UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from- to
Commission File Number 001-38293

SCPHARMACEUTICALS INC.
(Exact name of registrant as specified in its Charter)
Delaware 46-5184075
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2400 District Avenue, Suite 310
Burlington, Massachusetts 01803
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (617) 517-0730
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common stock, par value $0.0001 SCPH The Nasdaq Global Select Market
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☐ NO ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. YES ☐ NO ☒
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. YES ☒ NO ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YES ☒ NO ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth
company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☒ 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 pursuant to Section 13(a) of the Exchange Act. ☒
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the
effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by
the registered public accounting firm that prepared or issued its audit report. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒
The aggregate market value of the registrant’s voting and non-voting common equity held by non-affiliates of the registrant computed by reference to the price at which the
common equity was last sold as of the last business day of the registrant’s most recently completed second fiscal quarter (June 30, 2020) was $112,980,004. The number of
shares of registrant’s Common Stock outstanding as of March 22, 2021 was 27,355,453.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents (or parts thereof) are incorporated by reference into the following parts of this Form 10-K: Certain information required in Part III of this Annual Report
on Form 10-K is incorporated from the registrant’s Definitive Proxy Statement for the 2021 Annual Meeting of Shareholders.
 Table of Contents

Page
PART I
Item 1. Business 3
Item 1A. Risk Factors 25
Item 1B. Unresolved Staff Comments 72
Item 2. Properties 72
Item 3. Legal Proceedings 72
Item 4. Mine Safety Disclosures 72
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 73
Item 6. Selected Financial Data 73
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 74
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 83
Item 8. Financial Statements and Supplementary Data 84
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 105
Item 9A. Controls and Procedures 105
Item 9B. Other Information 106
PART III
Item 10. Directors, Executive Officers and Corporate Governance 107
Item 11. Executive Compensation 107
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 107
Item 13. Certain Relationships and Related Transactions, and Director Independence 107
Item 14. Principal Accounting Fees and Services 107
PART IV
Item 15. Exhibits, Financial Statement Schedules 108
Item 16. Form 10-K Summary 109

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 PART I

Summary of the Material and Other Risks Associated with Our Business

Our business is subject to numerous material and other risks and uncertainties that you should be aware of in evaluating our business.
These risks include, but are not limited to, the following:
• We are heavily dependent on the success of our product candidates and, in particular, our lead product candidate, FUROSCIX®.
We cannot give any assurance that we will receive regulatory approval for this product candidate or any other product candidates,
which is necessary before they can be commercialized.
• If we are not able to obtain required regulatory approvals, we will not be able to commercialize FUROSCIX, and our ability to
generate revenue will be materially impaired.
• If we fail to produce FUROSCIX, if approved, in the volumes that we require on a timely basis, we may face delays in our
commercialization efforts.
• We intend to utilize the 505(b)(2) pathway for the regulatory approval of FUROSCIX, and a New Drug Application (“NDA”)
submitted under Section 505(b)(2) may subject us to a patent infringement lawsuit that would delay or prevent the review or
approval of FUROSCIX.
• The commercial success of FUROSCIX and any other product candidates, if approved, depends upon attaining market acceptance
by hospital networks, physicians, patients, third-party payers and the medical community.
• If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to market and sell
FUROSCIX, if approved, we may be unable to generate any revenue.
• We have a limited operating history and no history of commercializing pharmaceutical products, which may make it difficult to
evaluate the prospects for our future success.
• We have a history of significant operating losses and expect to incur significant and increasing losses for the foreseeable future; we
may never achieve or maintain profitability.
• We may need additional funding and may be unable to raise capital when needed, which would force us to delay, reduce or
eliminate our product development programs or commercialization efforts.
• Our success depends on our ability to protect our intellectual property and proprietary technology, as well as the ability of our
collaborators to protect their intellectual property and proprietary technology.
• If we fail to comply with our obligations under our existing and any future intellectual property license with third parties, we could
lose license rights that are important to our business.
• We may be subject to product liability lawsuits related to our product candidates, if approved, which could divert our resources,
result in substantial liabilities and reduce the commercial potential of our product candidates.
• COVID-19 may materially and adversely affect our business and our financial results, including the activities required for the
resubmission of the FUROSCIX NDA and our intended commercial launch of FUROSCIX, if approved.
• Our failure to successfully identify, develop and market additional product candidates could impair our ability to grow.
• We depend heavily on our executive officers, directors and principal consultants and the loss of their services would materially
harm our business.

The material and other risks summarized above should be read together with the text of the full risk factors below and in the other information
set forth in this Annual Report, including our consolidated financial statements and the related notes, as well as in other documents that we
file with the SEC. If any such material and other risks and uncertainties actually occur, our business, prospects, financial condition and results
of operations could be materially and adversely affected. The risks summarized above or described in full below are not the only risks that we
face. Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial may also materially adversely
affect our business, prospects, financial condition and results of operations.

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 FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains express or implied forward-looking statements that are based on our management’s belief and
assumptions and on information currently available to our management. Although we believe that the expectations reflected in these forward-
looking statements are reasonable, these statements relate to future events or our future operational or financial performance, and involve
known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially
different from any future results, performance or achievements expressed or implied by these forward-looking statements. Forward-looking
statements in this Annual Report on Form 10-K include, but are not limited to, statements about:
• the completion of activities required for the resubmission of the FUROSCIX® NDA with the SmartDose drug delivery system on our
current projected timelines and subsequent review and potential approval by the U.S. Food and Drug Administration, or FDA,
including any delays in submission or approval related to COVID-19;
• the likelihood of approval by the FDA of our regulatory filings for FUROSCIX using our next generation delivery device;
• the timing or likelihood of other regulatory filings and approvals;
• the outcome of any bridging studies, clinical trials or human factors studies that may be required by the FDA for approval of any of
our product candidates;
• the commercialization of FUROSCIX, if approved, including launch preparation, ability to interact with physicians, patient access to
FUROSCIX, manufacturing and supply chain, including any delays related to COVID-19 in our ongoing Health Economics and
Outcomes Research study and future planned Phase 4 studies of FUROSCIX incorporating the SmartDose drug delivery system to
support the pricing and access to our product candidates;
• the pricing and reimbursement of FUROSCIX or any other of our product candidates, if approved;
• the rate and degree of market acceptance and clinical utility of FUROSCIX or any other of our product candidates for which we
receive marketing approval;
• the initiation, timing, progress and results of our research and development programs, including future preclinical and clinical
studies;
• our ability to advance any other product candidates into, and successfully complete, clinical studies and obtain regulatory approval
for them;
• our ability to identify additional product candidates;
• the implementation of our strategic plans for our business, product candidates and technology;
• the scope of protection we are able to establish and maintain for intellectual property rights covering FUROSCIX or any other of our
product candidates and technology;
• estimates of our expenses, future revenues, capital requirements and our needs for additional financing;
• our ability to manufacture, or the ability of third parties to deliver, sufficient quantities of components and drug product for
commercialization of FUROSCIX or any other of our product candidates;
• our ability to maintain and establish collaborations;
• our financial performance;
• developments relating to our competitors and our industry, including the impact of government regulation; and
• other risks and uncertainties, including those listed under the caption “Risk Factors.”

In some cases, forward-looking statements can be identified by terminology such as “may,” “should,” “expects,” “intends,” “plans,”
“anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology. These
statements are only predictions. You should not place undue reliance on forward-looking statements because they involve known and
unknown risks, uncertainties and other factors, which are, in some cases, beyond our control and which could materially affect results.
Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under

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the section entitled “Risk Factors” and elsewhere in this Annual Report on Form 10-K. If one or more of these risks or uncertainties occur, or
if our underlying assumptions prove to be incorrect, actual events or results may vary significantly from those implied or projected by the
forward-looking statements. No forward-looking statement is a guarantee of future performance. While we may elect to update these
forward-looking statements at some point in the future, we have no current intention of doing so except to the extent required by applicable
law. You should therefore not rely on these forward-looking statements as representing our views as of any date subsequent to the date of
this Annual Report on Form 10-K.

Item 1. Business.
OVERVIEW
We are a pharmaceutical company focused on developing and commercializing products that have the potential to optimize the delivery of
infused therapies, advance patient care and reduce healthcare costs. Our strategy is designed to enable the subcutaneous administration of
therapies that have previously been limited to intravenous, or IV, delivery. By moving delivery away from the high-cost healthcare settings
typically required for IV administration, we believe our technology has the potential to reduce overall healthcare costs and advance the
quality and convenience of care. Our lead product candidate, FUROSCIX, consists of our proprietary buffered formulation of furosemide
delivered subcutaneously via an on-body infusor and is under development for treatment of congestion in patients with worsening heart
failure who display reduced responsiveness to oral diuretics and do not require hospitalization.

We resubmitted our new drug application, or NDA, for FUROSCIX, with the U.S. Food and Drug Administration, or FDA, on June 30, 2020.
The resubmission was a response to a Complete Response Letter, or CRL, from the FDA with respect to our NDA submitted in August 2017,
which indicated that, among other things, certain device modifications to our infusor were required. Based on our interactions with the FDA
prior to our June 30, 2020 resubmission, we decided to transition to our next generation device. The resubmission incorporated our next
generation device which is being developed through a partnership with West Pharmaceutical Services, Inc., or West, using its proprietary,
wearable, SmartDose® drug delivery system (SmartDose is a registered trademark of West Pharma. Services IL, Ltd., a subsidiary of West,
in the United States and other jurisdictions).

On July 23, 2020, the FDA accepted the resubmission of our NDA and we were given a Prescription Drug User Fee Act, or PDUFA, target
action date of December 30, 2020; however, on December 3, 2020, we received a second CRL from the FDA, in which, among other things,
the FDA raised questions related to testing, labeling and features of the combination product unrelated to the drug constituent. The FDA also
indicated that they needed to conduct pre-approval inspections at two of our third-party manufacturing facilities that could not be conducted
due to travel restrictions related to COVID-19. No clinical deficiencies were noted. On January 28, 2021, we had a Type A meeting with the
FDA to discuss the issues described in the CRL and steps required for the resubmission of the NDA for FUROSCIX. Based on the meeting,
we will run additional modified bench tests on aged commercial units of the West SmartDose Gen II on-body infusor and anticipate the FDA
will still need to conduct pre-approval inspections at three of our third-party manufacturing facilities. We intend to resubmit our NDA in the
third quarter of 2021.

Heart failure affects 6.5 million adults in the United States and this population is expected to grow to greater than 8.0 million by 2030. Our
proprietary formulation of furosemide administered subcutaneously via the next generation SmartDose drug delivery system, which we refer
to together as FUROSCIX, is intended to help alleviate the signs and symptoms associated with congestion due to fluid retention in heart
failure patients, such as fatigue and shortness of breath. FUROSCIX is designed to offer alternative outpatient intervention for heart failure
patients who display reduced responsiveness to oral diuretics in non-emergency situations and do not require hospitalization.

We believe FUROSCIX, if approved by the FDA, would allow heart failure patients to receive IV-strength diuresis outside the high-cost
hospital setting. Prevention of hospital admission and reduced readmission rates would result in reducing the estimated 15 million days
patients with heart failure spend in the hospital each year. By decreasing the number of admissions and readmissions to hospitals, we
believe we can drive significant cost savings to payers and hospitals.

We are leveraging our subcutaneous formulation expertise to develop additional product candidates that we believe can significantly
decrease the cost of treatment by moving treatment away from the hospital setting and can improve patient quality of life by eliminating the
need for IV catheters. In this area, we have conducted additional development work to deliver ceftriaxone, a parenteral cephalosporin that is
typically administered

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intravenously or intramuscularly. Based on IMS Health data, each year in the United States, there are 15 million outpatient days of
ceftriaxone therapy to treat various types of infections, including pneumonia, urinary tract infections, and Lyme Disease. The current
outpatient treatment option for these patients, Outpatient Parenteral Antimicrobial Therapy, or OPAT, requires the placement of a long-term
venous access device, known as a peripherally inserted central catheter, or PICC, and coordination of home infusion or office-based infusion
services for patients to receive antibiotics outside of the hospital, which places significant burdens on the patients. Subcutaneous
administration of ceftriaxone represents an opportunity to reduce costs to the overall health care system and improve the quality of care by
reducing the complications and serious health risks associated with IV catheters and increasing patient mobility and convenience. We have
conducted a pharmacokinetic study with subcutaneous ceftriaxone and intend to conduct additional clinical trials to advance its development.

Beyond furosemide and ceftriaxone, we aim to leverage our subcutaneous formulation expertise to develop and seek approval of additional
drug candidates. We intend to conduct feasibility work on additional product candidates.

OUR PLATFORM AND OTHER PIPELINE PROGRAMS

FUROSCIX to Treat Decompensated Heart Failure
Heart failure is a chronic disease resulting from impairment of the heart’s ability to pump blood and is one of the most common causes of
hospital admissions in patients over 65 with at least 1-2 million hospitalizations in the United States annually. Patients with heart failure are
prone to retain sodium and water in their blood stream and, as this accumulates, it can distribute to tissues. This extra fluid settling in the
lungs, ankles and abdomen can cause symptoms ranging from weight gain, mild swelling and shortness of breath while walking to more
severe symptoms, such as weakness, severe fatigue and difficulty breathing when sitting or lying down. Congestion is the most common
cause of hospitalization for patients with heart failure.

Oral loop diuretics, such as furosemide, are the mainstay for the management and prevention of congestion in patients with heart failure.
However, during periods of worsening congestion in heart failure, the bioavailability of oral furosemide is reduced and becomes highly
variable. To overcome the limitation of oral furosemide in this setting, two strategies are typically employed. First, the furosemide dose is
typically doubled, and/or additional oral diuretics (thiazide diuretics) are incorporated to attempt to overcome the blunted pharmacological
response to these agents. Second, if this fails, clinicians often rely on giving IV diuretics, either in the hospital, an outpatient heart failure
clinic or an infusion center, if available. Approximately 800,000 patients with symptoms of heart failure are admitted to the hospital by an
emergency physician annually and we believe 50% of these admissions may be potentially avoided if patients could receive timely, effective
treatment for symptomatic congestion outside of the hospital setting.

In addition to potentially unnecessary hospitalizations, it has been estimated that up to 50% of patients hospitalized for an episode of acute
decompensated heart failure are discharged on oral diuretics with persistent signs and symptoms of congestion. The presence of congestion
at discharge has been associated with an increased risk of 30-day all-cause mortality and rehospitalization for heart failure. The American
College of Cardiology Foundation and the American Heart Association Task Force on Practice guidelines recommend that patients
hospitalized for heart failure have a post discharge follow up visit within 14 days of hospital discharge.
Since symptoms of congestion generally worsen over several days or weeks, patients with heart failure could receive FUROSCIX at the first
signs and symptoms of congestion, when the response to oral diuretics is not adequate.

Therefore, FUROSCIX may potentially offer an alternative outpatient route of administration of furosemide for heart failure patients to
alleviate the signs and symptoms associated with congestion when responsiveness to oral diuretics is reduced and hospitalization is not
indicated in order to potentially avoid unnecessary hospitalizations.

FUROSCIX is our novel formulation of furosemide contained in a pre-filled, Crystal Zenith® cartridge and self- administered subcutaneously
via a single-use, disposable and wearable on-body delivery system. The user inserts the pre-filled cartridge into the wearable device, secures
it to the abdomen via a medical-grade adhesive, and a subcutaneous infusion of FUROSCIX is administered through a pre-programmed,
biphasic delivery profile with 30 mg administered over the first hour, followed by 12.5 mg per hour for the subsequent 4 hours (a total dose of
80 mg (10 mL) over 5 hours).

We believe that, if approved, FUROSCIX has the potential to provide a safe and effective solution that will enable IV-strength diuresis outside
of the high-cost hospital setting. We believe FUROSCIX can potentially reduce the estimated 15 million days per year that heart failure
patients spend in the hospital and thus reduce overall health care costs by decreasing both admissions and readmissions.

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Subcutaneous FUROSCIX has the potential to:

• Reduce hospital admission rates: Since symptoms of congestion generally worsen over several days or weeks, there is a
window of opportunity to intervene. We believe FUROSCIX, if approved, could in certain instances avoid a hospitalization by
providing IV-strength diuresis in an outpatient setting such as the physician’s office, a heart failure clinic or at home. It is
estimated that 90% of patients presenting to the emergency department with worsening heart failure are admitted to the
hospital and approximately 50% of those patients could potentially be safely discharged after demonstrating effective diuresis
with parenteral therapy during a brief period of observation.
• Reduce patient readmission: We believe FUROSCIX, if approved, could reduce the incidence of readmission for heart failure
patients by providing IV-strength diuresis in the home post-hospital discharge. It is estimated that 30-50% of patients that are
hospitalized for acute decompensated heart failure that are transitioned to oral furosemide prior to being discharged from the
hospital have persistent symptoms of congestion at discharge. Persistent congestion may reduce the absorption of oral
furosemide reducing the diuretic effect. As a result, patients are often readmitted to the hospital to receive IV furosemide. We
believe FUROSCIX can break this cycle by providing IV-strength diuresis to patients shortly after discharge to reduce the rate
of readmissions for decompensated heart failure.

If approved, FUROSCIX may potentially offer an outpatient therapeutic option to deliver IV-strength furosemide to potentially avoid the need
for unnecessary, expensive hospitalizations which could improve patients’ quality of life with minimal interruption of daily living.

Clinical Development of FUROSCIX

We are developing FUROSCIX, a drug-device combination product, pursuant to Section 505(b)(2) of the Federal Food, Drug and Cosmetic
Act in which we are relying on the FDA’s finding of safety and efficacy for the Listed Drug Furosemide (Injection, USP, 10 mg/mL; NDA
18667; Hospira, Inc.), which is indicated for intravenous (IV) and intramuscular (IM) injection for the treatment of edema in adult patients with
congestive heart failure, cirrhosis of the liver and renal disease, including nephrotic syndrome. Currently, there are no FDA-approved
furosemide products for subcutaneous administration which could provide an alternative route of administration that could be used in the
outpatient setting when the response to oral diuretics is not adequate.
FUROSCIX (Furosemide Injection, 80 mg/10 mL) is a novel, pH neutral formulation of furosemide being developed for administration via a
subcutaneous infusion using a proprietary, wearable, pre-programmed on-body drug delivery system. The currently available furosemide
injection products are alkaline, with a pH of 8.0 – 9.3. Subcutaneous administration of IV/IM furosemide, USP formulation has been
associated with local skin reactions, some severe, requiring discontinuation of treatment and local treatment of the complication which has
been attributed to the alkaline pH of the furosemide formulation, volume of fluid administered and the rapid injection. There are currently no
furosemide products approved by the FDA for subcutaneous administration.

We resubmitted our new drug application, or NDA, for FUROSCIX, with the FDA, on June 30, 2020. On July 23, 2020, the FDA accepted the
resubmission of our NDA and we were given a PDUFA target action date of December 30, 2020; however, on December 3, 2020, we
received a second CRL from the FDA, in which, among other things, the FDA raised questions related to testing, labeling and features of the
combination product unrelated to the drug constituent. The FDA also indicated that they needed to conduct pre-approval inspections at two
of our third-party manufacturing facilities that could not be conducted due to travel restrictions related to COVID-19. No clinical deficiencies
were noted. On January 28, 2021, we had a Type A meeting with the FDA to discuss the issues described in the CRL and steps required for
the resubmission of the NDA for FUROSCIX. Based on the meeting, we will run additional modified bench tests on aged commercial units of
West SmartDose Gen II on-body infusor and anticipate the FDA will still need to conduct pre-approval inspections at three of our third-party
manufacturing facilities. We intend to resubmit our NDA in the third quarter of 2021.

Pharmacokinetic/Pharmacodynamic (PK/PD) Study

We conducted a pivotal, randomized, open-label crossover study from April to September 2015 to assess the relative bioavailability of
FUROSCIX in 17 patients with heart failure. In this study, FUROSCIX was delivered subcutaneously via the B. Braun Perfusor Space
Infusion Pump. This study also evaluated diuresis and the urinary sodium excretion over eight hours and 24 hours post-dosing as the
pharmacodynamic endpoints.

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Treatment arms
In this study, the reference treatment was IV furosemide with two bolus injections of 40 mg dosed over two minutes, two hours apart. Our test
treatment was FUROSCIX with 80 mg infused subcutaneously, with 30 mg over the first hour followed by 12.5 mg per hour over the
subsequent four hours.
Comparative pharmacokinetic results
This study demonstrated bioequivalence in the concentration of drug delivered over time based upon the area under the curve, or AUC,
between our subcutaneous formulation of furosemide and IV furosemide. Although the maximum concentration, or Cmax, of furosemide
achieved was four-fold higher with IV injection compared to subcutaneous infusion, the bioavailability of subcutaneous infusion relative to
intravenous injection was 99.6%, with a 90% confidence interval of 94.8% to 104.8%, thus meeting the FDA’s defined bioequivalence criteria
limit of 80% to 125%. We believe that the difference in Cmax between IV injection and subcutaneous furosemide is attributable to the two
bolus IV injections administered at the initiation of IV therapy. Nevertheless, the 5-hour infusion of FUROSCIX resulted in nearly complete
bioavailability compared to two bolus IV injections of furosemide.
Comparative pharmacodynamic results
Total mean urine outputs for subcutaneous versus IV administration were 102% (2654 mL vs 2641 mL; p = 0.83) and 103% (3630 mL vs
3538 mL; p = 0.71) at 8 and 24 hours, respectively. Total mean urine sodium excretion for subcutaneous versus IV administration were
97.3% (284 mmol vs 292 mmol; p = 0.78) and 97.4% (341 mmol vs 350 mmol; p = 0.80), at 8 and 24 hours, respectively. The total urine
sodium excretion and urine output were comparable between our subcutaneous formulation of furosemide and IV furosemide.

Adhesive Validation Study

An open label, non-randomized, single-site study was conducted in healthy volunteers to evaluate the effectiveness and local skin tolerability
of the 3M 9907W medical tape, the component of the FUROSCIX On-Body Infusor that adheres to the skin of the abdomen to deliver a
subcutaneous infusion. After preparation, the device was attached to the skin of the abdomen and a simulated infusion began. At the end of
the 5 and 6-hour assessment time points, the devices were ≥ 50% adhered in 100% of the subjects and at both time points, the orange
safety latch was not visible on any of the devices. The 3M 9907W medical tape was effective in maintaining the adhesion of the on-body
infusor to the skin of the abdomen during a 6-hour wear time and no subjects had a complete device dislodgement of the on-body infusor for
FUROSCIX.
Following a 6-hour wear time, 63.2% of the subjects exhibited minimal erythema or no evidence of skin irritation. For those subjects with
greater than minimal erythema, these effects were transient: 89.5% exhibited minimal erythema or no evidence of skin irritation when
assessed at the 1-hour post device removal. Pain and discomfort were assessed immediately after device removal. Most subjects (60.5%)
reported scores of 0 (no pain) or 1 on an 11-point pain scale. The majority of subjects (84.2%) reported no discomfort or mild discomfort upon
removal of the device.
The 3M 9907W medical tape was able to maintain adhesion of the FUROSCIX On-Body Infusor device for the duration of the 6-hour wear
time and was generally well tolerated.

Human Factors Summary

We conducted a human factors validation study for the next generation device from October 21, 2019 to November 14, 2019. The study
included 60 subjects made up of 30 heart failure patients, 15 caregivers and 15 healthcare practitioners (HCPs). Half of the patients were
trained, while the remaining patients, all caregivers and all HCPs were untrained.
Participants performed extremely well across all user groups and training conditions. All participants but one successfully setup and started
the infusion without experiencing any use errors related to critical tasks which would delay dosing or harm the patient.

All participants successfully noticed, identified, and articulated how to respond to an alarm experienced during an infusion without any use
errors.

All participants successfully allowed the infusion to carry out, noticed when it completed and performed all steps required to remove and
dispose of the on-body infusor without any use errors.

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Overall, the study, which was designed to measure eight observational use metrics, across 900 tasks including setup, starting of the infusion,
responding to the on-body infusor alarm and finishing the procedure after the infusion demonstrated a user success rate of 99%.

Participants also performed well during the knowledge and reading comprehension tasks. Thirty-seven knowledge and comprehension tasks
related to critical information were evaluated. Overall, across all 2,220 knowledge and comprehension tasks, participants experienced a user
success rate of over 99.5%.

Based on the results from the human factors program that culminated with this validation study, we believe the following:

• The FUROSCIX On-Body Infusor and Instructions for Use (IFU) have been successfully validated with the intended user
populations (congestive heart failure (CHF) patients, family caregivers, and HCPs) and use cases.
• The validation results demonstrate that the FUROSCIX On-Body Infusor and IFU can be safely and effectively used and that
performance of critical tasks will not result in patterns of preventable use errors.
• After two suggested minor edits to the IFU, all use-related risks for the commercial product will either (a) have been eliminated or
(b) consist of acceptable residual risks that cannot be mitigated.

FREEDOM-HF - Furoscix Real-World Evaluation for Decreasing Hospital Admissions in Heart Failure

FREEDOM-HF is a multicenter, prospective adaptive clinical trial to evaluate differences in heart failure and overall costs between subjects
receiving FUROSCIX outside the hospital and patients receiving intravenous furosemide in the hospital setting for 30-days after being
discharged from the emergency department. Differences in costs will be determined from a propensity-matched control arm derived from
Truven Health Analytics MarketScan databases. The study was designed to enroll up to 75 subjects in the FUROSCIX cohort to detect a
statistically significant difference in 30-day overall and heart-failure related costs. The study began enrollment in the fourth quarter of 2020
and we are expecting a top-line readout in the third quarter of 2021.

AT HOME-HF PILOT - Avoiding Treatment in the Hospital with Furoscix for the Management of Congestion in Heart Failure – A Pilot Study

AT-HOME-HF PILOT is a multicenter, randomized clinical trial designed to evaluate the clinical outcomes and safety of FUROSCIX
compared to a “treatment as usual” approach in patients presenting to a heart failure clinic with chronic heart failure and fluid overload
requiring augmented diuretic therapy. The primary endpoint is the improvement in a composite/combined morbidity/mortality endpoint
consisting of (1) cardiovascular death, (2) heart failure hospitalization, (3) urgent emergency department/clinic visit for worsening heart failure
(defined as IV diuretics, augmentation of, or new administration of, metolazone) and (4) NT-proBNP at 30 days using the Finkelstein
Schoenfeld method. We anticipate a sample size of 50 subjects (randomized 2:1) will provide adequate data on the effectiveness and safety
of FUROSCIX and inform a pivotal clinical trial. The study is expected to begin enrollment in the first quarter of 2021 and to complete
enrollment in the first quarter of 2022.

Investigator Sponsored Studies

We intend to support investigator sponsored studies post-approval and to initiate Phase 4 studies with FUROSCIX, incorporating the
SmartDose drug delivery system, to evaluate the efficacy, safety, patient acceptance and health economic outcomes.

Commercialization
If we successfully obtain regulatory approval, we plan to commercialize FUROSCIX in the United States by building and utilizing our own
commercial infrastructure. We currently intend to focus our commercial efforts on the United States market, which we believe represents the
largest market opportunity for FUROSCIX. In addition, we plan to seek collaborations with third-party partners outside of the United States to
distribute our products in foreign markets, if approved by the relevant foreign regulatory authorities.

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If approved, we believe that we can effectively commercialize FUROSCIX in the United States with an initial specialty sales force of
approximately 35-40 representatives. We intend to initially pursue a highly-concentrated target market, which consists of 400 hospitals,
associated clinics and office-based practices that, collectively account for 40% of all IV furosemide administered to heart failure patients
based on current IMS Drug Distribution Data. We also plan to target the top ten Medicare Part D plans, which cover 80% of Medicare Part D
patients. We conducted payer research on 14 payers, representing 22 to 29 million total Medicare lives. We found that reducing
readmissions and increasing patient comfort were ranked as important potential attributes of FUROSCIX by the health plans and pharmacy
benefit managers that were surveyed.

We intend to build a highly concentrated commercial infrastructure focused on distribution, promotion and customer support to healthcare
providers in our key hospital targets and in office-based practices. Our target call points within these hospitals and practices will include heart
failure specialists, cardiologists, emergency room doctors and heart failure nurse practitioners. To date, our market research with 309
healthcare professionals has indicated that 93% of our target prescribers would adopt FUROSCIX, if approved, with 80% intending to adopt
FUROSCIX in the first six months of product availability. Furthermore, within the prescriber group of heart failure specialists, cardiologists and
nurse practitioners that we intend to target at launch, the intent to adopt is 93%, 96% and 94%, respectively, and 89%, 88% and 86%,
respectively, of those prescribers intend to adopt in the first six months of product availability. Based on our market research, healthcare
professionals perceive the top potential advantages of FUROSCIX, if approved, as the ability to treat in the home setting, prevention of
hospitalization, and avoidance of IV placement, while the lowest perceived barriers to adoption identified in the survey were the preference to
monitor in a hospital setting, sufficiency of current medications and hospital guidelines or protocols. In addition, based on a last two patient
exercise conducted in our quantitative market research with healthcare professionals, when given the option to change their prior treatment
choice to FUROSCIX, if approved, 65% of healthcare practitioners in a clinic setting and 40% in a hospital setting responded that they would
prescribe our product candidate. We expect to supplement our sales force with representatives in the medical science, nursing and
reimbursement fields to support the proper training and utilization of FUROSCIX.

As part of our commercialization strategy, we plan to educate hospitals, healthcare practitioners, patients and caregivers of the benefits of
FUROSCIX and its proper use. We plan to work with national associations, such as the Heart Failure Society of America (HFSA) and the
American Association of Heart Failure Nurses (AAHFN), hospital networks and individual hospitals to update treatment and issue guidelines
to include subcutaneous furosemide outpatient treatment plans. These guidelines are intended to provide information to hospitals and
healthcare practitioners regarding treatment of outpatient heart failure patients with subcutaneous furosemide.

Patients with heart failure could receive FUROSCIX at the initial worsening signs and symptoms when the response to oral diuretics is not
adequate. In addition, patients could receive FUROSCIX after discharge, if they still are exhibiting some signs and symptoms of congestion
despite their oral diuretic regimen.

We expect to package FUROSCIX, if approved, as individual, single use only on-body infusor kits. In April 2016, we held a meeting with the
Centers for Medicare and Medicaid Services, or CMS, at which CMS stated that coverage and reimbursement of FUROSCIX may be
available under Medicare Part D as a transition of care drug.

By educating patients on the proper use of FUROSCIX shortly after discharge followed by a face-to-face visit, health care professionals can
ensure proper training, initiate treatment at the point of care, and ensure that patients can receive additional days of treatment in the home
setting.

Our Pipeline Programs

Beyond our initial focus on heart failure, our strategy is to identify and develop additional product candidates where, if approved, could
provide effective and convenient subcutaneous therapy that may benefit patients, caregivers and payers.
• FUROSCIX: FUROSCIX is a proprietary furosemide formulation that is buffered to a neutral pH to enable subcutaneous
administration via a proprietary wearable, pre-programmed on-body delivery system, based on the SmartDose drug delivery
system. It is under development for the treatment of congestion due to volume overload in patients with worsening heart failure
who display reduced responsiveness to oral diuretics and do not require hospitalization. We plan to resubmit the NDA for
FUROSCIX by the third quarter of 2021.

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 • scCeftriaxone: We have filed an investigational new drug application, or IND, for scCeftriaxone, an antibiotic currently used
intravenously for the treatment of infections caused by gram-positive and gram-negative organisms. To date, we have
completed a PK study for scCeftriaxone. We are currently evaluating a suitable on-body delivery system to administer
scCeftriaxone.
• scCarbapenem: We have completed several IND-enabling studies for our scCarbapenem program, an antibiotic currently used
intravenously for the treatment of infections caused by gram-negative organisms.

Ceftriaxone
Many patients with an infection requiring IV antibiotics are admitted to the hospital, and a portion of these patients will require subsequent
outpatient treatment with IV administration requiring insertion of a PICC line catheter. Ceftriaxone is a parenteral antibiotic commonly used to
treat various types of infections, including pneumonia, bone and joint infections, blood stream infections, urinary tract infections and Lyme
Disease. According to 2015 data from Arlington Medical Resources, ceftriaxone is the second most utilized antibiotic in the hospital setting
and second most utilized IV antibiotic at hospital discharge. Based on Option Care data from August 2016, ceftriaxone represents the largest
segment of antibiotics prescribed in the outpatient setting, accounting for 19% of all outpatient prescriptions. Each year, there are
approximately 15 million outpatient days of ceftriaxone therapy in the United States based on IMS Health data, with 50% of outpatient
ceftriaxone administered to Medicare patients who do not have coverage for home infusion services and frequently must drive to a hospital
clinic, emergency room or physician’s office or be admitted to a skilled nursing facility or hospital to receive IV antibiotics. Subcutaneous
antibiotics, including ceftriaxone, have the potential to reduce the length of hospital stay by facilitating transition of care and eliminating the
risks of complications from long term IV catheters. Such antibiotics could also enhance convenience and independence of patients and
caregivers and potentially reduce the economic burden to payers, particularly in Medicare, by reducing payments for outpatient infusion
services.

After the submission of the IND we conducted a randomized, partially blinded crossover study of 18 patients to evaluate the PK and
bioavailability of a commercial formulation of ceftriaxone administered subcutaneously as compared to IV administration. In this study, we
observed that the bioavailability of subcutaneous ceftriaxone was 108% of that of IV ceftriaxone. In a PD model based on subcutaneous
pharmacokinetics observed in this study, the T>MIC for the first 24 hours for the ceftriaxone 1-gram subcutaneous infusion was observed to
be not inferior to the 1-gram IV infusion (98.5% vs 100%). The most common adverse event observed with subcutaneous ceftriaxone
administration was pain, with a median pain score of two on a scale of zero to ten (with zero being no pain and ten being the worst possible
pain). There were no serious adverse events reported in this study.

We intend to identify a suitable on-body delivery system for the administration of ceftriaxone subcutaneously, conduct additional studies to
evaluate optimal delivery for ceftriaxone and to evaluate the skin safety of subcutaneous administration of ceftriaxone.

Additional Product Programs

We are leveraging our know-how for use in other clinical settings where subcutaneous delivery can improve IV treatments to develop a suite
of product candidates that, like FUROSCIX, we believe can decrease the cost of treatment by moving treatment out of the hospital setting
and eliminating the need for IV catheters. We expect to pursue the development of a subcutaneous carbapenem to treat infections caused by
gram-negative infections and have completed initial feasibility work on a potential candidate. We also intend to identify other opportunities
where subcutaneous delivery can improve patient treatment and reduce healthcare costs. We intend to evaluate market criteria to
systematically choose potential product programs for our pipeline. We plan to look for product candidates that we believe allow us to clearly
demonstrate value to patients and the healthcare system and that have large market potential and a concentrated specialty physician
prescribing base. We expect to leverage our FUROSCIX sales force to promote additional products that we develop and commercialize.

Our FUROSCIX On-Body Infusor

The FUROSCIX On-Body Infusor is a drug-device combination product consisting of FUROSCIX (furosemide injection, 80 mg per 10 mL), a
novel, pH neutral furosemide formulation optimized for subcutaneous administration and contained in a prefilled, Crystal Zenith® (CZ)
cartridge, and a proprietary wearable, pre-programmed on-body delivery system, the FUROSCIX On-Body Infusor, based on the SmartDose
drug delivery

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system. The FUROSCIX On-Body Infusor is applied to the abdomen via a medical grade adhesive and delivers a subcutaneous infusion of
FUROSCIX through a pre-programmed, biphasic delivery profile over 5 hours.

MANUFACTURE OF OUR PRODUCT CANDIDATES

We use a network of qualified suppliers or contract manufacturing organizations, or CMOs, to produce, manufacture, sterilize and assemble
the component parts of our product candidates, including FUROSCIX. Our suppliers produce these component parts to our designs and
specifications. Certain processes utilized in the manufacture and test of our product candidates have been verified and validated as required
by the FDA and other regulatory bodies. The manufacturing facilities of our suppliers are subject to periodic inspection by the FDA and
certain corresponding state agencies, and we regularly audit our suppliers’ processes to ensure conformity with the specifications, policies
and procedures for our product candidates.

We have produced FUROSCIX for use in our clinical trials and stability studies only. We believe that our current third-party manufacturers
have capacity for potential commercialization of FUROSCIX, if approved, in quantities sufficient to meet our expected commercial needs, and
to accommodate the manufacturing of materials for future clinical trials of other potential product programs that we may identify for our
product pipeline.

In order to meet projected global demand for FUROSCIX, if approved, we plan to support an increase in production capacity at West’s
facilities.

INTELLECTUAL PROPERTY
Proprietary protection
Our commercial success depends in part on our ability to obtain and maintain proprietary protection for our drug candidates, manufacturing
and process discoveries and other know-how, to operate without infringing the proprietary rights of others, and to prevent others from
infringing on our proprietary rights. We and our partners have been building and continue to build our intellectual property portfolio relating to
our product candidates and technology. Our policy is to seek to protect our proprietary position by, among other methods, filing U.S. and
certain foreign patent applications related to our proprietary technology, inventions and improvements that are important to the development
and implementation of our business. We also intend to rely on trade secrets, know-how, continuing technological innovation, and potential in-
licensing opportunities to develop and maintain our proprietary position. We cannot be sure that patents will be granted with respect to any of
our pending patent applications or with respect to any patent applications filed by us in the future, nor can we be sure that any of our existing
patents or any patents that may be granted to us or our partners in the future will be commercially useful in protecting our technology.

Patent rights
Patent life determination depends on the date of filing of the application and other factors as promulgated under the patent laws. In most
countries, including the United States, the patent term is generally 20 years from the earliest claimed filing date of a non-provisional patent
application in the applicable country.

Furosemide 8 mg/mL formulation

As of February 1, 2021, we own a patent family directed to the composition of matter of our subcutaneous formulation of furosemide and
methods of treating congestion, hypertension and heart failure using the formulation of furosemide. This patent family includes U.S. Patent
No. 9,884,039, directed to methods of treatment, U.S. Patent No. 10,272,064 directed to liquid pharmaceutical formulations, one pending
U.S. patent application directed to methods of treatment and pharmaceutical formulations, one granted patent in each of China and Europe,
two granted patents in Japan, one pending patent application in each of Canada and Europe, and three granted patents and seven pending
patent applications in other countries outside of the United States. Patents that issue from this patent family are generally expected to expire
in 2034, excluding any additional term in the United States for patent term adjustment. U.S. Patent Nos. 9,884,039 and 10,272,064 are
scheduled to expire in April 2034.

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Other furosemide formulations
As of February 1, 2021, we also own an international patent application filed under the Patent Cooperation Treaty (PCT) directed to
compositions of matter of liquid pharmaceutical formulations containing an increased concentration of furosemide and methods of treating
congestion, fluid overload, or hypertension using these formulations of furosemide. An international PCT patent application is not eligible to
become an issued patent until, among other things, we file a patent application in regional or national patent offices within 30 or 31 months of
filing of the earliest-filed priority patent application. If we continue to pursue patent protection and file one or more patent applications with
respect to our international PCT patent application, and if any patents issue based on the international PCT application, we expect such
patents, if issued, to expire in 2040.

Trade secret and other protection

In addition to patented intellectual property, we also rely on trade secrets and proprietary know-how to protect our technology and maintain
our competitive position, especially when we do not believe that patent protection is appropriate or can be obtained. Our policy is to require
each of our employees, consultants and advisors to execute a confidentiality and inventions assignment agreement before beginning their
employment, consulting or advisory relationship with us. The agreements generally provide that the individual must keep confidential and not
disclose to other parties any confidential information developed or learned by the individual during the course of the individual’s relationship
with us except in limited circumstances. These agreements generally also provide that we shall own all inventions conceived by the individual
in the course of rendering services to us.

Other intellectual property rights

We file trademark applications and pursue registrations in the United States and abroad when appropriate. We own trademark registrations
in the U.S. and E.U. for the marks SCPHARMACEUTICALS and FUROSCIX.

From time to time, we may find it necessary or prudent to obtain licenses from third-party intellectual property holders.

COMPETITION
Our industry is characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products. We face
competition and potential competition from a number of sources, including pharmaceutical and biotechnology companies, generic drug
companies, drug delivery companies and academic and research institutions. Some of these companies are developing therapies that are
directly competitive to our approach, and others are more generally developing therapies to treat heart failure. These companies include but
are not limited to: Abbott Laboratories, Amgen, AstraZeneca, Bayer, Bioheart, Boston Scientific, Boehringer Ingelheim, GlaxoSmithKline,
Johnson & Johnson, Eli Lilly and Company, Merck & Co., Medtronic, Novartis, Pfizer, Roche, Sanofi, Sarfez Pharmaceuticals, Servier
Pharmaceuticals, SQ Innovation and Takeda Pharmaceutical Company. We believe the key competitive factors that will affect the
development and commercial success of our product candidates include ease of administration and convenience of dosing, therapeutic
efficacy, safety and tolerability profiles and cost. Many of our potential competitors have substantially greater financial, technical and human
resources than we do, as well as more experience in the development of product candidates, obtaining FDA and other regulatory approvals
of products, and the commercialization of those products. Consequently, our competitors may develop similar products for the treatment of
heart failure or for other indications we may pursue in the future, and such competitors’ products may be more effective, better tolerated and
less costly than our product candidates. Our competitors may also be more successful in manufacturing and marketing their products than
we are. We will also face competition in recruiting and retaining qualified personnel and establishing clinical trial sites and patient enrollment
in clinical trials.

GOVERNMENT REGULATION
United States Drug Development
In the United States, the FDA regulates drugs, medical devices and combinations of drugs and devices, or combination products, under the
federal Food, Drug, and Cosmetic Act, or FDCA, and its implementing regulations. Drugs are also subject to other federal, state and local
statutes and regulations. 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. Failure to comply with

11
the applicable U.S. requirements at any time during the product development process, approval process or after approval, may subject an
applicant to administrative or judicial sanctions. These sanctions could include, among other actions, the FDA’s refusal to approve pending
applications, withdrawal of an approval, a clinical hold, untitled or warning letters, requests for voluntary product recalls or withdrawals from
the market, product seizures, total or partial suspension of production or distribution injunctions, fines, refusals of government contracts,
restitution, disgorgement, or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us.

Our product candidates are subject to regulation as combination products, which means that they are composed of both a drug product and
device product. If marketed individually, each component would be subject to different regulatory pathways and reviewed by different Centers
within the FDA. A combination product, however, is assigned to a Center that will have primary jurisdiction over its 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 our product candidates, the primary mode of action is attributable to the drug component of the product,
which means that the FDA’s Center for Drug Evaluation and Research has primary jurisdiction over the premarket development, review and
approval of our product candidates. Accordingly, we plan to investigate our products through the IND framework and seek approval through
the NDA pathway. Based on our discussions with the FDA to date, we do not anticipate that the FDA will require a separate medical device
authorization for the on-body infusor component of FUROSCIX, but this could change during the course of its review of any marketing
application that we may submit. The process required by the FDA before a drug may be marketed in the United States generally involves the
following:
• completion of extensive pre-clinical laboratory tests, animal studies and formulation studies in accordance with applicable
regulations, including the FDA’s Good Laboratory Practice regulations;
• submission to the FDA of an IND, which must become effective before human clinical trials may begin;
• performance of adequate and well-controlled human clinical trials in accordance with an applicable IND and other clinical study
related regulations, sometimes referred to as good clinical practices, or GCPs, to establish the safety and efficacy of the
proposed drug for its proposed indication;
• submission to the FDA of an NDA which, for a combination product like FUROSCIX, is expected to include information and
data regarding the drug delivery device technology;
• satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities at which the product, or
components thereof, are produced to assess compliance with the FDA’s current good manufacturing practice requirements, or
cGMP;
• potential FDA audit of the clinical trial sites that generated the data in support of the NDA; and
• FDA review and approval of the NDA prior to any commercial marketing or sale.

Once a pharmaceutical product candidate is identified for development, it enters the pre-clinical testing stage. Pre-clinical tests include
laboratory evaluations of product chemistry, toxicity, formulation and stability, as well as animal studies. An IND sponsor must submit the
results of the pre-clinical tests, together with manufacturing information, analytical data and any available clinical data or literature, to the
FDA as part of the IND. The sponsor must also include a protocol detailing, among other things, the objectives of the initial clinical trial, the
parameters to be used in monitoring safety and the effectiveness criteria to be evaluated if the initial clinical trial lends itself to an efficacy
evaluation. Some pre-clinical testing may continue even after the IND is submitted. The IND automatically becomes effective 30 days after
receipt by the FDA, unless the FDA raises concerns or questions related to a proposed clinical trial and places the trial on a clinical hold
within that 30-day period. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can
begin. Clinical holds also may be imposed by the FDA at any time before or during clinical trials due to safety concerns or non-compliance,
and may be imposed on all drug products within a certain class of drugs. The FDA also can impose partial clinical holds, for example,
prohibiting the initiation of clinical trials of a certain duration or for a certain dose.

All clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with GCP regulations. These
regulations include the requirement that all research subjects provide informed consent in writing before their participation in any clinical trial.
Further, an institutional review board, or IRB, must review and approve the plan for any clinical trial before it commences at any institution,
and the IRB must conduct continuing review and reapprove the study at least annually. An IRB considers, among other things, whether the

12
risks to individuals participating in the clinical trial are minimized and are reasonable in relation to anticipated benefits. The IRB also approves
the information regarding the clinical trial and the consent form that must be provided to each clinical trial subject or his or her legal
representative and must monitor the clinical trial until completed.

Each new clinical protocol and any amendments to the protocol must be submitted for FDA review, and to the IRBs for approval. Protocols
detail, among other things, the objectives of the clinical trial, dosing procedures, subject selection and exclusion criteria, and the parameters
to be used to monitor subject safety.

Human clinical trials are typically conducted in three sequential phases that may overlap or be combined:
• Phase 1. The product is initially introduced into a small number of healthy human subjects or patients and tested for safety,
dosage tolerance, absorption, metabolism, distribution and excretion and, if possible, to gain early evidence on effectiveness.
In the case of some products for severe or life-threatening diseases, especially when the product is suspected or known to be
unavoidably toxic, the initial human testing may be conducted in patients.
• Phase 2. Involves clinical trials in a limited patient population to identify possible adverse effects and safety risks, to
preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal
dosage and schedule.
• Phase 3. Clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population
at geographically dispersed clinical trial sites. These clinical trials are intended to establish the overall risk/benefit relationship
of the product and provide an adequate basis for product labeling.

Post-approval trials, sometimes referred to as Phase 4 clinical trials, may be conducted after initial marketing approval. These studies are
used to gain additional experience from the treatment of patients in the intended therapeutic indication. In certain instances, the FDA may
mandate the performance of Phase 4 trials. Companies that conduct certain clinical trials also are required to register them and post the
results of completed clinical trials on a government-sponsored database, such as ClinicalTrials.gov in the United States, within certain
timeframes. Failure to do so can result in fines, adverse publicity and civil and criminal sanctions.

Progress reports detailing the results of the clinical trials, among other information, must be submitted at least annually to the FDA, and
written IND safety reports must be submitted to the FDA and the investigators for serious and unexpected adverse events, findings from
other studies that suggest a significant risk to humans exposed to the product, findings from animal or in vitro testing that suggest a
significant risk to human subjects, and any clinically important increase in the rate of a serious suspected adverse reaction over that listed in
the protocol or investigator brochure. Phase 1, Phase 2 and Phase 3 clinical trials may not be completed successfully within any specified
period, if at all. The FDA or the clinical trial sponsor may suspend or terminate a clinical trial at any time on various grounds, including a
finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate
approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the product
has been associated with unexpected serious harm to patients. Additionally, some clinical trials are overseen by an independent group of
qualified experts organized by the clinical trial sponsor, known as a data safety monitoring board or committee. This group provides
authorization for whether a trial may move forward at designated check points based on access to certain data from the study. The clinical
trial sponsor may also suspend or terminate a clinical trial based on evolving business objectives and/or competitive climate.

Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the
chemistry and physical characteristics of the product and 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
candidate and, among other things, the manufacturer must develop 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 candidate does not undergo unacceptable deterioration over its shelf life.

NDA and FDA Review Process

The results of product development, pre-clinical studies and clinical trials, along with descriptions of the manufacturing process, analytical
tests conducted on the drug, proposed labeling and other relevant information,

13
are submitted to the FDA as part of an NDA for a new drug, requesting approval to market the product. The submission of an NDA is subject
to the payment of a substantial user fee, and the sponsor of an approved NDA is also subject to an annual program user fee; although a
waiver of such fee may be obtained under certain limited circumstances. For example, the agency will waive the application fee for the first
human drug application that a small business or its affiliate submits for review.

The FDA reviews all NDAs submitted before it accepts them for filing and may request additional information rather than accepting an NDA
for filing. The FDA typically makes a decision on accepting an NDA for filing within 60 days of receipt. The decision to accept the NDA for
filing means that the FDA has made a threshold determination that the application is sufficiently complete to permit a substantive review.
Under the goals and policies agreed to by the FDA under the Prescription Drug User Fee Act, or PDUFA, the FDA’s goal to complete its
substantive review of a standard NDA and respond to the applicant is ten months from the receipt of the NDA. The FDA does not always
meet its PDUFA goal dates, and the review process is often extended by FDA requests for additional information or clarification.

After the NDA submission is accepted for filing, the FDA reviews the NDA to determine, among other things, whether the proposed product is
safe and effective for its intended use, and whether the product is being manufactured in accordance with cGMPs to assure and preserve the
product’s identity, strength, quality and purity. During its review, the FDA will likely re-analyze the clinical trial data, which could result in
extensive discussions between the FDA and us during the review process. The review and evaluation of an NDA by the FDA is extensive
and time consuming and may take longer than originally planned to complete, and we may not receive a timely approval, if at all. The FDA
may refer applications for novel drug products or drug products which present difficult questions of safety or efficacy to an advisory
committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the
application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it
considers such recommendations carefully when making decisions.

Before approving an NDA, the FDA will conduct a pre-approval inspection of the manufacturing facilities for the new product to determine
whether they comply with cGMPs. The FDA will not approve the product 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. In
addition, before approving an NDA, the FDA may also audit data from clinical trials to ensure compliance with GCP requirements. After the
FDA evaluates the application, manufacturing process and manufacturing facilities, it may issue an approval letter or a Complete Response
Letter. An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications. A
Complete Response Letter indicates that the review cycle of the application is complete and the application will not be approved in its present
form. A Complete Response Letter usually describes all the specific deficiencies in the NDA identified by the FDA. The Complete Response
Letter may require additional clinical data and/or an additional pivotal Phase 3 clinical trial(s), and/or other significant and time-consuming
requirements related to clinical trials, nonclinical studies or manufacturing. If a Complete Response Letter is issued, the applicant may either
resubmit the NDA, addressing all the deficiencies identified in the letter, or withdraw the application. Even if such data and information are
submitted, the FDA may ultimately decide that the NDA does not satisfy the criteria for approval. Data obtained from clinical trials are not
always conclusive, and the FDA may interpret data differently than we interpret the same data.

505(b)(2) Approval Process

Section 505(b)(2) of the FDCA provides an alternate regulatory pathway for the FDA to approve a new product and permits reliance for such
approval on published literature or an FDA finding of safety and effectiveness for a previously approved drug product. Specifically, section
505(b)(2) permits the filing of an NDA where one or more of the investigations relied upon by the applicant for approval were not conducted
by or for the applicant and for which the applicant has not obtained a right of reference. Typically, 505(b)(2) applicants must perform
additional trials to support the change from the previously approved drug and to further demonstrate the new product’s safety and
effectiveness. The FDA may then approve the new product candidate for all or some of the labeled indications for which the referenced
product has been approved, as well as for any new indication sought by the section 505(b)(2) applicant.

Our subcutaneous formulation of furosemide is based upon an already approved version of furosemide in oral and IV formulations, rather
than a new chemical entity product candidate. Accordingly, we submitted a 505(b)(2) application that relied on FDA’s prior findings of safety
and effectiveness for previously-approved oral and/or IV

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furosemide in our clinical development plans and our NDA submission. We plan to use the 505(b)(2) pathway as well for other product
candidates that we may develop.

Regulation of Combination Products in the United States

Certain products may be comprised of components, such as drug components and device components that would normally be regulated
under different types of regulatory authorities, and frequently by different centers at the FDA. These products are known as combination
products. Specifically, under regulations issued by the FDA, a combination product may be:
• a product comprised of two or more regulated components that are physically, chemically, or otherwise combined or mixed and
produced as a single entity;
• two or more separate products packaged together in a single package or as a unit and comprised of drug and device products,
device and biological products, or biological and drug products;
• a drug, or device, or biological product packaged separately that according to its investigational plan or proposed labeling is
intended for use only with an approved individually specified drug, or device, or biological product where both are required to
achieve the intended use, indication, or effect and where upon approval of the proposed product the labeling of the approved
product would need to be changed, e.g., to reflect a change in intended use, dosage form, strength, route of administration, or
significant change in dose; or
• any investigational drug, or device, or biological product packaged separately that according to its proposed labeling is for use
only with another individually specified investigational drug, device, or biological product where both are required to achieve the
intended use, indication, or effect.

Under the FDCA and its implementing regulations, the FDA is charged with assigning a center with primary jurisdiction, or a lead center, for
review of a combination product. The designation of a lead center generally eliminates the need to receive approvals from more than one
FDA component for combination products, although it does not preclude consultations by the lead center with other components of the FDA.
The determination of which center will be the lead center is based on the “primary mode of action” of the combination product. Thus, if the
primary mode of action of a drug-device combination product is attributable to the drug product, the FDA center responsible for premarket
review of the drug product would have primary jurisdiction for the combination product. The FDA has also established an Office of
Combination Products to address issues surrounding combination products and provide more certainty to the regulatory review process. That
office serves as a focal point for combination product issues for agency reviewers and industry. It is also responsible for developing guidance
and regulations to clarify the regulation of combination products, and for assignment of the FDA center that has primary jurisdiction for review
of combination products where the jurisdiction is unclear or in dispute.

A combination product with a drug primary mode of action generally would be reviewed and approved pursuant to the drug approval
processes under the FDCA. In reviewing the NDA or 505(b)(2) application for such a product, however, FDA reviewers in the drug center
could consult with their counterparts in the device center to ensure that the device component of the combination product met applicable
requirements regarding safety, effectiveness, durability and performance. In addition, under FDA regulations, combination products are
subject to cGMP requirements applicable to both drugs and devices, including the Quality System Regulations, or QSRs, applicable to
medical devices.

Drug-device combination products present unique challenges for competitors seeking approval of Abbreviated New Drug Applications, or
ANDA, for generic versions of combination products. Generally, the FDA reviews both the drug and device constituents of a proposed
generic product to determine whether it is the same as the innovator product, including whether the basic design and operating principles of
the device component are the same and whether minor differences require significant differences in labeling for safe and effective use. If the
FDA determines that the device component of the proposed generic product is not the same in terms of performance and critical design, or
that the labeling is not the same, it generally will not approve the ANDA. Likewise, if the FDA determines that certain clinical studies, such as
clinical usability or human factors studies, are necessary to demonstrate the safety and/or effectiveness of the device component, the FDA
generally will not accept or approve an ANDA for a combination product and will instead require the submission of a full NDA or 505(b)(2)
application.

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Post-Marketing Requirements
Any products for which we receive FDA approval are subject to continuing regulation by the FDA, including, among other things, monitoring
and recordkeeping activities, reporting to the applicable regulatory authorities of adverse events with the product, providing the regulatory
authorities with updated safety and efficacy information, and product sampling and distribution requirements in accordance with the
Prescription Drug Marketing Act, a part of the FDCA. Moreover, each component of a combination product retains its regulatory status (as a
drug or device, for example) and is subject to the requirements established by the FDA for that type of component. The FDA strictly regulates
labeling, advertising, promotion and other types of information on products that are placed on the market.

Prescription drug advertising is subject to federal, state and foreign regulations. In the United States, the FDA regulates prescription drug
promotion and advertising, including direct-to-consumer advertising. Prescription drug promotional materials must be submitted to the FDA in
conjunction with their first use. In addition, a pharmaceutical company must comply with restrictions on promoting drugs for uses or in patient
populations that are not described in the drug’s approved labeling (known as “off-label use”), limitations on industry-sponsored scientific and
educational activities, and requirements for promotional activities involving the internet. Although physicians may prescribe legally available
drugs for off-label uses, manufacturers and their agents may not market or promote such off-label uses or provide off-label information in the
promotion of drug products that is not consistent with the approved labeling for those products. The FDA and other regulatory and
enforcement authorities actively enforce laws and regulations prohibiting promotion of off-label uses and the promotion of products for which
marketing approval has not been obtained. A company that is found to have improperly promoted off-label uses may be subject to corrective
advertising in addition to significant liability, which may include civil and administrative remedies as well as criminal sanctions.

In the United States, once a product is approved, its manufacture is subject to comprehensive and continuing regulation by the FDA. The
FDA regulations require that combination products be manufactured in specific approved facilities and in accordance with cGMPs applicable
to drugs and devices, including certain QSR requirements. We rely, and expect to continue to rely, on third parties for the production of
clinical and commercial quantities of our products in accordance with cGMP regulations. cGMP regulations require among other things,
quality control and quality assurance as well as the corresponding maintenance of records and documentation and the obligation to
investigate and correct any deviations from cGMP. Drug manufacturers and other entities involved in the manufacture and distribution of
approved drugs are required to register their establishments with the FDA and certain state agencies and are subject to periodic
unannounced inspections by the FDA and certain state agencies for compliance with cGMPs and other laws. Accordingly, manufacturers
must continue to expend time, money, and effort in the area of production and quality control to maintain cGMP compliance. These
regulations also impose certain organizational, procedural and documentation requirements with respect to manufacturing and quality
assurance activities. NDA holders using contract manufacturers, laboratories or packagers are responsible for the selection and monitoring of
qualified firms, and, in certain circumstances, qualified suppliers to these firms. These firms and, where applicable, their suppliers are subject
to inspections by the FDA at any time, and the discovery of violative conditions, including failure to conform to cGMPs, could result in
enforcement actions that interrupt the operation of any such facilities or the ability to distribute products manufactured, processed or tested
by them. Discovery of problems with a product after approval may result in restrictions on a product, manufacturer, or holder of an approved
NDA, including, among other things, recall or withdrawal of the product from the market.

The FDA also may require post-marketing testing, known as Phase 4 testing, a risk evaluation and mitigation strategy, or REMS, to assure
the safe use of the drug, and surveillance to monitor the effects of an approved product or place conditions on an approval that could restrict
the distribution or use of the product. Discovery of previously unknown problems with a product or the failure to comply with applicable FDA
requirements can have negative consequences, including adverse publicity, judicial or administrative enforcement, untitled or warning letters
from the FDA, mandated corrective advertising or communications with doctors, and civil or criminal penalties, among others. Newly
discovered or developed safety or effectiveness data may require changes to a product’s approved labeling, including the addition of new
warnings and contraindications, and may require the implementation of other risk management measures. Also, new government
requirements, including those resulting from new legislation, may be established, or the FDA’s policies may change, which could delay or
prevent regulatory approval of our products under development and impact approved products already on the market.

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Other Regulatory Matters
The distribution of pharmaceutical products is subject to additional requirements and regulations, including extensive record-keeping,
licensing, storage and security requirements intended to prevent the unauthorized sale of pharmaceutical products.

The failure to comply with regulatory requirements subjects firms to possible legal or regulatory action. Depending on the circumstances,
failure to meet applicable regulatory requirements can result in criminal prosecution, fines or other penalties, injunctions, voluntary recall,
seizure of products, total or partial suspension of production, denial or withdrawal of product approvals, exclusion from federal healthcare
programs, or refusal to allow a firm to enter into supply contracts, including government contracts. In addition, even if a firm complies with
FDA and other requirements, new information regarding the safety or effectiveness of a product could lead the FDA to modify or withdraw
product approval. Prohibitions or restrictions on sales or withdrawal of future products marketed by us could materially affect our business in
an adverse way.

Changes in regulations, statutes or the interpretation of existing regulations could impact our business in the future by requiring, for example:
(i) changes to our manufacturing arrangements; (ii) additions or modifications to product labeling; (iii) the voluntary recall or discontinuation of
our products; or (iv) additional record-keeping requirements. If any such changes were to be imposed, they could adversely affect the
operation of our business.

Orphan Designation and Exclusivity

The FDA may grant orphan drug designation to drugs intended to treat a rare disease or condition that affects fewer than 200,000 individuals
in the United States. Alternatively, orphan drug designation may be available if the disease or the condition affects more than 200,000
individuals in the United States and there is no reasonable expectation that the cost of developing and making the drug for this type of
disease or condition will be recovered from sales in the United States.

Orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical trial costs, tax
advantages, and user-fee waivers. In addition, if a product is the first to receive FDA approval of the indication for which it has orphan
designation, the product is entitled to orphan drug exclusivity, which means the FDA may not approve any other application to market the
same drug for the same orphan indication for a period of seven years, except in limited circumstances, such as a showing of clinical
superiority over the product with orphan exclusivity. Competitors, however, may receive approval of different products for the indication for
which the orphan product has exclusivity or obtain approval for the same product but for a different indication for which the orphan product
has exclusivity, which may permit off-label use for the orphan indication. Orphan product exclusivity also could block the approval of one of
our products for seven years if a competitor obtains approval of the same drug or biological product as defined by the FDA for the same
orphan indication or if our product candidate is determined to be contained within the competitor’s product for the same indication or disease.
If a drug or biological product designated as an orphan product receives marketing approval for an indication broader than what is
designated, it may not be entitled to orphan product exclusivity.

U.S. Marketing Exclusivity

Market exclusivity provisions under the FDCA can also delay the submission or the approval of certain marketing applications, including
505(b)(2) applications. The FDA provides three years of marketing exclusivity for an NDA (including a 505(b)(2) application), or supplement
to an existing NDA, if new clinical investigations, other than bioavailability studies, that were conducted or sponsored by the applicant are
deemed by the FDA to be essential to the approval of the application. Three-year exclusivity is typically awarded to innovative changes to a
previously-approved drug product, such as new indications, dosage forms or strengths. This three-year exclusivity covers only the
modification for which the drug received approval on the basis of the new clinical investigations and does not prohibit the FDA from approving
applications for drugs that do not have the innovative change, such as generic copies of the original, unmodified drug product. Three-year
exclusivity blocks approval of 505(b)(2) applications and ANDAs but will not delay the submission or approval of a full NDA. However, an
applicant submitting a full NDA would be required to conduct or obtain a right of reference to all of the nonclinical studies and adequate and
well-controlled clinical trials necessary to demonstrate safety and effectiveness. Orphan drug exclusivity, as described above, may offer a
seven-year period of marketing exclusivity, except in certain circumstances. Pediatric exclusivity is another type of regulatory market
exclusivity in the United States. Pediatric exclusivity, if granted, adds six months to existing exclusivity periods, including exclusivity attaching
to certain patent certifications. This six-month exclusivity, which runs from the end of other exclusivity protection and patent terms, may be
granted based on the voluntary completion within certain timeframes of a pediatric trial in accordance with an FDA-issued “Written Request”
for such a trial.

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European Orphan Designation and Exclusivity
In the European Union, the European Medicines Agency’s, or EMA’s, Committee for Orphan Medicinal Products, or COMP, grants orphan
drug designation to promote the development of products that are intended for the diagnosis, prevention or treatment of life-threatening or
chronically debilitating conditions that affect not more than five in 10,000 persons in the European Union Community, or when, without
incentives, it is unlikely that sales of such products in the European Union would be sufficient to justify the necessary investment in
developing the products. Additionally, orphan drug designation is only available where no satisfactory method of diagnosis, prevention, or
treatment of the condition has been authorized (or the product would be a significant benefit to those affected).

In the European Union, orphan drug designation entitles a party to financial incentives such as reduction of fees or fee waivers and 10 years
of market exclusivity is granted following medicinal product approval. This period may be reduced to six years if the orphan drug designation
criteria are no longer met, including where it is shown that the product is sufficiently profitable not to justify maintenance of market exclusivity.
Market exclusivity would not prevent the approval of a similar drug that is shown to be safer, more effective or otherwise clinically superior.

Other Healthcare Laws and Compliance Requirements

In the United States, our current and future operations are subject to regulation by various federal, state and local authorities in addition to
the FDA, including but not limited to, the Centers for Medicare and Medicaid Services, or CMS, other divisions of the U.S. Department of
Health and Human Services, or HHS (such as the Office of Inspector General, Office for Civil Rights and the Health Resources and Service
Administration), the U.S. Department of Justice, or DOJ, and individual U.S. Attorney offices within the DOJ, and state and local
governments. For example, our clinical research, sales, marketing and scientific/educational grant programs may have to comply with the
anti-fraud and abuse provisions of the Social Security Act, the false claims laws, the privacy and security provisions of the Health Insurance
Portability and Accountability Act of 1996, or HIPAA, and similar state laws, each as amended, as applicable:
• the federal Anti-Kickback Statute, which prohibits, among other things, knowingly and willfully soliciting, receiving, offering or
paying any remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in kind, to
induce, or in return for, either the referral of an individual, 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 a federal healthcare program, such as the Medicare
and Medicaid programs; a person or entity does not need to have actual knowledge of the federal Anti-Kickback Statute or
specific intent to violate it 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
federal False Claims Act, or FCA, or federal civil money penalties statute. On December 2, 2020, the Office of Inspector
General, or OIG, published further modifications to the federal Anti-Kickback Statute. Under the final rules, OIG added safe
harbor protections under the Anti-Kickback Statute for certain coordinated care and value-based arrangements among
clinicians, providers, and others. This rule (with exceptions) became effective January 19, 2021. Implementation of this change
and new safe harbors for point-of-sale reductions in price for prescription pharmaceutical products and pharmacy benefit
manager service fees are currently under review by the Biden administration and may be amended or repealed. We continue to
evaluate what effect, if any, the rule will have on our business;
• the federal civil and criminal false claims laws and civil monetary penalty laws, including the FCA, which prohibit, among other
things, individuals or entities from knowingly presenting, or causing to be presented, false or fraudulent claims for payment to,
or approval by Medicare, Medicaid, or other federal healthcare programs, knowingly making, using or causing to be made or
used a false record or statement material to a false or fraudulent claim or an obligation to pay or transmit money to the federal
government, or knowingly concealing or knowingly and improperly avoiding or decreasing or concealing an obligation to pay
money to the federal government. Manufacturers can be held liable under the FCA even when they do not submit claims
directly to government payers if they are deemed to “cause” the submission of false or fraudulent claims. The FCA also permits
a private individual acting as a “whistleblower” to bring actions on behalf of the federal government alleging violations of the
FCA and to share in any monetary recovery;
• the anti-inducement law, which prohibits, among other things, the offering or giving of remuneration, which includes, without
limitation, any transfer of items or services for free or for less than fair market

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 value (with limited exceptions), to a Medicare or Medicaid beneficiary that the person knows or should know is likely to
influence the beneficiary’s selection of a particular supplier of items or services reimbursable by a federal or state governmental
program;
• HIPAA, which created new federal criminal statutes that prohibit, among other things, knowingly and willfully executing, or
attempting to execute, a scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent
pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any
healthcare benefit program, regardless of the payer (e.g., public or private) and knowingly and willfully falsifying, concealing or
covering up by any trick or device a material fact or making any materially false statements in connection with the delivery of, or
payment for, healthcare benefits, items or services relating to healthcare matters; similar to the federal Anti-Kickback Statute, a
person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed
a violation;
• HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, and their respective
implementing regulations, which impose requirements on certain covered healthcare providers, health plans, and healthcare
clearinghouses as well as their respective business associates that perform services for them that involve the use, or
disclosure of, individually identifiable health information, relating to the privacy, security and transmission of individually
identifiable health information;
• the federal transparency requirements under the Affordable Care Act, or ACA, including the provision commonly referred to as
the Physician Payments Sunshine Act, which requires manufacturers of drugs, devices, biologics and medical supplies for
which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program to report annually to the U.S.
Department of Health and Human Services information related to payments or other transfers of value made 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 government price reporting laws, which require us to calculate and report complex pricing metrics in an accurate and
timely manner to government programs; and
• federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that
potentially harm consumers.

Additionally, we are subject to state and non-U.S. equivalents of each of the healthcare laws described above, among others, some of which
may be broader in scope and may apply regardless of the payer. Many U.S. states have adopted laws similar to the federal Anti-Kickback
Statute, some of which apply to the referral of patients for healthcare services reimbursed by any source, not just governmental payers,
including private insurers. In addition, some states have passed laws that require pharmaceutical companies to comply with the April 2003
Office of Inspector General Compliance Program Guidance for Pharmaceutical Manufacturers and/or the Pharmaceutical Research and
Manufacturers of America’s Code on Interactions with Healthcare Professionals. Several states also impose other marketing restrictions or
require pharmaceutical companies to make marketing or price disclosures to the state. There are ambiguities as to what is required to
comply with these state requirements and if we fail to comply with an applicable state law requirement we could be subject to penalties.
Finally, there are state and non-U.S. laws governing the privacy and security of health information, many of which differ from each other in
significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.

Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of
our business activities could be subject to challenge under one or more of such laws.

We may develop products that, if approved, may be administered by a physician. Under currently applicable U.S. law, certain products not
usually self-administered (including injectable drugs) may be eligible for coverage under Medicare through Medicare Part B. Medicare Part B
is part of original Medicare, the federal health care program that provides health care benefits to the aged and disabled, and covers
outpatient services and supplies, including certain pharmaceutical products, that are medically necessary to treat a beneficiary’s health
condition. As a condition of receiving Medicare Part B reimbursement for a manufacturer’s eligible drugs, the manufacturer is required to
participate in other government healthcare programs, including the Medicaid Drug Rebate Program and the 340B Drug Pricing Program. The
Medicaid Drug Rebate Program requires pharmaceutical manufacturers to enter into and have in effect a national rebate agreement with the
Secretary of HHS as a condition for states to receive federal matching funds for the manufacturer’s outpatient drugs furnished to Medicaid
patients. Under the 340B Drug Pricing Program, the manufacturer must extend discounts to entities that participate in the program.

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In addition, many pharmaceutical manufacturers must calculate and report certain price reporting metrics to the government, such as
average sales price, or ASP, and best price. Penalties may apply in some cases when such metrics are not submitted accurately and timely.
Further, these prices for drugs may be reduced by mandatory discounts or rebates required by government healthcare programs or private
payers.

In order to distribute products commercially, we must comply with state laws that require the registration of manufacturers and wholesale
distributors of drug and biological products in a state, including, in certain states, manufacturers and distributors who ship products into the
state even if such manufacturers or distributors have no place of business within the state. Some states also impose requirements on
manufacturers and distributors to establish the pedigree of product in the chain of distribution, including some states that require
manufacturers and others to adopt new technology capable of tracking and tracing product as it moves through the distribution chain. Several
states have enacted legislation requiring pharmaceutical and biotechnology companies to establish marketing compliance programs, file
periodic reports with the state, make periodic public disclosures on sales, marketing, pricing, clinical trials and other activities, and/or register
their sales representatives, as well as to prohibit pharmacies and other healthcare entities from providing certain physician prescribing data
to pharmaceutical and biotechnology companies for use in sales and marketing, and to prohibit certain other sales and marketing practices.
All of our activities are potentially subject to federal and state consumer protection and unfair competition laws.

Neither the U.S. government nor the U.S. courts have provided definitive guidance on the application of fraud and abuse laws to our
business. Law enforcement authorities are increasingly focused on enforcing these laws, and it is possible that some of our practices may be
challenged under these laws. Efforts to ensure that our current and future business arrangements with third parties, and our business
generally, will comply with applicable healthcare laws and regulations will involve substantial costs. It is possible that governmental
authorities will conclude that our business practices, including our arrangements with physicians and other healthcare providers, some of
whom received stock options as compensation for services provided, may not comply with current or future statutes, regulations, agency
guidance or case law involving applicable fraud and abuse or other healthcare laws and regulations. If 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,
including, without limitation, the imposition of civil, criminal and administrative penalties, damages, disgorgement, monetary fines, individual
imprisonment, exclusion from participation in Medicare, Medicaid and other federal healthcare programs, injunctions, private “qui tam”
actions brought by individual whistleblowers in the name of the government, or refusal to allow us to enter into government contracts,
additional reporting obligations and oversight if we become subject to a corporate integrity agreement or other agreement to resolve
allegations of non-compliance with these laws, 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. In addition,
the approval and commercialization of any of our drug candidates outside the United States will also likely subject us to non-U.S. equivalents
of the healthcare laws mentioned above, among other non-U.S. laws.

If any of the physicians or other healthcare providers or entities with whom we expect to do business are found to be not in compliance with
applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare
programs, which may also adversely affect our business.

Healthcare Reform
A primary trend in the U.S. healthcare industry and elsewhere is cost containment. Government authorities and other third-party payers have
attempted to control costs by limiting coverage and the amount of reimbursement for particular medical products. For example, in March
2010, the ACA was enacted, which, among other things, increased the minimum Medicaid rebates owed by most manufacturers under the
Medicaid Drug Rebate Program; introduced 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; extended the Medicaid Drug Rebate Program to
utilization of prescriptions of individuals enrolled in Medicaid managed care plans; imposed mandatory discounts for certain Medicare Part D
beneficiaries as a condition for manufacturers’ outpatient drugs coverage under Medicare Part D; subjected drug manufacturers to new
annual fees based on pharmaceutical companies’ share of sales to federal healthcare programs; imposed a new federal excise tax on the
sale of certain medical devices; created 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 the Center for Medicare Innovation at the
CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending.

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Some of the provisions of the ACA have yet to be implemented, and there have been legal and political challenges to certain aspects of the
ACA. Congress has considered legislation that would repeal or repeal and replace all or part of the ACA. While Congress has not passed
comprehensive repeal legislation, two bills affecting the implementation of certain taxes under the ACA have been signed into law. On
January 22, 2018, former President Trump signed a continuing resolution on appropriations for fiscal year 2018 that delayed the
implementation of certain ACA mandated fees, including the so-called “Cadillac” tax on certain high cost employer-sponsored insurance
plans, the annual fee imposed on certain health insurance providers based on market share, and the medical device excise tax on non-
exempt medical devices. The Bipartisan Budget Act of 2018, or the BBA, among other things, amends the ACA, effective January 1, 2019, to
close the coverage gap in most Medicare drug plans, commonly referred to as the “donut hole”. In December 2018, the CMS published a
final rule permitting further collections and payments to and from certain ACA qualified health plans and health insurance issuers under the
ACA risk adjustment program in response to the outcome of the federal district court litigation regarding the method CMS uses to determine
this risk adjustment. Since then, the ACA risk adjustment program payment parameters have been updated annually.

Further, the Tax Cuts and Jobs Act of 2017, or Tax Act, includes a provision repealing, effective January 1, 2019, 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 Act, the remaining provisions of the ACA are invalid as well. On December 18, 2019, the Fifth Circuit U.S.
Court of Appeals held that the individual mandate is unconstitutional, and remanded the case to the lower court to reconsider its earlier
invalidation of the full ACA. On March 2, 2020, the United States Supreme Court granted the petitions for writs of certiorari to review this
case, and held oral arguments on November 10, 2020. Pending a decision, the ACA remains in effect, but it is unclear at this time what effect
these developments will have on the status of the ACA.

Other legislative changes have been proposed and adopted since the ACA was enacted. For example, in August 2011, President Obama
signed into law the Budget Control Act of 2011, which, among other things, created the Joint Select Committee on Deficit Reduction to
recommend to Congress proposals in spending reductions. The Joint Select Committee on Deficit Reduction did not achieve a targeted
deficit reduction of at least $1.2 trillion for fiscal years 2012 through 2021, triggering the legislation’s automatic reduction to several
government programs. This includes aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, which went into
effect beginning on April 1, 2013 and, due to legislation amendments to the statute, including Coronavirus Aid, Relief and Economic Security
Act, or CARES Act, will stay in effect through 2030 unless additional Congressional action is taken. Pursuant to the CARES Act, which was
signed into law on March 27, 2020 to provide financial support and resources to individuals and businesses affected by the COVID-19
pandemic, and subsequent legislation, these reductions have been suspended from May 1, 2020 through March 31, 2021. Proposed
legislation, if passed, would extend this suspension until the end of the pandemic. In January 2013, the American Taxpayer Relief Act of
2012 was signed into law, which, among other things, further reduced Medicare payments to several types of providers, including hospitals,
imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to
providers from three to five years.

Additionally, there has been increasing legislative and enforcement interest in the United States with respect to specialty drug pricing
practices. Specifically, there have been several recent 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 Medicare, review the
relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs.
At the federal level, the former Trump administration’s budget proposal for fiscal year 2021 included a $135 billion allowance to support
legislative proposals seeking to reduce drug prices, increase competition, lower out-of-pocket drug costs for patients, and increase patient
access to lower-cost generic and biosimilar drugs. On March 10, 2020, the former Trump administration sent “principles” for drug pricing to
Congress, calling for legislation that would, among other things, cap Medicare Part D beneficiary out-of-pocket pharmacy expenses, provide
an option to cap Medicare Part D beneficiary monthly out-of-pocket expenses, and place limits on pharmaceutical price increases. Further,
the former Trump administration also released a “Blueprint”, or plan, 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. HHS has already started the process of soliciting feedback on some of these measures and, at the same time, is immediately

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implementing others under its existing authority. For example, in September 2018, CMS announced that it will allow Medicare Advantage
Plans the option to use step therapy for Part B drugs beginning January 1, 2019, and in October 2018, CMS proposed a new rule that would
require direct-to-consumer television 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.
However, it is unclear whether the Biden administration will challenge, reverse, revoke or otherwise modify these executive and
administrative actions after January 20, 2021.

In addition, there have been several changes to the 340B drug pricing program, which imposes ceilings on prices that drug manufacturers
can charge for medications sold to certain health care facilities. On December 27, 2018, the District Court for the District of Columbia
invalidated a reimbursement formula change under the 340B drug pricing program, and CMS subsequently altered the fiscal years 2019 and
2018 reimbursement formula on specified covered outpatient drugs (“SCODs”). The court ruled this change was not an “adjustment” which
was within the Secretary’s discretion to make but was instead a fundamental change in the reimbursement calculation. However, most
recently, on July 31, 2020, the U.S. Court of Appeals for the District of Columbia Circuit overturned the district court’s decision and found that
the changes were within the Secretary’s authority. On September 14, 2020, the plaintiffs-appellees filed a Petition for Rehearing En Banc
(i.e., before the full court), but was denied on October 16, 2020. Plaintiffs-appellees filed a petition for a writ of certiorari at the Supreme Court
on February 10, 2021. It is unclear how these developments could affect covered hospitals who might purchase our future products and
affect the rates we may charge such facilities for our approved products in the future, if any.

On July 24, 2020 and September 13, 2020, former President Trump announced several executive orders related to prescription drug pricing
that seek to implement several of the administration's proposals. In response, the FDA released a final rule on September 24, 2020, which
went into effect on November 30, 2020, providing guidance for states to build and submit importation plans for drugs from Canada. Further,
on November 20, 2020 CMS issued an Interim Final Rule implementing the Most Favored Nation, or MFN, Model under which Medicare Part
B reimbursement rates will be calculated for certain drugs and biologicals based on the lowest price drug manufacturers receive in
Organization for Economic Cooperation and Development countries with a similar gross domestic product per capita. The MFN Model
regulations mandate participation by identified Part B providers and would have applied in all U.S. states and territories for a seven-year
period beginning January 1, 2021, and ending December 31, 2027. However, in response to a lawsuit filed by several industry groups, on
December 28, the U.S. District Court for the Northern District of California issued a nationwide preliminary injunction enjoining government
defendants from implementing the MFN Rule pending completion of notice-and-comment procedures under the Administrative Procedure
Act. On January 13, 2021, in a separate lawsuit brought by industry groups in the U.S. District of Maryland, the government defendants
entered a joint motion to stay litigation on the condition that the government would not appeal the preliminary injunction granted in the U.S.
District Court for the Northern District of California and that performance for any final regulation stemming from the MFN Interim Final Rule
shall not commence earlier than 60 days after publication of that regulation in the Federal Register.

Additionally, on November 20, 2020, HHS finalized a regulation removing safe harbor protection for price reductions from pharmaceutical
manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by
law. The rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as well as a safe harbor for certain fixed fee
arrangements between pharmacy benefit managers and manufacturers. Pursuant to an order entered by the U.S. District Court for the
District of Columbia, the portion of the rule eliminating safe harbor protection for certain rebates related to the sale or purchase of a
pharmaceutical product from a manufacturer to a plan sponsor under Medicare Part D has been delayed to January 1, 2023. Further,
implementation of this change and new safe harbors for point-of-sale reductions in price for prescription pharmaceutical products and
pharmacy benefit manager service fees are currently under review by the Biden administration and may be amended or repealed. Although a
number of these and other proposed measures may require authorization through additional legislation to become effective, and the Biden
administration may reverse or otherwise change these measures, Congress has indicated that it will continue to seek new legislative
measures to control drug costs.

Individual states in the United States have also increasingly passed legislation and implemented 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, designed to encourage importation from other countries and bulk
purchasing.

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Coverage and Reimbursement
Significant uncertainty exists as to the coverage and reimbursement status of any product candidate for which we obtain regulatory approval.
In the United States and markets in other countries, sales of any product candidates for which we receive regulatory approval for commercial
sale will depend, in part, on the availability of coverage and reimbursement from third-party payers. Third-party payers include government
authorities, managed care providers, private health insurers and other organizations. Our ability to commercialize any products successfully
also will depend in part on the extent to which coverage and adequate reimbursement for these products and related treatments will be
available from third-party payers. Third-party payers decide which therapeutics they will pay for and establish reimbursement levels.
Coverage and reimbursement by a third-party payer may depend upon a number of factors, including the third-party payer’s determination
that use of a therapeutic is:
• a covered benefit under its health plan;
• safe, effective and medically necessary;
• appropriate for the specific patient;
• cost-effective; and
• neither experimental nor investigational.

The process for determining whether a payer will provide coverage for a product may be separate from the process for setting the
reimbursement rate that the payer will pay for the product. Third-party payers may limit coverage to specific products on an approved list, or
formulary, which might not include all of the FDA-approved products for a particular indication. A decision by a third-party payer not to cover
our product candidates could reduce physician utilization of our products if approved and have a material adverse effect on our sales, results
of operations and financial condition. Moreover, a payer’s decision to provide coverage for a product does not imply that an adequate
reimbursement rate will be approved. Adequate third-party reimbursement may not be available to enable us to maintain price levels
sufficient to realize an appropriate return on our investment in product development.

In addition, coverage and reimbursement for products can differ significantly from payer to payer. One third-party payer’s decision to cover a
particular medical product or service does not ensure that other payers will also provide coverage for the medical product or service, or will
provide coverage at an adequate reimbursement rate. As a result, the coverage determination process will require us to provide scientific and
clinical support for the use of our products to each payer separately and will be a time-consuming process.

Third-party payers are increasingly challenging the price and examining the medical necessity and cost-effectiveness of medical products
and services, in addition to their safety and efficacy. Obtaining reimbursement for our products may be particularly difficult because of the
higher prices often associated with branded drugs and drugs administered under the supervision of a physician. We may need to conduct
expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of our products, in addition to
the costs required to obtain FDA approvals. Our product candidates may not be considered medically necessary or cost-effective. Obtaining
coverage and reimbursement approval of a product from a government or other third-party payer is a time-consuming and costly process that
could require us to provide to each payer supporting scientific, clinical and cost-effectiveness data for the use of our product on a payer-by-
payer basis, with no assurance that coverage and adequate reimbursement will be obtained. A third-party payer’s decision to provide
coverage for a product does not imply that an adequate reimbursement rate will be approved. Further, in the United States, no uniform policy
of coverage and reimbursement for products exists among third-party payers. Private third-party payers tend to follow Medicare coverage
and reimbursement limitations to a substantial degree, but also have their own methods and approval process apart from Medicare
determinations. Therefore, one payer’s determination to provide coverage for a product does not assure that other payers will also provide
coverage for the product. Adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize
an appropriate return on our investment in product development. If reimbursement is not available or is available only at limited levels, we
may not be able to successfully commercialize any product candidate that we successfully develop.

Outside of the United States, the pricing of pharmaceutical products and medical devices is subject to governmental control in many
countries. For example, in the European Union, pricing and reimbursement schemes vary widely from country to country. Some countries
provide that products may be marketed only after a

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reimbursement price has been agreed. Some countries may require the completion of additional studies that compare the cost-effectiveness
of a particular therapy to currently available therapies or so-called health technology assessments, in order to obtain reimbursement or
pricing approval. Other countries may allow companies to fix their own prices for products, but monitor and control product volumes and
issue guidance to physicians to limit prescriptions. Efforts to control prices and utilization of pharmaceutical products and medical devices will
likely continue as countries attempt to manage healthcare expenditures.

The marketability of any product candidates for which we receive regulatory approval for commercial sale may suffer if third-party payers fail
to provide coverage and adequate reimbursement. In addition, emphasis on managed care, the increasing influence of health maintenance
organizations, and additional legislative changes in the United States has increased, and we expect will continue to increase, the pressure on
healthcare pricing. The downward pressure on the rise in healthcare costs in general, particularly prescription medicines, medical devices
and surgical procedures and other treatments, has become very intense. Coverage policies and third-party reimbursement rates may change
at any time. Even if favorable coverage and reimbursement status is attained for one or more products for which we receive regulatory
approval, less favorable coverage policies and reimbursement rates may be implemented in the future.

Employees
As of December 31, 2020, we had 27 full-time employees, including six in research and development, 10 in clinical and medical affairs,
regulatory affairs, and quality assurance, four in commercial and seven in finance, general administrative and executive administration. None
of our employees are represented by a labor union or are parties to a collective bargaining agreement and we believe that our employee
relations are good.

Facilities
Our principal executive offices are located in a 13,066 square foot facility in Burlington, Massachusetts. The term of the lease for our facility
extends through November 2022. Our facility houses our research and development, sales, marketing, finance and administrative activities.
We believe that our current facilities are adequate to meet our needs for the foreseeable future and that suitable additional space will be
available as and when needed.

Corporate Information
We were formed as a limited liability company under the laws of the State of Delaware in February 2013 under the name scPharmaceuticals
LLC and we converted to a corporation under the laws of the State of Delaware in March 2014 under the name scPharmaceuticals Inc. Our
website address is www.scpharmaceuticals.com.

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Item 1A. Risk Factors.
Investing in our common stock involves a high degree of risk. You should carefully consider the following risks and uncertainties, together
with all other information in this Annual Report on Form 10-K, including our consolidated financial statements and related notes and
“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before investing in our common stock. Any of the
risk factors we describe below could adversely affect our business, financial condition or results of operations. The market price of our
common stock could decline if one or more of these risks or uncertainties actually occur, causing you to lose all or part of the money you paid
to buy our common stock. Additional risks that we currently do not know about or that we currently believe to be immaterial may also impair
our business. Certain statements below are forward-looking statements. See “Forward-Looking Statements” in this Annual Report on Form
10-K.

Risks Related to our Product Candidates

Risks Related to Approval and Commercialization of our Product Candidates

We are heavily dependent on the success of our product candidates and, in particular, our lead product candidate, FUROSCIX. We
cannot give any assurance that we will receive regulatory approval for this product candidate or any other product candidates,
which is necessary before they can be commercialized.
To date, we have expended significant time, resources and effort on the development of our product candidates, and a substantial majority of
our resources are now focused on seeking marketing approval for and planning for potential commercialization of our most advanced product
candidate, FUROSCIX, in the United States. Our business and future success are substantially dependent on our ability to successfully and
timely obtain regulatory approval for and commercialize FUROSCIX for the treatment of decompensated heart failure. All of our other product
candidates are in earlier stages of development and subject to the risks of failure inherent in developing drug products. Accordingly, our
ability to generate significant product revenues in the near term will depend almost entirely on our ability to successfully obtain marketing
approval for and commercialize FUROSCIX.

We are not permitted to market any of our product candidates in the United States until we receive approval of an NDA from the FDA, or in
any foreign jurisdiction until we receive the requisite approvals from such jurisdiction. We resubmitted our NDA for FUROSCIX with the FDA
on June 30, 2020. The resubmission was a response to a CRL from the FDA with respect to our NDA submitted in August 2017, which
indicated that, among other things, certain device modifications to our infusor were required. Based on our interactions with the FDA, which
required device modifications necessary to advance FUROSCIX using the existing technology, we decided to transition to our next
generation device, which is being developed through a partnership with West Pharmaceutical Services, Inc., or West, using its proprietary,
wearable, SmartDose drug delivery system. On July 23, 2020, the FDA accepted the resubmission of our NDA and assigned a PDUFA target
action date of December 30, 2020 for completion of its review of the NDA. However, on December 3, 2020, we received a CRL from the FDA
and subsequently held a Type A meeting with the FDA. In each, among other things, the FDA raised questions related to testing, labeling
and features of the combination product unrelated to the drug constituent. The FDA also indicated that they needed to conduct pre-approval
inspections at two of our third-party manufacturing facilities that could not be conducted due to travel restrictions related to COVID. On
January 28, 2021, we had a Type A meeting with the FDA to discuss the issues described in the CRL and steps required for the
resubmission of the NDA for FUROSCIX. Based on the meeting, we will run additional modified bench tests on aged commercial units of the
West SmartDose Gen II on-body infusor and anticipate the FDA will still need to conduct pre-approval inspections at three of our third-party
manufacturing facilities.

There can be no assurance that the FDA will approve FUROSCIX and, unless it obtains regulatory approval, it may never be
commercialized. Satisfaction of regulatory requirements can be protracted, is dependent upon the type, complexity and novelty of the product
candidate and requires the expenditure of substantial resources. For example, FUROSCIX is considered to be a drug-device combination
product by the FDA, and its NDA thus will require review and coordination by the FDA’s drug and device centers prior to approval. We cannot
predict whether we will obtain regulatory approval to commercialize FUROSCIX or any of our other product candidates, and we cannot,
therefore, predict the timing of any future revenues from these product candidates, if any. Any further delay or setback in the regulatory
approval or commercialization of any of these product candidates will adversely affect our business.

25
Our ability to successfully commercialize any of our products candidates will depend, among other things, on our ability to:

• receive marketing approvals from the FDA and similar foreign regulatory authorities;
• produce, through a validated process, sufficiently large quantities of our product candidates to permit successful
commercialization;
• establish and maintain commercial manufacturing arrangements with third-party manufacturers;
• build and maintain sales, distribution and marketing capabilities sufficient to launch commercial sales of our product candidates;
• successfully complete our clinical trials for our product candidates under clinical development;
• establish collaborations with third parties for the commercialization of our product candidates in countries outside the United
States and such collaborators’ ability to obtain regulatory and reimbursement approvals in such countries;
• secure acceptance of our product candidates from physicians, healthcare payers, patients and the medical community; and
• manage our spending as costs and expenses increase due to clinical trials, regulatory approvals and commercialization.

There are no guarantees that we will be successful in completing these tasks. If we are unable to successfully complete these tasks, we may
not be able to commercialize FUROSCIX or any of our other product candidates in a timely manner, or at all, in which case we may be
unable to generate sufficient revenues to sustain and grow our business.

If we are not able to obtain required regulatory approvals, we will not be able to commercialize FUROSCIX, and our ability to
generate revenue will be materially impaired. There is no assurance that, if approved, our commercialization efforts with respect to
FUROSCIX will be successful or that we will be able to generate revenues at the levels or within the timing we expect or at the
levels or within the timing necessary to support our goals.
FUROSCIX and the activities associated with its development and commercialization, including its design, research, testing, manufacture,
safety, efficacy, recordkeeping, labeling, packaging, storage, approval, advertising, promotion, sale and distribution, are subject to
comprehensive regulation by the FDA and other regulatory agencies in the United States and similar regulatory authorities outside the United
States. Failure to obtain marketing approval for FUROSCIX will prevent us from commercializing it.

The time required to obtain approval by the FDA and comparable foreign authorities is unpredictable but typically takes many years following
the commencement of clinical trials and depends upon numerous factors, including the substantial discretion of the regulatory authorities. In
addition, approval policies, regulations, or the type and amount of clinical data necessary to gain approval may change during the course of a
product candidate’s clinical development and may vary among jurisdictions. We have not received approval from regulatory authorities to
market any product candidate in any jurisdiction, and it is possible that neither FUROSCIX nor any product candidates we may seek to
develop in the future will ever obtain the appropriate regulatory approvals necessary for us to commence product sales.

The FDA has substantial discretion in the drug approval process, including the ability to delay, limit or deny approval of a product candidate
for many reasons. For example, the FDA has already delayed our timeline to commercialization of FUROSCIX by issuing CRLs in June 2018
and December 2020 with respect to our NDA for FUROSCIX. As of June 23, 2020, the FDA noted it is continuing to ensure timely reviews of
applications for medical products during the COVID-19 pandemic in line with its user fee performance goals; however, the FDA may not be
able to continue its current pace and review timelines could be extended. In addition, the FDA:
• could determine that we cannot rely on the Section 505(b)(2) regulatory pathway for FUROSCIX;
• could determine that the information provided by us was inadequate, contained clinical deficiencies or otherwise failed to
demonstrate the safety and effectiveness of FUROSCIX or any of our product candidates for any indication;

26
 • could determine that additional clinical, human factors or other studies are required to evaluate FUROSCIX incorporating the
next generation SmartDose drug delivery system;
• may not find the data from bioequivalence studies and/or clinical trials sufficient to obtain marketing approval in the United
States, including any findings that the clinical and other benefits of our product candidates outweigh their safety risks;
• may disagree with our trial design or our interpretation of data from preclinical studies, bioequivalence studies and/or clinical
trials, or may change the requirements for approval even after it has reviewed and commented on the design for our trials;
• may determine that there are unacceptable risks associated with the device component of FUROSCIX or that there are
deficiencies with the information submitted to demonstrate the safety, effectiveness and reliability of the device component;
• may determine that we have identified the wrong listed drug or drugs or that approval of our Section 505(b)(2) application for
FUROSCIX or any of our other product candidates is blocked by patent or non-patent exclusivity of the listed drug or drugs or of
other previously-approved drugs with the same conditions of approval as FUROSCIX (e.g., subcutaneous injection);
• may delay the timing of routine or pre-approval inspections due to COVID-19, which could impact the approval process, or
identify deficiencies in the manufacturing processes or facilities of third-party manufacturers with which we enter into
agreements for the manufacturing of our product candidates;
• may approve our product candidates for fewer or more limited indications than we request, or may grant approval contingent on
the performance of costly post-approval clinical trials;
• may change its approval policies or adopt new regulations; or
• may not approve the labeling claims that we believe are necessary or desirable for the successful commercialization of our
product candidates.

To date, most patients who have been evaluated in studies of our product candidates have been treated with versions of our product
candidates incorporating the sc2Wear Infusor. As of February 2019, we have discontinued use of the sc2Wear Infusor in our product
candidates and have pivoted to incorporate the next generation SmartDose drug delivery system. We resubmitted our NDA for FUROSCIX
with the FDA on June 30, 2020. The resubmission was a response to a CRL from the FDA with respect to our NDA submitted in August
2017, which indicated that, among other things, certain device modifications to our infusor were required. Based on our interactions with the
FDA, which required device modifications necessary to advance FUROSCIX using the existing technology, we decided to transition to our
next generation device, which is being developed through a partnership with West, using its proprietary, wearable, SmartDose drug delivery
system. If we are required to conduct additional testing or additional clinical studies, it could adversely affect the commercial viability of our
product candidates and may adversely affect our ability to generate revenue, as a result of which our business, prospects, financial condition
and results of operations may suffer.

Even if we were to obtain approval, regulatory authorities may approve any of our product candidates for fewer or more limited indications
than we request, may not approve the price we intend to charge for our products, may grant approval contingent on the performance of costly
post-marketing clinical trials, may impose distribution or use restrictions, or may approve a product candidate with a label that does not
include the labeling claims necessary or desirable for the successful commercialization of that product candidate. Any of the foregoing
scenarios could materially harm the commercial prospects for our product candidates.

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

27
We have supported and continue to support investigator sponsored clinical trials evaluating novel approaches utilizing FUROSCIX to
manage patients with worsening heart failure who display reduced responsiveness to oral diuretics and do not require hospitalization. We do
not control the design or administration of investigator-sponsored trials, and the investigator-sponsored trials could, depending on the actions
of such third parties, jeopardize the validity of the clinical data generated, identify significant concerns with respect to FUROSCIX that could
impact our findings or clinical trials, and adversely affect our ability to obtain marketing approval from the FDA or other applicable regulatory
authorities.

All completed and ongoing studies are registered at www.clinicaltrials.gov, as applicable. To the extent the results of these or other
investigator-sponsored trials are inconsistent with, or different from, the results of our company-sponsored trials or raise concerns regarding
FUROSCIX, the FDA or a foreign regulatory authority may question the results of the company-sponsored trials or subject such results to
greater scrutiny than it otherwise would. In these circumstances, the FDA or such foreign regulatory authorities may require us to obtain and
submit additional clinical data, which could delay clinical development or marketing approval of FUROSCIX.

We expect to rely on third-party consultants to assist us in filing and supporting the applications necessary to gain marketing approvals.
Securing marketing approval requires the submission of extensive preclinical and clinical data and supporting information to regulatory
authorities for each therapeutic indication to establish FUROSCIX’s safety and efficacy for that indication. Securing marketing approval also
requires the submission of information about the manufacturing process to, and inspection of manufacturing facilities by, the regulatory
authorities. If we cannot successfully obtain approval of or commercialize FUROSCIX, our business will be materially harmed and the price of
our common stock will be adversely affected.

We intend to utilize the 505(b)(2) pathway for the regulatory approval of FUROSCIX. Final marketing approval of FUROSCIX or any
of our other product candidates by the FDA or other regulatory authorities may be delayed, limited, or denied, any of which would
adversely affect our ability to generate operating revenues.
We are pursuing a regulatory pathway pursuant to Section 505(b)(2) of the Federal Food, Drug and Cosmetic Act, or FDCA, for the approval
of FUROSCIX, which allows us to rely on existing clinical data for the drug. Section 505(b)(2) was enacted as part of the Drug Price
Competition and Patent Term Restoration Act of 1984, or the Hatch-Waxman Amendments, and permits the submission of an NDA where at
least some of the information required for approval comes from preclinical studies or clinical trials not conducted by or for the applicant and
for which the applicant has not obtained a right of reference. The FDA interprets Section 505(b)(2) of the FDCA to permit the applicant to rely
upon the FDA’s previous findings of safety and efficacy for an approved product. The FDA requires submission of information needed to
support any changes to a previously approved drug, such as published data or new studies conducted by the applicant or clinical trials
demonstrating safety and efficacy. The FDA could refuse to file our NDA submissions, request additional information before accepting our
submissions for filing or require additional information to sufficiently demonstrate safety and efficacy to support approval.

If the FDA does not allow us to pursue the Section 505(b)(2) regulatory pathway as anticipated, we may need to conduct additional clinical
trials, provide additional data and information, and meet additional standards for regulatory approval. If this were to occur, the time and
financial resources required to obtain FDA approval for these product candidates, and the complications and risks associated with these
product candidates, would likely substantially increase. Moreover, an inability to pursue the Section 505(b)(2) regulatory pathway would likely
result in new competitive products reaching the market more quickly than our product candidates, which would likely materially adversely
impact our competitive position and prospects. Even if we are allowed to pursue the Section 505(b)(2) regulatory pathway, we cannot assure
you that our product candidates will receive the requisite approvals for commercialization.

Notwithstanding the approval of many products by the FDA pursuant to Section 505(b)(2), over the last few years some pharmaceutical
companies and others have objected to the FDA’s interpretation of Section 505(b)(2) to allow reliance on the FDA’s prior findings of safety
and effectiveness. If the FDA changes its interpretation of Section 505(b)(2), or if the FDA’s interpretation is successfully challenged in court,
this could delay or even prevent the FDA from approving any Section 505(b)(2) application that we submit. Moreover, the FDA adopted an
interpretation of the three-year exclusivity provisions whereby a 505(b)(2) application can be blocked by exclusivity even if does not rely on
the previously-approved drug that has exclusivity (or any safety or effectiveness information regarding that drug). Under the FDA’s
interpretation, the approval of FUROSCIX may be blocked by exclusivity awarded to a previously-approved drug product that shares certain
innovative features with

28
FUROSCIX, even if our 505(b)(2) application does not identify the previously-approved drug product as a listed drug or rely upon any of its
safety or efficacy data. Any failure to obtain regulatory approval of our product candidates would significantly limit our ability to generate
revenues, and any failure to obtain such approval for all of the indications and labeling claims we deem desirable could reduce our potential
revenues.

Additional time may be required to obtain regulatory approval for our product candidates because they are combination products.
Because our product candidates are designed to be self-administered subcutaneously by patients, they are drug-device combination
products that require coordination within the FDA and similar foreign regulatory agencies for review of their device and drug components.
Although the FDA and similar foreign regulatory agencies have systems in place for the review and approval of combination products such as
ours, we may experience delays in the development and commercialization of our product candidates due to regulatory timing constraints
and uncertainties in the product development and approval process. For example, we resubmitted our NDA for FUROSCIX with the FDA on
June 30, 2020. The resubmission was a response to a CRL from the FDA with respect to our NDA submitted in August 2017, which indicated
that, among other things, certain device modifications to our infusor were required. Based on our interactions with the FDA, which required
device modifications necessary to advance FUROSCIX using the existing technology, we decided to transition to our next generation device,
which is being developed through a partnership with West, using its proprietary, wearable, SmartDose drug delivery system. On December 3,
2020, we received a CRL from the FDA, in which, among other things, the FDA raised questions related to testing, labeling and features of
the combination product unrelated to the drug constituent. The FDA also indicated that they needed to conduct pre-approval inspections at
two of our third-party manufacturing facilities that could not be conducted due to travel restrictions related to COVID-19. No clinical
deficiencies were noted. Based on our Type A meeting with the FDA, we will run additional modified bench tests on aged commercial units of
the West SmartDose Gen II on-body infusor and anticipate the FDA will still need to conduct pre-approval inspections at three of our third-
party manufacturing facilities, both of which will cause delays in regulatory approval. We intend to resubmit our NDA in the third quarter of
2021.

Even if we obtain FDA approval for FUROSCIX in the United States, we may never obtain approval for or commercialize it in any
other jurisdiction, which would limit our ability to realize its full market potential.
In order to market products in any particular jurisdiction, we must establish and comply with numerous and varying regulatory requirements
on a country-by-country basis regarding safety and efficacy. Approval by the FDA in the United States does not ensure approval by
regulatory authorities in other countries or jurisdictions. In addition, the clinical standards of care may differ significantly such that clinical
trials conducted in one country may not be accepted by healthcare providers, third-party payers or regulatory authorities in other countries,
and regulatory approval in one country does not guarantee regulatory approval in any other country. Approval processes vary among
countries and can involve additional drug testing and validation and additional administrative review periods. Seeking foreign regulatory
approval could result in difficulties and costs for us and require additional preclinical studies or clinical trials which could be costly and time
consuming. Regulatory requirements can vary widely from country to country and could delay or prevent the introduction of our products in
those countries. We do not have any product candidates approved for sale in any jurisdiction, including in international markets, and we do
not have experience in obtaining regulatory approval in international markets. If we fail to comply with regulatory requirements in international
markets or to obtain and maintain required approvals, or if regulatory approvals in international markets are delayed, our target market will be
reduced and our ability to realize the full market potential of any drug we develop will be unrealized.

Risks Related to Clinical Development

The commencement and completion of clinical trials can be delayed or prevented for a number of reasons.
Beyond FUROSCIX, we intend to identify, develop and market additional product candidates. However, we may not be able to commence or
complete the clinical trials that would support the submission of an NDA to the FDA or marketing authorization to any other regulatory
agency. Drug development is a long, expensive and uncertain process, and delay or failure can occur at any stage of any of our clinical trials.
Clinical trials can be delayed or prevented for a number of reasons, including:
• difficulties obtaining regulatory approval to commence a clinical trial or complying with conditions imposed by a regulatory
authority regarding the scope or term of a clinical trial;

29
 • delays in reaching or failing to reach agreement on acceptable terms with prospective contract research organizations, or
CROs, contract manufacturing organizations, or CMOs, and trial sites, the terms of which can be subject to extensive
negotiation and may vary significantly among different CROs and trial sites;
• failure of our third-party contractors, such as CROs and CMOs, or our investigators to comply with regulatory requirements or
otherwise meet their contractual obligations in a timely manner;
• insufficient or inadequate supply or quality of a product candidate or other materials necessary to conduct our clinical trials;
• difficulties obtaining institutional review board, or IRB, approval to conduct a clinical trial at a prospective site;
• the FDA requiring alterations to any of our study designs, our nonclinical strategy or our manufacturing plans;
• challenges recruiting and enrolling subjects to participate in clinical trials for a variety of reasons, including size and nature of
subject population, proximity of subjects to clinical sites, eligibility criteria for the trial, nature of trial protocol, the availability of
approved effective treatments for the relevant disease and competition from other clinical trial programs for similar indications;
• difficulties maintaining contact with subjects after treatment, which results in incomplete data;
• receipt by a competitor of marketing approval for a product targeting an indication that our product targets, such that we are not
“first to market” with our product candidate;
• governmental or regulatory delays and changes in regulatory requirements, policy and guidelines; and
• varying interpretations of data by the FDA and similar foreign regulatory agencies.

Clinical trials may also be delayed or terminated as a result of ambiguous or negative interim results. In addition, a clinical trial may be
suspended or terminated by us, the FDA, the IRBs at the sites where the IRBs are overseeing a trial, or a data safety monitoring board
overseeing the clinical trial at issue, or other regulatory authorities 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 sites by the FDA or other regulatory authorities;
• unforeseen safety issues, including serious adverse events associated with a product candidate, or lack of effectiveness; and
• lack of adequate funding to continue the clinical trial.

Clinical failure may occur at any stage of clinical development, and the results of our clinical trials may not support our proposed
indications for our product candidates.
We cannot be certain that existing clinical trial results will be sufficient to support regulatory approval of our product candidates. Success in
preclinical testing and early clinical trials does not ensure that later clinical trials will be successful, and we cannot be sure that the results of
later clinical trials will replicate the results of prior clinical trials and preclinical testing. Moreover, success in clinical trials in a particular
indication, does not ensure that a product candidate will be successful in other indications. A number of companies in the pharmaceutical
industry have suffered significant setbacks in clinical trials, even after promising results in earlier preclinical studies or clinical trials or
successful later-stage trials in other related indications. 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.
The results of preclinical and early clinical trials of our product candidates may not be predictive of the results of later-stage clinical trials.
Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through
preclinical and initial clinical trials. A failure of a clinical trial to meet its predetermined endpoints would likely cause us to abandon a product
candidate and may delay development of any other product candidates. Any delay in, or termination of, our clinical trials will delay the
submission of the NDA to the FDA, the marketing authorization application to the EMA or other similar applications with other relevant foreign
regulatory authorities and, ultimately, our ability to commercialize our product candidates and generate revenue.

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Additionally, several of our past and planned and ongoing clinical trials utilize an “open-label” trial design. An “open-label” clinical trial is one
where both the patient and investigator know whether the patient is receiving the investigational product candidate or either an existing
approved drug or placebo. Most typically, open-label clinical trials test only the investigational product candidate and sometimes may do so at
different dose levels. Open-label clinical trials are subject to various limitations that may exaggerate any therapeutic effect as patients in
open-label clinical trials are aware when they are receiving treatment. Open-label clinical trials may be subject to a “patient bias” where
patients perceive their symptoms to have improved merely due to their awareness of receiving an experimental treatment. In addition, open-
label clinical trials may be subject to an “investigator bias” where those assessing and reviewing the physiological outcomes of the clinical
trials are aware of which patients have received treatment and may interpret the information of the treated group more favorably given this
knowledge. The results from an open-label trial may not be predictive of future clinical trial results with any of our product candidates for
which we include an open-label clinical trial when studied in a controlled environment with a placebo or active control.

Our product candidates may have serious adverse, undesirable or unacceptable side effects which may delay or prevent marketing
approval. If such side effects are identified during the development of our product candidates or following approval, if any, we may
need to abandon our development of such product candidates, the commercial profile of any approved label may be limited, or we
may be subject to other significant negative consequences following marketing approval, if any.
Undesirable side effects that may be caused by our product candidates could cause us or regulatory authorities to interrupt, delay or halt
clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other comparable foreign
authorities. To date, patients treated with FUROSCIX have experienced drug-related side effects including local skin effects such as
reddening, or erythema, bruising and pain, which were mild or moderate in severity. Results of our trials could reveal a high and
unacceptable severity and prevalence of these or other side effects. It is possible that there may be side effects associated with our other
product candidates’ use. In such an event, our trials could be suspended or terminated and the FDA or comparable foreign regulatory
authorities could order us to cease further development of or deny approval of our product candidates for any or all targeted indications. The
drug-related side effects could affect patient recruitment or the ability of enrolled patients to complete the trial or result in potential product
liability claims. Clinical trials by their nature utilize a sample of the potential patient population. With a limited number of patients and limited
duration of exposure, rare and severe side effects of our product candidates may only be uncovered with a significantly larger number of
patients exposed to the product candidate. If our product candidates receive marketing approval and we or others identify undesirable side
effects caused by such products (or any other similar products) after such approval, a number of potentially significant negative
consequences could result, including:
• regulatory authorities may withdraw or limit their approval of such products;
• regulatory authorities may require the addition of labeling statements, such as a “boxed” warning or a contraindication;
• we may be required to change the way such products are distributed or administered, conduct additional clinical trials or
change the labeling of the products;
• we may be subject to regulatory investigations and government enforcement actions;
• we may decide to recall or remove such products from the marketplace; or
• we could be sued and held liable for injury caused to individuals exposed to or taking our product candidates; or
• secure acceptance of our product candidates from physicians, healthcare payers, patients and the medical community; and
• our reputation may suffer.
We believe that any of these events could prevent us from achieving or maintaining market acceptance of the affected products, and could
substantially increase the costs of commercializing our products and significantly impact our ability to successfully commercialize our
products and generate revenues. Any of these occurrences may harm our business, financial condition and prospects.

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Our failure to successfully identify, develop and market additional product candidates could impair our ability to grow.
As part of our growth strategy, we intend to identify, develop and market additional product candidates beyond FUROSCIX. We are exploring
various therapeutic opportunities for our pipeline and product programs for use with the next generation SmartDose drug delivery system. We
may spend several years completing our development of any particular current or future internal product candidates, and failure can occur at
any stage. The product candidates to which we allocate our resources may not end up being successful. In addition, because our internal
research capabilities are limited, we may be dependent upon pharmaceutical companies, academic scientists and other researchers to sell or
license product candidates, approved products or the underlying technology to us. The success of this strategy depends partly upon our
ability to identify, select, discover and acquire promising product candidates and products.

The process of proposing, negotiating and implementing a license or acquisition of a product candidate or approved product is lengthy and
complex. Other companies, including some with substantially greater financial, marketing and sales resources, may compete with us for the
license or acquisition of product candidates and approved products. We have limited resources to identify and execute the acquisition or in-
licensing of third-party products, businesses and technologies and integrate them into our current infrastructure. Moreover, we may devote
resources to potential acquisitions or in-licensing opportunities that are never completed, or we may fail to realize the anticipated benefits of
such efforts. We may not be able to acquire the rights to additional product candidates on terms that we find acceptable, or at all.

In addition, future acquisitions may entail numerous operational and financial risks, including:
• exposure to unknown liabilities;
• disruption of our business and diversion of our management’s time and attention to develop acquired products or technologies;
• incurrence of substantial debt, dilutive issuances of securities or depletion of cash to pay for acquisitions;
• higher than expected acquisition and integration costs;
• difficulty in combining the operations and personnel of any acquired businesses with our operations and personnel;
• increased amortization expenses;
• impairment of relationships with key suppliers or customers of any acquired businesses due to changes in management and
ownership; and
• inability to motivate key employees of any acquired businesses.

Further, any product candidate that we acquire may require additional development efforts prior to commercial sale, including extensive
clinical testing and approval by the FDA and other regulatory authorities.

Risks Related to Acceptance, Sales, Marketing and Competition

The commercial success of FUROSCIX and any other product candidates, if approved, depends upon attaining market acceptance
by hospital networks, physicians, patients, third-party payers and the medical community.
Even if our current and future product candidates are approved for commercialization by the appropriate regulatory authorities, physicians
may not prescribe our approved product candidates, in which case we would not generate the revenues we anticipate. Market acceptance of
any of our product candidates by physicians, patients, third-party payers and the medical community depends on, among other things:
• our ability to provide acceptable evidence of safety and efficacy, at least equivalent to IV-level treatments;
• perceived advantages of our product candidates over alternative treatments, such as oral and IV formulations;
• relative convenience as well as ease of administration of our product candidates compared to existing treatments;

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 • any labeling restrictions placed upon each product candidate in connection with its approval;
• the prevalence and severity of the adverse side effects of each of our product candidates;
• the clinical indications for which each of our product candidates is approved, including any potential additional restrictions
placed upon each product candidate in connection with its approval;
• prevalence of the disease or condition for which each product candidate is approved;
• the cost of treatment in relation to alternative treatments, including generic products;
• the extent to which each product is approved for use at, or included on formularies of, hospitals and managed care
organizations;
• any negative publicity related to our or our competitors’ products or other formulations of products that we administer
subcutaneously, including as a result of any related adverse side effects;
• the effectiveness of our or any current or future collaborators’ sales, marketing and distribution strategies;
• pricing and cost effectiveness; and
• the availability of coverage and adequate reimbursement by third parties.

Additionally, if FUROSCIX or any of our other product candidates receives marketing approval and we or others later identify undesirable or
unacceptable side effects caused by such products, a number of potentially significant negative consequences could result, including:
• regulatory authorities may withdraw approvals of such products, require us to take our approved product off the market or ask
us to voluntarily remove the product from the market;
• regulatory authorities may require the addition of labeling statements, specific warnings, a contraindication or field alerts to
physicians and pharmacies;
• regulatory authorities may impose conditions under a risk evaluation and mitigation strategy, or REMS, including distribution of
a medication guide to patients outlining the risks of such side effects or imposing distribution or use restrictions;
• we may be required to change the way the product is administered, conduct additional clinical trials or change the labeling of
the product;
• we may be subject to limitations on how we may promote the product;
• sales of the product may decrease significantly;
• we may be subject to litigation or product liability claims; and
• our reputation may suffer.

Any of these events could prevent us, our collaborators or our potential future partners from achieving or maintaining market acceptance of
the affected product or could substantially increase commercialization costs and expenses, which in turn could delay or prevent us from
generating significant revenue from the sale of our products.

Successful commercialization will also depend on whether we can adequately protect against and effectively respond to any claims by
holders of patents and other intellectual property rights that our products infringe upon their rights, whether any unanticipated adverse effects
or unfavorable publicity develops in respect of our products, as well as the emergence of new or existing products as competition, which may
be proven to be more clinically effective and cost-effective.

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If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to market and sell our lead
product candidate, FUROSCIX, if approved, we may be unable to generate any revenue.
We are in the process of establishing sufficient infrastructure for the sales, marketing or distribution of FUROSCIX, if approved, and for our
other product candidates, and the cost of establishing and maintaining such an organization may exceed the benefits of doing so. In order to
market FUROSCIX, if approved by the FDA, we must continue to build our sales, marketing, managerial, and other non-technical capabilities
or make arrangements with third parties to perform these services.

We are in the early stages of establishing a sales force to promote FUROSCIX to hospital networks, healthcare providers and third-party
payers in the United States, if we obtain FDA approval. There are significant expenses and risks involved with establishing our own sales and
marketing capabilities, including our ability to hire, retain and appropriately 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 could delay any product launch, which
would adversely impact the commercialization of FUROSCIX. For example, if we recruit any sales representatives or establish marketing
capabilities prior to the commercial launch of FUROSCIX and the commercial launch is delayed or does not occur for any reason, we would
have prematurely or unnecessarily incurred these commercialization expenses. This may be costly, and our investment would be lost if we
cannot retain or reposition our sales and marketing personnel.

We cannot be sure that we will be able to hire a sufficient number of sales representatives or that they will be effective at promoting
FUROSCIX. In addition, we will need to commit significant additional management and other resources to establish and grow our sales
organization. We may not be able to achieve the necessary development and growth in a cost-effective manner or realize a positive return on
our investment. We will also have to compete with other companies to recruit, hire, train and retain sales and marketing personnel.

Factors that may inhibit our efforts to commercialize our product candidates on our own include:
• our inability to recruit, train and retain adequate numbers of effective sales and marketing personnel;
• the inability of sales personnel to obtain access to physicians in order to educate physicians about our product candidates,
once approved; and
• unforeseen costs and expenses associated with creating an independent sales and marketing organization.

If we are unable to establish adequate sales, marketing and distribution capabilities, whether independently or with third parties, our
business, results of operations, financial condition and prospects will be materially adversely impacted.

Beyond FUROSCIX, we intend to leverage the sales and marketing capabilities that we establish for FUROSCIX to commercialize additional
product candidates, if approved by the FDA, in the United States. If we are unable to do so for any reason, we would need to expend
additional resources to establish commercialization capabilities for those product candidates, if approved.

In addition, we intend to establish collaborations to commercialize our product candidates, if approved by the relevant regulatory authorities,
outside of the United States. Therefore, our future success will depend, in part, on our ability to enter into and maintain collaborative
relationships for such efforts, the collaborator’s strategic interest in the product and such collaborator’s ability to successfully market and sell
the product. We cannot assure you that we will be able to establish or maintain such collaborative arrangements, or if able to do so, that they
will have effective sales forces. To the extent that we depend on third parties for marketing and distribution, any revenues we receive will
depend upon the efforts of such third parties, and there can be no assurance that such efforts will be successful.

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We face substantial competition, which may result in others discovering, developing or commercializing drugs before or more
successfully than we do, or limit the market potential of our product candidates, if approved.
We face and will continue to face competition from other companies in the pharmaceutical and medical device industries. We believe our
technology and approach of developing proprietary formulations of medicines to be delivered subcutaneously will compete with the efforts of
other companies seeking to develop similar therapies. These and other pharmaceutical companies are applying significant resources and
expertise to the challenges of drug delivery. Some of these current and potential future competitors may be addressing the same therapeutic
areas or indications as we are. Many of our current and potential future competitors have significantly greater research and development
capabilities than we do, have substantially more marketing, manufacturing, financial, technical, human and managerial resources than we do,
and have more institutional experience than we do.

As a result of these factors, our competitors may obtain regulatory approval of their products more rapidly than we are able to or may obtain
patent protection or other intellectual property rights that allow them to develop and commercialize their products before us and limit our
ability to develop or commercialize our product candidates. Our competitors may also develop drugs or devices that are more effective, more
widely used and less costly than ours, and they may also be more successful than us in manufacturing and marketing their products.

If the FDA approves a competitor’s application for a product candidate or drug-device combination product before our application for a similar
product candidate or drug-device combination product, and grants such competitor a period of exclusivity, the FDA may take the position that
it cannot approve our 505(b)(2) application for a similar product candidate until the exclusivity period expires. Additionally, even if our 505(b)
(2) application for FUROSCIX is approved first, we may still be subject to competition from other producers of heart failure and infectious
disease therapies with approved products or approved 505(b)(2) NDAs for different conditions of use that would not be restricted by any
grant of exclusivity to us.

The widespread acceptance of currently available therapies with which our product candidates will compete may limit market acceptance of
our product candidates even if commercialized. Oral medication and IV drug delivery are currently available treatments for heart failure and
are widely accepted in the medical community and have a long history of use. For example, the use of IV furosemide to treat
decompensation in heart failure patients is well-established and has received widespread market acceptance. These treatments will compete
with our FUROSCIX product candidate, if approved, and the established use of IV furosemide may limit the potential for FUROSCIX to
receive widespread acceptance if commercialized.

Risks Related to the COVID-19 Pandemic

COVID-19 may materially and adversely affect our business and our financial results, including the activities required for the
resubmission of the FUROSCIX NDA and our intended commercial launch of FUROSCIX, if approved.
The ongoing and developing COVID-19 pandemic may continue to have a negative impact on the global economy which could impact our
business and results of operations. The continued spread of COVID-19 could adversely impact our operations. For instance, the COVID-19
pandemic may negatively affect the operations of third-party suppliers, which could result in delays or disruptions in the supply of our product
candidates. Furthermore, COVID-19 may delay enrollment in any future clinical trials due to prioritization of hospital resources toward the
pandemic and restrictions in travel. Some patients may be unwilling to enroll in future clinical trials or be unable to comply with clinical trial
protocols if quarantines or travel restrictions impede patient movement or interrupt healthcare services. On December 3, 2020, we received a
CRL from the FDA, which indicated that, among other things, the FDA needed to conduct pre-approval inspections at two of our third-party
manufacturing facilities that could not be conducted due to travel restrictions related to COVID-19. Based on our recent Type A meeting with
the FDA, we anticipate the FDA will still need to conduct pre-approval inspections at three of our third-party manufacturing facilities. The FDA
may not be able to conduct these required inspections in a timely manner due to restrictions on travel and public health concerns related to
COVID-19. As of June 23, 2020, the FDA noted it is continuing to ensure timely reviews of applications for medical products during the
COVID-19 pandemic in line with its user fee performance goals; however, the FDA may not be able to continue its current pace and review
timelines could be extended. Moreover, we intend to resubmit our NDA in the third quarter of 2021. Our resubmission and subsequent review
by the FDA may be delayed and/or impacted by the COVID-19 pandemic. Any delay in the inspections could negatively impact our ability to
obtain regulatory approval for and to

35
commercialize our product candidates, particularly on our current projected timelines, increase our operating expenses and have a material
adverse effect on our business and financial results.

In addition, COVID-19 has resulted in significant governmental measures being implemented to control the spread of the virus, including
quarantines, travel restrictions and business shutdowns. We have taken temporary precautionary measures intended to help minimize the
risk of the virus to our employees, including encouraging all employees to work remotely. Strict protocols have been established for any
employee working in the office. We have already suspended non-essential travel worldwide for our employees and are discouraging
employee attendance at other gatherings. These measures could negatively affect our business. For instance, encouraging all employees to
work remotely may disrupt our operations or increase the risk of a cybersecurity incident. COVID-19 has also caused volatility in the global
financial markets and threatened a slowdown in the global economy, which may negatively affect our ability to raise additional capital on
attractive terms or at all.

The extent to which COVID-19 may impact our business will depend on future developments, which are highly uncertain and cannot be
predicted with confidence, such as the duration of the pandemic, the severity of COVID-19 or the effectiveness of actions to contain and
treat COVID-19, particularly in the geographies where we or our third party suppliers or contract research organizations operate. We cannot
presently predict the scope and severity of any potential business shutdowns or disruptions. If we or any of the third parties with whom we
engage, however, were to experience shutdowns or other business disruptions, our ability to conduct our business in the manner and on the
timelines presently planned could be materially and negatively affected, which could have a material adverse impact on our business and our
results of operations and financial condition.

Disruptions at the FDA, the SEC and other government agencies caused by funding shortages or global health concerns could
hinder their ability to hire and retain key leadership and other personnel, prevent new products and services from being developed
or commercialized in a timely manner or otherwise prevent those agencies from performing normal business functions on which
the operation of our business may rely, which could negatively impact our business.
As of June 23, 2020, the FDA noted it was continuing to ensure timely reviews of applications for medical products during the COVID-19
pandemic in line with its user fee performance goals and conducting mission critical domestic and foreign inspections to ensure compliance
of manufacturing facilities with FDA quality standards. However, the FDA may not be able to maintain this pace and delays or setbacks are
possible in the future. On July 10, 2020, the FDA announced its goal of restarting domestic on-site inspections during the week of July 20,
but such activities will depend on data about the virus’ trajectory in a given state and locality and the rules and guidelines that are put in place
by state and local governments. The FDA has developed a rating system to assist in determining when and where it is safest to conduct
prioritized domestic inspections. Should the FDA determine that an inspection is necessary for approval and an inspection cannot be
completed during the review cycle due to restrictions on travel, the FDA has stated that it generally intends to issue a complete response
letter. Further, if there is inadequate information to make a determination on the acceptability of a facility, the FDA may defer action on the
application until an inspection can be completed. Regulatory authorities outside the U.S. may adopt similar restrictions or other policy
measures in response to the COVID-19 pandemic and may experience delays in their regulatory activities. On December 3, 2020, we
received a CRL from the FDA, which indicated that, among other things, the FDA needed to conduct pre-approval inspections at two of our
third-party manufacturing facilities that could not be conducted due to travel restrictions related to COVID-19. We cannot guarantee that the
FDA will be able to complete the inspection or take other necessary actions with respect to our NDA in a timely fashion. A delay in the review
of our NDA could have a material impact on our results of operations.

Risks Related to Manufacturing, Supply and Use

If we fail to produce FUROSCIX in the volumes that we require on a timely basis, we may face delays in our commercialization
efforts, if it is approved.
We do not currently own or operate manufacturing facilities for the production of any of our product candidates, including FUROSCIX. We
currently depend on third parties to manufacture our product candidates, including the drug formulation and device components for
FUROSCIX, and expect to continue to rely on such third parties to produce the final commercial product, if approved. Any future curtailment
in the availability of materials could result in production or other delays with consequent adverse effects on us. In addition, because
regulatory

36
authorities must generally approve raw material sources for pharmaceutical products, changes in raw material suppliers may result in
production delays or higher raw material costs.

The manufacture of pharmaceutical products requires significant expertise and capital investment, including the development of advanced
manufacturing techniques and process controls. Pharmaceutical companies often encounter difficulties in production, particularly in scaling
up production, of their products. These problems include manufacturing difficulties relating to production costs and yields, quality control,
including stability of the product and quality assurance testing, shortages of qualified personnel, as well as compliance with federal, state and
foreign regulations. If we are unable to demonstrate stability in accordance with commercial requirements, or if our manufacturers were to
encounter difficulties or otherwise fail to comply with their obligations to us, our ability to obtain FDA approval and market our product
candidates would be jeopardized. In addition, any delay or interruption in the supply of clinical trial supplies could delay or prohibit the
completion of our bioequivalence and/or clinical trials, increase the costs associated with conducting our bioequivalence and/or clinical trials
and, depending upon the period of delay, require us to commence new trials at significant additional expense or to terminate a trial.

Manufacturers of combination products need to comply with both pharmaceutical current good manufacturing practice requirements, or
cGMPs, and medical device Quality System Regulations, or QSRs, enforced by the FDA through its facilities inspection programs. These
requirements include, among other things, quality control, quality assurance and the maintenance of records and documentation.
Manufacturers of our product candidates may be unable to comply with these cGMP and QSR requirements and with other FDA and foreign
regulatory requirements. A failure to comply with these requirements may result in fines and civil penalties, suspension of production,
suspension or delay in product approval, product seizure or recall, or withdrawal of product approval. If the safety of any of our product
candidates is compromised due to failure to adhere to applicable laws or for other reasons, we may not be able to successfully
commercialize such product candidate, and we may be held liable for any injuries sustained as a result. Any of these factors could cause a
delay in the commercialization of our product candidates, entail higher costs or even prevent us from effectively commercializing our product
candidates.

Even if we successfully obtain approval for, produce and distribute FUROSCIX, its success will be dependent on the proper use of
FUROSCIX by patients, healthcare professionals and caregivers.
While we believe FUROSCIX can be self-administered by patients, caregivers and healthcare practitioners in a clinic and home environment,
we cannot control the successful use of the product by patients, caregivers and healthcare professionals. We make use of packaging and
instructions for use to provide guidance to users of FUROSCIX, but we cannot ensure that the product will be used properly.

For example, in our Phase 3 Product Design Clinical Validation study, there were four cases in which the FUROSCIX administered doses fell
below the predefined criteria. One case was determined to be a dispensing failure, and the remaining three cases were determined to be
caused by an undetected incomplete filling of the sc2Wear Infusor, likely due to user errors. As a result, the study did not meet its specified
primary endpoints. If we are not successful in promoting the proper use of FUROSCIX, if approved, by patients, healthcare professionals and
caregivers, we may not be able to achieve market acceptance or effectively commercialize FUROSCIX.

Even in the event of proper use of FUROSCIX by patients, healthcare professionals and caregivers, individual devices may fail.
We have increased manufacturing capabilities for production of FUROSCIX, but increasing scale of production inherently creates increased
risk of manufacturing errors. We may not be able to adequately inspect every device that is produced, and it is possible that individual
devices may fail to perform as designed. Manufacturing errors could negatively impact market acceptance of FUROSCIX, result in negative
press coverage, or increase the risk that we may be sued.

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Risks Related to Our Financial Position and Capital Requirements
Risks Related to Past Financial Condition
We have a history of significant operating losses and expect to incur significant and increasing losses for the foreseeable future;
we may never achieve or maintain profitability.
We do not expect to generate revenue or profitability that is necessary to finance our operations in the short term. We incurred net losses of
$33.0 million and $32.2 million for the years ended December 31, 2019 and 2020, respectively. In addition, our accumulated deficit as of
December 31, 2020 was $161.7 million. To date, we have not commercialized any products or generated any revenues from the sale of
products, and absent the realization of sufficient revenues from product sales, if any, of our current or future product candidates, if approved,
we may never attain profitability in the future. We have devoted substantially all of our financial resources and efforts to date to research and
development, including preclinical studies and our clinical trials, and preparation for commercialization of our lead product candidate,
FUROSCIX, if approved.

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

• continue pursuing regulatory approval of FUROSCIX incorporating the SmartDose drug delivery system;
• build our sales, marketing, distribution and other commercial infrastructure and manufacture commercial inventory in
anticipation of the potential regulatory approval of FUROSCIX;
• initiate and continue research, preclinical and clinical development efforts for FUROSCIX and any additional or future product
candidates;
• seek to identify additional product candidates;
• seek regulatory and marketing approvals for other product candidates that successfully complete clinical trials;
• manufacture larger quantities of product candidates for clinical development and, potentially, commercialization;
• maintain, expand and protect our intellectual property portfolio;
• hire and retain additional personnel, such as clinical, quality control, commercial, scientific and sales and marketing personnel;
• add operational, financial and management information systems and personnel, including personnel to support our product
development and help us comply with our obligations as a public company; and
• add equipment and physical infrastructure to support our research and development.

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

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

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We have a limited operating history and no history of commercializing pharmaceutical products, which may make it difficult to
evaluate the prospects for our future viability.
We commenced operations in 2013. Our operations to date have been limited to financing and staffing our company, developing our
technology and conducting preclinical research and clinical trials for our product candidates. We resubmitted our NDA for FUROSCIX with
the FDA on June 30, 2020. The resubmission was a response to a CRL from the FDA with respect to our NDA submitted in August 2017,
which indicated that, among other things, certain device modifications to our infusor were required. Based on our interactions with the FDA,
which required device modifications necessary to advance the development of FUROSCIX using the existing technology, we decided to
transition to our next generation device, which is being developed through a partnership with West, using its proprietary, wearable,
SmartDose drug delivery system. On December 3, 2020, we received a CRL from the FDA, in which, among other things, the FDA raised
questions related to testing, labeling and features of the combination product unrelated to the drug constituent. The FDA also indicated that
they needed to conduct pre-approval inspections at two of our third-party manufacturing facilities that could not be conducted due to travel
restrictions related to COVID-19. There can be no assurance that our resubmitted FUROSCIX NDA, if submitted, will be approved by the
FDA. We have not yet demonstrated an ability to obtain marketing approvals, manufacture a commercial-scale product, or arrange for a third
party to do so on our behalf, or conduct sales and marketing activities necessary for successful product commercialization.

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

In addition, we expect our financial condition and operating results to continue to fluctuate significantly from quarter to quarter and year to
year due to a variety of factors, many of which are beyond our control.

We have not generated any revenue from FUROSCIX and may never be profitable.
Our ability to become profitable depends upon our ability to generate revenue. To date, we have not generated any revenue from
FUROSCIX, and we do not know when, or if, we will generate any revenue.

There can be no guarantee that the FDA will approve FUROSCIX in a timely fashion, if at all. We do not expect to generate significant
revenue unless or until we obtain marketing approval of, and begin to sell, FUROSCIX. Our ability to generate revenue depends on a number
of factors, including, but not limited to, our ability to:
• obtain marketing approval for FUROSCIX;
• set an acceptable price for FUROSCIX, if approved;
• obtain commercial quantities of FUROSCIX, if FUROSCIX is approved, at acceptable cost levels;
• commercialize FUROSCIX, if approved, by developing our own sales force for commercialization in the United States or in
other key territories by entering into partnership or co-promotion arrangements with third parties;
• obtain third-party coverage or adequate reimbursement for FUROSCIX, if approved;
• achieve market acceptance of FUROSCIX, if approved, in the medical community and with third-party payers, including
placement in accepted clinical guidelines for the conditions for which FUROSCIX is intended to target; and
• delay the introduction by third parties of alternate versions of FUROSCIX, if approved.

If FUROSCIX is approved for commercial sale, we expect to incur significant sales and marketing costs as we prepare for its
commercialization. Even if we receive marketing approval and expend these costs, FUROSCIX may not be a commercially successful
device-drug combination. We may not achieve profitability soon after generating product sales, if ever. If we are unable to generate product
revenue, we will not become profitable and may be unable to continue operations without continued funding.

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Risks Related to Future Financial Condition
We may need additional funding and may be unable to raise capital when needed, which would force us to delay, reduce or
eliminate our product development programs or commercialization efforts.
Developing our product programs is a time-consuming, expensive and uncertain process that takes years to complete. We resubmitted our
NDA for FUROSCIX to the FDA on June 30, 2020. On July 23, 2020, the FDA accepted the resubmission of our NDA and assigned a
PDUFA target action date of December 30, 2020 for completion of its review of the NDA; however, on December 3, 2020, we received a CRL
from the FDA, in which, among other things, the FDA raised questions related to testing, labeling and features of the combination product
unrelated to the drug constituent. The FDA also indicated that they needed to conduct pre-approval inspections at two of our third-party
manufacturing facilities that could not be conducted due to travel restrictions related to COVID-19. In addition, if FUROSCIX or any of our
other product candidates are approved, we may incur significant commercialization expenses related to product sales, marketing,
manufacturing and distribution. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations.
If we are unable to raise capital when needed or on attractive terms, we may be forced to delay, reduce or eliminate our research and
development programs or any future commercialization efforts.

We plan to continue to use our existing unrestricted cash primarily for development activities related to the advancement of FUROSCIX, pre-
commercial planning and commercialization of FUROSCIX, if approved, automation necessary to increase capacity for our delivery
technology, research and development, and for working capital and other general corporate purposes. We will be required to expend
significant funds in order to commercialize FUROSCIX, as well as other product candidates we may seek to develop. In any event, our
existing unrestricted cash may not be sufficient to fund all of the efforts that we plan to undertake, including the development of any of our
product candidates. Accordingly, we may be required to obtain further funding through public or private equity offerings, debt financings,
royalty-based financing arrangements, collaborations and licensing arrangements or other sources. We do not have any committed external
source of funds. Adequate additional financing may not be available to us on acceptable terms, or at all. Our failure to raise capital as and
when needed would have a negative impact on our financial condition and our ability to pursue our business strategy.

Our future funding requirements, both short-term and long-term, will depend on many factors, including:
• the time and expense required to resubmit an NDA for FUROSCIX;
• the outcome, timing and costs of completing development and seeking regulatory approvals for FUROSCIX and other product
candidates that we may develop;
• the costs of commercialization activities for FUROSCIX, if approved, and any other of our product candidates that receive
marketing approval, including the costs and timing of establishing product sales, marketing, distribution and manufacturing
capabilities;
• subject to receipt of marketing approval, revenue, if any, received from commercial sales of FUROSCIX or any other of our
current and future product candidates;
• the pricing and reimbursement of FUROSCIX, if approved, and of other product candidates that may be approved;
• the number of future product candidates that we pursue and their development requirements;
• the scope, progress, timing, costs and results of clinical trials of, and research and preclinical development efforts for, our other
product candidates;
• our ability to enter into, and the terms and timing of, any collaborations, licensing or other arrangements;
• our headcount growth and associated costs as we establish a commercial infrastructure and continue our research and
development activities;
• the costs of preparing, filing and prosecuting patent applications, maintaining and protecting our intellectual property rights
including enforcing and defending intellectual property related claims; and
• the costs of operating as a public company.

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We may not have cash available to us in an amount sufficient to enable us to make interest or principal payments on our
indebtedness when due.
In September 2019, we restructured our loan and security agreement with Solar Capital Ltd. and Silicon Valley Bank, providing for term loans
of $20.0 million. All obligations under our secured loan are secured by substantially all of our existing property and assets (including our
intellectual property assets), subject to certain exceptions. This debt financing may create additional financial risk for us, particularly if our
business or prevailing financial market conditions are not conducive to paying off or refinancing our outstanding debt obligations at maturity.

Failure to satisfy our current and future debt obligations, including covenants to take or avoid specific actions, under our secured credit facility
could result in an event of default and, as a result, our lenders could accelerate all of the amounts due. In the event of an acceleration of
amounts due under our secured credit facility as a result of an event of default, we may not have sufficient funds or may be unable to arrange
for additional financing to repay our indebtedness while still pursuing our current business strategy. In addition, our lenders could seek to
enforce their security interests in any collateral securing such indebtedness.

Risks Related to Government Regulation

Risks Related to Ongoing Regulatory Obligations
If we are unable to achieve and maintain coverage and adequate levels of reimbursement for our product candidates, if approved,
their commercial success may be severely hindered.
Successful sales of FUROSCIX and any other product candidates that receive regulatory approval depend on the availability of adequate
coverage and reimbursement rates from third-party payers, including governmental healthcare programs, such as Medicare and Medicaid,
commercial payers, and health maintenance organizations. Patients who are prescribed medications for the treatment of their conditions
generally rely on third-party payers to reimburse all or part of the costs associated with their prescription drugs. Coverage and adequate
reimbursement rates from governmental healthcare programs and commercial payers is critical to new product acceptance. Coverage
decisions may depend upon clinical and economic standards that disfavor new products when more established or lower cost therapeutic
alternatives are already available or subsequently become available. Even if we obtain coverage for a given product, the resulting
reimbursement rates might not be sufficient to achieve or sustain profitability or may require co-payments that patients find unacceptably
high, thereby discouraging their use of our products. Additionally, third-party payers may not cover, or provide adequate reimbursement for,
long-term follow-up evaluations required following the use of our product candidates. Patients are unlikely to use our products unless
coverage is provided and reimbursement is adequate to cover a significant portion of the cost of our products.

In addition, the market for FUROSCIX and any other product candidates that we attempt to commercialize will depend significantly on access
to third-party payers’ drug formularies, or lists of medications for which third-party payers provide coverage. The industry competition to be
included in such formularies often leads to downward pricing pressures on pharmaceutical companies. Also, third-party payers may refuse to
include a particular branded drug in their formularies, or may apply formulary controls (e.g., prior authorization or step therapy requirements,
higher co-payments) to restrict patient access to a branded drug when a less costly generic equivalent or other alternative is available.

Third-party payers, whether foreign or domestic, and whether governmental or commercial, are developing increasingly sophisticated
methods of controlling healthcare costs. In the United States, the principal decisions about reimbursement for new medications are typically
made by the Centers for Medicare & Medicaid Services, or CMS, an agency within the U.S. Department of Health and Human Services, or
HHS. CMS decides whether and to what extent products will be covered and reimbursed under Medicare. Third-party payers often rely upon
Medicare coverage policy and payment limitations in setting their own coverage and reimbursement policies. However, no uniform policy for
coverage and reimbursement of products exists among third-party payers. Reimbursement by a third-party payer may depend upon a
number of factors, including the third-party payer’s determination that a medication is safe, effective and medically necessary; appropriate for
the specific patient; cost-effective; supported by peer-reviewed medical journals; included in clinical practice guidelines; and neither cosmetic,
experimental nor investigational. Therefore, coverage of and reimbursement rates for products can differ significantly from payer to payer. As
a result, the coverage determination process is often a time-consuming and costly process that will require us to provide scientific, clinical,
and cost-effectiveness data for the use of our

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products to each payer separately, with no assurance that coverage will be applied consistently or obtained in the first instance.

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

Further, we believe that future coverage and reimbursement rates will likely be subject to increased restrictions both in the United States and
in international markets. Third-party coverage for our product candidates for which we may receive regulatory approval may not be available
or adequate in either the United States or international markets, which could have a material adverse effect on our business, results of
operations, financial condition and prospects.

If the FDA or other applicable regulatory authorities approve generic products that compete with any of our product candidates,
the sales of our product candidates, if approved, could be adversely affected.
Once an NDA, including a Section 505(b)(2) application, is approved, the product covered becomes a “listed drug” which can be cited by
potential competitors in support of approval of an abbreviated new drug application, or ANDA. FDA regulations and other applicable
regulations and policies provide incentives to manufacturers to create modified versions of a drug to facilitate the approval of an ANDA or
other application for similar substitutes. If these manufacturers demonstrate that their product has the same active ingredient(s), dosage
form, strength, route of administration, and conditions of use, or labeling, as our product candidate, they might only be required to conduct a
relatively inexpensive study to show that their generic product is absorbed in the body at the same rate and to the same extent as, or is
bioequivalent to, our product candidate (and in some cases even this limited bioequivalence testing can be waived by the FDA). Competition
from generic equivalents to our product candidates could substantially limit our ability to generate revenues and therefore to obtain a return
on the investments we have made in our product candidates.

An NDA submitted under 505(b)(2) may subject us to a patent infringement lawsuit that would delay or prevent the review or
approval of FUROSCIX.
Section 505(b)(2) permits the submission of an NDA where at least some of the information required for approval comes from preclinical
studies and/or clinical trials that were not conducted by, or for, the applicant and for which the applicant has not obtained a right of reference.
An NDA under 505(b)(2) would enable us to reference published literature and/or the FDA’s previous findings of safety and effectiveness for
a previously approved drug.

For NDAs submitted under section 505(b)(2), the patent certification and related provisions of the Hatch-Waxman Act apply. Accordingly, if
we rely for approval on the safety or effectiveness information for a previously approved drug, referred to as a listed drug, we will be required
to include patent certifications in our 505(b)(2) application regarding any patents covering the listed drug. If there are patents listed in the
FDA publication Approved Drug Products with Therapeutic Equivalence Evaluations, commonly known as the Orange Book, for the listed
drug, and we seek to obtain approval prior to the expiration of one or more of those patents, we will be required to submit a Paragraph IV
certification indicating our belief that the relevant patents are invalid, unenforceable or will not be infringed by the manufacture, use or sale of
the product that is the subject of our 505(b)(2) application. Otherwise, our 505(b)(2) application cannot be approved by the FDA until the
expiration of any patents listed in the Orange Book for the listed drug. In connection with our NDA for FUROSCIX that we resubmitted to the
FDA in July 2020, we certified that there were no unexpired patents for furosemide contained in the Orange Book.

In addition, a 505(b)(2) application will not be approved until any non-patent exclusivity listed in the Orange Book for the listed drug, or for
any other drug with the same, protected conditions of approval as our product, has expired. The FDA also may require us to perform one or
more additional clinical trials or measurements to support the change from the listed drug, which could be time consuming and could
substantially delay our achievement of regulatory approval. The FDA also may reject any future 505(b)(2) submissions and require us to
submit traditional NDAs under 505(b)(1), which would require extensive data to establish safety and effectiveness of the

42
product for the proposed use and could cause delay and additional costs. Or the FDA could reject any future 505(b)(2) application and
require us to submit an ANDA if, before the submission of our 505(b)(2) application, the FDA approves an application for a product that is
pharmaceutically equivalent to ours. These factors, among others, may limit our ability to commercialize our product candidates successfully.

If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or
incur costs that could have a material adverse effect on our business.
We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the
handling, use, storage, treatment and disposal of hazardous materials and wastes. From time to time and in the future, our operations may
involve the use of hazardous and flammable materials, including chemicals and biological materials, and may also produce hazardous waste
products. Even if we contract with third parties for the disposal of these materials and waste products, we cannot completely eliminate the
risk of contamination or injury resulting from these materials. In the event of contamination or injury resulting from the use or disposal of our
hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. We also could incur
significant costs associated with civil or criminal fines and penalties for failure to comply with such laws and regulations.

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

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

We will need to obtain FDA approval of any proposed product names, and any failure or delay associated with such approval may
adversely impact our business.
Any name we intend to use for our product candidates will require approval from the FDA regardless of whether we have secured a
trademark registration from the U.S. Patent and Trademark Office, or USPTO. The FDA typically conducts a review of proposed product
names, including an evaluation of potential for confusion with other product names. The FDA may object to any product name we submit if it
believes the name inappropriately implies medical claims. If the FDA objects to any of our proposed product names, we may be required to
adopt an alternative name for our product candidates. If we adopt an alternative name, we would lose the benefit of any existing trademark
applications for such product candidate, and may be required to expend significant additional resources in an effort to identify a suitable
product name that would qualify under applicable trademark laws, not infringe the existing rights of third parties and be acceptable to the
FDA. We may be unable to build a successful brand identity for a new trademark in a timely manner or at all, which would limit our ability to
commercialize our product candidates.

Laws and regulations governing any international operations we may have in the future may preclude us from developing,
manufacturing and selling certain products outside of the United States and require us to develop and implement costly
compliance programs.
If we expand our operations outside of the United States, we must dedicate additional resources to comply with numerous laws and
regulations in each jurisdiction in which we plan to operate. The Foreign Corrupt Practices Act, or FCPA, prohibits offering, promising, giving,
or authorizing others to give anything of value, either directly or indirectly, to a non-United States government official in order to influence
official action, or otherwise obtain or retain business. The FCPA also obligates companies whose securities are listed in the United States to
comply with certain accounting provisions requiring the company to maintain books and records that accurately and fairly reflect all
transactions of the corporation, including international subsidiaries, and to devise and maintain an adequate system of internal accounting
controls for international operations.

Our business is heavily regulated and therefore involves significant interaction with public officials, which may in the future include officials of
non-United States governments. Additionally, in many other countries, the healthcare providers who prescribe pharmaceuticals are employed
by their government, and the purchasers of

43
pharmaceuticals are government entities; therefore, our dealings with these prescribers and purchasers would be subject to regulation under
the FCPA. Recently the Securities and Exchange Commission, or SEC, and Department of Justice have increased their FCPA enforcement
activities with respect to biotechnology and pharmaceutical companies. There is no certainty that all of our employees, agents, suppliers,
manufacturers, contractors, or collaborators, or those of our affiliates, will comply with all applicable laws and regulations, particularly given
the high level of complexity of these laws.

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

The failure to comply with anti-bribery and anti-corruption laws, and other laws governing international business practices, may result in
substantial fines, criminal sanctions against us, our officers, or our employees, the closing down of facilities, including those of our suppliers
and manufacturers, requirements to obtain export licenses, cessation of business activities in sanctioned countries, implementation of
heightened monitoring by governmental authorities, and prohibitions on the conduct of our business. The SEC also may suspend or bar
issuers from trading securities on U.S. exchanges for violations of the FCPA’s accounting provisions.

Governments outside the United States tend to impose strict price controls, which may adversely affect our revenues, if any.
In some countries, such as the countries of the European Union, the pricing of prescription pharmaceuticals is subject to governmental
control. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing
approval for a product. In addition, there can be considerable pressure by governments and other stakeholders on prices and reimbursement
levels, including as part of cost containment measures. Political, economic and regulatory developments may further complicate pricing
negotiations, and pricing negotiations may continue after coverage and reimbursement have been obtained. Reference pricing used by
various countries and parallel distribution or arbitrage between low-priced and high-priced countries, can further reduce prices. To obtain
reimbursement or pricing approval in some countries, we, or any future collaborators, may be required to conduct a clinical trial that
compares the cost-effectiveness of our product candidates to other available therapies, which is time-consuming and costly. If reimbursement
of our product candidates is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our business could be
harmed.

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

The FDA or the EMA may also impose requirements for costly post-marketing studies or clinical trials and surveillance to monitor the safety
or efficacy of a product. The FDA and other agencies, including the Department of Justice, closely regulate and monitor the post-approval
marketing and promotion of products to ensure that they are manufactured, marketed and distributed only for the approved indications and in
accordance with the provisions of the approved labeling. The FDA imposes stringent restrictions on manufacturers’ communications

44
regarding off-label use and if we, or any future collaborators, do not market any of our products for which we, or they, receive marketing
approval in a manner consistent with the approved labeling, we, or they, may be subject to warnings or enforcement action for off-label
marketing. Violation of the FDCA and other statutes, including the False Claims Act, relating to the promotion and advertising of prescription
drugs may lead to investigations or allegations of violations of federal and state healthcare fraud and abuse laws and state consumer
protection laws.

In response to the U.S. COVID-19 pandemic, the United States passed the CARES Act. Throughout the COVID-19 outbreak, there has been
public concern over the availability and accessibility of critical medical products, and the CARES Act enhances the FDA’s existing authority
with respect to drug shortage measures. Under the CARES Act, we must have in place a risk management plan that identifies and evaluates
the risks to the supply of any approved drugs for certain serious diseases or conditions for each establishment where the drug or API is
manufactured. The risk management plan will be subject to FDA review during an inspection. If we obtain any product approvals and
experience shortages in the supply of our marketed products, our results could be materially impacted.

In addition, later discovery of previously unknown adverse events or other problems with our products or their manufacturers or
manufacturing processes, or failure to comply with regulatory requirements, may yield various results, including:
• restrictions on the marketing or manufacturing of such products;
• restrictions on the labeling or marketing of a product;
• restrictions on product distribution or use;
• requirements to conduct post-marketing studies or clinical trials;
• warning letters or untitled letters;
• withdrawal of the products from the market;
• refusal to approve pending applications or supplements to approved applications that we submit;
• recall of products;
• restrictions on coverage by third-party payers;
• fines, restitution or disgorgement of profits or revenues;
• suspension or withdrawal of marketing approvals;
• refusal to permit the import or export of products;
• product seizure; or
• injunctions or the imposition of civil or criminal penalties.

We may be liable if the FDA or other U.S. enforcement agencies determine we have engaged in the off-label promotion of our
products or have disseminated false or misleading labeling, advertising or promotional materials.
Our promotional materials and training methods must comply with the FDA and other applicable laws and regulations, including laws and
regulations prohibiting marketing claims that promote the off-label use of our products or that omit material facts or make false or misleading
statements about the safety or efficacy of our products. We are responsible for training our marketing and sales force against promoting our
product candidates for off-label use, but healthcare providers may use our products off-label, as the FDA does not restrict or regulate a
physician’s choice of treatment within the practice of medicine. The FDA also could conclude that a claim is misleading if it determines that
there are inadequate nonclinical and/or clinical data supporting the claim, or if a claim fails to reveal material facts about the safety or efficacy
of our products. If the FDA determines that our promotional labeling or advertising materials promote an off-label use or make false or
misleading claims, it could request that we modify our promotional materials or training content or subject us to regulatory or enforcement
actions, including the issuance of an untitled letter, a warning letter, injunction, seizure, civil fines and criminal penalties.

It is also possible that other federal, state or foreign enforcement authorities might take action if they determine that our promotional or
training materials promote an unapproved use or make false or misleading claims, which

45
could result in significant fines or penalties. Although our policy is to refrain from statements that could be considered off-label promotion of
our products or false or misleading claims, the FDA or another regulatory agency could disagree with the manner in which we advertise and
promote our products. Violations of the FDCA may also lead to investigations alleging violations of federal and state health care fraud and
abuse laws, as well as state consumer protection laws, which may lead to costly penalties and may adversely impact our business. Recent
court decisions have impacted FDA’s enforcement activity regarding off-label promotion in light of First Amendment considerations; however,
there are still significant risks in this area, in part due to the potential for False Claims Act exposure. In addition, the off-label use of our
products may increase the risk of product liability claims. Product liability claims are expensive to defend and could result in substantial
damage awards against us and harm our reputation.

Recently enacted and future legislation may increase the difficulty and cost for us to obtain marketing approval of and
commercialize FUROSCIX and may affect the prices we may obtain.
In the United States and many foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes
regarding the healthcare system that could prevent or delay marketing approval of FUROSCIX, restrict or regulate post-approval activities
and affect our ability to profitably sell any product candidates for which we obtain marketing approval. Changes in regulations, statutes or the
interpretation of existing regulations could impact our business in the future by requiring, for example: (i) changes to our manufacturing
arrangements; (ii) additions or modifications to product labeling; (iii) the recall or discontinuation of our products; or (iv) additional record-
keeping requirements. If any such changes were to be imposed, they could adversely affect the operation of our business.

Among policy makers and payers in the United States and elsewhere, there is significant interest in promoting changes in healthcare
systems with the stated goals of containing healthcare costs, improving quality and/or expanding access. In the United States, the
pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives. The
Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, collectively referred to
as the ACA, is a sweeping law intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending,
enhance remedies against fraud and abuse, add new transparency requirements for the healthcare and health insurance industries, impose
new taxes and fees on the health industry and impose additional health policy reforms.

Among the provisions of the ACA of importance to our product candidates are the following:
• an annual, nondeductible fee on any entity that manufactures or imports certain branded prescription drugs and biologic agents,
apportioned among these entities according to their market share in certain government healthcare programs;
• a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for
certain drugs and biologics that are inhaled, infused, instilled, implanted or injected;
• an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and
13.0% of the average manufacturer price for branded and generic drugs, respectively;
• expansion of potential liability under federal healthcare fraud and abuse laws, including the False Claims Act, or FCA, and the
Anti-Kickback Statute, or AKS;
• a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% (70% as of January 1,
2019 due to the Bipartisan Budget Act of 2018, or the BBA) 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;
• extension of manufacturers’ Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid
managed care organizations;
• expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to
additional individuals, thereby potentially increasing manufacturers’ Medicaid rebate liability;

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 • expansion of the entities eligible for discounts under the 340B drug pricing program;
• new requirements to annually report to CMS certain data on payments and other transfers of value to physicians and teaching
hospitals;
• a requirement to annually report drug samples that manufacturers and distributors provide to physicians; and
• a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical
effectiveness research, along with funding for such research.

There remain judicial and Congressional challenges to certain aspects of the ACA. While Congress has not passed comprehensive repeal
legislation, several bills affecting the implementation of certain taxes under the ACA have been signed into law. The 2020 federal spending
package permanently eliminated, effective January 1, 2020, the ACA-mandated “Cadillac” tax on high-cost employer-sponsored health
coverage and medical device tax and, effective January 1, 2021, also eliminates the health insurer tax. The BBA, among other things,
amended the ACA, effective January 1, 2019, to close the coverage gap in most Medicare drug plans, commonly referred to as the “donut
hole.” In December 2018, CMS published a new final rule permitting further collections and payments to and from certain ACA qualified
health plans and health insurance issuers under the ACA risk adjustment program in response to the outcome of federal district court
litigation regarding the method CMS uses to determine this risk adjustment.

Further, the Tax Cuts and Jobs Act of 2017, or Tax Act, includes a provision that repealed, effective January 1, 2019, 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 Texas United States District Court Judge ruled that the ACA
is unconstitutional in its entirety because the “individual mandate” was repealed by Congress as part of the Tax Act. Additionally, on
December 18, 2019, the United States Court of Appeals for the Fifth Circuit upheld the District Court ruling that the individual mandate was
unconstitutional and remanded the case back to the District Court to determine whether the remaining provisions of the ACA are invalid as
well. On March 2, 2020, the United States Supreme Court granted the petitions for writs of certiorari to review this case, and has allotted one
hour for oral arguments, and held oral arguments on November 10, 2020. Pending a decision, the ACA remains in effect, but it is unclear at
this time what effect these developments will have on the status of the ACA. It is unclear how such litigation 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 since the ACA was enacted. These changes include aggregate
reductions to Medicare payments to providers of 2% per fiscal year pursuant to the Budget Control Act of 2011, which began in 2013, and
due to subsequent legislative amendments to the statute, including the BBA, will remain in effect through 2030, unless additional
Congressional action is taken. The Coronavirus Aid, Relief and Economic Security Act, or the CARES Act, which was signed into law in
March 2020 and is designed to provide financial support and resources to individuals and businesses affected by the COVID-19 pandemic,
and subsequent legislation, suspended the 2% Medicare sequester from May 1, 2020 through March 31, 2021, and extended the sequester
by one year, through 2030. The American Taxpayer Relief Act of 2012, among other things, further reduced Medicare payments to several
providers, including hospitals and cancer treatment centers, and increased the statute of limitations period for the government to recover
overpayments to providers from three to five years. These laws and similar future initiatives may result in additional reductions in Medicare
and other healthcare funding, which could have an adverse effect on customers for our product candidates, if approved, and, accordingly, our
financial operations.

There also has been increasing legislative and enforcement interest in the United States with respect to specialty drug pricing practices.
Specifically, there have been several recent U.S. Congressional inquiries and proposed federal and state legislation designed to, among
other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between
pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs. At the federal level,
the former Trump administration’s budget proposal for fiscal year 2021 includes a $135 billion allowance (over a period of time) to support
legislative proposals seeking to reduce drug prices, increase competition, lower out-of-pocket drug costs for patients, and increase patient
access to lower-cost generic and biosimilar drugs. On March 10, 2020, the former Trump administration sent “principles” for drug pricing to
Congress, calling for legislation that would, among other things, cap Medicare Part D beneficiary out-of-pocket pharmacy expenses, provide
an option to cap Medicare Part D beneficiary monthly out-of-pocket expenses, and place limits on pharmaceutical price

47
increases. Further, the former Trump administration also previously released a plan to lower drug prices and reduce out-of-pocket costs of
drugs that contained 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. The HHS has solicited feedback on some of these measures and has implemented others under its existing authority. However,
it is unclear whether the Biden administration will challenge, reverse, revoke or otherwise modify these executive and administrative actions
after January 20, 2021.

In addition, there have been several changes to the 340B drug pricing program, which imposes ceilings on prices that drug manufacturers
can charge for medications sold to certain health care facilities. On December 27, 2018, the District Court for the District of Columbia
invalidated a reimbursement formula change under the 340B drug pricing program, and CMS subsequently altered the FYs 2019 and 2018
reimbursement formula on specified covered outpatient drugs (“SCODs”). The court ruled this change was not an “adjustment” which was
within the Secretary’s discretion to make but was instead a fundamental change in the reimbursement calculation. However, most recently,
on July 31, 2020, the U.S. Court of Appeals for the District of Columbia Circuit overturned the district court’s decision and found that the
changes were within the Secretary’s authority. On September 14, 2020, the plaintiffs-appellees filed a Petition for Rehearing En Banc (i.e.,
before the full court), but was denied on October 16, 2020. Plaintiffs-appellees filed a petition for a writ of certiorari at the Supreme Court on
February 10, 2021. It is unclear how these developments could affect covered hospitals who might purchase our future products and affect
the rates we may charge such facilities for our approved products in the future, if any.

On July 24, 2020 and September 13, 2020, former President Trump announced several executive orders related to prescription drug pricing
that seek to implement several of the administration's proposals. In response, the FDA released a final rule on September 24, 2020, which
went into effect on November 30, 2020, providing guidance for states to build and submit importation plans for drugs from Canada. Further,
on November 20, 2020 CMS issued an Interim Final Rule implementing the Most Favored Nation, or MFN, Model under which Medicare Part
B reimbursement rates will be calculated for certain drugs and biologicals based on the lowest price drug manufacturers receive in
Organization for Economic Cooperation and Development countries with a similar gross domestic product per capita. The MFN Model
regulations mandate participation by identified Part B providers and would have applied in all U.S. states and territories for a seven-year
period beginning January 1, 2021, and ending December 31, 2027. However, in response to a lawsuit filed by several industry groups, on
December 28, the U.S. District Court for the Northern District of California issued a nationwide preliminary injunction enjoining government
defendants from implementing the MFN Rule pending completion of notice-and-comment procedures under the Administrative Procedure
Act. On January 13, 2021, in a separate lawsuit brought by industry groups in the U.S. District of Maryland, the government defendants
entered a joint motion to stay litigation on the condition that the government would not appeal the preliminary injunction granted in the U.S.
District Court for the Northern District of California and that performance for any final regulation stemming from the MFN Interim Final Rule
shall not commence earlier than 60 days after publication of that regulation in the Federal Register.

Additionally, on November 20, 2020, HHS finalized a regulation removing safe harbor protection for price reductions from pharmaceutical
manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by
law. The rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as well as a safe harbor for certain fixed fee
arrangements between pharmacy benefit managers and manufacturers. Pursuant to an order entered by the U.S. District Court for the
District of Columbia, the portion of the rule eliminating safe harbor protection for certain rebates related to the sale or purchase of a
pharmaceutical product from a manufacturer to a plan sponsor under Medicare Part D has been delayed to January 1, 2023. Further,
implementation of this change and new safe harbors for point-of-sale reductions in price for prescription pharmaceutical products and
pharmacy benefit manager service fees are currently under review by the Biden administration and may be amended or repealed. While
some of these and other measures may require additional authorization to become effective, and the Biden administration may reverse or
otherwise change these measures, Congress has indicated that they will continue to seek new legislative and/or administrative measures to
control drug costs.

We may face competition in the United States for our product candidates, if approved, from therapies sourced from foreign countries that
have placed price controls on pharmaceutical products. In the United States, the FDA issued a final guidance document on October 1, 2020
outlining a pathway for manufacturers to obtain an additional National Drug Code, or NDC, for an FDA-approved drug that was originally
intended to be marketed in a foreign country and that was authorized for sale in that foreign country. The market implications of the final
guidance are unknown at this time. Proponents of drug reimportation may attempt to pass legislation that would

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directly allow reimportation under certain circumstances. Legislation or regulations allowing the reimportation of drugs, if enacted, could
decrease the price we receive for any products that we may develop and adversely affect our future revenues and prospects for profitability.

We expect that the ACA, as well as other healthcare reform measures that may be adopted in the future, may result in additional reductions
in Medicare and other healthcare funding, more rigorous coverage criteria, new payment methodologies and additional downward pressure
on the price that we receive for any approved product. Any reduction in reimbursement from Medicare or other government programs may
result in a similar reduction in payments from private payers. The implementation of cost containment measures or other healthcare reforms
may prevent us from being able to generate revenue, attain profitability, or commercialize our products.

Our relationships with customers and payers will be subject to applicable anti-kickback, fraud and abuse, transparency, and other
healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational
harm, administrative burdens, and diminished profits and future earnings.
Healthcare providers, including physicians, and third-party payers will play a primary role in the recommendation and prescription of any
products for which we obtain marketing approval. Our future arrangements with principal investigators, healthcare professionals, consultants,
third-party payers and customers, if any, will subject us to broadly applicable fraud and abuse and other healthcare laws and regulations.
These laws and regulations may constrain the business or financial arrangements and relationships through which we conduct our
operations, including how we research, market, sell and distribute any products for which we obtain marketing approval. The laws that will
affect our operations include, but are not limited to, the following:
• Anti-Kickback Statute. The federal AKS prohibits, among other things, individuals or entities from knowingly and willfully
soliciting, offering, receiving or paying any remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or
covertly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, lease, order or
recommendation or arranging of the purchase, lease or order of, any good, facility, item or service, for which payment may be
made, in whole or in part, under a federal healthcare program such as Medicare and Medicaid. This statute has been
interpreted to apply to arrangements between pharmaceutical manufacturers, on the one hand, and prescribers, purchasers
and formulary managers, on the other. Although there are several statutory exceptions and regulatory safe harbors to the AKS
protecting certain common activities from prosecution, they are drawn narrowly, and practices that involve remuneration
intended to induce prescribing, purchasing or ordering of products may be subject to scrutiny if they do not qualify for an
exception or safe harbor. A person can be found guilty of violating the federal AKS without actual knowledge of the statute or
specific intent to violate it. Violations may result in significant civil, criminal and administrative fines and penalties for each
violation, plus up to three times the remuneration involved, imprisonment, and exclusion from government healthcare programs.
In addition, the government may assert that a claim including items or services resulting from a violation of the federal AKS
constitutes a false or fraudulent claim for purposes of the federal FCA or federal Civil Monetary Penalties Law. On December 2,
2020, the Office of Inspector General, or OIG, published further modifications to the federal Anti-Kickback Statute. Under the
final rules, OIG added safe harbor protections under the Anti-Kickback Statute for certain coordinated care and value-based
arrangements among clinicians, providers, and others. This rule (with exceptions) became effective January 19, 2021.
Implementation of this change and new safe harbors for point-of-sale reductions in price for prescription pharmaceutical
products and pharmacy benefit manager service fees are currently under review by the Biden administration and may be
amended or repealed. We continue to evaluate what effect, if any, the rule will have on our business.
• False Claims Laws. The federal civil and criminal false claims laws and civil monetary penalty laws, including the FCA, prohibit,
among other things, individuals or entities from knowingly presenting, or causing to be presented, false or fraudulent claims for
payment to, or approval by Medicare, Medicaid, or other federal healthcare programs, knowingly making, using or causing to be
made or used a false record or statement material to a false or fraudulent claim or an obligation to pay or transmit money to the
federal government, or knowingly concealing or knowingly and improperly avoiding or decreasing or concealing an obligation to
pay money to the federal government. Manufacturers can be held liable under the FCA even when they do not submit claims
directly to government payers if they are deemed to “cause” the submission of false or fraudulent claims. The FCA also permits
a private individual acting as a “whistleblower” to bring actions on behalf of the federal government alleging violations of the
FCA and to share in any monetary recovery. When an entity is determined to have violated the FCA, the government may
impose civil fines and penalties for each false claim, plus treble damages, and exclude the entity from participation in Medicare,
Medicaid and other federal healthcare programs. Several pharmaceutical and other healthcare companies have been
prosecuted under these laws for allegedly providing free product to customers with the expectation that the customers would bill
federal programs for the product. Other companies have been prosecuted for causing false claims to be submitted because of
the companies’ marketing of products for unapproved, and thus non-reimbursable, uses.

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 • HIPAA. The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, 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 obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property
owned by, or under the custody or control of, any healthcare benefit program, regardless of the payer (i.e., public or private),
and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially
false, fictitious, or fraudulent statements, in connection with the delivery of, or payment for, healthcare benefits, items or
services. Similar to the federal AKS, a person does not need to have actual knowledge of the statute or specific intent to violate
it in order to have committed a violation. Additionally, HIPAA, as amended by the Health Information Technology for Economic
and Clinical Health Act of 2009, or HITECH, and its implementing regulations, imposes obligations on covered healthcare
providers, health plans, and healthcare clearinghouses as well as their business associates that perform services on their
behalf that involve the use, or disclosure of, individually identifiable health information, relating to the privacy, security and
transmission of individually identifiable health information. Such obligations include mandatory contractual terms and physical,
technical and administrative safeguards, with respect to maintaining the privacy and security of individually identifiable health
information. HITECH also created new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties
directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or
injunctions in federal courts to enforce HIPAA and seek attorneys’ fees and costs associated with pursuing federal civil actions.
• Transparency Requirements. The federal Physician Payments Sunshine Act requires certain manufacturers of drugs, medical
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 transfers of value
made to physicians (defined to include doctors of medicine or osteopathy, dentists, optometrists, podiatrists and chiropractors)
and teaching hospitals, as well as information regarding ownership and investment interests held by the physicians described
above and their immediate family members. Effective January 1, 2022, these reporting obligations will extend to include
transfers of value made during the previous year to certain non-physician providers such as physician assistants and nurse
practitioners.
• Analogous State and Foreign Laws. Analogous state and foreign fraud and abuse laws and regulations, such as state anti-
kickback and false claims laws, can 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 non-governmental third-party
payers, and are generally broad and are enforced by many different federal and state agencies as well as through private
actions. Some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance
guidelines and the relevant compliance guidance promulgated by the federal government, or otherwise restrict payments that
may be made to healthcare providers and other potential referral sources. In some cases, state laws require drug
manufacturers to report information related to payments and other transfers of value to physicians and other healthcare
providers, marketing expenditures or drug pricing information, while other state and local laws require registration of
pharmaceutical sales representatives. State and foreign laws also govern the privacy and security of health information in some
circumstances, many of which differ from each other in significant ways and often are not pre-empted by HIPAA, thus
complicating compliance efforts.

Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of
our business activities could be subject to challenge and may not comply under one or more of such laws, regulations, and guidance. Law
enforcement authorities are increasingly focused on enforcing fraud and abuse laws, and it is possible that some of our practices may be
challenged under these laws. Efforts to

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ensure that our business arrangements with third parties, and our business generally, will comply with applicable healthcare laws and
regulations will involve substantial costs. Because of the breadth of these laws and the narrowness of the statutory exceptions and regulatory
safe harbors available, it is possible that our business practices, including our arrangements with physicians and other healthcare providers,
some of whom received stock options as compensation for services provided, may be subject to challenge under current or future statutes,
regulations, agency guidance or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are
found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil,
criminal and administrative penalties, damages, fines, individual imprisonment, exclusion from government funded healthcare programs,
such as Medicare and Medicaid, disgorgement, additional reporting requirements and oversight if we become subject to a corporate integrity
agreement or similar agreement to resolve allegations of non-compliance with these laws, contractual damages, diminished profits and future
earnings, reputational harm, and the curtailment or restructuring of our operations. Defending against any such actions can be costly, time-
consuming and may require significant financial and personnel resources. Therefore, even if we are successful in defending against any such
actions that may be brought against us, our business may be impaired. Further, if any of the physicians or other healthcare providers or
entities with whom we expect to do business is found to be not in compliance with applicable laws, they may be subject to criminal, civil or
administrative sanctions, including exclusions from government funded healthcare programs.

The risk of our being found in violation of these laws is increased by the fact that many of them have not been fully interpreted by applicable
regulatory authorities or the courts, and their provisions are open to a variety of interpretations. Efforts to ensure that our business
arrangements with third parties, and our business generally, will comply with applicable healthcare laws and regulations will involve
substantial costs, including but not limited to, building out appropriate compliance program policies and procedures, processes and systems
to promote ethical and compliant conduct. Any action against us for violation of these laws, even if we successfully defend against it, could
cause us to incur significant legal expenses and divert our management’s attention from the operation of our business. The shifting
compliance environment and the need to build and maintain robust and expandable systems to comply with multiple jurisdictions with
different compliance and/or reporting requirements increases the possibility that a healthcare company may run afoul of one or more of the
requirements.

Failure to comply with health and data protection laws and regulations could lead to government enforcement actions (which could
include civil or criminal penalties), private litigation, and/or adverse publicity and could negatively affect our operating results and
business.
We and any potential collaborators may be subject to federal, state, and foreign data protection laws and regulations (i.e., laws and
regulations that address privacy and data security). In the United States, numerous federal and state laws and regulations, including federal
health information privacy laws, state data breach notification laws, state health information privacy laws, and federal and state consumer
protection laws (e.g., Section 5 of the Federal Trade Commission Act), that govern the collection, use, disclosure and protection of health-
related and other personal information could apply to our operations or the operations of our collaborators. In addition, we may obtain health
information from third parties (including research institutions from which we obtain clinical trial data) that are subject to privacy and security
requirements under HIPAA, as amended by HITECH. Depending on the facts and circumstances, we could be subject to civil, criminal, and
administrative penalties if we knowingly obtain, use, or disclose individually identifiable health information maintained by a HIPAA-covered
entity in a manner that is not authorized or permitted by HIPAA.

Compliance with U.S. and international data protection laws and regulations could require us to take on more onerous obligations in our
contracts, restrict our ability to collect, use and disclose data, or in some cases, impact our ability to operate in certain jurisdictions. Failure to
comply with these laws and regulations could result in government enforcement actions (which could include civil, criminal and administrative
penalties), private litigation, and/or adverse publicity and could negatively affect our operating results and business. Moreover, clinical trial
subjects, employees and other individuals about whom we or our potential collaborators obtain personal information, as well as the providers
who share this information with us, may limit our ability to collect, use and disclose the information. Claims that we have violated individuals’
privacy rights, failed to comply with data protection laws, or breached our contractual obligations, even if we are not found liable, could be
expensive and time-consuming to defend and could result in adverse publicity that could harm our business.

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

Agreements through which we license patent rights may not give us control over patent prosecution or maintenance, so that we may not be
able to control which claims or arguments are presented and may not be able to secure, maintain, or successfully enforce necessary or
desirable patent protection from those patent rights. We have not had and do not have primary control over patent prosecution and
maintenance for certain of the patents and patent applications we license, and therefore cannot guarantee that these patents and
applications will be prosecuted or maintained in a manner consistent with the best interests of our business. We are reliant on patents and
patent applications that we license for our product candidates and failure by owners of this intellectual property to enforce claims could have
a negative impact on our business. We cannot be certain that patent prosecution and maintenance activities by our licensors have been or
will be conducted in compliance with applicable laws and regulations or will result in valid and enforceable patents.

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

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

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

It is possible that defects of form in the preparation or filing of our patents or patent applications may exist, or may arise in the future, for
example, with respect to proper priority claims, inventorship, claim scope, or requests for patent term adjustments. If we or our partners,
collaborators, licensees, or licensors, whether current or future, fail to establish, maintain or protect such patents and other intellectual
property rights, such rights may be reduced or eliminated. If our partners, collaborators, licensees, or licensors, are not fully cooperative or
disagree with us as to the prosecution, maintenance or enforcement of any patent rights, such patent rights could be compromised. If there
are material defects in the form, preparation, prosecution, or enforcement of our patents or patent applications, such patents may be invalid
and/or unenforceable, and such applications may never result in valid, enforceable patents. Any of these outcomes could impair our ability to
prevent competition from third parties, which may have an adverse impact on our business.

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

Moreover, because the issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, our patents or pending
patent applications may be challenged in the courts or patent offices in the United States and abroad. There is no assurance that all of the
potentially relevant prior art relating to our patents and patent applications has been found. If such prior art exists, it may be used to
invalidate a patent, or may prevent a patent from issuing from a pending patent application. For example, such patent filings may be subject
to a third-party preissuance submission of prior art to the USPTO or to other patent offices around the world.

Patent applications are generally maintained in confidence until publication. In the United States, for example, patent applications are
typically maintained in secrecy for up to 18 months after their filing date. Similarly, publication of discoveries in scientific or patent literature
often lags behind actual discoveries. Consequently, we cannot be certain that we were the first to file patent applications on our product
candidates. Any of the foregoing could harm our competitive position, business, financial condition, results of operations, and prospects.

Alternately or additionally, we may become involved in post-grant review procedures, oppositions, derivations proceedings, reexaminations,
inter partes review or interference proceedings, in the United States or elsewhere, challenging patents or patent applications in which we
have rights, including patents on which we rely to protect our business. An adverse determination in any such challenges may result in loss
of exclusivity or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our ability to stop
others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of our
technology and products.

Pending and future patent applications may not result in patents being issued which protect our business, in whole or in part, or which
effectively prevent others from commercializing competitive products. Changes in either the patent laws or interpretation of the patent laws in
the United States and other countries may diminish the value of our patents or narrow the scope of our patent protection. In addition, the laws
of foreign countries may not protect our rights to the same extent or in the same manner as the laws of the United States. For example,
patent laws in various jurisdictions, including significant commercial markets such as Europe, restrict the patentability of methods of
treatment of the human body more than United States law does.

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

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 • patent applications may not result in any patents being issued;
• patents that may be issued or in-licensed 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 and many of whom have made significant investments in
competing technologies, may seek or may have already obtained patents that will limit, interfere with or eliminate our ability to
make, use, and sell our potential product candidates;
• 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 in such
countries.

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

Pursuant to the terms of potential license agreements with third parties, some of our third-party licensors may have the right, but not the
obligation in certain circumstances to control enforcement of our licensed patents or defense of any claims asserting the invalidity of these
patents. Even if we are permitted to pursue such enforcement or defense, we will require the cooperation of our licensors, and cannot
guarantee that we would receive it and on what terms. We cannot be certain that our licensors will allocate sufficient resources or prioritize
their or our enforcement of such patents or defense of such claims to protect our interests in the licensed patents. If we cannot obtain patent
protection, or enforce existing or future patents against third parties, our competitive position and our financial condition could suffer.

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

It is difficult and costly to protect our intellectual property and our proprietary technologies, and we may not be able to ensure their
protection.
Our commercial success will depend, in part, on obtaining and maintaining patent protection and trade secret protection for the formulations
and compounds of our product candidates, the methods used to manufacture them, and associated methods of treatment as well as on
successfully defending these patents against potential third-party challenges. Our ability to protect our products and product candidates from
unauthorized making, using, selling, offering to sell or importing by third parties is dependent on the extent to which we have rights under
valid and enforceable patents that cover these activities.

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

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

The degree of future protection for our proprietary rights is uncertain because legal means afford only limited protection and may not
adequately protect our rights or permit us to gain or keep our competitive advantage. For example:
• we may not be able to generate sufficient data to support full patent applications that protect the entire breadth of developments
in one or more of our programs;
• it is possible that one or more of our pending patent applications will not become an issued patent or, if issued, that the
patent(s) will not: (a) be sufficient to protect our technology, (b) provide us with a basis for commercially viable products or (c)
provide us with any competitive advantages;
• we may not be the first to make the inventions covered by each of our patents and pending patent applications;
• we may not be the first to file patent applications for these inventions;
• if our pending applications issue as patents, they may be challenged by third parties as not infringed, invalid or unenforceable
under U.S. or foreign laws; or
• if issued, the patents under which we hold rights may not be valid or enforceable.

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

We also may rely on trade secrets to protect our technologies or product candidates, especially where we do not believe patent protection is
appropriate or obtainable. However, trade secrets are difficult to protect. Although we use reasonable efforts to protect our trade secrets, our
employees, consultants, contractors, outside scientific collaborators and other advisers may unintentionally or willfully disclose our
information to competitors. Enforcing a claim that a third-party entity illegally obtained and is using any of our trade secrets is expensive and
time-consuming, and the outcome is unpredictable. In addition, courts outside the United States are sometimes less willing to protect trade
secrets. Moreover, our competitors may independently develop equivalent knowledge, methods and know-how.

Obtaining and maintaining patent protection depends on compliance with various procedural, document submission, fee payment
and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for
non-compliance with these requirements.
Periodic maintenance fees, renewal fees, annuity fees and various other governmental fees on patents and patent applications are required
to be paid to the USPTO and various governmental patent agencies outside of the United States in several stages over the lifetime of the
patents and applications. The USPTO and various non-U.S. governmental patent agencies require compliance with a number of procedural,
documentary, fee payment

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and other similar provisions during the patent application process and after a patent has issued. There are situations in which non-
compliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the
relevant jurisdiction. Under the terms of some of our licenses, we do not have the ability to maintain or prosecute patents in the portfolio, and
must therefore rely on third parties to comply with these requirements.

Patent terms may be inadequate to protect our competitive position on our product candidates for an adequate amount of time and
if we do not obtain protection under the Hatch-Waxman Act and similar non-U.S. legislation for extending the term of patents
covering each of our product candidates, our business may be materially harmed.
Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such
candidates might expire before or shortly after such candidates are commercialized. We expect to seek extensions of patent terms in the
United States, if available, and, if available, in other countries where we are prosecuting patents. In the United States, the Drug Price
Competition and Patent Term Restoration Act of 1984 (or Hatch-Waxman Act) permits a patent term extension of up to five years beyond the
normal expiration of the patent, which is limited to the approved indication. However, the applicable authorities, including the FDA and the
USPTO in the United States, and any equivalent regulatory authority in other countries, may not agree with our assessment of whether such
extensions are available, and may refuse to grant extensions to our patents, or may grant more limited extensions than we request. If this
occurs, our competitors may be able to take advantage of our investment in development and clinical trials by referencing our clinical and
preclinical data and launch their product earlier than might otherwise be the case.

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

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

Depending on future actions by the U.S. Congress, the U.S. courts, the USPTO and the relevant law-making bodies in other countries, the
laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce
our existing patents and patents that we might obtain in the future.

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

If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our marks
of interest and our business may be adversely affected.
Our trademarks or trade names may be challenged, infringed, circumvented or declared generic or determined to be infringing on other
marks. We rely on both registration and common law protection for our trademarks. We may not be able to protect our rights to these
trademarks and trade names or may be forced to stop using these names, which we need for name recognition by potential partners or
customers in our markets of interest. During the trademark registration process, we may receive Office Actions from the USPTO objecting to
the registration of our trademark. Although we would be given an opportunity to respond to those objections, we may be unable to overcome
such rejections. In addition, in the USPTO and in comparable agencies in many foreign jurisdictions, third parties are given an opportunity to
oppose pending trademark applications and/or to seek the cancellation of registered trademarks. Opposition or cancellation proceedings may
be filed against our trademarks, and our trademarks may not survive such proceedings. If we are unable to establish name recognition based
on our trademarks and trade names, we may not be able to compete effectively and our business may be adversely affected.

Risks Related to Intellectual Property Claims or Litigation

Our drug development strategy relies heavily upon the 505(b)(2) regulatory approval pathway, which requires us to certify that we
do not infringe upon third-party patents covering approved drugs that we rely upon for approval if we want to obtain approval prior
to patent expiry. Such certifications typically result in third-party claims of intellectual property infringement, the defense of which
would be costly and time consuming, and an unfavorable outcome in any litigation may prevent or delay our development and
commercialization efforts which would harm our business.
Our commercial success depends in large part on our avoiding infringement of the patents and proprietary rights of third parties for existing
approved drug products. Because we utilize the 505(b)(2) regulatory approval pathway for the approval of our product candidates, we rely in
whole or in part on studies conducted by third parties related to those approved drug products. As a result, upon filing with the FDA for
approval of our product candidates, we will be required to certify to the FDA that either: (1) there is no patent information listed in the FDA’s
Orange Book for the listed drug; (2) the patents listed in the Orange Book have expired; (3) the listed patents have not expired, but will expire
on a particular date and approval is sought after patent expiration; or (4) the listed patents are invalid or will not be infringed by the
manufacture, use or sale of our proposed drug product. We can avoid certifying to a method-of-use patent if we do not seek approval of the
patented condition of use. If we certify to the FDA that a patent is invalid or not infringed, or a Paragraph IV certification, a notice of the
Paragraph IV certification must also be sent to the patent owner and NDA holder shortly after our 505(b)(2) NDA is accepted for filing by the
FDA. The third party may then initiate a lawsuit against us asserting infringement of the patents identified in the notice. The filing of a patent
infringement lawsuit within 45 days of receipt of the notice automatically prevents the FDA from approving our 505(b)(2) application until the
earliest of 30 months or the date on which the patent expires, the lawsuit is settled, or the court reaches a decision in the infringement lawsuit
in our favor. If the third party does not file a patent infringement lawsuit within the required 45-day period, our

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application will not be subject to the 30-month stay. However, even if the third party does not sue within the 45-day time limit, thereby
invoking the 30-month stay, it may still challenge our right to market our product upon FDA approval; therefore, some risk of an infringement
suit remains even after the expiry of the 45-day limit.

We may not be able to enforce our intellectual property rights throughout the world.
Filing, prosecuting, enforcing and defending patents on our product candidates in all countries throughout the world would be prohibitively
expensive, and our intellectual property rights in some countries outside the United States can be less extensive than those in the United
States. The requirements for patentability may differ in certain countries, particularly in developing countries; thus, even in countries where
we do pursue patent protection, there can be no assurance that any patents will issue with claims that cover our product candidates.

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

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

Proceedings to enforce our patent rights in foreign jurisdictions, whether or not successful, could result in substantial costs and divert our
efforts and resources from other aspects of our business. Moreover, such proceedings could put our patents at risk of being invalidated or
interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not
prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful.
Furthermore, while we intend to protect our intellectual property rights in major markets for our products, we cannot ensure that we will be
able to initiate or maintain similar efforts in all jurisdictions in which we may wish to market our products. Accordingly, our efforts to protect
our intellectual property rights in such countries may be inadequate.

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

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identity of any adverse party. This is especially true in intellectual property cases that may turn on the testimony of experts as to technical
facts upon which experts may reasonably disagree.

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

There is a substantial amount of intellectual property litigation in the biotechnology and pharmaceutical industries, and we may become party
to, or threatened with, litigation or other adversarial proceedings regarding intellectual property rights with respect to our product candidates,
including interference and post-grant proceedings before the USPTO. There may be third-party patents or patent applications with claims to
materials, formulations, methods of manufacture or methods for treatment related to the formulations, use or manufacture of our product
candidates. We cannot guarantee that any of our patent analyses including, but not limited to, the scope of patent claims or the expiration of
relevant patents are complete or thorough, nor can we be certain that we have identified each and every patent and pending application in
the United States and abroad that is relevant to or necessary for the commercialization of our product candidates in any jurisdiction. Because
patent applications can take many years to issue, there may be currently pending patent applications which may later result in issued patents
that our product candidates may be accused of infringing. In addition, third parties may obtain patents in the future and claim that use of our
technologies infringes upon these patents. Accordingly, third parties may assert infringement claims against us based on intellectual property
rights that exist now or arise in the future. The outcome of intellectual property litigation is subject to uncertainties that cannot be adequately
quantified in advance. The pharmaceutical and biotechnology industries have produced a significant number of patents, and it may not
always be clear to industry participants, including us, which patents cover various types of products or methods of use or manufacture. The
scope of protection afforded by a patent is subject to interpretation by the courts, and the interpretation is not always uniform. If we were
sued for patent infringement, we would need to demonstrate that our product candidates, or methods of use or of making either do not
infringe the patent claims of the relevant patent or that the patent claims are invalid or unenforceable, and we may not be able to do this.
Proving invalidity is difficult. For example, in the United States, proving invalidity requires a showing of clear and convincing evidence to
overcome the presumption of validity enjoyed by issued patents. Even if we are successful in these proceedings, we may incur substantial
costs and the time and attention of our management and scientific personnel could be diverted in pursuing these proceedings, which could
significantly harm our business and operating results. In addition, we may not have sufficient resources to bring these actions to a successful
conclusion.

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

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

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

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

Even if we establish infringement, the court may decide not to grant an injunction against further infringing activity and instead award only
monetary damages, which may or may not be an adequate remedy. Furthermore, because of the substantial amount of discovery required in
connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure
during litigation. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments.
If securities analysts or investors perceive these results to be negative, it could adversely affect the price of shares of our common stock.
Moreover, there can be no assurance that we will have sufficient financial or other resources to file and pursue such infringement claims,
which typically last for years before they are concluded. Even if we ultimately prevail in such claims, the monetary cost of such litigation and
the diversion of the attention of our management and scientific personnel could outweigh any benefit we receive as a result of the
proceedings.

Additionally, for certain of our in-licensed patent rights, we do not have the right to bring suit for infringement and must rely on third parties to
enforce these rights for us. If we cannot or choose not to take action against those we

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believe infringe our intellectual property rights, we may have difficulty competing in certain markets where such potential infringers conduct
their business, and our commercialization efforts may suffer as a result.

Risks Related to Our Reliance on Third Parties

Risks Related to Third Party Performance
Use of third parties to manufacture our product candidates may increase the risk that we will not have sufficient quantities of our
product candidates, products, or necessary quantities at an acceptable cost.
We do not own or operate manufacturing facilities for the production of clinical or commercial quantities of our product candidates, and we
lack the resources and the capabilities to do so. As a result, we currently rely on third parties for supply of the active pharmaceutical
ingredients, or API, in our product candidates, as well as the device components of our drug-device combination product candidates. Our
current strategy is to outsource all manufacturing of our product candidates and products to third parties.

We currently engage third-party manufacturers to manufacture FUROSCIX. For example, we have engaged a third-party manufacturer for
the manufacture of the furosemide formulation used in FUROSCIX and we have engaged a third party designer and manufacturer to develop
and manufacture the on-body delivery system for FUROSCIX. There is no guarantee that we can maintain our relationships with these
manufacturers and we may incur added costs and delays in identifying and qualifying any replacements for such manufacturers. There is no
assurance that we will be able to timely secure further needed supply arrangements on satisfactory terms, or at all. Our failure to secure
these arrangements as needed could have a material adverse effect on our ability to commercialize FUROSCIX. There may be difficulties
and delays in scaling up to commercial quantities of FUROSCIX and the costs of manufacturing could be prohibitive. Beyond FUROSCIX,
third parties also manufacture the materials that we require for the development of our other product candidates, and our reliance on these
manufacturers for these activities carries similar risks as our reliance on third-party manufacturers in connection with FUROSCIX.

Reliance on third-party manufacturers entails additional risks, including:

• reliance on third parties for manufacturing process development, regulatory compliance and quality assurance;
• limitations on supply availability resulting from capacity and scheduling constraints of third parties;
• the possible breach of manufacturing agreements by third parties because of factors beyond our control; and
• the possible termination or non-renewal of the manufacturing agreements by the third party, at a time that is costly or
inconvenient to us.

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

If any third-party manufacturer with whom we contract fails to perform its obligations, we may be forced to manufacture the materials
ourselves, for which we may not have the capabilities or resources, or enter into an agreement with a different third-party manufacturer,
which we may not be able to do on reasonable terms, if at all. In either scenario, our product supply could be delayed significantly as we
establish alternative supply sources. In some cases, the technical skills required to manufacture our products or product candidates may be
unique or proprietary to the original third-party manufacturer and we may have difficulty, or there may be contractual restrictions prohibiting
us from, transferring such skills to a back-up or alternate supplier, or we may be unable to transfer such skills at all. In addition, if we are
required to change third-party manufacturers for any reason, we will be required to verify that the new manufacturer maintains facilities and
procedures that comply with quality standards and with all applicable regulations. We will also need to verify, such as through a
manufacturing comparability study, that any new manufacturing process will produce our product candidate according to the specifications
previously submitted to the FDA or another regulatory authority. The delays associated with the verification of a new manufacturer could
negatively affect our ability to develop product candidates or commercialize our products in a timely manner or within budget. Furthermore, a
third-party manufacturer may

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possess technology related to the manufacture of our product candidate that such manufacturer owns independently. This would increase
our reliance on such third-party manufacturer or require us to obtain a license from such manufacturer in order to have another third party
manufacture our product candidates. In addition, changes in manufacturers often involve changes in manufacturing procedures and
processes, which could require that we conduct bridging studies between our prior clinical supply used in our clinical trials and that of any
new manufacturer. We may be unsuccessful in demonstrating the comparability of clinical supplies which could require the conduct of
additional clinical trials.

Our lead product candidate, FUROSCIX, is a drug-device combination product that will be regulated under the drug regulations of the FDA
based on its primary mode of action as a drug. Third-party manufacturers may not be able to comply with the regulatory requirements, known
as current good manufacturing practice, or cGMP, applicable to drug-device combination products, including applicable provisions of the
FDA’s drug cGMP regulations, device cGMP requirements embodied in the QSR or similar regulatory requirements outside the United
States. Our failure, or the failure of our third-party manufacturers, to comply with applicable regulations could result in sanctions being
imposed on us, including clinical holds, fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation,
seizures or recalls of product candidates, operating restrictions and criminal prosecutions, any of which could significantly affect supplies of
our product candidates. The facilities used by our contract manufacturers to manufacture our product candidates must be approved by the
FDA pursuant to inspections that will be conducted after we submit our NDA to the FDA.

We do not control the manufacturing process of, and are completely dependent on, our contract manufacturing partners for compliance with
cGMPs and QSRs. If our contract manufacturers cannot successfully manufacture material that conforms to our specifications and the strict
regulatory requirements of the FDA or others, they will not be able to secure and/or maintain regulatory approval for their manufacturing
facilities. In addition, we have no control over the ability of our contract manufacturers to maintain adequate quality control, quality assurance
and qualified personnel. If the FDA or a comparable foreign regulatory authority does not approve these facilities for the manufacture of our
product candidates or if it withdraws any such approval in the future, we may need to find alternative manufacturing facilities, which would
significantly impact our ability to develop, obtain regulatory approval for or market our product candidates, if approved. Contract
manufacturers may face manufacturing or quality control problems causing drug substance production and shipment delays or a situation
where the contractor may not be able to maintain compliance with the applicable cGMP and QSR requirements. Any failure to comply with
cGMP or QSR requirements or other FDA, EMA and comparable foreign regulatory requirements could adversely affect our clinical research
activities and our ability to develop our product candidates and market our products following approval.

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

If our third-party manufacturers of our product candidates are unable to increase the scale of their production of our product
candidates, or increase the product yield of manufacturing, then our costs to manufacture the product may increase and
commercialization may be delayed.
In order to produce sufficient quantities to meet the demand for any additional clinical trials and subsequent commercialization of FUROSCIX
or any of our other product candidates in our pipeline or that we may develop, our third-party manufacturers will be required to increase their
production and automate and otherwise optimize their manufacturing processes while maintaining the quality of the product. The transition to
larger scale production could prove difficult. In addition, if our third-party manufacturers are not able to automate and otherwise optimize their
manufacturing process to increase the product yield for the next generation SmartDose drug delivery system and other components of our
product candidates, or if they are unable to produce increased amounts of our product candidates while maintaining quality, then we may not
be able to meet the demands of clinical trials or market demands, which could decrease our ability to generate revenues and have a material
adverse impact on our business and results of operations.

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

Further, although our reliance on these third parties for clinical development activities limits our control over these activities, we remain
responsible for ensuring that each of our trials is conducted in accordance with the applicable protocol, legal, regulatory and scientific
standards. For example, notwithstanding the obligations of a CRO for a trial of one of our product candidates, we remain responsible for
ensuring that each of our clinical trials is conducted in accordance with the general investigational plan and protocols for the trial. Moreover,
the FDA requires us to comply with standards, commonly referred to as Good Clinical Practices, or GCPs, for conducting, recording and
reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity and
confidentiality of trial participants are protected. The FDA enforces these GCPs through periodic inspections of trial sponsors, principal
investigators, clinical trial sites and institutional review boards. If we or our third-party contractors fail to comply with applicable GCPs, the
clinical data generated in our clinical trials may be deemed unreliable and the FDA may require us to perform additional clinical trials before
approving our product candidates, which would delay the marketing approval process. We cannot be certain that, upon inspection, the FDA
will determine that any of our clinical trials comply with GCPs. We are also required to register clinical trials and post the results of completed
clinical trials on a government-sponsored database, ClinicalTrials.gov, within certain timeframes. Failure to do so can result in fines, adverse
publicity and civil and criminal sanctions.

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

Risks Related to Third Party Contracts

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

Should our obligation under an indemnification provision exceed applicable insurance coverage or if we were denied insurance coverage, our
business, financial condition and results of operations could be adversely affected. Similarly, if we are relying on a collaborator to indemnify
us and the collaborator is denied insurance

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coverage or the indemnification obligation exceeds the applicable insurance coverage and does not have other assets available to indemnify
us, our business, financial condition and results of operations could be adversely affected.

We expect to seek to establish collaborations and, if we are not able to establish them on commercially reasonable terms, we may
have to alter our development and commercialization plans.
We expect to seek one or more collaborators for the development and commercialization of one or more of our product candidates. For
example, we started collaborating with West in 2019 for development of our next generation device. Likely collaborators may include large
and mid-size pharmaceutical companies, regional and national pharmaceutical companies and biotechnology companies. In addition, if we
are able to obtain marketing approval for product candidates from foreign regulatory authorities, we intend to enter into strategic relationships
with international biotechnology or pharmaceutical companies for the commercialization of such product candidates outside of the United
States.

We face significant competition in seeking appropriate collaborators. Whether we reach a definitive agreement for a collaboration will
depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed
collaboration and the proposed collaborator’s evaluation of a number of factors. Those factors may include the potential differentiation of our
product candidate from competing product candidates, design or results of clinical trials, the likelihood of approval by the FDA, the EMA or
comparable foreign regulatory authorities and the regulatory pathway for any such approval, the potential market for the product candidate,
the costs and complexities of manufacturing and delivering the product to patients and the potential of competing products. The collaborator
may also consider alternative product candidates or technologies for similar indications that may be available for collaboration and whether
such a collaboration could be more attractive than the one with us for our product candidate. If we elect to increase our expenditures to fund
development or commercialization activities on our own, we may need to obtain additional capital, which may not be available to us on
acceptable terms or at all. If we do not have sufficient funds, we may not be able to further develop our product candidates or bring them to
market and generate product revenue.

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

Risks Related to Employee Matters, Managing Growth and Business Operations

Risks Related to Employee Matters
We only have a limited number of employees to manage and operate our business.
As of December 31, 2020, we had 27 full-time employees. Our focus on the development of FUROSCIX has required us to optimize cash
utilization and to manage and operate our business in a lean manner. We cannot assure you that we will be able to hire and/or retain
adequate staffing levels to commercialize FUROSCIX or run our operations and/or to accomplish all of the objectives that we otherwise
would seek to accomplish.

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

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

Competition to hire from this limited pool is intense, and we may be unable to hire, train, retain or motivate these additional key employees on
acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. We also
experience competition for the hiring of scientific and clinical personnel from universities and research institutions.

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

Our company lacks experience commercializing products, which may have a material adverse effect on our business.

We will need to transition from a company with a development focus to a company capable of supporting commercial activities. We are in the
process of building our sales force and preparing for the launch of FUROSCIX, if approved. Since FUROSCIX, if approved, will be our first
commercial product approved, we have not yet demonstrated an ability to commercialize a product candidate or to obtain marketing approval
for a product candidate outside of the U.S. Therefore, our clinical development, and commercialization processes and our regulatory
approval process in the U.S. or countries outside of the U.S. may involve more inherent risk, take longer, and cost more than it would if we
were a company with a more significant operating history and had experience obtaining approval and marketing approval for and
commercializing a product candidate.

Our employees, independent contractors, consultants, collaborators and contract research organizations may engage in
misconduct or other improper activities, including non-compliance with regulatory standards and requirements, which could cause
significant liability for us and harm our reputation.
We are exposed to the risk that our employees, independent contractors, consultants, collaborators, contract research organizations,
principal investigators, suppliers and vendors may engage in fraud or other misconduct, including intentional, reckless and/or negligent
conduct that fails to comply with FDA regulations or similar regulations of comparable non-U.S. regulatory authorities, to provide true,
complete and accurate information to the FDA or comparable non-U.S. regulatory authorities, to comply with manufacturing standards we
have established, to comply with federal and state healthcare fraud and abuse laws and regulations and similar laws and regulations
established and enforced by comparable non-U.S. regulatory authorities, to report financial information or data accurately or to disclose
unauthorized activities to us. Such misconduct could also involve the improper use or misrepresentation of information obtained in the course
of clinical trials, creating fraudulent data in our preclinical studies or clinical trials or illegal misappropriation of product materials, which could
result in regulatory sanctions and serious harm to our reputation.
We have adopted a Code of Business Conduct and Ethics to aid our directors, officers, employees and certain designated agents in making
ethical and legal decisions when conducting business on our behalf and performing their day-to-day duties. However, it is not always possible
to identify and deter misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown
or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be
in compliance with such laws, standards or regulations. Additionally, we are subject to the risk that a private person or governmental agency
could allege such fraud or other misconduct, even if none occurred. If any such actions are instituted against us, and we are not successful in
defending ourselves or asserting our rights, those actions could have a significant impact on our business and results of operations, including
the imposition of significant fines or other sanctions.

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

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

Product liability lawsuits could divert our resources, result in substantial liabilities and reduce the commercial potential of our
product candidates.
The risk that we may be sued on product liability claims is inherent in the development of drug formulation and device products. We face a
risk of product liability exposure related to the testing of our current and future product candidates in clinical trials and will face even greater
risks upon any commercialization by us of our product candidates. Product liability claims might be brought against us by consumers,
healthcare providers or others coming into contact with our product candidates. These lawsuits may divert our management from pursuing
our business strategy and may be costly to defend. In addition, if we are held liable in any of these lawsuits, we may incur substantial
liabilities and may be forced to limit or forego further commercialization of one or more of our products which could adversely affect our stock
price and our operations.

We may become involved in litigation or other proceedings with third parties, which may be time consuming, costly and could
result in delays in our development and commercialization efforts.
In connection with our decision to discontinue use of the sc2Wear Infusor and refocus our development efforts on FUROSCIX incorporating
the next generation SmartDose drug delivery system, we eliminated our partnership with third parties, including contract manufacturers of the
first generation device. Any disputes with such third parties that lead to litigation or similar proceedings may result in us incurring legal
expenses, as well as facing potential legal liability. Such disputes, litigation or other proceedings are also time consuming and may cause
delays in our development and commercialization efforts. If we fail to resolve these disputes quickly and on favorable terms, our business,
results of operations, and financial condition may be harmed.

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We might not be able to utilize a significant portion of our net operating loss carryforwards and research and development tax
credit carryforwards.
As of December 31, 2020, we had federal net operating loss carryforwards of $17.5 million, which expire at various dates through 2038, and
$32.4 million, which may be carried forward indefinitely. At December 31, 2020, we had available state net operating loss carryforwards of
$46.5 million, which expire at various dates through 2040 and $0.1 million, which may be carried forward indefinitely. If not utilized, the net
operating loss carryforwards will expire. At December 31, 2020, we had federal and state research and development tax credit carryforwards
of $2.5 million and $0.6 million, respectively. If not utilized, the research and development credits expire at various dates through 2040.
These net operating loss and tax credit carryforwards could expire unused and be unavailable to offset future income tax liabilities. In
addition, under Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, and corresponding provisions of state law, if a
corporation undergoes an “ownership change,” which is generally defined as a greater than 50% change, by value, in its equity ownership
over a three-year period, the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes
to offset its post-change income may be limited.

In 2017 we experienced an ownership change that we believe under Section 382 of the Code will result in limitations in our ability to utilize
net operating losses and credits. In addition, we may experience future ownership changes as a result of future offerings or other changes in
ownership of our stock. As a result, the amount of the net operating loss and tax credit carryforwards presented in our consolidated financial
statements could be limited and may expire unutilized.

Risks Related to Ownership of Our Common Stock

The trading price of our common stock may be highly volatile and fluctuate substantially.
Our stock price is likely to be highly volatile. The stock market in general and the market for smaller pharmaceutical and biotechnology
companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular
companies. The market price for our common stock may be influenced by many factors, including:
• the timing and results of our application for FDA approval of FUROSCIX and other regulatory actions with respect to our
product candidates, including any delays related to COVID-19;
• the pricing, reimbursement and commercialization of FUROSCIX, if approved, and of other product candidates that may be
approved;
• regulatory actions with respect to our competitors’ products and product candidates;
• the success of existing or new competitive products or technologies;
• announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures, collaborations or
capital commitments;
• the timing and results of clinical trials of our pipeline product candidates;
• commencement or termination of collaborations for our development programs;
• failure or discontinuation of any of our development programs;
• results of clinical trials of product candidates of our competitors;
• regulatory or legal developments in the United States and other countries;
• developments or disputes concerning patent applications, issued patents or other proprietary rights, including proprietary rights
that we in-license from third parties;
• the recruitment or departure of key personnel;
• the level of expenses related to any of our product candidates or clinical development programs;
• the results of our efforts to develop additional product candidates or products;
• actual or anticipated changes in estimates as to financial results or development timelines;
• announcement or expectation of additional financing efforts;
• sales of our common stock by us, our insiders or other stockholders;

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 • variations in our financial results or those of companies that are perceived to be similar to us;
• changes in estimates or recommendations by securities analysts, if any, that cover our stock;
• changes in the structure of healthcare payment systems;
• market conditions in the pharmaceutical and biotechnology sectors;
• general economic, industry and market conditions; and
• the other factors described in this “Risk Factors” section.

Additionally, in the past, securities class action litigation has often been brought against a company following a decline in the market price of
its securities. This risk is especially relevant for us because pharmaceutical companies have experienced significant stock price volatility in
recent years. If we face such litigation, it could result in substantial costs and a diversion of management’s attention and resources, which
could harm our business.

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

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

We do not anticipate paying any cash dividends on our capital stock in the foreseeable future. Accordingly, stockholders must rely
on capital appreciation, if any, for any return on their investment.
We have never declared nor paid cash dividends on our capital stock. We currently plan to retain all of our future earnings, if any, to finance
the operation, development and growth of our business. In addition, the terms of any of our existing, and potentially future, debt or credit
agreements will preclude us from paying dividends. For example, under our loan and security agreement with Solar Capital Ltd. and Silicon
Valley Bank, we are restricted from paying any dividends or making any distributions on account of our capital stock. As a result, capital
appreciation, if any, of our common stock will be the sole source of gain for our stockholders for the foreseeable future.

Concentration of ownership of our common stock among our existing executive officers, directors and principal stockholders may
prevent new investors from influencing significant corporate decisions.
Based upon shares outstanding as of December 31, 2020, our executive officers and directors, combined with our stockholders who own
more than 5% of our outstanding common stock and their affiliates, in the aggregate, beneficially own shares representing approximately
72.8% of our common stock. As a result, if these stockholders were to choose to act together, they would be able to control all matters
submitted to our stockholders for approval, as well as our management and affairs. For example, these persons, if they choose to act
together,

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would control the election of directors and approval of any merger, consolidation or sale of all or substantially all of our assets. This
concentration of ownership control may:
• delay, defer or prevent a change in control;
• entrench our management or the board of directors; or
• impede a merger, consolidation, takeover or other business combination involving us that other stockholders may desire.

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

We are an “emerging growth company,” as defined in the JOBS Act and a “smaller reporting company,” as defined in the
Exchange Act, and the reduced disclosure requirements applicable to emerging growth companies and smaller reporting
companies may make our common stock less attractive to investors.
We are an “emerging growth company,” as defined in the JOBS Act, and may remain an emerging growth company for up to five years
following our completed initial public offering. For so long as we remain an emerging growth company, we are permitted and plan to rely on
exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies.
These exemptions include not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of
2002, or SOX Section 404, not being required to comply with any requirement that may be adopted by the Public Company Accounting
Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the
audit and the consolidated financial statements, reduced disclosure obligations regarding executive compensation and exemptions from the
requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments
not previously approved. We may choose to take advantage of some, but not all, of the available exemptions.

We are also a “smaller reporting company” as defined in the Exchange Act. We may continue to be a smaller reporting company even after
we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting
companies until the fiscal year following the determination that our voting and non-voting common stock held by non-affiliates is more than
$250.0 million measured on the last business day of our second fiscal quarter, or our annual revenues are more than $100.0 million during
the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is more than $700.0 million
measured on the last business day of our second fiscal quarter.

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

Our independent registered public accounting firm will not be required to provide an attestation report on the effectiveness of our internal
control over financial reporting so long as we qualify as either as an “emerging growth company” or “smaller reporting company” which may
increase the risk that material weaknesses or significant deficiencies in our internal control over financial reporting go undetected. Likewise,
so long as we qualify as an “emerging growth company” or a “smaller reporting company” we may elect not to provide you with certain
information, including certain financial information and certain information regarding compensation of our executive officers, that we would
otherwise have been required to provide in filings we make with the SEC, which may make it more difficult for investors and securities
analysts to evaluate our company. We cannot predict if investors will find our common stock less attractive because we may 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 and may decline.

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As a public company, we must comply with public company reporting and other obligations. Continued compliance with these
requirements will increase our costs and require additional management resources, and do not ensure that we will be able to
satisfy them.
As a result of operating as a public company, compliance with the Sarbanes-Oxley Act of 2002, as well as other rules and regulations
promulgated by the SEC and the Nasdaq Stock Market LLC, or Nasdaq, results in significant legal, accounting, administrative and other
costs and expenses, which will continue to increase after we are no longer an “emerging growth company.” The listing requirements of the
Nasdaq Global Select Market require that we satisfy certain corporate governance requirements relating to director independence,
distributing annual and interim reports, stockholder meetings, approvals and voting, soliciting 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 continue to comply with all
of these requirements.

We are subject to Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, and the related rules of the SEC that generally require our
management and independent registered public accounting firm to report on the effectiveness of our internal control over financial reporting.
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 Jumpstart Our Business Startups Act of 2012, or 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 before 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 control over financial reporting.

During the course of our review and testing of our internal controls, 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 control 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 are required to timely file accurate quarterly and annual reports with the SEC under the Securities
Exchange Act of 1934, or the Exchange Act, as amended. 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 Select Market or other adverse consequences.

Future sales of our common stock into the market could cause the market price of our common stock to decline significantly, even
if our business is doing well.
Sales of a substantial number of shares of our common stock in the public market could occur at any time. These sales, or the perception in
the market that the holders of a large number of shares of common stock intend to sell shares, could reduce the market price of our common
stock. Persons who were our stockholders prior to our IPO continue to hold a substantial number of shares of our common stock that many
of them are now able to sell in the public market. If these pre-IPO shares are sold, or if it is perceived that they will be sold, in the public
market, the trading price of our common stock could decline.

Moreover, certain holders of securities issued prior to our IPO have rights, subject to conditions, to require us to file registration statements
covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders.

If securities or industry analysts do not continue to publish research or publish inaccurate or unfavorable research about our
business, our share price and trading volume could decline.
The trading market for our common stock depends in part on the research and reports that securities or industry analysts publish about us or
our business. We do not have any control over these analysts. In the event one or more analysts downgrade our stock or change their
opinion of our stock, our share price would likely decline. In addition, if one or more analysts cease coverage of our company or fail to
regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to
decline.

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An active trading market for our common stock may not be sustainable. If an active trading market is not sustained, our ability to
raise capital in the future may be impaired.
We completed our initial public offering in November 2017. Prior to this time, there was no public market for our common stock. Although we
have completed our initial public offering and shares of our common stock are listed and trading on the Nasdaq Global Select Market, an
active trading market for our shares may not be sustained. If an active market for our common stock is not sustained, it may be difficult for
our stockholders to sell shares of our common stock without depressing the market price for the shares or at all. An inactive trading market
may also impair our ability to raise capital to continue to fund operations by selling shares and may impair our ability to acquire other
companies or technologies by using our shares as consideration.

Provisions in our corporate charter documents and under Delaware law may prevent or frustrate attempts by our stockholders to
change our management or hinder efforts to acquire a controlling interest in us.
Provisions in our corporate charter and our bylaws may discourage, delay or prevent a merger, acquisition or other change in control of us
that stockholders may consider favorable. These provisions could also limit the price that investors might be willing to pay in the future for
shares of our common stock, thereby depressing the market price of our common stock. In addition, because our board of directors is
responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our
stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of
directors. Among other things, these provisions:
• establish a classified board of directors such that all members of the board are not elected at one time;
• allow the authorized number of our directors to be changed only by resolution of our board of directors;
• limit the manner in which stockholders can remove directors from the board;
• establish advance notice requirements for nominations for election to the board of directors or for proposing matters that can be
acted on at stockholder meetings;
• require that stockholder actions must be effected at a duly called stockholder meeting and prohibit actions by our stockholders
by written consent;
• limit who may call a special meeting of stockholders;
• authorize our board of directors to issue preferred stock without stockholder approval, which could be used to institute a “poison
pill” that would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not
been approved by our board of directors; and
• require the approval of the holders of at least two-thirds of the votes that all our stockholders would be entitled to cast to amend
or repeal certain provisions of our charter or bylaws.
Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the General Corporation Law of
the State of Delaware, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with
us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock,
unless the merger or combination is approved in a prescribed manner. This could discourage, delay or prevent someone from acquiring us or
merging with us, whether or not it is desired by, or beneficial to, our stockholders. This could also have the effect of discouraging others from
making tender offers for our common stock. These provisions may also prevent changes in our management or limit the price that investors
are willing to pay for our stock.

Our bylaws designate specific courts as the exclusive forum for certain litigation that may be initiated by our stockholders, which
could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.
Pursuant to our bylaws, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware
is the sole and exclusive forum for state law claims for any state law claim for (1) any derivative action or proceeding brought on our behalf;
(2) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, or other employees to us or our
stockholders; (3) any action asserting a claim against us arising pursuant to any provision of the Delaware General Corporation Law or our
certificate of incorporation or bylaws; or (4) any action asserting a claim against us governed by the internal affairs doctrine (the “Delaware
Forum Provision”). The Delaware Forum Provision will not apply to any causes of action arising under the Securities Act or the Exchange
Act. Our bylaws further provide that, unless we consent in writing

71
to the selection of an alternative forum, the United States District Court for the District of Massachusetts is the sole and exclusive forum for
resolving any complaint asserting a cause of action arising under the Securities Act (the “Federal Forum Provision”), or the rules and
regulations promulgated thereunder, and of all suits in equity and actions at law brought to enforce any liability or duty created by the
Securities Act or the rules and regulations thereunder, as our principal executive offices are located in Burlington, Massachusetts. In addition,
our bylaws provide that any person or entity purchasing or otherwise acquiring any interest in shares of our Common Stock is deemed to
have notice of and consented to the foregoing Delaware Forum Provision and Federal Forum Provision; provided, however, that stockholders
cannot and will not be deemed to have waived our compliance with the U.S. federal securities laws and the rules and regulations thereunder.
We recognize that the Delaware Forum Provision and the Federal Forum Provision may impose additional litigation costs on stockholders in
pursuing any such claims. Additionally, the forum selection clauses in our bylaws may limit our stockholders’ ability to bring a claim in a
judicial forum that they find favorable for disputes with us or our directors, officers or employees, which may discourage the filing of lawsuits
against us and our directors, officers and employees even though an action, if successful, might benefit our stockholders. While the Delaware
Supreme Court ruled in March 2020 that federal forum selection provisions purporting to require claims under the Securities Act be brought in
federal court are “facially valid” under Delaware law, there is uncertainty as to whether other courts will enforce our Federal Forum Provision.
The Federal Forum Provision may also impose additional litigation costs on us and/or our stockholders who assert that the provision is invalid
or unenforceable, and if the Federal Forum Provision is found to be unenforceable, we may incur additional costs with resolving such
matters. The Court of Chancery of the State of Delaware or the United States District Court for the District of Massachusetts may also reach
different judgments or results than would other courts, including courts where a stockholder considering an action may be located or would
otherwise choose to bring the action, and such judgments may be more or less favorable to us than our stockholders. The Court of Chancery
of the State of Delaware or the United States District Court for the District of Massachusetts may also reach different judgments or results
than would other courts, including courts where a stockholder considering an action may be located or would otherwise choose to bring the
action, and such judgments may be more or less favorable to us than our stockholders.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.
Our principal executive offices are located in a 13,066 square foot facility in Burlington, Massachusetts. The term of the lease for our facility
extends through November 2022.

Item 3. Legal Proceedings.

From time to time, we may be subject to legal proceedings and claims in the ordinary course of business. We are not currently aware of any
such proceedings or claims that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial
condition or results of operations.

Item 4. Mine Safety Disclosures.

Not applicable.

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 PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
Our common stock is traded on the Nasdaq Global Select Market under the symbol “SCPH”.

As of March 22, 2021, there were 27 stockholders of record, which excludes stockholders whose shares were held in nominee or street
name by brokers.

Dividend Policy
We have never declared or paid any cash dividends on our capital stock. We currently intend to retain all available funds and any future
earnings, if any, to fund the development and expansion of our business and we do not anticipate paying any cash dividends in the
foreseeable future. Any future determination to pay cash dividends will be made at the discretion of our board of directors. In addition, the
terms of our outstanding indebtedness restrict our ability to pay cash dividends, and any future indebtedness that we may incur could
preclude us from paying cash dividends.

Securities authorized for issuance under equity compensation plans

Information about our equity compensation plans in Item 11 of Part III of this Annual Report on Form 10-K is incorporated herein by
reference.

Recent Sales of Unregistered Securities

We deemed the grants and exercises of stock options issued under our equity compensation plans prior to the completion of our initial public
offering in November 2017 to be exempt from registration in reliance on Rule 701 of the Securities Act as offers and sales of securities under
compensatory benefit plans and contracts relating to compensation. Each of the recipients of securities in any transaction exempt from
registration either received or had adequate access, through employment, business or other relationships, to information about us.

Issuer Purchases of Equity Securities

None.
Item 6. [RESERVED]
Not applicable.

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Item 7. 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 our consolidated
financial statements and the related notes appearing at the end of this Annual Report on Form 10-K. This discussion includes forward-looking
statements that involve risks, uncertainties and assumptions such as our plans, objectives, expectations and intentions. You should read the
“Forward-Looking Statements” and “Risk Factors” sections of this Annual Report on Form 10-K for a discussion of important factors that
could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the
following discussion and analysis.

OVERVIEW
We are a pharmaceutical company focused on developing and commercializing products that have the potential to optimize the delivery of
infused therapies, advance patient care and reduce healthcare costs. Our strategy is designed to enable the subcutaneous administration of
therapies that have previously been limited to intravenous, or IV, delivery. By moving delivery away from the high-cost healthcare settings
typically required for IV administration, we believe our technology has the potential to reduce overall healthcare costs and advances the
quality and convenience of care. Our lead product candidate, FUROSCIX, consists of our novel formulation of furosemide delivered
subcutaneously via an on-body infusor and is under development for treatment of congestion in patients with worsening heart failure who
display reduced responsiveness to oral diuretics and do not require hospitalization.

We resubmitted our new drug application, or NDA, for FUROSCIX, with the U.S. Food and Drug Administration, or FDA, on June 30, 2020.
The resubmission was a response to a Complete Response Letter, or CRL, from the FDA with respect to our NDA submitted in August 2017,
which indicated that, among other things, certain device modifications to our infusor were required. Based on our interactions with the FDA,
which required device modifications necessary to advance FUROSCIX using the existing technology, we decided to transition to our next
generation device. The resubmission incorporated our next generation device which is being developed through a partnership with West
Pharmaceutical Services, Inc., or West, using its proprietary, wearable, SmartDose® drug delivery system (SmartDose is a registered
trademark of West Pharma. Services IL, Ltd., a subsidiary of West, in the United States and other jurisdictions).

On July 23, 2020, the FDA accepted the resubmission of our NDA and we were given a Prescription Drug User Fee Act, or PDUFA, target
action date of December 30, 2020; however, on December 3, 2020, we received a CRL from the FDA, in which, among other things, the FDA
raised questions related to testing, labeling and features of the combination product unrelated to the drug constituent. The FDA also
indicated that they needed to conduct pre-approval inspections at two of our third-party manufacturing facilities that could not be conducted
due to travel restrictions related to COVID-19 and raised questions related to testing, labeling and features of the combination product
unrelated to the drug constituent. No clinical deficiencies were noted. On January 28, 2021, we had a Type A meeting with the FDA to
discuss the issues described in the CRL and steps required for the resubmission of the NDA for FUROSCIX. Based on the meeting, we will
run additional modified bench tests on aged commercial units of the West SmartDose Gen II on-body infusor and anticipate the FDA will still
need to conduct pre-approval inspections at three of our third-party manufacturing facilities. We intend to resubmit our NDA in the third
quarter of 2021.

We have funded our operations from inception through December 31, 2020 primarily through the sale of shares of our common stock and,
prior to that, through the private placement of our preferred stock and the incurrence of debt. We do not have any products approved for sale
and have not generated any revenue from product sales.

For the years ended December 31, 2019 and 2020, our net losses were $33.0 million and $32.2 million, respectively. We have not been
profitable since inception, and as of December 31, 2020, our accumulated deficit was $161.7 million. We expect to continue to incur net
losses for the foreseeable future as we develop the infrastructure to commercialize our products, if approved, in the United States, including
building our sales and marketing organization, continuing research and development efforts, engaging in scale-up manufacturing and
seeking regulatory approval for new product candidates and enhancements. We will need additional funding to pay expenses related to our
operating activities, including selling, general and administrative expenses and research and development expenses. Adequate funding may
not be available to us on acceptable terms, or at all. Our failure to obtain sufficient funds on acceptable terms when needed could have a
material adverse effect on our business, results of operations or financial condition.

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IMPACT OF COVID-19
A new strain of novel coronavirus which causes a severe respiratory disease (“COVID-19”) was identified in 2019, and subsequently
declared a pandemic by the World Health Organization, affecting the populations of the United States as well as the rest of the world. In
response to the pandemic, we transitioned our workforce to work from home in March 2020. In July 2020, we opened our offices for limited
access to employees integrating all recommendations for workplace safety, including appropriate protocols to ensure social-distancing. The
health of our employees remains a top priority and we are continuing to monitor the impact of COVID-19 and government regulations.
To date, the third parties that perform our manufacturing, assembly, packaging and testing of our products have generally remained
operational. The extent of the impact of the COVID-19 pandemic on the timing of our ability to resubmit the FUROSCIX NDA, the FDA’s
subsequent review of the FUROSCIX NDA and our operational and financial performance will depend on future developments, including
the duration, severity and spread of the pandemic, related restrictions on travel and transportation, the impact of new strains of the virus,
the effectiveness and availability of vaccines and other actions that may be taken by governmental authorities, including the ability of the
FDA to inspect facilities required for approval of our NDA, the impact to the business of our suppliers or customers, and other items
identified under “Risk Factors”, all of which are uncertain and cannot be predicted. An extended period of global supply chain and economic
disruption could materially affect our business, results of operations, access to sources of liquidity and financial condition.

COMPONENTS OF OUR RESULTS OF OPERATIONS

Research and Development Expenses
Research and development, or R&D, expenses consist of the cost of engineering, clinical trials, regulatory and medical affairs and quality
assurance associated with developing our proprietary technology and product candidates. R&D expenses consist primarily of:
• employee-related expenses, including salaries, benefits, travel expense and stock-based compensation expense;
• cost of outside consultants who assist with technology development, regulatory affairs, clinical trials and medical affairs, and
quality assurance;
• cost of clinical trial activities performed by third parties; and
• cost of facilities and supplies used for internal research and development and clinical activities.

We expense R&D costs as incurred. Given the emphasis to date on our lead product candidate FUROSCIX, our R&D expenses have not
been allocated on a program-specific basis. In the future, we expect R&D expenses to increase in absolute dollars as we continue to develop
new products and enhance existing products and technologies. We anticipate that our expenses will increase significantly as we:
• pursue regulatory approval of FUROSCIX incorporating the SmartDose drug delivery system;
• continue to advance our pipeline programs beyond FUROSCIX;
• continue our current research and development activity;
• seek to identify additional research programs and additional product candidates;
• initiate preclinical testing and clinical trials for any product candidates we identify and develop, maintain, expand and protect
our intellectual property portfolio; and
• hire additional research, clinical and scientific personnel.

General and Administrative Expenses

General and administrative, or G&A, expenses consist of employee-related expenses, including salaries, benefits, travel expense and stock-
based compensation expense for personnel in executive, finance, commercial, human resources, facility operations and administrative
functions. Other G&A expenses include pre-approval promotional activities, marketing, conferences and trade shows, professional services
fees, including legal, audit and tax fees, insurance costs, general corporate expenses and allocated facilities-related expenses.

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If we receive FDA approval for FUROSCIX incorporating the next generation SmartDose drug delivery system, we anticipate that our G&A
expenses will increase as we continue to build our corporate and commercial infrastructure to support the development and commercial
launch of FUROSCIX in the United States.

RESULTS OF OPERATIONS
Comparison of Years Ended December 31, 2019 and 2020
The following table summarizes our results of operations for the years ended December 31, 2019 and 2020 (in thousands):

YEAR ENDED
DECEMBER 31, INCREASE
(in thousands) 2019 2020 (DECREASE)
Operating expenses:
Research and development $ 24,632 $ 18,149 $ (6,483)
General and administrative 8,273 11,784 3,511
Total operating expenses 32,905 29,933 (2,972)
Loss from operations (32,905) (29,933) (2,972)
Other income (expense) 16 (4) 20
Interest income 1,660 315 (1,345)
Interest expense (1,767) (2,587) 820
Net loss $ (32,996) $ (32,209) $ (787)

Research and development expenses. R&D expenses decreased $6.5 million to $18.1 million during the year ended December 31, 2020,
compared to $24.6 million during the year ended December 31, 2019. This decrease was primarily attributable to a $4.2 million decrease in
device development costs, a $3.7 million decrease in pharmaceutical development costs, $1.7 million in unrecoverable component costs in
2019 related to the sc2Wear Infusor, and a $1.0 million decrease in severance costs. The decrease was partially offset by a $1.3 million
increase in employee-related costs, a $2.2 million increase in supplies and contract services for clinical and medical affairs, a $0.4 million
increase in quality and regulatory consulting and a $0.2 million increase in patent costs.

General and administrative expenses. G&A expenses increased $3.5 million to $11.8 million during the year ended December 31, 2020,
compared to $8.3 million during the year ended December 31, 2019. This increase was primarily attributable to a $1.9 million increase in
employee-related costs, a $0.8 million increase in public company costs, primarily related to directors & officers insurance, a $0.6 million
increase in costs related to commercial preparation and a $0.6 million increase in legal costs. The increase was partially offset by a $0.4
million decrease in severance costs.

Other income (expense). Other expense increased $20,000 to $4,000 during the year ended December 31, 2020, compared to income of
$16,000 during the year ended December 31, 2019. This increase was primarily attributable to the fair value adjustment to the derivative
liability associated with the term loan with Solar Capital Ltd. and Silicon Valley Bank.

Interest income. Interest income decreased $1.3 million to $0.3 million during the year ended December 31, 2020 compared to the year
ended December 31, 2019. This decrease was primarily attributable to lower interest rates on our financial instruments during the year ended
December 31, 2020.

Interest expense. Interest expense increased $0.8 million from the year ended December 31, 2019 to $2.6 million during the year ended
December 31, 2020. This increase was due to the restructuring of the term loan in September 2019 with Solar Capital Ltd. and Silicon Valley
Bank which increased the principal from $10.0 million to $20.0 million.

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LIQUIDITY AND CAPITAL RESOURCES
Overview

We have funded our operations from inception through December 31, 2020 primarily through the sale of shares of our common stock,
through the private placement of our preferred stock and the incurrence of debt. From inception through December 31, 2020, we had
received net cash proceeds of $92.7 million from our initial public offering in 2017, $56.7 million from sales of our preferred stock,
$18.8 million from borrowings under our term loan, $13.5 million from sales of convertible notes, $50.2 million from our public offering of
common stock in 2020 and $14.4 million from the sale of common stock in our at-the-market offering. As of December 31, 2020, we had
cash, cash equivalents and restricted cash of $72.0 million and short-term investments of $33.3 million.

We expect to incur substantial additional expenditures in the near future to support our ongoing activities and our plans to obtain regulatory
approval for FUROSCIX incorporating the next generation SmartDose drug delivery system. We believe our existing unrestricted cash is
sufficient to fund these operations through at least the next 12 months from the date of this annual report. We expect our costs and expenses
to increase in the future as we prepare for and, if approved, commence U.S. commercialization of FUROSCIX, including the development of
a direct sales force, and as we continue to make substantial expenditures on research and development, including to increase our
manufacturing capacity and for conducting clinical trials of our product candidates. Additionally, we will incur additional costs as a result of
operating as a public company. Our future capital requirements will depend on many factors, including:
• the time and expense required to resubmit the NDA for FUROSCIX;
• the potential FDA approval of FUROSCIX;
• the costs and expenses of establishing our U.S. sales and marketing infrastructure;
• the degree of success we experience in commercializing FUROSCIX, if approved;
• the revenue generated by sales of FUROSCIX, if approved and other products that may be approved;
• the pricing and reimbursement of FUROSCIX, if approved, and of other product candidates that may be approved;
• the costs, timing and outcomes of clinical trials and regulatory reviews associated with our product candidates;
• the emergence of competing or complementary technological developments;
• the extent to which FUROSCIX, if approved, is adopted by the healthcare community;
• the number and types of future products we develop and commercialize;
• the costs of preparing, filing and prosecuting patent applications and maintaining, enforcing and defending intellectual property-
related claims;
• the impact of COVID-19 on our operations; and
• the extent and scope of our general and administrative expenses.

Additional financing may not be available on a timely basis on terms acceptable to us, or at all. We may raise funds in equity, royalty-based
or debt financings or enter into additional credit facilities in order to access funds for our capital needs. If we raise additional funds through
further issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution in their percentage
ownership of our company, and any new equity securities we issue could have rights, preferences and privileges senior to those of holders of
our common stock. If we raise additional funds through royalty-based financing arrangements, we will likely agree to relinquish rights to
potentially valuable future revenue streams and may agree to covenants that restrict our operations or strategic flexibility. Any debt financing
obtained by us in the future would cause us to incur additional debt service expenses and could include restrictive covenants relating to our
capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and
pursue business opportunities. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, we
may terminate or delay the development of one or more of our products, delay clinical trials necessary to market our products, or delay
establishment or expansion of sales and marketing capabilities or other activities necessary to commercialize our products.

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Loan and Security Agreement
In May 2017, we entered into a loan and security agreement (the “2017 Loan Agreement”), with Solar Capital Ltd. and Silicon Valley Bank
(together, the “Lenders”), for $10.0 million. The 2017 Loan Agreement had a maturity date of May 1, 2021.

The interest rate under the 2017 Loan Agreement was the London Inter-bank Offered Rate (“LIBOR”) plus 8.45%. The initial interest-only
period was until November 30, 2018, followed by a 30-month principal and interest period. The First Amendment to the Loan and Security
Agreement, entered into in November 2018, extended the interest-only period through May 2019. The Third Amendment to the Loan and
Security Agreement, entered into in May 2019, extended the interest-only period through August 2019, with the ability to further extend the
interest only period to November 2019. Pursuant to the 2017 Loan Agreement, we provided a first priority security interest in all existing and
after-acquired assets, excluding intellectual property, owned by us.

The 2017 Loan Agreement allowed us to voluntarily prepay all (but not less than all) of the outstanding principal at any time. In the event of
prepayment, a prepayment premium of 1% would be assessed on the outstanding principal. A final payment fee of $250,000 was due upon
the earlier to occur of the maturity date or prepayment of such borrowings. The final payment fee was increased to $325,000 in the First
Amendment to the 2017 Loan Agreement. For the year ended December 31, 2019, the Company recorded $80,000, related to the
amortization of the final payment fee associated with the 2017 Loan Agreement.

In September 2019, we replaced the 2017 Loan Agreement with a new $20.0 million term loan with the Lenders (the “2019 Loan
Agreement”). The restructured four-year term loan facility allows for an expansion of the 2017 Loan Agreement. Some of the proceeds from
the 2019 Loan Agreement were used to pay off the 2017 Loan Agreement including the final fee of $325,000. The 2019 Loan Agreement
extends the term of the credit facility until September 17, 2023. The payoff of the 2017 Loan Agreement was treated as a modification of the
debt. Debt issuance costs for the 2019 Loan Agreement, including unamortized issuance costs for the 2017 Loan Agreement, will be
amortized to interest expense over the remaining term of the 2019 Loan Agreement using the effective-interest method.

The interest rate under the 2019 Loan Agreement is the higher of (i) LIBOR plus 7.95% or (ii) 10.18% and there is an interest-only period
until September 30, 2021. The rate at December 31, 2020 was 10.18%. Pursuant to the 2019 Loan Agreement, we provided a first priority
security interest in substantially all of our assets, including intellectual property, subject to certain exceptions.

We entered into an Exit Agreement in connection with the 2019 Loan Agreement which provides for an aggregate payment of 4% of the loan
commitment, or $800,000, to the lenders upon the occurrence of an exit event (the “Exit Fee”). We concluded that the exit payment obligation
met the definition of a derivative that was required to be accounted for as a separate unit of accounting. We recorded the issuance-date fair
value of the derivative liability of $763,000 as a debt discount and as a derivative liability in our balance sheet. The derivative liability is re-
measured at each balance sheet date and any changes in estimated fair value is recorded as other income (expense). We paid the Exit Fee
during the year ended December 31, 2020 in conjunction with our public offering, which was deemed to be an exit event pursuant to the Exit
Agreement. Prior to our public offering in 2020, we recorded $30,000 in non-cash expense as a fair value adjustment to the derivative liability.

As of December 31, 2020, unpaid borrowings under the 2019 Loan Agreement totaled $20.0 million. For the year ended December 31, 2020,
we recorded $357,000 related to the amortization of the debt discount associated with the 2019 Loan Agreement. For the year ended
December 31, 2019, we recorded $90,000 related to the amortization of the debt discount associated with the 2019 Loan Agreement.

The 2019 Loan Agreement allows us to voluntarily prepay all (but not less than all) of the outstanding principal at any time. A prepayment
premium of 3% or 1% through the one-year anniversary and the two-year anniversary, respectively, would be assessed on the outstanding
principal. After the two-year anniversary, a 0.5% prepayment premium would be assessed on the outstanding principal. A final payment fee
of $500,000 is due upon the earlier to occur of the maturity date or prepayment of such borrowings. For the year ended December 31, 2020,
we recorded $160,000 related to the amortization of the final payment fee associated with the 2019 Loan Agreement. For the year ended
December 31, 2019, we recorded $46,000 related to the amortization of the final payment fee associated with the 2019 Loan Agreement.

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In an event of default under the 2019 Loan Agreement, the interest rate will be increased by 5% and the balance under the loan may become
immediately due and payable at the option of the lenders.

The 2019 Loan Agreement includes restrictions on, among other things, our ability to incur additional indebtedness, change the name or
location of our business, merge with or acquire other entities, pay dividends or make other distributions to holders of our capital stock, make
certain investments, engage in transactions with affiliates, create liens, sell assets or pay subordinated debt.

At-the-Market Issuance Sales Agreement

On August 23, 2019, we entered into an Open Market Sale AgreementSM (“ATM Agreement”), with Jefferies LLC (“Jefferies”) with respect to
an at-the-market offering program under which we could offer and sell shares of our common stock (the “ATM Shares”), having an aggregate
offering price of up to $15.0 million through Jefferies as our sales agent. The offering and sale of ATM Shares were made pursuant to our
shelf registration statement on Form S-3, which was declared effective by the SEC on February 11, 2019 (the “Registration Statement”). We
agreed to pay Jefferies a commission equal to 3.0% of the gross sales proceeds of such ATM Shares.

During the year ended December 31, 2019, we sold a total of 827,525 ATM Shares under the ATM Agreement, in the open market, at a
weighted average gross selling price of $5.18 per share for proceeds of $4.2 million, net of commissions.

During the year ended December 31, 2020, we sold a total of 1,502,892 ATM Shares under the ATM Agreement, in the open market, at a
weighted average gross selling price of $7.13 per share for net proceeds of $10.4 million, which completed the program.

We incurred $189,000 of legal, accounting and other costs to establish and activate the ATM program. We charged $54,000 and $135,000 of
these costs against additional paid in capital upon issuance of shares during the years ended December 31, 2019 and 2020, respectively.
The program was completed in February 2020.

Sale of Common Stock

In May 2020, we completed an underwritten public offering of 5,780,347 shares of our common stock (the “2020 Offering Shares”), pursuant
to the Registration Statement. The 2020 Offering Shares were sold at an offering price of $8.65 per share, resulting in net proceeds of $46.6
million, after deducting underwriting discounts, commissions and offering expenses. In addition, the underwriters of the offering were granted
the option for a period of 30 days to purchase up to an additional 867,052 shares of common stock at $8.65 per share. In June 2020, the
underwriters exercised their option and purchased an additional 440,242 shares of common stock at $8.65 per share, resulting in additional
net proceeds to us of $3.6 million, after deducting underwriting discounts, commissions and offering expenses.

CASH FLOWS
The following table summarizes our sources and uses of cash for each of the periods presented:

YEAR ENDED
DECEMBER 31,
(in thousands) 2019 2020
Net cash (used in) provided by:
Operating activities $ (30,442) $ (27,693)
Investing activities - (33,460)
Financing activities 13,588 60,348
Net decrease in cash, cash equivalents
and restricted cash $ (16,854) $ (805)

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Net Cash Used in Operating Activities
During the year ended December 31, 2020, net cash used in operating activities was $27.7 million, consisting primarily of a net loss of
$32.2 million. This was offset by $1.4 million increase in net operating liabilities and non-cash charges of $3.1 million. The non-cash charges
primarily consisted of stock-based compensation expense, amortization of right-of-use leased assets and non-cash interest expense related
to amortization of debt discount associated with the 2019 Loan Agreement.
During the year ended December 31, 2019, net cash used in operating activities was $30.4 million, consisting primarily of a net loss of
$33.0 million. This was offset by $0.4 million increase in net operating liabilities and non-cash charges of $2.2 million. The non-cash charges
primarily consisted of depreciation, stock-based compensation expense, amortization of right-of-use leased assets and non-cash interest
expense related to amortization of debt discount associated with the 2017 and 2019 Loan Agreements.

Net Cash Used in Investing Activities

During the year ended December 31, 2020, net cash used by investing activities was $33.5 million, consisting of purchases of short term
investments, net of maturities.
There was no cash from investing activities during the year ended December 31, 2019.

Net Cash Provided by Financing Activities

During the year ended December 31, 2020, net cash provided by financing activities was $60.3 million, consisting primarily of net proceeds of
$50.2 million from the public offering, net proceeds of $10.4 million from the at-the-market offering and $0.7 million in proceeds from stock
option exercises. The proceeds were offset by the $0.8 million Exit Fee associated with the 2019 Loan Agreement and $0.2 million in tax
obligations from the settlement of restricted stock units.
During the year ended December 31, 2019, net cash provided by financing activities was $13.6 million, consisting primarily of $9.6 million in
borrowings under the 2019 Loan Agreement, net proceeds of $4.0 million from the at-the-market offering, and $60,000 in proceeds from
stock option exercises.

OFF-BALANCE SHEET ARRANGEMENTS

We currently have no off-balance sheet arrangements.

CONTRACTUAL OBLIGATIONS
The following table summarizes our contractual obligations as of December 31, 2020 and the effects that such obligations are expected to
have on our liquidity and cash flows in future periods.

PAYMENTS DUE BY PERIOD

(in thousands) TOTAL 2021 2022 and 2023 2024 and 2025 After 2025
Operating lease obligations (1) $ 1,033 $ 537 $ 496 $ — $ —
Term loan 20,000 2,500 17,500 — —
Total $ 21,033 $ 3,037 $ 17,996 $ — $ —

(1) Consists of obligations under multi-year, non-cancelable building and equipment leases for our facilities in Burlington, Massachusetts
and Lexington, Massachusetts. The building leases expire on November 30, 2022 and December 31, 2022, respectively.

We have drawn down an aggregate of $20.0 million from our 2019 Loan Agreement as of December 31, 2020. Our contractual commitments
under the 2019 Loan Agreement as of December 31, 2020 consist of an aggregate of $24.1 million in repayment obligations, inclusive of
related interest amounts and final fee in the amount of $500,000. See “—Loan and Security Agreement” for additional information regarding
the 2019 Loan Agreement.

We enter into contracts in the normal course of business with clinical trial sites and manufacturing organizations and with vendors for
preclinical studies, research supplies and other services and products for operating purposes. These contracts generally provide for
termination after a notice period, and, therefore, are cancelable contracts and not included in the table above.

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Due to the discontinuation of use of the sc2Wear Infusor, we have received notice of termination costs related to the program. We have
accrued all costs for which we either believe we are contractually liable or for which we have negotiated settlement agreements in good faith.
However, certain of our vendors have claimed or billed for additional costs for which we believe we are not obligated. At this time, we
estimate that additional termination costs, if any, will be immaterial to our financial statements.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements,
which have been prepared in accordance with U.S. generally accepted accounting principles, or U.S. GAAP. The preparation of these
consolidated financial statements requires us to make estimates and assumptions for the reported amounts of assets, liabilities, revenue,
expenses and related disclosures. 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 and any such differences may be material.

While our significant accounting policies are more fully described in the notes to our consolidated financial statements appearing elsewhere
in this Annual Report on Form 10-K, we believe the following discussion addresses our most critical accounting policies, which are those that
are most important to our financial condition and results of operations and require our most difficult, subjective and complex judgments.

Stock-Based Compensation Expense

We are required to determine the fair value of equity incentive awards and recognize compensation expense for all equity incentive awards,
including employee stock options and restricted stock units. We recognize this expense over the requisite service period. In addition, we
recognize stock-based compensation expense in the statements of operations based on awards expected to vest and, therefore, the amount
of expense has been reduced for estimated forfeitures. We use the ratable straight-line method for expense attribution.

The valuation model we used for calculating the fair value of stock options for stock-based compensation expense is the Black-Scholes
option-pricing model, or the Black-Scholes model. The Black-Scholes model requires us to make assumptions and judgments about the
variables used in the calculation, including:
• Expected term. We do not believe we are able to rely on our historical exercise and post-vesting termination activity to provide
accurate data for estimating the expected term for use in determining the fair value-based measurement of our options.
Therefore, we have opted to use the “simplified method” for estimating the expected term of options, which is the average of
the weighted-average vesting period and contractual term of the option.
• Expected volatility. Due to the lack of a public market for the trading of our common stock prior to our IPO and a lack of
company specific historical volatility, we have determined the share price volatility for options granted based on an analysis of
the volatility of a peer group of publicly traded companies. In evaluating similarity, we consider factors such as stage of
development, risk profile, enterprise value and position within the industry.
• Risk-free interest rate. The risk-free interest rate is based on the U.S. Treasury yield in effect at the time of the grant for zero-
coupon U.S. Treasury notes with remaining terms similar to the expected term of the options.
• Dividend rate. We assumed the expected dividend to be zero as we have never paid dividends and have no current plans to do
so.
• Expected forfeiture rate. We estimate forfeitures at the time of grant and revise those estimates in subsequent periods if actual
forfeitures differ from those estimates. We use historical data to estimate pre-vesting option forfeitures and record share-based
compensation expense only for those awards that are expected to vest.

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 • Service period. We amortize all stock-based compensation over the requisite service period of the awards, which is generally
the same as the vesting period of the awards. We amortize the stock-based compensation cost on a straight-line basis over the
expected service periods.

Restricted stock units are valued at the fair market value per share of our common stock on the date of grant.

Research and Development Expenses

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

We base our expenses related to R&D activities on our estimates of the services received and efforts expended pursuant to quotes and
contracts with vendors that conduct R&D on our behalf. The financial terms of these agreements are subject to negotiation, vary from
contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed
the level of services provided and result in a prepayment of the R&D expense. In accruing service fees, we estimate the time period over
which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or
the level of effort varies from our estimate, we adjust the accrual or prepaid accordingly. Advance payments for goods and services that will
be used in future R&D activities are expensed when the activity has been performed or when the goods have been received rather than
when the payment is made.

Although we do not expect our estimates to be materially different from amounts actually incurred, if our estimates of the status and timing of
services performed differ from the actual status and timing of services performed, it could result in us reporting amounts that are too high or
too low in any particular period. To date, there have been no material differences between our estimates of such expenses and the amounts
actually incurred.

JOBS ACT ACCOUNTING ELECTION

In April 2012, the Jumpstart Our Business Startups Act of 2012, or JOBS Act, was enacted. Section 107 of the JOBS Act provides that an
emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards.
Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to
private companies. We have elected not to avail ourselves of this extended transition period and, as a result, we will adopt new or revised
accounting standards on the relevant dates on which adoption of such standards is required for other public companies. This election is
irrevocable.

NEW ACCOUNTING PRONOUNCEMENTS

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board, or FASB, or other standard
setting bodies that are adopted by us as of the specified effective date. Unless otherwise discussed, we believe that the impact of recently
issued standards that are not yet effective will not have a material impact on our financial position or results of operations upon adoption.

A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is
disclosed in Note 2 to our consolidated financial statements appearing at the end of this Annual Report on Form 10-K.

82
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
We are exposed to market risks related to changes in foreign currency exchange rates and interest rates.

We contract with vendors in foreign countries. As such, we have exposure to adverse changes in exchange rates of foreign currencies,
principally the Swiss franc and the EU euro, associated with our foreign transactions. We believe this exposure to be immaterial. We
currently do not hedge against this exposure to fluctuations in exchange rates.

Our exposure to market risk also relates to interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates. As
of December 31, 2020, our aggregate outstanding indebtedness was $20.0 million, which bears interest at the higher of (i) LIBOR plus 7.95%
or (ii) 10.18%. Due to the short-term duration of our indebtedness, an immediate 100 basis point change in interest rates would not have a
material effect on the fair market value of our debt instruments.

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Item 8. Consolidated Financial Statements and Supplementary Data.
Index to Consolidated Financial Statements

PAGE
Report of Independent Registered Public Accounting Firm 85
Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31, 2019 and 2020 86
Consolidated Statements of Operations and Comprehensive Loss for the Years Ended December 31, 2019 and 2020 87
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2019 and 2020 88
Consolidated Statements of Cash Flows for the Years Ended December 31, 2019 and 2020 89
Notes to Consolidated Financial Statements 90

84
 Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of scPharmaceuticals Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of scPharmaceuticals Inc. and its subsidiary (the Company) as of
December 31, 2019 and 2020, the related consolidated statements of operations and comprehensive loss, stockholders’ equity and cash
flows for the years then ended, and the related notes to the consolidated financial statements (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, 2019 and
2020, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally
accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the
Company’s 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 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. 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. The
Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our
audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion
on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

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/ RSM US LLP

We have served as the Company's auditor since 2015.

Boston, Massachusetts
March 23, 2021

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 SCPHARMACEUTICALS INC.
Consolidated Balance Sheets
(in thousands, except share and per share data)

DECEMBER 31, DECEMBER 31,

2019 2020
Assets
Current assets
Cash and cash equivalents $ 72,624 $ 71,819
Short-term investments — 33,276
Prepaid expenses 2,619 2,610
VAT receivable 310 —
Other current assets 94 121
Total current assets 75,647 107,826
Restricted cash 182 182
Property and equipment, net 127 93
Right-of-use lease assets - operating, net 1,179 815
Deposits and other assets 148 132
Total assets $ 77,283 $ 109,048
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable $ 1,142 $ 1,666
Accrued expenses 3,688 4,787
Term loan, short-term — 2,408
Current portion of lease obligation - operating 407 460
Total current liabilities 5,237 9,321
Term loan, long-term 18,915 16,858
Long-term lease obligation - operating 943 480
Derivative liability 765 —
Other liabilities 58 219
Total liabilities 25,918 26,878
Commitments and contingencies (Note 12)
Stockholders’ Equity
Preferred stock, $0.0001 par value; 10,000,000 shares authorized
and no shares issued and outstanding — —
Common stock; $0.0001 par value; 150,000,000 shares
authorized at December 31, 2020; 19,418,955 and
27,325,959 shares issued and outstanding at December 31,
2019 and December 31, 2020, respectively 2 3
Additional paid-in capital 180,818 243,830
Accumulated deficit (129,455) (161,664)
Accumulated other comprehensive gain — 1
Total stockholders’ equity 51,365 82,170
Total liabilities and stockholders’ equity $ 77,283 $ 109,048

The accompanying notes are an integral part of these consolidated financial statements.

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 SCPHARMACEUTICALS INC.
Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except share and per share data)

FOR THE YEAR ENDED DECEMBER 31,

2019 2020
Operating expenses:
Research and development $ 24,632 $ 18,149
General and administrative 8,273 11,784
Total operating expenses 32,905 29,933
Loss from operations (32,905) (29,933)
Other income (expense) 16 (4)
Interest income 1,660 315
Interest expense (1,767) (2,587)
Net loss $ (32,996) $ (32,209)
Net loss per share, basic and diluted $ (1.77) $ (1.31)
Weighted—average common shares outstanding, basic and
diluted 18,600,718 24,568,897

Other comprehensive loss:

Unrealized gain on short-term investments $ - $ 1
Comprehensive loss $ (32,996) $ (32,208)

The accompanying notes are an integral part of these consolidated financial statements.

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 SCPHARMACEUTICALS INC.
Consolidated Statements of Stockholders’ Equity
(in thousands, except share data)

COMMON STOCK ADDITIONAL OTHER TOTAL

PAID-IN ACCUMULATED COMPREHENSIVE STOCKHOLDERS’
SHARES AMOUNT CAPITAL DEFICIT INCOME EQUITY
At December 31, 2018 18,569,289 $ 2 $ 175,201 $ (96,459) $ — $ 78,744
Net loss — — — (32,996) — (32,996)
Issuance of common stock under at-the-market
offering, net of commissions and issuance costs (Note
10) 827,525 — 4,108 — — 4,108
Issuance of common stock upon exercise
of stock options 22,141 — 60 — — 60
Stock-based compensation — — 1,449 1,449
At December 31, 2019 19,418,955 2 180,818 (129,455) — 51,365
Net loss — — — (32,209) — (32,209)
Issuance of common stock under at-the-market
offering, net of commissions and issuance costs (Note
10) 1,502,892 — 10,253 — — 10,253
Common stock offering, net of commissions and
issuance costs (Note 10) 6,220,589 1 50,187 — — 50,188
Issuance of common stock upon exercise
of stock options 121,671 — 736 — — 736
Vesting of restricted stock 61,852 — (164) — — (164)
Stock-based compensation — — 2,000 — — 2,000
Unrealized gain on short term investments — — — — 1 1
At December 31, 2020 27,325,959 $ 3 $ 243,830 $ (161,664) $ 1 $ 82,170

The accompanying notes are an integral part of these consolidated financial statements.

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 SCPHARMACEUTICALS INC.
Consolidated Statements of Cash Flows
(in thousands)

FOR THE YEAR ENDED DECEMBER 31,

2019 2020
Cash flows from operating activities
Net loss $ (32,996) $ (32,209)
Adjustments to reconcile net loss to net cash used in
operating activities
Depreciation expense 37 34
Amortization expense - right-of-use leased assets -
operating 327 365
Accretion expense — 122
Stock-based compensation 1,449 2,000
Non-cash interest expense 385 517
Fair value adjustment to derivative liability 2 30
Changes in operating assets and liabilities
Prepaid expenses and other assets (611) 236
Accounts payable, accrued expenses and other liabilities 965 1,212
Net cash flows used in operating activities (30,442) (27,693)
Cash flows from investing activities
Maturities of short-term investments — 38,700
Purchases of short-term investments — (72,160)
Net cash flows used in investing activities — (33,460)
Cash flows from financing activities
Proceeds from common stock offering, net of underwriter discounts
and offering costs — 50,188
Proceeds from term loan, net of costs 9,555 -
Proceeds from at-the-market offering, net 3,973 10,388
Proceeds from the exercise of stock options 60 736
Payment of term loan exit fee — (800)
Settlement of restricted stock units for tax withholding obligations — (164)
Net cash flows provided by financing activities 13,588 60,348
Net decrease in cash (16,854) (805)
Cash, cash equivalents and restricted cash, beginning of year 89,660 72,806
Cash, cash equivalents and restricted cash, end of year $ 72,806 $ 72,001
Supplemental cash flow information
Interest paid $ 1,383 $ 1,986
Taxes paid 337 226
Supplemental disclosure of non-cash activities
Issuance of derivative in connection with modification of term loan $ 763 $ —
Transfer of issuance costs from other noncurrent assets to equity 54 135

The accompanying notes are an integral part of these consolidated financial statements.

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 SCPHARMACEUTICALS INC.
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2019 and 2020

1. Description of Business and Basis of Presentation

Description of Business
scPharmaceuticals LLC was formed as a Limited Liability Company under the laws of the State of Delaware on February 19, 2013. On
March 24, 2014, scPharmaceuticals LLC was converted to a Delaware Corporation and changed its name to scPharmaceuticals Inc. (“the
Company”). The Company is a pharmaceutical company focused on developing and commercializing products that have the potential to
optimize the delivery of infused therapies, advance patient care and reduce healthcare costs. The Company’s strategy is designed to enable
the subcutaneous administration of therapies that have previously been limited to intravenous (“IV”) delivery. The Company’s headquarters
and primary place of business is Burlington, Massachusetts.

Basis of Presentation
The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the
United States (“U.S. GAAP”) and have been prepared on a basis which assumes that the Company will continue as a going concern, which
contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The consolidated
financial statements reflect the operations of the Company and its wholly-owned subsidiary, scPharmaceuticals Securities Corporation. All
significant intercompany balances and transactions have been eliminated in consolidation.

At December 31, 2020, the Company had cash, cash equivalents, restricted cash and investments of $105.3 million and working capital of
$98.5 million. During the year ended December 31, 2020, the Company incurred a net loss totaling $32.2 million and used cash in operating
activities totaling $27.7 million. The Company expects to continue to incur losses and use cash in operating activities in 2021.

During the year ended December 31, 2020, the Company received net proceeds of $50.2 million from the completion of a public offering of
6,220,589 shares of common stock and $10.4 million from an at-the-market offering of 1,502,892 shares of common stock (Note 10). The
Company believes that, based on its current development plans and activities, its resources will be sufficient to satisfy its liquidity
requirements for more than one year from the issuance date of these consolidated financial statements.

2. Significant Accounting Policies

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 the disclosure of contingent assets and liabilities at the date of the financial statements and
the reported amounts of expenses during the reporting periods. Significant items subject to such estimates and assumptions include the
determination of fair value of financial instruments, accruals related to development costs and clinical activities, and the establishment of the
tax valuation allowance. Actual results could differ from those estimates.

Foreign Currency Transactions

The functional currency of the Company is the U.S. dollar. Accordingly, gains and losses resulting from translating transactions denominated
in currencies and balances of assets and liabilities outstanding at the balance sheet date, other than U.S. dollars, are included in net loss in
the Statements of Operations and Comprehensive Loss.

Cash, Cash Equivalents and Restricted Cash

Cash, cash equivalents and restricted cash consists of bank deposits, certificates of deposit and money market accounts with financial
institutions. Cash equivalents are carried at cost which approximates fair value due to their short-term nature and which the Company
believes do not have a material exposure to credit risk. The Company considers all highly liquid investments with maturities of three months
or less from the date of purchase to be cash

90
equivalents. The Company places its cash and cash equivalents with institutions with high credit quality. However, at certain times such cash
and cash equivalents may be in excess of Federal Deposit Insurance Corporation and Securities Investor Protection Corporation insurance
limits. The Company has not experienced any losses with respect to these accounts.

As of December 31, 2019 and 2020, the Company classified $182,000 as restricted cash related to a letter of credit issued as a security
deposit in connection with the Company’s lease of its corporate office facilities (Note 12). Cash, cash equivalents and restricted cash consists
of the following (in thousands):

December 31, December 31,

2019 2020
Cash and cash equivalents $ 72,624 $ 71,819
Restricted cash 182 182
Cash, cash equivalents and restricted cash $ 72,806 $ 72,001

Concentration of Credit Risk

Financial instruments that subject the Company to credit risk primarily consist of cash and cash equivalents and short-term investments. The
Company maintains its cash and cash equivalent balances with high-quality financial institutions and, consequently, the Company believes
that such funds are subject to minimal credit risk. The Company’s short-term investments consist of United States Treasury securities,
mortgage-backed securities, corporate debt securities and commercial paper. The Company has adopted an investment policy that limits the
amounts the Company may invest in any one type of investment and requires all investments held by the Company to hold a minimum rating,
thereby reducing credit risk exposure.

Investments
The Company invests excess cash balances in available-for-sale debt securities. The Company determines the appropriate classification of
these securities at the time they are acquired and evaluates the appropriateness of such classifications at each balance sheet date. The
Company reports available-for-sale investments at fair value at each balance sheet date and includes any unrealized gains and losses in
accumulated other comprehensive income (loss), a component of stockholders’ equity. Realized gains and losses are determined using the
specific identification method and are included in other income (expense). If any adjustment to fair value reflects a decline in the value of the
investment, the Company considers all available evidence to evaluate the extent to which the decline is “other than temporary,” including the
intention to sell and, if so, marks the investment to market through a charge to the Company’s consolidated statements of operations and
comprehensive loss.

Leases
The Company determines if an arrangement is a lease at inception. Operating leases are included in right-of-use (“ROU”) lease assets,
current portion of lease obligations, and long term lease obligations on the Company’s balance sheets.

ROU lease assets represent the Company’s right to use an underlying asset for the lease term and lease obligations represent the
Company’s obligation to make lease payments arising from the lease. Operating ROU lease assets and obligations are recognized at the
commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an
implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining
the present value of lease payments. The ROU lease asset excludes lease incentives. The Company’s lease terms include options to extend
or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is
recognized on a straight-line basis over the lease term.

Research and Development Costs

Research and development costs are expensed as incurred. Nonrefundable advance payments, if any, for goods or services used in
research and development are initially recorded as an asset and then recognized as an expense as the related goods are delivered or
services are performed. Research and development expenses include contract services, consulting, salaries, materials and supplies and
overhead.

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Income Taxes
The Company accounts for income taxes in accordance with the ASC 740, Income Taxes. Deferred tax assets and liabilities are recorded to
reflect the impact of temporary differences between amounts of assets and liabilities for financial reporting purposes and such amounts as
measured under enacted tax laws. A valuation allowance is required to offset any net deferred tax assets if, based upon the available
evidence, it is more likely than not that some or all of the deferred tax asset will not be realized.

The Company provides reserves for potential payments of tax to various tax authorities related to uncertain tax positions. The tax benefits
recorded are based on a determination of whether and how much of a tax benefit taken by the Company in its tax filings or positions is “more
likely than not” to be realized following resolution of any uncertainty related to the tax benefit, assuming that the matter in question will be
raised by the tax authorities. Potential interest and penalties associated with such uncertain tax positions are recorded as a component of
income tax expense. At December 31, 2019 and 2020, the Company had no such accruals.

Stock-Based Compensation
Stock-based compensation expense for stock options is recognized based on the grant-date fair value using the Black-Scholes valuation
model. Restricted stock units are valued at the fair market value per share of the Company’s common stock on the date of grant. The
Company recognizes compensation expense only for those stock-based awards expected to vest after considering expected forfeitures.
Cumulative compensation expense is at least equal to the compensation expense for vested awards. Stock-based compensation is
recognized on a straight-line basis over the service period of each award.

Segments
Operating segments are identified as components of an enterprise about which separate discrete financial information is available for
evaluation by the chief operating decision-maker (“CODM”) in making decisions regarding resource allocation and assessing performance.
The Company’s chief executive officer is the CODM, and he uses consolidated financial information in determining how to allocate resources
and assess performance. The Company has determined that it operates in one segment. All of the Company’s assets are located in the
United States.

Recently Issued Accounting Standards

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820) (“ASU 2018-13”). ASU 2018-13 modifies fair value
disclosure requirements, specifically around level transfers and valuation of Level 3 assets and liabilities. ASU 2018-13 is effective for
financial statements issued for annual and interim periods beginning after December 15, 2019 for all entities. Early adoption of all or part of
ASU No. 2018-13 is permitted. The Company adopted ASU 2018-13 on January 1, 2020 and there has not been any impact to its financial
statements.

3. Net Loss per Share

Basic net loss per share is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding
during the period without consideration of dilutive common stock equivalents. Diluted net loss per share is the same as basic net loss per
common share, since the effects of potentially dilutive securities are anti-dilutive.

Dilutive common stock equivalents are comprised of unexercised stock options outstanding under the Company’s equity plan and unvested
restricted stock.

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The following table sets forth the computation of basic and diluted net loss per share of common stock (in thousands, except shares and per
share data):

FOR THE YEAR ENDED

DECEMBER 31, DECEMBER 31,
2019 2020
Net loss and comprehensive loss $ (32,996 ) $ (32,209 )
Weighted—average common shares
outstanding, basic and diluted 18,600,718 24,568,897
Net loss per share, basic and diluted $ (1.77) $ (1.31)

The following table sets forth the outstanding potentially dilutive securities that have been excluded in the calculation of diluted net loss per
share because their inclusion would be anti-dilutive (in common stock equivalent shares):

FOR THE YEAR ENDED

DECEMBER 31, DECEMBER 31,
2019 2020
Stock options to purchase common stock 1,439,518 2,224,913
Unvested restricted stock 160,900 80,450
1,600,418 2,305,363

4. Investments
Cash in excess of the Company’s immediate requirements is invested in accordance with the Company’s investment policy that
primarily seeks to maintain adequate liquidity and preserve capital.

A summary of the Company’s available-for-sale classified investments as of December 31, 2020 consisted of the following (in thousands):

At December 31, 2020

Accumulated Accumulated
Unrealized Unrealized
Investments - Current: Cost Basis Gains Losses Fair Value
United States Treasury securities $ 8,213 $ - $ - $ 8,213
Corporate debt securities 11,972 1 - 11,973
Commercial paper 13,090 - - 13,090
Total $ 33,275 $ 1 $ - $ 33,276

The amortized cost and fair value of the Company’s available-for-sale investments, by contract maturity, as of December 31, 2020 consisted
of the following (in thousands):

Amortized Cost Fair Value

Due in one year or less $ 33,275 $ 33,276
Total $ 33,275 $ 33,276

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5. Property and Equipment
Purchased property and equipment consist of the following as of December 31, 2019 and 2020 (in thousands):

ESTIMATED
USEFUL LIFE 2019 2020
Office equipment 5 years $ 10 $ 10
Office furniture 7 years 116 116
Computer equipment 3 years 8 8
Leasehold improvements Life of lease 95 95
229 229
Less: Accumulated depreciation (102) (136)
Property and equipment, net $ 127 $ 93

Depreciation expense for the years ended December 31, 2019 and 2020 was $37,000 and $34,000, respectively.

6. Accrued Expenses
Accrued expenses at December 31, 2019 and 2020 consist of (in thousands):

2019 2020
Contract research and development $ 2,001 $ 2,274
Employee compensation and related costs 1,250 1,978
Consulting and professional service fees 296 364
Interest 91 88
Financing related costs - 43
State taxes 49 40
Other 1 -
Total accrued expenses $ 3,688 $ 4,787

7. Income Taxes
The Company accounts for income taxes in accordance with ASC 740, Income Taxes (“ASC 740”), which requires an asset and liability
approach for measuring deferred taxes based on temporary differences between the financial statement and tax bases of assets and
liabilities existing at each balance sheet date using enacted tax rates for the years in which taxes are expected to be paid or recovered. The
tax benefit arising from the Company’s net loss has been offset by an increase in the valuation allowance.

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Accordingly, the Company had no net income tax provision or benefit during the years ended December 31, 2019 and 2020. Components of
the net deferred tax assets at December 31, 2019 and 2020 are as follows (in thousands):

2019 2020
Deferred tax assets:
Federal net operating loss carryforwards $ 7,638 $ 10,474
State net operating loss carryforwards 2,117 2,938
Research and development tax credits 2,410 2,963
Accrued liabilities 407 588
Stock-based compensation 778 679
Depreciation and amortization 1,330 1,545
Capitalized research and development costs 19,294 23,977
Lease liabilities 359 253
Total deferred tax assets $ 34,333 $ 43,417
Deferred tax liabilities:
Right-of-use lease assets (314) (219)
Other (21) (119)
Total deferred tax liabilities $ (335) $ (338)
Valuation allowance $ (33,998) $ (43,079)
Net deferred tax assets $ — $ —

At December 31, 2020, the Company had available federal net operating loss carryforwards of $17.5 million, which expire at various dates
through 2038, and $32.4 million, which may be carried forward indefinitely. At December 31, 2020, the Company had available state net
operating loss carryforwards of $46.5 million, which expire at various dates through 2040, and $0.1 million, which may be carried forward
indefinitely. In assessing the realizability of net deferred tax assets, management considers whether it is more likely than not that the net
deferred tax assets will be realized. The ultimate realization of net deferred tax assets is dependent upon the generation of future taxable
income during the periods in which temporary differences representing future deductible amounts become deductible. Management has
established a full valuation allowance against the net deferred tax assets at December 31, 2019 and 2020 since it is more likely than not that
these future tax benefits will not be realized. During 2020, the valuation allowance increased by $9.1 million.

At December 31, 2020, the Company had federal and state research and development credit carryforwards of $2.5 million and $0.6 million,
respectively. The net credit carryforwards may be used to offset future income taxes and expire at various dates through 2040. Changes in
the Company’s ownership, as defined in the U.S. Internal Revenue Code, may limit the Company’s ability to utilize the tax credit and net
operating loss carryforwards.

A reconciliation of income tax (expense) benefit at the statutory federal income tax rate and income taxes as reflected in the consolidated
financial statements at December 31, 2019 and 2020 are as follows:

2019 2020
Federal income tax at statutory rate 21.00% 21.00%
State income tax, net of federal benefit 5.68% 5.65%
Research and development credits 2.16% 2.03%
Book compensation related to stock options (0.27)% (0.91)%
Change in income tax rate (0.05)% 0.73%
Other (0.34)% (0.30)%
Increase in valuation allowance (28.18)% (28.20)%
Effective tax rate —% —%

The Company files tax returns in the United States, Massachusetts and other states. The tax years 2017 through 2020 remain open to
examination by major taxing jurisdictions to which the Company is subject, which are primarily the United States federal and Massachusetts.
Carryforward attributes generated in years past may still

95
be adjusted upon examination by the Internal Revenue Service or state tax authorities if they have or will be used in a future period. The
Company is currently not under examination by the Internal Revenue Service or any other jurisdictions for any tax years. The Company
recognizes both accrued interest and penalties related to unrecognized benefits in income tax expense. The Company has not recorded any
interest or penalties on any unrecognized tax benefits since its inception.

A reconciliation of the beginning and ending amount of uncertain tax benefits is as follows (in thousands):

2019 2020
Beginning uncertain tax benefits $ 476 $ 628
Prior year - increases — 1
Current year - decreases — —
Current year - increases 152 145
Ending uncertain tax benefits $ 628 $ 774

8. Fair Value of Financial Instruments

The Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic, Fair Value Measurements and
Disclosures (“ASC 820”), provides a fair value hierarchy, which classifies fair value measurements based on the inputs used in measuring fair
value. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from
sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market
participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances. The
fair value hierarchy applies only to the valuation inputs used in determining the reported fair value of the investments and is not a measure of
the investment credit quality. The three levels of the fair value hierarchy are described below:
Level 1—Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the
ability to access at the measurement date.
Level 2—Valuations based on quoted prices for similar assets or liabilities in markets that are not active or for which all significant
inputs are observable, either directly or indirectly.
Level 3—Valuations that require inputs that reflect the Company’s own assumptions that are both significant to the fair value
measurement and observable.

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair
value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for
instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that
is significant to the fair value measurement.

The carrying values of the Company’s cash and restricted cash, prepaid expenses, value added tax, or VAT, receivable and deposits
approximate their fair values due to their short-term nature. The carrying value of the Company’s loan payable was considered a reasonable
estimate of fair value because the Company’s interest rate is near current market rates for instruments with similar characteristics.

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The following tables summarize the Company’s assets and liabilities that are measured at fair value on a recurring basis and indicates the
level of the fair value hierarchy utilized to determine such fair values (in thousands):

As of December 31, 2019

Significant
Quoted Prices Other Significant
in Active Observable Unobservable
Markets Inputs Inputs
TOTAL (Level 1) (Level 2) (Level 3)
Assets:
Cash equivalents $ 67,824 $ 67,824 $ — $ —
Total $ 67,824 $ 67,824 $ — $ —
Liabilities:
Derivative liability $ 765 $ — $ — $ 765
Total $ 765 $ — $ — $ 765

As of December 31, 2020

Significant
Quoted Prices Other Significant
in Active Observable Unobservable
Markets Inputs Inputs
TOTAL (Level 1) (Level 2) (Level 3)
Assets:
Cash equivalents $ 70,797 $ 68,798 $ 1,999 $ —
Total cash equivalents 70,797 68,798 1,999 —

United States Treasury securities 8,213 8,213 — —

Corporate debt securities 11,973 — 11,973 —
Commercial paper 13,090 — 13,090 —
Investments 33,276 8,213 25,063 —

Total $ 104,073 $ 77,011 $ 27,062 $ —

Changes in the fair value of the Company’s Level 3 derivative liability for the years ended December 31, 2019 and 2020 are as follows:

At December 31, 2018 $ —

Issuance of derivative liability 763
Change in fair value of derivative liability 2
At December 31, 2019 765
Change in fair value of derivative liability 30
Allocation of debt discount to term loan 5
Payment of derivative liability (800)
At December 31, 2020 $ —

9. Term Loan
In May 2017, the Company entered into a loan and security agreement (the “2017 Loan Agreement”), with Solar Capital Ltd. and Silicon
Valley Bank, (together, the “Lenders”) for $10.0 million. The 2017 Loan Agreement had a maturity date of May 1, 2021. Debt issuance costs
for the 2017 Loan Agreement were to be amortized to interest expense over the remaining term of the 2017 Loan Agreement using the
effective-interest method.

The interest rate under the 2017 Loan Agreement was LIBOR plus 8.45%. The initial interest-only period was until November 30, 2018,
followed by a 30-month principal and interest period. The First Amendment to the Loan and Security Agreement, entered into in November
2018, extended the interest-only period through May 2019. The

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Third Amendment to the Loan and Security Agreement, entered into in May 2019, extended the interest-only period through August 2019,
with the ability to further extend the interest only period to November 2019. Pursuant to the 2017 Loan Agreement, the Company provided a
first priority security interest in all existing and after-acquired assets, excluding intellectual property, owned by the Company.

For the year ended December 31, 2019, the Company recorded $169,000 related to the amortization of debt discount associated with the
2017 Loan Agreement.

The 2017 Loan Agreement allowed the Company to voluntarily prepay all (but not less than all) of the outstanding principal at any time. In the
event of prepayment, a prepayment premium of 1% would be assessed on the outstanding principal. A final payment fee of $250,000 was
due upon the earlier to occur of the maturity date or prepayment of such borrowings. The final payment fee was increased to $325,000 in the
First Amendment to the 2017 Loan Agreement. For the year ended December 31, 2019, the Company recorded $80,000, related to the
amortization of the final payment fee associated with the 2017 Loan Agreement.

In September 2019, the Company replaced the 2017 Loan Agreement with a new $20.0 million term loan with the Lenders, the 2019 Loan
Agreement. The restructured four-year term loan facility allows for an expansion of the 2017 Loan Agreement. Some of the proceeds from
the 2019 Loan Agreement were used to pay off the 2017 Loan Agreement including the final fee of $325,000. The 2019 Loan Agreement
extends the term of the credit facility until September 17, 2023. The payoff of the 2017 Loan Agreement was treated as a modification of the
debt. Debt issuance costs for the 2019 Loan Agreement, including unamortized issuance costs for the 2017 Loan Agreement, will be
amortized to interest expense over the remaining term of the 2019 Loan Agreement using the effective-interest method.

The interest rate under the 2019 Loan Agreement is the higher of (i) LIBOR plus 7.95% or (ii) 10.18% and there is an interest-only period
until September 30, 2021. The rate at December 31, 2020 was 10.18%. Pursuant to the 2019 Loan Agreement, the Company provided a first
priority security interest in substantially all of the Company’s assets, including intellectual property, subject to certain exceptions.

The Company entered into the Exit Agreement in connection with the 2019 Loan Agreement which provides for an aggregate payment of 4%
of the loan commitment, or $800,000, to the Lenders upon the occurrence of an exit event. The Company concluded that the exit payment
obligation met the definition of a derivative that was required to be accounted for as a separate unit of accounting. The Company recorded
the issuance-date fair value of the derivative liability of $763,000 as a debt discount and as a derivative liability in the Company’s balance
sheet. The derivative liability is re-measured at each balance sheet date and any changes in estimated fair value is recorded as other income
(expense). The Company paid the Exit Fee during the year ended December 31, 2020 in conjunction with the Company’s public offering,
which was deemed to be an exit event pursuant to the Exit Agreement. Prior to the its public offering in 2020, the Company recorded $30,000
in non-cash expense as a fair value adjustment to the derivative liability.

As of December 31, 2020, unpaid borrowings under the 2019 Loan Agreement totaled $20.0 million. For the years ended December 31,
2019 and 2020, the Company recorded $90,000 and $357,000, respectively, related to the amortization of the debt discount associated with
the 2019 Loan Agreement.

The 2019 Loan Agreement allows the Company to voluntarily prepay all (but not less than all) of the outstanding principal at any time. A
prepayment premium of 3% or 1% through the one-year anniversary and the two-year anniversary, respectively, would be assessed on the
outstanding principal. After the two-year anniversary, a 0.5% prepayment premium would be assessed on the outstanding principal. A final
payment fee of $500,000 is due upon the earlier to occur of the maturity date or prepayment of such borrowings. For the years ended
December 31, 2019 and 2020, the Company recorded $46,000 and $160,000, respectively, related to the amortization of the final payment
fee associated with the 2019 Loan Agreement.

In an event of default under the 2019 Loan Agreement, the interest rate will be increased by 5% and the balance under the loan may become
immediately due and payable at the option of the lenders.

The 2019 Loan Agreement includes restrictions on, among other things, the Company’s ability to incur additional indebtedness, change the
name or location of the Company’s business, merge with or acquire other entities, pay

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dividends or make other distributions to holders of its capital stock, make certain investments, engage in transactions with affiliates, create
liens, sell assets or pay subordinated debt.

Total term loan and unamortized debt discount balances are as follows (in thousands):

DECEMBER 31, DECEMBER 31,

2019 2020
Face value $ 20,000 $ 20,000
Less: debt discount (1,085) (734)
Total $ 18,915 $ 19,266
Less: current portion — (2,408)
Long-term portion $ 18,915 $ 16,858

As of December 31, 2020, future principal payments due under the 2019 Loan Agreement are as follows (in thousands):

Year ended:
December 31, 2021 $ 2,500
December 31, 2022 10,000
December 31, 2023 7,500
Total minimum principal payments $ 20,000

10. Stockholders’ Equity

Common Stock
At December 31, 2019 and 2020, the Company had 150,000,000 shares of common stock authorized with a par value of $0.0001. There
were 19,418,955 and 27,325,959 shares issued and outstanding at December 31, 2019 and 2020, respectively. Voting, dividend and
liquidation rights of the holders of the common stock are subject to the Company’s articles of incorporation, corporate bylaws and underlying
shareholder agreements.

Reserved Shares
The Company has reserved 2,224,913 and 80,450 shares of common stock for the exercise of outstanding options to purchase common
stock and for the vesting of RSUs, respectively.

At-the-Market Issuance Sales Agreement

On August 23, 2019, the Company entered into an Open Market Sale AgreementSM (“ATM Agreement”), with Jefferies LLC (“Jefferies”) with
respect to an at-the-market offering program under which the Company could offer and sell shares of its common stock (the “ATM Shares”)
having an aggregate offering price of up to $15.0 million through Jefferies as its sales agent. The offering and sale of ATM Shares were made
pursuant to the Company’s shelf registration statement on Form S-3, which was declared effective by the SEC on February 11, 2019 (the
“Registration Statement”).

The Company agreed to pay Jefferies a commission equal to 3.0% of the gross sales proceeds of such ATM Shares. The Company incurred
$189,000 of legal, accounting and other costs to establish and activate the ATM program.

During the year ended December 31, 2019, the Company sold a total of 827,525 ATM Shares under the ATM Agreement, in the open
market, at an average gross selling price of $5.18 per share for proceeds of $4.2 million, net of commissions. The Company charged $54,000
in costs related to establishing and activating the program against additional paid in capital upon issuance of shares in 2019.

During the year ended December 31, 2020, the Company sold a total of 1,502,892 ATM Shares under the ATM Agreement, in the open
market, at a weighted average gross selling price of $7.13 per share for net proceeds of

99
$10.4 million, which completed the program. The Company charged $135,000 in costs related to establishing and activating the program
against additional paid in capital upon issuance of shares in 2020.

Sale of Common Stock

In May 2020, the Company completed an underwritten public offering of 5,780,347 shares of its common stock (the “2020 Offering Shares”),
pursuant to the Registration Statement. The 2020 Offering Shares were sold at an offering price of $8.65 per share, resulting in net proceeds
of $46.6 million, after deducting underwriting discounts, commissions and offering expenses. In addition, the underwriters of the offering were
granted the option for a period of 30 days to purchase up to an additional 867,052 shares of common stock at $8.65 per share. In June 2020,
the underwriters exercised their option and purchased an additional 440,242 shares of common stock at $8.65 per share, resulting in
additional net proceeds to the Company of $3.6 million, after deducting underwriting discounts, commissions and offering expenses.

Preferred Stock
At December 31, 2019 and 2020, the Company had 10,000,000 shares of preferred stock authorized with a par value of $0.0001 and no
shares of preferred stock were issued or outstanding.

11. Stock-Based Compensation

Stock Options
In October 2017, the board of directors approved the 2017 Stock Option and Incentive Plan (the “2017 Stock Plan”) which became effective
in November 2017, upon the closing of the Company’s IPO. The 2017 Stock Plan will expire in October 2027. Under the 2017 Stock Plan,
the Company may grant incentive stock options, non-statutory stock options, restricted stock awards, restricted stock units (“RSUs”) and
other stock-based awards. The Company’s 2014 Stock Incentive Plan (the “2014 Stock Plan”) terminated in November 2017 effective upon
the completion of the Company’s IPO. No additional options will be granted under the 2014 Stock Plan. At December 31, 2020, there were
690,673 options outstanding under the 2014 Stock Plan.

There were 1,430,000 shares of the Company’s common stock initially reserved for issuance under the 2017 Stock Plan. In addition, the
number of shares of common stock that may be issued under the 2017 Stock Plan automatically increases on each January 1, beginning on
January 1, 2018 and ending on January 1, 2027, by a number of shares equal to 4% of the Company’s shares of common stock outstanding
on the immediately preceding December 31, subject to limitation. On January 1, 2018, 2019, 2020 and 2021, the number of shares issuable
under the 2017 Stock Plan increased by 741,389, 742,772, 776,758 and 1,093,038 shares, respectively.

At December 31, 2020, there were 4,991,430 shares of the Company’s common stock authorized for issuance under the 2017 Stock Plan,
including 272,166 options that have been forfeited from the 2014 Stock Plan.

At December 31, 2020, there were 2,265,104 options available for issuance, 1,534,240 options outstanding and 80,450 restricted stock units
outstanding under the 2017 Stock Plan. Options granted under the 2017 Stock Plan have a term of ten years. Vesting of options under the
2017 Stock Plan is determined by the compensation committee of the board of directors but is generally a four-year term.

The fair value of options at date of grant was estimated using the Black-Scholes option-pricing model with the following assumptions:

2019 2020
Risk-free interest rate 1.59%—2.51% 0.33%—1.71%
Expected dividend yield 0% 0%
Expected life 5.5—6.1 years 5.5—6.6 years
Expected volatility 72%—74% 72%—75%
Weighted-average grant date
fair value $ 2.31 $ 4.35

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Due to the lack of a public market for the trading of the Company’s common stock prior to its initial public offering and the lack of company-
specific historical volatility, volatility was estimated using historical volatilities of similar companies. The expected life of the awards is
estimated based on the simplified method, which calculates the expected life based upon the midpoint of the term of the award and the
vesting period. The Company uses the simplified method because it does not have sufficient option exercise data to provide a reasonable
basis upon which to estimate the expected term. The Company has no history of paying dividends nor does management expect to pay
dividends over the contractual terms of these options. The risk-free interest rates are based on the United States Treasury yield curve in
effect at the time of grant, with maturities approximating the expected life of the stock options.

The following table summarizes information about stock option activity during 2019 and 2020 (in thousands, except share and per share
data):

WEIGHTED-
WEIGHTED- AVERAGE
AVERAGE REMAINING AGGREGATE
NUMBER OF EXERCISE CONTRACTUAL INTRINSIC
SHARES PRICE TERM VALUE
Outstanding, December 31, 2018 1,588,306 $ 6.75
Granted 162,522 3.56
Exercised (22,141) 2.73
Forfeited (289,169) 8.54
Outstanding, December 31, 2019 1,439,518 $ 6.09
Granted 1,021,705 6.79
Exercised (121,671) 6.07
Forfeited (114,639) 9.01
Outstanding, December 31, 2020 2,224,913 $ 6.26 7.79 $ 1,196
Vested and exercisable, December 31, 2020 1,067,552 $ 5.73 6.55 $ 1,066
Vested and expected to vest, December 31, 2020 1,710,991 $ 6.21 7.40 $ 1,163

The following table summarizes information about RSU activity during the 2019 and 2020:

AVERAGE GRANT
DATE FAIR VALUE
(IN DOLLARS PER
RSUs SHARE)
RSUs outstanding, December 31, 2018 — $ —
Granted 160,900 3.25
Exercised — —
Forfeited — —
RSUs outstanding, December 31, 2019 160,900 3.25
Granted — —
Exercised (80,450) 3.25
Forfeited — —
RSUs outstanding, December 31, 2020 80,450 $ 3.25

The number of RSUs vested includes shares of common stock withheld on behalf of employees to satisfy the minimum statutory tax
withholding requirements.

During 2019 and 2020, the Company received $60,000 and $736,000, respectively, upon exercise of stock options. The intrinsic value of the
options exercised in 2019 and 2020 was $47,000 and $388,000, respectively.

Unrecognized compensation expense related to unvested options as of December 31, 2020 was $2.3 million and will be recognized over the
remaining vesting periods of the underlying awards. The weighted-average period over which such compensation is expected to be
recognized is 2.4 years. Unrecognized compensation expense related to unvested RSUs as of December 31, 2020 was $81,000 and will be
recognized over the remaining

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vesting periods of the underlying awards. The weighted-average period over which such compensation is expected to be recognized is 0.8
years.

During the year ended December 31, 2019, the Company extended the exercise period to one year for 55,677 vested options and for two
years for 85,432 vested options with a weighted average exercise price of $8.41 pursuant to separation agreements. The modifications
affected seven grantees and the Company recorded incremental stock-based compensation expense of $70,000.

The Company recorded stock-based compensation expense in the following expense categories of its accompanying condensed
consolidated statements of operations and comprehensive loss for employees, directors and non-employees during the years ended
December 31, 2019 and 2020 as follows (in thousands):
2019 2020
Research and development $ 327 $ 619
General and administrative 1,122 1,381
Total $ 1,449 $ 2,000

12. Commitments and Contingencies

Operating Leases
The Company entered into noncancelable operating leases for office facilities located in Lexington, Massachusetts and Burlington,
Massachusetts through December 31, 2022 and November 30, 2022, respectively. Rent expense under the operating leases totaled $0.5
million and $0.5 million for the years ended December 31, 2019 and 2020, respectively.

Certain leases provide for increases in future minimum annual rental payments as defined in the lease agreements. The leases generally
also include real estate taxes and common area maintenance (“CAM”) charges in the annual rental payments.

Pursuant to the terms of its lease agreement for the Company’s headquarters in Burlington, Massachusetts, the Company obtained a letter of
credit in the amount of approximately $182,000 as security on the lease obligation. The letter of credit is listed as restricted cash on the
Company’s consolidated balance sheets.

Short-term leases are leases having a term of twelve months or less. The Company recognizes short-term leases on a straight-line basis and
does not record a related lease asset or liability for such leases.

The following is a maturity analysis of the annual undiscounted cash flows reconciled to the carrying value of the operating lease liabilities as
of December 31, 2020 (in thousands):

Year ended:
December 31, 2021 $ 537
December 31, 2022 496
Total minimum lease payments 1,033
Less imputed interest (93)
Total $ 940

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 2019 2020
Lease cost:
Operating lease cost $ 490 $ 491
Short-term lease cost 8 -
Sublease income (56) (51)
Total lease cost $ 442 $ 440
Other information
Cash paid for amounts included in the
measurement of liabilities $ 514 $ 529
Operating cash flows from operating leases $ (30) $ (45)
Weighted-average remaining lease term -
operating leases 2.9 years 1.9 years
Weighted-average discount rate -
operating leases 10.1% 10.1%

In February 2018, the Company signed a sublease agreement for its facility located in Lexington, Massachusetts. The sublease commenced
on April 1, 2018 and has an initial term of three years with an extension term through December 2022. In February 2020, the sublease was
extended until December 31, 2022.

Research and Development Agreements

As part of the Company’s research and development efforts, the Company enters into research and development agreements with unrelated
companies. These agreements contain varying terms and provisions which include fees and milestones to be paid by the Company. Some of
these agreements also contain provisions which require the Company to make payments for exclusivity in the development of products in the
area of loop diuretics.

Contingencies
The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies.

Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only
be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment
inherently involves an exercise of judgment.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be
estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potential
material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent
liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed. Loss contingencies considered
remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.

Due to the discontinuation of use of the sc2Wear Infusor, the Company has received notice of termination costs related to the program. The
Company has accrued all costs for which it either believes it is contractually liable or for which the Company has negotiated settlement
agreements in good faith. However, certain of the Company’s vendors have claimed or billed for additional costs for which the Company
believes it is not obligated. At this time, the Company estimates that additional termination costs, if any, will be immaterial to the Company’s
financial statements.

13. 401(k) Savings Plan

In July 2014, the Company established a defined contribution savings plan under Section 401(k) of the Internal Revenue Code covering all of
its employees. Employees may make contributions by withholding a percentage of their salary. The plan includes an employer match equal to
100% on the first 3% of deferred compensation and an additional 50% on the next 2% of deferred compensation. During the years ended
December 31, 2019 and 2020,

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the Company has recognized compensation expense of $104,000 and $151,000, respectively, for the employer match contribution.

14. Subsequent Events

The Company considers events or transactions that occur after the balance sheet date but prior to the issuance of the financial statements to
provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. During this period, the
Company did not have any material subsequent events that impacted its consolidated financial statements or disclosures.

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Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
None.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our principal executive and financial officer and our principal accounting officer, evaluated, as of
the end of the period covered by this Annual Report on Form 10-K, the effectiveness of our disclosure controls and procedures. Based on
that evaluation of our disclosure controls and procedures as of December 31, 2020, our principal executive and financial officer and our
principal accounting officer concluded that our disclosure controls and procedures as of such date are effective at the reasonable assurance
level. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means “controls
and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files
or submits under the Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and
forms.” Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required
to be disclosed by us in the reports we file or submit under the Act is accumulated and communicated to the issuer’s management, including
its principal executive and principal financial officers or persons performing similar functions, as appropriate to allow timely decisions
regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can
provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-
benefit relationship of possible controls and procedures.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over
financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the
supervision of, the company’s principal executive and financial officer and principal accounting officer and effected by the company’s board of
directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those
policies and procedures that:
• Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of
the assets of the company;
• Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and
• Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the
company’s assets that could have a material effect on the financial statements.

Our management assessed the effectiveness of our internal control over financial reporting as of the end of the period covered by this Annual
Report on Form 10-K. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of
the Treadway Commission in Internal Control—Integrated Framework (2013 framework). Based on its assessment, management believes
that, as of December 31, 2020, our internal control over financial reporting is effective based on those criteria.

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Inherent Limitations of Internal Controls
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those
systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act)
during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over
financial reporting.

Item 9B. Other Information.

Not applicable.

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 PART III

Item 10. Directors, Executive Officers and Corporate Governance.

The information required by this item will be contained in our definitive proxy statement to be filed with the SEC in connection with the Annual
Meeting of Stockholders within 120 days after the conclusion of our fiscal year ended December 31, 2020, or the Proxy Statement, and is
incorporated in this Annual Report on Form 10-K by reference.

Item 11. Executive Compensation.

The information required by this item will be contained in the Proxy Statement and is incorporated in this Annual Report Form 10-K by
reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information required by this item will be contained in the Proxy Statement and is incorporated in this Annual Report Form 10-K by
reference.

Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required by this item will be contained in the Proxy Statement and is incorporated in this Annual Report Form 10-K by
reference.

Item 14. Principal Accounting Fees and Services.

The information required by this item will be contained in the Proxy Statement and is incorporated in this Annual Report Form 10-K by
reference.

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 PART IV

Item 15. Exhibits, Financial Statement Schedules.

(a) Documents filed as a part of this Report:
(1) Consolidated Financial Statements—Included in Item 8 of this Annual Report on Form 10-K.

Report of Independent Registered Public Accounting Firm 85

Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31, 2019 and 2020 86
Consolidated Statement of Operations and Comprehensive Loss for the Years Ended December 31, 2019 and 2020 87
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2019 and 2020 88
Consolidated Statements of Cash Flows for the Years Ended December 31, 2019 and 2020 89
Notes to Consolidated Financial Statements 90

(2) Financial Statement Schedules

All financial statement schedules have been omitted because they are not applicable, not required or the information required is shown in the
financial statements or the notes thereto.

(3) Index to Exhibits.

Exhibit
Number Description

3.1 Second Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to the Registrant’s
Registration Statement on Form S-1/A (File No. 333-221077) filed on November 7, 2017)
3.2 Amended and Restated By-laws of the Registrant (incorporated by reference to the Registrant’s Registration Statement on
Form S-1/A (File No. 333-221077) filed on November 7, 2017)
3.3 Amendment No. 1 to the Company’s Amended and Restated Bylaws (incorporated by reference to the Registrant’s Current
Report on Form 8-K (File No. 001-38293) filed on June 10, 2020)
3.4 Amendment No. 2 to the Company’s Amended and Restated Bylaws (incorporated by reference to the Registrant’s Current
Report on Form 8-K (File No. 001-38293) filed on March 12, 2021)
4.1 Amended and Restated Investors’ Rights Agreement among the Registrant and certain of its stockholders, dated December
22, 2016 (incorporated by reference to the Registrant’s Registration Statement on Form S-1 (File No. 333-221077) filed on
October 23, 2017)
4.2* Description of Registered Securities

10.1# 2014 Stock Incentive Plan, as amended, and forms of award agreements thereunder (incorporated by reference to the
Registrant’s Registration Statement on Form S-1 (File No. 333-221077) on October 23, 2017)
10.2# 2017 Stock Option and Incentive Plan and forms of award agreements thereunder (incorporated by reference to the
Registrant’s Registration Statement on Form S-1/A (File No. 333-221077) filed on November 7, 2017)
10.3# Senior Executive Cash Incentive Bonus Plan (incorporated by reference to the Registrant’s Registration Statement on Form S-
1/A (File No. 333-221077) filed on November 7, 2017)
10.4# 2017 Employee Stock Purchase Plan (incorporated by reference to the Registrant’s Registration Statement on Form S-1/A
(File No. 333-221077) filed on November 7, 2017)
10.5# Form of Indemnification Agreement (incorporated by reference to the Registrant’s Registration Statement on Form S-1/A (File
No. 333-221077) filed on November 7, 2017)

108
 10.6 Office Lease Agreement, dated as of June 2, 2017, by and between the Registrant and NEEP Investors Holdings LLC
(incorporated by reference to the Registrant’s Registration Statement on Form S-1 (File No. 333-221077) filed on October 23,
2017)
10.7 Loan and Security Agreement, dated as of September 17, 2019, by and among the Registrant, Solar Capital Ltd., as collateral
agent, and the lenders listed on Schedule 1.1 thereto or otherwise a party thereto from time to time, including Solar Capital
Ltd., as a lender, and Silicon Valley Bank, as a lender (incorporated by reference to Exhibit 10.1 of the Registrant’s Quarterly
Report on Form 10-Q (File No. 001-38293) filed on November 12, 2019)
10.8# Amended and Restated Employment Agreement, by and between the Registrant and John H. Tucker (incorporated by
reference to the Registrant’s Registration Statement on Form S-1/A (File No. 333-221077) filed on November 7, 2017)
10.9# Employment Agreement, by and between the Registrant and Rachael Nokes (incorporated by reference as Exhibit 10.9 to the
Registrants Annual Report on Form 10-K (File No. 00138293) filed on March 24, 2020)
10.10 Development Agreement, by and between the Registrant and West Pharmaceutical Services, Inc., dated January 28, 2019
(incorporated by reference as Exhibit 10.2 to the Registrants Quarterly Report on Form 10-Q (File No. 00138293) filed on May
8, 2019)
10.11 Supply Agreement, dated August 15, 2020, by and between West Pharmaceutical Services, Inc. and the Registrant
(incorporated by reference as Exhibit 10.1 to the Registrants Quarterly Report on Form 10-Q (File No. 00138293) filed on
November 16, 2020)
21.1* Subsidiaries of the Registrant

23.1* Consent of RSM US LLP, Independent Registered Public Accounting Firm

31.1* Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the
Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1** Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS* XBRL Instance Document
101.SCH* XBRL Taxonomy Extension Schema Document

101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF* XBRL Taxonomy Extension Definition Linkbase Document

101.LAB* XBRL Taxonomy Extension Label Linkbase Document

101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document

* Filed herewith.
† The Securities and Exchange Commission has granted confidential treatment of certain provisions. Omitted material for which
confidential treatment has been granted has been filed separately with the Securities and Exchange Commission.
# Indicates a management contract or any compensatory plan, contract or arrangement.
** This certification will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by
reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent specifically
incorporated by reference into such filing.

Item 16. Form 10-K Summary.

Not applicable.

109
 SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused
this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

Company Name

Date: March 23, 2021 By: /s/ John H. Tucker

John H. Tucker
President, Chief Executive Officer, Principal Executive Officer
and Principal Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following
persons on behalf of the Registrant in the capacities and on the dates indicated.

Name Title Date

Director, President, Chief Executive Officer, Principal Executive

/s/ John H. Tucker Officer and Principal Financial Officer March 23, 2021
John H. Tucker

/s/ Rachael Nokes Principal Accounting Officer March 23, 2021

Rachael Nokes

/s/ Mette Kirstine Agger Director March 23, 2021

Mette Kirstine Agger

/s/ Sara Bonstein Director March 23, 2021

Sara Bonstein

/s/ Minnie V. Baylor-Henry Director March 23, 2021

Minnie V. Baylor-Henry

/s/ Jack A. Khattar Director March 23, 2021

Jack A. Khattar

/s/ Leonard D. Schaeffer Director March 23, 2021

Leonard D. Schaeffer

/s/ Klaus Veitinger, M.D., Ph.D. Director March 23, 2021

Klaus Veitinger, M.D., Ph.D.

/s/ Frederick Hudson Director March 23, 2021

Frederick Hudson

/s/ William T. Abraham, M.D. Director March 23, 2021

William T. Abraham, M.D.

110
 Exhibit 4.2

Description of the Registrant’s Securities Registered Pursuant to

Section 12 of the Securities Exchange Act of 1934, as amended

The following summary of the general terms and provisions of the registered capital stock of scPharmaceuticals Inc. (“scPharma”, “we”, “our”) does not
purport to be complete and is subject to, and qualified in its entirety by, reference to our Second Amended and Restated Certificate of Incorporation, or
certificate of incorporation, our Amended and Restated Bylaws, or bylaws, each of which is incorporated by reference as an exhibit to our most recent
Annual Report on Form 10-K filed with the Securities and Exchange Commission, and applicable provisions of the Delaware General Corporation Law, or
the DGCL. Our common stock, par value $0.0001 per share is registered pursuant to Section 12(b) of the Securities and Exchange Act of 1934 and trades
on the Nasdaq Global Select Market under the symbol SCPH. The summaries below do not purport to be complete statements of the relevant provisions of
the certificate of incorporation, the bylaws or the DGCL.

General
Our authorized capital stock consists of 150,000,000 shares of common stock, par value $0.0001 per share, or the common stock, and 10,000,000 shares of
undesignated preferred stock, par value $0.0001 per share, or the preferred stock.

Common Stock
The holders of our common stock are entitled to one vote for each share held on all matters submitted to a vote of the stockholders. The holders of our
common stock do not have any cumulative voting rights. Holders of our common stock are entitled to receive ratably any dividends declared by our board
of directors out of funds legally available for that purpose, subject to any preferential dividend rights of any outstanding preferred stock. Our common stock
has no preemptive rights, conversion rights or other subscription rights or redemption or sinking fund provisions. In the event of our liquidation, dissolution
or winding up, holders of our common stock will be entitled to share ratably in all assets remaining after payment of all debts and other liabilities and any
liquidation preference of any outstanding preferred stock. All outstanding shares of common stock are fully paid and nonassessable.
Our common stock is listed on the Nasdaq Global Select Market under the trading symbol “SCPH.”
The transfer agent and registrar for our common stock is Computershare Trust Company, N.A.

Preferred Stock
We may issue shares of preferred stock in one or more series. Our board of directors will determine the rights, preferences and privileges of the shares of
each wholly unissued series, and any qualifications, limitations or restrictions thereon, including dividend rights, conversion rights, preemptive rights,
voting rights, terms of redemption or repurchase, liquidation preferences, sinking fund terms and the number of shares constituting any series or the
designation of any series. Convertible preferred stock will be convertible into our common stock or exchangeable for other securities. Conversion may be
mandatory or at the holder’s option and would be at prescribed conversion rates. 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 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.

Anti-Takeover Effects of our Certificate of Incorporation and Bylaws and Delaware Law
Our certificate of incorporation and bylaws include a number of provisions that may have the effect of delaying, deferring or preventing another party from
acquiring control of us and encouraging persons considering unsolicited tender offers or other unilateral takeover proposals to negotiate with our board of
directors rather than pursue non-negotiated takeover attempts. These provisions include the items described below.

ACTIVE/102400065.2
Board Composition and Filling Vacancies
Our certificate of incorporation provides for the division of our board of directors into three classes serving staggered three-year terms, with one class being
elected each year. Our certificate of incorporation also provides that directors may be removed only for cause and then only by the affirmative vote of the
holders of two-thirds or more of the shares then entitled to vote at an election of directors. Furthermore, any vacancy on our board of directors, however
occurring, including a vacancy resulting from an increase in the size of our board, may only be filled by the affirmative vote of a majority of our directors
then in office even if less than a quorum. The classification of directors, together with the limitations on removal of directors and treatment of vacancies,
has the effect of making it more difficult for stockholders to change the composition of our board of directors.

No Written Consent of Stockholders

Our certificate of incorporation provides that all stockholder actions are required to be taken by a vote of the stockholders at an annual or special meeting,
and that stockholders may not take any action by written consent in lieu of a meeting. This limit may lengthen the amount of time required to take
stockholder actions and would prevent the amendment of our bylaws or removal of directors by our stockholders without holding a meeting of
stockholders.

Meetings of Stockholders
Our certificate of incorporation and bylaws provide that only a majority of the members of our board of directors then in office may call special meetings of
stockholders and only those matters set forth in the notice of the special meeting may be considered or acted upon at a special meeting of stockholders. Our
bylaws limit the business that may be conducted at an annual meeting of stockholders to those matters properly brought before the meeting.

Advance Notice Requirements

Our bylaws establish advance notice procedures with regard to stockholder proposals relating to the nomination of candidates for election as directors or
new business to be brought before meetings of our stockholders. These procedures provide that notice of stockholder proposals must be timely given in
writing to our corporate secretary prior to the meeting at which the action is to be taken. Generally, to be timely, notice must be received at our principal
executive offices not less than 90 days nor more than 120 days prior to the first anniversary date of the annual meeting for the preceding year. Our bylaws
specify the requirements as to form and content of all stockholders’ notices. These requirements may preclude stockholders from bringing matters before
the stockholders at an annual or special meeting.

Amendment to Certificate of Incorporation and Bylaws

Any amendment of our certificate of incorporation must first be approved by a majority of our board of directors, and if required by law or our certificate of
incorporation, must thereafter be approved by a majority of the outstanding shares entitled to vote on the amendment and a majority of the outstanding
shares of each class entitled to vote thereon as a class, except that the amendment of the provisions relating to stockholder action, board composition,
limitation of liability and the amendment of our bylaws and certificate of incorporation must be approved by not less than two-thirds of the outstanding
shares entitled to vote on the amendment, and not less than two-thirds of the outstanding shares of each class entitled to vote thereon as a class. Our bylaws
may be amended by the affirmative vote of a majority of the directors then in office, subject to any limitations set forth in the bylaws; and may also be
amended by the affirmative vote of at least two-thirds of the outstanding shares entitled to vote on the amendment, or, if our board of directors recommends
that the stockholders approve the amendment, by the affirmative vote of the majority of the outstanding shares entitled to vote on the amendment, in each
case voting together as a single class.

ACTIVE/102400065.2
Undesignated Preferred Stock
Our certificate of incorporation provides for 10,000,000 authorized shares of preferred stock. The existence of authorized but unissued shares of preferred
stock may enable our board of directors to discourage an attempt to obtain control of us by means of a merger, tender offer, proxy contest or otherwise. For
example, if in the due exercise of its fiduciary obligations, our board of directors were to determine that a takeover proposal is not in the best interests of
our stockholders, our board of directors could cause shares of preferred stock to be issued without stockholder approval in one or more private offerings or
other transactions that might dilute the voting or other rights of the proposed acquirer or insurgent stockholder or stockholder group. In this regard, our
certificate of incorporation grants our board of directors broad power to establish the rights and preferences of authorized and unissued shares of preferred
stock. The issuance of shares of preferred stock could decrease the amount of earnings and assets available for distribution to holders of shares of common
stock. The issuance may also adversely affect the rights and powers, including voting rights, of these holders and may have the effect of delaying, deterring
or preventing a change in control of us.

Choice of forum
Our bylaws provide that, unless we consent in writing to the selection of an alternative form, the Court of Chancery of the State of Delaware will be the
sole and exclusive forum for: (1) any derivative action or proceeding brought on our behalf; (2) any action asserting a claim of, or a claim based on, a
breach of a fiduciary duty or other wrongdoing by any current or former director, officer, or other of our employees to us or our stockholders; (3) any action
asserting a claim arising pursuant to any provision of the General Corporation Law of the State of Delaware or our certificate of incorporation or bylaws
(including the interpretation, validity or enforceability thereof); (4) any action to interpret, apply, enforce or determine the validity of our certificate of
incorporation or bylaws; or (5) any action asserting a claim governed by the internal affairs doctrine (the “Delaware Forum Provision”). The Delaware
Forum Provision will not apply to any causes of action arising under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934.
Our bylaws further provide that, unless we consent in writing to an alternative forum, the federal district courts of the United States of America will be the
exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act of 1933, as amended (the “Federal Forum
Provision”). In addition, our bylaws provide that any person or entity purchasing or otherwise acquiring any interest in shares of our common stock is
deemed to have notice of and consented to the foregoing Delaware Forum Provision and Federal Forum Provision. It is possible that a court of law could
rule that the choice of forum provision contained in our restated certificate of incorporation is inapplicable or unenforceable if it is challenged in a
proceeding or otherwise.

Section 203 of the Delaware General Corporation Law

We are subject to the provisions of Section 203 of the DGCL. In general, Section 203 prohibits a publicly held Delaware corporation from engaging in a
“business combination” with an “interested stockholder” for a three-year period following the time that this stockholder becomes an interested stockholder,
unless the business combination is approved in a prescribed manner. Under Section 203, a business combination between a corporation and an interested
stockholder is prohibited unless it satisfies one of the following conditions:
• before the stockholder became interested, our board of directors approved either the business combination or the transaction which resulted in
the stockholder becoming an interested stockholder;
• upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned
at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining
the voting stock outstanding, shares owned by persons who are directors and also officers, and employee stock plans, in some instances, but not
the outstanding voting stock owned by the interested stockholder; or
• at or after the time the stockholder became interested, the business combination was approved by our board of directors and authorized at an
annual or special meeting of the stockholders by the affirmative vote of at least two-thirds of the outstanding voting stock which is not owned
by the interested stockholder.

Section 203 defines a business combination to include:

• any merger or consolidation involving the corporation and the interested stockholder;

ACTIVE/102400065.2
 • any sale, transfer, lease, pledge or other disposition involving the interested stockholder of 10% or more of the assets of the corporation;
• subject to exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested
stockholder;
• subject to exceptions, any transaction involving the corporation that has the effect of increasing the proportionate share of the stock of any class
or series of the corporation beneficially owned by the interested stockholder; and
• the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or
through the corporation.

In general, Section 203 defines an interested stockholder as any entity or person beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or controlled by the entity or person.

ACTIVE/102400065.2
 Exhibit 21.1
SUBSIDIARIES

Subsidiary Jurisdiction of Incorporation

scPharmaceuticals Securities Corporation Massachusetts
 Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statements (Nos. 333-221677, 333-227071, 333-229122, and 333-237361)
on Forms S-8 and the Registration Statement (No. 333-229120) on Form S-3 of scPharmaceuticals Inc. of our report dated March 23, 2021,
relating to the consolidated financial statements of scPharmaceuticals Inc., appearing in this Annual Report on Form 10-K of
scPharmaceuticals Inc. for the year ended December 31, 2020.

/s/ RSM US LLP

Boston, Massachusetts
March 23, 2021
 Exhibit 31.1

CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, John H. Tucker, certify that:

1. I have reviewed this Annual Report on Form 10-K of scPharmaceuticals Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to
the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this
report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the
equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information;
and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.

Date: March 23, 2021 By: /s/ John H. Tucker

John H. Tucker
President, Chief Executive Officer, Principal Executive Officer
and Principal Financial Officer
 Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of scPharmaceuticals Inc. (the “Company”) on Form 10-K for the year ended December 31,
2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as
adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.

Date: March 23, 2021 By: /s/ John H. Tucker

John H. Tucker
President, Chief Executive Officer, Principal Executive Officer
and Principal Financial Officer

* This certification shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of
that section, nor shall it be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange
Act of 1934.