or use, if approved.

86

In July 2019, we initiated our Phase 3 EMERGE efficacy trial of STS101, a multi-center, single-dose, randomized, double-blind, placebo-controlled, parallel group study in approximately 1,140 migraine patients, and we expect to report topline data in the second half of 2020. In our EMERGE trial, STS101 will be self-administered by patients to treat a single migraine attack and the two co-primary endpoints to be assessed at two hours after STS101 administration are freedom from pain and freedom from most bothersome symptom. In addition, we expect to prospectively evaluate a number of secondary endpoints and the performance of STS101 in a number of patient subgroups that could enhance the differentiated clinical profile of STS101. After the completion of our Phase 3 EMERGE efficacy trial, we plan to initiate a 12-month safety trial of STS101, with a new drug application, or NDA, filing with the U.S. Food and Drug Administration, or FDA, anticipated by the end of 2021.

Our management team has extensive pharmaceutical industry experience in drug development, regulatory approval, manufacturing, reimbursement, commercialization and finance from their prior roles at other pharmaceutical and biotechnology companies, including ALZA, AstraZeneca, Athena Neurosciences, Elan Pharmaceuticals, GlaxoSmithKline, Ilypsa, Immunex, Johnson & Johnson, Pearl Therapeutics, Protagonist Therapeutics, Relypsa and Roivant Sciences. Collectively, our management team has materially contributed to the clinical development, registration and/or commercialization of 37 approved drug products, including 15 drug-device combination products, 13 of which are delivered via inhalation.

Our Strategy

Our strategy is to develop and commercialize STS101 and address the significant unmet medical needs of a large number of people with migraine. Key elements of our strategy include:

• Advance STS101 through clinical development and regulatory approval for the acute treatment of migraine. In July 2019, we initiated our Phase 3 EMERGE efficacy trial, with a target enrollment of 1,140 patients. We expect to report topline data from this trial in the second half of 2020. We expect to commence a 12-month safety trial in the second half of 2020, with an NDA filing anticipated by the end of 2021.

• Commercialize STS101 in the United States. If approved, we plan to commercialize STS101 in the United States by building a specialized sales organization focusing on headache specialists, as well as general neurologists and primary care physicians who are high prescribers of migraine therapeutics.

• Pursue market opportunities for STS101 outside the United States with one or more partners. We believe there is a significant market opportunity for STS101 in markets outside the United States. To address these markets, we plan to seek one or more ex-U.S. partners who can commercialize STS101.

• Maximize commercial potential of STS101. We may conduct additional clinical trials and consider additional headache indications for STS101 to maximize its commercial potential.

Migraine Overview

Migraine is a chronic and debilitating neurological disorder characterized by attacks of often severe headache and accompanying neurological symptoms lasting four to 72 hours. More than 90% of individuals suffering from migraine are unable to work or function normally during a migraine attack, with many experiencing comorbid conditions such as depression, anxiety and insomnia. Failure to effectively treat migraine attacks can lead to disease progression, increased frequency of attacks and greater migraine-related disability. Migraine is often accompanied by one or more of the following disabling symptoms:

• extreme sensitivity to light, sound, touch or smell;

• nausea and/or vomiting;

• dizziness;

87

• visual disturbances;

• tingling or numbness in the extremities or face; and

• neck pain.

Based on reported prevalence data, approximately 39 million individuals in the United States and over 100 million individuals in Europe suffer from migraine. Migraine is most prevalent among adults ages 18 to 44 and disproportionately affects women over men on a three-to-one basis. With a global prevalence of greater than one billion, migraine ranks as the world’s third most prevalent illness, the sixth highest specific cause of disability worldwide, and the leading cause of disability in people under 50 years of age. In addition, migraine is the second leading cause of disability in terms of number of patient-years lost to disability. It has been estimated that migraine results in up to $36 billion in healthcare and lost productivity costs and up to 157 million lost workdays annually in the United States. In 2018, more than 15 million prescriptions for migraine-specific acute therapies were written in the United States. This figure excludes prescriptions for non-specific therapies, such as NSAIDs and acetaminophen, and therefore likely significantly understates the total number of prescriptions written for the acute treatment of migraine.

The underlying causes of migraine are not well understood; however, both genetics and environmental factors appear to be relevant. Further, the underlying biology of migraine is complex and multifactorial, and it is believed that migraine susceptibility arises from genetic predisposition to generalized neuronal hyperexcitability. During a migraine attack, hyperexcitable neurons cause the release of various vasoactive, pro-inflammatory and neuroactive substances, including calcitonin gene-related peptide (CGRP), substance P, histamine, inducible nitric oxide synthase (iNOS), cyclooxygenase-2 (COX-2) and serotonin, leading to vasodilation, neurogenic inflammation and neurological symptoms, including headache and pain.

Migraine treatment can generally be categorized as either acute or preventive. Treatment guidelines indicate that all patients should be offered acute treatment, which is focused on stopping the migraine attack quickly and restoring the patient’s ability to function with minimal side effects. In addition to receiving acute treatments, a subset of patients (typically those with more severe and/or frequent migraine attacks) may also receive preventive treatment, which is focused on reducing the frequency, duration or severity of migraine attacks or the associated disability caused by such attacks. Historically, preventive therapies, such as anti-convulsants, beta blockers and BOTOX^®, have lacked strong efficacy for many patients, have been associated with significant side effects or required burdensome administration. The recent introduction of anti-CGRP antibodies as a new class of preventive therapy is raising awareness of the treatment opportunities in migraine and may lead to an increase in the number patients being diagnosed and treated for migraine. However, these new therapies do not alleviate the need for acute therapies, as such products on average result in patients experiencing a reduction of only two migraine days per month. Despite its high prevalence and burden, migraine remains a highly underdiagnosed and undertreated illness due to lack of awareness, stigma and the inherent limitations of currently available therapies.

Current Acute Treatment Paradigm

Patients typically seek acute treatment for migraine to relieve pain and associated symptoms. The current treatment guidelines from the American Headache Society define the five goals of acute therapy as:

• Rapid and consistent freedom from pain and associated symptoms without recurrence;

• Restored ability to function;

• Minimal need for repeat dosing or rescue medications;

• Optimal self-care and reduced subsequent use of resources (e.g., emergency room visits, diagnostic imaging, healthcare provider and ambulatory infusion center visits); and

• Minimal or no side effects.

88

Acute treatments are typically administered orally, via injection or nasally. Orally-administered acute treatments have significant limitations, including relatively slow onset of effect due to the time required for absorption of the drug from the gastrointestinal tract following ingestion. During a migraine attack, absorption of orally-administered treatments can be delayed due to gastric stasis, which commonly occurs in people with migraine both during and between attacks. In addition, orally-administered acute treatments are inappropriate for the many migraine patients who experience significant nausea or vomiting with their attacks or who have trouble swallowing orally-administered medications. Injectable therapies, while often offering the fastest means of achieving therapeutic blood levels of the administered drug product, often require the involvement of a healthcare provider, can be difficult to self-administer and typically result in greater side effects than non-injectable therapies. As a result, patients generally prefer non-injectable therapies over injectable therapies. While nasal administration of acute treatments has the potential to address certain of these limitations by facilitating rapid absorption of drug from the linings of the nasal passages into the bloodstream while simultaneously limiting side effects, currently available and development-stage nasally-administered acute treatments have drawbacks and limitations. These drawbacks and limitations may include one or more of the following:

• Efficacy that is comparable or only incrementally better than orally-administered acute treatments;

• Partial or variable absorption in the nose, with the remaining fraction of drug delivered into the nasal passage, running down the back of the throat, being swallowed and subsequently absorbed in the gastrointestinal tract;

• Variable pharmacokinetics (PK), resulting in inconsistent and sub-optimal clinical performance and perceived lack of reliability;

• For liquid nasal spray formulations, the administered drug product often drips out of the nose and runs-off down the back of throat, which can result in unpleasant taste;

• Non-intuitive and cumbersome administration procedures, including the need for assembly, priming and multiple administrations (sprays or insufflations) over time in order to deliver a full dose. For example, this is the case with Migranal DHE mesylate liquid nasal spray, for which the self-administration procedure requires four sprays, one in each nostril initially, followed by an additional spray in each nostril 15 minutes later, to administer a full dose; and

• Large size, which reduces practicality of transport for patients and ability to discreetly self-administer.

Acute treatments are categorized as non-specific therapies, including NSAIDs and acetaminophen, and migraine-specific therapies, such as triptans and ergot alkaloids (including DHE-based products). Non-specific therapies are generally recommended for the acute treatment of migraine with mild to moderate pain, and migraine-specific therapies are generally recommended for the acute treatment of migraine with moderate to severe pain. However, none of the currently available treatment options adequately achieve the acute treatment goals for a significant percentage of migraine patients.

Triptans

Oral triptans are currently the predominant class of drug for acute treatment of migraine, accounting for over 90% of migraine-specific acute therapy prescriptions, or more than 14 million prescriptions in the United States in 2018. Triptans are serotonergic agonists, typically with selective activity on a limited number of serotonergic receptors, including the 5-HT_1B and 5-HT_1D receptors. While widely prescribed, triptans have been reported to have low treatment persistence, with up to 66% of patients never refilling their initial triptan prescriptions. A substantial majority of patients who discontinue triptans cite a lack of efficacy and side effects as the reasons for discontinuation. Triptans have been reported to have a number of shortcomings, including the following:

• Inconsistent and sub-optimal efficacy. Approximately 40% of migraine patients do not respond to oral triptan therapy (assessed based on pain relief at two hours from the administration of treatment) and up to

89

80% do not achieve sustained freedom from pain. In addition, triptans have been reported to have poor effectiveness in multiple common migraine types, including migraine with allodynia (painful touch), migraine with aura (visual or olfactory disturbance), prolonged migraine, menstrual-related migraine, migraine with multiple recurrences, severe migraine, and migraine upon awakening.

• Side effects and medication overuse headache. Triptans may produce unpleasant “triptan sensation” side effects, including tightening of the throat, chest, neck and limbs with paresthesias, or tingling, and hot or cold sensations. In addition, triptans have the potential to cause MOH, which can require inpatient detoxification and significantly complicate migraine management. As a result, triptans carry a label warning against use on 10 or more days per month.

• Requirement for early treatments. While triptans have been shown to be more effective when taken early in the course a migraine attack, the opportunity for early treatment has been estimated to exist in only 50% of all migraine attacks. Moreover, migraine patients often wait to treat following the onset of a migraine attack due to uncertainty with respect to the peak severity of a particular migraine attack, concern over side effects or dosing limitations, or inability to treat early (for instance, in cases of migraine upon awakening). In one published study, 79% of patients experienced freedom from pain when attacks were treated within one hour of pain onset, but only 21% experienced freedom from pain when attacks were treated four hours after the onset of pain. As a result, many patients may not fully benefit from triptan therapy.

• Slow and variable onset of action and short duration of effect. With oral and nasal triptan therapies, the onset of pain relief tends to be relatively slow and variable due to inconsistent systemic absorption via oral and nasal routes of administration.

• Recurrence within 24 hours. Migraine recurrence within 24 hours occurs in up to 45% of attacks treated with triptans, resulting in the need for rescue medication and/or re-treatment. Published studies have reported that recurrence of migraine, or the recurrence within 24 hours of an effectively treated migraine, is a common reason given for dissatisfaction among people with migraine and is reported to be a significant unmet need with current acute treatments.

DHE

DHE products have long been recommended as a first-line therapeutic option for the acute treatment of migraine. DHE has broader pharmacological activity than triptans across multiple receptor types, including serotonergic, adrenergic and dopaminergic receptors, represses CGRP release, and is thought to inhibit neuroinflammation and central sensitization via adrenergic receptors. In addition, DHE has a long pharmacodynamic half-life thought to be attributed to slow receptor dissociation. Because of its differentiated clinical attributes, many headache specialists consider DHE to be a preferred treatment for many difficult-to-treat migraine types, including severe migraine, migraine with allodynia, migraine upon awakening, fast onset migraine, prolonged and recurrent migraine attacks, including menstrual-related migraine, and migraine attacks requiring late treatment (i.e., more than one hour after onset of attack). In addition, DHE is considered a standard-of-care treatment for MOH and for status migrainosus, which is a condition characterized by debilitating migraine attacks that last more than 72 hours. Given the complexity of migraine biology and the redundancy and interdependence of migraine disease pathways, DHE’s activity across multiple receptors is thought to offer the potential for better responses for many migraine patients.

DHE has a number of differentiating clinical attributes providing advantages for the acute treatment of migraine, including:

• Effective in patients who are non-responsive or refractory to triptan therapy. Published data indicate that approximately half of all patients who have previously failed to adequately respond to triptan therapy, do respond to DHE therapy.

90

• Effective in migraine attacks with allodynia. Allodynia is present in up to two-thirds of migraine attacks, and its presence is associated with poor response to triptans and most other acute treatments. DHE, however, has demonstrated strong efficacy in migraine attacks in which allodynia is present.

• Effective irrespective of when administered during the time course of a migraine attack. Unlike triptans and certain other acute treatments for migraine, which are most effective when administered within one hour of onset of pain, DHE remains effective when administered late after onset of attack.

• Low risk of headache recurrence. DHE has been demonstrated in head-to-head controlled studies to have significantly lower headache recurrence rates than available triptan therapies.

• Lower risk of causing MOH. DHE is thought to have a lower potential for causing MOH with frequent use and, unlike triptan class therapies, currently approved DHE products do not contain a label warning for MOH potential.

Based on published DHE PK and clinical trial data relating to DHE plasma concentrations and clinical efficacy of different DHE doses, we estimate that 1.0 ng/ml is the threshold concentration necessary for therapeutic response to DHE. Due to its chemical properties and structure, DHE has low bioavailability (approximately 1%) when administered orally and, as a result, oral forms have generally not been effective for the acute treatment of migraine. There are currently no approved oral DHE treatments in the United States. Approved DHE products include injectable and liquid nasal spray dosage forms, which have drawbacks that have resulted in limited clinical use.

Due to DHE’s vasoconstrictive effects, DHE products are not recommended for use in patients with cardiovascular risk factors. In addition, approved DHE products carry a “black box” warning in their labels for a risk that the coadministration of DHE and certain other drugs, including specific antivirals and antibiotics, may result in elevated levels of DHE in the blood, potentially causing vasospasm that may result in inadequate blood flow to the extremities or the brain. Unless we can successfully demonstrate by conducting a drug-drug interaction study that the coadministration of DHE and certain other drugs does not result in inhibition of DHE metabolism and elevated DHE levels, the FDA is likely to require the label for STS101, if approved, to include such warning, and this could result in STS101 not achieving its full commercial potential. We are currently evaluating the feasibility of undertaking such drug-drug interaction studies.

Injectable DHE

IV delivery is the fastest means of achieving plasma concentration levels of DHE that we estimate to be necessary to effectively treat a migraine attack, with anti-migraine responses reported as quickly as 15-20 minutes following administration. IV-delivered DHE is typically administered by a healthcare provider in a hospital, clinic or infusion center setting, which is expensive and requires the patient to travel to one of these locations while suffering from a migraine attack. Because IV delivery of DHE results in rapid achievement of high DHE blood levels, side effects are more common with IV administration than with other routes of administration, with nausea and vomiting being particularly common and typically requiring coadministration of anti-nausea medication. DHE can also be administered by IM or SC injection. However, IM and SC administration require a patient, caregiver or healthcare provider to use proper technique during a migraine attack to draw the correct dose of DHE solution for injection from a vial or glass ampule into a syringe and then inject the solution into the muscle or subcutaneous layer of the skin. Although generally considered effective, the challenges of injectable DHE and the fact that migraine patients typically prefer non-injectable therapies for acute treatment of attacks make injectable DHE a less favored treatment option for many people with migraine.

DHE Liquid Nasal Spray

DHE may also be delivered via liquid nasal spray. However, Migranal, the only FDA-approved DHE mesylate liquid nasal spray product, and development-stage DHE liquid nasal spray products may have a number

91

of limitations and complexities related to their liquid nasal spray formulation and delivery devices, including the following:

• High variability and slow absorption. The required administration of DHE via multiple liquid nasal sprays often results in highly variable delivered doses of DHE and highly variable DHE plasma concentrations. Moreover, absorption of DHE following administration of Migranal is relatively low and slow in comparison with injectable DHE products, and often fails to achieve plasma concentration levels of DHE of at least 1.0 ng/ml, which we estimate is the minimum threshold concentration necessary for therapeutic response to DHE. For example, in our Phase 1 clinical trial, 65% of subjects receiving Migranal DHE mesylate liquid nasal spray administration did not achieve 1.0 ng/ml at any time following administration. The low, slow, and highly variable DHE plasma levels achieved with Migranal DHE mesylate liquid nasal spray administration can result in inconsistent and unreliable clinical performance and sub-optimal therapeutic response for many patients.

• Complex and burdensome administration. The administration of DHE liquid nasal spray typically requires a complex and burdensome multi-step process, including the opening of the glass vial containing the nasal liquid spray solution and the assembly and priming of a nasal spray device. Due to the low aqueous solubility of DHE, an adequate dosage of DHE via liquid nasal spray requires multiple sprays. For example, Migranal requires four sprays, one in each nostril initially, followed by an additional spray in each nostril 15 minutes later, to administer a full dose. Following administration, liquid can drip out of the nose and run-off down the back of throat, which can result in bad taste.

• Inconvenient packaging and degradation potential. Formulations of DHE liquid nasal spray are sensitive to heat, light and oxygen, which necessitates packaging in a sealed, amber-colored, glass vial that cannot be stored in warm environments. In addition, any unused DHE liquid nasal spray remaining after eight hours since the opening of a DHE glass vial must be discarded.

Headache specialists articulate a need for a patient-friendly, self-administered, non-injected DHE product that consistently and reliably provides the rapid, durable and robust efficacy that is currently available only with injectable DHE therapies. Given the differentiated clinical features of DHE, we believe DHE, if made available in a non-injectable dosage form that is well tolerated, facilitates quick and convenient administration and delivers rapid and sustained achievement of therapeutic concentrations with low variability, could provide significant benefits over existing acute treatments for migraine and help a large number of people with migraine better achieve migraine treatment goals.

Our Solution: STS101 for the Acute Treatment of Migraine

STS101 is a drug-device combination of a proprietary dry-powder formulation of DHE administered by a proprietary pre-filled, single-use, nasal delivery device. STS101 is specifically designed to deliver the advantages of DHE while overcoming the shortcomings that have limited the utility of DHE for the acute treatment of migraine The proprietary and foundational dry-powder formulation and nasal delivery device technologies incorporated in STS101 were developed over more than 15 years by a dedicated team at Shin Nippon Biomedical Laboratories, Ltd., or SNBL.

Subsequent to licensing such technology from SNBL, we advanced the development of STS101 by developing and optimizing the STS101 formulation, establishing analytical methods and scalable manufacturing performed in accordance with good manufacturing practices, conducting extensive analytical characterization of STS101 and its components, and completing toxicology studies in accordance with good laboratory practices. The manufacturing processes we established employ standard technologies that are commonly utilized in the pharmaceutical industry for the manufacture of approved drug and drug-device combination products and that we believe will be reproducible on commercial-scale equipment. Furthermore, we have completed a Phase 1 clinical trial in 42 healthy volunteers and a preliminary human factors study that we believe validates the STS101 instructions for use that are being utilized in the EMERGE Phase 3 efficacy trial, and we have obtained written

92

feedback from the FDA on various aspects of our STS101 Phase 3 development program, including the protocol for our EMERGE Phase 3 efficacy trial, which we initiated in July 2019. Following our Phase 3 efficacy trial, we expect to commence a 12-month safety trial in the second half of 2020, with an NDA filing anticipated by the end of 2021.

STS101 was designed to be a rapidly-acting, reliable, and convenient DHE therapeutic product. It has a number of key attributes that we believe may provide significant advantages over existing acute treatments for migraine and result in robust and consistent clinical performance and thereby facilitate broad adoption and use. These attributes are primarily the result of our proprietary dry-powder formulation, which incorporates a mucoadhesive drug carrier and engineered drug particle technologies, and our proprietary nasal delivery device. Key STS101 attributes include:

• Targeted plasma concentrations rapidly achieved and sustained. In our Phase 1 clinical trial, administration of STS101 resulted in achievement within 10 minutes of a mean DHE plasma concentration of 1.0 ng/ml, which we estimate is the minimum threshold concentration necessary for therapeutic response to DHE. In addition, DHE exposure levels following STS101 administration, exceeded or fell within ranges that previously have demonstrated efficacy with other dosage forms of DHE, although such exposure levels did not exceed the peak concentration levels associated with IV or IM delivery of DHE.

• Low variability. In our Phase 1 clinical trial, STS101 demonstrated significantly lower variability in peak DHE plasma concentration and drug exposure (plasma concentration over time expressed as area-under-curve) as compared to Migranal, which may lead to more reliable clinical performance.

• Quick and convenient self-administration. STS101 utilizes a convenient, patient-friendly, single-use, nasal delivery device designed to enable self-administration of a full dose of DHE into a single nostril in a matter of seconds. The pre-filled device is pocket-sized and more compact than available DHE liquid nasal spray products, enabling portability and discreet use, and requires no assembly or priming. In addition, the STS101 dry-powder formulation has demonstrated favorable stability properties (including, insensitivity to light, heat or oxygen) we expect will enable storage across a wide range of temperatures and conditions.

• Well tolerated. In our Phase 1 clinical trial, all treatments were well tolerated, all adverse events were mild and transient, and no subject withdrew from the trial for an adverse event. Moreover, STS101 did not exhibit the rapid and high peak concentration associated with IV delivery of DHE, which may often result in side effects, in particular nausea and vomiting.

We believe the foregoing attributes of STS101 could lead to it having a favorable therapeutic response profile as compared to IV, IM or SC delivery of DHE and Migranal DHE mesylate liquid nasal spray. The faster a DHE product can produce the threshold DHE plasma concentration necessary for a therapeutic response, the more quickly following administration it may be able to achieve a therapeutic response. At the same time, rapid and high peak DHE plasma concentrations that greatly exceed the threshold therapeutic level are believed to be

93

associated with adverse side effects, including nausea and vomiting. Based on published DHE PK and clinical efficacy trial data relating to DHE plasma concentrations and clinical efficacy and safety data of different DHE doses, we estimate that 1.0 ng/ml is the threshold concentration necessary for therapeutic response to DHE.

The STS101 administration procedure is shown in the figure below:

Phase 1 Pharmacokinetic and Safety Trial Results

We have completed a Phase 1 clinical trial of STS101, which demonstrated favorable PK, safety and tolerability, and which established the doses of STS101 to be evaluated in our Phase 3 EMERGE efficacy trial. Our Phase 1 clinical trial evaluated STS101 in 42 healthy volunteers in a single-center, single-dose, open-label, 2-part, 3-period crossover, PK and safety trial. As reflected in the figure below, in Part 1 of the trial, 15 subjects each received three ascending doses of STS101 per a 3-period crossover design. The active pharmaceutical ingredient in each dose of STS101 is DHE and, like all currently approved migraine products that contain DHE, the STS101 formulation also contains mesylate salt. Per a request from the FDA, our dose strengths of STS101 are calculated as the active moiety without including the mesylate salt. As a result, for purposes of the following discussion, all references to STS101 doses herein are to the DHE content of such doses, whereas the doses for the Migranal and DHE mesylate IM injection include the mesylate in accordance with the commercially-available versions of such products. The STS101 DHE doses used in Part 1 of the trial were 1.3 mg (equivalent to 1.5 mg DHE mesylate), 2.6 mg (equivalent to 3.0 mg DHE mesylate) and 5.2 mg (equivalent to 6.0 mg DHE mesylate). Based on the results from Part 1, the STS101 5.2 mg (DHE) dose was selected for Part 2 of the clinical trial in which 27 subjects received STS101, Migranal DHE mesylate liquid nasal spray and an DHE mesylate IM injection in a random order.

STS101 Phase 1 Trial Design

As reflected in the figure below, Part 1 of the clinical trial demonstrated that DHE was rapidly absorbed after intranasal administration of single doses of STS101 1.3 mg, 2.6 mg, and 5.2 mg, with mean DHE plasma

94

concentrations increasing in a dose-dependent manner. DHE plasma concentrations for STS101 2.6 and 5.2 mg rapidly exceeded 1.0 ng/ml. Based on published DHE PK and clinical trial data relating to DHE plasma concentrations and clinical efficacy of different DHE doses, we estimate that 1.0 ng/ml is the minimum threshold concentration necessary for therapeutic response to DHE. This conclusion is supported by data from certain clinical trials of Migranal DHE mesylate liquid nasal spray conducted by third parties, which have demonstrated that DHE plasma concentrations resulting from Migranal DHE mesylate liquid nasal spray are dose dependent and linear. In certain such studies, the administration of 2.0 mg of Migranal DHE mesylate resulted in a mean maximum concentration of approximately 1.0 ng/ml, while the administration of smaller doses of Migranal (e.g., 1.5 mg DHE mesylate) did not reach such maximum concentrations and failed to show statistically significant efficacy in controlled studies.

Phase 1, Part 1: Mean DHE Plasma Concentrations in Healthy Subjects after

Administration of a Single Dose of STS101 (1.3 mg, 2.6 mg and 5.2 mg DHE)

Based on the PK, safety and tolerability data from Part 1 of our Phase 1 clinical trial, we selected STS101 5.2 mg for evaluation in Part 2 of the clinical trial.

As reflected in the figure below, in Part 2 of our Phase 1 clinical trial, DHE plasma concentrations rose rapidly after administration of STS101 5.2 mg and DHE mesylate IM injection, with mean concentrations exceeding 1.0 ng/ml at 10 minutes and 5 minutes after dosing, respectively. In contrast, the mean maximum DHE plasma concentration after Migranal DHE mesylate liquid nasal spray administration did not reach 1.0 ng/ml. In general, the amount of DHE delivered by STS101 5.2 mg into systemic circulation over time was approximately 2-fold greater as compared with Migranal DHE mesylate liquid nasal spray and was approximately 83% of the amount delivered by an DHE mesylate IM injection. Importantly, in our Phase 1 clinical trial, the DHE plasma concentration profiles observed following administration of Migranal DHE mesylate liquid nasal spray and DHE mesylate IM injection were consistent with historical data, including those data included in the Migranal summary basis of approval.

95

Phase 1, Part 2: Mean DHE Plasma Concentration in Healthy Subjects after Administration of a Single Dose of STS101 5.2 mg DHE, DHE Mesylate IM Injection 1.0 mg, and Migranal DHE Mesylate Liquid Nasal Spray 2.0 mg

Safety and Tolerability Profile

In our STS101 Phase 1 clinical trial, all treatments were well tolerated, all adverse events were mild and transient, and no subject withdrew from the trial for an adverse event. Subjects treated with STS101 reported a higher frequency of nasal adverse events than those treated with DHE mesylate IM injection or Migranal DHE mesylate liquid nasal spray. The most frequent adverse events reported after STS101 administration, all of which were mild and transient, were nasal discomfort (STS101 5.2 mg (34%), IM injection (0%) and Migranal (7%)) nasal congestion (STS101 5.2mg (13%), IM Injection (0%) and Migranal (0%)), rhinalgia (pain in the nose) (STS101 5.2mg (12%), IM Injection (0%) and Migranal (4%)), bitter or sour taste (STS101 5.2 mg (22%), IM Injection (0%) and Migranal (7%)), and runny nose (STS101 5.2mg (15%), IM Injection (0%) and Migranal (0%)). Patients receiving lower doses of STS101 reported fewer adverse events.

We further assessed nasal symptoms utilizing a subjective nasal symptom severity score self-reported by subjects on the visual analog scale, or VAS score, on a zero to one-hundred scale in which zero represents absence of the symptom and one-hundred represents presence of the symptom with the worst imaginable severity. The average scores for nasal symptoms (including, abnormal taste, nasal blockage or obstruction, nasal burning, nasal discomfort, nasal itching, nasal pain, runny nose and sneezing) were all under 5 mm following administration of STS101 5.2 mg. In addition, subjective nasal symptom severity scores self-reported in Part 1 of our Phase 1 clinical by subjects treated with STS101 1.3 mg and 2.6 mg were negligible.

96

Based on the safety and tolerability profile observed in our Phase 1 clinical trial, including the results of nasal examinations and subjective nasal symptom scores reported by subjects, we do not believe the tolerability of the STS101 5.2 mg dose should present a barrier to patient adoption or use, if approved.

Comparison of STS101 PK Data to Other Non-Injectable DHE Products

We conducted a further analysis comparing data from our Phase 1 clinical trial data of STS101 5.2 mg and Migranal DHE mesylate liquid nasal spray 2.0 mg to published data from earlier Phase 1 clinical trials of MAP0004, another company’s orally-inhaled, pulmonary-route DHE product candidate. Following such Phase 1 clinical trials, MAP0004 met all four of its primary efficacy endpoints and demonstrated a favorable safety profile, but was later discontinued by Allergan. The discontinuation of MAP0004 (previously referred to as the brand names Levadex and Semprana) followed multiple requests from the FDA that the developer address certain issues relating to chemistry, manufacturing, and controls, after certain manufacturing deficiencies were identified during the FDA’s inspection of a facility operated by a third party manufacturer. As a result, MAP0004 was never approved by the FDA and no determination was made by the FDA with respect to its efficacy and safety.

As the data presented below is based on a cross-trial comparison and not a head-to-head clinical trial, such data may not be directly comparable due to differences in study protocols, conditions and patient populations. Accordingly, cross-trial comparisons may not be reliable predictors of the relative efficacy or other benefits of STS101 compared to other product candidates that may be approved or that are or were in development for the acute treatment of migraine. In particular, our Phase 1 clinical trial and the Phase 3 clinical study of MAP0004 (FREEDOM-301) conducted by a third party used similar study designs with different patient eligibility criteria. While our Phase 1 clinical trial was conducted in healthy volunteers, the MAP0004 study (FREEDOM-301) required participants to have a one-year history of migraine according to the International Classification of Headache Disorders and a baseline frequency of two to eight migraine attacks per month. In addition, our Phase 1 clinical trial was designed to provide PK, safety and tolerability data for STS101, whereas the MAP0004 study (FREEDOM-301), used four co-primary endpoints at the 2-hour post dosing time point: pain relief, photophobia-free, phonophobia-free, and nausea-free. The MAP0004 study (FREEDOM-301) reported similar age ranges, gender and race among the participants as our Phase 1 clinical trial of STS101.

As reflected in the figures below, in our Phase 1 clinical trial, STS101 5.2 mg achieved greater DHE exposure levels by approximately 30 minutes and all time points thereafter as compared to DHE exposure levels achieved by MAP0004 in Phase 1 clinical trials conducted by its developer.

97

Mean DHE Plasma Concentration in Healthy Subjects after Administration of a Single Dose of STS101 5.2 mg DHE, Migranal DHE Mesylate Liquid Nasal Spray 2.0 mg and MAP0004 1.0 mg

In addition, in our Phase 1 clinical trial, STS101 5.2 mg showed significantly lower variability in peak DHE plasma concentrations and the amounts of DHE delivered into systemic circulation over 0.5, 2 and 48 hours after administration as compared to Migranal DHE mesylate liquid nasal spray. The variability of STS101 in peak plasma concentrations and in drug exposure expressed as area-under-curve, or AUC, over 2 and 48 hours was comparable to that of MAP0004 in a Phase 1 clinical trial conducted by its developer. The figure below reflects the PK variability of STS101 5.2 mg and Migranal DHE mesylate liquid nasal spray from our Phase 1 clinical trial and the previously reported third-party Phase 1 clinical trial data for MAP0004 measured by a mean percent coefficient of variation, which represents the variability of the specified data points.

PK Variability of STS101 5.2 mg DHE vs. Other Non-Injectable DHE Products

98

As reflected in the figure below, total drug exposure with STS101 5.2 mg in our Phase 1 clinical trial was almost three times greater than reported for MAP0004 in a Phase 1 clinical trial conducted by its developer. Within one hour after administration, STS101 5.2 mg delivered greater amounts of DHE into systemic circulation as compared to the amounts of DHE delivered into systemic circulation by Migranal DHE mesylate liquid nasal spray and MAP0004 over two hours.

Drug Exposure (AUC) for STS101 5.2 mg DHE and Other Non-Injectable DHE Products

In summary, the results from the STS101 Phase 1 clinical trial showed that, within 10 minutes after administration, STS101 5.2 mg achieved target DHE plasma concentrations exceeding 1.0 ng/ml and remained above this level for over 2.5 hours. Furthermore, trial results showed that in comparison with Migranal DHE mesylate liquid nasal spray, STS101 5.2 mg achieved more than a 2-fold higher mean maximum DHE plasma concentration, achieved the maximum concentration much more rapidly, and delivered nearly 2-fold as much DHE into systemic circulation.

Based on our Phase 1 clinical trial data and published data from separate clinical trials conducted by others for different DHE products, including a large Phase 3 study conducted with MAP0004, we believe that the PK profile of STS101 may lead to strong clinical performance expressed in rapid onset of pain relief, excellent 2-hour pain free rates, and sustained efficacy and low recurrence rates at 24 and 48 hours. Accordingly, we believe STS101 has the potential to treat a broad spectrum of migraine types, including those that are often difficult to treat, such as menstrual-related migraine, migraine upon awakening, migraine with allodynia, migraine associated with severe pain and migraine with nausea and vomiting. We expect to prospectively evaluate the performance of STS101 in these subgroups during our Phase 3 EMERGE efficacy trial.

Comparing efficacy data of a third-party DHE product candidate, MAP0004, with efficacy data of other emerging treatments for migraine

We performed a cross-trial comparative analysis of the largest placebo-adjusted effect size for key endpoints in Phase 3 trials conducted by third parties of product candidates for the acute treatment of migraine across a range of classes including inhaled DHE (MAP0004), oral CGRP antagonists (rimegepant, and ubrogepant) and an oral 5HT1F agonist (lasmiditan). The comparative analysis indicated that the DHE product MAP0004 had a greater effect size across a range of efficacy measures relative to the other product candidates.

99

We also conducted a comparison of the migraine attack severity, timing-of-treatment in relation to migraine onset, and study design information available to us from the clinical trials of the various product candidates. This comparison indicated that a larger proportion of treated patients in the MAP0004 Phase 3 trial experienced severe migraine attacks versus those treated patients in the Phase 3 trials for lasmiditan, rimegepant, and ubrogepant. In addition, we believe the MAP0004 Phase 3 trial allowed for a longer time window for treatment relative to the other trials.

The data presented below for each product candidate represents data from the trial with the largest placebo-adjusted effect size for each endpoint (the percentage of responding patients treated with study medication less the percentage of responding patients treated with placebo), where multiple trials have been conducted for a product candidate. Not all available trial data is presented. As the data presented below is based on a cross-trial comparison and not head-to-head clinical trials, such data may not be directly comparable due to differences in study protocols, conditions and patient populations. Accordingly, cross-trial comparisons may not be reliable predictors of the relative efficacy or other benefits of product candidates that may be approved or that are or were in development for the acute treatment of migraine.

The Phase 3 clinical studies with rimegepant, ubrogepant, lasmiditan and MAP0004 were all conducted between 2008 to 2018 and used substantially similar study designs and patient eligibility criteria. All studies required participants to have a one-year history of migraine according to the International Classification of Headache Disorders and a baseline frequency of two to eight migraine attacks per month. All studies were double-blinded, placebo-controlled and assessed the efficacy and safety of self-administered study medication or placebo in the outpatient setting following the treatment of a single migraine attack with moderate or severe pain during the treatment period. The lasmiditan studies allowed the use of a second dose for rescue, but the primary analyses were based on the first dose administered. The MAP0004 study (FREEDOM-301) used four co-primary endpoints at the 2-hour post dosing time point: pain relief, photophobia-free, phonophobia-free, and nausea-free. Pain free at two hours was used as a secondary endpoint. The studies with rimegepant, ubrogepant, and lasmiditan used freedom from pain and most bothersome symptom (selected by the patient from among photophobia, phonophobia and nausea) at 2-hours post dosing as co-primary endpoints. Pain relief, photophobia-free, phonophobia-free, and nausea-free were used as secondary endpoints. All studies reported similar age ranges, gender and race among the participants. Placebo-adjusted effect sizes, are shown for the different endpoints to account for possible differences in the placebo response rates in the studies.

In addition, while MAP0004 was a DHE-based product candidate, none of the clinical trials presented below studied STS101. The performance of STS101 across these or other efficacy measures in our planned clinical trials may differ materially from any results that could be inferred from this cross-trial comparison, including due to differences between MAP0004 and STS101, as well as differences in study protocols, conditions and patient populations.

100

Placebo-adjusted efficacy data (% of patients) from the clinical trials of various product candidates for migraine

Development Plan

Our development plan for STS101 is informed by published FDA guidance as well our discussions with the FDA. Following completion of our Phase 1 study, the FDA provided us with written feedback on our proposed STS101 development program, which we expect will be comprised of a single Phase 3 efficacy trial and a single Phase 3 safety trial to support approval of STS101 for the acute treatment of migraine headaches with or without aura. Our development program is intended to support registration of STS101 through the 505(b)(2) approval pathway. We plan to conduct both trials in the United States.

Phase 3 Efficacy Trial

Our Phase 3 EMERGE efficacy trial is designed to be a multi-center, single-dose, randomized, double-blind, placebo-controlled, parallel group study in approximately 1,140 patients experiencing episodic migraine attacks. To establish eligibility, study participants must have at least two but no more than eight migraine attacks during a 28-day screening period. After establishing full eligibility, the study participants are randomized (1:1:1) to receive one of three treatments: STS101 DHE 3.9 mg, STS101 DHE 5.2 mg or matching placebo. After randomization, the trial participants will be instructed to treat their next migraine attack of at least moderate pain severity with the allocated blinded study medication. All study participants are trained multiple times in the STS101 administration procedure prior to use, and we provide each participant with an electronic device preloaded with diary software designed to capture relevant trial data.

Our EMERGE trial will follow certain of the recommendations outlined in the FDA Guidance Migraine: Developing Drugs for Acute Treatment, February 2018. In particular, the two co-primary endpoints of our EMERGE trial to be assessed at two hours after STS101 administration are freedom from pain and freedom from most bothersome symptom. We believe the trial is powered to achieve these endpoints (i.e. at greater than 99% power for the freedom from pain endpoint and greater than 95% power for the freedom from most bothersome symptom endpoint). In addition, several secondary endpoints, including those suggested in the FDA guidance, are incorporated into the trial protocol. Such endpoints include rescue medication usage, headache relapse

101

measurements, and functional impairment scales. Further, we expect to prospectively evaluate the performance of STS101 in patient subgroups, including menstrual-related migraine, migraine upon awakening, migraine with allodynia, migraine associated with severe pain and migraine with nausea and vomiting, during our Phase 3 EMERGE efficacy trial to assess whether further study may be of interest. If both doses are successful in our EMERGE trial, then both doses may be submitted in the NDA.

The figure below provides details of the trial design of our Phase 3 EMERGE efficacy trial:

STS101 Phase 3 EMERGE Efficacy Trial Design

If successful, we believe our EMERGE trial’s differentiated secondary endpoints and clinical performance in prospectively-defined patient subgroups, could provide us with a strong foundation for promotion and commercialization. Labels for current DHE products, such as D.H.E. 45^® and Migranal, do not address the differentiating attributes of DHE and its potential to address unmet needs of many patients with difficult-to-treat migraine types, which we believe has led to low clinical awareness of its benefits by physicians other than headache specialists.

We initiated our EMERGE trial in July 2019 and expect topline data expected in the second half of 2020.

Phase 3 Safety Trial

We also plan to initiate a Phase 3 safety trial of STS101. This safety trial is expected to be a multi-center, open-label, 12-month trial in approximately 200 episodic migraine patients. After establishing eligibility, the study participants will be expected to use STS101 on an as-needed basis to treat migraine attacks for up to 12 months. We anticipate that at least 150 and 50 subjects will complete six and twelve months, respectively. Following the completion of this trial, if successful, we expect to submit our NDA to the FDA by the end of 2021.

Additional Trials

We are currently evaluating the feasibility of undertaking additional clinical trials with STS101, including a drug-drug interaction study. Unless we can successfully demonstrate by conducting such a study that the

102

coadministration of STS101 and certain other drugs does not result in inhibition of DHE metabolism and elevated DHE levels, the FDA is likely to require a “black box” warning in the label for STS101, if approved, in line with the warnings that are included in the labels for other approved DHE products.

To date, we and SNBL have completed preliminary human factor studies that we believe support self-administration of STS101 in the outpatient setting for the treatment of migraine and validate the STS101 instructions for use that we are utilizing in our Phase 3 EMERGE efficacy trial, which we initiated in July 2019. Following completion of such trial, we will evaluate whether further human factor studies are required.

Regulatory Pathway

Since DHE is well characterized and previously approved, we intend to seek FDA marketing approval of STS101 under Section 505(b)(2) of the Federal Food, Drug and Cosmetic Act, which provides an alternate path to FDA approval for modifications to formulations of products previously approved by the FDA. Section 505(b)(2) permits the filing of an NDA where at least some of the information required for approval comes from non-clinical studies and clinical trials not conducted by or for the applicant and for which the applicant has not obtained a right of reference. By utilizing this pathway, and based on our discussions with the FDA, we believe we would be able to forego a Phase 2 clinical trial of STS101 by establishing that STS101 has comparative bioavailability to a reference listed drug with the PK results of our Phase 1 clinical trial.

In the United States, we intend to pursue a 505(b)(2) NDA for STS101 referencing the NDAs for D.H.E. 45 (DHE mesylate injectable solution) and Migranal (DHE mesylate liquid nasal spray). Migranal has no therapeutic equivalents (other than an authorized generic) and is not covered under any unexpired patents that could delay approval of our NDA. We believe this development strategy could provide both an expeditious and cost-efficient approval pathway for STS101 in the United States, including by enabling us to forego a Phase 2 clinical trial. Our Phase 3 efficacy trial is intended to clinically and commercially differentiate STS101 from the reference products.

Manufacturing

Our manufacturing and regulatory teams, although limited in size, have substantial experience in manufacturing process development, registration and the commercial manufacture of drug-device combination products, including inhalation-route drug-device combination products. We do not have any manufacturing facilities and all of our manufacturing processes, which must comply with current good manufacturing practices, or cGMP, are outsourced to third parties with oversight by our internal managers. We rely on third-party manufacturers to produce sufficient quantities of drug product for use in clinical trials. We intend to continue this practice for any future clinical trials and large-scale commercialization of STS101.

We selected processes for manufacturing of STS101 that we believe are readily scalable and transferable, and all of our STS101 manufacturing processes employ standard technologies that are commonly utilized in the pharmaceutical industry for the manufacture of approved drug and drug-device combination products. However, certain processes for the manufacture of STS101 involve trade secrets and/or require custom or semi-custom equipment that is not available for off-the-shelf purchase, requires substantial investment, and/or has long lead times associated with its design, manufacture, delivery, installation and qualification.

For clinical supplies used in the development of STS101, we contract with CMOs to manufacture the final powder drug formulation and to semi-automatically fill the powder formulation into and manually assemble the STS101 nasal delivery device.

The drug substance of STS101 is supplied by a drug substance manufacturer based in Europe with manufacturing facilities in the United States. The manufacturer has extensive experience manufacturing the

103

STS101 drug substance under cGMP, has an active Drug Master File, or DMF, registered with FDA, and has the capacity to meet our anticipated clinical and commercial supply needs. We believe there are additional drug substance manufacturers with active DMFs registered with the FDA that could potentially serve as back-up suppliers for us.

The proprietary STS101 nasal powder delivery device plastic components are manufactured by two third-party CMOs using widely available common standard injection-molding and blow-molding equipment processes, and we are currently in the process of procuring the mold tooling, which we will own, that we plan to use for the manufacture of STS101 registration batches and commercial supplies.

For commercial supply of STS101, we intend to contract with one of the same CMOs that we utilize to manufacture the final nasal powder formulation for our clinical supplies, and we expect to use the same standard equipment and processes as used in the manufacture of such clinical supplies. For large-scale automated filling, automated assembly and packaging of the STS101 nasal powder delivery device for commercialization, we intend to contract with a CMO that we are utilizing to semi-automatically fill and manually assemble the STS101 delivery devices to be used in the STS101 Phase 3 clinical trial program. Automated filling, assembly and packaging of STS101 commercial supplies will utilize semi-custom equipment for which we have contracted, and, with respect to packaging, intend to contract.

Commercial Operations

We currently have no marketing and sales organization. If approved by the FDA for the acute treatment of migraine, we intend to market and commercialize STS101 in the United States by building a specialized sales organization focusing on headache specialists, as well as general neurologists and primary care physicians who are high prescribers of migraine therapeutics. Outside the United States, we intend to establish commercialization strategies for STS101 as we approach possible commercial approval in each market, which may include collaborations with other companies.

Competition

The pharmaceutical industry is highly competitive, with a number of established, large pharmaceutical companies, as well as many smaller companies. If approved for the acute treatment of migraine, we anticipate that STS101 would compete against other marketed migraine therapies for the acute treatment of migraine and may compete with products currently under development by other companies.

In 2018, over 15 million prescriptions for migraine-specific acute therapies were written in the United States. This figure excludes prescriptions of non-specific therapies, such as nonsteroidal anti-inflammatory drugs (NSAIDs) and acetaminophen, and thus likely understates the total number of prescriptions written for the acute treatment of migraine. The majority of the prescriptions written were for generic triptans. There are seven FDA-approved triptan molecules available in branded and branded generic/generic oral dosage forms, and two of these molecules are also available in injectable and/or liquid nasal spray dosage forms that may have faster onset of action than oral dosage forms. With respect to DHE products, we will compete with Bausch Health’s Migranal and its authorized generic, both of which are DHE liquid nasal spray products, as well as branded and generic DHE injectable products. In addition, we believe Impel NeuroPharma is developing a DHE liquid nasal spray product utilizing the same liquid formulation as Migranal, but with a different propellant-powered, single-use delivery device for which Impel NeuroPharma has indicated it plans to file an NDA in 2020. In addition, Promius Pharma reports that it is developing a DHE nasal liquid spray product. We believe these products will suffer from many of the same limitations as Migranal and have not been reported to significantly improve DHE absorption or pharmacokinetics as compared with Migranal to an extent that we believe likely to be clinically relevant. Impel NeuroPharma in particular has indicated that it plans to pursue approval of its product on the basis of a clinical development program that includes only a comparative pharmacokinetic study and an open-label, uncontrolled,

104

repeat-dose safety trial (and not a randomized, controlled, double-blinded Phase 3 efficacy study which the FDA typically requires to support any product-specific marketing claims relating to efficacy). There can be no assurance that we will be able to successfully bring STS101 to the market faster than these liquid nasal spray candidates or compete against such products, if approved.

We may also face competition from non-DHE acute treatments for migraine currently under development. For instance, modulation of CGRP is a therapeutic avenue being investigated for migraine treatment. CGRP is normally produced in neurons, but elevated levels of CGRP in the trigeminovascular system can have adverse effects on neurovascular and neurological function, leading to symptoms of migraine. Allergan recently submitted an NDA for ubrogepant, which if approved may become the first oral CGRP receptor antagonist marketed for the acute treatment of migraine. In addition, Biohaven is in late-stage development with rimegepant. Although these oral CGRP receptor antagonist products may be approved and commercialized, the oral CGRP receptor antagonist class has previously been associated with rare but serious liver toxicity and the efficacy reported with these products is modest in comparison with efficacy historically reported with triptan and DHE products.

In addition, Eli Lilly is developing and has submitted an NDA for lasmiditan, an oral 5HT_1F agonist, for the acute treatment of migraine. Although lasmiditan may be approved and commercialized, central nervous system adverse events such as dizziness, somnolence and paresthesia have been reported in significant proportions of patients treated with lasmiditan in Phase 2 and 3 studies, which may result in label warnings and/or product use limitations.

In contrast with triptan and ergot alkaloid (including DHE) products, both CGRP and 5HT_1F product candidates are thought to act by mechanisms other than vasoconstriction, which may result in these new products having reduced potential for cardiovascular adverse effects and thus being indicated for use in a broader population of migraine patients that includes patients with cardiovascular risk factors for whom triptan and ergot alkaloid treatments are not recommended.

Further, preventive treatment of migraine, could, if broadly adopted and used successfully, reduce the need and demand for acute treatment options. Injectable formulations of anti-CGRP monoclonal antibodies (e.g. erenumab, fremanezumab, and galcanezumab) have recently been approved for prevention of migraine attacks and Allergan and Biohaven have also reported that they are conducting clinical trials of oral CGRP antagonists for prevention of migraine attacks. In addition, Alder Biopharmaceuticals recently announced it was commencing a study of its intravenously injected monoclonal CGRP antibody, eptinezumab, for which it submitted a Biologics License Application for a migraine prevention indication in February 2019, for an acute treatment of migraine indication.

There are many pharmaceutical companies, biotechnology companies, public and private universities, government agencies and research organizations actively engaged in research and development of products which may target the same markets as STS101. We expect any future products we develop to compete on the basis of, among other things, product efficacy and safety, time to market, price, extent of adverse side effects experienced and convenience of administration and drug delivery. One or more of our competitors may develop products based upon the principles underlying our proprietary technologies earlier than us, obtain approvals for such products from the FDA more rapidly than us or develop alternative products or therapies that are safer, more effective and/or more cost effective than any future products developed by us. We also expect to face competition in our efforts to identify appropriate collaborators or partners to help commercialize STS101 in our target commercial areas outside the United States. Many of these companies have greater financial resources, marketing capabilities and experience in obtaining regulatory approvals for product candidates.

Intellectual Property

Our commercial success depends in part on our ability to obtain and maintain proprietary protection for STS101, manufacturing and process discoveries, and other know how, to operate without infringing the

105

proprietary rights of others, and to prevent others from infringing our proprietary rights. Our policy is to seek to protect our proprietary position by, among other methods, filing U.S. and foreign patent applications related to our proprietary technology, inventions and improvements that are important to the development and implementation of our business. We also rely on trade secrets, know how, continuing technological innovation and potential in licensing opportunities to develop and maintain our proprietary position.

With regard to STS101, we have patents and applications to formulations, dosages, devices, and methods of use.

As of July 1, 2019, we own or have an exclusive license to 6 issued U.S. patents and 9 issued foreign patents, which include granted European patent rights that have been validated in various EU member states, and various pending U.S. non-provisional patent applications, U.S. provisional patent applications, and pending foreign patent applications, and an international PCT patent application. Issued U.S. patents relating to STS101 are estimated to expire between 2029 and the end of 2033. If issued, future patents resulting from pending U.S. patent applications relating to STS101 would be estimated to expire between 2034 and 2039. All issued US and foreign patents relating to STS101 were exclusively licensed from SNBL. The pending US and foreign patent applications (including US provisionals) relating to STS101 are solely owned by us or exclusively licensed from SNBL.

The patent portfolio for STS101 is directed to cover formulations, dosages, devices, and methods of treatment. This patent portfolio includes issued U.S. patents, pending U.S. patent applications and corresponding foreign national and regional counterpart patents and patent applications. The U.S. issued formulation patents and device patents are exclusively licensed from SNBL. Royalties on products covered by this exclusive license are payable on a product-by-product and country-by-country basis until the latest of the expiration of the last-to-expire patent covering such product and the ten year anniversary of the first commercial sale of such product in such country. For more information on the SNBL License, see the section titled “Business—Licenses and Collaborations.” We own U.S. patent applications relating to the formulations, dosages, and methods of use of STS101 for treatment.

The term of patents and patent applications, if issued, relating to STS101 in other jurisdictions (some of the major foreign jurisdictions include Europe, Japan, China, India, Canada, Australia, Brazil, Korea, Mexico, Russia), if the appropriate maintenance, renewal, annuity and other government fees are paid, are expected to expire between 2025 and 2038. We also protect our proprietary technology and processes, in part, by confidentiality and invention assignment agreements with our employees, consultants, scientific advisors and other contractors. 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 employees, consultants, scientific advisors or other contractors 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 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, alter 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 a material adverse impact on us. If third parties prepare and file patent applications in the United States that also claim technology to which we have rights, we may have to participate in interference proceedings in the United States Patent and Trademark Office, or USPTO, to determine priority of invention.

Licenses and Collaborations

In June 2016, we and SNBL, entered into a licensing and assignment agreement, or the SNBL License, which was amended and restated in December 2016 and further amended in January 2017, April 2017, and October 2017. We currently rely and intend to continue to rely on the SNBL License for purposes of our development and potential commercialization of STS101. From the time we entered into the SNBL License until the consummation of our Series A convertible preferred stock financing in December 2016, we were a subsidiary of SNBL and SNBL continues to hold over 5% of our outstanding capital stock. Under the SNBL License, SNBL

106

assigned to us certain patent rights and know-how that are directed to SNBL’s proprietary nasal drug delivery technology, including its proprietary nasal delivery device, or the Device, and formulation technologies, for use with DHE, or the DHE Product. SNBL granted to us an exclusive, worldwide, royalty-bearing, sublicensable license, under certain patent rights and know-how, other than the assigned patent rights and know-how, to develop, make, use, and commercialize DHE Products in the field of treatment, prevention or prophylaxis of all indications and human medical conditions, as well as the products consisting of the Device used to deliver a combination of DHE and one or more active pharmaceutical ingredients other than DHE, or DHE Combination Products, in the field of treatment, prevention or prophylaxis of migraine and non-migraine headaches. We granted to SNBL a non-exclusive, royalty-free, sublicensable license, under our rights in improvements to the Device, to develop, make, use, and commercialize products and devices other than DHE Products and DHE Combination Products. During the term of the SNBL License, we, SNBL, and our and SNBL’s affiliates are not permitted to develop or commercialize, or to enable third parties to develop or commercialize, a product containing DHE as an active ingredient for delivery through nasal tissues or the respiratory system, other than pursuant to the SNBL License. We will be responsible, at our cost, for the development, manufacture and commercialization of DHE Products and DHE Combination Products under the SNBL License. We are required to use commercially reasonable efforts to develop and commercialize at least one such product, initially in the United States.

Under the SNBL License, we reimbursed SNBL for approximately $80,000 of costs relating to our incorporation and prosecution and maintenance of the product-specific patents. We also agreed to make royalty payments based on a low single-digit percentage of worldwide net sales of DHE Products and DHE Combination Products, payable on a product-by-product and country-by-country basis until the latest of the expiration of the last-to-expire patent covering such product and the ten year anniversary of the first commercial sale of such product in such country. The royalty payments are subject to reductions based on royalties paid to any third party under a license to such third party’s patent rights.

We have the sole right to control the prosecution and maintenance of, and to enforce, the patent rights that SNBL assigned to us. SNBL has the first right to control the prosecution and maintenance of the patent rights that SNBL licensed to us. We have step in rights if SNBL does not continue such prosecution and maintenance. We also have the first right to enforce such licensed patent rights with respect to certain infringing products. If we do not bring an action to enforce such patents against infringing activities that involve such infringing products, SNBL has the right to bring such an action.

The SNBL License will continue on a country-by-country and product-by-product basis until the expiration of the obligation to pay royalties with respect such product and country. We may terminate the SNBL License in its entirety without cause on ninety days’ prior written notice. SNBL may terminate the SNBL License for our material breach that remains uncured for ninety days. SNBL may also terminate the SNBL License if we challenge the licensed patents, or if we assist any third party in challenging such patents. In addition, SNBL has the right to terminate the license agreement upon our insolvency.

Government Regulation

The FDA and other regulatory authorities at federal, state, and local levels, as well as in foreign countries, extensively regulate, among other things, the research, development, testing, manufacture, storage, recordkeeping, approval, labeling, marketing and promotion, distribution, post-approval monitoring and reporting, sampling, and import and export of products, such as those we are developing. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources.

Our product candidate, STS101, is subject to regulation in the United States as a drug-device combination product. If marketed individually, the drug component and the propriety device component would be subject to

107

different regulatory pathways and would require approval of independent marketing applications by the FDA. A combination product, however, is assigned to a Center within FDA that will have primary jurisdiction over the product’s regulation based on a determination of the combination product’s primary mode of action, which is the single mode of action that provides the most important therapeutic action. In the case of STS101, the FDA has confirmed that the primary mode of action is attributable to the drug component of the product. Accordingly, STS101 will be regulated as a drug product by the FDA’s Center for Drug Evaluation and Research, or CDER, which will have primary jurisdiction over premarket development and approval. We plan to seek approval of STS101 through a single new drug application, or NDA, submitted to CDER through the 505(b)(2) approval pathway. We do not expect that the FDA will require separate marketing authorization for the proprietary device constituent of STS101. However, the drug delivery device component of STS101 will be subject to consulting review by FDA’s Center for Devices and Radiological Health, and we will be required to comply with applicable provisions of the medical device Quality System Regulation as part of ensuring STS101 complies with cGMP. The FDA will also require that we conduct human factors studies to support approval of STS101. To date, we and SNBL have completed preliminary human factor studies that we believe support self-administration of STS101 in the outpatient setting for the treatment of migraine and validate the STS101 instructions for use that we are utilizing in our Phase 3 EMERGE efficacy trial, which we initiated in July 2019. Following completion of such trial, we will evaluate whether further human factor studies are required.

U.S. Drug Regulation

In the United States, the FDA regulates drugs under the FDCA and its implementing regulations. FDA approval is required before any new unapproved drug or dosage form, including a new use or new formulation of a previously approved drug, can be marketed in the United States. Drugs are also subject to other federal, state and local statutes and regulations. Failure to comply with applicable FDA or other requirements may subject a company to a variety of administrative or judicial sanctions, such as FDA clinical holds, refusal to approve pending applications, withdrawal of an approval, warning or untitled letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties and criminal prosecution.

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

• completion of preclinical laboratory tests and animal studies, all performed in accordance with the FDA’s Good Laboratory Practice, or GLP, regulations;

• submission to the FDA of an investigational new drug application, or IND, which must become effective before human clinical studies may begin and must be updated annually or when significant changes are made;

• approval by an independent institutional review board, or IRB, representing each clinical site before a clinical study may be initiated;

• performance of adequate and well-controlled human clinical trials in accordance with good clinical practice, or GCP, regulations to establish the safety and efficacy of the product candidate for each proposed indication;

• preparation of and submission to the FDA of an NDA;

• satisfactory completion of an FDA advisory committee review, if applicable;

• a determination by the FDA within 60 days of its receipt of an NDA to file the application for review;

• satisfactory completion of an FDA pre-approval inspection of the manufacturing facility(ies) where the product is manufactured to assess compliance with current good manufacturing practice, or cGMP, regulations, and of selected clinical investigation sites to assess compliance with GCP; and

108

• FDA review and approval of an NDA to permit commercial marketing of the product for its particular labeled uses in the United States.

Preclinical and Clinical Studies

The preclinical and clinical testing and approval process can take many years and the actual time required to obtain approval, if any, may vary substantially based upon the type, complexity and novelty of the product or condition being treated.

Preclinical tests include laboratory evaluation of product chemistry, formulation and toxicity, as well as animal studies to assess the characteristics and potential safety and efficacy of the product. The conduct of preclinical tests must comply with federal regulations and requirements, including GLP. The results of preclinical testing are submitted to the FDA as part of an IND along with other information, including information about product chemistry, manufacturing and controls and any available human data or literature to support use of the product in humans. Long-term preclinical tests, such as animal tests of reproductive toxicity and carcinogenicity, may continue after the IND is submitted.

The central focus of an IND submission is on the general investigational plan and the protocol(s) for human studies. An IND must become effective before human clinical trials may begin. An IND will automatically become effective 30 days after receipt by the FDA, unless before that time the FDA raises concerns or questions related to the proposed clinical studies. In such a case, the IND may be placed on clinical hold and the IND sponsor and the FDA must resolve any outstanding concerns or questions before clinical studies can begin. A separate submission to an existing IND must also be made for each successive clinical trial conducted during product development along with any subsequent changes to the investigational plan.

Clinical studies involve the administration of the investigational new drug to human subjects under the supervision of qualified investigators in accordance with GCPs, which include the requirement that all research subjects provide their informed consent for participation in each clinical study. Clinical studies are conducted under protocols detailing, among other things, the objectives of the study, the parameters to be used in monitoring safety and the efficacy criteria to be evaluated. A protocol for each clinical study and any subsequent protocol amendments must be submitted to the FDA as part of the IND. Additionally, approval must also be obtained from each clinical study site’s IRB before a study may be initiated at the site, and the IRB must monitor the study until completed. Sponsors of clinical trials generally must register and report ongoing clinical studies and clinical study results to public registries, including the website maintained by the U.S. National Institutes of Health, ClinicalTrials.gov.

For purposes of NDA approval, human clinical trials are typically divided into three or four phases. Although the phases are usually conducted sequentially, they may overlap or be combined.

• Phase 1. The drug is initially introduced into healthy human subjects or into patients with the target disease or condition. These studies are designed to evaluate the safety, dosage tolerance, metabolism and pharmacologic actions of the drug in humans, the side effects associated with increasing doses, and if possible, to gain early evidence on effectiveness.

• Phase 2. The drug is administered to a limited patient population to evaluate dosage tolerance and optimal dosage, identify possible adverse side effects and safety risks and preliminarily evaluate efficacy.

• Phase 3. The drug is administered to an expanded patient population, generally at geographically dispersed clinical study sites to generate enough data to statistically evaluate dosage, clinical effectiveness and safety, to establish the overall benefit-risk relationship of the investigational product and to provide an adequate basis for product approval.

• Phase 4. In some cases, the FDA may condition approval of an NDA for a product candidate on the sponsor’s agreement to conduct additional clinical studies after approval. In other cases, a sponsor may

109

voluntarily conduct additional clinical studies after approval to gain more information about the drug. Such post-approval studies are typically referred to as Phase 4 clinical studies.

The FDA, the IRB or the clinical study sponsor may suspend or terminate a clinical study at any time on various grounds, including a finding that the research subjects are being exposed to an unacceptable health risk. We may also suspend or terminate a clinical study based on evolving business objectives and/or competitive climate.

Concurrent with clinical trials, companies may complete additional animal studies and develop additional information about the characteristics of the product candidate, and must finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the product and, among other things, must include methods for testing the identity, strength, quality and purity of the final product. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the product does not undergo unacceptable deterioration over its shelf life.

Submission of an NDA to the FDA

Assuming successful completion of all required testing in accordance with all applicable regulatory requirements, the results of product development and testing are submitted to the FDA in the form of an NDA requesting approval to market the product for one or more indications. The submission of an NDA requires payment of a substantial application user fee to the FDA, unless a waiver or exemption applies.

An NDA must include all relevant data available from pertinent preclinical and clinical studies, including negative or ambiguous results as well as positive findings, together with detailed information relating to the product’s chemistry, manufacturing, controls and proposed labeling, among other things. Data can come from company-sponsored clinical studies intended to test the safety and effectiveness of a use of a product, or from a number of alternative sources, including studies initiated by investigators. To support marketing approval, the data submitted must be sufficient in quality and quantity to establish the safety and effectiveness of the investigational product to the satisfaction of the FDA.

The FDA has 60 days from its receipt of an NDA to determine whether the application will be accepted for filing based on the agency’s threshold determination that it is sufficiently complete to permit substantive review. The FDA may request additional information rather than accept an application for filing. In this event, the application must be resubmitted with the additional information and is subject to payment of additional user fees. The resubmitted application is also subject to review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive review. Under the Prescription Drug User Fee Act, or PDUFA, the FDA has agreed to certain performance goals in the review of NDAs through a two-tiered classification system, standard review and priority review. Priority review designation is given to drugs that offer major advances in treatment, or provide a treatment where no adequate therapy exists. According to PDUFA performance goals, the FDA endeavors to review applications subject to standard review within ten to twelve months, whereas the FDA’s goal is to review priority review applications within six to eight months, depending on whether the drug is a new molecular entity.

The FDA may refer applications for novel drug products or drug products which present difficult questions of safety or efficacy to an advisory committee for review, evaluation and recommendation as to whether the application should be approved and under what conditions.

Before approving an NDA, the FDA typically will inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. Additionally, the FDA will typically inspect one or more clinical sites to assure that relevant study data was obtained in compliance with GCP requirements.

110

After the FDA evaluates the NDA and conducts inspections of manufacturing facilities, it may issue an approval letter or a complete response letter. A complete response letter indicates that the review cycle of the application is complete and the application is not ready for approval. A tentative approval may be issued for an NDA submitted under Section 505(b)(2) of the FDCA if the sponsor must await the expiration of applicable patents or other exclusivity covering the previously approved product referenced in the application before obtaining final approval. A complete response letter generally outlines the deficiencies in the submission and may require substantial additional testing or information in order for the FDA to reconsider the application. Even with submission of this additional information, the FDA may ultimately decide that an application does not satisfy the regulatory criteria for approval. If, or when, the deficiencies have been addressed to the FDA’s satisfaction in a resubmission of the application, the FDA will issue an approval letter. An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications.

As a condition of NDA approval, the FDA may require a Risk Evaluation and Mitigation Strategy, or REMS, program to help ensure that the benefits of the drug outweigh its risks. If the FDA determines a REMS program is necessary during review of the application, the drug sponsor must agree to the REMS plan at the time of approval. For 505(b)(2) NDAs, FDA will typically require a REMS if the reference product is required to have a REMS. A REMS program may be required to include various elements, such as a medication guide or patient package insert, a communication plan to educate healthcare providers of the drug’s risks, or other elements to assure safe use, such as limitations on who may prescribe or dispense the drug, dispensing only under certain circumstances, special monitoring and the use of patient registries. In addition, all REMS programs must include a timetable to periodically assess the strategy following implementation.

Further, product approval may require substantial post-approval testing and surveillance to monitor the drug’s safety and efficacy, and the FDA has the authority to prevent or limit further marketing of a product based on the results of these post-marketing programs. Once granted, product approvals may be withdrawn if compliance with regulatory standards is not maintained or problems are identified following initial marketing. Moreover, changes to the conditions established in an approved application, including changes in indications, labeling or manufacturing processes or facilities may require submission and FDA approval of a new NDA or NDA supplement before the changes can be implemented. An NDA supplement for a new indication typically requires clinical data similar to that supporting the original approval, and the FDA uses similar procedures in reviewing supplements as it does in reviewing original applications.

Post-Approval Requirements

Once an NDA is approved, a product will be subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to drug listing and registration, recordkeeping, periodic reporting, product sampling and distribution, adverse event reporting and advertising, marketing and promotion. Drugs may be marketed only for the approved indications and in accordance with the provisions of the approved labeling. While physicians may prescribe for off-label uses, manufacturers may only promote for the approved indications and in accordance with the provisions of the approved label. However, companies may share truthful and not misleading information that is otherwise consistent with a product’s FDA approved labeling. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability.

After approval, most changes to the approved product, such as adding new indications or other labeling claims, are subject to prior FDA review and approval. There also are continuing user fee requirements, under which FDA assesses an annual program fee for each product identified in an approved NDA. In addition, quality-control, drug manufacture, packaging and labeling procedures must continue to conform to cGMPs after approval. Drug manufacturers and certain of their subcontractors are required to register their establishments with the FDA and certain state agencies. Registration with the FDA subjects entities to periodic unannounced and announced inspections by the FDA and these state agencies, during which the agency inspects manufacturing facilities to assess compliance with cGMPs. FDA regulations also require investigation and correction of any

111

deviations from cGMP and impose reporting requirements upon us and any third-party manufacturers that we may decide to use. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain compliance with cGMP and other aspects of regulatory compliance.

The FDA may withdraw approval of a product if compliance with regulatory requirements is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical studies to assess new safety risks; or imposition of distribution restrictions or other restrictions under a REMS program. Other potential consequences include, among other things:

• restrictions on the marketing or manufacturing of a product, complete withdrawal of the product from the market or product recalls;

• fines, warning or untitled letters or holds on post-approval clinical studies;

• refusal of the FDA to approve pending applications or supplements to approved applications, or suspension or revocation of existing product approvals;

• product seizure or detention, or refusal of the FDA to permit the import or export of products; or

• injunctions or the imposition of civil or criminal penalties.

The FDA may also require post-approval studies and clinical trials if the FDA finds that scientific data, including information regarding related drugs, deem it appropriate. The purpose of such studies would be to assess a known serious risk or signals of serious risk related to the drug or to identify an unexpected serious risk when available data indicate the potential for a serious risk. The FDA may also require a labeling change if it becomes aware of new safety information that it believes should be included in the labeling of a drug.

The Hatch-Waxman Amendments

ANDA Approval Process

The Hatch-Waxman Amendments established abbreviated FDA approval procedures for drugs that are shown to be equivalent to proprietary drugs previously approved by the FDA through its NDA process. Approval to market and distribute these drugs is obtained by filing an abbreviated new drug application, or ANDA, with the FDA.

An ANDA is a comprehensive submission that contains, among other things, data and information pertaining to the active pharmaceutical ingredient, drug product formulation, specifications and stability of the generic drug, as well as analytical methods, manufacturing process validation data and quality control procedures. Premarket applications for generic drugs are termed abbreviated because they generally do not include preclinical and clinical data to demonstrate safety and effectiveness. Instead, a generic applicant must demonstrate that its product is bioequivalent to the innovator drug. In certain situations, an applicant may obtain ANDA approval of a generic product with a strength or dosage form that differs from a referenced innovator drug pursuant to the filing and approval of an ANDA suitability petition. The FDA will approve the generic product as suitable for an ANDA application if it finds that the generic product does not raise new questions of safety and effectiveness as compared to the innovator product. A product is not eligible for ANDA approval if the FDA determines that it is not equivalent to the referenced innovator drug or is intended for a different use, and it is not otherwise subject to an approved suitability petition. However, such a product might be approved under an NDA, with supportive data from clinical trials.

505(b)(2) NDAs

As an alternative path to FDA approval for modifications to formulations or uses of products previously approved by the FDA, an applicant may submit an NDA under Section 505(b)(2) of the FDCA. Section 505(b)(2)

112

was enacted as part of the Hatch-Waxman Amendments and permits the filing of an NDA where at least some of the information required for approval comes from studies not conducted by, or for, the applicant. If the 505(b)(2) applicant can establish that reliance on FDA’s previous findings of safety and effectiveness is scientifically appropriate, it may eliminate the need to conduct certain preclinical or clinical studies of the new product. The FDA may also require companies to perform additional studies or measurements, including clinical trials, to support the change from the approved reference drug. The FDA may then approve the new product candidate for all, or some, of the label indications for which the reference drug has been approved, as well as for any new indication sought by the 505(b)(2) applicant.

Orange Book Listing

In seeking approval for a drug through an NDA, including a 505(b)(2) NDA, applicants are required to list with the FDA certain patents whose claims cover the applicant’s product. Upon approval of an NDA, each of the patents listed in the application for the drug is then published in the Orange Book. Any applicant who files an ANDA seeking approval of a generic equivalent version of a drug listed in the Orange Book or a 505(b)(2) NDA referencing a drug listed in the Orange Book must certify to the FDA that (1) no patent information on the drug product that is the subject of the application has been submitted to the FDA; (2) such patent has expired; (3) the date on which such patent expires; or (4) such patent is invalid or will not be infringed upon by the manufacture, use or sale of the drug product for which the application is submitted. This last certification is known as a paragraph IV certification. A notice of the paragraph IV certification must be provided to each owner of the patent that is the subject of the certification and to the holder of the approved NDA to which the ANDA or 505(b)(2) application refers. The applicant may also elect to submit a “section viii” statement certifying that its proposed label does not contain (or carves out) any language regarding the patented method-of-use rather than certify to a listed method-of-use patent.

If the reference NDA holder and patent owners assert a patent challenge directed to one of the Orange Book listed patents within 45 days of the receipt of the paragraph IV certification notice, the FDA is prohibited from approving the application until the earlier of 30 months from the receipt of the paragraph IV certification expiration of the patent, settlement of the lawsuit or a decision in the infringement case that is favorable to the applicant. The ANDA or 505(b)(2) application also will not be approved until any applicable non-patent exclusivity listed in the Orange Book for the reference drug has expired.

Non-Patent Exclusivity

In addition to patent exclusivity, NDA holders may be entitled to a period of non-patent exclusivity, during which the FDA cannot approve an ANDA or 505(b)(2) application that relies on the listed drug. For example, a pharmaceutical manufacturer may obtain five years of non-patent exclusivity upon NDA approval of a new chemical entity, or NCE, which is a drug that contains an active moiety that has not been approved by FDA in any other NDA.

A non-NCE drug, including one approved under Section 505(b)(2), may qualify for a three-year period of exclusivity for a particular condition of approval or change to a previously approved product, such as a new formulation or method of administration for a previously approved product, if one or more new clinical studies (other than bioavailability or bioequivalence studies) was essential to the approval of the application and was conducted or sponsored by the applicant. Should this occur, the FDA would be precluded from approving any ANDA or 505(b)(2) application for the protected modification until after that three-year exclusivity period has concluded. However, unlike NCE exclusivity, the FDA can accept an application and being the review process during the exclusivity period. A drug approved under Section 505(b)(2) may also be eligible for pediatric exclusivity if the FDA issues a Written Request for one or more pediatric studies, the manufacturer conducts the studies and submits written reports to the FDA, and such studies meet the conditions of the Written Request. If granted, pediatric exclusivity extends any existing marketing exclusivity or patent protection for the product by an additional six months.

113

International Regulation

In addition to regulations in the United States, we could become subject to a variety of foreign regulations regarding development, approval, commercial sales and distribution of our products if we seek to market STS101 in other jurisdictions. Whether or not we obtain FDA approval for a product, we must obtain the necessary approvals by the comparable regulatory authorities of foreign countries before we can commence clinical trials or marketing of the product in those countries. The approval process varies from country to country and can involve additional product testing and additional review periods, and the time may be longer or shorter than that required to obtain FDA approval. The requirements governing, among other things, the conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from country to country. Regulatory approval in one country does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country may negatively impact the regulatory process in others. If we fail to comply with applicable foreign regulatory requirements, we may be subject to fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution.

Other Healthcare Laws

Pharmaceutical companies are subject to additional healthcare regulation and enforcement by the federal government and by authorities in the states and foreign jurisdictions in which they conduct their business. Such laws include, without limitation, U.S. federal and state fraud and abuse laws, including anti-kickback, false claims, civil monetary penalties laws, consumer protection and transparency laws as well as similar foreign laws in the jurisdictions outside the U.S. For example, the federal Anti-Kickback Statute prohibits, among other things, individuals or entities from knowingly and willfully offering, paying, soliciting or receiving remuneration, directly or indirectly, overtly or covertly, in cash or in kind to induce or in return for purchasing, leasing, ordering or arranging for or recommending the purchase, lease or order of any item or service reimbursable under Medicare, Medicaid or other federal healthcare programs. A person or entity does not need to have actual knowledge of this statute or specific intent to violate it in order to have committed a violation. In addition, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False Claims Act and the civil monetary penalties statute. The federal civil and criminal false claims laws, including the civil False Claims Act, prohibit, among other things, any individual or entity from knowingly presenting, or causing to be presented, a false claim for payment to the federal government or knowingly making, using or causing to be made or used a false record or statement material to a false or fraudulent claim to the federal government. The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, created additional federal civil and criminal statutes that prohibit, among other things, knowingly and willfully executing a scheme to defraud any healthcare benefit program. Similar to the U.S. federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the healthcare fraud statute implemented under HIPAA or specific intent to violate it in order to have committed a violation. The federal Physician Payments Sunshine Act requires certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with specific exceptions, to report annually to CMS information related to payments or other transfers of value made to physicians and teaching hospitals, and applicable manufacturers and applicable group purchasing organizations to report annually to CMS ownership and investment interests held by physicians and their immediate family members.

Similar state and local laws and regulations may also restrict business practices in the pharmaceutical industry, such as state anti-kickback and false claims laws, which may apply to business practices, including but not limited to, research, distribution, sales and marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers, or by patients themselves; state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the 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 or which require

114

tracking gifts and other remuneration and items of value provided to physicians, other healthcare providers and entities; state and local laws that require the registration of pharmaceutical sales representatives; and state and local laws governing the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts. Violation of any of such laws or any other governmental regulations that apply may result in penalties, including, without limitation, civil and criminal penalties, damages, fines, additional reporting obligation, the curtailment or restructuring of operations, exclusion from participation in governmental healthcare programs and individual imprisonment.

Data Privacy and Security Laws

Pharmaceutical companies may be subject to U.S. federal and state health information privacy, security and data breach notification laws, which may govern the collection, use, disclosure and protection of health-related and other personal information. State laws may be more stringent, broader in scope or offer greater individual rights with respect to protected health information, or PHI, than HIPAA and state laws may differ from each other, which may complicate compliance efforts. Entities that are found to be in violation of HIPAA as the result of a breach of unsecured PHI, a complaint about privacy practices or an audit by the Department of Health and Human Services, or HHS, may be subject to significant civil, criminal and administrative fines and penalties and/or additional reporting and oversight obligations if required to enter into a resolution agreement and corrective action plan with HHS to settle allegations of HIPAA non-compliance.

European Union member states, the United Kingdom, Switzerland and other jurisdictions have also adopted data protection laws and regulations, which impose significant compliance obligations. In the EEA and the United Kingdom, the collection and use of personal data, including clinical trial data, is governed by the provisions of the General Data Protection Regulation, or GDPR. The GDPR became effective on May 25, 2018, repealing its predecessor directive and increasing responsibility and liability of pharmaceutical companies in relation to the processing of personal data of EU data subjects. The GDPR, together with national legislation, regulations and guidelines of the EU member states and the United Kingdom governing the processing of personal data, impose strict obligations and restrictions on the ability to collect, analyze and transfer personal data, including health data from clinical trials and adverse event reporting. In particular, these obligations and restrictions concern the consent of the individuals to whom the personal data relates, the information provided to the individuals, the transfer of personal data out of the EEA or the United Kingdom, security breach notifications, security and confidentiality of the personal data and imposition of substantial potential fines for breaches of the data protection obligations. European data protection authorities may interpret the GDPR and national laws differently and impose additional requirements, which add to the complexity of processing personal data in or from the EEA or United Kingdom. Guidance on implementation and compliance practices are often updated or otherwise revised.

Coverage and Reimbursement

Sales of any pharmaceutical product depend, in part, on the extent to which such product will be covered by third-party payors, such as federal, state and foreign government healthcare programs, commercial insurance and managed healthcare organizations, and the level of reimbursement for such product by third-party payors. No uniform policy exists for coverage and reimbursement for products exists among U.S. third-party payors. Therefore, decisions regarding the extent of coverage and amount of reimbursement to be provided are made on a plan-by-plan basis. The process for determining whether a third-party payor will provide coverage for a product typically is separate from the process for setting the price of such product or for establishing the reimbursement rate that the payor will pay for the product once coverage is approved. Third-party payors may limit coverage to specific products on an approved list, also known as a formulary, which might not include all of the FDA-approved products for a particular indication, or place products at certain formulary levels that result in lower reimbursement levels and higher cost-sharing obligation imposed on patients. One third-party payor’s decision to cover a particular medical product or service does not ensure that other payors will also provide

115

coverage for the medical product or service. As a result, the coverage determination process will often require us to provide scientific and clinical support for the use of our products to each payor separately and can be a time-consuming process, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance. Existing acute treatments for migraine are generally covered or reimbursed by third-party payers and, based on preliminary primary market research we have conducted with certain third-party payers, we believe that STS101, if approved, would qualify for coverage and reimbursement substantially similar to other branded acute treatments for migraine; however, such research is preliminary and we cannot guarantee the availability of coverage or adequacy of reimbursement at this time.

In international markets, reimbursement and healthcare payment systems vary significantly by country, and many countries have instituted price ceilings on specific products and therapies. For example, the European Union provides options for its member states to restrict the range of medicinal products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. A member state may approve a specific price for the medicinal product or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the medicinal product on the market. Pharmaceutical products may face competition from lower-priced products in foreign countries that have placed price controls on pharmaceutical products. Furthermore, there can be no assurance that a product will be considered medically reasonable and necessary for a specific indication, that a product will be considered cost-effective by third-party payors, that an adequate level of reimbursement will be established even if coverage is available or that the third-party payors’ reimbursement policies will not adversely affect the ability to sell a product profitably.

Healthcare Reform

In the United States and certain foreign jurisdictions, there have been, and we expect there will continue to be, a number of legislative and regulatory changes to the healthcare system. 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 signed into law, which substantially changed the way healthcare is financed by both governmental and private insurers in the United States and significantly affected the pharmaceutical industry. The ACA contains a number of provisions, including those governing enrollment in federal healthcare programs, reimbursement adjustments and fraud and abuse changes. Additionally, the ACA increased the minimum level of Medicaid rebates payable by manufacturers of brand name drugs from 15.1% to 23.1%; required collection of rebates for drugs paid by Medicaid managed care organizations; required manufacturers to participate in a coverage gap discount program, under which they must agree to offer 70 percent 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; imposed a non-deductible annual fee on pharmaceutical manufacturers or importers who sell certain “branded prescription drugs” to specified federal government programs, implemented 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; expanded eligibility criteria for Medicaid programs; creates a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research; and established a Center for Medicare Innovation at 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. For example, in 2017, Congress enacted the Tax Cuts and Jobs Act, which eliminated the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate.” On December 14, 2018, a U.S. District Court Judge in the Northern District of Texas, or the Texas District Court Judge, ruled that the individual mandate is a critical and inseverable feature of the ACA, and therefore, because it was repealed as part of the Tax Cuts and Jobs Act, the remaining provisions of the ACA are invalid as well. While the Texas U.S. District Court Judge, as well as the Trump Administration and CMS, have stated that the ruling will have no immediate effect, and on

116

December 30, 2018 the Texas District Court Judge issued an order staying the judgment pending appeal, it is unclear how this decision, subsequent appeals, and other efforts to repeal and replace the ACA will impact the ACA.

Other legislative changes have been proposed and adopted since the ACA was enacted, including aggregate reductions of Medicare payments to providers of 2% per fiscal year and reduced payments to several types of Medicare providers, which will remain in effect through 2027 absent additional congressional action. Moreover, there has recently been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and proposed and enacted legislation designed, among other things, to bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs and reform government program reimbursement methodologies for pharmaceutical products. Further, the Trump Administration released a “Blueprint” to lower drug prices and reduce out of pocket costs of drugs that contains additional proposals to increase drug manufacturer competition, increase the negotiating power of certain federal healthcare programs, incentivize manufacturers to lower the list price of their products, and reduce the out of pocket costs of drug products paid by consumers. In addition, CMS issued a final rule, effective on July 9, 2019, that requires direct-to-consumer advertisements of prescription drugs and biological products, for which payment is available through or under Medicare or Medicaid, to include in the advertisement the Wholesale Acquisition Cost, or list price, of that drug or biological product if it is equal to or greater than $35 for a monthly supply or usual course of treatment. Prescription drugs and biological products that are in violation of these requirements will be included on a public list. Individual states in the United States have also become increasingly active in implementing regulations designed to control pharmaceutical 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, mechanisms to encourage importation from other countries and bulk purchasing. Furthermore, there has been increased interest by third party payors and governmental authorities in reference pricing systems and publication of discounts and list prices.

Employees

As of June 30, 2019, we had 11 employees, all of whom were full-time. None of our employees is represented by a labor union or a collective bargaining agreement.

Facilities

Our corporate headquarters are located in South San Francisco, California, where we lease approximately 4,148 square feet of office space pursuant to a lease dated January 9, 2018, which continues through April 30, 2021. In addition, we lease approximately 414 square feet of office space in Research Triangle Park, North Carolina pursuant to a lease dated December 8, 2018, which commenced on January 2, 2019 and which continues through September 30, 2019. We believe these facilities are sufficient for our near-term needs, and expect to expand to new and/or additional space as we grow. We believe the biotechnology environment in the South San Francisco area offers suitable additional space on commercially reasonable terms to enable our expansion.

Legal Proceedings

We are not currently involved in any litigation or legal proceedings that, in management’s opinion, are likely to have any material adverse effect on our company. While we know of no imminent legal action in which we are likely to be involved, we may in the future become engaged in litigation or other legal proceedings. Regardless of the outcome, litigation can have an adverse impact due to defense fees, settlement costs, demands on management attention, and other concerns.

117

MANAGEMENT

Executive Officers and Directors

The following table sets forth information regarding our executive officers, directors and key employees as of July 1, 2019:

Name	Age	Position(s)
Executive Officers and Employee Directors
John Kollins	56	Director, President and Chief Executive Officer
Detlef Albrecht, M.D.	58	Chief Medical Officer
Tom O’Neil	54	Chief Financial Officer
Significant Employees
Mic Iwashima	41	Vice President and Head of Operations
Robert Schultz	55	Vice President and Head of CMC
Shannon Strom, Ph.D., R.A.C.	43	Vice President and Head of Regulatory Affairs
Non-Employee Directors
Thomas King	64	Director
Heath Lukatch, Ph.D.	52	Director
Michael Riebe	59	Director
Rajeev Shah	42	Director
Elisabeth Sandoval	57	Director
Ken Takanashi	55	Director

Executive Officers and Employee Directors

John Kollins, Director, President and Chief Executive Officer. Mr. Kollins has served as a member of our board of directors and as our President and Chief Executive Officer since July 2016. Since 1989, Mr. Kollins has worked in the biopharmaceutical industry in Director, CEO, executive management, business and corporate development, and commercial roles. He has extensive experience working in CNS-focused biopharmaceutical companies, including Transcept Pharmaceuticals, where he served from June 2012 to October 2014 as Chief Business Officer, Renovis, Elan Pharmaceuticals and Athena Neurosciences. From November 2014 until co-founding Satsuma Pharmaceuticals in July 2016, Mr. Kollins was Managing Director of Parnassus Advisors, LLC, which he founded to provide strategic consulting and corporate development services to biopharmaceutical companies. Mr. Kollins earned an M.B.A. from the University of Virginia’s Darden School and an engineering degree from Duke University.

Detlef Albrecht, M.D., Chief Medical Officer. Dr. Albrecht has served as our Chief Medical Officer since July 2017. Previously, Dr. Albrecht served in various roles at Armetheon, Inc., a pharmaceutical company, from May 2015 to June 2017, most recently as Head of Research and Development. He also served as President and Chief Executive Officer for Sorbent Therapeutics, Inc., a biopharmaceutical company, from August 2010 to July 2014. Dr. Albrecht received a Physician Degree and an M.D. from Rheinisch-Westfälische Technische Hochschule Aachen University.

Tom O’Neil, Chief Financial Officer. Mr. O’Neil has served as our Chief Financial Officer since January 2019. Previously, Mr. O’Neil served as Chief Financial Officer at Protagonist Therapeutics, Inc., a public biopharmaceutical company, from February 2016 to January 2019. Prior to that, he served as Chief Financial Officer for Arcadia Biosciences, Inc., a biopharmaceutical company, from March 2015 to September 2015. From January 2014 to July 2014, Mr. O’Neil served as Chief Financial Officer of Sorbent Therapeutics, Inc., a biopharmaceutical company. From September 2011 to December 2013, Mr. O’Neil served as a consultant to

118

Sorbent and a variety of health care and technology companies. From December 2009 to August 2011, Mr. O’Neil served as Vice President of Finance & Administration of ChemGenex Pharmaceuticals Ltd., a biopharmaceutical company. From March 2007 to May 2009, Mr. O’Neil served as Vice President of Finance & Administration of Nodality, Inc., a biotechnology company. Mr. O’Neil received a BA in International Relations from Pomona College, and an M.B.A. from The UCLA Anderson Graduate School of Management.

Significant Employees

Mic Iwashima, Vice President and Head of Operations. Mr. Iwashima has served as our Vice President and Head of Operations since January 2017. Prior to that, Mr. Iwashima was employed by Shin Nippon Biomedical Laboratories, Ltd. from June 2002 to March 2017, most recently as Global Head of R&D. Mr. Iwashima received a B.S. in Mechanical Engineering from North Carolina State University.

Robert Schultz, Vice President and Head of CMC. Mr. Schultz has served as our Vice President and Head of CMC since July 2017. Prior to that, Mr. Schultz was employed by Pearl Therapeutics from August 2007 to July 2019, most recently as Senior Director. He has also served as Associate Director for Kos Pharmaceuticals from July 2004 to August 2007. Mr. Schultz received a B.A. in Biochemistry from Dartmouth College.

Shannon Strom, Ph.D., R.A.C., Vice President and Head of Regulatory Affairs. Dr. Strom has served as our Vice President and Head of Regulatory Affairs since May 2018. Prior to that, Dr. Strom was employed by Roivant Sciences from January 2018 to May 2018, most recently as Senior Director, Global Regulatory Affairs. She was employed by Pearl Therapeutics, a wholly-owned subsidiary of AstraZeneca, from January 2010 to January 2018, most recently as Senior Director for Regulatory Affairs. Dr. Strom received a B.S. in Biology from Duke University, and a Ph.D. in Pharmacology from the University of North Carolina at Chapel Hill.

Non-Employee Directors

Thomas King. Mr. King has served as a member of our board of directors since September 2017. Mr. King also currently serves on the board of directors of VIVUS, Inc. a public pharmaceutical company. Previously, Mr. King served in various roles at VIVUS, Inc. from May 2017 to May 2018, including as the interim Chief Executive Officer, as interim President, and as an independent biotechnology consultant and advisor. Previously, Mr. King served as President, Chief Executive Officer and a member of the board of directors of Alexza Pharmaceuticals, Inc., a publicly traded pharmaceutical company, from June 2003 to August 2016. From October 2015 to August 2016, Mr. King also served as Chief Financial Officer and Chief Accounting Officer of Alexza Pharmaceuticals, Inc. From September 2002 to April 2003, Mr. King served as President, Chief Executive Officer and a member of the board of directors of Cognetix, Inc., a privately held biopharmaceutical development stage company. From January 1994 to February 2001, Mr. King held various senior executive positions at Anesta Corporation, a publicly traded pharmaceutical company, including President and Chief Operating Officer from January 1995 to January 1997 and President and Chief Executive Officer from January 1997 to October 2000, and was a member of the board of directors from January 1995 until it was acquired by Cephalon, Inc., a publicly traded biopharmaceutical company. Mr. King currently serves on the board of directors of Concentric Analgesics, Inc. and Faraday Pharmaceuticals, Inc., both privately held biotechnology companies. Mr. King also serves as a mentor at SPIRE Bioventures, a multi-disciplinary international consortium aiding biotechnology entrepreneurs, and as an Advisory Board Member of the University of Colorado BioFrontiers Institute. Mr. King received a B.A. in chemistry from McPherson College and an M.B.A. from the University of Kansas Graduate School of Business. We believe that Mr. King’s extensive leadership experience in the pharmaceutical and biopharmaceutical industry, including experience with small and large development stage pharmaceutical companies, and his experience serving on several boards of directors of both public and private companies, provides him with the qualifications and skills necessary to serve as a member of our board of directors.

119

Heath Lukatch, Ph.D. Dr. Lukatch has served as the Chairman of our board of directors since December 2016. Dr. Lukatch is a Partner and Managing Director at TPG Biotechnology Partners, a life science venture investment firm. From May 2006 until April 2015, Dr. Lukatch was a Partner at Novo Ventures (US) Inc., which provides certain consultancy services to Novo A/S, a Danish limited liability company that manages investments and financial assets. He currently serves as the Chairman of the board of directors at Inogen, a publicly traded medical technology company, as a member of the board of directors of Flexion Therapeutics, Inc., a public biopharmaceutical company, and as Chairman of Engage Therapeutics, a private company. He also currently serves as a board member at Adynxx, Halo Neuroscience and ViewPoint Therapeutics. Previously he was a member of the board of directors of a number of private companies, including Amira Pharmaceuticals Inc., AnaptysBio, Inc., Cianna Medical, Inc., Elevation Pharmaceuticals, Inc., FoldRx Pharmaceuticals, Inc., InSound Medical, Inc., Spinifex, Inc. and Synosia Therapeutics, Inc. Prior to joining Novo Ventures (US) Inc., Dr. Lukatch was a Managing Director responsible for biotechnology venture investments at Piper Jaffray Ventures and SightLine Partners, a private equity firm and spin off of Piper Jaffray Ventures, from 2001 to 2006. Prior to joining Piper Jaffray Ventures, Dr. Lukatch worked as a strategy consultant with McKinsey & Company, a consulting firm. Dr. Lukatch also served as co-founder and Chief Executive Officer of AutoMate Scientific, Inc., a biotechnology instrumentation company and held scientific positions with Chiron Corporation, a biotechnology company, Roche Bioscience, a healthcare company, and Cetus Corporation, a biotechnology company. Dr. Lukatch received his Ph.D. in Neuroscience from Stanford University where he was a DOD USAF Fellow, and his B.A. in Biochemistry from the University of California at Berkeley. We believe that Dr. Lukatch’s extensive industry experience, his experience with venture capital investments, and his experience of serving on the board of directors for several biopharmaceutical and healthcare companies provides him with the qualifications and skills necessary to serve as a member of our board of directors.

Rajeev Shah. Mr. Shah has served as a member of our board of directors since December 2016. Mr. Shah currently serves as Portfolio Manager & Managing Director at RA Capital Management, LLC, an investment advisory firm that invests in healthcare and life science companies, a position he has held since June 2004. Mr. Shah is currently a member of the board of directors of the public companies Kala Pharmaceuticals, Inc., Ra Pharmaceuticals, Inc., Solid Biosciences, Inc. and Eidos Therapeutics, Inc., all life sciences companies. Mr. Shah was previously a member of the board of directors of KalVista Pharmaceuticals, Inc., a public pharmaceutical company, from June 2015 through April 2018. Mr. Shah holds a B.A. in Chemistry from Cornell University. We believe that Mr. Shah’s experience with biotechnology companies and his experience with venture capital investments provides him with the qualifications and skills necessary to serve as a member of our board of directors.

Michael Riebe. Mr. Riebe has served as a member of our board of directors since October 2017. Mr. Riebe currently serves as a Vice President at AstraZeneca Pharmaceuticals, a position held since June 2016. Prior to joining AstraZeneca Pharmaceuticals, Mr. Riebe was employed by Pearl Therapeutics from January 2013 to June 2016, most recently as Senior Vice President. He also previously served as Vice President of Research and Development for iCeutica, Inc. from January 2012 to December 2012. Mr. Riebe received a B.A. in Chemistry from Kalamazoo College, and a Ph.D. from the University of Wisconsin Madison. We believe Mr. Riebe’s experience as an officer of pharmaceutical and biopharmaceutical companies provides him with the qualifications and skills necessary to serve as a member of our board of directors.

Elisabeth Sandoval. Ms. Sandoval has served as a member of our board of directors since May 2019. Ms. Sandoval currently serves as a consultant to the pharmaceutical industry. From September 2016 to April 2019, Ms. Sandoval served as the Chief Commercial Officer and Executive Vice President of Corporate Strategy of Alder Biopharmaceuticals, a public biopharmaceutical company. Before joining Alder, Ms. Sandoval was Chief Commercial Officer for Kythera Biopharmaceuticals, a publicly traded biopharmaceutical company, acquired by Allergan in 2015, from March 2012 to October 2015. Before Kythera, Ms. Sandoval was Vice President of Marketing for Bausch and Lomb Surgical from November 2010 to November 2012. From October 1987 to October 2010, Ms Sandoval held various senior commercial roles at Allergan, a publicly traded company, including Vice President of Global Marketing at Allergan. Ms. Sandoval also currently serves on the

120

board of directors of Menlo Therapeutics, a public pharmaceutical company, as well as on the board of directors of one private company. Ms. Sandoval began her career in research and development at Johnson & Johnson’s Ethicon division. She holds an M.B.A. from Pepperdine University and a B.S. in Biology from the University of California, Irvine. We believe that Ms. Sandoval is qualified to serve on our board of directors because of her background working in the life sciences industry and her experience as an officer of biopharmaceutical companies provides her with the qualifications and skills necessary to serve as a member of our board of directors.

Ken Takanashi. Mr. Takanashi has served as a member of our board of directors since June 2016. Mr. Takanashi currently serves as Executive Vice President and Chief Operating Officer at Shin Nippon Biomedical Laboratories Ltd., where he has been employed since 2004. Prior to joining Shin Nippon Biomedical Laboratories Ltd., Mr.Takanashi was employed by Suasa Kristal (M) Bhd. from December 1996 to December 2002, most recently as Executive Director and General Manager. He also served as Business Development Manager for Mitsubishi Corporation from April 1987 to November 1996. Mr. Takanashi also currently serves on the board of directors of Wave Life Sciences, Ltd., a public biopharmaceutical company, as well as on the board of directors of several private companies. Mr. Takanashi is a Chartered Public Accountant in Delaware. Mr. Takanashi received a B.A. from The University of Tokyo, and an M.B.A. from The University of Warwick, Coventry U.K. We believe Mr. Takanashi’s experience as an officer and director of pharmaceutical and biopharmaceutical companies provides him with the qualifications and skills necessary to serve as a member of our board of directors.

Board Composition

Director Independence

Our board of directors currently consists of seven members. Our board of directors has determined that all of our directors, other than Mr. Kollins, qualify as “independent” directors in accordance with The Nasdaq Global Market listing requirements. Mr. Kollins is not considered independent because he is an employee of Satsuma Pharmaceuticals, Inc. The Nasdaq Global Market’s independence definition includes a series of objective tests, such as that the director is not, and has not been for at least three years, one of our employees and that neither the director nor any of his or her family members has engaged in various types of business dealings with us. In addition, as required by The Nasdaq Global Market rules, our board of directors has made a subjective determination as to each independent director that no relationships exists that, in the opinion of our board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In making these determinations, our board of directors reviewed and discussed information provided by the directors and us with regard to each director’s business and personal activities and relationships as they may relate to us and our management. There are no family relationships among any of our directors or executive officers.

Classified Board of Directors

In accordance with our amended and restated certificate of incorporation to be in effect immediately prior to the consummation of this offering, our board of directors will be divided into three classes with staggered, three-year terms. At each annual meeting of stockholders, the successors to directors whose terms then expire will be elected to serve from the time of election and qualification until the third annual meeting following election. Effective upon the consummation of this offering, we expect that our directors will be divided among the three classes as follows:

• the Class I directors will be              ,              and             , and their terms will expire at the annual meeting of stockholders to be held in 2020;

• the Class II directors will be              and             , and their terms will expire at the annual meeting of stockholders to be held in 2021; and

121

• the Class III directors will be              and             , and their terms will expire at the annual meeting of stockholders to be held in 2022.

Our amended and restated certificate of incorporation will provide that the authorized number of directors may be changed only by resolution of the board of directors. Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. The division of our board of directors into three classes with staggered three-year terms may delay or prevent a change of our board of directors or a change in control of our company.

Voting Arrangements

Prior to this offering, the election of the members of our board of directors has been governed by the Amended and Restated Voting Agreement, dated as of April 23, 2019, that we entered into with certain holders of our common stock and certain holders of our convertible preferred stock and the related provisions of our amended and restated certificate of incorporation.

Pursuant to the voting agreement and these provisions the holders of our Series A convertible preferred stock, voting together as a single class, have the right to elect two directors to our board of directors, the holders of our Series B convertible preferred stock, voting as a separate class, have the right to elect one director to our board of directors, the holders of our common stock, voting as a separate class, have the right to elect one director to our board of directors, and the holders of our common stock and our preferred stock, exclusively and voting together as a single class, have the right to elect the balance of the total number of our directors, which are designated as follows:

• one member designated by RA Capital Healthcare Fund, L.P. (together with its affiliated funds) and elected by the holders of a majority of our Series A convertible preferred stock, voting together as a single class, for which Mr. Shah has been designated;

• one member designated by TPG Biotechnology Partners V, L.P. (together with its affiliated funds) and elected by the holders of a majority of our Series A convertible preferred stock, voting together as a single class, for which Dr. Lukatch has been designated;

• one member designated by the holders of a majority of our Series B convertible preferred stock, voting as a separate class, for which Ms. Sandoval has been designated;

• two members, who are not employees of our company, are not otherwise affiliated with our company and are approved by our preferred directors, for which Mike Riebe and Tom King have been designated;

• one member designated by Shin Nippon Biomedical Laboratories, Ltd. and elected by the holders of a majority of the shares of our common stock and convertible preferred stock, voting together as a single class, for which Mr. Takanashi has been designated; and

• one member elected by the holders of a majority of the shares of our common stock, voting as a separate class, who shall be our then-serving Chief Executive Officer, for which Mr. Kollins has been designated.

The holders of our common stock and convertible preferred stock who are parties to our voting agreement are obligated to vote for such designees indicated above. The provisions of this voting agreement will terminate upon the consummation of this offering and our amended and restated certificate of incorporation will be amended and restated, after which there will be no further contractual obligations or charter provisions regarding the election of our directors by specific stockholders or classes of stockholders. Our directors hold office until their successors have been elected and qualified or appointed, or the earlier of their death, resignation or removal.

Leadership Structure of the Board

Our amended and restated bylaws and corporate governance guidelines will provide our board of directors with flexibility to combine or separate the positions of Chairman of the board of directors and Chief Executive

122

Officer and to implement a lead director in accordance with its determination that utilizing one or the other structure would be in the best interests of our company. Dr. Lukatch currently serves as the chairman of our board of directors. In that role, Dr. Lukatch presides over the executive sessions of the board of directors and serves as a liaison between management and the board of directors.

Our board of directors has concluded that our current leadership structure is appropriate at this time. However, our board of directors will continue to periodically review our leadership structure and may make such changes in the future as it deems appropriate.

Role of Board in Risk Oversight Process

Risk assessment and oversight are an integral part of our governance and management processes. Our board of directors encourages management to promote a culture that incorporates risk management into our corporate strategy and day-to-day business operations. Management discusses strategic and operational risks at regular management meetings, and conducts specific strategic planning and review sessions during the year that include a focused discussion and analysis of the risks facing us. Throughout the year, senior management reviews these risks with the board of directors at regular board meetings as part of management presentations that focus on particular business functions, operations or strategies, and presents the steps taken by management to mitigate or eliminate such risks.

Our board of directors does not have a standing risk management committee, but rather administers this oversight function directly through our board of directors as a whole, as well as through various standing committees of our board of directors that address risks inherent in their respective areas of oversight. While our board of directors is responsible for monitoring and assessing strategic risk exposure, our audit committee is responsible for overseeing our major financial risk exposures and the steps our management has taken to monitor and control these exposures. The audit committee also monitors compliance with legal and regulatory requirements and considers and approves or disapproves any related person transactions. Our nominating and corporate governance committee monitors the effectiveness of our corporate governance guidelines. Our compensation committee assesses and monitors whether any of our compensation policies and programs has the potential to encourage excessive risk-taking.

Board Committees

Our board of directors has the following standing committees: an audit committee, a compensation committee and a nominating and corporate governance committee. Our board of directors may establish other committees to facilitate the management of our business. The composition and functions of each committee are described below.

Audit Committee

Our audit committee oversees our corporate accounting and financial reporting process. Among other matters, the audit committee:

• appoints our independent registered public accounting firm;

• evaluates the independent registered public accounting firm’s qualifications, independence and performance;

• determines the engagement of the independent registered public accounting firm;

• reviews and approves the scope of the annual audit and pre-approves the audit and non-audit fees and services;

• reviews and approves all related party transactions on an ongoing basis;

123

• establishes procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters

• discusses with management and the independent registered public accounting firm the results of the annual audit and the review of our quarterly financial statements;

• approves the retention of the independent registered public accounting firm to perform any proposed permissible non-audit services;

• monitors the rotation of partners of the independent registered public accounting firm on our engagement team in accordance with requirements established by the SEC;

• discusses on a periodic basis, or as appropriate, with management the Company’s policies and procedures with respect to risk assessment and risk management;

• is responsible for reviewing our financial statements and our management’s discussion and analysis of financial condition and results of operations to be included in our annual and quarterly reports to be filed with the SEC;

• annually reviews and assesses internal controls and treasury functions including cash management procedures;

• investigates any reports received through the ethics helpline and report to the Board periodically with respect to the information received through the ethics helpline and any related investigations;

• reviews our critical accounting policies and estimates; and

• reviews the audit committee charter and the committee’s performance at least annually.

The current members of our audit committee are              and             .              serves as the chairperson of the committee. All members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and The Nasdaq Global Market. Our board of directors has determined that              is an audit committee financial expert as defined under the applicable rules of the SEC and has the requisite financial sophistication as defined under the applicable rules and regulations of The Nasdaq Global Market. Under the rules of the SEC, members of the audit committee must also meet heightened independence standards. Our board of directors has determined that each of              and              are independent under the applicable rules of the SEC and The Nasdaq Global Market. The audit committee operates under a written charter that satisfies the applicable standards of the SEC and The Nasdaq Global Market.

Compensation Committee

Our compensation committee oversees policies relating to compensation and benefits of our officers and employees. The compensation committee reviews and approves or recommends to our board of directors corporate goals and objectives relevant to compensation of our executive officers (other than our Chief Executive Officer), evaluates the performance of these officers in light of those goals and objectives and approves the compensation of these officers based on such evaluations. The compensation committee also reviews and approves or makes recommendations to our board of directors regarding the issuance of stock options and other awards under our stock plans to our executive officers (other than our Chief Executive Officer). The compensation committee reviews the performance of our Chief Executive Officer and makes recommendations to our board of directors with respect to his compensation and our board of directors retains the authority to make compensation decisions relative to our Chief Executive Officer. The compensation committee will review and evaluate, at least annually, the performance of the compensation committee and its members, including compliance by the compensation committee with its charter. The current members of our compensation committee are Mr. King, Dr. Lukatch and Mr. Riebe. Mr. King serves as the chairman of the committee. Each of the members of our compensation committee is independent under the applicable rules and regulations of The Nasdaq Global Market and is a “non-employee director” as defined in Rule 16b-3 promulgated under the Exchange Act. The compensation committee operates under a written charter that satisfies the applicable standards of the SEC and The Nasdaq Global Market.

124

Nominating and Corporate Governance Committee

The nominating and corporate governance committee is responsible for making recommendations to our board of directors regarding candidates for directorships and the size and composition of our board of directors. In addition, the nominating and corporate governance committee is responsible for overseeing our corporate governance policies and reporting and making recommendations to our board of directors concerning governance matters. The current members of our nominating and corporate governance committee are              and             .              serves as the chairman of the committee. Each of the members of our nominating and corporate governance committee is an independent director under the applicable rules and regulations of The Nasdaq Global Market relating to nominating and corporate governance committee independence. The nominating and corporate governance committee operates under a written charter that satisfies the applicable standards of the SEC and The Nasdaq Global Market.

Compensation Committee Interlocks and Insider Participation

During the year ended December 31, 2018, our compensation committee consisted of Mr. King, Dr. Lukatch and Mr. Riebe. None of the members of our compensation committee during 2018 nor any of the current members of our compensation committee has at any time been one of our officers or employees. None of our executive officers currently serves, or in the past fiscal year has served, as a member of the board of directors or compensation committee of any entity that has one or more executive officers on our board of directors or compensation committee.

Board Diversity

Upon consummation of this offering, our nominating and corporate governance committee will be responsible for reviewing with the board of directors, on an annual basis, the appropriate characteristics, skills and experience required for the board of directors as a whole and its individual members. In evaluating the suitability of individual candidates (both new candidates and current members), the nominating and corporate governance committee, in recommending candidates for election, and the board of directors, in approving (and, in the case of vacancies, appointing) such candidates, may take into account many factors, including but not limited to the following:

• personal and professional integrity;

• ethics and values;

• experience in corporate management, such as serving as an officer or former officer of a publicly held company;

• experience in the industries in which we compete;

• experience as a board member or executive officer of another publicly held company;

• diversity of expertise and experience in substantive matters pertaining to our business relative to other board members;

• conflicts of interest; and

• practical and mature business judgment.

Our board of directors evaluates each individual in the context of the board of directors as a whole, with the objective of assembling a group that can best maximize the success of the business and represent stockholder interests through the exercise of sound judgment using its diversity of experience in these various areas.

125

Code of Business Conduct and Ethics

Prior to the consummation of this offering, we will adopt a code of business conduct and ethics that will apply to all of our employees, officers and directors, including those officers responsible for financial reporting. Following the consummation of this offering, the code of business conduct and ethics will be available on our website. We expect that any amendments to the code, or any waivers of its requirements, will be disclosed on our website.

Limitation of Liability and Indemnification Matters

Our amended and restated certificate of incorporation, which will become effective immediately prior to the consummation of this offering, will contain provisions that limit the liability of our directors for monetary damages to the fullest extent permitted by Delaware law. Consequently, our directors will not be personally liable to us or our stockholders for monetary damages for any breach of fiduciary duties as directors, except liability for:

• any breach of the director’s duty of loyalty to us or our stockholders;

• any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;

• unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the Delaware General Corporation Law; or

• any transaction from which the director derived an improper personal benefit.

Each of our amended and restated certificate of incorporation and amended and restated bylaws, which will become effective immediately prior to the consummation of this offering, will provide that we are required to indemnify our directors and officers, in each case to the fullest extent permitted by Delaware law. Our amended and restated bylaws will also obligate us to advance expenses incurred by a director or officer in advance of the final disposition of any action or proceeding, and permit us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in that capacity regardless of whether we would otherwise be permitted to indemnify him or her under Delaware law. We have entered and expect to continue to enter into agreements to indemnify our directors, executive officers and other employees as determined by our board of directors. With specified exceptions, these agreements provide for indemnification for related expenses including, among other things, attorneys’ fees, judgments, fines and settlement amounts incurred by any of these individuals in any action or proceeding. We believe that these bylaw provisions and indemnification agreements are necessary to attract and retain qualified persons as directors and officers. We also maintain directors’ and officers’ liability insurance.

The limitation of liability and indemnification provisions in our amended and restated certificate of incorporation and amended and restated bylaws may discourage stockholders from bringing a lawsuit against our directors and officers for breach of their fiduciary duty. They may also reduce the likelihood of derivative litigation against our directors and officers, even though an action, if successful, might benefit us and our stockholders. Further, a stockholder’s investment may be adversely affected to the extent that we pay the costs of settlement and damages.

Director Compensation

Historically, we have not had a formalized non-employee director compensation program. Our non-employee directors who were affiliated with our principal investors did not receive any cash or equity compensation in 2018. However, we paid director fees to our independent directors, Mr. King and Mr. Riebe in the amount of $33,333 and $25,000, respectively, for their board service. In addition, during 2018, we issued to

126

(i) Mr. King an option to purchase 60,000 shares of our common stock with a per share exercise price of $0.22, which will vest in 24 substantially equal installments on each monthly anniversary of September 1, 2017, subject to Mr. King’s continued service to us through each such date, and (ii) Mr. Riebe, an option to purchase 60,000 shares of our common stock with a per share exercise price of $0.22, which will vest in 24 substantially equal installments on each monthly anniversary of November 1, 2017, subject to Mr. Riebe’s continued service to us through each such date. We did not make any other equity grants to our non-employee directors in 2018. We also provide reimbursement to our non-employee directors for their reasonable expenses incurred in attending meetings of our board of directors and committees of our board of directors.

We intend to approve and implement a compensation policy for our non-employee directors, or the Director Compensation Program, to be effective in connection with the consummation of this offering.

The following table summarizes the total compensation earned during the year ended December 31, 2018 for our non-employee directors.

Name	Fees Earned or Paid in Cash ($)		Option Awards(1) ($)		Total ($)
Thomas King		33,333		8,358		41,691
Michael Riebe		25,000		8,358		33,358
Heath Lukatch		—		—		—
Rajeev Shah		—		—		—
Ken Takanashi		—		—		—
Elisabeth Sandoval		—		—		—

(1) Amounts shown represents the grant date fair value of options granted during fiscal year 2018 as calculated in accordance with ASC Topic 718. See footnote 10 of the financial statements included elsewhere in this prospectus for the assumptions used in calculating these amounts. As of December 31, 2018, Messrs. King and Riebe held options to purchase 120,000 shares of our common stock and no other non-employee directors held any outstanding options or other equity awards as of December 31, 2018.

127

EXECUTIVE COMPENSATION

The following is a discussion and analysis of compensation arrangements of our named executive officers (“NEOs”). This discussion contains forward looking statements that are based on our current plans, considerations, expectations and determinations regarding future compensation programs. Actual compensation programs that we adopt may differ materially from currently planned programs as summarized in this discussion. As an “emerging growth company” as defined in the JOBS Act, we are not required to include a Compensation Discussion and Analysis section and have elected to comply with the scaled disclosure requirements applicable to emerging growth companies.

We seek to ensure that the total compensation paid to our executive officers is reasonable and competitive. Compensation of our executives is structured around the achievement of individual performance and near-term corporate targets as well as long-term business objectives.

Our NEOs for fiscal year 2018 were as follows:

• John A. Kollins, Chief Executive Officer and President; and

• Detlef Albrecht, M.D., Chief Medical Officer.

We did not have any other executive officers in 2018, as Tom O’Neil, our Chief Financial Officer, joined us in February 2019 and no other individual served as an executive officer in 2018.

2018 Summary Compensation Table

The following table sets forth information concerning the compensation of our NEOs for the year ended December 31, 2018.

Name and Principal Position	Year		Salary ($)		Option Awards(1) ($)		Non-Equity Incentive Plan Compensation(2) ($)		Total ($)
John A. Kollins, Chief Executive Officer		2018	$	361,623	$	86,400	$	120,157	$	568,180
Detlef Albrecht, M.D. Chief Medical Officer		2018		343,050		34,560		98,582		476,192

(1) For the option awards column, amounts shown represents the grant date fair value of options granted during fiscal year 2018 as calculated in accordance with ASC Topic 718. See footnote 10 of the financial statements included elsewhere in this prospectus for the assumptions used in calculating these amounts.

(2) Amounts represent the annual performance-based cash bonuses earned by our NEOs based on the achievement of certain corporate performance objectives during 2018. These amounts were paid to the NEOs in early 2019. Please see the descriptions of the annual performance bonuses paid to our NEOs under “2018 Bonuses” below.

128

Outstanding Equity Awards at 2018 Fiscal Year End

The following table lists all outstanding equity awards held by our NEOs as of December 31, 2018.

	Vesting Commencement Date(1)	Option Awards								Stock Awards
Name		Number of Securities Underlying Unexercised Options (#) Exercisable		Number Of Securities Underlying Unexercised Options (#) Unexercisable		Option Exercise Price ($)		Option Expiration Date		Number of Shares That Have Not Vested (#)		Market Value of Shares or Units of Shares that Have Not Vested as ($)(2)
John A. Kollins	1/18/2017		287,500		312,500		0.19		1/18/2027
	1/18/2017		287,500		312,500		0.22		5/1/2028
	4/19/2017(3)		450,000		150,000		0.19		4/19/2027
	12/16/2016(4)										150,000		33,000
Detlef Albrecht	6/19/2017		90,000		150,000		0.19		7/20/2027
	6/19/2017		90,000		150,000		0.22		5/1/2028

(1) Except as otherwise noted, options and stock awards vest as to 25% of the shares on the one year anniversary of the vesting commencement date and vest as to 1/36^th of the remaining shares monthly thereafter, such that all awards will be vested on the four year anniversary of the vesting commencement date, subject to the holder continuing to provide services to the Company through such vesting dates.

(2) The market value of shares that have not vested is calculated based on the fair market value of our common stock as of December 31, 2018 which our board of directors determined to be $0.22.

(3) Upon achievement of a qualified financing on February 1, 2018, (i) 312,500 of the shares subject to the option on the date of such financing vested and (ii) the remaining shares subject to the option will vest in equal monthly installments thereafter, subject to the holder continuing to provide services to the Company through such vesting dates.

(4) The shares vested as to 25% of the shares upon the achievement of a qualified financing on December 16, 2016 and will vest as to 1/36^th of the remaining shares monthly thereafter, subject to the holder continuing to provide services to the Company through such vesting dates.

Narrative to Summary Compensation Table

2018 Salaries

Our NEOs each receive a base salary to compensate them for services rendered to our company. The base salary payable to each NEO is intended to provide a fixed component of compensation reflecting the executive’s skill set, experience, role and responsibilities.

For fiscal year 2018, Mr. Kollins’ annual base salary was $361,623 and Dr. Albrecht’s annual base salary was $343,050.

2018 Bonuses

Each NEO’s target bonus opportunity is expressed as a percentage of base salary which can be achieved by meeting corporate goals. For each of our NEOs, their target bonus opportunity is originally set in their offer letter. Our board reviews these target percentages to ensure they are adequate. While reviewing these target percentages the board does not follow a formula, but rather reviews several factors, including each NEO’s general background information, prior to determining the target bonus opportunity rates for our participating NEOs.

The 2018 annual bonuses for Mr. Kollins and Dr. Albrecht were targeted at 35% and 30% of their respective base salaries.

129

For determining performance bonus amounts, our board of directors set certain corporate performance goals after receiving input from our Chief Executive Officer. For 2018, the board of directors set corporate performance goals in two broad strategic areas: advancing development of STS101 so as to be positioned to initiate a Phase 3 efficacy trial for STS101 in 2019; and financing the company. Both areas included specific performance objectives and a corresponding weighting that the board of directors assessed and took into account in determining 2018 bonus awards. This approach was consistent with our general compensation policy of paying for performance by setting aggressive performance goals and rewarding our employees through an annual cash incentive bonus program that is based primarily upon achievement of these goals. Following its review and determinations of corporate and individual performance for 2018, our board of directors determined an achievement level of 95% for each NEO. The actual amounts of the cash bonuses awarded to each NEO for 2018 performance are set forth above in the Summary Compensation Table in the column titled “Non-Equity Incentive Plan Compensation.”

Equity-Based Compensation

In May 2018, we granted to Mr. Kollins and Dr. Albrecht options to purchase an aggregate of 600,000 and 240,000 shares, respectively. Each option vests and becomes exercisable as to 25% of the shares on the one year anniversary of January 18, 2017 for Mr. Kollins and June 19, 2017 for Dr. Albrecht and vest as to 1/48 of the shares monthly thereafter, subject to the NEO’s continued service through the applicable vesting date. The exercise price per share for each option was $0.22, which was the fair market value of the Company’s common stock as of the date of grant.

We intend to adopt a 2019 Incentive Award Plan, referred to below as the 2019 Plan, in order to facilitate the grant of cash and equity incentives to directors, employees (including our NEOs) and consultants of our company and certain of its affiliates and to enable us to obtain and retain services of these individuals, which is essential to our long-term success. We expect that the 2019 Plan will be effective immediately prior to the consummation of this offering. For additional information about the 2019 Plan, see “Equity Compensation Plans” below.

Other Elements of Compensation

Retirement Savings and Health and Welfare Benefits

We currently maintain a 401(k) retirement savings plan for our employees, including our NEOs, who satisfy certain eligibility requirements. Our NEOs are eligible to participate in the 401(k) plan on the same terms as other full-time employees. We believe that providing a vehicle for tax-deferred retirement savings though our 401(k) plan adds to the overall desirability of our executive compensation package and further incentivizes our employees, including our NEOs, in accordance with our compensation policies. Following the consummation of this offering, we anticipate that our employees will continue to be eligible to participate in our 401(k) plan. We currently do not match employee contributions.

All of our full-time employees, including our NEOs, are eligible to participate in our health and welfare plans, including medical, dental and vision benefits; medical and dependent care flexible spending accounts; short-term and long-term disability insurance; and life and AD&D insurance.

Perquisites and Other Personal Benefits

We provide limited perquisites to our NEOs when our compensation committee determines that such perquisites are necessary or advisable to fairly compensate or incentivize our employees.

130

Executive Compensation Arrangements

Employment Agreements

As of December 31, 2018, we were party to offer letters with each of our NEOs which set forth their initial base salary, initial annual bonus opportunity, initial equity award grant, benefit plans participation and the other benefits noted below for each NEO.

Mr. Kollins. In addition to the above, Mr. Kollins is eligible to receive certain severance benefits upon qualifying terminations under the offer letter. In the event the company terminates Mr. Kollins other than for cause, death or disability, in any case, outside of the 12 months following a change in control, then he will receive (i) continued payment of his base salary for six months and (ii) reimbursement of COBRA premiums for up to six months. In the event Mr. Kollins resigns for good reason or the company terminates Mr. Kollins other than for cause, death or disability, in any case, within the 12 months following a change in control, then he will receive (i) a lump sum payment equal to six months of his base salary, (ii) a lump sum cash payment of his annual target bonus for the year in which the termination occurs (or, if higher, as in effect immediately prior to the change in control), (iii) reimbursement of COBRA premiums for up to six months and (iv) accelerated vesting of 100% of the then-unvested equity awards held by him. The severance benefits set forth above are subject to his timely execution and non-revocation of a general release of claims against the company.

Dr. Albrecht. Dr. Albrecht’s offer letter also included payment of a one-time signing bonus, which was paid to him in 2017. In addition, Dr. Albrecht is eligible to receive certain severance benefits upon qualifying terminations under the offer letter. In the event the company terminates Dr. Albrecht other than for cause, death or disability, in any case, outside of the 12 months following a change in control, then he will receive (i) continued payment of his base salary for six months and (ii) reimbursement of COBRA premiums for up to six months. In the event Dr. Albrecht resigns for good reason or the company terminates Dr. Albrecht other than for cause, death or disability, in any case, within the 12 months following a change in control, then he will receive (i) a lump sum payment equal to six months of his base salary, (ii) a lump sum cash payment of his annual target bonus for the year in which the termination occurs (or, if higher, as in effect immediately prior to the change in control), (iii) reimbursement of COBRA premiums for up to six months and (iv) accelerated vesting of 100% of the then-unvested equity awards held by him. The severance benefits set forth above are subject to his timely execution and non-revocation of a general release of claims against the company.

Equity Compensation Plans

The following summarizes the material terms of the long-term incentive compensation plan in which our NEOs will be eligible to participate following the consummation of this offering and our 2016 Equity Incentive Plan, referred to as the 2016 Plan, under which we have previously made periodic grants of equity and equity-based awards to our NEOs and other employees. We intend to file with the SEC a registration statement on Form S-8 covering the shares of our common stock issuable under the 2019 Plan, the 2016 Plan and the ESPP.

2019 Incentive Award Plan

We intend to adopt the 2019 Plan, which we expect will become effective on the date on which it is adopted by our board of directors, subject to approval of such plan by our stockholders. The principal purpose of the 2019 Plan is to attract, retain and motivate selected employees, consultants and directors through the granting of stock-based compensation awards and cash-based performance bonus awards. The material terms of the 2019 Plan, as it is currently contemplated, are summarized below.

Share reserve. Under the 2019 Plan,                  shares of our common stock will be initially reserved for issuance pursuant to a variety of stock-based compensation awards, including stock options, stock appreciation rights (“SARs”) restricted stock awards, restricted stock unit awards and other stock-based awards. The number

131

of shares initially reserved for issuance or transfer pursuant to awards under the 2019 Plan will be increased by an annual increase on the first day of each fiscal year beginning in 2020 and ending in 2029, equal to the lesser of (A)             % of the shares of stock outstanding (on an as converted basis) on the last day of the immediately preceding fiscal year and (B) such smaller number of shares of stock as determined by our board of directors; provided, however, that no more than              shares of stock may be issued upon the exercise of incentive stock options.

The following counting provisions will be in effect for the share reserve under the 2019 Plan:

• to the extent that an award terminates, expires or lapses for any reason or an award is settled in cash without the delivery of shares, any shares subject to the award at such time will be available for future grants under the 2019 Plan;

• to the extent shares are tendered or withheld to satisfy the grant, exercise price or tax withholding obligation with respect to any award under the 2019 Plan, such tendered or withheld shares will be available for future grants under the 2019 Plan;

• to the extent shares subject to SARs are not issued in connection with the stock settlement of SARs on exercise thereof, such shares will be available for future grants under the 2019 Plan;

• to the extent that shares of our common stock are repurchased by us prior to vesting so that shares are returned to us, such shares will be available for future grants under the 2019 Plan;

• the payment of dividend equivalents in cash in conjunction with any outstanding awards will not be counted against the shares available for issuance under the 2019 Plan; and

• to the extent permitted by applicable law or any exchange rule, shares issued in assumption of, or in substitution for, any outstanding awards of any entity acquired in any form of combination by us will not be counted against the shares available for issuance under the 2019 Plan.

Administration. The compensation committee of our board of directors is expected to administer the 2019 Plan unless our board of directors assumes authority for administration. The compensation committee must consist of at least three members of our board of directors, each of whom is intended to qualify as a “non-employee director” for purposes of Rule 16b-3 under the Exchange Act and an “independent director” within the meaning of the rules of the applicable stock exchange, or other principal securities market on which shares of our common stock are traded. The 2019 Plan provides that the board or compensation committee may delegate its authority to grant awards to employees other than executive officers and certain senior executives of the company to a committee consisting of one or more members of our board of directors or one or more of our officers, other than awards made to our non-employee directors, which must be approved by our full board of directors.

Subject to the terms and conditions of the 2019 Plan, the administrator has the authority to select the persons to whom awards are to be made, to determine the number of shares to be subject to awards and the terms and conditions of awards, and to make all other determinations and to take all other actions necessary or advisable for the administration of the 2019 Plan. The administrator is also authorized to adopt, amend or rescind rules relating to administration of the 2019 Plan. Our board of directors may at any time remove the compensation committee as the administrator and revest in itself the authority to administer the 2019 Plan. The full board of directors will administer the 2019 Plan with respect to awards to non-employee directors.

Eligibility. Options, SARs, restricted stock and all other stock-based and cash-based awards under the 2019 Plan may be granted to individuals who are then our officers, employees or consultants. Such awards also may be granted to our directors. Only employees of our company may be granted incentive stock options (“ISOs”).

Awards. The 2019 Plan provides that the administrator may grant or issue stock options, SARs, restricted stock, restricted stock units, other stock- or cash-based awards and dividend equivalents, or any combination

132

thereof. Each award will be set forth in a separate agreement with the person receiving the award and will indicate the type, terms and conditions of the award.

• Nonstatutory stock options. Nonstatutory stock options (“NSOs”) will provide for the right to purchase shares of our common stock at a specified price which may not be less than fair market value on the date of grant, and usually will become exercisable (at the discretion of the administrator) in one or more installments after the grant date, subject to the participant’s continued employment or service with us and/or subject to the satisfaction of corporate performance targets and individual performance targets established by the administrator. NSOs may be granted for any term specified by the administrator that does not exceed ten years.

• Incentive stock options. ISOs will be designed in a manner intended to comply with the provisions of Section 422 of the Code and will be subject to specified restrictions contained in the Code. Among such restrictions, ISOs must have an exercise price of not less than the fair market value of a share of common stock on the date of grant, may only be granted to employees, and must not be exercisable after a period of ten years measured from the date of grant. In the case of an ISO granted to an individual who owns (or is deemed to own) at least 10% of the total combined voting power of all classes of our capital stock, the 2019 Plan provides that the exercise price must be at least 110% of the fair market value of a share of common stock on the date of grant and the ISO must not be exercisable after a period of five years measured from the date of grant.

• Restricted stock. Restricted stock may be granted to any eligible individual and made subject to such restrictions as may be determined by the administrator. Restricted stock, typically, may be forfeited for no consideration or repurchased by us at the original purchase price if the conditions or restrictions on vesting are not met. In general, restricted stock may not be sold or otherwise transferred until restrictions are removed or expire. Purchasers of restricted stock, unlike recipients of options, will have voting rights and will have the right to receive dividends, if any, prior to the time when the restrictions lapse, however, extraordinary dividends will generally be placed in escrow, and will not be released until restrictions are removed or expire.

• Restricted stock units. Restricted stock units may be awarded to any eligible individual, typically without payment of consideration, but subject to vesting conditions based on continued employment or service or on performance criteria established by the administrator. Like restricted stock, restricted stock units may not be sold, or otherwise transferred or hypothecated, until vesting conditions are removed or expire. Unlike restricted stock, stock underlying restricted stock units will not be issued until the restricted stock units have vested, and recipients of restricted stock units generally will have no voting or dividend rights prior to the time when vesting conditions are satisfied.

• Stock appreciation rights. SARs may be granted in connection with stock options or other awards, or separately. SARs granted in connection with stock options or other awards typically will provide for payments to the holder based upon increases in the price of our common stock over a set exercise price. The exercise price of any SAR granted under the 2019 Plan must be at least 100% of the fair market value of a share of our common stock on the date of grant. SARs under the 2019 Plan will be settled in cash or shares of our common stock, or in a combination of both, at the election of the administrator.

• Other stock or cash based awards. Other stock or cash based awards are awards of cash, fully vested shares of our common stock and other awards valued wholly or partially by referring to, or otherwise based on, shares of our common stock. Other stock or cash based awards may be granted to participants and may also be available as a payment form in the settlement of other awards, as standalone payments and as payment in lieu of base salary, bonus, fees or other cash compensation otherwise payable to any individual who is eligible to receive awards. The plan administrator will determine the terms and conditions of other stock or cash based awards, which may include vesting conditions based on continued service, performance and/or other conditions.

• Dividend equivalents. Dividend equivalents represent the right to receive the equivalent value of dividends paid on shares of our common stock and may be granted alone or in tandem with awards other

133

than stock options or SARs. Dividend equivalents are credited as of dividend payments dates during the period between a specified date and the date such award terminates or expires, as determined by the plan administrator. In addition, dividend equivalents with respect to shares covered by a performance award will only be paid to the participant at the same time or times and to the same extent that the vesting conditions, if any, are subsequently satisfied and the performance award vests with respect to such shares.

Any award may be granted as a performance award, meaning that the award will be subject to vesting and/or payment based on the attainment of specified performance goals.

Change in control. In the event of a change in control, unless the plan administrator elects to terminate an award in exchange for cash, rights or other property, or cause an award to accelerate in full prior to the change in control, such award will continue in effect or be assumed or substituted by the acquirer, provided that any performance-based portion of the award will be subject to the terms and conditions of the applicable award agreement. In the event the acquirer refuses to assume or replace awards granted, prior to the consummation of such transaction, awards issued under the 2019 Plan will be subject to accelerated vesting such that 100% of such awards will become vested and exercisable or payable, as applicable. The administrator may also make appropriate adjustments to awards under the 2019 Plan and is authorized to provide for the acceleration, cash-out, termination, assumption, substitution or conversion of such awards in the event of a change in control or certain other unusual or nonrecurring events or transactions.

Adjustments of awards. In the event of any stock dividend or other distribution, stock split, reverse stock split, reorganization, combination or exchange of shares, merger, consolidation, split-up, spin-off, recapitalization, repurchase or any other corporate event affecting the number of outstanding shares of our common stock or the share price of our common stock that would require adjustments to the 2019 Plan or any awards under the 2019 Plan in order to prevent the dilution or enlargement of the potential benefits intended to be made available thereunder, the administrator will make appropriate, proportionate adjustments to: (i) the aggregate number and type of shares subject to the 2019 Plan; (ii) the number and kind of shares subject to outstanding awards and terms and conditions of outstanding awards (including, without limitation, any applicable performance targets or criteria with respect to such awards); and (iii) the grant or exercise price per share of any outstanding awards under the 2019 Plan.

Amendment and termination. The administrator may terminate, amend or modify the 2019 Plan at any time and from time to time. However, we must generally obtain stockholder approval to the extent required by applicable law, rule or regulation (including any applicable stock exchange rule). Notwithstanding the foregoing, an option may be amended to reduce the per share exercise price below the per share exercise price of such option on the grant date and options may be granted in exchange for, or in connection with, the cancellation or surrender of options having a higher per share exercise price without receiving additional stockholder approval.

No incentive stock options may be granted pursuant to the 2019 Plan after the tenth anniversary of the effective date of the 2019 Plan, and no additional annual share increases to the 2019 Plan’s aggregate share limit will occur from and after such anniversary. Any award that is outstanding on the termination date of the 2019 Plan will remain in force according to the terms of the 2019 Plan and the applicable award agreement.

2016 Equity Incentive Plan

On December 16, 2016, our board of directors adopted the 2016 Plan. Following the offering, and in connection with the effectiveness of our 2019 Plan, the 2016 Plan will terminate, and no further awards will be granted under the 2016 Plan. However, all outstanding awards will continue to be governed by their existing terms.

Administration. Our board of directors, or a committee thereof appointed by our board of directors, has the authority to administer the 2016 Plan and the awards granted under it. After the closing of this offering, certain

134

limitations as to the composition of the plan administrator may be imposed under Section 162(m) of the Internal Revenue Code, Section 16 of the Exchange Act and/or stock exchange rules, as applicable. The plan administrator has broad authority to make determinations and interpretations under, prescribe forms for use with, and adopt rules for the administration of, the 2016 Plan, subject to its express terms and conditions. The plan administrator also sets the terms and conditions of all awards under the 2016 Plan, including any vesting and acceleration conditions.

Limitation on awards and shares available. The aggregate number of shares of our common stock that is authorized pursuant to the 2016 Plan is 9,260,309, which shares may be authorized but unissued shares, reacquired common stock or represent shares underlying forfeited awards. Shares tendered or withheld to satisfy grant or exercise price or tax withholding obligations associated with an award granted under the 2016 Plan and shares issued pursuant to awards of restricted stock or restricted stock units that are repurchased by us or are forfeited due to the failure to vest may be used again for new grants under the 2016 Plan.

Awards. The 2016 Plan provides that the administrator may grant or issue ISOs, NSOs, SARs, restricted stock and restricted stock units to our employees, directors and consultants, provided that only employees may be granted ISOs. Awards under the 2016 Plan are set forth in award agreements, which detail the terms and conditions of the awards, including any applicable vesting and payment terms and post-termination exercise limitations. Awards are generally settled in shares of our common stock.

• Stock Options. Stock options provide for the purchase of shares of our common stock in the future at an exercise price set on the grant date. ISOs, by contrast to NSOs, may provide tax deferral beyond exercise and favorable capital gains tax treatment to their holders if certain holding period and other Internal Revenue Code requirements are satisfied. The exercise price of a stock option may not be less than 100% of the fair market value of the underlying share on the date of grant (or 110% in the case of ISOs granted to certain significant shareholders), except with respect to certain substitute options granted in connection with a corporate transaction. The term of a stock option may not be longer than ten years (or five years in the case of ISOs granted to certain significant shareholders). Vesting conditions determined by the plan administrator may apply to stock options and may include continued service, performance and/or other conditions. A stock option may provide for “early exercise” prior to vesting in exchange for shares of restricted shares that vest on the option’s vesting schedule. Options may generally be exercised for 90 days following termination of employment, with longer periods for certain terminations (such as death or disability).

• Stock appreciation rights. SARs may be granted in connection with stock options or other awards, or separately. SARs granted in connection with stock options or other awards typically will provide for payments to the holder based upon increases in the price of our common stock over a set exercise price. The exercise price of any SAR granted under the 2016 Plan must be at least 100% of the fair market value of a share of our common stock on the date of grant. SARs under the 2016 Plan will be settled in cash or shares of our common stock, or in a combination of both, at the election of the administrator.

• Restricted stock. Restricted stock may be granted to any eligible individual and made subject to such restrictions as may be determined by the administrator. Restricted stock, typically, may be forfeited for no consideration or repurchased by us at the original purchase price if the conditions or restrictions on vesting are not met. In general, restricted stock may not be sold or otherwise transferred until restrictions are removed or expire. Purchasers of restricted stock, unlike recipients of options, will have voting rights and will have the right to receive dividends, if any, prior to the time when the restrictions lapse.

• Restricted stock units. Restricted stock units may be awarded to any eligible individual, typically without payment of consideration, but subject to vesting conditions continuing service with us or our affiliates, the attainment of performance goals and/or such other conditions as the plan administrator may determine. Like restricted stock, restricted stock units may not be sold, or otherwise transferred or hypothecated, until vesting conditions are removed or expire. Unlike restricted stock, stock underlying restricted stock units will not be issued until the restricted stock units have vested, and recipients of restricted stock units generally will have no voting or dividend rights prior to the time when vesting conditions are satisfied.

135

Certain transactions. The plan administrator has broad discretion to equitably adjust the provisions of the 2016 Plan, as well as the terms and conditions of existing and future awards, to prevent the diminution or enlargement of intended benefits and facilitate necessary or desirable changes in the event of certain transactions and events affecting our common stock, such as dividends or other distribution, recapitalizations, stock splits, reverse stock splits, split ups, spin-offs, repurchase or exchange of shares or other securities of our company, mergers, consolidations, combinations, reorganizations, asset sales and other corporate transactions. In the event of a merger of the company with or into another corporation or other entity or a change in control (as defined in the 2016 Plan), the surviving entity may assume outstanding awards or substitute economically equivalent awards for such outstanding awards; however, if the surviving entity declines to assume or substitute for some or all outstanding awards, then each outstanding award will be treated as the administrator determines without a service provider’s consent, including, without limitation and in any combination, (i) upon written notice to a service provider, that the service provider’s awards will terminate upon or immediately prior to the consummation of the merger or change in control; (ii) outstanding awards will vest and become exercisable, realizable or payable, or restrictions applicable to an award will lapse, in whole or in part prior to or upon consummation of such merger or change in control, and, to the extent the administrator determines, terminate upon or immediately prior to the effectiveness of the merger or change in control and (iii) (A) the termination of an award in exchange for an amount of cash and/or property, if any, equal to the amount that would have been attained upon the exercise of such award or realization of the service provider’s rights as of the date of the occurrence of the transaction, or (B) the replacement of such Award with other rights or property selected by the administrator in its sole discretion. The administrator may also make appropriate adjustments to awards under the 2016 Plan and is authorized to provide for the acceleration, cash-out, termination, assumption, substitution or conversion of such awards in the event of a change in control or certain other unusual or nonrecurring events or transactions.

Foreign participants, transferability and participant payments. The plan administrator may modify award terms, establish supplements, amendments or alternative versions of the 2016 Plan and/or adjust other terms and conditions of awards, subject to the share limits described above, in order to facilitate grants of awards subject to the laws and/or stock exchange rules of countries outside of the United States. With limited exceptions for gifts or domestic relations orders, guardians or executors of the participant’s estate upon the participant’s death or disability, in connection with certain acquisitions or a change in control and transfers to us, awards under the 2016 Plan are generally non-transferable prior to exercise or delivery and are exercisable only by the participant. With regard to tax withholding, exercise price and purchase price obligations arising in connection with awards under the 2016 Plan, as applicable, the plan administrator may, in its discretion, accept cash or check, a promissory note, shares of our common stock that meet specified conditions, such other consideration and method of payment for the issuance of shares, to the extent permitted by applicable laws, by “net exercise,” a “market sell order” or any combination thereof.

Amendment; termination. Our board of directors may amend or terminate the 2016 Plan at any time; however, (i) no amendment or termination may adversely affect an outstanding award without the affected participant’s written consent and (ii) except in connection with certain changes in our capital structure, stockholder approval will be required for any amendment that increases the number of shares available under the 2016 Plan or extends the term of the 2016 Plan. No award may be granted pursuant to the 2016 Plan after the ten year anniversary of the date the 2016 Plan, as amended or restated, was approved by our board of directors or our stockholders (whichever was earlier), however, we will cease granting awards under the 2016 Plan upon effectiveness of the 2019 Plan.

2019 Employee Stock Purchase Plan

We intend to adopt and ask our stockholders to approve the 2019 Employee Stock Purchase Plan (“ESPP”), which will be effective immediately prior to the consummation of this offering. The ESPP is designed to allow our eligible employees to purchase shares of our common stock, at semi-annual intervals, with their accumulated payroll deductions. The ESPP is intended to qualify under Section 423 of the Code. The material terms of the ESPP, as it is currently contemplated, are summarized below.

136

Administration. Subject to the terms and conditions of the ESPP, our compensation committee will administer the ESPP. Our compensation committee can delegate administrative tasks under the ESPP to the services of an agent and/or employees to assist in the administration of the ESPP. The administrator will have the discretionary authority to administer and interpret the ESPP. Interpretations and constructions of the administrator of any provision of the ESPP or of any rights thereunder will be conclusive and binding on all persons. We will bear all expenses and liabilities incurred by the ESPP administrator.

Share reserve. The maximum number of shares of our common stock which will be authorized for sale under the ESPP is equal to the sum of (a)              shares of common stock and (b) an annual increase on the first day of each year beginning in 2020 and ending in 2029, equal to the lesser of (i) 1% of the shares of common stock outstanding (on an as converted basis) on the last day of the immediately preceding fiscal year and (ii) such number of shares of common stock as determined by our board of directors; provided, however, no more than              shares of our common stock may be issued under the ESPP. The shares reserved for issuance under the ESPP may be authorized but unissued shares or reacquired shares.

Eligibility. Employees eligible to participate in the ESPP for a given offering period generally include employees who are employed by us on the first day of the offering period, or the enrollment date. Our employees who customarily work less than five months in a calendar year or are customarily scheduled to work less than 20 hours per week will not be eligible to participate in the ESPP. Finally, an employee who owns (or is deemed to own through attribution) 5% or more of the combined voting power or value of all our classes of stock will not be allowed to participate in the ESPP.

Participation. Employees will enroll under the ESPP by completing a payroll deduction form permitting the deduction from their compensation of at least 1% of their compensation but not more than 15% of their compensation. Such payroll deductions may be expressed as either a whole number percentage or a fixed dollar amount, and the accumulated deductions will be applied to the purchase of shares on each purchase date. However, a participant may not purchase more than 30,000 shares in each offering period and may not subscribe for more than $25,000 in fair market value of shares of our common stock (determined at the time the option is granted) during any calendar year. The ESPP administrator has the authority to change these limitations for any subsequent offering period.

Offering. Under the ESPP, participants are offered the option to purchase shares of our common stock at a discount during a series of successive offering periods, the duration and timing of which will be determined by the ESPP administrator. However, in no event may an offering period be longer than 27 months in length.

The option purchase price will be the lower of 85% of the closing trading price per share of our common stock on the first trading date of an offering period in which a participant is enrolled or 85% of the closing trading price per share on the purchase date, which will occur on the last trading day of each offering period.

Unless a participant has previously canceled his or her participation in the ESPP before the purchase date, the participant will be deemed to have exercised his or her option in full as of each purchase date. Upon exercise, the participant will purchase the number of whole shares that his or her accumulated payroll deductions will buy at the option purchase price, subject to the participation limitations listed above.

A participant may cancel his or her payroll deduction authorization at any time prior to the end of the offering period. Upon cancellation, the participant will have the option to either (i) receive a refund of the participant’s account balance in cash without interest or (ii) exercise the participant’s option for the current offering period for the maximum number of shares of common stock on the applicable purchase date, with the remaining account balance refunded in cash without interest. Following at least one payroll deduction, a participant may also decrease (but not increase) his or her payroll deduction authorization once during any offering period. If a participant wants to increase or decrease the rate of payroll withholding, he or she may do so effective for the next offering period by submitting a new form before the offering period for which such change is to be effective.

137

A participant may not assign, transfer, pledge or otherwise dispose of (other than by will or the laws of descent and distribution) payroll deductions credited to a participant’s account or any rights to exercise an option or to receive shares of our common stock under the ESPP, and during a participant’s lifetime, options in the ESPP shall be exercisable only by such participant. Any such attempt at assignment, transfer, pledge or other disposition will not be given effect.

Adjustments upon changes in recapitalization, dissolution, liquidation, merger or asset sale. In the event of any increase or decrease in the number of issued shares of our common stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the common stock, or any other increase or decrease in the number of shares of common stock effected without receipt of consideration by us, we will proportionately adjust the aggregate number of shares of our common stock offered under the ESPP, the number and price of shares which any participant has elected to purchase under the ESPP and the maximum number of shares which a participant may elect to purchase in any single offering period. If there is a proposal to dissolve or liquidate us, then the ESPP will terminate immediately prior to the consummation of such proposed dissolution or liquidation, and any offering period then in progress will be shortened by setting a new purchase date to take place before the date of our dissolution or liquidation. We will notify each participant of such change in writing at least ten business days prior to the new exercise date. If we undergo a merger with or into another corporation or sell all or substantially all of our assets, each outstanding option will be assumed or an equivalent option substituted by the successor corporation or the parent or subsidiary of the successor corporation. If the successor corporation refuses to assume the outstanding options or substitute equivalent options, then any offering period then in progress will be shortened by setting a new purchase date to take place before the date of our proposed sale or merger. We will notify each participant of such change in writing at least ten business days prior to the new exercise date.

Amendment and termination. Our board of directors may amend, suspend or terminate the ESPP at any time. However, the board of directors may not amend the ESPP without obtaining stockholder approval within 12 months before or after such amendment to the extent required by applicable laws.

138

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

The following is a description of transactions since January 1, 2016 to which we have been a party, in which the amount involved exceeds $120,000, and in which any of our directors, executive officers or beneficial owners of more than 5% of our capital stock, or an affiliate or immediate family member thereof, had or will have a direct or indirect material interest.

Sales and Purchases of Securities

Series B Convertible Preferred Stock Financing

In April 2019, we issued an aggregate of 32,382,965 shares of our Series B convertible preferred stock at $1.9052 per share for aggregate proceeds to us of approximately $61.7 million.

The table below sets forth the number of shares of Series B convertible preferred stock sold to our directors, executive officers or owners of more than 5% of a class of our capital stock, or an affiliate or immediate family member thereof:

Name	Number of Shares of Series B Convertible Preferred Stock		Aggregate Purchase Price ($)
Shin Nippon Biomedical Laboratories, Ltd.(1)		1,443,418		2,750,000
TPG Biotechnology Partners V, L.P.(2)		3,674,154		6,999,998
RA Capital Healthcare Fund, L.P.(3)		5,356,288		10,204,800

(1) Shin Nippon Biomedical Laboratories, Ltd. beneficially owned more than 5% of our outstanding capital stock at the time of the Series B convertible preferred stock financing. Mr. Takanashi, a member of our board of directors, is a director and executive officer of Shin Nippon Biomedical Laboratories, Ltd.

(2) TPG Biotechnology Partners V, L.P. beneficially owned more than 5% of our outstanding capital stock at the time of the Series B convertible preferred stock financing. Dr. Lukatch, our Chairman and a member of our board of directors, is a Partner and Managing Director at TPG Biotechnology Partners, which is an affiliate of TPG Biotechnology Partners V, L.P.

(3) RA Capital Healthcare Fund, L.P. and its affiliated funds beneficially owned more than 5% of our outstanding capital stock at the time of the Series B convertible preferred stock financing. Rajeev Shah, a member of our board of directors, is a partner of RA Capital Fund, which is an affiliate of RA Capital Healthcare Fund, L.P.

Transactions with Shin Nippon Biomedical Laboratories, Ltd.

In June 2016, we and Shin Nippon Biomedical Laboratories, Ltd., or SNBL, entered into a licensing and assignment agreement, which we refer to as the SNBL License, which was amended and restated in December 2016 and further amended in January 2017, April 2017 and October 2017. In connection with the SNBL License, in July 2016, we entered into a common stock purchase agreement with SNBL pursuant to which it purchased 2,400,000 shares of our common stock at its par price of $0.0001 per share. Following the purchase of these shares, SNBL beneficially owned more than 5% of our outstanding capital stock. There have been no sales of products under the SNBL License to date. For more information about the terms of the SNBL License, see “Business—Licenses and Collaborations.”

In August 2016, SNBL purchased a convertible note from us in the principal amount of $0.1 million, which convertible note was later amended in December 2016. In February 2018, the convertible note and related accrued interest of less than $0.1 million converted into 158,585 shares of our Series A convertible preferred stock.

139

In December 2016, as part of the Series A convertible preferred stock financing, we granted to SNBL a right to obtain shares of our common stock for no additional consideration, which we refer to as the SNBL Grant, upon the occurrence of subsequent closings of our Series A convertible preferred stock financing such that SNBL’s percentage ownership of our fully-diluted capitalization would be equal to 20% following the final closing of the Series A convertible preferred stock financing. In return, SNBL assigned certain product-specific know-how and patents relating to STS101 to us with a fair value of $1.4 million. In February 2018, we issued 2,241,415 shares of common stock for no consideration to settle the right to obtain shares of our common stock granted in December 2016 as part of the Series A convertible preferred stock financing.

During the year ended December 31, 2017, we purchased an actuator for less than $0.1 million from SNBL. During the years ended December 31, 2017 and 2018, we incurred expenses in connection with preclinical study services of $0.2 million and less than $0.1 million, respectively. We incurred expenses in connection with clinical study services of less than $0.1 million during each of the six months ended June 30, 2018 and 2019.

Director and Executive Officer Compensation

See “Director Compensation” and “Executive Compensation” for information regarding the compensation of our directors and executive officers.

Employment Agreements

We have entered into employment agreements with our executive officers. For more information regarding these agreements, see “Executive Compensation—Executive Compensation Arrangements.”

Indemnification Agreements and Directors’ and Officers’ Liability Insurance

We have entered into or intend to enter into indemnification agreements with each of our directors and executive officers. These agreements will require us to, among other things, indemnify each director and executive officer to the fullest extent permitted by Delaware law, including indemnification of expenses such as attorneys’ fees, judgments, penalties fines and settlement amounts incurred by the director or executive officer in any action or proceeding, including any action or proceeding by or in right of us, arising out of the person’s services as a director or executive officer. We have obtained an insurance policy that insures our directors and officers against certain liabilities, including liabilities arising under applicable securities laws. For additional information see “Management—Limitation of Liability and Indemnification Matters.”

Investors’ Rights Agreement

We entered into an amended and restated investors’ rights agreement with the purchasers of our outstanding convertible preferred stock, including entities with which certain of our directors are affiliated. As of June 30, 2019, the holders of approximately 33.2 million shares of our common stock, including the shares of common stock issuable upon the automatic conversion of our Series A and Series B convertible preferred stock, are entitled to rights with respect to the registration of their shares under the Securities Act. For a more detailed description of these registration rights, see “Description of Capital Stock—Registration Rights.” The investors’ rights agreement also provides for a right of first refusal in favor of certain holders of preferred stock with regard to certain issuances of our capital stock. The rights of first refusal will not apply to, and will terminate upon the consummation of, this offering.

Voting Agreement

We entered into an amended and restated voting agreement with certain holders of our common stock and convertible preferred stock. Upon the consummation of this offering, the amended and restated voting agreement will terminate. For a description of the amended and restated voting agreement, see “Management—Board Composition—Voting Arrangements.”

140

Right of First Refusal and Co-Sale Agreement

We entered into an amended and restated right of first refusal and co-sale agreement with certain holders of our common stock and convertible preferred stock. This agreement provides for rights of first refusal and co-sale relating to the shares of our common stock held by the parties to the agreement. Upon the consummation of this offering, the amended and restated right of first refusal and co-sale agreement will terminate.

Policies and Procedures for Related Party Transactions

Prior to the consummation of this offering, our board of directors will adopt a written related person transaction policy, to be effective upon the consummation of this offering, setting forth the policies and procedures for the review and approval or ratification of related person transactions. This policy will cover, with certain exceptions set forth in Item 404 of Regulation S-K under the Securities Act, any transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships in which we were or are to be a participant, where the amount involved exceeds $120,000 and a related person had or will have a direct or indirect material interest, including without limitation purchases of goods or services by or from the related person or entities in which the related person has a material interest, indebtedness, guarantees of indebtedness and employment by us of a related person. In reviewing and approving any such transactions, our audit committee is tasked to consider all relevant facts and circumstances, including but not limited to whether the transaction is on terms comparable to those that could be obtained in an arm’s length transaction with an unrelated third party and the extent of the related person’s interest in the transaction. All of the transactions described in this section occurred prior to the adoption of this policy.

141

PRINCIPAL STOCKHOLDERS

The following table sets forth information relating to the beneficial ownership of our common stock as of July 1, 2019, by:

• each person, or group of affiliated persons, known by us to beneficially own more than 5% of our outstanding shares of common stock;

• each of our directors;

• each of our named executive officers; and

• all directors and executive officers as a group.

The number of shares beneficially owned by each entity, person, director or executive officer is determined in accordance with the rules of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares over which the individual has sole or shared voting power or investment power as well as any shares that the individual has the right to acquire within 60 days after July 1, 2019 through the exercise of any stock option, warrants or other rights. Except as otherwise indicated, and subject to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all shares of common stock held by that person.

142

The percentage of shares beneficially owned is computed on the basis of 52,194,757 shares of our common stock outstanding as of July 1, 2019, which reflects the assumed conversion of all of our outstanding shares of Series A and Series B convertible preferred stock into an aggregate of 46,700,842 shares of common stock. Shares of our common stock that a person has the right to acquire within 60 days after July 1, 2019 are deemed outstanding for purposes of computing the percentage ownership of the person holding such rights, but are not deemed outstanding for purposes of computing the percentage ownership of any other person, except with respect to the percentage ownership of all directors and executive officers as a group. Unless otherwise indicated below, the address for each beneficial owner listed is c/o Satsuma Pharmaceuticals, Inc., 400 Oyster Point Boulevard, Suite 221, South San Francisco, CA 94080.

	Beneficial Ownership Prior to this Offering									Beneficial Ownership After this Offering
Name of Beneficial Owner	Number of Outstanding Shares Beneficially Owned		Number of Shares Exercisable Within 60 Days		Number of Shares Beneficially Owned		Percentage of Beneficial Ownership			Number of Shares Beneficially Owned	Percentage of Beneficial Ownership
5% and Greater Stockholders:
Entities affiliated with RA Capital(1)		15,738,079		—		15,738,079		30.2	%			%
TPG Biotechnology Partners V, L.P.(2)		8,393,918		—		8,393,918		16.1	%			%
Shin Nippon Biomedical Laboratories, Ltd.(3)		6,243,418		—		6,243,418		12.0	%			%
Harbor Master Investors (Cayman) II L.P. and entities affiliated with Wellington Management Group LLP(4)		5,194,224		—		5,194,224		10.0	%			%
Osage University Partners III, LP(5)		3,149,275		—		3,149,275		6.0	%			%
Entities affiliated with CAM Capital(6)		2,886,836		—		2,886,836		5.5	%			%
Entities affiliated with Cormorant Asset Management(7)		2,624,396		—		2,624,396		5.0	%			%
Citadel Multi-Strategy Equities Master Fund Ltd.(8)		2,624,396		—		2,624,396		5.0	%			%
Mutual Fund Series Trust, On Behalf of Eventide Healthcare & Life Sciences Fund(9)		2,624,396		—		2,624,396		5.0	%			%
Named Executive Officers and Directors:
John Kollins(10)		600,000		1,406,250		2,006,250		3.7	%			%
Detlef Albrecht, MD(11)		95,000		186,875		281,875		*				%
Heath Lukatch, PhD		—		—		—		*				%
Thomas B. King(12)		—		119,375		119,375		*				%
Michael Riebe, PhD(13)		—		109,375		109,375		*				%
Rajeev Shah(14)		15,738,079		—		15,738,079		30.2	%			%
Ken Takanashi, MBA, CPA(15)		6,243,418		—		6,243,418		12.0	%			%
Elisabeth Sandoval(16)		—		8,750		8,750		*
All directors and executive officers as a group (9 persons)(17)		22,676,497		1,851,875		24,528,372		45.4	%			%

* Indicates beneficial ownership of less than 1% of the total outstanding common stock.

(1) Consists of (i) 7,721,534 shares of common stock issuable upon the conversion of Series A Preferred Stock directly held by RA Capital Healthcare Fund, L.P. (“RA Capital Fund”), (ii) 5,356,288 shares of common stock issuable upon the conversion of Series B Preferred Stock directly held by RA Capital Fund, (iii) 1,717,994 shares of common stock issuable upon the conversion of Series A Preferred Stock directly held by a separately managed account (the “Account”) and (iv) 942,263 shares of common stock issuable upon the conversion of Series B Preferred Stock directly held by the

143

Account. RA Capital Management, LLC (“RA Capital”) is the general partner of RA Capital Fund and the investment advisor to the Account. Peter Kolchinsky is the sole manager of RA Capital. Investment decisions with respect to the shares held by RA Capital Fund and the Account are made by a portfolio management team at RA Capital of which Mr. Shah is a member. Mr. Shah disclaims beneficial ownership of all shares held by RA Capital Fund and the Account, except to the extent of any actual pecuniary interest. The address for these entities is 20 Park Plaza, Suite 1200, Boston, Massachusetts 02116.

(2) Consists of (i) 4,719,764 shares of common stock issuable upon the conversion of Series A Preferred Stock and (ii) 3,674,154 shares of common stock issuable upon the conversion of Series B Preferred Stock, in each case held by TPG Biotechnology Partners V, L.P., a Delaware limited partnership (“TPG Biotechnology V”), whose general partner is TPG Biotechnology GenPar V, L.P., a Delaware limited partnership, whose general partner is TPG Biotechnology GenPar V Advisors, LLC, a Delaware limited liability company, whose sole member is TPG Holdings I, L.P., a Delaware limited partnership, whose general partner is TPG Holdings I-A, LLC, a Delaware limited liability company, whose sole member is TPG Group Holdings (SBS), L.P., a Delaware limited partnership, whose general partner is TPG Group Holdings (SBS) Advisors, LLC, a Delaware limited liability company, whose sole member is TPG Group Holdings (SBS) Advisors, Inc., a Delaware corporation. David Bonderman and James G. Coulter are sole stockholders of TPG Group Holdings (SBS) Advisors, Inc. and may therefore be deemed to be the beneficial owners of the securities held by the TPG Biotechnology V. Messrs. Bonderman and Coulter disclaim beneficial ownership of the securities held by the TPG Biotechnology V except to the extent of their pecuniary interest therein. The address of each of TPG Group Holdings (SBS) Advisors, Inc. and Messrs. Bonderman and Coulter is c/o TPG Global, LLC, 301 Commerce Street, Suite 3300, Fort Worth, Texas 76102.

(3) Consists of (i) 4,641,415 shares of common stock, (ii) 158,585 shares of common stock issuable upon the conversion of Series A Preferred Stock and (iii) 1,443,418 shares of common stock issuable upon the conversion of Series B Preferred Stock held by Shin Nippon Biomedical Laboratories, Ltd. (“SNBL”). Mr. Takanashi is a director and executive officer of SNBL and its affiliates such that Mr. Takanashi may be deemed to hold the power to direct the disposition and vote of, and therefore to own the shares held by SNBL. Mr. Takanashi disclaims beneficial ownership of all shares held by SNBL except to the extent of any actual pecuniary interest. The address for this entity is St. Luke’s Tower, 28F, 8-1 Akashi-cho, Chuo-ku, Tokyo 104-004, Japan.

(4) Consists of 5,194,224 shares of common stock issuable upon the conversion of Series B Preferred Stock held by Hadley Harbor Master Investors (Cayman) II L.P. Wellington Management Company LLP, a registered investment company under the Investment Advisors Act of 1940, as amended, is the investment adviser to Hadley Harbor Master Investors (Cayman) II L.P. Wellington Management Company LLP is an indirect subsidiary of Wellington Management Group LLP. Wellington Management Group LLP and Wellington Management Company LLP may be deemed beneficial owners (within the meaning of Rule 13d-3 promulgated under the Exchange Act) with shared investment and voting power over the shares held by Hadley Harbor Master Investors (Cayman) II L.P. The mailing address of Hadley Harbor Master Investors (Cayman) L.P. and the Wellington entities is 280 Congress Street, Boston, Massachusetts 02110.

(5) Consists of 3,149,275 shares of common stock issuable upon the conversion of Series B Preferred Stock held by Osage University Partners III, LP. The address for this entity is 50 Monument Road, Suite 201, Bala Cynwyd, Pennsylvania 19004.

(6) Consists of (i) 2,713,626 shares of common stock issuable upon the conversion of Series B Preferred Stock directly held by CDK Associates, LLC (“CDK”) and (ii) 173,210 shares of common stock issuable upon the conversion of Series B Preferred Stock directly held by Third Street Holdings, LLC (“Third Street”). Caxton Alternative Management, LP (“CAM”), is the investment manager for CDK and Third Street, and Caxton Corporation is the general partner of CAM. Caxton Corporation and CAM may be deemed the beneficial owner with the power to direct the disposition and vote of the shares held by CDK and Third Street. The address for these entities is 731 Alexander Road, Building 2, Suite 500, Princeton, New Jersey 08540.

(7) Consists of (i) 2,051,753 shares of common stock issuable upon the conversion of Series B Preferred Stock directly held by Cormorant Private Healthcare Fund II, LP, or Cormorant Private Fund II, (ii) 521,992 shares of common stock issuable upon the conversion of Series B Preferred Stock directly held by Cormorant Global Healthcare Master Fund, LP, or Cormorant Master Fund and (iii) 50,651 shares of common stock issuable upon the conversion of Series B Preferred Stock directly held by CRMA SPV, LP, or CRMA. The sole general partner of Cormorant Master Fund is Cormorant Global Healthcare GP, LLC and the sole general partner of Cormorant Private Fund II is Cormorant Private Healthcare II, LLC, or the Cormorant GP. The sole investment manager of CRMA is Cormorant Asset Management, LP. The address for these entities is 200 Clarendon Street, 52^nd Floor, Boston, Massachusetts 02116.

(8) Consists of 2,624,396 shares of common stock issuable upon the conversion of Series B Preferred Stock held by Citadel Multi-Strategy Equities Master Fund Ltd (“Citadel”). Citadel Advisors LLC (“Citadel Advisors”), acts as the portfolio manager of Citadel. Citadel Advisors Holdings LP (“CAH”), is the sole member of Citadel Advisors, and Citadel

144

GPLLC (“CGP”), is the general partner of CAH. Kenneth Griffin owns a controlling interest in CGP and may be deemed to share voting and dispositive power over shares held by Citadel. The address for this entity is 601 Lexington Avenue, New York, New York 10022.

(9) Consists of 2,624,396 shares of common stock issuable upon the conversion of Series B Preferred Stock held by Mutual Fund Series Trust, On Behalf of Eventide Healthcare & Life Sciences Fund. The address for this entity is One International Place, Suite 4210, Boston, Massachusetts 02110.

(10) Consists of (i) 600,000 shares of common stock and (ii) 1,406,250 shares of common stock that may be acquired pursuant to the exercise of stock options within 60 days of July 1, 2019.

(11) Consists of (i) 95,000 shares of common stock and (ii) 186,875 shares of common stock that may be acquired pursuant to the exercise of stock options within 60 days of July 1, 2019.

(12) Consists of 119,375 shares of common stock that may be acquired pursuant to the exercise of stock options within 60 days of July 1, 2019.

(13) Consists of 109,375 shares of common stock that may be acquired pursuant to the exercise of stock options within 60 days of July 1, 2019.

(14) Consists of the shares described in footnote 1 above. Mr. Shah is a member of the portfolio management team at RA Capital such that Mr. Shah may be deemed to hold the power to direct the disposition and vote of, and therefore to own the shares held by RA Capital Fund and Blackwell. Mr. Shah disclaims beneficial ownership of all shares held by RA Capital Fund and the Account except to the extent of any actual pecuniary interest.

(15) Consists of the shares described in footnote 3 above. Mr. Takanashi is a director and executive officer of SNBL and its affiliates such that Mr. Takanashi may be deemed to hold the power to direct the disposition and vote of, and therefore to own the shares held by SNBL. Mr. Takanashi disclaims beneficial ownership of all shares held by SNBL except to the extent of any actual pecuniary interest.

(16) Consists of 8,750 shares of common stock that may be acquired pursuant to the exercise of stock options within 60 days of July 1, 2019.

(17) Consists of (i) the shares described in notes 10 through 16 above and (ii) 21,250 shares of common stock that may be acquired pursuant to the exercise of stock options within 60 days of July 1, 2019.

145

DESCRIPTION OF CAPITAL STOCK

The following summary describes our capital stock and the material provisions of our amended and restated certificate of incorporation and our amended and restated bylaws, which will become effective immediately prior to the consummation of this offering, the amended and restated investors’ rights agreement to which we and certain of our stockholders are parties and of the Delaware General Corporation Law. Because the following is only a summary, it does not contain all of the information that may be important to you. For a complete description, you should refer to our amended and restated certificate of incorporation, amended and restated bylaws and amended and restated investors’ rights agreement, copies of which have been filed as exhibits to the registration statement of which this prospectus is part.

General

Immediately prior to the consummation of this offering, we will file our amended and restated certificate of incorporation that authorizes 300,000,000 shares of common stock, $0.0001 par value per share, and 10,000,000 shares of preferred stock, $0.0001 par value per share. As of June 30, 2019, there were outstanding:

• 52,194,757 shares of our common stock, on an as-converted basis, held by approximately              stockholders of record; and

• 7,828,000 shares of our common stock issuable upon exercise of outstanding stock options.

In connection with this offering, we expect to consummate a reverse stock split of our outstanding capital stock at a ratio to be determined.

Common Stock

Voting Rights

Each holder of our common stock is entitled to one vote for each share on all matters submitted to a vote of the stockholders, including the election of directors. Our stockholders do not have cumulative voting rights in the election of directors. Accordingly, holders of a majority of the voting shares are able to elect all of the directors. In addition, the affirmative vote of holders of 66²⁄₃% of the voting power of all of the then outstanding voting stock will be required to take certain actions, including amending certain provisions of our amended and restated certificate of incorporation, such as the provisions relating to amending our amended and restated bylaws, the classified board and director liability.

Dividends

Subject to preferences that may be applicable to any then outstanding preferred stock, holders of our common stock are entitled to receive dividends, if any, as may be declared from time to time by our board of directors out of legally available funds.

Liquidation

In the event of our liquidation, dissolution or winding up, holders of our common stock will be entitled to share ratably in the net assets legally available for distribution to stockholders after the payment of all of our debts and other liabilities and the satisfaction of any liquidation preference granted to the holders of any then outstanding shares of preferred stock.

Rights and Preferences

Holders of our common stock have no preemptive, conversion, subscription or other rights, and there are no redemption or sinking fund provisions applicable to our common stock. The rights, preferences and privileges of the holders of our common stock are subject to and may be adversely affected by the rights of the holders of shares of any series of our preferred stock that we may designate in the future.

146

Fully Paid and Nonassessable

All of our outstanding shares of common stock are, and the shares of common stock to be issued in this offering will be, fully paid and nonassessable.

Convertible Preferred Stock

Immediately prior to the consummation of this offering, all outstanding shares of our convertible preferred stock will be converted into shares of our common stock. See Note 8 to our audited financial statements included elsewhere in this prospectus for a description of our currently outstanding convertible preferred stock. Immediately prior to the consummation of this offering, our amended and restated certificate of incorporation will be amended and restated to delete all references to such shares of convertible preferred stock. From and after the consummation of this offering, our board of directors will have the authority, without further action by our stockholders, to issue up to 10,000,000 shares of preferred stock in one or more series and to fix the rights, preferences, privileges and restrictions thereof. These rights, preferences and privileges could include dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences, sinking fund terms and the number of shares constituting, or the designation of, such series, any or all of which may be greater than the rights of our common stock. The issuance of our preferred stock could adversely affect the voting power of holders of common stock and the likelihood that such holders will receive dividend payments and payments upon our liquidation. In addition, the issuance of preferred stock could have the effect of delaying, deferring or preventing a change in control of our company or other corporate action. Immediately after consummation of this offering, no shares of preferred stock will be outstanding, and we have no present plan to issue any shares of preferred stock.

Registration Rights

Under our amended and restated investors’ rights agreement, based on the number of shares outstanding as of July 1, 2019, following the consummation of this offering, the holders of approximately 33.2 million shares of common stock, or their transferees, have the right to require us to register their shares under the Securities Act so that those shares may be publicly resold, and to include their shares in any registration statement we file, in each case as described below.

Demand Registration Rights

Based on the number of shares outstanding as of July 1, 2019, after the consummation of this offering, the holders of approximately 33.2 million shares of our common stock (on an as-converted basis), or their transferees, will be entitled to certain demand registration rights. Beginning 180 days following the effectiveness of the registration statement of which this prospectus is a part, the holders of at least 20% of these shares can, on not more than two occasions, request that we register all or a portion of their shares if the aggregate price to the public of the shares offered is at least $10.0 million (before deductions of underwriters’ commissions and expenses).

Piggyback Registration Rights

Based on the number of shares outstanding as of July 1, 2019, after the consummation of this offering, in the event that we determine to register any of our securities under the Securities Act (subject to certain exceptions), either for our own account or for the account of other security holders, the holders of approximately 33.2 million shares of our common stock (on an as-converted basis), or their transferees, will be entitled to certain “piggyback” registration rights allowing the holders to include their shares in such registration, subject to certain marketing and other limitations. As a result, whenever we propose to file a registration statement under the Securities Act, other than with respect to a registration related to employee benefit plans, the offer and sale of

147

debt securities, or corporate reorganizations or certain other transactions, the holders of these shares are entitled to notice of the registration and have the right, subject to limitations that the underwriters may impose on the number of shares included in the registration, to include their shares in the registration. In an underwritten offering, the managing underwriter, if any, has the right, subject to specified conditions, to exclude or limit the number of shares such holders may include.

Form S-3 Registration Rights

Based on the number of shares outstanding as of July 1, 2019, after the consummation of this offering, the holders of approximately 33.2 million shares of our common stock (on an as-converted basis), or their transferees, will be entitled to certain Form S-3 registration rights. The holders of at least 20% of these shares can make a written request that we register their shares on Form S-3 if we are eligible to file a registration statement on Form S-3 and if the aggregate price to the public of the shares offered is at least $1.0 million (before deductions of underwriters’ commissions and expenses). These stockholders may make an unlimited number of requests for registration on Form S-3, but in no event shall we be required to file more than two registrations on Form S-3 in any given twelve-month period.

Expenses of Registration

We will pay the registration expenses of the holders of the shares registered pursuant to the demand and Form S-3 registration rights described above.

Expiration of Registration Rights

The demand, piggyback and Form S-3 registration rights described above will expire, with respect to any particular stockholder, upon the earlier of five years after the consummation of this offering or when that stockholder can sell all of its shares under Rule 144 of the Securities Act during any 90-day period (and without the requirement for the Company to be in compliance with the current public information required under Section c(1) of Rule 144 of the Securities Act).

Anti-Takeover Effects of Provisions of our Amended and Restated Certificate of Incorporation, our Amended and Restated Bylaws and Delaware Law

Certain provisions of Delaware law and our amended and restated certificate of incorporation and our amended and restated bylaws that will become effective immediately prior to the consummation of this offering contain provisions that could make the following transactions more difficult: acquisition of us by means of a tender offer; acquisition of us by means of a proxy contest or otherwise; or removal of our incumbent officers and directors. It is possible that these provisions could make it more difficult to accomplish or could deter transactions that stockholders may otherwise consider to be in their best interest or in our best interests, including transactions that might result in a premium over the market price for our shares.

These provisions, summarized below, are expected to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed to encourage persons seeking to acquire control of us to first negotiate with our board of directors. We believe that the benefits of increased protection of our potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure us outweigh the disadvantages of discouraging these proposals because negotiation of these proposals could result in an improvement of their terms.

Delaware Anti-Takeover Statute

We are subject to Section 203 of the Delaware General Corporation Law, which prohibits persons deemed “interested stockholders” from engaging in a “business combination” with a publicly-held Delaware corporation

148

for three years following the date these persons become interested stockholders unless the business combination is, or the transaction in which the person became an interested stockholder was, approved in a prescribed manner or another prescribed exception applies. Generally, an “interested stockholder” is a person who, together with affiliates and associates, owns, or within three years prior to the determination of interested stockholder status did own, 15% or more of a corporation’s voting stock. Generally, a “business combination” includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. The existence of this provision may have an anti-takeover effect with respect to transactions not approved in advance by the board of directors, such as discouraging takeover attempts that might result in a premium over the market price of our common stock.

Undesignated Preferred Stock

The ability to authorize undesignated preferred stock will make it possible for our board of directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to change control of us. These and other provisions may have the effect of deterring hostile takeovers or delaying changes in control or management of our company.

Special Stockholder Meetings

Our amended and restated bylaws will provide that a special meeting of stockholders may be called at any time by our board of directors, or our President or Chief Executive Officer, but such special meetings may not be called by the stockholders or any other person or persons.

Requirements for Advance Notification of Stockholder Nominations and Proposals

Our amended and restated bylaws will establish advance notice procedures with respect to stockholder proposals and the nomination of candidates for election as directors, other than nominations made by or at the direction of the board of directors or a committee of the board of directors.

Elimination of Stockholder Action by Written Consent

Our amended and restated certificate of incorporation and our amended and restated bylaws will eliminate the right of stockholders to act by written consent without a meeting.

Classified Board; Election and Removal of Directors; Filling Vacancies

Effective upon the consummation of this offering, our board of directors will be divided into three classes. The directors in each class will serve for a three-year term, one class being elected each year by our stockholders, with staggered three-year terms. Only one class of directors will be elected at each annual meeting of our stockholders, with the other classes continuing for the remainder of their respective three-year terms. Because our stockholders do not have cumulative voting rights, our stockholders holding a majority of the shares of common stock outstanding will be able to elect all of our directors. Our amended and restated certificate of incorporation will provide for the removal of any of our directors only for cause and requires a stockholder vote by the holders of at least a 66 2/3% of the voting power of the then outstanding voting stock. For more information on the classified board, see “Management—Board Composition.” Furthermore, any vacancy on our board of directors, however occurring, including a vacancy resulting from an increase in the size of the board, may only be filled by a resolution of the board of directors unless the board of directors determines that such vacancies shall be filled by the stockholders. This system of electing and removing directors and filling vacancies may tend to discourage a third party from making a tender offer or otherwise attempting to obtain control of us, because it generally makes it more difficult for stockholders to replace a majority of the directors.

149

Choice of Forum

Our amended and restated certificate of incorporation to be in effect immediately prior to the consummation of this offering provides that the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf us, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors or officers to us or our stockholders, (iii) any action asserting a claim against us arising pursuant to any provision of the Delaware General Corporation Law or our amended and restated certificate of incorporation or amended and restated bylaws or (iv) any action asserting a claim against us governed by the internal affairs doctrine. As a result, any action brought by any of our stockholders with regard to any of these matters will need to be filed in the Court of Chancery of the State of Delaware and cannot be filed in any other jurisdiction; provided that, the exclusive forum provision will not apply to suits brought to enforce any liability or duty created by the the Securities Act, the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction; and provided further that, if and only if the Court of Chancery of the State of Delaware dismisses any such action for lack of subject matter jurisdiction, such action may be brought in another state or federal court sitting in the State of Delaware. Nothing in our amended and restated certificate of incorporation or amended and restated bylaws precludes stockholders that assert claims under the Securities Act or the Exchange Act from bringing such claims in state or federal court, subject to applicable law.

This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, other employees or stockholders, which may discourage lawsuits with respect to such claims, although our stockholders will not be deemed to have waived our compliance with federal securities laws and the rules and regulations thereunder.

Amendment of Charter and Bylaws Provisions

The amendment of any of the above provisions in our amended and restated certificate of incorporation, except for the provision making it possible for our board of directors to issue undesignated preferred stock would require approval by a stockholder vote by the holders of at least a 66 2/3% of the voting power of the then outstanding voting stock.

The provisions of the Delaware General Corporation Law, our amended and restated certificate of incorporation and our amended and restated bylaws could have the effect of discouraging others from attempting hostile takeovers and, as a consequence, they may also inhibit temporary fluctuations in the market price of our common stock that often result from actual or rumored hostile takeover attempts. These provisions may also have the effect of preventing changes in our management. It is possible that these provisions could make it more difficult to accomplish transactions that stockholders may otherwise deem to be in their best interests.

Limitations of Liability and Indemnification Matters

For a discussion of liability and indemnification, see “Management—Limitation on Liability and Indemnification Matters.”

Listing

We intend to apply to have our common stock listed on The Nasdaq Global Market under the symbol “STSA.”

Transfer Agent and Registrar

The transfer agent and registrar for our common stock is                 . The transfer agent and registrar’s address is                .

150

SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no public market for our common stock. Future sales of our common stock, including shares issued upon the exercise of outstanding options or warrants, in the public market after this offering, or the perception that those sales may occur, could cause the prevailing market price for our common stock to fall or impair our ability to raise equity capital in the future. As described below, only a limited number of shares of our common stock will be available for sale in the public market for a period of several months after consummation of this offering due to contractual and legal restrictions on resale described below. Future sales of our common stock in the public market either before (to the extent permitted) or after restrictions lapse, or the perception that those sales may occur, could adversely affect the prevailing market price of our common stock at such time and our ability to raise equity capital at a time and price we deem appropriate.

Sale of Restricted Shares

Based on the number of shares of our common stock outstanding as of June 30, 2019 and assuming an initial public offering price of $             per share (the midpoint of the estimated price range set forth on the cover of this prospectus), upon the consummation of this offering and assuming (1) the conversion of all shares of our outstanding Series A and Series B convertible preferred stock as of June 30, 2019, (2) no exercise of the underwriters’ option to purchase additional shares of common stock and (3) no exercise of any of our outstanding options or warrants, we will have outstanding an aggregate of approximately              shares of common stock. Of these shares, all of the shares of common stock to be sold in this offering, and any shares sold upon exercise of the underwriters’ option to purchase additional shares, will be freely tradable in the public market without restriction or further registration under the Securities Act, unless the shares are held by any of our “affiliates” as such term is defined in Rule 144 of the Securities Act. All remaining shares of common stock held by existing stockholders immediately prior to the consummation of this offering will be “restricted securities” as such term is defined in Rule 144. These restricted securities were issued and sold by us, or will be issued and sold by us, in private transactions and are eligible for public sale only if registered under the Securities Act or if they qualify for an exemption from registration under the Securities Act, including the exemptions provided by Rule 144 or Rule 701, which rules are summarized below.

As a result of the lock-up agreements referred to below and the provisions of Rule 144 and Rule 701 under the Securities Act, based on the number of shares of our common stock outstanding as of June 30, 2019 and assumptions (1)-(3) described above, the shares of our common stock (excluding the shares sold in this offering) that will be available for sale in the public market, subject (1) to any waivers by the underwriters and/or our board of directors under the respective lock-up agreements and (2) with respect to shares held by directors, executive officers and other affiliates, the volume limitations under Rule 144 under the Securities Act, are as follows:

Approximate Number of Shares	First Date Available for Sale into Public Market
51,119,757 shares	180 days after the date of this prospectus upon expiration of the lock-up agreements referred to below, subject in some cases to applicable volume limitations under Rule 144

Lock-Up Agreements

In connection with this offering, we, our directors, our executive officers and substantially all of our other stockholders and option holders have agreed, subject to certain exceptions, with the underwriters not to dispose of or hedge any shares of our common stock or securities convertible into or exchangeable for shares of common stock during the period from the date of the lock-up agreement continuing through the date 180 days after the date of this prospectus, except with the prior written consent of Credit Suisse Securities (USA) LLC, SVB Leerink LLC and Evercore Group L.L.C.

151

Prior to the consummation of this offering, certain of our employees, including our executive officers, and/or directors may enter into written trading plans that are intended to comply with Rule 10b5-1 under the Exchange Act. Sales under these trading plans would not be permitted until the expiration of the lock-up agreements relating to the offering described above.

Following the lock-up periods set forth in the agreements described above, and assuming that the representatives of the underwriters do not release any parties from these agreements, all of the shares of our common stock that are restricted securities or are held by our affiliates as of the date of this prospectus will be eligible for sale in the public market in compliance with Rule 144 under the Securities Act.

Rule 144

In general, under Rule 144, as currently in effect, once we have been subject to the public company reporting requirements of the Exchange Act for at least 90 days, a person (or persons whose shares are required to be aggregated) who is not deemed to have been one of our “affiliates” for purposes of Rule 144 at any time during the three months preceding a sale, and who has beneficially owned restricted securities within the meaning of Rule 144 for at least six months, including the holding period of any prior owner other than one of our “affiliates,” is entitled to sell those shares in the public market (subject to the lock-up agreement referred to above, if applicable) without complying with the manner of sale, volume limitations or notice provisions of Rule 144, but subject to compliance with the public information requirements of Rule 144. If such a person has beneficially owned the shares proposed to be sold for at least one year, including the holding period of any prior owner other than “affiliates,” then such person is entitled to sell such shares in the public market without complying with any of the requirements of Rule 144 (subject to the lock-up agreement referred to above, if applicable). In general, under Rule 144, as currently in effect, once we have been subject to the public company reporting requirements of the Exchange Act for at least 90 days, our “affiliates,” as defined in Rule 144, who have beneficially owned the shares proposed to be sold for at least six months are entitled to sell in the public market, upon expiration of any applicable lock-up agreements and within any three-month period, a number of those shares of our common stock that does not exceed the greater of:

• 1% of the number of common shares then outstanding, which will equal approximately              shares of common stock immediately after this offering (calculated as of June 30, 2019 on the basis of the assumptions (1)-(3) described above); or

• the average weekly trading volume of our common stock on The Nasdaq Global Market during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale.

Such sales under Rule 144 by our “affiliates” or persons selling shares on behalf of our “affiliates” are also subject to certain manner of sale provisions, notice requirements and to the availability of current public information about us. Notwithstanding the availability of Rule 144, the holders of substantially all of our restricted securities have entered into lock-up agreements as referenced above and their restricted securities will become eligible for sale (subject to the above limitations under Rule 144) upon the expiration of the restrictions set forth in those agreements.

Rule 701

In general, under Rule 701 as currently in effect, any of our employees, directors, officers, consultants or advisors who acquired common stock from us in connection with a written compensatory stock or option plan or other written agreement in compliance with Rule 701 under the Securities Act before the effective date of the registration statement of which this prospectus is a part (to the extent such common stock is not subject to a lock-up agreement) is entitled to rely on Rule 701 to resell such shares beginning 90 days after we become subject to the public company reporting requirements of the Exchange Act in reliance on Rule 144, but without compliance with the holding period requirements contained in Rule 144. Accordingly, subject to any applicable

152

lock-up agreements, beginning 90 days after we become subject to the public company reporting requirements of the Exchange Act, under Rule 701 persons who are not our “affiliates,” as defined in Rule 144, may resell those shares without complying with the minimum holding period or public information requirements of Rule 144, and persons who are our “affiliates” may resell those shares without compliance with Rule 144’s minimum holding period requirements (subject to the terms of the lock-up agreement referred to above).

Registration Rights

Based on the number of shares outstanding as of July 1, 2019, after the consummation of this offering, the holders of approximately 33.2 million shares of our common stock, or their transferees, will, subject to the lock-up agreements referred to above, be entitled to certain rights with respect to the registration of the offer and sale of those shares under the Securities Act. For a description of these registration rights, see “Description of Capital Stock—Registration Rights.” If the offer and sale of these shares are registered, they will be freely tradable without restriction under the Securities Act.

Stock Plans

We intend to file with the SEC a registration statement under the Securities Act covering the shares of common stock that we may issue upon exercise of outstanding options reserved for issuance under our 2016 Equity Incentive Plan, our 2019 Incentive Award Plan and our 2019 Employee Stock Purchase Plan. Such registration statement is expected to be filed and become effective as soon as practicable after the consummation of this offering. Accordingly, shares registered under such registration statement will be available for sale in the open market following its effective date, subject to Rule 144 volume limitations and the lock-up agreements described above, if applicable.

153

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS

The following discussion is a summary of the material U.S. federal income tax consequences to Non-U.S. Holders (as defined below) of the purchase, ownership and disposition of our common stock issued pursuant to this offering, but does not purport to be a complete analysis of all potential tax effects. The effects of other U.S. federal tax laws, such as estate and gift tax laws, and any applicable state, local or non-U.S. tax laws are not discussed. This discussion is based on the U.S. Internal Revenue Code of 1986, as amended, or the Code, Treasury Regulations promulgated thereunder, judicial decisions, and published rulings and administrative pronouncements of the U.S. Internal Revenue Service, or the IRS, in each case in effect as of the date hereof. These authorities may change or be subject to differing interpretations. Any such change or differing interpretation may be applied retroactively in a manner that could adversely affect a Non-U.S. Holder. We have not sought and will not seek any rulings from the IRS regarding the matters discussed below. There can be no assurance the IRS or a court will not take a contrary position to that discussed below regarding the tax consequences of the purchase, ownership and disposition of our common stock.

This discussion is limited to Non-U.S. Holders that hold our common stock as a “capital asset” within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not address all U.S. federal income tax consequences relevant to a Non-U.S. Holder’s particular circumstances, including the impact of the Medicare contribution tax on net investment income. In addition, it does not address consequences relevant to Non-U.S. Holders subject to special rules, including, without limitation:

• U.S. expatriates and former citizens or long-term residents of the United States;

• persons subject to the alternative minimum tax or the federal Medicare contribution tax on net investment income;

• persons who acquire our common stock through the exercise of an option or otherwise as compensation;

• persons subject to special tax accounting rules under Section 451(b) of the Code;

• persons holding our common stock as part of a hedge, straddle or other risk reduction strategy or as part of a conversion transaction or other integrated investment;

• banks, insurance companies and other financial institutions;

• brokers, dealers or traders in securities;

• “controlled foreign corporations,” “passive foreign investment companies” and corporations that accumulate earnings to avoid U.S. federal income tax;

• partnerships or other entities or arrangements treated as partnerships for U.S. federal income tax purposes (and investors therein);

• tax-exempt organizations or governmental organizations;

• persons deemed to sell our common stock under the constructive sale provisions of the Code;

• tax-qualified retirement plans; and

• “qualified foreign pension funds” as defined in Section 897(l)(2) of the Code and entities all of the interests of which are held by qualified foreign pension funds.

If an entity treated as a partnership for U.S. federal income tax purposes holds our common stock, the tax treatment of a partner in the partnership will depend on the status of the partner, the activities of the partnership and certain determinations made at the partner level. Accordingly, partnerships holding our common stock and the partners in such partnerships should consult their tax advisors regarding the U.S. federal income tax consequences to them.

154

THIS DISCUSSION IS NOT TAX ADVICE. INVESTORS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF OUR COMMON STOCK ARISING UNDER THE U.S. FEDERAL ESTATE OR GIFT TAX LAWS OR UNDER THE LAWS OF ANY STATE, LOCAL OR NON-U.S. TAXING JURISDICTION OR UNDER ANY APPLICABLE INCOME TAX TREATY.

Definition of Non-U.S. Holder

For purposes of this discussion, a “Non-U.S. Holder” is any beneficial owner of our common stock that is neither a “U.S. person” nor an entity treated as a partnership for U.S. federal income tax purposes. A U.S. person is any person that, for U.S. federal income tax purposes, is or is treated as any of the following:

• an individual who is a citizen or resident of the United States;

• a corporation or other entity treated as a corporation for U.S. federal tax purposes created or organized under the laws of the United States, any state thereof or the District of Columbia;

• an estate, the income of which is subject to U.S. federal income tax regardless of its source; or

• a trust that (1) is subject to the primary supervision of a U.S. court and one or more U.S. persons have the authority to control substantial decisions of the trust, or (2) has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a United States person for U.S. federal income tax purposes.

Distributions

As described in the section of this prospectus titled “Dividend Policy,” we have never declared or paid cash dividends on our capital stock, and we do not anticipate paying any cash dividends in the foreseeable future. However, if we do make distributions of cash or property on our common stock, such distributions will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Amounts not treated as dividends for U.S. federal income tax purposes will constitute a return of capital and first be applied against and reduce a Non-U.S. Holder’s adjusted tax basis in its common stock, but not below zero. Any excess will be treated as capital gain and will be treated as described below under “—Sale or Other Taxable Disposition.”

Subject to the discussion below regarding effectively connected income, dividends paid to a Non-U.S. Holder will be subject to U.S. federal withholding tax at a rate of 30% of the gross amount of the dividends (or such lower rate specified by an applicable income tax treaty, provided the Non-U.S. Holder furnishes a valid IRS Form W-8BEN or W-8BEN-E (or other applicable documentation) certifying qualification for the lower treaty rate). In the case of a Non-U.S. Holder that is an entity, Treasury Regulations and the relevant tax treaty provide rules to determine whether, for purposes of determining the applicability of a tax treaty, dividends will be treated as paid to the entity or to those holding an interest in that entity. If a Non-U.S. Holder holds stock through a financial institution of other agent acting on the holder’s behalf, the holder will be required to provide appropriate documentation to such agent. The holder’s agent will then be required to provide certification to us or our paying agent, either directly or through intermediaries. A Non-U.S. Holder that does not timely furnish the required documentation, but that qualifies for a reduced treaty rate, may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS. Non-U.S. Holders should consult their tax advisors regarding their entitlement to benefits under any applicable tax treaties.

If dividends paid to a Non-U.S. Holder are effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, the Non-U.S. Holder maintains a permanent establishment or fixed base in the United States to which such dividends are attributable), the Non-U.S. Holder will be exempt from the U.S. federal withholding tax described above. To

155

claim the exemption, the Non-U.S. Holder must furnish to the applicable withholding agent a valid IRS Form W-8ECI, certifying that the dividends are effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States.

Any such effectively connected dividends will be subject to U.S. federal income tax on a net income basis at the regular graduated rates. A Non-U.S. Holder that is a corporation also may be subject to a branch profits tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty) on such effectively connected dividends, as adjusted for certain items. Non-U.S. Holders should consult their tax advisors regarding any applicable tax treaties that may provide for different rules.

Sale or Other Taxable Disposition

Subject to the discussion below regarding backup withholding and foreign accounts, a Non-U.S. Holder generally will not be subject to U.S. federal income tax on any gain realized upon the sale or other taxable disposition of our common stock unless:

• the gain is effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, the Non-U.S. Holder maintains a permanent establishment or fixed base in the United States to which such gain is attributable);

• the Non-U.S. Holder is a nonresident alien individual present in the United States for 183 days or more during the taxable year of the disposition and certain other requirements are met; or

• our common stock constitutes a U.S. real property interest, or a USRPI, by reason of our status as a U.S. real property holding corporation, or a USRPHC, for U.S. federal income tax purposes at any time within the shorter of the five-year period preceding such disposition of such holder’s holding period.

Gain described in the first bullet point above generally will be subject to U.S. federal income tax on a net income basis at the regular graduated rates. A Non-U.S. Holder that is a corporation also may be subject to a branch profits tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty) on such effectively connected gain, as adjusted for certain items.

Gain described in the second bullet point above will be subject to U.S. federal income tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty), which may be offset by certain U.S. source capital losses of the Non-U.S. Holder (even though the individual is not considered a resident of the United States), provided the Non-U.S. Holder has timely filed U.S. federal income tax returns with respect to such losses.

With respect to the third bullet point above, we believe we currently are not, and do not anticipate becoming, a USRPHC. Because the determination of whether we are a USRPHC depends, however, on the fair market value of our USRPIs relative to the fair market value of our non-U.S. real property interests and our other business assets, there can be no assurance we currently are not a USRPHC or will not become one in the future. Even if we are or were to become a USRPHC, gain arising from the sale or other taxable disposition by a Non-U.S. Holder will not be subject to U.S. federal income tax if our common stock is “regularly traded,” as defined by applicable Treasury Regulations, on an established securities market, and such Non-U.S. Holder owned, actually and constructively, 5% or less of our common stock throughout the shorter of the five-year period ending on the date of the sale or other taxable disposition or the Non-U.S. Holder’s holding period.

If any gain on a disposition by a holder of our common stock is taxable because we are a USRPHC and such holder’s ownership of our common stock exceeds 5%, such holder will be taxed on such disposition generally in the manner as gain that is effectively connected with the conduct of a U.S. trade or business (subject to the provisions under an applicable income tax treaty), except that the branch profits tax generally will not apply.

156

Non-U.S. Holders should consult their tax advisors regarding any applicable tax treaties that may provide for different rules.

Information Reporting and Backup Withholding

Payments of dividends on our common stock will not be subject to backup withholding, provided the Non-U.S. Holder certifies its non-U.S. status, such as by furnishing a valid IRS Form W-8BEN, W-8BEN-E or W-8ECI, or otherwise establishes an exemption. However, information returns are required to be filed with the IRS in connection with any dividends on our common stock paid to the Non-U.S. Holder, regardless of whether any tax was actually withheld. In addition, proceeds of the sale or other taxable disposition of our common stock within the United States or conducted through certain U.S.-related brokers generally will not be subject to backup withholding or information reporting if the applicable withholding agent receives the certification described above or the Non-U.S. Holder otherwise establishes an exemption. Proceeds of a disposition of our common stock conducted through a non-U.S. office of a non-U.S. broker that does not have certain enumerated relationships with the United States generally will not be subject to backup withholding or information reporting.

Copies of information returns that are filed with the IRS may also be made available under the provisions of an applicable treaty or agreement to the tax authorities of the country in which the Non-U.S. Holder resides or is established.

Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against a Non-U.S. Holder’s U.S. federal income tax liability, provided the required information is timely furnished to the IRS.

Additional Withholding Tax on Payments Made to Foreign Accounts

Withholding taxes may be imposed under Sections 1471 to 1474 of the Code (such Sections commonly referred to as the Foreign Account Tax Compliance Act, or FATCA) on certain types of payments made to non-U.S. financial institutions and certain other non-U.S. entities. Specifically, a 30% withholding tax may be imposed on dividends on, or (subject to the proposed Treasury Regulations discussed below) gross proceeds from the sale or other disposition of, our common stock paid to a “foreign financial institution” or a “non-financial foreign entity” (each as defined in the Code), unless (1) the foreign financial institution undertakes certain diligence and reporting obligations, (2) the non-financial foreign entity either certifies it does not have any “substantial United States owners” (as defined in the Code) or furnishes identifying information regarding each substantial United States owner, or (3) the foreign financial institution or non-financial foreign entity otherwise qualifies for an exemption from these rules. If the payee is a foreign financial institution and is subject to the diligence and reporting requirements in (1) above, it must enter into an agreement with the U.S. Department of the Treasury requiring, among other things, that it undertake to identify accounts held by certain “specified United States persons” or “United States owned foreign entities” (each as defined in the Code), annually report certain information about such accounts, and withhold 30% on certain payments to non-compliant foreign financial institutions and certain other account holders. Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United States governing FATCA may be subject to different rules.

Under the applicable Treasury Regulations and administrative guidance, withholding under FATCA generally applies to payments of dividends on our common stock. While, beginning on January 1, 2019, withholding under FATCA would have applied also to payments of gross proceeds from the sale or other disposition of our common stock, recently proposed Treasury Regulations eliminate FATCA withholding on payments of gross proceeds entirely. Taxpayers generally may rely on these proposed Treasury Regulations until final Treasury Regulations are issued.

Prospective investors should consult their tax advisors regarding the potential application of withholding under FATCA to their investment in our common stock.

157

UNDERWRITING

Under the terms and subject to the conditions contained in an underwriting agreement dated                 , 2019, we have agreed to sell to the underwriters named below, for whom Credit Suisse Securities (USA) LLC, SVB Leerink LLC and Evercore Group L.L.C. are acting as representatives, the following respective numbers of shares of common stock:

Underwriter	Number of Shares
Credit Suisse Securities (USA) LLC
SVB Leerink LLC
Evercore Group L.L.C.
Total

The underwriting agreement provides that the underwriters are obligated to purchase all the shares of common stock in the offering if any are purchased, other than those shares covered by the underwriters’ option to purchase additional shares described below. The underwriting agreement also provides that if an underwriter defaults, the purchase commitments of non-defaulting underwriters may be increased or the offering may be terminated.

We have agreed to indemnify the underwriters and certain of their controlling persons against certain liabilities, including liabilities under the Securities Act, and to contribute to payments that the underwriters may be required to make in respect of those liabilities.

We have granted to the underwriters a 30-day option to purchase on a pro rata basis up to             additional shares from us at the initial public offering price less the underwriting discounts and commissions. The option may be exercised only to cover any over-allotments of common stock.

The underwriters propose to offer the shares of common stock initially at the public offering price on the cover page of this prospectus and to selling group members at that price less a selling concession of up to $        per share. After the initial public offering the representatives may change the public offering price and the selling concession.

The following table summarizes the compensation and estimated expenses we will pay:

	Per Share		Total
	Without Option	With Option	Without Option	With Option
Underwriting discounts and commissions paid by us	$	$	$	$
Expenses payable by us	$	$	$	$

We estimate that our out of pocket expenses for this offering excluding the underwriting discounts and commissions will be approximately $        . We have also agreed to reimburse the underwriters for up to $        of expenses related to the review of this offering by the Financial Industry Regulatory Authority, Inc. In accordance with FINRA Rule 5110, this reimbursed fee is deemed underwriting compensation for this offering.

We have agreed that we will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, or file with the SEC a registration statement under the Securities Act relating to, any shares of our common stock or securities convertible into or exchangeable or exercisable for any shares of our common stock, or publicly disclose the intention to make any offer, sale, pledge, disposition or filing, without the prior written consent of Credit Suisse Securities (USA) LLC, SVB Leerink LLC and Evercore L.L.C. for a period of 180 days after the date of this prospectus, subject to certain exceptions.

158

Our officers, our directors and substantially all of our other securityholders have agreed that they will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any shares of our common stock or securities convertible into or exchangeable or exercisable for any shares of our common stock, enter into a transaction that would have the same effect, or enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of our common stock, whether any of these transactions are to be settled by delivery of our common stock or other securities, in cash or otherwise, or publicly disclose the intention to make any such offer, sale, pledge or disposition, or to enter into any such transaction, swap, hedge or other arrangement, or make any demand for or exercise any right with respect to the registration of our common stock, without, in each case, the prior written consent of Credit Suisse Securities (USA) LLC and SVB Leerink LLC and Evercore L.L.C. for a period of 180 days after the date of this prospectus, subject to certain exceptions.

We have agreed to indemnify the underwriters against certain liabilities under the Securities Act, or contribute to payments that the underwriters may be required to make in that respect.

We intend to apply to list our shares of common stock on The Nasdaq Global Market under the symbol “STSA”.

Prior to this offering, there has been no public market for our common stock. The initial public offering price was determined by negotiations among us and the representatives and will not necessarily reflect the market price of our common stock following this offering. The principal factors that were considered in determining the initial public offering price included:

• the information presented in this prospectus and otherwise available to the underwriters;

• the history of, and prospects for, the industry in which we will compete;

• the ability of our management;

• the prospects for our future earnings;

• the present state of our development, results of operations and our current financial condition;

• the general condition of the securities markets at the time of this offering; and

• the recent market prices of, and the demand for, publicly traded common stock of generally comparable companies.

We cannot assure you that the initial public offering price will correspond to the price at which the common stock will trade in the public market subsequent to this offering or that an active trading market for the common stock will develop and continue after this offering.

In connection with this offering, the underwriters may engage in stabilizing transactions, over-allotment transactions, syndicate covering transactions, penalty bids and passive market making in accordance with Regulation M under the Exchange Act.

• Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum.

• Over-allotment involves sales by the underwriters of shares in excess of the number of shares the underwriters are obligated to purchase, which creates a syndicate short position. The short position may be either a covered short position or a naked short position. In a covered short position, the number of shares over-allotted by the underwriters is not greater than the number of shares that they may purchase in their option to purchase additional shares. In a naked short position, the number of shares involved is greater than the number of shares in their option to purchase additional shares. The underwriters may close out any covered short position by either exercising their option and/or purchasing shares in the open market.

159

• Syndicate covering transactions involve purchases of the common stock in the open market after the distribution has been completed in order to cover syndicate short positions. In determining the source of shares to close out the short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the option to purchase additional shares. If the underwriters sell more shares than could be covered by the option to purchase additional shares, a naked short position, the position can only be closed out by buying shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there could be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering.

• Penalty bids permit the representatives to reclaim a selling concession from a syndicate member when the common stock originally sold by the syndicate member is purchased in a stabilizing transaction or a syndicate covering transaction to cover syndicate short positions.

• In passive market making, market makers in the common stock who are underwriters or prospective underwriters may, subject to limitations, make bids for or purchases of our common stock until the time, if any, at which a stabilizing bid is made.

These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our common stock or preventing or retarding a decline in the market price of the common stock. As a result the price of our common stock may be higher than the price that might otherwise exist in the open market. These transactions may be effected on The Nasdaq Global Market or otherwise and, if commenced, may be discontinued at any time.

A prospectus in electronic format may be made available on the web sites maintained by one or more of the underwriters, or selling group members, if any, participating in this offering and one or more of the underwriters participating in this offering may distribute prospectuses electronically. The representatives may agree to allocate a number of shares to underwriters and selling group members for sale to their online brokerage account holders. Internet distributions will be allocated by the underwriters and selling group members that will make internet distributions on the same basis as other allocations.

Conflicts of Interest

The underwriters and their respective affiliates are full-service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. Certain of the underwriters and their respective affiliates have, from time to time, performed, and may in the future perform, various financial advisory and investment banking services for us, for which they received or will receive customary fees and expenses.

In addition, in the ordinary course of their business activities, the underwriters and their affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers.

These investments and securities activities may involve securities and/or instruments of ours or our affiliates. The underwriters and their affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.

Selling Restrictions

Notice to Prospective Investors in Switzerland

This document is not intended to constitute an offer or solicitation to purchase or invest in the securities described herein. The securities may not be publicly offered, sold or advertised, directly or indirectly, in, into or

160

from Switzerland and will not be listed on the SIX Swiss Exchange or on any other exchange or regulated trading facility in Switzerland. Neither this document nor any other offering or marketing material relating to the securities constitutes a prospectus as such term is understood pursuant to article 652a or article 1156 of the Swiss Code of Obligations or a listing prospectus within the meaning of the listing rules of the SIX Swiss Exchange or any other regulated trading facility in Switzerland, and neither this document nor any other offering or marketing material relating to the securities may be publicly distributed or otherwise made publicly available in Switzerland.

Neither this document nor any other offering or marketing material relating to the offering, nor the Company nor the securities have been or will be filed with or approved by any Swiss regulatory authority. The securities are not subject to the supervision by any Swiss regulatory authority, e.g., the Swiss Financial Markets Supervisory Authority FINMA, and investors in the securities will not benefit from protection or supervision by such authority.

Notice to Prospective Investors in the European Economic Area

In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a “Relevant Member State”), each underwriter represents and agrees that with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State, it has not made and will not make an offer of securities which are the subject of the offering contemplated by this prospectus to the public in that Relevant Member State other than:

(a) to any legal entity which is a qualified investor as defined in the Prospectus Directive;

(b) to fewer than 100 or, if the Relevant Member State has implemented the relevant provision of the 2010 PD Amending Directive, 150, natural or legal persons (other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent of the representatives for any such offer; or

(c) in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of securities shall require us or any underwriter to publish a prospectus pursuant to Article 3 of the Prospectus Directive.

For the purposes of this provision, the expression an “offer to the public” in relation to any securities in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the securities to be offered so as to enable an investor to decide to purchase or subscribe the securities, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State, the expression Prospectus Directive means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in the Relevant Member State and the expression “2010 PD Amending Directive” means Directive 2010/73/EU.

Notice to Prospective Investors in the United Kingdom

Each of the underwriters severally represents warrants and agrees as follows:

(a) it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000 (FSMA) received by it in connection with the issue or sale of the securities in circumstances in which Section 21 of the FSMA does not apply to us; and

(b) it has complied with, and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the securities in, from or otherwise involving the United Kingdom.

161

Notice to Canadian Residents

Resale Restrictions

The distribution of our common stock in Canada is being made only in the provinces of Ontario, Quebec, Alberta and British Columbia on a private placement basis exempt from the requirement that we prepare and file a prospectus with the securities regulatory authorities in each province where trades of these securities are made. Any resale of our common stock in Canada must be made under applicable securities laws which may vary depending on the relevant jurisdiction, and which may require resales to be made under available statutory exemptions or under a discretionary exemption granted by the applicable Canadian securities regulatory authority. Purchasers are advised to seek legal advice prior to any resale of the securities.

Representations of Canadian Purchasers

By purchasing our common stock in Canada and accepting delivery of a purchase confirmation, a purchaser is representing to us and the dealer from whom the purchase confirmation is received that:

• the purchaser is entitled under applicable provincial securities laws to purchase our common stock without the benefit of a prospectus qualified under those securities laws as it is an “accredited investor” as defined under National Instrument 45-106—Prospectus Exemptions,

• the purchaser is a “permitted client” as defined in National Instrument 31-103—Registration Requirements, Exemptions and Ongoing Registrant Obligations, where required by law, the purchaser is purchasing as principal and not as agent, and

• the purchaser has reviewed the text above under Resale Restrictions.

Conflicts of Interest

Canadian purchasers are hereby notified that the underwriters are relying on the exemption set out in section 3A.3 or 3A.4, if applicable, of National Instrument 33-105—Underwriting Conflicts from having to provide certain conflict of interest disclosure in this document.

Statutory Rights of Action

Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if the offering memorandum (including any amendment thereto) such as this document contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser of these securities in Canada should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor.

Enforcement of Legal Rights

All of our directors and officers as well as the experts named herein may be located outside of Canada and, as a result, it may not be possible for Canadian purchasers to effect service of process within Canada upon us or those persons. All or a substantial portion of our assets and the assets of those persons may be located outside of Canada and, as a result, it may not be possible to satisfy a judgment against us or those persons in Canada or to enforce a judgment obtained in Canadian courts against us or those persons outside of Canada.

Taxation and Eligibility for Investment

Canadian purchasers of our common stock should consult their own legal and tax advisors with respect to the tax consequences of an investment in our common stock in their particular circumstances and about the eligibility of our common stock for investment by the purchaser under relevant Canadian legislation.

162

LEGAL MATTERS

The validity of the issuance of our common stock offered in this prospectus will be passed upon for us by Latham & Watkins LLP, 140 Scott Drive, Menlo Park, California. Cooley LLP is acting as counsel for the underwriters in connection with this offering.

EXPERTS

The financial statements of Satsuma Pharmaceuticals, Inc. as of December 31, 2017 and 2018, and for each of the years in the two-year period ended December 31, 2018, have been included herein in reliance upon the report of KPMG LLP, independent registered public accounting firm, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the shares of common stock offered hereby. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement or the exhibits and schedules filed therewith. For further information with respect to Satsuma Pharmaceuticals, Inc. and the common stock offered hereby, reference is made to the registration statement and the exhibits and schedules filed therewith. Statements contained in this prospectus regarding the contents of any contract or any other document that is filed as an exhibit to the registration statement are not necessarily complete, and each such statement is qualified in all respects by reference to the full text of such contract or other document filed as an exhibit to the registration statement. The SEC maintains a website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. The address is www.sec.gov.

Upon consummation of this offering, we will become subject to the information and periodic reporting requirements of the Exchange Act and, in accordance therewith, will file periodic reports, proxy statements and other information with the SEC. Such periodic reports, proxy statements and other information will be available for inspection and copying at the website of the SEC referred to above. We maintain a website at www.satsumarx.com. Upon consummation of this offering, you may access our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act with the SEC free of charge at our website as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. The reference to our website address does not constitute incorporation by reference of the information contained on our website, and you should not consider the contents of our website in making an investment decision with respect to our common stock.

163

SATSUMA PHARMACEUTICALS, INC.

INDEX TO THE FINANCIAL STATEMENTS

	Page
Audited Financial Statements
Report of Independent Registered Public Accounting Firm		F-2
Balance Sheets		F-3
Statements of Operations and Comprehensive Loss		F-4
Statements of Convertible Preferred Stock and Stockholders’ Deficit		F-5
Statements of Cash Flows		F-6
Notes to Financial Statements		F-7
Unaudited Interim Financial Statements
Condensed Balance Sheets as of December 31, 2018 and June  30, 2019		F-32
Condensed Statements of Operations and Comprehensive Loss for the Six Months Ended June 30, 2018 and 2019		F-33
Condensed Statements of Convertible Preferred Stock and Stockholders’ Deficit for the Six Months Ended June 30, 2018 and 2019		F-34
Condensed Statements of Cash Flows for the Six Months Ended June  30, 2018 and 2019		F-35
Condensed Notes to Unaudited Interim Condensed Financial Statements		F-36

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors

Satsuma Pharmaceuticals, Inc.:

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Satsuma Pharmaceuticals, Inc. (the “Company”) as of December 31, 2017 and 2018, the related statements of operations and comprehensive loss, convertible preferred sock and stockholders’ deficit, and cash flows for each of the years in the two-year period ended December 31, 2018, and the related notes (collectively, the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2018, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2018, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ KPMG LLP

We have served as the Company’s auditor since 2019.

San Diego, California

June 21, 2019

F-2

SATSUMA PHARMACEUTICALS, INC.

Balance Sheets

(in thousands, except share and per share amounts)

	December 31,						Pro Forma December 31, 2018
	2017			2018
							(unaudited)
Assets
Current assets
Cash and cash equivalents	$	1,658		$	5,205
Prepaid expenses and other current assets		256			199
Total current assets		1,914			5,404
Property and equipment, net		70			445
Other non-current assets		—			532
Total assets	$	1,984		$	6,381
Liabilities, Convertible Preferred Stock and Stockholders’ Deficit
Current liabilities
Accounts payable	$	473		$	327
Accrued liabilities		566			1,490
Deferred rent, current		—			7
Current portion of long-term debt		—			141
Convertible preferred stock tranche liability		291			—
Obligation to issue additional common stock		370			—
Total current liabilities		1,700			1,965
Long-term debt		—			4,824
Deferred rent, non-current		—			16
Convertible note		94			—
Other non-current liabilities		94			60
Total liabilities		1,888			6,865
Commitments and contingencies (Note 7)
Series A convertible preferred stock, $0.0001 par value, 15,000,000 shares authorized as of December 31, 2017 and December 31, 2018; 7,079,646 and 14,317,877 shares issued and outstanding as of December 31, 2017 and December 31, 2018, respectively; liquidation value of $6,000 and $12,134 as of December 31, 2017 and December 31, 2018, respectively; no shares issued or outstanding, pro forma (unaudited)		5,528			11,648		$	—
Stockholders’ deficit
Common stock, $0.0001 par value, 25,000,000 shares authorized as of December 31, 2017 and December 31, 2018; 2,700,000 and 5,091,415 shares issued and outstanding as of December 31, 2017 and December 31, 2018; 19,409,292 shares issued and outstanding, pro forma (unaudited)		—			1			2
Additional paid-in capital		2,048			2,693			14,340
Accumulated deficit		(7,480	)		(14,826	)		(14,826	)
Total stockholders’ deficit		(5,432	)		(12,132	)	$	(484	)
Total liabilities, convertible preferred stock and stockholders’ deficit	$	1,984		$	6,381

The accompanying notes are an integral part of these financial statements.

F-3

SATSUMA PHARMACEUTICALS, INC.

Statements of Operations and Comprehensive Loss

(in thousands, except share and per share amounts)

	Years ended December 31,
	2017			2018
Operating expenses
Research and development	$	4,193		$	6,433
General and administrative		754			1,082
Total operating expenses		4,947			7,515
Loss from operations		(4,947	)		(7,515	)
Interest income		30			72
Interest expense		(15	)		(90	)
Other income (expense), net		(240	)		187
Net loss and comprehensive loss	$	(5,172)		$	(7,346)
Net loss per share attributable to common stockholders, basic and diluted	$	(1.97	)	$	(1.52	)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted		2,625,411			4,826,459
Pro forma net loss per share, basic and diluted (unaudited)				$	(0.40	)
Weighted-average shares used in computing pro forma net loss per share, basic and diluted (unaudited)					18,529,582

The accompanying notes are an integral part of these financial statements.

F-4

SATSUMA PHARMACEUTICALS, INC.

Statements of Convertible Preferred Stock and Stockholders’ Deficit

(in thousands, except share amounts)

	Convertible Preferred Stock				Common Stock				Additional Paid-In Capital		Accumulated Deficit			Total Stockholders’ Deficit
	Shares		Amount		Shares		Amount
Balances at January 1, 2017		7,079,646	$	5,528		2,550,000	$	—	$	1,982	$	(2,308	)	$	(326)
Vesting of restricted stock		—		—		150,000		—		—		—			—
Stock-based compensation		—		—		—		—		66		—			66
Net loss		—		—		—		—		—		(5,172	)		(5,172	)
Balances at December 31, 2017		7,079,646		5,528		2,700,000		—		2,048		(7,480	)		(5,432	)
Vesting of restricted stock		—		—		150,000		—		—		—			—
Issuance of common stock on settlement of obligation to issue additional common stock		—		—		2,241,415		1		471		—			472
Common stock warrants issued in connection with long-term debt		—		—		—		—		4		—			4
Issuance of Series A convertible preferred stock for cash, net of issuance costs of $14		7,079,646		5,986		—		—		—		—			—
Conversion of convertible note into Series A convertible preferred stock, including interest of $8 adjusted for derivative liability of $27		158,585		134		—		—		—		—			—
Stock-based compensation		—		—		—		—		170		—			170
Net loss		—		—		—		—		—		(7,346	)		(7,346	)
Balances at December 31, 2018		14,317,877	$	11,648		5,091,415	$	1	$	2,693	$	(14,826)		$	(12,132)

The accompanying notes are an integral part of these financial statements.

F-5

SATSUMA PHARMACEUTICALS, INC.

Statements of Cash Flows

(in thousands)

	December 31,
	2017			2018
Cash flows from operating activities
Net loss	$	(5,172	)	$	(7,346	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization		10			57
Non-cash interest expense, and amortization of debt discount and issuance costs		15			28
Stock-based compensation		66			170
Change in fair value of derivative liability		7			1
Change in fair value of obligation to issue additional common stock		232			101
Change in fair value of convertible preferred stock tranche liability		—			(291	)
Loss on extinguishment of convertible note		—			4
Changes in assets and liabilities
Prepaid expenses and other assets		(254	)		(475	)
Accounts payable		363			(177	)
Accrued and other liabilities		412			924
Deferred rent		—			23
Net cash used in operating activities		(4,321	)		(6,981	)
Cash flows from investing activities
Purchases of property and equipment		(58	)		(402	)
Net cash used in investing activities		(58	)		(402	)
Cash flows from financing activities
Borrowings, net of issuance costs		—			4,944
Proceeds from issuance of convertible preferred stock, net of issuance costs		—			5,986
Net cash provided by financing activities		—			10,930
Net increase (decrease) in cash and cash equivalents		(4,379	)		3,547
Cash and cash equivalents
Cash and cash equivalents, at beginning of period		6,037			1,658
Cash and cash equivalents, at end of period	$	1,658		$	5,205
Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	1		$	4
Cash paid for interest	$	—		$	34
Supplemental non-cash investing and financing activities:
Purchases of property and equipment in accounts payable and accrued liabilities	$	22		$	29
Issuance of common stock warrants in connection with long-term debt	$	—		$	4
Conversion of convertible note and accrued interest into preferred stock	$	—		$	134
Issuance of common stock to settle liability for obligation to issue additional common stock	$	—		$	471

The accompanying notes are an integral part of these financial statements.

F-6

SATSUMA PHARMACEUTICALS, INC.

Notes to Financial Statements

1.    Organization and Summary of Significant Accounting Policies

Description of the Business

Satsuma Pharmaceuticals, Inc. (the “Company”) is a clinical-stage biopharmaceutical company developing a novel therapeutic for the acute treatment of migraine. The Company’s product candidate, STS101, is a drug-device combination of a proprietary dry-powder formulation of dihydroergotamine mesylate, or DHE, which can be quickly and easily self-administered by a proprietary pre-filled, single-use, nasal delivery device. The Company, headquartered in South San Francisco, was incorporated in 2016 in the state of Delaware.

Liquidity

The Company is subject to risks and uncertainties common to early-stage companies in the biopharmaceutical industry, including, but not limited to, risks of clinical delays or failure, development by competitors of new technological innovations, protection of proprietary technology, dependence on key personnel, reliance on contract manufacturing organizations (“CMOs”), contract research organizations (“CROs”), compliance with government regulations and the need to obtain additional financing to fund operations. STS101 is currently under development and will require significant additional development efforts as we continue the development of, and seek regulatory approvals for, STS101 and begin to commercialize it, if approved. These efforts require significant amounts of additional capital, adequate personnel and infrastructure and extensive compliance and reporting.

There can be no assurance that the Company’s development of STS101 will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained or maintained, that STS101 will obtain necessary government regulatory approval or that STS will be commercially viable, if approved. Even if STS101 development efforts are successful, it is uncertain when, if ever, the Company will generate revenue from product sales. The Company operates in an environment of rapid change in technology and substantial competition from other pharmaceutical and biopharmaceutical companies. In addition, the Company is dependent upon the services of its employees, consultants and other third parties.

The Company has incurred significant losses and negative cash flows from operations in all periods since its inception and had an accumulated deficit of $14.8 million as of December 31, 2018. The Company has historically financed its operations primarily through private placements of convertible preferred stock, a convertible promissory note, and long-term debt. The Company has no products approved for sale, and the Company has not generated any revenue since its inception. The Company expects to incur significant additional operating losses over at least the next several years. There can be no assurance that in the event the Company requires additional financing, such financing will be available on terms which are favorable or at all. Failure to generate sufficient cash flows from operations, raise additional capital or reduce certain discretionary spending would have a material adverse effect on the Company’s ability to achieve its intended business objectives.

As of December 31, 2018, the Company had cash and cash equivalents of $5.2 million. The Company’s management team believes that the Company’s current cash and cash equivalents, including the gross proceeds of $61.7 million from its Series B convertible preferred stock financing in April 2019 (see Note 14), will be sufficient to fund its planned operations for at least 12 months from the date of the issuance of these financial statements.

Basis of Presentation

The financial statements and accompanying notes have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”).

F-7

SATSUMA PHARMACEUTICALS, INC.

Notes to Financial Statements (continued)

Unaudited Pro Forma Information

The unaudited pro forma information as of December 31, 2018 has been prepared to give effect to the conversion of all of the outstanding convertible preferred stock of the Company on a one-to-one basis into 14,317,877 shares of common stock, which will automatically convert upon the consummation of a Qualified IPO (as defined in Note 8). The unaudited pro forma information does not assume any issuance of shares of common stock or any proceeds from the initial public offering (“IPO”).

The unaudited pro forma basic and diluted net loss per share has been computed to give effect to (1) an adjustment to the denominator in the pro forma basic and diluted net loss per share calculation for the automatic conversion of the convertible preferred stock into shares of common stock as of the beginning of the period or the date of issuance, if later and (2) the filing and effectiveness of the Company’s amended and restated certificate of incorporation.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Such estimates include the accrual of research and development expenses, valuation of the convertible preferred stock tranche liability, obligation to issue additional common stock, deferred tax assets, useful lives of property and equipment and the fair value of stock-based awards. The Company evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors and adjust those estimates and assumptions when facts and circumstances dictate. Actual results could differ from those estimates and assumptions.

Segments

The Company operates and manages its business as a single operating and reportable segment, which is the business of developing, seeking regulatory approval for and commercializing STS101 for the acute treatment of migraine. The Company’s chief executive officer, who is the chief operating decision maker, reviews financial information on an aggregate basis for purposes of allocating resources and evaluating financial performance. No product revenue has been generated since its inception and all of the Company’s long-lived assets are located in the United States.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an original or remaining maturity of three months or less at the date of purchase to be cash equivalents.

Concentration of Credit Risk

The Company has no significant off balance sheet concentrations of credit risk. Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents. Substantially all the Company’s cash is held by one financial institution that management believes to be of high credit quality. Such deposits may, at times, exceed federally insured limits. The Company invests its cash equivalents in money market funds. The Company has not experienced any credit losses on its deposits of cash or cash equivalents.

F-8

SATSUMA PHARMACEUTICALS, INC.

Notes to Financial Statements (continued)

Fair Value of Financial Instruments

The carrying amounts of certain of the Company’s financial instruments, including cash equivalents, accounts payable and accrued liabilities, approximate fair value due to their relatively short maturities and market interest rates, if applicable. The carrying amounts of the convertible preferred stock tranche liability and the obligation to issue additional common stock represent their fair value.

Property and Equipment, Net

Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which generally ranges from three to five years. Leasehold improvements are stated at cost and amortized over the shorter of the useful lives of the assets or the lease term. Maintenance and repairs are charged to expense as incurred. When assets are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the balance sheet and any resulting gain or loss is reflected in the statements of operations and comprehensive loss in the period realized.

Impairment of Long-Lived Assets

Long-lived assets consist of property and equipment. The Company reviews property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable or that the useful life is shorter than we had originally estimated. Recoverability is measured by comparison of the carrying amount of the asset or asset group to the future undiscounted cash flows which the asset or asset group is expected to generate. If the asset or asset group is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset or asset group exceeds the fair value of the asset or asset group. If the useful life is shorter than originally estimated, the Company amortizes the remaining carrying value over the new shorter useful life. There have been no such impairments of long-lived assets during the years ended December 31, 2017 and December 31, 2018.

Convertible Preferred Stock

The Company records all shares of convertible preferred stock at their respective fair values on the dates of issuance, net of issuance costs, or residual value, if issued together with other instruments that are remeasured to fair value on a recurring basis. The convertible preferred stock is recorded outside of permanent equity because while it is not mandatorily redeemable, in certain events considered not solely within the Company’s control, such as a merger or acquisition or sale of all or substantially all of the Company’s assets (each, a “deemed liquidation event”), the convertible preferred stock will become redeemable at the option of the holders of at least a majority of the then outstanding shares of such preferred stock. The Company has not adjusted the carrying values of the convertible preferred stock to its liquidation preference because a deemed liquidation event obligating the Company to pay the liquidation preferences to holders of shares of convertible preferred stock is not probable of occurring. Subsequent adjustments to the carrying values of the liquidation preferences will be made only when it becomes probable that such a deemed liquidation event will occur.

Convertible Preferred Stock Tranche Liability

The Company was obligated to issue additional shares of Series A convertible preferred stock at future dates pursuant to the Series A convertible preferred stock purchase agreement. This obligation was determined to be a freestanding instrument that should be accounted for as a liability. At initial recognition, the Company recorded the convertible preferred stock tranche liability on the balance sheet at its fair value. The liability was subject to

F-9

SATSUMA PHARMACEUTICALS, INC.

Notes to Financial Statements (continued)

remeasurement at each balance sheet date, with changes in fair value recognized as a component of other income (expense), net in the statements of operations and comprehensive loss until it was extinguished upon issuance of Series A convertible preferred stock in February 2018 (see Note 6).

Obligation to Issue Additional Common Stock

The obligation to issue additional common stock to Shin Nippon Biomedical Laboratories, Ltd., or SNBL, pursuant to the Series A convertible preferred stock financing documents (the “SNBL Grant”), was accounted and classified as a liability as it was not indexed to the Company’s stock, specifically because the settlement amount of the SNBL Grant could be affected by future issuance of equity shares or potential equity shares. Therefore, the obligation to issue additional shares of common stock to SNBL was initially measured at fair value and subsequently remeasured at fair value at each reporting date until it was extinguished upon issuance of common stock in February 2018, with changes in fair value recognized as a component of other income (expense), net in the statements of operations and comprehensive loss.

Research and Development Expenses

The Company’s research and development expenses consist primarily of payroll and personnel-related expenses, including salaries, employee benefit costs and stock-based compensation expenses for the Company’s research and product development employees, fees paid to third parties to conduct preclinical and clinical studies and other research and development activities on behalf of the Company, including CROs, CMOs and other service providers, costs for licenses, and allocated overhead, including rent, equipment, depreciation, information technology costs and utilities. The Company charges all research and development costs, both internal and external, to research and development expenses within the statements of operations and comprehensive loss as incurred. Payments associated with licensing agreements to acquire exclusive licenses to develop, use, manufacture and commercialize products that have not reached technological feasibility and do not have alternate commercial use are also expensed as incurred.

Accrued Research and Development

The Company monitors the activity under its various agreements with CROs, CMOs and other service providers to the extent possible through communication with each service provider, detailed invoice and task completion review, analysis of actual expenses against budget, pre-approval of any changes in scope, and review of contractual terms. The Company’s research and development accruals are estimated based on the level of services performed, progress of the studies, including the phase or completion of events, and contracted costs. These estimates may or may not match the actual services performed by the service providers. The estimated costs of research and development provided, but not yet invoiced, are included in accrued liabilities on the balance sheet. If the actual timing of the performance of services or the level of effort varies from the original estimates, the Company will adjust the accrual accordingly. Payments made to service providers under these arrangements in advance of the performance of the related services are recorded as prepaid expenses and other current assets on the balance sheet until the services are rendered.

Stock-Based Compensation

The Company maintains incentive plans under which incentive stock options and nonqualified stock options may be granted to employees and non-employee service providers. The Company accounts for all shared-based awards granted to employees and non-employees based on the fair value on the date of grant and recognizes compensation expense for those awards over the requisite service period, which is generally the vesting period of the respective award. The Company accounts for forfeitures as they occur. Generally, the Company issues

F-10

SATSUMA PHARMACEUTICALS, INC.

Notes to Financial Statements (continued)

awards with only service-based vesting conditions. For share-based awards with service-based vesting conditions, the Company recognizes compensation expense using the straight-line method. The Company recognizes expense for awards subject to performance-based milestones over the requisite service period, using the accelerated attribution method, once the performance condition becomes probable of being achieved. Management evaluates when the achievement of a performance-based milestone is probable based on the expected satisfaction of the performance conditions at each reporting date.

Estimating fair value of stock-based awards using an option pricing model requires input of subjective assumptions, including fair value of the Company’s common stock, and, for stock options, expected term of options and stock price volatility. The Company uses the Black-Scholes option pricing model to value its stock option awards. The assumptions used in calculating the fair value of stock-based awards represent management’s estimates, involve inherent uncertainties and require application of management’s judgment. As a result, if factors change and management uses different assumptions, stock-based compensation expense could be materially different for future awards.

The Company classifies stock-based compensation expense in its statements of operations and comprehensive loss in the same manner in which the award recipient’s payroll costs are classified or in which the award recipient’s service payments are classified.

Comprehensive Loss

Comprehensive loss is defined as a change in equity during a period from transactions and other events and circumstances from non-owner sources. For the periods presented, there are no components of other comprehensive income or accumulated comprehensive income and the net loss is equal to the comprehensive loss.

Net Loss per Share Attributable to Common Stockholders

Basic net loss per common share is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of common stock outstanding during the period, without consideration of potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common stock and potentially dilutive securities outstanding for the period. For purposes of the diluted net loss per share calculation, convertible preferred stock, convertible preferred stock tranche liability, obligation to issue additional common stock, convertible note, stock options and common stock subject to repurchase related to unvested restricted stock awards are considered to be potentially dilutive securities. Basic and diluted net loss per share attributable to common stockholders is presented in conformity with the two-class method required for participating securities as the convertible preferred stock is considered a participating security because it participates in dividends with common stock. The holders of convertible preferred stock do not have a contractual obligation to share in the Company’s losses. As such, the net loss was attributed entirely to common stockholders. Because the Company has reported a net loss for all periods presented, diluted net loss per common share is the same as basic net loss per common share for those periods.

Income Taxes

Income taxes are recorded using an asset and liability approach. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Tax benefits are recognized when it is more

F-11

SATSUMA PHARMACEUTICALS, INC.

Notes to Financial Statements (continued)

likely than not that a tax position will be sustained during an audit. Deferred tax assets are reduced by a valuation allowance if current evidence indicates that it is considered more likely than not that these benefits will not be realized. In making such a determination, management considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If management determines that the Company would be able to realize its deferred tax assets in the future in excess of their net recorded amount, management would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.

The Company’s tax positions are subject to income tax audits. The Company recognizes the tax benefit of an uncertain tax position only if it is more likely than not that the position is sustainable upon examination by the taxing authority, based on the technical merits. The tax benefit recognized is measured as the largest amount of benefit which is more likely than not to be realized upon settlement with the taxing authority. The Company recognizes interest accrued and penalties related to unrecognized tax benefits in its tax provision. The Company evaluates uncertain tax positions on a regular basis. The evaluations are based on a number of factors, including changes in facts and circumstances, changes in tax law, correspondence with tax authorities during the course of the audit, and effective settlement of audit issues. The provision for income taxes includes the effects of any accruals that the Company believes are appropriate, as well as the related net interest and penalties.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) under its accounting standard codifications (“ASC”) or other standard setting bodies and adopted by the Company as of the specified effective date, unless otherwise discussed below.

Recently Adopted Accounting Pronouncements

In March 2018, the FASB issued ASU No. 2018-05, Income Taxes (Topic 740)—Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118. This ASU amends ASC 740, Income Taxes, to provide guidance on accounting for the tax effects of the Tax Cuts and Jobs Act (the “Tax Act”) pursuant to Staff Accounting Bulletin No. 118, which allows companies to complete the accounting under ASC 740 within a one-year measurement period from the Tax Act enactment date. This ASU was effective upon issuance. The Company has applied the guidance in this ASU. See Note 12 for more information and disclosures related to this amended guidance.

New Accounting Pronouncements Not Yet Adopted

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASC 842”), which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. ASC 842 provides a lessee with an option to not account for leases with a term of 12 month or less as leases in the scope of the new standard. ASC 842 supersedes the previous leases standard, ASC 840 Leases. For public business entities, this ASU is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, and should be applied through a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in

F-12

SATSUMA PHARMACEUTICALS, INC.

Notes to Financial Statements (continued)

the financial statements. Early adoption is permitted. For all other entities, this ASU is effective for fiscal years beginning after December 15, 2019 and interim periods within fiscal years beginning after December 15, 2020. The Company will adopt this ASU on January 1, 2020. In July 2018, the FASB issued supplemental adoption guidance and clarification to ASC 842 within ASU 2018-10, Codification Improvements to Topic 842, Leases and ASU 2018-11, Leases (Topic 842): Targeted Improvements. ASU 2018-11 provides another transition method in addition to the existing modified retrospective transition method by allowing entities to initially apply the new leasing standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company is currently evaluating the impact the adoption of these ASUs will have on its financial statements and related disclosures. The Company expects to recognize a right-of-use asset and corresponding lease liability for its real estate operating leases upon adoption. See Note 7 for more information related to the Company’s lease obligations, which are presented on an undiscounted basis therein.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements on fair value measurements. ASU 2018-13 removes the requirement to disclose: the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy; the policy for timing of transfers between levels; and the valuation processes for Level 3 fair value measurements. For public business entities, this ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact the adoption of this ASU will have on its financial statements and related disclosures.

2.    Fair Value Measurements

The Company applies fair value accounting for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, a three-tier fair value hierarchy has been established, which prioritizes the inputs used in measuring fair value as follows:

Level 1—Observable inputs, such as quoted prices in active markets for identical assets or liabilities at the measurement date.

Level 2—Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3—Unobservable inputs which reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value. The Company’s Level 3 liabilities consist of the convertible preferred stock tranche liability and the obligation to issue additional common stock. The determination of the fair value of the convertible preferred stock tranche liability is discussed in Note 6 and the determination of the fair value of the obligation to issue additional common stock is discussed in Note 13.

F-13

SATSUMA PHARMACEUTICALS, INC.

Notes to Financial Statements (continued)

As of December 31, 2017, financial assets and liabilities measured and recognized at fair value were as follows (in thousands):

	Fair Value Measurements at December 31, 2017
	Quoted Price in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets
Money market funds(1)	$	1,633	$	—	$	—	$	1,633
Total fair value of assets	$	1,633	$	—	$	—	$	1,633
Liabilities
Convertible preferred stock tranche liability	$	—	$	—	$	291	$	291
Obligation to issue additional common stock		—		—		370		370
Total fair value of liabilities	$	—	$	—	$	661	$	661

(1) Included in cash and cash equivalents on the balance sheet.

As of December 31, 2018, financial assets measured and recognized at fair value were as follows (in thousands):

	Fair Value Measurements at December 31, 2018
	Quoted Price in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets
Money market funds(1)	$	5,184	$	—	$	—	$	5,184
Total fair value of assets	$	5,184	$	—	$	—	$	5,184

(1) Included in cash and cash equivalents on the balance sheet.

There were no financial liabilities measured and recognized at fair value as of December 31, 2018.

The following tables set forth the changes in the fair value of Level 3 financial liabilities (in thousands):

	Convertible Preferred Stock Tranche Liability			Obligation to Issue Additional Common Stock
Fair value at January 1, 2017	$	291		$	138
Change in fair value included in other income (expense), net		—			232
Fair value as of December 31, 2017	$	291		$	370
Change in fair value included in other income (expense), net		(291	)		102
Settlement of obligation		—			(472	)
Fair value as of December 31, 2018	$	—		$	—

F-14

SATSUMA PHARMACEUTICALS, INC.

Notes to Financial Statements (continued)

The Company used the Black-Scholes option pricing model to estimate the fair value of the convertible preferred stock tranche liability (see Note 6). The Company used the fair value of the Company’s common stock to estimate the fair value of the obligation to issue additional common stock (see Note 13).

3.    Balance Sheet Components

Property and Equipment, Net

Property and equipment consisted of the following (in thousands, except years):

		December 31,
	Useful Life (In Years)	2017			2018
Furniture and fixtures	3	$	—		$	13
Leasehold improvements	Shorter of useful life or lease term		—			7
Machinery and equipment	3-5		64			375
Tooling	3-5		16			117
			80			512
Less: Accumulated depreciation and amortization			(10	)		(67	)
		$	70		$	445

Depreciation and amortization are computed using the straight-line method. Depreciation and amortization expense for the years ended December 31, 2017 and December 31, 2018 was less than $0.1 million and $0.1 million, respectively.

Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):

	December 31,
	2017		2018
Accrued salaries and benefits	$	287	$	553
Accrued research and development expenses		196		772
Accrued interest		—		29
Other		83		136
	$	566	$	1,490

4.    Convertible Note

On August 1, 2016, the Company issued a $0.1 million convertible promissory note (the “Convertible Note”) to one of its founders and existing shareholders (see Note 13) bearing simple interest at 5.0% per annum. The outstanding amount was due and payable upon the earlier of (i) a demand made by the investor after the two-year anniversary of the initial issuance, or (ii) the continued occurrence of an event of default when declared due and payable by the investor.

The Convertible Note was amended on December 16, 2016 to redefine the automatic conversion trigger from a qualified financing before the maturity date of $7.0 million to the occurrence of the subsequent closing as defined in the Series A Preferred Stock Purchase Agreement dated December 16, 2016.

F-15

SATSUMA PHARMACEUTICALS, INC.

Notes to Financial Statements (continued)

The Convertible Note included an embedded derivative that was required to be bifurcated and accounted for separately as a derivative liability. The derivative instrument was measured at fair value and recorded as a discount to the Convertible Note. The discount was amortized to interest expense over the term of the Convertible Note using the effective interest rate and the derivative liability was remeasured at each reporting period, with changes in value recorded to other income (expense), net on the Company’s statements of operations and comprehensive loss. The estimated fair value of the derivative instrument was immaterial as of the issuance date and December 31, 2017, due to the probability of occurrence of the underlying events being remote.

Upon the subsequent financing, which occurred in February 2018 (see Note 8), the Convertible Note, including all accrued interest of less than $0.1 million at the date of the subsequent financing, converted into 158,585 shares of Series A preferred stock at $0.678 per share, which was equal to 80.0% of the price per share paid by the cash purchasers. The conversion of the Convertible Note was accounted for as an extinguishment with the loss on extinguishment of the Convertible Note of less than $0.1 million recorded in other income (expense), net on the Company’s statements of operations and comprehensive loss. Total interest expense for each of the years ended December 31, 2017 and December 31, 2018 was less than $0.1 million. At December 31, 2017, accrued interest expense of less than $0.1 million was included in accrued liabilities on the Company’s balance sheet. Amortization of debt discount for each of the years ended December 31, 2017 and December 31, 2018 was less than $0.1 million and was accounted for as interest expense on the Company’s statements of operations and comprehensive loss. Loss on revaluation of derivative liability for each of the years ended December 31, 2017 and December 31, 2018 was less than $0.1 million.

5.    Long-Term Debt

On October 26, 2018, the Company entered into a Loan and Security Agreement (the “Loan Agreement”) with Silicon Valley Bank. The Loan Agreement provides for loan advances of up to $10.0 million. The first advance (the “Term A Loan”) of $5.0 million was available for draw down by the Company as of the effective date of the Loan Agreement. The remaining $5.0 million (the “Term B Loan” and together with the Term A Loan, the “Term Loans”) is available for draw down by the Company in $1.0 million increments. Interest on the loan advances is payable monthly at a floating per annum rate equal to the greater of 1.5% above the prime rate or 6.5%. Upon the occurrence of an event of default, interest will increase to 5.0% above the rate that is otherwise applicable. The maturity date of the loan advances is May 1, 2022.

Principal on the Term A Loan is repayable commencing on December 1, 2019 in 30 monthly payments through maturity, however if a Term B Loan advance is made, then the Term A Loan will be repayable in 24 monthly payments commencing on June 1, 2020. The Term B Loan, if drawn, will be repayable in 24 monthly payments commencing on June 1, 2020. In addition to regular monthly payments, a final payment equal to the original principal amount of the Term Loans multiplied by 5.0% is due on the earliest to occur of (a) May 1, 2020 or (b) the prepayment in full of the term loan advances. The Company has the option to prepay the term loan advances with a prepayment premium of 3.0% of the outstanding principal if prepayment is made prior to October 26, 2019, 2.0% of the outstanding principal if prepayment is made after October 26, 2019 but before October 26, 2020, and 1.0% of the outstanding principal if prepayment is made after October 26, 2020 but before May 1, 2020. The repayment of term loan advances will be accelerated upon occurrence of an event of default. The Loan Agreement contains customary affirmative and negative covenants and events of default, including covenants and restrictions that among other things, restrict the ability of the Company to incur liens, incur additional indebtedness, make loans and investments, engage in mergers and acquisitions, engage in asset sales or sale and leaseback transactions, and declare dividends or redeem or repurchase capital stock. The Company is in compliance with all the covenants contained in the Loan Agreement.

F-16

SATSUMA PHARMACEUTICALS, INC.

Notes to Financial Statements (continued)

As of December 31, 2018, the future contractual maturities of debt by fiscal year are as follows (in thousands):

2019	$	167
2020		2,000
2021		2,000
2022		833
Total future maturities of debt	$	5,000

In accordance with the terms of the Loan Agreement, on October 26, 2018, the Company issued warrants to purchase 48,094 shares of the Company’s common stock at an exercise price of $0.22 per share with a term of 10 years. The Company will be obligated to issue additional warrants to purchase up to a maximum aggregate amount of shares of the Company’s common stock equal to 0.15% of the Company’s fully-diluted capitalization in connection with drawdowns of the Term B Loan at an exercise price equal to the latest valuation of the Company’s common stock or if the Company’s common stock is publicly traded, the lower of the trailing 10-day average closing share price of the Company’s common stock prior to the first Term B Loan advance or the closing price per share on the day prior to the first Term B Loan advance (“Term B Warrants”). The Term B Warrants are considered issued and outstanding for accounting purposes on execution of the Loan Agreement. The warrants were accounted for and classified as equity at fair value using the following assumptions under the Option Pricing Model (“OPM”):

	Year Ended December 31, 2018
Expected term (years)		10.0
Expected volatility		74.8	%
Risk-free interest rate		3.1	%
Dividend yield		0	%

The proceeds from the Term A Loan advance were allocated to the debt and the warrants based on their relative fair values. The resulting debt discount of less than $0.1 million is being recognized as interest expense over the term of the loan of 3.6 years using the effective interest method.

The Company incurred debt issuance costs of $0.1 million, which is presented as reduction of the Term A Loan advance, consistent with the presentation of debt discount. Debt issuance cost and final payment of $0.3 million is recognized as additional interest expense using the effective interest method over the term of the loan.

As of December 31, 2018, the term loan advances, net of debt discount and debt issuance costs, were $5.0 million and are included in current portion of long-term debt and long-term debt on the Company’s balance sheet.

6.    Convertible Preferred Stock Tranche Liability

In December 2016, the Company executed a Series A Preferred Stock Purchase Agreement to sell shares of Series A convertible preferred stock. The Series A convertible preferred stock issuance was structured in two tranches: (i) 7,079,646 shares at $0.8475 per share (the “First Tranche”) and (ii) 7,079,646 shares at $0.8475 per share on achieving a certain development milestone by the Company or at the option of First Tranche investors at any time before such milestone is achieved (the “Second Tranche”). In December 2016, the Company recognized

F-17

SATSUMA PHARMACEUTICALS, INC.

Notes to Financial Statements (continued)

a convertible preferred stock tranche liability for the First Tranche investors’ right to purchase from the Company, on the same terms, additional shares of Series A convertible preferred stock. The convertible preferred stock tranche liability was valued using the OPM, which resulted in an initial fair value of $0.3 million for the Company’s obligation to sell the convertible preferred stock related to the Second Tranche. On December 31, 2017, the convertible preferred stock tranche liability was revalued, and the Company recorded a gain of less than $0.1 million in other income (expense), net for the year then ended.

On February 1, 2018, the Company issued an additional 7,079,646 shares of Series A convertible preferred stock at $0.8475 per share thereby extinguishing the convertible preferred stock tranche liability for the Second Tranche. Immediately prior to the closing of the Second Tranche, the Company remeasured the convertible preferred stock tranche liability to its then fair value of $0 and recorded a gain of $0.3 million in other income (expense), net.

The convertible preferred stock tranche liability for the Second Tranche was valued using the following assumptions under the OPM:

	December 31,
	2017
Stock price	$	0.85
Expected term (years)		0.1
Expected volatility		40.0	%
Risk-free interest rate		1.28	%
Dividend yield		0	%

7.    Commitments and Contingencies

Operating Leases

The Company entered into a one-year lease agreement for office space in South San Francisco, California. Total rent payment under the agreement, which ran from January 1, 2017 to December 31, 2017, was $0.1 million.

On January 9, 2018, the Company entered into an office lease agreement for office space in South San Francisco, California. The lease term is through April 30, 2021. There is an option to renew for an additional three years.

On December 8, 2018, the Company entered into an office lease agreement for office space in North Carolina. The lease commenced on January 2, 2019 and the lease term is through June 30, 2019. There is an option to renew for two additional periods of three months each. On March 14, 2019, the Company entered into an amendment to the lease agreement for the office space in North Carolina to lease additional workspace at the same address over the same lease term.

Rent expense was $0.1 million for each of the years ended December 31, 2017 and December 31, 2018. As of December 31, 2018, less than $0.1 million of deferred rent representing future minimum rental payments for leases with scheduled rent escalations was included in deferred rent, current and deferred rent, non-current on the Company’s balance sheet.

F-18

SATSUMA PHARMACEUTICALS, INC.

Notes to Financial Statements (continued)

Future minimum lease payments under non-cancelable operating leases as of December 31, 2018 were as follows (in thousands):

	Operating Leases
Year Ending December 31,
2019	$	161
2020		163
2021		55
Total minimum lease payments	$	379

Contingencies

From time to time, the Company may be involved in litigation related to claims that arise in the ordinary course of its business activities. The Company accrues for these matters when it is probable that future expenditures will be made and these expenditures can be reasonably estimated. As of December 31, 2017 and December 31, 2018, the Company did not believe that any such matters, individually or in the aggregate, would have a material adverse effect on the Company’s financial position, results of operations or cash flows.

Indemnification

The Company enters into standard indemnification arrangements in the ordinary course of business. Pursuant to these arrangements, the Company indemnifies, holds harmless and agrees to reimburse the indemnified parties for losses suffered or incurred by the indemnified party, in connection with any trade secret, copyright, patent or other intellectual property infringement claim by any third party with respect to its technology. The term of these indemnification agreements is generally perpetual any time after the execution of the agreement. The maximum potential amount of future payments the Company could be required to make under these arrangements is not determinable. The Company has never incurred costs to defend lawsuits or settle claims related to these indemnification agreements. As a result, the Company believes the fair value of these agreements is minimal.

8.    Convertible Preferred Stock

The Company has authorized 15,000,000 shares of convertible preferred stock, $0.0001 par value.

In December 2016, the Company issued 7,079,646 shares of its Series A convertible preferred stock at $0.8475 per share to existing investors for proceeds of $5.8 million which was net of issuance costs of $0.2 million.

In February 2018, the Company issued 7,079,646 shares of its Series A convertible preferred stock at $0.8475 per share to existing investors for proceeds of $6.0 million, which was net of issuance costs of less than $0.1 million. The Convertible Note was exchanged for 158,585 shares of Series A convertible preferred stock at $0.678 per share, reflecting accrued interest of less than $0.1 million and a 20% discount to the purchase price per share paid by the cash investors.

F-19

SATSUMA PHARMACEUTICALS, INC.

Notes to Financial Statements (continued)

Issued and outstanding shares of convertible preferred stock were as follows (in thousands, except share and per share amounts):

December 31, 2017

	Convertible Preferred Stock				Liquidation Value		Carrying Amount		Original Issue Price Per Share
	Authorized		Outstanding
Series A convertible preferred stock		15,000,000		7,079,646	$	6,000	$	5,528	$	0.8475
		15,000,000		7,079,646	$	6,000	$	5,528

December 31, 2018

	Convertible Preferred Stock				Liquidation Value		Carrying Amount		Original Issue Price Per Share
	Authorized		Outstanding
Series A convertible preferred stock		15,000,000		14,317,877	$	12,134	$	11,648	$	0.8475
		15,000,000		14,317,877	$	12,134	$	11,648

The holders of the convertible preferred stock have various rights and preferences as follows:

Liquidation Preference

In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, or a deemed liquidation event, the holders of the convertible preferred stock shall be entitled to receive, prior and in preference to any distribution of any of the assets of the Company to the holders of the common stock by reason of their ownership of such stock, an amount per share for each share of convertible preferred stock held by them equal to the greater of (i) $0.8475 per share (subject to adjustment from time to time for recapitalization), plus all declared but unpaid dividends (if any) on such share of convertible preferred stock, or (ii) such amount per share as would have been payable had all shares of convertible preferred stock been converted into common stock immediately prior to such liquidation. If available assets are insufficient to pay the full liquidation preference of the series of convertible preferred stock, the assets available for distribution to holders of such preferred stock will be distributed among such holders on a pro rata basis. Any remaining funds and assets of the Company legally available for distribution shall be distributed pro rata to the common shareholders in proportion to the number of shares of common stock held by them. Shares of convertible preferred stock shall not be entitled to be converted into shares of common stock in order to participate in any distribution, as shares of common stock, without first foregoing participation in the distribution as shares of convertible preferred stock.

Conversion

Each share of convertible preferred stock is convertible, at the option of the holder thereof, at any time and from time to time, and without the payment of additional consideration by the holder. The conversion price is determined by dividing the original issuance price applicable to each series of convertible preferred stock, adjusted for any anti-dilution adjustments, by the applicable conversion price for such series. As of December 31, 2017 and December 31, 2018 the Company’s convertible preferred stock is convertible into the Company’s shares of common stock on a one-for-one basis.

F-20

SATSUMA PHARMACEUTICALS, INC.

Notes to Financial Statements (continued)

The shares shall automatically convert into fully-paid non-assessable shares of common stock at the conversion rate (a) immediately prior to the closing of a firm commitment underwritten initial public offering pursuant to an effective registration statement filed under the Securities Act of 1933, as amended (the “Securities Act”) provided that the aggregate gross proceeds to the Company are not less than $25.0 million and the per share price is at least three times the original issuance price (a “Qualified IPO”), or (b) at the time upon the receipt of a written request for conversion from the holders of at least a majority of the convertible preferred stock outstanding.

Dividends

In any calendar year, the holders of outstanding shares of convertible preferred stock shall be entitled to receive dividends, when, as and if declared by the Company’s board of directors (the “Board of Directors”), at a rate of $0.068 per share, in preference and priority to any declaration, set aside or payment of any distribution on common stock of the Company. The right to receive dividends on shares of convertible preferred stock shall not be cumulative, and no right to dividends shall accrue to holders of preferred stock unless dividends are declared. The Loan Agreement contains covenants that place restrictions on the Company’s ability to pay dividends.

Voting

The holders of convertible preferred stock have one vote for each full share of common stock into which their respective shares of convertible preferred stock could then be converted.

Redemption and Balance Sheet Classification

The convertible preferred stock is recorded in mezzanine equity because while it is not mandatorily redeemable, it will become redeemable at the option of the stockholders upon the occurrence of certain deemed liquidation events that are considered not solely within the Company’s control.

9.    Common Stock

The Company has authorized 25,000,000 shares of common stock, $0.0001 par value per share.

Dividends—after the payment of dividends to the holders of the preferred stock, any additional dividends (other than dividends on common stock payable solely in common stock) shall be paid to the holders of the preferred stock and common stock then outstanding as if all shares of preferred stock were converted at the then effective conversion rate.

Liquidation Preference—after the payments to the holders of the preferred stock, the entire remaining assets of the Company shall be distributed pro rata to holders of the common stock of the Company in proportion to the number of shares of common stock held by them.

Voting—each holder of shares of common stock shall be entitled to one vote for each share thereof held.

F-21

SATSUMA PHARMACEUTICALS, INC.

Notes to Financial Statements (continued)

The Company had reserved common stock, on an as-converted basis, for future issuance as follows:

	December 31,
	2017		2018
Conversion of Series A convertible preferred stock		7,079,646		14,317,877
Conversion of Series A convertible preferred stock issuable upon settlement of the convertible preferred stock tranche liability		7,079,646		—
Conversion of Convertible Note		157,938		—
Exercise of common stock warrants		—		48,094
Exercise of outstanding options under the 2016 Plan		2,020,000		3,900,000
Shares of common stock available for grant under the 2016 Plan		500,000		540,000
Obligation to issue additional common stock		1,761,076		—
Total		18,598,306		18,805,971

10.    Stock-Based Compensation

In 2016, the Company established its 2016 Equity Incentive Plan (the “2016 Plan”) which provides for the granting of stock options to employees and consultants of the Company. Awards granted under the 2016 Plan may be either incentive stock options (“ISOs”), nonqualified stock options (“NSOs”), stock appreciation rights (“SARs”), or restricted stock units (“RSUs”). ISOs may be granted only to Company employees (including officers and directors who are also employees). NSOs may be granted to Company employees and consultants.

The exercise price of ISOs and NSOs shall not be less than 100% of the estimated fair value of the shares on the date of grant. The exercise price of ISOs granted to an employee who, at the time of grant, owns stock representing more than 10% (“10% stockholder”) of the voting power of all classes of stock of the Company shall be no less than 110% of the estimated fair value of the shares on the date of grant. The options usually have a term of 10 years (or no more than five years if granted to a 10% stockholder). Vesting conditions determined by the plan administrator may apply to stock options and may include continued service, performance and/or other conditions. Generally, options and restricted stock awards vest over a four-year period.

Activity under the 2016 Plan is set forth below:

				Outstanding Options
	Shares Available for Grant			Number of Shares			Weighted Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)
Balance, January 1, 2017		1,920,000
Additional shares authorized		600,000
Options granted		(2,020,000	)		2,020,000		$	0.19		9.32
Balance, December 31, 2017		500,000			2,020,000			0.19
Additional shares authorized		1,920,000
Options granted		(1,890,000	)		1,890,000		$	0.22		9.32
Options cancelled		10,000			(10,000	)	$	0.19
Balance, December 31, 2018		540,000			3,900,000		$	0.20		8.82
Exercisable as of December 31, 2018		1,796,932
Vested and expected to vest, December 31, 2018		3,900,000

F-22

SATSUMA PHARMACEUTICALS, INC.

Notes to Financial Statements (continued)

The weighted-average grant-date fair value of options granted during the years ended December 31, 2017 and December 31, 2018 was $0.12 and $0.14 per share, respectively. There were no stock options exercised under the 2016 Plan as of December 31, 2018.

As of December 31, 2018, the total unrecognized stock-based compensation expense for stock options was $0.3 million, which is expected to be recognized over a weighted-average period of 2.4 years.

The total fair value of options vested for the years ended December 31, 2017 and December 31, 2018 was less than $0.1 million and $0.2 million, respectively.

The following table summarizes information about stock options outstanding as of December 31, 2018 (in thousands, except share and per share data).

	Options Outstanding				Options Vested and Exercisable
Exercise Price	Number Outstanding		Weighted Average Remaining Contractual Term (Years)		Number Exercisable		Aggregate Intrinsic Value		Weighted Average Exercise Price
$ 0.19		2,010,000		8.32		1,165,057	$	710,685	$	0.19
$ 0.22		1,890,000		9.36		631,875	$	366,488	$	0.22
		3,900,000				1,796,932	$	1,077,173	$	0.20

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock options and the fair value of the Company’s common stock for stock options that were in-the-money as of December 31, 2018.

Stock-Based Compensation Associated with Awards to Employees and Non-employees

During the years ended December 31, 2017 and December 31, 2018, the Company granted stock options to employees to purchase 2,010,000 and 1,890,000 shares of common stock, respectively. During the year ended December 31, 2017, the Company granted stock options to non-employees to purchase 10,000 shares of common stock. During the year ended December 31, 2018, the Company did not grant any stock options to non-employees.

The fair value of employee stock options was valued using the following assumptions:

	December 31,
	2017	2018
Expected term (years)	5.5 - 6.3	5.5 - 6.1
Expected volatility	65.2% - 67.8%	77.2% - 78.6%
Risk-free interest rate	1.8% - 2.3%	2.9%
Dividend yield	0%	0%

Expected Term. The expected term is calculated using the simplified method, which is available where there is insufficient historical data about exercise patterns and post-vesting employment termination behavior. The simplified method is based on the vesting period and the contractual term for each grant, or for each vesting-tranche for awards with graded vesting. The mid-point between the vesting date and the maximum contractual expiration date is used as the expected term under this method. For awards with multiple vesting-tranches, the periods from grant until the mid-point for each of the tranches are averaged to provide an overall expected term.

F-23

SATSUMA PHARMACEUTICALS, INC.

Notes to Financial Statements (continued)

Expected Volatility. The Company used an average historical stock price volatility of a peer group of publicly traded companies to be representative of its expected future stock price volatility, as the Company did not have any trading history for its common stock. For purposes of identifying these peer companies, the Company considered the industry, stage of development, size and financial leverage of potential comparable companies. For each grant, the Company measured historical volatility over a period equivalent to the expected term.

Risk-Free Interest Rate. The risk-free interest rate is based on the implied yield currently available on U.S. Treasury zero-coupon issues with a remaining term equivalent to the expected term of a stock award.

Expected Dividend Rate. The Company has not paid any dividends and does not anticipate paying any dividends in the near future. Accordingly, the Company has estimated the dividend yield to be zero.

Fair Value of Common Stock

The fair value of the Company’s common stock underlying the stock options is determined by the Board of Directors with assistance from management and, in part, on input from an independent third-party valuation firm. The Board of Directors determines the fair value of common stock by considering a number of objective and subjective factors, including valuations of comparable companies, sales of convertible preferred stock, operating and financial performance, the lack of liquidity of the Company’s common stock and the general and industry-specific economic outlook.

Restricted Stock

Activity with respect to restricted stock awards (“RSAs”) was as follows:

	Number of Shares Underlying Outstanding RSAs			Weighted Average Grant Date Fair Value
Unvested, January 1, 2017		450,000		$	—
Vested		(150,000	)	$	—
Unvested, December 31, 2017		300,000		$	—
Vested		(150,000	)	$	—
Unvested, December 31, 2018		150,000		$	—

Stock-Based Compensation Expense

Total stock-based compensation expense recorded related to options granted to employees and non-employees was as follows (in thousands):

	Year Ended December 31,
	2017		2018
Research and development	$	13	$	69
General and administrative		53		101
	$	66	$	170

F-24

SATSUMA PHARMACEUTICALS, INC.

Notes to Financial Statements (continued)

11.    Net Loss Per Share Attributable to Common Stockholders

The following table sets forth the computation of basic and diluted net loss per share attributable to common stockholders (in thousands, except share and per share data):

	Year Ended December 31,
	2017			2018
Numerator:
Net loss attributable to common stockholders	$	(5,172)		$	(7,346)
Denominator:
Weighted-average shares outstanding		3,000,000			5,051,048
Less: weighted-average unvested restricted shares and shares subject to repurchase		(374,589	)		(224,589	)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted		2,625,411			4,826,459
Net loss per share attributable to common stockholders, basic and diluted	$	(1.97)		$	(1.52	)

The following outstanding shares of potentially dilutive securities were excluded from the computation of diluted net loss per share attributable to common stockholders for the period presented because including them would have been antidilutive:

	Year Ended December 31,
	2017		2018
Convertible preferred stock		7,079,646		14,317,877
Convertible Note		157,938		—
Convertible preferred stock tranche liability		7,079,646		—
Options to purchase common stock		2,020,000		3,900,000
Unvested restricted common stock awards		300,000		150,000
Obligation to issue additional common stock		1,761,076		—
Warrants to purchase common stock		—		48,094
Total		18,398,306		18,415,971

Unaudited Pro Forma Net Loss per Share

Unaudited pro forma basic and diluted net loss per share were computed to give effect to the automatic one-for-one conversion of all outstanding shares of convertible preferred stock into shares of common stock in connection with a Qualified IPO, using the as-converted method as though the conversion had occurred as of the beginning of the period presented or the date of issuance, if later.

F-25

SATSUMA PHARMACEUTICALS, INC.

Notes to Financial Statements (continued)

Unaudited pro forma basic and diluted loss per share is computed as follows (in thousands, except share and per share data):

	Year Ended December 31, 2018
	(unaudited)
Numerator:
Net loss per share attributable to common stockholders	$	(7,346)
Denominator:
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted		4,826,459
Adjust: Conversion of convertible preferred stock		13,703,123
Weighted-average shares used in computing pro forma net loss per share, basic and diluted		18,529,582
Pro forma net loss per share, basic and diluted	$	(0.40	)

12.    Income Taxes

No provision for income taxes was recorded for the years ended December 31, 2017 and December 31, 2018. The Company has incurred net operating losses only in the United States since its inception. The Company has not reflected any benefit of such net operating loss carryforwards in the financial statements.

The differences between the statutory tax expense (benefit) rate and the effective tax expense (benefit) rate, were as follows (in thousands):

	Year Ended December 31,
	2017			2018
Tax at federal statutory income tax rate	$	(1,758	)	$	(1,542	)
Change in valuation allowance		1,099			1,527
Permanent differences		105			84
Prior year true ups		(70	)		—
Research and development credits		—			(69	)
State income taxes		—			1
Federal tax rate change		625			—
Other		—			—
Tax at effective income tax rate	$	1		$	1

F-26

SATSUMA PHARMACEUTICALS, INC.

Notes to Financial Statements (continued)

Significant components of the Company’s net deferred tax assets are summarized as follows (in thousands):

	December 31,
	2017			2018
Deferred tax assets:
Net operating loss carryforwards	$	995		$	2,456
Research and development credit carryforwards		54			188
Stock-based compensation		—			4
Accruals and other		61			134
Gross deferred tax assets		1,110			2,782
Less: Valuation allowance		(1,103	)		(2,696	)
Deferred tax assets, net of valuation allowance		7			86
Deferred tax liabilities:
Property and equipment		(7	)		(86	)
Net deferred tax assets	$	—		$	—

As of December 31, 2018, the Company had federal and state net operating loss carryforwards (“NOLs”) of $11.6 million and $0.4 million, respectively. The federal NOLs consist of: (1) $4.7 million generated before January 1, 2018, which will begin to expire in 2036 but are able to offset 100% of taxable income; and (2) $7.0 million generated after December 31, 2017 that will carryforward indefinitely, but are subject to an 80% taxable income limitation. The state NOLs will begin to expire in 2036 if unused.

The Company also has California state research and development credit carryforwards of $0.2 million, which do not expire and federal tax credit carryforwards of $0.2 million which will begin to expire in 2038.

The utilization of NOLs and tax credit carryforwards to offset future taxable income may be subject to an annual limitation as a result of ownership changes that have occurred previously or may occur in the future. Under Sections 382 and 383 of the Internal Revenue Code (“IRC”) a corporation that undergoes an ownership change may be subject to limitations on its ability to utilize its pre-change NOLs and other tax attributes otherwise available to offset future taxable income and/or tax liability. An ownership change is defined as a cumulative change of 50% or more in the ownership positions of certain stockholders during a rolling three-year period. The Company has not completed a formal study to determine if any ownership changes within the meaning of IRC Section 382 and 383 have occurred. If an ownership change has occurred, the Company’s ability to use its NOLs or tax credit carryforwards may be restricted, which could require the Company to pay federal or state income taxes earlier than would be required if such limitations were not in effect.

The Company conducts intensive research and development activities, generating research tax credits for federal and state purposes under IRC Section 41. The Company has not performed a formal study validating these credits claimed in the tax returns. Once a study is prepared, the amount of research and development tax credits available could vary from what was originally claimed on the tax returns.

Uncertain Income Tax Positions

The total amount of unrecognized tax benefits as of December 31, 2018 is $0.2 million. If recognized, none of the unrecognized tax benefits would affect the effective tax rate.

F-27

SATSUMA PHARMACEUTICALS, INC.

Notes to Financial Statements (continued)

The following table summarizes the activity related to the Company’s unrecognized tax benefits:

Balance as of January 1, 2017	$	—
Increase related to current year tax positions		23
Balance as of December 31, 2017	$	23
Increase related to current year tax positions		134
Balance as of December 31, 2018	$	157

The Company’s policy is to account for interest and penalties as income tax expense. As of December 31, 2018, the Company had no interest related to unrecognized tax benefits. No amounts of penalties related to unrecognized tax benefits were recognized in the provision for income taxes.

The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. The Company is subject to U.S. federal and state income tax examinations for calendar tax years ending 2016 through 2018 due to net operating losses that are being carried forward for tax purposes.

On December 22, 2017, the U.S. government enacted the Tax Cuts and Jobs Act (the “Tax Act”), which became effective January 1, 2018. The Tax Act significantly changes the fundamentals of U.S. corporate income taxation by, among many other things, reducing the U.S. federal corporate income tax rate to 21%, converting to a territorial tax system, and creating various income inclusion and expense limitation provisions.

Also, on December 22, 2017, the Securities and Exchange Commission staff issued Staff Accounting Bulletin (“SAB”) 118 to provide guidance for companies that are not able to complete their accounting for the income tax effects of the Tax Act in the period of enactment. SAB 118 provides for a measurement period of up to one year from the date of enactment. During the measurement period, companies need to reflect adjustments to any provisional amounts if it obtains, prepares or analyzes additional information about facts and circumstances that existed as of the enactment date that, if known, would have affected the income tax effects initially reported as provisional amounts.

At December 31, 2018, the Company completed its analysis of the Tax Act. The Tax Act included a re-measurement of the Company’s net U.S. deferred tax assets reducing the U.S. federal corporate tax rate to 21%, which was fully offset by a valuation allowance. During 2018, this amount was finalized, and no additional adjustment was required to be made due to the change in corporate tax rate.

13.    Related Party Transactions

In June 2016, the Company and SNBL, entered into a licensing and assignment agreement (the “SNBL License”), which was amended and restated in December 2016 and further amended in January 2017, April 2017, and October 2017. Under the SNBL License, SNBL assigned to the Company certain patent rights and know-how that are directed to SNBL’s proprietary nasal drug delivery technology, including its proprietary nasal delivery device (the “Device”), and formulation technologies, for use with DHE (the “DHE Product”). SNBL granted to the Company an exclusive, worldwide, royalty-bearing, sublicensable license, under certain patent rights and know-how, other than the assigned patent rights and know-how, to develop, make, use, and commercialize DHE Products in the field of treatment, prevention or prophylaxis of all indications and human medical conditions, as well as the products consisting of the Device used to deliver a combination of DHE and one or more active pharmaceutical ingredients other than DHE (“DHE Combination Products”), in the field of treatment, prevention or prophylaxis of migraine and non-migraine headaches. The Company granted to SNBL a

F-28

SATSUMA PHARMACEUTICALS, INC.

Notes to Financial Statements (continued)

non-exclusive, royalty-free, sublicensable license, under the Company’s rights in improvements to the Device, to develop, make, use, and commercialize products and devices other than DHE Products and DHE Combination Products. During the term of the SNBL License, the Company, SNBL, and the Company’s and SNBL’s affiliates are not permitted to develop or commercialize, or to enable third parties to develop or commercialize, a product containing DHE as an active ingredient for delivery through nasal tissues or the respiratory system, other than pursuant to the SNBL License. The Company will be responsible, at our cost, for the development, manufacture and commercialization of DHE Products and DHE Combination Products under the SNBL License. The Company is required to use commercially reasonable efforts to develop and commercialize at least one such product, initially in the United States.

Under the SNBL License, the Company reimbursed SNBL for costs relating to its incorporation and prosecution and maintenance of the product-specific patents. The Company also agreed to make royalty payments based on a low single-digit percentage of worldwide net sales of DHE Products and DHE Combination Products, payable on a product-by-product and country-by-country basis until the latest of the expiration of the last-to-expire patent covering such product and the ten year anniversary of the first commercial sale of such product in such country. The royalty payments are subject to reductions based on royalties paid to any third party under a license to such third party’s patent rights.

The Company has the sole right to control the prosecution and maintenance of, and to enforce, the patent rights that SNBL assigned to the Company. SNBL has the first right to control the prosecution and maintenance of the patent rights that SNBL licensed to the Company. The Company has step in rights if SNBL does not continue such prosecution and maintenance. The Company also have the first right to enforce such licensed patent rights with respect to certain infringing products. If the Company does not bring an action to enforce such patents against infringing activities that involve such infringing products, SNBL has the right to bring such an action.

The SNBL License will continue on a country-by-country and product-by-product basis until the expiration of the obligation to pay royalties with respect such product and country. The Company may terminate the SNBL License in its entirety without cause on ninety days’ prior written notice. SNBL may terminate the SNBL License for our material breach that remains uncured for ninety days. SNBL may also terminate the SNBL License if the Company challenges the licensed patents, or if the Company assists any third party in challenging such patents. In addition, SNBL has the right to terminate the SNBL License upon the Company’s insolvency.

There were no sales of products under the SNBL License during the years ended December 31, 2017 and December 31, 2018. In connection with the SNBL License, in July 2016, SNBL entered into a Common Stock Purchase Agreement with the Company to purchase of 2,400,000 shares of the Company’s common stock at its par price of $0.0001. The Company recorded the estimated fair value of the SNBL License of $0.7 million as of the SNBL License date as additional paid-in capital as contribution by SNBL for 2,400,000 shares of common stock purchased by SNBL.

In August 2016, the Company signed the Convertible Note with SNBL for $0.1 million, which was later amended in December 2016 (Note 5). In February 2018, the Convertible Note and related accrued interest of less than $0.1 million converted into 158,585 shares of Company’s Series A convertible preferred stock.

In December 2016, as part of the Series A convertible preferred stock financing, the Company granted to SNBL a right to obtain shares of Common Stock for no additional paid-in capital upon the occurrence of subsequent closings of the Company’s Series A convertible preferred stock financing such that SNBL’s percentage ownership of the fully-diluted capitalization of the Company following the SNBL Grant would be

F-29

SATSUMA PHARMACEUTICALS, INC.

Notes to Financial Statements (continued)

equal to 20% following the final closing of the Series A convertible preferred stock financing. In return, SNBL assigned product-specific know-how and patents relating to STS101 to the Company. The Company recorded an additional fair value of the SNBL License of $1.4 million in December 2016.

The obligation to issue additional common stock to SNBL was accounted and classified for as a liability as it was not indexed to the Company’s own stock, specifically because the settlement amount of the SNBL Grant could be affected by future issuance of equity shares or potential equity shares. Therefore, the obligation to issue additional common stock to SNBL was initially measured at fair value and subsequently remeasured at fair value at each reporting date until it expires or is exercised. Upon the initial issuance, the Company recorded the obligation to issue additional common stock to SNBL at its estimated fair value of $0.1 million based on the estimated fair value of the Company’s common stock of $0.19 per share and estimated 1.6 million shares of the Company’s common stock to be issued to settle such obligation adjusted for the probability or the occurrence of the subsequent closing of the Series A convertible preferred stock financing. The difference between the additional fair value of the SNBL License and the estimated fair value of the obligation to issue additional common stock to SNBL, of $1.3 million was accounted as additional paid-in capital. On December 31, 2017, the obligation to issue additional common stock to SNBL was remeasured to its estimated fair value of $0.4 million and $0.2 million was recorded as a loss in other income (expense), net for the year ended December 31, 2017. In February 2018, the Company issued 2,241,415 shares of common stock for no consideration. Upon extinguishment of the obligation to issue additional common stock to SNBL, the obligation to issue additional common stock to SNBL was remeasured to its estimated fair value of $0.5 million and $0.1 million was recorded as a loss in other income (expense), net for the year ended December 31, 2018, and the estimated fair value of $0.5 million of the obligation to issue additional common stock to SNBL was reclassified to additional paid-in capital on the balance sheet.

During the year ended December 31, 2017, the Company purchased an actuator for less than $0.1 million from SNBL, which was accounted for in property and equipment on the Company’s balance sheet. The Company incurred expenses in connection with preclinical study services of $0.2 million and less than $0.1 million, which are included in research and development expenses on the statement of operations for the years ended December 31, 2017 and 2018, respectively. Amounts due to SNBL in connection with these expenses of less than $0.1 million are included in accrued liabilities on the balance sheets as of December 31, 2017 and 2018.

14.    Subsequent Events

The Company reviews all activity subsequent to year-end but prior to the issuance of the financial statements for events that could require disclosure, or which could impact the carrying value of assets or liabilities as of the balance sheet date.

The Company evaluated subsequent events through June 21, 2019, the date the accompanying financial statements were available to be issued. The Company has determined that there were no subsequent events which required recognition, adjustment to or disclosure in the accompanying financial statements except as follows:

In April 2019, the Company raised $61.7 million in gross proceeds from the sale of 32,382,965 shares of a newly authorized series of preferred stock, Series B convertible preferred stock, at $1.9052 per share. In connection with the issuance of the Series B convertible preferred stock, the Company amended and restated its certificate of incorporation to authorize the issuance of 32,383,000 shares of Series B convertible preferred stock, amended the definition of Qualified IPO to be the consummation of an underwritten public offering of common stock pursuant to the Securities Act, in which the aggregate gross proceeds to the Company are not less than $50.0 million (before deductions of underwriters discounts and commissions), the per share price is no less than the original issue price of the Series B convertible preferred stock, and in connection with such offering the

F-30

SATSUMA PHARMACEUTICALS, INC.

Notes to Financial Statements (continued)

common stock is listed for trading on The Nasdaq Stock Market or the New York Stock Exchange. Each share of convertible preferred stock will automatically convert at any time upon a written request for such conversion from the holders of at least 60% of the outstanding shares of convertible preferred stock, voting together as a single class on an as converted basis.

During the period from January 1, 2019 and to the date of issuance of the financial statements, the Company granted options to purchase 520,000 shares of common stock at an exercise price of $0.22 per share and options to purchase 3,733,000 shares of common stock at an exercise price of $0.97 per share. These options vest over a service period of two to four years.

F-31

SATSUMA PHARMACEUTICALS, INC.

Condensed Balance Sheets

(in thousands, except share and per share amounts)

	December 31, 2018			June 30, 2019			Pro Forma June 30, 2019
				(unaudited)			(unaudited)
Assets
Current assets
Cash and cash equivalents	$	5,205		$	47,621
Short-term marketable securities		—			7,420
Prepaid expenses and other current assets		199			3,849
Total current assets		5,404			58,890
Property and equipment, net		445			404
Deferred offering costs		—			1,223
Other non-current assets		532			57
Total assets	$	6,381		$	60,574
Liabilities, Convertible Preferred Stock and Stockholders’ Deficit
Current liabilities
Accounts payable	$	327		$	1,138
Accrued and other current liabilites		1,497			2,187
Current portion of long-term debt		141			1,141
Total current liabilities		1,965			4,466
Long-term debt		4,824			3,887
Other non-current liabilities		76			70
Total liabilities		6,865			8,423
Commitments and contingencies (Note 9)
Series A convertible preferred stock, $0.0001 par value, 15,000,000 shares authorized as of December 31, 2018 and 14,317,877 shares authorized as of June 30, 2019; 14,317,877 shares issued and outstanding as of December 31, 2018 and June 30, 2019; liquidation value of $12,134 as of December 31, 2018 and June 30, 2019; no shares issued or outstanding, pro forma (unaudited)		11,648			11,648		$	—
Series B convertible preferred stock, $0.0001 par value, No shares and 32,383,000 shares authorized as of December 31, 2018 and June 30, 2019, respectively; No shares and 32,382,965 shares issued and outstanding as of December 31, 2018 and June 30, 2019, respectively; liquidation value of $61,696 as of June 30, 2019; no shares issued or outstanding, pro forma (unaudited)		—			61,490		$	—
Stockholders’ deficit
Common stock, $0.0001 par value, 25,000,000 shares authorized as of December 31, 2018 and 61,800,000 shares authorized as of June 30, 2019; 5,091,415 shares and 5,418,915 shares issued and outstanding as of December 31, 2018 and June 30, 2019; 52,119,757 shares issued and outstanding, pro forma (unaudited)		1			1			5
Additional paid-in capital		2,693			2,944			76,078
Accumulated deficit		(14,826	)		(23,932	)		(23,932	)
Total stockholders’ deficit		(12,132	)		(20,987	)	$	52,151
Total liabilities, convertible preferred stock and stockholders’ deficit	$	6,381		$	60,574

The accompanying notes are an integral part of these unaudited interim condensed financial statements.

F-32

SATSUMA PHARMACEUTICALS, INC

Condensed Statements of Operations and Comprehensive Loss

(in thousands, except share and per share amounts)

(unaudited)

	Six Months Ended June 30,
	2018			2019
Operating expenses
Research and development	$	3,099		$	7,605
General and administrative		532			1,531
Total operating expenses	$	3,631		$	9,136
Loss from operations		(3,631	)		(9,136	)
Interest income		33			271
Interest expense		(2	)		(244	)
Other income, net		185			3
Net loss and comprehensive loss	$	(3,415	)	$	(9,106	)
Net loss per share attributable to common stockholders, basic and diluted	$	(0.74	)	$	(1.71	)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted		4,595,164			5,316,401
Pro forma net loss per share, basic and diluted (unaudited)				$	(0.28	)
Weighted-average shares used in computing pro forma net loss per share, basic and diluted (unaudited)					31,970,466

The accompanying notes are an integral part of these unaudited interim condensed financial statements.

F-33

SATSUMA PHARMACEUTICALS, INC.

Condensed Statements of Convertible Preferred Stock and Stockholders’ Deficit

(in thousands, except share amounts)

(unaudited)

	Convertible Preferred Stock				Common Stock				Additional Paid-In Capital		Accumulated Deficit			Total Stockholders’ Deficit
	Shares		Amount		Shares		Amount
Balances at January 1, 2018		7,079,646	$	5,528		2,700,000	$	—	$	2,048	$	(7,480	)	$	(5,432	)
Vesting of restricted stock		—		—		75,000		—		—		—			—
Stock-based compensation		—		—		—		—		107		—			107
Net loss		—		—		—		—		—		(3,415	)		(3,415	)
Issuance of common stock on settlement of obligation to issue additional common stock		—		—		2,241,415		1		471		—			472
Issuance of Series A convertible preferred stock for cash, net of issuance costs of $14		7,079,646		5,986		—		—		—		—			—
Conversion of convertible note into Series A convertible preferred stock, including interest of $8 adjusted for derivative liability of $27		158,585		134		—		—		—		—			—
Balances at June 30, 2018		14,317,877	$	11,648		5,016,415	$	1	$	2,626	$	(10,895	)	$	(8,268	)

	Convertible Preferred Stock				Common Stock				Additional Paid-In Capital		Accumulated Deficit			Total Stockholders’ Deficit
	Shares		Amount		Shares		Amount
Balances at January 1, 2019		14,317,877	$	11,648		5,091,415	$	1	$	2,693	$	(14,826	)	$	(12,132	)
Vesting of restricted stock		—		—		75,000		—		—		—			—
Stock-based compensation		—		—		—		—		198		—			198
Net loss		—		—		—		—		—		(9,106	)		(9,106	)
Issuance of common stock upon exercise of stock options		—		—		252,500		—		53		—			53
Issuance of Series B convertible preferred stock for cash, net of issuance costs of $206		32,382,965		61,490		—		—		—		—			—
Balances at June 30, 2019		46,700,842	$	73,138		5,418,915	$	1	$	2,944	$	(23,932	)	$	(20,987	)

The accompanying notes are an integral part of these unaudited interim condensed financial statements.

F-34

SATSUMA PHARMACEUTICALS, INC.

Condensed Statements of Cash Flows

(in thousands)

(unaudited)

	Six Months Ended June 30,
	2018			2019
Cash flows from operating activities
Net loss	$	(3,415	)	$	(9,106	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization		16			64
Non-cash interest expense, and amortization of debt discount and issuance costs		2			64
Net amortization of premiums and discounts on marketable securities		—			(92	)
Stock-based compensation		107			198
Change in fair value of derivative liability		1			—
Change in fair value of obligation to issue additional common stock		101			—
Change in fair value of convertible preferred stock tranche liability		(291	)		—
Loss on extinguishment of convertible note		4			—
Changes in assets and liabilities
Prepaid expenses and other assets		(135	)		(2,644	)
Accounts payable		(210	)		682
Accrued and other liabilities		(105	)		(299	)
Net cash used in operating activities		(3,925	)		(11,133	)
Cash flows from investing activities
Purchases of marketable securities		—			(7,403	)
Purchases of property and equipment		(98	)		(482	)
Net cash used in investing activities		(98	)		(7,885	)
Cash flows from financing activities
Proceeds from issuance of convertible preferred stock, net of issuance costs		5,986			61,490
Deferred offering costs		—			(109	)
Proceeds from exercise of common stock options		—			53
Net cash provided by financing activities		5,986			61,434
Net increase in cash and cash equivalents		1,963			42,416
Cash and cash equivalents
Cash and cash equivalents, at beginning of period		1,658			5,205
Cash and cash equivalents, at end of period	$	3,621		$	47,621
Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	1		$	3
Cash paid for interest	$	—		$	176
Supplemental non-cash investing and financing activities:
Unpaid deferred offering costs included in accounts payable and accrued liabilities	$	—		$	1,114
Issuance of common stock warrants in connection with long-term debt	$	4		$	—
Conversion of convertible note and accrued interest into preferred stock	$	134		$	—
Issuance of common stock to settle liability for obligation to issue additional common stock	$	471		$	—

The accompanying notes are an integral part of these unaudited interim condensed financial statements.

F-35

SATSUMA PHARMACEUTICALS, INC.

Notes to Unaudited Interim Condensed Financial Statements

1.    Organization and Summary of Significant Accounting Policies

Description of the Business

Satsuma Pharmaceuticals, Inc. (the “Company”) is a clinical-stage biopharmaceutical company developing a novel therapeutic for the acute treatment of migraine. The Company’s product candidate, STS101, is a drug-device combination of a proprietary dry-powder formulation of dihydroergotamine mesylate, or DHE, which can be quickly and easily self-administered by a proprietary pre-filled, single-use, nasal delivery device. The Company, headquartered in South San Francisco, was incorporated in 2016 in the state of Delaware.

Liquidity

The Company is subject to risks and uncertainties common to early-stage companies in the biopharmaceutical industry, including, but not limited to, risks of clinical delays or failure, development by competitors of new technological innovations, protection of proprietary technology, dependence on key personnel, reliance on contract manufacturing organizations (“CMOs”), contract research organizations (“CROs”), compliance with government regulations and the need to obtain additional financing to fund operations. STS101 is currently under development and will require significant additional development efforts as the Company continues the development of, and seek regulatory approvals for, STS101 and begin to commercialize it, if approved. These efforts require significant amounts of additional capital, adequate personnel and infrastructure and extensive compliance and reporting.

There can be no assurance that the Company’s development of STS101 will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained or maintained, that STS101 will obtain necessary government regulatory approval or that STS101 will be commercially viable, if approved. Even if STS101 development efforts are successful, it is uncertain when, if ever, the Company will generate revenue from product sales. The Company operates in an environment of rapid change in technology and substantial competition from other pharmaceutical and biopharmaceutical companies. In addition, the Company is dependent upon the services of its employees, consultants and other third parties.

The Company has incurred significant losses and negative cash flows from operations in all periods since its inception and had an accumulated deficit of $23.9 million as of June 30, 2019. The Company has historically financed its operations primarily through private placements of convertible preferred stock, a convertible promissory note, and long-term debt. The Company has no products approved for sale, and the Company has not generated any revenue since its inception. The Company expects to incur significant additional operating losses over at least the next several years. There can be no assurance that in the event the Company requires additional financing, such financing will be available on terms which are favorable or at all. Failure to generate sufficient cash flows from operations, raise additional capital or reduce certain discretionary spending would have a material adverse effect on the Company’s ability to achieve its intended business objectives.

As of June 30, 2019, the Company had cash and cash equivalents and short-term marketable securities of $47.6 million and $7.4 million, respectively. The Company’s management believes that the Company’s current cash and cash equivalents will be sufficient to fund its planned operations for at least 12 months from the date of the issuance of these financial statements.

Basis of Presentation

The financial statements and accompanying notes have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”).

F-36

SATSUMA PHARMACEUTICALS, INC.

Notes to Unaudited Interim Condensed Financial Statements (continued)

Unaudited Interim Financial Information

The accompanying balance sheet as of June 30, 2019, the statements of operations and comprehensive loss, the statements of convertible preferred stock and stockholders’ deficit and statements of cash flows for the six months ended June 30, 2018 and 2019 are unaudited. The unaudited interim financial statements have been prepared on the same basis as the audited annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of June 30, 2019 and the results of its operations and its cash flows for the six months ended June 30, 2018 and 2019. The financial data and other information disclosed in these notes related to the six months ended June 30, 2018 and 2019 are also unaudited. The results for the six months ended June 30, 2019 are not necessarily indicative of results to be expected for the year ending December 31, 2019, any other interim periods, or any future year or period. The balance sheet as of December 31, 2018 included herein was derived from the audited financial statements as of that date. Certain disclosures have been condensed or omitted from the interim financial statements. These financial statements should be read in conjunction with the Company’s audited financial statements included elsewhere in this prospectus.

Unaudited Pro Forma Information

The unaudited pro forma information as of June 30, 2019 has been prepared to give effect to the automatic conversion of all of the outstanding convertible preferred stock of the Company on a one-to-one basis into 46,700,842 shares of common stock, which will occur immediately upon the consummation of a firm commitment underwritten initial public offering pursuant to an effective registration statement filed under the Securities Act of 1933, as amended (the “Securities Act”), provided that the aggregate gross proceeds to the Company are not less than $50.0 million and the per share price is no less than the original issuance price of the Series B convertible preferred stock (a “Qualified IPO”). The unaudited pro forma information does not assume any proceeds from the initial public offering.

The unaudited pro forma basic and diluted net loss per share has been computed to give effect to (1) an adjustment to the denominator in the pro forma basic and diluted net loss per share calculation for the automatic conversion of the convertible preferred stock into shares of common stock as of the beginning of the respective period or the date of issuance, if later, and (2) the filing and effectiveness of the Company’s amended and restated certificate of incorporation.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Such estimates include the accrual of research and development expenses, valuation of the convertible preferred stock tranche liability, obligation to issue additional common stock, deferred tax assets, useful lives of property and equipment and the fair value of stock-based awards. The Company evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors and adjust those estimates and assumptions when facts and circumstances dictate. Actual results could differ from those estimates and assumptions.

Fair Value of Financial Instruments

The carrying amounts of certain of the Company’s financial instruments, including cash equivalents, short-term marketable securities accounts payable and accrued liabilities, approximate fair value due to their relatively short maturities and market interest rates, if applicable. The carrying amounts of the convertible preferred stock tranche liability and the obligation to issue additional common stock represent their fair value.

F-37

SATSUMA PHARMACEUTICALS, INC.

Notes to Unaudited Interim Condensed Financial Statements (continued)

Deferred Offering Costs

The Company capitalizes costs that are directly associated with in-process equity financings until such financings are consummated at which time such costs are recorded against the gross proceeds of the offering. Should the in-process equity financing be abandoned, the deferred offering costs will be expensed immediately as a charge to operating expenses in the statements of operations and comprehensive loss.

Net Loss per Share Attributable to Common Stockholders

Basic net loss per common share is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of common stock outstanding during the period, without consideration of potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common stock and potentially dilutive securities outstanding for the period. For purposes of the diluted net loss per share calculation, convertible preferred stock, convertible preferred stock tranche liability, obligation to issue additional common stock, convertible notes, stock options and common stock subject to repurchase related to unvested restricted stock awards are considered to be potentially dilutive securities. Basic and diluted net loss per share attributable to common stockholders is presented in conformity with the two-class method required for participating securities as the convertible preferred stock is considered a participating security because it participates in dividends with common stock. The holders of convertible preferred stock do not have a contractual obligation to share in the Company’s losses. As such, the net loss was attributed entirely to common stockholders. Because the Company has reported a net loss for all periods presented, diluted net loss per common share is the same as basic net loss per common share for those periods.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) under its accounting standard codifications (“ASC”) or other standard setting bodies and adopted by the Company as of the specified effective date, unless otherwise discussed below.

New Accounting Pronouncements Not Yet Adopted

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASC 842”), which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. ASC 842 provides a lessee with an option to not account for leases with a term of 12 month or less as leases in the scope of the new standard. ASC 842 supersedes the previous leases standard, ASC 840 Leases. For public business entities, this ASU is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, and should be applied through a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. Early adoption is permitted. For all other entities, this ASU is effective for fiscal years beginning after December 15, 2019 and interim periods within fiscal years beginning after December 15, 2020. The Company will adopt this ASU on January 1, 2020. In July 2018, the FASB issued supplemental adoption guidance and clarification to ASC 842 within ASU No. 2018-10, Codification Improvements to Topic 842, Leases and ASU No. 2018-11, Leases (Topic 842): Targeted Improvements. ASU No. 2018-11 provides another

F-38

SATSUMA PHARMACEUTICALS, INC.

Notes to Unaudited Interim Condensed Financial Statements (continued)

transition method in addition to the existing modified retrospective transition method by allowing entities to initially apply the new leasing standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company is currently evaluating the impact the adoption of these ASUs will have on its financial statements and related disclosures. The Company expects to recognize a right-of-use asset and corresponding lease liability for its real estate operating leases upon adoption. See Note 9 for more information related to the Company’s lease obligations, which are presented on an undiscounted basis therein.

2.    Fair Value Measurements

The Company applies fair value accounting for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, a three-tier fair value hierarchy has been established, which prioritizes the inputs used in measuring fair value as follows:

Level 1—Observable inputs, such as quoted prices in active markets for identical assets or liabilities at the measurement date.

Level 2—Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3—Unobservable inputs which reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value.

As of December 31, 2018, financial assets measured and recognized at fair value were as follows (in thousands):

	Fair Value Measurements at December 31, 2018
	Quoted Price in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets
Money market funds(1)	$	5,184	$	—	$	—	$	5,184
Total fair value of assets	$	5,184	$	—	$	—	$	5,184

(1) Included in cash and cash equivalents on the balance sheet

F-39

SATSUMA PHARMACEUTICALS, INC.

Notes to Unaudited Interim Condensed Financial Statements (continued)

As of June 30, 2019, financial assets measured and recognized at fair value were as follows (in thousands):

	Fair Value Measurements at June 30, 2019
	Quoted Price in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets
Overnight Repurchase Agreements	$	—	$	6,000	$	—	$	6,000
Corporate Bonds		—		5,920		—		5,920
Asset Backed Securities		—		1,499		—		1,499
Marketable Securities		—		13,419		—		13,419
Money market funds(1)		41,597		—		—		41,597
Total fair value of assets	$	41,597	$	13,419	$	—	$	55,016

	June 30, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimate Fair Value
Assets
Overnight Repurchase Agreements	$	6,000	$	—	$	—	$	6,000
Corporate Bonds		5,920		—		—		5,920
Asset Backed Securities		1,499		—		—		1,499
Marketable securities		13,419		—		—		13,419
Money market funds(1)		41,597		—		—		41,597
Total fair value of assets	$	55,016	$	—	$	—	$	55,016

(1) Included in cash and cash equivalents on the balance sheet

There were no financial liabilities measured and recognized at fair value as of December 31, 2018 and June 30, 2019.

3.    Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):

	December 31, 2018		June 30, 2019
Deferred offering costs	$	—	$	983
Accrued salaries and benefits		553		365
Accrued research and development expenses		772		616
Accrued interest		29		29
Other		143		194
Total	$	1,497	$	2,187

F-40

SATSUMA PHARMACEUTICALS, INC.

Notes to Unaudited Interim Condensed Financial Statements (continued)

4.    Convertible Preferred Stock

In April 2019, the Company issued 32,382,965 shares of its Series B convertible preferred stock at $1.9052 per share to certain investors for gross proceeds of $61.7 million.

December 31, 2018	Redeemable Convertible Preferred Stock				Liquidation Value		Carrying Amount		Original Issue Price
	Authorized		Outstanding
Series A convertible preferred stock		15,000,000		14,317,877	$	12,134	$	11,648	$	0.8475
		15,000,000		14,317,877	$	12,134	$	11,648

June 30, 2019	Redeemable Convertible Preferred Stock				Liquidation Value		Carrying Amount		Original Issue Price
	Authorized		Outstanding
Series A convertible preferred stock		14,317,877		14,317,877	$	12,134	$	11,648	$	0.8475
Series B convertible preferred stock		32,383,000		32,382,965		61,696		61,490	$	1.9052
		46,700,877		46,700,842	$	73,830	$	73,138

Liquidation Preference

In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, or a deemed liquidation event, the holders of the Series B convertible preferred stock shall be entitled to receive, prior and in preference to any distribution of any of the assets of the Company to the holders of the Series A convertible preferred stock and the common stock by reason of their ownership of such stock, an amount per share for each share of convertible preferred stock held by them equal to the greater of (i) $1.9052 per share (subject to adjustment from time to time for recapitalization), plus all declared but unpaid dividends (if any) on such share of convertible preferred stock, or (ii) such amount per share as would have been payable had all shares of convertible preferred stock been converted into shares of common stock immediately prior to such liquidation. After the payment to the Series B convertible preferred stock, the holders of the Series A convertible preferred stock shall be entitled to receive, prior and in preference to any distribution of any of the assets of the Company to the holders of the common stock by reason of their ownership of such stock, an amount per share for each share of convertible preferred stock held by them equal to the greater of (i) $0.8475 per share (subject to adjustment from time to time for recapitalization), plus all declared but unpaid dividends (if any) on such share of convertible preferred stock, or (ii) such amount per share as would have been payable had all shares of convertible preferred stock been converted into shares of common stock immediately prior to such liquidation. If available assets are insufficient to pay the full liquidation preference of the series of convertible preferred stock, the assets available for distribution to holders of such preferred stock will be distributed among such holders on a pro rata basis. Any remaining funds and assets of the Company legally available for distribution shall be distributed pro rata to the common shareholders in proportion to the number of shares of common stock held by them. Shares of convertible preferred stock shall not be entitled to be converted into shares of common stock in order to participate in any distribution, as shares of common stock, without first foregoing participation in the distribution as shares of convertible preferred stock.

Conversion

Each share of convertible preferred stock is convertible, at the option of the holder thereof, at any time and from time to time, and without the payment of additional consideration by the holder. The conversion price is determined by dividing the original issuance price applicable to each series of convertible preferred stock,

F-41

SATSUMA PHARMACEUTICALS, INC.

Notes to Unaudited Interim Condensed Financial Statements (continued)

adjusted for any anti-dilution adjustments, by the applicable conversion price for such series. As of December 31, 2018 and June 30, 2019, the Company’s convertible preferred stock is convertible into the Company’s shares of common stock on a one-for-one basis.

The shares shall automatically convert into fully-paid non-assessable shares of common stock at the conversion rate (a) immediately prior to the consummation of a Qualified IPO, or (b) at the time upon the receipt of a written request for conversion from the holders of at least sixty percent of the convertible preferred stock outstanding voting together as a single class on an as converted basis.

Dividends

In any calendar year, the holders of outstanding shares of Series A convertible preferred stock and Series B convertible preferred stock shall be entitled to receive dividends, when, as and if declared by the Company’s Board of Directors (the “Board of Directors”), at a rate of $0.068 per share and at a rate of $0.1524 per share, respectively, in preference and priority to any declaration, set aside or payment of any distribution on common stock of the Company. The right to receive dividends on shares of convertible preferred stock shall not be cumulative, and no right to dividends shall accrue to holders of preferred stock unless dividends are declared. The Company’s long-term debt facility with Silicon Valley Bank contains covenants that place restrictions on the Company’s ability to pay dividends.

Voting

The holders of convertible preferred stock have one vote for each full share of common stock into which their respective shares of convertible preferred stock could then be converted.

Redemption and Balance Sheet Classification

The convertible preferred stock is recorded in mezzanine equity because while it is not mandatorily redeemable, it will become redeemable at the option of the stockholders upon the occurrence of certain deemed liquidation events that are considered not solely within the Company’s control.

5.    Long-Term Debt

On October 26, 2018, the Company entered into a Loan and Security Agreement (the “Loan Agreement”)

with Silicon Valley Bank. The Loan Agreement provides for loan advances of up to $10.0 million. The first advance (the “Term A Loan”) of $5.0 million was available for draw down by the Company as of the effective date of the Loan Agreement. The remaining $5.0 million (the “Term B Loan” and together with the Term A Loan, the “Term Loans”) is available for draw down by the Company in $1.0 million increments. Interest on the loan advances is payable monthly at a floating per annum rate equal to the greater of 1.5% above the prime rate or 6.5%. Upon the occurrence of an event of default, interest will increase to 5.0% above the rate that is otherwise applicable. The maturity date of the loan advances is May 1, 2022.

As of June 30, 2019, the future contractual maturities of debt by fiscal year are as follows (in thousands):

2019 remaining six months	$	167
2020		2,000
2021		2,000
2022		833
Total future maturities of debt	$	5,000

F-42

SATSUMA PHARMACEUTICALS, INC.

Notes to Unaudited Interim Condensed Financial Statements (continued)

As of June 30, 2019, the term loan advances, net of debt discount and debt issuance costs, were $5.0 million and are included in current portion of long-term debt and long-term debt on the Company’s balance sheet.

6.    Stock-Based Compensation

In 2016, the Company established its 2016 Equity Incentive Plan (the “2016 Plan”) which provides for the granting of stock options to employees and consultants of the Company. Awards granted under the 2016 Plan may be either incentive stock options (“ISOs”), nonqualified stock options (“NSOs”), stock appreciation rights (“SARs”), or restricted stock units (“RSUs”). ISOs may be granted only to Company employees (including officers and directors who are also employees). NSOs may be granted to Company employees and consultants.

The exercise price of ISOs and NSOs shall not be less than 100% of the estimated fair value of the shares on the date of grant. The exercise price of ISOs granted to an employee who, at the time of grant, owns stock representing more than 10% (“10% stockholder”) of the voting power of all classes of stock of the Company shall be no less than 110% of the estimated fair value of the shares on the date of grant. The options usually have a term of 10 years (or no more than five years if granted to a 10% stockholder). Vesting conditions determined by the plan administrator may apply to stock options and may include continued service, performance and/or other conditions. Generally, options and restricted stock awards vest over a four-year period.

Activity under the 2016 Plan is set forth below:

	Shares Available for Grant			Outstanding Options					Weighted- Average Remaining Contractual Term (Years)
				Number of Shares			Weighted Average Exercise Price
Balance, January 1, 2019		540,000			3,900,000		$	0.20		8.82
Additional shares authorized		4,820,309
Options granted		(4,253,000	)		4,253,000		$	0.88
Options exercised					(252,500	)	$	0.21
Options cancelled		72,500			(72,500	)	$	0.22
Balance, June 30, 2019		1,179,809			7,828,000		$	0.57		9.14
Exercisable as of June 30, 2019		2,124,488
Vested and expected to vest, June 30, 2019		7,828,000

The weighted-average grant-date fair value of options granted during the six months ended June 30, 2018 and 2019 was $0.14 and $0.63 per share, respectively. During the six months ended June 30, 2019, there were 252,500 stock options exercised under the 2016 Plan.

As of June 30, 2019, the total unrecognized stock-based compensation expense for stock options was $2.7 million, which is expected to be recognized over a weighted-average period of 3.3 years.

The total fair value of options vested for the six months ended June 30, 2018 and 2019 was $0.1 million and $0.2 million, respectively.

F-43

SATSUMA PHARMACEUTICALS, INC.

Notes to Unaudited Interim Condensed Financial Statements (continued)

The following table summarizes information about stock options outstanding as of June 30, 2019 (in thousands, except share and per share data).

	Options Outstanding				Option Vested and Exercisable
Exercise Price	Number Outstanding		Weighted Average Remaining Contractual Term (Years)		Number Exercisable		Aggregate Intrinsic Value		Weighted Average Exercise Price
$ 0.19		1,931,250		7.81		1,246,875	$	972,563	$	0.19
$ 0.22		2,163,750		9.04		789,375	$	592,031	$	0.22
$ 0.97		3,733,000		9.88		88,238	$	—	$	0.97
		7,828,000				2,124,488	$	1,564,594	$	0.57

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock options and the fair value of the Company’s common stock for stock options that were in-the-money as of June 30, 2019.

Stock-Based Compensation Associated with Awards to Employees and Non-employees

During the six months ended June 30, 2018 and 2019, the Company granted stock options to employees to purchase 1,890,000 and 4,253,000 shares of common stock, respectively.

The Company estimated the fair value of employee stock options using the Black-Scholes valuation model. The fair value of employee stock options is recognized on a straight-line basis over the requisite service period of the awards. The fair value of employee stock options was estimated using the following assumptions:

	Six Months Ended June 30,
	2018	2019
Expected term (years)	5.5 - 6.1	5.5 - 6.1
Expected volatility	77.2% - 78.6%	70.9% - 74.9%
Risk-free interest rate	2.9%	2.1% -2.5%
Dividend yield	0%	0%

Expected Term. The expected term is calculated using the simplified method, which is available where there is insufficient historical data about exercise patterns and post-vesting employment termination behavior. The simplified method is based on the vesting period and the contractual term for each grant, or for each vesting-tranche for awards with graded vesting. The mid-point between the vesting date and the maximum contractual expiration date is used as the expected term under this method. For awards with multiple vesting-tranches, the period from grant until the mid-point for each of the tranches are averaged to provide an overall expected term.

Expected Volatility. The Company used an average historical stock price volatility of a peer group of publicly traded companies to be representative of its expected future stock price volatility, as the Company did not have any trading history for its common stock. For purposes of identifying these peer companies, the Company considered the industry, stage of development, size and financial leverage of potential comparable companies. For each grant, the Company measured historical volatility over a period equivalent to the expected term.

Risk-Free Interest Rate. The risk-free interest rate is based on the implied yield currently available on U.S. Treasury zero-coupon issues with a remaining term equivalent to the expected term of a stock award.

F-44

SATSUMA PHARMACEUTICALS, INC.

Notes to Unaudited Interim Condensed Financial Statements (continued)

Expected Dividend Rate. The Company has not paid any dividends and does not anticipate paying any dividends in the near future. Accordingly, the Company has estimated the dividend yield to be zero.

The Company accounts for forfeitures as they occur.

Fair Value of Common Stock

The fair value of the Company’s common stock underlying the stock options is determined by the Board of Directors with assistance from management and, in part, on input from an independent third-party valuation firm. The Board of Directors determines the fair value of common stock by considering a number of objective and subjective factors, including valuations of comparable companies, sales of convertible preferred stock, operating and financial performance, the lack of liquidity of the Company’s common stock and the general and industry-specific economic outlook.

Restricted Stock

Activity with respect to restricted stock awards (“RSAs”) was as follows:

	Number of Shares Underlying Outstanding RSAs			Weighted Average Grant Date Fair Value
Unvested, January 1, 2019		150,000			—
Vested		(75,000	)		—
Unvested, June 30, 2019		75,000			—

Stock-Based Compensation Expense

Total stock-based compensation expense recorded related to options granted to employees and non-employees was as follows (in thousands):

	Six Months Ended June 30,
	2018		2019
Research and development	$	69	$	87
General and administrative		38		111
	$	107	$	198

F-45

SATSUMA PHARMACEUTICALS, INC.

Notes to Unaudited Interim Condensed Financial Statements (continued)

7.    Net Loss Per Share Attributable to Common Stockholders

The following table sets forth the computation of basic and diluted net loss per share attributable to common stockholders (in thousands, except share and per share data):

	Six Months Ended June 30,
	2018			2019
Numerator:
Net loss attributable to common stockholders	$	(3,415	)	$	(9,106	)
Denominator:
Weighted-average shares outstanding		4,857,526			5,428,763
Less: weighted-average unvested restricted shares and shares subject to repurchase		(262,362	)		(112,362	)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted		4,595,164			5,316,401
Net loss per share attributable to common stockholders, basic and diluted	$	(0.74	)	$	(1.71	)

The following outstanding shares of potentially dilutive securities were excluded from the computation of diluted net loss per share attributable to common stockholders for the period presented because including them would have been antidilutive:

	Six Months Ended June 30,
	2018		2019
Convertible preferred stock		14,317,877		46,700,842
Options to purchase common stock		3,900,000		7,828,000
Unvested restricted common stock awards		225,000		75,000
Warrants to purchase common stock		—		48,094
Total		18,442,877		54,651,936

Unaudited Pro Forma Net Loss per Share

Unaudited pro forma basic and diluted net loss per share were computed to give effect to the automatic one-for-one conversion of all outstanding shares of convertible preferred stock into shares of common stock in connection with a Qualified IPO, using the as-converted method as though the conversion had occurred as of the beginning of the period presented or the date of issuance, if later.

F-46

SATSUMA PHARMACEUTICALS, INC.

Notes to Unaudited Interim Condensed Financial Statements (continued)

Unaudited pro forma basic and diluted loss per share is computed as follows (in thousands, except share and per share data):

	Six Months Ended June 30, 2019
	(unaudited)
Numerator:
Net loss per share attributable to common stockholders	$	(9,106	)
Denominator:
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted		5,316,401
Adjust: Conversion of convertible preferred stock		26,654,065
Weighted-average shares used in computing pro forma net loss per share, basic and diluted		31,970,466
Pro forma net loss per share, basic and diluted	$	(0.28	)

8.    Related Party Transactions

In August 2016, the Company signed the Convertible Note with SNBL for $0.1 million, which was later amended in December 2016. In February 2018, the Convertible Note and related accrued interest of less than $0.1 million converted into 158,585 shares of Company’s Series A convertible preferred stock.

In December 2016, as part of the Series A convertible preferred stock financing, the Company granted to SNBL a right to obtain shares of common stock for no additional paid-in capital (the “SNBL Grant”) upon the occurrence of subsequent closings of the Company’s Series A convertible preferred stock financing such that SNBL’s percentage ownership of the fully-diluted capitalization of the Company following the SNBL Grant would be equal to 20% following the final closing of the Series A convertible preferred stock financing.

In February 2018, the Company issued 2,241,415 shares of common stock for no consideration. Upon extinguishment of the obligation to issue additional common stock to SNBL, the obligation to issue additional common stock to SNBL was remeasured to its estimated fair value of $0.5 million and $0.1 million was recorded as a loss in other income, net for the six months ended June 30, 2018, and the estimated fair value of $0.5 million of the obligation to issue additional common stock to SNBL was reclassified to additional paid-in capital on the balance sheet.

In April 2019, as part of the Company’s Series B Financing, SNBL purchased 1,443,418 shares of Series B convertible preferred stock with an aggregate purchase price of $2.7 million.

The Company incurred expenses in connection with clinical study services of less than $0.1 million, which are included in research and development expenses on the statement of operations for the six months ended June 30, 2018 and 2019, respectively. Amounts due to SNBL in connection with these expenses of less than $0.1 million and $0.1 million are included in accrued liabilities on the balance sheet as of December 31, 2018 and June 30, 2019, respectively.

F-47

SATSUMA PHARMACEUTICALS, INC.

Notes to Unaudited Interim Condensed Financial Statements (continued)

9.    Commitments and Contingencies

Operating Leases

Future minimum lease payments under non-cancelable operating leases as of June 30, 2019 were as follows (in thousands):

	Operating Leases
2019 remaining six months	$	79
2020		163
2021		55
Total minimum lease payments	$	297

10.    Income Taxes

For the six months ended June 30, 2018 and 2019, the Company did not record an income tax provision. The U.S. federal and California deferred tax assets generated from the Company’s net operating losses have been fully reserved, as the Company believes it is more likely than not the benefit will not be realized.

11.    Subsequent Events

The Company evaluated subsequent events through August 2, 2019, the date the accompanying financial statements were available to be issued. The Company has determined that there were no subsequent events which required recognition, adjustment to or disclosure in the accompanying financial statements except as follows:

In July 2019, the Company entered a lease for office space under a non-cancelable operating lease in Durham, North Carolina, commencing on August 1, 2019, for a period of three years from the commencement date. Total future minimum lease payments are $0.4 million.

F-48

PART II

Information Not Required in Prospectus

Item 13. Other Expenses of Issuance and Distribution.

The following table sets forth the costs and expenses, other than the underwriting discounts and commissions, payable by the registrant in connection with the sale of common stock being registered. All amounts are estimates except for the Securities and Exchange Commission, or SEC, registration fee, the Financial Industry Regulatory Authority, Inc., or FINRA, filing fee and The Nasdaq Global Market listing fee.

Item	Amount to be paid
SEC registration fee	$	*
FINRA filing fee		*
The Nasdaq Global Market listing fee		*
Printing and engraving expenses		*
Legal fees and expenses		*
Accounting fees and expenses		*
Blue Sky, qualification fees and expenses		*
Transfer Agent fees and expenses		*
Miscellaneous expenses		*
Total	$	*

* To be completed by amendment.

Item 14. Indemnification of Directors and Officers.

As permitted by Section 102 of the Delaware General Corporation Law, we have adopted provisions in our amended and restated certificate of incorporation and amended and restated bylaws, to be in effect immediately prior to the consummation of this offering, that will limit or eliminate the personal liability of our directors for a breach of their fiduciary duty of care as a director. The duty of care generally requires that, when acting on behalf of the corporation, directors exercise an informed business judgment based on all material information reasonably available to them. Consequently, a director will not be personally liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director, except for liability for:

• any breach of the director’s duty of loyalty to us or our stockholders;

• any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;

• any act related to unlawful stock repurchases, redemptions or other distributions or payment of dividends; or

• any transaction from which the director derived an improper personal benefit.

These limitations of liability do not affect the availability of equitable remedies such as injunctive relief or rescission. Our amended and restated certificate of incorporation will also authorize us to indemnify our officers, directors and other agents to the fullest extent permitted under Delaware law.

As permitted by Section 145 of the Delaware General Corporation Law, our amended and restated bylaws will provide that:

• we may indemnify our directors, officers, and employees to the fullest extent permitted by the Delaware General Corporation Law, subject to limited exceptions;

II-1

• we may advance expenses to our directors, officers and employees in connection with a legal proceeding to the fullest extent permitted by the Delaware General Corporation Law, subject to limited exceptions; and

• the rights provided in our amended and restated bylaws are not exclusive.

Our amended and restated certificate of incorporation, to be attached as Exhibit 3.2 hereto, and our amended and restated bylaws, to be attached as Exhibit 3.4 hereto, will provide for the indemnification provisions described above and elsewhere herein. We have entered into separate indemnification agreements with our directors and officers which may be broader than the specific indemnification provisions contained in the Delaware General Corporation Law. These indemnification agreements generally require us, among other things, to indemnify our officers and directors against liabilities that may arise by reason of their status or service as directors or officers, other than liabilities arising from willful misconduct. These indemnification agreements also generally require us to advance any expenses incurred by the directors or officers as a result of any proceeding against them as to which they could be indemnified. In addition, we have purchased a policy of directors’ and officers’ liability insurance that insures our directors and officers against the cost of defense, settlement or payment of a judgment in some circumstances. These indemnification provisions and the indemnification agreements may be sufficiently broad to permit indemnification of our officers and directors for liabilities, including reimbursement of expenses incurred, arising under the Securities Act of 1933, as amended, or the Securities Act.

The form of Underwriting Agreement, to be attached as Exhibit 1.1 hereto, provides for indemnification by the underwriters of us and our officers who sign this Registration Statement and directors for specified liabilities, including matters arising under the Securities Act.

Item 15. Recent Sales of Unregistered Securities.

The following list sets forth information as to all securities we have sold since January 1, 2016, which were not registered under the Securities Act.

1. In June 2016, we issued 600,000 shares of common stock to John Kollins at a $0.0001 per share for gross proceeds of $60.00

2. In July 2016, we issued 2,400,000 shares of our common stock to Shin Nippon Biomedical Laboratories, Ltd. at a $0.0001 per share for gross proceeds to us of $240.00.

3. In August 2016, we issued a convertible promissory note in the aggregate principal amount of $100,000 to one accredited investor.

4. Between December 2016 and February 2018, we issued an aggregate of 14,317,877 shares of our Series A convertible preferred stock, including (i) 14,159,292 shares of Series A convertible preferred stock to three accredited investors at $0.8475 per share, and (ii) 158,585 shares of Series A convertible preferred stock issued upon conversion of a convertible promissory note issued by us, in exchange for approximately $108,000 in cancellation of indebtedness, for a total amount raised (including the cancellation of indebtedness) of approximately $12.1 million.

5. In January 2018, we issued 2,241,415 shares of common stock to Shin Nippon Biomedical Laboratories Ltd. in satisfaction of certain contractual rights held by Shin Nippon Biomedical Laboratories Ltd.

6. In October 2018, we issued warrants to purchase 48,094 shares of common stock at an exercise price of $0.22 per share to each of Silicon Valley Bank and Life Science Loans II, LLC.

7. In April 2019, we issued an aggregate of 32,382,965 shares of our Series B convertible preferred stock to sixteen accredited investors at $1.9052 per share for aggregate proceeds to us of approximately $61.7 million.

8. Since January 1, 2016, we granted stock options and stock awards to employees, directors and consultants under our 2016 Equity Incentive plan, covering an aggregate of 8,153,000 shares of common stock, at a weighted average exercise price of $0.56 per share.

II-2

9. Since January 1, 2016, we issued an aggregate of 173,750 shares of common stock at a weighted-average purchase price of $0.22 per share to employees, directors and consultants for aggregate proceeds to us of $38,225 upon the exercise of stock options.

We claimed exemption from registration under the Securities Act for the sale and issuance of securities in the transactions described in paragraphs (1) through (7) by virtue of Section 4(a)(2) and/or Regulation D promulgated thereunder as transactions not involving any public offering. All of the purchasers of unregistered securities for which we relied on Section 4(a)(2) and/or Regulation D represented that they were accredited investors as defined under the Securities Act. We claimed such exemption on the basis that (a) the purchasers in each case represented that they intended to acquire the securities for investment only and not with a view to the distribution thereof and that they either received adequate information about the registrant or had access, through employment or other relationships, to such information and (b) appropriate legends were affixed to the stock certificates issued in such transactions.

We claimed exemption from registration under the Securities Act for the sales and issuances of securities in the transactions described in paragraphs (8) and (9) above under Section 4(a)(2) of the Securities Act in that such sales and issuances did not involve a public offering or under Rule 701 promulgated under the Securities Act, in that they were offered and sold either pursuant to written compensatory plans or pursuant to a written contract relating to compensation, as provided by Rule 701.

Item 16. Exhibits and Financial Statement Schedules.

(a) Exhibits.

				Incorporated by Reference
Exhibit Number			Exhibit Description	Form	Date	Number	Filed Herewith
	1.1	*	Form of Underwriting Agreement.
	3.1		Amended and Restated Certificate of Incorporation, as amended, currently in effect.
	3.2	*	Form of Amended and Restated Certificate of Incorporation, effecting a stock split, to be in effect prior to the effectiveness of this registration statement.
	3.3		Form of Amended and Restated Certificate of Incorporation, to be in effect immediately prior to the consummation of this offering.
	3.4		Bylaws, currently in effect.
	3.5		Form of Amended and Restated Bylaws, to be in effect immediately prior to the consummation of this offering.
	4.1		Reference is made to exhibits 3.1 through 3.5.
	4.2	*	Form of Common Stock Certificate.
	4.3	*	Amended and Restated Investors’ Rights Agreement, dated as of April 23, 2019, by and among Satsuma Pharmaceuticals, Inc. and the investors party thereto.
	4.4	*	Warrant by and between Satsuma Pharmaceuticals, Inc. and Silicon Valley Bank.

II-3

				Incorporated by Reference
Exhibit Number			Exhibit Description	Form	Date	Number	Filed Herewith
	4.5	*	Warrant by and between Satsuma Pharmaceuticals, Inc. and Life Science Loans II, LLC.
	5.1	*	Opinion of Latham & Watkins LLP.
	10.1		Lease Agreement, dated January 9, 2018, by and between Satsuma Pharmaceuticals, Inc. and Kashiwa Fudosan America, Inc.
	10.2	(a)†	Amended and Restated Licensing and Assignment Agreement, dated December 16, 2016, by and between Satsuma Pharmaceuticals, Inc. and Shin Nippon Biomedical Laboratories, Ltd.
	10.2	(b)†	First Amendment to Amended and Restated Licensing and Assignment Agreement, dated January 13, 2017, by and between Satsuma Pharmaceuticals, Inc. and Shin Nippon Biomedical Laboratories, Ltd.
	10.2	(c)†	Second Amendment to Amended and Restated Licensing and Assignment Agreement, dated as of April 27, 2017, by and between Satsuma Pharmaceuticals, Inc. and Shin Nippon Biomedical Laboratories, Ltd.
	10.2	(d)†	Third Amendment to the Amended and Restated Licensing and Assignment Agreement, dated October 6, 2017, by and between Satsuma Pharmaceuticals, Inc. and Shin Nippon Biomedical Laboratories, Ltd.
	10.3	*	Loan and Security Agreement, dated as of October 26, 2018, by and between Silicon Valley Bank and the Company.
	10.4	(a)#*	2016 Equity Incentive Plan.
	10.4	(b)#*	Form of Stock Option Agreement under 2016 Equity Incentive Plan.
	10.5	(a)#*	2019 Incentive Award Plan.
	10.5	(b)#*	Form of Stock Option Grant Notice and Stock Option Agreement under the 2019 Incentive Award Plan.
	10.5	(c)#*	Form of Restricted Stock Award Grant Notice and Restricted Stock Award Agreement under the 2019 Incentive Award Plan.
	10.5	(d)#*	Form of Restricted Stock Unit Award Grant Notice and Restricted Stock Unit Award Agreement under the 2019 Incentive Award Plan.
	10.6	#*	2019 Employee Stock Purchase Plan.
	10.7	(a)#	Offer Letter, dated June 17, 2016, by and between Satsuma Pharmaceuticals, Inc. and John Kollins.

II-4

				Incorporated by Reference
Exhibit Number			Exhibit Description	Form	Date	Number	Filed Herewith
	10.7	(b)#	First Amendment to Offer Letter, dated June 17, 2016, by and between Satsuma Pharmaceuticals, Inc. and John Kollins.
	10.8	#	Offer Letter, dated June 12, 2017, by and between Satsuma Pharmaceuticals, Inc. and Detlef Albrecht.
	10.9	#	Offer Letter, dated December 21, 2018, by and between Satsuma Pharmaceuticals, Inc. and Tom O’Neil.
	10.10	#*	Non-Employee Director Compensation Program.
	10.11	*	Form of Indemnification Agreement for directors and officers.
	23.1	*	Consent of Independent Registered Public Accounting Firm.
	23.2	*	Consent of Latham & Watkins LLP (included in Exhibit 5.1).
	24.1	*	Power of Attorney. Reference is made to the signature page to the Registration Statement.

* To be filed by amendment.

# Indicates management contract or compensatory plan.

† Certain confidential portions (indicated by brackets and asterisks) have been omitted from this exhibit.

(b) Financial Statement Schedules. Schedules not listed above have been omitted because the information required to be set forth therein is not applicable or is shown in the financial statements or notes thereto.

Item 17. Undertakings.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer, or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

The undersigned Registrant hereby undertakes that:

1. For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective.

2. For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities

II-5

offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

The undersigned Registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

II-6

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement on Form S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in Brisbane, California on                  , 2019.

Satsuma Pharmaceuticals, Inc.
By:
	John Kollins President and Chief Executive Officer

Power of Attorney

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints John Kollins and Tom O’Neil, and each of them acting individually, as his or her true and lawful attorneys-in-fact and agents, each with full power of substitution, for him or her in any and all capacities, to sign any and all amendments to this Registration Statement on Form S-1, including post-effective amendments or any abbreviated registration statement and any amendments thereto filed pursuant to Rule 462(b) increasing the number of securities for which registration is sought, and to file the same, with all exhibits thereto and other documents in connection therewith, with the SEC, granting unto said attorneys-in-fact and agents, with full power of each to act alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully for all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or his or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
John Kollins	President and Chief Executive Officer and Director (Principal Executive Officer)	, 2019
Tom O’Neil	Chief Financial Officer (Principal Financial and Accounting Officer)	, 2019
Heath Lukatch	Chairman of the Board of Directors	, 2019
Thomas B. King	Director	, 2019
Michael Riebe	Director	, 2019
Elisabeth Sandoval	Director	, 2019
Rajeev Shah	Director	, 2019
Ken Takanashi	Director	, 2019

II-7

EX-3.1

Exhibit 3.1

AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION OF

SATSUMA PHARMACEUTICALS, INC.

Satsuma Pharmaceuticals, Inc., a corporation organized and existing under the laws of the State of Delaware (the “Corporation”), certifies that:

1.    The name of the Corporation is Satsuma Pharmaceuticals, Inc. The Corporation’s original Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on June 21, 2016.

2.    This Amended and Restated Certificate of Incorporation was duly adopted in accordance with Sections 242 and 245 of the General Corporation Law of the State of Delaware, and has been duly approved by the written consent of the stockholders of the Corporation in accordance with Section 228 of the General Corporation Law of the State of Delaware.

3.    The text of the Certificate of Incorporation is amended and restated to read as set forth in EXHIBIT A attached hereto.

IN WITNESS WHEREOF, Satsuma Pharmaceuticals, Inc. has caused this Amended and Restated Certificate of Incorporation to be signed by John Kollins, a duly authorized officer of the Corporation, on April 22, 2019.

/s/ John Kollins

John Kollins

President and Chief Executive Officer

-1-

EXHIBIT A

ARTICLE I

The name of the Corporation is Satsuma Pharmaceuticals, Inc.

ARTICLE II

The purpose of this Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware.

ARTICLE III

The address of the Corporation’s registered office in the State of Delaware is 1209 Orange Street, City of Wilmington, County of New Castle, 19801. The name of the registered agent at such address is The Corporation Trust Company.

ARTICLE IV

The total number of shares of stock that the Corporation shall have authority to issue is one hundred eight million five hundred thousand eight hundred seventy-seven (108,500,877), consisting of sixty-one million eight hundred thousand (61,800,000) shares of Common Stock, $0.0001 par value per share, and forty-six million seven hundred thousand eight hundred seventy-seven (46,700,877) shares of Preferred Stock, $0.0001 par value per share. The first series of Preferred Stock shall be designated “Series A Preferred Stock” and shall consist of fourteen million three hundred seventeen thousand eight hundred seventy-seven (14,317,877) shares and the second series of Preferred Stock shall be designated “Series B Preferred Stock” and shall consist of thirty-two million three hundred eighty-three thousand (32,383,000) shares.

The number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares of Common Stock then outstanding) by the affirmative vote of the holders of a majority of the stock of the Corporation entitled to vote (voting together as a single class on an as-if-converted basis).

ARTICLE V

The terms and provisions of the Common Stock and Preferred Stock are as follows:

1. Definitions. For purposes of this ARTICLE V, the following definitions shall apply:

(a)    “Conversion Price” shall initially mean $0.8475 per share for the Series A Preferred Stock (subject to adjustment from time to time for Recapitalizations and as otherwise set forth elsewhere herein) and $1.9052 per share for the Series B Preferred Stock (subject to adjustment from time to time for Recapitalizations and as otherwise set forth elsewhere herein).

(b)    “Convertible Securities” shall mean any evidences of indebtedness, shares or other securities convertible into or exchangeable for Common Stock.

(c)    “Corporation” shall mean Satsuma Pharmaceuticals, Inc.

(d)    “Distribution” shall mean the transfer of cash or other property without consideration whether by way of dividend or otherwise, other than dividends on Common Stock payable in Common Stock, or the purchase or redemption of shares of the Corporation by the Corporation for cash or property other than:

-2-

(i) repurchases of Common Stock issued to or held by employees, officers, directors or consultants of the Corporation upon termination of their employment or services pursuant to agreements approved by the Board of Directors providing for the right of said repurchase, (ii) repurchases of Common Stock issued to or held by employees, officers, directors or consultants of the Corporation pursuant to rights of first refusal contained in agreements approved by the Board of Directors providing for such right, (iii) repurchase of capital stock of the Corporation in connection with the settlement of disputes with any stockholder provided that such settlement is approved by the Board of Directors, and (iv) any other repurchase or redemption of capital stock of the Corporation approved by the holders of at least sixty percent (60%) of the Preferred Stock, voting together on an as converted basis.

(e)    “Dividend Rate” shall mean an annual rate of $0.068 per share for the Series A Preferred Stock (subject to adjustment from time to time for Recapitalizations as set forth elsewhere herein) and $0.1524 per share for the Series B Preferred Stock (subject to adjustment from time to time for Recapitalizations as set forth elsewhere herein).

(f)    “Liquidation Preference” shall mean $0.8475 per share for the Series A Preferred Stock (subject to adjustment from time to time for Recapitalizations as set forth elsewhere herein) and $1.9052 per share for the Series B Preferred Stock (subject to adjustment from time to time for Recapitalizations as set forth elsewhere herein).

(g)    “Options” shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities.

(h)    “Original Issue Price” shall mean $0.8475 per share for the Series A Preferred Stock (subject to adjustment from time to time for Recapitalizations as set forth elsewhere herein) and $1.9052 per share for the Series B Preferred Stock (subject to adjustment from time to time for Recapitalizations as set forth elsewhere herein).

(i)    “Preferred Stock” shall mean the Series A Preferred Stock and Series B Preferred Stock.

(j)    “Recapitalization” shall mean any stock dividend, stock split, combination of shares, reorganization, recapitalization, reclassification or other similar event.

2. Dividends.

(a)    Preferred Stock. In any calendar year, the holders of outstanding shares of Series B Preferred Stock shall be entitled to receive dividends, when, as and if declared by the Board of Directors of the Corporation (the “Board of Directors”), out of any assets at the time legally available therefor, at the Dividend Rate specified for such shares of Series B Preferred Stock, in preference and priority to any declaration, set aside or payment of any Distribution on the Series A Preferred Stock or Common Stock of the Corporation in such calendar year. After the payment or setting aside for payment of the dividends to the holders of Series B Preferred Stock in any calendar year described above, the holders of outstanding shares of Series A Preferred Stock shall be entitled to receive dividends, when, as and if declared by the Board of Directors, out of any assets at the time legally available therefor, at the Dividend Rate specified for such shares of Series A Preferred Stock, in preference and priority to any declaration, set aside or payment of any Distribution on Common Stock of the Corporation in such calendar year. So long as any shares of Preferred Stock are outstanding, no Distributions shall be made with respect to the Common Stock unless dividends on the Preferred Stock have been declared in accordance with the preferences stated herein and all declared dividends on the Preferred Stock have been paid or set aside for payment to the Preferred Stock holders. The right to receive dividends on shares of Preferred Stock shall not be cumulative, and no right to dividends shall accrue to holders of Preferred Stock by reason of the fact that dividends on said shares are not declared.

-3-

(b)    Additional Dividends. After the payment or setting aside for payment of the dividends described in Section 2(a), any additional dividends (other than dividends on Common Stock payable solely in Common Stock) set aside or paid in any fiscal year shall be set aside or paid among the holders of the Preferred Stock and Common Stock then outstanding in proportion to the greatest whole number of shares of Common Stock which would be held by each such holder if all shares of Preferred Stock were converted at the then-effective Conversion Rate (as defined in Section 4).

(c)    Non-Cash Distributions. Whenever a Distribution provided for in this Section 2 shall be payable in property other than cash, the value of such Distribution shall be deemed to be the fair market value of such property as determined in good faith by the Board of Directors.

(d)    Consent to Certain Distributions. For purposes of Section 500 of the California Corporations Code (to the extent applicable), in connection with any repurchase of shares of Common Stock permitted under this Amended and Restated Certificate of Incorporation from employees, officers, directors or consultants of the Corporation in connection with a termination of employment or services pursuant to agreements or arrangements approved by the Board of Directors (in addition to any other consent required under this Amended and Restated Certificate of Incorporation), such repurchase may be made without regard to any “preferential dividends arrears amount” or “preferential rights amount” (as those terms are defined in Section 500 of the California Corporations Code). Accordingly, for purposes of making any calculation under California Corporations Code Section 500 in connection with such repurchase, the amount of any “preferential dividends arrears amount” or “preferential rights amount” (as those terms are defined therein) shall be deemed to be zero (0).

3. Liquidation Rights.

(a)    Liquidation Preference. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, or a Deemed Liquidation Event (as defined below):

(i)    the holders of Series B Preferred Stock shall be entitled to receive, prior and in preference to any Distribution of any of the assets of the Corporation to the holders of Series A Preferred Stock and Common Stock by reason of their ownership of such stock, an amount per share for each share of Series B Preferred Stock held by them equal to the Liquidation Preference specified for such share of Series B Preferred Stock, plus all declared but unpaid dividends (if any) on such share of Series B Preferred Stock. If upon the liquidation, dissolution or winding up of the Corporation, the assets of the Corporation legally available for distribution to the holders of the Series B Preferred Stock are insufficient to permit the payment to such holders of the full amounts specified in this Section 3(a)(i), then the entire assets of the Corporation legally available for distribution shall be distributed with equal priority and pro rata among the holders of the Series B Preferred Stock in proportion to the full amounts they would otherwise be entitled to receive pursuant to this Section 3(a)(i); and

(ii)    after the payment or setting aside of payment to the holders of Series B Preferred Stock of the full amounts specified in Section 3(a)(i), the holders of Series A Preferred Stock shall be entitled to receive, prior and in preference to any Distribution of any of the assets of the Corporation to the holders of Common Stock by reason of their ownership of such stock, an amount per share for each share of Series A Preferred Stock held by them equal to the Liquidation Preference specified for such share of Series A Preferred Stock, plus all declared but unpaid dividends (if any) on such share of Series A Preferred Stock. If upon the liquidation, dissolution or winding up of the Corporation, the assets of the Corporation legally available for distribution to the holders of the Series A Preferred Stock are insufficient to permit the payment

-4-

to such holders of the full amounts specified in this Section 3(a)(ii), then the entire assets of the Corporation legally available for distribution shall be distributed with equal priority and pro rata among the holders of the Series A Preferred Stock in proportion to the full amounts they would otherwise be entitled to receive pursuant to this Section 3(a)(ii).

(b)    Remaining Assets. After the payment or setting aside for payment to the holders of Preferred Stock of the full amounts specified in Section 3(a), the entire remaining assets of the Corporation legally available for distribution shall be distributed pro rata to holders of the Common Stock of the Corporation in proportion to the number of shares of Common Stock held by them.

(c)    Shares not Treated as Both Preferred Stock and Common Stock in any Distribution. Shares of Preferred Stock shall not be entitled to be converted into shares of Common Stock in order to participate in any Distribution, or series of Distributions, as shares of Common Stock, without first forgoing participation in the Distribution, or series of Distributions, as shares of Preferred Stock.

(d)    Deemed Conversion. Notwithstanding the foregoing, upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, or a Deemed Liquidation Event, then each holder of Preferred Stock shall be entitled to receive, for each share of a series of Preferred Stock then held, out of the proceeds available for distribution, the greater of (i) the amount of cash, securities or other property to which such holder would be entitled to receive with respect to such shares in a liquidation, dissolution or winding up of the Corporation pursuant to Section 3(a) (without giving effect to this Section 3(d)) or (ii) the amount of cash, securities or other property to which such holder would be entitled to receive in a liquidation, dissolution or winding up of the Corporation with respect to such shares if such shares had been converted to Common Stock immediately prior to such liquidation, dissolution or winding up of the Corporation, giving effect to this Section 3(d) with respect to any such series of Preferred Stock simultaneously.

(e)    Deemed Liquidation Event. For purposes of this Section 3, a “Deemed Liquidation Event” shall be deemed to be occasioned by, or to include, (i) the acquisition of the Corporation by another entity by means of any transaction or series of related transactions to which the Corporation is party (including, without limitation, any stock acquisition, reorganization, merger or consolidation but excluding any sale of stock for capital raising purposes) other than a transaction or series of related transactions in which the holders of the voting securities of the Corporation outstanding immediately prior to such transaction or series of related transactions retain, immediately after such transaction or series of related transactions, as a result of shares in the Corporation held by such holders prior to such transaction or series of related transactions, at least a majority of the total voting power represented by the outstanding voting securities of the Corporation or such other surviving or resulting entity (or if the Corporation or such other surviving or resulting entity is a wholly-owned subsidiary immediately following such acquisition, its parent); (ii) a sale, lease, transfer, exclusive license or other disposition of all or substantially all of the assets or intellectual property of the Corporation and its subsidiaries taken as a whole by means of any transaction or series of related transactions, except where such sale, lease, transfer exclusive license or other disposition is to a wholly-owned subsidiary of the Corporation; or (iii) any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary. The treatment of any transaction or series of related transactions as a liquidation, dissolution or winding up pursuant to clause (i) or (ii) of the preceding sentence may be waived by the consent or vote of the holders of at least sixty percent (60%) of the outstanding shares of Preferred Stock, voting together as a single class on an as converted basis. Notwithstanding the foregoing, none of the following events shall be deemed to be a Deemed Liquidation Event: (X) a consolidation with a wholly-owned subsidiary, (Y) a merger effected exclusively to change the domicile of the Corporation, or (Z) a bona fide equity financing of the Corporation.

-5-

(f)    Valuation of Non-Cash Consideration. If any assets of the Corporation distributed to stockholders in connection with any liquidation, dissolution, or winding up of the Corporation or Deemed Liquidation Event are other than cash, then the value of such assets shall be their fair market value as determined in good faith by the Board of Directors, except that any publicly-traded securities to be distributed to stockholders in a liquidation, dissolution, or winding up of the Corporation or Deemed Liquidation Event shall be valued as follows:

(i)    if the securities are then traded on a national securities exchange, then the value of the securities shall be deemed to be the average of the closing prices of the securities on such exchange over the ten (10) trading day period ending five (5) trading days prior to the Distribution;

(ii)    if the securities are actively traded over-the-counter, then the value of the securities shall be deemed to be the average of the closing bid prices of the securities over the ten (10) trading day period ending five (5) trading days prior to the Distribution.

In the event of a merger or other acquisition of the Corporation by another entity, the Distribution date shall be deemed to be the date such transaction closes.

For the purposes of this subsection 3(f), “trading day” shall mean any day which the exchange or system on which the securities to be distributed are traded is open and “closing prices” or “closing bid prices” shall be deemed to be: (i) for securities traded primarily on the New York Stock Exchange or a Nasdaq Stock Market, the last reported trade price or sale price, as the case may be, at 4:00 p.m., New York time, on that day and (ii) for securities listed or traded on other exchanges, markets and systems, the market price as of the end of the regular hours trading period that is generally accepted as such for such exchange, market or system. If, after the date hereof, the benchmark times generally accepted in the securities industry for determining the market price of a stock as of a given trading day shall change from those set forth above, the fair market value shall be determined as of such other generally accepted benchmark times.

(g)    Definitive Agreement. The Corporation shall not have the power to effect a Deemed Liquidation Event unless the definitive agreement for such transaction provides that the consideration payable to the stockholders of the Corporation in connection therewith shall be allocated among the holders of capital stock of the Corporation in accordance with this Section 3.

(h)    Allocation of Escrow and Contingent Consideration. In the event of a Deemed Liquidation Event pursuant to Subsection 3(e), if any portion of the consideration payable to the stockholders of the Corporation is payable only upon satisfaction of contingencies (the “Additional Consideration”), the transaction agreement shall provide that (i) the portion of such consideration that is not Additional Consideration (such portion, the “Initial Consideration”) shall be allocated among the holders of capital stock of the Corporation in accordance with Subsections 3(a), 3(b) and 3(c) as if the Initial Consideration were the only consideration payable in connection with such Deemed Liquidation Event; and (ii) any Additional Consideration which becomes payable to the stockholders of the Corporation upon satisfaction of such contingencies shall be allocated among the holders of capital stock of the Corporation in accordance with Subsections 3(a), 3(b) and 3(c) after taking into account the previous payment of the Initial Consideration as part of the same transaction. For the purposes of this Subsection 3(h), consideration placed into escrow or retained as holdback to be available for satisfaction of indemnification or similar obligations in connection with such Deemed Liquidation Event shall be deemed to be Additional Consideration.

4. Conversion. The holders of the Preferred Stock shall have conversion rights as follows:

(a)    Right to Convert. Each share of Preferred Stock shall be convertible, at the option of the holder thereof, at any time after the date of issuance of such share at the office of the Corporation or any

-6-

transfer agent for the Preferred Stock, into that number of fully-paid, nonassessable shares of Common Stock determined by dividing the Original Issue Price for the relevant series by the Conversion Price for such series then in effect. The number of shares of Common Stock into which each share of Preferred Stock of a series may be converted is hereinafter referred to as the “Conversion Rate” for each such series. Upon any decrease or increase in the Conversion Price for any series of Preferred Stock, as described in this Section 4, the Conversion Rate for such series shall be appropriately increased or decreased.

(b)    Automatic Conversion. Each share of Preferred Stock shall automatically be converted into fully-paid, non-assessable shares of Common Stock at the then effective Conversion Rate for such share (A) immediately prior to the closing of a firm commitment underwritten initial public offering pursuant to an effective registration statement filed under the Securities Act of 1933, as amended (the “Securities Act”), covering the offer and sale of the Corporation’s Common Stock, provided that (i) the aggregate gross proceeds to the Corporation are not less than $50,000,000, (ii) the per share price is no less than the Original Issue Price and (iii) in connection with such offering the Common Stock is listed for trading on the Nasdaq Stock Market or the New York Stock Exchange (a “Qualified Public Offering”), or (B) at any time upon the receipt by the Corporation of a written request for such conversion from sixty percent (60%) of the outstanding shares of Preferred Stock, voting together as a single class on an as converted basis, or, if later, the effective date for conversion specified in such requests (each of the events referred to in (A) and (B) are referred to herein as an “Automatic Conversion Event”).

(c)    Mechanics of Conversion. No fractional shares of Common Stock shall be issued upon conversion of Preferred Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the then fair market value of a share of Common Stock as determined by the Board of Directors. For such purpose, all shares of Preferred Stock held by each holder of Preferred Stock shall be aggregated, and any resulting fractional share of Common Stock shall be paid in cash. Before any holder of Preferred Stock shall be entitled to convert the same into full shares of Common Stock, and to receive certificates therefor, the holder shall either (A) surrender the certificate or certificates therefor, duly endorsed, at the office of the Corporation or of any transfer agent for the Preferred Stock or (B) notify the Corporation or its transfer agent that such certificates have been lost, stolen or destroyed and execute an agreement satisfactory to the Corporation to indemnify the Corporation from any loss incurred by it in connection with such certificates, and shall give written notice to the Corporation at such office that the holder elects to convert the same; provided, however, that on the date of an Automatic Conversion Event, the outstanding shares of Preferred Stock shall be converted automatically without any further action by the holders of such shares and whether or not the certificates representing such shares are surrendered to the Corporation or its transfer agent; provided further, however, that the Corporation shall not be obligated to issue certificates evidencing the shares of Common Stock issuable upon such Automatic Conversion Event unless either the certificates evidencing such shares of Preferred Stock are delivered to the Corporation or its transfer agent as provided above, or the holder notifies the Corporation or its transfer agent that such certificates have been lost, stolen or destroyed and executes an agreement satisfactory to the Corporation to indemnify the Corporation from any loss incurred by it in connection with such certificates. On the date of the occurrence of an Automatic Conversion Event, each holder of record of shares of Preferred Stock shall be deemed to be the holder of record of the Common Stock issuable upon such conversion, notwithstanding that the certificates representing such shares of Preferred Stock shall not have been surrendered at the office of the Corporation, that notice from the Corporation shall not have been received by any holder of record of shares of Preferred Stock, or that the certificates evidencing such shares of Common Stock shall not then be actually delivered to such holder.

(d)    Adjustments to Conversion Price for Diluting Issues.

(i)    Special Definition. For purposes of this Section 4(d), “Additional Shares of Common” shall mean all shares of Common Stock issued (or, pursuant to Section 4(d)(iii), deemed to be issued) by the Corporation after the filing of this Amended and Restated Certificate of Incorporation, other than issuances or deemed issuances of (which are referred to as “Exempted Securities”):

-7-

(1)    shares of Series B Preferred Stock issued by the Corporation pursuant to that certain Series B Preferred Stock Purchase Agreement dated on or about the date hereof and any shares of Common Stock issuable upon the conversion of Preferred Stock;

(2)    shares of Common Stock and options, warrants or other rights to purchase Common Stock issued or issuable to employees, officers or directors of, or consultants or advisors to the Corporation or any subsidiary pursuant to stock grants, restricted stock purchase agreements, option plans, purchase plans, incentive programs or similar arrangements approved by the Board of Directors, including two Preferred Directors (as defined below);

(3)    shares of Common Stock issuable upon the exercise or conversion of Convertible Securities outstanding as of the date hereof;

(4)    shares of Common Stock issued or issuable as a dividend or distribution on Preferred Stock or pursuant to any event for which adjustment is made pursuant to paragraph 4(e), 4(f) or 4(g) hereof; and

(5)    shares of Common Stock issued or issuable in a Qualified Public Offering.

(ii)    No Adjustment of Conversion Price. No adjustment in the Conversion Price of a particular series of Preferred Stock shall be made in respect of the issuance of Additional Shares of Common unless the consideration per share (as determined pursuant to Section 4(d)(v)) for an Additional Share of Common issued or deemed to be issued by the Corporation is less than the Conversion Price in effect on the date of, and immediately prior to such issue, for such series of Preferred Stock.

(iii)    Deemed Issue of Additional Shares of Common. In the event the Corporation at any time or from time to time after the date of the filing of this Amended and Restated Certificate of Incorporation shall issue any Options or Convertible Securities or shall fix a record date for the determination of holders of any class of securities entitled to receive any such Options or Convertible Securities, then the maximum number of shares (as set forth in the instrument relating thereto without regard to any provisions contained therein for a subsequent adjustment of such number) of Common Stock issuable upon the exercise of such Options or, in the case of Convertible Securities, the conversion or exchange of such Convertible Securities or, in the case of Options for Convertible Securities, the exercise of such Options and the conversion or exchange of the underlying securities, shall be deemed to have been issued as of the time of such issue or, in case such a record date shall have been fixed, as of the close of business on such record date, provided that in any such case in which shares are deemed to be issued:

(1)    no further adjustment in the Conversion Price of any series of Preferred Stock shall be made upon the subsequent issue of Convertible Securities or shares of Common Stock in connection with the exercise of such Options or conversion or exchange of such Convertible Securities;

(2)    if such Options or Convertible Securities by their terms provide, with the passage of time or otherwise, for any change in the consideration payable to the Corporation or in the number of shares of Common Stock issuable upon the exercise, conversion or exchange thereof (other than a change pursuant to the anti-dilution provisions of such Options or Convertible Securities such as this Section 4(d) or pursuant to Recapitalization provisions of such Options or Convertible Securities such as

-8-

Sections 4(e), 4(f) and 4(g) hereof), the Conversion Price of each series of Preferred Stock and any subsequent adjustments based thereon shall be recomputed to reflect such change as if such change had been in effect as of the original issue thereof (or upon the occurrence of the record date with respect thereto);

(3)    no readjustment pursuant to clause (2) above shall have the effect of increasing the Conversion Price of a series of Preferred Stock to an amount above the Conversion Price that would have resulted from any other issuances of Additional Shares of Common and any other adjustments provided for herein between the original adjustment date and such readjustment date;

(4)    upon the expiration of any such Options or any rights of conversion or exchange under such Convertible Securities which shall not have been exercised, the Conversion Price of each series of Preferred Stock computed upon the original issue thereof (or upon the occurrence of a record date with respect thereto) and any subsequent adjustments based thereon shall, upon such expiration, be recomputed as if:

(a)    in the case of Convertible Securities or Options for Common Stock, the only Additional Shares of Common issued were the shares of Common Stock, if any, actually issued upon the exercise of such Options or the conversion or exchange of such Convertible Securities and the consideration received therefor was the consideration actually received by the Corporation for the issue of such exercised Options plus the consideration actually received by the Corporation upon such exercise or for the issue of all such Convertible Securities which were actually converted or exchanged, plus the additional consideration, if any, actually received by the Corporation upon such conversion or exchange, and

(b)    in the case of Options for Convertible Securities, only the Convertible Securities, if any, actually issued upon the exercise thereof were issued at the time of issue of such Options, and the consideration received by the Corporation for the Additional Shares of Common deemed to have been then issued was the consideration actually received by the Corporation for the issue of such exercised Options, plus the consideration deemed to have been received by the Corporation (determined pursuant to Section 4(d)(v)) upon the issue of the Convertible Securities with respect to which such Options were actually exercised; and

(5)    if such record date shall have been fixed and such Options or Convertible Securities are not issued on the date fixed therefor, the adjustment previously made in the Conversion Price which became effective on such record date shall be canceled as of the close of business on such record date, and thereafter the Conversion Price shall be adjusted pursuant to this Section 4(d)(iii) as of the actual date of their issuance.

(iv)    Adjustment of Conversion Price Upon Issuance of Additional Shares of Common. In the event this Corporation shall issue Additional Shares of Common (including Additional Shares of Common deemed to be issued pursuant to Section 4(d)(iii)) without consideration or for a consideration per share less than the applicable Conversion Price of a series of Preferred Stock in effect on the date of and immediately prior to such issue, then, the Conversion Price of the affected series of Preferred Stock shall be reduced, concurrently with such issue, to a price (calculated to the nearest hundredth of a cent) determined by multiplying such Conversion Price by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such issue plus the number of shares which the aggregate consideration received by the Corporation for the total number of Additional Shares of Common so issued would purchase at such Conversion Price, and the denominator of which shall be the number of shares of Common Stock outstanding immediately prior to such issue plus the number of such Additional Shares of Common so issued. Notwithstanding the foregoing, the Conversion Price shall not be reduced at such time if the amount of such reduction would be less than $0.0001, but any such amount shall be carried forward, and a reduction will be made with respect to such amount at the time of, and together with, any subsequent

-9-

reduction which, together with such amount and any other amounts so carried forward, equal $0.0001 or more in the aggregate. For the purposes of this Section 4(d)(iv), all shares of Common Stock issuable upon conversion of all outstanding shares of Preferred Stock and the exercise and/or conversion of any other outstanding Convertible Securities and all outstanding Options shall be deemed to be outstanding Common Stock.

(v)    Determination of Consideration. For purposes of this Section 4(d), the consideration received by the Corporation for the issue (or deemed issue) of any Additional Shares of Common shall be computed as follows:

(1)    Cash and Property. Such consideration shall:

(a)    insofar as it consists of cash, be computed at the aggregate amount of cash received by the Corporation before deducting any reasonable discounts, commissions or other expenses allowed, paid or incurred by the Corporation for any underwriting or otherwise in connection with such issuance;

(b)    insofar as it consists of property other than cash, be computed at the fair market value thereof at the time of such issue, as determined in good faith by the Board of Directors; and

(c)    in the event Additional Shares of Common are issued together with other shares or securities or other assets of the Corporation for consideration which covers both, be the proportion of such consideration so received, computed as provided in clauses (a) and (b) above, as reasonably determined in good faith by the Board of Directors.

(2)    Options and Convertible Securities. The consideration per share received by the Corporation for Additional Shares of Common deemed to have been issued pursuant to Section 4(d)(iii) shall be determined by dividing

(x)    the total amount, if any, received or receivable by the Corporation as consideration for the issue of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration) payable to the Corporation upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities by

(y)    the maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities.

(e)    Adjustments for Subdivisions or Combinations of Common Stock. In the event the outstanding shares of Common Stock shall be subdivided (by stock split, by payment of a stock dividend or otherwise), into a greater number of shares of Common Stock, the Conversion Price of each series of Preferred Stock in effect immediately prior to such subdivision shall, concurrently with the effectiveness of such subdivision, be proportionately decreased. In the event the outstanding shares of Common Stock shall be combined (by reclassification or otherwise) into a lesser number of shares of Common Stock, the Conversion Prices in effect immediately prior to such combination shall, concurrently with the effectiveness of such combination, be proportionately increased.

-10-

(f)    Adjustments for Subdivisions or Combinations of Preferred Stock. In the event the outstanding shares of Preferred Stock or a series of Preferred Stock shall be subdivided (by stock split, by payment of a stock dividend or otherwise), into a greater number of shares of Preferred Stock, the Dividend Rate, Original Issue Price and Liquidation Preference of the affected series of Preferred Stock in effect immediately prior to such subdivision shall, concurrently with the effectiveness of such subdivision, be proportionately decreased. In the event the outstanding shares of Preferred Stock or a series of Preferred Stock shall be combined (by reclassification or otherwise) into a lesser number of shares of Preferred Stock, the Dividend Rate, Original Issue Price and Liquidation Preference of the affected series of Preferred Stock in effect immediately prior to such combination shall, concurrently with the effectiveness of such combination, be proportionately increased.

(g)    Adjustments for Reclassification, Exchange and Substitution. Subject to Section 3 (“Liquidation Rights”), if the Common Stock issuable upon conversion of the Preferred Stock shall be changed into the same or a different number of shares of any other class or classes of stock, whether by capital reorganization, reclassification or otherwise (other than a subdivision or combination of shares provided for above), then, in any such event, in lieu of the number of shares of Common Stock which the holders would otherwise have been entitled to receive each holder of such Preferred Stock shall have the right thereafter to convert such shares of Preferred Stock into a number of shares of such other class or classes of stock which a holder of the number of shares of Common Stock deliverable upon conversion of such series of Preferred Stock immediately before that change would have been entitled to receive in such reorganization or reclassification, all subject to further adjustment as provided herein with respect to such other shares.

(h)    Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price pursuant to this Section 4, the Corporation at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, upon the written request at any time of any holder of Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth (i) such adjustments and readjustments, (ii) the Conversion Price at the time in effect and (iii) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of Preferred Stock.

(i)    Waiver of Adjustment of Conversion Price. Notwithstanding anything herein to the contrary, any downward adjustment of the Conversion Price of any series of Preferred Stock may be waived by the consent or vote of the holders of sixty percent (60%) of the outstanding shares of such series either before or after the issuance causing the adjustment. Any such waiver shall bind all future holders of shares of such series of Preferred Stock.

(j)    Notices of Record Date. In the event that this Corporation shall propose at any time:

(i)    to declare any Distribution upon its Common Stock, whether in cash, property, stock or other securities, whether or not a regular cash dividend and whether or not out of earnings or earned surplus;

(ii)    to effect any reclassification or recapitalization of its Common Stock outstanding involving a change in the Common Stock; or

(iii)    to voluntarily liquidate or dissolve or to enter into any transaction deemed to be a liquidation, dissolution or winding up of the Corporation pursuant to Section 3(e);

-11-

then, in connection with each such event, this Corporation shall send to the holders of the Preferred Stock at least 10 days’ prior written notice of the date on which a record shall be taken for such Distribution (and specifying the date on which the holders of Common Stock shall be entitled thereto and, if applicable, the amount and character of such Distribution) or for determining rights to vote in respect of the matters referred to in (ii) and (iii) above.

Such written notice shall be given by first class mail (or express courier), postage prepaid, addressed to the holders of Preferred Stock at the address for each such holder as shown on the books of the Corporation and shall be deemed given on the date such notice is mailed.

The notice provisions set forth in this section may be shortened or waived prospectively or retrospectively by the consent or vote of the holders of a majority of the Preferred Stock, voting as a single class and on an as-converted basis.

(k)    Reservation of Stock Issuable Upon Conversion. The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock solely for the purpose of effecting the conversion of the shares of the Preferred Stock, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all then outstanding shares of the Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Preferred Stock, the Corporation will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose.

5. Voting.

(a)    Restricted Class Voting. Except as otherwise expressly provided herein or as required by law, the holders of Preferred Stock and the holders of Common Stock shall vote together on an as-converted basis, and not as separate classes.

(b)    No Series Voting. Other than as provided herein or required by law, there shall be no series voting.

(c)    Preferred Stock. Each holder of Preferred Stock shall be entitled to the number of votes equal to the number of shares of Common Stock into which the shares of Preferred Stock held by such holder could be converted as of the record date. The holders of shares of the Preferred Stock shall be entitled to vote on all matters on which the Common Stock shall be entitled to vote. Holders of Preferred Stock shall be entitled to notice of any stockholders’ meeting in accordance with the Bylaws of the Corporation (the “Bylaws”). Fractional votes shall not, however, be permitted and any fractional voting rights resulting from the above formula (after aggregating all shares into which shares of Preferred Stock held by each holder could be converted) shall be disregarded.

(d)    Election of Directors. The holders of Series B Preferred Stock, voting as a separate class, shall be entitled to elect one member of the Board of Directors at each meeting of the Corporation’s stockholders for the election of directors (the “Series B Director”). The holders of Series A Preferred Stock, voting as a separate class, shall be entitled to elect two members of the Board of Directors at each meeting of the Corporation’s stockholders for the election of directors (the “Series A Directors” and together with the Series B Director, the “Preferred Directors”). The holders of Common Stock, voting as a separate class, shall be entitled to elect one member of the Board of Directors at each meeting of the Corporation’s stockholders for the election of directors. Any additional members of the Board of Directors shall be elected by the holders of Common Stock and Preferred Stock, voting together as a single class. If a vacancy on the Board of Directors is to be filled by the Board of Directors, only directors elected by the same class or classes of stockholders as those who would be entitled to vote to fill such vacancy shall vote to fill such vacancy.

-12-

(e)    Common Stock. Each holder of shares of Common Stock shall be entitled to one vote for each share thereof held.

6. Amendments and Changes.

(a)    As long as any shares of the Preferred Stock shall be issued and outstanding, the Corporation shall not (whether by amendment, merger, consolidation, recapitalization or otherwise), without first obtaining the approval (by vote or written consent as provided by law) of the holders of at least sixty percent (60%) of the Preferred Stock, voting as a single class on an as converted basis (in addition to any other vote required by law or this Amended and Restated Certificate of Incorporation or Bylaws):

(i)    amend, alter or repeal any provision of this Amended and Restated Certificate of Incorporation or Bylaws;

(ii)     create or authorize the creation of, or issue any security convertible into, or exercisable for, any equity security having rights, preferences or privileges senior to any series of the Preferred Stock;

(iii)    reclassify, alter or amend any existing security of the Company that is pari passu with any series of the Preferred Stock in respect of the distribution of assets on the liquidation, dissolution or winding up of the Company, the payment of dividends or rights of redemption, if such reclassification, alteration or amendment would render such other security senior to any series of the Preferred Stock in respect of any such right, preference, or privilege or (ii) reclassify, alter or amend any existing security of the Company that is junior to any series of the Preferred Stock in respect of the distribution of assets on the liquidation, dissolution or winding up of the Company, the payment of dividends or rights of redemption, if such reclassification, alteration or amendment would render such other security senior to or pari passu with any series of the Preferred Stock in respect of any such right, preference or privilege;

(iv)    effect any transaction or series of related transactions deemed to be a Deemed Liquidation Event pursuant to Section 3(e);

(v)    authorize a merger, acquisition or sale of substantially all of the assets of the Corporation or any of its subsidiaries (other than a merger exclusively to effect a change of domicile of the Corporation);

(vi)    voluntarily liquidate, dissolve or wind-up the affairs of the Corporation;

(vii)    purchase or redeem any capital stock of the Corporation, other than repurchases of Common Stock pursuant to stock restriction agreements approved by the Board of Directors upon termination of service of a consultant, director or employee at the lower of fair market value or cost;

(viii)    create or authorize the creation of any debt security (except for trade accounts of the Corporation or any subsidiary arising in the ordinary course of business or the second tranche of the Corporation’s currently outstanding line of credit with Silicon Valley Bank) if the Corporation’s aggregate indebtedness would exceed $500,000, or guarantee any indebtedness;

(ix)    create or hold capital stock in any subsidiary that is not a wholly-owned subsidiary or dispose of any subsidiary stock or all or substantially all of any subsidiary assets;

-13-

(x)    increase or decrease the size of the Board of Directors;

(xi)    make any loan or advance to, or own any stock or other securities of, any subsidiary or other corporation, partnership, or other entity unless it is wholly owned by the Corporation;

(xii)    make any loan or advance to any person, including, any employee or director, except advances and similar expenditures in the ordinary course of business or under the terms of an employee stock or option plan approved by the Board of Directors;

(xiii)    enter into or be a party to any transaction with any director, officer or employee of the Corporation or any “associate” (as defined in Rule 12b-2 promulgated under the Exchange Act) of any such person except transactions resulting in payments to or by the Corporation in an amount less than $120,000 per year, or transactions made in the ordinary course of business and pursuant to reasonable requirements of the Corporation’s business and upon fair and reasonable terms that are approved by a majority of the disinterested members of the Board of Directors;

(xiv)    change the principal business of the Corporation, enter new lines of business, or exit the current line of business;

(xv)    sell, assign, license, pledge or encumber material technology or intellectual property, other than licenses granted in the ordinary course of business; or

(xvi)    amend this Section 6(a).

(b)    As long as any shares of the Series B Preferred Stock shall be issued and outstanding, the Corporation shall not (whether by amendment, merger, consolidation, recapitalization or otherwise), without first obtaining the approval (by vote or written consent as provided by law) of the holders of at least sixty percent (60%) of the Series B Preferred Stock, voting as a separate class (in addition to any other vote required by law or this Amended and Restated Certificate of Incorporation or Bylaws):

(i)    amend, alter or repeal any provision of this Amended and Restated Certificate of Incorporation or Bylaws in a manner that would limit or impair the rights, preferences or privileges of the Series B Preferred;

(ii)    increase the authorized number of shares of Series B Preferred Stock;

(iii)    declare or pay any Distribution with respect to the Series A Preferred Stock or Common Stock of the Corporation prior to the Series B Preferred Stock; or

(iv)    amend this Section 6(b).

(c)    As long as any shares of the Series A Preferred Stock shall be issued and outstanding, the Corporation shall not (whether by amendment, merger, consolidation, recapitalization or otherwise), without first obtaining the approval (by vote or written consent as provided by law) of the of the holders of a majority of the outstanding shares of Series A Preferred Stock (voting as a separate class) (in addition to any other vote required by law or this Amended and Restated Certificate of Incorporation or Bylaws) (i) amend, alter or repeal any provision of this Amended and Restated Certificate of Incorporation or Bylaws that would limit or impair the rights, preferences or privileges of the Series A Preferred or (ii) amend this Section 6(c).

-14-

7.     Notices. Any notice required by the provisions of this ARTICLE V to be given to the holders of Preferred Stock shall be deemed given if deposited in the United States mail, postage prepaid, and addressed to each holder of record at such holder’s address appearing on the books of the Corporation.

ARTICLE VI

The Corporation is to have perpetual existence.

ARTICLE VII

Elections of directors need not be by written ballot unless the Bylaws shall so provide.

ARTICLE VIII

Unless otherwise set forth herein, the number of directors that constitute the Board of Directors shall be fixed by, or in the manner provided in, the Bylaws.

ARTICLE IX

Unless otherwise set forth herein, in furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to adopt, amend or repeal the Bylaws.

ARTICLE X

1.     To the fullest extent permitted by the Delaware General Corporation Law as the same exists or as may hereafter be amended, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for a breach of fiduciary duty as a director. If the Delaware General Corporation Law is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law, as so amended. Neither any amendment nor repeal of this section, nor the adoption of any provision of this Amended and Restated Certificate of Incorporation inconsistent with this section, shall eliminate or reduce the effect of this section, in respect of any matter occurring, or any action or proceeding accruing or arising or that, but for this section, would accrue or arise, prior to such amendment, repeal or adoption of an inconsistent provision. If the Corporation or any of its successors or assignees consolidates with or merges into any other corporation or entity and is not the continuing or surviving corporation or entity of such consolidation or merger, then to the extent necessary, proper provision shall be made so that the successors and assignees of the Corporation assume the obligations of the Corporation with respect to indemnification of directors as in effect immediately before such transaction.

2.     The Corporation shall have the power to indemnify, to the extent permitted by the Delaware General Corporation Law, as it presently exists or may hereafter be amended from time to time, any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”) by reason of the fact that he or she is or was a director, officer, employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with any such Proceeding. A right to indemnification or to advancement of expenses arising under a provision of this Amended and Restated Certificate of Incorporation or a bylaw of the Corporation shall not be eliminated or impaired by an amendment to this Amended and Restated

-15-

Certificate of Incorporation or the Bylaws after the occurrence of the act or omission that is the subject of the civil, criminal, administrative or investigative action, suit or proceeding for which indemnification or advancement of expenses is sought, unless the provision in effect at the time of such act or omission explicitly authorizes such elimination or impairment after such action or omission has occurred.

ARTICLE XI

Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws may provide. The books of the Corporation may be kept (subject to any provision contained in the statutes) outside of the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the Bylaws.

ARTICLE XII

The Corporation renounces any interest or expectancy of the Corporation in, or in being offered an opportunity to participate in, any Excluded Opportunity. An “Excluded Opportunity” is any matter, transaction or interest that is presented to, or acquired, created or developed by, or which otherwise comes into the possession of, any director of the Corporation who is not an employee of the Corporation or any of its subsidiaries, (collectively, “Covered Persons”), unless in either case such matter, transaction or interest is presented to, or acquired, created or developed by, or otherwise comes into the possession of, a Covered Person expressly and solely in such Covered Person’s capacity as a director of the Corporation.

-16-

EX-3.3

Exhibit 3.3

AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION OF

SATSUMA PHARMACEUTICALS, INC.

Satsuma Pharmaceuticals, Inc., a corporation organized and existing under the laws of the State of Delaware (the “Corporation”), certifies that:

1.    The name of the Corporation is Satsuma Pharmaceuticals, Inc. The Corporation’s original Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on June 21, 2016.

2.    The Amended and Restated Certificate of Incorporation in the form of Exhibit A attached hereto has been duly adopted in accordance with the provisions of Sections 242, 245 and 228 of the Delaware General Corporation Law.

3.    The text of the Amended and Restated Certificate of Incorporation as heretofore amended or supplemented is hereby restated and further amended to read in its entirety as set forth in Exhibit A attached hereto. The Amended and Restated Certificate of Incorporation shall be effective as of 9:00 a.m. Eastern Time on May 7, 2018.

IN WITNESS WHEREOF, this Amended and Restated Certificate of Incorporation has been signed this     th day of             , 2019.

SATSUMA PHARMACEUTICALS, INC.

John Kollins

President and Chief Executive Officer

EXHIBIT A

AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION OF

SATSUMA PHARMACEUTICALS, INC.

ARTICLE I

NAME

The name of the corporation is Satsuma Pharmaceuticals, Inc. (the “Corporation”).

ARTICLE II

REGISTERED OFFICE AND AGENT

The address of the Corporation’s registered office in the State of Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle, 19801. The name of its registered agent at such address is The Corporation Trust Company.

ARTICLE III

PURPOSE AND DURATION

The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the Delaware General Corporation Law. The Corporation is to have a perpetual existence.

ARTICLE IV

CAPITAL STOCK

Section 1.    This Corporation is authorized to issue two classes of capital stock which shall be designated, respectively, “Common Stock” and “Preferred Stock.” The total number of shares that the Corporation is authorized to issue is 310,000,000, of which 300,000,000 shares shall be Common Stock and 10,000,000 shares shall be Preferred Stock. The Common Stock shall have a par value of $0.0001 per share and the Preferred Stock shall have a par value of $0.0001 per share. Subject to the rights of the holders of any series of Preferred Stock, the number of authorized shares of any of the Common Stock or Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority in voting power of the stock of the Corporation with the power to vote thereon irrespective of the provisions of Section 242(b)(2) of the Delaware General Corporation Law or any successor provision thereof, and no vote of the holders of any of the Common Stock or Preferred Stock voting separately as a class shall be required therefor.

Section 2.    Shares of Preferred Stock may be issued from time to time in one or more series. The Board of Directors of the Corporation (the “Board of Directors”) is hereby authorized to provide from time to time by resolution or resolutions for the creation and issuance, out of the authorized and unissued shares of Preferred Stock, of one or more series of Preferred Stock by filing a certificate (a “Certificate of Designation”) pursuant to the Delaware General Corporation Law, setting forth such resolution and, with respect to each such series, establishing the designation of such series and the number of shares to be included in such series and fixing

the voting powers (full or limited, or no voting power), preferences and relative, participating, optional or other special rights, and the qualifications, limitations and restrictions thereof, of the shares of each such series. Without limiting the generality of the foregoing, the resolution or resolutions providing for the establishment of any series of Preferred Stock may, to the extent permitted by law, provide that such series shall be superior to, rank equally with or be junior to the Preferred Stock of any other series. The powers, preferences and relative, participating, optional and other special rights of each series of Preferred Stock, and the qualifications, limitations or restrictions thereof, if any, may be different from those of any and all other series at any time outstanding. Except as otherwise expressly provided in the resolution or resolutions providing for the establishment of any series of Preferred Stock, no vote of the holders of shares of Preferred Stock or Common Stock shall be a prerequisite to the issuance of any shares of any series of the Preferred Stock so authorized in accordance with this Amended and Restated Certificate of Incorporation. Unless otherwise provided in the Certificate of Designation establishing a series of Preferred Stock, the Board of Directors may, by resolution or resolutions, increase or decrease (but not below the number of shares of such series then outstanding) the number of shares of such series and, if the number of shares of such series shall be so decreased, the shares constituting such decrease shall resume the status that they had prior to the adoption of the resolution originally fixing the number of shares of such series.

ARTICLE V

BOARD OF DIRECTORS

For the management of the business and for the conduct of the affairs of the Corporation it is further provided that:

Section 1.    

(a)    The management of the business and the conduct of the affairs of the Corporation shall be vested in the Board of Directors. The number of directors which shall constitute the whole Board of Directors shall be fixed exclusively by one or more resolutions adopted from time to time by the Board of Directors. Except as otherwise expressly delegated by resolution of the Board of Directors, the Board of Directors shall have the exclusive power and authority to appoint and remove officers of the Corporation.

(b)    Other than any directors elected by the separate vote of the holders of one or more series of Preferred Stock, the Board of Directors shall be and is divided into three classes, designated as Class I, Class II and Class III, as nearly equal in number as possible. Directors shall be assigned to each class in accordance with a resolution or resolutions adopted by the Board of Directors. At the first annual meeting of stockholders following the effectiveness of this Amended and Restated Certificate of Incorporation (the “Qualifying Record Date”), the term of office of the Class I directors shall expire and Class I directors shall be elected for a full term of three years. At the second annual meeting of stockholders following the Qualifying Record Date, the term of office of the Class II directors shall expire and Class II directors shall be elected for a full term of three years. At the third annual meeting of stockholders following the Qualifying Record Date, the term of office of the Class III directors shall expire and Class III directors shall be elected for a full term of three years. Subject to the special rights of the holders of one or more series of Preferred Stock to elect directors, at each succeeding annual meeting of stockholders, directors shall be elected for a full term of three years to succeed the directors of the class whose terms expire at such annual meeting.

Notwithstanding the foregoing provisions of this Article V, Section 1(b), each director shall serve until his or her successor is duly elected and qualified or until his or her earlier death, resignation, disqualification, retirement or removal. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director.

(c)    Subject to the special rights of the holders of one or more series of Preferred Stock to elect directors, the Board of Directors or any individual director may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of sixty-six and two-thirds percent (66-2/3%) of the voting power of all the then outstanding shares of voting stock of the Corporation with the power to vote at an election of directors (the “Voting Stock”).

(d)    Subject to the special rights of the holders of one or more series of Preferred Stock to elect directors, any vacancies on the Board of Directors resulting from death, resignation, disqualification, retirement, removal or other causes and any newly created directorships resulting from any increase in the number of directors shall, unless the Board of Directors determines by resolution that any such vacancies or newly created directorships shall be filled by the stockholders, and except as otherwise provided by law, be filled only by the affirmative vote of a majority of the directors then in office, even though less than a quorum, or by a sole remaining director, and shall not be filled by the stockholders. Any director appointed in accordance with the preceding sentence shall hold office for a term that shall coincide with the remaining term of the class to which the director shall have been appointed and until such director’s successor shall have been elected and qualified or until his or her earlier death, resignation, disqualification, retirement or removal.

Section 2.    

(a)    In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, alter or repeal Bylaws of the Corporation. In addition to any vote of the holders of any class or series of stock of the Corporation required by applicable law or by this Amended and Restated Certificate of Incorporation (including any Certificate of Designation in respect of one or more series of Preferred Stock), the adoption, amendment or repeal of the Bylaws of the Corporation by the stockholders of the Corporation shall require the affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of all the then-outstanding shares of the Voting Stock, voting together as a single class.

(b)    The directors of the Corporation need not be elected by written ballot unless the Bylaws so provide.

ARTICLE VI

STOCKHOLDERS

Section 1.    Subject to the special rights of the holders of one or more series of Preferred Stock, any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of the stockholders of the Corporation, and the taking of any action by written consent of the stockholders in lieu of a meeting of the stockholders is specifically denied.

Section 2.    Subject to the special rights of the holders of one or more series of Preferred Stock, special meetings of the stockholders of the Corporation may be called, for any purpose or purposes, at any time by the Board of Directors, chief executive officer or president (in the absence of a chief executive officer), but such special meetings may not be called by stockholders or any other person or persons.

Section 3.     Advance notice of stockholder nominations for the election of directors and of other business proposed to be brought by stockholders before any meeting of the stockholders of the Corporation shall be given in the manner provided in the Bylaws of the Corporation.

ARTICLE VII

LIABILITY AND INDEMNIFICATION

Section 1.    To the fullest extent permitted by the Delaware General Corporation Law, as the same exists or as may hereafter be amended, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. If the Delaware General Corporation Law is amended after approval by the stockholders of this Article VII to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law as so amended, automatically and without further action, upon the date of such amendment.

Section 2.    The Corporation, to the fullest extent permitted by law, shall indemnify and advance expenses to any person made or threatened to be made a party to an action, suit or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that he or she, or his or her testator or intestate, is or was a director or officer of the Corporation or any predecessor of the Corporation, or serves or served at any other enterprise as a director or officer at the request of the Corporation or any predecessor to the Corporation.

Section 3.    The Corporation, to the fullest extent permitted by law, may indemnify and advance expenses to any person made or threatened to be made a party to an action, suit or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that he or she, or his or her testator or intestate, is or was an employee or agent of the Corporation or any predecessor of the Corporation, or serves or served at any other enterprise as an employee or agent at the request of the Corporation or any predecessor to the Corporation.

Section 4.    Neither any amendment nor repeal of this Article VII, nor the adoption by amendment of this certificate of incorporation of any provision inconsistent with this Article VII, shall eliminate or reduce the effect of this Article VII in respect of any matter occurring, or any action or proceeding accruing or arising (or that, but for this Article VII, would accrue or arise) prior to such amendment or repeal or adoption of an inconsistent provision.

ARTICLE VIII

EXCLUSIVE FORUM

Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for (1) any derivative action or proceeding brought on behalf of the Corporation, (2) any action asserting a claim of breach of a fiduciary duty owed by any director, officer, other employee or stockholder of the Corporation to the Corporation or the Corporation’s stockholders, (3) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, this Amended and Restated Certificate of Incorporation or the Bylaws (as either may be amended from time to time), or (4) any action asserting a claim governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring or holding any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Article VIII, in each case, subject to said Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein; provided that, the provisions of this Article VIII will not apply to suits brought to enforce any liability or duty created by the Securities Exchange Act of 1934, as amended, or any other claim for which the federal courts have exclusive jurisdiction; and provided, further, that, if and only if the Court of Chancery of the State of Delaware dismisses any such action for lack of subject matter jurisdiction, such action may be brought in another state or federal court sitting in the State of Delaware.

Nothing herein contained shall be construed to preclude stockholders that assert claims under the Securities Act of 1933, as amended, or any successor thereto, from bringing such claims in state or federal court, subject to applicable law.

If any action the subject matter of which is within the scope of the preceding sentence is filed in a court other than a court located within the State of Delaware (a “Foreign Action”) in the name of any stockholder, such stockholder shall be deemed to have consented to (i) the personal jurisdiction of the state and federal courts located within the State of Delaware in connection with any action brought in any such court to enforce the preceding sentence and (ii) having service of process made upon such stockholder in any such action by service upon such stockholder’s counsel in the Foreign Action as agent for such stockholder. Any person or entity purchasing or otherwise acquiring or holding any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Article VIII.

If any provision or provisions of this Article VIII shall be held to be invalid, illegal or unenforceable as applied to any circumstance for any reason whatsoever, (a) the validity, legality and enforceability of such provisions in any other circumstance and of the remaining provisions of this Article VIII (including, without limitation, each portion of any paragraph of this Article VIII containing any such provision held to be invalid, illegal or unenforceable that is not itself held to be invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and (b) the application of such provision to other persons or entities and circumstances shall not in any way be affected or impaired thereby.

ARTICLE IX

AMENDMENTS

Notwithstanding any other provisions of this Amended and Restated Certificate of Incorporation or any provision of law which might otherwise permit a lesser vote or no vote, but in addition to any affirmative vote of the holders of any particular class or series of the Voting Stock required by law or by this Amended and Restated Certificate of Incorporation (including any Certificate of Designation in respect of one or more series of Preferred Stock), the affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of all of the then-outstanding shares of the Voting Stock, voting together as a single class, shall be required to alter, amend or repeal Articles V, VI, VII and VIII and this Article IX.

* * * *

EX-3.4

Exhibit 3.4

BYLAWS OF

SATSUMA PHARMACEUTICALS, INC.

Amended and Restated December 16, 2016

TABLE OF CONTENTS

Page

ARTICLE I — MEETINGS OF STOCKHOLDERS			1
	1.1	Place of Meetings	1
	1.2	Annual Meeting	1
	1.3	Special Meeting	1
	1.4	Notice of Stockholders’ Meetings	1
	1.5	Quorum	2
	1.6	Adjourned Meeting; Notice	2
	1.7	Conduct of Business	2
	1.8	Voting	2
	1.9	Stockholder Action by Written Consent Without a Meeting	3
	1.10	Record Dates	4
	1.11	Proxies	5
	1.12	List of Stockholders Entitled to Vote	5
ARTICLE II — DIRECTORS			5
	2.1	Powers	5
	2.2	Number of Directors	6
	2.3	Election, Qualification and Term of Office of Directors	6
	2.4	Resignation and Vacancies	6
	2.5	Place of Meetings; Meetings by Telephone	7
	2.6	Conduct of Business	7
	2.7	Regular Meetings	7
	2.8	Special Meetings; Notice	7
	2.9	Quorum; Voting	8
	2.10	Board Action by Written Consent Without a Meeting	8
	2.11	Fees and Compensation of Directors	8
	2.12	Removal of Directors	8
ARTICLE III — COMMITTEES			8
	3.1	Committees of Directors	8
	3.2	Committee Minutes	9
	3.3	Meetings and Actions of Committees	9
	3.4	Subcommittees	9
ARTICLE IV — OFFICERS			9
	4.1	Officers	9
	4.2	Appointment of Officers	10
	4.3	Subordinate Officers	10
	4.4	Removal and Resignation of Officers	10
	4.5	Vacancies in Offices	10
	4.6	Representation of Shares of Other Corporations	10
	4.7	Authority and Duties of Officers	10
ARTICLE V — INDEMNIFICATION			10
	5.1	Indemnification of Directors and Officers in Third Party Proceedings	10

TABLE OF CONTENTS

(Continued)

Page

	5.2	Indemnification of Directors and Officers in Actions by or in the Right of the Company	11
	5.3	Successful Defense	11
	5.4	Indemnification of Others	11
	5.5	Advanced Payment of Expenses	11
	5.6	Limitation on Indemnification	12
	5.7	Determination; Claim	12
	5.8	Non-Exclusivity of Rights	12
	5.9	Insurance	13
	5.10	Survival	13
	5.11	Effect of Repeal or Modification	13
	5.12	Certain Definitions	13
ARTICLE VI — STOCK			13
	6.1	Stock Certificates; Partly Paid Shares	13
	6.2	Special Designation on Certificates	14
	6.3	Lost Certificates	14
	6.4	Dividends	14
	6.5	Stock Transfer Agreements	15
	6.6	Registered Stockholders	15
	6.7	Transfers	15
	6.8	Restrictions on Transfer	15
	6.9	Right of First Refusal	16
ARTICLE VII — MANNER OF GIVING NOTICE AND WAIVER			18
	7.1	Notice of Stockholder Meetings	18
	7.2	Notice by Electronic Transmission	18
	7.3	Notice to Stockholders Sharing an Address	19
	7.4	Notice to Person with Whom Communication is Unlawful	19
	7.5	Waiver of Notice	19
ARTICLE VIII — GENERAL MATTERS			20
	8.1	Fiscal Year	20
	8.2	Seal	20
	8.3	Annual Report	20
	8.4	Construction; Definitions	20
ARTICLE IX — AMENDMENTS			20

BYLAWS

ARTICLE I — MEETINGS OF STOCKHOLDERS

1.1    Place of Meetings.    Meetings of stockholders of Satsuma Pharmaceuticals, Inc. (the “Company”) shall be held at any place, within or outside the State of Delaware, determined by the Company’s board of directors (the “Board”). The Board may, in its sole discretion, determine that a meeting of stockholders shall not be held at any place, but may instead be held solely by means of remote communication as authorized by Section 211(a)(2) of the Delaware General Corporation Law (the “DGCL”). In the absence of any such designation or determination, stockholders’ meetings shall be held at the Company’s principal executive office.

1.2    Annual Meeting.    Unless directors are elected by written consent in lieu of an annual meeting as permitted by Section 211(b) of the DGCL, an annual meeting of stockholders shall be held for the election of directors at such date and time as may be designated by resolution of the Board from time to time. Stockholders may, unless the certificate of incorporation otherwise provides, act by written consent to elect directors; provided, however, that, if such consent is less than unanimous, such action by written consent may be in lieu of holding an annual meeting only if all of the directorships to which directors could be elected at an annual meeting held at the effective time of such action are vacant and are filled by such action. Any other proper business may be transacted at the annual meeting.

1.3    Special Meeting.    A special meeting of the stockholders may be called at any time by the Board, Chairperson of the Board, Chief Executive Officer or President (in the absence of a Chief Executive Officer) or by one or more stockholders holding shares in the aggregate entitled to cast not less than 10% of the votes at that meeting.

If any person(s) other than the Board calls a special meeting, the request shall:

(i)    be in writing;

(ii)    specify the time of such meeting and the general nature of the business proposed to be transacted; and

(iii)    be delivered personally or sent by registered mail or by facsimile transmission to the Chairperson of the Board, the Chief Executive Officer, the President (in the absence of a Chief Executive Officer) or the Secretary of the Company.

The officer(s) receiving the request shall cause notice to be promptly given to the stockholders entitled to vote at such meeting, in accordance with these bylaws, that a meeting will be held at the time requested by the person or persons calling the meeting. No business may be transacted at such special meeting other than the business specified in such notice to stockholders. Nothing contained in this paragraph of this section 1.3 shall be construed as limiting, fixing, or affecting the time when a meeting of stockholders called by action of the Board may be held.

1.4    Notice of Stockholders’ Meetings.    Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, if any, date and hour of the meeting, the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, the record date for

determining the stockholders entitled to vote at the meeting, if such date is different from the record date for determining stockholders entitled to notice of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Except as otherwise provided in the DGCL, the certificate of incorporation or these bylaws, the written notice of any meeting of stockholders shall be given not less than 10 nor more than 60 days before the date of the meeting to each stockholder entitled to vote at such meeting as of the record date for determining the stockholders entitled to notice of the meeting.

1.5    Quorum.    Except as otherwise provided by law, the certificate of incorporation or these bylaws, at each meeting of stockholders the presence in person or by proxy of the holders of shares of stock having a majority of the votes which could be cast by the holders of all outstanding shares of stock entitled to vote at the meeting shall be necessary and sufficient to constitute a quorum. Where a separate vote by a class or series or classes or series is required, a majority of the outstanding shares of such class or series or classes or series, present in person or represented by proxy, shall constitute a quorum entitled to take action with respect to that vote on that matter, except as otherwise provided by law, the certificate of incorporation or these bylaws.

If, however, such quorum is not present or represented at any meeting of the stockholders, then either (i) the chairperson of the meeting, or (ii) the stockholders entitled to vote at the meeting, present in person or represented by proxy, shall have the power to adjourn the meeting from time to time, in the manner provided in section 1.6, until a quorum is present or represented.

1.6    Adjourned Meeting; Notice.    Any meeting of stockholders, annual or special, may adjourn from time to time to reconvene at the same or some other place, and notice need not be given of the adjourned meeting if the time, place, if any, thereof, and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the Company may transact any business which might have been transacted at the original meeting. If the adjournment is for more than 30 days, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. If after the adjournment a new record date for stockholders entitled to vote is fixed for the adjourned meeting, the Board shall fix a new record date for notice of such adjourned meeting in accordance with Section 213(a) of the DGCL and section 1.10 of these bylaws, and shall give notice of the adjourned meeting to each stockholder of record entitled to vote at such adjourned meeting as of the record date fixed for notice of such adjourned meeting.

1.7    Conduct of Business.    Meetings of stockholders shall be presided over by the Chairperson of the Board, if any, or in his or her absence by the Vice Chairperson of the Board, if any, or in the absence of the foregoing persons by the Chief Executive Officer, or in the absence of the foregoing persons by the President, or in the absence of the foregoing persons by a Vice President, or in the absence of the foregoing persons by a chairperson designated by the Board, or in the absence of such designation by a chairperson chosen at the meeting. The Secretary shall act as secretary of the meeting, but in his or her absence the chairperson of the meeting may appoint any person to act as secretary of the meeting. The chairperson of any meeting of stockholders shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of business, and shall have the power to adjourn the meeting to another place, if any, date or time, whether or not a quorum is present.

1.8    Voting.    The stockholders entitled to vote at any meeting of stockholders shall be determined in accordance with the provisions of section 1.10 of these bylaws, subject to Section 217 (relating to voting rights of fiduciaries, pledgors and joint owners of stock) and Section 218 (relating to voting trusts and other voting agreements) of the DGCL.

2

Except as may be otherwise provided in the certificate of incorporation, each stockholder entitled to vote at any meeting of stockholders shall be entitled to one vote for each share of capital stock held by such stockholder which has voting power upon the matter in question. Voting at meetings of stockholders need not be by written ballot and, unless otherwise required by law, need not be conducted by inspectors of election unless so determined by the holders of shares of stock having a majority of the votes which could be cast by the holders of all outstanding shares of stock entitled to vote thereon which are present in person or by proxy at such meeting. If authorized by the Board, such requirement of a written ballot shall be satisfied by a ballot submitted by electronic transmission (as defined in section 7.2 of these bylaws), provided that any such electronic transmission must either set forth or be submitted with information from which it can be determined that the electronic transmission was authorized by the stockholder or proxy holder.

Except as otherwise required by law, the certificate of incorporation or these bylaws, in all matters other than the election of directors, the affirmative vote of a majority of the voting power of the shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders. Except as otherwise required by law, the certificate of incorporation or these bylaws, directors shall be elected by a plurality of the voting power of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. Where a separate vote by a class or series or classes or series is required, in all matters other than the election of directors, the affirmative vote of the majority of shares of such class or series or classes or series present in person or represented by proxy at the meeting shall be the act of such class or series or classes or series, except as otherwise provided by law, the certificate of incorporation or these bylaws.

1.9    Stockholder Action by Written Consent Without a Meeting.    Unless otherwise provided in the certificate of incorporation, any action required by the DGCL to be taken at any annual or special meeting of stockholders of a corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice, and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted.

Every written consent shall bear the date of signature of each stockholder who signs the consent, and no written consent shall be effective to take the corporate action referred to therein unless, within 60 days of the earliest dated consent delivered in the manner required by Section 228 of the DGCL to the Company, written consents signed by a sufficient number of holders to take action are delivered to the Company by delivery to its registered office in the State of Delaware, its principal place of business or an officer or agent of the Company having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Company’s registered office shall be by hand or by certified or registered mail, return receipt requested. Any person executing a consent may provide, whether through instruction to an agent or otherwise, that such a consent will be effective at a future time (including a time determined upon the happening of an event), no later than 60 days after such instruction is given or such provision is made, and, for the purposes of this section 1.9, if evidence of such instruction or provision is provided to the Company, such later effective time shall serve as the date of signature. Unless otherwise provided, any such consent shall be revocable prior to its becoming effective.

An electronic transmission (as defined in section 7.2) consenting to an action to be taken and transmitted by a stockholder or proxy holder, or by a person or persons authorized to act for a stockholder

3

or proxy holder, shall be deemed to be written, signed and dated for purposes of this section, provided that any such electronic transmission sets forth or is delivered with information from which the Company can determine (i) that the electronic transmission was transmitted by the stockholder or proxy holder or by a person or persons authorized to act for the stockholder or proxy holder and (ii) the date on which such stockholder or proxy holder or authorized person or persons transmitted such electronic transmission.

In the event that the Board shall have instructed the officers of the Company to solicit the vote or written consent of the stockholders of the Company, an electronic transmission of a stockholder written consent given pursuant to such solicitation may be delivered to the Secretary or the President of the Company or to a person designated by the Secretary or the President. The Secretary or the President of the Company or a designee of the Secretary or the President shall cause any such written consent by electronic transmission to be reproduced in paper form and inserted into the corporate records.

Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing and who, if the action had been taken at a meeting, would have been entitled to notice of the meeting if the record date for notice of such meeting had been the date that written consents signed by a sufficient number of holders to take the action were delivered to the Company as provided in Section 228 of the DGCL. In the event that the action which is consented to is such as would have required the filing of a certificate under any provision of the DGCL, if such action had been voted on by stockholders at a meeting thereof, the certificate filed under such provision shall state, in lieu of any statement required by such provision concerning any vote of stockholders, that written consent has been given in accordance with Section 228 of the DGCL.

1.10    Record Dates.    In order that the Company may determine the stockholders entitled to notice of any meeting of stockholders or any adjournment thereof, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board and which record date shall not be more than 60 nor less than 10 days before the date of such meeting. If the Board so fixes a date, such date shall also be the record date for determining the stockholders entitled to vote at such meeting unless the Board determines, at the time it fixes such record date, that a later date on or before the date of the meeting shall be the date for making such determination.

If no record date is fixed by the Board, the record date for determining stockholders entitled to notice of and to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held.

A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board may fix a new record date for determination of stockholders entitled to vote at the adjourned meeting, and in such case shall also fix as the record date for stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote in accordance with the provisions of Section 213 of the DGCL and this Section 1.10 at the adjourned meeting.

In order that the Company may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and which date shall not be more than 10 days after the date upon which the resolution fixing the record date is adopted by the Board. If no record date has been fixed by the Board, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board is required by

4

law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Company in accordance with applicable law. If no record date has been fixed by the Board and prior action by the Board is required by law, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the Board adopts the resolution taking such prior action.

In order that the Company may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than 60 days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto.

1.11    Proxies.    Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for such stockholder by proxy authorized by an instrument in writing or by a transmission permitted by law filed in accordance with the procedure established for the meeting, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Section 212 of the DGCL.

1.12    List of Stockholders Entitled to Vote.    The officer who has charge of the stock ledger of the Company shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting; provided, however, if the record date for determining the stockholders entitled to vote is less than 10 days before the meeting date, the list shall reflect the stockholders entitled to vote as of the tenth day before the meeting date, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. The Company shall not be required to include electronic mail addresses or other electronic contact information on such list. Such list shall be open to the examination of any stockholder for any purpose germane to the meeting for a period of at least ten days prior to the meeting: (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (ii) during ordinary business hours, at the Company’s principal place of business. In the event that the Company determines to make the list available on an electronic network, the Company may take reasonable steps to ensure that such information is available only to stockholders of the Company. If the meeting is to be held at a place, then a list of stockholders entitled to vote at the meeting shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be examined by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then such list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting.

ARTICLE II — DIRECTORS

2.1    Powers.    The business and affairs of the Company shall be managed by or under the direction of the Board, except as may be otherwise provided in the DGCL or the certificate of incorporation.

5

2.2    Number of Directors.    The Board shall consist of one or more members, each of whom shall be a natural person. Unless the certificate of incorporation fixes the number of directors, the number of directors shall be determined from time to time by resolution of the Board. No reduction of the authorized number of directors shall have the effect of removing any director before that director’s term of office expires.

2.3    Election, Qualification and Term of Office of Directors.    Except as provided in section 2.4 of these bylaws, and subject to sections 1.2 and 1.9 of these bylaws, directors shall be elected at each annual meeting of stockholders. Directors need not be stockholders unless so required by the certificate of incorporation or these bylaws. The certificate of incorporation or these bylaws may prescribe other qualifications for directors. Each director shall hold office until such director’s successor is elected and qualified or until such director’s earlier death, resignation or removal.

2.4    Resignation and Vacancies.    Any director may resign at any time upon notice given in writing or by electronic transmission to the Company. A resignation is effective when the resignation is delivered unless the resignation specifies a later effective date or an effective date determined upon the happening of an event or events. A resignation which is conditioned upon the director failing to receive a specified vote for reelection as a director may provide that it is irrevocable. Unless otherwise provided in the certificate of incorporation or these bylaws, when one or more directors resign from the Board, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective.

Unless otherwise provided in the certificate of incorporation or these bylaws:

(i)    Vacancies and newly created directorships resulting from any increase in the authorized number of directors elected by all of the stockholders having the right to vote as a single class may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director.

(ii)    Whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the provisions of the certificate of incorporation, vacancies and newly created directorships of such class or classes or series may be filled by a majority of the directors elected by such class or classes or series thereof then in office, or by a sole remaining director so elected.

If at any time, by reason of death or resignation or other cause, the Company should have no directors in office, then any officer or any stockholder or an executor, administrator, trustee or guardian of a stockholder, or other fiduciary entrusted with like responsibility for the person or estate of a stockholder, may call a special meeting of stockholders in accordance with the provisions of the certificate of incorporation or these bylaws, or may apply to the Court of Chancery for a decree summarily ordering an election as provided in Section 211 of the DGCL.

If, at the time of filling any vacancy or any newly created directorship, the directors then in office constitute less than a majority of the whole Board (as constituted immediately prior to any such increase), the Court of Chancery may, upon application of any stockholder or stockholders holding at least 10% of the voting stock at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office as aforesaid, which election shall be governed by the provisions of Section 211 of the DGCL as far as applicable.

6

A director elected to fill a vacancy shall be elected for the unexpired term of his or her predecessor in office and until such director’s successor is elected and qualified, or until such director’s earlier death, resignation or removal.

2.5    Place of Meetings; Meetings by Telephone.    The Board may hold meetings, both regular and special, either within or outside the State of Delaware.

Unless otherwise restricted by the certificate of incorporation or these bylaws, members of the Board, or any committee designated by the Board, may participate in a meeting of the Board, or any committee, by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting.

2.6    Conduct of Business.    Meetings of the Board shall be presided over by the Chairperson of the Board, if any, or in his or her absence by the Vice Chairperson of the Board, if any, or in the absence of the foregoing persons by a chairperson designated by the Board, or in the absence of such designation by a chairperson chosen at the meeting. The Secretary shall act as secretary of the meeting, but in his or her absence the chairperson of the meeting may appoint any person to act as secretary of the meeting.

2.7    Regular Meetings.    Regular meetings of the Board may be held without notice at such time and at such place as shall from time to time be determined by the Board.

2.8    Special Meetings; Notice.    Special meetings of the Board for any purpose or purposes may be called at any time by the Chairperson of the Board, the Chief Executive Officer, the President, the Secretary or any two directors.

Notice of the time and place of special meetings shall be:

(i) delivered personally by hand, by courier or by telephone;

(ii) sent by United States first-class mail, postage prepaid;

(iii) sent by facsimile;

(iv) sent by electronic mail; or

(v) otherwise given by electronic transmission (as defined in section 7.2),

directed to each director at that director’s address, telephone number, facsimile number, electronic mail address or other contact for notice by electronic transmission, as the case may be, as shown on the Company’s records.

If the notice is (i) delivered personally by hand, by courier or by telephone, (ii) sent by facsimile, (iii) sent by electronic mail or (iv) otherwise given by electronic transmission, it shall be delivered, sent or otherwise directed to each director, as applicable, at least 24 hours before the time of the holding of the meeting. If the notice is sent by United States mail, it shall be deposited in the United States mail at least four days before the time of the holding of the meeting. Any oral notice may be communicated to the director. The notice need not specify the place of the meeting (if the meeting is to be held at the Company’s principal executive office) nor the purpose of the meeting.

7

2.9    Quorum; Voting.    At all meetings of the Board, a majority of the total authorized number of directors shall constitute a quorum for the transaction of business. If a quorum is not present at any meeting of the Board, then the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present. A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for that meeting.

The vote of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board, except as may be otherwise specifically provided by statute, the certificate of incorporation or these bylaws.

If the certificate of incorporation provides that one or more directors shall have more or less than one vote per director on any matter, every reference in these bylaws to a majority or other proportion of the directors shall refer to a majority or other proportion of the votes of the directors.

2.10    Board Action by Written Consent Without a Meeting.    Unless otherwise restricted by the certificate of incorporation or these bylaws, any action required or permitted to be taken at any meeting of the Board, or of any committee thereof, may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing or by electronic transmission and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the Board or committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form. Any person (whether or not then a director) may provide, whether through instruction to an agent or otherwise, that a consent to action will be effective at a future time (including a time determined upon the happening of an event), no later than 60 days after such instruction is given or such provision is made and such consent shall be deemed to have been given for purposes of this section 2.10 at such effective time so long as such person is then a director and did not revoke the consent prior to such time. Any such consent shall be revocable prior to its becoming effective.

2.11    Fees and Compensation of Directors.    Unless otherwise restricted by the certificate of incorporation or these bylaws, the Board shall have the authority to fix the compensation of directors.

2.12    Removal of Directors.    Unless otherwise restricted by statute, the certificate of incorporation or these bylaws, any director or the entire Board may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors.

No reduction of the authorized number of directors shall have the effect of removing any director prior to the expiration of such director’s term of office.

ARTICLE III — COMMITTEES

3.1    Committees of Directors.    The Board may designate one or more committees, each committee to consist of one or more of the directors of the Company. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board or in these bylaws, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Company, and

8

may authorize the seal of the Company to be affixed to all papers that may require it; but no such committee shall have the power or authority to (i) approve or adopt, or recommend to the stockholders, any action or matter (other than the election or removal of directors) expressly required by the DGCL to be submitted to stockholders for approval, or (ii) adopt, amend or repeal any bylaw of the Company.

3.2    Committee Minutes.    Each committee shall keep regular minutes of its meetings and report the same to the Board when required.

3.3    Meetings and Actions of Committees.    Meetings and actions of committees shall be governed by, and held and taken in accordance with, the provisions of:

(i) section 2.5 (Place of Meetings; Meetings by Telephone);

(ii) section 2.7 (Regular Meetings);

(iii) section 2.8 (Special Meetings; Notice);

(iv) section 2.9 (Quorum; Voting);

(v) section 2.10 (Board Action by Written Consent Without a Meeting); and

(vi) section 7.5 (Waiver of Notice)

with such changes in the context of those bylaws as are necessary to substitute the committee and its members for the Board and its members. However:

(i)    the time of regular meetings of committees may be determined either by resolution of the Board or by resolution of the committee;

(ii)    special meetings of committees may also be called by resolution of the Board; and

(iii)    notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. The Board may adopt rules for the government of any committee not inconsistent with the provisions of these bylaws.

Any provision in the certificate of incorporation providing that one or more directors shall have more or less than one vote per director on any matter shall apply to voting in any committee or subcommittee, unless otherwise provided in the certificate of incorporation or these bylaws.

3.4    Subcommittees.    Unless otherwise provided in the certificate of incorporation, these bylaws or the resolutions of the Board designating the committee, a committee may create one or more subcommittees, each subcommittee to consist of one or more members of the committee, and delegate to a subcommittee any or all of the powers and authority of the committee.

ARTICLE IV — OFFICERS

4.1    Officers.    The officers of the Company shall be a President and a Secretary. The Company may also have, at the discretion of the Board, a Chairperson of the Board, a Vice Chairperson of the Board, a Chief Executive Officer, one or more Vice Presidents, a Chief Financial Officer, a Treasurer, one or more Assistant Treasurers, one or more Assistant Secretaries, and any such other officers as may be appointed in accordance with the provisions of these bylaws. Any number of offices may be held by the same person.

9

4.2    Appointment of Officers.    The Board shall appoint the officers of the Company, except such officers as may be appointed in accordance with the provisions of section 4.3 of these bylaws.

4.3    Subordinate Officers.    The Board may appoint, or empower the Chief Executive Officer or, in the absence of a Chief Executive Officer, the President, to appoint, such other officers and agents as the business of the Company may require. Each of such officers and agents shall hold office for such period, have such authority, and perform such duties as are provided in these bylaws or as the Board may from time to time determine.

4.4    Removal and Resignation of Officers.    Any officer may be removed, either with or without cause, by an affirmative vote of the majority of the Board at any regular or special meeting of the Board or, except in the case of an officer chosen by the Board, by any officer upon whom such power of removal may be conferred by the Board.

Any officer may resign at any time by giving written notice to the Company. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice. Unless otherwise specified in the notice of resignation, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the Company under any contract to which the officer is a party.

4.5    Vacancies in Offices.    Any vacancy occurring in any office of the Company shall be filled by the Board or as provided in section 4.3.

4.6    Representation of Shares of Other Corporations.    Unless otherwise directed by the Board, the President or any other person authorized by the Board or the President is authorized to vote, represent and exercise on behalf of the Company all rights incident to any and all shares of any other corporation or corporations standing in the name of the Company. The authority granted herein may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by such person having the authority.

4.7    Authority and Duties of Officers.    Except as otherwise provided in these bylaws, the officers of the Company shall have such powers and duties in the management of the Company as may be designated from time to time by the Board and, to the extent not so provided, as generally pertain to their respective offices, subject to the control of the Board.

ARTICLE V — INDEMNIFICATION

5.1    Indemnification of Directors and Officers in Third Party Proceedings.    Subject to the other provisions of this Article V, the Company shall indemnify, to the fullest extent permitted by the DGCL, as now or hereinafter in effect, any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”) (other than an action by or in the right of the Company) by reason of the fact that such person is or was a director or officer of the Company, or is or was a director or officer of the Company serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses

10

(including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such Proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person’s conduct was unlawful. The termination of any Proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had reasonable cause to believe that such person’s conduct was unlawful.

5.2    Indemnification of Directors and Officers in Actions by or in the Right of the Company.    Subject to the other provisions of this Article V, the Company shall indemnify, to the fullest extent permitted by the DGCL, as now or hereinafter in effect, any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Company to procure a judgment in its favor by reason of the fact that such person is or was a director or officer of the Company, or is or was a director or officer of the Company serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Company; except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Company unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.

5.3    Successful Defense.    To the extent that a present or former director or officer of the Company has been successful on the merits or otherwise in defense of any action, suit or proceeding described in section 5.1 or section 5.2, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection therewith.

5.4    Indemnification of Others.    Subject to the other provisions of this Article V, the Company shall have power to indemnify its employees and agents to the extent not prohibited by the DGCL or other applicable law. The Board shall have the power to delegate to such person or persons the determination of whether employees or agents shall be indemnified.

5.5    Advanced Payment of Expenses.    Expenses (including attorneys’ fees) actually and reasonably incurred by an officer or director of the Company in defending any Proceeding shall be paid by the Company in advance of the final disposition of such Proceeding upon receipt of a written request therefor (together with documentation reasonably evidencing such expenses) and an undertaking by or on behalf of the person to repay such amounts if it shall ultimately be determined that the person is not entitled to be indemnified under this Article V or the DGCL. Such expenses (including attorneys’ fees) actually and reasonably incurred by former directors and officers or other employees and agents of the Company or by persons serving at the request of the Company as directors, officers, employees or agents of another corporation, partnership, joint venture, trust or other enterprise may be so paid upon such terms and conditions, if any, as the Company deems appropriate. The right to advancement of expenses shall not apply to any Proceeding (or any part of any Proceeding) for which indemnity is excluded pursuant to these bylaws, but shall apply to any Proceeding (or any part of any Proceeding) referenced in section 5.6(ii) or 5.6(iii) prior to a determination that the person is not entitled to be indemnified by the Company.

11

5.6    Limitation on Indemnification.    Subject to the requirements in section 5.3 and the DGCL, the Company shall not be obligated to indemnify any person pursuant to this Article V in connection with any Proceeding (or any part of any Proceeding):

(i)    for which payment has actually been made to or on behalf of such person under any statute, insurance policy, indemnity provision, vote or otherwise, except with respect to any excess beyond the amount paid;

(ii)    for an accounting or disgorgement of profits pursuant to Section 16(b) of the Securities Exchange Act of 1934, as amended (the “1934 Act”), or similar provisions of federal, state or local statutory law or common law, if such person is held liable therefor (including pursuant to any settlement arrangements);

(iii)    for any reimbursement of the Company by such person of any bonus or other incentive-based or equity-based compensation or of any profits realized by such person from the sale of securities of the Company, as required in each case under the 1934 Act (including any such reimbursements that arise from an accounting restatement of the Company pursuant to Section 304 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), or the payment to the Company of profits arising from the purchase and sale by such person of securities in violation of Section 306 of the Sarbanes-Oxley Act), if such person is held liable therefor (including pursuant to any settlement arrangements);

(iv)    initiated by such person, including any Proceeding (or any part of any Proceeding) initiated by such person against the Company or its directors, officers, employees, agents or other indemnitees, unless (a) the Board authorized the Proceeding (or the relevant part of the Proceeding) prior to its initiation, (b) the Company provides the indemnification, in its sole discretion, pursuant to the powers vested in the Company under applicable law, (c) otherwise required to be made under section 5.7 or (d) otherwise required by applicable law; or

(v)    if prohibited by applicable law.

5.7    Determination; Claim.    If a claim for indemnification or advancement of expenses under this Article V is not paid by the Company or on its behalf within 90 days after receipt by the Company of a written request therefor, the claimant shall be entitled to an adjudication by a court of competent jurisdiction of his or her entitlement to such indemnification or advancement of expenses. To the extent not prohibited by law, the Company shall indemnify such person against all expenses actually and reasonably incurred by such person in connection with any action for indemnification or advancement of expenses from the Company under this Article V, to the extent such person is successful in such action. In any such suit, the Company shall, to the fullest extent not prohibited by law, have the burden of proving that the claimant is not entitled to the requested indemnification or advancement of expenses.

5.8    Non-Exclusivity of Rights.    The indemnification and advancement of expenses provided by, or granted pursuant to, this Article V shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under the certificate of incorporation or any statute, bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person’s official capacity and as to action in another capacity while holding such office. The Company is specifically authorized to enter into individual contracts with any or all of its directors, officers, employees or agents respecting indemnification and advancement of expenses, to the fullest extent not prohibited by the DGCL or other applicable law.

12

5.9    Insurance.    The Company may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Company, or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person’s status as such, whether or not the Company would have the power to indemnify such person against such liability under the provisions of the DGCL.

5.10    Survival.    The rights to indemnification and advancement of expenses conferred by this Article V shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.

5.11    Effect of Repeal or Modification.    A right to indemnification or to advancement of expenses arising under a provision of the certificate of incorporation or a bylaw shall not be eliminated or impaired by an amendment to the certificate of incorporation or these bylaws after the occurrence of the act or omission that is the subject of the civil, criminal, administrative or investigative action, suit or proceeding for which indemnification or advancement of expenses is sought, unless the provision in effect at the time of such act or omission explicitly authorizes such elimination or impairment after such action or omission has occurred.

5.12    Certain Definitions.    For purposes of this Article V, references to the “Company” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Article V with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued. For purposes of this Article V, references to “other enterprises” shall include employee benefit plans; references to “fines” shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to “serving at the request of the Company” shall include any service as a director, officer, employee or agent of the Company which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the Company” as referred to in this Article V.

ARTICLE VI — STOCK

6.1    Stock Certificates; Partly Paid Shares.    The shares of the Company shall be represented by certificates, provided that the Board may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Company. Every holder of stock represented by certificates shall be entitled to have a certificate signed by, or in the name of the Company by the Chairperson of the Board or Vice-Chairperson of the Board, or the President or a Vice-President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the

13

Company representing the number of shares registered in certificate form. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Company with the same effect as if such person were such officer, transfer agent or registrar at the date of issue. The Company shall not have power to issue a certificate in bearer form.

The Company may issue the whole or any part of its shares as partly paid and subject to call for the remainder of the consideration to be paid therefor. Upon the face or back of each stock certificate issued to represent any such partly paid shares, or upon the books and records of the Company in the case of uncertificated partly paid shares, the total amount of the consideration to be paid therefor and the amount paid thereon shall be stated. Upon the declaration of any dividend on fully paid shares, the Company shall declare a dividend upon partly paid shares of the same class, but only upon the basis of the percentage of the consideration actually paid thereon.

6.2    Special Designation on Certificates.    If the Company is authorized to issue more than one class of stock or more than one series of any class, then the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate that the Company shall issue to represent such class or series of stock; provided that, except as otherwise provided in Section 202 of the DGCL, in lieu of the foregoing requirements there may be set forth on the face or back of the certificate that the Company shall issue to represent such class or series of stock, a statement that the Company will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Within a reasonable time after the issuance or transfer of uncertificated stock, the Company shall send to the registered owner thereof a written notice containing the information required to be set forth or stated on certificates pursuant to this section 6.2 or Sections 156, 202(a) or 218(a) of the DGCL or with respect to this section 6.2 a statement that the Company will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Except as otherwise expressly provided by law, the rights and obligations of the holders of uncertificated stock and the rights and obligations of the holders of certificates representing stock of the same class and series shall be identical.

6.3    Lost Certificates.    Except as provided in this section 6.3, no new certificates for shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the Company and cancelled at the same time. The Company may issue a new certificate of stock or uncertificated shares in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Company may require the owner of the lost, stolen or destroyed certificate, or such owner’s legal representative, to give the Company a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares.

6.4    Dividends.    The Board, subject to any restrictions contained in the certificate of incorporation or applicable law, may declare and pay dividends upon the shares of the Company’s capital stock. Dividends may be paid in cash, in property, or in shares of the Company’s capital stock, subject to the provisions of the certificate of incorporation.

14

The Board may set apart out of any of the funds of the Company available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve.

6.5    Stock Transfer Agreements.    The Company shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes of stock of the Company to restrict the transfer of shares of stock of the Company of any one or more classes owned by such stockholders in any manner not prohibited by the DGCL.

6.6    Registered Stockholders.    The Company:

(i)    shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends and to vote as such owner;

(ii)    shall be entitled to hold liable for calls and assessments the person registered on its books as the owner of shares; and

(iii)    shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of another person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.

6.7    Transfers.    Transfers of record of shares of stock of the Company shall be made only upon its books by the holders thereof, in person or by an attorney duly authorized, and, if such stock is certificated, upon the surrender of a certificate or certificates for a like number of shares, properly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer.

6.8    Restrictions on Transfer

(i)    No holder of any of the shares of common stock (excluding common stock issued upon conversion of preferred stock) of the Company may sell, transfer, assign, pledge, or otherwise dispose of or encumber any of the shares of common stock (excluding common stock issued upon conversion of preferred stock) of the Company, or any right or interest therein, whether voluntarily or by operation of law, or by gift or otherwise (each, a “Transfer”) without the prior written consent of the Company, upon duly authorized action of its Board. The Company may withhold consent for any legitimate corporate purpose, as determined by the Board. Examples of the basis for the Company to withhold its consent include, without limitation, if such Transfer: (i) is proposed to be made to individuals, companies or any other form of entity identified by the Company as a potential competitor or considered by the Company to be unfriendly; or (ii) increases the risk of the Company having a class of security held of record by two thousand (2,000) or more persons, or five hundred (500) or more persons who are not accredited investors (as such term is defined by the Securities and Exchange Commission), as described in Section 12(g) of the 1934 Act, and any related regulations, or otherwise requiring the Company to register any class of securities under the 1934 Act; or (iii) would result in the loss of any federal or state securities law exemption relied upon by the Company in connection with the initial issuance of such shares or the issuance of any other securities; or (iv) is facilitated in any manner by any public posting, message board, trading portal, internet site, or similar method of communication, including without limitation any trading portal or internet site intended to facilitate secondary transfers of securities; or (v) is to be effected in a brokered transaction; or (vi) represents a Transfer of less than all of the shares then held by the stockholder and its affiliates; or (vii) is to be made to more than a single transferee.

15

(ii)    If a stockholder desires to Transfer any shares of the Company’s common stock (excluding common stock issued upon conversion of preferred stock) (such shares, the “Transferred Shares”), then the stockholder shall first give written notice thereof to the Company. The notice shall name the proposed transferee and state the number of Transferred Shares to be transferred, the proposed consideration, and all other terms and conditions of the proposed transfer. Any Transferred Shares proposed to be transferred to which Transfer the Company has consented pursuant to section 6.8(i) of this Article VI will thereafter first be subject to the Company’s right of first refusal located in section 6.9 hereof.

(iii)    Any Transfer, or purported Transfer, of Transferred Shares not made in strict compliance with this section 6.8 of this Article VI shall be null and void, shall not be recorded on the books of the Company and shall not be recognized by the Company.

(iv)    The foregoing restriction on Transfer shall terminate upon the date securities of the Company are first offered to the public pursuant to a registration statement filed with, and declared effective by, the United States Securities and Exchange Commission under the Securities Act of 1933, as amended.

(v)    The certificates representing shares of stock of the Company shall bear on their face the following legend so long as the foregoing Transfer restrictions are in effect:

“THE SHARES REPRESENTED BY THIS CERTIFICATE ARE

SUBJECT TO A TRANSFER RESTRICTION, AS PROVIDED IN

THE BYLAWS OF THE COMPANY.”

6.9    Right of First Refusal.    No stockholder shall Transfer any of the shares of common stock (excluding common stock issued upon conversion of preferred stock) of the Company, except by a Transfer which meets the requirements set forth in section 6.8 and below:

(i)    If the stockholder desires to Transfer any of his shares of common stock (excluding common stock issued upon conversion of preferred stock), then the stockholder shall first give the notice specified in section 6.8(ii) hereof and comply with the provisions therein.

(ii)    For thirty (30) days following receipt of such notice, the Company shall have the option to purchase all (but not less than all) of the shares specified in the notice at the price and upon the terms set forth in such notice; provided, however, that, with the consent of the stockholder, the Company shall have the option to purchase a lesser portion of the shares specified in said notice at the price and upon the terms set forth therein. In the event of a gift, property settlement or other Transfer in which the proposed transferee is not paying the full price for the shares, and that is not otherwise exempted from the provisions of this section 6.9, the price shall be deemed to be the fair market value of the stock at such time as determined in good faith by the Board. In the event the Company elects to purchase all of the shares or, with consent of the stockholder, a lesser portion of the shares, it shall give written notice to the transferring stockholder of its election and settlement for said shares shall be made as provided below in paragraph (iv).

(iii)    The Company may assign its rights hereunder.

(iv)    In the event the Company and/or its assignee(s) elect to acquire any of the shares of the transferring stockholder as specified in said transferring stockholder’s notice, the Secretary of the Company shall so notify the transferring stockholder and settlement thereof shall be made in cash within

16

thirty (30) days after the Secretary of the Company receives said transferring stockholder’s notice; provided that if the terms of payment set forth in said transferring stockholder’s notice were other than cash against delivery, the Company and/or its assignee(s) shall pay for said shares on the same terms and conditions set forth in said transferring stockholder’s notice.

(v)    In the event the Company and/or its assignees(s) do not elect to acquire all of the shares specified in the transferring stockholder’s notice, said transferring stockholder may, subject to the Company’s approval and all other restrictions on Transfer located in section 6.8 hereof, within the sixty (60) day period following the expiration or waiver of the option rights granted to the Company and/or its assignees(s) herein, Transfer the shares specified in said transferring stockholder’s notice which were not acquired by the Company and/or its assignees(s) as specified in said transferring stockholder’s notice. All shares so sold by said transferring stockholder shall continue to be subject to the provisions of this bylaw in the same manner as before said Transfer.

(vi)    Anything to the contrary contained herein notwithstanding, the following transactions shall be exempt from the right of first refusal in section 6.9(a):

(a)    A stockholder’s Transfer of any or all shares held either during such stockholder’s lifetime or on death by will or intestacy to such stockholder’s immediate family or to any custodian or trustee for the account of such stockholder or such stockholder’s immediate family or to any limited partnership of which the stockholder, members of such stockholder’s immediate family or any trust for the account of such stockholder or such stockholder’s immediate family will be the general or limited partner(s) of such partnership. “Immediate family” as used herein shall mean spouse, domestic partner, lineal descendant, father, mother, brother, or sister of the stockholder making such Transfer;

(b)    A stockholder’s bona fide pledge or mortgage of any shares with a commercial lending institution, provided that any subsequent Transfer of said shares by said institution shall be conducted in the manner set forth in this bylaw;

(c)    A stockholder’s Transfer of any or all of such stockholder’s shares to the Company or to any other stockholder of the Company;

(d)    A stockholder’s Transfer of any or all of such stockholder’s shares to a person who, at the time of such Transfer, is an officer or director of the Company;

(e)    A corporate stockholder’s Transfer of any or all of its shares pursuant to and in accordance with the terms of any merger, consolidation, reclassification of shares or capital reorganization of such corporate stockholder, or pursuant to a sale of all or substantially all of the stock or assets of such corporate stockholder;

(f)    A corporate stockholder’s Transfer of any or all of its shares to any or all of its stockholders; or

(g)    A Transfer by a stockholder which is a limited or general partnership to any or all of its partners or former partners in accordance with partnership interests.

In any such case, the transferee, assignee, or other recipient shall receive and hold such stock subject to the provisions of this section 6.9 and the transfer restrictions in section 6.8, and there shall be no further Transfer of such stock except in accord with this bylaw and the transfer restrictions in section 6.8.

17

(vii)    The provisions of this bylaw may be waived with respect to any Transfer either by the Company, upon duly authorized action of its Board, or by the stockholders, upon the express written consent of the owners of a majority of the voting power of the Company (excluding the votes represented by those shares to be transferred by the transferring stockholder). This bylaw may be amended or repealed either by a duly authorized action of the Board or by the stockholders, upon the express written consent of the owners of a majority of the voting power of the Company.

(viii)    Any Transfer, or purported Transfer, of securities of the Company shall be null and void unless the terms, conditions, and provisions of this bylaw are strictly observed and followed.

(ix)    The foregoing right of first refusal shall terminate upon the date securities of the Company are first offered to the public pursuant to a registration statement filed with, and declared effective by, the United States Securities and Exchange Commission under the Securities Act of 1933, as amended.

(x)    The certificates representing shares of stock of the Company shall bear on their face the following legend so long as the foregoing right of first refusal remains in effect:

“THE SHARES REPRESENTED BY THIS CERTIFICATE ARE

SUBJECT TO A RIGHT OF FIRST REFUSAL OPTION IN FAVOR

OF THE COMPANY AND/OR ITS ASSIGNEE(S), AS PROVIDED IN

THE BYLAWS OF THE COMPANY.”

ARTICLE VII— MANNER OF GIVING NOTICE AND WAIVER

7.1    Notice of Stockholder Meetings.    Notice of any meeting of stockholders, if mailed, is given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder’s address as it appears on the Company’s records. An affidavit of the Secretary or an Assistant Secretary of the Company or of the transfer agent or other agent of the Company that the notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

7.2    Notice by Electronic Transmission.    Without limiting the manner by which notice otherwise may be given effectively to stockholders pursuant to the DGCL, the certificate of incorporation or these bylaws, any notice to stockholders given by the Company under any provision of the DGCL, the certificate of incorporation or these bylaws shall be effective if given by a form of electronic transmission consented to by the stockholder to whom the notice is given. Any such consent shall be revocable by the stockholder by written notice to the Company. Any such consent shall be deemed revoked if:

(i)    the Company is unable to deliver by electronic transmission two consecutive notices given by the Company in accordance with such consent; and

(ii)    such inability becomes known to the Secretary or an Assistant Secretary of the Company or to the transfer agent, or other person responsible for the giving of notice.

However, the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action.

Any notice given pursuant to the preceding paragraph shall be deemed given:

18

(i)    if by facsimile telecommunication, when directed to a number at which the stockholder has consented to receive notice;

(ii)    if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice;

(iii)    if by a posting on an electronic network together with separate notice to the stockholder of such specific posting, upon the later of (A) such posting and (B) the giving of such separate notice; and

(iv)    if by any other form of electronic transmission, when directed to the stockholder.

An affidavit of the Secretary or an Assistant Secretary or of the transfer agent or other agent of the Company that the notice has been given by a form of electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

An “electronic transmission” means any form of communication, not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved, and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process.

Notice by a form of electronic transmission shall not apply to Sections 164, 296, 311, 312 or 324 of the DGCL.

7.3    Notice to Stockholders Sharing an Address.    Except as otherwise prohibited under the DGCL, without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to stockholders given by the Company under the provisions of the DGCL, the certificate of incorporation or these bylaws shall be effective if given by a single written notice to stockholders who share an address if consented to by the stockholders at that address to whom such notice is given. Any such consent shall be revocable by the stockholder by written notice to the Company. Any stockholder who fails to object in writing to the Company, within 60 days of having been given written notice by the Company of its intention to send the single notice, shall be deemed to have consented to receiving such single written notice.

7.4    Notice to Person with Whom Communication is Unlawful.    Whenever notice is required to be given, under the DGCL, the certificate of incorporation or these bylaws, to any person with whom communication is unlawful, the giving of such notice to such person shall not be required and there shall be no duty to apply to any governmental authority or agency for a license or permit to give such notice to such person. Any action or meeting which shall be taken or held without notice to any such person with whom communication is unlawful shall have the same force and effect as if such notice had been duly given. In the event that the action taken by the Company is such as to require the filing of a certificate under the DGCL, the certificate shall state, if such is the fact and if notice is required, that notice was given to all persons entitled to receive notice except such persons with whom communication is unlawful.

7.5    Waiver of Notice.    Whenever notice is required to be given under any provision of the DGCL, the certificate of incorporation or these bylaws, a written waiver, signed by the person entitled to notice, or a waiver by electronic transmission by the person entitled to notice, whether before or after the time of the event for which notice is to be given, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice or any waiver by electronic transmission unless so required by the certificate of incorporation or these bylaws.

19

ARTICLE VIII — GENERAL MATTERS

8.1    Fiscal Year.    The fiscal year of the Company shall be fixed by resolution of the Board and may be changed by the Board.

8.2    Seal.    The Company may adopt a corporate seal, which shall be in such form as may be approved from time to time by the Board. The Company may use the corporate seal by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced.

8.3    Annual Report.    The Company shall cause an annual report to be sent to the stockholders of the Company to the extent required by applicable law. If and so long as there are fewer than 100 holders of record of the Company’s shares, the requirement of sending an annual report to the stockholders of the Company is expressly waived (to the extent permitted under applicable law).

8.4    Construction; Definitions.    Unless the context requires otherwise, the general provisions, rules of construction, and definitions in the DGCL shall govern the construction of these bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, and the term “person” includes both a corporation and a natural person.

ARTICLE IX — AMENDMENTS

These bylaws may be adopted, amended or repealed by the stockholders entitled to vote. However, the Company may, in its certificate of incorporation, confer the power to adopt, amend or repeal bylaws upon the directors. The fact that such power has been so conferred upon the directors shall not divest the stockholders of the power, nor limit their power to adopt, amend or repeal bylaws.

A bylaw amendment adopted by stockholders which specifies the votes that shall be necessary for the election of directors shall not be further amended or repealed by the Board.

20

EX-3.5

Exhibit 3.5

AMENDED AND RESTATED BYLAWS OF

SATSUMA PHARMACEUTICALS, INC.

(a Delaware corporation)

TABLE OF CONTENTS

		Page
ARTICLE I - CORPORATE OFFICES			1
1.1	REGISTERED OFFICE		1
1.2	OTHER OFFICES		1
ARTICLE II - MEETINGS OF STOCKHOLDERS			1
2.1	PLACE OF MEETINGS		1
2.2	ANNUAL MEETING		1
2.3	SPECIAL MEETING		1
2.4	ADVANCE NOTICE PROCEDURES FOR BUSINESS BROUGHT BEFORE A MEETING		2
2.5	ADVANCE NOTICE PROCEDURES FOR NOMINATIONS OF DIRECTORS		6
2.6	NOTICE OF STOCKHOLDERS’ MEETINGS		10
2.7	MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE		10
2.8	QUORUM		10
2.9	ADJOURNED MEETING; NOTICE		10
2.10	CONDUCT OF BUSINESS		11
2.11	VOTING		11
2.12	NO STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING		12
2.13	RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS		12
2.14	PROXIES		13
2.15	LIST OF STOCKHOLDERS ENTITLED TO VOTE		13
2.16	INSPECTORS OF ELECTION		13
ARTICLE III - DIRECTORS			14
3.1	POWERS		14
3.2	NUMBER OF DIRECTORS		14
3.3	ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS		14
3.4	RESIGNATION AND VACANCIES		15
3.5	PLACE OF MEETINGS; MEETINGS BY TELEPHONE		15
3.6	REGULAR MEETINGS		15
3.7	SPECIAL MEETINGS; NOTICE		15
3.8	QUORUM		16
3.9	BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING		16
3.10	FEES AND COMPENSATION OF DIRECTORS		16
3.11	REMOVAL OF DIRECTORS		16
ARTICLE IV - COMMITTEES			17
4.1	COMMITTEES OF DIRECTORS		17
4.2	COMMITTEE MINUTES		17
4.3	MEETINGS AND ACTION OF COMMITTEES		17

-i-

TABLE OF CONTENTS

(continued)

		Page
ARTICLE V - OFFICERS			18
5.1	OFFICERS		18
5.2	APPOINTMENT OF OFFICERS		18
5.3	SUBORDINATE OFFICERS		18
5.4	REMOVAL AND RESIGNATION OF OFFICERS		18
5.5	VACANCIES IN OFFICES		19
5.6	REPRESENTATION OF SHARES OF OTHER CORPORATIONS		19
5.7	AUTHORITY AND DUTIES OF OFFICERS		19
ARTICLE VI - RECORDS AND REPORTS			19
6.1	MAINTENANCE AND INSPECTION OF RECORDS		19
6.2	INSPECTION BY DIRECTORS		20
ARTICLE VII - GENERAL MATTERS			20
7.1	EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS		20
7.2	STOCK CERTIFICATES; PARTLY PAID SHARES		20
7.3	SPECIAL DESIGNATION ON CERTIFICATES		21
7.4	LOST CERTIFICATES		21
7.5	CONSTRUCTION; DEFINITIONS		21
7.6	DIVIDENDS		22
7.7	FISCAL YEAR		22
7.8	SEAL		22
7.9	TRANSFER OF STOCK		22
7.10	STOCK TRANSFER AGREEMENTS		22
7.11	REGISTERED STOCKHOLDERS		23
7.12	WAIVER OF NOTICE		23
ARTICLE VIII - NOTICE BY ELECTRONIC TRANSMISSION			23
8.1	NOTICE BY ELECTRONIC TRANSMISSION		23
ARTICLE IX - INDEMNIFICATION			23
9.1	INDEMNIFICATION OF DIRECTORS AND OFFICERS		23
9.2	INDEMNIFICATION OF OTHERS		24
9.3	PREPAYMENT OF EXPENSES		24
9.4	DETERMINATION; CLAIM		24
9.5	NON-EXCLUSIVITY OF RIGHTS		24
9.6	INSURANCE		25
9.7	OTHER INDEMNIFICATION		25
9.8	CONTINUATION OF INDEMNIFICATION		25
ARTICLE X - AMENDMENTS			26
ARTICLE XI - FORUM SELECTION			26

-ii-

AMENDED AND RESTATED

BYLAWS OF

SATSUMA PHARMACEUTICALS, INC.

(Adopted             , 2019)

(Effective as of             , 2019)

ARTICLE I - CORPORATE OFFICES

1.1    REGISTERED OFFICE.

The registered office of Satsuma Pharmaceuticals, Inc. (the “Corporation”) shall be fixed in the Corporation’s certificate of incorporation, as the same may be amended from time to time (the “Certificate of Incorporation”).

1.2    OTHER OFFICES.

The Corporation’s board of directors (the “Board”) may at any time establish other offices at any place or places where the Corporation is qualified to do business.

ARTICLE II - MEETINGS OF STOCKHOLDERS

2.1    PLACE OF MEETINGS.

Meetings of stockholders shall be held at any place, within or outside the State of Delaware, designated by the Board. The Board may, in its sole discretion, determine that a meeting of stockholders shall not be held at any place, but may instead be held solely by means of remote communication as authorized by Section 211(a)(2) of the General Corporation Law of the State of Delaware (the “DGCL”). In the absence of any such designation or determination, stockholders’ meetings shall be held at the Corporation’s principal executive office.

2.2    ANNUAL MEETING.

The Board shall designate the date and time of the annual meeting. At the annual meeting, directors shall be elected and other proper business properly brought before the meeting in accordance with Section 2.4 may be transacted. The Corporation may postpone, reschedule or cancel any annual meeting of stockholders previously scheduled by the Board

2.3    SPECIAL MEETING.

Except as otherwise provided by the Certificate of Incorporation, a special meeting of the stockholders may be called at any time by the Board, chief executive officer or president (in the absence of a chief executive officer), but such special meetings may not be called by the stockholders or any other person or persons.

No business may be transacted at such special meeting other than the business specified in the notice to stockholders. Nothing contained in this paragraph of this Section 2.3 shall be construed as limiting, fixing, or affecting the time when a meeting of stockholders called by action of the Board may be held. The Corporation may postpone, reschedule or cancel any special meeting of stockholders previously scheduled by the Chair of the Board or by the Secretary of the Corporation upon direction of the Board.

2.4    ADVANCE NOTICE PROCEDURES FOR BUSINESS BROUGHT BEFORE A MEETING.

(i)    At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be (a) specified in a notice of meeting given by or at the direction of the Board, (b) if not specified in a notice of meeting, otherwise brought before the meeting by or at the direction of the Board or the chairperson of the Board, or (c) otherwise properly brought before the meeting by a stockholder present in person who (A)(1) was a beneficial owner of shares of the Corporation both at the time of giving the notice provided for in this Section 2.4 and at the time of the meeting, (2) is entitled to vote at the meeting and (3) has complied with this Section 2.4 in all applicable respects, or (B) properly made such proposal in accordance with Rule 14a-8 under the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (as so amended and inclusive of such rules and regulations, the “Exchange Act”). The foregoing clause (c) shall be the exclusive means for a stockholder to propose business to be brought before an annual meeting of the stockholders. The only matters that may be brought before a special meeting are the matters specified in the notice of meeting given by or at the direction of the person calling the meeting pursuant to Section 2.3 of these bylaws, and stockholders shall not be permitted to propose business to be brought before a special meeting of the stockholders. For purposes of this Section 2.4, “present in person” shall mean that the stockholder proposing that the business be brought before the annual meeting of the Corporation, or, if the proposing stockholder is not an individual, a qualified representative of such proposing stockholder, appear at such annual meeting. A “qualified representative” of such proposing stockholder shall be, if such proposing stockholder is (x) a general or limited partnership, any general partner or person who functions as a general partner of the general or limited partnership or who controls the general or limited partnership, (y) a corporation or a limited liability company, any officer or person who functions as an officer of the corporation or limited liability company or any officer, director, general partner or person who functions as an officer, director or general partner of any entity ultimately in control of the corporation or limited liability company or (z) a trust, any trustee of such trust. Stockholders seeking to nominate persons for election to the Board must comply with Section 2.5 of these bylaws, and this Section 2.4 shall not be applicable to nominations except as expressly provided in Section 2.5 of these bylaws.

-2-

(ii)    For business to be properly brought before an annual meeting by a stockholder, the stockholder must (a) provide Timely Notice (as defined below) thereof in writing and in proper form to the Secretary of the Corporation and (b) provide any updates or supplements to such notice at the times and in the forms required by this Section 2.4. To be timely, a stockholder’s notice must be delivered to, or mailed and received at, the principal executive offices of the Corporation not less than ninety (90) days nor more than one hundred twenty (120) days prior to the one-year anniversary of the preceding year’s annual meeting; provided, however, that if the date of the annual meeting is more than thirty (30) days before or more than sixty (60) days after such anniversary date, notice by the stockholder to be timely must be so delivered, or mailed and received, not later than the ninetieth (90^th) day prior to such annual meeting or, if later, the tenth (10^th) day following the day on which public disclosure of the date of such annual meeting was first made (such notice within such time periods, “Timely Notice”). In no event shall any adjournment or postponement of an annual meeting or the announcement thereof commence a new time period for the giving of Timely Notice as described above.

(iii)    To be in proper form for purposes of this Section 2.4, a stockholder’s notice to the Secretary shall set forth:

(a)    As to each Proposing Person (as defined below), (A) the name and address of such Proposing Person (including, if applicable, the name and address that appear on the Corporation’s books and records); and (B) the class or series and number of shares of the Corporation that are, directly or indirectly, owned of record or beneficially owned (within the meaning of Rule 13d-3 under the Exchange Act) by such Proposing Person, except that such Proposing Person shall in all events be deemed to beneficially own any shares of any class or series of the Corporation as to which such Proposing Person has a right to acquire beneficial ownership at any time in the future (the disclosures to be made pursuant to the foregoing clauses (A) and (B) are referred to as “Stockholder Information”);

(b)    As to each Proposing Person, (A) the full notional amount of any securities that, directly or indirectly, underlie any “derivative security” (as such term is defined in Rule 16a-1(c) under the Exchange Act) that constitutes a “call equivalent position” (as such term is defined in Rule 16a-1(b) under the Exchange Act) (“Synthetic Equity Position”) and that is, directly or indirectly, held or maintained by such Proposing Person with respect to any shares of any class or series of shares of the Corporation; provided that, for the purposes of the definition of “Synthetic Equity Position,” the term “derivative security” shall also include any security or instrument that would not otherwise constitute a “derivative security” as a result of any feature that would make any conversion, exercise or similar right or privilege of such security or instrument becoming determinable only at some future date or upon the happening of a future occurrence, in which case the determination of the amount of securities into which such security or instrument would be convertible or exercisable shall be made assuming that such security or instrument is immediately convertible or exercisable at the time of such determination; and, provided, further, that any Proposing Person satisfying the requirements of Rule 13d-1(b)(1) under the Exchange Act (other than a Proposing Person that so satisfies Rule 13d-1(b)(1) under the

-3-

Exchange Act solely by reason of Rule 13d-1(b)(1)(ii)(E)) shall not be deemed to hold or maintain the notional amount of any securities that underlie a Synthetic Equity Position held by such Proposing Person as a hedge with respect to a bona fide derivatives trade or position of such Proposing Person arising in the ordinary course of such Proposing Person’s business as a derivatives dealer, (B) any rights to dividends on the shares of any class or series of shares of the Corporation owned beneficially by such Proposing Person that are separated or separable from the underlying shares of the Corporation, (C)(x) if such Proposing Person is (i) a general or limited partnership, syndicate or other group, the identity of each general partner and each person who functions as a general partner of the general or limited partnership, each member of the syndicate or group and each person controlling the general partner or member, (ii) a corporation or a limited liability company, the identity of each officer and each person who functions as an officer of the corporation or limited liability company, each person controlling the corporation or limited liability company and each officer, director, general partner and person who functions as an officer, director or general partner of any entity ultimately in control of the corporation or limited liability company or (iii) a trust, any trustee of such trust (each such person or persons set forth in the preceding clauses (i), (ii) and (iii), a “Responsible Person”), any fiduciary duties owed by such Responsible Person to the equity holders or other beneficiaries of such Proposing Person and any material interests or relationships of such Responsible Person that are not shared generally by other record or beneficial holders of the shares of any class or series of the Corporation and that reasonably could have influenced the decision of such Proposing Person to propose such business to be brought before the meeting, and (y) if such Proposing Person is a natural person, any material interests or relationships of such natural person that are not shared generally by other record or beneficial holders of the shares of any class or series of the Corporation and that reasonably could have influenced the decision of such Proposing Person to propose such business to be brought before the meeting, (D) any material shares or any Synthetic Equity Position in any principal competitor of the Corporation in any principal industry of the Corporation held by such Proposing Persons, (E) a summary of any material discussions regarding the business proposed to be brought before the meeting (x) between or among any of the Proposing Persons or (y) between or among any Proposing Person and any other record or beneficial holder of the shares of any class or series of the Corporation (including their names), (F) any material pending or threatened legal proceeding in which such Proposing Person is a party or material participant involving the Corporation or any of its officers or directors, or any affiliate of the Corporation, (G) any other material relationship between such Proposing Person, on the one hand, and the Corporation, any affiliate of the Corporation or any principal competitor of the Corporation, on the other hand, (H) any direct or indirect material interest in any material contract or agreement of such Proposing Person with the Corporation, any affiliate of the Corporation or any principal competitor of the Corporation (including, in any such case, any employment agreement, collective bargaining agreement or consulting agreement) and (I) any other information relating

-4-

to such Proposing Person that would be required to be disclosed in a proxy statement or other filing required to be made in connection with solicitations of proxies or consents by such Proposing Person in support of the business proposed to be brought before the meeting pursuant to Section 14(a) of the Exchange Act (the disclosures to be made pursuant to the foregoing clauses (A) through (I) are referred to as “Disclosable Interests”); provided, however, that Disclosable Interests shall not include any such disclosures with respect to the ordinary course business activities of any broker, dealer, commercial bank, trust company or other nominee who is a Proposing Person solely as a result of being the stockholder directed to prepare and submit the notice required by these bylaws on behalf of a beneficial owner; and

(c)    As to each item of business that the stockholder proposes to bring before the annual meeting, (A) a brief description of the business desired to be brought before the annual meeting, the reasons for conducting such business at the annual meeting and any material interest in such business of each Proposing Person, (B) the text of the proposal or business (including the text of any resolutions proposed for consideration and in the event that such business includes a proposal to amend the bylaws of the Corporation, the language of the proposed amendment), (C) a reasonably detailed description of all agreements, arrangements and understandings between or among any of the Proposing Persons or between or among any Proposing Person and any other person or entity (including their names) in connection with the proposal of such business by such stockholder and (D) any other information relating to such item of business that would be required to be disclosed in a proxy statement or other filing required to be made in connection with solicitations of proxies in support of the business proposed to be brought before the meeting pursuant to Section 14(a) of the Exchange Act; provided, however, that the disclosures required by this Section 2.4(iii) shall not include any disclosures with respect to any broker, dealer, commercial bank, trust company or other nominee who is a Proposing Person solely as a result of being the stockholder directed to prepare and submit the notice required by these bylaws on behalf of a beneficial owner.

(iv)    For purposes of this Section 2.4, the term “Proposing Person” shall mean (a) the stockholder providing the notice of business proposed to be brought before an annual meeting, (b) the beneficial owner or beneficial owners, if different, on whose behalf the notice of the business proposed to be brought before the annual meeting is made and (c) any participant (as defined in paragraphs (a)(ii)-(vi) of Instruction 3 to Item 4 of Schedule 14A) with such stockholder in such solicitation or associate (within the meaning of Rule 12b-2 under the Exchange Act for the purposes of these bylaws) of such stockholder or beneficial owner.

(v)    A Proposing Person shall update and supplement its notice to the Corporation of its intent to propose business at an annual meeting, if necessary, so that the information provided or required to be provided in such notice pursuant to this Section 2.4 shall be true and correct as of the record date for notice of the meeting and as of the date that is ten (10) business days prior to the meeting or any adjournment or postponement thereof, and such update and supplement shall be

-5-

delivered to, or mailed and received by, the Secretary at the principal executive offices of the Corporation not later than five (5) business days after the record date for notice of the meeting (in the case of the update and supplement required to be made as of such record date), and not later than eight (8) business days prior to the date for the meeting or, if practicable, any adjournment or postponement thereof (and, if not practicable, on the first practicable date prior to the date to which the meeting has been adjourned or postponed) (in the case of the update and supplement required to be made as of ten (10) business days prior to the meeting or any adjournment or postponement thereof).

(vi)    Notwithstanding anything in these bylaws to the contrary, no business shall be conducted at an annual meeting that is not properly brought before the meeting in accordance with this Section 2.4. The presiding officer of the meeting shall, if the facts warrant, determine that the business was not properly brought before the meeting in accordance with this Section 2.4, and if he or she should so determine, he or she shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted.

(vii)    This Section 2.4 is expressly intended to apply to any business proposed to be brought before an annual meeting of stockholders, other than any proposal made in accordance with Rule 14a-8 under the Exchange Act and included in the Corporation’s proxy statement. In addition to the requirements of this Section 2.4 with respect to any business proposed to be brought before an annual meeting, each Proposing Person shall comply with all applicable requirements of the Exchange Act with respect to any such business. Nothing in this Section 2.4 shall be deemed to affect the rights of stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act.

(viii)    For purposes of these bylaws, “public disclosure” shall mean disclosure in a press release reported by a national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) of the Exchange Act.

2.5    ADVANCE NOTICE PROCEDURES FOR NOMINATIONS OF DIRECTORS.

(i)    Nominations of any person for election to the Board at an annual meeting or at a special meeting (but only if the election of directors is a matter specified in the notice of meeting given by or at the direction of the person calling such special meeting) may be made at such meeting only (a) by or at the direction of the Board, including by any committee or persons authorized to do so by the Board or these bylaws, or (b) by a stockholder present in person (A) who was a beneficial owner of shares of the Corporation both at the time of giving the notice provided for in this Section 2.5 and at the time of the meeting, (B) is entitled to vote at the meeting and (C) has complied with this Section 2.5 as to such notice and nomination. The foregoing clause (b) shall be the exclusive means for a stockholder to make any nomination of a person or persons for election to the Board at an annual meeting or special meeting. For purposes of this Section 2.5, “present in person” shall mean that the stockholder proposing that the business be brought before the meeting of the Corporation, or, if the proposing stockholder is not an individual, a qualified representative of such

-6-

stockholder, appear at such meeting. A “qualified representative” of such proposing stockholder shall be, if such proposing stockholder is (x) a general or limited partnership, any general partner or person who functions as a general partner of the general or limited partnership or who controls the general or limited partnership, (y) a corporation or a limited liability company, any officer or person who functions as an officer of the corporation or limited liability company or any officer, director, general partner or person who functions as an officer, director or general partner of any entity ultimately in control of the corporation or limited liability company or (z) a trust, any trustee of such trust.

(ii)    Without qualification, for a stockholder to make any nomination of a person or persons for election to the Board at an annual meeting, the stockholder must (a) provide Timely Notice (as defined in Section 2.4(ii) of these bylaws) thereof in writing and in proper form to the Secretary of the Corporation, (b) provide the information with respect to such stockholder and its proposed nominee as required by this Section 2.5, and (c) provide any updates or supplements to such notice at the times and in the forms required by this Section 2.5. Without qualification, if the election of directors is a matter specified in the notice of meeting given by or at the direction of the person calling such special meeting, then for a stockholder to make any nomination of a person or persons for election to the Board at a special meeting, the stockholder must (a) provide timely notice thereof in writing and in proper form to the Secretary of the Corporation at the principal executive offices of the Corporation, (b) provide the information with respect to such stockholder and its proposed nominee as required by this Section 2.5, and (c) provide any updates or supplements to such notice at the times and in the forms required by this Section 2.5. To be timely, a stockholder’s notice for nominations to be made at a special meeting must be delivered to, or mailed and received at, the principal executive offices of the Corporation not earlier than the one hundred twentieth (120^th) day prior to such special meeting and not later than the ninetieth (90^th) day prior to such special meeting or, if later, the tenth (10^th) day following the day on which public disclosure (as defined in Section 2.4(ix) of these bylaws) of the date of such special meeting was first made. In no event shall any adjournment or postponement of an annual meeting or special meeting or the announcement thereof commence a new time period for the giving of a stockholder’s notice as described above.

(iii)    To be in proper form for purposes of this Section 2.5, a stockholder’s notice to the Secretary shall set forth:

(a)    As to each Nominating Person (as defined below), the Stockholder Information (as defined in Section 2.4(iii)(a) of these bylaws) except that for purposes of this Section 2.5, the term “Nominating Person” shall be substituted for the term “Proposing Person” in all places it appears in Section 2.4(iii)(a);

(b)    As to each Nominating Person, any Disclosable Interests (as defined in Section 2.4(iii)(b), except that for purposes of this Section 2.5 the term “Nominating Person” shall be substituted for the term “Proposing Person” in all places it appears in Section 2.4(iii)(b) and the disclosure with respect to the business to be brought before the meeting in Section 2.4(iii)(b) shall be made with respect to the election of directors at the meeting);

-7-

(c)    As to each person whom a Nominating Person proposes to nominate for election as a director, (A) all information with respect to such proposed nominee that would be required to be set forth in a stockholder’s notice pursuant to this Section 2.5 if such proposed nominee were a Nominating Person, (B) all information relating to such proposed nominee that is required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors in a contested election pursuant to Section 14(a) under the Exchange Act (including such proposed nominee’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected), (C) a description of any direct or indirect material interest in any material contract or agreement between or among any Nominating Person, on the one hand, and each proposed nominee or his or her respective associates or any other participants in such solicitation, on the other hand, including, without limitation, all information that would be required to be disclosed pursuant to Item 404 under Regulation S-K if such Nominating Person were the “registrant” for purposes of such rule and the proposed nominee were a director or executive officer of such registrant (the disclosures to be made pursuant to the foregoing clauses (A) through (C) are referred to as “Nominee Information”), and (D) a completed and signed questionnaire, representation and agreement as provided in Section 2.5(vi); and

(d)    The Corporation may require any proposed nominee to furnish such other information (A) as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as an independent director of the Corporation in accordance with the Corporation’s Corporate Governance Guidelines or (B) that could be material to a reasonable stockholder’s understanding of the independence or lack of independence of such proposed nominee.

(iv)    For purposes of this Section 2.5, the term “Nominating Person” shall mean (a) the stockholder providing the notice of the nomination proposed to be made at the meeting, (b) the beneficial owner or beneficial owners, if different, on whose behalf the notice of the nomination proposed to be made at the meeting is made and (c) any associate of such stockholder or beneficial owner or any other participant in such solicitation.

(v)    A stockholder providing notice of any nomination proposed to be made at a meeting shall further update and supplement such notice, if necessary, so that the information provided or required to be provided in such notice pursuant to this Section 2.5 shall be true and correct as of the record date for notice of the meeting and as of the date that is ten (10) business days prior to the meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to, or mailed and received by, the Secretary at the principal executive offices of the Corporation not later than five (5) business days after the record date for notice of the meeting (in the case of the update and supplement required to be made as of such record date), and not later

-8-

than eight (8) business days prior to the date for the meeting or, if practicable, any adjournment or postponement thereof (and, if not practicable, on the first practicable date prior to the date to which the meeting has been adjourned or postponed) (in the case of the update and supplement required to be made as of ten (10) business days prior to the meeting or any adjournment or postponement thereof).

(vi)    To be eligible to be a nominee for election as a director of the Corporation at an annual or special meeting, the proposed nominee must be nominated in the manner prescribed in Section 2.5 and must deliver (in accordance with the time period prescribed for delivery in a notice to such proposed nominee given by or on behalf of the Board), to the Secretary at the principal executive offices of the Corporation, (a) a completed written questionnaire (in a form provided by the Corporation) with respect to the background, qualifications, stock ownership and independence of such proposed nominee and (b) a written representation and agreement (in form provided by the Corporation) that such proposed nominee (A) is not and, if elected as a director during his or her term of office, will not become a party to (1) any agreement, arrangement or understanding with, and has not given and will not give any commitment or assurance to, any person or entity as to how such proposed nominee, if elected as a director of the Corporation, will act or vote on any issue or question (a “Voting Commitment”) or (2) any Voting Commitment that could limit or interfere with such proposed nominee’s ability to comply, if elected as a director of the Corporation, with such proposed nominee’s fiduciary duties under applicable law, (B) is not, and will not become a party to, any agreement, arrangement or understanding with any person or entity other than the Corporation with respect to any direct or indirect compensation or reimbursement for service as a director and (C) if elected as a director of the Corporation, will comply with all applicable corporate governance, conflict of interest, confidentiality, stock ownership and trading and other policies and guidelines of the Corporation applicable to directors and in effect during such person’s term in office as a director (and, if requested by any proposed nominee, the Secretary of the Corporation shall provide to such proposed nominee all such policies and guidelines then in effect).

(vii)    In addition to the requirements of this Section 2.5 with respect to any nomination proposed to be made at a meeting, each Proposing Person shall comply with all applicable requirements of the Exchange Act with respect to any such nominations.

(viii)    No proposed nominee shall be eligible for nomination as a director of the Corporation unless such proposed nominee and the Nominating Person seeking to place such proposed nominee’s name in nomination have complied with this Section 2.5, as applicable. The presiding officer at the meeting shall, if the facts warrant, determine that a nomination was not properly made in accordance with this Section 2.5, and if he or she should so determine, he or she shall so declare such determination to the meeting, the defective nomination shall be disregarded and any ballots cast for the proposed nominee in question (but in the case of any form of ballot listing other qualified nominees, only the ballots cast for the nominee in question) shall be void and of no force or effect.

-9-

2.6    NOTICE OF STOCKHOLDERS’ MEETINGS.

Unless otherwise provided by law, the Certificate of Incorporation or these bylaws, the notice of any meeting of stockholders shall be sent or otherwise given in accordance with either Section 2.7 or Section 8.1 of these bylaws not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting. The notice shall specify the place, if any, date and hour of the meeting, the means of remote communication, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called.

2.7    MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE.

Notice of any meeting of stockholders shall be deemed given:

(i)    if mailed, when deposited in the U.S. mail, postage prepaid, directed to the stockholder at his or her address as it appears on the Corporation’s records; or

(ii)    if electronically transmitted as provided in Section 8.1 of these bylaws.

An affidavit of the secretary or an assistant secretary of the Corporation or of the transfer agent or any other agent of the Corporation that the notice has been given by mail or by a form of electronic transmission, as applicable, shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

2.8    QUORUM.

Unless otherwise provided by law, the Certificate of Incorporation or these bylaws, the holders of a majority in voting power of the stock issued and outstanding and entitled to vote, present in person, or by remote communication, if applicable, or represented by proxy, shall constitute a quorum for the transaction of business at all meetings of the stockholders. If, however, a quorum is not present or represented at any meeting of the stockholders, then either (i) the chairperson of the meeting or (ii) a majority in voting power of the stockholders entitled to vote at the meeting, present in person, or by remote communication, if applicable, or represented by proxy, shall have power to adjourn the meeting from time to time in the manner provided in Section 2.9 of these bylaws until a quorum is present or represented. At such adjourned meeting at which a quorum is present or represented, any business may be transacted that might have been transacted at the meeting as originally noticed.

2.9    ADJOURNED MEETING; NOTICE.

When a meeting is adjourned to another time or place, unless these bylaws otherwise require, notice need not be given of the adjourned meeting if the time, place, if any, thereof, and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the Corporation may transact any business which

-10-

might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

2.10    CONDUCT OF BUSINESS.

The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced at the meeting by the chair of the meeting. The Board may adopt by resolution such rules and regulations for the conduct of the meeting of stockholders as it shall deem appropriate. Except to the extent inconsistent with such rules and regulations as adopted by the Board, the chair of any meeting of stockholders shall have the right and authority to convene and (for any or no reason) to recess and/or adjourn the meeting, to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chair of the meeting, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board or prescribed by the chair of the meeting, may include, without limitation, the following: (i) the establishment of an agenda or order of business for the meeting; (ii) rules and procedures for maintaining order at the meeting and the safety of those present; (iii) limitations on attendance at or participation in the meeting to stockholders entitled to vote at the meeting, their duly authorized and constituted proxies or such other persons as the presiding person of the meeting shall determine; (iv) restrictions on entry to the meeting after the time fixed for the commencement thereof; and (v) limitations on the time allotted to questions or comments by participants. The chair of any meeting of stockholders, in addition to making any other determinations that may be appropriate to the conduct of the meeting, shall, if the facts warrant, determine and declare to the meeting that a matter or business was not properly brought before the meeting and if such chair of the meeting should so determine, such chair of the meeting shall so declare to the meeting and any such matter or business not properly brought before the meeting shall not be transacted or considered. Unless and to the extent determined by the Board or the chair of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.

2.11    VOTING.

The stockholders entitled to vote at any meeting of stockholders shall be determined in accordance with the provisions of Section 2.13 of these bylaws, subject to Section 217 (relating to voting rights of fiduciaries, pledgors and joint owners of stock) and Section 218 (relating to voting trusts and other voting agreements) of the DGCL.

Except as may be otherwise provided in the Certificate of Incorporation or these bylaws, each stockholder entitled to vote at a meeting of stockholders shall be entitled to one (1) vote for each share of capital stock held by such stockholder which has voting power upon the matter in question.

-11-

At all duly called or convened meetings of stockholders, at which a quorum is present, for the election of directors, a plurality of the votes cast shall be sufficient to elect a director. Except as otherwise provided by the Certificate of Incorporation, these bylaws, the rules or regulations of any stock exchange applicable to the Corporation, or applicable law or pursuant to any regulation applicable to the Corporation or its securities, all other elections and questions presented to the stockholders at a duly called or convened meeting, at which a quorum is present, shall be decided by the majority of the votes cast affirmatively or negatively (excluding abstentions and broker non-votes) and shall be valid and binding upon the Corporation.

2.12    NO STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING.

Subject to the rights of the holders of the shares of any series of Preferred Stock or any other class of stock or series thereof having a preference over the Common Stock as to dividends or upon liquidation, and except as otherwise provided in the Certificate of Incorporation, any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of stockholders of the Corporation and may not be effected by any consent in writing by such stockholders.

2.13    RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS.

In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board may fix, in advance, a record date, which record date shall not precede the date on which the resolution fixing the record date is adopted and which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other such action.

If the Board does not so fix a record date:

(i)    The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held.

(ii)    The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto.

A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board may fix a new record date for the adjourned meeting.

-12-

2.14    PROXIES.

Each stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for such stockholder by proxy authorized by an instrument in writing or by a transmission permitted by law filed in accordance with the procedure established for the meeting, but no such proxy shall be voted or acted upon after three (3) years from its date, unless the proxy provides for a longer period. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Section 212 of the DGCL. A proxy may be in the form of a telegram, cablegram or other means of electronic transmission which sets forth or is submitted with information from which it can be determined that the telegram, cablegram or other means of electronic transmission was authorized by the stockholder.

2.15    LIST OF STOCKHOLDERS ENTITLED TO VOTE.

The Corporation shall prepare, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. The Corporation shall not be required to include electronic mail addresses or other electronic contact information on such list. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting for a period of at least ten (10) days prior to the meeting: (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (ii) during ordinary business hours, at the Corporation’s principal executive office. In the event that the Corporation determines to make the list available on an electronic network, the Corporation may take reasonable steps to ensure that such information is available only to stockholders of the Corporation. If the meeting is to be held at a place, then the list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting. Such list shall presumptively determine the identity of the stockholders entitled to vote at the meeting and the number of shares held by each of them.

2.16    INSPECTORS OF ELECTION.

Before any meeting of stockholders, the Board shall appoint an inspector or inspectors of election to act at the meeting or its adjournment and make a written report thereof. The number of inspectors shall be either one (1) or three (3). If any person appointed as inspector fails to appear or fails or refuses to act, then the chairperson of the meeting may, and upon the request of any stockholder or a stockholder’s proxy shall, appoint a person to fill that vacancy.

Such inspectors shall:

(i)    ascertain the number of shares of capital stock of the corporation outstanding and the voting power of each such share;

-13-

(ii)    determine the shares of capital stock of the corporation represented at the meeting and the validity of proxies and ballots;

(iii)    count all votes and ballots;

(iv)    determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors; and

(v)    certify their determination of the number of shares of capital stock of the corporation represented at the meeting and such inspectors’ count of all votes and ballots.

(vi)    The inspectors of election shall perform their duties impartially, in good faith, to the best of their ability and as expeditiously as is practical. If there are three (3) inspectors of election, the decision, act or certificate of a majority is effective in all respects as the decision, act or certificate of all. Any report or certificate made by the inspectors of election is prima facie evidence of the facts stated therein. The inspectors of election may appoint such persons to assist them in performing their duties as they determine.

ARTICLE III - DIRECTORS

3.1    POWERS.

Subject to the provisions of the DGCL and any limitations in the Certificate of Incorporation, the business and affairs of the Corporation shall be managed and all corporate powers shall be exercised by or under the direction of the Board.

3.2    NUMBER OF DIRECTORS.

The authorized number of directors shall be determined from time to time by resolution of the Board, provided the Board shall consist of at least one member. No reduction of the authorized number of directors shall have the effect of removing any director before that director’s term of office expires.

3.3    ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS.

Except as provided in Section 3.4 of these bylaws, each director, including a director elected to fill a vacancy, shall hold office until the expiration of the term for which elected and until such director’s successor is elected and qualified or until such director’s earlier death, resignation or removal. Directors need not be stockholders unless so required by the Certificate of Incorporation or these bylaws. The Certificate of Incorporation or these bylaws may prescribe other qualifications for directors.

As provided in the Certificate of Incorporation, the directors of the Corporation shall be divided into three (3) classes.

-14-

3.4    RESIGNATION AND VACANCIES.

Any director may resign at any time upon notice given in writing or by electronic transmission to the Corporation. When one or more directors so resigns and the resignation is effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office as provided in this section in the filling of other vacancies.

Unless otherwise provided in the Certificate of Incorporation or these bylaws, vacancies and newly created directorships resulting from any increase in the authorized number of directors shall, unless the Board determines by resolution that any such vacancies or newly created directorships shall be filled by stockholders, be filled only by a majority of the directors then in office, although less than a quorum, or by a sole remaining director. Any director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the director for which the vacancy was created or occurred and until such director’s successor shall have been elected and qualified. A vacancy in the Board of Directors shall be deemed to exist under these bylaws in the case of the death, removal or resignation of any director.

3.5    PLACE OF MEETINGS; MEETINGS BY TELEPHONE.

The Board may hold meetings, both regular and special, either within or outside the State of Delaware.

Unless otherwise restricted by the Certificate of Incorporation or these bylaws, members of the Board, or any committee designated by the Board, may participate in a meeting of the Board, or any committee, by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting pursuant to this bylaw shall constitute presence in person at the meeting.

3.6    REGULAR MEETINGS.

Regular meetings of the Board may be held without notice at such time and at such place as shall from time to time be determined by the Board.

3.7    SPECIAL MEETINGS; NOTICE.

Special meetings of the Board for any purpose or purposes may be called at any time by the chairperson of the Board, the chief executive officer, the president, the secretary or a majority of the authorized number of directors.

Notice of the time and place of special meetings shall be:

(i) delivered personally by hand, by courier or by telephone;

-15-

(ii) sent by United States first-class mail, postage prepaid;

(iii) sent by facsimile; or

(iv) sent by electronic mail,

directed to each director at that director’s address, telephone number, facsimile number or electronic mail address, as the case may be, as shown on the Corporation’s records.

If the notice is (i) delivered personally by hand, by courier or by telephone, (ii) sent by facsimile or (iii) sent by electronic mail, it shall be delivered or sent at least twenty-four (24) hours before the time of the holding of the meeting. If the notice is sent by U.S. mail, it shall be deposited in the U.S. mail at least four (4) days before the time of the holding of the meeting. Any oral notice may be communicated to the director. The notice need not specify the place of the meeting (if the meeting is to be held at the Corporation’s principal executive office) nor the purpose of the meeting.

3.8    QUORUM.

At all meetings of the Board, a majority of the authorized number of directors shall constitute a quorum for the transaction of business. The vote of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board, except as may be otherwise specifically provided by statute, the Certificate of Incorporation or these bylaws. If a quorum is not present at any meeting of the Board, then the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present.

3.9    BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING.

Unless otherwise restricted by the Certificate of Incorporation or these bylaws, any action required or permitted to be taken at any meeting of the Board, or of any committee thereof, may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing or by electronic transmission and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the Board or committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

3.10    FEES AND COMPENSATION OF DIRECTORS.

Unless otherwise restricted by the Certificate of Incorporation or these bylaws, the Board shall have the authority to fix the compensation of directors.

3.11    REMOVAL OF DIRECTORS.

Except as otherwise provided by the DGCL or the Certificate of Incorporation, the Board of Directors or any individual director may be removed from office at any time, but only with cause by the affirmative vote of the holders of at least sixty six and two thirds percent (66-2/3%) of the voting power of all the then outstanding shares of voting stock of the Corporation with the power to vote at an election of directors (the “Voting Stock”).

-16-

No reduction of the authorized number of directors shall have the effect of removing any director prior to the expiration of such director’s term of office.

ARTICLE IV - COMMITTEES

4.1    COMMITTEES OF DIRECTORS.

The Board may designate one (1) or more committees, each committee to consist of one (1) or more of the directors of the Corporation. The Board may designate one (1) or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board or in these bylaws, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers that may require it; but no such committee shall have the power or authority to (i) approve or adopt, or recommend to the stockholders, any action or matter expressly required by the DGCL to be submitted to stockholders for approval, or (ii) adopt, amend or repeal any bylaw of the Corporation.

4.2    COMMITTEE MINUTES.

Each committee shall keep regular minutes of its meetings and report the same to the Board when required.

4.3    MEETINGS AND ACTION OF COMMITTEES.

Meetings and actions of committees shall be governed by, and held and taken in accordance with, the provisions of:

(i) Section 3.5 (place of meetings and meetings by telephone);

(ii) Section 3.6 (regular meetings);

(iii) Section 3.7 (special meetings and notice);

(iv) Section 3.8 (quorum);

(v) Section 7.12 (waiver of notice); and

(vi) Section 3.9 (action without a meeting),

-17-

with such changes in the context of those bylaws as are necessary to substitute the committee and its members for the Board and its members. However:

(i)    the time of regular meetings of committees may be determined either by resolution of the Board or by resolution of the committee;

(ii)    special meetings of committees may also be called by resolution of the Board or the chairperson of the applicable committee;

(iii)    notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee; and

(iv)    the Board may adopt rules for the governance of any committee to override the provisions that would otherwise apply to the committee pursuant to this Section 4.3, provided that such rules do not violate the provisions of the Certificate of Incorporation or applicable law.

ARTICLE V - OFFICERS

5.1    OFFICERS.

The officers of the Corporation shall be a president and a secretary. The Corporation may also have, at the discretion of the Board, a chairperson of the Board, a vice chairperson of the Board, a chief executive officer, a chief financial officer or treasurer, one (1) or more vice presidents, one (1) or more assistant vice presidents, one (1) or more assistant treasurers, one (1) or more assistant secretaries, and any such other officers as may be appointed in accordance with the provisions of these bylaws. Any number of offices may be held by the same person.

5.2    APPOINTMENT OF OFFICERS.

The Board shall appoint the officers of the Corporation, except such officers as may be appointed in accordance with the provisions of Section 5.3 of these bylaws, subject to the rights, if any, of an officer under any contract of employment.

5.3    SUBORDINATE OFFICERS.

The Board may appoint, or empower the chief executive officer or, in the absence of a chief executive officer, the president, to appoint, such other officers and agents as the business of the Corporation may require. Each of such officers and agents shall hold office for such period, have such authority, and perform such duties as are provided in these bylaws or as the Board may from time to time determine.

5.4    REMOVAL AND RESIGNATION OF OFFICERS.

Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by an affirmative vote of the majority of the Board at any regular or special meeting of the Board or, except in the case of an officer chosen by the Board, by any officer upon whom such power of removal may be conferred by the Board.

-18-

Any officer may resign at any time by giving written notice to the Corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice. Unless otherwise specified in the notice of resignation, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the Corporation under any contract to which the officer is a party.

5.5    VACANCIES IN OFFICES.

Any vacancy occurring in any office of the Corporation shall be filled by the Board or as provided in Section 5.2.

5.6    REPRESENTATION OF SHARES OF OTHER CORPORATIONS.

The chairperson of the Board, the chief executive officer, the president, any vice president, the treasurer, the secretary or assistant secretary of this Corporation, or any other person authorized by the Board , the chief executive officer, the president or a vice president, is authorized to vote, represent and exercise on behalf of this Corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of this Corporation. The authority granted herein may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by such person having the authority.

5.7    AUTHORITY AND DUTIES OF OFFICERS.

All officers of the Corporation shall respectively have such authority and perform such duties in the management of the business of the Corporation as may be designated from time to time by the Board or the stockholders and, to the extent not so provided, as generally pertain to their respective offices, subject to the control of the Board.

ARTICLE VI - RECORDS AND REPORTS

6.1    MAINTENANCE AND INSPECTION OF RECORDS.

The Corporation shall, either at its principal executive office or at such place or places as designated by the Board, keep a record of its stockholders listing their names and addresses and the number and class of shares held by each stockholder, a copy of these bylaws as amended to date, accounting books and other records.

Any stockholder of record, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose the Corporation’s stock ledger, a list of its stockholders, and its other books and records and to make copies or extracts therefrom. A proper purpose shall mean a purpose

-19-

reasonably related to such person’s interest as a stockholder. In every instance where an attorney or other agent is the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing that authorizes the attorney or other agent so to act on behalf of the stockholder. The demand under oath shall be directed to the Corporation at its registered office in Delaware or at its principal executive office.

6.2    INSPECTION BY DIRECTORS.

Any director shall have the right to examine the Corporation’s stock ledger, a list of its stockholders, and its other books and records for a purpose reasonably related to his or her position as a director to the extent such director is entitled to do so under Section 220 of the DGCL.

The Court of Chancery is hereby vested with the exclusive jurisdiction to determine whether a director is entitled to the inspection sought. The Court may summarily order the Corporation to permit the director to inspect any and all books and records, the stock ledger, and the stock list and to make copies or extracts therefrom. The Court may, in its discretion, prescribe any limitations or conditions with reference to the inspection, or award such other and further relief as the Court may deem just and proper.

ARTICLE VII - GENERAL MATTERS

7.1    EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS.

The Board, except as otherwise provided in these bylaws, may authorize any officer or officers, or agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the Corporation; such authority may be general or confined to specific instances. Unless so authorized or ratified by the Board or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.

7.2    STOCK CERTIFICATES; PARTLY PAID SHARES.

The shares of the Corporation shall be represented by certificates, provided that the Board may provide by resolution or resolutions that some or all of any or all classes or series of stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the corporation. Certificates for the shares of stock, if any, shall be in such form as is consistent with the Certificate of Incorporation and applicable law. Every holder of stock represented by a certificate shall be entitled to have a certificate signed by, or in the name of the Corporation by any two authorized officers of the Corporation (it being understood that each of the chairperson or vice-chairperson of the Board, or the president or vice-president, and by the treasurer or an assistant treasurer, or the secretary or an assistant secretary of the Corporation shall be an authorized officer for such purpose), representing the number of shares registered in certificate form. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon

-20-

a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he or she were such officer, transfer agent or registrar at the date of issue.

The Corporation may issue the whole or any part of its shares as partly paid and subject to call for the remainder of the consideration to be paid therefor. Upon the face or back of each stock certificate issued to represent any such partly paid shares, upon the books and records of the Corporation in the case of uncertificated partly paid shares, the total amount of the consideration to be paid therefor and the amount paid thereon shall be stated. Upon the declaration of any dividend on fully paid shares, the Corporation shall declare a dividend upon partly paid shares of the same class, but only upon the basis of the percentage of the consideration actually paid thereon.

7.3    SPECIAL DESIGNATION ON CERTIFICATES.

If the Corporation is authorized to issue more than one class of stock or more than one series of any class, then the powers, the designations, the preferences and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate that the Corporation shall issue to represent such class or series of stock; provided, however, that, except as otherwise provided in Section 202 of the DGCL, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate that the Corporation shall issue to represent such class or series of stock a statement that the Corporation will furnish without charge to each stockholder who so requests the powers, the designations, the preferences and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.

7.4    LOST CERTIFICATES.

Except as provided in this Section 7.4, no new certificates for shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the Corporation and cancelled at the same time. The Corporation may issue a new certificate of stock or uncertificated shares in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or such owner’s legal representative, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares.

7.5    CONSTRUCTION; DEFINITIONS.

Unless the context requires otherwise, the general provisions, rules of construction and definitions in the DGCL shall govern the construction of these bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, and the term “person” includes both a corporation and a natural person.

-21-

7.6    DIVIDENDS.

The Board, subject to any restrictions contained in either (i) the DGCL or (ii) the Certificate of Incorporation, may declare and pay dividends upon the shares of its capital stock. Dividends may be paid in cash, in property or in shares of the Corporation’s capital stock.

The Board may set apart out of any of the funds of the Corporation available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve. Such purposes shall include but not be limited to equalizing dividends, repairing or maintaining any property of the Corporation, and meeting contingencies.

7.7    FISCAL YEAR.

The fiscal year of the Corporation shall be fixed by resolution of the Board and may be changed by the Board.

7.8    SEAL.

The Corporation may adopt a corporate seal, which shall be adopted and which may be altered by the Board. The Corporation may use the corporate seal by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced.

7.9    TRANSFER OF STOCK.

Shares of the Corporation shall be transferable in the manner prescribed by law and in these bylaws. Shares of stock of the Corporation shall be transferred on the books of the Corporation only by the holder of record thereof or by such holder’s attorney duly authorized in writing, upon surrender to the Corporation of the certificate or certificates representing such shares endorsed by the appropriate person or persons (or by delivery of duly executed instructions with respect to uncertificated shares), with such evidence of the authenticity of such endorsement or execution, transfer, authorization and other matters as the Corporation may reasonably require, and accompanied by all necessary stock transfer stamps. No transfer of stock shall be valid as against the Corporation for any purpose until it shall have been entered in the stock records of the Corporation by an entry showing the names of the persons from and to whom it was transferred.

7.10    STOCK TRANSFER AGREEMENTS.

The Corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes of stock of the Corporation to restrict the transfer of shares of stock of the Corporation of any one or more classes owned by such stockholders in any manner not prohibited by the DGCL.

-22-

7.11    REGISTERED STOCKHOLDERS.

The Corporation:

(i)     shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends and to vote as such owner; and

(ii)    shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of another person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.

7.12    WAIVER OF NOTICE.

Whenever notice is required to be given under any provision of the DGCL, the Certificate of Incorporation or these bylaws, a written waiver, signed by the person entitled to notice, or a waiver by electronic transmission by the person entitled to notice, whether before or after the time of the event for which notice is to be given, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice or any waiver by electronic transmission unless so required by the Certificate of Incorporation or these bylaws.

ARTICLE VIII - NOTICE BY ELECTRONIC TRANSMISSION

8.1    NOTICE BY ELECTRONIC TRANSMISSION.

Without limiting the manner by which notice otherwise may be given effectively to stockholders pursuant to the DGCL, the Certificate of Incorporation or these bylaws, any notice to stockholders given by the Corporation under any provision of the DGCL, the Certificate of Incorporation or these bylaws shall be effective if given by a form of electronic transmission satisfying the requirements of and given in accordance with applicable law.

ARTICLE IX - INDEMNIFICATION

9.1    INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Corporation shall indemnify and hold harmless, to the fullest extent permitted by the DGCL as it presently exists or may hereafter be amended, any director or officer of the Corporation who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”) by reason of the fact that he or she, or a person for whom he or she is the legal representative, is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, enterprise or non-profit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorneys’ fees) reasonably incurred by such person in connection

-23-

with any such Proceeding. Notwithstanding the preceding sentence, except as otherwise provided in Section 9.4, the Corporation shall be required to indemnify a person in connection with a Proceeding initiated by such person only if the Proceeding was authorized in the specific case by the Board.

9.2    INDEMNIFICATION OF OTHERS.

The Corporation shall have the power to indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any employee or agent of the Corporation who was or is made or is threatened to be made a party or is otherwise involved in any Proceeding by reason of the fact that he or she, or a person for whom he or she is the legal representative, is or was an employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, enterprise or non-profit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses reasonably incurred by such person in connection with any such Proceeding.

9.3    PREPAYMENT OF EXPENSES.

The Corporation shall to the fullest extent not prohibited by applicable law pay the expenses (including attorneys’ fees) incurred by any officer or director of the Corporation, and may pay the expenses incurred by any employee or agent of the Corporation, in defending any Proceeding in advance of its final disposition; provided, however, that, to the extent required by law, such payment of expenses in advance of the final disposition of the Proceeding shall be made only upon receipt of an undertaking by the person to repay all amounts advanced if it should be ultimately determined that the person is not entitled to be indemnified under this Article IX or otherwise.

9.4    DETERMINATION; CLAIM.

If a claim for indemnification (following the final disposition of such Proceeding) or advancement of expenses under this Article IX is not paid in full within sixty (60) days after a written claim therefor has been received by the Corporation the claimant may file suit to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim to the fullest extent permitted by law. In any such action the Corporation shall have the burden of proving that the claimant was not entitled to the requested indemnification or payment of expenses under applicable law.

9.5    NON-EXCLUSIVITY OF RIGHTS.

The rights conferred on any person by this Article IX shall not be exclusive of any other rights which such person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, these bylaws, agreement, vote of stockholders or disinterested directors or otherwise.

-24-

9.6    INSURANCE.

The Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust enterprise or non-profit entity against any liability asserted against him or her and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the Corporation would have the power to indemnify him or her against such liability under the provisions of the DGCL.

9.7    OTHER INDEMNIFICATION.

The Corporation’s obligation, if any, to indemnify or advance expenses to any person who was or is serving at its request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, enterprise or non-profit entity shall be reduced by any amount such person may collect as indemnification or advancement of expenses from such other corporation, partnership, joint venture, trust, enterprise or non-profit enterprise.

9.8    CONTINUATION OF INDEMNIFICATION.

The rights to indemnification and to prepayment of expenses provided by, or granted pursuant to, this Article IX shall continue notwithstanding that the person has ceased to be a director or officer of the Corporation and shall inure to the benefit of the estate, heirs, executors, administrators, legatees and distributees of such person.

9.9    AMENDMENT OR REPEAL.

The provisions of this Article IX shall constitute a contract between the Corporation, on the one hand, and, on the other hand, each individual who serves or has served as a director or officer of the Corporation (whether before or after the adoption of these bylaws), in consideration of such person’s performance of such services, and pursuant to this Article IX the Corporation intends to be legally bound to each such current or former director or officer of the Corporation. With respect to current and former directors and officers of the Corporation, the rights conferred under this Article IX are present contractual rights and such rights are fully vested, and shall be deemed to have vested fully, immediately upon adoption of theses bylaws. With respect to any directors or officers of the Corporation who commence service following adoption of these bylaws, the rights conferred under this provision shall be present contractual rights and such rights shall fully vest, and be deemed to have vested fully, immediately upon such director or officer commencing service as a director or officer of the Corporation. Any repeal or modification of the foregoing provisions of this Article IX shall not adversely affect any right or protection (i) hereunder of any person in respect of any act or omission occurring prior to the time of such repeal or modification or (ii) under any agreement providing for indemnification or advancement of expenses to an officer or director of the Corporation in effect prior to the time of such repeal or modification.

-25-

ARTICLE X - AMENDMENTS

Subject to the limitations set forth in Section 9.9 of these bylaws or the provisions of the certificate of incorporation, the Board is expressly empowered to adopt, amend or repeal the bylaws of the Corporation. Any adoption, amendment or repeal of the bylaws of the Corporation by the Board shall require the approval of a majority of the authorized number of directors. The stockholders also shall have power to adopt, amend or repeal the bylaws of the Corporation; provided, however, that, in addition to any vote of the holders of any class or series of stock of the Corporation required by law or by the Certificate of Incorporation, such action by stockholders shall require the affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of all of the then-outstanding shares of the Voting Stock.

ARTICLE XI - FORUM SELECTION

Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery (the “Chancery Court”) of the State of Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer, other employee or stockholder of the Corporation to the Corporation or to the Corporation’s stockholders, (iii) any action arising pursuant to any provision of the DGCL or the Certificate of Incorporation or these bylaws (as either may be amended from time to time) or (iv) any action asserting a claim against the Corporation governed by the internal affairs doctrine, in each case, subject to said Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein; provided that, the provisions of this Article XI will not apply to suits brought to enforce any liability or duty created by the Securities Exchange Act of 1934, as amended, or any other claim for which the federal courts have exclusive jurisdiction; and provided, further, that, if and only if the Court of Chancery of the State of Delaware dismisses any such action for lack of subject matter jurisdiction, such action may be brought in another state or federal court sitting in the State of Delaware.

Nothing herein contained shall be construed to preclude stockholders that assert claims under the Securities Act of 1933, as amended, or any successor thereto, from bringing such claims in state or federal court, subject to applicable law.

If any action the subject matter of which is within the scope of the preceding sentence is filed in a court other than a court located within the State of Delaware (a “Foreign Action”) in the name of any stockholder, such stockholder shall be deemed to have consented to (a) the Personal jurisdiction of the state and federal courts located within the State of Delaware in connection with any action brought in any such court to enforce the preceding sentence and (b) having service of process made upon such stockholder in any such action by service upon such stockholder’s counsel in the Foreign Action as agent for such stockholder. Any person or entity purchasing or otherwise acquiring or holding any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Article XI.

-26-

If any provision or provisions of this Article XI shall be held to be invalid, illegal or unenforceable as applied to any circumstance for any reason whatsoever, (a) the validity, legality and enforceability of such provisions in any other circumstance and of the remaining provisions of this Article XI (including, without limitation, each portion of any paragraph of this Article XI containing any such provision held to be invalid, illegal or unenforceable that is not itself held to be invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and (b) the application of such provision to other persons or entities and circumstances shall not in any way be affected or impaired thereby.

* * * * *

-27-

SATSUMA PHARMACEUTICALS, INC.

CERTIFICATE OF AMENDMENT AND RESTATEMENT OF BYLAWS

The undersigned hereby certifies that he or she is the duly elected, qualified, and acting Secretary of Satsuma Pharmaceuticals, Inc., a Delaware corporation, and that the foregoing bylaws were amended and restated on             , 2019 by the Corporation’s board of directors.

IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand this      day of             , 2019.

Alan C. Mendelson

Secretary

EX-10.1

Exhibit 10.1

O Y S T E R    P O I N T    M A R I N A    P L A Z A

Office Lease

of

SUITE 221

to

SATSUMA PHARMACEUTICALS, INC.,

a Delaware corporation

400 Oyster Point Boulevard

South San Francisco, CA 94080

O Y S T E R    P O I N T     M A R I N A     P L A Z A

Office Lease

THIS OFFICE LEASE (the “Lease”) is entered into as of January 9, 2018, by and between KASHIWA FUDOSAN AMERICA, INC., a California corporation (“Landlord”) and SATSUMA PHARMACEUTICALS, INC., a Delaware corporation (“Tenant”).

1     BASIC LEASE TERMS

1.1    LEASE OF PREMISES. Landlord leases to Tenant, and Tenant rents and hires from Landlord, the premises described in § 1.3 below, in the building known by the street address 400 Oyster Point Boulevard (the “Building”) in the City of South San Francisco, County of San Mateo, State of California, on the property described in § 1.6 below, in the business park commonly known as Oyster Point Marina Plaza (the “Complex”), for the term stated in § 1.4 below, for the rents hereinafter reserved, and upon and subject to the terms, conditions (including limitations, restrictions, and reservations), and covenants hereinafter provided. The Building and the Complex are more particularly described and depicted in Exhibit A which is attached hereto. Each party hereby expressly covenants and agrees to observe and perform all of the conditions and covenants herein contained on its part to be observed and performed.

1.2    SUMMARY TABLE. The parties agree that the following table (the “Table”) sets forth in summary form the basic terms of this Lease, including the specific space comprising the Premises and, with respect to such space, the Term of the Lease, the usable and rentable square footage, the Base Rent, Base Year, and Tenant’s Share, as all of such terms are defined below:

PERIOD	SUITE NO.		RSF		USF		MONTHLY BASE RENT		T’S SHARE BLDG			T’S SHARE COMPLEX			BASE YEAR
Commencement Date through Month 13 * subject to the Base Rent Abatement stated in § 1.5.3 below		221		4,148		3,527	$	12,858.80		1.777	%		0.888	%		2018
Month 14 through Month 25		221		4,148		3,527	$	13,244.56		1.777	%		0.888	%		2018
Month 26 through Month 38		221		4,148		3,527	$	13,641.90		1.777	%		0.888	%		2018

In the event of any conflict between the terms contained in the Table and the terms contained in subsequent sections of the Lease, the terms of the Table shall control, except that any dates stated in the Table are subject to adjustment as appropriate to the extent any other provisions of the Lease provide for adjustments to the Commencement Date and/or the Expiration Date.

1.3    PREMISES. The premises leased to Tenant comprise approximately 4,148 rentable square feet of space on the second (2nd) floor of the Building and are commonly known as Suite 221 (the “Premises”), as shown on the floor plan annexed hereto as Exhibit B (the “Space Plan”). The Premises also include all fixtures and equipment which are attached thereto, except items not deemed to be included therein and which are removable by Tenant as provided in Article 10 below. Landlord and Tenant agree that the usable and rentable area of the Premises, and the respective rentable areas of the Property (as defined in § 1.6 below) and Complex, for all purposes under this Lease, are as follows and as specified in the Table:

Property’s Rentable Area:	233,446 rsf
Complex’s Rentable Area:	467,360 rsf.

Oyster Point Marina Plaza Office Lease

Kashiwa Fudosan America, Inc. :: Satsuma Pharmaceuticals, Inc.

page 1 of 55

[Suite 221 (400 OPB); 4,148 rsf]

Tenant acknowledges that it has caused its architect to verify the numbers stated in the Table and herein relating to the measurements of such spaces prior to the Commencement Date of this Lease or has had an opportunity to do so.

1.3.1 Expansion Right. In consideration for Tenant’s execution and delivery of this Lease, provided no material Event of Default remains outstanding and uncured on the date Tenant exercises its rights under this § 1.3.1 et seq., Landlord hereby grants to Tenant a right of first refusal (the “RFR”) exercisable from the Commencement Date through June 30, 2019 (the “Exercise Period”), with respect to approximately 778 rentable square feet of space (662 usable square feet) known as Suite 227 in the Building (the “RFR Space”), as shown on the Space Plan.

(a)    Notice of Bona Fide Offer. If at any time during the Exercise Period Landlord receives a bona fide offer, agreement, or proposal (“Lease Proposal”) which is acceptable to Landlord from any third party to lease any portion of the RFR Space; or if Landlord makes a bona fide offer, agreement, or proposal to a third party which the third party is willing to accept, in each case as evidenced by a signed letter of intent, Landlord shall send Tenant a summary (the “RFR Summary”) of the economic terms and conditions of the Lease Proposal, including a description of the subject space, proposed term, and basic business terms and shall notify Tenant of Landlord’s intention to conclude a lease on the terms of the Lease Proposal. Landlord shall not lease the RFR Space to a third party without first providing Tenant a RFR Summary. Tenant shall have the right for a period of five (5) full business days (concluding at 5:00 p.m.) following Tenant’s receipt of the RFR Summary in which to exercise its right to lease the RFR Space on the terms and conditions set forth in this § 1.3.1 et seq. by giving Landlord written notice of such exercise. If Tenant fails to notify Landlord of the exercise of its rights hereunder within such five-business-day period, Landlord may then lease the RFR Space to the third party tenant named as the tenant in the RFR Summary or an affiliate of such third party tenant, provided that the lease entered into pursuant to the Lease Proposal is (i) on the same terms and conditions as set forth in the RFR Summary or (ii) on substantially the same terms and conditions as set forth in the RFR Summary and Landlord is not required to re offer such First Refusal Space to Tenant pursuant to § 1.3.1(d) below.

(b)    Commencement and Duration. If Tenant exercises its right of first refusal, Landlord shall make the RFR Space available for purposes of construction of improvements within ninety (90) days following Tenant’s exercise of its RFR; the lease shall commence as provided herein and shall continue for the duration of the Term of the Lease and expire coterminously therewith. The RFR Space shall be provided “as is” for purposes of construction, with all existing tenant improvements in place, or in such condition as specified in the RFR Summary. Unless otherwise specified in the RFR Summary, the commencement date of the lease of such RFR Space (upon which Base Rent and Additional Rent shall begin to accrue, and Tenant’s Pro Rata Share shall be adjusted to take into account the RFR Space) shall be the earlier of (i) the date upon which Landlord’s construction of the improvements within the RFR Space satisfies the Occupancy Conditions (hereinafter defined) with respect to the RFR Space or (ii) the date upon which Tenant occupies the RFR Space (or any portion thereof) and commences conducting Tenant’s business operations therein; provided, however, that in the event of any Tenant Delay (hereinafter defined), Tenant’s obligation to pay Base Rent and Additional Rent with regard to such RFR Space shall be advanced by one (1) day for each such day substantial completion of such improvements was delayed by a Tenant Delay. Following Landlord’s delivery of the RFR Space in compliance with all Occupancy Conditions, the RFR Space shall be deemed to be a part of the Premises and shall be leased by Tenant upon and subject to all of the terms, covenants, and conditions of this Lease.

(c)    Terms and Conditions. If Tenant exercises its RFR, all terms and conditions for the lease of any such space shall be the same as those then in effect under the Lease, except for the rental,

Oyster Point Marina Plaza Office Lease

Kashiwa Fudosan America, Inc. :: Satsuma Pharmaceuticals, Inc.

page 2 of 55

[Suite 221 (400 OPB); 4,148 rsf]

tenant inducements, rent abatements, and improvement allowances and other terms set forth in the RFR Summary (“Third-Party Economics”). Tenant shall have the right to a lease of the RFR Space upon such Third-Party Economics as were contained in the Lease Proposal in the same proportion as the number of months remaining in the Term (including the term of any extension option then having been exercised) bears to the number of months in the lease term contained in the RFR Summary.

(d)    Continuing Right, Re-Offer, and Priority. If Tenant shall not timely exercise the RFR, Tenant shall again have the same rights as to such space each time Landlord receives or makes a bona fide offer, from or to a third party, which both Landlord and the third party are willing to accept, as evidenced by a signed letter of intent, to lease such space, whether or not Tenant has previously exercised or refused to exercise the rights herein contained with respect to such space or other space. If Tenant rejects or is deemed to have rejected a bona fide offer of which Tenant is notified, and if (i) such third-party bona fide offer is not consummated within five (5) months; (ii) the effective rental rate to be paid pursuant to the bona fide offer changes in any respect so as to become more than five percent (5%) more favorable to the prospective tenant; (iii) there is any change in the term, expansion rights, extension rights, or renewal rights proposed in the Lease Proposal; or (iv) there is any other material change in the nonmonetary terms of the bona fide offer, then the RFR Space shall again become subject to the terms of this § 1.3.1 et seq. and shall again be offered to Tenant as provided above. As used in the previous sentence, the term effective rental rate means an amount determined by taking the total base rental and deducting all abatements, allowances, cost of non-monetary tenant inducements (e.g., health club memberships, etc.), tenant improvement costs in excess of Building-standard, and any other monetary inducements. Landlord represents and warrants that the rights of first refusal granted to Tenant herein are and shall be paramount in interest to the rights of Landlord to use the First Refusal Space for its own purposes and that no other tenant of the Building has a right of first refusal or other expansion right prior to or superior to the rights granted to Tenant herein. The foregoing right of first refusal shall be subject to the existing tenants of the First Refusal Space renewing their existing leases, whether pursuant to options to extend or renew which were in existence in their written lease agreements as of the date of this Lease or not.

(e)    Confirmatory Documentation. After Tenant validly exercises the right of first refusal provided herein, the parties shall execute an amendment to the Lease adding the First Refusal Space, or such other documentation as Landlord shall reasonably require, promptly after Landlord shall prepare the same, in order to confirm the leasing of such First Refusal Space to Tenant; but an otherwise valid exercise of the rights of first refusal contained herein shall be fully effective, whether or not such confirmatory documentation is executed.

(f)    Failure to Exercise. If Tenant shall fail to exercise its right of first refusal after notice by Landlord of the receipt of a bona fide third-party offer to lease the RFR Space within the time specified herein, such right shall be deemed to have lapsed and expired with respect to that particular RFR Summary, and Landlord may, for a period of five (5) months, enter into a lease pursuant to the terms of the RFR Summary with the prospective tenant named therein.

(g)    Default and Termination. Tenant’s exercise of such right of first refusal hereunder shall not operate to cure any default by Tenant of any of the terms or provisions in the Lease, nor to extinguish or impair any rights or remedies of Landlord arising by virtue of such default. The exercises of the right of first refusal herein shall, at Landlord’s election, be null and void if Tenant has committed a material Event of Default which remains outstanding and uncured on the date Tenant exercises its rights hereunder. Tenant agrees that time is of the essence of rights of first refusal specified herein.

Oyster Point Marina Plaza Office Lease

Kashiwa Fudosan America, Inc. :: Satsuma Pharmaceuticals, Inc.

page 3 of 55

[Suite 221 (400 OPB); 4,148 rsf]

(h)    Effect of Transfer. If Tenant subleases or assigns any portion of the Premises at any time during the Term of this Lease (other than as permitted without Landlord’s consent under § 17.12 or § 17.13), the rights of first refusal hereunder with respect to the Specific RFR Spaces shall terminate with immediate effect.

1.4    TERM; TARGET DATE. The term (the “Term”) for which the Premises are hereby leased shall commence on the “Commencement Date,” which shall be the day on which the Premises are ready for occupancy (as defined in Article 3) and Landlord has delivered possession of the Premises to Tenant in the required condition, and shall end at noon on the “Expiration Date,” which shall be the last day of the calendar month in which occurs the day preceding the thirty-eighth (38th) mensiversary of the Commencement Date or any earlier date upon which the Term may expire or be cancelled or terminated pursuant to any of the conditions or covenants of this Lease or pursuant to law. The parties anticipate that the Premises will be ready for Tenant’s occupancy on or before February 1, 2018 (the “Target Date”) and that, if the Target Date holds as the Commencement Date of the Lease, the Expiration Date will be March 31, 2021. Promptly following the Commencement Date the parties hereto shall, if required by Landlord, enter into a supplementary agreement fixing the dates of the Commencement Date and the Expiration Date in the form which is attached hereto as Exhibit E and incorporated herein by reference.

1.4.1 Option to Renew. Tenant is hereby granted one (1) option to extend (the “Extension Option”) the Term of the Lease for one (1) additional period of three (3) years (the “Extension Period”). The Extension Period term shall begin the first day following the Expiration Date and shall take effect on the same terms and conditions in effect under the Lease immediately prior to the Extension Period, except that (i) Tenant shall have no further right to extend, (ii) monthly Base Rent shall be the rate which is Fair Market Value (as defined below), and (iii) the Base Expense Year and Base Tax Year shall each be the calendar year 2021. The Fair Market Value shall be the effective rent (face rate less free rent) being charged for comparable space in comparable buildings in the vicinity of the Building leased on comparable terms and shall be limited the rates charges in such comparable transactions for tenants renewing or extending their leases.

(a)    Exercise of Option. The Extension Option may be exercised only by (i) delivering in person to Landlord’s Building Manager in the Building Office written notice of Tenant’s irrevocable election to exercise no earlier than nine (9) months and no later than six (6) months prior to the commencement of the Extension Period, and (ii) collecting and retaining in exchange for such notice of exercise an original written receipt therefor signed and dated by Landlord’s Building Manager. Tenant’s exercise of its Extension Option shall not be effective or valid if there is any deviation in the timing or manner of exercise prescribed herein.

(b)    Failure to Exercise. If Tenant shall fail validly and timely to exercise the Option herein granted, said Option shall terminate and shall be null and void and of no further force and effect.

(c)    Fair Market Value. Provided that Tenant has validly exercised its Option when and as required hereunder, not less than one hundred and eighty (180) days prior to the commencement of the Extension Period, Landlord shall provide written notice to Tenant of its determination of the Fair Market Value. Within ten (10) days after receiving such determination (“Tenant’s Review Period”), Tenant shall irrevocably elect, in writing, to do one of the following: (i) accept Landlord’s determination; or (ii) object to Landlord’s determination and with such objection set forth in writing Tenant’s determination of the Fair Market Value. If Tenant so objects, Landlord and Tenant shall attempt in good faith to agree upon such Fair Market Value using their best good-faith efforts. If Landlord and Tenant fail to reach agreement within fifteen (15) days following Tenant’s Review Period (the “Outside Agreement Date”), then each party’s determination shall be submitted to arbitration in accordance with the

Oyster Point Marina Plaza Office Lease

Kashiwa Fudosan America, Inc. :: Satsuma Pharmaceuticals, Inc.

page 4 of 55

[Suite 221 (400 OPB); 4,148 rsf]

then-current rules and procedures of the American Arbitration Association, but subject to the instructions set forth in this § 1.4.1 et seq.. If Tenant objects to Landlord’s determination of Fair Market Value, Tenant shall pay Rent at the Fair Market Value determined by Landlord until the matter is resolved by binding arbitration as provided below subject to retroactive adjustment after the matter is so resolved. If Tenant fails so to accept or object to Landlord’s determination of Fair Market Value in writing within Tenant’s Review Period, Tenant shall conclusively be deemed to have approved of the Fair Market Value as determined by Landlord. The determination of the arbitrators shall be limited solely to the issue of whether Landlord’s or Tenant’s submitted Fair Market Value for the Premises is the more accurate as determined by the arbitrators, taking into account the requirements of this § 1.4.1 et seq.

(d)    Appointment of Arbitrators. Not later than fifteen (15) days following the Outside Agreement Date, Landlord and Tenant shall each appoint one arbitrator who shall by profession be a real estate broker who shall have been active over the ten-year period ending on the date of such appointment in the leasing of commercial properties within northern San Mateo County. The determination of the arbitrators shall be limited solely to the issue of whether Landlord’s or Tenant’s submitted Fair Market Value for the Premises is the more accurate as determined by the arbitrators, taking into account the requirements of this § 1.4.1 et seq.

(e)    Appointment of Third Arbitrator. The two (2) arbitrators so appointed shall within fifteen (15) days of the date of the appointment of the last-appointed arbitrator agree upon and appoint a third arbitrator, who shall be qualified under the same criteria as set forth hereinabove for qualification of the initial two arbitrators.

(f)    Arbitrators’ Decision. The three (3) arbitrators shall, within thirty (30) days of the appointment of the third arbitrator, reach a decision as to whether the parties shall use Landlord’s or Tenant’s submitted Fair Market Value, and shall notify Landlord and Tenant thereof. The decision of the majority of the three (3) arbitrators shall be binding upon Landlord and Tenant. The arbitrators shall not be permitted to set Fair Market Value to any level other than either Landlord’s or Tenant’s submitted Fair Market Value.

(g)    Failure to Appoint. If either Landlord or Tenant fails to appoint an arbitrator within fifteen (15) days after the Outside Agreement Date, the arbitrator timely appointed by one of the parties shall reach a decision, notify Landlord and Tenant thereof, and such arbitrator’s decision shall be binding upon Landlord and Tenant. If the two (2) arbitrators fail to agree upon and appoint a third arbitrator, both arbitrators shall be dismissed and the matter to be decided shall be forthwith submitted to arbitration under the Commercial Arbitration Rules of the American Arbitration Association then in effect, but subject to the instructions set forth in this § 1.4.1 et seq..

(h)    Cost of Arbitration. The cost of arbitration shall be paid by Landlord and Tenant equally.

(i)     Default. Tenant’s exercise of the Option shall, at Landlord’s election, be null and void if Tenant is in Default on the date of Tenant’s notice of exercise or at any time thereafter and prior to commencement of the Extension Period. Tenant’s exercise of the Extension Option shall not operate to cure any Default by Tenant nor to extinguish or impair any rights or remedies of Landlord arising by virtue of such Default. If the Lease or Tenant’s right to possession of the Premises shall terminate before Tenant shall have exercised the Extension Option, then immediately upon such termination the Extension Option shall simultaneously terminate and become null and void.

(j)     Time. Time is of the essence of the Extension Option granted hereunder.

Oyster Point Marina Plaza Office Lease

Kashiwa Fudosan America, Inc. :: Satsuma Pharmaceuticals, Inc.

page 5 of 55

[Suite 221 (400 OPB); 4,148 rsf]

1.5    RENT. The “Rent” reserved under this Lease, for the Term thereof, shall consist of the following:

(a) “Base Rent” as set forth in the Table for the various spaces and periods described therein per month, which shall be payable in advance on the first day of each and every calendar month during the Term of this Lease, except that Tenant shall pay the first month’s Base Rent due under the Lease upon the execution and delivery of this Lease by Tenant; and

(b) “Additional Rent” consisting of any and all other sums of money as shall become payable by Tenant to Landlord hereunder; and Landlord shall have the same remedies for default in the payment of Additional Rent as for a default in payment of Base Rent).

1.5.1 Payment of Rent. Tenant shall pay the Base Rent and Additional Rent promptly when due, without demand therefor and without any abatement, deduction, or setoff whatsoever, except as may be expressly provided in this Lease. Tenant shall pay the Rent to Landlord, in lawful money of the United States of America, at Landlord’s office at the Complex or at such other place, or to such agent and at such place, as Landlord may designate by notice to Tenant. If the Commencement Date occurs on a day other than the first day of a calendar month, the Base Rent for such calendar month shall be prorated based on a 30-day month, and the balance of the first month’s Base Rent theretofore paid shall be credited against the next monthly installment of Base Rent. Notwithstanding anything to the contrary in this Lease, Tenant shall pay the third (3rd) month’s Base Rent due hereunder, together with the Security Deposit due under § 5.1 below, upon Tenant’s execution and delivery of this Lease to Landlord.

1.5.2 Interest and Late Charges. If Tenant fails to pay any Rent when due, the unpaid amounts shall bear interest from the due date until paid at a rate per annum equal to the Prime Rate plus five percent (5%) or, if less, at the highest rate of interest permitted by applicable law. As used herein, “Prime Rate” means the prime rate published in the Money Rates section of the Wall Street Journal (Western edition) as the same may change from time to time or in a similar publication if the Wall Street Journal ceases publication or ceases publication of its Money Rates section during the Term. Tenant acknowledges that the late payment of any monthly Rent will cause Landlord to lose the use of that money and incur costs and expenses not contemplated under this Lease, including administrative and collection costs and processing and account expenses, the exact amount of which it is difficult to ascertain. Therefore, in addition to interest, if any such installment is not received by Landlord within five (5) days from the date it is due, Tenant shall pay Landlord a late charge equal to ten percent (10%) of such installment. Landlord and Tenant agree that this late charge represents a reasonable estimate of such costs and expenses and is fair compensation to Landlord for the loss suffered from such nonpayment by Tenant. In addition, any check returned by the bank for any reason will be considered late and will be subject to all late charges plus an additional returned check fee of Twenty Dollars ($20.00). After two such occasions upon which checks have been returned in any twelve-month period, Landlord will have the right to require payment by a cashier’s check or money order. Acceptance of any interest or late charge shall not constitute a waiver of Tenant’s default with respect to such nonpayment by Tenant nor prevent Landlord from exercising any other rights or remedies available to Landlord under this Lease or at law or in equity, unless the payment of such interest and late charges is accompanied by all rentals then due and owning (notwithstanding anything to the contrary in § 20.2.1 below).

1.5.3 Base Rent Abatement. Notwithstanding anything to the contrary in this § 1.5.3, commencing with the first full calendar month following the Commencement Date, Tenant’s Monthly Installment of Base Rent shall be abated for a period of two (2) months (the “Abatement Period”). If Tenant shall default under the Lease and fail to cure within the time permitted for cure thereunder, while the

Oyster Point Marina Plaza Office Lease

Kashiwa Fudosan America, Inc. :: Satsuma Pharmaceuticals, Inc.

page 6 of 55

[Suite 221 (400 OPB); 4,148 rsf]

Abatement Period is still in effect, the Abatement Period shall thereupon terminate, and Tenant shall commence paying the Base Rent under the Lease. In addition, if Tenant shall default under the Lease at any time and fail to cure within the time permitted for cure thereunder, Tenant shall upon demand pay Landlord the amount of Base Rent theretofore abated, multiplied by a fraction, the numerator of which is the number of months then remaining in the initial Term at the time of the default, and the denominator of which is the total number of months in the initial Term (without limiting Landlord’s other remedies).

1.6    PROPERTY. For the purposes of this Lease, the “Property” shall mean the Building and any common or public areas or facilities, easements, corridors, lobbies, sidewalks, loading areas, driveways, landscaped areas, skywalk, parking garages and lots, and any and all other structures or facilities operated or maintained in connection with or for the benefit of the Building, and all parcels or tracts of land on which all or any portion of the Building or any of the other foregoing items are located, and any fixtures, machinery, equipment, apparatus, Systems and Equipment (as defined in § 1.6.5 below), furniture and other personal property located thereon or therein and used in connection therewith, whether title is held by Landlord or its affiliates. The Property shall also be deemed to include such other of the Complex’s buildings or structures (and related facilities and parcels on which the same are located) as Landlord shall have incorporated by reference to the total square footage of the Building stated in § 1.3 above.

1.6.1 Common Areas. Tenant and its agents, employees, and invitees shall have the non-exclusive right with others designated by Landlord to the free use of the common areas in the Property and the Complex for the common areas’ intended and normal purpose. The term common areas shall mean elevators, sidewalks, parking areas, driveways, hallways, stairways, public restrooms, common entrances, lobbies, and other similar public areas and access ways.

1.6.2 Athletic Facility. Notwithstanding the foregoing, the common areas do not include the Building’s athletic facility (the “Athletic Facility”), which is an unsupervised and unattended weight and exercise room and shower facility. Tenant acknowledges that Landlord presently makes available (but is not obligated under this Lease to make available) the Athletic Facility for the general use of all tenants and their officers and employees, subject to such rules and regulations as Landlord may impose from time to time in its sole and absolute discretion regarding the use thereof. Tenant shall cause each of its officers and employees using the Athletic Facility to sign and deliver to Landlord an “Athletic Facility Use Agreement” in the form attached hereto as Exhibit D, as such form may be revised by Landlord from time to time in its sole and absolute discretion. Tenant understands and agrees that no individual shall be permitted use of or access to the Athletic Facility unless and until such individual shall have first signed and delivered the Athletic Facility Use Agreement to Landlord. Landlord shall have the right to limit the use of the Athletic Facility in any manner it may deem necessary, or to discontinue the Athletic Facility altogether, at any time, in its sole and absolute discretion, and neither Tenant nor its officers or employees shall be entitled to any compensation, credit, allowance, or offset of expenses or Rent as a result of any such limitation or discontinuance.

1.6.3 Reservation to Landlord. Notwithstanding anything to the contrary herein, possession of areas necessary for utilities, services, safety, and operation of the Property, including the Systems and Equipment, telephone closets (whether located in the common areas or in the Premises), fire exits and stairways, perimeter walls, space between the finished ceiling of the Premises and the slab of the floor or roof of the Property thereabove, and the use thereof, together with the right to install, maintain, operate, repair, and replace any part of the Systems and Equipment in, through, under, or above the Premises in locations that will not materially interfere with Tenant’s use of the Premises, are hereby excepted from both the Premises and the common areas and are reserved by Landlord and not demised to Tenant. Tenant’s access to the telephone closets on each floor and the Building’s

Oyster Point Marina Plaza Office Lease

Kashiwa Fudosan America, Inc. :: Satsuma Pharmaceuticals, Inc.

page 7 of 55

[Suite 221 (400 OPB); 4,148 rsf]

main telephone room shall be subject to the Rules (as defined in § 13.1 below) and shall be permitted only with Landlord’s written consent and under the supervision of Landlord’s Building Engineer on each occasion that such access is sought.

1.6.4 Changes and Alterations of the Property. Landlord reserves the right to make repairs, alterations, additions, or improvements, structural or otherwise, in or to the Property or Complex as deemed necessary or desirable in Landlord’s sole and absolute discretion, so long as such repairs or alterations do not materially and unreasonably interfere with Tenant’s access to or beneficial use of the Premises for their intended purposes. Landlord reserves the right hereunder to do the following: (i) install, use, maintain, repair, and replace pipes, ducts, conduits, wires, and appurtenant meters and equipment for service to the various parts of the Property above the ceiling surfaces, below the floor surfaces, within the walls, and in the central core areas; (ii) to relocate any pipes, ducts, conduits, wires, and appurtenant meters and equipment which are located in the Premises or located elsewhere outside the Premises; (iii) expand the Building or the Complex; (iv) make changes to the Property or the Complex, including changes, expansions, and reductions in the location, size, shape, and number of driveways, entrances, loading and unloading areas, ingress, egress, direction of traffic, landscaped areas, walkways, parking spaces, and parking areas; (v) close any of the common areas, so long as reasonable access to the Premises remains available; (vi) use the common areas while engaged in making additional improvements, repairs, or alterations to the Property, Complex, or any portion thereof; and (vii) do and perform such other acts and make such other changes in, to, or with respect to the Property, Complex, common areas, and Building as Landlord may deem appropriate. The exercise of any of the foregoing rights shall not subject Landlord to claims for constructive eviction, abatement of Rent, damages, or other claims of any kind, except as otherwise expressly provided in this Lease. If Landlord enters the Premises to exercise any of the foregoing rights, Landlord shall provide reasonable advance written or oral notice to Tenant’s on-site manager.

1.6.5 Systems and Equipment. As used in this Lease, “Systems and Equipment” means collectively any existing plant, machinery, transformers, duct work, intrabuilding network cables and wires that transmit voice, data, and other telecommunications signals (“INC”), and other equipment, facilities, and systems designed to supply water, heat, ventilation, air conditioning and humidity or any other services or utilities, or comprising or serving as any component or portion of the electrical, gas, steam, plumbing, sprinkler, communications, alarm, security, or fire/life/safety systems or equipment, or any other mechanical, electrical, electronic, computer or other systems or equipment for the Property.

2     USE

2.1    USE AND ENJOYMENT OF PREMISES. Tenant shall use and occupy the Premises for executive and general offices and for no other purpose. Notwithstanding anything contained herein to the contrary, Tenant may use portions of the Premises not to exceed one hundred fifty (150) usable square feet for the preparation and reheating of food and beverages, including the use of refrigerators, ice makers, coffee machines, hot plates, microwave ovens, or similar heating devices (but not for the actual cooking of food) for service only to Tenant’s employees and business invitees.

2.1.1 Suitability. Tenant acknowledges that neither Landlord nor any agent of Landlord has made any representation or warranty with respect to the Premises, the Property, or the Complex, or with respect to the suitability of same for the conduct of Tenant’s business, except as expressly provided in this Lease. Tenant’s acceptance of possession of the Premises shall conclusively establish that the foregoing were at such time in satisfactory condition. Landlord makes no representation to Tenant regarding the installation, ownership, location, or suitability for Tenant’s purposes of the INC in the Building.

Oyster Point Marina Plaza Office Lease

Kashiwa Fudosan America, Inc. :: Satsuma Pharmaceuticals, Inc.

page 8 of 55

[Suite 221 (400 OPB); 4,148 rsf]

2.1.2 Insurance Rates. Tenant shall not do or suffer anything to be done in or about the Premises, nor shall Tenant bring or allow anything to be brought into the Premises, which will in any way increase the rate of any fire insurance or other insurance upon the Property or its contents, cause a cancellation of said insurance, or otherwise affect said insurance in any manner.

2.1.3 Use to Comply with Laws. Tenant shall use the Premises in conformity with all applicable Laws, as specified in Article 6 below.

2.1.4 Floor Loading. Tenant shall not place or permit to be placed on any floor a load exceeding eighty (80) pounds per square foot or such lower floor load as such floor was designed to carry.

2.2    NUISANCE AND WASTE. Tenant also shall not do or suffer anything to be done in or about the Premises which will in any way obstruct or interfere with the rights of other tenants or occupants of the Property or injure or annoy said tenants or occupants, nor shall Tenant use or suffer the Premises to be used for any unlawful purposes. In no event shall Tenant cause or permit any nuisance in or about the Premises, and no loudspeakers or similar devices shall be used without the prior written approval of Landlord, which approval may be withheld in Landlord’s sole and absolute discretion. Tenant shall not commit or suffer to be committed any waste in or upon the Premises. The provisions of this section are for the benefit of Landlord only and shall not be construed to be for the benefit of any tenant or occupant of the Building. If any governmental license or permit, other than a Certificate of Occupancy, shall be required for the proper and lawful conduct of Tenant’s business in the Premises, or any part thereof, and if failure to secure such license or permit would in any way affect Landlord, Tenant, at its sole expense, shall procure and thereafter maintain such license or permit and submit the same for inspection by Landlord. Tenant shall at all times comply with the terms and conditions of each such license or permit.

2.3    COMPLIANCE WITH CERTIFICATE OF OCCUPANCY Tenant shall not at any time use or occupy the Premises, or suffer or permit anyone to use or occupy, the Premises, or do or permit anything to be done in the Premises, in violation of the Certificate of Occupancy for the Premises or for the Building.

3     PREPARATION OF THE PREMISES

3.1    CONDITION OF PREMISES. Except as otherwise expressly provided in § 3.2 below, Tenant shall accept the Premises, any existing Improvements in the Premises (as defined in § 10.1 below), and the Systems and Equipment serving the same in an “as is” condition on the date the Term commences, and Landlord shall have no obligation to improve, alter, remodel, or otherwise modify the Premises prior to Tenant’s occupancy or thereafter under this Lease. Notwithstanding anything to the contrary herein, Landlord shall deliver possession of the Premises to Tenant in vacant, broom-clean condition, with all Systems and Equipment in good working order.

3.2    LANDLORD’S PREPARATION. Landlord shall use reasonable diligence in completing and preparing the Premises for Tenant’s occupancy in the manner and subject to the terms, conditions, and covenants set forth in this Article 3 on or before the Target Date specified in § 1.4 above.

3.2.1 Effect of Delay. If the Occupancy Conditions specified in § 3.2.3 below are not met by the Target Date specified in § 1.4 above, the Commencement Date shall not occur until the date on which the Occupancy Conditions are met and Landlord delivers the Premises in the required condition; and in any such case, Tenant shall not have the right to terminate the Lease, but Tenant’s obligation to pay Rent shall be delayed until the occurrence of the Commencement Date.

3.2.2 Landlord’s Work. The facilities, materials, and work to be furnished, installed, and performed in the Premises by Landlord hereunder at Landlord’s sole cost and expense are referred to as the “Work.” Any other installations, materials, and work which may be undertaken by or for the account of Tenant to prepare, equip, decorate, and furnish the Premises for Tenant’s occupancy are referred to as the “Tenant’s Work,” which shall be undertaken or installed by Tenant at Tenant’s sole

Oyster Point Marina Plaza Office Lease

Kashiwa Fudosan America, Inc. :: Satsuma Pharmaceuticals, Inc.

page 9 of 55

[Suite 221 (400 OPB); 4,148 rsf]

cost and expense and which shall include the installation of Tenant’s furniture, fixtures, office systems, and Tenant’s data and telecommunications cables and wiring. The Landlord’s Work shall be constructed in accordance with all applicable Laws, in a good and workmanlike manner, free of defects. The parties agree that Landlord’s Work shall comprise the following elements and the following elements only, which Landlord shall undertake, perform, and install at Landlord’s sole cost and expense on a turnkey basis, as shown on the Space Plan:

(a)    installation of new Building-standard carpet and VCT throughout the Premises;

(b)    application of new Building-standard paint in a color of Tenant’s choice on one (1) accent wall;

(c)    patching and touching up of walls as needed; and

(d)    delivery of the Premises with all Systems and Equipment, including ceiling tiles and light bulbs, serving the same in good working order and condition.

3.2.3 Readiness for Occupancy. The Premises shall be deemed ready for occupancy on the earliest date on which all of the following conditions (the “Occupancy Conditions”) have first been met:

(a) Substantial Completion of Work. The Work has been substantially completed as determined by Landlord its reasonable discretion and, if applicable, Landlord’s architect has issued a certificate of substantial completion; and it shall be so deemed notwithstanding the fact that minor or insubstantial details of construction, mechanical adjustment, or decoration remain to be performed, the noncompletion of which does not materially interfere with Tenant’s beneficial use of the Premises for their intended purposes;

(b) Access and Services. Reasonable means of access and facilities necessary to Tenant’s use and occupancy of the Premises, including corridors, elevators, stairways, heating, ventilating, air-conditioning, sanitary, water, and electrical facilities (but exclusive of parking facilities) have been installed and are in reasonably good operating order and available to Tenant; and

(c) Required Governmental Approval. If a building permit for the Work is required, a final inspection card or similar governmental approval (temporary or final) has been issued by the City of South San Francisco permitting use of the Premises for office purposes.

3.2.4 Tenant Delays. If the occurrence of any of the Occupancy Conditions and Landlord’s preparation of the Premises for occupancy shall be delayed owing to either (a) any act, omission, or failure of Tenant or any of its employees, agents, or contractors which shall continue after Landlord shall have given Tenant reasonable notice that such act, omission, or failure would result in delay, and such delay shall have been unavoidable by Landlord in the exercise of reasonable diligence and prudence; or (b) the nature of any items of additional work or change orders that Landlord undertakes to perform for the account of Tenant (including any delays incurred by Landlord, after making reasonable efforts, in procuring any materials, equipment, or fixtures of a kind or nature not used by Landlord as part of its standard construction) (collectively “Tenant Delays”), then the Premises shall be deemed ready for occupancy on the date when they would have been ready but for such Tenant Delays.

3.2.5 Construction Management Services. Notwithstanding anything to the contrary in this Lease, at the completion of Landlord’s Work, Tenant shall pay to Landlord promptly upon receipt of invoice a construction management fee in the amount of five percent (5%) of the total cost of Landlord’s Work (the “CM Fee”) to cover the cost of Landlord’s personnel providing construction management services in connection with Landlord’s Work in the Premises. Notwithstanding the foregoing, the CM Fee shall not exceed One Thousand Dollars ($1,000).

Oyster Point Marina Plaza Office Lease

Kashiwa Fudosan America, Inc. :: Satsuma Pharmaceuticals, Inc.

page 10 of 55

[Suite 221 (400 OPB); 4,148 rsf]

3.3    EARLY ENTRY. During any period that Tenant shall be permitted to enter the Premises prior to the Commencement Date other than to occupy the same (e.g., to perform alterations or improvements), Tenant shall comply with all terms and provisions of this Lease, except those provisions requiring the payment of Rent. If Tenant shall be permitted to enter the Premises prior to the Commencement Date for the purpose of occupying the same, Rent shall commence on such date at the rate specified in the Table for the first period during which Rent is payable after the Commencement Date; and if Tenant shall commence occupying only a portion of the Premises prior to the Commencement Date, Rent shall be prorated based on the number of rentable square feet occupied by Tenant. Landlord shall permit early entry, provided the Premises are legally available and Landlord has completed any Work required under this Lease. In no event shall Tenant’s early entry extend or shorten the Term of the Lease set forth in § 1.2 above. Notwithstanding anything to the contrary herein, Tenant shall have the right enter the Premises free from the obligation to pay Rent for the period commencing two (2) weeks prior to the Commencement Date for the limited purposes installing Tenant’s furniture and fixtures and telephone and data equipment, lines, and cabling, and otherwise preparing the Premises for Tenant’s occupancy, provided that Tenant’s activity does not interfere with Landlord’s completion of the Work and that Tenant has delivered to Landlord the insurance certificates and the Security Deposit required hereunder.

3.4    FINAL COMPLETION. Substantial completion shall not prejudice Tenant’s rights to require full completion of any remaining items of Work; however, if Landlord notifies Tenant in writing that the Work is fully completed, and Tenant fails to object thereto in writing within fifteen (15) days thereafter specifying in reasonable detail the items of work needed to be completed and the nature of work needed to complete said items, Tenant shall be deemed conclusively to have accepted the Work as fully completed (or such portions thereof as to which Tenant has not so objected).

3.5    NOTICE OF DEFECTS. It shall be conclusively presumed upon Tenant’s taking actual possession of the Premises that the same were in satisfactory condition (except for latent defects) as of the date of such taking of possession, unless within thirty (30) days after the Commencement Date Tenant shall give Landlord notice in writing specifying the respects in which the Premises were not in satisfactory condition.

4     ADJUSTMENTS OF RENT

4.1    TAXES AND OPERATING EXPENSES. In addition to the Base Rent and all other payments due under this Lease, Tenant shall pay to Landlord, in the manner set forth in this Article 4, as Additional Rent, the following amounts:

(a) Increased Operating Expenses. An amount equal to Tenant’s Pro Rata Share of that portion of Operating Expenses paid by Landlord during each Adjustment Period which exceeds the amount of Base Operating Expenses (as all of such terms are defined in § 4.2 below); and

(b) Increased Taxes. An amount equal to Tenant’s Pro Rata Share of that portion of Real Estate Taxes paid by Landlord during each Adjustment Period which exceeds the amount of Base Real Estate Taxes (as all of such terms are defined in § 4.2 below).

Tenant’s Pro Rata Share of (i) such increase in Operating Expenses over the Base Operating Expenses and (ii) such increase in Real Estate Taxes over the Base Real Estate Taxes is sometimes referred to collectively herein as the “Rental Adjustment.”

Oyster Point Marina Plaza Office Lease

Kashiwa Fudosan America, Inc. :: Satsuma Pharmaceuticals, Inc.

page 11 of 55

[Suite 221 (400 OPB); 4,148 rsf]

4.2     DEFINITIONS. For the purposes of this Lease, the following definitions shall apply:

(a) Base Operating Expenses. “Base Operating Expenses” means the total of Operating Expenses paid by Landlord during calendar year 2018 (the “Base Expense Year”), as adjusted under § 4.5 below.

(b) Base Real Estate Taxes. “Base Real Estate Taxes” means the total of Real Estate Taxes paid by Landlord during calendar year 2018 (the “Base Tax Year”).

(c) Tenant’s Pro Rata Share. “Tenant’s Pro Rata Share” as to the Building is the percentage labeled as such in the Table in § 1.2 and is calculated by dividing the agreed rentable area of the Premises (numerator) by the agreed rentable area of the Property (denominator) and expressing the resulting quotient as a percentage. “Tenant’s Pro Rata Share” as to the Complex is the percentage labeled as such in the Table in § 1.2 as is calculated by dividing the agreed rentable area of the Premises (numerator) by the agreed rentable area of the Complex (denominator) and expressing the resulting quotient as a percentage. Tenant’s Pro Rata Share shall be increased during the Term in proportion to any increase in the area of the Premises in accordance with the formula stated herein.

(d) Adjustment Period. “Adjustment Period” as to Operating Expenses and Real Estate Taxes means each calendar year of which any portion occurs during the Term, excluding the Base Year and beginning with the first calendar year immediately following the Base Year.

(e) Real Estate Taxes. “Real Estate Taxes” means all of the following charges, whether or not now customary or in the contemplation of the parties hereto, and whether or not general, special, ordinary, or extraordinary, which Landlord shall pay during any Adjustment Period because of or in connection with the ownership, leasing, or operation of the Property:

(1) ad valorem real property taxes;

(2) any form of assessment, license fee, license tax, business license fee, commercial rental tax, levy, charge, fee, tax, or other imposition imposed by any authority, including any city, county, state, or federal governmental agency, or any school, agricultural, lighting, transportation, housing, drainage, or other improvement or special assessment district thereof;

(3) any tax on Landlord’s ‘right’ to rent or ‘right’ to other income from the Building or as against Landlord’s business of leasing the Building;

(4) any assessment, tax, fee, levy, or charge in substitution, partially or totally, of any assessment tax, fee, levy or charge previously included within the definition of Real Estate Taxes, it being acknowledged by Tenant and Landlord that Proposition 13 was adopted by the voters of the State of California in the Election of June, 1978, and that assessments, taxes, fees, levies, and charges may be imposed by governmental agencies for such services as fire protection, street, sidewalk, and road maintenance, refuse removal, and for other governmental services formerly provided without charge to property owners or occupants, and it being the intention of Tenant and Landlord that all such new and increased assessments, taxes, fees, levies, and charges be included within the definition of Real Estate Taxes for the purposes of this Lease;

Oyster Point Marina Plaza Office Lease

Kashiwa Fudosan America, Inc. :: Satsuma Pharmaceuticals, Inc.

page 12 of 55

[Suite 221 (400 OPB); 4,148 rsf]

(5) any assessment, tax, fee, levy, or charge allocable to or measured by the area of the Building or Property or the Rent payable hereunder, including any gross income tax or excise tax levied by any city, county, state, or federal governmental agency or any political subdivision thereof with respect to the receipt of such Rent, or upon or with respect to the possession, leasing, operating, management, maintenance, alteration, repair, use, or occupancy by Tenant of the Property or any portion thereof;

(6) any assessment, tax, fee, levy, or charge upon this transaction or any document to which Tenant is a party, creating or transferring an interest or an estate in the Building or Property;

(7) any assessment, tax, fee, levy, or charge by any governmental agency related to any transportation plan, fund, or system instituted within the geographic area of which the Building is a part; or

8) reasonable legal and other professional fees, costs and disbursements incurred in connection with proceedings to contest, determine or reduce Real Estate Taxes.

Exclusions. Notwithstanding the foregoing, Real Estate Taxes shall not include (A) federal, state, or local income taxes; (B) franchise, gift, transfer, excise, capital stock, estate, succession, or inheritance taxes; (C) penalties or interest for late payment of Real Estate Taxes; or (D) taxes or assessments in excess of the amount which would be payable if such tax or assessment expense had been paid in installments over the longest permitted term.

(f) Operating Expenses. “Operating Expenses” means all expenses, costs, and amounts (other than Real Estate Taxes) of every kind and nature which Landlord shall pay during any Adjustment Period of which any portion occurs during the Term, because of or in connection with the ownership, management, repair, maintenance, restoration, and/or operation of the Property, including costs of the following:

(1) any and all Utilities (as defined in § 4.2(g) below) delivered to or consumed or used in or on the Property;

(2) permits, licenses, and certificates necessary to operate, manage, and lease the Property;

(3) supplies, tools, equipment, and materials used in the operation, repair, and maintenance of the Property;

(4) all insurance premiums for any insurance policies deemed necessary or desirable by Landlord (including workers’ compensation, health, accident, group life, public liability, property damage, earthquake, and fire and extended coverage insurance for the full replacement cost of the Property as required by Landlord or its lenders for the Property);

(5) the deductible portion of any claim paid under any insurance policy maintained by Landlord in connection with its management and operation of the Property;

(6) accounting, legal, inspection, consulting, concièrge, and other services;

(7) services of independent contractors;

Oyster Point Marina Plaza Office Lease

Kashiwa Fudosan America, Inc. :: Satsuma Pharmaceuticals, Inc.

page 13 of 55

[Suite 221 (400 OPB); 4,148 rsf]

(8) compensation (including employment taxes and fringe benefits) of all persons who perform duties in connection with the operation, maintenance, repair, or overhaul of the Building or Property, and equipment, improvements, and facilities located within the Property, including engineers, janitors, painters, floor waxers, window washers, security, parking personnel, and gardeners;

(9) operation and maintenance of a room for delivery and distribution of mail to tenants of the Building as required by the U.S. Postal Service (including an amount equal to the fair market rental value of the mail room premises);

(10) management of the Building or Property, whether managed by Landlord or an independent contractor (including an amount equal to the fair market value of any on-site manager’s office);

(11) rental expenses for (or a reasonable depreciation allowance on) personal property used in maintenance, operation, or repair of the Property and installment equipment purchase or equipment financing agreements for such personal property;

(12) costs, expenditures, or charges (whether capitalized or not) required by any governmental or quasi-governmental authority after the Commencement Date;

(13) payments under any easement, operating agreement, declaration, restrictive covenant, or instrument pertaining to the sharing of costs in any planned development;

(14) amortization of capital expenses (including financing costs) incurred by Landlord after the Commencement Date in order to (A) comply with Laws, (B) reduce Property Operating Expenses, or (C) upgrade the utility, efficiency, or capacity of any Utility or telecommunication systems serving tenants of the Property;

(15) operation, repair, and maintenance of all Systems and Equipment and components thereof (including replacement of components); janitorial service; alarm and security service; window cleaning; trash removal; elevator maintenance; cleaning of walks, parking facilities, and building walls; removal of ice and snow; replacement of wall and floor coverings, ceiling tiles, and fixtures in lobbies, corridors, restrooms and other common or public areas or facilities; maintenance and repair of the roof and exterior fabric of the Building, including replacement of glazing as needed; maintenance and replacement of shrubs, trees, grass, sod, and other landscaped items, irrigation systems, drainage facilities, fences, curbs, and walkways; repaving and restriping parking facilities; and roof repairs;

(16) the operation of any on-site maintenance shop(s) and the operation and maintenance of the Athletic Facility, any other fitness center, conference rooms, and all other common areas and amenities in the Property;

(17) provision of shuttle busses, shuttle services, and drivers between the Complex and BART and SFO airport, as required by the Bay Area Regional Transportation Act and deed covenants and restrictions applicable to the Complex; and

Oyster Point Marina Plaza Office Lease

Kashiwa Fudosan America, Inc. :: Satsuma Pharmaceuticals, Inc.

page 14 of 55

[Suite 221 (400 OPB); 4,148 rsf]

(18) any other costs or expenses incurred by Landlord which are reasonably necessary to operate, repair, manage, and maintain the Building and Property in a first-class manner and condition and which are not otherwise reimbursed by tenants of the Building.

Exclusions. Notwithstanding the foregoing, Operating Expenses shall not include (A) depreciation, interest, and amortization on Superior Mortgages (as defined in § 18.1 below), and other debt costs or ground lease payments, if any; (B) legal fees in connection with leasing, tenant disputes, or enforcement of leases; (C) real estate brokers’ leasing commissions; (D) improvements or alterations to tenant spaces; (E) the cost of providing any service directly to, and reimbursed or paid directly by, any tenant; (F) any costs expressly excluded from Operating Expenses elsewhere in this Lease; (G) costs of any items to the extent Landlord receives reimbursement from insurance proceeds or from a third party (such proceeds to be deducted from Operating Expenses in the year in which received); (H) capital expenditures, except those expressly permitted above; provided, all such permitted capital expenditures (together with reasonable financing charges) shall be amortized for purposes of this Lease over the shorter of (x) their useful lives or (y) the period during which the reasonably estimated savings in Operating Expenses equals the expenditures; (I) expense reserves; and (J) costs occasioned by casualties or condemnation.

(g) Utilities. “Utilities” means all expenses, costs, and amounts of every kind and nature which Landlord shall pay during any Adjustment Period of which any portion occurs during the Term, because of or in connection with the electricity, power, gas, steam, oil or other fuel, water, sewer, lighting, heating, air conditioning, and ventilating delivered to or consumed or used in or on the Property, but excluding the cost of any Utilities provided by a public utility directly to any tenant in the Complex and/or billed directly and separately by such utility or Landlord to such tenant by means of separate metering or otherwise.

4.3    MANNER OF PAYMENT. To provide for current payments of the Rental Adjustment, Tenant shall pay as Additional Rent during each Adjustment Period an amount equal to Landlord’s estimate of the Rental Adjustment which will be payable by Tenant for such Adjustment Period. Such payments shall be made in monthly installments, commencing on the first day of the month following the month in which Landlord notifies Tenant of the amount it is to pay hereunder and continuing until the first day of the month following the month in which Landlord gives Tenant a new notice of the estimated Rental Adjustment. It is the intention hereunder to estimate from time to time the amount of Tenant’s Rental Adjustment for each Adjustment Period and then to effect a reconciliation in the following year based on the actual expenses incurred for the preceding Adjustment Period, as provided in 4.4 below.

4.4    RECONCILIATION. On or before the first day of April of each year after the first Adjustment Period (or as soon thereafter as is practical), Landlord shall deliver to Tenant a statement (the “Statement”) setting forth the Rental Adjustment for the preceding year. If the actual Rental Adjustment for the preceding Adjustment Period exceeds the total of the estimated monthly payments made by Tenant for such Adjustment Period, Tenant shall pay Landlord the amount of the deficiency within thirty (30) days of the receipt of the Statement. If such total of estimated payments made exceeds the actual Rental Adjustment for such Adjustment Period, then Tenant shall receive a credit for the difference against payments of Rent next due. If the credit is due from Landlord on the Expiration Date, Landlord shall pay Tenant the amount of the credit, less any Rent then due. The obligations of Tenant and Landlord to make payments required under this § 4.4 shall survive the expiration or earlier termination of the Term of this Lease.

Oyster Point Marina Plaza Office Lease

Kashiwa Fudosan America, Inc. :: Satsuma Pharmaceuticals, Inc.

page 15 of 55

[Suite 221 (400 OPB); 4,148 rsf]

4.4.1 Changes in Method. So long as Tenant’s obligations hereunder are not materially adversely affected thereby, Landlord reserves the right reasonably to change from time to time the manner or timing of the foregoing payments. In lieu of providing one Statement covering Real Estate Taxes and Operating Expenses, Landlord may provide separate statements, at the same or different times. No delay by Landlord in providing the Statement (or separate statements) shall be deemed a default by Landlord or a waiver of Landlord’s right to require payment of Tenant’s obligations for actual or estimated Real Estate Taxes or Operating Expenses. In no event shall a decrease in Real Estate Taxes or Operating Expenses below the Base Operating Expenses or Base Real Estate Taxes ever decrease the monthly Base Rent or give rise to a credit in favor of Tenant.

4.4.2 Proration of Rental Adjustment. If the Term does not commence on January 1 or does not end on December 31, Tenant’s obligations to pay estimated and actual amounts towards Real Estate Taxes and Operating Expenses for such first or final calendar year shall be prorated to reflect the portion of such year(s) included in the Term. Such proration shall be made by multiplying the total estimated or actual (as the case may be) Real Estate Taxes and Operating Expenses for such calendar year(s), as well as the Base Real Estate Taxes and Base Operating Expenses, by a fraction, the numerator of which shall be the number of days of the Term during such calendar year, and the denominator of which shall be three hundred sixty-five (365).

4.5    GROSS-UP. If the Building is less than ninety-five percent (95%) occupied during the Base Period or any Adjustment Period, then Operating Expenses and Real Estate Taxes for the Base Period and/or such Adjustment Period shall be “grossed up” to that amount of Operating Expenses and Real Estate Taxes that, using reasonable projections, would normally have been incurred during the Base Period and/or such Adjustment Period if the Building had been ninety-five percent (95%) occupied during the Base Period and/or such Adjustment Period, as determined in accordance with sound accounting and management practices, consistently applied. Only those component elements or items of expense of Operating Expenses and Real Estate Taxes that are affected by variations in occupancy levels shall be grossed up.

4.6    ADJUSTMENT OF BASE OPERATING EXPENSES. Notwithstanding anything to the contrary contained in the Lease, the parties agree that Base Operating Expenses and Operating Expenses for any subsequent Adjustment Period (herein called “Subsequent Operating Expenses”) shall be subject to further adjustment by Landlord as follows:

(a) Exclusion of Capital Expenditures. Landlord may exclude from Base Operating Expenses capital expenditures otherwise permitted, provided Landlord shall also exclude any amortization of such expenditures from Subsequent Operating Expenses.

(b) Elimination of Recurring Expenses. If Landlord eliminates from any Subsequent Operating Expenses a category of recurring expenses previously included in Base Operating Expenses, Landlord may subtract such category from Base Operating Expenses commencing with such subsequent Adjustment Period.

(c) New Recurring Expenses. If Landlord includes a new category of recurring Subsequent Operating Expenses not previously included in Base Operating Expenses, Landlord shall also include an amount (the “Assumed Base Amount”) for such category in Base Operating Expenses commencing in such subsequent Adjustment Period.

(d) Assumed Base Amount. The “Assumed Base Amount” under § 4.6(c) above shall be the annualized amount of expenses for such new category in the first Adjustment Period it is included, reduced by an amount determined in Landlord’s

Oyster Point Marina Plaza Office Lease

Kashiwa Fudosan America, Inc. :: Satsuma Pharmaceuticals, Inc.

page 16 of 55

[Suite 221 (400 OPB); 4,148 rsf]

sole good faith discretion (but in no event by an amount less than five percent (5%)) for each full or partial Adjustment Period that has elapsed during the Term of the Lease before such Adjustment Period.

4.7    ADJUSTMENT OF REAL ESTATE TAXES. If Base Real Estate Taxes are reduced as the result of protest, by means of agreement, as the result of legal proceedings, or otherwise, Landlord may adjust Tenant’s obligations for Real Estate Taxes in all years affected by any refund of taxes following the Base Tax Year; and Tenant shall pay Landlord within thirty (30) days after notice any additional amount required by such adjustment for any Adjustment Periods that have theretofore occurred. Tenant shall be entitled to receive a share of any refund or abatement of Real Estate Taxes received by Landlord to the extent of and in proportion to Tenant’s actual contribution to the amount of Real Estate Taxes paid by Landlord during the period to which such refund or abatement relates, but in no event shall Tenant be entitled to any refund with respect to Real Estate Taxes paid by Landlord during Tenant’s Base Tax Year. If Real Estate Taxes for any Adjustment Period during the Term or any extension thereof shall be increased after payment thereof by Landlord for any reason, including error or reassessment by applicable governmental authorities, Tenant shall pay Landlord upon demand Tenant’s Pro Rata Share of such increased Real Estate Taxes. Tenant shall pay increased Real Estate Taxes whether Real Estate Taxes are increased as a result of increases in the assessment or valuation of the Property (whether based on a sale, change in ownership, refinancing of the Property, or otherwise), increases in the tax rates, reduction or elimination of any rollbacks or other deductions available under current law, scheduled reductions of any tax abatement, as a result of the elimination, invalidity, or withdrawal of any tax abatement, or for any other cause whatsoever. Notwithstanding the foregoing, if any Real Estate Taxes shall be paid based on assessments or bills by a governmental authority using a fiscal year other than a calendar year, Landlord may elect to average the assessments or bills for the subject calendar year, based on the number of months of such calendar year included in each such assessment or bill.

4.8    ALLOCATION WITHIN COMPLEX. So long as the Property shall be part of the Complex collectively owned or managed by Landlord or its affiliates or collectively managed by Landlord’s managing agent, Landlord may allocate Real Estate Taxes and Operating Expenses within the Complex and between the buildings and structures comprising the Complex and the parcels on which they are located, in accordance with sound accounting and management principles. In the alternative, Landlord shall have the right to determine, in accordance with sound accounting and management principles, Tenant’s Pro Rata Share of Real Estate Taxes and Operating Expenses based upon the totals of each of the same for all such buildings and structures, the land constituting parcels on which the same are located, and all related facilities, including common areas and easements, corridors, lobbies, sidewalks, elevators, loading areas, parking facilities, driveways, and other appurtenances and public areas, in which event Tenant’s Pro Rata Share shall be based on the ratio of the rentable area of the Premises to the rentable area of all buildings in the Complex.

4.9    LANDLORD’S RECORDS. Landlord shall maintain records with respect to Real Estate Taxes and Operating Expenses and determine the same in accordance with sound accounting and management practices, consistently applied. Although this Lease contemplates the computation of Real Estate Taxes and Operating Expenses on a cash basis, Landlord shall make reasonable and appropriate accrual adjustments to ensure that each Adjustment Period includes substantially the same recurring items. Landlord reserves the right to change to a full accrual system of accounting so long as the same is consistently applied and Tenant’s obligations are not materially adversely affected. Tenant or its representative shall have the right to examine such records, upon reasonable prior written notice specifying such records Tenant desires to examine, during normal business hours at the place or places where such records are normally kept, by sending such notice no later than forty-five (45) days following the furnishing of the Statement.

Oyster Point Marina Plaza Office Lease

Kashiwa Fudosan America, Inc. :: Satsuma Pharmaceuticals, Inc.

page 17 of 55

[Suite 221 (400 OPB); 4,148 rsf]

4.10 OTHER TAXES PAYABLE BY TENANT. In addition to the Base Rent and any other charges to be paid by Tenant hereunder, Tenant shall, as an element of Rent, reimburse Landlord upon demand for any and all taxes payable by Landlord (other than net income taxes) which are not otherwise reimbursable under this Lease, whether or not now customary or within the contemplation of the parties, where such taxes are upon, measured by, or reasonably attributable to (A) the cost or value of Tenant’s equipment, furniture, fixtures, and other personal property located at the Premises, or the cost or value of any improvements made in or to the Premises by or for Tenant, regardless of whether title to such improvements is held by Tenant or Landlord; (B) the gross or net Rent payable under this Lease, including any rental or gross receipts tax levied by any taxing authority with respect to the receipt of the Rent hereunder; (C) the possession, leasing, operation, management, maintenance, alteration, repair, use, or occupancy by Tenant of the Premises or any portion thereof; or (D) this transaction or any document to which Tenant is a party creating or transferring an interest or an estate in the Premises. Tenant shall pay any rent tax, sales tax, service tax, transfer tax, value-added tax, or any other applicable tax on the Rent or services herein or otherwise respecting this Lease.

4.11 RENT CONTROL. If the amount of Rent or any other payment due under this Lease violates the terms of any governmental restrictions on such Rent or payment, then the Rent or payment due during the period of such restrictions shall be the maximum amount allowable under those restrictions. Upon termination of the restrictions, Landlord shall, to the extent it is legally permitted, recover from Tenant the difference between the amounts received during the period of the restrictions and the amounts Landlord would have received had there been no restrictions.

5     SECURITY DEPOSIT

5.1    DEPOSIT FOR SECURITY. Tenant shall deposit with Landlord the amount of Forty Thousand Nine Hundred Twenty-Five Dollars and Seventy Cents ($40,925.70) (the “Security Deposit”) upon Tenant’s execution and delivery of this Lease to Landlord. The Security Deposit shall serve as security for the prompt, full, and faithful performance by Tenant of the terms and provisions of this Lease, including the value of future rents as damages in accordance with California Civil Code § 1951.2, as set forth in § 20.3 below. Landlord shall not be required to keep the Security Deposit separate from Landlord’s general funds or pay interest on the Security Deposit.

5.1.1 Application of Deposit. In the event that Tenant is in Default hereunder and fails to cure within any applicable time permitted under this Lease, or in the event that Tenant owes any amounts to Landlord upon the expiration of this Lease, Landlord may use or apply the whole or any part of the Security Deposit for the payment of Tenant’s obligations hereunder. The use or application of the Security Deposit or any portion thereof shall not prevent Landlord from exercising any other right or remedy provided hereunder or under any Law and shall not be construed as liquidated damages.

5.1.2 Restoration of Full Deposit. In the event the Security Deposit is reduced by such use or application, Tenant shall deposit with Landlord, within ten (10) days after written notice, an amount sufficient to restore the full amount of the Security Deposit. If the Premises shall be expanded at any time, or if the Term shall be extended at any increased rate of Rent, the Security Deposit shall thereupon be proportionately increased.

5.1.3 Disposition of Security Deposit. Within thirty (30) days after the Expiration Date or any earlier termination of the Lease, any remaining portion of the Security Deposit shall be returned to Tenant after deduction of all amounts due as Rent or otherwise. Tenant expressly waives the provisions of § 1950.7 of the California Civil Code.

Oyster Point Marina Plaza Office Lease

Kashiwa Fudosan America, Inc. :: Satsuma Pharmaceuticals, Inc.

page 18 of 55

[Suite 221 (400 OPB); 4,148 rsf]

6     COMPLIANCE WITH LAWS

6.1    TENANT’S COMPLIANCE WITH LAWS. Tenant shall use the Premises in compliance with all applicable federal, state, county, and local governmental and municipal laws, statutes, ordinances, rules, regulations, codes, decrees, orders, and other such requirements, and decisions by courts in cases where such decisions are considered binding precedents in the State of California (the “State”), and decisions of federal courts applying the laws of the State (collectively “Laws”). Tenant shall, at its sole cost and expense, promptly comply with each and all of such Laws, and also with the requirements of any board of fire underwriters or other similar body now or hereafter constituted to deal with the condition, use, or occupancy of the Premises, except in the case of required structural changes not triggered by Tenant’s change in its particular use of the Premises or Tenant’s alterations, additions, or improvements therein. Tenant shall comply with all applicable Laws regarding the physical condition of the Premises, but only to the extent that the applicable Laws pertain to the particular manner in which Tenant uses the Premises or the particular use to which Tenant puts the Premises, if different from that permitted under Article 2 of this Lease. Tenant shall also comply with all applicable Laws which do not relate to the physical condition of the Premises and with which only the occupant can comply, such as laws governing maximum occupancy, workplace smoking, VDT regulations, and illegal business operations, such as gambling. The judgement of any court of competent jurisdiction or the admission of Tenant in any judicial action, regardless of whether Landlord is a party thereto, that Tenant has violated any of such Laws shall be conclusive of that fact as between Landlord and Tenant.

6.1.1 Code Costs. Notwithstanding anything to the contrary in this Article 6, if the requirement of any public authority obligates either Landlord or Tenant to expend money in order to bring the Premises and/or any area of the Property into compliance with Laws as a result of (a) Tenant’s particular use or alteration of the Premises; (b) Tenant’s change in the use of the Premises; (c) the manner of conduct of Tenant’s business or operation of its installations, equipment, or other property therein; (d) any cause or condition created by or at the instance of Tenant, other than by Landlord’s performance of any work for or on behalf of Tenant; or (e) breach of any of Tenant’s obligations hereunder, then Tenant shall bear all costs (“Code Costs”) of bringing the Premises and/or Property into compliance with Laws, whether such Code Costs are related to structural or nonstructural elements of the Premises or Property.

6.2    LANDLORD’S COMPLIANCE WITH LAWS. Landlord represents that on the Commencement Date Landlord has no actual knowledge of any violation of any applicable Laws respecting the Premises. During the Term Landlord shall comply with all applicable Laws regarding the Premises and Property, except to the extent Tenant must comply under § 6.1 above.

7     HAZARDOUS MATERIALS

7.1    REGULATION OF HAZARDOUS MATERIALS. Tenant shall not transport, use, store, maintain, generate, manufacture, handle, dispose, release, or discharge any “Hazardous Material” (as defined below) upon or about the Property, nor permit Tenant’s employees, agents, contractors, and other occupants of the Premises to engage in such activities upon or about the Property. However, the foregoing provisions shall not prohibit the transportation to and from, and use, storage, maintenance, and handling within, the Premises of substances customarily used in offices, provided all of the following conditions are met:

(a) such substances shall be used and maintained only in such quantities as are reasonably necessary for such permitted use of the Premises, strictly in accordance with applicable Laws and the manufacturers’ instructions therefor;

(b) such substances shall not be disposed of, released, or discharged on the Property and shall be transported to and from the Premises in compliance with all applicable Laws, and as Landlord shall reasonably require;

Oyster Point Marina Plaza Office Lease

Kashiwa Fudosan America, Inc. :: Satsuma Pharmaceuticals, Inc.

page 19 of 55

[Suite 221 (400 OPB); 4,148 rsf]

(c) if any applicable Laws or Landlord’s trash removal contractor requires that any such substances be disposed of separately from ordinary trash, Tenant shall make arrangements at Tenant’s expense for such disposal directly with a qualified and licensed disposal company at a lawful disposal site (subject to scheduling and approval by Landlord), and shall ensure that disposal occurs frequently enough to prevent unnecessary storage of such substances in the Premises; and

(d) any remaining such substances shall be completely, properly, and lawfully removed from the Property upon expiration or earlier termination of this Lease.

7.1.1 DEFINITION OF HAZARDOUS MATERIAL. The term “Hazardous Material” for purposes hereof shall mean any chemical, substance, material, or waste or component thereof which is now or hereafter listed, defined, or regulated as a hazardous or toxic chemical, substance, material, or waste or component thereof by any federal, state, or local governing or regulatory body having jurisdiction, or which would trigger any employee or community “right-to-know” requirements adopted by any such body, or for which any such body has adopted any requirements for the preparation or distribution of an MSDS.

7.2    NOTIFICATION OF LANDLORD. Tenant shall promptly notify Landlord of (A) any enforcement, cleanup, or other regulatory action taken or threatened by any governmental or regulatory authority with respect to the presence of any Hazardous Material on the Premises or the migration thereof from or to other property; (B) any demands or claims made or threatened by any party against Tenant or the Premises relating to any loss or injury resulting from any Hazardous Material on or from the Premises; and (C) any matters where Tenant is required by law to give a notice to any governmental or regulatory authority respecting any Hazardous Material on the Premises. Landlord shall have the right (but not the obligation) to join and participate, as a party, in any legal proceedings or actions affecting the Premises initiated in connection with any environmental, health, or safety law.

7.3    LIST OF HAZARDOUS MATERIALS. At such times as Landlord may reasonably request, Tenant shall provide Landlord with a written list identifying any Hazardous Material then used, stored, or maintained upon the Premises, the use and approximate quantity of each such material, a copy of any material safety data sheet (“MSDS”) issued by the manufacturer thereof, written information concerning the removal, transportation, and disposal of the same, and such other information as Landlord may reasonably require or as may be required by law.

7.4    CLEANUP. If any Hazardous Material is released, discharged or disposed of by Tenant or any other occupant of the Premises, or their employees, agents, or contractors, on or about the Property in violation of the foregoing provisions, Tenant shall immediately, properly, and in compliance with applicable Laws clean up and remove the Hazardous Material from the Property and any other affected property and clean or replace any affected personal property (whether or not owned by Landlord), at Tenant’s expense. Such clean up and removal work shall be subject to Landlord’s prior written approval (except in emergencies), and shall include any testing, investigation, and the preparation and implementation of any remedial action plan required by any governmental body having jurisdiction or reasonably required by Landlord. If Tenant shall fail to comply with the provisions of this § 7.2 within five (5) days after written notice by Landlord, or such shorter time as may be required by Laws or in order to minimize any hazard to persons or property, Landlord may (but shall not be obligated to) arrange for such compliance directly or as Tenant’s agent through contractors or other parties selected by Landlord, at Tenant’s expense (without limiting Landlord’s other remedies under this Lease or applicable Laws).

7.5    CASUALTY DAMAGE. If any Hazardous Material is released, discharged, or disposed of on or about the Property and such release, discharge, or disposal is not caused by Tenant or other occupants of the Premises, or their employees, agents, or contractors, such release, discharge, or disposal shall be deemed casualty damage under Article 15 to the extent that the Premises or common areas serving the Premises are affected thereby; in such case, Landlord and Tenant shall have the obligations and rights respecting such casualty damage provided under Article 15 of this Lease.

Oyster Point Marina Plaza Office Lease

Kashiwa Fudosan America, Inc. :: Satsuma Pharmaceuticals, Inc.

page 20 of 55

[Suite 221 (400 OPB); 4,148 rsf]

7.6    REFRIGERANT. Tenant shall not install any refrigerant-containing systems or equipment, including refrigerators, freezers, supplemental HVAC systems or self-contained air conditioners, without Landlord’s prior approval, which Landlord may withhold in its sole discretion. Unless Tenant shall have obtained Landlord’s prior written approval to install existing equipment after an inspection, at Tenant’s sole cost and expense, by Landlord’s engineer for defects and proper proposed installation in the Premises, all refrigerant-containing equipment and/or systems which Tenant installs in the Premises shall be new. Whether Tenant’s refrigerant-containing equipment or systems are defective and are properly installed shall be determined at the sole discretion of Landlord’s engineer. If Tenant wishes to install any refrigerant-containing equipment or systems, Tenant shall obtain and provide Landlord with copies of all required permits associated with such equipment or systems.

7.6.1 Removal of Refrigerant. Notwithstanding anything to the contrary in this Lease, Tenant shall remove all refrigerant and refrigerant-containing equipment and/or systems installed in the Premises by or on behalf of Tenant prior to the Expiration Date of this Lease. Prior to the removal of any such refrigerant or refrigerant-containing equipment and/or systems, Tenant shall submit to Landlord for Landlord’s approval, the names of Tenant’s contractors and all plans and specifications for such removal. Tenant and Tenant’s contractors shall comply with all legal requirements, industry practices and rules established by Landlord in performing such removal work. Tenant shall repair any damage to the Property or the Systems and Equipment associated with such removal, and Tenant shall be responsible for the costs associated with restoring the Property to the condition which existed immediately prior to any modification undertaken by Landlord in order to accommodate Tenant’s refrigerant-containing equipment or systems.

8     SERVICES AND UTILITIES

8.1    LANDLORD’S SERVICES. Landlord agrees to provide, on the terms and conditions specified herein, the following services and Utilities for Tenant’s use and consumption in the Premises, the cost of which shall be included in Operating Expenses and reimbursed to Landlord in accordance with § 4.1 above:

(a) Electricity. Electricity for standard office lighting fixtures and for equipment and accessories customary for offices, provided (i) the connected electrical load of all the same does not exceed an average of four (4) watts per usable square foot of the Premises (or such lesser amount as may be available, based on the safe and lawful capacity of the existing electrical circuit(s) and facilities serving the Premises); (ii) the electricity will be at nominal 120 volts, single phase (or 110 volts, depending on available service in the Building); and (iii) the safe and lawful capacity of the existing electrical circuit(s) serving the Premises is not exceeded. Landlord will permit its electric feeders, risers, and wiring servicing the Premises to be used by Tenant to the extent available and safely capable of being used for such purpose.

(b) Telecommunications Interface. Interface with the telephone network at the demarcation point or minimum point of entry (“MPOE”) supplied by the local regulated public utility by means of Landlord’s INC consisting of cable pairs with a capacity consistent with the engineering standards to which the Building was designed.

(c) HVAC. Heat, ventilation, and air-conditioning (“HVAC”) to provide a temperature required, in Landlord’s reasonable opinion and in accordance with applicable Laws, for the comfortable occupancy of the Premises during business hours (as defined in § 8.1.1 below). Landlord shall not be responsible for inadequate air-conditioning or ventilation to the extent the same occurs because Tenant uses any item of equipment consuming more than 500 watts at rated capacity without providing adequate air-conditioning and ventilation therefor.

Oyster Point Marina Plaza Office Lease

Kashiwa Fudosan America, Inc. :: Satsuma Pharmaceuticals, Inc.

page 21 of 55

[Suite 221 (400 OPB); 4,148 rsf]

(d) Water. Water for drinking, lavatory and toilet purposes at those points of supply provided for nonexclusive general use of other tenants at the Property.

(e) Janitorial Services. Customary office cleaning and trash removal service Monday through Friday or Sunday through Thursday in and about the Premises.

(f) Elevator Services. Operatorless passenger elevator service and freight elevator service (if the Property has such equipment serving the Premises, and subject to scheduling by Landlord) in common with Landlord and other tenants and their contractors, agents, and visitors.

8.1.1 Business Hours. The term business hours in this Lease shall mean the hours from 8:00 a.m. until 6:00 p.m. on Monday through Friday and from 9:00 a.m. until 1:00 p.m. on Saturday throughout the year, except for New Year’s Day, Presidents’ Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, Christmas Day, and any other federally-observed holiday which may be created during the Term (“Holidays”).

8.2    ADDITIONAL ELECTRICAL CAPACITY. Any additional risers, feeders, or other equipment or service proper or necessary to supply Tenant’s electrical requirements will be installed by Landlord, upon written request of Tenant, at the sole cost and expense of Tenant, if, in Landlord’s sole judgement, the same are necessary and will not cause permanent damage or injury to the Property, the Premises, or the Systems and Equipment or cause or create a dangerous or hazardous condition or entail excessive or unreasonable alterations, repairs, or expense or interfere with or disturb other tenants or occupants. Rigid conduit only will be allowed.

8.2.1 Approved Electrical Load. Tenant agrees not to connect any additional electrical equipment of any type to the building electric distribution system, beyond that on Tenant’s approved plans for initial occupancy, other than lamps, typewriters, and other office machines which consume comparable amounts of electricity or other electrical equipment which in the aggregate consumes the same amount of electricity as those approved for initial occupancy and will not result in any overload of electrical circuits, lines, or wiring, without Landlord’s prior written consent. In no event shall Tenant use or install any fixtures, equipment, or machines the use of which in conjunction with other fixtures, equipment, and machines in the Premises would result in an overload or the electrical circuits servicing the Premises. Tenant covenants and agrees that at all times its use of electric current shall never exceed the capacity of the feeders to the Building or the risers or wiring installation existing at the time in question.

8.3    ADDITIONAL TELECOMMUNICATIONS CAPACITY. If Tenant desires any telecommunications capacity in excess of that available as of the Commencement Date in the form of the INC between the MPOE and the telephone closet nearest the Premises and provided pursuant to § 8.1 above, Tenant shall bear the cost of installing additional risers or INC or replacing existing INC serving the Premises pursuant to Article 9 below.

8.4    REPLACEMENT BULBS AND TUBES. Tenant shall furnish, install, and replace, as required, all non-Building-standard lighting tubes, lamps, bulbs, and ballasts required in the Premises, at Tenant’s sole cost and expense. All lighting tubes, lamps, bulbs, and ballasts so installed become Landlord’s property upon the expiration or sooner termination of this Lease.

8.5    TWENTY-FOUR HOURS ACCESS. Subject to the provisions of § 8.8, Tenant, its employees, agents, and invitees shall have access to the Premises twenty-four (24) hours a day, seven (7) days a week. Landlord may restrict access outside of business hours by requiring persons to show a badge or identification card

Oyster Point Marina Plaza Office Lease

Kashiwa Fudosan America, Inc. :: Satsuma Pharmaceuticals, Inc.

page 22 of 55

[Suite 221 (400 OPB); 4,148 rsf]

issued by Landlord. Landlord shall not be liable for denying entry to any person unable to show the proper identification. Landlord may without liability temporarily close the Building if required because of a life-threatening or Building-threatening situation.

8.6    EXTRA SERVICES. Landlord shall, subject to all applicable Laws, seek to provide such utilities or services in excess of those Landlord is required to provide under § 8.1 above as Tenant may from time to time request, if the same are reasonable and feasible for Landlord to provide and do not involve modifications or additions to the Property or the Systems and Equipment and if Landlord shall receive Tenant’s request within a reasonable period prior to the time such extra utilities or services are required. Landlord may comply with written or oral requests by any officer or employee of Tenant, unless Tenant shall notify Landlord of, or Landlord shall request, the names of authorized individuals (up to three (3) for each floor on which the Premises are located) and procedures for written requests. Tenant shall, for such extra utilities or services, pay such charges as Landlord shall from time to time establish.

8.6.1 Extraordinary Service Usage. If Tenant shall utilize Building services for the Premises at any time other than during business hours, Landlord shall furnish such extraordinary services (excluding air-conditioning, except as provided below) at Landlord’s then-current prevailing rate for such services. In addition to the foregoing services, if Tenant shall require air-conditioning service for the Premises at any time other than during business hours, Landlord shall, upon reasonable advance notice from Tenant, furnish such after-hours air-conditioning service at Landlord’s then-current prevailing rate for such services as a separate charge; provided, however, in the event Tenant requests such after-hours air-conditioning service at a time not immediately preceding or immediately succeeding times when “regular hours” service is being furnished hereunder, then Tenant must request not less than five (5) hours of after-hours air-conditioning service. Notwithstanding anything contained herein to the contrary, Landlord’s prevailing rate for the extraordinary services described herein shall be subject to increase from time to time as Landlord may reasonably determine.

8.6.2 Payment for Excess Usage. All charges for extra utilities or services or those requested outside business hours shall be due at the same time as the installment of Base Rent with which the same are billed, or if billed separately, shall be due within thirty (30) days after such billing.

8.6.3 Changes in HVAC System. Use of the Premises, or any part thereof, in a manner exceeding the design conditions (including occupancy and connected electrical load) for the heating or cooling units in the Premises, or rearrangement of partitioning which interferes with normal operation of the HVAC system in the Premises, may require changes in the HVAC system servicing the Premises. Such changes shall be made by Tenant, at its expense, as Tenant’s Changes pursuant to Article 9. Tenant shall not change or adjust any closed or sealed thermostat or other element of the HVAC system without Landlord’s express prior written consent.

8.6.4 Separate Metering. Landlord may install and operate meters or any other reasonable system for monitoring or estimating any services or utilities used by Tenant in excess of those required to be provided by Landlord under this Article 8 (including a system for Landlord’s engineer reasonably to estimate any such excess usage). If such system indicates such excess services or utilities, Tenant shall pay Landlord’s reasonable charges for installing and operating such system and any supplementary air-conditioning, ventilation, heat, electrical, or other systems or equipment (or adjustments or modifications to the existing Systems and Equipment), and Landlord’s reasonable charges for such amount of excess services or utilities used by Tenant. If Tenant’s use of extra utilities or services causes Landlord’s regulated baseline quantities of water, gas, electricity, or any other utility or service to be exceeded, Tenant shall pay for such excess quantities of such utilities or services at the rate which is imposed upon Landlord for quantities in excess of the regulated baseline. In addition, Tenant shall pay prior to delinquency any fine or penalty which may be imposed upon or assessed against Landlord or the Building or the Property by virtue of Tenant’s excess usage of any services or utilities, including water, gas, and electricity.

Oyster Point Marina Plaza Office Lease

Kashiwa Fudosan America, Inc. :: Satsuma Pharmaceuticals, Inc.

page 23 of 55

[Suite 221 (400 OPB); 4,148 rsf]

8.6.5 Supplemental HVAC. If Tenant operates a supplemental HVAC unit in the Premises for cooling of a dedicated server room or otherwise, whether such unit is was existing on the Commencement Date, installed by Landlord as part of Landlord’s Work to prepare the Premises for Tenant’s occupancy, or installed later by Tenant as a Tenant’s Change, Tenant shall pay to Landlord as an extra service charge all costs of operating such supplementary HVAC unit in accordance with the provisions of § 8.6.4 above as determined by separate metering or the reasonable estimate of Landlord’s engineer.

8.7    INTERRUPTION OF SERVICES. Landlord does not warrant that any services or utilities provided hereunder for Tenant’s use in the Premises will be free from shortages, failures, variations, or interruptions caused by repairs, maintenance, replacements, improvements, alterations, changes of service, strikes, lockouts, labor controversies, accidents, inability to obtain services, fuel, steam, water or supplies, governmental requirements or requests, or other causes beyond Landlord’s reasonable control, including interference with light or other incorporeal hereditaments and any interruption in services or any failure to provide services to Landlord by a designated utility company at the demarcation point at which Landlord accepts responsibility for such service or at any point prior thereto, which interference impedes Landlord in furnishing plumbing, HVAC, electrical, sanitary, life safety, elevator, telecommunications, or other Building services, utilities, or the Systems and Equipment. None of the same shall be deemed an eviction or disturbance of Tenant’s use and possession of the Premises or any part thereof, shall render Landlord liable to Tenant for abatement of Rent, or shall relieve Tenant from performance of Tenant’s obligations under this Lease. Landlord in no event shall be liable for damages by reason of loss of profits, business interruption, or other compensatory or consequential damages.

8.8    SAFETY AND SECURITY DEVICES, SERVICES, AND PROGRAMS. The parties acknowledge that safety and security devices, services, and programs provided by Landlord, if any, while intended to deter crime and ensure safety, may not in given instances prevent theft or other criminal acts or ensure safety of persons or property, and such devices, services and programs shall not under any circumstances be deemed to be a guaranty, representation, or warranty by Landlord to Tenant or any third parties as to the safety or protection of person or property. The risk that any safety or security device, service, or program may not be effective, or may malfunction, or be circumvented by a criminal, is assumed by Tenant with respect to Tenant’s property and interests; and Tenant shall obtain insurance coverage to the extent Tenant desires protection against such criminal acts and other losses, as further described in Article 14. Tenant agrees to coöperate in any reasonable safety or security program developed by Landlord or required by Law.

9     TENANT’S CHANGES

9.1    TENANT’S REQUESTED CHANGES. Tenant may, subject to § 9.2 below, from time to time during the Term of this Lease, at its expense, make such alterations, additions, installations, substitutions, improvements, and decorations (collectively “Tenant’s Changes”) in and to the Premises as Tenant may reasonably consider necessary for the conduct of its business in the Premises (except for changes which would require modification of the Property outside the Premises), on the following conditions:

(a) the outside appearance or the strength of the Building or of any of its structural parts shall not be affected, and Tenant shall cause no penetration of the roof or the exterior fabric of the Building;

(b) no part of the Building outside of the Premises shall be physically affected;

(c) the proper functioning of any of the Systems and Equipment shall not be adversely affected, and the usage of such systems by Tenant shall not be increased;

Oyster Point Marina Plaza Office Lease

Kashiwa Fudosan America, Inc. :: Satsuma Pharmaceuticals, Inc.

page 24 of 55

[Suite 221 (400 OPB); 4,148 rsf]

(d) no such change shall require the addition of new INC riser cable or expand the number of telephone pairs dedicated to the Premises by the Buildings’ telecommunications engineering design;

(e) in performing the work involved in making such changes, Tenant shall be bound by and observe all of the conditions and covenants contained in the following sections of this Article 9; and

(f) with respect to Tenant’s Changes, Tenant shall make all arrangements for, and pay all expenses incurred in connection with, use of the freight elevators servicing the Premises.

9.2    PLANS AND APPROVAL. Before proceeding with any Tenant’s Changes, Tenant shall advise Landlord thereof and arrange a meeting with the Building Manager, the Building Architect, and/or the Building Contractor, as required by Landlord in relation to the scope of the proposed Changes. Except in extraordinary circumstances which would reasonably require an exception, all work to be performed in the Building shall be performed by the Building Contractor on the basis of plans and drawings prepared by the Building Architect. If Landlord grants permission for Tenant to utilize another contractor and/or architect for its Changes, before proceeding with any Tenant’s Changes, Tenant shall submit to Landlord plans and specifications and all changes and revisions thereto for the work to be done for Landlord’s reasonable approval; and Tenant shall, upon demand of Landlord, pay to Landlord the reasonable costs incurred and paid to third parties by Landlord for the review of such plans and specifications and all changes and revisions thereto by its architect, engineer, and other consultants. Landlord may as a condition of its approval require Tenant to make reasonable revisions in and to the plans and specifications. Landlord may require Tenant to post a bond or other security reasonably satisfactory to Landlord to insure the completion of such change. If Landlord consents to any Tenant’s Changes or supervises the work of constructing any Tenant’s Changes, such consent or supervision shall not be deemed a warranty as to the adequacy of the design, workmanship, or quality of materials, and Landlord hereby expressly disclaims any responsibility or liability for the same. Landlord shall under no circumstances have any obligation to repair, maintain, or replace any portion of such work.

9.2.1 As-Built Plans. Within thirty (30) days after completion of Tenant’s Changes requiring the submission of plans to Landlord, Tenant shall furnish to Landlord a complete set of “as-built” plans and specifications.

9.3    PERMITS AND PERFORMANCE. Tenant, at its expense, shall obtain all necessary governmental permits and certificates for the commencement and prosecution of Tenant’s Changes and for final approval thereof upon completion and shall furnish copies thereof to Landlord. Tenant shall cause Tenant’s Changes to be performed in compliance therewith and with all applicable Laws and requirements of public authorities and with all applicable requirements of insurance bodies, and in good and workmanlike manner, using new materials and equipment at least equal in quality and class to the original installations in the Property. Tenant’s Changes shall be performed in such manner as not unreasonably to interfere with, delay, or impose any additional expense upon Landlord in the renovation, maintenance, or operation of the Property or any portion thereof, unless Tenant shall indemnify Landlord therefor to the latter’s reasonable satisfaction.

9.4    CONTRACTORS. All electrical, mechanical, and plumbing work in connection with Tenant’s Changes shall be performed by Landlord’s contractors at Tenant’s expense. If Tenant shall request any electrical, mechanical, or plumbing work in connection with Tenant’s Changes, Landlord shall request Landlord’s contractors to furnish Tenant with prices to perform the same prior to prosecuting same. In addition to the foregoing, and notwithstanding anything to the contrary in this Article 9, Landlord may, at Landlord’s option, require that the work of constructing any Tenant’s Changes be performed by Landlord’s contractor, in which case the cost of such work shall be paid for before commencement of the work.

Oyster Point Marina Plaza Office Lease

Kashiwa Fudosan America, Inc. :: Satsuma Pharmaceuticals, Inc.

page 25 of 55

[Suite 221 (400 OPB); 4,148 rsf]

9.5    SUPERVISION AND FEE. Landlord may require that all work of constructing Tenant’s Changes be performed under Landlord’s supervision. If Landlord does not elect to require that Tenant use Landlord’s contractor, and if Tenant chooses to use its own contractor for the work of constructing Tenant’s Changes, Tenant shall pay to Landlord upon completion of any such work by Tenant’s contractor an administrative fee of fifteen percent (15%) of the cost of the work, to cover Landlord’s overhead in reviewing Tenant’s plans and specifications and performing any supervision of the work of Tenant’s Changes. If Tenant chooses to use Landlord’s contractor for such work, Tenant shall pay to Landlord upon completion an administrative fee equal to five percent (5%) of the cost of the work.

9.6    RESTORATION OF FIXTURES. If any of Tenant’s Changes shall involve the removal of any fixtures, equipment, or other property in the Premises which are not Tenant’s Property (as defined in Article 10), such fixtures, equipment, or other property shall be promptly replaced, at Tenant’s expense, with new fixtures, equipment, or other property (as the case may be) of like utility and at least equal value, unless Landlord shall otherwise expressly consent in writing; and Tenant shall, upon Landlord’s request, store and preserve, at Tenant’s sole cost and expense, any such fixtures, equipment or property so removed and shall return same to Landlord upon the expiration or sooner termination of this Lease. Notwithstanding anything to the contrary herein, Landlord shall have no right to require Tenant to remove any alterations unless it notifies Tenant at the time it consents to such alteration that it shall require such alteration to be removed.

9.7    MECHANIC’S LIENS. Tenant shall keep the Property and Premises free from any mechanic’s, materialman’s, or similar liens or other such encumbrances, including the liens of any security interest in, conditional sales of, or chattel mortgages upon, any materials, fixtures, or articles so installed in and constituting part of the Premises, in connection with any Tenant’s Changes on or respecting the Premises not performed by or at the request of Landlord and shall indemnify, defend, protect, and hold Landlord harmless from and against any claims, liabilities, judgements, or costs (including attorneys’ fees) arising out of the same or in connection with any such lien, security interest, conditional sale or chattel mortgage or any action or proceeding brought thereon. Tenant shall give Landlord written notice at least twenty (20) days prior to the commencement of work on any Tenant’s Change in the Premises (or such additional time as may be necessary under applicable Laws), in order to afford Landlord the opportunity of posting and recording appropriate notices of nonresponsibility. Tenant shall remove any such lien or encumbrance by bond or otherwise within thirty (30) days after written notice by Landlord; and if Tenant shall fail to do so, Landlord may pay the amount necessary to remove such lien or encumbrance, without being responsible for investigating the validity thereof. The amount so paid shall be deemed Additional Rent under this Lease payable upon demand, without limitation as to other remedies available to Landlord under this Lease. Nothing contained in this Lease shall authorize Tenant to do any act which shall subject Landlord’s title to the Property or Premises to any liens or encumbrances, whether claimed by operation of law or express or implied contract. Any claim to a lien or encumbrance upon the Property or Premises arising in connection with any Work on or respecting the Premises not performed by or at the request of Landlord shall be null and void, or, at Landlord’s option, shall attach only against Tenant’s interest in the Premises and shall in all respects be subordinate to Landlord’s title to the Property and Premises.

9.8    NOTICES OF VIOLATION. Tenant, at its expense, and with diligence and dispatch, shall procure the cancellation or discharge of all notices of violation arising from or otherwise connected with Tenant’s Changes which shall be issued by any governmental, public, or quasi-public authority having or asserting jurisdiction. However, nothing herein contained shall prevent Tenant from contesting, in good faith and at its own expense, any such notice of violation, provided that Landlord’s rights hereunder are in no way compromised or diminished thereby.

Oyster Point Marina Plaza Office Lease

Kashiwa Fudosan America, Inc. :: Satsuma Pharmaceuticals, Inc.

page 26 of 55

[Suite 221 (400 OPB); 4,148 rsf]

9.9    INDUSTRIAL RELATIONS. Tenant agrees that the exercise of its rights pursuant to the provisions of this Article 9 or any other provision of this Lease shall not be done in a manner which would create any work stoppage, picketing, labor disruption, or dispute or violate Landlord’s union contracts affecting the Property and/or Complex or interfere with the business of Landlord or any Tenant or occupant of the Building. Tenant shall, immediately upon notice from Landlord, cease any activity, whether or not permitted by this Lease, giving rise to such condition. If Tenant fails to do so, Landlord, in addition to any rights available to it under this Lease and pursuant to Law, shall have the right to an ex parte injunction without notice.

10     TENANT’S PROPERTY

10.1 FIXTURES AND IMPROVEMENTS. All fixtures, equipment, improvements, alterations, and appurtenances attached to or built into the Premises at the commencement of or during the Term of this Lease, including cabinets, sinks, faucets, appliances, hot water heaters, etc. (collectively “Improvements”), whether or not by or at the expense of Tenant, shall be and remain a part of the Premises, shall be deemed the property of Landlord, and shall not be removed by Tenant, except as expressly provided in Article 11 below.

10.2 TENANT’S PROPERTY AND TRADE FIXTURES. All movable partitions, trade fixtures, office machinery and equipment, communications equipment, and computer equipment (whether or not attached to or built into the Premises) which are installed in the Premises by or for the account of Tenant, without expense to Landlord and which can be removed without structural damage to the Property, and all furniture, furnishings, and other articles of movable personal property owned by Tenant and located in the Premises (collectively “Tenant’s Property”) shall be and shall remain the property of Tenant and may be removed by it at any time during the Term of this Lease; provided that if any of Tenant’s Property is removed, Tenant or any party or person entitled to remove same shall repair or pay the cost of repairing any damage to the Premises or to the Property resulting from such removal. Any equipment or other property for which Landlord shall have granted any allowance or credit to Tenant or which has replaced such items originally provided by Landlord at Landlord’s expense shall not be deemed to have been installed by or for the account of Tenant, without expense to Landlord, and shall not be considered Tenant’s Property.

11     CONDITION UPON SURRENDER

11.1 CONDITION AND RESTORATION. At or before the Expiration Date or the date of any earlier termination of this Lease, or as promptly as practicable using Tenant’s best efforts after such an earlier termination date, Tenant, at its expense, shall do all of the following:

(a) surrender possession of the Premises in as good condition as existed on the Commencement Date, ordinary wear and tear, casualties, alterations, or other interior improvements which Tenant is permitted to surrender at the termination of this Lease and repairs that Tenant is not responsible for under this Lease excepted;

(b) surrender all keys, any key cards, and any parking stickers or cards to Landlord and give Landlord in writing the combinations of any locks or vaults then remaining in the Premises;

(c) remove from the Premises all of Tenant’s Property, including any data wiring and cabling that Tenant has installed, except such items thereof as Tenant shall have expressly agreed in writing with Landlord were to remain and to become the property of Landlord; and

(d) fully repair any damage to the Premises or the Property resulting from such removal.

Oyster Point Marina Plaza Office Lease

Kashiwa Fudosan America, Inc. :: Satsuma Pharmaceuticals, Inc.

page 27 of 55

[Suite 221 (400 OPB); 4,148 rsf]

Tenant’s obligations herein shall survive the expiration or earlier termination of the Lease, unless expressly provided to the contrary herein. All Improvements and other items in or upon the Premises (except Tenant’s Property), whether installed by Tenant or Landlord, shall be Landlord’s property and shall remain upon the Premises, all without compensation, setoff, allowance, or credit to Tenant; provided, however, that if Landlord so directs by notice at the time is grants consent, Tenant shall promptly remove such of the Improvements in the Premises as are designated in such notice and shall restore the Premises to their condition prior to the installation of such Improvements. Notwithstanding the foregoing, Landlord shall not require removal of customary office improvements installed as part of Landlord’s Work under § 3.2 above (except as expressly provided to the contrary therein), or installed by Tenant with Landlord’s written approval (except as expressly required by Landlord in connection with granting such approval).

11.2 TENANT’S FAILURE TO REMOVE OR RESTORE. If Tenant shall fail to perform any repairs or restoration or fail to remove any items from the Premises as required under this Article 11, Landlord may do so, and Tenant shall pay Landlord the cost thereof upon demand. All property removed from the Premises by Landlord pursuant to any provisions of this Lease or any Law may be handled or stored by Landlord at Tenant’s expense, and Landlord shall in no event be responsible for the value, preservation, or safekeeping thereof. All property not removed from the Premises or retaken from storage by Tenant within thirty (30) days after expiration or earlier termination of this Lease or Tenant’s right to possession shall at Landlord’s option be conclusively deemed to have been conveyed by Tenant to Landlord as if by bill of sale without payment by Landlord. Unless prohibited by applicable Laws, Landlord shall have a lien against such property for the costs incurred in removing and storing the same.

12     REPAIRS AND MAINTENANCE

12.1 TENANT’S CARE OF PREMISES. Except for customary cleaning and trash removal provided by Landlord under § 8.1 above and damage covered under Article 15, Tenant shall keep the Premises in good and sanitary condition, working order, and repair, including carpet, wall-covering, doors pertinent to and within the Premises, plumbing, all telecommunications cables and wiring within Tenant’s Premises (“IW”) from the interface of such IW with the INC, and other fixtures, equipment, alterations, and improvements, whether installed by Landlord or Tenant. In addition, Tenant, at its expense, shall promptly make all repairs, ordinary or extraordinary, interior or exterior, structural or otherwise, in and about the Premises and the Property, as shall be required by reason of (a) the performance or existence of Tenant’s Work or Tenant’s Changes; (b) the installation, use, or operation of Tenant’s Property in the Premises; (c) the moving of Tenant’s Property in or out of the Building; or (d) the misuse or neglect of Tenant or any of its employees, agents, or contractors. Tenant, at its expense, shall replace all scratched, damaged, or broken doors or other glass in or about the Premises and shall be responsible for all repairs, maintenance, and replacement of wall and floor coverings in the Premises and for the repair and maintenance of all lighting fixtures therein. All repairs except for emergency repairs made by Tenant as provided herein shall be performed by contractors or subcontractors approved in writing by Landlord prior to commencement of such repairs, which approval shall not be unreasonably withheld or delayed. If Tenant does not promptly make such arrangements, Landlord may, but need not, make such repairs, maintenance, and replacements, and the costs paid or incurred by Landlord therefor shall be reimbursed by Tenant promptly after request by Landlord.

12.2 LANDLORD’S CARE OF PROPERTY. Landlord, at its expense, shall keep and maintain the common areas of the Property and the Systems and Equipment serving the Premises in good working order, condition, and repair and shall make all repairs, structural and otherwise, interior and exterior, as and when needed in or about the Premises, except for those repairs for which Tenant is responsible pursuant to § 12.1 above or any other provisions of this Lease. Landlord shall maintain and repair all INC in the Building, and Tenant shall have no right to make repairs to INC. The cost of Landlord’s maintenance and repairs pursuant to this Article 12 shall be reimbursed to Landlord to the extent provided in Article 4 above.

Oyster Point Marina Plaza Office Lease

Kashiwa Fudosan America, Inc. :: Satsuma Pharmaceuticals, Inc.

page 28 of 55

[Suite 221 (400 OPB); 4,148 rsf]

12.3 WAIVER BY TENANT. Tenant waives the benefits of any statute now or hereafter in effect which would otherwise afford Tenant the right to make repairs at Landlord’s expense or to terminate this Lease because of Landlord’s failure to keep the Premises in good order, condition, and repair.

13     RULES AND REGULATIONS

13.1 OBSERVANCE AND MODIFICATION. Tenant and its employees and agents shall faithfully observe and comply with the Rules and Regulations attached hereto as Exhibit C (the “Rules”) and such reasonable changes therein (whether by modification, elimination, or addition) as Landlord at any time or times hereafter may make and communicate in writing to Tenant, so long as such changes do not unreasonably affect the conduct of Tenant’s business in the Premises, except as required by any applicable Law; provided, however, that in case of any conflict or inconsistency between the provisions of this Lease and any of the Rules as originally promulgated or as changed, the provisions of this Lease shall control.

13.2 APPLICATION TO TENANT. Nothing in this Lease shall be construed to impose upon Landlord any obligation to Tenant to enforce the Rules or the terms, covenants, or conditions in any other lease, as against any other tenant, and Landlord shall not be liable to Tenant for violation of the same by any other tenant or its employees, agents, or visitors.

14     INSURANCE AND INDEMNIFICATION

14.1 TENANT’S INSURANCE. Tenant shall obtain and maintain in effect at all times during Tenant’s possession of the Premises the following insurance coverages and policies:

14.1.1    Liability Insurance. Tenant shall maintain a policy of commercial general liability insurance, which shall include coverages for (a) personal injury; (b) broad-form contractual liability; and (c) broad-form property damage liability. The minimum limits of liability shall be a combined single limit with respect to each occurrence of not less than Two Million Dollars ($2,000,000) and an aggregate limit of not less than Three Million Dollars ($3,000,000). Such limits may be met through any combination of primary and excess liability policies, provided that any umbrella or excess liability policy shall be in following form. The policy shall contain a cross-liability endorsement and a severability of interest clause. Tenant shall increase the insurance coverage as required by Landlord’s lender or if Landlord’s insurance consultant believes that the coverage is not adequate.

14.1.2    Tenant’s Business Auto Liability Insurance. Tenant shall maintain business auto liability insurance with an “any auto, owned, non-owned, and hired” endorsement in an amount not less than Two Million Dollars ($2,000,000) combined single limit.

14.1.3    Tenant’s Business Personal Property Insurance. Tenant shall maintain on all of its business personal property, including valuable business papers and accounts receivable; operating supplies; inventory; and furniture, fixtures, and equipment (whether owned, leased, or rented) (collectively “Business Personal Property”) an “all risk” property damage insurance policy including coverages for sprinkler leakage and containing an agreed amount endorsement (or, if applicable, a business owner’s policy with a no-coinsurance provision) in an amount not less than one hundred percent (100%) of the full replacement cost valuation of such Business Personal Property. The proceeds from any such policy shall be used by Tenant for the replacement of such Business Personal property.

14.1.4    Workers’ Compensation Insurance. Tenant shall maintain workers’ compensation insurance as required by law and employer’s liability insurance in an amount not less than Five Hundred Thousand Dollars ($500,000).

Oyster Point Marina Plaza Office Lease

Kashiwa Fudosan America, Inc. :: Satsuma Pharmaceuticals, Inc.

page 29 of 55

[Suite 221 (400 OPB); 4,148 rsf]

14.1.5    Business Interruption/Extra Expense Insurance. Tenant shall maintain business interruption or (if applicable) contingent business interruption and extra expense insurance in such amounts as will reimburse Tenant for direct or indirect loss of earnings and incurred costs attributable to the perils commonly covered by Tenant’s property insurance described in § 14.1.3 above but in no event less than the average total of Tenant’s annual net profits plus annual continuing business expenses during the three-year period immediately preceding such interruption or loss. Such insurance will be carried with the same insurer that issues the insurance for Tenant’s Business Personal Property pursuant to § 14.1.3 above.

14.1.6    Other Coverage. Tenant, at its cost, shall maintain such other insurance as Landlord may reasonably require from time to time, but in no event may Landlord require any other insurance which is not then available at commercially reasonable rates.

14.2 TENANT’S INSURANCE CRITERIA. All insurance required to be maintained by Tenant under this Lease shall conform to the following criteria:

(i)    Tenant’s insurance shall be issued by insurance companies authorized to do business in the State of California with a financial rating of at least A-:VIII for any property insurance and at least A-:VIII for any liability insurance, as rated in the most recent edition of Best’s Insurance Reports.

(ii)    Tenant’s commercial general liability insurance shall be issued as primary and noncontributory to any insurance maintained by Landlord.

(iii)    Tenant’s liability insurance policies shall name Tenant as the insured and Landlord, Landlord’s agents, and any Lessors and Holders (as such terms are defined in § 18.1 below) whose names shall have been furnished to Tenant as additional insureds.

(iv)    Should Tenant receive a notice of cancellation from the insurer of any of the insurance required in this Lease, Tenant shall notify Landlord in writing within five (5) business days of receipt of such notice. Tenant will take all reasonable steps to remedy the cause of any such cancellation or shall find replacement insurance meeting the requirements of this Lease, such that no lapse in the required insurance shall occur. Tenant shall provide written notice to Landlord that the pending cancellation has been rescinded or shall provide a certificate of insurance evidencing the replacement insurance, by the date the pending cancellation was to become effective.

(v)    with respect to damage to or loss of Tenant’s Business Personal Property, a waiver of subrogation must be obtained, as required under § 14.4 below.

14.2.1    Blanket Coverage. All of the insurance requirements set forth herein on the part of Tenant to be observed shall be deemed satisfied if the Premises are covered by a blanket insurance policy complying with the limits, requirements, and criteria contained in this Article 14 insuring all or most of Tenant’s facilities in California.

14.2.2    Evidence of Coverage. A duplicate original policy or a certificate of insurance shall be deposited with Landlord at the commencement of the Term or, if earlier, upon Tenant’s taking possession of the Premises; and on renewal of the policy a certificate of insurance listing the insurance coverages required hereunder and naming the appropriate additional insureds shall be deposited with Landlord not less than seven (7) days before expiration of the policy.

14.3 LANDLORD’S INSURANCE. Landlord shall maintain “all risk” property damage insurance containing an agreed amount endorsement covering not less than one hundred percent (100%) of the full insurable replacement cost valuation of (y) the Building and the tenant improvements, betterments, and the alterations thereto; and (z) Landlord’s personal property, business papers, furniture, fixtures, and

Oyster Point Marina Plaza Office Lease

Kashiwa Fudosan America, Inc. :: Satsuma Pharmaceuticals, Inc.

page 30 of 55

[Suite 221 (400 OPB); 4,148 rsf]

equipment (collectively “Landlord’s Property”), exclusive of the costs of excavation, foundations and footings, and risks required to be covered by Tenant’s insurance, and subject to commercially reasonable deductibles.    Landlord shall also obtain and keep in full force the following policies of insurance: (a) commercial general liability insurance; (b) loss of rent insurance (also known as rent continuation insurance); (c) workers’ compensation insurance, if required by applicable Law; and (d) such other insurance as Landlord deems appropriate or as may be required by any Holder or Lessor.

14.4 RELEASES AND WAIVERS OF SUBROGATION. The purpose of this provision is to allow Landlord and Tenant to allocate and assume certain risks to coincide with insurance coverages required to be maintained pursuant to the terms to this Lease. Landlord and Tenant recognize the benefit that each will receive from the waivers of subrogation each is required to obtain pursuant to this § 14.4 and that there are significant advantages to each in connection with minimizing duplication of insurance coverages. Accordingly, Landlord and Tenant agree to accept and place the limitations which follow on each other’s respective liabilities and responsibility for damages in order to coincide with required insurance coverages.

14.4.1    Tenant’s Property Agreement. In light of Tenant’s agreement to insure Tenant’s Business Personal Property in accordance with § 14.1.2 above, notwithstanding anything to the contrary in this Lease (but subject to § 14.5 below), Tenant agrees that Landlord will have no liability to Tenant in the event Landlord damages or destroys, negligently or otherwise, all or any part of Tenant’s Business Personal Property. Tenant will cause to be placed in its insurance policies covering Tenant’s Business Personal Property a waiver of subrogation so that its insurance company will not become subrogated to Tenant’s rights and will not be able to proceed against Landlord in connection with any such damage or destruction.

14.4.2    Landlord’s Property Agreement. In light of Landlord’s agreement to insure Landlord’s Property in accordance with § 14.3 above, notwithstanding anything to the contrary in this Lease (but subject to § 14.5 below), Landlord agrees that Tenant will have no liability to Landlord in the event that Tenant damages or destroys, negligently or otherwise, all or any part of Landlord’s Property. Landlord will cause to be placed in its insurance policies covering Landlord’s Property a waiver of subrogation so that its insurance company will not become subrogated to Landlord’s rights and will not be able to proceed against Tenant in connection with any such damage or destruction.

14.4.3    Tenant’s Release.     Notwithstanding anything to the contrary in this Lease (but subject to § 14.5 below), Landlord shall not be responsible or liable to Tenant for any damages or destruction to Tenant’s Business Personal Property caused by Landlord’s employees, agents, visitors, invitees, guests, or independent contractors (collectively “Landlord’s Associates”), and Tenant hereby releases Landlord from any claims, liabilities, demands, losses, damages, consequential damages, and the like, including reasonable attorneys’ fees and court costs (collectively “Claims”) resulting from damage or destruction to Tenant’s Business Personal Property caused directly or indirectly by Landlord and/or Landlord’s Associates; provided, however, that nothing herein shall be deemed to release Landlord’s independent contractors from any such Claims Tenant may have against Landlord’s independent contractors.

14.4.4     Landlord’s Release. Notwithstanding anything to the contrary in this Lease (but subject to § 14.5 below), Tenant shall not be responsible or liable to Landlord for any damages or destruction to Landlord’s Property caused by Tenant’s employees, agents, visitors, invitees, guests, or independent contractors (collectively “Tenant’s Associates”), and Landlord hereby releases Tenant from any Claims resulting from damage or destruction to Landlord’s Property caused directly or indirectly by Tenant and/or Tenant’s Associates; provided, however, that nothing herein shall be deemed to release Tenant’s independent contractors from any such Claims Landlord may have against Tenant’s independent contractors.

Oyster Point Marina Plaza Office Lease

Kashiwa Fudosan America, Inc. :: Satsuma Pharmaceuticals, Inc.

page 31 of 55

[Suite 221 (400 OPB); 4,148 rsf]

14.4.5    Damage to Business and Loss of Rents. In light of Landlord’s agreement to carry continuation of rent insurance pursuant to § 14.3 above and Tenant’s agreement to carry business interruption insurance (extra expense insurance) in accordance with § 14.1.5 above, in the event that Landlord’s Property is damaged or destroyed because of any act or conduct, negligent or otherwise, by Tenant and/or by Tenant’s Associates, Landlord shall have no rights against Tenant by virtue of such damage or destruction, and Landlord hereby releases Tenant from all Claims, including claims for loss of rent, by Landlord directly or indirectly resulting from the damage or destruction of Landlord’s Property by conduct by Tenant and/or by Tenant’s Associates. Likewise, in the event that Tenant’s Business Personal Property is damaged or destroyed because of any act or conduct, negligent or otherwise, by Landlord and/or by Landlord’s Associates, Tenant shall have no rights against Landlord by virtue of such damage or destruction, and Tenant hereby releases Landlord from all Claims by Tenant directly or indirectly resulting from the damage or destruction to Tenant’s Business Personal Property by the conduct of Landlord and/or Landlord’s Associates, including Claims for loss of business or loss of profits. Notwithstanding the foregoing, nothing herein shall be deemed to release Tenant’s or Landlord’s independent contractors from any liability to Tenant and/or Landlord.

14.4.6    Injury and Death to Individuals. Landlord and Tenant understand that waivers of subrogation do not apply to injury to and death of individuals. Landlord and Tenant shall each carry insurance, as provided by this Article 14, in connection with injury and death to individuals. Landlord hereby agrees to indemnify and hold Tenant harmless from any Claims which Tenant may otherwise have with respect to injury or death to individuals occurring within the Property but outside the Premises, except to the extent that such injury or death is caused by Tenant and/or Tenant’s Associates, through negligence or otherwise, and is not covered by the insurance Landlord is required to carry under this Lease. Likewise, Tenant agrees to indemnify, defend, protect, and hold Landlord harmless from any Claims for injury or death to persons occurring within the Premises or caused, directly or indirectly, by Tenant or Tenant’s Associates outside the Premises, except to the extent such injuries or death are caused by Landlord and/or Landlord’s Associates, through negligence or otherwise, and are not covered by the insurance Tenant is required to carry under this Lease.

14.4.7    Abatement of Rent. Except as may be expressly provided elsewhere in this Lease, Tenant shall not be entitled to Rent abatement and shall not otherwise have, and hereby releases Landlord from, any Claims resulting from Tenant’s inability to utilize all or any part of the Premises, except to the extent that Tenant is unable to use all or any part of the Premises and does not use all or any part of the Premises as a result of Landlord’s intentional decision to refuse to provide access to the Building and/or the Premises and/or to provide services and/or utilities to Tenant as required to be provided by Landlord to Tenant pursuant to this Lease, where such refusal is not caused by a Force Majeure occurrence.

14.4.8    Availability of Waiver of Subrogation. If an insurance policy cannot be obtained with a waiver of subrogation or is obtainable only by the payment of an additional premium charge above that charged by insurance companies issuing policies without waiver of subrogation, the party undertaking to obtain the insurance shall notify the other party of this fact. The other party shall have a period of ten (10) days after receiving the notice either to place the insurance with a company that is reasonably satisfactory to the other party and that will carry the insurance with a waiver of subrogation at no additional cost or to agree to pay the additional premium if such a policy is obtainable at additional cost. If the insurance cannot be obtained or the party in whose favor a waiver of subrogation is desired refuses to pay the additional premium charged, the other party is relieved of the obligation to obtain a waiver of subrogation with respect to the particular insurance involved.

Oyster Point Marina Plaza Office Lease

Kashiwa Fudosan America, Inc. :: Satsuma Pharmaceuticals, Inc.

page 32 of 55

[Suite 221 (400 OPB); 4,148 rsf]

14.5 OTHER CASES OF DAMAGE OR INJURY. In all cases not covered by the foregoing provisions of this Article 14, Tenant hereby assumes all risk of damage to property or injury to persons in, upon, or about the Premises from any cause other than the active negligence or intentional misconduct of, or violation of this Lease by, Landlord and its agents or employees. Without limiting the generality of the foregoing, Landlord shall not be liable for injury or damage which may be sustained by the person, goods, wares, merchandise, or property of Tenant or Tenant’s Associates or any other person in or about the Premises caused by or resulting from fire, steam, electricity, gas, water or rain, which may leak or flow from or into any part of the Premises, or from the breakage, leakage, obstruction, or other defects of the Systems and Equipment, pipes, sprinklers, wires, INC, appliances, plumbing, heating, air-conditioning, or lighting fixtures of the same, whether the damage or injury results from conditions arising upon the Premises or upon other portions of the Property, the Complex, or from other sources. Landlord shall not be liable for any damages arising from any act or omission of any other tenant or occupant of the Property or Complex. In all cases not covered by the foregoing provisions of this Article 14, Tenant shall indemnify, defend, protect, and hold Landlord harmless against (a) any and all Claims arising from any death or injury to any person or damage to any property whatsoever occurring in, on, or about the Premises or any part thereof, and (b) any and all Claims occurring in, on or about any of the Common Areas, the Property, or the Complex, when such injury or damage is caused in whole or in part by the act, negligence, fault, or omission of any duty with respect to the same by Tenant or Tenant’s Associates. In all cases not covered by the foregoing provisions of this Article 14, Tenant shall further indemnify, defend, protect, and hold Landlord harmless from and against any and all Claims arising from any breach or default in the performance of any obligation on Tenant’s part to be performed under this Lease, or arising from any act or negligence of Tenant or Tenant’s Associates, and from and against all costs, attorneys’ fees, expenses, and liabilities incurred in connection with any such Claim or any action or proceeding brought thereon. In case any action or proceeding be brought against Landlord by reason of any such Claim, Tenant, upon notice from Landlord, shall defend the same at Tenant’s expense by counsel reasonably satisfactory to Landlord; provided, however, that Tenant shall not be liable in any case for damage to property or death or injury to person(s) occasioned by the active negligence or intentional misconduct of, or violation of this Lease by, Landlord or Landlord’s Associates, unless covered by insurance Tenant is required to provide.

15     DAMAGE OR DESTRUCTION

15.1 LOSS COVERED BY INSURANCE. If at any time prior to the expiration or termination of this Lease the Premises or the Property is wholly or partially damaged or destroyed by any casualty which results in a loss to Landlord that is fully covered by insurance maintained by Landlord or for Landlord’s benefit (or required to be maintained by Landlord pursuant to § 14.3 above), which casualty renders the Premises totally or partially inaccessible or unusable by Tenant in the ordinary conduct of Tenant’s business, the parties agree that the following provisions shall modify their obligations under this Lease after such damage or destruction.

15.1.1    Repairs Which Can Be Completed Within Six (6) Months. Within thirty (30) days after Tenant’s written notice to Landlord of such damage or destruction, Landlord shall provide Tenant with notice of its determination of whether the damage or destruction can be repaired within six (6) months after the commencement of the work of repairing such damage or destruction without the payment of overtime or other premiums. If all repairs to Premises or Property can, in Landlord’s judgement, be completed within six (6) months following the date of the commencement of the work of repairing such damage or destruction without the payment of overtime or other premiums, Landlord shall, at Landlord’s expense, repair the same; and this Lease shall remain in full force and

Oyster Point Marina Plaza Office Lease

Kashiwa Fudosan America, Inc. :: Satsuma Pharmaceuticals, Inc.

page 33 of 55

[Suite 221 (400 OPB); 4,148 rsf]

effect, except that a proportionate reduction of the Base Rent shall be allowed Tenant to the extent that the Premises shall be rendered inaccessible or unusable by Tenant and are not used by Tenant during the period of time that such portion is unusable or inaccessible and not used by Tenant.

15.1.2    Repairs Which Cannot Be Completed Within Six (6) Months. If all such repairs to the Property and Premises cannot, in Landlord’s judgement, be completed within six (6) months following the commencement of the work of repairing such damage or destruction without the payment of overtime or other premiums, Landlord shall notify Tenant of such determination; and in such an event, either Landlord or Tenant may, at its option, upon written notice to the other party given within sixty (60) days after the occurrence of such damage or destruction, elect to terminate this Lease as of the date of the occurrence of such damage or destruction. In the event that neither Landlord nor Tenant elects to terminate the Lease in accordance with the foregoing provisions, then Landlord shall, at Landlord’s expense, repair such damage or destruction; and in such event, this Lease shall continue in full force and effect, except that the Base Rent shall be proportionately reduced as provided in § 15.1.1 above; provided, however, that if any such repair is not commenced by Landlord within ninety (90) days after the occurrence of such damage or destruction or is not substantially completed by Landlord within nine (9) months after the occurrence of such damage or destruction, then in either such event Tenant may, at its option, upon written notice to Landlord, elect to terminate this Lease as of the date of Landlord’s receipt of such notice. Notwithstanding the foregoing, Tenant shall have no right to terminate this Lease in the situation just described if all of the following conditions are met: (x) Landlord shall have informed Tenant in its notice of determination that the repair of such damage or destruction could not be substantially completed by Landlord within nine (9) months after the occurrence of such damage or destruction; (y) Tenant shall not have elected to terminate the Lease by written notice delivered to Landlord within sixty (60) days after the occurrence of such damage or destruction; and (z) Landlord shall have commenced the work of repairing such damage or destruction.

15.2 LOSS NOT COVERED BY INSURANCE. If at any time prior to the expiration or earlier termination of this Lease the Premises or the Property is totally or partially damaged or destroyed in connection with a casualty, which loss to Landlord is not fully covered by insurance maintained by Landlord or for Landlord’s benefit (or required to be maintained by Landlord pursuant to § 14.3 above); and if such damage renders the Premises inaccessible or unusable to Tenant for their intended purpose in the ordinary course of its business, Landlord may, at its option, upon written notice given to Tenant within sixty (60) days after Tenant’s written notice to Landlord of the occurrence of such damage or destruction, either (a) elect to repair or to restore such damage or destruction or (b) elect to terminate this Lease. If Landlord elects to repair or restore such damage or destruction, this Lease shall continue in full force and effect, except that the Base Rent shall be proportionately reduced as provided in § 15.1.1 above. If Landlord does not elect by notice to Tenant to repair such damage, the Lease shall terminate as of the date of Tenant’s receipt of Landlord’s notice of election to terminate. Notwithstanding the foregoing, if all repairs to the Premises or the Building cannot, in Landlord’s reasonable judgement, be completed within six (6) months following the date of the commencement of the work of repairing such damage or destruction without the payment of overtime or other premiums, then either Landlord or Tenant may at the option of either, upon written notice to the other party given within sixty (60) days after the occurrence of such damage or destruction, elect to terminate this Lease as of the date of such notice.

15.3 DESTRUCTION DURING FINAL YEAR. Notwithstanding anything to the contrary contained in §§ 15.1 and15.2, if the Premises or the Building are wholly or partially damaged or destroyed within the final twelve (12) months of the Term of this Lease or, if an applicable renewal option has been exercised, during the last year of any renewal term, in such a way that Tenant shall be prevented from using the Premises for at least thirty (30) consecutive days as a result of such damage or destruction, then either Landlord or Tenant may, at the option of either, by written notice to the other party delivered within sixty (60) days after the occurrence of such damage or destruction, elect to terminate the Lease as of the date of such notice.

Oyster Point Marina Plaza Office Lease

Kashiwa Fudosan America, Inc. :: Satsuma Pharmaceuticals, Inc.

page 34 of 55

[Suite 221 (400 OPB); 4,148 rsf]

15.4 DESTRUCTION OF TENANT’S PROPERTY. Under no circumstances shall Landlord be required to repair any injury or damage to, or make any repairs to or replacements of, Tenant’s Property. However, as part of Operating Expenses, Landlord shall cause to be insured the Improvements in the Premises which do not consist of Tenant’s Property and shall cause such Improvements to be repaired and restored at Landlord’s sole expense, except that Tenant shall pay any applicable deductible. Landlord shall have no responsibility for any contents placed or kept in or on the Premises or the Property by Tenant or Tenant’s employees or invitees or any other person claiming through Tenant.

15.5 EXCLUSIVE REMEDY. Landlord and Tenant agree that their respective rights and obligations in the event of any damage or destruction of the Premises, Property, or Complex shall be governed exclusively by this Lease. Tenant, as a material inducement to Landlord entering into this Lease, irrevocably waives and releases Tenant’s rights under California Civil Code §§ 1932(2), 1933(4), and 1942, as the same may be modified or replaced hereafter. No damages, compensation, setoff, allowance, or claim shall be payable by Landlord for any inconvenience, interruption, or cessation of Tenant’s business or any annoyance arising from any damage to or destruction of all or any portion of the Premises, Property, or Complex.

16     EMINENT DOMAIN

16.1 CONDEMNATION. If the whole or any material part of the Premises or Property shall be taken by power of eminent domain or condemned by any competent authority for any public or quasi-public use or purpose; or if any adjacent property or street shall be so taken, condemned, reconfigured, or vacated by such authority in such manner as to require the use, reconstruction, or remodeling of any part of the Premises or Property; or if Landlord shall grant a deed or other instrument in lieu of such taking by eminent domain or condemnation (collectively “Takings”), Landlord shall have the option to terminate this Lease upon ninety (90) days’ notice, provided such notice is given no later than one hundred and eighty (180) days after the date of such Taking. Tenant shall have reciprocal termination rights, on the same terms and conditions and to be exercised in the same manner as the foregoing sentence provides, if the whole or any material part of the Premises is permanently taken, or if access to the Premises is permanently materially impaired.

16.2 RENTAL APPORTIONMENT. All Rent shall be apportioned as of the date of such termination or the date of such Taking, whichever shall first occur. If any part of the Premises shall be taken, and this Lease shall not be so terminated, the Rent shall be proportionately abated.

16.3 AWARDS AND DAMAGES. Landlord shall be entitled to receive the entire award or payment in connection with any Taking, except that Tenant shall have the right to file any separate claim available to Tenant for any taking of Tenant’s personal property and fixtures belonging to Tenant and removable by Tenant upon expiration of the Term, and for moving expenses, so long as such claim does not diminish the award available to Landlord and such claim is payable separately to Tenant.

16.4 TEMPORARY CONDEMNATION. If part or all of the Premises are condemned for a limited period of time (“Temporary Condemnation”), this Lease shall remain in effect. The Rent and Tenant’s obligations for the part of the Premises taken shall abate during the Temporary Condemnation in proportion to the part of the Premises that Tenant is unable to use in its business operations as a result of the Temporary Condemnation. Landlord shall receive the entire award for any Temporary Condemnation.

17     ASSIGNMENT AND SUBLETTING

17.1 CONSENT REQUIRED FOR TRANSFER. Tenant agrees that it shall not assign, sublet, mortgage, hypothecate, or encumber this Lease, nor permit or allow the Premises or any part thereof to be used or occupied by others, without the prior written consent of Landlord in each instance. The actions described

Oyster Point Marina Plaza Office Lease

Kashiwa Fudosan America, Inc. :: Satsuma Pharmaceuticals, Inc.

page 35 of 55

[Suite 221 (400 OPB); 4,148 rsf]

in the foregoing sentence are referred to collectively herein as “Transfers” and individually as a “Transfer.” If the Premises or any part thereof be sublet or occupied by anybody other than Tenant, Landlord may, after default by Tenant, collect rent from the subtenant or occupant and apply the net amount collected to the Rent herein reserved; but no Transfer, occupancy, or collection shall be deemed a waiver of the provisions hereof, the acceptance of the subtenant or occupant as tenant, or a release of Tenant from the further performance hereunder by Tenant. The consent by Landlord to a Transfer shall not relieve Tenant from obtaining the Landlord’s express written consent to any further Transfer. In no event shall any permitted sublessee assign or encumber its sublease or further sublet all or any portion of its sublet space, or otherwise suffer or permit the sublet space or any part thereof to be used or occupied by others, without Landlord’s prior written consent in each instance.

17.1.1 Corporate Transferor. If Tenant is a corporation, the provisions of § 17.1 shall apply to a transfer (by one or more transfers) of a majority of the stock of Tenant as if such transfer of a majority of the stock of Tenant were an assignment of this Lease, subject to the exceptions set forth in § 17.12 below. Notwithstanding the foregoing, the sale, issuance, or transfer of any stock of Tenant in connection with an equity financing (including an IPO) shall not be deemed an assignment of this Lease or require Landlord’s consent (subject to prior demonstration of the qualified nature of each such transaction as required under §§ 17.2 and 17.12 below).

17.2 NOTICE OF INTENT TO TRANSFER. If Tenant shall at any time or times during the Term of this Lease desire to assign this Lease or sublet all or part of the Premises, Tenant shall give notice thereof (the “Transfer Notice”) to Landlord, which notice shall set forth all of the following:

(a) the proposed terms of the assignment or subletting, including (i) the effective or commencement date thereof, which shall be not less than thirty (30) nor more than one hundred eighty (180) days after the giving of such notice; (ii) in the case of a proposed assignment, the consideration therefor; and (iii) in the case of a proposed subletting, the rental rate to be paid by the proposed subtenant (including any escalation or Additional Rent payable), the term of the proposed sublease (including any renewal options), any work to be performed or paid for by Tenant, the amount of any security deposit, the cost and extent of any so-called “take-over” obligations to be assumed by Tenant on behalf of such subtenant, the amount of any rent concessions to be granted by Tenant, and any other additional monetary or so-called “business” terms or conditions;

(b) a statement setting forth in reasonable detail the identity of the proposed assignee or subtenant, the nature of its business, and its proposed use of the Premises; and

(c) current financial information with respect to the proposed assignee or subtenant, including its most recent financial report, and any other information which may reasonably be required by Landlord.

17.3 CONDITIONS OF CONSENT. Landlord shall respond in writing to Tenant’s Transfer Notice within ten (10) days after receipt. Providing that Tenant is not in default of any of Tenant’s obligations under this Lease after notice and the expiration of any applicable grace period, Landlord’s consent (which must be in writing and in form reasonably satisfactory to Landlord) to the proposed assignment or sublease shall not be unreasonably withheld or delayed, provided the following conditions are met:

(a) Tenant shall have complied with the provisions of § 17.2 above within the time permitted therefor;

(b) In Landlord’s reasonable judgement the proposed assignee or subtenant is engaged in a business which would use the Premises, or the relevant part thereof, in a manner which is in keeping with the then-current standards of the Building, is

Oyster Point Marina Plaza Office Lease

Kashiwa Fudosan America, Inc. :: Satsuma Pharmaceuticals, Inc.

page 36 of 55

[Suite 221 (400 OPB); 4,148 rsf]

limited to the use expressly permitted under this Lease, and will not violate any negative covenant or other restriction or agreement as to use contained in any other lease of space in the Complex;

(c) The proposed assignee or subtenant is a reputable entity or person of good character and with reasonably sufficient financial worth considering the responsibility involved (and in no event of less financial standing than Tenant), is not subject to any toxic or hazardous materials cleanup order with respect to any other property, and Landlord has been furnished with reasonable proof thereof;

(d) Neither the proposed assignee or sublessee nor any person which, directly or indirectly, controls, is controlled by, or is under common control with, the proposed assignee or sublessee or any person who controls the proposed assignee or sublessee, is then an occupant of any part of the Complex, provided Landlord then has suitable space in the Complex available for leasing. For purposes of this Lease control shall be deemed to mean ownership of more than fifty percent (50%) of all the voting stock of a corporation or more than fifty percent (50%) of all the legal and equitable interest in any other business entity;

(e) The proposed assignee or sublessee is not a person or entity with whom Landlord is then negotiating to lease space in the Building;

(f) The form of the proposed lease shall be in form reasonably satisfactory to Landlord and shall comply with the applicable provisions of this Article 17;

(g) There shall not be more than two (2) subtenants (not including the Permitted Occupant (as defined in § 17.13 below) of the Premises);

(h) Tenant shall reimburse Landlord on demand for any reasonable costs that may be incurred or paid by Landlord to third persons in connection with said assignment or sublease, including costs of making investigations as to the acceptability of the proposed assignee or subtenant and legal costs incurred in connection with the granting of any requested consent; and

(i) The sublease shall not allow the use of the Premises or any part thereof for (i) the sale of food for on or off-premises consumption or (ii) use by a foreign or domestic governmental agency.

Whether or not Landlord shall grant consent, Tenant shall pay $500.00 towards Landlord’s review and processing expenses in connection with any Transfer request, as well as any reasonable legal fees incurred by Landlord, within thirty (30) days after written request by Landlord.

17.4 CONTINUATION OF LEASE TERMS. Each subletting pursuant to this Article 17 shall be subject to all of the covenants, agreements, terms, provisions, and conditions contained in this Lease. Notwithstanding any such subletting to any other subtenant and/or acceptance of Rent by Landlord from any subtenant, Tenant shall remain liable for the payment of the Base Rent and Additional Rent due and to become due hereunder and for the performance of all the covenants, agreements, terms, provisions, and conditions contained in this Lease on the part of Tenant to be performed and all acts and omissions of any licensee or subtenant or anyone claiming under or through any subtenant which shall be in violation of any of the obligations of this Lease; and any such violation shall be deemed to be a violation by Tenant. Tenant further agrees that notwithstanding any such subletting, no other and further subletting of the Premises by Tenant or any person or entity claiming through or under Tenant shall or will be made except upon compliance with and subject to the provisions of this Article 17. If Landlord shall decline to give its consent to any proposed assignment or sublease, Tenant shall indemnify, defend, protect, and hold

Oyster Point Marina Plaza Office Lease

Kashiwa Fudosan America, Inc. :: Satsuma Pharmaceuticals, Inc.

page 37 of 55

[Suite 221 (400 OPB); 4,148 rsf]

Landlord harmless against and from any and all Claims resulting from any Claims that may be made against Landlord by the proposed assignee or sublessee or by any brokers or other persons claiming a commission or similar compensation in connection with the proposed assignment or sublease.

17.5 LAPSE OF CONSENT. In the event that Landlord consents to a proposed Transfer described in the Transfer Notice and Tenant fails to execute and deliver the assignment or sublease described in the Transfer Notice to which Landlord consented within one hundred twenty (120) days after the giving of such consent, then Tenant shall again comply with all of the provisions and conditions of § 17.2 above before assigning this Lease or subletting all or part of the Premises.

17.6 TRANSFER DOCUMENTATION. With respect to each and every Transfer authorized by Landlord under the provisions of this Lease, it is further agreed as follows:

(a) no subletting shall be for a term ending later than one day prior to the Expiration Date of this Lease;

(b) no sublease shall be valid, and no subtenant shall take possession of the Premises or any part thereof, until an executed counterpart of such sublease has been delivered to Landlord;

(c) each sublease shall provide that it is subject and subordinate to this Lease and to the matters to which this Lease is or shall be subordinate, and that in the event of termination (whether by voluntary surrender or otherwise), re-entry, or dispossession by Landlord under this Lease, Landlord may, at its option, take over all of the right, title, and interest of Tenant, as sublessor, under such sublease, and such subtenant shall, at Landlord’s option, attorn to Landlord pursuant to the then-executory provisions of such sublease, except that Landlord shall not be (i) liable for any previous act or omission of Tenant under such sublease; (ii) subject to any offset, credit, or allowance not expressly provided in such sublease which theretofore accrued to such subtenant against Tenant or (iii) bound by any previous modification of such sublease or by any previous prepayment of more than one month’s rentals; and

(d) each assignment or sublease document must provide that the assignee or subtenant expressly assumes all obligations of the Tenant under the Lease as joint and several obligations without any release of Tenant.

17.7 TRANSFER PREMIUM. If Landlord shall give its consent to any assignment of this Lease or to any sublease, Tenant shall in consideration therefor pay to Landlord, as Additional Rent, the following amounts (collectively the “Transfer Premium”):

(a) in the case of an assignment, an amount equal to fifty percent (50%) of all sums and other considerations paid to Tenant by the assignee for or by reason of such assignment, including sums paid for the sale of Tenant’s Property, but excluding the following: (i) in the case of a sale of Tenant’s Property, the then-current net unamortized or undepreciated cost thereof determined on the basis of Tenant’s federal income tax returns; (ii) then-customary brokerage commissions being paid by Landlord for leasing of space in the Building or, if less, the brokerage commission paid by Tenant in connection with the assignment; (iii) reasonable legal fees and disbursements; and (iv) reasonable amounts paid by Tenant for tenant improvements constructed for the assignee; and

(b) in the case of a sublease, fifty percent (50%) of any rents, additional charge, or other consideration paid under the sublease to Tenant by the subtenant which is in excess

Oyster Point Marina Plaza Office Lease

Kashiwa Fudosan America, Inc. :: Satsuma Pharmaceuticals, Inc.

page 38 of 55

[Suite 221 (400 OPB); 4,148 rsf]

of the Base Rent and Additional Rent accruing during the term of the sublease in respect of the subleased space (at the rate per square foot payable by Tenant hereunder) pursuant to the terms hereof, including sums paid for the sale or rental of Tenant’s Property, but excluding the following: (i) in the case of the sale or lease of Tenant’s Property, the then-current net unamortized or undepreciated cost thereof determined on the basis of Tenant’s federal income tax returns; (ii) then-customary brokerage commissions being paid by Landlord for leasing of space in the Building or, if less, the brokerage commission paid by Tenant in connection with the sublease; (iii) reasonable legal fees and disbursements; and (iv) reasonable amounts paid by Tenant for tenant improvements constructed for the subtenant.

The sums payable as the Transfer Premium under this § 17.7 shall be paid to Landlord as and when payable by the subtenant or assignee to Tenant.

17.8 ASSUMPTION BY TRANSFEREE     Any Transfer, whether made with Landlord’s consent pursuant to § 17.1 or without Landlord’s consent pursuant to § 17.1.1, shall be made only if, and shall not be effective until, the assignee or subtenant shall execute, acknowledge, and deliver to Landlord an agreement in form and substance satisfactory to Landlord under which the assignee or transferee shall assume the obligations of this Lease on the part of Tenant to be performed or observed, from and after the date of Transfer, and whereby the assignee or transferee shall agree that the provisions in § 17.1 shall, notwithstanding such Transfer, continue to be binding upon it in respect of all future Transfers. The original named Tenant covenants that, notwithstanding any Transfer, whether or not in violation of the provisions of this Lease, and notwithstanding the acceptance of Base Rent and/or Additional Rent by Landlord from an assignee, transferee, or any other party, the original named Tenant shall remain fully liable for the payment of the Base Rent and Additional Rent and for the other obligations of this Lease on the part of Tenant to be performed or observed.

17.9 NO WAIVER OR DISCHARGE. The joint and several liability of Tenant and any immediate or remote successor in interest of Tenant and the due performance of the obligations of this Lease on Tenant’s part to be performed or observed shall not be discharged, released, or impaired in any respect by any agreement or stipulation made by Landlord extending the time of, or modifying any of the obligations of, this Lease, or by any waiver or failure of Landlord to enforce any of the obligations of this Lease.

17.10    LISTING OF NAME. The listing of any name other than that of Tenant, whether on the doors of the Premises or the Building directory, or otherwise, shall not operate to vest any right or interest in this Lease or in the Premises, nor shall it be deemed to be the consent of Landlord to any Transfer of this Lease or to any sublease of the Premises or to the use or occupancy of the Premises by others.

17.11    NET PROFITS AGREEMENT. Anything contained in the foregoing provisions of this Article 17 to the contrary notwithstanding, neither Tenant nor any other person or entity having an interest in the possession, use, occupancy, or utilization of the Premises shall enter into any lease, sublease, license, concession, or other agreement for use, occupancy, or utilization of space in the Premises which provides for rental or other payment for such use, occupancy, or utilization based, in whole or in part, on the net income or profits derived by any person from the premises leased, used, occupied, or utilized (other than an amount based on a fixed percentage or percentages of receipts or sales); and any such purported lease, sublease, license, concession, or other agreement shall be absolutely void and ineffective as a conveyance of any right or interest in the possession, use, occupancy, or utilization of any part of the Premises.

17.12    AFFILIATES. Notwithstanding anything to the contrary in this Article 17, Landlord’s consent shall not be required in the event Tenant desires to transfer a majority of iots stock as described in § 17.1.1 above or assign this Lease or sublet the Premises or any portion thereof to any corporation or entity which controls, is controlled by, or is under common control with Tenant, or to an entity related to

Tenant by merger, or a purchaser of substantially all of Tenant’s stock or assets, provided and subject to the following conditions:

(a) Tenant shall not be in default of any of the terms, covenants, or conditions on Tenant’s part to observe or perform hereunder beyond applicable notice and cure periods;

Oyster Point Marina Plaza Office Lease

Kashiwa Fudosan America, Inc. :: Satsuma Pharmaceuticals, Inc.

page 39 of 55

[Suite 221 (400 OPB); 4,148 rsf]

(b) such sublet or assignment shall be subject to all of the terms, covenants, and conditions of this Lease;

(c) Tenant shall notify Landlord of such sublet or assignment in accordance with § 17.2 hereof and furnish Landlord with reasonably satisfactory evidence that such sublessee or assignee controls, is controlled by, or is under common control with Tenant or is otherwise covered by this § 17.12 above; and

(d) in the event of such merger, consolidation, or transfer of a majority of its stock or substantially all of Tenant’s assets, the successor to Tenant (or Tenant following a stock transfer) has a net worth, computed in accordance with generally-accepted accounting principles, at least equal to the net worth of Tenant immediately prior to such merger, consolidation, or transfer; and proof satisfactory to Landlord of such net worth shall have been delivered to Landlord at least ten (10) days prior to the effective date of any such transaction.

As used herein, the terms control and common control shall be deemed to mean the ownership of fifty percent (50%) or more of all of the issued and outstanding voting shares of such corporation, or fifty percent (50%) or more of all the legal and equitable interest in any such business entities.

17.13    PERMITTED OCCUPANTS. Landlord hereby agrees that the provisions of this Article 17 shall not apply to the shared occupancy of individual offices in the Premises with Tenant by individuals renting not more than one (1) such office (the “Permitted Occupant”), provided that the space occupied by the Permitted Occupant shall not be separately demised or contain separate entrances, demarcations, or reception areas and the occupancy by the Permitted Occupant shall be upon and subject to all of the terms and conditions of this Lease.

18     SUBORDINATION AND ATTORNMENT

18.1    SUBORDINATION OF LEASE. This Lease and all rights of Tenant hereunder are and shall be subject and subordinate in all respects to (a) all ground leases, overriding leases, and underlying leases of the Building, Property, and/or the Complex now or hereafter existing; (b) all mortgages which may now or hereafter affect the Building, Property, or Complex and any of such leases, whether or not such mortgages shall also cover other lands and/or buildings; (c) each and every advance made or hereafter to be made under such mortgages; and (d) to all renewals, modifications, replacements, and extensions of such leases and such mortgages and spreaders and consolidations of such mortgages. This § 18.1 shall be self-operative, and no further instrument of subordination shall be required. In confirmation of such subordination, Tenant shall promptly execute and deliver any instrument that Landlord, the lessor of any such lease or the holder (“Holder”) of any such mortgage or any of their respective successors in interest may reasonably request to evidence such subordination. The leases to which this Lease is, at the time referred to, subject and subordinate pursuant to this Article 18 are hereinafter sometimes referred to as “Superior Leases”; the mortgages to which this Lease is, at the time referred to, subject and subordinate are hereinafter sometimes referred to as “Superior Mortgages”; and the lessor of a superior lease or its successor in interest at the time referred to is sometimes hereinafter referred to as a “Lessor.” Notwithstanding the foregoing, Tenant agrees, upon written request from Landlord or any Holder or Lessor, to reorder the relative priority of the Lease with respect to any particular Superior Mortgage or Superior Lease so as to subordinate the lien of any such Superior Mortgage or Superior Lease to the

Oyster Point Marina Plaza Office Lease

Kashiwa Fudosan America, Inc. :: Satsuma Pharmaceuticals, Inc.

page 40 of 55

[Suite 221 (400 OPB); 4,148 rsf]

Lease. Tenant agrees to execute any instrument which Landlord or any Holder or Lessor may present in order to effect such prioritization of the Lease, provided that such instrument does not modify any material term of the Lease or increase Tenant’s obligations thereunder.

18.2 NOTICE AND CURE RIGHT. In the event of any action or omission of Landlord which would give Tenant the right, immediately or after lapse of a period of time, to cancel or terminate this Lease, or to claim a partial or total eviction, Tenant shall not exercise such right unless and until (i) Tenant shall have given written notice of such act or omission to the Holder of each Superior Mortgage and the Lessor of each Superior Lease whose name and address shall previously have been furnished to Tenant in writing; and (ii) unless such act or omission shall be one which is not capable of being remedied by Landlord or such mortgage Holder or Lessor within a reasonable period of time, a reasonable period for remedying such act or omission shall have elapsed following the giving of such notice and following the time when such Holder or Lessor shall have become entitled under such Superior Mortgage or Superior Lease, as the case may be, to remedy the same (which reasonable period shall in no event be less than the period to which Landlord would be entitled under this Lease or otherwise, after similar notice, to effect such remedy), provided such Holder or Lessor shall with due diligence give Tenant written notice of intention to remedy such act or omission and shall thereafter diligently and continuously prosecute such cure to completion.

18.3 ATTORNMENT. If the Lessor of a Superior Lease or the Holder of a Superior Mortgage shall succeed to the rights of Landlord under this Lease, whether through possession or foreclosure action or delivery of a new lease or deed, then at the request of such party so succeeding to Landlord’s rights or other person having or acquiring title by virtue of such foreclosure or termination (herein sometimes referred to as “Successor Landlord”) and upon such Successor Landlord’s written agreement to accept Tenant’s attornment, Tenant shall attorn to and recognize such Successor Landlord as Tenant’s landlord under this Lease and shall promptly execute and deliver any instrument that such Successor Landlord may reasonably request to evidence such attornment. Upon such attornment this Lease shall continue in full force and effect as a direct lease between the Successor Landlord and Tenant upon all of the terms, conditions, and covenants in this Lease, except as follows:

(a) the Successor Landlord shall not be liable for any previous act or omission of Landlord under this Lease;

(b) the Successor Landlord shall not be subject to any offset (unless expressly provided for in this Lease) which shall have theretofore accrued to Tenant against Landlord;

(c) the Successor Landlord shall not be bound by any previous modification of this Lease, unless expressly provided for in this Lease, or by any previous prepayment of more than one month’s Base Rent, unless such modification or prepayment shall have been expressly approved in writing by the Lessor of the Superior Lease or the Holder of the Superior Mortgage through or by reason of which the Successor Landlord shall have succeeded to the rights of Landlord under this Lease.

19     FINANCING REQUIREMENTS

19.1 LENDER-REQUESTED MODIFICATIONS. If, in connection with obtaining financing or refinancing for the Property or Complex a prospective lender shall request reasonable modifications to this Lease as a condition to such financing or refinancing, Tenant shall not withhold, delay, or unreasonably condition its consent thereto. It is agreed that, among the modifications which shall be deemed reasonable, are modifications to the subordination and attornment provisions of this Lease, modifications to the notice provisions of this Lease, modifications to the provisions of this Lease which permit the lender to cure any defaults by Landlord, and modifications to the provisions which grant additional time to cure as may be reasonably required by the lender.

Oyster Point Marina Plaza Office Lease

Kashiwa Fudosan America, Inc. :: Satsuma Pharmaceuticals, Inc.

page 41 of 55

[Suite 221 (400 OPB); 4,148 rsf]

19.2 FAILURE TO COMPLY. If Tenant fails or refuses to execute and deliver to Landlord, within fifteen (15) days after written notice to do so, the amendment(s) to this Lease accomplishing such reasonable modification(s), Landlord, at its sole option, shall have the right either (a) to terminate this Lease after the expiration of any applicable notice and cure periods or (b) to execute the amendment for and on behalf of Tenant as its attorney-in-fact. Tenant hereby irrevocably appoints Landlord as its attorney-in-fact solely to execute any documents required to carry out the intent of § 19.1 above on behalf of Tenant.

20     DEFAULT

20.1 TENANT’S DEFAULT. Tenant’s failure to perform any of its obligations under this Lease when due and in the manner required shall constitute a material breach and default (“Event of Default”) of this Lease by Tenant, subject to any cure period(s) permitted or available under applicable laws or statutes. In addition, the following shall also be deemed Events of Default hereunder:

(a) Tenant’s abandonment of the Premises;

(b) any material misrepresentation or omission herein or in any financial statements or other materials provided by Tenant or any Guarantor in connection with negotiating or entering this Lease or in connection with any Transfer under Article 17;

(c) cancellation of any guaranty of this Lease by any Guarantor;

(d) failure by Tenant to cure within any applicable times permitted thereunder any default under any other lease for space in the Complex or any other buildings owned or managed by Landlord or its affiliates now or hereafter entered by Tenant; and any Default hereunder not cured within the times permitted for cure herein shall, at Landlord’s election, constitute a default under any other such lease or leases;

(e) The levy of a writ of attachment or execution on this Lease or on any of Tenant’s property;

(f) Tenant’s or any Guarantor’s general assignment for the benefit of creditors or arrangement, composition, extension, or adjustment with its creditors;

(g) Tenant’s or any Guarantor’s filing of a voluntary petition for relief, or the filing of a petition against Tenant or any Guarantor in a proceeding under the Federal Bankruptcy laws or other insolvency laws which is not withdrawn or dismissed within forty-five (45) days thereafter; or, under the provisions of any law providing for reorganization or winding up of corporations, the assumption by any court of competent jurisdiction of jurisdiction, custody, or control of Tenant or any substantial part of its property, or of any Guarantor, where such jurisdiction, custody, or control remains in force unrelinquished, unstayed, or unterminated for a period of forty five (45) days;

(h) In any proceeding or action in which Tenant is a party, the appointment of a trustee, receiver, agent, or custodian to take charge of the Premises or Tenant’s Property for the purpose of enforcing a lien against the Premises or Tenant’s Property; or

(i) If Tenant or any Guarantor is a partnership or consists of more than one (1) person or entity, the involvement of any partner of the partnership or other person or entity in any of the acts or events described in subsections (i) through (l) above.

Oyster Point Marina Plaza Office Lease

Kashiwa Fudosan America, Inc. :: Satsuma Pharmaceuticals, Inc.

page 42 of 55

[Suite 221 (400 OPB); 4,148 rsf]

Notwithstanding anything to the contrary herein, an Event of Default shall not be deemed to have occurred if Tenant fails to perform any covenant of this Lease other than its obligation timely to pay the Rent, unless such failure continues after Landlord’s delivery of written notice for a period of thirty (30) days or such longer time as may reasonably be required to cure the default, provided in the latter case that Tenant immediately begins to cure such nonmonetary default and thereafter diligently and continuously prosecutes such cure to completion.

20.2 LANDLORD’S REMEDIES. Upon the occurrence of an Event of Default hereunder, Landlord shall have the right, in addition to any other rights or remedies Landlord may have under Laws, at Landlord’s option, without further notice or demand of any kind, to elect to do one of the following alternatives:

(i) Terminate this Lease and Tenant’s right to possession of the Premises, re-enter the Premises, and take possession thereof; and Tenant shall have no further claim to the Premises or under this Lease; or

(ii) Continue this Lease in effect and collect any unpaid Rent or other charges which have theretofore accrued or which thereafter become due and payable. It is intended hereunder that Landlord have the remedy described in California Civil Code § 1951.4, which provides that a landlord may continue a lease in effect after a tenant’s breach and abandonment and recover rent as it becomes due, if tenant has the right to sublease or assign, subject only to reasonable limitations.

In the event of any re-entry or retaking of possession by Landlord, Landlord shall have the right, but not the obligation, to remove all or any part of Tenant’s Property from the Premises and to place such property in storage at a public warehouse at the expense and risk of Tenant.

20.2.1    No Waiver of Default. The waiver by Landlord of any Event of Default or of any other breach of any term, covenant, or condition of this Lease shall not be deemed a waiver of such term, covenant, or condition or of any subsequent breach of the same or any other term, covenant, or condition. Acceptance of Rent by Landlord subsequent to any Event of Default or breach hereof shall not be deemed a waiver of any preceding Event of Default or breach other than the failure to pay the particular Rent so accepted, regardless of Landlord’s knowledge of any breach at the time of such acceptance of Rent. Landlord shall not be deemed to have waived any term, covenant, or condition of this Lease, unless Landlord gives Tenant written notice of such waiver. Tenant should not rely upon Landlord’s failure or delay in enforcing any right or remedy hereunder.

20.2.2    Landlord’s Right to Cure. If Tenant defaults in the performance of any of its obligations under this Lease, Landlord may (but shall not be obligated to), without waiving such default, perform the same for the account and at the expense of Tenant. Tenant shall pay Landlord all costs of such performance promptly upon receipt of a bill therefor.

20.3 DAMAGES. Should Landlord elect to terminate this Lease under the provisions of § 20.2 (i) above, Landlord may recover as damages from Tenant the following:

(a) Past Rent: The worth at the time of the award of any unpaid Rent which had been earned at the time of termination; plus

(b) Rent Prior to Award: The worth at the time of the award of the amount by which the unpaid Rent which would have been earned after termination until the time of award exceeds the amount of such rental loss that Tenant proves could have been reasonably avoided; plus

(c) Rent After Award: The worth at the time of the award of the amount by which the unpaid Rent for the balance of the Term after the time of award exceeds the amount of the rental loss that Tenant proves could have been reasonably avoided; plus

Oyster Point Marina Plaza Office Lease

Kashiwa Fudosan America, Inc. :: Satsuma Pharmaceuticals, Inc.

page 43 of 55

[Suite 221 (400 OPB); 4,148 rsf]

(d) Proximately Caused Damages: Any other amount necessary to compensate Landlord for all detriment proximately caused by Tenant’s failure to perform its obligations under this Lease or which in the ordinary course of things would be likely to result therefrom, including, but not limited to, any costs or expenses (including attorneys’ fees), incurred by Landlord in (i) retaking possession of the Premises; (ii) maintaining the Premises after Tenant’s default; (iii) preparing the Premises for reletting to a new tenant, including any repairs or alterations; and (iv) reletting the Premises, including brokers’ commissions.

“The worth at the time of the award” as used in subsections (a) and (b) above is to be computed by allowing interest at the rate of ten percent (10%) per annum or, if different, the legal rate then applicable in California. “The worth at the time of the award” as used in subsection (c) above is to be computed by discounting the amount at the discount rate of the Federal Reserve Bank situated nearest to the Premises at the time of the award plus one percent (1%).

20.4 LANDLORD’S DEFAULT. If Landlord fails to perform any covenant, condition, or agreement contained in this Lease within thirty (30) days after receipt of written notice from Tenant specifying a default and the relevant Lease provision, or if Landlord fails within that thirty-day period after notice to commence to cure any such default which cannot reasonably be cured within thirty (30) days, then, subject to § 21.1 below, Landlord shall be liable to Tenant for any damages sustained by Tenant as a result of Landlord’s breach. Tenant shall not have the right to terminate this Lease or to withhold, reduce, or offset any amount against any payments of Rent or any other charges due and payable under this Lease, except to the extent that a specific Lease provision permits such termination or withholding, reduction, or offset of Rent.

20.5 HOLDER’S RIGHT TO CURE. Tenant shall give any Holder a copy, by registered mail, of any notice of default served upon Landlord, provided that Tenant previously has been notified in writing of the address of such Holder. If Landlord fails to cure such default within the time provided in this Lease, any such Holder shall have an additional forty-five (45) days within which to cure such default by Landlord or, if such default cannot reasonably be cured within that time, such additional time as may be necessary, provided that within such forty-five (45) day period the Holder has commenced and is pursuing the remedies necessary to cure such default (including commencement of foreclosure proceedings, if necessary to effect such cure), in which event this Lease shall not be terminated while such remedies are being so pursued.

20.6 SURVIVAL OF REMEDIES. The remedies permitted under this Article 20, the parties’ indemnities under §§ 14.4.3, 14.4.4, and14.4.5, and § 29.5 below shall survive the termination of this Lease.

21     LIMITATIONS ON LANDLORD’S LIABILITY

21.1 PERSONAL LIABILITY. The liability of Landlord to Tenant for any default by Landlord under this Lease or arising in connection herewith or with Landlord’s operation, management, leasing, repair, renovation, alteration, or any other matter relating to the Property or the Premises shall be limited to the value of the interest of Landlord in the Property (and the rental proceeds thereof). Under no circumstances shall Landlord ever be liable for consequential or punitive damages, including damages for lost profits or for business interruption. Tenant agrees to look solely to Landlord’s interest in the Property (and the rental proceeds thereof) for the recovery of any judgement against Landlord, and Landlord shall not be personally liable for any such judgement or deficiency after execution thereon. The limitations of liability contained in this Article 21 shall apply equally and inure to the benefit of Landlord’s present and future partners, beneficiaries, officers, directors, trustees, shareholders, agents, and employees, and their respective partners, heirs, successors, and assigns. Under no circumstances shall any present or future general or limited partner of Landlord (if Landlord is a partnership), or trustee

Oyster Point Marina Plaza Office Lease

Kashiwa Fudosan America, Inc. :: Satsuma Pharmaceuticals, Inc.

page 44 of 55

[Suite 221 (400 OPB); 4,148 rsf]

or beneficiary (if Landlord or any partner of Landlord is a trust) or corporate officer, director, or shareholder (if Landlord or any partner of Landlord is a corporation or company) or member (if Landlord is a limited liability company) have any liability for the performance of Landlord’s obligations under this Lease.

21.2 LIABILITY UPON TRANSFER. The term Landlord as used in this Lease, so far as covenants or obligations on the part of the Landlord are concerned, shall be limited to mean and include only the owner or owners, at the time in question, of the fee title to, or a lessee’s interest in a ground lease or master lease of the Property. In the event of any transfer, assignment, or other conveyance or transfer of any such title or interest, Landlord herein named (and in case of subsequent transfers or conveyances, the current grantor) shall be automatically freed and relieved from and after the date of such transfer, assignment, or conveyance of all liability with respect to the performance of any covenants or obligations on the part of Landlord contained in this Lease thereafter to be performed; and, without further agreement, the transferee of such title or interest shall be deemed to have assumed and agreed to observe and perform any and all obligations of Landlord hereunder, during its ownership of the Premises. Landlord may transfer its interest in the Premises without the consent of Tenant, and such transfer or subsequent transfer shall not be deemed a violation on Landlord’s part of any of the terms and conditions of this Lease.

22     ESTOPPEL CERTIFICATES

22.1 REQUEST AND DELIVERY. Within ten (10) days following any written request Landlord may make from time to time, Tenant without any charge therefor, shall execute, acknowledge, and deliver a statement certifying the following: (a) the Commencement Date of this Lease; (b) the fact that this Lease is unmodified and in full force and effect or, if there have been modifications hereto, that this Lease is in full force and effect, as modified, and stating the date and nature of such modifications; (c) the date to which the Rent and other sums payable under this Lease have been paid; (d) the fact that there are no current defaults under this Lease by either Landlord or Tenant except as specified in the statement; and (e) such other matters as may be reasonably requested by Landlord. Landlord and Tenant intend that any statement delivered pursuant to this Article 22 may be relied upon by any Holder, Lessor, beneficiary, purchaser, or prospective purchaser of the Building, the Complex, or any interest therein. Tenant’s failure to deliver any such statement within the specified ten-day period shall constitute a material default hereunder, and Tenant shall indemnify, defend, protect, and hold Landlord harmless from and against any and all Claims which Landlord may sustain or incur as a result of or in connection with Tenant’s failure or delay in delivering such statement.

22.2 ELECTION TO SELL BUILDING. If Landlord elects to sell the Building or to obtain loans secured by a lien on the Building, Tenant, promptly after demand, shall include with the estoppel certificate(s) provided to any prospective purchaser or lender as required under this Article 22 any financial statements of Tenant reasonably required by the purchaser or lender. The financial statements so provided shall be kept confidential as to any parties other than the purchaser or lender.

Oyster Point Marina Plaza Office Lease

Kashiwa Fudosan America, Inc. :: Satsuma Pharmaceuticals, Inc.

page 45 of 55

[Suite 221 (400 OPB); 4,148 rsf]

23     NOTICES

23.1 MANNER OF DELIVERY. Any notice required or permitted under this Lease shall be in writing and shall be delivered in at least one of the following ways: (a) personally or by private hand-delivery messenger service; (b) by depositing the same in the United States mail, postage prepaid, registered or certified, return receipt requested; (c) by depositing such notice, postage prepaid, with Federal Express or another nationally-recognized private overnight delivery service; or (d) by any other means permitted or required by applicable California law or statutes relevant in the context in which such notice is given. Each such notice shall be addressed to the intended recipient at such party’s address set forth as follows, or at such other address as such party has theretofore specified by written notice delivered in accordance with this § 23.1:

if to Landlord:

KASHIWA FUDOSAN AMERICA, INC.

c/o RiverRock Real Estate Group, Inc.

Attn: Property Manager

400 Oyster Point Boulevard, Suite 117

South San Francisco, CA 94080

copy to:

Metro Properties, LLC, Agent

Attn: Oyster Point Asset Manager

11150 West Olympic Boulevard, Suite 1090

Los Ángeles, CA 90064

if to Tenant:

SATSUMA PHARMACEUTICALS, INC.

Attn: General Manager

400 Oyster Point Boulevard, Suite 221

South San Francisco, CA 94080

23.2 REQUIRED CONTENTS. Every notice (other than the giving or withholding of consent or approval under the provisions of the Lease) given to a party shall state the section of the Lease pursuant to which the notice is given; the period of time within which the recipient of the notice must respond (or, if no response is required, a statement to that effect); and if applicable, that the failure to object to the notice within the stated time period will be deemed to be the equivalent of the recipient’s approval, consent to, or satisfaction with the subject matter of the notice.

23.3 PRESUMPTION OF RECEIPT. Any notice delivered personally or by private messenger service shall be deemed delivered on the next day following the deposit of such notice at the recipient’s address. Any notice delivered by Federal Express or another nationally-recognized private overnight delivery service shall be deemed delivered on the earlier of (y) the second day following deposit thereof with the carrier or (z) the delivery date shown on the carrier’s record of delivery. Any notice delivered by mail in the manner specified in § 23.1 shall be deemed delivered on the earlier of (a) the third day following deposit thereof in the United States Mail or (b) the delivery date shown on the return receipt prepared in connection therewith. Refusal by Tenant or Landlord to accept either certified or registered mail shall constitute a waiver of such notice by the respective party.

24     BROKERS

24.1 TENANT’S REPRESENTATION. Tenant represents and warrants to Landlord that Tenant has dealt with no broker in connection with this Lease other than JLL and Cushman & Wakefield of California, Inc. Tenant shall be responsible for all foreseeable consequences of damages (including attorneys’ fees and costs) resulting from any claims that may be asserted against Landlord by any other broker, finder, or other person with whom Tenant has or purportedly has dealt in connection with this Lease, and Tenant agrees to indemnify, defend, protect, and hold Landlord harmless in connection with any such Claims which may be asserted.

Oyster Point Marina Plaza Office Lease

Kashiwa Fudosan America, Inc. :: Satsuma Pharmaceuticals, Inc.

page 46 of 55

[Suite 221 (400 OPB); 4,148 rsf]

25     RIGHTS RESERVED TO LANDLORD

25.1 ACCESS TO PROPERTY. All of the Property except the inside surfaces of all walls, windows, and doors bounding the Premises (including exterior Building walls, core corridor walls and doors, and any core corridor entrance) and any space in or adjacent to the Premises used for shafts, stacks, pipes, conduits, fan rooms, ducts, electric, or other utilities, sinks or other Building facilities, and the use thereof, as well as access thereto through the Premises for the purpose of operation, maintenance, decoration, and repair, are reserved to Landlord. Tenant shall permit Landlord to install, use, replace, and maintain pipes, ducts, and conduits within the demising walls, bearing columns, and ceilings of the Premises.

25.2 CONTROL OF PROPERTY. Except to the extent expressly limited herein, Landlord reserves full rights to control the Property (which rights may be exercised without subjecting Landlord to claims for constructive eviction, abatement of Rent, damages, or other claims of any kind), including more particularly the following rights:

(a) Name, Address, Access. To change the name or street address of the Property; install and maintain signs on the exterior and interior of the Property; retain at all times, and use in appropriate instances, keys to all doors within and into the Premises; grant to any Person the right to conduct any business or render any service at the Property, whether or not it is the same or similar to the use permitted Tenant by this Lease; and have access for Landlord and other tenants of the Property to any mail chutes located on the Premises according to the rules of the United States Postal Service.

(b) Entry into Premises. To enter the Premises at reasonable hours for reasonable purposes, including inspection and supplying cleaning service or other services to be provided Tenant hereunder, to show the Premises to current and prospective lenders, ground lessors, insurers, and prospective purchasers, tenants and brokers, at reasonable hours; and if Tenant shall abandon the Premises at any time, or shall vacate the same during the last three (3) months of the Term, to decorate, remodel, repair, or alter the Premises.

(c) Safety Measures. To limit or prevent access to the Property, shut down elevator service, activate elevator emergency controls, or otherwise take such action or preventative measures deemed necessary by Landlord for the safety of tenants or other occupants of the Property or the protection of the Property and other property located thereon or therein, in case of fire, invasion, insurrection, riot, civil disorder, public excitement or other dangerous condition, or threat thereof.

(d) Improvements. To decorate and to make alterations, additions and improvements, structural or otherwise, in or to the Property or any part thereof, and any adjacent building, structure, parking facility, land, street or alley (including changes and reductions in corridors, lobbies, parking facilities and other public areas and the installation of kiosks, planters, sculptures, displays, escalators, mezzanines, and other structures, facilities, amenities and features therein, and changes for the purpose of connection with or entrance into or use of the Property in conjunction with any adjoining or adjacent building or buildings, now existing or hereafter constructed). In connection with such matters, or with any other repairs, maintenance, improvements or alterations, in or about the Property, Landlord may erect scaffolding and other structures reasonably required, and during such operations may enter upon the Premises and take into and upon or through the Premises, all materials required to make such repairs, maintenance, alterations or improvements, and may close public entry ways, other public areas, restrooms, stairways or corridors.

Oyster Point Marina Plaza Office Lease

Kashiwa Fudosan America, Inc. :: Satsuma Pharmaceuticals, Inc.

page 47 of 55

[Suite 221 (400 OPB); 4,148 rsf]

25.3 LANDLORD’S RIGHT TO MAINTAIN. Except as expressly otherwise provided in this Lease, Landlord shall have no liability to Tenant by reason of any inconvenience, annoyance, interruption, or injury to business arising from Landlord’s making any repairs or changes which Landlord is required or permitted to make by this Lease, by any other lease or agreement affecting the Property, or by Law, in or to any portion of the Property, Complex, or the Premises, including the Systems and Equipment and appurtenances of the Property or the Premises, provided that Landlord shall use due diligence with respect thereto and shall perform such work, except in case of emergency, at times reasonably convenient to Tenant and otherwise in such manner as will not materially diminish Tenant’s beneficial enjoyment of the Premises for their intended use.

25.4 REASONABLE NOTICE. In connection with entering the Premises to exercise any of the foregoing rights, Landlord shall: (a) provide reasonable advance written or oral notice to Tenant’s on-site manager or other appropriate person (except in emergencies, or for routine cleaning or other routine matters), and (b) take reasonable steps to avoid any unreasonable interference with Tenant’s business.

26     BUILDING PLANNING

26.1 RELOCATION RIGHT. In the event Landlord requires the Premises for use in conjunction with another suite or for other reasons connected with Landlord’s planning program for the Building, upon notifying Tenant in writing, Landlord shall have the one-time right to move Tenant to other comparable space in the Building on a weekend reasonably acceptable to Tenant on not less than ninety (90) days’ advance notice, provided such space is not more than ten percent (10%) larger than the Premises and has comparable views, configuration, and finishes. If the relocated space is smaller than the Premises as it existed before the relocation, Rent and Tenant’s Share hereunder shall be reduced proportionally. If the relocated space is larger than the Premises as it existed before the relocation, rent as and Tenant’s Share shall remain in the same amount. If Landlord elects to move Tenant to such other space, Landlord shall pay for (a) all direct, out of pocket, reasonable expenses of Tenant in moving from the Premises to the new space, including stationery, business cards, data cabling and configuring Tenant’s work stations and (b) the cost of improving the new space so that the level of improvements in the new space is comparable to the level of improvements in the Premises. All the terms and conditions of the original Lease shall remain in full force and effect, except that (i) a revised Exhibit B shall become a part of this Lease and shall reflect the location of the new space; and (ii) Tenant agrees to execute promptly upon notice from Landlord an amendment to this Lease amending the Table and corresponding sections of the Lease in order to reflect all correct data for the new space.

27     HOLDING OVER

27.1 HOLDOVER. Unless Landlord expressly agrees otherwise in writing, Tenant shall pay Landlord one hundred fifty percent (150%) of the amount of Rent then applicable prorated on per diem basis for each day Tenant shall retain possession of the Premises or any part thereof after expiration of the Term or earlier termination of this Lease, together with all damages sustained by Landlord on account thereof. In the case of any such holdover, the Lease shall be converted to a month-to-month tenancy which either party may terminate upon written notice of not less than thirty (30) days to the other. Tenant shall remain bound to comply with all provisions of this Lease until Tenant vacates the Premises and shall be subject to the provisions of § 11.1 above.

27.2 PERMISSIVE MONTH-TO-MONTH TENANCY. Notwithstanding the foregoing to the contrary, at any time before or after expiration or earlier termination of the Term of the Lease, Landlord may serve notice advising Tenant of the amount of Rent and other terms required, should Tenant desire to enter a month- to-month tenancy. If Tenant shall hold over more than one full calendar month after such notice, Tenant

Oyster Point Marina Plaza Office Lease

Kashiwa Fudosan America, Inc. :: Satsuma Pharmaceuticals, Inc.

page 48 of 55

[Suite 221 (400 OPB); 4,148 rsf]

shall thereafter be deemed a month-to-month tenant, on the terms and provisions of this Lease then in effect, as modified by Landlord’s notice, except that Tenant shall not be entitled to any renewal or expansion rights contained in this Lease or any amendments hereto.

28     PARKING

28.1 AVAILABLE PARKING. Subject to the terms and conditions contained in the balance of this Article 28, Landlord agrees to make available to Tenant during the Term of this Lease and any renewal term up to a maximum of fifteen (15) parking spaces on a non-exclusive basis in the area(s) designated by Landlord for parking in the Building’s parking lots and/or facility (the “Parking Facility”) without payment of any parking fee. Said parking spaces shall be in locations designated by Landlord, and parking shall be on a first-come-first-served, unassigned, nonreserved basis. Landlord reserves the right to designate different locations or different parking areas for Tenant’s use without any liability to Tenant and Tenant agrees that any change shall not give rise to any claims or offset against Landlord hereunder. Tenant shall abide by any and all parking regulations and rules established from time to time by Landlord or Landlord’s parking operator. Landlord reserves the right in its sole and absolute discretion to restrict or prohibit the use of the Parking Facility for any vehicles other than passenger automobiles, such as full-sized vans or trucks. Tenant shall not permit any vehicles belonging to Tenant or Tenant’s employees, agents, customers, contractors, or invitees to be loaded, unloaded, or parked in areas other than those designated by Landlord for such activities and shall not permit any such vehicles to be parked overnight in the Parking Facility; provided, Tenant may apply for an Overnight Parking Permit from Landlord’s Property Manager for limited periods for good cause relating to Tenant’s business, subject to such rules and regulations governing such overnight parking as Landlord’s Property Manager may establish from time to time. A failure to comply with the foregoing provisions shall afford Landlord the right without notice to remove any vehicles involved and to charge the cost to Tenant, which cost shall be immediately due and payable upon demand by Landlord.

28.2 USE AT TENANT’S OWN RISK. Landlord shall have no obligation to monitor the use of the Parking Facility. Tenant’s and its employees’ use of the Parking Facility shall be at the sole risk of Tenant and its employees. Unless caused by the willful harmful act of Landlord, Landlord shall have no responsibility or liability for any injury or damage to any person or property by or as a result of the use of the Parking Facility (or substitute parking) by Tenant and its employees, whether by theft, collision, criminal activity, or otherwise, and Tenant hereby assumes, for itself and its employees, all risks associated with any such occurrences in or about the Parking Facility.

29     MISCELLANEOUS PROVISIONS.

29.1 GENERAL DEFINITIONS. The definitions which follow shall apply generally to the provisions of this Lease.

(a) The term business days means Monday through Friday inclusive, excluding Holidays as defined in § 8.1.1 above. Throughout this Lease, wherever days is used the term shall refer to calendar days. Wherever the term business days is used the term shall refer to business days as defined hereunder.

(b) The term mortgage shall include any mortgage or deed of trust, and the term mortgagee shall include a trustee.

(c) The terms include, including, and such as shall each be construed as if followed by the phrase “without limitation.” The rule of eiusdem generis shall not be applicable to limit a general statement following or referrable to an enumeration of specific matters to matters similar to the matters specifically mentioned.

Oyster Point Marina Plaza Office Lease

Kashiwa Fudosan America, Inc. :: Satsuma Pharmaceuticals, Inc.

page 49 of 55

[Suite 221 (400 OPB); 4,148 rsf]

(d) The term obligations under this Lease and words of like import shall mean the covenants to pay Rent and Additional Rent under this Lease and all of the other covenants and conditions contained in this Lease. Any provision in this Lease that one party or the other or both shall do or not do or shall cause or permit or not cause or permit a particular act, condition, or circumstance shall be deemed to mean that such party so covenants or both parties so covenant, as the case may be.

(e) The term Tenant’s obligations hereunder and words of like import and the term Landlord’s obligations hereunder and words of like import shall mean the obligations under this Lease which are to be performed or observed by Tenant, or by Landlord, as the case may be. Reference to performance of either party’s obligations under this Lease shall be construed as “performance and observance.”

(f) Reference to Tenant being or not being in default hereunder or words like import shall mean that Tenant is in default in the performance of one or more of Tenant’s obligations hereunder, or that Tenant is not in default in the performance of any of Tenant’s obligations hereunder, or that a condition of the character described in § 20.1 above has occurred and continues or has not occurred or does not continue, as the case may be.

(g) References to Landlord as having no liability to Tenant or being without liability to Tenant shall mean that Tenant is not entitled to terminate this Lease or to claim actual or constructive eviction, partial or total, or to receive any credit, allowance, setoff, abatement, or diminution of Rent, or to be relieved in any manner of any of its other obligations hereunder, or to be compensated for loss or injury suffered or to enforce any other kind of liability whatsoever against Landlord under or with respect to this Lease or with respect to Tenant’s use or occupancy of the Premises.

(h) The term requirements of insurance bodies and words of like import shall mean rules, regulations, orders, and other requirements of the California Board of Fire Underwriters and/or the California Fire Insurance Rating Organization and/or any other similar body performing the same or similar functions and having jurisdiction or cognizance of the Property and/or the Premises.

(i) The term repair shall be deemed to include restoration and replacement as may be necessary to achieve and/or maintain good working order and condition.

(j) Reference to termination of this Lease includes expiration or earlier termination of the Term of this Lease or cancellation of this Lease pursuant to any of the provisions of this Lease or to Law. Upon a termination of this Lease, the Term and estate granted by this Lease shall end at noon of the date of termination as if such date were the date of expiration of the Term of this Lease, and neither party shall have any further obligation or liability to the other after such termination, except as shall be expressly provided for in this Lease and except for any such obligation as by its nature or under the circumstances can only be, or by the provisions of this Lease may be, performed after such termination; and in any event, unless expressly provided to the contrary in this Lease, any liability for a payment or obligation which shall have accrued to or with respect to any period ending at the time of termination shall survive the termination of this Lease.

(k) The term in full force and effect when herein used in reference to this Lease as a condition to the existence or exercise of a right on the part of Tenant shall be construed in each instance as including the further condition that at the time in

Oyster Point Marina Plaza Office Lease

Kashiwa Fudosan America, Inc. :: Satsuma Pharmaceuticals, Inc.

page 50 of 55

[Suite 221 (400 OPB); 4,148 rsf]

question no default on the part of Tenant exists, and no event has occurred which has continued to exist for such period of time (after the notice, if any, required by this Lease), as would entitle Landlord to terminate this Lease or to dispossess Tenant.

(l) The term Tenant shall mean Tenant herein named or any assignee, heir, distributee, executor, administrator, legal representative, or other successor in interest (immediate or remote) of Tenant herein named, while such Tenant or such assignee or other successor in interest, as the case may be, is in possession of the Premises as owner of the Tenant’s estate and interest granted by this Lease and also, if Tenant is not a single individual or a corporation, all of the persons, firms, and corporations then comprising Tenant; and their liability hereunder shall be joint and several.

29.2 LIGHT AND AIR. No diminution of light, air or view by any structure which may hereafter be erected (whether or not by Landlord) shall entitle Tenant to any reduction of Rent under this Lease, result in any liability of Landlord to Tenant, or in any other way affect this Lease.

29.3 WAIVER OF TERMS. If either Landlord or Tenant waives the performance of any term, covenant, or condition contained in this Lease, such waiver shall not be deemed to be a waiver of the term, covenant, or condition itself or a waiver of any subsequent breach of the same or any other term, covenant, or condition contained herein. Furthermore, the acceptance of Rent by Landlord shall not constitute a waiver of any preceding breach by Tenant of any term, covenant, or condition of this Lease, regardless of Landlord’s knowledge of such preceding breach at the time Landlord accepts such Rent. Failure by Landlord to enforce any of the terms, covenants, or conditions of this Lease for any length of time shall not be deemed to waive or to decrease the right of Landlord to insist thereafter upon strict performance by Tenant. Waiver by Landlord of any term, covenant, or condition contained in this Lease may only be made by a written document signed by Landlord.

29.4 FAILURE TO DELIVER STATEMENTS. Landlord’s failure during the Term of this Lease to prepare and deliver any of the Statements, estimates, notices, or bills contemplated or required under this Lease, or Landlord’s failure to make a demand, shall not in any way cause Landlord to forfeit or surrender its rights to collect any of the foregoing items of Rent which may have become due during the Term of this Lease.

29.5 ATTORNEY’S FEES. In the event that any action or proceeding (including arbitration) is brought to enforce or interpret any term, covenant, or condition of this Lease on the part of Landlord or Tenant, the prevailing party in such action or proceeding (whether after trial or upon appeal) shall be entitled to recover from the party not prevailing its expenses therein, including reasonable attorneys’ fees and all allowable costs as fixed by the court.

29.6 CORPORATE REVIEW FEES. Notwithstanding anything to the contrary in this Lease, Tenant agrees to reimburse Landlord for its reasonable costs and/or attorneys’ fees incurred in the review of (i) any transaction with respect to which Tenant is required to give notice under § 17.13 of the Lease and/or (ii) any other change of name, registration, corporate status or merger, acquisition, consolidation, transfer, loan, security, or collateral transaction, or other matter related to Tenant’s legal or corporate status or the financing of any loan or collateral or security associated with the same requiring Landlord’s attention and need to seek legal advice.

29.7 JURY TRIAL. Tenant and Landlord each hereby waive their respective rights to a trial by jury under applicable Laws in the event of any litigation or dispute between Landlord and Tenant arising out of or in connection with this Lease and the parties’ performance thereunder.

29.8 MERGER. Notwithstanding the acquisition (if same should occur) by the same party of the title and interests of both Landlord and Tenant under this Lease, there shall never be a merger of the estates of

Oyster Point Marina Plaza Office Lease

Kashiwa Fudosan America, Inc. :: Satsuma Pharmaceuticals, Inc.

page 51 of 55

[Suite 221 (400 OPB); 4,148 rsf]

Landlord and Tenant under this Lease, but instead the separate estates, rights, duties, and obligations of Landlord and Tenant, as existing hereunder, shall remain unextinguished and continue, separately, in full force and effect until this Lease expires or otherwise terminates in accordance with the express provisions herein contained.

29.9 NO MERGER ON VOLUNTARY SURRENDER. A voluntary or other surrender of this Lease by Tenant or the mutual cancellation of this Lease shall not work a merger and shall, at the option of Landlord, terminate all or any existing subleases or subtenancies, or may, at the option of Landlord, operate as an assignment to it of any or all such subleases or subtenancies.

29.10    CONSENT. Notwithstanding anything contained in this Lease to the contrary, Tenant shall have no claim and hereby waives the right to any claim against Landlord for money damages by reason of any refusal, withholding, or delaying by Landlord of any consent, approval, statement, or satisfaction; and in such event, Tenant’s only remedies therefor shall be an action for specific performance, injunction, or declaratory judgement to enforce any right to such consent, approval, statement, or satisfaction.

29.11    COUNTERPARTS. This Lease may be executed in multiple counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument.

29.12    FINANCIAL STATEMENTS. In order to induce Landlord to enter into this Lease, Tenant agrees that it shall promptly furnish Landlord, from time to time, upon Landlord’s written request, with financial statements reflecting Tenant’s current financial condition. Landlord shall hold such statements confidentially. Tenant represents and warrants that all financial statements, records, and information furnished by Tenant to Landlord in connection with this Lease are and shall be true, correct, and complete in all respects.

29.13    GENDER AND NUMBER. Words used in neuter gender include the feminine and masculine, where applicable, and words used in the singular or plural shall include the opposite number if appropriate.

29.14    JOINT AND SEVERAL OBLIGATION. If more than one person executes this Lease as Tenant, each of them is jointly and severally liable for the keeping, observing, and performing of all of the terms, covenants, conditions, provisions, and agreements of this Lease to be kept, observed, and performed by Tenant. The term Tenant as used in this Lease shall mean and include each of such signatories jointly and severally. The act of or notice from, or notice or refund to, or the signature of, any one or more of such signatories with respect to the tenancy or this Lease, including any renewal, extension, expiration, termination, or modification of this Lease, shall be binding upon each and all of the persons executing this Lease as Tenant with the same force and effect as if each and all of them had so acted or so given or received such notice or refund or so signed.

29.15    HEADINGS AND SECTION NUMBERS. The headings and titles of the articles and sections of this Lease are used for convenience only and shall have no effect upon the construction or interpretation of this Lease. Wherever a reference is made in this Lease to a particular article or section, such reference shall be deemed to include all subsections following such section reference, unless the contrary is expressly provided in connection with such reference. All references in this Lease to numbered articles, numbered sections, and lettered exhibits are references to articles and sections of this Lease and exhibits annexed to (and thereby made part of) this Lease, as the case may be, unless expressly otherwise designated in the context.

29.16     TIME. Time is of the essence of this Lease and all of its provisions.

29.17    APPLICABLE LAW. This Lease shall in all respects be governed by and interpreted in accordance with the laws of the State of California without reference to its conflicts of law principles. If suit is brought by a party to this Lease, the parties agree that jurisdiction of such action shall be vested

Oyster Point Marina Plaza Office Lease

Kashiwa Fudosan America, Inc. :: Satsuma Pharmaceuticals, Inc.

page 52 of 55

[Suite 221 (400 OPB); 4,148 rsf]

exclusively in the state courts of the State of California, County of San Mateo, or in the United States District Court for the Northern District of California, and with its execution and delivery of this Lease Tenant waives any defense it might otherwise have against the jurisdiction of such courts.

29.18    SEVERABILITY. If any provision of this Lease or the application thereof to any person or circumstance shall be invalid or unenforceable to any extent, the remainder of this Lease and the application of such provision to other persons or circumstances shall not be affected thereby and shall be enforced to the greatest extent permitted by law.

29.19    SIGNS. Tenant shall not place or permit to be placed in or upon the Premises where visible from outside the Premises or any part of the Building, any signs, notices, drapes, shutters, blinds or window coatings, or displays of any type without the prior written consent of Landlord. Landlord shall consent to the location at the cost of Tenant of a building standard sign on or near the entrance of the Premises and shall include Tenant in the Building and Complex directories located in the Building. Landlord reserves the right in Landlord’s sole discretion to place and locate on the roof and exterior of the Building and Complex and in any area of the Building and the Complex not leased to Tenant, such signs, notices, displays and similar items as Landlord deems appropriate in the proper operation of the Building and the Complex.

29.20    EXECUTION BY LANDLORD. The submission of this document for examination and negotiation does not constitute an offer to lease, or a reservation of, or option for, the Premises. This document becomes effective and binding only upon execution and delivery hereof by Tenant and by Landlord. No act or omission of any employee or agent of Landlord or of Landlord’s broker shall alter, change or modify any of the provisions hereof.

29.21    USE OF NAME. Tenant shall not use the name of the Building or Complex for any purpose other than the address of the business to be conducted by Tenant in the Premises. Tenant shall not use any picture of the Building or Complex in its advertising, stationery or in any other manner so as to imply that the entire Building or Complex is leased by Tenant. Landlord expressly reserves the right at any time to change the name or street address of the Building and/or Complex without in any manner being liable to Tenant therefor.

29.22    NONRECORDABILITY OF LEASE. Tenant agrees that in no event shall this Lease or a memorandum hereof be recorded without Landlord’s express prior written consent, which consent Landlord may withhold in its sole discretion.

29.23    CONSTRUCTION. All provisions hereof, whether covenants or conditions, shall be deemed to be both covenants and conditions. The definitions contained in this Lease, shall be used to interpret the Lease. All rights and remedies of Landlord and Tenant shall, except as otherwise expressly provided, be cumulative and non-exclusive of any other remedy at law or in equity.

29.24    FORCE MAJEURE DELAYS. This Lease and the obligations of Tenant hereunder shall not be affected or impaired because Landlord is unable to fulfill any of its obligations hereunder or is delayed in doing so, if such inability or delay is caused by reason of force majeure, strike, labor troubles, acts of God, acts of government, unavailability of materials or labor, or any other cause beyond the reasonable control of Landlord (collectively “Force Majeure Delays”).

29.25    AUTHORITY. If Tenant is a corporation, Tenant represents and warrants that Tenant is qualified to do business in California and that each individual executing this Lease on behalf of Tenant is duly authorized to execute and deliver this Lease on behalf of Tenant and shall deliver appropriate certification to that effect if requested. If Tenant is a limited liability company, partnership, joint venture, or other unincorporated association, Tenant represents and warrants that each individual executing this Lease on behalf of Tenant is duly authorized to execute and deliver this Lease on behalf of Tenant and that this Lease is binding on Tenant. Furthermore, Tenant agrees that the execution of any written consent hereunder, or any written modification or termination of this Lease, by any general partner or member of Tenant or any other authorized agent of Tenant, shall be binding on Tenant.

Oyster Point Marina Plaza Office Lease

Kashiwa Fudosan America, Inc. :: Satsuma Pharmaceuticals, Inc.

page 53 of 55

[Suite 221 (400 OPB); 4,148 rsf]

29.26    NONDISCLOSURE. Tenant agrees that it shall not disclose any of the matters set forth in this Lease or disseminate or distribute any information concerning the terms, covenants, or conditions thereof to any person, firm, or entity, other than a prospective assignee or subtenant of the Premises, without first obtaining the express written approval of Landlord; provided, however, that Tenant may disclose the contents of this Lease to any director, officer, or employee of Tenant, to Tenant’s lawyers, accountants, or other third party consultants or professionals, to any lenders, investors, or others to whom Tenant provides financial statements, or in response to any legally effective demand for disclosure pursuant to court order or from any other properly constituted legal authority.

29.27    QUIET ENJOYMENT. So long as Tenant is not in default under this Lease beyond any applicable notice and cure periods, Tenant shall have quiet enjoyment of the Premises for the Term, subject to all the terms and conditions of this Lease and all liens and encumbrances prior to this Lease.

ACCESS INSPECTION DISCLOSURE. Pursuant to California Civil Code § 1938, Landlord hereby notifies Tenant that, as of the date of this Lease, the Premises have not undergone inspection by a “Certified Access Specialist” to determine whether the Premises meet all applicable construction-related accessibility standards under California Civil Code § 55.53, and the Premises have not been determined to meet all applicable construction-related accessibility standards pursuant to Civil Code § 55.53. In addition, Civil Code § 1938(e) requires that the following language be inserted into this Lease:

A Certified Access Specialist (CASp) can inspect the subject premises and determine whether the subject premises comply with all of the applicable construction-related accessibility standards under state law. Although state law does not require a CASp inspection of the subject premises, the commercial property owner or lessor may not prohibit the lessee or tenant from obtaining a CASp inspection of the subject premises for the occupancy or potential occupancy of the lessee or tenant, if requested by the lessee or tenant. The parties shall mutually agree on the arrangements for the time and manner of the CASp inspection, the payment of the fee for the CASp inspection, and the cost of making any repairs necessary to correct violations of construction-related accessibility standards within the premises.

Landlord is acting in compliance with applicable Laws by inserting the foregoing paragraph into this Lease, but Landlord thereby expresses no opinion as to the meaning or applicability of § 1938 and offers no legal advice as to its meaning or applicability. Tenant is informed and agrees that it will seek its own legal counsel if it has questions regarding the meaning of § 1938 or its applicability to this Lease.

29.28    LANDLORD’S REPRESENTATIVE. Tenant acknowledges and agrees that, in executing this Lease, TAK Development, Inc., a California corporation, is acting solely in its capacity as Landlord’s authorized attorney-in-fact. TAK Development, Inc. is not acquiring or assuming any legal liability or obligation to any other party executing this Lease, and any claim or demand of any such other party arising under or with respect to this Lease shall be made and enforced solely against Landlord.

29.29    EXHIBITS AND ATTACHMENTS. All exhibits and attachments referred to in the body of this Lease are deemed attached hereto and incorporated herein by reference. The parties have attached the following exhibits to the Lease prior to execution:

Exhibit A	Site Plan
Exhibit B	Floor Plan of Premises
Exhibit C	Rules and Regulations
Exhibit D	Athletic Facility Use Agreement
Exhibit E	Commencement Date Agreement

Oyster Point Marina Plaza Office Lease

Kashiwa Fudosan America, Inc. :: Satsuma Pharmaceuticals, Inc.

page 54 of 55

[Suite 221 (400 OPB); 4,148 rsf]

29.30    ENTIRE AGREEMENT. This Lease, together with its exhibits, contains all the agreements of the parties hereto and supersedes any previous negotiations. There have been no representations made by the Landlord or understandings made between the parties other than those set forth in this Lease and its exhibits. This Lease may not be modified except by a written instrument duly executed by the parties hereto.

In witness whereof, the parties have executed this Lease as of the date first above written.

Landlord: KASHIWA FUDOSAN AMERICA, INC., a California corporation		Tenant: SATSUMA PHARMACEUTICALS, INC., a Delaware corporation
By:	TAK Development, Inc., a California corporation	By:
Its:	Attorney-in-Fact		[name typed]
		Its:
	By:     Tomoki Miura, Senior Manager

Robert L. Delsman Approved as to Legal Form & Sufficiency Berkeley, California 2018.01.19 13:50:16 -08’00’

Oyster Point Marina Plaza Office Lease

Kashiwa Fudosan America, Inc. :: Satsuma Pharmaceuticals, Inc.

page 55 of 55

[Suite 221 (400 OPB); 4,148 rsf]

Oyster Point Marina Plaza Rules & Regulations

page C-1 of 1

Oyster Point Marina Plaza Rules & Regulations

page C-2 of 1

[ Exhibit C ]

O Y S T E R    P O I N T    M A R I N A    P L A Z A

Rules And Regulations

1. The sidewalks, doorways, halls, stairways, vestibules and other similar areas shall not be obstructed by Tenant or used by Tenant for any purpose other than ingress to and egress from the Premises and going from one part of the Building to another part.

2. Plumbing fixtures shall be used only for their designated purpose, and no foreign substances of any kind shall be thrown therein. Damage to any such fixture resulting from misuse by Tenant or any employee or invitee of Tenant shall be repaired at the expense of Tenant.

3. Tenant shall not install any radio or television antenna, loudspeaker, or other device on the roof or exterior walls of the Building. No TV or radio or recorder shall be played in such a manner as to cause a nuisance to any other tenant.

4. There shall not be used in any space, or in the public halls of the Building, either by Tenant or others, any hand trucks except those equipped with rubber tires and side guards or such other material handling equipment as Landlord may approve. No other vehicles of any kind shall be brought by any tenant into the Building or kept in or about its premises.

5. Tenant shall store all its trash and garbage within its Premises. No material shall be placed in the hallways or in the trash boxes or receptacles if such material is of such nature that it may not be disposed of in the ordinary and customary manner of removing and disposing of office building trash and garbage in the City of South San Francisco without being in violation of any law or ordinance governing such disposal. All garbage and refuse disposal shall be made only through entryways and elevators provided for such purposes and at such times as Landlord shall designate.

6. The requirements of tenants will be attended to only upon application in writing at the office of the Building. Employees of Landlord shall not perform any work or do anything outside of their regular duties unless under special instructions from Landlord.

7. These Rules and Regulations are in addition to, and shall not be construed to in any way modify or amend, in whole or in part, the agreements, covenants, conditions, and provisions of any lease of premises in the Building.

8. Tenant shall not occupy the Building or permit any portion of the Building to be occupied for the manufacture or direct sale of liquor, narcotics, or tobacco in any

Oyster Point Marina Plaza Rules & Regulations

page C-3 of 1

form, or as a medical office, barber shop, manicure shop, music or dance studio, or employment agency. Tenant shall not conduct in or about the Building any auction, public or private, without the prior written approval of Landlord.

9. Tenant shall not use in the Building any machines, other than standard office machines such as typewriters, calculators, personal computers, photocopiers, and similar machines, without the prior written approval of Landlord. All office equipment and any other device of any electrical or mechanical nature shall be placed by Tenant in the Premises in settings approved by Landlord, so as to absorb or prevent any vibration, noise, or annoyance. Tenant shall not cause improper noises, vibrations, or odors within the Building.

10. Tenant shall not enter the mechanical rooms, air conditioning rooms, electrical closets, janitorial closets, or similar areas or go upon the roof of the Building without the prior written consent of Landlord.

11. Tenant shall not mark, paint, drill into, cut, string wires within, or in any way deface any part of the Building, without the prior written consent of Landlord and as Landlord may direct. Should Landlord grant approval, Tenant agrees to assume full responsibility and warrants that, should a contractor other than the Building Contractor be used, Tenant’s contractor will strictly abide by Landlord’s guidelines for work contracted directly by Tenant. Upon removal of any wall decorations or installations or floor coverings by Tenant, any damage to the walls or floors shall be repaired by Tenant at Tenant’s sole cost and expense. This rule shall apply to all work performed in the Building, electrical devices, and attachments, and installations of any nature affecting floors, walls, woodwork, trim, windows, ceilings, equipment, or any other portion of the Building. Plans and specifications for such work, prepared at Tenant’s sole expense, shall be submitted to Landlord and shall be subject to Landlord’s prior written approval in each instance before the commencement of work. All installations, alterations, and additions shall be constructed by Tenant in a good and workmanlike manner, and only good grades of materials shall be used in connection therewith.

12. Tenant will not place objects on window sills or otherwise obstruct the exterior wall window covering.

13. The Tenant will keep all doors opening to the exterior of the Building, all fire doors, and all smoke doors closed at all times.

14. If Tenant uses the Premises after regular business hours or on non-business days Tenant shall lock any entrance doors to the Building or to the Premises used by Tenant immediately after using such doors.

15. The Tenant shall not use any portion of the Premises for lodging.

16. Landlord reserves the right to exclude or expel from the Building any person who, in

Oyster Point Marina Plaza Rules & Regulations

page C-2 of 2

in the judgement of Landlord is intoxicated or under the influence of liquor or drugs, or who shall in any manner do any act in violation of any of the rules and regulations of the Building.

17. Tenant shall not park or attach any bicycle or motor driven cycle on or to any part of the Premises, the Building, or within the landscaping.

18. In all carpeted areas where desks and chairs are utilized, Landlord shall require Tenant, at Tenant’s own cost, to place mats under each and every chair or use chairs on 1¹⁄₂” wide rollers at minimum in order to protect said carpeting from unnecessary wear and tear.

19. Signs, advertisements, graphics, or notices visible in or from public corridors shall be subject to Landlord’s written approval. Nails, screws, and other attachments to the Building require prior written consent from Landlord.

20. Landlord shall be notified in writing in advance of any and all contractors and technicians rendering any installation service to Tenant, and such contractors and technicians shall be referred to Landlord for approval and supervision prior to performing services. This applies to all work performed in the Building, including installation of telephone and communications lines and equipment, electrical devices, and all installations affecting floors, walls, woodwork, windows, ceilings, and any other physical portions of the Building.

21. Landlord shall be notified in writing in advance of any movement in or out of the Building of furniture, office equipment, or other bulky or heavy material which requires the use of elevators, stairways, or Building entrance and lobby; and such movement shall be restricted to hours established by Landlord and any other requirements of Landlord, including the use of elevator pads and the placement of masonite panel on the path of travel to protect flooring. All such movement shall be under Landlord’s supervision, and the use of an elevator for such movements shall be restricted to the Building’s freight elevators. Arrangements with Landlord should be made regarding the time, method, and routing of movement, and Tenant shall assume all risks of damage to articles moved and injury to persons or public resulting from such moves. Landlord shall not be liable for any acts or damages resulting from any such activity.

22. Landlord reserves the right to restrict access to all telephone closets, cabling, conduits, and risers in the Property. Tenant shall not have access for any reason to any of the aforementioned areas of the Property without the written permission of Landlord and the supervision of Landlord’s Building Engineer. The means by which telephone, telegraph, and similar wires are to be introduced to the Premises and the location of telephones, call boxes, and other office equipment affixed to the Premises, shall be subject to the prior written approval of Landlord.

23. Any damage done to the Building by the movement of Tenant’s property, or done by Tenant’s property while in the Building, shall be repaired at Tenant’s expense.

Oyster Point Marina Plaza Rules & Regulations

page C-3 of 3

24. All door pertinent to Tenant’s Premises and all other Building door outside the Premises (other than smoke or heat-activated fire doors) are to be kept closed and not blocked open at all times, as they are fire control doors.

25. Tenant shall cooperate with Landlord in maintaining the Premises. Tenant shall not employ any person for the purpose of such cleaning other than the Building’s cleaning and maintenance personnel.

26. To insure orderly operation of the Building, no deliveries of water, soft drinks, newspapers, or other such items to any Premises shall be made except by persons appointed or approved by Landlord in writing.

27. Nothing shall be swept or thrown into the corridors, halls elevator shafts, or stairways. No birds, fish, or animals of any kind shall be brought into or kept in, on, or about the Premises without the written permission of Landlord.

28. Except for trained and certified service dogs assisting the disabled consistent with the ADA and registered with Landlord’s Property Manager, Tenant shall not bring into or keep in, on, or about the Premises or Property any birds, fish, dogs, cats, or animals of any kind without the express written permission of Landlord, which Landlord shall have the right to withhold or deny in its sole and absolute discretion. If Landlord elects to grant such permission with respect to the presence of animals in, on, or about the Premises or Property, it shall be conditioned upon Tenant’s agreement to indemnify Landlord in writing with respect to the presence and activities of any such animals in, on, or about the Premises of Property and an increase in Tenant’s liability insurance coverage commensurate with the associated increased liability exposure of Landlord, as determined by Landlord in its sole and absolute discretion.

29. No machinery of any kind, except for standard electronic office machinery such as personal computers, typewriters, and photocopiers, shall be operated by Tenant in the Premises without the prior written approval of the Landlord.

30. No cooking shall be done in the Premises, except that the use by Tenant of Underwriter’s Laboratory approved microwave ovens and equipment for brewing coffee, tea, or other hot beverages shall be permitted, provided such use is in accordance with all applicable codes, laws, and ordinances.

31. Tenant shall not install any food, soft drink, or other vending machine within the Premises.

32. Tenant shall not use or keep on its Premises any kerosene, gasoline, or inflammable or combustible fluid or material other than limited quantities reasonably necessary for the operation and maintenance of office equipment. Tenant shall not use or keep

Oyster Point Marina Plaza Rules & Regulations

page C-4 of 4

any noxious gas or substances in the Premises or permit the Premises to be used in a manner offensive or objectionable to Landlord or other occupants of the Building by reason of noise, odors, or vibrations, or interfere in any way with other Tenants or those having business therein.

33. Tenant shall not tamper with or attempt to adjust temperature control thermostats in the Premises. Landlord shall make adjustments in thermostats on call from Tenant.

34. Tenant shall comply with all measures instituted by Landlord in its sole and absolute discretion for the security of the Premises, Property, and Complex, and all personnel using the same, including the use of service passes issued by Landlord for after-hours movement of office equipment or packages and signing a security register in Building lobby after hours. Nothing herein shall be construed to impose any obligation or requirement that Landlord provide any security services in the Premises, Property, or Complex, or any particular level or type of security services.

35. Landlord will initially furnish Tenant with a reasonable number of keys for entrance doors into the Premises and may charge Tenant for additional keys thereafter. All such keys shall remain the property of Landlord. No additional locks are allowed on any door of the Premises. At termination of this Lease, Tenant shall surrender to Landlord all keys to the Premises and give to Landlord the combination of all locks for safes and vault doors, if any, in the Premises.

36. Landlord retains the right, without notice or liability to any Tenant, to change the name and street address of the Building.

37. Canvassing, peddling, soliciting, and distribution of handbills in the Building are prohibited, and Tenant will cooperate to prevent these activities.

38. The Building hours of operation (excluding Holidays) are:

8:00 a.m. to 6:00 p.m.                    Monday through Friday

9:00 a.m. to 1:00 p.m.                    Saturday

39. Landlord reserves the right to rescind any of these Rules and regulations and to make future Rules and regulations required for the safety, protection, and maintenance of the Building, the operation and preservation of good order thereof, and the protection and comfort of the tenants and their employees and visitors. Such Rules and regulations and all modifications thereto shall, upon written notice, be binding as if originally included herein.

*****

Oyster Point Marina Plaza Rules & Regulations

page C-5 of 5

[Exhibit D]   O Y S T E R  P O I N T  M A R I N A  P L A Z A   Athletic Facility Use Agreement & Release of Liability

THIS IS A LEGALLY BINDING AGREEMENT. READ IT CAREFULLY.

I,                                                     , hereby acknowledge that my use of the exercise facility (the “Facility”) at 395 / 400 Oyster Point Boulevard, owned by KASHIWA FUDOSAN AMERICA, INC. (“Landlord”), as well as any activities in which I may engage in conjunction with my use of the Facility, is entirely voluntary.

I AM AWARE THAT PARTICIPATING IN ATHLETIC ACTIVITIES AND THE USE OF THE EXERCISE FACILITY MAY BE HAZARDOUS AND THAT IT IS NOT POSSIBLE FOR LANDLORD TO GUARANTEE THAT OTHER PATRONS USING THE FACILITY WILL COMPLY WITH ALL ESTABLISHED RULES AND REGULATIONS. I AM VOLUNTARILY PARTICIPATING IN THESE ATHLETIC ACTIVITIES AND UTILIZING THE FACILITY WITH FULL KNOWLEDGE OF THE DANGER INVOLVED. I HEREBY AGREE TO ACCEPT AND ASSUME ANY AND ALL RISKS OF PROPERTY LOSS, PERSONAL INJURY, OR DEATH, WHETHER OR NOT CAUSED BY THE NEGLIGENCE OF LANDLORD, LANDLORD’S EMPLOYEES OR AGENTS, OR ANY OTHER PATRON OR GUEST USING THESE FACILITIES.

[initial here]

In exchange, as lawful consideration for being permitted by Landlord to participate in activities on Landlord’s property and use its exercise Facility, I hereby agree that I, my heirs, next of kin, successors, and assigns will not sue, make a claim against, attach the property of or prosecute Landlord or Landlord’s agents and employees for injury, death, or damage resulting from the negligence or other acts, howsoever caused, by any of Landlord’s employees, agents, contractors, or patrons as a result of my participation in these activities or use of the exercise Facility. In addition, I hereby release and discharge Landlord from all actions, claims, or demands that I, my heirs, next of kin, successors, or assigns now have or may hereafter have for any loss of property, personal injury, death, or damage resulting from my participation in these activities or use of the facilities.

I HAVE CAREFULLY READ THIS AGREEMENT AND FULLY UNDERSTAND ITS CONTENTS. I AM AWARE THAT THIS IS A RELEASE OF LIABILITY AND A CONTRACT BETWEEN MYSELF AND LANDLORD AND SIGN IT OF MY OWN FREE WILL.

FACILITY HOURS:	Monday - Friday:	6:00 am to 9:00 pm
	Saturday:	9:00 am to 1:00 pm and CLOSED ON SUNDAYS
	NO GUESTS ALLOWED! - NO OVERNIGHT LOCKERS ALLOWED!

REIMBURSEMENT POLICY: You must fill out a Key Fob Return Form when you return your Key Fob. The form will ask for your new mailing address where the reimbursement check will be mailed. No cash will be received or refunded at any time.

Participant Signature:	Gender:Male / Female	Date:
Company Name/Tenant:	Building:	Suite:

Key Fob No.:                New                    Existing                Total: $                     Check No.:            

==========================================================================================================

Witness

I certify that the person whose signature appears above acknowledged in my presence that he or she has read and fully understands the meaning and consequences of the foregoing Agreement and Release of Liability and the he or she signed it in my presence.

Witness:		Date:
	[name typed or printed]

WARNING: USE OF STEROIDS TO INCREASE STRENGTH OR GROWTH CAN CAUSE SERIOUS HEALTH PROBLEMS. STEROIDS CAN KEEP TEENAGERS FROM GROWING TO THEIR FULL HEIGHT; THEY CAN ALSO CAUSE HEART DISEASE, STROKE, AND DAMAGED LIVER FUNCTION. MEN AND WOMEN USING STEROIDS MAY DEVELOP FERTILITY PROBLEMS, PERSONALITY CHANGES, AND ACNE. MEN CAN ALSO EXPERIENCE PREMATURE BALDING AND DEVELOPMENT OF BREAST TISSUE. THESE HEALTH HAZARDS ARE IN ADDITION TO THE CIVIL AND CRIMINAL PENALTIES FOR UNAUTHORIZED SALE, USE, OR EXCHANGE OF ANABOLIC STEROIDS. California Civil Code § 1812.67.

[EXHIBIT E]

O Y S T E R  P O I N T  M A R I N A  P L A Z A

Lease Commencement Date Agreement

THIS LEASE COMMENCEMENT DATE AGREEMENT (the “Agreement”) is made as of                         , between KASHIWA FUDOSAN AMERICA, INC., a California corporation (“Landlord”) and                         , a                            (“Tenant”).

Tenant and Landlord acknowledge and agree as follows:

1.        Tenant has received a fully-executed counterpart of the Lease dated as of                                  for premises commonly known as Suite                     at                     Oyster Point Boulevard in the Oyster Point Marina Plaza business part.

2.        The Commencement Date of the Lease for all purposes thereunder is                                         , 20     , and the Expiration Date is                                    , 20    .

3.        Tenant acknowledges and agrees that, in executing this Agreement, TAK Development, Inc., a California corporation, is acting solely in its capacity as Landlord’s authorized attorney-in-fact. TAK Development, Inc. is not acquiring or assuming any legal liability or obligation to any other party executing this Agreement or the Lease, and any claim or demand of any such other party arising under or with respect to this Agreement or the Lease shall be made and enforced solely against Landlord.

IN WITNESS WHEREOF, Landlord and Tenant have executed this Agreement as of the date first above written.

Landlord:	Tenant:
KASHIWA FUDOSAN AMERICA, INC., a	, a
California corporation

By:	TAK Development, Inc., a California corporation	By:
Its:   Attorney-in-Fact
			[name typed]

    By:                                                                                                 Its:                              Yujin Yamaai, Vice President

Oyster Point Marina Plaza Commencement Date Agreement

Kashiwa Fudosan America, Inc. ::                                          

opmp lse commencement date agmt.doc page E-1 [Suite      (        rsf)]

TABLE OF CONTENTS

1	BASIC LEASE TERMS	1
2	USE	8
3	PREPARATION OF THE PREMISES	9
4	ADJUSTMENTS OF RENT	11
5	SECURITY DEPOSIT	18
6	COMPLIANCE WITH LAWS	19
7	HAZARDOUS MATERIALS	19
8	SERVICES AND UTILITIES	21
9	TENANT’S CHANGES	24
10	TENANT’S PROPERTY	27
11	CONDITION UPON SURRENDER	27
12	REPAIRS AND MAINTENANCE	28
13	RULES AND REGULATIONS	29
14	INSURANCE AND INDEMNIFICATION	29
15	DAMAGE OR DESTRUCTION	33
16	EMINENT DOMAIN	35
17	ASSIGNMENT AND SUBLETTING	35
18	SUBORDINATION AND ATTORNMENT	40
19	FINANCING REQUIREMENTS	41
20	DEFAULT	42
21	LIMITATIONS ON LANDLORD’S LIABILITY	44
22	ESTOPPEL CERTIFICATES	45
23	NOTICES	46
24	BROKERS	46
25	RIGHTS RESERVED TO LANDLORD	47
26	BUILDING PLANNING	48
27	HOLDING OVER	48
28	PARKING	49
29	MISCELLANEOUS PROVISIONS	49

Oyster Point Marina Plaza Lease Table of Contents

page T-1 of 1

INDEX OF DEFINED TERMS

A
Additional Rent	6, 11, 15, 26, 36, 37, 38, 39, 49
Adjustment Period	11, 12, 13, 15, 16, 17
Assumed Base Amount	16
Athletic Facility	7, 14, 54
B
Base Expense Year	12
Base Operating Expenses	11, 12, 16
Base Real Estate Taxes	11, 12, 16, 17
Base Rent	1, 6, 11, 16, 17, 23, 33, 34, 37, 39, 41
Base Tax Year	12, 17
Building	1, 7, 8, 9, 12, 13, 14, 16, 21, 22, 23, 24, 25, 27, 28, 30, 32, 34, 36, 37, 38, 39, 40, 45, 46, 48, 52, 53
Business Hours	22
Business Personal Property	29, 30, 31, 32
C
Claims	31, 32, 33, 38, 45, 46
Code Costs	19
Commencement Date	1, 2, 4, 6, 11, 14, 19, 22, 42, 45, 54
Complex	1, 2, 6, 7, 8, 12, 14, 17, 27, 33, 35, 36, 37, 40, 41, 42, 45, 48, 52, 53
E
Event of Default	42, 43
Expiration Date	1, 4, 15, 18, 21, 27, 38
F
Force Majeure Delays	53
H
Hazardous Material	19, 20
Holder	31, 40, 41, 44, 45
Holidays	22, 49
HVAC	21, 23, 24
I
Improvements	9, 27, 34, 47
INC	1, 8, 21, 22, 25, 28, 33
IW	28
L
Landlord	1, 4, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44, 45, 46, 47, 48, 49, 50, 51, 52, 53, 54
Laws	9, 14, 18, 19, 20, 21, 23, 25, 26, 28
Lease	i, 1, 2, 4, 5, 6, 7, 8, 9, 11, 12, 15, 16, 17, 18, 19, 20, 21, 22, 24, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44, 45, 46, 47, 48, 49, 50, 51, 52, 53, 54, 55
Lessor	31, 40, 41, 45
M
MPOE	21, 22

Oyster Point Marina Plaza Lease Table of Defined Terms

Page I-ii of 1

MSDS	20
O
Occupancy Conditions	10
Operating Expenses	11, 12, 13, 14, 15, 16, 17, 34
P
Parking Facility	48, 49
Permitted Occupant	37, 40
Premises	1, 4, 7, 8, 9, 10, 11, 12, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 32, 33, 34, 35, 36, 37, 38, 39, 40, 42, 43, 44, 45, 46, 47, 48, 50, 52, 53, 54
Prime Rate	6
Property	1, 2, 7, 8, 9, 12, 13, 14, 15, 17, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 38, 39, 40, 41, 42, 43, 44, 45, 46, 47, 50
R
Real Estate Taxes	11, 12, 13, 16, 17
Rent	1, 5, 6, 7, 8, 11, 13, 15, 16, 17, 18, 23, 24, 26, 32, 33, 34, 35, 36, 37, 38, 39, 41, 43, 44, 45, 47, 48, 49, 50, 51
Rental Adjustment	11, 15, 16
Rules	7, 29, 54
S
Security Deposit	18
State	1, 12, 19, 30, 52
Statement	15, 16, 17
Subsequent Operating Expenses	16
Successor Landlord	41
Superior Leases	40
Superior Mortgages	15, 40
Systems and Equipment	7, 8, 9, 14, 21, 22, 23, 24, 28, 33, 48
T
Table	1, 2, 6, 11, 12, 48
Takings	35
Temporary Condemnation	35
Tenant	1, 2, 4, 6, 7, 8, 9, 10, 11, 12, 13, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44, 45, 46, 47, 48, 49, 50, 51, 52, 53, 54
Tenant Delays	10
Term	1, 4, 5, 6, 9, 11, 12, 13, 15, 16, 17, 18, 19, 22, 24, 27, 30, 34, 35, 36, 43, 47, 48, 50, 51, 54
Transfer	35, 36, 37, 38, 39, 42, 45
Transfer Notice	36, 37, 38
Transfer Premium	38, 39
U
Utilities	13, 15
W
Work	9, 10, 11, 26, 28, 54

Oyster Point Marina Plaza Lease Table of Defined Terms

Page I-iii of 2

EX-10.2(A)

Exhibit 10.2(a)

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

EXECUTION VERSION

LICENSING AND ASSIGNMENT AGREEMENT

THIS LICENSING AND ASSIGNMENT AGREEMENT (this “Agreement”) is effective as of June 30, 2016 (the “Effective Date”) by and between Shin Nippon Biomedical Laboratories, Ltd., a Japanese corporation with a principal place of business at 2438 Miyanouracho, Kagoshima-shi, Kagoshima-ken 891-1394, Japan (“SNBL”), and Satsuma Pharmaceuticals, Inc., a Delaware company (“SATSUMA”), and amends and restates in its entirety that certain Licensing and Assignment Agreement executed on or about June 30, 2016 by SNBL and SATSUMA (the “Original Agreement”). In this Agreement, either SNBL or SATSUMA may be referred to individually as a “Party”, or collectively as the “Parties”.

BACKGROUND

A. SNBL owns or controls certain proprietary nasal drug delivery technology comprising a nasal powder formulation delivered by a specialized nasal drug delivery device;

B. SATSUMA is developing the Compound (as defined in Section 1.6); and

C. SATSUMA desires to obtain an assignment and license to develop and commercialize products that combine SNBL’s proprietary nasal drug delivery technology with the Compound, and SNBL desires to grant such an assignment and license, all as set forth in more detail and on the terms and conditions set forth herein below.

D. SNBL and SATSUMA desire to amend certain terms of the Original Agreement, and to restate the Original Agreement, as so amended, in its entirety in this Agreement, all on the terms and conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, and intending to be legally bound hereby, the Parties agree as follows:

ARTICLE 1

DEFINITIONS / INTERPRETATION

1.1 “Accounting Standards” means (a) with respect to SATSUMA and calculations to be performed by SATSUMA, the generally accepted accounting principles (“GAAP”) of the United States, and (b) with respect to SNBL and calculations to be performed by SNBL, the generally accepted accounting principles in Japan or the International Financial Reporting Standards, in each case (a) and (b) or such other similar principles as consistently applied by such Party throughout its enterprise.

1.2 “Acquiring Entity” means a Third Party (a) that merges or consolidates with or acquires a Party or an Affiliate of a Party, or (b) to which a Party or an Affiliate of a Party transfers all or substantially all of its assets to which this Agreement pertains.

1

1.3 “Affiliate” means, with respect to a Person, any other Person that, directly or indirectly, through one or more intermediaries, owns or controls, is owned or controlled by or is under common control with the first Person, in each case only for so long as such control exists. For purposes of this definition, “control” means (a) direct or indirect ownership of more than fifty percent (50%) (or, if less than or equal to fifty percent (50%), the maximum ownership interest permitted by applicable Laws) of the stock or shares having the right to vote for the election of directors of such corporate entity or (b) the possession, directly or indirectly, of the power to direct, or cause the direction of, the management or policies of such entity, whether through the ownership of voting securities, by contract or otherwise. Notwithstanding the foregoing, SATSUMA shall not be an Affiliate of SNBL.

1.4 Capture Period.

1.4.1 “SATSUMA Device Capture Period” means the period commencing on the Effective Date and continuing until the First Commercial Sale of any Product hereunder, unless earlier terminated in accordance with Section 10.6.

1.4.2 “SNBL Device Capture Period” means the period commencing on the Closing Date and continuing until the First Commercial Sale of any Product hereunder, unless earlier terminated in accordance with Section 10.6. For purposes of this Agreement, “Closing Date” means the first closing date of a Series A financing transaction by SATSUMA.

1.4.3 “SNBL Product Capture Period” means the period commencing on the Effective Date and continuing until the Closing Date, unless earlier terminated in accordance with Section 10.6.

1.5 “Commercially Reasonable Efforts” means, with respect to the development, manufacture and/or commercialization of a Product and any other activities conducted under the Agreement with respect to such Product, the level of efforts and resources commonly used in the pharmaceutical or biotechnology industry by a similarly situated company of similar size and resources in the exercise of its reasonable business discretion with respect to a product at a similar stage in its development or product life, that is of similar commercial potential, taking into account actual or potential issues including, but not limited to, issues relating to efficacy, safety, manufacturing, quality, supply, regulatory or market exclusivity, patents and intellectual property protection, product profile, labeling, pricing, reimbursement, distribution, market potential, competitive conditions, the regulatory environment, and any other technical, legal, scientific, medical, operational or commercial factors that could reasonably be expected to affect profitability of the product.

1.6 “Compound” means the compound known as Dihydroergotamine or DHE, and any [***] of such compound.

1.7 “Control” means, with respect to particular Know-How or a particular Patent, possession by the Party granting the applicable right, license or sublicense to the other Party as provided herein of the power and authority, whether arising by ownership, license, or other authorization, to disclose and deliver the particular Know-How to the other Party, and to grant and authorize under such Know-How or Patent the right, license or sublicense, as applicable, of the

2

scope granted to such other Party in this Agreement without giving rise to a violation of the terms of any written agreement with any Third Party; provided, however, that for rights acquired or licensed from Third Parties after the Effective Date, no additional payment is due to such Third Parties as a result of the grant or exercise of such right, license or sublicense, unless such other Party agrees to pay such additional payment due to such Third Parties for such right, license or sublicense. “Controlled” and “Controlling” have their correlative meanings. Notwithstanding anything to the contrary in this Agreement, the following shall not be deemed to be Controlled by a Party or its Affiliates: (i) any technology owned or controlled by any Acquiring Entity immediately prior to the effective date of merger, consolidation, acquisition or transfer with such Party or its Affiliate, and (ii) any technology that any Acquiring Entity subsequently (x) develops without accessing or practicing the subject matter within the Other Product Technology or (y) licenses or otherwise obtains or acquires from a Third Party, in each case (x) and (y) after the effective date of merger, consolidation, acquisition or transfer with such Party or its Affiliate.

1.8 “Cover” means, with respect to any subject matter, that the manufacture, use, sale, offering for sale, importation, exportation or other exploitation of such subject matter would infringe a claim of a Patent at the time thereof. For clarity, with respect to a claim within a patent application, “Cover” includes infringing a claim in such patent application if it was issued as then prosecuted. “Covered” or “Covering” shall have their correlative meanings.

1.9 “Device” means the single-use version of SNBL’s proprietary nasal delivery device as further described in Exhibit 1.9.

1.10 [Intentionally left blank]

1.11 “EU” means all member states of the European Union as may be updated from time to time.

1.12 “FDA” means the United States Food and Drug Administration and any successor agency thereto performing similar functions.

1.13 “Field” means, with respect to any DHE Product, the DHE Field and, with respect to any DHE Combination Product, the DHE Combination Field.

1.13.1 “DHE Field” means the treatment, prevention or prophylaxis of all indications and human medical conditions.

1.13.2 “DHE Combination Field” means the treatment, prevention, prophylaxis of migraine and non-migraine headaches.

1.14 “First Commercial Sale” means, with respect to a Product, the first sale for consideration to a Third Party of such Product to be used for commercial purposes in a given regulatory jurisdiction of the Territory after all applicable Regulatory Approvals required prior to commercial sale of such Product in such jurisdiction has been obtained. Sales or other transfers for clinical studies, compassionate use, named patient programs, sales under a treatment IND, test marketing or any non-registration studies where Products are supplied by or under the authority of SATSUMA shall not constitute a First Commercial Sale.

3

1.15 “Invention” means any discovery, finding, invention, technology or any improvement thereof, whether patentable or not, that is conceived or reduced to practice during the SATSUMA Device Capture Period by or on behalf of SATSUMA, whether individually or jointly with SNBL, or the SNBL Product Capture Period or SNBL Device Capture Period by or on behalf of SNBL, whether individually or jointly with SATSUMA, in each case related to the Product or the Device, as applicable.

1.16 “Know-How” means any data, results, technology, business information and other information of any type whatsoever, in any tangible or intangible form, including knowhow, trade secrets, practices, techniques, methods, processes, inventions, developments, specifications, formulations, formulae, materials or compositions of matter of any type or kind (patentable or otherwise), software, algorithms, marketing reports, expertise, technology, test data (including pharmacological, biological, chemical, biochemical, toxicological, research, preclinical and clinical test data (including original patient report forms, investigator reports, clinical protocols, statistical analyses, expert opinions and reports)), manufacturing data (including, analytical and quality control data, stability data, other study data and procedures and other chemistry, manufacturing and control (CMC) data), safety or other adverse reaction files and complaint files, presentations and papers from academic meetings or market research, in each case, together with all supporting data and raw source data therefor; provided, however, Know-How shall exclude any and all patient-specific and other similar data to the extent such exclusion is required by Laws. Know-How excludes any and all Patents.

1.17 “Law” means, individually and collectively, any and all laws, ordinances, orders, rules, rulings, directives and regulations of any kind whatsoever of any Regulatory Authority, other governmental authority or court of competent jurisdiction within the applicable jurisdiction.

1.18 “NDA” means a New Drug Application, as described in the FDA regulations, 21 CFR §314.50, including all amendments and supplements thereto, or similar applications filed with a Regulatory Authority in any other jurisdiction.

1.19 “Net Sales” means the total amount invoiced or otherwise billed by SATSUMA and its Affiliates and their sublicensees for sales or other commercial dispositions of any Product less the following (collectively, “Net Sales Deductions”): (a) transportation charges, freight, postage, shipping and insurance (but only insurance related to protecting the particular shipment against physical loss or damage); (b) taxes (other than taxes based on income), tariffs, customs duty, surcharges, excise or other duty and any other governmental charges, all to the extent imposed upon the sale, transportation or delivery of such Product and paid by the seller; (c) trade discounts, quantity discounts, cash discounts, rebates, allowances, credits or charge backs or retroactive price reductions actually granted or allowed and related directly to the sale of such Product; (d) other adjustments, allowances or credits (calculated on a per unit basis) to customers relating to such Product and actually paid; and (e) reasonable amounts for bad debts directly relating to sales of Products that have been actually written off as bad debt losses (net of any bad debts later recovered). Net Sales and Net Sales Deductions in territories outside the US will be calculated as described in Section 5.4 for the given royalty calculation period. Net Sales and Net Sales Deductions shall be calculated in accordance with Accounting Standards (as applied to SATSUMA) in a manner consistent with SATSUMA’s existing accounting policies as applied to similar transactions and will be denominated in US dollars. Sales of any Product between or among

4

SATSUMA and its Affiliates and their sublicensees shall be excluded from the computation of Net Sales if such sales are not intended for end use, but Net Sales shall include the subsequent final sales to Third Party customers by SATSUMA or any such Affiliates or their sublicensees. If a sale, transfer or other disposition with respect to any Product involves consideration other than cash or is not at arm’s length, then the Net Sales from such sale, transfer or other disposition shall be the arm’s length fair market value, which generally will mean the selling party’s average sales price (excluding Net Sales that are not at arm’s length) for the calendar quarter in the country where such sale took place. A sale or other commercial disposition of Products is deemed to occur upon the invoicing or billing therefor by SATSUMA or its Affiliate or their sublicensee, as applicable. Any Products used (but not sold for more than nominal consideration) for sample, promotional, advertising or humanitarian purposes or used (but not sold for more than nominal consideration) for clinical or other research purposes shall not be considered in determining Net Sales hereunder. With respect to sales of DHE Combination Products, Net Sales shall be calculated by multiplying the Net Sales of the DHE Combination Product by the fraction A/(A + B), where A is the average gross selling price(s) during the previous calendar quarter of the DHE Compound (in the same or similar form) sold separately, and B is the gross selling price during the previous calendar quarter of the Additional APIs (in the same or similar form) sold separately; provided that in the event that a substantial number of such separate sales were not made during the previous calendar quarter then the Net Sales shall be as reasonably allocated by SATSUMA between the DHE Compound and the Additional APIs based upon their relative importance and proprietary protection.

1.20 “Other Product Technology” means the Other Product Know-How and Other Product Patents.

1.20.1 “Other Product Know-How” means (a) the Know-How Controlled by SNBL and its Affiliates as of the Effective Date, (b) any other Know-How Controlled by SNBL and its Affiliates during the SNBL Product Capture Period, and (c) any other Know-How Controlled by SNBL and its Affiliates during the SNBL Device Capture Period relating to the Device Technology Improvements, in each case (a), (b) and (c) reasonably necessary for the development, manufacture, sale, use, offer for sale or importation of any Product (other than the Product-Specific Know-How), including without limitation the Know-How described in Exhibit 1.20.1.

1.20.2 “Other Product Patents” means (a) the Patents Controlled by SNBL and its Affiliates as of the Effective Date listed on Exhibit 1.20.2, (b) any other Patents Controlled by SNBL and its Affiliates during the SNBL Product Capture Period, and (c) any other Patents Controlled by SNBL or its Affiliates during the SNBL Device Capture Period relating to the Device Technology Improvements, in each case (a), (b) and (c) reasonably necessary for the development, manufacture, sale, use, offer for sale or importation of any Product (other than the Product-Specific Patents). Exhibit 1.20.2 will be updated to include all Other Product Patents as of the Closing Date.

1.21 “Patent” means any of the following, whether existing now or in the future anywhere in the world: (i) any issued patent, including inventor’s certificates, substitutions, extensions, confirmations, reissues, reexamination, renewal or any like governmental grant for protection of inventions; and (ii) any pending application for any of the foregoing, including any continuation, divisional, substitution, continuations-in-part, provisional and converted provisional applications.

5

1.22 “Person” means any individual, partnership, joint venture, limited liability company, corporation, firm, trust, association, unincorporated organization, Regulatory Authority, or any other entity not specifically listed herein.

1.23 “Product” means, individually and collectively, the DHE Product and DHE Combination Product.

1.23.1 “DHE Product” means any product consisting of (i) a pharmaceutical product containing the Compound as the only active pharmaceutical ingredient, and (ii) the Device that contains such pharmaceutical product.

1.23.2 “DHE Combination Product” means any product consisting of (i) a pharmaceutical product containing the Compound as an active pharmaceutical ingredient and one or more other active pharmaceutical ingredients ([***]) (“Additional APIs”), and (ii) the Device that contains such pharmaceutical product.

1.24 “Product-Specific Technology” means the Product-Specific Know-How and the Product-Specific Patents.

1.24.1 “Product-Specific Know-How” means (a) the Know-How Controlled by SNBL and its Affiliates as of the Effective Date listed on Exhibit 1.24.1, and (b) any other Know-How Controlled by SNBL and its Affiliates during the SNBL Product Capture Period, in each case (a) and (b) directed solely to the composition of any Product or methods for the manufacture or use of any Product. Exhibit 1.24.1 will be updated to include all Product- Specific Know-How as of the Closing Date.

1.24.2 “Product-Specific Patents” means (a) the Patents Controlled by SNBL and its Affiliates as of the Effective Date listed on Exhibit 1.24.2, (b) the Patents Controlled by SNBL and its Affiliates during the SNBL Product Capture Period, and (c) the Other Product-Specific Patents, in each case (a), (b) and (c) directed solely to the composition of any Product or methods for the manufacture or use of any Product. Exhibit 1.24.2 will be updated to include all Product-Specific Patents as of the Closing Date.

1.25 “Prosecution and Maintenance” means, with respect to a Patent, the preparing, filing, prosecuting and maintenance of such Patent, as well as reexaminations, reissues, requests for Patent term extensions and the like with respect to such Patent, together with the conduct of interferences, the defense of oppositions, inter partes review, supplemental examination, and other similar proceedings with respect to the particular Patent; and “Prosecute and Maintain” shall have the correlative meaning.

1.26 “Regulatory Approval” means all approvals or clearances (including, where applicable, pricing and reimbursement approval and schedule classifications), product or establishment licenses, registrations or authorizations of any Regulatory Authority, necessary for the manufacture, use, storage, import, export, transport, offer for sale, sale and marketing of a pharmaceutical product or medical device or combination thereof, as applicable, in a regulatory jurisdiction.

6

1.27 “Regulatory Approval Application” means, with respect to a Product, an application for Regulatory Approval (including NDA) filed with or submitted to any Regulatory Authority to obtain permission to initiate marketing and sales of such Product for the Field within the applicable regulatory jurisdiction.

1.28 “Regulatory Authority” means any governmental regulatory authority (whether regional, federal, state or local) that regulates the development, manufacture, market approval, sale, distribution, packaging or use of any pharmaceutical product or medical device or combination thereof for the Field, including the FDA.

1.29 “Regulatory Material” means regulatory applications, submissions, notifications, communications, correspondence, registrations, Regulatory Approvals or other filings made to, received from or otherwise conducted with any Regulatory Authorities responsible for the acceptance, review or approval thereof (including minutes of meetings with such Regulatory Authorities) that are reasonably necessary for the development, manufacture, marketing, sale or other commercialization of any Product in a particular country or regulatory jurisdiction. Regulatory Materials include Regulatory Approval Applications.

1.30 “Territory” means the entire world.

1.31 “Third Party” means any Person other than SNBL or SATSUMA or any Affiliate of either Party.

1.32 Additional Definitions. Each of the following terms shall have the meaning described in the corresponding Section of this Agreement indicated below:

Term	Section	Term	Section
Additional APIs	1.23.2	Enforcement Action	7.4.1
Adverse Drug Experience	4.4	GAAP	1.1
Adverse Drug Reaction	4.4
Agreement	Preamble	Term	Section
Change of Control	10.6	Indemnifying Party	9.2
Closing Date	1.4.2	Indemnitee	9.2
Competing Activities	2.2	Infringing Product	7.4.1
Competing Product	2.2	[***]	11.2.2
Confidential Information	6.1.1	[***] Rules	11.2.2
Controlling Party	7.4.4	Net Sales Deductions	1.19
Cooperating Party	7.4.4	Orange Book	7.6
CRO Services	3.1.2	Other Product-Specific Patents	7.2.2(c)
CRO Services Agreement	3.1.2	Original Agreement	Preamble
Defending Party	7.3	Party/Parties	Preamble
Device Technology Improvements	7.1.1	Product Development Plan	3.1.1
Disclosing Party	6.1.1	Product Trademarks	3.5.1

7

Dispute	11.1	Progress Report	3.4
Effective Date	Preamble	Term	10.1
SATSUMA	Preamble	Third Party Claim	9.1.1
SNBL	Preamble
Technology Transfer Plan	4.1

1.33 Interpretation. Unless specified to the contrary, references to Articles, Sections or Exhibits mean the particular Articles, Sections or Exhibits to this Agreement and references to this Agreement include all Exhibits hereto. Unless the context clearly requires otherwise, whenever used in this Agreement: (a) the words “include” or “including” shall be construed as incorporating, also, “but not limited to” or “without limitation,” whether or not such additional words are written; (b) the word “or” shall have its inclusive meaning of “and/or” except when paired as “either/or”; (c) the word “day” or “quarter” or “year” means a calendar day or quarter or calendar year unless otherwise specified; (d) the word “notice” shall require notice in writing (whether or not specifically stated) and shall include notices, consents, approvals and other communications contemplated under this Agreement; (e) the words “hereof,” “herein,” “hereunder,” “hereby” and derivative or similar words refer to this Agreement (including the Exhibits hereto); (f) provisions that require that a Party, the Parties or a committee hereunder “agree,” “consent” or “approve” or the like shall require that such agreement, consent or approval be specific and in writing, whether by written agreement, letter or otherwise; (g) words of any gender include the other gender; (h) words using the singular or plural number also include the plural or singular number, respectively; (i) references to any specific Law, article, section or other division thereof, shall be deemed to include the then-current amendments thereto or any replacement thereof; and (j) neither Party nor its Affiliates shall be deemed to be acting “on behalf of” or “under the authority of” the other Party hereunder.

ARTICLE 2

ASSIGNMENT; LICENSES

2.1 Assignment; Licenses. Subject to the terms and conditions of this Agreement:

2.1.1 Assignment to SATSUMA. Upon the Closing Date, SNBL hereby assigns (and agrees to assign) to SATSUMA its entire right, title and interest in and to the Product-Specific Technology.

2.1.2 License to SATSUMA. SNBL hereby grants (and agrees to grant) to SATSUMA an exclusive (subject to Section 2.1.5), royalty-bearing, perpetual license (with the right to sublicense in accordance with Section 2.1.4) under the Other Product Technology to develop, make, have made, use, sell, offer for sale, import or otherwise commercialize within the Territory (a) DHE Products solely for the DHE Field, and (b) DHE Combination Products solely for the DHE Combination Field.

2.1.3 License to SNBL. SATSUMA hereby grants (and agrees to grant) to SNBL a non-exclusive, royalty-free, perpetual license (with the right to sublicense in accordance with Section 2.1.4(b)) under SATSUMA’s rights in any Device Technology Improvements to develop, make, have made, use, sell, offer for sale, import or otherwise commercialize products and devices (other than Products and subject to Section 2.2).

8

2.1.4 Sublicensing.

(a) Subject to Section 2.1.4(c), SATSUMA has the right to grant and authorize sublicenses (through multiple tiers) under the license granted to it under Section 2.1.2 to any Affiliate or Third Party without SNBL’s prior written approval.

(b) SNBL has the right to grant and authorize sublicenses (through multiple tiers) under the license granted to it under Section 2.1.3 to any Affiliate or Third Party without SATSUMA’s prior written approval.

(c) With respect to any sublicense granted under Section 2.1.2, (i) SATSUMA and its Affiliates shall have entered into a written agreement with their sublicensee that shall be consistent and not conflict with, and shall be subordinate to, the terms and conditions of this Agreement; and (ii) SATSUMA shall remain responsible to SNBL for any violations by such sublicensee of the terms and conditions of this Agreement. Within [***] days after the execution by SATSUMA of a sublicense agreement of the rights granted to SATSUMA by SNBL under the terms of this Agreement, SATSUMA shall provide SNBL with a copy of such sublicense agreement, which copy may be redacted to remove any and all information not applicable to the obligations of SATSUMA under this Agreement. Without limiting the foregoing, if a sublicensee is in breach of the applicable sublicense agreement and such breach, if committed by SATSUMA, would be a material breach of SATSUMA’s obligations to SNBL under this Agreement, SATSUMA shall, at its own expense, enforce the applicable terms of such sublicense agreement against the sublicensee, including termination thereof in accordance with the terms of such sublicense agreement. For clarity, SATSUMA shall be and remain responsible to SNBL for any breach of this Agreement or any sublicense by any sublicensees, including all damages due to SNBL as a result of such breach. The entry by SATSUMA or its Affiliates into a sublicense shall not relieve SATSUMA of its obligations under this Agreement, including the obligation to report the Net Sales of such sublicensee and ensure payment of royalties to SNBL in accordance with the terms and conditions of this Agreement.

(d) Upon termination of this Agreement for any reason, any sublicensee (of either party) not then in default shall have the right to seek a license from the applicable party hereto and each party agrees to negotiate such licenses in good faith under reasonable terms and conditions consistent with this Agreement.

2.1.5 Reservation of Rights. SNBL reserves the right (for itself and its Affiliates) to practice the Other Product Technology solely for the development of Products within the Territory during the SNBL Product Capture Period (without SNBL being obligated to pay SATSUMA any royalties or other compensation).

2.2 Exclusivity of Efforts. During the Term, neither SNBL, nor SATSUMA nor any of their Affiliates shall, outside of their activities under this Agreement, (i) conduct, participate in or sponsor, directly or indirectly, any activities directed toward the development or commercialization of any Competing Product within the Territory (collectively, such activities “Competing Activities”) or (ii) appoint, license or otherwise authorize any Third Party to perform any Competing Activities; provided that this Section 2.2 shall not apply to any Third Party that succeeds to all or substantially all of the business or assets of SATSUMA to which this Agreement

9

pertains (whether by merger, reorganization, acquisition, sale, operation of law or otherwise) or such Third Party’s Affiliates. For purposes of the foregoing, “Competing Product” means any product, other than any Product subject to this Agreement, incorporating the Compound as an active pharmaceutical ingredient for delivery through nasal tissues or the respiratory system. For clarity, nothing in this Section 2.2 shall prevent SNBL or its Affiliates from conducting activities (a) directed toward the development of any Product within the Territory during the SNBL Product Capture Period, or (b) on behalf of any Third Party as a contract research organization, in each case (a) and (b) subject to the terms and conditions of this Agreement, including without limitation the license provisions set forth in Section 2.1.2 and the confidentiality and non-use provisions set forth in Article 6 relating to SATSUMA’s Confidential Information.

2.3 No Implied Licenses. Each Party acknowledges that the rights and licenses granted under this Article 2 and elsewhere in this Agreement are limited to the scope expressly granted. Accordingly, except as expressly provided in this Agreement, neither Party grants to the other Party any right or license in any intellectual property right, whether by implication, estoppel or otherwise. All rights with respect to Patents or other intellectual property rights that are not specifically granted herein are reserved to the owner thereof, and no implied licenses are granted under this Agreement.

ARTICLE 3

PRODUCT DEVELOPMENT AND COMMERCIALIZATION

3.1 Development.

3.1.1 Product Development. SATSUMA (directly or through its sublicensees) shall fund, lead and be responsible for the development of any Product (including any additional development of the Device) in accordance with the product development plan prepared by SATSUMA (as updated by SATSUMA from time to time, the “Product Development Plan”), which Product Development Plan shall be updated [***]. SATSUMA shall use Commercially Reasonable Efforts to conduct such development activities, including conducting clinical trials, as may be reasonably necessary or desirable to obtain Regulatory Approvals for at least one Product for the Field initially to support and maintain Regulatory Approval for the United States and thereafter in other commercially important markets in the Territory (if any) in accordance with the Product Development Plan, including the timelines set forth therein. With respect to SATSUMA’s obligation to use Commercially Reasonable Efforts to develop at least one Product under this Agreement, SATSUMA shall be deemed to have satisfied such obligation if it has achieved the development milestone objectives in accordance with the timelines therefor as set forth in the Product Development Plan. It is understood and agreed that, except as otherwise expressly provided herein, all development efforts for Products for the Field within the Territory shall be at the sole expense of SATSUMA.

3.1.2 CRO Services. If at any time during the Term, SATSUMA desires to obtain contract research organization (CRO) services for any preclinical or clinical development for any Product of the type that SNBL makes generally available to Third Parties (any, “CRO Services”), SATSUMA shall provide SNBL with notice thereof specifying in reasonable detail the CRO Services planned. In the event that SNBL wishes to provide any such CRO Services, SNBL shall notify SATSUMA within [***] days of receipt of such notice, and SNBL and SATSUMA

10

shall negotiate in good faith to reach agreement on the terms of a CRO services agreement (each, a “CRO Services Agreement”), taking into account the experience, capabilities and expertise of SNBL. If the Parties do not reach such CRO Services Agreement during the [***] days following notification by SNBL (or if SNBL notifies SATSUMA that it elects not to provide such services), then neither Party will have any obligation or liability under this Section 3.1.2 with respect to the applicable CRO Services.

3.2 Manufacturing.

3.2.1 General Responsibilities. SATSUMA shall be responsible for the manufacture of Products for clinical and commercial purposes for the Field within the Territory.

3.2.2 Consultation. At SATSUMA’s reasonable request and expense, SNBL will make its employees and personnel with experience in the manufacture of the Products (or Device) available to consult with SATSUMA or its designees. SATSUMA agrees to pay SNBL the compensation set forth in Exhibit 3.2.2 for SNBL’s performance of consulting services.

3.3 Commercialization.

3.3.1 General. SATSUMA shall use Commercially Reasonable Efforts to commercialize at least one Product for any indication in the Field, initially in the United States and thereafter in other commercially important markets in the Territory (if any). Without limiting the foregoing, SATSUMA agrees to, directly or through one or more of its sublicensees, use Commercially Reasonable Efforts to launch at least one Product for the Field in those jurisdictions in the Territory set forth in the Product Development Plan, and to market, promote and sell such Product(s) for the Field throughout such jurisdictions. It is understood and agreed that, as between the Parties, all commercialization efforts for Products for the Field within the Territory shall be at the sole expense of SATSUMA and SATSUMA shall have the sole right to control in all aspects the commercialization of Products subject to its obligations hereunder.

3.4 Reporting. Without limiting any other provisions of this Agreement, SATSUMA shall keep SNBL reasonably informed as to the progress of its activities with respect to the development and commercialization of Products hereunder. Without limiting the foregoing, [***], SATSUMA shall provide SNBL a written report (each, a “Progress Report”) describing in reasonable detail: (i) SATSUMA’s progress in the development or commercialization of Products during the preceding [***] period, including (as applicable) all material preclinical or clinical studies completed or then in progress, any material regulatory activities (e.g. submission or receipt of any material Regulatory Materials), pre-launch activities and commercial launch of any Product, and (ii) SATSUMA’s then-current schedule of forecasted development milestones and marketing plans for Products for the following [***] period. All contents of all Progress Reports shall constitute the Confidential Information of SATSUMA and shall be subject to the confidentiality and non-use provisions set forth in Article 6. In addition, each Party shall promptly notify the other Party if such Party anticipates or there are material deviations from the then-current Product Development Plan, and such Party shall discuss in good faith and keep such other Party informed as to any corrective actions that it intends or is taking to address such deviations.

11

3.5 Trademarks.

3.5.1 Product Trademarks. SATSUMA shall have the right to select names and all trademarks used in connection with the commercialization of Products including special promotional or advertising taglines, in each case in the Territory (all such trademarks specific to Products and including all goodwill associated therewith, and all applications, registrations, extensions and renewals relating thereto, shall be referred to as “Product Trademarks”). As between the Parties, SATSUMA shall be the exclusive owner of the Product Trademarks.

3.5.2 Assignor/Licensor Status of SNBL. To the extent permitted by applicable Laws, at SNBL’s election, the labels and packaging of any Product and all promotional materials and scientific publications for any Product shall include text identifying SNBL as the assignor of the Product-Specific Technology and licensor of the Other Product Technology used in such Product(s) in a manner consistent with standard industry practice.

ARTICLE 4

TECHNOLOGY TRANSFER / REGULATORY MATTERS

4.1 Technology Transfer. Promptly after the execution of this Agreement, SNBL shall transfer to SATSUMA the information and materials set forth in the technology transfer plan attached hereto as Exhibit 4.1 (the “Technology Transfer Plan”). [***] The Parties acknowledge and agree that all Other Product Know-How disclosed to SATSUMA under this Agreement shall be deemed Confidential Information of SNBL. Accordingly, SATSUMA may use and disclose such Other Product Know-How solely in the exercise of the license granted to SATSUMA under Article 2 and subject to the terms and conditions set forth in Article 6.

4.2 Regulatory Filings and Regulatory Approvals.

4.2.1 Except as expressly provided herein, as between the Parties, SATSUMA (itself or through its sublicensees) shall have the sole right to and be responsible for preparing and submitting to applicable Regulatory Authorities any and all Regulatory Materials for Products and obtaining and maintaining any and all Regulatory Approvals for Products for the Field within the Territory. SATSUMA shall keep SNBL reasonably and regularly informed of the preparation and submission of all Regulatory Materials, Regulatory Authority communications and review of Regulatory Materials, and Regulatory Approvals for Products for the Field within Territory. Except as contemplated by this Agreement or otherwise mutually agreed by the Parties in writing, SNBL shall not be obligated to undertake any development activities or otherwise generate any new information, document or materials in connection with its obligations under this Section 4.2.1.

4.3 Information Sharing.

4.3.1 SATSUMA shall provide or make available to SNBL (i) data and information described on Exhibit 4.3.1 generated from the development of any Product, and (ii) all Regulatory Materials and Regulatory Approvals that are Controlled by SATSUMA related to any Product, in each case (i) and (ii) to the extent applicable to any Device; provided that such information and materials shall be deemed SATSUMA’s Confidential Information. SATSUMA shall use Commercially Reasonable Efforts to obtain and retain Control of all Regulatory Materials and Regulatory Approvals from its Affiliates and their sublicensees related to any Product. SATSUMA hereby grants to SNBL, its Affiliates and their licensees the right to use such data and

12

information that is under its Control and to reference such Regulatory Materials for research and development purposes, including obtaining Regulatory Approvals, with respect to any product that does not contain the Compound. SNBL shall use reasonable efforts to obtain and retain Control of all Regulatory Materials and Regulatory Approvals from its Affiliates and their sublicensees. SNBL hereby grants to SATSUMA, its Affiliates and their licensees the right to use such data and information that is under its Control and to reference such Regulatory Materials for research and development purposes, including obtaining Regulatory Approvals, with respect to any Product. Notwithstanding anything to the contrary, SATSUMA may redact competitively sensitive information from such data and information, and from such Regulatory Materials and Regulatory Approvals.

4.4 Adverse Events. As between the Parties, SATSUMA shall have all regulatory responsibilities as the manufacturer and distributor of finished Products. Accordingly, SATSUMA shall be solely responsible for (a) reporting all Adverse Drug Reactions to the applicable Regulatory Authority in the Territory; (b) handling medical and technical complaints and disputes with the applicable Regulatory Authority, patients and physicians in the Territory; and (c) dealing with Product recalls; provided that SATSUMA shall keep SNBL reasonably informed thereof and coordinate with SNBL in communications with any Regulatory Authority with respect thereto. SATSUMA and its Affiliates and their sublicensees shall also enter into safety exchange and pharmacovigilance agreement(s), which shall: (i) provide detailed procedures regarding the maintenance of core safety information; (ii) require the exchange of safety information and reports of Adverse Drug Reactions for ensuring compliance with the reporting requirements of all applicable Regulatory Authorities; and (iii) provide procedures for the preparation, and periodic review of, a common technical document for use in connection with any filing with a Regulatory Authority relating to any Product. For purposes of the foregoing, “Adverse Drug Reaction” shall have the meaning as defined in the then-current guidelines and regulations promulgated by the ICH (International Conference on Harmonization of Technical Requirements for Registration of Pharmaceuticals for Human Use) and shall include any “Adverse Drug Experience” as defined in the then-current 21 CFR §§ 312.32 and 314.80. Subject to the foregoing, SNBL shall use Commercially Reasonable Efforts to collect and investigate information concerning Adverse Drug Reactions involving or reported to SNBL, its Affiliates and/or licensees, and shall keep SATSUMA reasonably informed as to any and all Adverse Drug Reactions of which it has actual knowledge.

ARTICLE 5

FINANCIAL TERMS

5.1 Reimbursement. Within [***] days of the Closing Date, SATSUMA shall reimburse SNBL [***] incurred prior to the Closing Date relating to: (a) the incorporation of SATSUMA, and (b) the Prosecution and Maintenance of the Product-Specific Patents; provided that the aggregate amount to be reimbursed under clause (a) shall not exceed $[***].

5.2 Royalties.

5.2.1 Royalty Rates. SATSUMA shall pay to SNBL a royalty rate of [***]% of Net Sales of Products.

13

5.2.2 Royalty Term. SATSUMA’s royalty obligation shall commence on the First Commercial Sale of any Product in such country and continue on a Product-by-Product and country-by-country basis until the later of (a) the expiration of the last Patent within the Product- Specific Patents or the Other Product Patents Covering such Product in such country, or (b) ten (10) years following the First Commercial Sale of such Product in such country (the “Royalty Term”).

5.2.3 Royalty Stacking. If, during the Royalty Term, SATSUMA or its Affiliates or sublicensees enters into an agreement with a Third Party pursuant to which SATSUMA or its Affiliates or sublicensees obtains a license under any Patent right of such Third Party that is [***] for SATSUMA, its Affiliates and/or their sublicensees to exercise SATSUMA’s rights under this Agreement or to make, use or sell Products, with respect to any Product in any country, then, on a country-by-country basis, royalties payable to SNBL under this Section 5.2 during any quarter shall be reduced by the amount equal to [***] percent ([***]%) of royalties payable to such Third Party in connection with the sale of such Product during the same quarter under such Third Party license; provided that in no event shall the royalties payable to SNBL for any Product in any country be reduced to a royalty rate of less than [***]%.

5.2.4 Combination Product. In the event that a Product is sold in combination with another product, component or service (other than, with respect to any DHE Combination Product, Applicable APIs) for which no royalty would be due hereunder if sold separately, Net Sales from such combination sales for purposes of calculating the amounts due under this Section 5.2 shall be calculated by multiplying the Net Sales of the combination product by the fraction A/(A + B), where A is the average gross selling price during the previous calendar quarter of such Product sold separately and B is the gross selling price during the previous calendar quarter of the combined product(s), component(s) and/or service(s). In the event that a substantial number of such separate sales were not made during the previous calendar quarter then the Net Sales shall be as reasonably allocated by SATSUMA between such Product and such other product(s), component(s) or service(s) based upon their relative importance and proprietary protection.

5.2.5 Payment/Reports. All payments under this Section 5.2 shall be due and payable within [***] days of the last day of the quarter during which the corresponding Net Sales are recognized. Together with any such payment, SATSUMA shall deliver a report specifying on a country-by-country basis: (i) total gross invoiced amount from sales of Products by SATSUMA and its Affiliates and their sublicensees; (ii) to the extent reasonably available to SATSUMA, amounts deducted by category (e.g., normal and customary trade, cash and other discounts, allowances and credits actually allowed and taken directly with respect to sales of Products) from gross invoiced amounts to calculate Net Sales; (iii) Net Sales; and (iv) royalties payable to SNBL hereunder.

5.3 Payment Method. All payments under this Agreement shall be made in U.S. Dollars. Except as otherwise provided herein payments shall be due [***] days after receipt of SNBL’s invoice therefor. All payments hereunder shall be paid by wire transfer in immediately available funds to an account designated by SNBL. Any payments or portions thereof due under this Agreement that are not paid by the date such payments are due under this Agreement will bear simple interest at per annum amount equal to the lower of (a) the [***] percent ([***]%), as reported in The Wall Street Journal (U.S. Internet Edition at www.wsj.com), on the due date (or,

14

if the due date is not a business day, on the last business day prior to such due date), or (b) the maximum rate permitted by applicable Laws, calculated based on the number of days such payment is delinquent. This Section 5.3 shall in no way limit any other remedies available to SNBL.

5.4 Currency Conversion. For any currency conversion required in determining any Net Sales, such conversion shall be made at the exchange rate used by SATSUMA, consistent with its general internal corporate policies as they relate to its income statement, for its own consolidation purposes for the translation of such currency into United States Dollars for any payments due pursuant to this Agreement. Such policies will be made available to SNBL upon request.

5.5 Taxes. All amounts referenced hereunder are exclusive of any withholding tax or similar taxes and payments hereunder shall be made without deduction for such taxes, except to the extent that any such deduction or withholding is required by Laws in effect at the time of payment. Any tax required to be withheld on amounts payable under this Agreement shall promptly be paid by SATSUMA on behalf of SNBL to the appropriate governmental authority, and SATSUMA shall furnish to SNBL appropriate evidence of payment of any such tax or other amount required by applicable Laws to be deducted from any royalty payment, including any tax or withholding levied by a foreign taxing authority in respect of the payment or accrual of any royalty.

5.6 Inspection of Records. During the Term and [***] years thereafter, SATSUMA shall, and shall cause its Affiliates and their sublicensees to, keep full and accurate books and records setting forth gross sales of Products, Net Sales of Products, to the extent reasonably available to SATSUMA from its Affiliates and their sublicensees, if applicable, itemized deductions from gross sales taken to calculate Net Sales and otherwise necessary to calculate other amounts payable to SNBL under this Article 5. SATSUMA shall permit SNBL, by itself and/or through independent third party accountants engaged by SNBL, to examine such books and records at any reasonable time, but not later than [***] years following the rendering of any corresponding reports, accountings and payments pursuant to this Article 5. Such accountants may be required by SATSUMA to enter into a reasonably acceptable confidentiality agreement. The opinion of said independent accountants regarding such reports, accountings and payments shall be binding on the Parties other than in the case of clear error. SNBL shall bear the cost of any such examination and review; provided that if the inspection and audit shows an underpayment of more than [***] percent ([***]%) of the amount due for the applicable period, then SATSUMA shall promptly reimburse SNBL for all costs incurred in connection with such examination and review. SATSUMA shall promptly pay to SNBL the amount of any underpayment revealed by an examination and review. Any overpayment by SATSUMA revealed by an examination and review shall be fully-creditable against future payments owed by SATSUMA to SNBL under this Article 5.

5.7 Nonrefundable. Except as expressly set forth in the Agreement, all amounts paid hereunder shall be nonrefundable to and non-creditable by SATSUMA.

15

ARTICLE 6

CONFIDENTIALITY

6.1 Confidential Information.

6.1.1 Confidential Information. As used in this Agreement, the term “Confidential Information” means all secret, confidential or proprietary information or data of a Party or any of its Affiliates, whether provided in written, oral, graphic, video, computer, electronic or other form, provided pursuant to this Agreement, or generated pursuant to this Agreement, by one Party or its Affiliate (the “Disclosing Party”) to the other Party or its Affiliate (the “Receiving Party”), including but not limited to, information relating to the Disclosing Party’s existing or proposed research, development efforts, patent applications, business or proprietary formulations, compounds or other products and any other information, data and materials expressly stated in this Agreement to be Confidential Information of a Party. Notwithstanding the foregoing, Confidential Information shall not include any information or materials that:

(a) were already known to the Receiving Party (other than under an obligation of confidentiality), at the time of disclosure by the Disclosing Party, to the extent such Receiving Party has documentary evidence to that effect existing prior to such disclosure;

(b) were generally available to the public or otherwise part of the public domain at the time of disclosure thereof to the Receiving Party through no breach of this Agreement;

(c) became generally available to the public or otherwise part of the public domain after disclosure or development thereof, as the case may be, and other than through any act or omission of the Receiving Party in breach of such Party’s confidentiality obligations under this Agreement;

(d) were disclosed to the Receiving Party, other than under an obligation of confidentiality, by a Third Party who had no obligation to the Disclosing Party not to disclose such information to others; or

(e) were independently discovered or developed by or on behalf of the Receiving Party without the use of the Confidential Information belonging to the other Party, to the extent such Receiving Party has documentary evidence to that effect.

6.1.2 Confidentiality Obligations. Each Party shall keep all Confidential Information of the other Party with the same degree of care it maintains the confidentiality of its own information of a similar nature. Neither Party shall use Confidential Information of the other Party for any purpose other than in performance of its obligations or the exercise of its rights under this Agreement or disclose the such Confidential Information or the terms of this Agreement to any other Person other than to such of its and its Affiliates’ directors, managers, employees, independent contractors, agents, suppliers, or consultants and others who have a need to know such Confidential Information or terms of this Agreement for the purposes of such Party’s performance of its obligations or exercise of its rights (including granting sublicenses and assigning the Agreement in accordance with the terms and conditions hereof) under this Agreement or such Party’s enforcement of its rights under this Agreement; provided, however, that the Party intending to disclose the Confidential Information of the other Party or the terms of this Agreement shall advise any such Person who receives such Confidential Information or terms

16

of this Agreement of the confidential nature thereof and of the obligations contained in this Agreement relating thereto, and such Party shall ensure (including, in the case of a Third Party, by means of a written agreement with such Third Party having terms at least as protective as those contained in this Article 6) that all such directors, managers, employees, independent contractors, agents, suppliers, consultants or others comply with such obligations as if they had been a Party hereto. Each Party shall be responsible for any breaches of this Agreement by its or its Affiliates’ directors, managers, employees, independent contractors, agents, suppliers, consultants or others to whom it discloses the other Party’s Confidential Information, except that each Party may keep one (1) copy of the Confidential Information of the other Party for the first Party’s archival purposes. Such archival copy shall be deemed to be the property of the Disclosing Party, and shall continue to be subject to the provisions of this Article 6. It is understood that receipt of Confidential Information under this Agreement will not limit the Receiving Party from assigning its employees to any particular job or task in any way it may choose, subject to the terms and conditions of this Agreement.

6.1.3 Permitted Disclosure and Use. Without limiting Section 6.1.2, the Receiving Party may disclose Confidential Information of the other Party or the terms of this Agreement (i) to any governmental authority in order to prosecute or maintain any intellectual property in accordance with this Agreement, (ii) as reasonably necessary to exercise the rights and licenses granted such Receiving Party in this Agreement, (iii) for prosecuting or defending litigation as contemplated by, or arising out of, this Agreement, (iv) to its or its Affiliates’ employees, agents, consultants, advisors (including financial advisors, lawyers and accountants), contractors, licensees or sublicensees only on a need-to-know basis for the sole purpose of performing its or its Affiliates’ obligations or exercising its or its Affiliates’ rights under this Agreement, provided that in each case the recipient of such Confidential Information are bound by written obligations of confidentiality and non-use at least as equivalent in scope as those set forth in this Article 6 prior to any such disclosure, (v) to existing and potential investors, merger partners or acquirers, including their respective consultants and professional advisors (including financial advisors, lawyers and accounts), solely on a need-to-know basis in order to evaluate an actual or potential investment, acquisition or similar business transactions; and provided that in connection with such disclosure, the disclosing Party shall inform each recipient of the confidential nature of such terms and cause each recipient to treat such information as confidential consistent with the nature of the information so disclosed.

6.1.4 Required Disclosure. A Receiving Party may disclose Confidential Information of the Disclosing Party or the terms of this Agreement to the extent that it is required by Law (including, without limitation, in connection with FDA filings, U.S. Securities and Exchange Commission filings or filings with other government agencies) or any rules of any recognized stock exchange, to be disclosed by the Receiving Party; provided that the Receiving Party shall apply for confidential treatment of such Confidential Information of the Disclosing Party or the terms of this Agreement required to be disclosed to the fullest extent permitted by Law, shall provide the Disclosing Party a copy of the proposed confidential treatment request as soon as reasonably practicable and shall use commercially reasonable efforts to provide such copy sufficiently in advance of its filing to give such Disclosing Party a meaningful opportunity to comment thereon, and shall incorporate in such confidential treatment request any reasonable comments of the Disclosing Party or shall cooperate with the Disclosing Party in the event that the Disclosing Party wishes to seek a protective order or the like with respect to any of its Confidential Information.

17

6.1.5 Notification. The Receiving Party shall notify the Disclosing Party promptly upon discovery of any unauthorized use or disclosure of the Disclosing Party’s Confidential Information, and will cooperate with the Disclosing Party in any reasonably requested fashion to assist the Disclosing Party to regain possession of such Confidential Information and to prevent its further unauthorized use or disclosure.

6.2 Publicity; Filing of this Agreement. Except as required by Law or order of any governmental authority, all publicity, press releases and other announcements or disclosures relating to the existence and terms of this Agreement or the transactions contemplated hereby shall be reviewed in advance by, and shall be subject to the written approval of, both Parties. It is understood that such publicity, press releases and other announcements shall (i) not disclose any Confidential Information of the other Party and (ii) shall give complete and appropriate attribution to the other Party’s role(s) in the project contemplated in this Agreement. Each Party shall provide the other Party an opportunity to review and comment on the language of such attribution prior to first use thereof in a press release or other public disclosure proposed to be made by such Party. Once information is disclosed to the public pursuant to this Section 6.2, either Party may further disclose such information without further approval of the other Party.

6.3 Use of Names. Except as otherwise provided in Section 6.2 or pursuant to Section 3.5.2, neither Party shall use the name of the other Party in relation to this transaction in any public announcement, press release or other public document without the written consent of such other Party, which consent shall not be unreasonably withheld, conditioned or delayed; provided, however, that either Party may use the name of the other Party in any document filed with any governmental authority, in all cases subject to such Party giving complete and appropriate attribution to the other Party’s role(s) in the project contemplated in this Agreement.

6.4 Survival. The obligations and prohibitions contained in this Article 6 shall survive the expiration or termination of this Agreement for a period of [***] years.

ARTICLE 7

OWNERSHIP OF INVENTIONS AND PATENT RIGHTS

7.1 Ownership of Inventions; Disclosure.

7.1.1 Inventions. Any and all Inventions shall be owned (solely or jointly) by the inventor(s) thereof in accordance with applicable Law.

7.1.2 Disclosure of Device Technology Improvements. Each Party shall promptly disclose to the other Party any invention disclosures, or other similar documents, submitted to it by its employees, agents or independent contractors describing subject matter that are purported to be Inventions constituting (i) any improvement or modification to the Device; or (ii) any methods or processes of use or manufacture relating to the Device (collectively, “Device Technology Improvements”), and information relating to such Device Technology Improvements.

18

7.1.3 Further Assurances. Each Party agrees to assist the other Party, at such other Party’s expense, in every proper way to accomplish and perfect the ownership provisions set forth in this Section 7.1 in any and all countries, including the execution of all applications, specifications, oaths, assignments and all other instruments that such other Party may deem reasonably necessary or useful in connection therewith.

7.2 Patent Prosecution.

7.2.1 Product-Specific Patents.

(a) During the SNBL Product Capture Period, as between the Parties, SNBL shall have the sole right to control the Prosecution and Maintenance of the Product- Specific Patents [***] using counsel of SNBL’s choice. SNBL agrees to (i) keep SATSUMA reasonably informed with respect to such activities (including providing SATSUMA copies of all material documents received and filed in connection with the Prosecution and Maintenance of such Other Product Patents), (ii) consult in good faith with SATSUMA regarding such matters, including the abandonment of any claims thereof Covering any Product, and (iii) provide SATSUMA a reasonable opportunity to review and comment on material submissions and correspondence with the applicable patent offices and take into consideration SATSUMA’s reasonable input with respect thereto.

(b) Following the Closing Date, as between the Parties, SATSUMA shall have the sole right to control the Prosecution and Maintenance of the Product-Specific Patents [***] using counsel of its choice.

7.2.2 Other Product Patents.

(a) Subject to Section 7.2.2(c) below, as between the Parties, SNBL shall have the first right to control the Prosecution and Maintenance of the Other Product Patents [***] using counsel of its choice. SNBL agrees to (i) keep SATSUMA reasonably informed with respect to such activities (including providing SATSUMA copies of all material documents received and filed in connection with the Prosecution and Maintenance of such Other Product Patents), (ii) consult in good faith with SATSUMA regarding such matters, including the abandonment of any claims thereof Covering any Product, and (iii) provide SATSUMA a reasonable opportunity to review and comment on material submissions and correspondence with the applicable patent offices and take into consideration SATSUMA’s reasonable input with respect thereto.

(b) In the event SNBL elects to abandon any Other Product Patent, it shall notify SATSUMA at least [***] days in advance of the next applicable deadline with the applicable patent office, in which case SATSUMA shall have the right (but not the obligation) to control the Prosecution and Maintenance of such Other Product Patent. SATSUMA agrees to (i) keep SNBL reasonably informed with respect to such activities (including providing SNBL copies of all material documents received and filed in connection with the Prosecution and Maintenance of such Other Product Patents), (ii) consult in good faith with SNBL regarding such matters, including the abandonment of any claims thereof Covering any Product, and (iii) provide SNBL a reasonable opportunity to review and comment on material submissions and correspondence with

19

the applicable patent offices and take into consideration SNBL’s reasonable input with respect thereto. If SATSUMA is required to pay any out-of-pocket expenses in connection with the Prosecution and Maintenance of an Other Product Patent in any country then, on a country-by-country basis, [***].

(c) Notwithstanding Section 7.2.2(a) above, SNBL agrees to consider in good faith any reasonable request by SATSUMA to file appropriate divisionals of the Other Product Patents (i) that claim and contain disclosure supporting claims directed solely to the composition of any Product or methods for the manufacture or use of any Product; and (ii) that do not contain claims, and will not be amended to contain claims, directed to any subject matter other than as described in (i) above (collectively, “Other Product-Specific Patents”) and mutually agree upon a plan, to the extent it would not interfere with any other claims in or otherwise be detrimental to any patent in which SNBL has an interest. SNBL will use commercially reasonable efforts, at SATSUMA’s expense, to Prosecute and Maintain any Other Product-Specific Patents in accordance with the agreed plan. Upon issuance, each Other Product- Specific Patent shall be deemed a Product-Specific Patent for purposes of this Agreement, and SNBL shall assign to SATSUMA its entire right, title and interest in and to such Other Product- Specific Patent.

7.2.3 Other Patents. Except as provided this Section 7.2, each Party shall have the sole right to control the Prosecution and Maintenance of Patents Controlled solely by such Party and its Affiliates claiming Device Technology Improvements. Except as otherwise provided herein, unless mutually agreed by the Parties in writing, neither Party shall file any Patents claiming Device Technology Inventions Controlled jointly by the Parties without the prior written consent of the other Party.

7.3 Defense of Third Party Infringement Claims. If any Product commercialized by SATSUMA or its Affiliates or their sublicensees becomes the subject of a Third Party’s claim or assertion of infringement of a Patent relating to the manufacture, use, sale, offer for sale or importation of any Product for the Field within the Territory, the Party first having notice of the claim or assertion shall promptly notify the other Party, and the Parties shall promptly confer to consider the claim or assertion and the appropriate course of action. Unless the Parties otherwise agree in writing, each Party shall have the right to defend itself against a suit that names it as a defendant (the “Defending Party”). Neither Party shall enter into any settlement of any claim described in this Section 7.3 that adversely affects the other Party’s rights or interests without such other Party’s written consent, which consent shall not be unreasonably conditioned, withheld or delayed. In any event, the other Party shall reasonably assist the Defending Party and cooperate in any such litigation at the Defending Party’s request and expense.

7.4 Enforcement.

7.4.1 Notice of Infringement. In the event that either Party reasonably believes that any Product-Specific Patent or Other Product Patent is being infringed by a Third Party or is subject to a declaratory judgment action arising from such infringement, in each case with respect to the manufacture, use, sale, offer for sale or importation of a product comprising [***] (an “Infringing Product”), such Party shall promptly notify the other Party. In such event, the Parties shall negotiate in good faith a strategy with respect to such infringement. As between the Parties, the right to (i) initiate or prosecute an infringement or other appropriate suit or action against such

20

Third Party including, without limitation, any certification filed pursuant to 21 U.S.C. §355(b)(2)(A) (or any amendment or successor statute thereto) claiming that any Product-Specific Patent or Other Product Patent is invalid or that infringement will not arise from the manufacture, importation, use or sale of an Infringing Product by a Third Party; or (ii) defending any declaratory judgment action with respect thereto (the type of action described in each of (i) and (ii), an “Enforcement Action”), shall be as set forth in Sections 7.4.2 and 7.4.3 below.

7.4.2 Product-Specific Patents. As between the Parties, SATSUMA shall have the sole right to initiate and control any Enforcement Action of the Product-Specific Patents.

7.4.3 Other Product Patents.

(a) As between the Parties, SATSUMA shall have the first right to initiate and control any Enforcement Action of the Other Product Patents with respect to any Infringing Product. Reasonably in advance of undertaking any Enforcement Action under this Section 7.4.3, SATSUMA will notify SNBL of its intent to take such action and will keep SNBL reasonably informed regarding the status of such action. SATSUMA will have the sole and exclusive right to select counsel for any suit brought or defended by SATSUMA under this Section 7.4.3 [***]. In the event that SATSUMA fails to take reasonable measures to enforce any Other Product Patent against infringing activities that involve any Infringing Product within [***] days of a request by SNBL to do so, SNBL may initiate an Enforcement Action against such infringement activities with respect to such Infringing Product at SNBL’s expense. Reasonably in advance of taking any Enforcement Action under this Section 7.4.3, SNBL will notify SATSUMA of its intent to take such action and will keep SATSUMA reasonably informed regarding the status of such action. SNBL will have the sole and exclusive right to select counsel for any suit brought by SNBL under this Section 7.4.3 [***].

(b) As between the Parties, SNBL retains the sole right to initiate and control any Enforcement Action of the Other Product Patents with respect to any infringing activities that do not involve any Infringing Product.

7.4.4 Expenses and Cooperation. The Party bringing an Enforcement Action pursuant to Section 7.4.2 or 7.4.3 (the “Controlling Party”) will have the sole and exclusive right to select counsel for such Enforcement Action [***]. If required under applicable Law in order for the Controlling Party to initiate and/or maintain such Enforcement Action, or if the Controlling Party is unable to initiate, prosecute or defend such Enforcement Action solely in its own name, the other Party (the “Cooperating Party”) will join as a necessary party to the Enforcement Action at the Controlling Party’s request and expense. In addition, at the Controlling Party’s request and expense, the Cooperating Party will provide reasonable assistance to the Controlling Party in connection with an Enforcement Action. The Cooperating Party will have the right to participate and be represented in any such Enforcement Action by its own counsel at its own expense.

7.4.5 Recoveries. Any amounts recovered by the Controlling Party in an Enforcement Action will be used first to reimburse the Controlling Party and then the Cooperating Party, in each case for its reasonable costs and expenses, including attorneys’ fees incurred in bringing and maintaining the applicable enforcement action, with any remainder to be allocated between the Parties as follows: [***].

21

7.4.6 Other Patents. It is understood that, during the Term, SNBL’s Device Technology Improvements that are reasonably necessary or useful for the development and commercialization of any Product shall be deemed Other Product Know-How, and Patents claiming such Other Product Know-How shall be deemed Other Product Patents and the enforcement thereof shall be subject to Sections 7.4.1 to 7.4.5 (all inclusive). Subject to the foregoing, each Party shall have the sole right to control the enforcement of Patents Controlled solely by such Party and its Affiliates claiming Device Technology Improvements.

7.5 Patent Marking. To the extent commercially feasible, SATSUMA shall mark (and shall use Commercially Reasonable Efforts to cause to be marked) all units of Products sold under this Agreement with the number of each issued patent within the Product-Specific Patents or Other Product Patents that cover such Products. Any such marking with be in conformance with the Laws of the country of sale.

7.6 Regulatory Data Protection. The Parties will evaluate in good faith and identify all Patents that may meet the requirements for FDA publication in Approved Drug Products with Therapeutic Equivalence Evaluations (the “Orange Book”), in connection with any Product. Subject to the terms of this Section 7.6, SATSUMA shall be solely responsible for deciding which such patents to submit to FDA for listing in the Orange Book. In the case of newly allowed Patents, prior to issuance and no later than [***] days following a notice of allowance of any such Patent, SATSUMA shall inform SNBL whether it believes that there is a reasonable basis for listing such Patent in the Orange Book. SATSUMA shall maintain with FDA correct and complete listings of applicable Patents for Products.

ARTICLE 8

REPRESENTATIONS AND WARRANTIES

8.1 Representations, Warranties and Covenants.

8.1.1 Mutual Representations. Each of the Parties hereby represents and warrants to the other Party that, as of the Effective Date:

(a) such Party has full corporate right, power and authority to enter into this Agreement and to perform its respective obligations under this Agreement;

(b) such Party has the right to grant the licenses and sublicenses granted pursuant to, and under the terms of, this Agreement;

(c) this Agreement is a legal and valid obligation binding upon such Party and enforceable in accordance with its terms;

(d) the execution, delivery and performance of the Agreement by such Party does not conflict with any agreement, instrument or understanding, oral or written, to which it is a party or by which it is bound, nor violate any Law of any governmental authority having jurisdiction over it; and

22

(e) such Party has not granted, and will not grant during the Term, rights to any Third Party under the Other Product Technology that conflict with the rights granted to the other Party hereunder.

8.1.2 Additional Representations of SNBL. SNBL hereby represents and warrants to SATSUMA that, as of the Effective Date:

(a) all Patents and all Know-How owned by SNBL, or licensed by SNBL from a Third Party, reasonably necessary to develop and commercialize Products for the Field in the Territory are assigned or licensed to SATSUMA under the terms and conditions of this Agreement;

(b) the Patents and Know-How owned by SNBL and assigned or licensed to SATSUMA under the terms and conditions of this Agreement are free and clear of any encumbrance, lien, claim of ownership or license by any Third Party except for such encumbrance, lien, claim of ownership or license that does not conflict with the license granted by SNBL to SATSUMA hereunder;

(c) SNBL has not granted, and will not grant during the Term, rights to any Third Party under the Product-Specific Technology or Other Product Technology that conflict with the rights granted to SATSUMA hereunder;

(d) SNBL has not received any written notice of any threatened claim or litigation seeking to invalidate or otherwise challenge the Product-Specific Patents or Other Product Patents or SNBL’s rights therein; and

(e) none of the Product-Specific Patents or Other Product Patents are subject to any pending reexamination, opposition, interference or litigation proceedings.

8.2 Disclaimer of Warranty / Limitation of Liability.

8.2.1 Disclaimer. EXCEPT FOR THE EXPRESS WARRANTIES SET FORTH IN THIS AGREEMENT, SNBL AND SATSUMA MAKE NO REPRESENTATIONS AND GRANT NO WARRANTIES, EXPRESS OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, BY STATUTE OR OTHERWISE, AND SNBL AND SATSUMA EACH SPECIFICALLY DISCLAIMS ANY OTHER REPRESENTATIONS AND WARRANTIES, WHETHER WRITTEN OR ORAL, EXPRESS, STATUTORY OR IMPLIED, INCLUDING ANY WARRANTY OF QUALITY, MERCHANTABILITY OR FITNESS FOR A PARTICULAR USE OR PURPOSE OR ANY WARRANTY AS TO THE VALIDITY OF ANY PATENTS OR THE NON-INFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.

8.2.2 Limitation of Liability. IN NO EVENT WILL EITHER PARTY BE LIABLE FOR LOST PROFITS OR FOR ANY SPECIAL, INDIRECT, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES, HOWEVER CAUSED, ON ANY THEORY OF LIABILITY AND WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, ARISING UNDER ANY CAUSE OF ACTION AND ARISING IN ANY WAY OUT OF THIS AGREEMENT. THE FOREGOING LIMITATIONS SHALL NOT APPLY TO BREACHES OF ARTICLE 6 OR OTHERWISE LIMIT EITHER PARTY’S INDEMNIFICATION OBLIGATIONS UNDER ARTICLE 9.

23

ARTICLE 9

INDEMNIFICATION; INSURANCE

9.1 Indemnification.

9.1.1 Indemnification by SATSUMA. SATSUMA hereby agrees to save, defend and hold SNBL, its Affiliates, and their respective officers, directors, agents and employees harmless from and against any and all complaints, actions, suits, proceedings, hearings, investigations, claims, demands brought by Third Parties (each, a “Third Party Claim”) or any liability, loss, damage, cost and expense (including reasonable attorneys’ fees) arising from such Third Party Claims, in either case resulting from (a) any breach by SATSUMA of any of its representations, warranties, covenants or obligations pursuant to this Agreement, (b) the negligence or willful misconduct by SATSUMA or its Affiliates or their respective officers, directors, employees, agents or consultants in performing any obligations under this Agreement, or (c) the development, manufacture, use, offer for sale, sale or marketing of any Product by or under the authority of SATSUMA, or any of its Affiliates or their sublicensees; in each case except to the extent that such Third Party Claims, liability, loss, damage, cost and expense (including reasonable attorneys’ fees) are the responsibility of SNBL pursuant to Section 9.1.2. For purposes of (c) in this Section 9.1.1, the activities of SNBL under the terms of this Agreement shall not be activities conducted under the authority of SATSUMA.

9.1.2 Indemnification by SNBL. SNBL hereby agrees to save, defend and hold SATSUMA, its Affiliates, and their respective officers, directors, agents and employees harmless from and against any and all Third Party Claims, liability, loss, damage, cost and expense (including reasonable attorneys’ fees) arising from such Third Party Claims, in either case resulting from (a) any breach by SNBL of any of its representations, warranties, covenants or obligations pursuant to this Agreement, (b) the negligence or willful misconduct by SNBL or its Affiliates or their respective officers, directors, employees, agents or consultants in performing any obligations under this Agreement, (c) the development, manufacture, use, offer for sale, sale or marketing of the Device by or under the authority of SNBL, or any of its Affiliates or licensees (excluding SATSUMA), or (d) the use by SNBL of the Product Specific Technology, the Other Product Technology or the Device except as part of Products delivered to SATSUMA under the terms of this Agreement; in each case except to the extent that such Third Party Claims, liability, loss, damage, cost and expense (including reasonable attorneys’ fees) are the responsibility of SATSUMA pursuant to Section 9.1.1.

9.2 Indemnification Procedures. Promptly after receipt by a Party seeking indemnification under this Article 9 (an “Indemnitee”) of notice of any pending or threatened Third Party Claim against it, such Indemnitee shall give written notice to the Party from whom the Indemnitee is entitled to seek indemnification pursuant to this Article 9 (the “Indemnifying Party”) of the commencement thereof; provided that the failure so to notify the Indemnifying Party shall not relieve it of any liability that it may have to any Indemnitee hereunder, except to the extent the Indemnifying Party demonstrates that it is materially prejudiced thereby. Any Third Party Claim that is subject to indemnification under this Article 9 shall be brought against an

24

Indemnitee and such Indemnitee shall give written notice to the Indemnifying Party of the commencement thereof, the Indemnifying Party shall assume sole control of the defense thereof with counsel reasonably satisfactory to such Indemnitee and, the Indemnifying Party shall not be liable to such Indemnitee under this Article 9 for any fees of other counsel thereafter, in each case subsequently incurred by such Indemnitee in connection with the defense thereof. No compromise or settlement of any Third Party Claim may be effected by the Indemnifying Party without the Indemnitee’s written consent, which consent shall not be unreasonably withheld, conditioned or delayed; provided such consent shall not be required if (a) there is no finding or admission of any violation of Law or any violation of the rights of any person and no effect on any other claims that may be made against the Indemnitee and (b) the sole relief provided is monetary damages that are paid in full by the Indemnifying Party.

9.3 Insurance. Each Party shall obtain and maintain reasonable insurance at levels and for periods consistent with industry standards based upon such Party’s activities hereunder and indemnification obligations hereunder, [***]. Each Party shall furnish to the other Party on request certificates issued by the insurance company setting forth the amount of the liability insurance (or evidence of self-insurance) and shall promptly notify the other Party at least [***] days prior to termination or material reduction to the level of coverage of its insurance policy.

ARTICLE 10

TERM AND TERMINATION

10.1 Term. The term of this Agreement and the rights and obligations of the Parties under this Agreement shall commence on the Effective Date and, unless earlier terminated in accordance with the provisions of this Article 10, shall continue on a country-by-country and Product-by-Product basis until the expiration of the applicable Royalty Term for such Product in such country (the “Term”). Upon expiration, but not earlier termination, of this Agreement, SATSUMA’s licenses under the Other Product Know-How shall become fully-paid, non-exclusive and irrevocable.

10.2 Termination for Material Breach. SNBL may terminate this Agreement and the licenses granted herein for material breach of SATSUMA by giving ninety (90) days’ written notice to SATSUMA (specifying in reasonable detail the basis for such termination and referencing this Section 10.2) and SATSUMA has not cured such breach (if curable) within such ninety (90)-day period. For the avoidance of doubt, SATSUMA’s failure to use Commercially Reasonable Efforts to develop at least one Product in accordance with Section 3.1.1 shall be deemed a material breach of this Agreement entitling SNBL to terminate this Agreement if SATSUMA fails to cure such breach during the applicable ninety (90) day cure period. Notwithstanding the foregoing, if SATSUMA disputes such a material breach in good faith, then SNBL shall not have the right to terminate this Agreement unless it is determined in accordance with Article 12 that such material breach occurred.

10.3 Termination for Convenience. SATSUMA shall have the right to terminate this Agreement in its entirety upon ninety (90) days’ prior notice to SNBL referencing this Section 10.3.

25

10.4 Termination for Patent Challenge.

10.4.1 Challenges by SATSUMA. If SATSUMA or any of its Affiliates challenges under any court action or proceeding, or before any patent office, the validity, patentability, enforceability, scope or non-infringement of any Other Product Patent, or initiates a reexamination of any Other Product Patent, or assists any Third Party to conduct any of the foregoing activities, SNBL will have the right to immediately terminate this Agreement.

10.4.2 Challenges by Sublicensees. If any sublicensee of SATSUMA or its Affiliates challenges under any court action or proceeding, or before any patent office, the validity, patentability, enforceability, scope or non-infringement of any Other Product Patent, or initiates a reexamination of any Other Product Patent, or assists any Third Party to conduct any of the foregoing activities, SNBL will have the right to immediately terminate (and to cause SATSUMA and its Affiliates to immediately terminate) the applicable sublicense(s).

10.5 Termination for Insolvency. To the extent permitted under applicable Law, SNBL shall have the right to terminate this Agreement upon delivery of written notice to SATSUMA in the event that (i) SATSUMA files in any court or agency pursuant to any statute or regulation of any jurisdiction a petition in bankruptcy or insolvency or for reorganization or similar arrangement for the benefit of creditors or for the appointment of a receiver or trustee for SATSUMA or its assets, (ii) SATSUMA is served with an involuntary petition against it in any insolvency proceeding and such involuntary petition has not been stayed or dismissed within ninety (90) days of its filing, or (iii) such other Party makes an assignment of substantially all of its assets for the benefit of its creditors.

10.6 Termination of Capture Period. SATSUMA may elect to terminate the SATSUMA Capture Period, and SNBL may elect to terminate the SNBL Capture Period, in each case upon a Change of Control of such Party by giving the other Party at least [***] days’ prior notice referencing this Section 10.6 and specifying the effective date of such termination. For purposes of this Agreement, “Change of Control” means, with respect to a Party, either: (i) the acquisition of such Party by a Third Party by means of any transaction or series of related transactions (including, without limitation, any reorganization, merger or consolidation or stock transfer, but excluding any such transaction effected primarily for the purpose of changing the domicile of such Party and excluding any sale of stock for capital raising purposes), unless the holders of the voting power of such Party immediately prior to such transaction or series of related transactions hold, immediately after such transaction or series of related transactions, at least 50% of the voting power of the surviving or resulting entity (or if the Party or such other surviving or resulting entity is a wholly-owned subsidiary immediately following such acquisition, its parent); or (ii) a sale, lease or other disposition of all or substantially all of the assets of such Party to which this Agreement relates to a Third Party by means of any transaction or series of related transactions, except where such sale, lease or other disposition is to a wholly- owned subsidiary of such Party. Notwithstanding the foregoing, in no event shall a sale by such Party of capital stock (whether voting or otherwise) in any offering made pursuant to an effective registration statement filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended, covering the offer and sale of such capital stock, or any foreign equivalent thereof, constitute a Change of Control of such Party.

26

10.7 Effects of Termination.

10.7.1 Accrued Obligations. The expiration or termination of this Agreement for any reason shall not release either Party from any liability which, at the time of such expiration or termination, has already accrued to the other Party or which is attributable to a period prior to such expiration or termination, nor will any termination of this Agreement preclude either Party from pursuing all rights and remedies it may have under this Agreement, or at law or in equity, with respect to breach of this Agreement.

10.7.2 Survival. The following Articles and Sections, together with any definitions used or Exhibit referenced therein, shall survive any termination or expiration of this Agreement: Articles 1, 6 (for [***] years), 9, 11 and 12 and Sections 2.3, 3.4 (for the period preceding such termination or expiration), 4.4, 5.6 (for [***] years), 5.7, 7.1, 7.2.3, 7.4.6, 8.2 and 10.7. Except as otherwise provided in this Article 10, all rights and obligations of the Parties under this Agreement shall terminate upon expiration or termination of this Agreement for any reason.

ARTICLE 11

DISPUTE RESOLUTION

11.1 Initial Escalation. With respect to all disputes arising between the Parties, including any alleged failure to perform, or breach of, this Agreement, or any issue relating to the interpretation or application of this Agreement (any such dispute or issue, a “Dispute”), if the Parties are unable to resolve such Dispute within [***] days after such Dispute is first identified by either Party in writing to the other, either Party shall have the right to refer such Dispute to the senior executive officers for each Party for attempted resolution by written notice to the other Party referencing the particular Dispute and this Section 11.1. In such case, each Party shall designate a senior executive officer of the Party having the right to bind such Party with respect to the matter of the Dispute, and such officers shall conduct good faith negotiations and seek to resolve the Dispute within [***] days after such notice is received, including having [***] meeting of the senior executive officers within [***] days after such notice is received. If the senior executive officers resolve such Dispute, a memorandum setting forth their agreement to resolve the Dispute will be prepared and signed by both Parties if requested by either Party. In all events, the Parties shall cooperate in an effort to limit the issues for consideration in such manner as narrowly as reasonably practicable in order to resolve the Dispute.

11.2 Binding Arbitration. If the senior executive officers designated by the Parties are not able to resolve such Dispute referred to them under Section 11.1 within such [***] day period, then either Party shall have the right to refer such Dispute (except as provided in Section 11.3) for resolution through binding arbitration by written notice to the other Party referencing the particular Dispute and this Section 11.2 at any time after the conclusion of such period, on the following basis:

11.2.1 The place of arbitration shall be San Francisco, California, U.S.A. and all proceedings and communications shall be in English.

11.2.2 The arbitration shall be administered by [***] pursuant to the [***] of [***] then in effect (the “[***] Rules”).

27

11.2.3 The arbitration shall be conducted by a panel of three neutral, independent arbitrators experienced in the pharmaceutical business and life sciences industry generally. Within [***] days after the notice initiating the arbitration, each Party shall appoint one arbitrator meeting the foregoing criteria by written notice to the other Party and the two Party-appointed arbitrators shall select the third arbitrator within [***] days of their appointment. If the Party-appointed arbitrators are unable to agree upon the third arbitrator, the third arbitrator shall be appointed by [***].

11.2.4 Judgment upon the award rendered by such arbitrators shall be binding on the Parties and may be entered by any court or forum having jurisdiction.

11.2.5 Either Party may apply to the arbitrators for interim injunctive relief until the arbitration award is rendered or the controversy is otherwise resolved. Further, either Party also may, without waiving any remedy under this Agreement, seek from any court having jurisdiction any injunctive or provisional relief necessary to protect the rights or property of such Party pending the arbitration award.

11.2.6 The arbitrators shall have no authority to award punitive or any other type of damages not measured by a Party’s compensatory damages.

11.2.7 Each Party shall bear its own costs and expenses and attorneys’ fees and an equal share of the arbitrators’ and any administrative fees of arbitration.

11.2.8 Reasons for the arbitrators’ decision should be complete and explicit, including determinations of law and fact. The written reasons should also include the basis for any damages awarded and a statement of how the damages were calculated. Such written decision should be rendered by the arbitrators following a full comprehensive hearing, as soon as practicable but in no event later than [***] months following the selection of the arbitrators under Section 11.2.3.

11.2.9 Except to the extent necessary to confirm an award or as may be required by law, neither Party nor any arbitrator may disclose the existence, content, or results of any arbitration conducted hereunder without the prior written consent of both Parties.

11.2.10 In no event shall an arbitration be initiated after the date when commencement of a legal or equitable proceeding based on the dispute, controversy or claim would be barred by the applicable statute of limitations; provided that such limitation shall be tolled as of the date a Party notifies the other Party of such dispute, controversy or claim pursuant to this Article 11.

11.2.11 Any and all activities conducted under this Section 11.2, including any and all proceedings, written and oral submission, and decisions of the arbitrator(s), shall be deemed Confidential Information of each of the Parties, and shall be subject to Article 6.

11.3 Patent Dispute Resolution. Notwithstanding Section 11.2, any dispute, controversy or claim relating to the ownership, scope, validity, enforceability or infringement of any Patent rights covering the manufacture, use or sale of any Product or of any trademark rights relating to any Product shall not be subject to arbitration under Section 11.2, but shall be submitted to a court of competent jurisdiction in which such Patent or trademark rights were granted or arose.

28

11.4 Injunctive Relief. Nothing herein may prevent either Party from seeking any preliminary injunction or temporary restraining order in order to prevent any Confidential Information from being disclosed or further disclosed without appropriate authorization under this Agreement.

ARTICLE 12

MISCELLANEOUS

12.1 Governing Law. This Agreement and any Dispute shall be governed by and construed and enforced in accordance with the laws of the State of New York, without reference to conflicts of laws principles.

12.2 Entire Agreement; Amendment. This Agreement, including the Exhibits attached hereto, sets forth the complete, final and exclusive agreement and all the covenants, promises, agreements, warranties, representations, conditions and understandings between the Parties and supersedes and terminates all prior agreements and understandings between the Parties with respect to the subject matter hereof (including the Original Agreement in its entirety). There are no covenants, promises, agreements, warranties, representations, conditions or understandings, either oral or written, between the Parties. No subsequent alteration, amendment, change or addition to this Agreement shall be binding upon the Parties unless reduced to writing and signed by an authorized officer of each Party.

12.3 Force Majeure. Except for payment obligations hereunder, each Party shall be excused from the performance of its obligations under this Agreement (other than payment obligations) to the extent that such performance is prevented by force majeure and the nonperforming Party promptly provides notice of the prevention to the other Party. Such excuse shall be continued so long as the condition constituting force majeure continues and the nonperforming Party takes reasonable efforts to remove the condition. For purposes of this Agreement, force majeure shall include conditions beyond the reasonable control of the affected Party, including, an act of God, voluntary or involuntary compliance with any regulation, law or order of any government, war, civil commotion, labor strike or lock-out, epidemic, failure or default of public utilities or common carriers, destruction of production facilities or materials by fire, earthquake, storm or like catastrophe. If the performance of any such obligation under this Agreement is delayed, or is reasonably likely to be delayed, owing to such a force majeure for any continuous period of more than [***] days, the Parties will consult with respect to an equitable solution, including the possibility of the mutual termination of this Agreement.

12.4 Notices. Every notice, election, demand, consent, request, approval, report, offer, acceptance, certificate, or other communication required or permitted under this Agreement or by applicable Laws shall be in writing and shall be deemed to have been delivered and received (a) when personally delivered, (b) on the seventh (7^th) business day after which sent by registered or certified mail, postage prepaid, return receipt requested, (c) on the date on which transmitted by facsimile with a receipt evidencing a successful transmission, or by email with confirmation by the recipient confirming such email has been received and reviewed, or (d) on the third (3rd)

29

business day after the business day on which deposited with a regulated public carrier (e.g., Federal Express) for overnight delivery (receipt verified), freight prepaid, addressed to the Party for whom intended at the mailing address or facsimile number set forth below, or such other mailing address or facsimile number, notice of which is given in a manner permitted by this Section 12.4.

For SNBL:

Shin Nippon Biomedical Laboratories, Ltd

2438 Miyanouracho, Kagoshima-shi

Kagoshima-ken 891-1394, Japan

Attn: [***]

Facsimile: [***]

Email: [***]

For SATSUMA:

Satsuma Pharmaceuticals, Inc.

Attn:

Facsimile:

Email:

12.5 Independent Contractors. In making and performing this Agreement, SATSUMA and SNBL shall act at all times as independent contractors and nothing contained in this Agreement shall be construed or implied for any purpose to create an agency, partnership, limited partnership, joint venture or employer and employee relationship between SATSUMA and SNBL and this Agreement shall not be construed to suggest otherwise. At no time shall one Party make commitments or incur any charges or expenses for or in the name of the other Party. Except as otherwise provided in this Agreement, each Party shall be solely responsible for its own costs and expenses associated with this Agreement.

12.6 Assignment. Neither Party will sell, transfer, assign, delegate, pledge or otherwise dispose of, whether voluntarily, involuntarily, by operation of Law or otherwise, this Agreement or any of its rights or obligations under this Agreement without the prior written consent of the other Party (which consent may not be unreasonably withheld, conditioned or delayed); provided, however, that either Party may assign or transfer this Agreement or any of its rights or obligations under this Agreement without the consent of the other Party (a) to any Affiliate of such Party, provided that the assigning Party shall remain responsible for the acts and omissions of such Affiliate hereunder, or (b) to any Third Party that succeeds to all or substantially all of the business or assets of such Party to which this Agreement pertains (whether by merger, reorganization, acquisition, sale, operation of law or otherwise). Any such assignment described in clause (b) above shall be conditioned upon the relevant permitted assignee or surviving entity following any merger or consolidation (if such surviving entity is not the assigning Party) to assume in writing all of the assigning Party’s obligations under this Agreement. Any attempted assignment in violation of this Section 12.6 shall be null and void.

30

12.7 Compliance with Laws/Other. Without limiting anything herein, all rights and obligations of SATSUMA and SNBL are subject to prior compliance with, and each Party shall comply with, all applicable Laws, including obtaining all necessary approvals required by the applicable Regulatory Authorities. In addition, each Party shall conduct its activities under this Agreement in accordance with good scientific and business practices.

12.8 Counterparts. This Agreement may be executed in two counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Signatures provided by facsimile transmission shall be deemed to be original signatures.

12.9 Further Actions. Each Party agrees to execute, acknowledge and deliver such further instruments, and to do all such other acts, as may be necessary or appropriate in order to carry out the purposes and intent of this Agreement.

12.10 Severability. If any one or more of the provisions of this Agreement is held to be invalid or unenforceable by any court of competent jurisdiction from which no appeal can be or is taken, the provision shall be considered severed from this Agreement and shall not serve to invalidate any remaining provisions hereof. The Parties shall make a good faith effort to replace any invalid or unenforceable provision with a valid and enforceable one such that the objectives contemplated by the Parties when entering this Agreement may be realized.

12.11 No Waiver. Any delay in enforcing a Party’s rights under this Agreement or any waiver as to a particular default or other matter shall not constitute a waiver of such Party’s rights to the future enforcement of its rights under this Agreement. No provision of this Agreement shall be waived by any act, omission or knowledge of a Party or its agents or employees except by an instrument in writing expressly waiving such provision and signed by a duly authorized officer of the waiving Party.

[THE REMAINDER OF THIS PAGE LEFT BLANK INTENTIONALLY; SIGNATURE PAGE FOLLOWS.]

31

IN WITNESS WHEREOF, the Parties have executed this Agreement in duplicate originals by their duly authorized representatives as of the Effective Date.

Shin Nippon Biomedical Laboratories, Ltd.	SATSUMA Pharmaceuticals, Inc.
By: /s/ Shunji Haruta, PhD                         Name: Shunji Haruta, PhD Title: General Manager, TR Company	By: /s/ John Kollins                         Name: John Kollins Title: President & CEO

List of Exhibits:

Exhibit 1.9	Device and Specifications
Exhibit 1.20.2	Other Product Patents
Exhibit 1.24.1	Product Specific Know-How
Exhibit 1.24.2	Product Specific Patents
Exhibit 3.2.2	Consultation Fees
Exhibit 4.1	Technology Transfer Plan
Exhibit 4.3.1	Information Sharing

32

Exhibit 1.9

Device and Specifications

• Nasal delivery device for powder formulation

[***]

33

Exhibit 1.20.1

Other Product Know-How

Omitted pursuant to Regulation S-K, Item 601(a)(5)

34

Exhibit 1.20.2

Other Product Patents

Omitted pursuant to Regulation S-K, Item 601(a)(5)

35

Exhibit 1.24.1

Product-Specific Know-How

Omitted pursuant to Regulation S-K, Item 601(a)(5)

36

Exhibit 1.24.2

Product-Specific Patents

Omitted pursuant to Regulation S-K, Item 601(a)(5)

37

Exhibit 3.2.2

Consulting Fees

Omitted pursuant to Regulation S-K, Item 601(a)(5)

38

Exhibit 4.1

Draft Technology Transfer Plan

Omitted pursuant to Regulation S-K, Item 601(a)(5)

39

Exhibit 4.3.1

Development Information to be Shared with SNBL

Omitted pursuant to Regulation S-K, Item 601(a)(5)

40

EX-10.2(B)

Exhibit 10.2(b)

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

AMENDMENT NO. l

TO LICENSING AND ASSIGNMENT AGREEMENT

This Amendment No. l (“Amendment No. l”) to the Licensing and Assignment Agreement by and between Satsuma Pharmaceuticals, Inc. (“Company”) and Shin Nippon Biomedical Laboratories, Ltd. (“SNBL”) of June 30, 2016 (the “Agreement”) is dated as of January 13, 2017 (“Amendment No. l Effective Date”)

A. Company and SNBL have previously entered into the Agreement and now wish to amend certain provisions.

B. Company and SNBL desire that all other terms and conditions of the Agreement to remain in full force and effect.

For good and valuable consideration, Company and SNBL hereby agree as follows:

1. Amendment to the Agreement.

a. The Parties agree to amend and revise ARTICLE 5 as follows (changes shown in bold):

5.1 Reimbursement. Within [***] days of the Closing Date, SATSUMA shall reimburse SNBL for all of SNBL’s costs and expenses (actual and internal) incurred prior to the [***] Closing Date relating to: (a) the incorporation of SATSUMA, and (b) the Prosecution and Maintenance of the Product-Specific Patents; provided that the aggregate amount to be reimbursed under clause (a) shall not exceed $[***].

2. Miscellaneous. Capitalized terms used herein and not otherwise defined shall have the meaning given to them in the Agreement. This Amendment No. l will be effective for all purposes as of the Amendment No. l Effective Date. This Amendment No. l may be executed in two counterparts, including by facsimile or electronically transmitted copies, each of which will be deemed to be an original, but all of which together will constitute one and the same instrument.

IN WITNESS WHEREOF, the Parties have caused this Amendment No. l to be signed by their respective duly authorized representatives as of the Amendment Effective Date.

SATSUMA PHARMACEUTICALS, INC.	SHIN NIPPON BIOMEDICAL LABORATORIES, LTD.
By: /s/ John Kollins	By: /s/ Shunji Haruta
Printed Name: John Kollins	Printed Name: Shunji Haruta
Title: President & CEO	Title: General Manager, TR Company

EX-10.2(C)

Exhibit 10.2(c)

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

AMENDMENT NO. 2

TO LICENSING AND ASSIGNMENT AGREEMENT

This Amendment No. 2 (“Amendment No. 2”) to the Licensing and Assignment Agreement by and between Satsuma Pharmaceuticals, Inc. (“Company”) and Shin Nippon Biomedical Laboratories, Ltd. (“SNBL”) of June 30, 2016 (the “Agreement”) is dated as of April 27, 2017 (“Amendment No. 2 Effective Date”)

A. Company and SNBL have previously entered into the Agreement and now wish to amend certain provisions.

B. Company and SNBL desire that all other terms and conditions of the Agreement to remain in full force and effect.

For good and valuable consideration, Company and SNBL hereby agree as follows:

1. Amendment to the Agreement.

a. Exhibit 1.20.2. “Other Product Patents” is hereby amended and replaced in its entirely with the following:

Other Product Patents

Other Product Patents

[***]

2. Miscellaneous. Capitalized terms used herein and not otherwise defined shall have the meaning given to them in the Agreement. This Amendment No. 2 will be effective for all purposes as of the Amendment No. 2 Effective Date. This Amendment No. 2 may be executed in two counterparts, including by facsimile or electronically transmitted copies, each of which will be deemed to be an original, but all of which together will constitute one and the same instrument.

IN WITNESS WHEREOF, the Parties have caused this Amendment No. 2 to be signed by their respective duly authorized representatives as of the Amendment Effective Date.

SATSUMA PHARMACEUTICALS, INC.	SHIN NIPPON BIOMEDICAL LABORATORIES, LTD.
By: /s/ John Kollins	By: /s/ Shunji Haruta
Printed Name: John Kollins	Printed Name: Shunji Haruta
Title: President & CEO	Title: General Manager, TR Company

EX-10.2(D)

Exhibit 10.2(d)

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

AMENDMENT NO. 3

TO LICENSING AND ASSIGNMENT AGREEMENT

This Amendment No. 3 (“Amendment No. 3”) to LICENSING AND ASSIGNMENT AGREEMENT, made and entered into the 6^th day of October, 2017 (“Amendment No. 3 Effective Date”) by and between Satsuma Pharmaceuticals, Inc., having its principal place of business at 395 Oyster Point Boulevard, South San Francisco, CA 94080, USA (“Company”) and Shin Nippon Biomedical Laboratories, Ltd., having its principal place of business at 2438, Miyanoura-cho, Kagoshima-shi, Kagoshima-ken, Japan (“SNBL”). Company and SNBL are collectively the “Parties”.

A. The Parties have entered in to a LICENSING AND ASSIGNMENT AGREEMENT, effective as of the 30^th day of June, 2016 (“AGREEMENT”), as well as AMENDMENT NO. 1 TO LICENSING AND ASSIGNMENT AGREEMENT, effective as of the 13^th day of January, 2017 (“Amendment No. 1”), and AMENDMENT NO. 2 TO LICENSING AND ASSIGNMENT AGREEMENT, effective as of the 19^th day of April, 2017 (“Amendment No. 2”), and

B. The Parties agree to amend certain provision of the AGREEMENT;

1. Amendment to the AGREEMENT.

The Parties therefore agree to this Amendment No. 3 as set forth herein.

a. Exhibit 1.20.2. “Other Product Patents” is hereby amended and replaced in its entirely as stated as in the Attachment of this Amendment No. 3.

2. Miscellaneous. Capitalized terms used herein and not otherwise defined shall have the meaning given to them in the AGREEMENT. This Amendment No. 3 will be effective for all purposes as of the Amendment No. 3 Effective Date. This Amendment No. 3 may be executed in two counterparts, including by facsimile or electronically transmitted copies, each of which will be deemed to be an original, but all of which together will constitute one and the same instrument.

IN WITNESS WHEREOF, the Parties have caused this Amendment No. 3 to be signed by their respective duly authorized representatives as of the Amendment No. 3 Effective Date.

SATSUMA PHARMACEUTICALS, INC.	SHIN NIPPON BIOMEDICAL LABORATORIES, LTD.
By: /s/ Mic Iwashima	By: /s/ Shunji Haruta
Printed Name: Mic Iwashima	Printed Name: Shunji Haruta
Title: Vice President, Head of Operations	Title: General Manager, TR Company

Attachment

Exhibit 1.20.2

Other Product Patents

Omitted pursuant to Regulation S-K, Item 601(a)(5)

EX-10.7(A)

Exhibit 10.7.a

Satsuma Pharmaceuticals, Inc.

June 17th, 2016

John A. Kollins

***

Dear John:

I am pleased to offer you a position with Satsuma Pharmaceuticals, Inc. (the “Company”), as its Chief Executive Officer reporting to the Company’s Board of Directors (the “Board”). Unless otherwise defined in the letter, capitalized terms will have the meanings set forth in Appendix A. If you accept our offer, your first day of employment will be as soon as practicable, but no later than July 15, 2016 (the day you actually commence employment hereunder, the “Start Date”).

1.    Duties. As Chief Executive Officer, you will have such duties and responsibilities commensurate with those customarily associated with that position, including such duties and responsibilities as reasonably assigned by the Board. Additionally, you will be appointed as a member of the Board for so long as you are serving as the Company’s Chief Executive Officer, subject to any required Board or shareholder approval. You will devote substantially all of your time, attention and skill to such duties, except during any paid vacation and other excused absence periods, and will use your best efforts to promote the success of the business of the Company.

For the duration of your term of employment with the Company, you agree not to (a) actively engage in any other employment, occupation or consulting activity for any direct or indirect remuneration or (b) render commercial or professional services of any nature to any person or organization, whether or not for compensation, in each case, without the prior approval of the Board, provided, that prior to the completion of a Qualified Financing the Board’s consent to any request by you to engage in other consulting and advisor service for compensation will not be unreasonably withheld or delayed. Notwithstanding the previous sentence, the Company acknowledges that you currently have ongoing professional obligations and activities (none of which, you agree and acknowledge, are in conflict with the Company’s business) and the Company and you agree that you will have a reasonable time period following the Start Date during which to wind down such obligations and activities, provided that such activities do not materially interfere with your duties under this letter or in violation of your obligations pursuant to Section 11, below.

2.    Base Salary. You will receive an initial annual base salary of $100,000. Upon the closing of a Qualified Financing, your annual base salary will be increased to $350,000. The Board will review your salary annually and you will be eligible for salary increases subject to Board approval. Your annual base salary will be paid, less applicable withholdings, in accordance with the Company’s normal payroll procedures. For purposes of this letter agreement, a “Qualified Financing” means the closing of the sale and issuance of equity securities of the Company (or securities convertible or exchangeable into equity securities of the Company) in a single transaction or series of related transactions primarily for capital raising purposes (a “Financing”) where the Company raises an amount that when combined with all prior Financings equals or exceeds $7,000,000. For avoidance of doubt, a Qualified Financing may be accomplished as part of a merger of the Company with or into another company or reorganization of the Company.

3.    Annual Performance Bonus. You also will be eligible to receive an annual target bonus of 35% of your annual base salary upon achievement of performance objectives to be determined by the Board (the “Bonus”). Following the end of the each calendar year, the Board, in its discretion, will determine the extent to which the performance objectives relating to the Bonus for that year were achieved and the extent

to which the Bonus becomes earned for that year. In order to be eligible to receive a Bonus, you must be employed through the date the Board makes its determination to what extent the performance goals have been achieved and the amount of the Bonus to which you will be entitled, which the Board will make its determination no later than April 1 of the calendar year following the calendar year to which the Bonus relates. Any Bonus, or portion thereof, will be paid, less applicable withholdings, as soon as practicable after the Board makes its determination of the extent to which the Bonus has been earned, but in no event later than May 1 following the calendar year in which the Board makes its determination as to the extent a Bonus has been earned (if at all).

4.    Employee Benefits. You also will be eligible to receive certain employee benefits that the Company may establish from time to time for its other employees, subject to the eligibility requirements of the applicable benefit plans. You will also be entitled to a minimum of twenty (20) days paid time-off each year, subject to the terms of the Company’s paid time off policy as in effect from time to time. You should note that the Company may modify job titles, salaries and benefits from time to time as it deems necessary (though certain modifications may trigger your rights to resign for Good Reason, described below).

5.    Expenses. You will be entitled to reimbursement for all reasonable and necessary out-of-pocket business, entertainment and travel expenses incurred in connection with the performance of your duties hereunder in accordance with the Company’s expense reimbursement policies and procedures.

6.    Restricted Stock Grant. In addition, if you decide to join the Company, it will be recommended that the Board grant you an award of 600,000 shares of the Company’s Common Stock (“Restricted Stock”), which represents approximately 20% of the fully-diluted capital stock of the Company as of the date of this letter agreement. The Restricted Stock will be issued for no cash consideration and the par value will be deemed to have been paid through past services rendered by you to the Company. Any shares of Restricted Stock that are unvested on the date you cease to continuously provide services to the Company will be immediately forfeited by you to the Company for no consideration and you will have no further rights with respect to those shares. Subject to any vesting acceleration provisions described herein, the Restricted Stock will vest as follows: 20% of the Restricted Stock will vest upon the closing of a Qualified Financing that occurs while you are providing services to the Company. The remaining shares of Restricted Stock will vest as to I/361 of the remaining shares each month following the Start Date (on the same day of the month as the Start Date), subject to you continuing to provide services to the Company through each vesting date. The award of Restricted Stock will otherwise be subject to the terms and conditions of the Company’s equity plan and restricted stock agreement approved by the Board.

7.    Termination other than for Cause, death or Disability outside the Change in Control Period. If, outside of the Change in Control Period, the Company terminates your employment other than for Cause, death or Disability, then, provided you deliver to the Company a customary separation agreement and release of claims related to your employment with the Company in a form reasonably satisfactory to the Company (the “Release”) that becomes effective and irrevocable within 60 days of the date your employment with the Company terminates, you will be entitled to receive, subject to the terms of Appendix A:

(a)    continuing payments of your base salary, as then in effect, less applicable withholdings and in accordance with the Company’s normal payroll procedures, for a period of six (6) months from the date your employment with the Company terminates with the first payment to made within 10 days following the effective date of the Release (and include any payments that otherwise would have been paid to you between your termination date and the effective date of the Release under the Company’s normal payroll cycle), with any remaining payments paid in accordance with the Company’s normal payroll practices for the remainder of the 6-month period following your termination of employment (subject to any delay as may be required for compliance with Section 409A in accordance with Appendix A);

-2-

(b)    reimbursement for the cost of continuation of health coverage for you and your eligible dependents pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) until the earlier of (i) six (6) months following your termination of employment or (ii) the date you and your eligible dependents are no longer eligible for COBRA; provided, however, if, at the time of your termination of employment, the Company determines that providing the COBRA reimbursement in this paragraph would result in a violation of law or an excise tax to the Company, then the Company instead will pay a lump sum payment, grossed up to an amount that mitigates the effect of any applicable tax withholding obligations that arise with respect to the payment, equal to six (6) months of your estimated COBRA premiums, less applicable withholdings, within 10 days following the effective date of the Release (subject to any delay as may be required for compliance with Section 409A).

8.    Termination other than for Cause, death or Disability, or Resignation for Good Reason within the Change in Control Period. If, within 12 months following a Change in Control (the “Change in Control Period”), the Company (or its successor) terminates your employment other than for Cause, death or Disability or you resign from your employment with the Company (or its successor) for Good Reason, then, provided you deliver to the Company a Release that becomes effective and irrevocable within 60 days of the date your employment with the Company (or its successor) terminates, you will be entitled to receive subject to the terms of Appendix A:

(a)    a lump-sum payment equal to six (6) months of your base salary, as then in effect, to be paid within 10 days following the effective date of the Release (subject to any delay as may be required for compliance with Section 409A);

(b)    a lump-sum payment, to be paid within 10 days following the effective date of the Release (subject to any delay as may be required for compliance with Section 409A), of an amount equal to your annual target Bonus for the year in which the termination occurs (or, if higher, your target annual Bonus as in effect immediately prior to the Change in Control), prorated to the termination date.

(c)    reimbursement for the cost of continuation of health coverage for you and your eligible dependents pursuant to the COBRA until the earlier of (i) six (6) months following your termination of employment or (ii) the date you and your eligible dependents are no longer eligible for COBRA; provided, however, if, at the time of your termination of employment, the Company (or its successor) determines that providing the COBRA reimbursement in this paragraph would result in a violation of law or an excise tax to the Company (or its successor), then the Company (or its successor) instead will pay a lump sum payment, grossed up to an amount that mitigates the effect of any applicable tax withholding obligations that arise with respect to the payment, equal to six (6) months of your estimated COBRA premiums, less applicable withholdings, within 10 days following the effective date of the Release (subject to any delay as may be required for compliance with Section 409A); and

(d)    the vesting of each equity award held by you, including, without limitation, the Restricted Stock and any other stock option, restricted stock unit award or restricted stock award held by you as of your employment termination date shall be accelerated and, if applicable, become exercisable with respect to 100% of the then-unvested shares of Company common stock subject to such equity award.

9.    Termination for Cause, death or Disability or Resignation Without Good Reason. If your employment with the Company is terminated voluntarily by you without Good Reason or for Good Reason outside the Change in Control Period, by the Company for Cause or due to your death or Disability, then you will be entitled to receive salary and accrued but unused vacation time through the effective date of termination plus any Bonus earned, but not yet paid, as of your date of termination (“Accrued Benefits”). Moreover, on your termination date: (i) all vesting will terminate immediately with respect to your then outstanding equity awards (unless you commence providing services as a consultant or director as of the

-3-

date of such termination of employment, in which case your outstanding equity awards will be treated in accordance with the equity plan under which they are granted and the agreements evidencing any such awards); (ii) all payments of compensation by the Company to you hereunder will terminate immediately (except your Accrued Benefits); and (iii) you will only be eligible for severance benefits in accordance with the Company’s established policies, if any, as then in effect.

In the event of your termination of employment with the Company, the preceding Sections 7, 8, and 9 are intended to be and are exclusive and in lieu of any other rights or remedies to which you or the Company may otherwise be entitled, whether at law, tort or contract, in equity or under this letter.

10.    Confidential Information Agreement; Compliance with Company Policies. As a condition of your employment, you are also required to sign and comply with an [At-Will Employment, Confidential Information, Invention Assignment and Arbitration Agreement (the “Confidential Information Agreement”)] which requires, among other provisions, the assignment of patent rights to any invention made during your employment at the Company, and non-disclosure of Company proprietary information and compliance with the arbitration provisions in the event of any dispute or claim relating to or arising out of our employment relationship.

As a Company employee, you will be expected to abide by the Company’s rules and standards. Specifically, you will be required to sign an acknowledgment that you have read and that you understand the Company’s rules of conduct which are included in the Company Handbook, which the Company will soon complete and distribute.

11.    Conflicting Interests. We also ask that, if you have not already done so, you disclose to the Company any and all agreements relating to your prior employment that may affect your eligibility to be employed by the Company or limit the manner in which you may be employed. The Company understands that any such agreements will not prevent you from performing the duties of your position and you represent that such is the case. Moreover, you agree that, during the term of your employment with the Company, you will not engage in any other employment, occupation, consulting or other business activity directly related to the business in which the Company is now involved or becomes involved during the term of your employment, nor will you engage in any other activities that conflict with your obligations to the Company. Similarly, you agree not to bring any third party confidential information to the Company, including that of your former employer, and that in performing your duties for the Company you will not in any way utilize any such information.

12.    Proof of Eligibility to Work. For purposes of federal immigration law, you will be required to provide to the Company documentary evidence of your identity and eligibility for employment in the United States. Such documentation must be provided to us within three (3) business days of your date of hire, or our employment relationship with you may be terminated.

13.    Miscellaneous. The Company is excited about your joining and looks forward to a beneficial and productive relationship. Nevertheless, you should be aware that your employment with the Company is for no specified period and constitutes at-will employment. As a result, you are free to resign at any time, for any reason or for no reason. Similarly, the Company is free to conclude its employment relationship with you at any time, with or without cause and with or without notice. We request that, in the event of resignation, you give the Company at least two weeks’ notice.

To accept the Company’s offer, please sign and date this letter in the space provided below. A duplicate original is enclosed for your records. This letter (including Appendix A), along with any agreements relating to proprietary rights between you and the Company and the equity plan and stock option agreement, set forth the terms of your employment with the Company and supersede any prior

-4-

representations or agreements including, but not limited to, any representations made during your recruitment, interviews or pre-employment negotiations, whether written or oral. This letter, including, but not limited to, its at-will employment provision, may not be modified or amended except by a written agreement signed by a non-employee member of the Board and you. This offer of employment will terminate if it is not accepted, signed and returned by June 20th 2016.

We look forward to your favorable reply and to working with you at the Company.

Sincerely,

/s/ Ken Takanashi

Ken Takanashi

Director

-5-

Agreed to and accepted:

Signature:	/s/ John Kollins
Printed Name:	John Kollins
Date:
Enclosures

Duplicate Original Letter

Employment, Confidential Information, Invention Assignment and Arbitration Agreement

-6-

Appendix A

ADDITIONAL TERMS TO EMPLOYMENT LETTER

Unless otherwise defined below, capitalized terms used herein will have the meanings set forth in the Agreement.

1.    Section 409A.

(a)    Notwithstanding anything to the contrary in this Agreement, no Deferred Payments will be paid or otherwise provided until you have a “separation from service” (within the meaning of Section 409A) from the relevant position or positions. Similarly, no severance payable to you, if any, pursuant to this Agreement that otherwise would be exempt from Section 409A solely pursuant to Treasury Regulation Section 1.409A-l(b)(9) will be payable until you have a “separation from service” (within the meaning of Section 409A).

(b)    Notwithstanding anything to the contrary in this Agreement, if you are a “specified employee” within the meaning of Section 409A at the time of your termination of employment (other than due to death), then the Deferred Payments that are payable within the first six (6) months following your separation from service, will, to the extent required to be delayed pursuant to Section 409A(a)(2)(B) of the Code, become payable on the first payroll date that occurs on or after the date six (6) months and one (1) day following the date of your separation from service. All subsequent Deferred Payments, if any, will be payable in accordance with the payment schedule applicable to each payment or benefit. Notwithstanding anything herein to the contrary, if you die following your separation from service, but prior to the six (6) month anniversary of the separation from service, then any payments delayed in accordance with this paragraph will be payable in a lump sum as soon as administratively practicable after the date of your death and all other Deferred Payments will be payable in accordance with the payment schedule applicable to each payment or benefit. In no event will the Company reimburse you for any taxes that may be imposed on you as a result of Section 409A. Each payment and benefit payable under this Agreement is intended to constitute a separate payment for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations.

(c)    Any amount paid under this Agreement that satisfies the requirements of the “short-term deferral” rule set forth in Section 1.409A-l(b)(4) of the Treasury Regulations will not constitute Deferred Payments for purposes of this Agreement.

(d)    Any amount paid under this Agreement that qualifies as a payment made as a result of an involuntary separation from service pursuant to Section l.409A-l(b)(9)(iii) of the Treasury Regulations that does not exceed the Section 409A Limit (as defined below) will not constitute Deferred Payments for purposes of this Agreement.

(e)    The provisions of this Agreement and the payments and benefits hereunder are intended to be exempt from or comply with the requirements of Section 409A so that none of the severance or other payments and benefits to be provided hereunder will be subject to the additional tax imposed under Section 409A, and any ambiguities herein will be interpreted to be so exempt or so comply. The Company and you agree to work together in good faith to consider amendments to this Agreement and to take such reasonable actions which are necessary, appropriate or desirable to avoid imposition of any additional tax or income recognition prior to actual payment to you under Section 409A.

-7-

2.    Definitions.

(a)    “Cause” means the occurrence of any of the following: (A) your willful and continued failure to perform your material duties to the Company that goes uncured after notice from the Board; (B) your willful or intentional conduct that causes or is expected to material and demonstrable injury, monetarily or otherwise, to the Company; or (C) your conviction of, or a plea of nolo contendere to, a crime constituting (x) a felony under the laws of the United States or any state thereof, or (y) a misdemeanor involving moral turpitude.

Any determination that you have engaged in conduct for which the Board wishes to terminate your employment will be made after a meeting of the outside directors of the Board at which you will be invited to appear, with counsel, to respond to the allegations set forth in the written notice to you of such meeting (which notice will provide sufficient specificity to allow you to respond to such allegations).

For purposes of the letter agreement, an act (or failure to act) will only be considered “willful” if done (or failed to be done) by you intentionally.

(b)    “Change in Control” is defined as:

(i)    any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing more than 50% of the total voting power represented by the Company’s then outstanding voting securities; or

(ii)    the date of the consummation of a merger or consolidation of the Company with any other corporation that has been approved by the stockholders of the Company, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least 50% of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation; or

(iii)    the date of the consummation of the sale or disposition by the Company of all or substantially all the Company’s assets.

Notwithstanding the foregoing provisions of this definition, a transaction will not be deemed a Change in Control unless the transaction qualifies as a “change in control event” within the meaning of Section 409A.

Further and for the avoidance of doubt, a transaction will not constitute a Change in Control if: (i) its sole purpose is to change the jurisdiction of the Company’s incorporation, or (ii) its sole purpose is to create a holding company that will be owned in substantially the same proportions by the persons who held the Company’s securities immediately before such transaction.

(c)    “Code” is defined as the Internal Revenue Code of 1986, as amended.

(d)    “Deferred Payment” is defined as any severance pay or benefits to be paid or provided to you (or your estate or beneficiaries) pursuant to this Agreement and any other severance payments or separation benefits to be paid or provided to you (or your estate or beneficiaries), that in each case, when considered together, are considered deferred compensation under Section 409A.

-8-

(e)    “Disability” is defined as your inability to perform the essential functions of your position with or without reasonable accommodation for a period of 120 consecutive days because of your physical or mental impairment.

(f)    “Good Reason” means the occurrence of any of the following events or conditions, without your express written consent (which consent may be denied, withheld or delayed for any reason):

(i)    a material reduction in your duties, authority or responsibilities;

(ii)    a requirement that you report to a corporate officer or employee instead of directly to the Board;

(iii)    a material reduction by the Company in your annual base salary or annual bonus or incentive compensation opportunity as in effect as of the Start Date or as the same may be increased from time to time;

(iv)    a requirement by the Board that your principal place of employment to a location more than 30 miles from your principal place of employment immediately prior to his termination or the Company’s requiring you to be based anywhere other than such principal place of employment (or permitted relocation thereof) except for required travel on the Company’s business to an extent substantially consistent with travel requirements standard and customary in the industry; or

(v)    any action or inaction that constitutes an uncured, material breach by the Company of the letter agreement or any other agreement between the Company and you, or any uncured, material breach by the Company of a policy relating to the benefits to which are entitled.

You will provide notice to the Company of the condition giving rise to “Good Reason” within 90 days of the initial existence of such condition and the Company will have 30 days following such notice to remedy such condition. Your right to terminate your employment for Good Reason will not be affected by your incapacity due to physical or mental illness. Your continued employment will not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder.

(g)    “Section 409A” is defined as Section 409A of the Code and the final regulations and any guidance thereunder and any applicable state law equivalent, as each may be amended or promulgated from time to time.

(h)    “Section 409A Limit” is defined as two (2) times the lesser of: (i) your annualized compensation based upon the annual rate of pay paid to you during the your taxable year preceding the taxable year of your separation from service as determined under Treasury Regulation Section l.409A-l(b)(9)(iii)(A)(l) and any Internal Revenue Service guidance issued with respect thereto; or (ii) the maximum amount that may be taken into account under a qualified plan pursuant to Section 401(a)(l 7) of the Code for the year in which your separation from service occurred.

3.    Limitation on Payments. In the event that the severance and other payments and benefits provided for in this Agreement or otherwise payable to you (collectively, the “Payments”) (i) constitute “parachute payments” within the meaning of Section 280G of the Code and (ii) but for this Section 3 of Appendix A, would be subject to the excise tax imposed by Section 4999 of the Code, then such Payments will be either:

(a)    delivered in full, or

-9-

(b)    delivered as to such lesser extent which would result in no portion of such Payments being subject to the excise tax under Code Section 4999,

whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the excise tax imposed by Code Section 4999, results in the receipt by you on an after-tax basis, of the greatest amount of Payments, notwithstanding that all or some portion of such Payments may be taxable under Code Section 4999. If a reduction in the Payments constituting “parachute payments” is necessary so that no portion of such Payments is subject to the excise tax under Code Section 4999, the reduction will occur in the following order: (1) reduction of the cash severance payments, which will occur in reverse chronological order such that the cash payment owed on the latest date following the occurrence of the event triggering such excise tax will be the first cash payment to be reduce; (2) cancellation of accelerated vesting of equity awards which will occur in the reverse order of the date of grant for such stock awards (i.e., the vesting of the most recently granted stock awards will be reduced first); and (3) reduction of continued employee benefits, which will occur in reverse chronological order such that the benefit owed on the latest date following the occurrence of the event triggering such excise tax will be the first benefit to be reduced. If two or more equity awards are granted on the same date, each award will be reduced on a pro-rata basis. Notwithstanding the foregoing, to the extent the Company submits any Payment to the Company’s shareholders for approval in accordance with Treasury Reg. Section l.280G-1 Q&A 7, the foregoing provisions will not apply following such submission and such payments and benefits will be treated in accordance with the results of such vote, except that any reduction in, or waiver of, such payments or benefits required by such vote will be applied without any application of discretion by you and in the order prescribed by this section. In no event will you have any discretion with respect to the ordering of payment reductions.

A nationally recognized certified professional services firm selected by the Company, the Company’s legal counsel or such other person or entity to which the parties mutually agree (the “Firm”) will perform the foregoing calculations related to the Excise Tax. The Company will bear all expenses with respect to the determinations by the Firm required to be made hereunder. For purposes of making the calculations required by this Section, the Firm may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Code Sections 280G and 4999. The Company and you will furnish to the Firm such information and documents as the Firm may reasonably request in order to make a determination under this Section. The Firm engaged to make the determinations hereunder will provide its calculations, together with detailed supporting documentation, to the Company and you within 15 calendar days after the date on which your right to the severance benefits or other payments is triggered (if requested at that time by the Company or you) or such other time as requested by the Company or you. Any good faith determinations of the Firm made hereunder will be final, binding, and conclusive upon the Company and you.

-10-

EX-10.7(B)

Exhibit 10.7.b

Amendment to Offer Letter

This Amendment to the Offer Letter from Satsuma Pharmaceuticals, Inc. (the “Company”) to John A. Kollins dated as of June 17, 2016 (this “Amendment”), is effective upon the Closing of the Qualified Financing of the Company (as defined herein) (the “Effective Date”).

In consideration of these promises and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

1. The definition of Qualified Financing in Paragraph 2 shall be amended to read: “Qualified Financing” means the closing of the sale and issuance of equity securities of the Company (or securities convertible or exchangeable into equity securities of the Company) in a single transaction or series of related transactions primarily for capital raising purposes (a “Financing”) where the Company raises an amount that when combined with all prior Financings equals or exceeds $6,000,000.

2. The penultimate sentence in Paragraph 6 shall be amended to read: “Subject to any vesting acceleration provisions, the Restricted Stock will vest as follows: 25% of the Restricted Stock will vest upon the initial closing of a Qualified Financing (the “Closing”) that occurs while you are providing services to the Company and 1/36th of the remaining shares of Restricted Stock will vest each month following the Closing (on the same day of the month as the Closing), subject to you continuing to provide services to the Company through each vesting date.”

3. The following sentence shall be added to the end of Paragraph 8: “For the avoidance of doubt, if you are entitled to the benefits set forth in this Section 8, you shall not also be entitled to the benefits set forth in Section 7 above.”

4. The last paragraph of subsection (iii) in the definition of “Change in Control” in Appendix A shall be amended to read in its entirety: “Further and for the avoidance of doubt, for the purposes of this letter agreement, (A) a transaction will not constitute a Change in Control if: (x) its sole purpose is to change the jurisdiction of the Company’s incorporation, (y) its sole purpose is to create a holding company that will be owned in substantially the same proportions by the persons who held the Company’s securities immediately before such transaction, or (z) it is a sale of equity securities (or securities convertible or exercisable for equity securities) by the Company primarily for capital raising purposes (an “Equity Financing”), and (B) investors in any Equity Financing shall not be deemed to be a “group” for purposes of Sections 13(d) and (g) of the Securities Exchange Act of 1934, as amended, due to their concerted action relating to the purchase of securities in an Equity Financing or due to their execution of, performance under, or enforcement of, any investor agreements entered into in connection with an Equity Financing, including, without limitation, purchase agreements, voting agreements, investor rights agreements, rights of first refusal agreements and security agreements.”

5. The applicable provisions of the Restricted Stock Purchase Agreement between John Kollins and the Company dated June 29, 2016 will be amended according to the terms of this Amendment.

(remainder of page intentionally left blank)

In Witness Whereof, the undersigned have executed this Amendment as of the Effective Date. This Amendment may be executed in one or more counterparts, each of which shall be deemed an original, and all of which shall constitute one and the same instrument. Any copy, facsimile or other reliable reproduction of this action may be substituted or used in lieu of the original writing for any and all purposes for which the original writing could be used.

JOHN KOLLINS	SATSUMA PHARMACEUTICALS, INC.
/s/ John Kollins John Kollins	/s/ Ken Takanashi Ken Takanashi]
	Director

EX-10.8

Exhibit 10.8

Satsuma Pharmaceuticals, Inc.

June 12, 2017

Detlef F. Albrecht, M.D.

***

Dear Detlef:

I am pleased to offer you a position with Satsuma Pharmaceuticals, Inc. (the “Company”), as its Chief Medical Officer (“CMO”) reporting to the Company’s President and Chief Executive Officer (the “CEO”). Unless otherwise defined in the letter, capitalized terms will have the meanings set forth in Appendix A. If you accept our offer, your first day of employment will be June 19, 2017 (the day you actually commence employment hereunder, the “Start Date”).

1.    Duties. As CMO, you will have such duties and responsibilities commensurate with those customarily associated with that position, including such duties and responsibilities as reasonably assigned by the CEO. You will devote substantially all of your time, attention and skill to such duties, except during any paid vacation and other excused absence periods, and will use your best efforts to promote the success of the business of the Company.

For the duration of your term of employment with the Company, you agree not to (a) actively engage in any other employment, occupation or consulting activity for any direct or indirect remuneration or (b) render commercial or professional services of any nature to any person or organization, whether or not for compensation, in each case, without the prior approval of the CEO.

2.    Base Salary. You will receive an initial annual base salary of $340,000. The CEO will review your salary annually and you will be eligible for salary increases subject to requisite approvals, including those of the CEO and Satsuma Pharrnaceutical’s Board of Directors (the “Board”). Your annual base salary will be paid, less applicable withholdings, in accordance with the Company’s normal payroll procedures.

3.    Annual Performance Bonus and Signing Bonus. You also will be eligible to receive an annual target bonus of 15% of your annual base salary for 2017, and for each year thereafter 30% of your annual base salary, upon achievement of performance objectives to be determined by the CEO and Board (the “Bonus”). Following the end of the each calendar year, the Board, in its discretion, will determine the extent to which the performance objectives relating to the Bonus for that year were achieved and the extent to which the Bonus becomes earned for that year. In order to be eligible to receive a Bonus, you must be employed through the date the Board makes its determination to what extent the performance goals have been achieved and the amount of the Bonus to which you will be entitled, which the Board will make its determination no later than April 1 of the calendar year following the calendar year to which the Bonus relates. Any Bonus, or portion thereof, will be paid, less applicable withholdings, as soon as practicable after the Board makes its determination of the extent to which the Bonus has been earned, but in no event later than May 1 following the calendar year in which the Board makes its determination as to the extent a Bonus has been earned (if at all). Upon receiving from you a final signed version of this Employment Letter, the Company shall as soon as practicable pay to you a signing bonus in the amount of $51,000, less any applicable withholdings (the “Signing Bonus”). Should you resign from the Company before the first anniversary of the Start Date, you shall, within 30 days of the date of such resignation, repay to the Company the full amount of the Signing Bonus.

4.    Employee Benefits. You also will be eligible to receive certain employee benefits that the Company may establish from time to time for its other employees, subject to the eligibility requirements of the applicable benefit plans. You will also be entitled to a minimum of twenty (20) days paid time-off each year, subject to the terms of the Company’s paid time off policy as in effect from time to time. You should note that the Company may modify job titles, salaries and benefits from time to time as it deems necessary (though certain modifications may trigger your rights to resign for Good Reason, described below).

5.    Expenses. You will be entitled to reimbursement for all reasonable and necessary out-of-pocket business, entertainment and travel expenses incurred in connection with the performance of your duties hereunder in accordance with the Company’s expense reimbursement policies and procedures.

6.    Stock Option Grant. In addition, if you decide to join the Company, it will be recommended that the Board grant you an award of 240,000 common stock options that vest according to the following schedule and subject to you continuing to provide services to the Company through each vesting date:

(a)    25% cliff vest upon one year anniversary of issuance

(b)    1/36th of the remaining options will begin vesting each month following the one year anniversary of issuance

7.    Termination other than for Cause, death or Disability outside the Change in Control Period. If , outside of the Change in Control Period, the Company terminates your employment other than for Cause, death or Disability, then, provided you deliver to the Company a customary separation agreement and release of claims related to your employment with the Company in a form reasonably satisfactory to the Company (the “Release”) that becomes effective and irrevocable within 60 days of the date your employment with the Company terminates, you will be entitled to receive, subject to the terms of Appendix A:

(a)    continuing payments of your base salary, as then in effect, less applicable withholdings and in accordance with the Company’s normal payroll procedures, for a period of six (6) months from the date your employment with the Company terminates with the first payment to made within 10 days following the effective date of the Release (and include any payments that otherwise would have been paid to you between your termination date and the effective date of the Release under the Company’s normal payroll cycle), with any remaining payments paid in accordance with the Company’s normal payroll practices for the remainder of the 6-month period following your termination of employment (subject to any delay as may be required for compliance with Section 409A in accordance with Appendix A);

(b)    reimbursement for the cost of continuation of health coverage for you and your eligible dependents pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) until the earlier of (i) six (6) months following your termination of employment or (ii) the date you and your eligible dependents are no longer eligible for COBRA; provided, however, if, at the time of your termination of employment, the Company determines that providing the COBRA reimbursement in this paragraph would result in a violation of law or an excise tax to the Company, then the Company instead will pay a lump sum payment, grossed up to an amount that mitigates the effect of any applicable tax withholding obligations that arise with respect to the payment, equal to six (6) months of your estimated COBRA premiums, less applicable withholdings, within 10 days following the effective date of the Release (subject to any delay as may be required for compliance with Section 409A).

8.    Termination other than for Cause, death or Disability, or Resignation for Good Reason within the Change in Control Period. If, within 12 months following a Change in Control (the “Change in Control Period”), the Company (or its successor) terminates your employment other than for Cause, death

-2-

or Disability or you resign from your employment with the Company (or its successor) for Good Reason, then, provided you deliver to the Company a Release that becomes effective and irrevocable within 60 days of the date your employment with the Company (or its successor) terminates, you will be entitled to receive subject to the terms of Appendix A:

(a)    a lump-sum payment equal to six (6) months of your base salary, as then in effect, to be paid within 10 days following the effective date of the Release (subject to any delay as may be required for compliance with Section 409A);

(b)    a lump-sum payment, to be paid within 10 days following the effective date of the Release (subject to any delay as may be required for compliance with Section 409A), of an amount equal to your annual target Bonus for the year in which the termination occurs (or, if higher, your target annual Bonus as in effect immediately prior to the Change in Control), prorated to the termination date.

(c)    reimbursement for the cost of continuation of health coverage for you and your eligible dependents pursuant to the COBRA until the earlier of (i) six (6) months following your termination of employment or (ii) the date you and your eligible dependents are no longer eligible for COBRA; provided, however, if, at the time of your termination of employment, the Company (or its successor) determines that providing the COBRA reimbursement in this paragraph would result in a violation of law or an excise tax to the Company (or its successor), then the Company (or its successor) instead will pay a lump sum payment, grossed up to an amount that mitigates the effect of any applicable tax withholding obligations that arise with respect to the payment, equal to six (6) months of your estimated COBRA premiums, less applicable withholdings, within 10 days following the effective date of the Release (subject to any delay as may be required for compliance with Section 409A); and

(d)    the vesting of each equity award held by you, including, without limitation, any other stock option, restricted stock unit award or restricted stock award held by you as of your employment termination date shall be accelerated and, if applicable, become exercisable with respect to 100% of the then-unvested shares of Company common stock subject to such equity award.

(e)    For the avoidance of doubt, if you are entitled to the benefits set forth in this Section 8, you shall not also be entitled to the benefits set forth in Section 7 above.

9.    Termination for Cause, death or Disability or Resignation Without Good Reason. If your employment with the Company is terminated voluntarily by you without Good Reason or for Good Reason outside the Change in Control Period, by the Company for Cause or due to your death or Disability, then you will be entitled to receive salary and accrued but unused vacation time through the effective date of termination. Additionally, provided you have not voluntarily terminated your employment with the Company without Good Reason or the Company has not terminated your employment for Cause, you will also be entitled to receive any Bonus earned, but not yet paid, as of your date of termination (“Accrued Benefits”). Moreover, on your termination date: (i) all vesting will terminate immediately with respect to your then outstanding equity awards (unless you commence providing services as a consultant or director as of the date of such termination of employment, in which case your outstanding equity awards will be treated in accordance with the equity plan under which they are granted and the agreements evidencing any such awards); (ii) all payments of compensation by the Company to you hereunder will terminate immediately (except your Accrued Benefits); and (iii) you will only be eligible for severance benefits in accordance with the Company’s established policies, if any, as then in effect.

In the event of your termination of employment with the Company, the preceding Sections 8, 9, and 10 are intended to be and are exclusive and in lieu of any other rights or remedies to which you or the Company may otherwise be entitled, whether at law, tort or contract, in equity or under this letter.

-3-

10.    Confidential Information Agreement; Compliance with Company Policies. As a condition of your employment, you are also required to sign and comply with an At-Will Employment, Confidential Information, Invention Assignment and Arbitration Agreement (the “Confidential Information Agreement”) which requires, among other provisions, the assignment of patent rights to any invention made during your employment at the Company, and non-disclosure of Company proprietary information and compliance with the arbitration provisions in the event of any dispute or claim relating to or arising out of our employment relationship.

As a Company employee, you will be expected to abide by the Company’s rules and standards. Specifically, you will be required to sign an acknowledgment that you have read and that you understand the Company’s rules of conduct which are included in the Company Handbook, which the Company will soon complete and distribute.

11.    Conflicting Interests. We also ask that, if you have not already done so, you disclose to the Company any and all agreements relating to your prior employment that may affect your eligibility to be employed by the Company or limit the manner in which you may be employed. The Company understands that any such agreements will not prevent you from performing the duties of your position and you represent that such is the case. Moreover, you agree that, during the term of your employment with the Company, you will not engage in any other employment, occupation, consulting or other business activity directly related to the business in which the Company is now involved or becomes involved during the term of your employment, nor will you engage in any other activities that conflict with your obligations to the Company. Similarly, you agree not to bring any third party confidential information to the Company, including that of your former employer, and that in performing your duties for the Company you will not in any way utilize any such information.

12.    Proof of Eligibility to Work. For purposes of federal immigration law, you will be required to provide to the Company documentary evidence of your identity and eligibility for employment in the United States. Such documentation must be provided to us within three (3) business days of your date of hire, or our employment relationship with you may be te1minated.

13.    Miscellaneous. The Company is excited about your joining and looks forward to a beneficial and productive relationship. Nevertheless, you should be aware that your employment with the Company is for no specified period and constitutes at-will employment. As a result, you are free to resign at any time, for any reason or for no reason . Similarly, the Company is free to conclude its employment relationship with you at any time, with or without cause and with or without notice. We request that , in the event of resignation, you give the Company at least two weeks’ notice.

To accept the Company’s offer, please sign and date this letter in the space provided below. A duplicate original is enclosed for your records. This letter (including Appendix A), along with any agreements relating to proprietary rights between you and the Company and the equity plan and stock option agreement , set forth the terms of your employment with the Company and supersede any prior representations or agreements including, but not limited to, any representations made during your recruitment, interviews or pre-employment negotiations, whether written or oral. This letter, including, but not limited to, its at-will employment provision, may not be modified or amended except by a written agreement signed by an authorized representative of the Company and you.

-4-

We look forward to your favorable reply and to working with you at the Company.

Sincerely,

/s/ John Kollins

John Kollins

President & Chief Executive Officer

Agreed to and accepted:

Signature:	/s/ Detlef F. Albrecht
Printed Name:
Date:

Enclosures

Employment, Confidential Information, Invention Assignment and Arbitration Agreement

-5-

Appendix A

ADDITIONAL TERMS TO EMPLOYMENT LETTER

Unless otherwise defined below, capitalized terms used herein will have the meanings set forth in the Agreement.

1.    Section 409A.

(a)    Notwithstanding anything to the contrary in this Agreement, no Deferred Payments will be paid or otherwise provided until you have a “separation from service” (within the meaning of Section 409A) from the relevant position or positions. Similarly, no severance payable to you, if any, pursuant to this Agreement that otherwise would be exempt from Section 409A solely pursuant to Treasury Regulation Section l.409A-l(b)(9) will be payable until you have a “separation from service” (within the meaning of Section 409A).

(b)    Notwithstanding anything to the contrary in this Agreement, if you are a “specified employee” within the meaning of Section 409A at the time of your termination of employment (other than due to death), then the Deferred Payments that are payable within the first six (6) months following your separation from service, will, to the extent required to be delayed pursuant to Section 409A(a)(2)(B) of the Code, become payable on the first payroll date that occurs on or after the date six (6) months and one (1) day following the date of your separation from service. All subsequent Deferred Payments, if any, will be payable in accordance with the payment schedule applicable to each payment or benefit. Notwithstanding anything herein to the contrary, if you die following your separation from service, but prior to the six (6) month anniversary of the separation from service, then any payments delayed in accordance with this paragraph will be payable in a lump sum as soon as administratively practicable after the date of your death and all other Deferred Payments will be payable in accordance with the payment schedule applicable to each payment or benefit. In no event will the Company reimburse you for any taxes that may be imposed on you as a result of Section 409A. Each payment and benefit payable under this Agreement is intended to constitute a separate payment for purposes of Section l.409A-2(b)(2) of the Treasury Regulations.

(c)    Any amount paid under this Agreement that satisfies the requirements of the “short-term deferral” rule set forth in Section 1.409A-1(b)(4) of the Treasury Regulations will not constitute Deferred Payments for purposes of this Agreement.

(d)    Any amount paid under this Agreement that qualifies as a payment made as a result of an involuntary separation from service pursuant to Section l. 409A-l (b)(9)(iii) of the Treasury Regulations that does not exceed the Section 409A Limit (as defined below) will not constitute Deferred Payments for purposes of this Agreement.

(e)    The provisions of this Agreement and the payments and benefits hereunder are intended to be exempt from or comply with the requirements of Section 409A so that none of the severance or other payments and benefits to be provided hereunder will be subject to the additional tax imposed under Section 409A, and any ambiguities herein will be interpreted to be so exempt or so comply. The Company and you agree to work together in good faith to consider amendments to this Agreement and to take such reasonable actions which are necessary, appropriate or desirable to avoid imposition of any additional tax or income recognition prior to actual payment to you under Section 409A.

-6-

2.    Definitions.

(a)    “Cause” means the occurrence of any of the following: (A) your willful and continued failure to perform your material duties to the Company that goes uncured after notice from the Company; (B) your willful or intentional conduct that causes or is expected to material and demonstrable injury, monetarily or otherwise, to the Company; or (C) your conviction of, or a plea of nolo contendere to, a crime constituting (x) a felony under the laws of the United States or any state thereof, or (y) a misdemeanor involving moral turpitude.

For purposes of the letter agreement, an act (or failure to act) will only be considered “willful” if done (or failed to be done) by you intentionally.

(b)    “Change in Control” is defined as:

(i)    any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) is or becomes the “ beneficial owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing more than 50% of the total voting power represented by the Company’s then outstanding voting securities; or

(ii)    the date of the consummation of a merger or consolidation of the Company with any other corporation that has been approved by the stockholders of the Company, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least 50% of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation; or

(iii)    the date of the consummation of the sale or disposition by the Company of all or substantially all the Company’s assets.

Notwithstanding the foregoing provisions of this definition, a transaction will not be deemed a Change in Control unless the transaction qualifies as a “change in control event” within the meaning of Section 409A.

Further and for the avoidance of doubt, for the purposes of this letter agreement, (A) a transaction will not constitute a Change in Control if: (x) its sole purpose is to change the jurisdiction of the Company’s incorporation, (y) its sole purpose is to create a holding company that will be owned in substantially the same proportions by the persons who held the Company’s securities immediately before such transaction, or (z) it is a sale of equity securities (or securities convertible or exercisable for equity securities) by the Company primarily for capital raising purposes (an “Equity Financing”), and (B) investors in any Equity Financing shall not be deemed to be a “group” for purposes of Sections 13(d) and (g) of the Securities Exchange Act of 1934, as amended, due to their concerted action relating to the purchase of securities in an Equity Financing or due to their execution of, performance under, or enforcement of, any investor agreements entered into in connection with an Equity Financing, including, without limitation, purchase agreements, voting agreements, investor rights agreements, rights of first refusal agreements and security agreements.

(c)    “Code” is defined as the Internal Revenue Code of 1986, as amended.

(d)    “Deferred Payment” is defined as any severance pay or benefits to be paid or provided to you (or your estate or beneficiaries) pursuant to this Agreement and any other severance payments or separation benefits to be paid or provided to you (or your estate or beneficiaries), that in each case, when considered together, are considered deferred compensation under Section 409A.

-7-

(e)    “Disability” is defined as your inability to perform the essential functions of your position with or without reasonable accommodation for a period of 120 consecutive days because of your physical or mental impairment.

(f)    “Good Reason” means the occurrence of any of the following events or conditions, without your express written consent (which consent may be denied, withheld or delayed for any reason):

(i)    a material reduction in your duties, authority or responsibilities;

(ii)    outside of a Change of Control Period, a requirement that you report to any person who is not the CEO, unless such person or persons has duties, authority and responsibilities that are at least commensurate with those of the CEO; and within a Change of Control Period, a material change in the person or persons to whom you have reporting responsibilities that represents an adverse change from those reporting responsibilities in effect at any time within ninety (90) days preceding the date of the Change of Control or at any time thereafter; provided, however, that a Change of Control which results in the subsequent conversion of the Company to a division or unit of the acquiring corporation will not by itself be deemed to result in a material reduction in your reporting responsibilities.

(iii)    a material reduction by the Company in your annual base salary or annual bonus or incentive compensation opportunity as in effect as of the Start Date or as the same may be increased from time to time;

(iv)    a requirement by the Company that your principal place of employment to a location more than 30 miles from your principal place of employment immediately prior to his termination or the Company’s requiring you to be based anywhere other than such principal place of employment (or permitted relocation thereof) except for required travel on the Company’s business to an extent substantially consistent with travel requirements standard and customary in the industry; or

(v)    any action or inaction that constitutes an uncured, material breach by the Company of the letter agreement or any other agreement between the Company and you, or any uncured, material breach by the Company of a policy relating to the benefits to which are entitled.

You will provide notice to the Company of the condition giving rise to “Good Reason” within 90 days of the initial existence of such condition and the Company will have 30 days following such notice to remedy such condition. Your right to terminate your employment for Good Reason will not be affected by your incapacity due to physical or mental illness. Your continued employment will not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder.

(g)    “Section 409A” is defined as Section 409A of the Code and the final regulations and any guidance thereunder and any applicable state law equivalent, as each may be amended or promulgated from time to time.

(h)    “Section 409A Limit” is defined as two (2) times the 1esser of: (i) your annualized compensation based upon the annual rate of pay paid to you during the your taxable year preceding the taxable year of your separation from service as determined under Treasury Regulation Section l.409A-l(b)(9)(iii)(A)(l) and any Internal Revenue Service guidance issued with respect thereto; or (ii) the maximum amount that may be taken into account under a qualified plan pursuant to Section 40l(a)(l 7) of the Code for the year in which your separation from service occurred.

-8-

3.    Limitation on Payments. In the event that the severance and other payments and benefits provided for in this Agreement or otherwise payable to you (collectively, the “Payments”) (i) constitute “parachute payments” within the meaning of Section 280G of the Code and (ii) but for this Section 3 of Appendix A, would be subject to the excise tax imposed by Section 4999 of the Code, then such Payments will be either:

(a)    delivered in full, or

(b)    delivered as to such lesser extent which would result in no portion of such Payments being subject to the excise tax under Code Section 4999,

whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the excise tax imposed by Code Section 4999, results in the receipt by you on an after-tax basis, of the greatest amount of Payments, notwithstanding that all or some portion of such Payments may be taxable under Code Section 4999. If a reduction in the Payments constituting “parachute payments” is necessary so that no portion of such Payments is subject to the excise tax under Code Section 4999, the reduction will occur in the following order: (1) reduction of the cash severance payments, which will occur in reverse chronological order such that the cash payment owed on the latest date following the occurrence of the event triggering such excise tax will be the first cash payment to be reduce; (2) cancellation of accelerated vesting of equity awards which will occur in the reverse order of the date of grant for such stock awards (i.e., the vesting of the most recently granted stock awards will be reduced first); and (3) reduction of continued employee benefits, which will occur in reverse chronological order such that the benefit owed on the latest date following the occurrence of the event triggering such excise tax will be the first benefit to be reduced. If two or more equity awards are granted on the same date, each award will be reduced on a pro-rata basis. Notwithstanding the foregoing, to the extent the Company submits any Payment to the Company’s shareholders for approval in accordance with Treasury Reg. Section l.280G-1 Q&A 7, the foregoing provisions will not apply following such submission and such payments and benefits will be treated in accordance with the results of such vote, except that any reduction in, or waiver of, such payments or benefits required by such vote will be applied without any application of discretion by you and in the order prescribed by this section. In no event will you have any discretion with respect to the ordering of payment reductions.

A nationally recognized certified professional services firm selected by the Company, the Company’s legal counsel or such other person or entity to which the parties mutually agree (the “Firm”) will perform the foregoing calculations related to the Excise Tax. The Company will bear all expenses with respect to the determinations by the Firm required to be made hereunder. For purposes of making the calculations required by this Section, the Firm may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Code Sections 280G and 4999. The Company and you will furnish to the Firm such information and documents as the Firm may reasonably request in order to make a determination under this Section. The Firm engaged to make the determinations hereunder will provide its calculations, together with detailed supporting documentation, to the Company and you within 15 calendar days after the date on which your right to the severance benefits or other payments is triggered (if requested at that time by the Company or you) or such other time as requested by the Company or you. Any good faith determinations of the Firm made hereunder will be final, binding, and conclusive upon the Company and you.

-9-

EX-10.9

Exhibit 10.9

Satsuma Pharmaceuticals, Inc.

December 21, 2018

Tom O’Neil

***

Via Electronic Mail

Dear Tom:

I am pleased to offer you a position with Satsuma Pharmaceuticals, Inc. (the “Company”), as its Chief Financial Officer reporting to the Company’s President and Chief Executive Officer (the “CEO”). Unless otherwise defined in the letter, capitalized terms will have the meanings set forth in Appendix A. If you accept our offer, your first day of employment will be January 14, 2019 (the day you actually commence employment hereunder, the “Start Date”).

1.    Duties. As Chief Financial Officer, you will have such duties and responsibilities commensurate with those customarily associated with that position, including such duties and responsibilities as reasonably assigned by the CEO. You will devote substantially all of your time, attention and skill to such duties, except during any paid vacation and other excused absence periods, and will use your best efforts to promote the success of the business of the Company.

For the duration of your term of employment with the Company, you agree not to (a) actively engage in any other employment, occupation or consulting activity for any direct or indirect remuneration or (b) render commercial or professional services of any nature to any person or organization, whether or not for compensation, in each case, without the prior approval of the CEO.

2.    Base Salary. You will receive an initial annual base salary of $300,000. The CEO will review your salary annually and you will be eligible for salary increases subject to requisite approvals, including those of the CEO and Satsuma Pharmaceutical’s Board of Directors (the “Board”). Your annual base salary will be paid, less applicable withholdings, in accordance with the Company’s normal payroll procedures.

3.    Signing Bonus and Annual Performance Bonus. Upon receiving from you a final signed version of this Employment Letter, you shall be eligible to receive a signing bonus in the amount of $80,000, less any applicable withholdings (the “Signing Bonus”). The Signing Bonus will be payable in two equal payments: The Company shall make the first payment to you (in the amount of $40,000, less any applicable withholdings) on the first regularly scheduled payroll date following your Start Date, and it shall make the second payment to you (in the amount of $40,000, less any applicable withholdings) on the first regularly scheduled payroll date following the closing of a Qualified Financing. For purposes of this letter agreement, a “Qualified Financing” means the closing of the sale and issuance of equity securities of the Company prior to or on December 31, 2019 in a single transaction or series of related transactions primarily for capital raising purposes where the Company raises an amount that equals or exceeds $25,000,000. Should you resign from the Company before the first anniversary of the Start Date, you shall, within 30 days of the date of such resignation, repay to the Company the full amount of the Signing Bonus that was actually paid to you by the Company.

Annual Performance Bonus.

In addition, beginning in calendar year 2019, you will be eligible to receive an annual target bonus of 25% of your annual base salary upon achievement of performance objectives to be determined by the CEO and Board (the “Bonus”). Following the end of the each calendar year, the Board, in its discretion, will determine the extent to which the performance objectives relating to the Bonus for that year were achieved and the extent to which the Bonus becomes earned for that year. In order to be eligible to receive a Bonus, you must be employed through the date the Board makes its determination to what extent the performance goals have been achieved and the amount of the Bonus to which you will be entitled, which the Board will make its determination no later than April 1 of the calendar year following the calendar year to which the Bonus relates. Any Bonus, or portion thereof, will be paid, less applicable withholdings, as soon as practicable after the Board makes its determination of the extent to which the Bonus has been earned, but in no event later than May 1 following the calendar year in which the Board makes its determination as to the extent a Bonus has been earned (if at all).

4.    Employee Benefits. You also will be eligible to receive certain employee benefits that the Company may establish from time to time for its other employees, subject to the eligibility requirements of the applicable benefit plans. You will also be entitled to a minimum of twenty (20) days paid time-off each year, subject to the terms of the Company’s paid time off policy as in effect from time to time. You should note that the Company may modify job titles, salaries and benefits from time to time as it deems necessary (though certain modifications may trigger your rights to resign for Good Reason, described below).

5.    Expenses. You will be entitled to reimbursement for all reasonable and necessary out-of-pocket business, entertainment and travel expenses incurred in connection with the performance of your duties hereunder in accordance with the Company’s expense reimbursement policies and procedures.

6.    Relocation. In the event the Company requires you to permanently relocate, you will be entitled to reimbursement of reasonable relocation expenses, subject to the terms of the Company’s employee relocation policy, as in effect from time to time.

7.    Stock Option Grants. In addition, if you decide to join the Company the Company will, subject to Board approval, grant you an award of 360,000 common stock options¹ (the “Initial Stock Option Grant”) that vest according to the following schedule and subject to you continuing to provide services to the Company through each vesting date:

(a)    25% vest upon one year anniversary of issuance

(b)    1/36^th of the remaining options will begin vesting each month on each monthly anniversary of your Start Date thereafter so that all 360,000 options are fully vested on the fourth anniversary of your Start Date.

¹  This option grant represents 1.5% of the Company’s current fully diluted shares outstanding.

-2-

Top-up Stock Option Grant. Subject to Board approval, the Company will grant you an award of additional common stock options (the “Top-up Stock Option Grant) following the closing of a Qualified Financing in an amount such that the sum of the common stock options granted to you under the Initial Stock Option Grant and the Top-up Stock Option Grant represents one percent of the Company’s fully diluted outstanding shares immediately following the closing of the Qualified Financing. To the extent feasible, the common stock options granted to you under the Top-up Stock Option Grant will have the same vesting schedule as those common stock options issued to you under the Initial Stock Option Grant, with such vesting subject to you continuing to provide services to the Company through each vesting date.

8.    Termination other than for Cause, death or Disability outside the Change in Control Period. If, outside of the Change in Control Period, the Company terminates your employment other than for Cause, death or Disability, then, provided you deliver to the Company a customary separation agreement and release of claims related to your employment with the Company in a form reasonably satisfactory to the Company (the “Release”) that becomes effective and irrevocable within 60 days of the date your employment with the Company terminates, you will be entitled to receive, subject to the terms of Appendix A:

(a)    continuing payments of your base salary, as then in effect, less applicable withholdings and in accordance with the Company’s normal payroll procedures, for a period of six (6) months from the date your employment with the Company terminates with the first payment to be made within 10 days following the effective date of the Release (and include any payments that otherwise would have been paid to you between your termination date and the effective date of the Release under the Company’s normal payroll cycle), with any remaining payments paid in accordance with the Company’s normal payroll practices for the remainder of the 6-month period following your termination of employment (subject to any delay as may be required for compliance with Section 409A in accordance with Appendix A);

(b)    reimbursement for the cost of continuation of health coverage for you and your eligible dependents pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) until the earlier of (i) six (6) months following your termination of employment or (ii) the date you and your eligible dependents are no longer eligible for COBRA; provided, however, if, at the time of your termination of employment, the Company determines that providing the COBRA reimbursement in this paragraph would result in a violation of law or an excise tax to the Company, then the Company instead will pay a lump sum payment, grossed up to an amount that mitigates the effect of any applicable tax withholding obligations that arise with respect to the payment, equal to six (6) months of your estimated COBRA premiums, less applicable withholdings, within 10 days following the effective date of the Release (subject to any delay as may be required for compliance with Section 409A).

9.    Termination other than for Cause, death or Disability, or Resignation for Good Reason within the Change in Control Period. If, within 12 months following a Change in Control (the “Change in Control Period”), the Company (or its successor) terminates your employment other than for Cause, death or Disability or you resign from your employment with the Company (or its successor) for Good Reason, then, provided you deliver to the Company a Release that becomes effective and irrevocable within 60 days of the date your employment with the Company (or its successor) terminates, you will be entitled to receive subject to the terms of Appendix A:

(a)    a lump-sum payment equal to six (6) months of your base salary, as then in effect, to be paid within 10 days following the effective date of the Release (subject to any delay as may be required for compliance with Section 409A);

-3-

(b)    a lump-sum payment, to be paid within 10 days following the effective date of the Release (subject to any delay as may be required for compliance with Section 409A), of an amount equal to your annual target Bonus for the year in which the termination occurs (or, if higher, your target annual Bonus as in effect immediately prior to the Change in Control), prorated to the termination date.

(c)    reimbursement for the cost of continuation of health coverage for you and your eligible dependents pursuant to the COBRA until the earlier of (i) six (6) months following your termination of employment or (ii) the date you and your eligible dependents are no longer eligible for COBRA; provided, however, if, at the time of your termination of employment, the Company (or its successor) determines that providing the COBRA reimbursement in this paragraph would result in a violation of law or an excise tax to the Company (or its successor), then the Company (or its successor) instead will pay a lump sum payment, grossed up to an amount that mitigates the effect of any applicable tax withholding obligations that arise with respect to the payment, equal to six (6) months of your estimated COBRA premiums, less applicable withholdings, within 10 days following the effective date of the Release (subject to any delay as may be required for compliance with Section 409A); and

(d)    the vesting of each equity award held by you, including, without limitation, any other stock option, restricted stock unit award or restricted stock award held by you as of your employment termination date shall be accelerated and, if applicable, become exercisable with respect to 100% of the then-unvested shares of Company common stock subject to such equity award.

(e)    For the avoidance of doubt, if you are entitled to the benefits set forth in this Section 8, you shall not also be entitled to the benefits set forth in Section 7 above.

10.    Termination for Cause, death or Disability or Resignation Without Good Reason. If your employment with the Company is terminated voluntarily by you without Good Reason or for Good Reason outside the Change in Control Period, by the Company for Cause or due to your death or Disability, then you will be entitled to receive salary and accrued but unused vacation time through the effective date of termination. Additionally, if you have not voluntarily terminated your employment with the Company without Good Reason or the Company has not terminated your employment for Cause, you will also be entitled to receive any Bonus earned, but not yet paid, as of your date of termination (“Accrued Benefits”), which will be paid to you within 30 days of the date your employment terminates and in no event will it be paid later than May 1s^t of the year following the year in which your termination occurs. Moreover, on your termination date: (i) all vesting will terminate immediately with respect to your then outstanding equity awards (unless you commence providing services as a consultant or director as of the date of such termination of employment, in which case your outstanding equity awards will be treated in accordance with the equity plan under which they are granted and the agreements evidencing any such awards); (ii) all payments of compensation by the Company to you hereunder will terminate immediately (except your Accrued Benefits); and (iii) you will only be eligible for severance benefits in accordance with the Company’s established policies, if any, as then in effect.

-4-

In the event of your termination of employment with the Company, the preceding Sections 8, 9, and 10 are intended to be and are exclusive and in lieu of any other rights or remedies to which you or the Company may otherwise be entitled, whether at law, tort or contract, in equity or under this letter.

11.    Confidential Information Agreement; Compliance with Company Policies. As a condition of your employment, you are also required to sign and comply with an At-Will Employment, Confidential Information, Invention Assignment and Arbitration Agreement (the “Confidential Information Agreement”) which requires, among other provisions, the assignment of patent rights to any invention made during your employment at the Company, and non-disclosure of Company proprietary information and compliance with the arbitration provisions in the event of any dispute or claim relating to or arising out of our employment relationship.

As a Company employee, you will be expected to abide by the Company’s rules and standards. Specifically, you will be required to sign an acknowledgment that you have read and that you understand the Company’s rules of conduct which are included in the Company Handbook, which the Company will soon complete and distribute.

12.    Conflicting Interests. We also ask that, if you have not already done so, you disclose to the Company any and all agreements relating to your prior employment that may affect your eligibility to be employed by the Company or limit the manner in which you may be employed. The Company understands that any such agreements will not prevent you from performing the duties of your position and you represent that such is the case. Moreover, you agree that, during the term of your employment with the Company, you will not engage in any other employment, occupation, consulting or other business activity directly related to the business in which the Company is now involved or becomes involved during the term of your employment, nor will you engage in any other activities that conflict with your obligations to the Company. Similarly, you agree not to bring any third party confidential information to the Company, including that of your former employer, and that in performing your duties for the Company you will not in any way utilize any such information.

13.    Proof of Eligibility to Work. For purposes of federal immigration law, you will be required to provide to the Company documentary evidence of your identity and eligibility for employment in the United States. Such documentation must be provided to us within three (3) business days of your date of hire, or our employment relationship with you may be terminated.

14.    Miscellaneous. The Company is excited about your joining and looks forward to a beneficial and productive relationship. Nevertheless, you should be aware that your employment with the Company is for no specified period and constitutes at-will employment. As a result, you are free to resign at any time, for any reason or for no reason. Similarly, the Company is free to conclude its employment relationship with you at any time, with or without cause and with or without notice. We request that, in the event of resignation, you give the Company at least two weeks’ notice.

-5-

To accept the Company’s offer, please sign and date this letter in the space provided below. This letter (including Appendix A), along with any agreements relating to proprietary rights between you and the Company and the equity plan and stock option agreement, set forth the terms of your employment with the Company and supersede any prior representations or agreements including, but not limited to, any representations made during your recruitment, interviews or pre-employment negotiations, whether written or oral. This letter, including, but not limited to, its at-will employment provision, may not be modified or amended except by a written agreement signed by an authorized representative of the Company and you.

We look forward to your favorable reply and to working with you at the Company.

-6-

Sincerely,

/s/ John Kollins

John Kollins

President & Chief Executive Officer

Agreed to and accepted:

Signature:	/s/ Tom O’Neil
Printed Name:	Tom O’Neil
Date:	December 21, 2018

Enclosures

Employment, Confidential Information, Invention Assignment and Arbitration Agreement

-7-