FORM 10-Q

For the quarterly period ended March 31, 2024

Commission File Number 001-40532

Yes o   No ☒

•the likelihood of our clinical trials demonstrating safety and efficacy of our product candidates to the satisfaction of the Food and Drug Administration ("FDA"), and other positive results;

•the timing, scope and likelihood of regulatory filings and approvals for LNZ100;

•our ability to obtain and maintain regulatory approval of LNZ100;

•our plans relating to the development of LNZ100;

•the size of the market opportunity for LNZ100, including our estimates of the size of the affected population and potential adoption rate;

•our plans relating to commercializing LNZ100, if approved, including the geographic areas of focus and sales strategy;

•our competitive position and the success of competing therapies that are or may become available;

•the beneficial characteristics, and the potential safety, efficacy and therapeutic effects of LNZ100;

•the need to hire additional personnel and our ability to attract and retain such personnel;

•our plans relating to the further development and manufacturing of LNZ100 and any future product candidates;

•the expected potential benefits of strategic collaborations with third parties and our ability to attract collaborators with development, regulatory and commercialization expertise;

•the rate and degree of market acceptance and clinical utility of LNZ100 and any other product candidates we may develop;

•the impact of existing laws and regulations and regulatory developments in the United States and other jurisdictions;

•our intellectual property position, including the scope of protection we are able to establish and maintain for intellectual property rights covering LNZ100, including the extensions of existing patent terms where available, the validity of intellectual property rights held by third parties, and our ability not to infringe, misappropriate or otherwise violate any third-party intellectual property rights;

•our continued reliance on third parties to conduct any additional clinical trials of LNZ100 or any future product candidates, and for the manufacture of our product candidates for any such trials;

•the accuracy of our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;

•our financial performance;

•costs related to the Merger (as defined in Part I, Item I, Note 1, “Organization and Liquidity,” in our notes to condensed consolidated financial statements in this Quarterly Report on Form 10-Q);

•our ability to recognize the anticipated benefits of the Merger;

•our expectation that our existing cash, cash equivalents, and marketable securities will be sufficient to fund the Company to positive operating cash flow subsequent to commercial launch, if LNZ100 is approved;

•our expectations regarding the period during which we will remain an emerging growth company under the JOBS Act; and

•our anticipated use of our existing resources and the proceeds from the Merger and the concurrent PIPE Financing (as defined in Part I, Item I, Note 3, “Merger and Related Transactions,” in our notes to condensed consolidated financial statements in this Quarterly Report on Form 10-Q).

(1)Retroactively recast for the reverse recapitalization as described in Note 3.

(1)Retroactively recast for the reverse recapitalization as described in Note 3. See Note 2 for further information on weighted-average common shares outstanding.

(1)Retroactively recast for the reverse recapitalization as described in Note 3.

(1)Retroactively recast for the reverse recapitalization as described in Note 3.

•Rapid onset: 71% achieved three-lines or greater improvement at 30 minutes.

•Primary endpoint: 71% achieved three-lines or greater improvement at 3 hours.

•Long duration: 40% achieved three-lines or greater improvement at 10 hours.

As of March 31, 2024, we had $213.3 million of cash, cash equivalents and marketable securities. We believe that our existing cash, cash equivalents and marketable securities will allow us to continue to build infrastructure and commercialize LNZ100, subject to NDA submission and FDA approval, and will be sufficient to fund the Company to positive operating cash flow subsequent to such commercial launch. We do not expect to generate any revenues from product sales unless and until we successfully complete development and obtain regulatory approval for LNZ100. We have incurred net losses in each year since inception, and as of March 31, 2024, we had an accumulated deficit of $111.9 million. These losses have resulted principally from costs incurred in connection with research and development activities and selling, general and administrative costs associated with our operations. We expect to continue to incur significant expenses and operating losses as we seek approval and begin commercialization. These costs include expenses associated with the regulatory approval process and preparation for the potential commercial launch of LNZ100, subject to FDA approval. Additionally, we anticipate incurring expenses related to product sales, marketing and distribution, and additional costs associated with being a public company, including audit, legal, regulatory and tax-related services associated with maintaining compliance with an exchange listing and SEC requirements. As a result of these and other factors, it is possible that we may require additional financing to fund our operations and planned growth.

Through the completion of the Merger, LENZ OpCo financed its operations primarily through private placements of its common stock and convertible preferred stock. Concurrent with the closing of the Merger on March 21, 2024, the Company completed the PIPE Financing of 3,559,565 shares for an aggregate gross purchase price of $53.5 million.

If we are unsuccessful in generating sufficient revenue and operating cash flow from sales of LNZ100, if ever, we may be required to finance our cash needs through equity offerings, debt financings or other capital sources, including potential collaborations, licenses and other similar arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into such other arrangements if and when needed would have a negative impact on our financial condition and could force us to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

•Our research and development costs increased slightly during the three months ended March 31, 2024, relative to the three months ended March 31, 2023, as our headcount increased in preparation for the potential NDA and commercial launch, pending FDA approval, while contract manufacturing expenses and clinical research expenses decreased as our Phase 3 CLARITY trials substantially completed in March 2024. We expect our research and development costs will decrease in 2024, relative to 2023, given the completion of the CLARITY trials and subsequent wind-down over 2024.

•We expect that selling, general and administrative expenses will increase in 2024, relative to 2023, as we expand our operating activities and number of employees in connection with a potential commercial launch of LNZ100, subject to FDA approval.

•We have built a cross-functional commercial team consisting of marketing, market access and commercial operations and will continue to strategically build our sales and commercial infrastructure with capabilities designed to scale when necessary to support a commercial launch if approval is received. These expenses increased during the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, and we expect such expenses to continue to increase for the foreseeable future, in connection with our shift in focus towards a potential commercial launch of LNZ100, subject to FDA approval.

•As a result of the Merger, the Company’s expenses will increase from those that we incurred in prior years as a privately held company, including as a result of costs related to (i) compliance with the rules and regulations of the SEC and those of Nasdaq, (ii) legal, accounting and other professional services, (iii) insurance, (iv) investor relations activities, and (v) other administrative and professional services.

On November 14, 2023, LENZ OpCo entered into the Merger Agreement with Graphite and Generate Merger Sub, pursuant to which LENZ OpCo merged with and into Generate Merger Sub at the closing of the Merger on March 21, 2024, with LENZ OpCo continuing after the Merger as the surviving company and a wholly-owned subsidiary of the Company. At the closing of the Merger, each outstanding share of LENZ OpCo capital stock was converted into the right to receive shares of Graphite common stock, par value $0.00001, as set forth in the Merger Agreement. Upon closing of the Merger, the combined company changed its name to “LENZ Therapeutics, Inc.” and continued to be listed on the Nasdaq but commenced trading under the ticker symbol “LENZ” as of March 22, 2024.

Under the exchange ratio formula in the Merger Agreement, immediately following the closing of the Merger, the LENZ OpCo securityholders owned approximately 65% of the outstanding shares of the combined company’s common stock on a fully-diluted basis and securityholders of Graphite as of immediately prior to the closing of the Merger owned approximately 35% of the outstanding shares of the combined company’s common stock on a fully-diluted basis (prior to giving effect to the PIPE Financing and excluding shares reserved for future grants under the 2024 Equity Incentive Plan and the 2024 Employee Stock Purchase Plan).

The following discussion highlights our results of operations and the principal factors that have affected our financial condition as well as our liquidity and capital resources for the periods described and provides information that management believes is relevant for an assessment and understanding of the balance sheets and statements of operations and comprehensive loss presented herein. The following discussion and analysis are based on our audited financial statements and related notes thereto, which we have prepared in accordance with GAAP. You should read the discussion and analysis together with such audited financial statements and the related notes thereto.

Selling, general and administrative expenses consist primarily of salaries and related benefits, including share-based compensation, related to our executive, finance, business development, sales and marketing, human resources, and other corporate functions. Other general and administrative expenses include professional fees for legal, auditing, tax and business consulting services, insurance costs, intellectual property and patent costs, facility costs and travel costs.

We believe that our existing cash, cash equivalents and marketable securities will allow us to continue to build infrastructure and commercialize LNZ100, subject to NDA submission and FDA approval, and such funds are anticipated to fund the Company to positive operating cash flow subsequent to such commercial launch. This belief is based on assumptions that may prove to be wrong, and we could use our available capital resources sooner than expected. Changing circumstances, some of which may be beyond our control, could cause us to consume capital significantly faster than currently anticipated, and we may need to seek additional funds sooner than planned.

•the results, costs, and timing of any additional clinical trials we are required to complete for LNZ100;

•the costs and timing of manufacturing for LNZ100 and commercial manufacturing if LNZ100 is approved;

•costs associated with establishing a sales, marketing, and distribution infrastructure to commercialize LNZ100 if we obtain marketing approval;

•our ability to generate positive operating cash flow from sales of LNZ100 subsequent to commercial launch of LNZ100, if LNZ100 is approved;

•the costs, timing, and outcome of regulatory review of LNZ100;

•the legal costs of obtaining, maintaining, and enforcing our patents and other intellectual property rights;

•our efforts to enhance operational systems and hire additional personnel to satisfy our obligations as a public company;

•the terms and timing of establishing and maintaining licenses and other similar arrangements;

•our ability to achieve sufficient market acceptance and adequate market share and revenue for LNZ100, if approved; and

•costs associated with any products or technologies that we may in-license or otherwise acquire or develop.

Fair Value of Common Stock—Prior to the Merger, since there was no public market for our common stock, our board of directors, with input from management, determined the fair value of our common stock on each grant date by considering a number of objective and subjective factors, the achievement of clinical and operational milestones by the Company, the significant risks associated with the Company’s stage of development, capital market conditions for life science companies, particularly similarly situated, privately held, early-stage life science companies, the Company’s available cash, financial condition, and results of operations, the most recent sales of the Company’s convertible preferred stock, the preferential rights of the outstanding convertible preferred stock and Class B convertible common stock. Historically, these independent third-party valuations of our equity instruments were generally performed contemporaneously with identified value inflection points. Following the Merger, the fair market value of our common stock is based on its closing price as reported on the date of grant on the primary stock exchange on which our common stock is traded, adjusted for special dividends, if any.

Expected Term—The Company uses the simplified method as prescribed by the Securities and Exchange Commission Staff Accounting Bulletin No. 107, Share-Based Payment, to calculate the expected term for options granted to employees as it does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term.

Expected Volatility—Given our limited historical stock price volatility data, we derived the expected volatility from the average historical volatilities over a period approximately equal to the expected term of comparable publicly traded companies within our peer group that were deemed to be representative of future stock price trends as we have limited trading history for our common stock. We will continue to apply this process until a sufficient amount of historical information regarding the volatility of our own stock price becomes available.

Risk-Free Interest Rate—The risk-free interest rate is based on a United States Treasury instrument whose term is consistent with the expected term of the stock options.

Expected Dividend Yield—The expected dividend yield is based on the Company’s historical and expected dividend payouts. The Company has historically paid no dividends, other than the special dividend paid by Graphite immediately prior to the close of the Merger, and does not anticipate dividends to be paid in the future.

Jumpstart Our Business Startups Act (“JOBS Act”)

In connection with the Merger, one complaint was filed in the United States District Court for the Northern District of California captioned Glen Chew v. Graphite Bio, Inc. et al., Case No. 3:24-cv-00613 (filed February 1, 2024) (the “Chew Complaint”) and one complaint was filed in the United States District Court for the District of Delaware captioned Kevin Turner v. Graphite Bio, Inc. et al., Case No. 1:24-cv-00241-UNA (filed February 22, 2024) (the “Turner Complaint” and collectively, the “Complaints”). The Complaints generally alleged that the definitive proxy statement/prospectus (the “Proxy Statement/Prospectus”) included in Graphite’s Registration Statement on Form S-4 (File No. 333-275919), filed with the Securities and Exchange Commission (the “SEC”), misrepresents and/or omits certain purportedly material information relating to LENZ’s financial projections, the analyses performed by the financial advisor to Graphite’s Board of Directors in connection with the Merger, potential conflicts of interest of the financial advisor to Graphite’s Board of Directors, potential conflicts of interest of Graphite’s officers, and Graphite’s liquidation analysis. The Complaints asserted violations of Section 14(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 14a-9 promulgated thereunder against all defendants (Graphite, its Board of Directors and certain officers) and violations of Section 20(a) of the Exchange Act against Graphite’s directors and officers. The Complaints sought orders rescinding the Merger or awarding rescissory damages, as well as costs, including attorneys’ and experts’ fees. On March 22, 2024, the Chew Complaint was voluntarily dismissed and on April 17, 2024, the Turner Complaint was dismissed.

•We are a late-stage biopharmaceutical company with limited operating history. We have incurred significant losses and negative cash flows from operations since our formation, and we anticipate that we will continue to incur losses as we seek approval and begin commercialization. We have no products approved for commercial sale, which may make it difficult for you to evaluate our current business and predict our future success and viability.

•Our business depends entirely on the development and commercialization of LNZ100, and we do not have additional product candidates in our current development pipeline. If we are unable to successfully complete our

•Clinical trials are expensive, time-consuming, difficult to design and implement and involve an uncertain outcome. The outcome of preclinical testing and earlier clinical trials may not be predictive of the success of later clinical trials. The results of our clinical trials may not satisfy the requirements of the FDA, European Medicines Agency (“EMA”) or other comparable foreign regulatory authorities, and we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of such product candidate.

•Even if LNZ100 or any other product candidate receives marketing approval, they may fail to achieve market acceptance by eye care professionals (“ECPs”) and patients, and the market opportunity for these products, if approved, may be smaller than we estimate.

•If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to sell and market our product candidates on acceptable terms, we may be unable to successfully commercialize our product candidates that obtain regulatory approval.

•If we are unable to obtain and maintain sufficient intellectual property protection for our technology and products and product candidates we may develop, or if the scope of the intellectual property protection obtained is not sufficiently broad, our competitors or other third parties could develop and commercialize products similar or identical to ours, and our ability to successfully develop and, if approved, commercialize our product candidates may be adversely affected.

•We face significant competition, and if our competitors develop and market technologies or products more rapidly than we do or that are more effective, safer or less expensive than the product candidates we develop, our commercial opportunities will be negatively impacted. Our product candidates may, if approved, also face competition from existing branded, generic and off-label products.

•We contract with third parties for the manufacture of our product candidates for our ongoing clinical trials, and expect to continue to do so for additional clinical trials and ultimately for commercialization. This reliance on third parties increases the risk that we will not have sufficient quantities of our product candidates or drugs or such quantities at an acceptable cost, which could delay, prevent or impair our development or commercialization efforts.

•We have relied, and expect to continue to rely on third parties, including independent clinical investigators and CROs, to conduct, supervise and monitor certain aspects of our clinical trials and any future preclinical studies. If these third parties do not successfully carry out their contractual duties, comply with applicable regulatory requirements or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize our product candidates, or such approval or commercialization may be delayed, and our business could be substantially harmed.

•Our success is highly dependent on our ability to attract and retain highly skilled executive officers and employees.

•An active trading market for our common stock may never develop or be sustained.

•The market price of our common stock is expected to be volatile, and the market price of the common stock may drop following the Merger.

We are a late-stage biopharmaceutical company with limited operating history. We have incurred significant losses and negative cash flows from operations since our formation, and we anticipate that we will continue to incur losses as we seek approval and begin commercialization. We have no products approved for commercial sale, which may make it difficult for you to evaluate our current business and predict our future success and viability.

We expect to continue incurring significant expenses and increasing operating losses as we seek approval and begin commercialization. We anticipate that our expenses will increase substantially if and as we:

•initiate additional clinical and other studies for our product candidates;

•change or add additional manufacturers or suppliers, some of which may require additional permits or other governmental approvals;

•create additional infrastructure to support our operations as a public company and our product development and planned future commercialization efforts;

•seek marketing approvals for our product candidates;

•establish a sales, marketing, and distribution infrastructure to commercialize any products for which we may obtain marketing approval;

•seek to identify, acquire, and develop additional product candidates;

•acquire or in-license other product candidates and technologies;

•make milestone or other payments in connection with the development or approval of our product candidates;

•maintain, protect, and expand our intellectual property portfolio; and

•experience any delays or encounter issues with any of the above.

•successful and timely completion of clinical development of LNZ100 and any other future product candidates;

•effective investigational new drug applications (“INDs”) from the FDA or comparable foreign applications that allow the commencement of our clinical trials or future clinical trials for such product candidates;

•completion of clinical studies in compliance with the FDA’s current Good Clinical Practices (“GCPs”) with positive results;

•the prevalence and severity of adverse events experienced with any of our product candidates;

•establishing and maintaining relationships with CROs and clinical sites for the clinical development, both in the United States and internationally, of our product candidates, including LNZ100 and any other future product candidates;

•timely receipt of marketing approvals from applicable regulatory authorities for any product candidates for which we successfully complete clinical development for their intended uses;

•making any required post-marketing approval commitments to applicable regulatory authorities;

•establishing and maintaining commercially viable supply and manufacturing relationships with third parties that can provide adequate products and services, in both amount and quality, to support clinical development and meet the market demand for product candidates that we develop, if approved;

•successful commercial launch following any marketing approval, including the development of a commercial infrastructure, whether in-house or with one or more collaborators;

•maintaining compliance with regulatory requirements, including the FDA’s current Good Manufacturing Practice (“cGMP”) requirements;

•a continued acceptable safety profile both prior to and following any marketing approval of our product candidates;

•commercial acceptance of our product candidates by patients and the medical community;

•identifying, assessing and developing new product candidates;

•obtaining, maintaining and expanding patent protection, trade secret protection and regulatory exclusivity, both in the United States and internationally;

•protecting our rights in our intellectual property portfolio;

•defending against third-party interference or infringement claims, if any;

•obtaining favorable terms in any collaboration, licensing or other arrangements that may be necessary or desirable to develop, manufacture or commercialize our existing or acquired product candidates;

•addressing any competing therapies and technological and market developments; and

•attracting, hiring and retaining qualified personnel.

•inability to generate sufficient preclinical, toxicology, or other in vivo or in vitro data to support the initiation of clinical trials for any future product candidates;

•delays in sufficiently developing, characterizing or controlling a manufacturing process suitable for advanced clinical trials;

•delays in reaching agreement with the FDA or other regulatory authorities as to the design or implementation of our clinical trials;

•obtaining regulatory authorization to commence a clinical trial;

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

•obtaining institutional review board (“IRB”) approval at each trial site;

•recruiting suitable patients to participate in a clinical trial;

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

•inspections of clinical trial sites or operations by applicable regulatory authorities, or the imposition of a clinical hold;

•clinical sites, CROs or other third parties deviating from trial protocol or dropping out of a trial;

•failure to perform in accordance with applicable regulatory requirements, including the FDA’s GCP requirements, or applicable regulatory requirements in other countries;

•addressing patient safety concerns that arise during the course of a trial, including occurrence of adverse events associated with the product candidate that are viewed to outweigh its potential benefits;

•adding a sufficient number of clinical trial sites;

•manufacturing sufficient quantities of product candidate for use in clinical trials; or

•suspensions or terminations by IRBs of the institutions at which such trials are being conducted, by the Data Safety Monitoring Board (“DSMB”), for such trial or by the FDA or other regulatory authorities due to a number of factors, including those described above.

•changes in regulatory requirements or guidance, or receiving feedback from regulatory authorities, that requires us to modify the design of our clinical trials;

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

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

•third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all;

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

•the cost of clinical trials of our product candidates may be greater than we anticipate and we may not have funds to cover the costs;

•the supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product candidates may be insufficient or inadequate;

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

•any future collaborators that conduct clinical trials may face any of the above issues, and may conduct clinical trials in ways they view as advantageous to them but that are suboptimal for us.

•incur unplanned costs;

•be delayed in obtaining marketing approval for LNZ100 or any future product candidates or not obtain marketing approval at all;

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

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

•obtain marketing approval with labeling that includes significant use or distribution restrictions or safety warnings, including boxed warnings or a Risk Evaluation Mitigation Strategy (“REMS”);

•be subject to additional post-marketing testing requirements;

•be subject to changes in the way the product is administered; or

•have regulatory authorities withdraw or suspend their approval of the product.

•the efficacy and potential advantages of our product candidates compared to alternative treatments, including the existing standard of care;

•our ability to offer products for sale at competitive prices, particularly in light of the lower cost of alternative treatments;

•the clinical indications for which the product is approved;

•the convenience and ease of administration compared to alternative treatments;

•the willingness of the target patient population to try new therapies and of ECPs to prescribe these therapies;

•the strength of our marketing and distribution support;

•the timing of market introduction of competitive products;

•the potential for our competitors to limit our access to the market through anti-competitive contracts or other arrangements;

•the prevalence and severity of any side effects; and

•any restrictions on the use of our products together with other medications.

•size and nature of the patient population, and process for identifying patients;

•severity and difficulty of diagnosing the condition under investigation;

•availability and efficacy of approved drugs and other competing therapeutic candidates for the condition under investigation;

•the eligibility and exclusion criteria for the trial in question as defined in the protocol;

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

•the design of the clinical trial;

•perceived risks and benefits of the product candidate under study;

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

•efforts to facilitate timely enrollment in clinical trials;

•participant referral practices of ECPs;

•our ability to monitor participants adequately during and after treatment;

•proximity and availability of clinical trial sites for prospective trial subjects;

•continued enrollment of prospective subjects by clinical trial sites; and

•the risk that subjects enrolled in clinical trials will drop out of the trials before completion.

A variety of risks associated with marketing our product candidates internationally could materially adversely affect our business.

•differing regulatory requirements and drug pricing regimes in foreign countries;

•potential issues due to aceclidine having been previously marketed and sold in Europe as a treatment for glaucoma, including, but not limited to potential competition from or for manufacturers and suppliers, and potential assumptions, concerns or biases resulting from the limited efficacy of the prior marketed products;

•unexpected changes in tariffs, trade barriers, price and exchange controls and other regulatory requirements;

•economic weakness, including inflation, or political instability in particular foreign economies and markets;

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

•foreign taxes, including withholding of payroll taxes;

•foreign currency fluctuations, which could result in increased operating expenses and reduced revenue, and other obligations incident to doing business in another country;

•difficulties staffing and managing foreign operations;

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

•potential liability under the U.S. Foreign Corrupt Practices Act (“FCPA”) or comparable foreign regulations;

•challenges enforcing our contractual and intellectual property rights, especially in those foreign countries that do not respect and protect intellectual property rights to the same extent as the United States;

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

•business interruptions resulting from geopolitical actions, including war and terrorism.

Risks Related to Our Intellectual Property

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

•the USPTO requires us to disclose all material references to the Patent Examiner during prosecution of our patent applications at the USPTO, and failure to do so could result in a third party successfully challenging our ability to enforce a patent against an infringer;

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

•granted patents may not have a claim scope that covers LNZ100 or any future product candidates;

•patents may be challenged, invalidated, modified, revoked, circumvented, found to be unenforceable or otherwise may not provide any competitive advantage;

•our competitors, many of whom have substantially greater resources than we do and many of whom have made significant investments in competing technologies, may seek or may have already obtained patents that will limit, interfere with or block our ability to make, use and sell our 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 treatments of diseases or conditions 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 products.