UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal quarter ended ~~June~~September 30, 2020

☐ 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: 001-38601

LIQUIDIA TECHNOLOGIES, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware		20-1926605
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

419 Davis Drive, Suite 100
Morrisville, North Carolina

27560

(Address of Principal Executive Offices)

(Zip Code)

Registrant’s telephone number, including area code: (919) 328-4400

N/A

(Former name, former address and former fiscal year, if changed since last report)

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, $0.001 par value per share	LQDA	The Nasdaq Stock Market LLC

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 is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

As of ~~August~~November 32, 2020, there were 37,~~749~~752,~~890~~882 shares of the registrant’s common stock outstanding.

LIQUIDIA TECHNOLOGIES, INC.

PART I. FINANCIAL INFORMATION		Page
Item 1.	Financial Statements	6
	Consolidated Balance Sheets as of June 30, 2020 (Unaudited) and December 31, 2019	6
	Consolidated Balance Sheets as of September 30, 2020 (Unaudited) and December 31, 2019	6
	Consolidated Statements of Operations and Comprehensive Loss for the Three and Six Months Ended June 30, 2020 and 2019 (Unaudited)	7
	Consolidated Statements of Operations and Comprehensive Loss for the Three and Nine Months Ended September 30, 2020 and 2019 (Unaudited)	7
	Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, 2020 and 2019 (Unaudited)	8
	Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, 2020 and 2019 (Unaudited)	8
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2020 and 2019 (Unaudited)	9
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2020 and 2019 (Unaudited)	9
	Notes to Consolidated Financial Statements (Unaudited)	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2223
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3537
Item 4.	Controls and Procedures	3537
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	3638
Item 1A.	Risk Factors	3739
Item 6.	Exhibits	7681
	Signatures	7882

This quarterly report on Form 10-Q includes our trademarks, trade names and service marks, such as Liquidia, the Liquidia logo and PRINT, or Particle Replication In Non-wetting Templates, which are protected under applicable intellectual property laws and are the property of Liquidia Technologies, Inc. This quarterly report also contains trademarks, trade names and service marks of other companies, which are the property of their respective owners. Solely for convenience, trademarks, trade names and service marks referred to in this quarterly report may appear without the ®, ™ or SM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the right of the applicable licensor to these trademarks, trade names and service marks. We do not intend our use or display of other parties’ trademarks, trade names or service marks to imply, and such use or display should not be construed to imply, a relationship with, or endorsement or sponsorship of us by, these other parties.

Cautionary Note Regarding Forward-Looking Statements

This ~~quarterly~~Quarterly ~~report~~Report on Form 10-Q contains forward-looking statements. All statements other than statements of historical facts contained in this ~~quarterly~~Quarterly ~~report~~Report may be forward-looking statements. The forward-looking statements are contained principally in the sections entitled “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, but are also contained elsewhere in this ~~quarterly~~Quarterly ~~report~~Report. In some cases, you can identify forward-looking statements by terms such as “may,” “might,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “would,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions. Forward-looking statements involve known and unknown risks, uncertainties and other important 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 the forward-looking statements. Forward-looking statements include, but are not limited to, statements about:

● those identified and disclosed in our public filings with the SEC, including, but not limited to (i) the timing of and our ability to obtain and maintain regulatory approvals for our product candidates, including potential FDA approval of the January 2020 filing of our New Drug Application, or NDA, for LIQ861; (ii) the timeline ~~and~~or outcome ofrelated ~~(x)~~to our current patent litigation with United Therapeutics pending in the U.S. District Court for the District of Delaware ~~and~~or ~~(y)~~its ~~our two petitions for~~ inter partes review with the Patent Trial and Appeal Board of the U.S. Patent and Trademark Office; (iii) our ability to predict, foresee, and effectively address or mitigate future developments resulting from the COVID-19 pandemic or other global shutdowns, which could include a negative impact on the availability of key personnel, the temporary closure of our facility or the facilities of our business partners, suppliers, third-party service providers or other vendors, or delays in payments or purchasing decisions, or the interruption of domestic and global supply chains, liquidity and capital or financial markets; and (iv) our ability to continue operations as a going concern without obtaining additional funding;

●

failing to obtain stockholder approval of the proposed acquisition of RareGen, LLC, or RareGen, by way of merger, or the Merger Transaction, pursuant to that certain Agreement and Plan of Merger, dated as of June 29, 2020, by and among our company, Liquidia Corporation, or HoldCo, RareGen and certain other parties thereto, or the Merger Agreement;

●

satisfying the conditions to the closing of the Merger Transaction;

●

the length of time necessary to complete the Merger Transaction;

●

successfully integrating our and RareGen’s businesses, and avoiding problems which may result in HoldCo not operating as effectively and efficiently as expected;

●

the possibility that the expected benefits of the Merger Transaction will not be realized within the expected timeframe or at all, including without limitation, anticipated revenue, expenses, earnings and other financial results, and growth and expansion of HoldCo’s operations, and the anticipated tax treatment;

●

the restrictions on our and RareGen’s ability to pursue alternative transactions to the Merger Transaction and the possibility that, in specified circumstances, we could be required to pay a fee to RareGen;

●

possible disruptions from the proposed Merger Transaction that could harm our or RareGen’s business, including current plans and operations;

●

the ability of us or RareGen to retain, attract and hire key personnel;

●

prevailing economic, market and business conditions;

●

the cost and availability of capital and any restrictions imposed by lenders or creditors;

●

changes in the industry in which we or RareGen operate;

●

the failure to renew, or the revocation of, any license or other required permits;

● unexpected charges or unexpected liabilities arising from a change in accounting policies, or the effects of acquisition accounting varying from ~~the~~our ~~companies’~~ expectations;

●

the risk that the credit ratings of HoldCo or its subsidiaries may be different from what the companies expect, which may increase borrowing costs and/or make it more difficult for HoldCo to pay or refinance its debts and require it to borrow or divert cash flow from operations in order to service debt payments;

●

fluctuations in interest rates;

●

the effects on the businesses of the companies resulting from uncertainty surrounding the Merger Transaction, including with respect to customers, suppliers, licensees, collaborators, business partners, employees, other third parties or the diversion of management’s time and attention, that could affect our and/or RareGen’s financial performance;

●

adverse outcomes of pending or threatened litigation or governmental investigations, if any, unrelated to the Merger Transaction;

●

potential litigation relating to the proposed Merger Transaction that could be instituted against us, RareGen or our and their respective officers or directors;

●

the effects on the companies of future regulatory or legislative actions, including changes in healthcare, environmental and other laws and regulations to which we or RareGen are subject;

●

conduct of and changing circumstances related to third-party relationships on which we and RareGen rely, including the level of credit worthiness of counterparties;

●

the volatility and unpredictability of the stock market and credit market conditions;

●

conditions beyond our control, such as disaster, global pandemics such as COVID-19, or acts of war or terrorism;

●

variations between the stated assumptions on which forward-looking statements are based and our and RareGen’s actual experience;

●

other legislative, regulatory, economic, business, and/or competitive factors;

●

our plans to develop and commercialize our product candidates;

●

our planned clinical trials for our product candidates;

●

the timing of the availability of data from our clinical trials;

●

the timing of our planned regulatory filings;

●

the timing of and our ability to obtain and maintain regulatory approvals for our product candidates;

●

the clinical utility of our product candidates and their potential advantages compared to other treatments;

●

our commercialization, marketing and distribution capabilities and strategy;

●

our ability to establish and maintain arrangements for the manufacture of our product candidates and the sufficiency of our current manufacturing facilities to produce development and commercial quantities of our product candidates;

●

our ability to establish and maintain collaborations;

●

our estimates regarding the market opportunities for our product candidates;

●

our intellectual property position and the duration of our patent rights;

●

our estimates regarding future expenses, capital requirements and needs for additional financing; and

● our expected use of proceeds from prior public offerings and the period over which such proceeds, together with cash, will be sufficient to meet our operating needs.

~~You~~● ~~should~~our ~~refer~~expected touse ~~the “Risk Factors” section~~ of ~~this~~proceeds ~~quarterly report for a discussion of important factors that may cause our actual results to differ materially~~ from ~~those~~prior ~~expressed~~public orofferings ~~implied by our forward-looking statements, including, but not limited to, the impact of the COVID-19 outbreak on our Company~~ and ~~our financial condition and results of operations. The forward-looking statements in this quarterly report are only predictions, and we may not actually achieve~~ the ~~plans,~~period ~~intentions~~over orwhich ~~expectations~~such included in our forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our businessproceeds, ~~financial~~together ~~condition~~with ~~and results of operations. Because forward-looking statements are inherently subject to risks and uncertainties~~cash, ~~some~~will ~~of which cannot~~ be ~~predicted~~sufficient orto ~~quantified,~~meet ~~you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in~~ our ~~forward-looking~~operating ~~statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements~~needs.

~~These~~You should refer to the “Risk Factors” section of this Quarterly Report on Form 10-Q for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements, ~~speak~~including, ~~only~~but asnot limited to, the impact of the ~~date~~COVID-19 outbreak on our Company and our financial condition and results of operations. The forward-looking statements in this ~~quarterly~~Quarterly ~~report.~~Report ~~While~~are only predictions, and we may ~~elect~~not toactually ~~update~~achieve the plans, intentions or expectations included in our forward-looking statements. We have based these forward-looking statements atlargely ~~some~~on ~~point~~our incurrent ~~the~~expectations and projections about future, events and financial trends that we ~~have~~believe nomay ~~current~~affect ~~intention~~our business, financial condition and results of ~~doing~~operations. soBecause ~~except~~forward-looking statements are inherently subject to ~~the~~risks ~~extent~~and ~~required~~uncertainties, bysome ~~applicable~~of ~~law.~~which ~~You~~cannot ~~should~~be ~~therefore~~predicted or quantified, you should not rely on these forward-looking statements as ~~representing~~predictions of future events. The events and circumstances reflected in our ~~views~~forward-looking asstatements ofmay ~~any~~not ~~date~~be ~~subsequent~~achieved toor ~~the~~occur ~~date~~and ofactual ~~this~~results ~~quarterly~~could ~~report~~differ onmaterially ~~Form 10~~from those projected in the forward-Qlooking statements.

~~Unless~~These ~~the~~forward-looking ~~context~~statements ~~otherwise~~speak ~~requires,~~only ~~references~~as inof the date of this ~~quarterly~~Quarterly ~~report~~Report. toWhile “we,” ~~“us”,~~may ~~“our”~~elect ~~and~~to update these forward-looking statements at some point in the ~~“Company”~~future, ~~refer~~we have no current intention of doing so except to ~~Liquidia~~the ~~Technologies, Inc~~extent required by applicable law., aYou ~~Delaware~~should ~~corporation~~therefore not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Quarterly Report on Form 10-Q.

Unless the context otherwise requires, references in this Quarterly Report on Form 10-Q to “we,” “us”, “our” and the “Company” refer to Liquidia Technologies, Inc., a Delaware corporation.

Liquidia Technologies, Inc.

Consolidated Balance Sheets

	June 30, 2020 (Unaudited)			December 31, 2019
	September 30, 2020 (Unaudited)			December 31, 2019
Assets
Current assets:
Cash	$	2379,~~586~~551,~~442~~041		$	55,796,378
Prepaid expenses and other current assets		~~750~~1,~~023~~095,331			590,251
Total current assets		2480,~~336~~646,~~465~~372			56,386,629
Property, plant and equipment, net		7,~~976~~388,~~411~~376			9,253,965
Operating lease right-of-use assets, net		2,~~743~~698,~~600~~344			2,823,430
Other assets		378,043			378,043
Total assets	$	3591,~~434~~111,~~519~~135		$	68,842,067
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	23,~~520~~414,~~467~~978		$	3,498,043
Accrued compensation		2,~~141~~068,~~133~~480			3,164,687
Accrued stock offering expenses		~~65,000~~—			1,289,413
Other accrued expenses		1,~~068~~409,~~276~~976			1,525,919
Current portion of operating lease liabilities		~~614~~638,~~083~~862			566,390
Current portion of finance lease liabilities		1,~~336~~113,~~833~~670			1,244,229
Current portion of long-term debt		5,585,636			5,585,637
Total current liabilities		1314,~~331~~231,~~428~~602			16,874,318
Long-term operating lease liabilities		5,~~350~~183,~~198~~539			5,670,971
Long-term finance lease liabilities		~~378~~310,~~547~~513			1,056,747
Long-term debt		76,~~504~~104,~~757~~374			10,292,484
Total liabilities		2625,~~564~~830,~~930~~028			33,894,520
Commitments and contingencies
Stockholders’ equity:
Preferred stock — 10,000,000 shares authorized as of June 30, 2020 and December 31, 2019, 0 shares issued and outstanding as of June 30, 2020 and December 31, 2019		—			—
Preferred stock — 10,000,000 shares authorized as of September 30, 2020 and December 31, 2019, 0 shares issued and outstanding as of September 30, 2020 and December 31, 2019		—			—
Common stock — $0.001 par value, 60,000,000 shares authorized as of June 30, 2020 and December 31, 2019, 28,374,585 and 28,231,267 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively		28,374			28,231
Common stock — $0.001 par value, 60,000,000 and 40,000,000 shares authorized as of September 30, 2020 and December 31, 2019, respectively, 37,752,261 and 28,231,267 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively		37,752			28,231
Additional paid-in capital		~~252~~324,~~788~~159,~~245~~065			250,158,766
Accumulated deficit		(~~243~~258,~~947~~915,~~030~~710	)		(215,239,450	)
Total stockholders’ equity		865,~~869~~281,~~589~~107			34,947,547
Total liabilities and stockholders’ equity	$	3591,~~434~~111,~~519~~135		$	68,842,067

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

Liquidia Technologies, Inc.

Consolidated Statements of Operations and Comprehensive Loss (Unaudited)

	Three Months Ended						~~Six~~Nine Months Ended
	June 30,						June 30,
	September 30,						September 30,
	2020			2019			2020			2019
Revenue	$	—		$	~~8,072,120~~—		$	—		$	8,072,120
Costs and expenses:
Cost of revenue		—			~~807,192~~—			—			807,192
Research and development		87,~~490~~660,~~418~~979			10,~~723~~942,~~591~~561			1926,~~313~~974,~~342~~320			2132,~~387~~330,~~894~~454
General and administrative		57,~~226~~151,~~264~~788			2,~~408~~377,~~651~~687			916,~~049~~201,~~460~~249			57,~~430~~807,~~233~~920
Total costs and expenses		1314,~~716~~812,~~682~~767			13,~~939~~320,~~434~~248			2843,~~362~~175,~~802~~569			2740,~~625~~945,~~319~~566
Loss from operations		(1314,~~716~~812,~~682~~767	)		(513,~~867~~320,~~314~~248	)		(2843,~~362~~175,~~802~~569	)		(1932,~~553~~873,~~199~~446	)
Other income (expense):
Interest income		1134,~~631~~633			~~219~~162,~~869~~207			~~121~~155,~~220~~852			~~357~~519,~~654~~861
Interest expense		(~~211~~190,~~050~~546	)		(~~253~~265,~~720~~018	)		(~~465~~656,~~998~~543	)		(~~472~~737,~~410~~429	)
Total other income (expense), net		(~~199~~155,~~419~~913	)		(33102,~~851~~811	)		(~~344~~500,~~778~~691	)		(~~114~~217,~~756~~568	)
Net loss		(13,916,101	)		(5,901,165	)		(28,707,580	)		(19,667,955	)
Net loss and comprehensive loss	$	(14,968,680	)	$	(13,423,059	)	$	(43,676,260	)	$	(33,091,014
Other comprehensive loss		—			—			—			—
Net loss attributable to common stockholders, basic and diluted	$	(0.40	)	$	(0.72	)	$	(1.38	)	$	(1.85	)
Comprehensive loss	$	(13,916,101	)	$	(5,901,165	)	$	(28,707,580	)	$	(19,667,955	)
Weighted average common shares outstanding, basic and diluted		37,755,472			18,757,166			31,576,992			17,856,826
Net loss per common share:
Basic	$	(0.49	)	$	(0.31	)	$	(1.01	)	$	(1.13	)
Diluted	$	(0.49	)	$	(0.31	)	$	(1.01	)	$	(1.13	)
Weighted average common shares outstanding:
Basic		28,479,016			18,749,239			28,453,812			17,408,667
Diluted		28,479,016			18,749,239			28,453,812			17,408,667

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

Liquidia Technologies, Inc.

Consolidated Statements of Stockholders’ Equity (Unaudited)

For the Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2020 and 2019:

	Common Stock Shares		Common Stock Amount		Additional Paid in Capital			Accumulated Deficit			Total Stockholders’ Equity
Balance as of December 31, 2019		28,231,267	$	28,231	$	250,158,766		$	(215,239,450	)	$	34,947,547
Exercise of common stock options		2,035		2		(2	)		—			—
Stock-based compensation		—		—		878,963			—			878,963
Issuance of common stock under employee stock purchase plan		3,269		3		11,488			—			11,491
Issuance of common stock under stock incentive plan		702		1		(1	)		—			—
Sale of common stock, net		131,425		131		725,267			—			725,398
Net loss		—		—		—			(14,791,479	)		(14,791,479	)
Balance as of March 31, 2020		28,368,698	$	28,368	$	251,774,481		$	(230,030,929	)	$	21,771,920
Exercise of common stock options		5,184		5		25,646			—			25,651
Stock-based compensation		—		—		988,119			—			988,119
Issuance of common stock under stock incentive plan		703		1		(1	)		—			—
Net loss		—		—		—			(13,916,101	)		(13,916,101	)
Balance as of June 30, 2020		28,374,585	$	28,374	$	252,788,245		$	(243,947,030	)	$	8,869,589

For the Three and Nine Months Ended September 30, 2020:

For the Three and Six Months Ended June 30, 2019:

	Common Stock Shares		Common Stock Amount		Additional Paid in Capital			Accumulated Deficit			Total Stockholders’ Equity
Balance as of December 31, 2019		28,231,267	$	28,231	$	250,158,766		$	(215,239,450	)	$	34,947,547
Exercise of common stock options		2,035		2		(2	)		—			—
Stock-based compensation		—		—		878,963			—			878,963
Issuance of common stock under employee stock purchase plan		3,269		3		11,488			—			11,491
Issuance of common stock under stock incentive plan		702		1		(1	)		—			—
Sale of common stock, net		131,425		131		725,267			—			725,398
Net loss		—		—		—			(14,791,479	)		(14,791,479	)
Balance as of March 31, 2020		28,368,698	$	28,368	$	251,774,481		$	(230,030,929	)	$	21,771,920
Exercise of common stock options		5,184		5		25,646			—			25,651
Stock-based compensation		—		—		988,119			—			988,119
Issuance of common stock under stock incentive plan		703		1		(1	)		—			—
Net loss		—		—		—			(13,916,101	)		(13,916,101	)
Balance as of June 30, 2020		28,374,585	$	28,374	$	252,788,245		$	(243,947,030	)	$	8,869,589
Exercise of common stock options		153		—		273			—			273
Stock-based compensation		—		—		1,081,000			—			1,081,000
Issuance of common stock under employee stock purchase plan		1,821		2		7,923			—			7,925
Issuance of common stock under stock incentive plan		702		1		(1	)		—			—
Sale of common stock, net		9,375,000		9,375		70,281,625			—			70,291,000
Net loss		—		—		—			(14,968,680	)		(14,968,680	)
Balance as of September 30, 2020		37,752,261	$	37,752	$	324,159,065		$	(258,915,710	)	$	65,281,107

	Common Stock Shares		Common Stock Amount		Additional Paid in Capital			Accumulated Deficit			Total Stockholders’ Equity
Balance as of December 31, 2018		15,519,469	$	15,520	$	185,726,048		$	(167,053,897	)	$	18,687,671
Cumulative adjustment - adoption of ASC 842		—		—		—			(602,098	)		(602,098	)
Exercise of common stock options		52,914		53		63,099			—			63,152
Exercise of common stock warrants		64,629		64		649			—			713
Stock-based compensation		—		—		887,022			—			887,022
Public offering of common stock, net		3,000,000		3,000		32,427,000			—			32,430,000
Public offering financing costs		—		—		(382,423	)		—			(382,423	)
Net loss		—		—		—			(13,766,790	)		(13,766,790	)
Balance as of March 31, 2019		18,637,012	$	18,637	$	218,721,395		$	(181,422,785	)	$	37,317,247
Exercise of common stock options		6,430		6		30,110			—			30,116
Stock-based compensation		—		—		821,770			—			821,770
Public offering financing costs		—		—		(174,768	)		—			(174,768	)
Net loss		—		—		—			(5,901,165	)		(5,901,165	)
Balance as of June 30, 2019		18,643,442	$	18,643	$	219,398,507		$	(187,323,950	)	$	32,093,200

For the Three and Nine Months Ended September 30, 2019:

	Common Stock Shares		Common Stock Amount		Additional Paid in Capital			Accumulated Deficit			Total Stockholders’ Equity
Balance as of December 31, 2018		15,519,469	$	15,520	$	185,726,048		$	(167,053,897	)	$	18,687,671
Cumulative adjustment - adoption of ASC 842		—		—		—			(602,098	)		(602,098	)
Exercise of common stock options		52,914		53		63,099			—			63,152
Exercise of common stock warrants		64,629		64		649			—			713
Stock-based compensation		—		—		887,022			—			887,022
Public offering of common stock, net		3,000,000		3,000		32,427,000			—			32,430,000
Public offering financing costs		—		—		(382,423	)		—			(382,423	)
Net loss		—		—		—			(13,766,790	)		(13,766,790	)
Balance as of March 31, 2019		18,637,012	$	18,637	$	218,721,395		$	(181,422,785	)	$	37,317,247
Exercise of common stock options		6,430		6		30,110			—			30,116
Stock-based compensation		—		—		821,770			—			821,770
Public offering financing costs		—		—		(174,768	)		—			(174,768	)
Net loss		—		—		—			(5,901,165	)		(5,901,165	)
Balance as of June 30, 2019		18,643,442	$	18,643	$	219,398,507		$	(187,323,950	)	$	32,093,200
Exercise of common stock options		13,244		13		48,046			—			48,059
Stock-based compensation		—		—		830,502			—			830,502
Net loss		—		—		—			(13,423,059	)		(13,423,059	)
Balance as of September 30, 2019		18,656,686	$	18,656	$	220,277,055		$	(200,747,009	)	$	19,548,702

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

Liquidia Technologies, Inc.

Consolidated Statements of Cash Flows (Unaudited)

	Six Months Ended June 30,
	Nine Months Ended September 30,
	2020			2019
Operating activities
Net loss	$	(2843,~~707~~676,~~580~~260	)	$	(1933,~~667~~091,~~955~~014	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation		12,~~867~~948,082			12,~~708~~539,~~792~~294
Depreciation and amortization		12,~~456~~178,~~077~~402			1,~~252~~857,~~906~~070
Non-cash lease expense		79125,~~830~~086			~~148~~190,~~455~~784
Amortization of discount and debt issuance costs on long-term debt		3547,~~801~~183			—
Non-cash interest expense		—			2832,~~595~~180
Changes in operating assets and liabilities:
Accounts receivable, net		—			~~261~~262,~~117~~999
Prepaid expenses and other current assets		(94505,~~772~~080	)		(~~104~~267,~~348~~414	)
Other non-current assets		—			1,437,416
Accounts payable		~~(749~~133,~~202~~521	)		1,~~014,~~353,762
Accrued expenses		~~(137~~203,~~867~~833	)		~~692~~77,~~129~~630
Accrued compensation		(1,~~023~~096,~~554~~207	)		(~~795~~252,~~317~~436	)
Deferred revenue		—			(8,071,920	)
Operating lease liabilities		(~~273~~414,~~080~~960	)		(~~174~~290,~~096~~492	)
Net cash used in operating activities		(2740,~~547~~056,~~265~~400	)		(2234,~~269~~222,~~873~~141	)
Investing activities
Purchases of property, plant and equipment		(~~590~~713,~~619~~121	)		(1,~~080~~716,~~236~~208	)
Net cash used in investing activities		(~~590~~713,~~619~~121	)		(1,~~080~~716,~~236~~208	)
Financing activities
Principal payments on finance leases		(~~585~~876,~~596~~793	)		(~~476~~696,~~423~~875	)
Proceeds from issuance of long-term debt		—			5,000,000
Principal payments on long-term debt		(24,~~823~~235,~~529~~294	)		—
Proceeds from sale of common stock, net of underwriting fees and commissions		~~725~~71,225,398			31,872,808
Payments for offering costs		(1,~~425~~634,467	)		(~~554~~610,~~507~~007	)
Proceeds from issuance of common stock under stock incentive plans		3745,~~142~~340			—
Proceeds from exercise of stock options and warrants		—			93142,~~981~~002
Net cash (used in) provided by financing activities		(4,072,052	)		35,935,859
Net cash provided by financing activities		64,524,184			35,707,928
Net (decrease) increase in cash		(32,209,936	)		12,585,750
Net increase (decrease) in cash		23,754,663			(230,421	)
Cash, beginning of period		55,796,378			39,534,985
Cash, end of period	$	2379,~~586~~551,~~442~~041		$	5239,~~120~~304,~~735~~564
Supplemental disclosure of cash flow information
Cash paid for interest	$	~~444~~601,~~210~~838		$	~~443~~705,~~816~~249
Cash paid for operating lease liabilities	$	~~583~~875,~~486~~229		$	~~509~~790,~~369~~688
Changes in purchases of property and equipment in accounts payable and accrued expenses	$	412,096		$	150,461
Right of use assets obtained with lease liabilities	$	—		$	354,791
Accrued tenant improvements and receivable from landlord	$	—		$	592,586
Changes in purchases of property and equipment in accounts payable and accrued expenses	$	400,308		$	187,086
Deferred offering costs incurred but not paid	$	65,000		$	—
Accrued tenant improvements and receivable from landlord	$	—		$	936,104
Deferred offering costs incurred but not paid	$	—		$	141,314

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

Liquidia Technologies, Inc.

Notes to Consolidated Financial Statements (Unaudited)

1. Business

Liquidia Technologies, Inc. (“Liquidia” or the “Company”) is a late-stage clinical biopharmaceutical company focused on the development and commercialization of novel products utilizing the Company’s proprietary PRINT technology to transform the lives of patients. PRINT is a particle engineering platform that enables precise production of uniform drug particles designed to improve the safety, efficacy and performance of a wide range of therapies. The Company is currently focused on the development of two product candidates for which it holds worldwide commercial rights: LIQ861 for the treatment of pulmonary arterial hypertension (“PAH”) and LIQ865 for the treatment of local post-operative pain.

The development and commercialization activities are conducted at the Company’s headquarters located in Morrisville, North Carolina. The Company was incorporated under the laws of the state of Delaware in 2004.

Recent Developments and Subsequent Events

~~Proposed~~ Acquisition of RareGen, LLC

On June 29, 2020, the Company entered into that certain Agreement and Plan of Merger with RareGen, LLC, a privately-held entity, Liquidia Corporation, a wholly- owned subsidiary of the Company (“HoldCo”), Gemini Merger Sub I, Inc., a wholly- owned subsidiary of HoldCo (“Liquidia Merger Sub”), Gemini Merger Sub II, LLC, a wholly- owned subsidiary of HoldCo (“RareGen Merger Sub”), and PBM RG Holdings, LLC, as the Members’ Representative (the “Merger Agreement”), pursuant to which, among other things, the Company and RareGen will each become a subsidiary of HoldCo (the “Merger Transaction”). RareGen provides strategy, investment, and commercialization for ~~rare~~generic ~~disease~~Treprostinil ~~pharmaceutical products~~injection. RareGen has a small, targeted sales force focused on PAH. Pursuant to a Promotion Agreement, dated as of August 1, 2018, as amended (the “Promotion Agreement”), between RareGen and Sandoz Inc. (“Sandoz”), RareGen owns the exclusive rights to conduct any and all promotional and non-promotional activities to encourage the appropriate use of the first-to-file substitutable generic of treprostinil injection for the treatment of patients with PAH in the United States. The Merger Transaction is expected to close in the ~~second~~fourth ~~half~~quarter of 2020. If the Merger Transaction is completed, (i) each share of Company common stock, $0.001 par value per share (“Company Common Stock”), whether certificated or held in book-entry form, will automatically convert into one share of HoldCo common stock, $0.001 par value per share (“HoldCo Common Stock”), (ii) each option and warrant to purchase a share of Company Common Stock will entitle the holder to purchase one share of HoldCo Common Stock, and the exercise price per share will be identical to the Company option or warrant, and (iii) each Company restricted stock unit will entitle the holder to a HoldCo restricted stock unit, each to vest and settle into a share of HoldCo Common Stock. At the effective time of the Merger Transaction, an aggregate of 6,166,666 shares of HoldCo Common Stock, including 616,666 shares of HoldCo Common Stock which will be withheld from RareGen members to secure the indemnification obligations of RareGen members (the “Holdback Shares”), will be issued to RareGen members in exchange for all of the 10,000 outstanding RareGen common units, representing all of the issued and outstanding RareGen equity. RareGen members will be entitled to receive, on a pro rata basis, any Holdback Shares remaining on March 31, 2022. Additionally, RareGen members shall be entitled to a pro rata portion of any RareGen cash at closing in excess of $1 million. RareGen members will also be entitled to receive a pro rata portion of up to an additional 2,708,333 shares of HoldCo Common Stock in the aggregate in 2022, based on the amount of 2021 net sales of the generic treprostinil product owned by Sandoz, which RareGen markets pursuant to the Promotion Agreement. The fair value of the purchase consideration, or the purchase price is currently estimated to be approximately $3723.49 million based on 6,166,666 shares of HoldCo Common Stock at a per share price of $53.3834, which represents the closing price of Company Common Stock on ~~July~~November 272, 2020, and the estimated fair value of the contingent consideration liability of $43.3 million. The estimated purchase price is variable depending on the valuation of the Company Common Stock and the acquisition of RareGen is currently anticipated to be accounted for as a business combination in accordance with Accounting Standards Codification (ASC) 805, Business Combinations. The special meeting for stockholders to consider approval of the Merger Transaction is currently scheduled for November 13, 2020.

Issuance of Common Stock on July 2, 2020

On June 29, 2020, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Jefferies LLC, as representative of the several underwriters named therein (collectively, the “Underwriters”), pursuant to which 9,375,000 shares of the Company’s Common Stock were sold in an underwritten registered public offering at an offering price of $8.00 per Share (the “Offering”).

The Offering closed on July 2, 2020, and the Company received net proceeds of approximately $69.8 million from the sale of the Shares, after deducting the underwriting discounts and commissions and other offering expenses. The Company intends to use the net proceeds from this Offering for ongoing commercial development of LIQ861, for continued development of LIQ865 and for general corporate purposes. The Company’s management will retain broad discretion over the allocation of the net proceeds.

Joinder and Second Amendment to Amended and Restated Loan and Security Agreement on July 3, 2020

On July 3, 2020, the Company, HoldCo, Liquidia Merger Sub and RareGen Merger Sub entered into a Joinder and Second Amendment (the “Second Amendment”) to Amended and Restated Loan and Security Agreement, dated as of October 26, 2018 (the “A&R LSA”), with Pacific Western Bank (“Pacific Western”), pursuant to which, among other things, (i) HoldCo, Liquidia Merger Sub and RareGen Merger Sub have executed a joinder to the A&R LSA for the purpose of acknowledging that it shall be a “Borrower” along with the Company thereunder and, in connection therewith, collaterally assign and transfer to Pacific Western, and grant the Bank a continuing security interest in, all of such parties’ now owned and existing or hereafter acquired and arising assets of “Collateral” (as defined in the A&R LSA), (ii) the Borrowers shall not make any payments pursuant to that certain Litigation Funding and Indemnification Agreement, to be entered into by and between RareGen and the Members’ Representative prior to closing the Merger Transaction, without Pacific Western’s consent unless such payments are reimbursed within 30 days and do not exceed $250,000 at any time and (iii) the definition of “Permitted Indebtedness” was amended to accommodate the transactions contemplated by the Litigation Funding and Indemnification Agreement.

2. Basis of Presentation, Significant Accounting Policies and Going Concern

Basis of Presentation and Significant Accounting Policies

The unaudited interim consolidated financial statements as of ~~June~~September 30, 2020 and for the three and ~~six~~nine months ended ~~June~~September 30, 2020 and 2019 have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial reporting. These consolidated financial statements are unaudited and, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments and accruals) necessary for a fair statement of the results for the periods presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Operating results for the three and ~~six~~nine months ended ~~June~~September 30, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2020. Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with GAAP have been omitted in accordance with the SEC’s rules and regulations for interim reporting. The Company’s financial position, results of operations and cash flows are presented in U.S. Dollars.

The accompanying unaudited consolidated financial statements and related notes should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2019, which are included in the Company’s Annual Report on Form 10-K.

There have been no material changes to the Company’s significant accounting policies during the three and ~~six~~nine months ended ~~June~~September 30, 2020 compared with the significant accounting policies disclosed in Note 2 of the financial statements for the years ended December 31, 2019 and 2018.

Going Concern

The Company’s consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The Company's operations have consisted primarily of developing its technology, developing products, prosecuting its intellectual property and securing financing. The Company has incurred recurring losses and cash outflows from operations, has an accumulated deficit, and has debt principal payments that commenced in the first quarter of 2020. The Company expects to continue to incur losses in the foreseeable future and will require additional financial resources to continue to advance its products and intellectual property, in addition to repaying its maturing debt and other obligations. These conditions raise substantial doubt regarding the Company’s ability to continue as a going concern.

The Company believes that its existing cash will enable it to fund its operating expenses and capital expenditure requirements, make payments of interest and principal on its term loan facility with Pacific Western, and remain in compliance with its minimum cash covenant of $8.5 million pursuant to this term loan facility, into the ~~third~~first quarter of ~~2021~~2022. The Company has based these estimates on assumptions that may prove to be wrong, and it could utilize its available capital resources sooner than it expects. The Company will need to raise substantial additional capital to continue its business operations and remain in compliance with the minimum cash covenant of $8.5 million on its debt during and beyond the ~~third~~first quarter of ~~2021~~2022, in addition to commercializing LIQ861, if approved. Such capital may not be available on a timely basis, on terms that are favorable to the Company, or at all.

The pandemic caused by the outbreak of the novel coronavirus, or COVID-19, and the various governmental, industry and consumer actions related thereto, could have a material and adverse effect on ~~our~~the Company’s business. The effect, which largely depends on future developments that cannot be accurately predicted and are uncertain, could include a negative impact on the availability of ~~our~~the Company’s key personnel, temporary closures of ~~our~~the Company’s facilities or the facilities of ~~our~~the Company’s business partners, suppliers, third-party service providers or other vendors, delays in payments or purchasing decisions, and the interruption of domestic and global supply chains, distribution channels and financial markets. As the pandemic continues to spread, wethe ~~have~~Company has and may continue to experience disruptions that could severely impact ~~our~~the Company’s business. Currently, most of ~~our~~the Company’s employees are working remotely, with only essential personnel working on site as needed to produce LIQ861 and prepare for a pre-approval inspection by the FDA. As a result of the pandemic, we have also paused enrollment in our hemodynamic study, which has been conducted in Europe. As such, the results for the three and six months ended June 30, 2020 may not be indicative of results for the full 2020 year.

Consolidation

The accompanying consolidated financial statements include the Company’s wholly- owned subsidiary, Liquidia Corporation, and Liquidia Corporation’s wholly owned subsidiaries, Gemini Merger Sub I, Inc. and Gemini Merger Sub II, LLC. All intercompany accounts and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual amounts could differ from those estimates.

Reclassifications

The Company has reclassified certain prior period amounts for comparative purposes. The Company reclassified certain prior period amounts to conform to the current period presentation, including the categorization of non-cash lease expense within the operating activities section of the Statements of Cash Flows. These reclassifications did not have any effect on the Company’s previously reported financial condition, results of operations or cash flows.

Revision of Previously Issued Financial Statements

During the three months ended June 30, 2020, the Company identified an error in the matter in which it calculated diluted weighted common shares outstanding and diluted net loss per common share. While the Company has included common stock warrants whose exercise price is de minimis in the calculation of basic weighted average common shares outstanding and basic net loss per common share, these warrants were inappropriately excluded from the calculation of diluted weighted common shares outstanding and diluted net loss per common share, which resulted in an error in those previously reported amounts for the three and ~~six~~nine month periods ended ~~June~~September 30, 2019. The Company has evaluated this error and determined that this presentation error was not material to any prior annual or interim periods. However, the Company is revising the previously presented ~~June~~September 30, 2019 diluted weighted common shares outstanding and diluted net loss per common share as follows:

	Three Months Ended						~~Six~~Nine Months Ended
	June 30, 2019						June 30, 2019
	September 30, 2019						September 30, 2019
	As Presented			As Revised			As Presented			As Revised
Net loss per common share: Diluted	$	(0.3272	)	$	(0.3172	)	$	(1.1487	)	$	(1.1385	)
Diluted weighted average shares outstanding		18,~~642~~650,965			18,~~749~~757,~~239~~166			17,~~283~~737,~~064~~737			17,~~408~~856,~~667~~826

Summary of Significant Accounting Policies

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash. The Company is exposed to credit risk, subject to federal deposit insurance, in the event of default by the financial institutions holding its cash to the extent of amounts recorded on the consolidated balance sheet. With regard to cash, 100% of the Company’s cash is held on deposit with Pacific Western.

Revenue Recognition

The Company may derive revenue from licensing its proprietary PRINT technology and from performing research and development services. Revenue is recognized as services are performed in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services and technology.

The Company’s research, development and licensing agreements provide for multiple promised goods and services to be satisfied by the Company and include a license to the Company’s technology in a particular field of study, participation in collaboration committees, performance of certain research and development services and obligations for certain manufacturing services.

The transaction price for these contracts includes non-refundable fees and fees for research and development services. Non-refundable up-front fees which may include, for example, an initial payment upon effectiveness of the contractual relationship or payment to secure a right for a future license, are recorded as deferred revenue and recognized into revenue over time as the Company provides the research services under the contract required to advance the products to the point where the Company is able to transfer control of the licensed technology to the customer (“Technology Transfer”). The contract consideration may also include additional non-refundable payments due to the Company based on the achievement of research, development, regulatory or commercialization milestone events. In agreements involving multiple goods or services promised to be transferred to customers, the Company must assess, at the inception of the contract, whether each promise represents a separate performance obligation (i.e., is “distinct”), or whether such promises should be combined as a single performance obligation. As these goods and services are considered to be highly interrelated, they may be considered to represent a single, combined performance obligation. The Company includes an estimate of the probable amount of milestone payments to which it will be entitled in the transaction price. The estimate requires evaluation of factors which are outside of the Company’s control and significantly limit the Company’s ability to achieve the remaining milestone payments. ~~Therefore, the Company has not included any future milestone payments in the transaction price allocated to research, development and licensing agreements as of June 30, 2020 or December 31, 2019.~~ The Company revises the transaction price to include milestone payments once the specific milestone achievement is not considered to be subject to a significant reversal of revenue. At that time, the estimated transaction price is adjusted and a cumulative catch-up adjustment is recorded to adjust the amount of revenue to be recognized from the license inception to the date the milestone was deemed probable of achievement. The milestone is included with other non-refundable up-front fees and recognized into revenue over time as the Company continues to provide services under the contract through the Company’s Technology Transfer. The amount of revenue recognized is based on the proportion of total research services performed to date to the expected services to be provided through the Technology Transfer.

The estimate of the research services to be provided through the Technology Transfer requires significant judgment to evaluate assumptions regarding the level of effort required for the Company to have performed sufficient obligations for the customer to be able to utilize the licensed technology without requiring further services from the Company. If the estimated level of effort changes, the remaining deferred revenue is recognized over the revised period in which the expected research services and Technology Transfer are required. Changes in estimates occur for a variety of reasons, including but not limited to (i) research and development acceleration or delays, (ii) customer prioritization of research projects, or (iii) results of research and development activities. The Company recognizes the consideration it is entitled to receive for research and development services, which are primarily billed quarterly in arrears on a time and materials basis, as the services are performed (under a proportional performance model) and collection is reasonably assured. Additionally, any up-front or development milestone payments received are also recognized as revenue, over time, under this same proportional performance model.

The estimate of the research services to be provided through the Technology Transfer requires significant judgment to evaluate assumptions regarding the level of effort required for the Company to have performed sufficient obligations for the customer to be able to utilize the licensed technology without requiring further services from the Company. If the estimated level of effort changes, the remaining deferred revenue is recognized over the revised period in which the expected research services and Technology Transfer are required. Changes in estimates occur for a variety of reasons, including but not limited to (i) research and development acceleration or delays, (ii) customer prioritization of research projects, or (iii) results of research and development activities. The Company recognizes the consideration it is entitled to receive for research and development services, which are primarily billed quarterly in arrears on a time and materials basis, as the services are performed (under a proportional performance model) and collection is reasonably assured. Additionally, any up-front or development milestone payments received are also recognized as revenue, over time, under this same proportional performance model.

Royalties related to product sales will be recognized as revenue when the sale occurs since payments relate directly to products that will have been fully developed and for which the Company will have satisfied all of its performance obligations.

Stock-Based Compensation

The Company estimates the grant date fair value of its share-based awards and amortizes this fair value to compensation expense on a straight-line basis over the requisite service period, which is generally the vesting period of the respective award (see Note 4). The grant date fair value of stock options is determined using the Black-Scholes option-pricing model.

Net Loss Per Share

Basic net loss per share is calculated by dividing net loss attributable to common stockholders by the weighted average shares outstanding during the period, without consideration of common stock equivalents.

Diluted net loss per share is calculated by adjusting the weighted average shares outstanding for the dilutive effect of common stock equivalents outstanding for the period, determined using the treasury-stock method. For purposes of the diluted net loss per share calculation, stock options and restricted stock units are considered to be common stock equivalents but are excluded from the calculation of diluted net loss per share because their effect would be anti-dilutive. Due to their anti-dilutive effect, the calculation of diluted net loss per share for the three and ~~six~~nine months ended ~~June~~September 30, 2020 and 2019 does not include the following common stock equivalent shares:

Three Months Ended

~~Six~~Nine Months Ended

June 30,

September 30,

2020

2019

2020

2019

Stock Options

2,~~680~~747,~~133~~538

12,~~994~~037,~~137~~003

2,~~399~~516,~~868~~604

12,~~994~~037,~~137~~003

Restricted Stock Units

~~144~~123,~~736~~369

—

9798,~~942~~355

—

Total

2,~~824~~870,~~869~~907

12,~~994~~037,~~137~~003

2,~~497~~614,~~810~~959

12,~~994~~037,~~137~~003

For the three and ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, common stock warrants are included in the calculation of basic and diluted net loss per share since their exercise price is de minimis.

Fair Value of Financial Instruments

The carrying values of cash and accounts payable at ~~June~~September 30, 2020 and December 31, 2019 approximated their fair value due to the short maturity of these instruments.

The Company’s valuation of financial instruments is based on a three-tiered approach, which requires that fair value measurements be classified and disclosed in one of three tiers. The fair value hierarchy defines a three-level valuation hierarchy for disclosure of fair value measurements as follows:

Level 1 — Quoted prices in active markets for identical assets or liabilities;

Level 2 — Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly; and

Level 3 — Unobservable inputs for the asset and liability used to measure fair value, to the extent that observable inputs are not available.

13 The categorization of a financial instrument within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The following tables present the placement in the fair value hierarchy of financial liabilities measured at fair value as of September 30, 2020 and December 31, 2019:

The categorization of a financial instrument within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The following tables present the placement in the fair value hierarchy of financial liabilities measured at fair value as of June 30, 2020 and December 31, 2019:

September 30, 2020

Quoted
Prices in
Active
Markets
(Level 1)

Significant

Other

Observable

Inputs

(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Carrying
Value

Pacific Western Bank note - A&R LSA

—

9,972,600

—

11,690,010

June 30, 2020		Quoted Prices in Active Markets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				Carrying Value
Pacific Western Bank note - A&R LSA		$	—			$	10,934,698			$	—			$	13,090,393

December 31, 2019

Quoted
Prices in
Active
Markets
(Level 1)

Significant

Other

Observable

Inputs

(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Carrying
Value

Pacific Western Bank note - A&R LSA

—

14,094,792

—

15,878,121

The fair value of debt is measured in accordance with ASU 2016-01, Financial Instruments–Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. The fair value is determined based on the exit price notion using credit spreads and an illiquidity premium for each loan. The credit spread is determined by the credit risk rating, loan rate index, and maturity date. The illiquidity premium is based on the loan’s credit risk rating.

Recent Accounting Pronouncements

In October 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606 ("ASU 2018-18"). The provisions of ASU 2018-18 clarify when certain transactions between collaborative arrangement participants should be accounted for under ASC 606 and incorporates unit-of-account guidance consistent with ASC 606 to aid in this determination. The guidance is effective for annual periods and interim periods within those annual periods beginning after December 15, 2019, with early adoption permitted. The Company adopted ASU 2018-18 effective January 1, 2020 and it did not have a material effect on the Company's consolidated financial statements for the three and ~~six~~nine months ended ~~June~~September 30, 2020.

3. Stockholders’ Equity

Authorized Capital

As of ~~June~~September 30, 2020, the authorized capital of the Company consists of 70,000,000 shares of capital stock, $0.001 par value per share, of which 60,000,000 shares are designated as common stock and 10,000,000 shares are designated as preferred stock.

Common Stock

Upon any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, the holders of the common stock shall be entitled to receive that portion of the remaining funds to be distributed to the stockholders, subject to the liquidation preferences of any outstanding preferred stock, if any. Such funds shall be paid to the holders of common stock on the basis of the number of shares so held by each of them.

In March 2019, the Company closed an underwritten offering of 3,000,000 shares of its common stock at a public offering price of $11.50 per share. The gross proceeds from the offering were $34.5 million and net proceeds were $31.8 million, after deducting underwriting discounts and commissions and other offering expenses.

In August 2019, the Company entered into a sales agreement (the “ATM Agreement”) with Jefferies LLC (“Jefferies”) to issue and sell shares of the Company’s common stock, having an aggregate offering price of up to $40.0 million, from time to time during the term of the ATM Agreement, through an “at-the-market” equity offering program at the Company’s sole discretion, under which Jefferies will act as the Company’s agent and/or principal. The Company will pay Jefferies a commission up to 3.0% of the gross proceeds of any common stock sold through Jefferies under the ATM Agreement. During the three and six months ended June 30, 2020, the Company sold 131,425 shares of common stock for net proceeds of $0.7 million after deducting underwriting discounts and other offering expenses under the ATM Agreement.

On December 23, 2019, the Company entered into a Common Stock Purchase Agreement (the “Purchase Agreement”) with certain institutional accredited investors (the “Purchasers”) for the sale by the Company in a private placement (the “Private Placement”) of an aggregate of 7,164,534 shares (the “Private Placement Shares”) of common stock, at a purchase price of $3.13 per Private Placement Share. The closing of the Private Placement occurred on December 27, 2019. The Company granted the Purchasers indemnification rights with respect to its representations, warranties, covenants and agreements under the Purchase Agreement. The gross proceeds from the sale of the Private Placement Shares were $22.4 million and net proceeds were $21.0 million, after deducting placement agent fees and offering expenses.

Issuance of Common Stock on July 2, 2020 from an Underwritten Public Offering

On June 29, 2020, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Jefferies LLC, as representative of the several underwriters named therein (collectively, the “Underwriters”), pursuant to which 9,375,000 shares of the Company’s Common Stock were sold in an underwritten registered public offering at an offering price of $8.00 per Share (the “Offering”).

The Offering closed on July 2, 2020, and the Company received net proceeds of approximately $70.3 million from the sale of the Shares, after deducting the underwriting discounts and commissions and other offering expenses. The Company intends to use the net proceeds from this Offering for ongoing commercial development of LIQ861, for continued development of LIQ865 and for general corporate purposes. The Company’s management will retain broad discretion over the allocation of the net proceeds.

Issuance of Common Stock from the Private Placement in December 2019

On December 23, 2019, the Company entered into a Common Stock Purchase Agreement (the “Purchase Agreement”) with certain institutional accredited investors (the “Purchasers”) for the sale by the Company in a private placement (the “Private Placement”) of an aggregate of 7,164,534 shares (the “Private Placement Shares”) of common stock, at a purchase price of $3.13 per Private Placement Share. The closing of the Private Placement occurred on December 27, 2019. The Company granted the Purchasers indemnification rights with respect to its representations, warranties, covenants and agreements under the Purchase Agreement. The gross proceeds from the sale of the Private Placement Shares were $22.4 million and net proceeds were $21.0 million, after deducting placement agent fees and offering expenses.

Issuance of Common Stock from the ATM Agreement Commencing in August 2019

The Company entered into a sales agreement (the “ATM Agreement”) with Jefferies LLC (“Jefferies”) to issue and sell shares of the Company’s common stock, having an aggregate offering price of up to $40.0 million, from time to time during the term of the ATM Agreement, through an “at-the-market” equity offering program at the Company’s sole discretion, under which Jefferies will act as the Company’s agent and/or principal. The Company pays Jefferies a commission equal to 3.0% of the gross proceeds of any common stock sold through Jefferies under the ATM Agreement. During the nine months ended September 30, 2020, the Company sold 131,425 shares of common stock for net proceeds of $0.7 million after deducting underwriting discounts and other offering expenses under the ATM Agreement.

Issuance of Common Stock from an Underwritten Public Offering in March 2019

In March 2019, the Company closed an underwritten offering of 3,000,000 shares of its common stock at a public offering price of $11.50 per share. The gross proceeds from the offering were $34.5 million and net proceeds were $31.8 million, after deducting underwriting discounts and commissions and other offering expenses.

Warrants

During the three and ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, no warrants to purchase shares of common stock were exercised. During the three and nine months ended September 30, 2020 and 2019, 0no warrants and 64,629 warrants to purchase shares of common stock were exercised, respectively. As of ~~June~~September 30, 2020 and December 31, 2019, there were outstanding warrants to purchase 106,274 shares of common stock with an exercise price of $0.0168 per share. The warrants expire on December 31, 2026.

4. Stock-Based Compensation

The Company’s 2018 Long-Term Incentive Plan (the “2018 Plan”) was approved by stockholders in July 2018. In addition to stock options, the 2018 Plan provides for the granting of stock appreciation rights, stock awards, stock units, and other stock-based awards. A total of 1,600,000 shares of the Company’s common stock was initially authorized and reserved for issuance under the 2018 Plan. This reserve will automatically increase each subsequent anniversary of January 1 through 2028, by an amount equal to the smaller of (a) 4% of the number of shares of common stock issued and outstanding on the immediately preceding December 31, or (b) an amount determined by the Board of Directors (the “Evergreen Provision”).

On January 1, 2019, the number of shares of common stock available for issuance under the 2018 Plan automatically increased by 620,778 shares from 1,600,000 shares to 2,220,778 shares pursuant to the Evergreen Provision. On January 1, 2020, the number of shares of common stock available for issuance under the 2018 Plan automatically increased by 1,129,250 shares from 1,287,561 shares to 2,416,811 shares pursuant to the Evergreen Provision. The 2018 Plan provides for accelerated vesting under certain change of control transactions. As of ~~June~~September 30, 2020, there were 1,~~369~~696,~~553~~052 shares of common stock available for issuance under the 2018 Plan.

The 2018 Plan replaced the 2016 and 2004 Plans as the Company’s primary long-term incentive program. The 2016 and 2004 Plans were discontinued following stockholder approval of the 2018 Plan, but the outstanding awards under the 2016 and 2004 Plans will continue to remain in effect in accordance with their terms. Shares that are returned under the 2016 and 2004 Plans upon cancellation, termination or otherwise of awards outstanding under the 2016 and 2004 Plans will not be available for grant under the 2018 Plan. As of June 30, 2020, the Company had reserved for issuance 697,694 shares of common stock under the 2016 Plan and 376,095 shares of common stock under the 2004 Plan, representing the remaining outstanding options granted under the 2016 and 2004 Plans. 15

The 2018 Plan replaced the 2016 and 2004 Plans as the Company’s primary long-term incentive program. The 2016 and 2004 Plans were discontinued following stockholder approval of the 2018 Plan, but the outstanding awards under the 2016 and 2004 Plans will continue to remain in effect in accordance with their terms. Shares that are returned under the 2016 and 2004 Plans upon cancellation, termination or otherwise of awards outstanding under the 2016 and 2004 Plans will not be available for grant under the 2018 Plan. As of September 30, 2020, the Company had reserved for issuance 656,927 shares of common stock under the 2016 Plan and 375,056 shares of common stock under the 2004 Plan, representing the remaining outstanding options granted under the 2016 and 2004 Plans.

Stock-Based Compensation Valuation and Expense

The Company accounts for its employee stock-based compensation plans using the fair value method. The fair value method requires the Company to estimate the grant-date fair value of its stock-based awards and amortize this fair value to compensation expense over the requisite service period or vesting term. The fair value of each option grant is estimated using a Black-Scholes option-pricing model.

For restricted stock units (“RSUs”), the grant-date fair value is based upon the market price of the Company’s common stock on the date of the grant. This fair value is then amortized to compensation expense over the requisite service period or vesting term.

The Company recorded the following share-based compensation expense:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

By Expense Category:

2020

2019

2020

2019

Research and development

~~286~~292,~~177~~386

~~275~~238,~~245~~920

~~561~~853,~~319~~704

~~547~~679,~~166~~875

General and administrative

~~701~~788,~~942~~614

~~546~~591,~~525~~582

12,~~305~~094,~~763~~378

1,~~161~~859,~~626~~419

Total stock-based compensation expense

~~988~~1,~~119~~081,000

~~821~~830,~~770~~502

12,~~867~~948,082

12,~~708~~539,~~792~~294

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

By Type of Award:

2020

2019

2020

2019

Stock Options

~~943~~1,~~648~~044,991

~~799~~808,~~656~~153

12,~~798~~843,~~418~~409

12,~~616~~424,~~500~~654

Restricted stock awards

4436,~~471~~009

22,~~114~~349

68104,~~664~~673

92114,~~292~~640

Total stock-based compensation expense

~~988~~1,~~119~~081,000

~~821~~830,~~770~~502

12,~~867~~948,082

12,~~708~~539,~~792~~294

The following table summarizes the unamortized compensation expense and the remaining years over which such expense would be expected to be recognized, on a weighted average basis, by type of award:

	As of June 30, 2020
	As of September 30, 2020
	Unamortized Expense		Weighted Average Remaining Recognition Period (Years)
Stock Options	$	87,~~658~~000,~~010~~498		2.7153
Restricted Stock Units	$	~~593~~443,~~586~~913		3.6538

Stock Options

The following table summarizes the assumptions used for estimating the fair value of stock options granted under the Black-Scholes option-pricing model during:

	Six Months Ended
	Nine Months Ended
	June 30,
	September 30,
	2020				~~2019~~	2019
Expected dividend yield			—%			—%		—%
Risk-free interest rate		0.40%	-	1.60%	~~1.85%~~	-	21.5444%	-	2.54%
Expected Volatility		87%	-	90%	~~83%~~	-	8483%	-	85%
Expected life (years)			6.4032			~~6.08~~		6.04

As a result of using these assumptions in the Black-Scholes option-pricing model, the weighted average fair value for options granted during the ~~six~~nine months ended ~~June~~September 30, 2020 and 2019 was $34.6516 and $98.0735 per share, respectively.

The following describes each of these assumptions and the Company’s methodology for determining each assumption:

Expected Dividend Yield

The dividend yield percentage is zero because the Company neither currently pays dividends nor intends to do so during the expected option term.

Risk-Free Interest Rate

The risk-free interest rate is based on the U.S. Treasury yield curve approximating the term of the expected life of the award in effect on the date of grant.

Expected Volatility

Expected stock price volatility is based on a weighted average of several peer public companies and the historical volatility of the Company’s common stock during the period for which it has traded since the initial public offering. For purposes of identifying peer companies, the Company considered characteristics such as industry, length of trading history and similar vesting terms.

Expected Life

The expected life represents the period the awards are expected to be outstanding. The Company’s historical share option exercise experience does not provide a reasonable basis upon which to estimate an expected term because of a lack of sufficient data. Therefore, the Company estimates the expected term by using the simplified method.

16 The following table summarizes the Company’s stock option activity during the nine months ended September 30, 2020:

The following table summarizes the Company’s stock option activity during the six months ended June 30, 2020:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Contractual Term (in years)		Aggregate Intrinsic Value
Outstanding as of December 31, 2019		2,052,976		$	9.33
Granted		963,191		$	5.63
Exercised		(22,351	)	$	3.30
Cancelled		(424,454	)	$	8.11
Outstanding as of September 30, 2020		2,569,362		$	8.20		7.20	$	1,030,161
Exercisable as of September 30, 2020		1,274,181		$	8.34		5.55	$	444,747
Vested and expected to vest as of September 30, 2020		2,392,942		$	8.26		7.05	$	901,226

	Number of Shares			Weighted Average Exercise Price		Weighted Average Contractual Term (in years)		Aggregate Intrinsic Value
Outstanding as of December 31, 2019		2,052,976		$	9.33
Granted		943,591		$	5.64
Exercised		(21,230	)	$	3.37
Cancelled		(67,086	)	$	8.51
Outstanding as of June 30, 2020		2,908,251		$	8.20		7.62	$	5,008,675
Exercisable as of June 30, 2020		1,144,876		$	8.29		6.14	$	1,887,009
Vested and expected to vest as of June 30, 2020		2,629,235		$	8.26		7.52	$	4,337,035

The aggregate intrinsic value of stock options in the table above represents the difference between the $4.92 closing price of the Company’s common stock as of September 30, 2020 and the exercise price of outstanding, exercisable, and vested and expected to vest in-the-money stock options.

The aggregate intrinsic value of stock options in the table above represents the difference between the $8.42 closing price of the Company’s common stock as of June 30, 2020 and the exercise price of outstanding, exercisable, and vested and expected to vest in-the-money stock options. 17

Restricted Stock Unit Awards

During the ~~six~~nine months ended ~~June~~September 30, 2020, the Board of Directors approved grants of an aggregate of 138,614 non-performance-based RSUs to employees. RSUs represent the right to receive shares of common stock of the Company at the end of a specified time period. The RSUs vest over a four-year period similar to stock options granted to employees. RSUs can only be settled in shares of the Company’s common stock.

A summary of nonvested RSU awards outstanding as of ~~June~~September 30, 2020 and changes during the ~~six~~nine months then ended is as follows:

	Number of RSUs			Weighted Average Grant-Date Fair Value (per RSU)
Nonvested as of December 31, 2019		7,493		$	28.87
Granted		138,614			3.3132
Vested		(12,~~405~~107	)		28.87
Forfeited		(439,~~104~~102	)		3.31
Nonvested as of June 30, 2020		140,598		$	4.42
Nonvested as of September 30, 2020		104,898		$	4.63

Employee Stock Purchase Plan

On May 8, 2019, the Company’s stockholders approved the Liquidia Technologies, Inc. 2019 Employee Stock Purchase Plan (the “ESPP”). As of ~~June~~September 30, 2020, a total of 446,731 shares of the Company’s common stock are reserved for issuance under the ESPP. Subject to any plan limitations, the ESPP allows eligible employees to contribute through payroll deductions up to $25,000 per year of their earnings for the purchase of the Company’s common stock at a discounted price per share. The offering periods are six months each and begin in March and September of each year, with the initial offering period ~~commencing~~having commenced on September 3, 2019. Unless otherwise determined by the administrator, the Company’s common stock will be purchased for the accounts of employees participating in the ESPP at a price per share that is 85% of the fair market value of the Company’s common stock on the last trading day of the offering period.

During the Company’s first offering period from September 1, 2019 to February 28, 2020, based upon 85% of the closing price of $4.13 on February 28, 2020, 3,269 shares were purchased based upon employee withholdings. During the Company’s second offering period from March 1, 2020 to August 31, 2020, based upon 85% of the closing price of $5.12 on August 31, 2020, 1,821 shares were purchased based upon employee withholdings.

5. License Agreements

The Company performs research under a license agreement with The University of North Carolina at Chapel Hill (“UNC”) as amended to date (the “UNC Letter Agreement”). As part of the UNC Letter Agreement, the Company holds an exclusive license to certain research and development technologies and processes in various stages of patent pursuit, for use in its research and development and commercial activities, with a term until the expiration date of the last to expire patent subject to the UNC Letter Agreement, subject to industry standard contractual compliance. Under the UNC Letter Agreement, the Company is obligated to pay UNC royalties equal to a low single digit percentage of all net sales of drug products whose manufacture, use or sale includes any use of the technology or patent rights covered by the UNC Letter Agreement. The Company may grant sublicenses of UNC licensed intellectual property in return for specified payments based on a percentage of any fee, royalty or other consideration received.

6. Revenue From Contracts With Customers

The Company derived its revenue during the ~~six~~nine months ended ~~June~~September 30, 2019 primarily from licensing its proprietary PRINT technology and from performing research and development services. Revenue was recognized as services were performed in an amount that reflected the consideration the Company expected to be entitled to in exchange for those services and technology.

The transaction price for these contracts includes non-refundable fees and fees for research and development services. Non-refundable up-front fees which may include, for example, an initial payment upon effectiveness of the contractual relationship or payment to secure a right for a future license, are recorded as deferred revenue and recognized into revenue over time as the Company provides the research services under the contract required to advance the products to the point where the Company is able to transfer control of the licensed technology to the customer (“Technology Transfer”). The contract consideration may also include additional non-refundable payments due to the Company based on the achievement of research, development, regulatory or commercialization milestone events. In agreements involving multiple goods or services promised to be transferred to customers, the Company must assess, at the inception of the contract, whether each promise represents a separate performance obligation (i.e., is “distinct”), or whether such promises should be combined as a single performance obligation. As these goods and services are considered to be highly interrelated, they were considered to represent a single, combined performance obligation. The Company includes an estimate of the probable amount of milestone payments to which it will be entitled in the transaction price. The estimate requires evaluation of factors which are outside of the Company’s control and significantly limit the Company’s ability to achieve the remaining milestone payments. Therefore, the Company has not included any future milestone payments in the transaction price allocated to research, development and licensing agreements as of June 30, 2019. The Company revises the transaction price to include milestone payments once the specific milestone achievement is not considered to be subject to a significant reversal of revenue. At that time, the estimated transaction price is adjusted and a cumulative catch-up adjustment is recorded to adjust the amount of revenue to be recognized from the license inception to the date the milestone was deemed probable of achievement. The milestone is included with other non-refundable up-front fees and recognized into revenue over time as the Company continues to provide services under the contract through the Company’s Technology Transfer. The amount of revenue recognized is based on the proportion of total research services performed to date to the expected services to be provided through the Technology Transfer. 18

The transaction price for these contracts includes non-refundable fees and fees for research and development services. Non-refundable up-front fees which may include, for example, an initial payment upon effectiveness of the contractual relationship or payment to secure a right for a future license, are recorded as deferred revenue and recognized into revenue over time as the Company provides the research services under the contract required to advance the products to the point where the Company is able to transfer control of the licensed technology to the customer (“Technology Transfer”). The contract consideration may also include additional non-refundable payments due to the Company based on the achievement of research, development, regulatory or commercialization milestone events. In agreements involving multiple goods or services promised to be transferred to customers, the Company must assess, at the inception of the contract, whether each promise represents a separate performance obligation (i.e., is “distinct”), or whether such promises should be combined as a single performance obligation. As these goods and services are considered to be highly interrelated, they were considered to represent a single, combined performance obligation. The Company includes an estimate of the probable amount of milestone payments to which it will be entitled in the transaction price. The estimate requires evaluation of factors which are outside of the Company’s control and significantly limit the Company’s ability to achieve the remaining milestone payments. Therefore, the Company has not included any future milestone payments in the transaction price allocated to research, development and licensing agreements as of September 30, 2020. The Company revises the transaction price to include milestone payments once the specific milestone achievement is not considered to be subject to a significant reversal of revenue. At that time, the estimated transaction price is adjusted and a cumulative catch-up adjustment is recorded to adjust the amount of revenue to be recognized from the license inception to the date the milestone was deemed probable of achievement. The milestone is included with other non-refundable up-front fees and recognized into revenue over time as the Company continues to provide services under the contract through the Company’s Technology Transfer. The amount of revenue recognized is based on the proportion of total research services performed to date to the expected services to be provided through the Technology Transfer.

The estimate of the research services to be provided through the Technology Transfer requires significant judgment to evaluate assumptions regarding the level of effort required for the Company to have performed sufficient obligations for the customer to be able to utilize the licensed technology without requiring further services from the Company. If the estimated level of effort changes, the remaining deferred revenue is recognized over the revised period in which the expected research services and Technology Transfer are required. Changes in estimates occur for a variety of reasons, including but not limited to (i) research and development acceleration or delays, (ii) customer prioritization of research projects, or (iii) results of research and development activities. The Company recognizes the consideration it is entitled to receive for research and development services, which are primarily billed quarterly in arrears on a time and materials basis, as the services are performed (under a proportional performance model) and collection is reasonably assured. Additionally, any up-front or development milestone payments received are also recognized as revenue, over time, under this same proportional performance model.

~~Royalties~~No ~~related~~royalties tohave ~~product~~been ~~sales will be~~ recognized asduring ~~revenue when~~ the ~~sale~~three ~~occurs~~and ~~since~~nine ~~payments~~months ~~relate~~ended September ~~directly~~30, to2020 ~~products~~or ~~that~~during ~~will~~the ~~have~~three ~~been fully developed~~ and ~~for~~nine ~~which~~months ~~the~~ended September ~~Company~~30, ~~will have satisfied all of its performance obligations~~2019.

In September 2015, GSK Inhaled exercised the option to permanently license the technology for a non-refundable payment to the Company of $15.0 million. Pursuant to the license provisions of the collaboration agreement, GSK Inhaled is potentially required to pay the Company for certain milestones reached in addition to tiered royalties on the worldwide sales of the licensed products at percentages ranging from the mid-single digits to low-single digits depending on the total number of products developed and other royalty step-down events with a fixed low-single digit royalty floor. In February 2016, GSK Inhaled paid the Company a $3.0 million milestone payment pursuant to the collaboration agreement. The combined $18 million in up-front and milestone payments was subject to deferral pursuant to the adoption of ASC 606 and the revenue policy described herein.

18 In July 2018, GSK notified the Company of its plans to discontinue development of the inhaled antiviral for viral exacerbations in chronic obstructive pulmonary disease under the GSK Inhaled collaboration agreement after completion of the related Phase 1 clinical trial. In June 2019, the Company and GSK executed the third amendment to the collaboration agreement providing the Company rights to develop and commercialize additional inhaled programs at the Company’s sole cost and development. This amendment granted the Company the right to develop three additional molecular entities for application in inhaled programs using the Company’s PRINT technology and a mechanism to acquire further molecular entities for inhaled applications. New inhaled programs developed under this amendment would carry milestone and royalty payments due to GSK upon initiation of Phase 3 studies and subsequent commercialization, respectively. This amendment, among other factors including the lack of continued performance anticipated by the Company and GSK under the original agreement, led the Company to the belief that no further research and development services will be provided to GSK under the collaboration agreement and the earnings process related to the up-front and development milestone payments previously received under the collaboration agreement is completed under the proportional performance model. Therefore, the remaining deferred revenue of $8.1 million was recognized as revenue during the nine months ended September 30, 2019. If GSK were to request additional services under the original agreement, which the Company believes is a remote likelihood, the Company does not expect the value of any incremental efforts that the Company might agree to perform to be material. Any potential milestone or royalty payments from the Company to GSK associated with this amendment will be recorded as operating expenses.

In July 2018, GSK notified the Company of its plans to discontinue development of the inhaled antiviral for viral exacerbations in chronic obstructive pulmonary disease under the GSK Inhaled collaboration agreement after completion of the related Phase 1 clinical trial. In June 2019, the Company and GSK executed the third amendment to the collaboration agreement providing the Company rights to develop and commercialize additional inhaled programs at the Company’s sole cost and development. This amendment granted the Company the right to develop three additional molecular entities for application in inhaled programs using the Company’s PRINT technology and a mechanism to acquire further molecular entities for inhaled applications. New inhaled programs developed under this amendment would carry milestone and royalty payments due to GSK upon initiation of Phase 3 studies and subsequent commercialization, respectively. This amendment, among other factors including the lack of continued performance anticipated by the Company and GSK under the original agreement, led the Company to the belief that no further research and development services will be provided to GSK under the collaboration agreement and the earnings process related to the up-front and development milestone payments previously received under the collaboration agreement is completed under the proportional performance model. Therefore, the remaining deferred revenue of $8.1 million was recognized as revenue during the six months ended June 30, 2019. If GSK were to request additional services under the original agreement, which the Company believes is a remote likelihood, the Company does not expect the value of any incremental efforts that the Company might agree to perform to be material. Any potential milestone or royalty payments from the Company to GSK associated with this amendment will be recorded as operating expenses. 19

The following tables represent a disaggregation of revenue by each significant research, development and licensing agreement and payment type for the ~~three~~nine ~~and six~~ months ended ~~June~~September 30, 2019:

	Revenue for the Three and Six Months Ended
	Revenue for the Nine Months Ended
	June 30, 2019 From
	September 30, 2019 From
	Non-Refundable Payments				Research and
			Up-front		Development
	Milestones		Payments		Services		Total
GSK Inhaled	$	1,345,320	$	6,726,600	$	—	$	8,071,920
Other		—		—		200		200
Total	$	1,345,320	$	6,726,600	$	200	$	8,072,120

Deferred Sublicense Payments

Sublicense payments to UNC are considered direct and incremental fulfillment costs of the Company’s research, development and licensing agreements as the PRINT technology resources used by the Company are continually researched by UNC. These costs are deferred and then amortized into Cost of Sales over the same estimated period of benefit as the period of the underlying revenue recognition. In conjunction with the June 2019 amendment to the GSK collaboration agreement, the balance of deferred sublicense payments were expensed to Cost of revenue in the ~~same~~nine ~~period~~months ended September 30, 2019.

7. Property, Plant and Equipment

Property, plant and equipment consisted of the following:

	June 30,			December 31,
	September 30,			December 31,
	2020			2019
Lab and build-to-suit equipment	$	78,~~587~~071,~~415~~881		$	7,562,263
Office equipment		128,669			128,669
Furniture and fixtures		294,689			237,951
Computer equipment		~~804~~896,~~046~~022			804,046
Leasehold improvements		11,~~875~~524,~~094~~739			11,762,351
Construction-in-progress		~~91,797~~—			91,797
Total property, plant and equipment		20,~~781~~916,~~710~~000			20,587,077
Accumulated depreciation and amortization		(1213,~~805~~527,~~299~~624	)		(11,333,112	)
Property, plant and equipment, net	$	7,~~976~~388,~~411~~376		$	9,253,965

The Company recorded depreciation and amortization expense of $~~724~~722,~~048~~325 and $~~618~~604,~~230~~164 for the three months ended ~~June~~September 30, 2020 and 2019, respectively, and $12,~~456~~178,~~077~~402 and $1,~~252~~857,~~906~~070 for the ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, respectively.

8. Income Taxes

The Company did not record a federal or state income tax expense or benefit for the three or ~~six~~nine months ended ~~June~~September 30, 2020 and 2019 as a result of the establishment of a full valuation allowance being required against the Company’s net deferred tax assets.

9. Commitments and Contingencies

Commitments

In March 2012, the Company entered into an agreement, as amended, with Chasm Technologies, Inc. for manufacturing consulting services related to the Company’s manufacturing capabilities during the term of the agreement. The Company agreed to pay future contingent royalties on net sales totaling no more than $1,500,000, none of which has been earned as of ~~June~~September 30, 2020.

Contingencies

Merger Termination Fee and Merger Transaction Fees

In the event the Merger Agreement is terminated by the Company on account of its acceptance of a ~~superior~~Superior ~~proposal~~Proposal or by RareGen, if the ~~Company’s~~Board ~~board~~ of ~~directors~~Directors shall have made a change in recommendation to its stockholders following the receipt of a ~~superior~~Superior ~~proposal~~Proposal, then, in the case of a termination by the Company pursuant to (i), the Company shall pay to RareGen by wire transfer a one-time termination fee equal to $7.5 million immediately before and as a condition to such termination, and in the case of a termination by RareGen pursuant to (ii), within two business days after the date of such termination.

The Company estimates it will incur $45.0 million of fees in connection with the Merger Transaction.

The Company from time-to-time is subject to claims and litigation in the normal course of business, none of which the Company believes represent a risk of material loss or exposure.

10. Long-Term Debt

Long-term debt consisted of the following as of ~~June~~September 30, 2020 and December 31, 2019:

		June 30,			December 31,
		September 30,			December 31,
	Maturity Date	2020			2019
Pacific Western Bank term loan outstanding	October 25, 2022	$	1311,~~090~~690,~~393~~010		$	15,878,121
Less current portion			(5,585,636	)		(5,585,637	)
Long-term debt, less current portion		$	76,~~504~~104,~~757~~374		$	10,292,484

Pacific Western Bank

In January 2016 and October 2016, the Company entered into a Loan and Security Agreement (“LSA”) and an amendment, respectively, with Pacific Western. The LSA provided that the Company may borrow up to $10.0 million in three tranches of a term loan (“Term Loan”) to supplement working capital and finance facility expansion and capital equipment purchases. The Term Loan was collateralized by a lien on all assets of the Company that are not otherwise encumbered, including a negative pledge on intellectual property prohibiting its sale without Pacific Western’s consent. Amounts borrowed under the Term Loan could be repaid at any time without penalty or premium.

In March 2018, the Company and Pacific Western executed the Ninth Amendment to the LSA (the “Ninth Amendment”). With the Ninth Amendment, new covenants were enacted requiring the Company to (1) at all times maintain a balance of cash at Pacific Western of at least $8.0 million, an increase of $5.5 million from its prior cash balance covenant, and (2) not observe any materially adverse data from its LIQ861 Phase 3 study on or before December 31, 2018.

In October 2018, the Company and Pacific Western entered into the A&R LSA in which the Company received an initial tranche of $11.0 million to extinguish its existing debt of $8.0 million under the LSA, repay in full the $1.8 million in outstanding indebtedness under the UNC Promissory Note and for general corporate purposes. The indebtedness under the A&R LSA bears interest at the greater of the Prime rate or 5% and has a four-year term maturing in October 2022. The A&R LSA provided for access to a second tranche of up to $5.0 million available to be drawn at the Company’s option through June 30, 2019. The second tranche became accessible as a result of the full enrollment of the Company’s LIQ861 INSPIRE clinical trial, without observing any materially adverse data through the two week endpoint. The entire second tranche of $5.0 million was drawn by the Company in May 2019 bringing the total amount outstanding to $16.0 million. Both tranches required payments of interest-only through December 31, 2019.

The A&R LSA carries a one-time success fee of $375,000 and a prepayment penalty of 1% if the drawn tranche is prepaid prior to October 27, 2020. The success fee was triggered in December 2019 by the sale of common stock and this was recorded as interest expense of $375,000 during the year ended December 2019. Accrued interest is included in Other accrued expenses in the Balance Sheet as of December 31, 2019. The minimum cash covenant is $8.5 million. Pacific Western maintains a blanket lien on all assets excluding intellectual property, for which it has been provided a negative pledge. Pursuant to the A&R LSA, the Company is also obligated to comply with various other customary covenants, including, among others, restrictions on its ability to dispose of assets, replace or suffer the departure of the CEO or CFO without delivering ten days’ prior written notification to Pacific Western, suffer a change on the Board of Directors which would result in the failure of at least one partner of Canaan Partners or their respective affiliates to serve as a voting member in each case without having used best efforts to deliver at least 15 days’ prior written notification to Pacific Western, make acquisitions, be acquired, incur indebtedness, grant liens, make distributions to its stockholders, make investments, enter into certain transactions with affiliates or pay down subordinated debt, subject to specified exceptions.

In May 2019, the Company and Pacific Western entered into a First Amendment to A&R LSA to provide for a limit of $2.5 million of ~~our~~the Company’s capital expenditures during the year ended December 31, 2019. As of ~~June~~September 30, 2020, the Company was in compliance with all covenants under the A&R LSA. The Company received a waiver of covenant compliance from Pacific Western for non-timely submissions of monthly financial statements for the January and February 2020 periods.

Scheduled annual maturities of long-term debt as of June 30, 2020 are as follows:

Year ending December 31:
2020 – six months remaining	$	2,823,531
2021		5,647,059
2022		4,705,881
Thereafter		—
Total		13,176,471
Less: Unamortized discount		(61,043	)
Less: Unamortized debt issuance costs		(25,035	)
Less: Current portion of long-term debt		(5,585,636	)
Long-term debt, noncurrent	$	7,504,757

Joinder and Second Amendment to Amended and Restated Loan and Security Agreement on July 3, 2020

On July 3, 2020, the Company, HoldCo, Liquidia Merger Sub and RareGen Merger Sub entered into a Joinder and Second Amendment (the “Second Amendment”) to Amended and Restated Loan and Security Agreement, dated as of October 26, 2018 (the “A&R LSA”), with Pacific Western Bank (“Pacific Western”), pursuant to which, among other things, (i) HoldCo, Liquidia Merger Sub and RareGen Merger Sub have executed a joinder to the A&R LSA for the purpose of acknowledging that it shall be a “Borrower” along with the Company thereunder and, in connection therewith, collaterally assign and transfer to Pacific Western, and grant the Bank a continuing security interest in, all of such parties’ now owned and existing or hereafter acquired and arising assets of “Collateral” (as defined in the A&R LSA), (ii) the Borrowers shall not make any payments pursuant to that certain Litigation Funding and Indemnification Agreement, to be entered into by and between RareGen and the Members’ Representative prior to closing the Merger Transaction, without Pacific Western’s consent unless such payments are reimbursed within 30 days and do not exceed $250,000 at any time and (iii) the definition of “Permitted Indebtedness” was amended to accommodate the transactions contemplated by the Litigation Funding and Indemnification Agreement.

Scheduled annual maturities of long-term debt as of September 30, 2020 are as follows:

Year ending December 31:
2020 – three months remaining	$	1,411,766
2021		5,647,059
2022		4,705,881
Thereafter		—
Total		11,764,706
Less: Unamortized discount		(52,336	)
Less: Unamortized debt issuance costs		(22,360	)
Less: Current portion of long-term debt		(5,585,636	)
Long-term debt, noncurrent	$	6,104,374

Item 2. 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 related notes appearing in this ~~quarterly~~Quarterly ~~report~~Report on Form 10-Q. This discussion and other parts of this ~~quarterly~~Quarterly ~~report~~Report contain forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. As a result of many factors, including those factors set forth in the “Risk Factors” section of this ~~quarterly~~Quarterly ~~report~~Report, our actual results could differ materially from the results described in, or implied by, the forward-looking statements contained in the following discussion and analysis.

Overview

We are a late-stage clinical biopharmaceutical company focused on the development and commercialization of novel products utilizing our proprietary PRINT® technology to transform the lives of patients. PRINT is a particle engineering platform that enables precise production of uniform drug particles designed to improve the safety, efficacy and performance of a wide range of therapies. We are currently focused on the development of two product candidates for which we hold worldwide commercial rights: LIQ861 for the treatment of pulmonary arterial hypertension, or PAH, and LIQ865 for the treatment of local post-operative pain. LIQ861, for which we recently filed a New Drug Application, or NDA, with the FDA, is an inhaled dry powder formulation of treprostinil designed to improve the therapeutic profile of treprostinil by enhancing deep-lung delivery and achieving higher dose levels than current inhaled therapies. We have applied our PRINT technology to enable us to deliver LIQ861 through a convenient, palm-sized dry powder inhaler, or DPI. We have also applied our PRINT technology to our second product candidate, LIQ865, for which we have completed two Phase 1 clinical trials and have ~~initiated~~conducted toxicology studies in order to support Phase 2~~-enabling~~ ~~toxicology~~clinical studies. LIQ865 is designed to deliver sustained-release particles of bupivacaine, a non-opioid anesthetic, to treat local post-operative pain for three to five days through a single administration. Additionally, we recently initiated a pre-clinical program to develop an inhaled product leveraging the benefits of our PRINT technology to engineer particles with precise, uniform, aerodynamic size and shape for deep lung delivery.

Our primary objective has been to pursue marketing approval of LIQ861 and to commercialize such product if approved by FDA. We will need to raise substantial additional capital to commercialize LIQ861, if approved, pursue our other research and development stage programs, and remain in compliance with the minimum cash requirement covenant on our debt. Such capital may not be available to us on a timely basis, on terms that are favorable to us, or at all.

Product Pipeline

We are currently focused on the development of two product candidates for which we hold worldwide commercial rights: LIQ861 for the treatment of PAH and LIQ865 for the treatment of local post-operative pain.

The following table summarizes our clinical-stage product candidates being developed using PRINT technology:

22 23

LIQ861

In January 2020, we submitted an NDA to the FDA for LIQ861, our lead product candidate, as a potential treatment for patients with PAH. ~~In April 2020, the FDA accepted the NDA for review and provided a Prescription Drug User Fee Act (PDUFA) goal date of November 24, 2020.~~ Treprostinil is a synthetic analog of prostacyclin, a vasoactive mediator essential to normal lung function, which is deficient in patients with PAH. We believe that LIQ861 has the potential to improve the therapeutic profile of existing formulations of treprostinil by enhancing deep-lung delivery and achieving higher dose levels than current inhaled therapies. We are developing LIQ861 under the 505(b)(2) regulatory pathway with Tyvaso as the reference listed drug, which allows us to rely in part on the FDA’s previous findings of efficacy and safety of Tyvaso and the active ingredient treprostinil, which has been approved in four different products administered through the oral, inhaled and continuous infusion (parenteral) routes.

~~Our~~In April 2020, the FDA accepted the NDA ~~submission~~for isreview ~~based~~and inprovided ~~part~~a ~~upon~~Prescription ~~the~~Drug ~~results~~User ofFee ~~our~~Act ~~open-label~~(PDUFA) ~~Phase 3~~goal ~~clinical~~date ~~trial~~of November 24, ~~INSPIRE~~2020. Under the Hatch-Waxman Act, oras ~~Investigation~~a result of the ~~Safety~~Hatch-Waxman ~~and~~Litigation ~~Pharmacology~~commenced ofby ~~Dry~~United ~~Powder~~Therapeutics ~~Inhalation~~on ofJune ~~Treprostinil~~4, ~~for LIQ861~~2020, the ~~initiation~~FDA ofmay ~~which~~not weissue ~~announced~~a infinal ~~January 2018.~~approval ~~The~~for ~~primary~~the ~~objective~~LIQ861 ofNDA ~~the~~for ~~INSPIRE~~up ~~study~~to ~~was~~30 months, absent an earlier judgment unfavorable to ~~evaluate~~United Therapeutics by the ~~long-term~~court. ~~safety~~When ~~and~~the ~~tolerability~~FDA ofis ~~LIQ861.~~precluded ~~The~~from ~~study~~approving ~~was~~a ~~designed~~505(b)(2) application due to ~~evaluate~~a ~~patients~~30-month ~~who~~stay, ~~have~~it ~~either~~is ~~been~~generally ~~under~~possible ~~stable~~that ~~treatment~~the ~~with~~agency ~~Tyvaso~~could ~~(nebulizer-delivered~~issue ~~treprostinil)~~“tentative ~~for~~approval” atif ~~least~~it ~~three months~~determines ~~and~~that ~~were~~all ~~transitioned~~requirements tofor ~~LIQ861~~approval ~~under~~have ~~the~~been ~~protocol~~met. However, ora ~~Transition~~drug ~~patients,~~product orthat ~~patients~~is ~~who~~granted ~~had~~tentative ~~been~~approval ~~under~~may ~~stable~~be ~~treatment~~subject ~~with~~to noadditional review before final approval, particularly if tentative approval was granted more than ~~two~~three ~~non-prostacyclin~~years ~~oral~~before ~~PAH~~the ~~therapies~~earliest ~~for~~lawful atapproval ~~least~~date. ~~three months~~The ~~and~~FDA’s ~~then~~tentative ~~had~~approval ~~their~~of ~~treatment~~drug ~~regimen~~product ~~supplemented~~would ~~with~~be ~~LIQ861~~based ~~under~~on information available to FDA at the ~~protocol,~~time orof ~~Add-On~~the ~~patients~~tentative approval letter (i.e., ~~Within~~information in the ~~INSPIRE~~application ~~study,~~and 18the ~~Transition~~status ~~patients~~of ~~were~~current ~~evaluated~~good manufacturing practices of the facilities used in athe ~~one-directional~~manufacturing ~~crossover~~and ~~sub-study~~testing ~~comparing~~of ~~bioavailability~~the drug product) and ~~pharmacokinetics,~~is ortherefore ~~PK,~~subject ofto ~~treprostinil~~change ~~following~~on ~~dosing~~the basis of ~~LIQ861~~new asinformation ~~compared~~that ~~with~~may ~~Tyvaso~~come to FDA’s attention. A new drug product may not be marketed until the date of final approval.

InOur ~~March 2019,~~NDA wesubmission ~~reported~~is ~~that~~based wein ~~had~~part ~~completed~~upon ~~enrollment and met~~ the ~~primary~~results ~~endpoint,~~of ~~which~~our ~~was long~~open-~~term~~label ~~safety~~Phase 3 ~~and~~clinical ~~tolerability~~trial, inINSPIRE, ~~our~~or ~~INSPIRE~~Investigation ~~trial.~~of ~~LIQ861~~the ~~was~~Safety ~~observed~~and toPharmacology beof ~~well-tolerated~~Dry inPowder ~~109~~Inhalation ~~patients~~of Treprostinil, ~~with~~for ~~101~~LIQ861, ~~patients~~the ~~(93%)~~initiation ~~completing~~of atwhich ~~least~~we ~~two~~announced in January ~~months~~2018. The primary objective of ~~treatment.~~the ~~During~~INSPIRE study was to evaluate the ~~two~~long-~~month~~term ~~period,~~safety and tolerability of LIQ861. The study was ~~evaluated~~designed atto ~~doses~~evaluate uppatients towho ~~159~~have ~~mcg~~either ~~with~~been nounder ~~study-drug~~stable ~~related~~treatment ~~serious~~with ~~adverse~~Tyvaso ~~events.~~(nebulizer-delivered ~~Dosing~~treprostinil) ~~has~~for ~~exceeded~~at ~~159~~least ~~mcg~~three months inand ~~some~~were ~~patients~~transitioned ~~receiving~~to ~~drug~~LIQ861 ~~beyond~~under the ~~Month~~protocol, 2or ~~time~~Transition ~~point.~~patients, Weor ~~have~~patients ~~not~~who ~~yet~~had ~~determined~~been aunder ~~maximum~~stable ~~tolerated~~treatment ~~dose~~with ofno ~~LIQ861.~~more Wethan ~~also~~two ~~reported~~non-prostacyclin ~~fully~~oral ~~enrolling~~PAH ~~our~~therapies ~~one-directional~~for ~~crossover~~at ~~sub-study~~least ~~comparing~~three months ~~bioavailability~~ and PKthen ofhad ~~treprostinil~~their astreatment ~~sub-study~~regimen ~~patients~~supplemented ~~transitioned~~with ~~from~~LIQ861 ~~Tyvaso~~under tothe ~~LIQ861~~protocol, or Add-On patients.

In ~~April~~August 2019, we ~~reported~~completed ~~further~~the ~~data~~pivotal ~~from~~INSPIRE ~~these~~trial. ~~109~~Final enrollment included 121 PAH patients into ~~our~~assess ~~INSPIRE~~safety and tolerability through Month 2, the primary endpoint of the trial. Of the 121 patients enrolled in the study, 55 were Transition patients and 66 were Add-On patients. Add-On patients started on ~~exploratory~~a ~~endpoints~~dose atof 26.5 mcg of LIQ861, with most (>80%) titrating to a 79.5 mcg dose or higher within the first two months of treatment. ~~that~~Consistent ~~demonstrated~~with ~~generally~~preliminary ~~favorable~~data ~~results~~presented ~~with~~in ~~respect~~the second quarter of 2019, LIQ861 was observed to ~~six~~be well-~~minute~~tolerated ~~walk~~and ~~distance~~treatment-emergent ~~and~~adverse ~~quality~~events, ofor ~~life~~TEAEs, aswere ~~indicated~~mostly bymild ~~the~~to ~~Minnesota~~moderate ~~Living~~in ~~with~~nature ~~Heart~~at ~~Failure~~Month ~~Questionnaire,~~2 orup ~~MLHFQ.~~to Indoses ~~May 2019~~of 159 mcg of LIQ861, wethe ~~reported~~highest ~~further~~dose ~~presentation~~studied at Month 2. Durability of ~~this~~therapy ~~data~~with atLIQ861 ~~the~~appeared ~~American~~to ~~Thoracic~~be ~~Society~~favorable, orwith ~~ATS,~~96% ~~International~~of ~~Conference~~Transition ~~2019~~patients and 91% of Add-On patients remaining on study drug at the Month 2 timepoint.

In ~~June~~April ~~2019~~2020, we reported ~~results~~final ~~from~~safety ~~the~~and ~~INSPIRE~~tolerability ~~study~~results ~~indicating~~from ~~that~~ the ~~79.5~~two-month ~~mcg~~primary ~~dose~~endpoint of ~~LIQ861 correlates with nine breaths of Tyvaso,~~ the ~~maximum~~INSPIRE ~~recommended label dose of Tyvaso~~study. ~~Analysis~~Of of the ~~data~~121 ~~from~~PAH ~~the PK sub-study in~~ patients, ~~showed variability in systemic plasma levels of both LIQ861 and Tyvaso~~113, ~~which~~or ~~is believed to be attributed to variation in severity of disease and has been seen in prior studies of treprostinil in patients. To more accurately characterize the PK of LIQ861~~93%, wecompleted ~~conducted~~their two-month ~~additional PK studies in healthy volunteers~~visit. InThe ~~the~~most ~~first~~common ofreported ~~these~~TEAEs ~~studies,~~(reported ~~we observed unexpected variability~~ in PK≥ ~~levels.~~four percent) ~~Post-hoc analysis showed that plasma levels of treprostinil~~ were ~~tightly~~cough ~~correlated~~(42%), toheadache ~~the~~(26%), ~~LIQ861~~throat ~~dose~~irritation ~~delivered.~~(16%), ~~Based~~dizziness ~~upon~~(11%), ~~additional~~diarrhea ~~non-clinical~~(9%), ~~and~~chest ~~clinical~~discomfort ~~work~~(8%), wenausea ~~believe~~(7%), ~~the~~dyspnea ~~unexpected variability seen in this healthy volunteer study was due to an administration technique unique to the conduct of the study in the Phase 1 setting. In August 2019~~(5%), weflushing ~~completed~~(5%) ~~a second PK study in healthy volunteers in which the proper administration technique was followed. This study demonstrated significantly reduced variability,~~ and weoropharyngeal ~~believe~~pain ~~we have established comparative bioavailability to the reference listed drug~~(4%).

In August 2019, we completed the INSPIRE trial. Final enrollment in the pivotal INSPIRE trial included 121 PAH patients to assess safety and tolerability through Month 2, the primary endpoint of the trial. Of the 121 patients enrolled in the study, 55 were Transition patients and 66 were Add-On patients. Add-On patients started on a dose of 26.5 mcg of LIQ861, with most (>80%) titrating to a 79.5 mcg dose or higher within the first two months of treatment. Consistent with preliminary data presented in the second quarter of 2019, LIQ861 was observed to be well-tolerated and treatment-emergent adverse events, or TEAEs, were mostly mild to moderate in nature at Month 2 up to doses of 159 mcg of LIQ861, the highest dose studied at Month 2. Durability of therapy with LIQ861 appeared to be favorable, with 96% of Transition patients and 91% of Add-On patients remaining on study drug at the Month 2 timepoint.

In April 2020, we reported final safety and tolerability results from the two-month endpoint of the INSPIRE study. Of the 121 PAH patients, 113, or 93%, completed their two-month visit. The most common reported TEAEs (reported in ≥ four percent) were cough (42%), headache (26%), throat irritation (16%), dizziness (11%), diarrhea (9%), chest discomfort (8%), nausea (7%), dyspnea (5%), flushing (5%) and oropharyngeal pain (4%).

Analysis of the exploratory endpoints from the INSPIRE study indicates that LIQ861 may provide functional and quality-of-life benefits to PAH patients in New York Heart Association, or NYHA, functional classes II and III. More than 70% of patients were able to titrate to a LIQ861 dose greater than or equal to 79.5 mcg, the LIQ861 dose-level comparable to 54 mcg of nebulized treprostinil, the maximum recommended dose in the Tyvaso® package insert. More than 95% of all patients who completed two months of treatment maintained (75.9%) or improved (20.5%) their NYHA functional class. We observed improvements in median six-minute-walk-distance (+10.1 meter increase). Quality-of-life as measured by the MLHFQ showed an improved total score (>5-point reduction), as well as improvements in both emotional and physical dimensions. We observed a greater percentage of subjects who met two or three PAH low-risk criteria at month 2 compared to baseline. We did not see clinically meaningful changes in N-terminal pro b-type natriuretic peptide (NT-proBNP). The majority of Transition patients preferred the LIQ861 dry-powder inhaler to the Tyvaso® Inhalation System.

WeIn ~~continued~~September 2019, towe ~~treat~~reported ~~patients~~results ~~who~~from ~~chose~~pharmacokinetic to(PK) ~~remain~~studies onindicating ~~LIQ861~~that ~~beyond~~ the ~~Month 2 timepoint of the primary endpoint~~79.5 ~~More~~mcg ~~than~~dose ~~80%~~ of ~~INSPIRE~~LIQ861 ~~patients~~correlates ~~remained on study drug at Month 4~~ with nonine ~~significant~~breaths ~~changes~~of inTyvaso, ~~safety~~the ormaximum ~~tolerability~~recommended ~~observed~~label ~~compared~~dose toof ~~Month 2~~Tyvaso. AtTo ~~the~~accurately ~~completion~~characterize of the ~~INSPIRE~~pharmacokinetics ~~study, the patient with the longest duration~~ of ~~treatment had been on~~ LIQ861, ~~therapy~~we ~~for~~conducted ~~18 months~~two ~~and~~PK ~~the~~studies ~~highest~~in ~~dosing~~healthy ~~reached~~volunteers. inIn the ~~INSPIRE~~first ~~study~~of ~~was~~these ~~212~~studies, ~~mcg~~we ofobserved ~~treprostinil~~unexpected ~~given~~variability ~~four~~in ~~times~~PK ~~per day~~levels. ToPost-hoc ~~provide~~analysis ~~for~~showed ~~continuity~~that ofplasma ~~treatment,~~levels ~~patients~~of ~~from~~treprostinil ~~INSPIRE~~ were ~~provided~~tightly ~~the~~correlated ~~opportunity~~ to ~~continue~~the ~~receiving~~LIQ861 ~~treatment~~dose ~~in an extension study, which is currently ongoing~~delivered. InBased ~~addition,~~upon ~~when~~additional ~~the COVID~~non-19clinical ~~pandemic has ended~~ and ~~when~~clinical ~~it is safe to do so~~work, we ~~plan~~believe tothe ~~resume~~unexpected ~~enrolling~~variability ~~patients~~seen in athis ~~clinical~~healthy volunteer study atwas ~~certain~~due ~~investigational~~to ~~sites~~an inadministration ~~Europe~~technique unique to ~~characterize~~ the ~~hemodynamic~~conduct ~~dose-response~~of ~~relationship~~the tostudy ~~LIQ861.~~in Wethe ~~are~~Phase 1 ~~also~~setting. ~~considering~~In ~~conducting~~August 2019, ~~other~~we ~~clinical~~completed ~~trials~~a tosecond ~~generate~~PK ~~additional~~study ~~data~~in onhealthy ~~LIQ861,~~volunteers ~~including~~in awhich ~~clinical~~the ~~trial~~proper inadministration ~~pediatric~~technique ~~patients~~was followed. WeThis ~~also~~study ~~continue~~demonstrated tosignificantly ~~conduct~~reduced ~~development~~variability, ~~work~~and inwe ~~support~~believe ofwe ~~potential~~have ~~approval~~established ~~and~~comparative ~~commercialization~~bioavailability ofto ~~LIQ861,~~the ~~including~~reference ~~label~~listed ~~and patient-use assessments~~drug.

23 Results from the INSPIRE trial have been presented at various international scientific meetings such as the American Thoracic Society (ATS), International Society of Heart Lung Transplantation (ISHLT), Pulmonary Vascular Research Institute (PVRI), American College of Chest Physicians (ACCP) in 2019 and 2020.

We continued to treat patients who chose to remain on LIQ861 beyond the Month 2 timepoint of the primary endpoint. At the completion of the INSPIRE study, the patient with the longest duration of treatment had been on LIQ861 therapy for 18 months and the highest dosing reached in the INSPIRE study was 212 mcg of treprostinil given four times per day. To provide for continuity of treatment, patients from INSPIRE were provided the opportunity to continue receiving treatment in an extension study, which is currently ongoing (LTI-302). Currently, more than 70 patients have now received therapy with LIQ861 for more than two years. We have also observed that more than 70 percent of patients who have been enrolled in the INSPIRE and extension studies have received LIQ861 doses of 100 mcg or more.

Prior to submission of the NDA in January 2020, the FDA visited our manufacturing site in June 2019 as a qualifying participant in the Emerging Technology Program sponsored by the Center for Drug Evaluation and Research (CDER). The program supports innovation by providing a forum for sponsors to engage the FDA early in development and ensures consistency, continuity, and predictability in review and inspection. The program has allowed us to discuss PRINT® technology with Emerging Technology Team members, including personnel who may be involved in the prior approval inspection (PAI) and review of the Chemistry Manufacturing Controls section of the NDA to support LIQ861.

The FDA communicated in August 2020 that inspections of two sites involved in the manufacturing of LIQ861, both of which are located in the United States, would be required before the FDA can approve the NDA for LIQ861. The FDA also informed us that because of restrictions on travel due to COVID-19, the FDA may be unable to conduct inspections of these two sites prior to the User Fee Date of November 24, 2020. We will continue to work closely with the FDA with regard to the PAIs; however, the FDA has not yet conducted these inspections as of the date of this Quarterly Report on Form 10-Q.

In addition to the studies submitted in the NDA for FDA review, we are conducting a clinical study at certain investigational sites in France and Germany to characterize the hemodynamic dose-response relationship to LIQ861 (LTI-201). After pausing enrollment due to the COVID-19 pandemic in the second quarter of 2020, we resumed enrollment in September 2020 at sites in Germany as allowed by local regulatory authorities. We intend to resume enrollment at French sites as soon as feasible in cooperation with French regulatory authorities.

We are considering conducting other clinical trials to generate additional data on LIQ861, including a clinical trial in pediatric patients. We will continue to conduct development work in support of potential approval and commercialization of LIQ861, including label and patient-use assessments.

LIQ865

LIQ865 is our proprietary injectable, sustained-release formulation of bupivacaine, a non-opioid pain medication. We have engineered the size and composition of the LIQ865 PRINT particles to release bupivacaine over three to five days through a single administration for the management of local post-operative pain after a surgical procedure. We completed a Phase 1a clinical trial of LIQ865 in Denmark in 2017 and a Phase 1b clinical trial in the United States in 2018. We initiated Phase 2-enabling toxicology studies in 2019 to assess LIQ865 in multiple non-clinical tissue models. Results from a study to assess incision tensile strength after healing were acceptable and not statistically different from controls. A nonclinical study to examine soft tissue healing was also completed, and the results were acceptable and comparable to vehicle-treated, saline-treated, and Marcaine-treated sites. We believe this data supports progression to Phase 2 hernia repair studies. In a study to assess bone fracture healing, we observed dose-dependent delayed healing at the two LIQ865 doses studied; however, there were no adverse effects noted on surrounding soft tissues. Additional studies have been initiated with lower doses of LIQ865 to determine a no adverse effect level, or NOAEL, on bone healing. We will review the results from these toxicology studies, and if supportive, we intend to initiate Phase 2 proof-of-concept clinical trials, subject to availability of capital and other factors, during 2021. We believe LIQ865, if successfully developed and approved, has the potential to provide significantly longer local post-operative pain relief compared to currently marketed formulations of bupivacaine.

We initiated Phase 2-enabling toxicology studies in 2019 to assess LIQ865 in multiple non-clinical tissue models. Results from a study to assess incision tensile strength after healing were acceptable and not statistically different from controls. A nonclinical study to examine soft tissue healing was also completed, and the results were acceptable and comparable to vehicle-treated, saline-treated, and Marcaine-treated sites. We believe this data supports progression to Phase 2 hernia repair studies.

In a toxicology study to assess bone fracture healing, we observed dose-dependent delayed healing at the two LIQ865 doses studied; however, there were no adverse effects noted on surrounding soft tissues. We have completed an additional non-Good Laboratory Practice (GLP) study to investigate bone fracture healing using the same animal model with lower doses of LIQ865. This additional non-GLP study has established a no adverse effect level, or NOAEL, on bone healing and provides evidence that LIQ865 could proceed into a GLP toxicology study to support Phase 2 clinical activities.

Considering our focus in advancing our lead asset, LIQ861, we will seek to advance LIQ865 through a strategic collaboration with an external partner. We believe LIQ865, if successfully developed and approved, has the potential to provide significantly longer local post-operative pain relief compared to currently marketed formulations of bupivacaine.

Other Potential Applications of PRINT

We believe that our PRINT technology can be applied to a wide range of therapeutic areas, molecule types and routes of administration. We are currently focused on developing product candidates that we believe are eligible to be approved under the 505(b)(2) regulatory pathway, which can be capital efficient and potentially enable a shorter time to approval, as it allows us to rely in part on existing knowledge of the safety and efficacy of the relevant reference listed drugs to support our applications for approval in the United States. If any of our product candidates are approved, we intend to conduct initial commercial manufacturing of drug product using in-house capabilities, and to outsource packaging and distribution to third parties. Where appropriate, we may also transition the commercial manufacture of our drug product to third parties. In addition to developing our two product candidates, we have provided specific field-limited licenses to our PRINT technology to pharmaceutical companies seeking to develop their own potential drugs and biological therapies.

Proposed Acquisition of RareGen, LLC

On June 29, 2020, we entered into that certain Agreement and Plan of Merger with RareGen, LLC, a privately-held entity, Liquidia Corporation, a wholly- owned subsidiary of our company, or HoldCo, Gemini Merger Sub I, Inc., a wholly- owned subsidiary of HoldCo, or Liquidia Merger Sub, Gemini Merger Sub II, LLC, a wholly- owned subsidiary of HoldCo, or RareGen Merger Sub, and PBM RG Holdings, LLC, as the Members’ Representative, pursuant to which, among other things, we and RareGen will each become a subsidiary of HoldCo, which we refer to as the Merger Transaction. RareGen provides strategy, investment, and commercialization for ~~rare~~generic ~~disease~~Treprostinil ~~pharmaceutical products~~injection. RareGen has a small, targeted sales force focused on PAH. Pursuant to a Promotion Agreement, dated as of August 1, 2018, as amended, or the Promotion Agreement, between RareGen and Sandoz Inc., or Sandoz, RareGen owns the exclusive rights to conduct any and all promotional and non-promotional activities to encourage the appropriate use of the first-to-file substitutable generic of treprostinil injection for the treatment of patients with PAH in the United States. The Merger Transaction is expected to close in the ~~second~~fourth ~~half~~quarter of 2020. If the Merger Transaction is completed, (i) each share of common stock, $0.001 par value per share, of our company, whether certificated or held in book-entry form, will automatically convert into one share of HoldCo common stock, $0.001 par value per share, or HoldCo Common Stock, (ii) each option and warrant to purchase a share of our common stock will entitle the holder to purchase one share of HoldCo Common Stock, and the exercise price per share will be identical to the option or warrant issued by our company, and (iii) each restricted stock unit issued by our company will entitle the holder to a HoldCo restricted stock unit, each to vest and settle into a share of HoldCo Common Stock. At the effective time of the Merger Transaction, an aggregate of 6,166,666 shares of HoldCo Common Stock, including 616,666 shares of HoldCo Common Stock which will be withheld from RareGen members to secure the indemnification obligations of RareGen members, or the Holdback Shares, will be issued to RareGen members in exchange for all of the 10,000 outstanding RareGen common units, representing all of the issued and outstanding RareGen equity. RareGen members will be entitled to receive, on a pro rata basis, any Holdback Shares remaining on March 31, 2022. Additionally, RareGen members shall be entitled to a pro rata portion of any RareGen cash at closing in excess of $1 million. RareGen members will also be entitled to receive a pro rata portion of up to an additional 2,708,333 shares of HoldCo Common Stock in the aggregate in 2022, based on the amount of 2021 net sales of the generic treprostinil product owned by Sandoz, which RareGen markets pursuant to the Promotion Agreement. The fair value of the purchase consideration, or the purchase price is currently estimated to be approximately $3723.49 million based on 6,166,666 shares of HoldCo Common Stock at a per share price of $53.3834, which represents the closing price of our common stock on ~~July~~November 272, 2020, and the estimated fair value of the contingent consideration liability of $43.3 million. The estimated purchase price is variable depending on the valuation of our common stock and the acquisition of RareGen is currently anticipated to be accounted for as a business combination in accordance with Accounting Standards Codification (ASC) 805, Business Combinations.

24 On November 2, 2020, we announced that we have rescheduled our special meeting of stockholders, which was originally scheduled for October 21, 2020, to be held at 4:30 p.m., Eastern Time, on November 13, 2020, or the Special Meeting. The Special Meeting will be a virtual meeting conducted solely online via live webcast and can be attended by visiting www.meetingcenter.io/287587626. On October 16, 2020, we received an unsolicited offer to enter into a License Agreement for LIQ861, or the Alternative Proposal. The Alternative Proposal was conditioned upon us terminating the Merger Agreement. On November 1, 2020, our board of directors determined that the Alternative Proposal does not constitute a “Superior Proposal” under the Merger Agreement and we subsequently informed the counterparty that we are terminating discussions with respect to such Alternative Proposal. Accordingly, our board of directors has unanimously reaffirmed its recommendations that our stockholders vote “FOR” each proposal being submitted to a vote of our stockholders at the Special Meeting. Closing of the Merger Transaction is expected to occur within a few business days following the Special Meeting.

Financial Overview

We have not generated any revenue to date from the sale of pharmaceutical products, and we have historically financed our operations in large part with an aggregate of $~~236~~311.0 million of gross proceeds from sales of our capital stock and convertible promissory notes, $16.0 million in term loans from a bank and a $2.1 million loan from The University of North Carolina at Chapel Hill, or UNC. We do not expect to generate significant product revenue unless and until we obtain marketing approval for and commercialize LIQ861, LIQ865 or one of our other future product candidates.

Since our inception, we have incurred significant operating losses. Our net loss was $2843.7 million for the ~~six~~nine months ended ~~June~~September 30, 2020 and $47.6 million, $53.1 million and $29.2 million for the years ended December 31, 2019, 2018 and 2017, respectively. As of ~~June~~September 30, 2020, we had an accumulated deficit of $~~243~~258.9 million. We expect to incur significant expenses and operating losses for the foreseeable future as we advance our product candidates through clinical trials, seek regulatory approval and pursue commercialization of any approved product candidates. In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution. In addition, we may incur expenses in connection with the in-license or acquisition of additional product candidates.

As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through the sale of equity, debt financings or other capital sources, including potential collaborations with other companies or other strategic transactions. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed, on favorable terms, or at all. If we fail to raise capital or enter into such agreements as, and when, needed, we may have to significantly delay, scale back or discontinue the development and commercialization of one or more of our product candidates or delay our pursuit of potential in-licenses or acquisitions.

As of ~~June~~September 30, 2020, we had $2379.6 million of cash. On July 2, 2020, we received $6970.83 million in net proceeds from the issuance of 9,375,000 shares of our common stock through a public offering. We believe that our existing cash will enable us to fund our operating expenses and capital expenditure requirements, make payments of interest and principal on our term loan facility with Pacific Western Bank, or PWB, and remain in compliance with the minimum cash covenant of $8.5 million pursuant to this term loan facility, into the ~~third~~ first quarter of ~~2021~~2022. We have based these estimates on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect. See “Liquidity and Capital Resources.”

~~As of June 30, 2020, we do not have any material capital expenditure commitments.~~ 26

As of September 30, 2020, we do not have any material capital expenditure commitments.

Going Concern

Our consolidated financial statements have been prepared assuming we will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. Our operations have consisted primarily of developing our technology, developing products, prosecuting our intellectual property and securing financing. We have incurred recurring losses and cash outflows from operations, have an accumulated deficit, and have debt principal payments that commenced in the first quarter of 2020. We expect to continue to incur losses in the foreseeable future and will require additional financial resources to continue to advance our products and intellectual property, in addition to repaying our maturing debt and other obligations. These circumstances raise substantial doubt about our ability to continue as a going concern.

Management’s plans with regard to this matter include continuing attempts to obtain additional financing to sustain our operations. However, there is no assurance that we will be successful in obtaining sufficient financing on terms acceptable to us, and the failure to obtain sufficient funds on acceptable terms, when needed, could have a material adverse effect on our business, results of operations and financial condition. If sufficient financing is not obtained, this may necessitate other actions by us. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Our Collaborations

We recognized no revenue during the three and ~~six~~nine months ended ~~June~~September 30, 2020. Revenue has been derived from collaborating with, and licensing our proprietary PRINT technology to, pharmaceutical companies, and amounted to $8.1 and $2.7 million for the years ended December 31, 2019 and 2018, respectively. GlaxoSmithKline plc, or GSK, accounted for $8.1 and $0.4 million of our revenue for the years ended December 31, 2019 and 2018, respectively, or 100% and 15% respectively, of our total revenue during these years. We have received upfront fees for technology access, milestone payments, and fees to develop drug products through research and development services, such as particle formulation and manufacturing.

In addition to advancing our own product candidates, LIQ861 and LIQ865, we have collaborated, and may consider collaborating, with pharmaceutical companies to develop their own product candidates across a wide range of therapeutic areas, molecule types and routes of administration, leveraging our PRINT technology. These collaborations are intended to help advance new PRINT capabilities and build upon our competitive advantage in the pharmaceutical industry, while adding to our intellectual property portfolio.

We have exclusively licensed our PRINT technology to (i) GSK for applications broadly across inhaled delivery of their small molecule and biologic chemical entities, although we retained the ability to develop LIQ861, inhaled vaccines and other rights, subject to certain contractual obligations, to apply our PRINT technology to certain inhaled molecules; and (ii) Aerie Pharmaceuticals, Inc., which in 2017 acquired most of the assets of Envisia Therapeutics, Inc., an entity which we formed in 2013, for broad usage in the design and commercialization of small molecule and biologic ophthalmic therapies.

GlaxoSmithKline

Previously, we had collaborated with GSK on the use of our PRINT technology in respiratory disease. In June 2012, we entered into an Inhaled Collaboration and Option Agreement, or the GSK ICO Agreement, with GSK to collaborate on research regarding the application of our PRINT technology to specified inhaled therapies. Pursuant to the GSK ICO Agreement, we granted GSK exclusive options and licenses to further develop and commercialize such inhaled therapies using our PRINT technology. In partial consideration of the rights granted to GSK under the GSK ICO Agreement, we received a one-time up-front payment of $4.0 million.

In September 2015, GSK exercised its option to obtain an exclusive, worldwide license to certain of our know-how and patents relating to our PRINT technology, for the purpose of, among others, preclinical studies of inhaled therapeutics developed, manufactured or otherwise produced using our PRINT technology. In connection with the grant of this license, we received a one-time option exercise fee of $15.0 million. Under the terms of the GSK ICO Agreement, we were also entitled to continued research and development funding and certain milestone payments aggregating up to $158 million upon the achievement of specified events for new non-rescue therapeutic products. Rescue therapeutic products are therapeutics that GSK develops with our PRINT technology that had previously been discontinued from development. We are also entitled to tiered royalties on the worldwide sales of the licensed products at percentages ranging from the mid-single digits to low-single digits depending on the total number of products developed and other royalty step-down events with a fixed low-single digit royalty floor. In February 2016, we received a $3.0 million payment from GSK upon the achievement of a clinical development milestone related to the development of an inhaled antiviral for viral exacerbations in chronic obstructive pulmonary disease. However, in July 2018, GSK notified us of its plans to discontinue development of this compound after completion of the related Phase 1 clinical trial.

GSK has the right to terminate the GSK ICO Agreement in its entirety or on a product-by-product basis upon a specified period of prior written notice. Upon termination of the GSK ICO Agreement, each party will continue to have the right to practice and/or license its interest in any know-how developed during the collaboration without seeking the consent of, or accounting to, the other party.

In June 2019, we and GSK executed the third amendment to the collaboration agreement providing us with rights to develop and commercialize three specified molecular entities for application in inhaled programs using our PRINT technology at our sole expense. This amendment also provided a mechanism for us to acquire rights to develop and commercialize further molecular entities for inhaled applications. New inhaled programs developed under this amendment would carry milestone and royalty payments due to GSK upon initiation of Phase 3 studies and subsequent commercialization, respectively. This amendment, among other factors, including the lack of continued performance anticipated by us and GSK under the original agreement, led us to believe that no further research and development services will be provided to GSK under the collaboration agreement. Accordingly, in January 2020, we notified GSK of our intent to terminate the GSK ICO Agreement based upon GSK's lack of performance under the agreement, which we believe constitutes a material breach of the agreement. In February 2020, we received a letter from GSK disputing our basis for termination. The parties are currently attempting to resolve the dispute pursuant to the terms of the GSK ICO Agreement.

This amendment, among other factors, including the lack of continued performance anticipated by us and GSK under the original agreement, led us to believe that no further research and development services will be provided to GSK under the collaboration agreement. Accordingly, in January 2020, we notified GSK of our intent to terminate the GSK ICO Agreement based upon GSK's lack of performance under the agreement, which we believe constitutes a material breach of the agreement. In February 2020, we received a letter from GSK disputing our basis for termination. The parties are currently attempting to resolve the dispute pursuant to the terms of the GSK ICO Agreement.

Components of Consolidated Statements of Operations

Revenue

In prior years, our revenue has been primarily derived from collaborating with and licensing our proprietary PRINT technology to pharmaceutical companies. In the future, we also expect to derive our revenue from our own pharmaceutical products. We recognized no revenue during the three and ~~six~~nine months ended ~~June~~September 30, 2020. We manage our operations and reporting structure under a single reportable segment.

All long-lived assets are domiciled and all revenue was earned within the United States.

Research and Development Expenses

Research and development expense consists of expenses incurred in connection with the development of our product candidates. We expense research and development costs as incurred. These expenses include:

●

expenses incurred under agreements with contract research organizations as well as investigative sites and consultants that conduct our clinical trials and preclinical studies;

●

manufacturing process development and scale-up expenses and the cost of acquiring and manufacturing preclinical and clinical trial materials and commercial materials, including manufacturing validation batches;

●

outsourced professional scientific development services;

●

employee-related expenses, which include salaries, benefits and stock-based compensation for personnel in research and development functions;

●

expenses relating to regulatory activities, including filing fees paid to regulatory agencies;

●

laboratory materials and supplies used to support our research activities; and

●

allocated expenses for utilities and other facility-related costs.

Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect our research and development expenses to increase significantly over the next several years as we increase personnel costs, including stock-based compensation, conduct our ongoing clinical trial and other development work for LIQ861, continue the development of LIQ865, conduct additional clinical trials, continue manufacturing process development and scale up and prepare for regulatory filings for our product candidates and regulatory inspection of facilities utilizing our PRINT manufacturing process. The successful development of our product candidates is highly uncertain. At this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the remainder of the development of, or when, if ever, material net cash inflows may commence from any of our product candidates. This uncertainty is due to the numerous risks and uncertainties associated with the duration and cost of clinical trials, which vary significantly over the life of a project as a result of many factors, including:

●

the number of clinical sites included in the trials;

●

the length of time required to enroll suitable patients;

●

the number of patients that ultimately participate in the trials;

●

the number of doses patients receive;

●

the duration of patient follow-up; and

●

the results of our clinical trials.

Our expenditures are subject to additional uncertainties, including the terms and timing of regulatory approvals, and the expense of filing, prosecuting, defending and enforcing any patent claims or other intellectual property rights. We may never succeed in achieving regulatory approval for any of our product candidates. We may obtain unexpected results from our clinical trials. We may elect to discontinue, delay or modify clinical trials of some product candidates or focus on others. A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. For example, if the FDA or other regulatory authorities were to require us to conduct clinical trials beyond those that we currently anticipate, or if we experience significant delays in enrollment in any of our clinical trials, or our ability to manufacture and supply product, we could be required to expend significant additional financial resources and time on the completion of clinical development. Drug commercialization will take several years and millions of dollars in development costs.

General and Administrative Expenses

General and administrative expenses consist principally of salaries and related costs for personnel in executive, administrative, finance and legal functions, including stock-based compensation, travel expenses and recruiting expenses. Other general and administrative expenses include costs for efforts to prepare for commercialization, facility related costs, patent filing and prosecution costs and professional fees for marketing, legal, auditing and tax services and insurance costs.

We anticipate that our general and administrative expenses will increase as a result of increased personnel costs, including stock-based compensation, expanded infrastructure and higher consulting, legal and tax-related services associated with maintaining compliance with stock exchange listing and SEC requirements, accounting and investor relations costs, and director and officer insurance premiums associated with being a public company. We expect that our general and administrative expenses will also increase during the second half of 2020 and during 2021 as a result of our proposed acquisition of RareGen. Additionally, when we believe a regulatory approval of a product candidate appears likely, we anticipate an increase in payroll and expense as a result of our preparation for commercial operations, especially as it relates to the sales and marketing of LIQ861.

Other Income (Expense)

Other income (expense) is comprised primarily of interest income and expense. Interest income consists of interest earned on our cash deposits. Interest expense consists of interest charges on leases and debt. These charges include monthly recurring interest on such obligations in addition to non-cash charges. Non-cash charges include the expensing of debt issuance costs and amortization of discounts on long-term debt to interest expense.

Critical Accounting Estimates

We discussed our accounting policies and significant assumptions used in our estimates in Note 2 of our audited financial statements included in our 2019 Annual Report on Form 10-K. There have been no material changes during the ~~six~~nine months ended ~~June~~September 30, 2020 to our critical accounting policies, significant judgments and estimates disclosed in our 2019 Annual Report on Form 10-K.

COVID-19

The pandemic caused by the outbreak of the novel coronavirus, or COVID-19, and the various governmental, industry and consumer actions related thereto, could have a material and adverse effect on our business. The effect, which largely depends on future developments that cannot be accurately predicted and are uncertain, could include a negative impact on the availability of our key personnel, temporary closures of our facilities or the facilities of our business partners, suppliers, third-party service providers or other vendors, delays in the conduct of our clinical trials, delays in payments or purchasing decisions, and the interruption of domestic and global supply chains, distribution channels and financial markets. As the pandemic continues to spread, we have and may continue to experience disruptions that could severely impact our business. Currently, most of our employees are working remotely, with only essential personnel working on site as needed to produce LIQ861 and prepare for a pre-approval inspection by the FDA. As a result of the pandemic, we ~~have also~~ paused enrollment in our hemodynamic study, which ~~has~~is ~~been~~being conducted in ~~Europe~~France and Germany. In September 2020, we resumed enrollment in the hemodynamic study at a site in Germany with the expectation that additional sites will resume enrollment in the fourth quarter 2020. As such, the results for the ~~six~~three and nine months ended ~~June~~September 30, 2020 may not be indicative of results for the full year.

Results of Operations

Comparison of the Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2020 with the Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2019

The following table summarizes the results of our operations for each of the three- and ~~six~~ nine-month periods ended ~~June~~September 30, 2020 and 2019, together with the changes in those items in dollars and as a percentage (in thousands, except for percentages):

	Three Months Ended June 30,						$			%			Six Months Ended June 30,						$			%
	Three Months Ended September 30,						$			%			Nine Months Ended September 30,						$			%
	2020			2019			Change			Change			2020			2019			Change			Change
	(in thousands)
Revenue	$	—		$	~~8,072~~—		$	~~(8,072~~—	)		*		$	—		$	8,072		$	(8,072	)		*
Costs and expenses:
Cost of revenue		—			~~807~~—			~~(807~~—	)		*			—			807			(807	)		*
Research and development		87,~~491~~661			10,~~723~~942			(23,~~232~~281	)		(2030.80	)%		1926,~~313~~975			2132,~~388~~330			(25,~~075~~355	)		(916.76	)%
General and administrative		57,~~226~~152			2,~~409~~378			24,~~817~~774			~~117~~200.08	%		916,~~050~~201			57,~~430~~808			38,~~620~~393			66107.65	%
Total costs and expenses		1314,~~717~~813			13,~~939~~320			~~(222~~1,493	)		(111.62	)%		2843,~~363~~176			2740,~~625~~945			~~738~~2,231			25.74	%
Loss from operations		(1314,~~717~~813	)		(513,~~867~~320	)		(71,~~850~~493	)		(~~133~~11.82	)%		(2843,~~363~~176	)		(1932,~~553~~873	)		(810,~~810~~303	)		(4531.13	)%
Interest income		1235			~~220~~162			(~~208~~127	)		(9478.76	)%		~~121~~156			~~358~~520			(~~237~~364	)		(6670.10	)%
Interest expense		(~~211~~191	)		(~~254~~265	)		4374			1628.81	%		(~~466~~656	)		(~~473~~738	)		782			111.40	%
Net loss	$	(1314,~~916~~969	)	$	(513,~~901~~423	)	$	(81,~~015~~546	)		(~~135~~11.85	)%	$	(2843,~~708~~676	)	$	(1933,~~668~~091	)	$	(910,~~040~~585	)		(4632.0	)%

_______________

* Not meaningful

Revenue

~~Revenue~~We ~~was~~recognized $0no revenue for the ~~three~~nine months ended ~~June~~ September 30, 2020, compared with $8.1 million for the ~~three~~nine months ended ~~June~~ September 30, 2019. Revenue during the ~~three~~nine months ended ~~June~~September 30, 2019 was due to the recognition of $8.1 million of deferred revenue from the GSK ICO Agreement resulting from the third amendment to such agreement that was entered into in June 2019.

~~Revenue was $0 for the six months ended June~~ 30, 2020, compared with $8.1 million for the six months ended June 30, 2019. Revenue during the six months ended June 30, 2019 was due to the recognition of $8.1 million of deferred revenue from the GSK ICO Agreement resulting from the third amendment as noted above.

Cost of Revenue

~~Cost~~We ofrecognized ~~revenue~~no ~~was~~cost $0of revenue for the ~~three~~nine months ended ~~June~~ September 30, 2020, compared to $0.8 million for the ~~three~~nine months ended ~~June~~ September 30, 2019. ~~The~~ As noted above, the decrease of $0.8 million was due to the decrease in revenue. Cost of revenue represents sub-licensing fees paid to UNC when licensing revenue is recognized from the use of the intellectual property that we in-licensed from UNC.

Cost of revenue was $0 for the six months ended June 30, 2020, compared to $0.8 million for the six months ended June 30, 2019. As noted above, the decrease of $0.8 million was due to the decrease in revenue.

Research and Development Expenses

Research and development expenses were $87.57 million for the three months ended ~~June~~September 30, 2020 compared with $10.79 million for the three months ended ~~June~~September 30, 2019, a decrease of $23.23 million or 2030.80%. Clinical trial related expenses for the development of LIQ861 and LIQ865 decreased by $2.85 million and $0.6 million, respectively, during the three months ended ~~June~~September 30, 2020 compared with the three months ended ~~June~~September 30, 2019. ~~This~~The decrease ~~was~~in ~~partially~~clinical ~~offset~~trial byexpenses was a ~~$0.5~~result ~~million~~of ~~increase~~our incompany ~~consulting~~substantially ~~fees~~completing ~~during~~our ~~the~~clinical ~~three~~trial ~~months~~activity ~~ended~~prior ~~June~~to ~~30,~~filing ~~2020 compared with~~ the ~~three~~NDA ~~months~~in ~~ended June 30, 2019~~2020. Research and development expenses for the three months ended ~~June~~September 30, 2020 consisted of $5.83 million and $0.42 million attributable to our development of LIQ861 and LIQ865, respectively, and $2.32 million from general research and development that was not directly related to LIQ861 and LIQ865. This compares with $7.49 million and $10.68 million which were attributable to our development of LIQ861 and LIQ865, respectively, and $12.72 million from general research and development that was not directly related to either LIQ861 or LIQ865 during the three months ended ~~June~~September 30, 2019.

29 Research and development expenses were $27.0 million for the nine months ended September 30, 2020 compared with $32.3 million for the nine months ended September 30, 2019, a decrease of $5.4 million or 16.6%. Clinical trial related expenses for the development of LIQ861 and LIQ865 decreased by $4.1 million and $2.1 million, respectively, during the nine months ended September 30, 2020 compared with the nine months ended September 30, 2019. The decrease in clinical trial expenses was a result of our company substantially completing our clinical trial activity prior to filing the NDA in 2020. These decreases were partially offset by an increase in general research and development expenses not specifically associated with the LIQ861 and LIQ865 development programs. Research and development expenses for the nine months ended September 30, 2020 consisted of $18.6 million and $1.0 million attributable to our development of LIQ861 and LIQ865, respectively, and $7.4 million from general research and development that was not directly related to either LIQ861 or LIQ865 during the nine months ended September 30, 2020. This compares with $23.7 million and $3.1 million which were attributable to our development of LIQ861 and LIQ865, respectively, and $5.5 million from general research and development that was not directly related to either LIQ861 or LIQ865 during the nine months ended September 30, 2019.

Research and development expenses were $19.3 million for the six months ended June 30, 2020 compared with $21.4 million for the six months ended June 30, 2019, a decrease of $2.1 million or 9.7%. Clinical trial related expenses decreased by $2.8 million and $1.1 million of commercial costs were reclassified from R&D to G&A during the six months ended June 30, 2020 compared with the six months ended June 30, 2019. This decrease was partially offset by an increase of $1.7 million in consulting costs during the six months ended June 30, 2020 compared with the six months ended June 30, 2019. Research and development expenses for the six months ended June 30, 2020 consisted of $13.3 million and $0.8 million attributable to our development of LIQ861 and LIQ865, respectively, and $5.1 million from general research and development that was not directly related to either LIQ861 or LIQ865 during the six months ended June 30, 2020. This compares with $15.8 million and $2.3 million which were attributable to our development of LIQ861 and LIQ865, respectively, and $3.3 million from general research and development that was not directly related to either LIQ861 or LIQ865 during the six months ended June 30, 2019.

General and Administrative Expenses

General and administrative expenses were $57.2 million for the three months ended ~~June~~September 30, 2020, compared with $2.4 million for the three months ended ~~June~~September 30, 2019. The increase of $24.8 million, or ~~117~~200.08%, was primarily due to a $1.57 million ~~increase~~ in ~~legal and patent~~ expenses ~~due~~related to our ~~proposed~~pending acquisition of RareGen, $1.1 million in legal and patent expenses from our ongoing litigation with United Therapeutics, ~~and~~an ~~other~~increase ~~general~~of ~~increases~~$1.1 million in ~~salaries,~~employee ~~consulting~~compensation ~~fees,~~and ~~audit~~outside consulting expenses and ~~tax~~$0.9 ~~services,~~million ~~and~~from ~~recruiting~~a ~~expenses~~reclassification during ~~the~~2020 ~~three~~of ~~months~~expenses ~~ended~~for ~~June~~directors’ ~~30,~~and ~~2020~~officers’ ~~compared~~insurance ~~with~~and ~~the~~certain ~~three~~commercial ~~months~~activities ~~ended~~to ~~June~~general ~~30,~~and ~~2019~~administrative expenses from research and development expenses. General and administrative expenses consist primarily of personnel expenses, including stock-based compensation, as well as directors’ and officers’ insurance, and fees for audit, legal, consulting and other service fees.

General and administrative expenses were $916.12 million for the ~~six~~nine months ended ~~June~~September 30, 2020, compared with $57.48 million for the ~~six~~nine months ended ~~June~~September 30, 2019. The increase of $38.64 million, or 66107.65%, was ~~primarily~~ due to an$2.7 ~~increase~~million in expenses related to our pending acquisition of RareGen, $1.81 million ~~for~~in legal and patent expenses ~~due~~from toour ~~the~~ongoing ~~proposed~~litigation ~~RareGen~~with ~~merger and the~~ United Therapeutics, ~~lawsuit~~an ~~and~~increase ~~other~~of ~~general~~$2.1 ~~increases~~million in ~~consulting~~employee ~~fees,~~compensation ~~audit~~ and ~~tax~~outside ~~services,~~consulting expenses and ~~consultants~~ $2.3 million from a reclassification during ~~the~~2020 ~~six~~of ~~months~~expenses ~~ended~~for ~~June~~directors’ ~~30,~~and ~~2020~~officers’ ~~compared~~insurance ~~with~~and ~~the~~certain ~~six~~commercial ~~months~~activities ~~ended~~to ~~June~~general ~~30,~~and ~~2019~~administrative expenses from research and development expenses.

~~Other~~Interest Income (Expense)

Interest income was $1235,000 for the three months ended ~~June~~September 30, 2020, compared with $~~220~~162,000 for the three months ended ~~June~~September 30, 2019. The decrease in interest income of $~~208~~127,000 was primarily due to lower interest rates in 2020 compared with 2019, ~~and~~partially tooffset aby ~~lesser~~an ~~extent,~~increase ~~a decrease~~ in cash balances held in interest bearing accounts during 2020 compared with 2019.

Interest income was $~~121~~156,000 for the ~~six~~nine months ended ~~June~~September 30, 2020, compared with $~~358~~520,000 for the ~~six~~nine months ended ~~June~~September 30, 2019. The decrease in interest income of $~~237~~364,000 was primarily due to lower interest rates in 2020 compared with 2019 ~~and to a lesser extent, a decrease in cash balances held in interest bearing accounts during 2020 compared with 2019~~.

Interest expense was $211,000 for the three months ended June 30, 2020, compared with $254,000 for the three months ended June 30, 2019. The decrease in interest expense of $43,000 was primarily due to lower levels of debt during the three months ended June 30, 2020 compared with the three months ended June 30, 2019. 31

Interest expense was $~~466~~(191,000) for the ~~six~~three months ended ~~June~~September 30, 2020, compared with $~~473~~(265,000) for the ~~six~~three months ended ~~June~~September 30, 2019. The decrease in interest expense of $774,000 was primarily due to lower levels of debt during the ~~six~~three months ended ~~June~~September 30, 2020 compared with the ~~six~~three months ended ~~June~~September 30, 2019.

Interest expense was $(656,000) for the nine months ended September 30, 2020, compared with $(738,000) for the nine months ended September 30, 2019. The decrease in interest expense of $82,000 was primarily due to lower levels of debt during the nine months ended September 30, 2020 compared with the nine months ended September 30, 2019.

Net Loss

Net loss was $1315.90 million for the three months ended ~~June~~September 30, 2020, compared with $513.94 million for the three months ended ~~June~~September 30, 2019. The increase in net loss of $81.05 million, or ~~135~~11.85%, was primarily due to zero revenue and cost of revenue recognized during the three months ended June 30, 2020 compared with $8.1 million of revenue and $0.8 million cost of revenue during the three months ended June 30, 2019. Additionally, an increase in general and administrative expenses, ~~was~~ partially offset by a decrease in research and development expenses during the three months ended ~~June~~September 30, 2020 compared with the three months ended ~~June~~September 30, 2019. See the discussion above for further information.

Net loss was $2843.7 million for the ~~six~~nine months ended ~~June~~September 30, 2020, compared with $1933.71 million for the ~~six~~nine months ended ~~June~~September 30, 2019. The increase in net loss of $910.06 million, or 4632.0%, was primarily due to ~~zero~~the decrease in revenue, ~~and~~partially offset by the decrease in cost of revenue recognized during the ~~six~~nine months ended ~~June~~September 30, 2020 compared with ~~$8.1 million of revenue and $0.8 million cost of revenue during~~ the ~~six~~nine months ended ~~June~~September 30, 2019. Additionally, an increase in general and administrative expenses was partially offset by a decrease in research and development expenses during the ~~six~~nine months ended ~~June~~September 30, 2020 compared with the ~~six~~nine months ended ~~June~~September 30, 2019. See the discussion above for further information.

Liquidity and Capital Resources

We have financed our growth and operations through a combination of funds generated from our licensing revenue, the issuance of convertible preferred stock and common stock, finance leases, bank borrowings and the issuance of convertible notes. Our principal uses of cash have been for working capital requirements and capital expenditures. As of ~~June~~September 30, 2020, we had a cash balance of $2379.6 million, stockholders’ equity of $865.93 million and an accumulated deficit of $~~243~~258.9 million.

In ~~March~~July ~~2019~~2020, we closed an underwritten ~~follow-on~~public offering of 39,~~000~~375,000 shares of our common stock at a ~~public offering~~ price of $118.5000 per share. The gross proceeds from the offering were $3475.50 million and net proceeds were approximately $3170.8 3 million, after deducting underwriting discounts and commissions and other offering expenses.

In August 2019, we entered into a sales agreement, or the ATM Agreement, with Jefferies to issue and sell shares of our common stock, having an aggregate offering price of up to $40.0 million, from time to time during the term of the ATM Agreement, through an “at-the-market” equity offering program at our sole discretion, under which Jefferies will act as our agent and/or principal. We will pay Jefferies a commission up to 3.0% of the gross proceeds of any common stock sold through Jefferies under the ATM Agreement. During the year ended December 31, 2019, we sold 2,409,356 shares of our common stock for gross proceeds of $8.4 million and net proceeds were $8.1 million, after deducting underwriting discounts and other offering expenses under the ATM Agreement. During the six months ended June 30, 2020, we sold 131,425 shares of our common stock for net proceeds of $0.7 million, after deducting underwriting discounts and other offering expenses under the ATM Agreement.

In December 2019, we entered into a Common Stock Purchase Agreement, or the Purchase Agreement, with certain institutional accredited investors, or the Purchasers, for the sale by us in a private placement, or the Private Placement, of an aggregate of 7,164,534 shares, or the Private Placement Shares, of our common stock, at a purchase price of $3.13 per Private Placement Share. The gross proceeds from the sale of the Private Placement Shares were $22.4 million and net proceeds were $21.0 million, after placement agent fees and offering expenses.

In ~~July~~August ~~2020~~2019, we ~~closed~~entered aninto ~~underwritten~~a ~~public~~sales ~~offering~~agreement, ofor 9the ATM Agreement,~~375,000~~ with Jefferies to issue and sell shares of our common stock, athaving aan aggregate offering price of up to $840.000 ~~per~~million, ~~share~~from time to time during the term of the ATM Agreement, through an “at-the-market” equity offering program at our sole discretion, under which Jefferies will act as our agent and/or principal. ~~The~~We pay Jefferies a commission equal to 3.0% of the gross proceeds ~~from~~of any common stock sold through Jefferies under the ~~offering~~ATM ~~were~~Agreement. During the year ended December 31, 2019, we sold 2,409,356 shares of our common stock for gross proceeds of $758.04 million and net proceeds were ~~approximately~~ $~~69.~~8 .1 million, after deducting underwriting discounts and ~~commissions~~other offering expenses under the ATM Agreement. During the nine months ended September 30, 2020, we sold 131,425 shares of our common stock for net proceeds of $0.7 million, after deducting underwriting discounts and ~~estimated~~other offering expenses under the ATM Agreement.

In March 2019, we closed an underwritten follow-on offering of 3,000,000 shares of our common stock at a public offering price of $11.50 per share. The gross proceeds from the offering were $34.5 million and net proceeds were $31.8 million, after deducting underwriting discounts and commissions and other offering expenses.

In October 2018, we and PWB entered into an Amended and Restated Loan and Security Agreement, or the A&R LSA, in which we received an initial tranche of $11.0 million to extinguish our then-current debt of $8.0 million under the LSA, repay in full the outstanding indebtedness under the UNC Promissory Note (as defined below) and to utilize for general corporate purposes. The indebtedness under the A&R LSA bears interest at the greater of the Prime rate or 5% and has a four-year term and maturity. The A&R LSA provided for access to a second tranche of up to $5.0 million, the full amount of which we drew in June 2019. The second tranche became accessible as a result of the full enrollment of the Company’s LIQ861 INSPIRE clinical trial, without observing any materially adverse data through the two-week endpoint. Both tranches required payments of interest-only through December 31, 2019. The A&R LSA carries a one-time success fee of $375,000 and a prepayment penalty of 1% if the drawn tranche is prepaid prior to October 27, 2020. The success fee was triggered in December 2019 by the sale of our common stock and this was recorded as interest expense of $375,000 during the year ended December 2019. The minimum cash covenant is $8.5 million. In May 2019, we and PWB entered into an amendment to the A&R LSA to, among others, amend our negative covenant related to capitalized expenditures to increase the aggregate amount of capitalized expenditures we are permitted to make without PWB’s prior written consent during the fiscal year ending December 31, 2019 from $1.25 million to $2.5 million. The Company received a waiver of covenant compliance from PWB for non-timely submissions of monthly financial statements for the February and March 2020 periods.

The A&R LSA with PWB, as amended, contains restrictions that limit our flexibility in operating our business. We may not, among other things, without the prior written consent of PWB, (a) pay any dividends or make any other distribution or payment on account of or in redemption, retirement or purchase of any capital stock except in certain prescribed circumstances, (b) create, incur, assume, guarantee or be or remain liable with respect to any indebtedness except certain permitted indebtedness or prepay any indebtedness, (c) replace or suffer the departure, as defined, of our Chief Executive Officer or Chief Financial Officer without delivering written notification to PWB within ten days of such change or (d) suffer a change on our Board which results in the failure of at least one partner of Canaan Partners or their respective affiliates to serve as a voting member, in each case without having used best efforts to deliver at least 15 days’ prior written notification to PWB. PWB maintains a blanket lien on all assets excluding intellectual property, for which it has been provided a negative pledge.

Cash Flows

The following table summarizes our sources and uses of cash:

	Six Months Ended
	Nine Months Ended
	June 30,
	September 30,
	2020			2019
	(in thousands)
Net cash (used in) provided by:
Operating activities	$	(2740,~~547~~056	)	$	(2234,~~270~~222	)
Investing activities		(~~591~~713	)		(1,~~080~~716	)
Financing activities		(464,~~072~~524	)		35,~~936~~708
Net (decrease) increase in cash	$	(32,210	)	$	12,586
Net increase (decrease) in cash	$	23,755		$	(230	)

Operating Activities

Net cash used in operating activities increased $5.38 million to $2740.51 million for the ~~six~~nine months ended ~~June~~September 30, 2020 from $2234.32 million for the ~~six~~nine months ended ~~June~~September 30, 2019. The increase was mainly due to an increase in our general and administrative expenses partially offset by a decrease in our research and development expenses during the ~~six~~nine months ended ~~June~~September 30, 2020 compared with 2019. For the ~~six~~nine months ended ~~June~~September 30, 2020, the net cash used in operating activities of $2740.51 million was comprised of operating cash outflows before working capital changes of $2538.24 million and net working capital outflows of $21.37 million. For the nine months ended September 30, 2019, the net cash used in operating activities of $34.2 million was comprised of operating cash outflows before working capital changes of $28.4 million and net working capital outflows of $5.8 million.

Investing Activities

Net cash used in investing activities consisting of property, plant and equipment was $0.67 million during the ~~six~~nine months ended ~~June~~September 30, 2020 compared with $1.17 million during the ~~six~~nine months ended ~~June~~September 30, 2019.

Financing activities

Net cash ~~used~~provided inby financing activities was $464.15 million during the ~~six~~nine months ended ~~June~~September 30, 2020 compared with $35.97 million provided by financing activities during the ~~six~~nine months ended ~~June~~September 30, 2019. During the ~~six~~nine months ended ~~June~~September 30, 2020, we received $70.3 million from the public offering of common stock in July 2020 and $0.7 million from the sale of our common stock under our ATM facility, which was offset by $24.82 million in principal payments on our long-term debt, $1.4 million for expenses related to our sale of Private Placement Shares that closed in December 2019 and $0.69 million in principal payments on our finance leases. During the ~~six~~nine months ended ~~June~~September 30, 2019, cash provided by financing activities consisted primarily of $31.9 million in net proceeds from a follow-on sale of our common stock and a $5.0 million draw under the A&R LSA.

Funding Requirements

We plan to focus in the near-term on the development, regulatory approval and potential commercialization of LIQ861 ~~and LIQ865~~. We anticipate we will incur net losses for the next several years as we complete clinical development of these product candidates and continue research and development of additional product candidates. In addition, we plan to commercialize LIQ861, if approved, continue sales of generic Remodulin® through our RareGen acquisition, if the Merger Transaction is successfully completed, expand our corporate infrastructure and continue to invest in research and development efforts to explore additional product candidates. We may not be able to complete the development and initiate commercialization of these programs if, among others, our clinical trials are not successful or if the FDA does not approve our product candidates arising out of our current clinical trials when we expect, or at all.

Our primary uses of capital are, and we expect will continue to be, compensation and related personnel expenses, clinical costs, manufacturing process development, external research and development services, laboratory and related supplies, legal and other regulatory expenses, administrative and overhead costs and debt service. Our future funding requirements will be heavily determined by the resources needed to support development of our product candidates.

As a publicly traded company we incur significant legal, accounting and other expenses. In addition, the Sarbanes-Oxley Act, as well as rules adopted by the SEC and Nasdaq Stock Market LLC, or Nasdaq, require public companies to implement specified corporate governance practices. We expect these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly.

32 We believe that our current cash balance will enable us to fund our operating expenses and capital expenditure requirements and remain in compliance with the minimum cash covenant of $8.5 million pursuant to our term loan facility with PWB into the first quarter of 2022. We are in the process of implementing a more cost-efficient operating plan to further improve our cashflow. In addition, a successful close of the Merger Transaction has the potential to improve our cashflow going forward. We have based these estimates on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect. We expect that we will require additional capital to complete NDA regulatory review of LIQ861 and commercialize our product candidates, if we receive regulatory approval, and to pursue in-licenses or acquisitions of other product candidates. If we receive regulatory approval for LIQ861 or LIQ865, we expect to incur significant commercialization expenses related to product manufacturing, sales, marketing and distribution, depending on where we choose to commercialize. Additional funds may not be available on a timely basis, on favorable terms, or at all, and such funds, if raised, may not be sufficient to enable us to continue to implement our long-term business strategy. If we are unable to raise sufficient additional capital, we may need to substantially curtail our planned operations and the pursuit of our growth strategy.

We believe that our current cash balance will enable us to fund our operating expenses and capital expenditure requirements and remain in compliance with the minimum cash covenant of $8.5 million pursuant to our term loan facility with PWB into the third quarter of 2021. We have based these estimates on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect. We expect that we will require additional capital to complete NDA regulatory review of LIQ861 and commercialize our product candidates, if we receive regulatory approval, and to pursue in-licenses or acquisitions of other product candidates. If we receive regulatory approval for LIQ861 or LIQ865, we expect to incur significant commercialization expenses related to product manufacturing, sales, marketing and distribution, depending on where we choose to commercialize. Additional funds may not be available on a timely basis, on favorable terms, or at all, and such funds, if raised, may not be sufficient to enable us to continue to implement our long-term business strategy. If we are unable to raise sufficient additional capital, we may need to substantially curtail our planned operations and the pursuit of our growth strategy.

We may raise additional capital through licensing activities, other business arrangements or the sale of equity or convertible debt securities. In such an event, your ownership will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a holder of our common stock.

Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceuticals, we are unable to estimate the exact amount of our working capital requirements. Our future funding requirements will depend on many factors, including:

●

the number and characteristics of the product candidates we pursue;

●

the scope, progress, results and costs of researching and developing our product candidates, and conducting preclinical studies and clinical trials;

●

the timing of, and the costs involved in, obtaining regulatory approvals for our product candidates;

●

the cost of manufacturing our product candidates and any product we successfully commercialize;

●

our ability to establish and maintain strategic collaborations, licensing or other arrangements and the financial terms of such agreements;

●

the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcome of such litigation; and

●

the timing, receipt and amount of sales of, or milestone payments related to or royalties on, our current or future product candidates, if any.

See “Risk Factors” for additional risks associated with our substantial capital requirements.

Internal Controls and Procedures

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Internal control over financial reporting is a process designed by, or under the supervision of, the issuer’s Chief Executive Officer and Chief Financial Officer, or persons performing similar functions, and effected by the issuer’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: (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the issuer; (ii) 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 issuer are being made only in accordance with authorizations of management and directors of the issuer; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the issuer’s assets that could have a material effect on the financial statements.

Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, 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.

33 Under the supervision and with the participation of management, including our Chief Executive Officer and Interim Chief Financial Officer, management has assessed the effectiveness of our internal control over financial reporting based on the criteria set forth in the Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations, or COSO, of the Treadway Commission, and concluded that our internal control over financial reporting was not effective as of September 30, 2020 as a result of material weaknesses in our internal control over financial reporting.

~~Under~~A ~~the~~material ~~supervision~~weakness ~~and~~is ~~with~~a ~~the~~deficiency, ~~participation~~or a combination of ~~management~~deficiencies, ~~including~~in ~~our~~internal ~~Chief~~control ~~Executive~~over ~~Officer~~financial ~~and~~reporting, ~~Chief~~such ~~Financial~~that ~~Officer,~~there ~~management~~is ~~has~~a reasonable ~~assessed~~possibility that ~~the~~a ~~effectiveness~~material misstatement of ~~our~~the ~~internal~~company's ~~control~~annual ~~over~~or interim financial ~~reporting~~statements ~~based~~will onnot ~~the~~be ~~criteria~~prevented ~~set~~or ~~forth~~detected inon ~~the~~a ~~Internal~~timely ~~Control -~~basis. ~~Integrated~~In ~~Framework~~connection ~~(2013)~~with ~~issued by~~ the ~~Committee~~assessment of ~~Sponsoring~~the ~~Organizations,~~effectiveness ~~or COSO,~~ of ~~the Treadway Commission, and concluded that~~ our internal control over financial reporting ~~was not effective as of June 30~~, ~~2020~~our asmanagement aidentified ~~result~~the offollowing material weaknesses inthat ~~our~~existed ~~internal~~as ~~control~~of ~~over~~September ~~financial~~30, ~~reporting.~~2020:

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis. In connection with the assessment of the effectiveness of our internal control over financial reporting, our management identified the following material weaknesses that existed as of June 30, 2020:

During 2019, we experienced significant turnover in finance personnel that reduced the complement and skill of the resources within the Company. As a result, we did not maintain an effective control environment as we lacked a sufficient complement of resources with an appropriate level of knowledge, experience and training to design, maintain and monitor our internal control over financial reporting commensurate with our financial reporting requirements. As a result, this material weakness contributed to the following material weaknesses:

	●	We did not design and maintain controls to ensure adequate segregation of duties within our financial reporting function, including the preparation and review of journal entries. Specifically, some key accounting personnel had the ability to both prepare and post journal entries without an independent review by someone without the ability to prepare and post journal entries.

	●	We did not design and maintain effective controls over certain information technology general controls for information systems that are relevant to the preparation of our consolidated financial statements. Specifically, we did not design and maintain effective user access controls to ensure appropriate segregation of duties and that adequately restrict user and privileged access to financial applications and data to appropriate Company personnel.

These material weaknesses did not result in a material misstatement of the annual or interim financial statements. Additionally, these material weaknesses could result in a misstatement of the relevant account balances or disclosures that would result in a material misstatement to the annual or interim financial statements that would not be prevented or detected.

Remedial Actions to Address Material Weaknesses

We continue to evaluate the effectiveness of our remediation efforts, including implementing and demonstrating that the new or improved controls are designed appropriately and operate effectively for a reasonable period of time. We Although ~~expect~~we tohave ~~make~~not ~~further~~fully ~~changes~~remediated tothe material weaknesses described in our ~~internal~~2019 ~~controls.~~Annual ~~The~~Report ~~following~~on ~~actions~~Form 10-K, we believe that we have ~~been,~~made orprogress ~~are~~on ~~expected~~the toremediation ~~be,~~plans ~~taken~~described toin ~~strengthen~~Item ~~our~~9A ~~controls~~Controls and ~~organizational~~Procedures ~~structure~~in our 2019 Annual Report on Form 10-K. The following remediation steps were taken by the Company during the quarter ended September 30, 2020:

•● ToWe ~~address issues with recent employee turnover, we~~ have ~~hired~~engaged aan ~~new~~external ~~controller, senior accountant,~~ accounting ~~analyst~~firm ~~and accounts payable clerk. We also plan~~ to hire or outsource additional accounting personnel to assist with improving the internal control environment, including a manager of accounting or senior accountant and director of SEC reporting and internal control. We expect to continue to evaluate our needs for additional personnel. We plan to leverage the services of consulting firms to assist us with the strengthening and monitoring of our internal controls processes and documentation. We expect to provide ~~enhanced~~controller ~~training to existing~~ and ~~new~~other ~~employees in order to enhance the level of communication and understanding of controls with individuals that provide key information and perform key roles within our~~ financial ~~accounting~~consulting ~~and~~services ~~reporting group. • We plan~~ to ~~appropriately~~strengthen ~~design, implement and maintain a formal policy that expressly prohibits a manual journal entry from being created and posted by~~ the ~~same~~finance ~~employee~~team. Further, we plan to implement a process that includes the creation of a journal entry report that identifies who created and posted each journal entry. The report will be reviewed each month by independent senior accounting personnel so that any exceptions to the policy can be identified on a timely basis and appropriately addressed. • We plan to appropriately design, implement and maintain a formal policy to limit the number of “Super Users”, maintain effective user access controls to ensure appropriate segregation of duties and adequately restrict user and privileged access to financial applications, programs and data to appropriate personnel. • We plan to implement a formal policy that preparation, review and approval of account reconciliations will be performed by qualified accounting personnel independent of those who create and post the related underlying journal entries.

To● ~~assess the effectiveness of internal controls related to the remediation of the 2019 identified material weaknesses, we plan to implement the remediation described herein.~~ We have also engaged aan ~~large~~ accounting and consulting firm to assist us with the ~~remediation~~strengthening ~~efforts~~ and ~~commenced~~monitoring ~~these~~of ~~efforts~~our ininternal ~~June~~controls ~~2020.~~processes Weand ~~plan~~documentation. toIn ~~provide~~addition, anwe ~~update~~have onworked with the ~~status~~consulting offirm ~~our remediation activities~~ on athe ~~quarterly basis.~~following:

34 ● Modified user rights to our accounting system to ensure that journal entries cannot be created and posted by the same user.

●

Modified the user rights to our accounting system to ensure that no accounting personnel have “Super User” rights.

●

Implemented procedures to ensure that account reconciliations are reviewed and approved by qualified accounting personnel independent from the personnel that prepared the reconciliation and related journal entry.

In addition, we expect to provide enhanced training to existing and new employees in order to increase the level of understanding of controls with individuals that provide key information and perform key roles within our financial accounting and reporting group.

The material weaknesses described in our 2019 Annual Report on Form 10-K will not be considered remediated, until the applicable controls operate for a sufficient period of time and management has concluded that these controls operate effectively.

JOBS Act

As an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012, as amended, or the JOBS Act, we 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 to “opt out” of this provision and, as a result, we will comply with new or revised accounting standards when they are required to be adopted by public companies that are not emerging growth companies.

Subject to certain conditions, as an emerging growth company, we rely on certain of these exemptions, including without limitation:

●

reduced disclosure about our executive compensation arrangements;

●

no advisory votes on executive compensation or golden parachute arrangements; and

●

exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting.

We may take advantage of these exemptions for up to five years or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company on the date that is the earliest of (i) the last day of the fiscal year in which we have total annual gross revenue of $1.07 billion or more; (ii) the last day of 2023; (iii) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC. We may choose to take advantage of some but not all of these exemptions. Accordingly, the information contained herein may be different from the information you receive from other public companies in which you hold stock.

Smaller Reporting Company

As a “smaller reporting company,” as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, in addition to providing reduced disclosure about our executive compensation arrangements and business developments, among other reduced disclosure requirements available to smaller reporting companies, we present only two years of audited financial statements in addition to any required unaudited interim financial statements with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure. Accordingly, the information contained herein may be different from the information you receive from other public companies in which you hold stock.

Off-Balance Sheet Arrangements

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Under the supervision of and with the participation of our management, including our Chief Executive Officer, who is our principal executive officer, and our Interim Chief Financial Officer, who is our principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of ~~June~~September 30, 2020, the end of the period covered by this ~~quarterly~~Quarterly ~~report~~Report on Form 10-Q. 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 Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms promulgated by the SEC. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange 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 management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of ~~June~~September 30, 2020, our Chief Executive Officer and Interim Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were not effective due to the material weaknesses in internal control over financial reporting discussed above under “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Internal Controls and Procedures.”

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended ~~June~~September 30, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Subsequent to our December 31, 2019 year end, we began taking a number of actions, including designing and implementing new controls and revising existing controls, in order to remediate the material weaknesses described above. We expect to continue our remediation efforts, including testing of operating effectiveness of new controls, as described ~~below~~above under “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Internal Controls and Procedures – Remedial Actions to Address Material Weaknesses”, and we plan to provide an update on the status of our remediation activities on a quarterly basis.

PART II.

Item 1. Legal Proceedings.

On June 4, 2020, United Therapeutics Corporation, a Delaware corporation, or United Therapeutics, filed a complaint for patent infringement against us in the U.S. District Court for the District of Delaware (Case No. 1:20-cv-00755-UNA), or the Hatch-Waxman Litigation, asserting infringement by us of U.S. Patent Nos. 9,604,901, entitled “Process to Prepare Treprostinil, the Active Ingredient in Remodulin®”, or the ’901 Patent, and 9,593,066, entitled “Process to Prepare Treprostinil, the Active Ingredient in Remodulin®”, or the ’066 Patent, relating to United Therapeutics’ Tyvaso®, a nebulized treprostinil solution for the treatment of pulmonary arterial hypertension, or PAH. On July 16, 2020, we filed an answer to United Therapeutics’ complaint and also included counterclaims of invalidity, non-infringement, and Orange Book de-listing of the ’901 Patent and ’066 Patent. United Therapeutics seeks a judgment that the asserted patents are infringed and an injunction of FDA final approval and subsequent commercial launch of LIQ861 product until after the latest to expire asserted patent. United Therapeutics’ complaint is in response to our New Drug Application, or the LIQ861 NDA, filed with the U.S. Food and Drug Administration, or the FDA, requesting approval to market LIQ861, a dry powder inhalation of treprostinil for the treatment of PAH. The LIQ861 NDA was filed under the 505(b)(2) regulatory pathway with Tyvaso® as the reference listed drug. Under the Hatch-Waxman Act, the FDA is automatically precluded from approving the LIQ861 NDA for up to 30 months, absent an earlier judgment unfavorable to United Therapeutics by the court. Although we believe our LIQ861 dry powder inhaler for the treatment of PAH is highly differentiated from Tyvaso®, since we are seeking approval of the LIQ861 NDA under the 505(b)(2) regulatory pathway, the LIQ861 NDA is subject to the provisions of the Hatch-Waxman Act.

On July 21, 2020, the U.S. Patent and Trademark Office, or the USPTO, issued U.S. Patent No. 10,716,793, or the “793 Patent”, entitled “Treprostinil Administration by Inhalation”, to United Therapeutics. On July 22, 2020, United Therapeutics filed an amended complaint in the Hatch-Waxman Litigation asserting infringement of the ‘793 Patent by the practice of LIQ861. The infringement allegation of the ‘793 Patent is separate from the 30-month regulatory stay on final approval of the NDA for LIQ861, which is only associated with the infringement allegations of the ‘901 Patent and the ‘066 Patent. We are required to make a certification with respect to the ‘793 Patent in our NDA for LIQ861. United Therapeutics’ motion to dismiss the Company’s invalidity defenses and counterclaims concerning the ‘793 Patent was denied by the U.S. District Court for the District of Delaware on November 3, 2020.

On July 30, 2020, Judge Andrews, presiding over the Hatch-Waxman Litigation, conducted a scheduling conference and set a claim construction hearing in May 2021 and set the trial to begin in March 2022.

On March 30, 2020, we filed two petitions for inter partes review with the Patent Trial and Appeal Board, or the PTAB, of the U.S. Patent and Trademark Office, or USPTO. One petition iswas for inter partes review of the ‘901 Patent, and sought a ~~second~~determination ~~petition~~that isthe ~~for~~claims ~~inter~~in ~~partes review of~~ the ‘~~066~~901 Patent” are invalid, ~~both~~and ofa ~~which~~second ~~are~~petition ~~owned~~was byfor ~~United~~inter ~~Therapeutics~~partes ~~Corporation,~~review orof ~~United~~the ~~Therapeutics.~~‘066 WePatent”, ~~are~~and ~~seeking~~sought a determination that the claims in the ‘066 Patent ~~and the ‘901 Patent~~ are invalid. Both the ‘~~066~~901 Patent and ~~the~~ ‘~~901~~066 Patent are owned by United Therapeutics Corporation, or United Therapeutics, and both patents are related to U.S. Patent No. 8,497,393 which was granted to United Therapeutics and subsequently invalidated by the USPTO in an inter partes review instituted in 2016 by SteadyMed Ltd. AOn ~~determination~~October by13, 2020, the PTAB toinstituted ~~institute~~an inter partes review of the ~~petitions~~‘901 isPatent ~~expected~~and ~~early~~concurrently indenied ~~the~~institution ~~fourth~~on ~~quarter~~the of‘066 ~~2020~~Patent, ~~and~~stating that the ‘066 petition has not established a ~~final~~reasonable ~~written~~likelihood ~~decision~~that ~~determining~~it ~~the~~would ~~validity~~prevail in showing that at least one of the challenged claims ofis ~~the~~unpatentable. ~~‘066~~A ~~Patent~~final ~~and~~written ~~the~~decision ~~‘901~~determining ~~Patent,~~the ifvalidity of the ~~petitions~~challenged ~~are~~claims ~~instituted~~of by the ~~PTAB,~~‘901 Patent is expected within 12 months from institution.

We may become subject to additional legal proceedings and claims arising in connection with the normal course of our business. In the opinion of management, except as disclosed herein, there are currently no claims that would have a material adverse effect on our financial position, results of operations or cash flows.

36 38

Item 1A. Risk Factors.

Investing in our common stock involves a high degree of risk. You should carefully consider the risks described below, as well as the other information in this Quarterly Report on Form 10-Q, including our consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before deciding whether to invest in our common stock. The occurrence of any of the events or developments described below could harm our business, financial condition, results of operations and growth prospects. In such an event, the market price of our common stock could decline and you may lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations.

Risks Related to the Merger Transaction

We may not achieve the benefits expected from the proposed acquisition of RareGen, LLC, or RareGen, by way of merger, or the Merger Transaction, pursuant to that certain Agreement and Plan of Merger, dated as of June 29, 2020, by and among our company, Liquidia Corporation, or HoldCo, RareGen and certain other parties thereto, or the Merger Agreement, which may harm our business and could result in the loss of key suppliers, licensees, collaborators, business partners and personnel.

Achieving the benefits of the Merger Transaction will depend in part on the successful integration of the technology, platforms, capabilities, operations and personnel of our company and RareGen in a timely and efficient manner to minimize the impact on suppliers, licensees, collaborators, business partners, employees and management. The integration of our company and RareGen will be a complex, time-consuming and expensive process and may harm our business, financial condition and results of operations. The challenges involved in this integration include, but are not limited to, the following:

●	retaining existing suppliers, licensees, collaborators and business partners of both our company and RareGen;

●	retaining and integrating directors, executive management and other key employees of both our company and RareGen;

●	onboarding RareGen employees to our company’s benefit plans and payroll;

●	managing the RareGen field sales team;

●	consolidating the companies’ promotional, sales and commercialization efforts so that the industry receives useful information about HoldCo’s product candidates and services;

●	identifying and eliminating redundant operations and assets;

●	coordinating research and development activities to integrate existing technologies and enhance introduction of new products and technologies;

●	persuading employees that the business cultures of our company and RareGen are compatible; and

●

maintaining and upgrading uniform standards, controls, procedures and policies for compliance with rules and regulations customary in our line of business, including but not limited to federal and state healthcare requirements and internal controls and procedures that we will be required to maintain under the Sarbanes-Oxley Act of 2002.

We cannot assure you that we can successfully integrate our business with that of RareGen in a timely manner or that all or any of the anticipated benefits of the Merger Transaction will be realized.

The Merger Transaction involves the integration of two companies that previously have operated independently. Risks to the successful integration of the two companies include:

●	the impairment of relationships with employees, suppliers, licensees, collaborators and business partners;

●	the potential disruption of our business and distraction of our management;

●	the difficulty of incorporating acquired technology, platforms and relationships from RareGen into our offerings;

37 39

●

not achieving expected synergies as a result of a number of factors, including, but not limited to, the failure of the FDA to timely approve our NDA for LIQ861 and/or the failure of Sandoz Inc.’s treprostinil pursuant to the Promotion Agreement between RareGen and Sandoz Inc. to be administered subcutaneously; and

●	unanticipated expenses related to integration of the two companies.

We may not succeed in addressing these risks or any other problems encountered in connection with the Merger Transaction.

Any delay in completing the Merger Transaction may reduce or eliminate the benefits expected to be achieved thereunder.

The Merger Transaction is subject to a number of conditions beyond our and RareGen’s control that may prevent, delay or otherwise materially adversely affect its completion. Neither we nor RareGen can predict whether and when these conditions will be satisfied. Any delay in completing the Merger Transaction could cause us not to realize some or all of the operational and revenue synergies and other benefits that we and RareGen expect to achieve if the merger is successfully completed within its expected time frame.

We may incur substantial transaction fees and merger-related costs in connection with the Merger Transaction.

We expect to incur a number of substantial expenses, totaling approximately $45.0 million, associated with completing the Merger Transaction, including the costs and expenses of filing, printing and mailing the notice of internet availability of the definitive proxy statement/prospectus and all filing and other fees paid to the SEC and Nasdaq in connection with the Merger Transaction, investment banking fees and expenses, and combining the operations of the two companies. While we have assumed that a certain level of transaction and coordination expenses will be incurred, there are a number of factors beyond our control that could affect the total amount or the timing of these transaction and coordination expenses. Many of the expenses that will be incurred, by their nature, are difficult to estimate accurately. Additional unanticipated costs may be incurred in the integration of the businesses of our company and RareGen, and such costs could become substantial. Although it is expected that the elimination of certain duplicative costs, as well as the realization of other efficiencies related to the integration of the two businesses, will offset the incremental transaction and merger-related costs over time, this net benefit may not be achieved in the near term, or at all. Further, if the Merger Transaction is not completed, we would have to recognize these expenses without realizing the expected benefits of the Merger Transaction. These costs could adversely affect our financial condition and results of operations prior to the Merger Transaction and of HoldCo following completion of the Merger Transaction.

Our stockholders may not realize a benefit from the Merger Transaction commensurate with the ownership dilution they will experience in connection with the Merger Transaction.

If we are unable to realize the strategic and financial benefits currently anticipated from the Merger Transaction, our stockholders will have experienced substantial dilution of their ownership interest without receiving any commensurate benefit. Significant management attention and resources will be required to integrate the two companies. Delays in this process could adversely affect our business, financial results, financial condition and stock price following completion of the Merger Transaction. Even if the combined company were able to integrate the business operations successfully, there can be no assurance that this integration will result in the realization of the full benefits of synergies, innovation and operational efficiencies that may be possible from this integration and that these benefits will be achieved within a reasonable period of time.

We and RareGen will be subject to business uncertainties and contractual restrictions while the Merger Transaction is pending that may cause disruption from the transaction and may make it more difficult to maintain relationships with employees, suppliers, business partners or licensees.

Uncertainties about the effect of the Merger Transaction on employees, suppliers, business partners, licensees and other persons with whom we or RareGen has a business relationship may have an adverse effect on our business or RareGen prior to the Merger Transaction and on HoldCo following completion of the Merger Transaction. In connection with the pendency of the Merger Transaction, as well as during times of significant change and uncertainty such as the period following completion of the Merger Transaction, suppliers, business partners, licensees and other persons with whom we or RareGen have a business relationship may delay or defer business decisions, decide to terminate, modify or renegotiate their relationships with our company or RareGen, or take other actions as a result of the Merger Transaction that could negatively affect our or RareGen’s respective revenue, earnings and cash flows, as well as the market price or fair market value of their respective securities. The ability of us or RareGen to raise additional capital through the debt markets, and the associated borrowing costs, may also be negatively impacted. These disruptions could have an adverse effect on the results of operations, cash flows and financial position of us or RareGen, including an adverse effect on HoldCo’s ability to realize the expected cost savings and other benefits of the Merger Transaction. The risk, and adverse effect, of any disruption could be exacerbated by a delay in completion of the Merger Transaction or termination of the Merger Agreement.

38 40

~~Employee~~During ~~execution of retention agreements and recruitment of additional employees may be particularly challenging prior to~~ the ~~completion~~pendency of the Merger Transaction, we ~~as employees and prospective employees~~ may ~~experience~~not ~~uncertainty~~be ~~about~~able ~~their~~to ~~future~~enter ~~roles~~into ~~with~~a ~~HoldCo.~~business ~~If,~~combination ~~despite our or RareGen’s retention and recruiting efforts, key employees depart or prospective key employees fail to accept employment~~ with ~~either~~another ~~company~~party because of ~~issues~~restrictions ~~relating~~in to the uncertainty and difficulty of integration or a desire not to remain with the combined company, our and RareGen’s financial results could be adversely affected. Furthermore, HoldCo’s operational and financial performance following completion of the Merger ~~Transaction could be adversely affected if it is unable to retain key employees and skilled workers of our company or RareGen~~Agreement. The loss of the services of key employees and skilled workers and their experience and knowledge regarding our or RareGen’s businesses could adversely affect HoldCo’s future operating results and successful ongoing operation of the business.

~~During~~Covenants in the ~~pendency~~Merger Agreement impede our ability to make acquisitions or complete other transactions that are not in the ordinary course of business pending completion of the Merger Transaction, we ~~may~~even if such transactions might be favorable to our stockholders. As a result, if the Merger Transaction is not completed, we may be ~~able~~at a disadvantage to ~~enter~~our competitors. In addition, while the Merger Agreement is in effect and subject to limited exceptions, we are discouraged from soliciting, initiating, encouraging or taking actions designed to facilitate any inquiries or the making of any proposal or offer that could lead to the entering into certain extraordinary transactions with any third party, such as a strategic collaboration agreement involving LIQ861, or a sale of our assets, an acquisition of our common stock, a tender offer for our common stock, a merger or other business combination ~~with~~outside ~~another~~the ~~party~~ordinary ~~because~~course of ~~restrictions~~business, inas the termination of the Merger Agreement of (i) by us if our board of directors decides to accept a superior proposal or (ii) by RareGen if our board of directors changes its recommendation following the receipt of an alternative proposal would result in us paying to RareGen a termination fee of $7.5 million.

~~Covenants~~The infuture ~~the~~results ~~Merger Agreement impede our ability to make acquisitions or complete other transactions that are not in the ordinary course~~ of ~~business~~HoldCo ~~pending~~will ~~completion~~suffer ~~of the Merger Transaction, even~~ if ~~such~~it ~~transactions~~does ~~might be favorable to our stockholders. As a result, if the Merger Transaction is~~ not ~~completed,~~effectively wemanage ~~may~~its beexpanded atoperations afollowing ~~disadvantage to our competitors. In addition, while~~ the ~~Merger~~completion ~~Agreement is in effect and subject to limited exceptions, we are discouraged from soliciting, initiating, encouraging or taking actions designed to facilitate any inquiries or the making~~ of ~~any proposal or offer that could lead to~~ the entering into certain extraordinary transactions with any third party, such as a strategic collaboration agreement involving LIQ861, or a sale of our assets, an acquisition of our common stock, a tender offer for our common stock, a merger or other business combination outside the ordinary course of business, as the termination of the Merger Agreement of (i) by us if our board of directors decides to accept a superior proposal or (ii) by RareGen if our board of directors changes its recommendation following the receipt of an alternative proposal would result in us paying to RareGen a termination fee of $7Transaction.~~5 million.~~

~~The~~Following ~~future~~the ~~results~~completion of the Merger Transaction, the size and complexity of HoldCo’s business will ~~suffer~~increase ifbeyond the current size of either our or RareGen’s business. HoldCo’s ~~does~~future ~~not~~success ~~effectively~~depends, ~~manage~~in part, upon its ability to manage this expanded ~~operations~~business, ~~following~~which will pose substantial challenges for management, including challenges related to the ~~completion~~management and monitoring of new operations and associated increased costs and complexity. If HoldCo is unsuccessful in managing its integrated operations, or if it does not realize the expected operating efficiencies, cost savings and other benefits currently anticipated from the Merger Transaction, HoldCo’s operations and financial condition could be adversely affected and it may not be able to take advantage of business development opportunities.

~~Following~~Our ~~the~~internal ~~completion~~financial offorecasts ~~the~~regarding ~~Merger Transaction, the size and complexity of HoldCo’s business will increase beyond the current size of either our or~~ RareGen’s business. HoldCo’s future success depends, in part, upon its ability to manage this expanded business, which will pose substantial challenges for management, including challenges related to the management and monitoring of new operations and associated increased costs and complexity. If HoldCo is unsuccessful in managing its integrated operations, or if it does not realize the expected operating efficiencies, cost savings and other benefits currently anticipated from the Merger Transaction, HoldCo’s operations and financial condition could be adversely affected and it may not beprove ~~able to take advantage of business development opportunities~~accurate.

~~Our~~In connection with the Merger Transaction, our management prepared internal, stand-alone, pre-transaction financial forecasts ~~regarding~~of RareGen. These forecasts were based on numerous variables and assumptions that are inherently uncertain and are beyond our control, including assumptions with respect to macro-economic trends, interest rates and anticipated growth rates, and is not necessarily indicative of what RareGen’s actual results of operations, cash flows or financial position would be on the dates indicated. The assumptions used in preparing these forecasts may not prove to be accurate and other factors may affect HoldCo’s actual results and financial condition after the completion of the Merger Transaction, which may cause HoldCo’s actual results and financial condition to differ materially from our estimates contained in the unaudited prospective financial information for RareGen. These forecasts were not prepared with a view to public disclosure, are subject to significant economic, competitive, industry and other uncertainties and may not be achieved in full, at all, or within projected timeframes. The failure of our or RareGen’s businesses to achieve projected results could have a material adverse effect on the price of HoldCo common stock, HoldCo’s financial position, and HoldCo’s operating results and cash flows.

InThe ~~connection with the~~ Merger ~~Transaction,~~Agreement ~~our~~may management prepared internal, stand-alone, pre-transaction financial forecasts of RareGen. These forecasts are based on numerous variables and assumptions that are inherently uncertain and are beyond our control, including assumptions with respect to macro-economic trends, interest rates and anticipated growth rates, and is not necessarily indicative of what RareGen’s actual results of operations, cash flows or financial position would be onterminated ~~the dates indicated. The assumptions used~~ in ~~preparing~~accordance ~~these~~with ~~forecasts~~its ~~may~~terms ~~not prove to be accurate~~ and ~~other factors may affect HoldCo’s actual results and financial condition after~~ the ~~completion of the~~ Merger Transaction, ~~which~~ may ~~cause HoldCo’s actual results and financial condition to differ materially from our estimates contained in the unaudited prospective financial information for RareGen. These forecasts were~~ not ~~prepared with a view to public disclosure, are subject to significant economic, competitive, industry and other uncertainties and may not~~ be ~~achieved in full, at all, or within projected timeframes~~completed. The failure of our or RareGen’s businesses to achieve projected results could have a material adverse effect on the price of HoldCo common stock, HoldCo’s financial position, and HoldCo’s operating results and cash flows.

~~The~~We ~~Merger~~and ~~Agreement~~RareGen may beterminate ~~terminated~~the inMerger ~~accordance~~Agreement ~~with~~under ~~its~~certain ~~terms~~circumstances, ~~and~~including, among other reasons, if the Merger Transaction ~~may~~is not be completed by December 31, 2020. In addition, if the Merger Agreement is terminated (i) by us if our board of directors decides to accept a superior proposal or (ii) by RareGen if our board of directors changes its recommendation to our stockholders following receipt of an alternative proposal, then we shall pay to RareGen a termination fee of $7.5 million.

We Risks ~~and~~Related RareGen may terminate the Merger Agreement under certain circumstances, including, among other reasons, if the Merger Transaction is not completed by December 31, 2020. In addition, if the Merger Agreement is terminated (i) by us if our board of directors decides to ~~accept a superior proposal or (ii) by RareGen if~~ our ~~board~~Financial ofPosition ~~directors~~and ~~changes~~Need ~~its~~for ~~recommendation~~Additional ~~to our stockholders following receipt of an alternative proposal, then we shall pay to RareGen a termination fee of $7.5 million.~~Capital

39 Our net losses and significant cash used in operating activities have raised substantial doubt regarding our ability to continue as a going concern.

InOur ~~addition,~~consolidated ~~although~~financial ~~Neal~~statements ~~Fowler,~~for ~~Canaan~~the ~~VIII~~nine ~~L.P.~~months ended September 30, ~~Eshelman~~2020 ~~Ventures~~include a statement that our recurring losses and cash outflows from operations, ~~LLC~~our accumulated deficit and ~~Fredric~~our Ndebt maturing within twelve months raise substantial doubt about our ability to continue as a going concern. ~~Eshelman~~As ~~and~~of anSeptember ~~additional~~30, ~~large~~2020, ~~institutional~~we ~~investor~~had $79.6 million of cash. We believe that our ~~company~~existing ~~have~~cash ~~agreed~~will enable us to ~~vote~~fund ~~their~~our ~~shares~~operating expenses and capital expenditure requirements, make payments of interest and principal on our ~~common~~term ~~stock~~loan facility with Pacific Western Bank, or PWB, and remain in ~~favor~~compliance ofwith the ~~approval~~minimum cash covenant of ~~the~~$8.5 ~~Merger~~million ~~Agreement~~pursuant ~~and~~to this term loan facility, into the ~~Merger~~first quarter ~~Transaction~~of 2022. We have based these estimates on assumptions that may prove to be wrong, ~~pursuant~~and we could utilize our available capital resources sooner than we expect. If we are unable to ~~separate~~obtain ~~Support~~sufficient ~~Agreements~~funding or execute on strategic initiatives to generate sufficient cash, ~~this~~our ~~obligation~~business, prospects, financial condition and results of operations will ~~terminate~~be ifmaterially and adversely affected, and we may be unable to continue as a going concern. If we are unable to continue as a going concern, we may have to liquidate our assets and may receive less than the ~~Merger~~value ~~Agreement~~at which those assets are carried on our audited financial statements, and it is ~~validly~~likely ~~terminated~~that investors will lose all or a part of their investment. Future financial statements may also include statements expressing substantial doubt about our ability to continue as a going concern. If we seek additional financing to fund our business activities in the future and there remains substantial doubt about our ability to continue as a going concern, investors or other financing sources may be unwilling to provide additional funding to us on commercially reasonable terms or at all.

~~Risks Related to our Financial Position and Need for Additional Capital~~ 41

~~Our~~We ~~net~~have ~~losses~~a ~~and~~history ~~significant~~of ~~cash~~losses, ~~used~~have innot ~~operating~~commenced ~~activities~~commercial ~~have~~operations ~~raised~~to ~~substantial~~date ~~doubt~~and ~~regarding~~ our ~~ability~~future toprofitability ~~continue~~is ~~as a going concern~~uncertain.

~~Our~~We ~~consolidated~~have ~~financial~~incurred ~~statements~~net ~~for the six months ended June 30, 2020 include a statement that our recurring~~ losses ~~and~~of ~~cash~~$43.7 ~~outflows~~million ~~from~~during ~~operations,~~the ~~our~~nine ~~accumulated deficit and our debt maturing within twelve~~ months ~~raise~~ended ~~substantial~~September ~~doubt about our ability to continue as a going concern. As of June~~ 30, 2020, weand ~~had~~ $2347.6 million ~~of cash. Subsequent to the close of the second quarter~~, ~~we raised~~ $7553.0 1 million ofand ~~gross proceeds through an underwritten public offering of our common stock that closed on July~~ $29.2, million ~~2020.~~during ~~We believe that our existing cash, including~~ the ~~proceeds~~years ofended ~~this public offering~~December 31, ~~will enable us to fund our operating expenses and capital expenditure requirements~~2019, 2018 ~~make payments of interest~~ and ~~principal on our term loan facility with Pacific Western Bank~~2017, orrespectively. ~~PWB,~~We ~~and~~also ~~remain~~had innegative ~~compliance~~operating ~~with the minimum~~ cash ~~covenant~~flows offor ~~$8.5~~each ~~million pursuant to this term loan facility, into the third quarter~~ of ~~2021. We have based~~ these ~~estimates on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect~~periods. IfAs ~~we are unable to obtain sufficient funding or execute on strategic initiatives to generate sufficient cash, our business, prospects, financial condition and results~~ of ~~operations~~September ~~will be materially and adversely affected~~30, ~~and we may be unable to continue as a going concern. If we are unable to continue as a going concern~~2020, we ~~may~~had ~~have~~an toaccumulated ~~liquidate~~deficit ~~our assets and may receive less than the value at which those assets are carried on our audited financial statements, and it is likely that investors will lose all or a part~~ of ~~their investment~~$258. ~~Future financial statements may also include statements expressing substantial doubt about our ability to continue as a going concern~~9 million. If we seek additional financing to fund our business activities in the future and there remains substantial doubt about our ability to continue as a going concern, investors or other financing sources may be unwilling to provide additional funding to us on commercially reasonable terms or at all.

WeSince our incorporation, we have ainvested ~~history~~heavily in the development of ~~losses~~our product candidates and technologies, as well as in recruiting management and scientific personnel. To date, we have not commenced ~~commercial~~the ~~operations~~commercialization of our product candidates and all of our revenue has been derived from up-front fees and milestone payments made to ~~date~~us in connection with licensing and collaboration arrangements we have entered into. These up-front fees and milestone payments have been, and may continue to be, insufficient to match our ~~future~~operating expenses. We expect to continue to devote substantial financial and other resources to the clinical development of our product candidates and, as a result, must generate significant revenue to achieve and maintain profitability. isWe ~~uncertain~~may continue to incur losses and negative cash flow and may never transition to profitability or positive cash flow.

We ~~have~~expect ~~incurred~~that ~~net~~we ~~losses~~will ofneed ~~$28.7~~further ~~million~~financing ~~during~~for ~~the~~our ~~six~~existing ~~months~~business ~~ended~~and ~~June~~future 30growth, ~~2020~~which ~~and~~may ~~$47.6 million~~not be available on acceptable terms, ~~$53.1 million~~if ~~and~~at ~~$29~~all.~~2 million~~ ~~during~~Failure ~~the~~to ~~years~~obtain ~~ended~~funding ~~December 31,~~on ~~2019, 2018~~acceptable terms and ~~2017~~on a timely basis may require us to curtail, ~~respectively~~delay or discontinue our product development efforts or other operations. WeThe failure to obtain further financing may also ~~had~~prevent ~~negative~~us ~~operating~~from ~~cash~~capitalizing ~~flows~~on ~~for~~other ~~each~~potential ofproduct ~~these~~candidates ~~periods.~~or Asindications ofwhich ~~June~~may ~~30,~~be ~~2020,~~more weprofitable ~~had~~than anLIQ861 ~~accumulated~~and ~~deficit~~LIQ865 or for which there may be a greater likelihood of ~~$243~~success.~~9 million.~~

~~Since~~We ~~our~~anticipate ~~incorporation,~~that we ~~have~~will ~~invested~~need ~~heavily~~to inraise additional funds to meet our future funding requirements for the continued research, development and commercialization of our product candidates and ~~technologies,~~technology. asIn ~~well~~the asevent inthat ~~recruiting~~funds ~~management~~generated ~~and~~from ~~scientific~~our ~~personnel.~~operations Toare ~~date~~insufficient to fund our future growth, we ~~have~~may ~~not~~raise ~~commenced~~additional funds through the ~~commercialization~~issuance of ~~our~~equity ~~product~~or ~~candidates~~debt ~~and~~securities ~~all~~or ofby ~~our~~borrowing ~~revenue~~from ~~has~~banks ~~been~~or ~~derived~~other ~~from~~financial ~~up-front~~institutions. ~~fees~~We ~~and~~cannot ~~milestone~~assure ~~payments~~you ~~made~~that we will be able to usobtain insuch ~~connection~~additional ~~with~~financing ~~licensing~~on ~~and~~terms ~~collaboration~~that ~~arrangements~~are weacceptable ~~have~~to ~~entered~~us, ~~into.~~or ~~These~~at ~~up-front~~all. ~~fees~~Global and ~~milestone~~local ~~payments~~economic ~~have~~conditions ~~been,~~could ~~and~~negatively ~~may~~affect ~~continue~~our ability to ~~be,~~raise ~~insufficient~~funds. toTo ~~match~~the ~~our~~extent ~~operating~~that ~~expenses.~~we Weraise ~~expect~~additional tocapital ~~continue~~through tothe ~~devote~~sale ~~substantial~~of ~~financial~~equity ~~and~~or ~~other~~convertible ~~resources~~debt tosecurities, ~~the~~your ~~clinical~~ownership ~~development~~interest will be diluted, and the terms of ~~our~~such ~~product~~securities ~~candidates~~may ~~and,~~include liquidation or other preferences that adversely affect your rights as a ~~result~~stockholder. Such financing, ~~must~~even ~~generate~~if ~~significant~~obtained, ~~revenue~~may tobe ~~achieve~~accompanied ~~and~~by ~~maintain~~restrictive ~~profitability.~~covenants Wethat may, ~~continue~~among others, limit our ability to ~~incur~~pay ~~losses~~dividends ~~and~~or ~~negative~~require ~~cash~~us ~~flow~~to ~~and~~seek ~~may~~consent ~~never~~for ~~transition~~payment toof ~~profitability~~dividends, or ~~positive~~restrict ~~cash~~our ~~flow~~freedom to operate our business by requiring consent for certain actions.

WeIf ~~expect that~~ we ~~will~~fail ~~need~~to ~~further~~obtain additional financing ~~for~~on ~~our~~terms ~~existing~~that ~~business~~are ~~and~~acceptable ~~future~~to ~~growth~~us, ~~which~~we ~~may~~will not be ~~available~~able ~~on acceptable terms, if at all. Failure~~ to ~~obtain~~implement ~~funding~~our ongrowth ~~acceptable~~plans, ~~terms~~ and onwe ~~a timely basis~~ may ~~require~~be usrequired to significantly curtail, delay or discontinue one or more of our ~~product~~research, development ~~efforts~~or manufacturing programs or ~~other~~the ~~operations~~commercialization of any approved product. ~~The~~Furthermore, ~~failure~~if we fail to obtain ~~further~~additional financing ~~may~~on ~~also~~terms ~~prevent~~that are acceptable to us, ~~from~~we ~~capitalizing~~may onforgo or delay the pursuit of opportunities presented by other potential product candidates or indications ~~which~~that may belater ~~more~~prove ~~profitable~~to ~~than~~have ~~LIQ861~~greater ~~and~~commercial ~~LIQ865~~potential orthan ~~for~~the ~~which~~product ~~there~~candidates ~~may~~and beindications athat ~~greater~~we ~~likelihood~~have ofchosen ~~success~~to pursue.

We ~~anticipate~~may ~~that~~acquire ~~we will need to raise additional funds to meet our future funding requirements for the continued research~~businesses, ~~development~~products ~~and~~or ~~commercialization of our~~ product candidates ~~and technology. In the event that funds generated from our operations are insufficient to fund our future growth~~, ~~we may raise additional funds through the issuance of equity~~ or ~~debt~~form ~~securities~~strategic oralliances ~~by borrowing from banks~~ or ~~other~~create ~~financial~~joint ~~institutions.~~ventures, Wein ~~cannot~~the ~~assure you that we will be able to obtain such additional financing on terms that are acceptable to us~~future, ~~or at all. Global~~ and ~~local economic conditions could negatively affect our ability to raise funds. To the extent that~~ we ~~raise~~may ~~additional~~not ~~capital~~realize ~~through~~ the ~~sale~~benefits of ~~equity or convertible debt securities, your ownership interest will be diluted, and the terms of~~ such ~~securities may include liquidation or other preferences that adversely affect your rights as a stockholder~~transactions. Such financing, even if obtained, may be accompanied by restrictive covenants that may, among others, limit our ability to pay dividends or require us to seek consent for payment of dividends, or restrict our freedom to operate our business by requiring consent for certain actions.

IfWe wemay ~~fail~~acquire toadditional ~~obtain~~businesses, ~~additional~~products ~~financing~~or onproduct ~~terms~~candidates, ~~that~~form ~~are~~strategic ~~acceptable~~alliances toor ~~us,~~create wejoint ~~will~~ventures ~~not~~with bethird ~~able~~parties tothat ~~implement~~we believe will complement or augment our ~~growth~~existing ~~plans~~business, ~~and~~although we ~~may~~have beno ~~required~~current agreements, commitments or understandings to ~~significantly~~do ~~curtail,~~so. ~~delay~~If orwe ~~discontinue~~acquire ~~one~~businesses orwith ~~more~~promising ofmarkets ~~our~~or ~~research~~technologies, ~~development~~we ormay ~~manufacturing~~not ~~programs~~be orable to realize the ~~commercialization~~benefit of ~~any~~acquiring ~~approved~~such ~~product.~~businesses ~~Furthermore,~~ if we ~~fail~~are unable to ~~obtain~~successfully ~~additional~~integrate ~~financing~~them onwith ~~terms~~our ~~that~~existing ~~are~~operations ~~acceptable~~and tocompany ~~us,~~culture. weWe may ~~forgo~~encounter ornumerous ~~delay~~difficulties ~~the~~in ~~pursuit~~developing, ofmanufacturing ~~opportunities~~and ~~presented~~marketing byany ~~other~~new ~~potential~~products or product candidates resulting from a strategic alliance or ~~indications~~acquisition that ~~may~~delay ~~later~~or ~~prove~~prevent tous ~~have~~from ~~greater~~realizing ~~commercial~~their ~~potential~~expected ~~than~~benefits ~~the~~or ~~product~~enhancing ~~candidates~~our ~~and~~business. ~~indications~~We cannot assure you that, following any such acquisition, strategic alliance or joint venture, we ~~have~~will ~~chosen~~achieve the expected synergies to ~~pursue~~justify the transaction.

40 42

WeOur ~~may~~credit ~~acquire~~facility ~~businesses,~~with ~~products~~Pacific orWestern ~~product candidates~~Bank, or ~~form~~PWB, ~~strategic~~contains ~~alliances~~operating orand ~~create~~financial ~~joint~~covenants ~~ventures,~~that inrestrict ~~the~~our ~~future~~business and financing activities, and weis subject to acceleration in specified circumstances, which may ~~not~~result ~~realize~~in ~~the~~PWB ~~benefits~~taking possession and disposing of ~~such~~any ~~transactions~~collateral.

WeOur ~~may~~credit ~~acquire~~facility ~~additional~~contains ~~businesses,~~restrictions ~~products~~that orlimit ~~product~~our ~~candidates,~~flexibility ~~form~~in ~~strategic~~operating ~~alliances~~our orbusiness. ~~create~~Under ~~joint~~the ~~ventures~~terms ~~with~~of ~~third~~the ~~parties~~amended ~~that~~and werestated ~~believe~~loan ~~will~~and ~~complement~~security oragreement ~~augment~~dated ~~our~~as ~~existing~~of ~~business~~October 26, ~~although~~2018, weas ~~have~~amended, noor ~~current~~the ~~agreements~~A&R LSA, ~~commitments~~with orPWB, ~~understandings~~pursuant to dowhich soPWB extended a $16.0 Ifmillion weterm ~~acquire~~loan ~~businesses~~facility ~~with~~to ~~promising~~us, ~~markets~~of orwhich ~~technologies~~$11.0 million was received in October 2018 in an initial tranche and $5.0 million was received in May 2019, we may not, beamong ~~able~~others, towithout ~~realize~~ the ~~benefit~~prior written consent of ~~acquiring~~PWB, ~~such~~(a) ~~businesses~~pay ifany wedividends ~~are~~or ~~unable~~make toany ~~successfully~~other ~~integrate~~distribution ~~them~~or ~~with~~payment ~~our~~on ~~existing~~account ~~operations~~of ~~and~~or ~~company~~in ~~culture.~~redemption, Weretirement ~~may~~or ~~encounter~~purchase ~~numerous~~of ~~difficulties~~any capital stock except in ~~developing~~certain prescribed circumstances, ~~manufacturing~~(b) ~~and~~create, ~~marketing~~incur, ~~any~~assume, ~~new~~guarantee ~~products~~or be or ~~product~~remain ~~candidates~~liable ~~resulting~~with ~~from~~respect ato ~~strategic~~any ~~alliance~~indebtedness except certain permitted indebtedness or ~~acquisition~~prepay ~~that~~any ~~delay~~indebtedness, (c) replace or ~~prevent~~suffer usthe ~~from~~departure ~~realizing~~of ~~their~~our ~~expected~~Chief ~~benefits~~Executive Officer or ~~enhancing~~Chief ~~our~~Financial ~~business.~~Officer Wewithout ~~cannot~~delivering ~~assure~~written ~~you~~notification ~~that,~~to ~~following~~PWB ~~any~~within ten days of such ~~acquisition~~change or (d) suffer a change on our board of directors, ~~strategic~~or ~~alliance~~Board, which results in the failure of at least one partner of Canaan Partners or ~~joint~~their ~~venture~~respective affiliates to serve as a voting member, wewithout ~~will~~having ~~achieve~~used ~~the~~best ~~expected~~efforts ~~synergies~~to deliver at least 15 days’ prior written notification to ~~justify~~PWB. ~~the~~Our ~~transaction~~facility with PWB is collateralized by all of our assets excluding our intellectual property, on which we have granted a negative pledge.

~~Our~~We ~~credit~~have, ~~facility~~in ~~with~~the ~~Pacific~~past, ~~Western~~breached ~~Bank~~multiple covenants in our loan and security agreement dated as of January 6, or2016, as amended, with PWB related to cash levels, ~~contains~~reporting ~~operating~~requirements and ~~financial~~required ~~covenants~~periodic ~~that~~deliverables ~~restrict~~to PWB, but have obtained waivers from PWB in relation to all such breaches. If we breach certain of our ~~business~~debt covenants and ~~financing~~are ~~activities~~unable to cure such breach within the prescribed period or are not granted waivers in relation to such breach, it may constitute an event of default under our facility agreements, giving lenders the right to require us to repay the then outstanding debt immediately, and isthe ~~subject~~lenders could, among other things, foreclose on the collateral granted to ~~acceleration~~them into ~~specified~~collateralize ~~circumstances~~such indebtedness, which ~~may~~excludes ~~result~~our intellectual property, if we are unable to pay the outstanding debt immediately. A breach of covenants in ~~PWB~~the ~~taking~~A&R ~~possession~~LSA and ~~disposing~~the acceleration of ~~any~~our ~~collateral~~repayment obligations by PWB could have a material adverse effect on our business, financial condition, results of operations and prospects.

~~Our~~Although ~~credit~~we ~~facility~~have ~~contains~~historically ~~restrictions~~depended ~~that~~on ~~limit~~GSK ~~our~~for flexibility in operating our business. Under the terms of the amended and restated loan and security agreement dated as of October 26, 2018, as amended, or the A&R LSA, with PWB, pursuant to which PWB extended a ~~$16.0~~significant ~~million~~portion ~~term loan facility to us,~~ of ~~which~~our ~~$11.0 million was received in October 2018 in an initial tranche and $5.0 million was received in May 2019~~revenue, we ~~may~~do not, ~~among~~expect others, without the prior written consent of PWB, (a) pay any dividends or make any other distribution or payment on account of or in redemption, retirement or purchase of any capital stock except in certain prescribed circumstances, (b) create, incur, assume, guarantee or be or remain liable with respect to ~~any~~receive ~~indebtedness except certain permitted indebtedness or prepay~~ any ~~indebtedness,~~additional ~~(c)~~revenue ~~replace~~from ~~or suffer the departure of~~ our ~~Chief~~GSK Executive Officer or Chief Financial Officer without delivering written notification to PWB within ten days of such change or (d) suffer a change on our board of directors, or Board, which results in the failure of at least one partner of Canaan Partners or their respective affiliates to serve as a voting member, without having used best efforts to deliver at least 15 days’ prior written notification to PWBcollaboration. ~~Our facility with PWB is collateralized by all of our assets excluding our intellectual property, on which we have granted a negative pledge.~~

We ~~have,~~are inparty ~~the~~to ~~past,~~a ~~breached~~licensing ~~multiple covenants in our loan and security~~ agreement ~~dated as of January 6, 2016, as amended,~~ with ~~PWB~~GSK ~~related~~pursuant to ~~cash~~which ~~levels,~~GSK ~~reporting~~has ~~requirements~~exercised ~~and~~an ~~required~~option ~~periodic deliverables~~ to ~~PWB,~~exclusively ~~but~~license ~~have~~our ~~obtained~~PRINT ~~waivers~~technology ~~from~~for ~~PWB~~applications in ~~relation~~certain toinhaled ~~all~~therapies, ~~such~~or ~~breaches.~~the IfGSK weICO ~~breach~~Agreement. ~~certain~~We ofpreviously ~~our~~entered ~~debt~~into ~~covenants~~a ~~and~~separate ~~are~~licensing ~~unable~~agreement towith ~~cure~~GSK ~~such~~relating ~~breach~~to ~~within~~ the ~~prescribed~~field ~~period~~of orvaccines, ~~are~~which ~~not~~lapsed ~~granted waivers~~ in ~~relation~~April to2016. ~~such~~We ~~breach,~~have ithistorically ~~may~~received ~~constitute~~a ansignificant ~~event~~portion of ~~default under~~ our ~~facility~~revenue ~~agreements,~~from ~~giving~~GSK ~~lenders~~pursuant ~~the~~to ~~right~~these tolicensing ~~require~~agreements. usWe torecorded ~~repay~~no ~~the~~revenue ~~then~~attributable ~~outstanding~~to ~~debt~~our ~~immediately,~~collaboration and ~~the~~licensing ~~lenders~~agreements ~~could,~~with ~~among~~GSK ~~other~~during ~~things,~~the ~~foreclose~~nine onmonths ~~the~~ended ~~collateral~~September ~~granted~~30, to2020. ~~them~~For tothe ~~collateralize~~year ~~such~~ended ~~indebtedness~~December 31, 2019, ~~which excludes~~ our ~~intellectual~~revenue ~~property,~~attributable ~~if we are unable~~ to ~~pay~~our ~~the~~collaboration ~~outstanding~~and ~~debt~~licensing ~~immediately.~~arrangements Awith ~~breach~~GSK, ofwhich ~~covenants~~included ina ~~the~~combination ~~A&R LSA and the acceleration~~ of ~~our~~billings ~~repayment~~for ~~obligations~~particle byformulations, ~~PWB~~manufacturing, ~~could~~milestone ~~have~~payments aand ~~material~~amortization ~~adverse~~of ~~effect~~deferred onrevenue ~~our~~from ~~business~~up-front fees, ~~financial~~accounted ~~condition,~~for ~~results~~100% of ~~operations~~our ~~and~~total ~~prospects~~revenue.

~~Although~~During the second quarter of 2019 we ~~have~~concluded ~~historically~~that ~~depended~~no onfurther research and development services will be provided to GSK ~~for~~under athe ~~significant~~collaboration ~~portion~~agreement and the earnings process related to the license fees previously received under the collaboration agreement has been completed under the proportional performance model. Therefore, the remaining deferred revenue of ~~our~~$8.1 million was recognized as revenue during the second quarter of 2019, and we do not expect to receive any additional revenue from GSK pursuant to our collaboration. Because GSK is no longer actively advancing any programs under our collaboration, we entered into the Third Amendment to the GSK ICO Agreement during the second quarter of 2019, pursuant to which we have the right to develop three products for delivery via inhalation, subject to specified milestone payments and royalties due to GSK. Additionally, under certain circumstances GSK has a right of first negotiation with respect to these programs. Although a large proportion of our revenue has historically been obtained from our collaboration with GSK, we do not expect this collaboration to continue. To that end, in January 2020 we notified GSK of our intent to terminate the collaboration because we believe that GSK's inactivity with respect to the collaboration constitutes a material breach and GSK has rebutted our notice of termination. We are currently attempting to resolve the dispute with GSK pursuant to the terms of the GSK ICO Agreement.

WeOur ~~are~~management ~~party to a licensing agreement with GSK pursuant to which GSK~~ has ~~exercised~~broad andiscretion ~~option to exclusively license our PRINT technology for applications~~ in ~~certain~~using ~~inhaled therapies, or~~ the ~~GSK~~net ~~ICO~~proceeds Agreement. We previously entered into a separate licensing agreement with GSK relating to the field of vaccines, which lapsed in April 2016. We have historically received a significant portion of our revenue from ~~GSK~~prior ~~pursuant~~equity toofferings ~~these licensing agreements. We recorded no revenue attributable to our collaboration~~ and ~~licensing~~may ~~agreements~~not ~~with~~use ~~GSK~~them ~~during the six months ended June 30, 2020~~effectively. For the year ended December 31, 2019, our revenue attributable to our collaboration and licensing arrangements with GSK, which included a combination of billings for particle formulations, manufacturing, milestone payments and amortization of deferred revenue from up-front fees, accounted for 100% of our total revenue.

~~During~~We ~~the~~expect ~~second~~to ~~quarter~~use ofthe ~~2019~~net weproceeds ~~concluded~~of ~~that~~our noJuly ~~further~~2020 ~~research~~public offering and ~~development~~prior ~~services~~public ~~will be provided to GSK under the collaboration agreement~~ and ~~the~~private ~~earnings~~equity ~~process~~offerings ~~related~~for toongoing ~~the~~commercial ~~license~~development ~~fees~~of ~~previously~~LIQ861, ~~received~~for ~~under~~continued ~~the~~development ~~collaboration~~of ~~agreement~~LIQ865 ~~has~~and ~~been~~for ~~completed~~general ~~under~~corporate ~~the proportional performance model~~purposes. ~~Therefore,~~The ~~the~~net ~~remaining~~proceeds ~~deferred~~are ~~revenue~~not ofbeing ~~$8.1~~used ~~million~~to ~~was~~fund ~~recognized as revenue during~~ the ~~second~~acquisition ~~quarter~~ of ~~2019,~~RareGen and we do not expect to ~~receive~~use any ~~additional~~material ~~revenue~~proceeds from ~~GSK~~this ~~pursuant~~offering to ~~our~~fund ~~collaboration.~~the ~~Because~~operations ~~GSK~~of isRareGen. noOur ~~longer~~management ~~actively~~has ~~advancing~~broad ~~any~~discretion ~~programs~~in ~~under~~the ~~our~~application ~~collaboration,~~of wesuch ~~entered~~proceeds ~~into~~and ~~the~~could ~~Third~~spend ~~Amendment~~the toproceeds ~~the~~in ~~GSK~~ways ~~ICO~~that ~~Agreement~~do ~~during~~not ~~the~~improve ~~second~~our ~~quarter~~results of ~~2019,~~operations ~~pursuant~~or toenhance ~~which we have~~ the ~~right~~value toof ~~develop~~our ~~three~~equity. ~~products~~The ~~for~~failure ~~delivery~~by ~~via~~our ~~inhalation,~~management ~~subject~~ to ~~specified~~apply ~~milestone~~these ~~payments~~funds ~~and~~effectively ~~royalties~~could ~~due~~result toin ~~GSK.~~financial ~~Additionally,~~losses ~~under~~that ~~certain~~could ~~circumstances~~have ~~GSK has~~ a ~~right~~material ofadverse ~~first~~effect ~~negotiation~~on ~~with respect to these programs. Although a large proportion of~~ our ~~revenue has historically been obtained from our collaboration with GSK~~business, wediminish docash ~~not~~flows ~~expect~~available ~~this collaboration~~ to ~~continue.~~service Toour ~~that end~~debt, wecause ~~recently~~the ~~notified~~value ~~GSK~~ of our ~~intent~~equity to ~~terminate~~decline ~~the~~and ~~collaboration~~delay ~~because we believe that GSK's inactivity with respect to~~ the ~~collaboration~~development ~~constitutes~~of ~~a material breach and GSK has rebutted~~ our ~~notice~~product ~~of termination~~candidates. WePending ~~are~~their ~~currently~~use, ~~attempting~~we tomay ~~resolve~~invest ~~the~~such ~~dispute~~proceeds ~~with~~in ~~GSK~~short-term, ~~pursuant~~investment-grade, tointerest-bearing ~~the~~securities, ~~terms~~which ofmay ~~the~~not ~~GSK~~yield ~~ICO~~favorable ~~Agreement~~returns.

41 43

Our ~~management~~ability ~~has~~to ~~broad~~use ~~discretion~~our innet ~~using~~operating ~~the~~loss ~~net~~carry ~~proceeds~~forwards ~~from~~and ~~prior~~certain ~~equity~~other ~~offerings~~tax ~~and~~attributes may ~~not~~be ~~use them effectively~~limited.

WeUnder ~~expect~~Section to382 ~~use~~of the ~~net~~Internal ~~proceeds~~Revenue Code of ~~our~~1986, ~~July~~as ~~2020~~amended, ~~public~~or ~~offering~~the ~~and~~Code, ~~prior~~if ~~public~~a ~~and~~corporation ~~private~~undergoes ~~equity~~an ~~offerings~~“ownership ~~for~~change”, ~~ongoing~~generally ~~commercial~~defined ~~development~~as ofa ~~LIQ861,~~greater ~~for~~than ~~continued~~50.0% ~~development~~change of(by ~~LIQ865~~value) ~~and~~in ~~for~~its ~~general~~equity ~~corporate~~ownership ~~purposes.~~over ~~The~~a ~~net~~three-year ~~proceeds~~period, ~~are~~the ~~not~~corporation’s ~~being~~ability ~~used~~ to ~~fund~~use ~~the~~its ~~acquisition~~pre-change ofnet ~~RareGen~~operating loss carryforwards and weother dopre-change ~~not~~tax ~~expect~~attributes, such as research tax credits, to ~~use~~offset ~~any~~its ~~material~~post-change ~~proceeds~~income ~~from~~may ~~this~~be limited. With our July 2020 equity offering, toour ~~fund~~December ~~the~~2019 ~~operations~~private ofplacement, ~~RareGen.~~recent ~~Our~~issuances ~~management~~under ~~has~~our ~~broad~~ATM ~~discretion~~facility, inour ~~the~~March ~~application~~2019 offollow-on ~~such~~equity ~~proceeds~~offering and ~~could~~our ~~spend~~July ~~the~~2018 ~~proceeds~~initial inpublic ~~ways~~offering, as well as other past transactions, we believe that dowe ~~not~~have ~~improve~~already ~~our~~triggered ~~results~~an of“ownership ~~operations~~change” limitation, or ~~enhance~~will likely trigger an “ownership change” following the ~~value~~consummation of ~~our~~the ~~equity~~Merger Transaction. ~~The~~We ~~failure~~have bynot ~~our~~completed ~~management~~a formal study to ~~apply~~determine ~~these~~if ~~funds~~any ~~effectively~~“ownership ~~could~~changes” ~~result~~within inthe ~~financial~~meaning ~~losses~~of ~~that~~IRC ~~could~~Section 382 have aoccurred. ~~material~~If ~~adverse~~“ownership ~~effect~~changes” onwithin ~~our~~the ~~business,~~meaning ~~diminish~~of ~~cash~~Section ~~flows~~382 ~~available~~of tothe ~~service~~Code ~~our~~have ~~debt~~occurred, ~~cause~~and ~~the~~if ~~value~~we ofearn net taxable income, our ~~equity~~ability to ~~decline~~use our net operating loss carryforwards and ~~delay~~research ~~the~~and development oftax ~~our~~credits ~~product~~generated ~~candidates~~since inception to offset U.S. ~~Pending~~federal ~~their~~taxable ~~use~~income may be subject to limitations, wewhich ~~may~~could ~~invest~~potentially result in increased future tax liability to us and could require us to pay U.S. federal income taxes earlier than would be required if such ~~proceeds~~limitations were not in ~~short-term,~~effect. ~~investment-grade,~~Similar ~~interest-bearing~~rules ~~securities,~~and ~~which~~limitations may ~~not~~apply ~~yield~~for ~~favorable~~state ~~returns~~income tax purposes.

~~Our~~We ~~ability~~are toa ~~use~~late-stage ~~our~~clinical ~~net~~biopharmaceutical ~~operating~~company ~~loss~~with ~~carry~~no ~~forwards~~approved products and ~~certain~~no ~~other~~historical ~~tax~~product ~~attributes~~revenue, which may bemake ~~limited~~it difficult for you to evaluate our business, financial condition and prospects.

~~Under~~We ~~Section~~are ~~382~~a oflate-stage ~~the~~clinical ~~Internal~~biopharmaceutical ~~Revenue~~company ~~Code~~with ofno ~~1986,~~history asof ~~amended,~~commercial oroperations ~~the~~upon ~~Code,~~which ifyou acan ~~corporation~~evaluate ~~undergoes~~our anprospects. ~~“ownership~~Drug ~~change”,~~product ~~generally~~development ~~defined~~involves as a ~~greater~~substantial ~~than~~degree 50of uncertainty.0% ~~change~~Our ~~(by~~operations ~~value)~~to indate ~~its~~have ~~equity~~been ~~ownership~~limited ~~over~~to adeveloping ~~three-year~~our ~~period~~PRINT technology, ~~the~~undertaking ~~corporation’s~~preclinical ~~ability~~studies toand ~~use~~clinical ~~its~~trials ~~pre-change~~for ~~net~~our ~~operating~~product ~~loss~~candidates ~~carryforwards~~ and ~~other~~collaborating ~~pre-change~~with ~~tax~~pharmaceutical ~~attributes~~companies, ~~such~~including asGlaxoSmithKline ~~research~~plc ~~tax~~and/or ~~credits, to offset~~ its ~~post-change income may be limited. With our July 2020 equity offering~~subsidiaries, ~~our December 2019 private placement~~collectively, ~~recent issuances under our ATM facility~~GSK, ~~our~~to ~~March~~expand ~~2019~~the ~~follow-on~~applications ~~equity~~for ~~offering and~~ our ~~July~~PRINT ~~2018~~technology ~~initial~~through ~~public~~licensing ~~offering,~~ as well as ~~other~~joint ~~past~~product ~~transactions,~~development wearrangements. ~~believe~~We ~~that we~~ have ~~already~~not ~~triggered~~obtained anmarketing ~~“ownership~~approval ~~change”~~for ~~limitation,~~any ~~or will likely trigger an “ownership change” following the consummation~~ of ~~the~~our ~~Merger~~product ~~Transaction.~~candidates Weand, accordingly, have not ~~completed~~demonstrated aan ~~formal~~ability ~~study~~ to ~~determine~~generate ifrevenue ~~any~~from ~~“ownership~~pharmaceutical ~~changes”~~products ~~within~~or ~~the~~successfully ~~meaning~~overcome ~~of IRC Section 382 have occurred. If “ownership changes” within~~ the ~~meaning~~risks ofand ~~Section~~uncertainties ~~382~~frequently ofencountered ~~the~~by ~~Code~~companies ~~have~~undertaking ~~occurred,~~drug ~~and~~product ifdevelopment. ~~we earn net taxable income~~Consequently, ~~our~~your ability to ~~use~~assess our ~~net~~business, ~~operating~~financial ~~loss~~condition ~~carryforwards~~ and ~~research~~prospects ~~and development tax credits generated since inception to offset U.S. federal taxable income~~ may be ~~subject~~significantly tolimited. ~~limitations~~Further, ~~which~~the ~~could~~net ~~potentially~~losses ~~result~~that inwe ~~increased~~incur ~~future~~may ~~tax~~fluctuate ~~liability~~significantly from quarter-to-quarter us and ~~could~~year-to-year, ~~require~~such usthat a period-to-period ~~pay~~comparison ~~U.S.~~of ~~federal~~our ~~income~~results ~~taxes~~of ~~earlier~~operations ~~than~~may ~~would~~not be ~~required~~a ifgood ~~such~~indication ~~limitations~~of ~~were~~our ~~not~~future ~~in effect~~performance. ~~Similar~~Other ~~rules~~unanticipated ~~and~~costs ~~limitations~~ may ~~apply~~also ~~for state income tax purposes~~arise.

WeThe ~~are~~TCJA acould ~~late-stage~~adversely ~~clinical~~affect ~~biopharmaceutical company with no approved products and no historical product revenue, which may make it difficult for you to evaluate~~ our business, and financial condition ~~and prospects~~.

WeIn ~~are~~December a2017, ~~late-stage~~the ~~clinical~~TCJA ~~biopharmaceutical~~was ~~company~~enacted ~~with~~into nolaw. ~~history~~The ofTCJA ~~commercial~~includes ~~operations~~significant ~~upon~~changes ~~which~~to ~~you~~the ~~can~~U.S. ~~evaluate~~corporate ~~our~~income ~~prospects.~~tax ~~Drug~~system, ~~product~~including ~~development~~a ~~involves~~permanent areduction ~~substantial~~in ~~degree~~the ofcorporate ~~uncertainty.~~income ~~Our~~tax ~~operations~~rate tofrom ~~date~~35% ~~have~~to ~~been~~21%, ~~limited~~limitations toon ~~developing~~the ~~our~~deductibility ~~PRINT~~of ~~technology,~~interest ~~undertaking~~expense ~~preclinical~~and ~~studies~~executive compensation and ~~clinical~~the ~~trials~~transition ~~for~~of ~~our~~U.S. ~~product~~international ~~candidates~~taxation ~~and~~from ~~collaborating~~a worldwide system to a territorial tax system. For taxpayers with ~~pharmaceutical~~revenue ~~companies~~over a certain threshold, ~~including~~the ~~GlaxoSmithKline~~TCJA ~~plc~~also ~~and/or~~limits ~~its~~interest ~~subsidiaries,~~expense ~~collectively,~~deductions ~~GSK~~to 30% of taxable income before interest, depreciation and amortization from 2018 to ~~expand~~2021 ~~the~~and ~~applications~~then ~~for~~taxable ~~our~~income ~~PRINT~~before ~~technology~~interest ~~through~~thereafter. ~~licensing~~The asTCJA ~~well~~permits asdisallowed ~~joint~~interest ~~product~~expense ~~development~~to ~~arrangements~~be carried forward indefinitely. We ~~have~~calculated ~~not~~our ~~obtained~~best ~~marketing~~estimate ~~approval~~of ~~for~~the ~~any~~impact of the TCJA in our ~~product~~income ~~candidates~~tax ~~and,~~provision ~~accordingly~~for the year ended December 31, ~~have~~2017 ~~not~~in ~~demonstrated~~accordance anwith ~~ability~~our tounderstanding ~~generate~~of ~~revenue~~the ~~from~~TCJA ~~pharmaceutical~~and ~~products~~guidance oravailable ~~successfully~~at ~~overcome~~the time. The overall impact of the ~~risks~~TCJA ~~and~~resulted ~~uncertainties~~in ~~frequently~~a ~~encountered~~decrease byto ~~companies~~the ~~undertaking~~deferred ~~drug~~tax ~~product~~assets ~~development.~~and ~~Consequently,~~a ~~your~~corresponding ~~ability~~decrease to ~~assess~~the valuation allowance of $14.1 million. We completed our ~~business,~~accounting ~~financial~~for ~~condition~~the ~~and~~TCJA ~~prospects~~during ~~may~~the bethird quarter ~~significantly~~of ~~limited~~2018. ~~Further,~~No changes to the ~~net~~provisional ~~losses~~amounts ~~that~~as weof ~~incur~~December ~~may~~31, ~~fluctuate~~2017 ~~significantly~~were ~~from~~recorded. ~~quarter-to-quarter~~Notwithstanding ~~and~~the ~~year-to-year,~~reduction ~~such~~in ~~that~~the acorporate ~~period-to-period~~income ~~comparison~~tax rate, the overall impact of the TCJA is uncertain and our ~~results~~business ofand ~~operations~~financial ~~may~~condition ~~not~~could be aadversely ~~good~~affected. ~~indication~~The impact of this tax reform on holders of our ~~future~~common ~~performance~~stock is also uncertain and could be adverse. ~~Other~~We ~~unanticipated~~urge ~~costs~~our ~~may~~stockholders ~~also~~to ~~arise~~consult with their legal and tax advisors with respect to such legislation and the potential tax consequences of investing in our common stock.

~~The~~Risks ~~TCJA~~Related ~~could~~to ~~adversely~~the ~~affect~~Commercialization of our ~~business~~Product ~~and financial condition.~~Candidates

InUnited ~~December~~Therapeutics ~~2017,~~has ~~the~~initiated ~~TCJA was enacted into law. The TCJA includes significant changes to the U.S. corporate income tax system, including~~ a ~~permanent~~lawsuit ~~reduction~~against us in ~~the~~which ~~corporate~~it ~~income~~claims ~~tax~~that ~~rate~~LIQ861 ~~from~~is ~~35%~~infringing tothree ~~21%, limitations on the deductibility~~ of ~~interest~~its ~~expense and executive compensation and the transition of U.S. international taxation from a worldwide system to a territorial tax system. For taxpayers with revenue over a certain threshold~~patents, ~~the~~which ~~TCJA~~may ~~also~~result limits interest expense deductions to 30% of taxable income before interest, depreciation and amortization from 2018 to 2021 and then taxable income before interest thereafter. The TCJA permits disallowed interest expense to be carried forward indefinitely. We calculated our best estimate of the impact of the TCJA in our ~~income~~company ~~tax~~being ~~provision~~delayed ~~for the year ended December 31, 2017~~ in ~~accordance~~its ~~with~~efforts ~~our understanding of the TCJA and guidance available at the time. The overall impact of the TCJA resulted in a decrease~~ to ~~the~~commercialize ~~deferred tax assets and a corresponding decrease to the valuation allowance of $14~~LIQ861.1 million. We completed our accounting for the TCJA during the third quarter of 2018. No changes to the provisional amounts as of December 31, 2017 were recorded. Notwithstanding the reduction in the corporate income tax rate, the overall impact of the TCJA is uncertain and our business and financial condition could be adversely affected. The impact of this tax reform on holders of our common stock is also uncertain and could be adverse. We urge our stockholders to consult with their legal and tax advisors with respect to such legislation and the potential tax consequences of investing in our common stock.

42 We are developing LIQ861 under the 505(b)(2) regulatory pathway with Tyvaso® as the reference listed drug. Accordingly, under the Hatch-Waxman Amendments to the Food, Drug and Cosmetic Act, we were required to, in the NDA for LIQ861, certify that patents listed in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations, or the “Orange Book”, for Tyvaso are invalid, unenforceable or will not be infringed by the manufacture, use or sale of LIQ861. Two of these patents are U.S. Patent No. 9,604,901, or the ‘901 Patent, entitled “Process to Prepare Treprostinil, the Active Ingredient in Remodulin®”, and U.S. Patent No. 9,593,066, or the ‘066 Patent”, entitled “Process to Prepare Treprostinil, the Active Ingredient in Remodulin®”, both of which are owned by United Therapeutics. A notice of the paragraph IV certification was required to be provided to United Therapeutics as the owner of the patents that are the subject of the certification to which the NDA for LIQ861 refers. On June 4, 2020, United Therapeutics, as the holder of such patents, asserted a patent challenge directed to the ‘901 Patent and the ‘066 Patent by filing a complaint against us in the U.S. District Court for the District of Delaware (Case No. 1:20-cv-00755-UNA), or the Hatch-Waxman Litigation, thereby triggering an automatic 30-month regulatory stay on final approval of the NDA for LIQ861. As a result of United Therapeutics’ patent challenge, the FDA is prohibited from approving the NDA for LIQ861 until the earliest to occur of the expiration of the 30-month stay, expiration of the ‘901 Patent and ‘066 Patent, settlement of the lawsuit or a decision in the infringement suit that is favorable to us as the NDA applicant. Accordingly, we may be subject to significant delay and incur substantial costs in litigation before we are able to commercialize LIQ861, if at all.

~~Risks Related to the Commercialization of our Product Candidates~~ 44

On July 21, 2020, the U.S. Patent and Trademark Office, or the USPTO, issued U.S. Patent No. 10,716,793, or the “793 Patent”, entitled “Treprostinil Administration by Inhalation”, to United Therapeutics. ~~has~~On ~~initiated~~July a22, ~~lawsuit~~2020, ~~against~~United usTherapeutics filed an amended complaint in ~~which~~the itHatch-Waxman ~~claims~~Litigation ~~that~~asserting infringement of the ‘793 Patent by the practice of LIQ861. The infringement allegations of the ‘793 Patent is ~~infringing~~separate ~~three~~from the 30-month regulatory stay on final approval of ~~its~~the ~~patents~~NDA for LIQ861, which ~~may~~is ~~result~~only associated with the infringement allegations of the ‘901 Patent and the ‘066 Patent. We are required to make a certification with respect to the ‘793 Patent in our ~~company~~NDA ~~being~~for ~~delayed~~LIQ861. inUnited ~~its~~Therapeutics’ ~~efforts~~motion to ~~commercialize~~dismiss ~~LIQ861~~our invalidity defenses and counterclaims concerning the ‘793 Patent was denied by the U.S. District Court for the District of Delaware on November 3, 2020.

We are developing LIQ861 under the 505(b)(2) regulatory pathway with Tyvaso® as the reference listed drug. Accordingly, under the Hatch-Waxman Amendments to the Food, Drug and Cosmetic Act, we were required to, in the NDA for LIQ861, certify that patents listed in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations, or the “Orange Book”, for Tyvaso are invalid, unenforceable or will not be infringed by the manufacture, use or sale of LIQ861. Two of these patents are U.S. Patent No. 9,604,901, or the ‘901 Patent, entitled “Process to Prepare Treprostinil, the Active Ingredient in Remodulin®”, and U.S. Patent No. 9,593,066, or the ‘066 Patent”, entitled “Process to Prepare Treprostinil, the Active Ingredient in Remodulin®”, both of which are owned by United Therapeutics. A notice of the paragraph IV certification was required to be provided to United Therapeutics as the owner of the patents that are the subject of the certification to which the NDA for LIQ861 refers. On ~~June~~July 430, 2020, ~~United~~Judge ~~Therapeutics~~Andrews, aspresiding ~~the~~over ~~holder of such patents, asserted a patent challenge directed to~~ the ~~‘901 Patent and the ‘066 Patent by filing a complaint against us in the U.S. District Court for the District of Delaware (Case No. 1:20-cv-00755-UNA), or the~~ Hatch-Waxman Litigation, ~~thereby~~conducted ~~triggering~~a anscheduling ~~automatic~~conference ~~30-month~~and ~~regulatory~~set ~~stay on final approval of the NDA for LIQ861. As~~ a ~~result~~claim ofconstruction ~~United~~hearing ~~Therapeutics’~~on ~~patent~~May ~~challenge~~24, ~~the~~2021 ~~FDA is prohibited from approving the NDA for LIQ861 until the earliest to occur of the expiration of the 30-month stay, expiration of the ‘901 Patent~~ and ~~‘066~~set ~~Patent, settlement of~~ the ~~lawsuit~~trial ~~or a decision in the infringement suit that is favorable~~ to usbegin ason ~~the~~March ~~NDA applicant. Accordingly~~28, ~~we may be subject to significant delay and incur substantial costs in litigation before we are able to commercialize LIQ861, if at all~~2022.

On ~~July~~March 2130, 2020, ~~the~~we ~~U.S.~~filed two petitions for inter partes review with the Patent Trial and ~~Trademark~~Appeal ~~Office~~Board, or the ~~USPTO~~PTAB, ~~issued~~of Uthe USPTO.S. ~~Patent~~One ~~No.~~petition ~~10,716,793,~~was orfor inter partes review of the ~~“793~~‘901 Patent”, ~~entitled~~seeking ~~“Treprostinil~~a ~~Administration~~determination bythat ~~Inhalation”,~~the toclaims ~~United~~in ~~Therapeutics.~~the On‘901 ~~July~~Patent 22are invalid, ~~2020~~and a second petition is for inter partes review of the ‘066 Patent, ~~United~~seeking ~~Therapeutics~~a ~~filed~~determination anthat ~~amended~~the ~~complaint~~claims in the ~~Hatch-Waxman~~‘066 ~~Litigation~~Patent ~~asserting~~are ~~infringement~~invalid. ofBoth the ‘~~793~~901 Patent and ‘066 Patent are owned by ~~the~~United ~~practice~~Therapeutics ofand ~~LIQ861~~are related to U.S. ~~The~~Patent ~~infringement~~No. ~~allegations~~8,497,393 ofwhich ~~the~~was ~~‘793~~granted ~~Patent~~to isUnited ~~separate~~Therapeutics ~~from~~and subsequently invalidated by the ~~30-month~~USPTO ~~regulatory~~in ~~stay~~an inter onpartes review ~~final~~instituted ~~approval~~in of2016 ~~the~~by ~~NDA~~SteadyMed ~~for~~Ltd. ~~LIQ861~~On October 13, ~~which~~2020, isthe ~~only~~PTAB ~~associated~~instituted ~~with~~an ~~the~~inter ~~infringement~~partes ~~allegations~~review of the ‘901 Patent and concurrently denied institution on the ‘066 Patent., Westating ~~are~~that ~~required~~the to‘066 ~~make~~petition has not established a ~~certification~~reasonable ~~with~~likelihood ~~respect~~that toit would prevail in showing that at least one of the challenged claims is unpatentable. A final written decision determining the validity of the challenged claims of the ‘~~793~~901 Patent inis ~~our~~expected ~~NDA~~within ~~for~~12 ~~LIQ861~~months from institution.

OnWe ~~July~~face ~~30,~~significant ~~2020,~~competition ~~Judge~~from ~~Andrews,~~large ~~presiding~~pharmaceutical ~~over~~companies, ~~the~~among ~~Hatch-Waxman Litigation~~others, ~~conducted a scheduling conference~~ and ~~set~~our aoperating ~~claim~~results ~~construction~~will ~~hearing~~suffer onif ~~May~~we ~~24,~~are ~~2021~~unable ~~and set the trial~~ to ~~begin~~compete ~~on March 28, 2022~~effectively.

OnWe ~~March~~face 30significant competition from industry players worldwide, ~~2020~~including large multi-national pharmaceutical companies, weother ~~filed~~emerging ~~two~~or ~~petitions~~smaller ~~for inter~~pharmaceutical ~~partes review~~companies, ~~with~~as ~~the~~well ~~Patent~~as ~~Trial~~universities and ~~Appeal~~other ~~Board~~research institutions. Many of our competitors have substantially greater financial, ortechnical ~~the~~and ~~PTAB~~other resources, ofsuch ~~the~~as ~~USPTO.~~a ~~One~~larger ~~petition~~research isand ~~for inter~~development ~~partes review~~staff, ofand ~~the~~more ~~‘901~~experience ~~Patent~~in manufacturing and marketing, than we do. As a ~~second~~result, ~~petition~~these iscompanies may obtain marketing approval for ~~inter~~ ~~partes review~~their ofproduct ~~the~~candidates ~~‘066~~more ~~Patent~~quickly than we are able to and be more successful in commercializing their products than us. Smaller or early-stage companies may also prove to be significant competitors, ~~both~~particularly ofthrough ~~which~~collaboration ~~are~~arrangements ~~owned~~with bylarge, ~~United~~established ~~Therapeutics~~companies. We ~~are~~may ~~seeking~~also aface ~~determination~~competition ~~that~~as ~~the~~a ~~claims~~result of advances in the ~~‘066~~commercial ~~Patent~~applicability of new technologies and ~~the~~greater ~~‘901~~availability ~~Patent~~of ~~are~~capital ~~invalid~~for investment in such technologies. ~~Both~~Our ~~the~~competitors ~~‘066~~may ~~Patent~~also ~~and~~invest heavily in the ~~‘901~~discovery ~~Patent~~and ~~are~~development ~~related~~of tonovel ~~U.S.~~drug ~~Patent~~products ~~No.~~that ~~8,497,393~~could ~~which~~make ~~was~~our ~~granted~~product tocandidates ~~United~~less ~~Therapeutics~~competitive ~~and~~or ~~subsequently~~may ~~invalidated~~file byFDA citizen petitions which may delay the ~~USPTO~~approval inprocess ~~an inter~~for ~~partes review~~our ~~instituted~~product candidates. Furthermore, our competitors may succeed in ~~2016~~developing, byacquiring ~~SteadyMed~~or ~~Ltd.~~licensing, Aon ~~determination~~an byexclusive ~~the~~basis, ~~PTAB~~pharmaceutical products that are easier to ~~institute~~develop, ~~the~~more ~~petitions~~effective isor ~~expected~~less ~~early~~costly inthan ~~the~~any ~~fourth~~product ~~quarter~~candidates ofthat ~~2020,~~we ~~and~~are acurrently ~~final~~developing ~~written~~or ~~decision~~that ~~determining~~we ~~the~~may ~~validity~~develop. ofOur ~~the~~competitors ~~challenged~~may ~~claims~~also ofsucceed ~~the~~in ~~‘066~~asserting ~~Patent~~existing ~~and~~patents ~~the~~or ~~‘901~~developing ~~Patent,~~new ifpatents ~~the~~to ~~petitions~~which ~~are~~we ~~instituted~~do bynot ~~the~~have ~~PTAB,~~a islicense ~~expected~~in ~~within~~an 12attempt ~~months~~to prevent us from ~~institution~~marketing our products.

WeAny ~~face~~new ~~significant~~drug ~~competition~~product ~~from~~that ~~large~~competes ~~pharmaceutical~~with ~~companies,~~a ~~among~~prior ~~others~~approved drug product must demonstrate advantages in safety, efficacy, tolerability or convenience in order to overcome price competition and ~~our~~to ~~operating~~be ~~results~~commercially ~~will~~successful. ~~suffer~~Our products, if weand when approved, are ~~unable~~expected to ~~compete~~face ~~effectively~~competition from drug products that are already on the market, as well as those in our competitors’ development pipelines. We expect that our lead program, LIQ861, an inhaled treprostinil therapy for the treatment of PAH, will face competition from the following inhaled treprostinil therapies that are either currently marketed or in clinical development:

We● ~~face significant competition from industry players worldwide~~Tyvaso, ~~including~~marketed ~~large~~by ~~multi-national~~United ~~pharmaceutical companies~~Therapeutics, ~~other~~has ~~emerging~~been orapproved smaller pharmaceutical companies, as well as universities and other research institutions. Many of our competitors have substantially greater financial, technical and other resources, such as a larger research and development staff, and more experience in manufacturing and marketing, than we do. As a result, these companies may obtain marketing approval for ~~their~~the ~~product~~treatment candidates more quickly than we are able to and be more successful in commercializing their products than us. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaboration arrangements with large, established companies. We may also face competition as a result of ~~advances~~PAH in the ~~commercial~~United ~~applicability~~States ofsince ~~new technologies and greater availability of capital for investment in such technologies~~2009. ~~Our~~Tyvaso ~~competitors~~is ~~may also invest heavily in~~ the ~~discovery~~reference ~~and~~listed ~~development of novel~~ drug ~~products~~in ~~that could make~~ our ~~product~~NDA ~~candidates less competitive or may file FDA citizen petitions which may delay the approval process~~ for ~~our product candidates~~LIQ861. ~~Furthermore,~~Following ~~our~~patent ~~competitors may succeed in developing~~litigation, ~~acquiring~~United orTherapeutics ~~licensing,~~and onWatson anPharmaceuticals ~~exclusive~~reached ~~basis,~~a ~~pharmaceutical~~settlement ~~products~~whereby ~~that~~Watson ~~are~~Pharmaceuticals ~~easier~~will tobe ~~develop,~~permitted more effective or less costly than any product candidates that we are currently developing or that we may develop. Our competitors may also succeed in asserting existing patents or developing new patents to ~~which~~enter wethe domarket ~~not~~with ~~have~~ a ~~license~~generic inversion anof ~~attempt~~Tyvaso tobeginning ~~prevent~~on usJanuary ~~from~~1, ~~marketing our products~~2026.

43 45

~~Any~~● ~~new~~Ventavis, ~~drug~~marketed ~~product~~by ~~that~~Actelion, ~~competes with~~ a ~~prior~~division ~~approved~~of ~~drug~~Johnson ~~product~~& ~~must demonstrate advantages in safety~~Johnson, ~~efficacy,~~has ~~tolerability~~been ~~or convenience in order to overcome price competition and to be commercially successful. Our products, if and when~~ approved, are expected to face competition from drug products that are already on the market, as well as those in our competitors’ development pipelines. We expect that our lead program, LIQ861, an inhaled treprostinil therapy for the treatment of PAH, ~~will~~in ~~face competition from~~ the ~~following~~United ~~inhaled~~States ~~treprostinil~~since ~~therapies that are either currently marketed or in clinical development:~~2004.

● ~~Tyvaso~~TreT, ~~marketed~~licensed from MannKind, by United Therapeutics, ~~has~~is ~~been~~currently ~~approved~~in late-stage clinical development in the United States for the treatment of PAH. inUnder the license agreement, United ~~States~~Therapeutics ~~since~~is ~~2009~~responsible for global development, regulatory and commercial activities. ~~Tyvaso~~MannKind iswill manufacture clinical supplies and initial commercial supplies of the ~~reference~~product ~~listed~~while ~~drug~~long-term incommercial ~~our~~supplies ~~NDA~~will ~~for~~be ~~LIQ861~~manufactured by United Therapeutics. ~~Following~~In ~~patent~~September, ~~litigation~~2019, United Therapeutics commenced a clinical study (BREEZE) to evaluate the safety and ~~Watson~~pharmacokinetics ~~Pharmaceuticals~~of ~~reached~~switching aPAH ~~settlement~~patients ~~whereby~~from ~~Watson~~Tyvaso ~~Pharmaceuticals~~to ~~will~~TreT beand ~~permitted~~announced that a second clinical study is expected to ~~enter~~be completed by the ~~market~~end ~~with~~of a2020 ~~generic~~to ~~version~~compare the pharmacokinetics of TreT to Tyvaso ~~beginning~~in onhealthy ~~January~~volunteers. 1United Therapeutics further reported that the two studies, ~~2026~~if successful, are the only clinical studies necessary to support FDA approval.

●In ~~Ventavis~~addition to these other inhaled treprostinil therapies, ~~marketed~~we byexpect ~~Actelion~~that LIQ861 will also face competition from other treprostinil-based drugs, aincluding ~~division~~Orenitram, ofwhich ~~Johnson~~is &administered ~~Johnson~~orally, ~~has~~and ~~been~~Remodulin, ~~approved~~which ~~for~~is ~~the~~administered ~~treatment~~parenterally, both of ~~PAH~~which inare ~~the~~marketed by United ~~States since 2004~~Therapeutics.

●In ~~TreT,~~addition ~~licensed~~to ~~from~~treprostinil-based ~~MannKind~~therapies, byother ~~United~~classes ~~Therapeutics,~~of istherapeutic ~~currently~~agents ~~in late-stage clinical development in the United States~~ for the treatment of PAH. ~~Under~~include the license agreement, United Therapeutics is responsible for global development, regulatory and commercial activities. MannKind will manufacture clinical supplies and initial commercial supplies of the product while long-term commercial supplies will be manufactured by United Therapeutics. In September, 2019, United Therapeutics commenced a clinical study (BREEZE) to evaluate the safety and pharmacokinetics of switching PAH patients from Tyvaso to TreT and announced plans to commence a second clinical study during the first half of 2020 to compare the pharmacokinetics of TreT to Tyvaso in healthy volunteers. United Therapeutics further reported that the two studies, if successful, are the only clinical studies necessary to support FDA approval.following:

In● ~~addition~~IP-agonists, tosuch ~~these~~as ~~other~~selexipag, ~~inhaled~~marketed ~~treprostinil~~by ~~therapies~~Actelion, weand ~~expect~~ralinepeg, ~~that~~licensed ~~LIQ861 will also face competition~~ from ~~other~~Arena ~~treprostinil-based drugs~~Pharmaceuticals, ~~including~~Inc. ~~Orenitram,~~by ~~which~~United ~~is administered orally~~Therapeutics, ~~and Remodulin,~~ which is ~~administered~~currently ~~parenterally,~~in ~~both~~clinical ~~of which are marketed by United Therapeutics.~~development;

In● ~~addition~~Endothelin toreceptor ~~treprostinil-based~~antagonists, ~~therapies~~such as bosentan and macitentan, ~~other~~both ~~classes~~marketed ofby ~~therapeutic~~Actelion, ~~agents~~and ~~for~~ambrisentan, ~~the~~marketed ~~treatment~~by Gilead. Generic version of ~~PAH~~bosentan ~~include~~and ~~the~~ambrisentan ~~following:~~are currently available.

● IPPDE-~~agonists~~5 inhibitors, such as ~~selexipag~~tadalafil, marketed by ~~Actelion~~United Therapeutics, and ~~ralinepeg~~sildenafil, ~~licensed~~marketed ~~from~~by ~~Arena~~Pfizer ~~Pharmaceuticals,~~ Inc. byGeneric ~~United~~versions ~~Therapeutics,~~of ~~which~~both istadalafil ~~currently~~and insildenafil ~~clinical~~are ~~development;~~currently available.

● ~~Endothelin~~Soluble ~~receptor~~guanylate ~~antagonists~~cyclase (sGC) stimulator, such as ~~bosentan~~riociguat ~~and macitentan, both~~ marketed by ~~Actelion, and ambrisentan, marketed by Gilead~~Bayer. ~~Generic version of bosentan and ambrisentan are currently available.~~

●In ~~PDE-5 inhibitors~~addition, ~~such~~we asare ~~tadalafil,~~also ~~marketed~~aware byof ~~United~~several ~~Therapeutics,~~other ~~and~~agents ~~sildenafil,~~currently ~~marketed~~in byclinical ~~Pfizer~~development ~~Inc.~~in ~~Generic~~the ~~versions~~United States for the treatment of ~~both~~PAH, ~~tadalafil~~including ~~and~~those ~~sildenafil~~in ~~are~~development ~~currently~~by ~~available~~Insmed, Inc. and Acceleron Pharma, Inc.

●We ~~Soluble~~expect ~~guanylate~~LIQ865 ~~cyclase~~to ~~(sGC)~~face ~~stimulator~~competition from EXPAREL®, ~~such~~an asexisting ~~riociguat~~injectable ~~marketed~~version byof ~~Bayer~~bupivacaine. The early success of EXPAREL may make it difficult for us to convince physicians, patients and other members of the medical community to accept and use LIQ865 over EXPAREL. Generic equivalents of EXPAREL may also enter the market following the expiry of EXPAREL’s patent in 2021.

InWhile ~~addition~~EXPAREL is currently the only direct competitor to LIQ865 on the market, wein ~~are~~October ~~also~~2018 ~~aware~~Heron Therapeutics, Inc., or Heron, announced the submission of ~~several~~its ~~other~~NDA ~~agents~~to ~~currently~~the inFDA ~~clinical~~for ~~development~~HTX-011, an investigational long-acting, extended-release formulation of the local anesthetic bupivacaine in a fixed-dose combination with the ~~United~~anti-inflammatory ~~States~~meloxicam for the ~~treatment~~management of ~~PAH,~~postoperative ~~including~~pain. ~~those~~HTX-011 inwas ~~development~~granted both breakthrough therapy and fast track designations from the FDA as well as priority review by ~~Insmed~~the FDA. On May 1, ~~Inc~~2019, Heron announced that it received a complete response letter, or CRL, for HTX-011 from the FDA. On October 1, 2019, Heron announced that it had resubmitted its NDA for HTX-011 to the FDA and ~~Acceleron~~expected ~~Pharma~~a six-month review. On June 26, ~~Inc~~2020, Heron announced that it received a CRL from the FDA for HTX-011. In addition to Heron, Durect Corporation and Innocoll Holdings plc each also have products in clinical development that are potential competitors to LIQ865.

WeIf ~~expect~~we ~~LIQ865~~are unable to ~~face~~maintain ~~competition~~our ~~from~~competitive ~~EXPAREL®~~position, anour ~~existing~~business ~~injectable version of bupivacaine. The early success of EXPAREL may make it difficult for us to convince physicians, patients~~ and ~~other~~prospects ~~members~~will ofbe ~~the~~materially ~~medical community to accept~~ and ~~use~~adversely ~~LIQ865 over EXPAREL~~affected. ~~Generic equivalents of EXPAREL may also enter the market following the expiry of EXPAREL’s patent in 2021.~~

~~While~~If ~~EXPAREL~~a ~~is currently the only direct~~ competitor toobtains ~~LIQ865~~orphan ondrug ~~the~~designation ~~market,~~from ~~in October 2018 Heron Therapeutics, Inc., or Heron, announced~~ the ~~submission of its NDA to the~~ FDA for ~~HTX-011,~~the ansame ~~investigational~~drug ~~long-acting,~~and ~~extended-release~~same ~~formulation~~indication ofas ~~the~~we ~~local~~are ~~anesthetic~~seeking ~~bupivacaine~~for in a ~~fixed-dose~~product ~~combination~~candidate, ~~with~~and ~~the~~then ~~anti-inflammatory~~obtains ~~meloxicam~~approval ~~for the management~~ of ~~postoperative~~that ~~pain.~~drug ~~HTX-011~~for ~~was~~that ~~granted~~condition ~~both~~before ~~breakthrough~~we ~~therapy~~do, ~~and~~the ~~fast~~resulting ~~track~~FDA ~~designations~~exclusivity ~~from~~would ~~the~~significantly ~~FDA~~delay asour ~~well~~ability asto ~~priority~~commercialize ~~review~~that byproduct ~~the FDA~~candidate. ~~On May 1~~Similarly, ~~2019,~~if ~~Heron announced that it received~~ a ~~complete~~competitor ~~response~~obtains ~~letter,~~marketing orapproval ~~CRL,~~ for ~~HTX-011~~a ~~from~~new ~~the~~condition ~~FDA.~~of Onuse ~~October 1, 2019, Heron announced~~ that itrequired ~~had~~new ~~resubmitted~~clinical ~~its~~investigations ~~NDA~~ for ~~HTX-011~~support, to the ~~FDA~~competitor ~~and~~may ~~expected~~obtain ~~a six~~three-~~month~~year ~~review.~~marketing Onexclusivity ~~June~~for ~~26,, 2020, Heron announced~~ that itcondition ~~received~~of ause, ~~CRL~~and ~~from~~thereby ~~the~~delay ~~FDA~~our ~~for~~ability ~~HTX-011. In addition~~ to ~~Heron,~~receive ~~Durect~~marketing ~~Corporation~~approval ~~and~~for ~~Innocoll~~that ~~Holdings~~drug ~~plc~~product ~~each~~for ~~also~~that ~~have~~condition ~~products~~of inuse ~~clinical~~by ~~development~~three ~~that~~years ~~are~~form ~~potential~~the ~~competitors~~date toof ~~LIQ865~~that approval.

IfUnder wethe ~~are~~Orphan ~~unable~~Drug Act, the FDA may grant orphan drug designation to ~~maintain~~drugs ~~our~~intended ~~competitive~~to ~~position~~treat a rare disease or condition — generally a disease or condition that affects fewer than 200,000 ~~our~~individuals ~~business~~in the United States or that affects more than 200,000 individuals in the United States and ~~prospects~~for ~~will~~which bethere ~~materially~~is no reasonable expectation that the costs of research and ~~adversely~~development ~~affected~~of the drug for the indication can be recovered by sales of the drug in the United States. Orphan drug designation must be requested before submitting an NDA.

If a competitor obtains orphan drug designation from the FDA for the same drug and same indication as we are seeking for a product candidate, and then obtains approval of that drug for that condition before we do, the resulting FDA exclusivity would significantly delay our ability to commercialize that product candidate. Similarly, if a competitor obtains marketing approval for a new condition of use that required new clinical investigations for support, the competitor may obtain three-year marketing exclusivity for that condition of use, and thereby delay our ability to receive marketing approval for that drug product for that condition of use by three years form the date of that approval. 46

44 After the FDA grants orphan drug designation, the generic identity of the drug and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process. The first applicant to receive FDA approval for a particular active ingredient to treat a particular disease or condition with orphan drug designation is entitled to a seven-year exclusive marketing period in the United States for that product in that indication. Among the other benefits of orphan drug designation are tax credits for certain research and a waiver of the NDA application user fee.

~~Under~~During the ~~Orphan~~exclusivity ~~Drug Act~~period, the FDA may ~~grant~~not ~~orphan~~approve ~~drug~~any ~~designation~~other applications to ~~drugs~~market ~~intended~~the tosame ~~treat~~drug afor ~~rare~~the same disease or condition, —except ~~generally~~in alimited ~~disease~~circumstances, orsuch ~~condition~~as ~~that~~if ~~affects~~the ~~fewer~~second ~~than~~applicant ~~200,000~~demonstrates ~~individuals~~clinical insuperiority of its product to the ~~United~~product ~~States~~with orphan drug exclusivity through a demonstration of superior safety, superior efficacy or ~~that~~a ~~affects~~major ~~more~~contribution ~~than~~to ~~200~~patient care,~~000~~ ~~individuals~~or inif the ~~United~~manufacturer ~~States~~of ~~and~~the ~~for~~product ~~which~~with ~~there~~orphan exclusivity is nonot ~~reasonable~~able ~~expectation~~to assure sufficient quantities of the product. “Same drug” means a drug that contains the ~~costs~~same identity of ~~research~~the ~~and~~active ~~development~~moiety if it is a drug composed of small molecules, or of the ~~drug~~principal molecular structural features if it is composed of macromolecules and is intended for the ~~indication~~same use as a previously approved drug, except that if the subsequent drug can be ~~recovered~~shown byto ~~sales~~be ofclinically superior to the first drug, init will not be considered to be the ~~United~~same ~~States~~drug. ~~Orphan~~Drug exclusivity does not prevent the FDA from approving a different drug ~~designation~~for ~~must~~the besame ~~requested~~disease ~~before~~or ~~submitting~~condition, anor ~~NDA~~the same drug for a different disease or condition.

~~After~~The ~~the~~commercial ~~FDA~~success ~~grants~~of ~~orphan~~our drug ~~designation,~~products ~~the~~depends ~~generic~~on ~~identity of~~ the ~~drug~~availability and ~~its~~sufficiency ~~potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not convey any advantage in, or shorten the duration~~ of, the regulatory review and approval process. The first applicant to receive FDA approval for a particular active ingredient to treat a particular disease or condition with orphan drug designation is entitled to a seventhird-~~year~~party ~~exclusive~~payor ~~marketing~~coverage ~~period in the United States for that product in that indication. Among the other benefits of orphan drug designation are tax credits for certain research~~ and ~~a waiver of the NDA application user fee~~reimbursement.

~~During~~Patients ~~the exclusivity period, the FDA may not approve any other applications to market the same drug for the same disease or condition, except~~ in ~~limited circumstances, such as if~~ the ~~second~~United ~~applicant~~States ~~demonstrates~~and ~~clinical~~elsewhere ~~superiority~~generally ofrely ~~its~~on ~~product~~third-party topayors ~~the product with orphan drug exclusivity through a demonstration of superior safety, superior efficacy or a major contribution~~ to ~~patient~~reimburse ~~care,~~part or ifall ~~the manufacturer~~ of the ~~product~~costs associated with ~~orphan~~their ~~exclusivity~~prescription isdrugs. ~~not~~Accordingly, ~~able~~market toacceptance ~~assure sufficient quantities~~ of ~~the~~our ~~product. “Same~~ drug” ~~means~~products ~~a drug that contains the same identity of the active moiety if it~~ is adependent ~~drug~~on ~~composed of small molecules, or of~~ the ~~principal~~extent ~~molecular~~to ~~structural~~which ~~features~~third-party ifcoverage ~~it is composed of macromolecules~~ and reimbursement is ~~intended~~available ~~for~~from ~~the~~government ~~same~~health ~~use~~administration asauthorities a(including ~~previously~~in ~~approved~~connection ~~drug,~~with ~~except~~government ~~that~~healthcare ~~if the subsequent drug can be shown to be clinically superior to the first drug~~programs, itsuch ~~will~~as ~~not~~Medicare beand ~~considered~~Medicaid toin be the ~~same~~United ~~drug. Drug exclusivity does not prevent the FDA from approving a different drug for the same disease or condition~~States), orprivate ~~the~~healthcare ~~same~~insurers ~~drug~~and ~~for~~other ahealthcare ~~different~~funding ~~disease or condition~~organizations.

~~The~~Significant ~~commercial~~uncertainty ~~success~~exists as to the coverage and reimbursement status of ~~our~~any drug products ~~depends~~for onwhich ~~the~~we ~~availability~~may ~~and~~obtain ~~sufficiency~~regulatory ofapproval. ~~third~~Coverage decisions may not favor new drug products when more established or lower-~~party~~cost ~~payor~~therapeutic alternatives are already available. Even if we obtain coverage for a given drug product, the associated reimbursement rate may not be adequate to cover our costs, including research, development, intellectual property, manufacture, sale and distribution expenses, or may require co-payments that patients find unacceptably high. Patients are unlikely to use our products unless reimbursement is adequate to cover all or a significant portion of the cost of our drug products.

~~Patients~~Coverage inand ~~the~~reimbursement ~~United~~policies ~~States~~for drug products can differ significantly from payor to payor as there is no uniform policy of coverage and ~~elsewhere~~reimbursement ~~generally~~for ~~rely~~drug onproducts among third-party payors toin ~~reimburse~~the ~~part~~United orStates. ~~all~~There ofmay ~~the~~be ~~costs~~significant ~~associated~~delays ~~with~~in ~~their~~obtaining ~~prescription~~coverage ~~drugs.~~and ~~Accordingly,~~reimbursement ~~market~~as ~~acceptance~~the process of ~~our~~determining ~~drug~~coverage ~~products~~and reimbursement is ~~dependent~~often ontime-consuming ~~the~~and ~~extent~~costly, to which ~~third-party~~will ~~coverage~~require us to provide scientific and ~~reimbursement~~clinical issupport ~~available~~for ~~from~~the ~~government~~use ~~health~~of ~~administration~~our ~~authorities~~products ~~(including~~to ineach ~~connection~~payor separately, with ~~government~~no ~~healthcare~~assurance ~~programs,~~that ~~such~~coverage asor ~~Medicare~~adequate reimbursement will be obtained. It is difficult to predict at this time what government authorities and ~~Medicaid~~third-party inpayors ~~the~~will ~~United~~decide ~~States),~~with ~~private~~respect ~~healthcare~~to ~~insurers~~coverage and ~~other~~reimbursement ~~healthcare~~for ~~funding~~our ~~organizations~~drug products.

~~Significant~~The ~~uncertainty~~market ~~exists~~for asour product candidates will depend significantly on access to ~~the~~third-party payors’ drug formularies, or lists of medications for which third-party payors provide coverage and reimbursement. ~~status~~Competition ofto ~~any~~be ~~drug~~included ~~products~~in ~~for~~such ~~which~~formularies weoften ~~may~~leads ~~obtain~~to ~~regulatory~~downward ~~approval~~pricing pressures. ~~Coverage~~In ~~decisions~~particular, third-party payors may ~~not~~refuse ~~favor~~to ~~new~~include a particular drug ~~products~~in their formularies or otherwise restrict patient access to a drug when ~~more~~a ~~established~~less orcostly ~~lower-cost~~generic ~~therapeutic~~equivalent ~~alternatives~~or ~~are~~other ~~already~~alternative is available. ~~Even~~In ifparticular, wegiven ~~obtain~~that ~~coverage~~several ~~for~~therapeutically asimilar ~~given~~ drug ~~product~~products to LIQ861, including inhaled, oral and parenteral prostacyclins, are available on the ~~associated~~market, ~~reimbursement~~managed ~~rate~~care organizations may ~~not~~minimize bethe ~~adequate~~utilization toof ~~cover~~a ~~our~~new ~~costs,~~to ~~including~~market ~~research,~~product ~~development~~and accordingly, ~~intellectual~~we ~~property,~~expect ~~manufacture~~that LIQ861, ~~sale~~if and ~~distribution~~when ~~expenses~~approved, orwill ~~may~~operate ~~require~~in ~~co-payments~~a ~~that~~highly ~~patients~~cost-constrained ~~find~~environment. ~~unacceptably~~Similarly, ~~high.~~as ~~Patients~~there are ~~unlikely~~a tonumber ~~use~~of ~~our~~generic ~~products~~and ~~unless~~branded ~~reimbursement~~therapeutic isalternatives ~~adequate~~ to ~~cover~~LIQ865 ~~all~~in orthe post-operative pain market, there is a significant ~~portion~~risk ofthat LIQ865 may not be placed on the ~~cost~~formularies of ~~our~~key ~~drug~~institutions ~~products~~and/or receive favorable reimbursement, if and when approved.

~~Coverage~~The ~~and~~U.S. ~~reimbursement~~government, ~~policies~~state ~~for~~legislatures ~~drug products can differ significantly from payor to payor as there is no uniform policy of coverage~~ and ~~reimbursement~~foreign ~~for~~governmental ~~drug~~entities ~~products~~have ~~among~~shown ~~third-party payors in the United States. There may be~~ significant ~~delays~~interest in ~~obtaining~~implementing ~~coverage~~cost ~~and~~containment ~~reimbursement~~programs asto limit the ~~process~~growth of ~~determining coverage and reimbursement is often time~~government-~~consuming~~paid ~~and~~healthcare ~~costly~~costs, ~~which~~including ~~will~~price ~~require~~controls, usrestrictions toon ~~provide~~reimbursement ~~scientific~~ and ~~clinical~~coverage ~~support~~and requirements for ~~the~~substitution ~~use~~ of ~~our~~generic products tofor ~~each~~branded ~~payor~~prescription ~~separately,~~drugs. ~~with~~Adoption noof ~~assurance~~government ~~that~~controls ~~coverage~~and ormeasures, ~~adequate~~and ~~reimbursement~~tightening ~~will~~of berestrictive ~~obtained.~~policies Itin isjurisdictions ~~difficult~~with toexisting ~~predict~~controls atand ~~this~~measures, ~~time~~could ~~what~~exclude ~~government~~or ~~authorities~~limit ~~and~~our ~~third-party~~drug ~~payors~~products ~~will~~from ~~decide with respect to~~ coverage and ~~reimbursement~~limit payments for ~~our drug products~~pharmaceuticals.

The market for our product candidates will depend significantly on access to third-party payors’ drug formularies, or lists of medications for which third-party payors provide coverage and reimbursement. Competition to be included in such formularies often leads to downward pricing pressures. In particular, third-party payors may refuse to include a particular drug in their formularies or otherwise restrict patient access to a drug when a less costly generic equivalent or other alternative is available. In particular, given that several therapeutically similar drug products to LIQ861, including inhaled, oral and parenteral prostacyclins, are available on the market, managed care organizations may minimize the utilization of a new to market product and accordingly, we expect that LIQ861, if and when approved, will operate in a highly cost-constrained environment. Similarly, as there are a number of generic and branded therapeutic alternatives to LIQ865 in the post-operative pain market, there is a significant risk that LIQ865 may not be placed on the formularies of key institutions and/or receive favorable reimbursement, if and when approved. 47

~~The~~In ~~U.S. government~~addition, ~~state~~we ~~legislatures~~expect ~~and~~that ~~foreign~~the ~~governmental~~increased ~~entities~~emphasis ~~have~~on ~~shown~~managed ~~significant~~care ~~interest~~and ~~in implementing~~ cost containment ~~programs~~measures toin ~~limit~~ the ~~growth~~United ofStates ~~government~~by third-~~paid~~party ~~healthcare~~payors ~~costs,~~and ~~including~~government ~~price~~authorities ~~controls,~~will ~~restrictions~~continue and will place pressure on ~~reimbursement~~pharmaceutical pricing and coverage. ~~and~~Coverage ~~requirements~~policies ~~for~~and ~~substitution~~third-party ofreimbursement ~~generic~~rates ~~products~~may ~~for~~change ~~branded~~at ~~prescription~~any ~~drugs~~time. ~~Adoption~~Even ofif ~~government~~favorable ~~controls~~coverage and ~~measures,~~reimbursement ~~and~~status ~~tightening~~is ofattained ~~restrictive~~for ~~policies~~one inor ~~jurisdictions~~more ~~with~~drug ~~existing~~products ~~controls~~for ~~and~~which ~~measures,~~we ~~could~~receive ~~exclude~~regulatory orapproval, ~~limit~~less ~~our~~favorable ~~drug~~coverage ~~products~~policies ~~from~~and ~~coverage~~reimbursement ~~and~~rates ~~limit~~may ~~payments~~be ~~for~~implemented ~~pharmaceuticals~~in the future.

45 If we are unable to obtain and maintain sufficient third-party coverage and adequate reimbursement for our drug products, the commercial success of our drug products may be greatly hindered and our financial condition and results of operations may be materially and adversely affected.

InOur addition, we expect that the increased emphasis on managed care and cost containment measures in the United States by third-party payors and government authorities will continue and will place pressure on pharmaceutical pricing and coverage. 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 drug products ~~for which we receive regulatory approval, less favorable coverage policies and reimbursement rates~~ may benot ~~implemented~~achieve inmarket ~~the future~~acceptance.

IfWe are currently focused on developing drug products that can be approved under abbreviated regulatory pathways in the United States, such as the 505(b)(2) regulatory pathway, which allows us to rely on existing knowledge of the safety and efficacy of the relevant reference listed drugs to support our applications for approval in the United States. While we ~~are~~believe ~~unable~~that it will be less difficult for us to ~~obtain~~convince physicians, patients and ~~maintain~~other ~~sufficient~~members ~~third-party~~of ~~coverage~~the medical community to accept and ~~adequate~~use ~~reimbursement~~our ~~for~~drug products as compared to entirely new drugs, our drug products may nonetheless fail to gain sufficient market acceptance by physicians, ~~the~~patients, ~~commercial~~other ~~success~~healthcare providers and third-party payors. If any of our drug products fail to achieve sufficient market acceptance, we may not be ~~greatly~~able ~~hindered~~to ~~and~~generate ~~our~~sufficient ~~financial~~revenue ~~condition~~to ~~and~~become ~~results~~profitable. The degree of ~~operations~~market ~~may~~acceptance beof ~~materially~~our drug products, if and ~~adversely~~when ~~affected.~~they are approved for commercial sale, will depend on a number of factors, including but not limited to:

~~Our~~● ~~products~~the ~~may~~timing ~~not~~of ~~achieve~~our ~~market~~receipt ~~acceptance.~~of marketing approvals, the terms of such approvals and the countries in which such approvals are obtained;

We● ~~are currently focused on developing drug products that can be approved under abbreviated regulatory pathways in~~ the ~~United States~~safety, ~~such as the 505(b)(2) regulatory pathway, which allows us to rely on existing knowledge of the safety and~~ efficacy ~~of the relevant reference listed drugs to support our applications for approval in the United States. While we believe that it will be less difficult for us to convince physicians~~, ~~patients~~reliability and ~~other~~ease ~~members~~ of ~~the~~administration medical community to accept and use our drug products as compared to entirely new drugs, our drug products may nonetheless fail to gain sufficient market acceptance by physicians, patients, other healthcare providers and third-party payors. If any of our drug products fail to achieve sufficient market acceptance, we may not be able to generate sufficient revenue to become profitable. The degree of market acceptance of our drug products, if and when they are approved for commercial sale, will depend on a number of factors, including but not limited to:;

● the ~~timing~~prevalence ofand ~~our~~severity ~~receipt~~ of ~~marketing~~undesirable ~~approvals,~~side ~~the~~effects ~~terms of such approvals~~ and ~~the~~adverse ~~countries in which such approvals are obtained~~events;

● the ~~safety,~~extent ~~efficacy,~~of ~~reliability~~the ~~and~~limitations ~~ease~~or ofwarnings ~~administration~~required by the FDA or comparable regulatory authorities in other countries to be contained in the labeling of our drug products;

● the ~~prevalence~~clinical ~~and~~indications ~~severity~~for ofwhich ~~undesirable~~our ~~side~~drug ~~effects~~products ~~and~~are ~~adverse events~~approved;

● the ~~extent~~availability ofand ~~the~~perceived ~~limitations~~advantages ~~or warnings required by the FDA or comparable regulatory authorities in other countries to be contained in the labeling~~ of ~~our~~alternative ~~drug products~~therapies;

● ~~the~~any ~~clinical~~publicity ~~indications~~related ~~for~~to ~~which~~ our drug products ~~are~~or ~~approved~~those of our competitors;

● the ~~availability~~quality and ~~perceived~~price ~~advantages~~ of ~~alternative~~competing ~~therapies~~drug products;

● ~~any~~our ~~publicity~~ability ~~related~~ to ~~our~~obtain ~~drug~~third-party ~~products~~payor orcoverage ~~those~~and ofsufficient ~~our competitors~~reimbursement;

● the ~~quality~~willingness ~~and~~of ~~price~~patients to pay out of ~~competing~~pocket ~~drug~~in ~~products~~the absence of third-party payor coverage; and

● ~~our~~the ~~ability~~selling toefforts ~~obtain~~and ~~third-party~~commitment ~~payor~~of ~~coverage~~our ~~and~~commercialization ~~sufficient reimbursement;~~collaborators.

●If ~~the~~our ~~willingness~~drug products, if and when approved, fail to receive a sufficient level of ~~patients~~market acceptance, our ability to ~~pay~~generate ~~out~~revenue from sales of ~~pocket~~our indrug ~~the~~products ~~absence~~will be limited, and our business and results of ~~third-party~~operations ~~payor~~may ~~coverage;~~be materially and adversely affected.

●The ~~the~~pharmaceutical ~~selling~~industry ~~efforts~~is ~~and~~subject ~~commitment~~to rapid technological change, which could affect the commercial viability of our ~~commercialization collaborators~~products.

IfThe ~~our~~pharmaceutical ~~drug~~industry ~~products,~~is ifsubject to rapid and ~~when~~significant ~~approved~~technological change. Research, ~~fail~~discoveries toor ~~receive~~inventions aby ~~sufficient~~others ~~level~~may ofresult ~~market~~in ~~acceptance,~~medical insights or breakthroughs that render our ~~ability~~products toless ~~generate~~competitive ~~revenue~~or ~~from~~even ~~sales~~obsolete. Furthermore, there may be breakthroughs of ~~our~~new ~~drug~~pharmaceutical ~~products~~technologies ~~will~~which bemay ~~limited,~~become ~~and~~superior to our ~~business~~PRINT ~~and~~technology ~~results~~that ofmay ~~operations~~result ~~may~~in bethe ~~materially~~loss ~~and~~of ~~adversely~~our ~~affected~~commercial advantage. Our future success will depend in part upon our ability to, among others:

~~The~~● ~~pharmaceutical~~develop ~~industry~~or islicense ~~subject~~new totechnologies ~~rapid~~that ~~technological~~address ~~change,~~the ~~which~~changing ~~could~~needs ~~affect~~of the ~~commercial~~medical ~~viability~~community; ofand ~~our~~● ~~products~~respond to technological advances and changing industry standards and practices in a cost-effective and timely manner.

~~The~~Developing ~~pharmaceutical~~technology ~~industry~~entails issignificant ~~subject~~technical toand ~~rapid~~business risks and ~~significant~~substantial ~~technological change~~costs. ~~Research,~~We ~~discoveries~~cannot orassure ~~inventions~~you bythat ~~others~~we ~~may~~will ~~result~~be inable ~~medical~~to ~~insights~~utilize ornew ~~breakthroughs~~technologies effectively or that ~~render~~we ~~our~~will ~~products~~be ~~less~~able ~~competitive~~to oradapt ~~even~~our ~~obsolete.~~existing ~~Furthermore,~~technologies ~~there~~to ~~may~~changing beindustry ~~breakthroughs~~standards ofin ~~new~~a ~~pharmaceutical~~timely ~~technologies~~or ~~which~~cost-effective ~~may~~manner, ~~become~~or ~~superior~~at toall. ~~our~~If ~~PRINT~~we ~~technology~~are ~~that~~unable ~~may~~to ~~result~~keep inup ~~the~~with ~~loss~~advancements ofin technology, our ~~commercial~~competitive ~~advantage.~~position ~~Our~~may ~~future~~suffer ~~success~~and ~~will~~our ~~depend~~business inand ~~part~~prospects ~~upon~~may ~~our~~be ~~ability~~materially ~~to,~~and ~~among~~adversely ~~others:~~affected.

● develop or license new technologies that address the changing needs of the medical community; and ● respond to technological advances and changing industry standards and practices in a cost-effective and timely manner. 48

~~Developing~~Disruptions ~~technology~~at ~~entails~~the ~~significant~~FDA ~~technical~~ and ~~business~~other ~~risks~~government ~~and~~agencies ~~substantial~~could ~~costs.~~hinder Wetheir ~~cannot~~ability ~~assure you that we will be able~~ to ~~utilize~~hire ~~new~~and ~~technologies~~retain ~~effectively~~key orleadership ~~that~~and weother ~~will~~personnel, beprevent ~~able~~new toproducts ~~adapt~~and ~~our~~services ~~existing~~from ~~technologies~~being todeveloped ~~changing~~or ~~industry~~commercialized ~~standards~~ in a timely ~~or cost-effective~~ manner, or atotherwise ~~all.~~prevent Ifthose weagencies ~~are~~from ~~unable~~performing tonormal ~~keep~~business upfunctions ~~with~~on ~~advancements~~which inthe ~~technology,~~operation ~~our~~of ~~competitive position may suffer and~~ our business ~~and~~may ~~prospects~~rely, ~~may~~which becould ~~materially~~negatively ~~and~~impact ~~adversely~~our ~~affected~~business.

46 The ability of the FDA to review and approve new products can be affected by a variety of factors, including global pandemics, natural disasters, geopolitical actions, government budget and funding levels, ability to hire and retain key personnel and accept the payment of user fees, and statutory, regulatory, and policy changes. Average review times at the FDA have fluctuated in recent years as a result. In addition, government funding of other government agencies on which our operations may rely, including those that fund research and development activities, is subject to the political process, which is inherently fluid and unpredictable.

Disruptions at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed and/or approved by necessary government agencies, ~~could~~which ~~hinder~~would ~~their~~adversely ~~ability~~affect our business. For example, in December 2019, a novel strain of COVID-19, or coronavirus, was reported to ~~hire~~have ~~and~~surfaced ~~retain~~in ~~key~~Wuhan, ~~leadership~~China and ~~other~~has ~~personnel,~~become ~~prevent~~a ~~new~~global ~~products~~pandemic as of the date of this Quarterly Report on Form 10-Q. The full impact of the coronavirus is unknown and ~~services~~rapidly ~~from~~evolving. ~~being~~For ~~developed~~example, orafter ~~commercialized~~generally suspending in-person inspections due to COVID-19, the FDA recently announced it would resume domestic facility inspections, although the agency continues its general suspension of foreign facility inspections (although “mission-critical” inspections may be considered on a ~~timely~~case-by-case ~~manner~~basis). orBecause ~~otherwise~~of ~~prevent~~the ~~those~~global ~~agencies~~pandemic, decision-making around facility inspections by the FDA (including preapproval inspections) continues to evolve. Additionally, over the last several years, including from ~~performing~~December ~~normal~~22, ~~business~~2018 ~~functions~~until onJanuary ~~which~~25, 2019, the ~~operation~~U.S. ofgovernment ~~our~~has ~~business~~shut down several times and certain regulatory agencies, such as the FDA and the SEC, have had to furlough critical FDA and other government employees and stop critical activities. In addition, there may ~~rely~~be personnel and other changes following the 2020 Presidential election and other developments, the impact of which is currently unknown. If a prolonged government disruption occurs, it could ~~negatively~~significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business. Further, in our operations as a public company, prolonged government disruptions, global pandemics and other natural disasters or geopolitical actions could impact our ability to access the public markets and obtain necessary capital in order to properly capitalize and continue our operations.

~~The~~Our ~~ability~~business ~~of the FDA to review~~ and ~~approve~~operations ~~new~~are ~~products~~likely ~~can~~to be adversely affected by ~~a variety of factors, including global pandemics, natural disasters, geopolitical actions, government budget and funding levels, ability to hire and retain key personnel and accept~~ the ~~payment~~evolving ~~of user fees,~~ and ~~statutory,~~ongoing ~~regulatory,~~COVID-19 ~~and~~global ~~policy changes~~pandemic. Average review times at the FDA have fluctuated in recent years as a result. In addition, government funding of other government agencies on which our operations may rely, including those that fund research and development activities, is subject to the political process, which is inherently fluid and unpredictable.

~~Disruptions~~Our atbusiness ~~the FDA~~ and ~~other~~operations ~~agencies~~are ~~may~~likely ~~also slow the time necessary for new drugs~~ to be ~~reviewed~~adversely ~~and/or~~affected ~~approved~~ by ~~necessary~~the ~~government~~effects ~~agencies,~~of ~~which~~the ~~would~~recent ~~adversely~~and ~~affect~~evolving ~~our business. For example, in December 2019, a novel strain of~~ COVID-19, ~~or coronavirus~~virus, which was ~~reported~~declared toby ~~have~~the ~~surfaced~~World inHealth ~~Wuhan,~~Organization ~~China~~as ~~and has become~~ a global pandemic ~~as of the date of this Quarterly Report on Form 10-Q~~. The ~~full~~COVID-19 ~~impact~~pandemic ofhas ~~the~~resulted ~~coronavirus~~in istravel ~~unknown~~ and ~~rapidly~~other ~~evolving.~~restrictions ~~For example, after generally suspending~~ in~~-person~~ ~~inspections~~order ~~due~~ to ~~COVID-19,~~reduce the ~~FDA~~spread ~~recently announced it would resume domestic facility inspections, although the agency continues its general suspension~~ of ~~foreign facility inspections (although “mission-critical” inspections may be considered on a case-by-case basis). Because of~~ the ~~global pandemic~~disease, ~~decision-making around facility inpsections by the FDA (~~including ~~preapproval~~state ~~inspections) continues to evolve. Additionally, over the last several years, including from December 22, 2018 until January 25, 2019, the U.S. government has shut down several times~~ and ~~certain~~local ~~regulatory~~orders ~~agencies,~~across ~~such as~~ the ~~FDA~~United ~~and~~States ~~the SEC~~that, ~~have~~among ~~had to furlough critical FDA and~~ other ~~government employees and stop critical activities. If a prolonged government disruption occurs~~things, itdirected ~~could~~individuals ~~significantly impact the ability of the FDA~~ to ~~timely~~shelter ~~review~~at ~~and~~their ~~process~~places ~~our~~of ~~regulatory submissions~~residence, ~~which~~directed ~~could~~businesses ~~have~~and agovernmental ~~material~~agencies ~~adverse~~to ~~effect~~cease onnon-essential ~~our business. Further, in our~~ operations asat aphysical ~~public company~~locations, ~~prolonged~~prohibited ~~government~~certain ~~disruptions,~~non-essential ~~global~~gatherings ~~pandemics~~ and ~~other~~events ~~natural disasters or geopolitical actions could impact our ability to access the public markets~~ and ~~obtain~~ordered ~~necessary~~cessation ~~capital~~of innon-essential ~~order to properly capitalize and continue our operations~~travel.

~~Our~~Remote ~~business~~work policies, quarantines, shelter-in-place and similar government orders, shutdowns or other restrictions on the conduct of business operations related to the COVID-19 pandemic may negatively impact productivity and our research and development activities, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on our ability to conduct our business in the ordinary course. In addition, although our employees are ~~likely~~accustomed to beworking ~~adversely~~remotely, ~~affected~~changes byin internal controls due to remote work arrangements may result in control deficiencies in the ~~evolving~~preparation of our financial reports, which could be material. Currently, most of our employees are working remotely, with only essential personnel working on site as needed to produce LIQ861 and ~~ongoing~~prepare ~~COVID~~for a pre-19approval ~~global~~inspection ~~pandemic~~by the FDA.

~~Our~~Such ~~business~~orders ~~and~~may ~~operations~~also ~~are~~impact ~~likely~~personnel toat bethird-party ~~adversely~~contract ~~affected~~research byorganizations ~~the~~that ~~effects~~conduct ofclinical ~~the~~trials ~~recent~~or ~~and~~research ~~evolving COVID-19 virus~~activities, which ~~was~~could ~~declared~~impact byour ~~the~~ability ~~World~~to ~~Health~~continue ~~Organization~~or ascommence asuch ~~global~~activities, ~~pandemic.~~or ~~The~~contract ~~COVID-19~~manufacturing ~~pandemic~~facilities ~~has~~in ~~resulted~~the inUnited ~~travel~~States and other ~~restrictions~~countries, inor ~~order~~the toavailability ~~reduce~~or ~~the~~cost ~~spread~~ of ~~the disease~~materials, ~~including~~which ~~state~~would ~~and~~disrupt ~~local~~our ~~orders~~supply ~~across~~chain ~~the~~and ~~United~~could ~~States~~affect ~~that,~~our ~~among~~ability ~~other things, directed individuals~~ to ~~shelter~~conduct atongoing ~~their~~and ~~places~~planned ofclinical ~~residence,~~trials ~~directed businesses~~ and ~~governmental~~preparatory ~~agencies~~activities. toFor ~~cease~~example, ~~non-essential~~as ~~operations~~a atresult ~~physical~~of ~~locations~~the pandemic, ~~prohibited~~we ~~certain~~have ~~non-essential~~paused ~~gatherings~~enrollment ~~and~~in ~~events~~our ~~and~~hemodynamic ~~ordered~~study, ~~cessation~~which ofhas ~~non-essential~~been ~~travel~~conducted in Europe.

~~Remote~~The ~~work~~spread ~~policies,~~of ~~quarantines~~COVID-19, ~~shelter-in-place~~which ~~and~~has ~~similar~~caused ~~government~~a ~~orders~~broad impact globally, ~~shutdowns~~may ormaterially ~~other~~affect ~~restrictions~~us oneconomically. While the ~~conduct~~potential ofeconomic ~~business~~impact ~~operations~~brought ~~related~~by, toand the duration of, COVID-19 ~~pandemic~~ may ~~negatively~~be ~~impact~~difficult ~~productivity~~to ~~and~~assess ~~our~~or ~~research and development activities~~predict, ~~the~~a ~~magnitude~~widespread ofpandemic ~~which~~could ~~will~~result ~~depend,~~ in ~~part,~~significant ondisruption ~~the length and severity~~ of ~~the~~global ~~restrictions~~financial ~~and~~markets, ~~other~~reducing ~~limitations on~~ our ability to ~~conduct~~access ~~our~~capital, ~~business~~which could in the ~~ordinary~~future ~~course.~~negatively Inaffect ~~addition, although~~ our ~~employees~~liquidity. ~~are~~In ~~accustomed to working remotely~~addition, ~~changes~~a inrecession ~~internal~~or ~~controls~~market ~~due~~correction toresulting ~~remote~~from ~~work arrangements may result in control deficiencies in~~ the ~~preparation~~spread of ~~our~~COVID-19 ~~financial reports, which~~ could bematerially ~~material.~~affect ~~Currently, most of~~ our ~~employees~~business ~~are working remotely, with only essential personnel working on site as needed to produce LIQ861~~ and ~~prepare~~the ~~for~~value aof ~~pre-approval~~our ~~inspection~~common ~~by the FDA~~stock.

Such orders may also impact personnel at third-party contract research organizations that conduct clinical trials or research activities, which could impact our ability to continue or commence such activities, or contract manufacturing facilities in the United States and other countries, or the availability or cost of materials, which would disrupt our supply chain and could affect our ability to conduct ongoing and planned clinical trials and preparatory activities. For example, as a result of the pandemic, we have paused enrollment in our hemodynamic study, which has been conducted in Europe. 49

The ~~spread~~global pandemic of COVID-19, continues to rapidly evolve. The extent to which ~~has~~the ~~caused~~COVID-19 apandemic ~~broad~~impacts ~~impact~~our ~~globally~~business and operations, ~~may~~including ~~materially~~our ~~affect~~clinical usdevelopment ~~economically.~~and ~~While~~regulatory efforts, will depend on future developments that are highly uncertain and cannot be predicted with confidence at the ~~potential~~time ~~economic~~of ~~impact~~this ~~brought~~Quarterly byReport on Form 10-Q, ~~and~~such as the ultimate geographic spread of the disease, the duration of the outbreak, ~~COVID~~the duration and effect of business disruptions and the short-19term ~~may~~effects beand ~~difficult~~ultimate toeffectiveness ~~assess~~of orthe ~~predict~~travel restrictions, aquarantines, ~~widespread~~social ~~pandemic~~distancing ~~could~~requirements ~~result~~and business closures in ~~significant~~the ~~disruption~~United ofStates ~~global~~and ~~financial~~other ~~markets,~~countries ~~reducing~~to ~~our~~contain ~~ability~~and totreat ~~access~~the ~~capital~~disease. For example, ~~which~~during ~~could~~the incourse of the ~~future~~pandemic ~~negatively~~the ~~affect~~FDA ~~our~~has ~~liquidity~~at points delayed both domestic and foreign facility inspections. InThe ~~addition,~~agency announced in July 2020 that domestic facility inspections will be conducted but prioritized through a ~~recession~~risk-based orapproach, ~~market~~while ~~correction~~foreign ~~resulting~~facility ~~from~~inspections remain delayed unless the ~~spread~~FDA determines they can be conducted based on an assessment of whether it is “mission-critical.” We expect the impact of COVID-19 ~~could~~on ~~materially~~the ~~affect~~FDA’s operations will continue to evolve. Accordingly, we do not yet know the full extent of potential delays or impacts on our business, our clinical and regulatory activities, healthcare systems or the ~~value~~global ofeconomy as a whole. However, these impacts could adversely affect our ~~common~~business, ~~stock~~financial condition, results of operations and growth prospects.

~~The~~In ~~global~~addition, ~~pandemic of COVID-19 continues~~ to ~~rapidly~~the ~~evolve. The~~ extent ~~to which~~ the ongoing COVID-19 pandemic ~~impacts~~adversely affects our business and ~~operations,~~results ~~including our clinical development and regulatory efforts, will depend on future developments that are highly uncertain and cannot be predicted with confidence at the time~~ of ~~this prospectus supplement~~operations, ~~such~~it asmay ~~the~~also ~~ultimate~~have ~~geographic spread of~~ the ~~disease, the duration of the outbreak, the duration and~~ effect of ~~business~~heightening ~~disruptions~~many ~~and the short-term effects and ultimate effectiveness~~ of the ~~travel~~other ~~restrictions,~~risks ~~quarantines, social distancing requirements~~ and ~~business~~uncertainties ~~closures~~described in ~~the~~this ~~United~~“Risk ~~States~~Factors” ~~and~~section ~~other countries to contain~~ and ~~treat~~ the ~~disease.~~“Risk ~~Accordingly,~~Factors” wesections ~~do not yet know the full extent~~ of ~~potential delays or impacts on our business, our clinical and regulatory activities, healthcare systems or~~ the ~~global~~documents ~~economy~~incorporated asby areference ~~whole~~herein. ~~However, these impacts could adversely affect our business, financial condition, results of operations and growth prospects.~~

InOur ~~addition,~~products ~~to the extent the ongoing COVID-19 pandemic adversely affects our business and results of operations, it~~ may ~~also~~be ~~have~~subject ~~the~~to ~~effect~~reduced ofprices ~~heightening~~negotiated ~~many~~by ofcertain ~~the~~group ~~other~~purchasing ~~risks~~organizations ~~and~~that ~~uncertainties~~could ~~described~~adversely inimpact ~~this~~our ~~“Risk~~product ~~Factors” section and the “Risk Factors” sections of the documents incorporated by reference herein~~revenue.

47 Our customers may organize with each other or with third parties, such as distributors, manufacturers or hospitals, to negotiate prices that are lower than we may have been able to obtain from each of them individually. In such event, our ability to generate product revenue, and consequently our results of operations, may be materially and adversely affected.

~~Our~~We ~~products~~ may not be ~~subject~~able to ~~reduced~~build ~~prices~~a ~~negotiated~~commercial byoperation, ~~certain~~including ~~group~~establishing ~~purchasing~~and ~~organizations~~maintaining marketing ~~that~~and ~~could~~sales ~~adversely~~capabilities ~~impact~~or enter into agreements with third parties to market and sell our ~~product~~drug ~~revenue~~products.

~~Our~~In ~~customers~~order ~~may~~to ~~organize~~market ~~with~~and ~~each~~sell ~~other~~any of our drug products, if and when approved, we will be required to build our marketing and sales capabilities. We cannot assure you that we will be successful in doing so or be able to do so in a cost-effective manner. In addition, we may enter into collaboration arrangements with third parties, ~~such~~to asmarket ~~distributors,~~our ~~manufacturers~~drug orproducts. ~~hospitals~~We may face significant competition for collaborators. In addition, collaboration arrangements may be time-consuming to negotiate ~~prices~~and ~~that~~document. ~~are~~We ~~lower~~cannot ~~than~~assure weyou ~~may~~that ~~have~~we ~~been~~will be able to ~~obtain~~negotiate ~~from~~collaborations ~~each~~for the marketing and sales of ~~them~~our ~~individually~~drug products on acceptable terms, or at all. InEven if we do enter into such ~~event~~collaborations, we cannot assure you that our ~~ability~~collaborators will be successful in commercializing our products. If we or our collaborators are unable to ~~generate~~successfully ~~product~~commercialize ~~revenue~~our drug products, ~~and~~whether ~~consequently~~in the United States or elsewhere, our business and results of operations, may be materially and adversely affected.

WeAs ~~may~~we ~~not~~seek to establish a commercial operation in anticipation of potential approval from the FDA, we also continue to develop additional drug candidates. There can be no assurance that we will be able to ~~build~~successfully manage the balance of our ~~marketing~~research and ~~sales~~development ~~capabilities~~operations orwith ~~enter~~our ~~into~~commercial ~~agreements~~activities. Potential investors should be aware of the problems, delays, expenses and difficulties frequently encountered by companies balancing development of product candidates, which can include problems such as unanticipated issues relating to clinical trials and receipt of approvals from the FDA and foreign regulatory bodies, with ~~third~~commercialization ~~parties~~efforts, which include problems relating to ~~market~~managing manufacturing and ~~sell~~supply, ~~our~~reimbursement, ~~drug~~marketing ~~products~~problems, and other additional costs.

InThere ~~order~~are torisks ~~market~~involved ~~and~~with ~~sell~~building ~~any of~~ our ~~drug products~~sales, ~~if and when approved~~marketing, ~~we will be required to build our marketing~~ and ~~sales~~other commercialization capabilities. WeFor ~~cannot~~example, ~~assure~~recruiting ~~you~~and ~~that~~training ~~we will be successful in doing so or be able to do so in~~ a ~~cost-effective~~sales ~~manner.~~force Inis ~~addition,~~expensive weand ~~may enter into collaboration arrangements with third parties to market our drug products. We may face significant competition for collaborators. In addition, collaboration arrangements may be~~ time-consuming ~~to negotiate~~ and ~~document.~~could Wedelay ~~cannot~~any ~~assure~~drug ~~you~~launch. ~~that~~If wethe ~~will~~commercial belaunch ~~able~~of toa ~~negotiate~~drug ~~collaborations~~candidate for ~~the~~which ~~marketing~~we ~~and~~recruit a sales offorce ~~our~~and ~~drug~~establish ~~products~~marketing oncapabilities ~~acceptable~~is ~~terms,~~delayed or atdoes ~~all.~~not ~~Even~~occur iffor weany ~~do enter into such collaborations~~reason, we ~~cannot~~would ~~assure~~have ~~you~~prematurely ~~that~~or ~~our~~unnecessarily ~~collaborators~~incurred ~~will~~these becommercialization ~~successful in commercializing our products~~expenses. IfThis wemay orbe ~~our~~costly, ~~collaborators~~and ~~are unable to successfully commercialize~~ our ~~drug~~investment ~~products,~~would ~~whether~~be inlost ~~the~~if ~~United~~we ~~States~~cannot retain or ~~elsewhere,~~reposition our ~~business~~sales and ~~results~~marketing ~~of operations may be materially and adversely affected~~personnel.

If the FDA or comparable regulatory authorities in other countries approve generic versions of our product candidates, or do not grant our product candidates a sufficient period of market exclusivity before approving their generic versions, our ability to generate revenue may be adversely affected. 50

~~Once~~Factors anthat ~~NDA is approved, the drug product covered will be listed as a reference listed drug in the FDA’s Orange Book. In the United States, manufacturers of drug products~~ may ~~seek~~impact ~~approval~~our ofefforts ~~generic versions of reference listed drugs through the submission of abbreviated new drug applications, or ANDAs. In support of an ANDA, a generic manufacturer is generally required~~ to ~~show~~commercialize ~~that~~our ~~its product has the same active pharmaceutical ingredient(s), dosage form, strength, route of administration and conditions of use or labeling as the reference listed~~ drug ~~and~~candidates ~~that~~on ~~the~~our ~~generic~~own ~~version is bioequivalent to the reference listed drug. Generic drug products may be significantly less expensive to bring to market than the reference listed drug,~~ and ~~companies~~generate ~~that produce generic drug products are generally able to offer them at lower prices. Thus, following the introduction of a generic drug~~ product, arevenues ~~significant percentage of the sales of any reference listed drug may be lost to the generic drug product.~~include:

~~The~~● ~~FDA~~our ~~will~~inability ~~not~~to ~~approve~~recruit anand ~~ANDA~~retain ~~for~~adequate anumbers ~~generic drug product until the applicable period~~ of ~~market~~effective ~~exclusivity~~sales ~~for~~and ~~the~~marketing ~~reference~~personnel ~~listed~~over ~~drug~~a ~~has~~large ~~expired.~~geographic ~~The~~area; ~~applicable~~● ~~period of market exclusivity varies depending on~~ the ~~type~~costs ofand ~~exclusivity~~time ~~granted.~~associated Awith ~~grant of market exclusivity is separate from~~ the ~~existence~~initial ~~of patent protection~~ and ~~manufacturers~~ongoing ~~may~~training ~~seek to launch generic versions~~ of ~~our~~sales ~~drug~~and ~~products following the expiry of their respective~~ marketing ~~exclusivity~~personnel ~~periods,~~on ~~even~~legal ifand ~~our~~regulatory ~~drug~~compliance ~~products~~matters ~~are~~and ~~still~~monitoring ~~under~~their ~~patent protection at the relevant time.~~actions;

~~Any~~● ~~competition~~understanding ~~that our product candidates may face, if~~ and ~~when~~training ~~such~~relevant ~~product~~personnel ~~candidates~~on ~~are~~the ~~approved~~limitations ~~for~~on, ~~marketing~~ and ~~commercialized,~~the ~~from~~transparency ~~generic~~and ~~versions~~reporting ~~could~~requirements ~~substantially~~applicable ~~limit~~to, ~~our~~remuneration ~~ability~~provided to ~~realize~~actual ~~a return on our investment in the development of our product candidates~~ and ~~have~~potential areferral ~~material and adverse effect on our business and prospects.~~sources;

~~The~~● ~~off-label~~the ~~use~~clinical orindications ~~misuse~~for ofwhich ~~our~~the products ~~may~~are ~~harm~~approved ~~our~~and ~~image in~~ the ~~marketplace,~~claims ~~result in injuries~~ that ~~lead to costly product liability suits, or result in costly investigations and regulatory agency sanctions under certain circumstances if~~ we ~~are~~may ~~deemed~~make tofor ~~have engaged in~~ the ~~promotion of these uses, any of which could be costly to our business.~~products;

We● ~~are~~limitations ~~developing~~or ~~LIQ861 for the treatment of PAH and LIQ865 for the treatment of local post-operative pain. If our product candidates receive marketing approval from the FDA for these specific indications~~warnings, weincluding ~~may~~distribution ~~only promote~~ or ~~market~~use our product candidates for their specifically approved indications and make promotional claims consistent with the FDA-required product labeling. We will train our marketing and sales force against promoting our product candidates for “off-label uses” that would be inconsistent with FDA law and guidance. With respect to whether communications are consistent with the FDA-required product labelingrestrictions, wecontained ~~cannot predict whether the FDA will agree with our assessment. We also cannot prevent a physician from using our products off-label, when~~ in the ~~physician~~products’s ~~independent professional medical judgment he or she deems it appropriate. There may be increased risk of injury to patients if physicians attempt to use our products for uses for which they are not~~ approved. Furthermore, the use of our products for indications other than those approved by the FDA may not effectively treat such conditions, which could harm our reputation in the marketplace among physicians and patients.labeling;

48 ● the inability of sales personnel to obtain access to physicians or to effectively promote any future drugs;

If● ~~the FDA determines that~~ our ~~promotional~~ability ~~materials or training constitute promotion of an off-label or other improper use, it could request that we modify our training or promotional materials, or subject us~~ to ~~regulatory~~appropriately ~~or enforcement actions~~market, ~~including~~detail ~~the~~and ~~issuance~~distribute ofproducts anin ~~untitled~~light letter, a warning letter, injunction, seizure, civil fine or criminal penalties. It is also possible that other federal, state or foreign enforcement authorities might take action if they consider our business activities to constitute promotion of an off-label use, which could result in significant penalties, including, but not limited to, criminal, civil or administrative penalties, damages, fines, disgorgement, exclusion from participation in government healthcare ~~programs,~~provider ~~mandatory~~facility ~~compliance programs under corporate integrity agreements~~closures, ~~debarment~~quarantine, ~~refusal~~travel ofrestrictions ~~government contracts,~~ and ~~the~~other ~~curtailment~~governmental ofrestrictions ~~our~~caused ~~operations.~~by COVID-19;

~~These~~● ~~regulations~~the orlack ~~codes~~of ~~may~~complementary ~~limit~~drugs ~~our ability~~ to ~~effectively~~be ~~market~~offered ~~our products, or we could run afoul of the requirements imposed~~ by ~~these~~sales ~~regulations~~personnel, ~~causing~~which ~~reputational~~may ~~harm.~~put ~~These~~us ~~regulations~~at ora ~~codes~~competitive ~~may~~disadvantage ~~also~~relative ~~impose~~to ~~potentially~~companies ~~substantial~~with ~~costs~~more onextensive ~~us.~~product lines;

We● ~~may~~any ~~not~~distribution beand ~~able~~use torestrictions ~~respond~~imposed ~~effectively~~by tothe ~~changing~~FDA ~~consumer~~or ~~preferences~~to ~~and~~which ~~demand.~~we agree;

~~Our~~● ~~success~~liability ~~depends,~~for insales ~~part,~~and onmarketing ~~our~~personnel ~~ability~~who tofail ~~anticipate and respond~~ to ~~changing~~comply ~~consumer~~with ~~trends and preferences in~~ the ~~pharmaceutical~~applicable ~~industry.~~legal We may not be able to respond to these changes in a timely or commercially effective manner or at all. Our failure to accurately predict these trends could negatively impact our inventory levels, sales and ~~reputation.~~regulatory ~~The commercial success of our drug products will depend upon a number of factors, including our ability to, among others:~~requirements;

● ~~anticipate~~our ~~consumers’~~ability ~~therapeutic~~to ~~needs~~maintain a healthcare compliance program including effective mechanisms for compliance monitoring; and

● ~~innovate,~~unforeseen ~~develop~~costs and ~~commercialize~~expenses ~~new~~associated ~~drug~~with ~~products~~creating in a ~~timely~~sales ~~manner;~~and marketing organization.

●In ~~competitively~~the ~~price~~future, we may choose to participate in sales activities with collaborators for some of our drug ~~products;~~candidates. However, there are also risks with entering into these types of arrangements with third parties to perform sales, marketing and distribution services. For example, we may not be able to enter into such arrangements on terms that are favorable to us. Our drug revenues or the profitability of these drug revenues to us are likely to be lower than if we were to market and sell any drug candidates that we develop ourselves. In addition, we likely will have little control over such third parties, and any of them may fail to devote the necessary resources and attention to sell and market our drug candidates effectively. If we do not establish sales and marketing capabilities successfully, either on our own or in collaboration with third parties, we will not be successful in commercializing our drug candidates. Further, our business, results of operations, financial condition and prospects will be materially adversely affected.

●If ~~procure~~the ~~and~~FDA ~~maintain~~or ~~our~~comparable ~~drug~~regulatory ~~products~~authorities in ~~sufficient~~other ~~volumes~~countries ~~and~~approve ingeneric versions of our product candidates, or do not grant our product candidates a ~~timely~~sufficient ~~manner;~~period ~~and~~of market exclusivity before approving their generic versions, our ability to generate revenue may be adversely affected.

●Once ~~differentiate~~an ~~our~~NDA is approved, the drug product covered will be listed as a reference listed drug in the FDA’s Orange Book. In the United States, manufacturers of drug products ~~from~~may ~~those~~seek approval of ~~our~~generic ~~competitors~~versions of reference listed drugs through the submission of abbreviated new drug applications, or ANDAs. In support of an ANDA, a generic manufacturer is generally required to show that its product has the same active pharmaceutical ingredient(s), dosage form, strength, route of administration and conditions of use or labeling as the reference listed drug and that the generic version is bioequivalent to the reference listed drug. Generic drug products may be significantly less expensive to bring to market than the reference listed drug, and companies that produce generic drug products are generally able to offer them at lower prices. Thus, following the introduction of a generic drug product, a significant percentage of the sales of any reference listed drug may be lost to the generic drug product.

IfThe weFDA ~~are~~will ~~unable~~not toapprove ~~introduce~~an ~~new~~ANDA for a generic drug ~~products,~~product ~~develop~~until ~~improvements~~the toapplicable ~~our~~period ~~existing~~of market exclusivity for the reference listed drug ~~products~~has orexpired. ~~maintain~~The applicable period of market exclusivity varies depending on the ~~appropriate~~type ~~inventory~~of ~~levels~~exclusivity granted. A grant of market exclusivity is separate from the existence of patent protection and manufacturers may seek to ~~meet~~launch generic versions of our ~~customers’~~drug ~~demand~~products infollowing athe ~~timely~~expiry ~~manner~~of ortheir atrespective ~~all~~marketing exclusivity periods, even if our ~~business~~drug ~~and~~products ~~prospects~~are ~~could~~still beunder ~~materially~~patent ~~and~~protection ~~adversely~~at ~~affected~~the relevant time.

WeAny competition that our product candidates may beface, ~~exposed~~if toand ~~claims~~when such product candidates are approved for marketing and ~~may~~commercialized, ~~not~~from begeneric ~~able~~versions could substantially limit our ability to ~~obtain~~realize ora ~~maintain~~return ~~adequate~~on our investment in the development of our product ~~liability~~candidates ~~insurance~~and have a material and adverse effect on our business and prospects.

Our business is exposed to the risk of product liability and other liability risks that are inherent in the development, manufacture, clinical testing and marketing of pharmaceutical products. These risks exist even if a product is approved for commercial sale by the FDA or comparable regulatory authorities in other countries and manufactured in licensed facilities. Our current product candidates, LIQ861 and LIQ865, are designed to affect important bodily functions and processes. Any side effects, manufacturing defects, misuse or abuse associated with our products could result in injury to a patient or even death. 51

~~Claims~~The ~~that~~off-label ~~are~~use ~~successfully~~or ~~brought~~misuse ~~against~~of usour ~~could~~products ~~have~~may aharm ~~material~~our ~~and~~image ~~adverse~~in ~~effect~~the onmarketplace, ~~our~~result ~~financial~~in ~~condition~~injuries ~~and~~that ~~results~~lead ofto ~~operations.~~costly ~~Further~~product liability suits, ~~even~~or ifresult wein ~~are~~costly ~~successful~~investigations inand ~~defending~~regulatory ~~claims~~agency ~~brought~~sanctions ~~against~~under ~~us,~~certain ~~our~~circumstances ~~reputation~~if ~~could~~we ~~suffer.~~are ~~Regardless~~deemed ofto ~~merit~~have orengaged ~~eventual~~in ~~outcome~~the promotion of these uses, ~~product~~any ~~liability~~of ~~claims~~which ~~may~~could ~~also~~be ~~result~~costly ~~in,~~to ~~among~~our ~~others:~~business.

●We are developing LIQ861 for the treatment of PAH and LIQ865 for the treatment of local post-operative pain. If our product candidates receive marketing approval from the FDA for these specific indications, we may only promote or market our product candidates for their specifically approved indications and make promotional claims consistent with the FDA-required product labeling. We will train our marketing and sales force against promoting our product candidates for “off-label uses” that would be inconsistent with FDA law and guidance. With respect to whether communications are consistent with the FDA-required product labeling, we cannot predict whether the FDA will agree with our assessment. We also cannot prevent a ~~decreased~~physician ~~demand~~from using our products off-label, when in the physician’s independent professional medical judgment he or she deems it appropriate. There may be increased risk of injury to patients if physicians attempt to use our products for uses for which they are not approved. Furthermore, the use of our products; for indications other than those approved by the FDA may not effectively treat such conditions, which could harm our reputation in the marketplace among physicians and patients.

●If athe ~~withdrawal~~FDA determines that our promotional materials or ~~recall~~training constitute promotion of an off-label or other improper use, it could request that we modify our ~~products~~training ~~from~~or promotional materials, or subject us to regulatory or enforcement actions, including the ~~market;~~issuance ●of an untitled letter, a ~~withdrawal~~warning letter, injunction, seizure, civil fine or criminal penalties. It is also possible that other federal, state or foreign enforcement authorities might take action if they consider our business activities to constitute promotion of ~~participants~~an off-label use, which could result in significant penalties, including, but not limited to, criminal, civil or administrative penalties, damages, fines, disgorgement, exclusion from ~~our~~participation ~~ongoing~~in ~~clinical~~government ~~trials;~~healthcare programs, mandatory compliance programs under corporate integrity agreements, debarment, refusal of government contracts, and the curtailment of our operations.

●These ~~the~~regulations ~~distraction~~or ofcodes may limit our ~~management’s~~ability ~~attention~~to ~~from~~effectively market our ~~core~~products, ~~business~~or ~~activities~~we tocould ~~defend~~run ~~such~~afoul ~~claims;~~of the requirements imposed by these regulations, causing reputational harm. These regulations or codes may also impose potentially substantial costs on us.

●We ~~additional~~may ~~costs~~not be able to ~~us;~~respond effectively to changing consumer preferences and demand.

●Our success depends, in part, on our ability to anticipate and respond to changing consumer trends and preferences in the pharmaceutical industry. We may not be able to respond to these changes in a ~~loss~~timely ofor ~~revenue~~commercially effective manner or at all. Our failure to accurately predict these trends could negatively impact our inventory levels, sales and reputation. The commercial success of our drug products will depend upon a number of factors, including our ability to, among others:

~~Our~~● ~~insurance~~anticipate ~~may~~consumers’ ~~not~~therapeutic provide adequate coverage against our potential liabilities. Furthermore, we, our collaborators or our licensees may not be able to obtain or maintain insurance on acceptable terms, or at all. In addition, our collaborators or licensees may not be willing to indemnify us against these types of liabilities and may not themselves be sufficiently insured or have sufficient assets to satisfy any product liability claims. To the extent that they are uninsured or uninsurable, claims or losses that may be suffered by us, our collaborators or our licensees may have a material and adverse effect on our financial condition and results of operations.needs;

If● ~~our~~innovate, ~~product~~develop ~~candidates~~and ~~are~~commercialize ~~approved~~new ~~for~~drug ~~commercialization~~products ~~outside~~in ~~of the United States, we may be exposed to~~ a ~~number~~timely ~~of risks associated with international business operations.~~manner;

49 ● competitively price our drug products;

If● ~~our~~procure ~~product~~and ~~candidates~~maintain ~~are approved for commercialization outside of the United States, we may market~~ our drug products ~~ourselves,~~in orsufficient wevolumes ~~may~~and ~~enter~~in ~~into~~a ~~agreements~~timely ~~with~~manner; ~~third parties to market the aforesaid drug products outside of the United States. In such event, we may be subject to risks related to international business operations, including, but not limited to:~~and

● ~~varying~~differentiate ~~levels~~our ofdrug ~~protection~~products ~~for~~from ~~intellectual~~those ~~property~~of ~~rights;~~our competitors.

●If ~~changes~~we are unable to introduce new drug products, develop improvements to our existing drug products or maintain the appropriate inventory levels to meet our customers’ demand in ~~tariffs~~a timely manner or at all, our business and ~~the~~prospects ~~imposition~~could ofbe ~~trade~~materially ~~barriers;~~and adversely affected.

●We ~~economic~~may ~~weakness,~~be ~~including~~exposed ~~inflation~~to orclaims ~~political~~and ~~instability~~may innot ~~particular~~be ~~foreign~~able ~~economies~~to ~~and~~obtain ~~markets;~~or maintain adequate product liability insurance.

●Our ~~differing~~business ~~payor~~is ~~reimbursement~~exposed ~~regimes~~to the risk of product liability and other liability risks that are inherent in the development, ~~governmental~~manufacture, ~~payors~~clinical testing and marketing of pharmaceutical products. These risks exist even if a product is approved for commercial sale by the FDA or ~~patient~~comparable ~~self-pay~~regulatory ~~systems~~authorities in other countries and ~~price~~manufactured ~~controls;~~in licensed facilities. Our current product candidates, LIQ861 and LIQ865, are designed to affect important bodily functions and processes. Any side effects, manufacturing defects, misuse or abuse associated with our products could result in injury to a patient or even death.

●Claims ~~compliance~~that ~~with~~are ~~tax,~~successfully ~~employment,~~brought ~~immigration~~against us could have a material and ~~labor~~adverse ~~laws~~effect inon ~~respect~~our financial condition and results of ~~employees~~operations. ~~living~~Further, even if we are successful in defending claims brought against us, our reputation could suffer. Regardless of merit or ~~traveling~~eventual ~~abroad;~~outcome, product liability claims may also result in, among others:

● ~~foreign~~a ~~tax~~decreased ~~laws~~demand for our products;

● ~~currency~~a ~~fluctuations~~withdrawal or recall of our products from the market; ~~and~~● a withdrawal of participants from our ongoing clinical trials;

● ~~business~~the ~~interruptions~~distraction ~~resulting~~of ~~from~~our ~~geopolitical~~management’s ~~actions,~~attention ~~such~~from asour ~~wars~~core ~~and~~business ~~terrorist~~activities ~~attacks,~~to ~~among~~defend ~~others, or global pandemics or natural disasters,~~ such ~~as fires, floods, earthquakes and hurricanes, among others.~~claims;

~~Risks~~● ~~Related~~additional costs to ~~the~~us; ~~Development~~ and ~~Regulatory Approval of our Product Candidates~~

We● ~~are~~a ~~primarily~~loss ~~dependent on the success~~ of our lead product candidate, LIQ861, for which we have recently filed an NDA with the FDA, and to a lesser degree, LIQ865, which is still in clinical development, and these product candidates may fail to receive marketing approval or may not be commercialized successfullyrevenue.

We do not have any products approved for marketing in any jurisdiction and we have never generated any revenue from product sales. Our ability to generate revenue from product sales and achieve profitability depends on our ability, alone or with strategic collaboration partners, to successfully complete the development of, and obtain the regulatory and marketing approvals necessary to commercialize, one or more of our product candidates. We expect that a substantial portion of our efforts and expenditure over the next few years will be devoted to our product candidates, LIQ861, a proprietary inhaled dry powder formulation of treprostinil for the treatment of pulmonary arterial hypertension, or PAH, and LIQ865, a sustained-release formulation of bupivacaine for the management of local post-operative pain. We do not anticipate generating revenue from sales of LIQ861 until 2021 at the earliest, if ever. 52

~~LIQ861~~Our isinsurance ~~being~~may ~~developed~~not ~~under~~provide ~~the~~adequate ~~505(b)(2)~~coverage ~~regulatory~~against ~~pathway~~our ~~with~~potential ~~Tyvaso as the reference listed drug~~liabilities. WeFurthermore, ~~commenced~~we, aour ~~Phase~~collaborators 3or ~~clinical~~our ~~trial~~licensees ofmay ~~LIQ861,~~not ~~which~~be weable ~~refer~~ to asobtain ~~INSPIRE,~~or inmaintain ~~the~~insurance ~~first~~on ~~quarter~~acceptable ofterms, ~~2018~~or ~~and~~at ~~reported~~all. ~~completion~~In ofaddition, ~~enrollment~~our ~~and~~collaborators ~~achievement~~or oflicensees ~~the~~may ~~primary~~not ~~endpoint,~~be ~~which~~willing ~~was~~to ~~long-term~~indemnify ~~safety~~us ~~and~~against ~~tolerability,~~these intypes ~~the first quarter~~ of ~~2019.~~liabilities ~~LIQ861~~and ~~was~~may ~~observed~~not tothemselves be ~~well-tolerated~~sufficiently ininsured ~~109~~or ~~patients,~~have ~~with~~sufficient ~~101~~assets ~~patients~~to ~~(93%)~~satisfy ~~completing~~any atproduct ~~least~~liability ~~two months of treatment~~claims. ~~During~~To the ~~two-month~~extent ~~treatment~~that ~~period,~~they ~~LIQ861~~are ~~was~~uninsured ~~evaluated~~or atuninsurable, ~~doses~~claims upor tolosses ~~159~~that ~~mcg~~may ~~with~~be nosuffered ~~study-drug~~by ~~related serious adverse events~~us, ~~with~~ ~~some~~our ~~patients~~collaborators ~~receiving~~or ~~doses~~our uplicensees tomay ~~212~~have ~~mcg~~a ~~after~~material ~~the~~and ~~two-month~~adverse ~~timepoint.~~effect ~~Exploratory~~on ~~endpoints~~our offinancial ~~the~~condition ~~INSPIRE trial demonstrated generally favorable functional~~ and ~~patient~~results ~~outcomes~~of operations.

InIf ~~June 2019,~~our weproduct ~~reported~~candidates ~~results~~are ~~from~~approved ~~the~~for ~~INSPIRE~~commercialization ~~study~~outside ~~indicating that the 79.5 mcg dose~~ of ~~LIQ861 correlates with nine breaths of Tyvaso,~~ the ~~maximum~~United ~~recommended label dose of Tyvaso. Analysis of the data from the PK sub-study in patients showed variability in systemic plasma levels of both LIQ861 and Tyvaso~~States, ~~which~~we ismay ~~believed to~~ be ~~attributed~~exposed to ~~variation~~a innumber ~~severity~~ of ~~disease~~risks ~~and~~associated ~~has~~with ~~been~~international ~~seen~~business ~~in prior studies of treprostinil in patients~~operations. To more accurately characterize the PK of LIQ861, we conducted two additional PK studies in healthy volunteers. In the first of these studies, we observed unexpected variability in PK levels. Post-hoc analysis showed that plasma levels of treprostinil were tightly correlated to the LIQ861 dose delivered. Based upon additional non-clinical and clinical work, we believe the unexpected variability seen in this healthy volunteer study was due to an administration technique unique to the conduct of the study in the Phase 1 setting. In August 2019, we completed a second PK study in healthy volunteers in which the proper administration technique was followed. This study demonstrated significantly reduced variability, and we believe we have established comparative bioavailability to the reference listed drug.

InIf ~~August~~our ~~2019,~~product ~~one~~candidates ofare ~~the~~approved ~~clinical~~for ~~investigators~~commercialization inoutside of the ~~INSPIRE~~United ~~study reassessed a serious adverse event~~States, ~~preliminarily~~we ~~identified~~may asmarket ~~hypersensitivity~~our ~~pneumonitis, as~~drug ~~being~~products ~~possibly related to LIQ861~~ourselves, ~~whereas~~or ~~the~~we ~~investigator~~may ~~had~~enter ~~previously,~~into inagreements ~~May~~with ~~and~~third ~~June~~parties ~~2019, characterized the event as not related~~ to ~~LIQ861.~~market ~~Based on~~ the ~~patient’s~~aforesaid ~~medical~~drug ~~history,~~products ~~two~~outside ~~other potential alternative causes~~ of ~~this event noted by~~ the ~~clinical~~United ~~investigator,~~States. ~~and~~In ~~the~~such ~~fact that the patient has been taking LIQ861 since October 2018~~event, we domay ~~not~~be ~~agree~~subject ~~with~~to ~~the~~risks ~~clinical~~related ~~investigator’s assessment. However, we reported the event~~ to ~~the~~international ~~FDA~~business operations, ~~as required~~including, ~~and~~but wenot ~~will~~limited ~~continue~~ to ~~monitor and assess this event for any change.~~:

We● ~~completed~~varying ~~the~~levels ~~pivotal~~of ~~INSPIRE~~protection ~~trial in October 2019 and submitted an NDA~~ for ~~LIQ861~~intellectual toproperty the FDA in January 2020. In April 2020, the FDA accepted the NDA for review and provided a Prescription Drug User Fee Act (PDUFA) goal date of November 24, 2020. Final enrollment in the trial included 121 PAH patients to assess safety and tolerability through Month 2, the primary endpoint of the trial. Of the 121 patients enrolled in the study, 55 were Transition patients and 66 were Add-On patients. Add-On patients started on a dose of 26.5 mcg of LIQ861, with most (>80%) titrating to a 79.5 mcg dose or higher within the first two months of treatment. Consistent with preliminary data presented in the second quarter of 2019, LIQ861 was observed to be well-tolerated and treatment-emergent adverse events were mostly mild to moderate in nature at Month 2 up to doses of 159 mcg of LIQ861, the highest dose studied at Month 2. Durability of therapy with LIQ861 appeared to be favorable, with 96% of Transition patients and 91% of Add-On patients remaining on study drug at the Month 2 timepoint.rights;

50 ● changes in tariffs and the imposition of trade barriers;

In● ~~April~~economic ~~2020~~weakness, weincluding ~~reported~~inflation ~~final safety and tolerability results from the two-month endpoint of the INSPIRE study. Of the 121 PAH patients, 113,~~ or ~~93%,~~political ~~completed~~instability ~~their two-month visit. The most common reported TEAEs (reported~~ in ≥particular ~~four~~foreign ~~percent)~~economies ~~were cough (42%), headache (26%), throat irritation (16%), dizziness (11%), diarrhea (9%), chest discomfort (8%), nausea (7%), dyspnea (5%), flushing (5%)~~ and ~~oropharyngeal pain (4%).~~markets;

~~Initial~~● ~~analysis~~differing ofpayor ~~the~~reimbursement ~~exploratory endpoints from the INSPIRE study indicates that LIQ861 may provide functional and quality-of-life benefits to PAH patients in New York Heart Association~~regimes, orgovernmental ~~NYHA,~~payors ~~functional classes II and III. More than 90% of all patients who completed two months of treatment maintained~~ or ~~improved~~patient ~~their NYHA functional class. Additionally, we observed improvement in six~~self-~~minute-walk-distance~~pay systems and ~~quality~~price ~~of life as measured by the MLHFQ in both patient groups.~~controls;

We● ~~continued~~compliance ~~to treat patients who chose to remain on LIQ861 beyond the Month 2 timepoint of the primary endpoint. More than 80% of INSPIRE patients remained on study drug at Month 4~~ with ~~no significant changes in safety or tolerability observed compared to Month 2. At the completion of the INSPIRE study~~tax, ~~the patient with the longest duration of treatment had been on LIQ861 therapy for 18 months. To provide for continuity of treatment~~employment, ~~patients~~immigration ~~from~~and ~~INSPIRE~~labor ~~were~~laws ~~provided the opportunity to continue receiving treatment~~ in anrespect extension study, which is currently ongoing. In addition, we are enrolling patients in a clinical study at certain investigational sites in Europe to characterize the hemodynamic dose-response relationship to LIQ861, however, enrollment has been paused due to the coronavirus pandemic. We are also considering conducting other clinical trials to generate additional data on LIQ861, including a clinical trial in pediatric patients. We also continue to conduct development work in support of ~~potential~~employees ~~approval~~living ~~and~~or ~~commercialization~~traveling ~~of LIQ861, including label and patient-use assessments.~~abroad;

~~With~~● ~~respect~~foreign totax LIQ865, we initiated Phase 2-enabling toxicology studies in March 2019 in both soft tissue and bone models. The soft tissue toxicology study showed favorable results. However, our bone toxicology study showed delayed bone healing at the dose tested and we therefore have recently initiated an additional non-GLP bone toxicology study at lower doses of LIQ865, with results expected during the second half of 2020. Provided that results of this study are favorable, we may then initiate a GLP bone toxicology study. We may also consider developing one or more alternative formulations of LIQ865. Depending upon the results of the further bone toxicology studies and the availability of funding, among other considerations, we may initiate one or more Phase 2 proof-of-concept clinical trials during 2021. We cannot assure you that our toxicology studies or clinical trials, if commenced, will be successful or meet their endpoints, or that the endpoints for any future Phase 3 trials that we may conduct will be sufficient to receive marketing approval.laws;

If● wecurrency ~~successfully~~fluctuations; ~~complete the clinical development of LIQ861~~ and LIQ865, we cannot assure you that they will receive marketing approval. The FDA or comparable regulatory authorities in other countries may delay, limit or deny approval of our product candidates for various reasons. For example, such authorities may disagree with the design, scope or implementation of our clinical trials, or with our interpretation of data from our preclinical studies or clinical trials. Further, there are numerous FDA personnel assigned to review different aspects of an NDA, and uncertainties can be presented by their ability to exercise judgment and discretion during the review process. During the course of review, the FDA may request or require additional preclinical, clinical, CMC (chemistry, manufacturing, and control), or other data and information, and the development and information may be time-consuming and expensive. Status as a combination product, as is the case for LIQ861, may complicate or delay the FDA review process. Product candidates that the FDA deems to be combination products, such as LIQ861, or that otherwise rely on innovative drug delivery systems, may face additional challenges, risks and delays in the product development and regulatory approval process. Moreover, the applicable requirements for approval may differ from country to country.

If● webusiness ~~successfully~~interruptions ~~obtain~~resulting ~~marketing~~from ~~approval~~geopolitical ~~for LIQ861 and LIQ865~~actions, wesuch ~~cannot~~as ~~assure~~wars ~~you~~and ~~that~~terrorist ~~they will be commercialized in a timely manner or successfully~~attacks, oramong ~~at all. For example~~others, ~~LIQ861 and LIQ865 may not achieve a sufficient level of market acceptance,~~ or weglobal ~~may~~pandemics ~~not be able to effectively build our marketing and sales capabilities~~ or ~~scale~~natural ~~our manufacturing operations to meet commercial demand. The successful commercialization of LIQ861 and LIQ865 will also~~disasters, insuch ~~part,~~as ~~depend on factors that are beyond our control. Therefore~~fires, ~~we may not generate significant revenue from the sale of such products~~floods, ~~even~~earthquakes ~~if approved. Any delay or setback we face in the commercialization of LIQ861 or LIQ865 may have a material~~ and ~~adverse effect on our business and prospects~~hurricanes, ~~which~~among ~~will adversely affect your investment in our company~~others.

~~Our~~Risks ~~preclinical~~Related ~~studies~~to ~~and~~the ~~clinical~~Development ~~trials may not be successful~~ and ~~delays~~Regulatory inApproval ~~such~~of ~~preclinical studies or clinical trials may cause~~ our ~~costs~~Product to increase and significantly impair our ability to commercialize our product candidates. Results of previous clinical trials or interim results of ongoing clinical trials may not be predictive of future results.Candidates

~~Before~~We we are ~~able~~primarily todependent ~~commercialize~~on our drug products, we are required to undertake extensive preclinical studies and clinical trials to demonstrate that our drug products are safe and effective for their intended uses. However, we cannot assure you that our drug products will, in preclinical studies and clinical trials, demonstrate safety and efficacy as necessary to obtain marketing approval. Due to the ~~nature~~success of ~~drug~~our ~~product~~lead ~~development, many~~ product ~~candidates~~candidate, ~~especially those in early stages of development~~LIQ861, ~~may be terminated during development. Although we believe we have completed clinical development~~ for ~~LIQ861,~~which we have ~~not~~recently ~~yet~~filed ~~obtained~~an ~~approval~~NDA ~~for~~with orthe ~~commercialized~~FDA, ~~any product candidates~~ and asto a ~~result~~lesser ~~do not have a track record of successfully bringing product candidates to market. Furthermore~~degree, ~~LIQ861 and~~ LIQ865 ~~have~~, towhich ~~date,~~is ~~been~~still ~~tested only~~ in ~~relatively~~clinical ~~small~~development, ~~study populations~~ and, ~~accordingly,~~these ~~the~~product ~~results~~candidates ~~from our earlier clinical trials~~ may befail ~~less~~to ~~reliable~~receive ~~than~~marketing ~~results~~approval ~~achieved~~or ~~in larger clinical trials. Additionally, the outcome of preclinical testing and early clinical trials~~ may not be ~~predictive~~commercialized ~~of the success of later clinical trials, and preliminary and interim results of a clinical trial do not necessarily predict final results~~successfully.

51 We do not have any products approved for marketing in any jurisdiction and we have never generated any revenue from product sales. Our ability to generate revenue from product sales and achieve profitability depends on our ability, alone or with strategic collaboration partners, to successfully complete the development of, and obtain the regulatory and marketing approvals necessary to commercialize, one or more of our product candidates. We expect that a substantial portion of our efforts and expenditure over the next few years will be devoted to our product candidates, LIQ861, a proprietary inhaled dry powder formulation of treprostinil for the treatment of pulmonary arterial hypertension, or PAH, and LIQ865, a sustained-release formulation of bupivacaine for the management of local post-operative pain. We do not anticipate generating revenue from sales of LIQ861 until 2022 at the earliest, if ever.

~~Preclinical~~LIQ861 ~~studies~~is ~~and~~being ~~clinical~~developed ~~trials~~under ~~may~~the ~~fail~~505(b)(2) ~~due~~regulatory topathway ~~factors~~with ~~such~~Tyvaso as ~~flaws~~the inreference ~~trial~~listed ~~design,~~drug. ~~dose~~We ~~selection~~commenced ~~and~~a ~~patient~~Phase ~~enrollment~~3 ~~criteria.~~clinical ~~The~~trial ~~results~~ of ~~preclinical~~LIQ861, ~~studies~~which ~~and~~we ~~early~~refer ~~clinical~~to ~~trials~~as ~~may~~INSPIRE, ~~not~~in bethe ~~indicative~~first quarter of 2018. We completed the ~~results~~pivotal ofINSPIRE ~~subsequent~~trial ~~clinical~~in ~~trials~~August 2019. ~~Product~~Final ~~candidates~~enrollment ~~may,~~included in121 ~~later~~PAH ~~stages~~patients ofto ~~clinical~~assess ~~testing~~safety and tolerability through Month 2, ~~fail~~the toprimary ~~show~~endpoint of the ~~desired~~trial. ~~safety~~Of ~~and~~the ~~efficacy~~121 ~~traits~~patients ~~despite~~enrolled ~~having~~in ~~progressed~~the ~~through~~study, ~~preclinical~~55 ~~studies~~were Transition patients and ~~earlier~~66 ~~clinical~~were ~~trials~~Add-On patients. ~~Moreover,~~Add-On ~~there~~patients ~~may~~started beon ~~significant~~a ~~variability~~dose inof ~~safety~~26.5 ormcg ~~efficacy~~of ~~results~~LIQ861, ~~between~~with ~~different~~most ~~trials~~(>80%) oftitrating ~~the~~to ~~same~~a ~~product~~79.5 ~~candidate~~mcg ~~due~~dose toor ~~factors~~higher ~~including,~~within ~~but~~the ~~not~~first ~~limited~~two months ~~to,~~of ~~changes~~treatment. inConsistent ~~trial~~with ~~protocols,~~preliminary ~~differences~~data presented in the ~~composition~~second quarter of ~~the~~2019, ~~patient~~LIQ861 ~~population,~~was ~~adherence~~observed to ~~the~~be ~~dosing~~well-tolerated ~~regimen~~ and ~~other~~treatment-emergent ~~trial~~adverse ~~protocols~~events, ~~and~~or ~~amendments~~TEAEs, were mostly mild to ~~protocols~~moderate ~~and~~in ~~the~~nature ~~rate~~at ofMonth ~~drop-out~~2 ~~among~~up ~~patients~~to indoses aof ~~clinical~~159 ~~trial.~~mcg Ifof ~~our~~LIQ861, ~~preclinical~~the ~~studies~~highest ordose ~~clinical~~studied ~~trials~~at ~~are~~Month ~~not~~2. ~~successful~~Durability ~~and~~of wetherapy ~~are~~with ~~unable~~LIQ861 appeared to ~~bring~~be ~~our~~favorable, ~~product~~with ~~candidates~~96% toof ~~market~~Transition aspatients aand ~~result,~~91% ~~our~~of ~~business~~Add-On ~~and~~patients ~~prospects~~remaining ~~may~~on bestudy ~~materially~~drug ~~and~~at ~~adversely~~the ~~affected~~Month 2 timepoint.

~~Furthermore~~In April 2020, ~~conducting~~we ~~preclinical~~reported ~~studies~~final safety and ~~clinical~~tolerability ~~trials~~results isfrom athe ~~costly and time~~two-~~consuming~~month ~~process.~~primary ~~The~~endpoint ~~length~~ of ~~time~~the ~~required~~INSPIRE tostudy. ~~conduct~~Of the ~~required~~121 ~~studies~~PAH ~~and~~patients, ~~trials~~113, ~~may~~or ~~vary substantially according to the type~~93%, ~~complexity,~~completed ~~novelty~~their ~~and~~two-month ~~intended~~visit. ~~use~~The ofmost ~~the~~common ~~product~~reported ~~candidate.~~TEAEs A(reported ~~single~~in ~~clinical~~≥ ~~trial~~four percent) ~~may~~were ~~take~~cough up(42%), toheadache ~~several~~(26%), ~~years~~throat toirritation ~~complete. Moreover~~(16%), ~~our~~dizziness ~~preclinical~~(11%), ~~studies~~diarrhea ~~and~~(9%), ~~clinical~~chest ~~trials~~discomfort ~~may~~(8%), benausea ~~delayed~~(7%), ordyspnea ~~halted~~(5%), ~~due~~flushing to(5%) ~~various~~and ~~factors,~~oropharyngeal ~~including,~~pain ~~among others:~~(4%).

●In ~~delays~~August 2019, one of the clinical investigators in ~~raising~~the INSPIRE study reassessed a serious adverse event, preliminarily identified as hypersensitivity pneumonitis, as being possibly related to LIQ861, whereas the ~~funding~~clinical ~~necessary~~investigator had previously, in May and June 2019, characterized the event as not related to ~~initiate~~LIQ861. orBased ~~continue~~on athe patient’s medical history, two other potential alternative causes of this event noted by the clinical ~~trial;~~investigator, and the fact that the patient has been taking LIQ861 since October 2018, we do not agree with the clinical investigator’s assessment. However, we reported the event to the FDA, as required, and we will continue to monitor and assess this event for any change.

~~● delays in manufacturing sufficient quantities of product candidates for clinical trials;~~ 53

●In ~~delays~~September 2019, inwe ~~reaching~~reported ~~agreement~~results onfrom ~~acceptable~~pharmacokinetic ~~terms~~(PK) studies indicating that the 79.5 mcg dose of LIQ861 correlates with ~~prospective~~nine breaths ~~contract~~of ~~research~~Tyvaso, ~~organizations~~the maximum recommended label dose of Tyvaso. To accurately characterize the pharmacokinetics of LIQ861, we conducted two PK studies in healthy volunteers. In the first of these studies, we observed unexpected variability in PK levels. Post-hoc analysis showed that plasma levels of treprostinil were tightly correlated to the LIQ861 dose delivered. Based upon additional non-clinical and clinical ~~trial~~work, ~~sites;~~we believe the unexpected variability seen in this healthy volunteer study was due to an administration technique unique to the conduct of the study in the Phase 1 setting. In August 2019, we completed a second PK study in healthy volunteers in which the proper administration technique was followed. This study demonstrated significantly reduced variability, and we believe we have established comparative bioavailability to the reference listed drug.

●We ~~delays~~continued to treat patients who chose to remain on LIQ861 beyond the Month 2 timepoint of the primary endpoint. More than 80% of INSPIRE patients remained on study drug at Month 4 with no significant changes in ~~obtaining~~safety ~~institutional~~or ~~review~~tolerability ~~board~~observed ~~approval~~compared to Month 2. At the completion of the INSPIRE study, the patient with the longest duration of treatment had been on LIQ861 therapy for 18 months. To provide for continuity of treatment, patients from INSPIRE were provided the opportunity to continue receiving treatment in an extension study, which is currently ongoing. Currently, more than 70 patients have now received therapy with LIQ861 for more than two years. In addition, we are enrolling patients in a clinical study at certain investigational sites in Europe to characterize the hemodynamic dose-response relationship to LIQ861. Enrollment was paused in the second quarter 2020 due to concerns related to the COVID-19 pandemic, but has resumed in September 2020. We are also considering conducting other clinical trials to generate additional data on LIQ861, including a clinical trial ~~sites;~~in pediatric patients. We also continue to conduct development work in support of potential approval and commercialization of LIQ861, including label and patient-use assessments.

●We ~~delays~~submitted an NDA for LIQ861 to the FDA in ~~recruiting~~January ~~suitable~~2020. ~~patients~~In April 2020, the FDA accepted the NDA for review and provided a Prescription Drug User Fee Act (PDUFA) goal date of November 24, 2020. Expectations related to ~~participate~~this PDUFA date as originally set are impacted by ongoing Hatch-Waxman Litigation following a lawsuit filed by United Therapeutics Corporation on June 4, 2020. Prior to submission of the NDA in January 2020, the FDA visited our manufacturing site in June 2019 as a ~~clinical~~qualifying ~~trial;~~participant in the Emerging Technology Program sponsored by the CDER. The program supports innovation by providing a forum for sponsors to engage FDA early in development and ensures consistency, continuity, and predictability in review and inspection. The program has allowed us to discuss PRINT® technology with Emerging Technology Team members, including personnel who would be involved in the PAI and review of the Chemistry Manufacturing Controls section of the NDA to support LIQ861.

●The ~~delays~~FDA communicated in ~~patients’~~August ~~completion~~2020 that inspections of ~~clinical~~two ~~trials~~domestic orsites ~~their~~involved ~~post-treatment~~in ~~follow~~the manufacturing of LIQ861 would be required before the FDA can approve our NDA for LIQ861. Due to restrictions on travel due to COVID-up19, the FDA may be unable to conduct inspections of these two sites prior to the User Fee Date of November 24, 2020. We will continue to work closely with the FDA with regard to the PAIs; however, as of the date of this Quarterly Report on Form 10-Q, the FDA has not yet conducted these inspections.

●With ~~regulatory~~respect ~~authorities’~~to ~~interpretation~~LIQ865, ofwe ~~our~~initiated ~~preclinical~~Phase 2-enabling toxicology studies in March 2019 in both soft tissue and ~~clinical~~bone ~~data~~models. The soft tissue toxicology study showed favorable results; however, our bone toxicology study showed delayed bone healing at the dose tested. We have completed an additional non-GLP study to investigate bone fracture healing using the same animal model with lower doses of LIQ865. This additional non-GLP study has established a NOAEL on bone healing and provides evidence that LIQ865 could proceed into a GLP toxicology study to support Phase 2 clinical activities. Considering our focus in advancing our lead asset, LIQ861, we will seek to advance LIQ865 through a strategic collaboration with an external partner. We cannot assure you that our toxicology studies or clinical trials, if commenced, will be successful or meet their endpoints, that the endpoints for any future Phase 3 trials that we may conduct will be sufficient to receive marketing approval, or that we will be successful in entering a strategic collaboration to further advance the program.

●If ~~unforeseen~~we ~~safety~~successfully ~~issues,~~complete ~~including~~the aclinical ~~high~~development of LIQ861 and ~~unacceptable~~LIQ865, ~~severity~~we cannot assure you that they will receive marketing approval. The FDA or comparable regulatory authorities in other countries may delay, limit or ~~prevalence~~deny approval of our product candidates for various reasons. For example, such authorities may disagree with the design, scope or implementation of ~~undesirable~~our ~~side~~clinical ~~effects~~trials, or ~~adverse~~with ~~events~~our ~~caused~~interpretation byof data from our preclinical studies or clinical trials. Further, there are numerous FDA personnel assigned to review different aspects of an NDA, and uncertainties can be presented by their ability to exercise judgment and discretion during the review process. During the course of review, the FDA may request or require additional preclinical, clinical, CMC (chemistry, manufacturing, and control), or other data and information, and the development and information may be time-consuming and expensive. Status as a combination product, ~~candidates~~as is the case for LIQ861, may complicate or ~~similar~~delay ~~drug~~the FDA review process. Product candidates that the FDA deems to be combination products, such as LIQ861, or that otherwise rely on innovative drug delivery systems, may face additional challenges, risks and delays in the product ~~candidates~~development and regulatory approval process. Moreover, the applicable requirements for approval may differ from country to country.

If our preclinical studies or clinical trials are delayed, the commercialization of our product candidates will be delayed and, as a result, we may incur substantial additional costs or not be able to recoup our investment in the development of our product candidates, which would have a material and adverse effect on our business. 54

~~LIQ861~~Under the Hatch-Waxman Act, ~~for~~as ~~which~~a weresult ~~submitted~~of anthe ~~NDA,~~Hatch-Waxman ~~requires~~Litigation ~~regulatory~~commenced ~~review~~by United Therapeutics on June 4, ~~and~~2020, ~~subject~~the toFDA ~~feedback~~may ~~from~~not issue a final approval for the ~~FDA~~LIQ861 NDA for up to 30 months, ~~may~~absent ~~require~~an ~~additional~~earlier ~~clinical~~judgment ~~testing~~unfavorable ~~and~~to ~~data~~United ~~analysis~~Therapeutics by the court. When ~~LIQ865,~~the FDA is not permitted to issue an approval for ~~which~~a we505(b)(2) ~~have~~application ~~only~~due ~~completed~~to ~~Phase~~a 130-month ~~studies~~stay, ~~requires~~it ~~additional~~is ~~clinical~~generally ~~testing,~~possible ~~data~~that ~~analysis,~~the ~~and~~agency could issue “tentative approval” if it determines that all regulatory ~~review~~requirements have been met. However, ~~Clinical~~a ~~trials~~drug ~~and~~product ~~data~~that ~~analysis~~is ~~can~~granted tentative approval may be ~~expensive~~subject to additional review before final approval, ~~time-consuming~~particularly ~~and~~if ~~difficult~~tentative toapproval ~~design~~was ~~and~~granted ~~implement.~~more Ifthan wethree ~~are~~years ~~unsuccessful~~before inthe ~~obtaining~~earliest ~~regulatory~~lawful approval ~~for~~date. The ~~LIQ861~~FDA’s ortentative ~~LIQ865~~approval of drug product would be based on information available to FDA at the time of the tentative approval letter (i.e., orinformation ~~any~~in the application and the status of ~~our~~current ~~product~~good ~~candidates~~manufacturing dopractices ~~not~~of ~~provide~~the ~~positive~~facilities ~~results,~~used wein ~~may~~the bemanufacturing ~~required~~and testing of the drug product) and is therefore subject to ~~delay~~change oron ~~abandon~~the ~~development~~basis of ~~such~~new information that may come to FDA’s attention. A new drug product, ~~which~~may ~~would~~not ~~have~~be amarketed ~~material~~until ~~adverse~~the ~~impact~~date onof ~~our~~final ~~business~~approval.

~~Continuing~~If ~~product~~we ~~development~~successfully ~~requires~~obtain ~~additional~~marketing approval for LIQ861 and ~~extensive~~LIQ865, ~~clinical~~we ~~testing.~~cannot ~~Human~~assure ~~clinical~~you ~~trials~~that ~~are~~they ~~very~~will ~~expensive~~be ~~and~~commercialized ~~difficult~~in toa ~~design~~timely ~~and~~manner ~~implement~~or successfully, inor ~~part~~at ~~because~~all. ~~they~~For ~~are~~example, ~~subject~~LIQ861 toand ~~rigorous~~LIQ865 ~~regulatory~~may ~~requirements.~~not ~~The~~achieve ~~clinical~~a ~~trial~~sufficient ~~process~~level isof ~~also~~market ~~time-consuming.~~acceptance, Weor ~~cannot~~we ~~provide~~may ~~any~~not ~~assurance~~be orable ~~certainty~~to ~~regarding~~effectively ~~when~~build weour ~~might~~marketing ~~receive~~and ~~regulatory~~sales ~~approval~~capabilities ~~for~~or ~~LIQ861~~scale orour ~~LIQ865.~~manufacturing ~~Furthermore,~~operations ~~failure~~to ~~can~~meet ~~occur~~commercial atdemand. ~~any~~The ~~stage~~successful commercialization of ~~the~~LIQ861 ~~process~~and LIQ865 will also, ~~and~~in wepart, ~~could~~depend ~~encounter~~on ~~problems~~factors that ~~cause~~are usbeyond toour ~~abandon~~control. anTherefore, ~~NDA~~we ~~filed~~may ~~with~~not generate significant revenue from the ~~FDA~~sale orof ~~repeat~~such ~~clinical~~products, ~~trials~~even if approved. ~~The~~Any ~~commencement~~delay ~~and~~or ~~completion~~setback ofwe ~~clinical~~face ~~trials~~in ~~for~~the ~~any~~commercialization ~~current~~of LIQ861 or ~~future~~LIQ865 ~~development~~may ~~product~~have ~~candidate~~a ~~may~~material beand ~~delayed~~adverse byeffect ~~several~~on ~~factors~~our business and prospects, ~~including:~~which will adversely affect your investment in our company.

●Our ~~unforeseen~~preclinical ~~safety~~studies ~~issues;~~and clinical trials may not be successful and delays in such preclinical studies or clinical trials may cause our costs to increase and significantly impair our ability to commercialize our product candidates. Results of previous clinical trials or interim results of ongoing clinical trials may not be predictive of future results.

●Before ~~determination~~we are able to commercialize our drug products, we are required to undertake extensive preclinical studies and clinical trials to demonstrate that our drug products are safe and effective for their intended uses. However, we cannot assure you that our drug products will, in preclinical studies and clinical trials, demonstrate safety and efficacy as necessary to obtain marketing approval. Due to the nature of ~~dosing~~drug ~~issues;~~product development, many product candidates, especially those in early stages of development, may be terminated during development. Although we believe we have completed clinical development for LIQ861, we have not yet obtained approval for or commercialized any product candidates and as a result do not have a track record of successfully bringing product candidates to market. Furthermore, LIQ861 and LIQ865 have, to date, been tested only in relatively small study populations and, accordingly, the results from our earlier clinical trials may be less reliable than results achieved in larger clinical trials. Additionally, the outcome of preclinical testing and early clinical trials may not be predictive of the success of later clinical trials, and preliminary and interim results of a clinical trial do not necessarily predict final results.

●Preclinical ~~lack~~studies and clinical trials may fail due to factors such as flaws in trial design, dose selection and patient enrollment criteria. The results of ~~effectiveness~~preclinical ~~during~~studies and early clinical trials; may not be indicative of the results of subsequent clinical trials. Product candidates may, in later stages of clinical testing, fail to show the desired safety and efficacy traits despite having progressed through preclinical studies and earlier clinical trials. Moreover, there may be significant variability in safety or efficacy results between different trials of the same product candidate due to factors including, but not limited to, changes in trial protocols, differences in the composition of the patient population, adherence to the dosing regimen and other trial protocols and amendments to protocols and the rate of drop-out among patients in a clinical trial. If our preclinical studies or clinical trials are not successful and we are unable to bring our product candidates to market as a result, our business and prospects may be materially and adversely affected.

●Furthermore, ~~slower~~conducting ~~than~~preclinical ~~expected~~studies ~~rates~~and clinical trials is a costly and time-consuming process. The length of ~~patient~~time ~~recruitment;~~required to conduct the required studies and trials may vary substantially according to the type, complexity, novelty and intended use of the product candidate. A single clinical trial may take up to several years to complete. Moreover, our preclinical studies and clinical trials may be delayed or halted due to various factors, including, among others:

● ~~inability~~delays toin ~~monitor~~raising ~~patients~~the ~~adequately~~funding ~~during~~necessary to initiate or ~~after~~continue ~~treatment;~~a ~~and~~clinical trial;

● ~~inability~~delays orin ~~unwillingness~~manufacturing ofsufficient ~~medical~~quantities ~~investigators~~of toproduct ~~follow~~candidates ~~our~~for clinical ~~protocols or amendments to our protocols.~~trials;

In● ~~addition,~~delays the FDA or an independent institutional review board, or IRB, may suspend our clinical trials at any time if it appears that we are exposing participants to unacceptable health risks or if the FDA finds deficiencies in ~~our~~reaching ~~IND~~agreement ~~submissions~~on oracceptable ~~the~~terms ~~conduct of these trials. Therefore, we cannot provide any assurance or predict~~ with ~~certainty~~prospective ~~the~~contract ~~schedule~~research ~~for~~organizations ~~future~~and clinical ~~trials.~~trial ~~In the event we do not ultimately receive regulatory approval for LIQ861 and LIQ865, we may be required to terminate development of our only product candidates.~~sites;

52 ● delays in obtaining institutional review board approval at clinical trial sites;

~~The~~● ~~marketing~~delays ~~approval processes of the FDA and comparable regulatory authorities~~ in ~~other~~recruiting ~~countries~~suitable ~~are~~patients ~~unpredictable and our product candidates may be subject~~ to ~~multiple~~participate ~~rounds~~in ofa ~~review~~clinical ~~or may not receive marketing approval.~~trial;

We● ~~have~~delays ~~not previously submitted an NDA to the FDA or similar drug approval filings to comparable regulatory authorities~~ in ~~other~~patients’ ~~countries~~completion ~~for any product candidate, and we cannot assure you that any~~ of ~~our~~clinical ~~product~~trials candidates will receive marketing approval. Filing an application and obtaining marketing approval for a pharmaceutical product candidate is an extensive, lengthy, expensive and inherently uncertain process, and regulatory authorities may delay, limit or ~~deny~~their ~~approval~~post-treatment ~~of our product candidates for many reasons, including, but not limited to, the following:~~follow-up;

● ~~the FDA or comparable~~ regulatory authorities’ ininterpretation ~~other~~of ~~countries~~our ~~may~~preclinical ~~refuse~~and toclinical ~~file an NDA or similar drug approval filing if they deem the application to be incomplete~~data; and

● ~~the~~unforeseen ~~FDA~~safety orissues, ~~comparable~~including ~~regulatory~~a ~~authorities~~high inand ~~other~~unacceptable ~~countries~~severity, ~~may~~or ~~disagree~~prevalence, ~~with~~of ~~the~~undesirable ~~number,~~side ~~design,~~effects ~~size,~~or ~~conduct~~adverse orevents ~~statistical~~caused ~~analysis~~by ofour ~~one~~product candidates or ~~more~~similar ofdrug ~~our~~products ~~clinical~~or ~~trials;~~product candidates.

● we may be unable to demonstrate to the satisfaction of the FDA or comparable regulatory authorities in other countries that our product candidate is safe and effective for its proposed indication, or that its clinical and other benefits outweigh its safety risks; 55

●If our preclinical studies or clinical trials are delayed, the ~~results~~commercialization of our ~~clinical~~product ~~trials~~candidates will be delayed and, as a result, we may incur substantial additional costs or not ~~meet~~be able to recoup our investment in the ~~level~~development of ~~statistical~~our ~~significance~~product ~~required~~candidates, bywhich ~~the~~would ~~FDA~~have ora ~~comparable~~material ~~regulatory~~and ~~authorities~~adverse ineffect ~~other~~on ~~countries;~~our business.

●LIQ861, for which we submitted an NDA, requires regulatory review, and, subject to feedback from the FDA, may require additional clinical testing and data ~~collected~~analysis. ~~from~~LIQ865, ~~our~~for which we have only completed Phase 1 studies, requires additional clinical testing, data analysis, and regulatory review. Clinical trials ~~may~~and ~~not~~data analysis can be ~~sufficient~~expensive, time-consuming and difficult to ~~support~~design ~~the~~and ~~submission~~implement. ofIf anwe ~~NDA~~are orunsuccessful ~~similar~~in ~~drug~~obtaining regulatory approval ~~filing~~for toLIQ861 ~~the~~or ~~FDA~~LIQ865, or ~~comparable~~any ~~regulatory~~of ~~authorities~~our inproduct ~~other~~candidates ~~countries;~~do not provide positive results, we may be required to delay or abandon development of such product, which would have a material adverse impact on our business.

●Continuing ~~the~~product ~~FDA~~development requires additional and extensive clinical testing. Human clinical trials are very expensive and difficult to design and implement, in part because they are subject to rigorous regulatory requirements. The clinical trial process is also time-consuming. We cannot provide any assurance or ~~comparable~~certainty regarding when we might receive regulatory ~~authorities~~approval infor ~~other~~LIQ861 ~~countries~~or ~~may~~LIQ865. ~~disagree~~Furthermore, ~~with~~failure ~~our~~can ~~interpretation~~occur at any stage of ~~data~~the ~~from~~process, ~~our~~and ~~preclinical~~we ~~studies~~could encounter problems that cause us to abandon an NDA filed with the FDA or repeat clinical trials;. The commencement and completion of clinical trials for any current or future development product candidate may be delayed by several factors, including:

● ~~our~~unforeseen ~~manufacturing~~safety processes and facilities have not been inspected by the FDA, and the FDA or comparable regulatory authorities in other countries may not ultimately conclude that our manufacturing processes or facilities or those of our third-party manufacturers sufficiently demonstrate compliance with cGMP to support NDA approvalissues;

● ~~our~~determination ~~product candidates may not meet the level~~ of ~~quality~~dosing ~~and control required by the FDA or comparable regulatory authorities in other countries~~issues;

● ~~our~~lack ~~product~~of ~~candidates~~effectiveness ~~may~~during ~~not~~clinical ~~demonstrate sufficient long-term stability to support an NDA filing or obtain approval, or the product shelf life may be limited by stability results~~trials;

● ~~the~~slower ~~FDA~~than orexpected ~~comparable~~rates ~~regulatory authorities in other countries may require development~~ of apatient ~~costly and extensive risk evaluation and mitigation strategy, or REMS, as a condition of approval~~recruitment;

● ~~the~~inability ~~success or further approval of competing products approved in indications similar~~ to ~~those~~monitor ofpatients ~~our~~adequately ~~product~~during ~~candidates~~or ~~may~~after ~~change the standards for approval of our product candidates in their proposed indications~~treatment; and

● ~~the~~inability ~~approval~~or ~~policies~~unwillingness of ~~the~~medical ~~FDA~~investigators orto ~~comparable~~follow ~~regulatory~~our ~~authorities~~clinical inprotocols ~~other~~or ~~countries~~amendments ~~may~~to ~~change in a manner that renders~~ our ~~clinical data insufficient for approval~~protocols.

In addition, the FDA or ~~comparable~~an ~~regulatory~~independent ~~authorities~~institutional inreview ~~other countries may~~board, inor ~~their sole discretion~~IRB, ~~change~~may ~~their~~suspend ~~views~~our inclinical ~~respect~~trials ofat ~~regulatory~~any ~~pathways~~time ~~they~~if ~~had~~it ~~previously~~appears ~~affirmed~~that orwe ~~clinical~~are ~~trial~~exposing ~~protocols~~participants to ~~which~~unacceptable ~~they~~health ~~were~~risks ~~previously~~or ~~not~~if ~~opposed. While we have consulted with~~ the FDA onfinds ~~the~~deficiencies ~~appropriate~~in ~~regulatory~~our ~~pathway~~IND ~~and~~submissions ~~clinical~~or ~~trial~~the ~~protocols~~conduct ~~for~~of ~~our~~these ~~product~~trials. ~~candidates~~Therefore, ~~LIQ861 and LIQ865,~~ we cannot ~~assure~~provide ~~you~~any ~~that~~assurance ~~the~~or ~~FDA~~predict ~~will~~with ~~not~~certainty ~~revise~~the ~~its~~schedule ~~position~~for ~~significantly~~future atclinical ~~a later date~~trials. In the event ~~that~~we ~~this~~do ~~occurs,~~not ~~the~~ultimately ~~clinical~~receive ~~development~~regulatory ~~and~~approval ~~commercialization~~for ofLIQ861 ~~our~~and ~~product~~LIQ865, ~~candidates~~we may be ~~delayed~~required orto ~~even~~terminate ~~derailed~~development of our only product candidates.

~~Even~~The ~~if we obtain~~ marketing approval, processes of the FDA orand comparable regulatory authorities in other countries ~~may~~are ~~approve~~unpredictable ~~our~~and product candidates for fewer or more limited indications than those for which we requested approval, or may include safety warnings or other restrictions that may negatively impact the commercial viability of our product candidates. ~~Likewise, regulatory authorities~~ may ~~grant~~be ~~approval~~subject ~~contingent~~to onmultiple ~~the~~rounds ~~performance~~ of ~~costly~~review ~~post-marketing clinical trials~~ or ~~the conduct of an expensive REMS, which could significantly reduce the potential for commercial success or viability of our product candidates. We also~~ may not bereceive ~~able~~marketing ~~to find acceptable collaborators to manufacture our drug products, if and when approved, in commercial quantities and at acceptable prices, or at all~~approval.

~~Our~~We ~~product~~have ~~candidates~~not ~~may~~previously ~~cause~~submitted ~~undesirable~~an ~~side~~NDA ~~effects~~to the FDA or ~~have~~similar drug approval filings to comparable regulatory authorities in other ~~properties~~countries for any product candidate, and we cannot assure you that ~~could~~any ~~delay~~of orour ~~prevent~~product ~~their~~candidates ~~regulatory~~will receive marketing approval. Filing an application and obtaining marketing approval for a pharmaceutical product candidate is an extensive, ~~limit~~lengthy, ~~the~~expensive ~~commercial~~and ~~potential~~inherently oruncertain ~~result~~process, inand ~~significant~~regulatory ~~negative~~authorities ~~consequences~~may ~~following~~delay, ~~any~~limit ~~potential~~or ~~marketing~~deny approval. of our product candidates for many reasons, including, but not limited to, the following:

53 ● the FDA or comparable regulatory authorities in other countries may refuse to file an NDA or similar drug approval filing if they deem the application to be incomplete;

If● ~~our~~the ~~product~~FDA ~~candidates are associated with undesirable side effects~~ or ~~have~~comparable ~~characteristics~~regulatory ~~that~~authorities ~~are unexpected, we may need to abandon our development or limit development to certain uses or subpopulations~~ in ~~which the undesirable side effects or~~ other ~~characteristics~~countries ~~are~~may ~~less~~disagree ~~prevalent,~~with ~~less severe or more acceptable from a risk-benefit perspective. Any serious adverse or undesirable side effects identified during~~ the ~~development of our product candidates could interrupt~~number, ~~delay or halt clinical trials and could result in the denial of regulatory approval by the FDA or other regulatory authorities for any or all targeted indications~~design, ~~and in turn prevent us from commercializing our product candidates and generating revenue from their sale. In addition~~size, ifconduct ~~any of our product candidates receive regulatory approval and we~~ or ~~others~~statistical ~~later~~analysis ~~identify~~of ~~undesirable adverse effects caused by the product, we could face~~ one or more of ~~the~~our ~~following~~clinical ~~consequences:~~trials;

● ~~regulatory~~we ~~authorities~~ may ~~require~~be unable to demonstrate to the ~~addition~~satisfaction of ~~labeling~~the ~~statements,~~FDA ~~such~~or ascomparable aregulatory ~~boxed~~authorities ~~warning~~in orother acountries ~~contraindication~~that our product candidate is safe and effective for its proposed indication, or that its clinical and other ~~safety~~benefits ~~labeling~~outweigh ~~changes~~its safety risks;

● ~~regulatory~~the ~~authorities~~results of our clinical trials may ~~require~~not ameet ~~REMS~~the level of statistical significance required by the FDA or comparable regulatory authorities in other countries;

● ~~regulatory~~the ~~authorities~~data collected from our clinical trials may ~~withdraw~~not ~~their~~be ~~approval~~sufficient to support the submission of an NDA or similar drug approval filing to the ~~product~~FDA or comparable regulatory authorities in other countries;

● the FDA or comparable regulatory authorities in other countries may ~~seize~~disagree ~~the~~with ~~product~~our interpretation of data from our preclinical studies or clinical trials;

● weour ~~may~~manufacturing beprocesses ~~required~~and tofacilities ~~change~~have not been inspected by the ~~way~~FDA, ~~that~~and the ~~product~~FDA isor ~~administered~~comparable regulatory authorities in other countries may not ultimately conclude that our manufacturing processes or facilities or those of our third-party manufacturers sufficiently demonstrate compliance with cGMP to support NDA approval;

● weour product candidates may benot meet the level of quality and control required toby ~~conduct~~the ~~additional~~FDA ~~clinical~~or ~~trials~~comparable regulatory authorities in other countries;

~~● we may be required to recall the product;~~ 56

● weour product candidates may benot ~~subject~~demonstrate sufficient long-term stability to ~~litigation~~support an NDA filing or obtain approval, or the product ~~liability~~shelf ~~claims,~~life ~~fines,~~may ~~injunctions~~be orlimited ~~criminal~~by ~~penalties;~~stability ~~and~~results;

● ~~our~~the ~~reputation~~FDA or comparable regulatory authorities in other countries may ~~suffer.~~require development of a costly and extensive risk evaluation and mitigation strategy, or REMS, as a condition of approval;

We● ~~may~~the ~~encounter~~success ~~difficulties~~or infurther ~~enrolling~~approval ~~patients~~of competing products approved in indications similar to those of our ~~clinical~~product ~~trials.~~candidates may change the standards for approval of our product candidates in their proposed indications; and

We● ~~may~~the ~~not~~approval bepolicies ~~able~~of tothe ~~commence~~FDA or ~~complete~~comparable ~~clinical~~regulatory ~~trials~~authorities ~~for~~in ~~our~~other ~~product~~countries ~~candidates~~may ifchange wein ~~are unable to locate and enroll~~ a ~~sufficient~~manner ~~number~~that ofrenders ~~eligible~~our ~~patients~~clinical todata ~~participate~~insufficient infor ~~these trials~~approval.

~~Patient~~In ~~enrollment~~addition, the FDA or comparable regulatory authorities in other countries may, bein ~~affected~~their bysole discretion, ~~among~~change ~~others:~~their views in respect of regulatory pathways they had previously affirmed or clinical trial protocols to which they were previously not opposed. While we have consulted with the FDA on the appropriate regulatory pathway and clinical trial protocols for our product candidates, LIQ861 and LIQ865, we cannot assure you that the FDA will not revise its position significantly at a later date. In the event that this occurs, the clinical development and commercialization of our product candidates may be delayed or even derailed.

●Even if we obtain marketing approval, the ~~severity~~FDA or comparable regulatory authorities in other countries may approve our product candidates for fewer or more limited indications than those for which we requested approval, or may include safety warnings or other restrictions that may negatively impact the commercial viability of our product candidates. Likewise, regulatory authorities may grant approval contingent on the ~~disease~~performance ~~under~~of ~~investigation;~~costly post-marketing clinical trials or the conduct of an expensive REMS, which could significantly reduce the potential for commercial success or viability of our product candidates. We also may not be able to find acceptable collaborators to manufacture our drug products, if and when approved, in commercial quantities and at acceptable prices, or at all.

●Our ~~the~~product ~~design~~candidates ofmay cause undesirable side effects or have other properties that could delay or prevent their regulatory approval, limit the ~~clinical~~commercial ~~trial~~potential ~~protocol~~or ~~and~~result ~~amendments~~in tosignificant anegative ~~protocol;~~consequences following any potential marketing approval.

●If our product candidates are associated with undesirable side effects or have characteristics that are unexpected, we may need to abandon our development or limit development to certain uses or subpopulations in which the ~~size~~undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective. Any serious adverse or undesirable side effects identified during the development of our product candidates could interrupt, delay or halt clinical trials and ~~nature~~could result in the denial of regulatory approval by the ~~patient~~FDA ~~population;~~or other regulatory authorities for any or all targeted indications, and in turn prevent us from commercializing our product candidates and generating revenue from their sale. In addition, if any of our product candidates receive regulatory approval and we or others later identify undesirable adverse effects caused by the product, we could face one or more of the following consequences:

● ~~eligibility~~regulatory ~~criteria~~authorities ~~for~~may require the ~~clinical~~addition ~~trial~~of inlabeling ~~question~~statements, such as a boxed warning or a contraindication, or other safety labeling changes;

● ~~the~~regulatory ~~perceived~~authorities ~~risks~~may ~~and~~require ~~benefits of the product candidate under clinical testing, including~~ a ~~high and unacceptable severity, or prevalence, of undesirable side effects or adverse events caused by our product candidates or similar products or product candidates~~REMS;

● ~~the~~regulatory ~~existing~~authorities ~~body~~may ofwithdraw ~~safety~~their ~~and~~approval ~~efficacy data in respect~~ of the product ~~candidate under clinical testing~~;

● ~~the~~regulatory ~~proximity~~authorities ofmay ~~patients~~seize tothe ~~clinical trial sites~~product;

● ~~the~~we ~~number~~may ~~and~~be ~~nature~~required ofto ~~competing~~change ~~therapies~~the ~~and~~way ~~clinical~~that ~~trials; and ● other environmental factors such as~~ the ~~recent~~product ~~coronavirus~~is ~~pandemic or other natural or unforeseen disasters.~~administered;

~~Any~~● ~~negative results~~ we may ~~report~~be inrequired ~~clinical trials of our product candidates may also make it difficult or impossible~~ to ~~recruit~~conduct ~~and~~additional ~~retain patients in other~~ clinical trials ~~of that same product candidate.~~;

In● ~~particular,~~ we ~~will~~may be required to ~~identify~~recall and enroll a sufficient number of patients with PAH for our clinical trials and studies of LIQ861. PAH is a rare disease with a relatively small patient population, and our enrollment of clinical trial participants may be slow as a result. Additionally, we expect that if we initiate, as we are currently contemplating, a clinical trial of LIQ861 in pediatric patients, we may encounter difficulties enrolling patients in such a trial because of the limited number of pediatric patients with this disease. Furthermore, we are aware of a number of therapies for PAH that are being developed or that are already available on the market, and we expect to face competition from these investigational drugs or approved drugs for potential subjects in our clinical trials, which may delay enrollment in our planned clinical trials.product;

~~Delays~~● orwe ~~failures in planned patient enrollment or retention~~ may ~~result~~be insubject ~~increased~~to ~~costs,~~litigation ~~program delays,~~ or ~~both.~~product Weliability ~~may~~claims, ~~as a result of such delays or failures~~fines, beinjunctions ~~unable to carry out our clinical trials as planned~~ or ~~within~~criminal ~~the~~penalties; ~~timeframe that we expect or at all,~~ and ~~our business and prospects may be materially and adversely affected as a result.~~

~~Product~~● ~~candidates~~our ~~that~~reputation ~~the FDA deems to be combination products, such as LIQ861, or that otherwise rely on innovative drug delivery systems,~~ may ~~face additional challenges, risks and delays in the product development and regulatory approval process~~suffer.

~~The~~We FDA has indicated that it considers LIQ861, which is delivered by a DPI, to be a drug-device combination product and, accordingly, the DPI will be evaluated as part of our NDA filing. When evaluating products that utilize a specific drug delivery system or device, the FDA will evaluate the characteristics of that delivery system and its functionality, as well as the potential for undesirable interactions between the drug and the delivery system, including the potential to negatively impact the safety or effectiveness of the drug. The FDA review process can be more complicated for combination products, and may ~~result~~encounter difficulties in ~~delays,~~enrolling ~~particularly~~patients ~~if novel delivery systems are involved. We rely on third parties for the design and manufacture of the delivery systems for our products, including the DPI for LIQ861, and~~ in some cases for the right to refer to their data on file with the FDA or other regulators. Quality or design concerns with the delivery system, or commercial disputes with these third parties, could delay or prevent regulatory approval and commercialization of our ~~product~~clinical ~~candidates~~trials.

54 We may not be able to commence or complete clinical trials for our product candidates if we are unable to locate and enroll a sufficient number of eligible patients to participate in these trials.

WePatient ~~are~~enrollment ~~pursuing~~may ~~the~~be ~~FDA~~affected ~~505(b)(2) pathway for all of our current product candidates. If we are unable to rely on the 505(b)(2) regulatory pathway to apply for marketing approval of our product candidates in the United States~~by, ~~seeking~~among approval of these product candidates through the 505(b)(1) NDA pathway would require full reports of investigations of safety and effectiveness, and the process of obtaining marketing approval for our product candidates would likely be significantly longer and more costly.others:

We● ~~are currently focused on developing drug products that can be approved under abbreviated regulatory pathways in~~ the ~~United~~severity ~~States, such as the 505(b)(2) regulatory pathway, which permits the filing~~ of ~~an NDA where at least some of~~ the ~~information~~disease ~~required~~under for approval comes from studies that were not conducted by or for the applicant and for which the applicant has not obtained a right of reference. Section 505(b)(2), if applicable to us for a particular product candidate, would allow an NDA we submit to the FDA to rely in part on data in the public domain or the FDA’s prior conclusions regarding the safety and effectiveness of approved compounds, which could expedite the development program for a product candidate by potentially decreasing the amount of clinical data that we would need to generate in order to obtain FDA approval. We plan to pursue this pathway for our current product candidates, LIQ861 and LIQ865, and have submitted a 505(b)(2) NDA for LIQ861. Even if the FDA allows us to rely on the 505(b)(2) regulatory pathway, we cannot assure you that such marketing approval will be obtained in a timely manner, or at all.investigation;

~~The~~● ~~FDA may require us to perform additional clinical trials to support any change from~~ the ~~reference~~design ~~listed drug, which could be time-consuming and substantially delay our receipt~~ of ~~marketing approval. Also, as has been~~ the ~~experience~~clinical oftrial ~~others~~protocol inand ~~our~~amendments ~~industry, our competitors may file citizens’ petitions with the FDA~~ to contest approval of our NDA, which may delay or even prevent the FDA from approving any NDA that we submit under the 505(b)(2) regulatory pathway. If an FDA decision or action relative to our product candidate, or the FDA’s interpretation of Section 505(b)(2) more generally, is successfully challenged, it could result in delays or even prevent the FDA from approving a 505(b)(2) application for our product candidates. Even if we are able to utilize the 505(b)(2) regulatory pathway, a drug approved via this pathway may be subject to the same post-approval limitations, conditions and requirements as any other drug.protocol;

In● ~~addition, we may face Hatch-Waxman litigation in relation to our NDAs submitted under~~ the ~~505(b)(2)~~size ~~regulatory pathway, which may further delay or prevent the approval of our product candidates. The pharmaceutical industry is highly competitive,~~ and ~~505(b)(2)~~nature ~~NDAs are subject to special requirements designed to protect the patent rights~~ of ~~sponsors of previously approved drugs that are referenced in a 505(b)(2) NDA. If~~ the ~~previously~~patient approved drugs referenced in an applicant’s 505(b)(2) NDA are protected by patent(s) listed in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations publication, or the Orange Book, the 505(b)(2) applicant is required to make a claim after filing their its NDA that each such patent is invalid, unenforceable or will not be infringed. The patent holder may thereafter bring suit for patent infringement, which will trigger a mandatory 30-month delay (or the shorter of dismissal of the lawsuit or expiration of the patent(s)) in approval of the 505(b)(2) NDA application. It is not uncommon for a manufacturer of an approved product to file a citizen petition with the FDA seeking to delay approval of, or impose additional approval requirements for, pending competing products. If successful, such petitions can significantly delay, or even prevent, the approval of the new product. However, even if the FDA ultimately denies such a petition, the FDA may substantially delay approval while it considers and responds to the petition.population;

If the FDA determines that our product candidates do not qualify for the 505(b)(2) regulatory pathway, we would need to reconsider our plans and might not be able to commercialize our product candidates in a cost-efficient manner, or at all. If we were to pursue approval under the 505(b)(1) NDA pathway, we would be subject to more extensive requirements and risks such as conducting additional clinical trials, providing additional data and information or meeting additional standards for marketing approval. As a result, the time and financial resources required to obtain marketing approval for our product candidates would likely increase substantially and further complications and risks associated with our product candidates may arise. Also, new competing products may reach the market faster than ours, which may materially and adversely affect our competitive position, business and prospects. 57

We● ~~may~~eligibility becriteria ~~unable~~for tothe ~~continually~~clinical ~~develop~~trial ain ~~pipeline of product candidates, which could affect our business and prospects.~~question;

A● ~~key~~the ~~element~~perceived ofrisks ~~our~~and ~~long-term~~benefits ~~strategy is to continually develop a pipeline~~ of the product ~~candidates~~candidate byunder ~~developing~~clinical ~~proprietary~~testing, ~~innovations~~including toa ~~FDA-approved~~high ~~drug~~and ~~products~~unacceptable ~~using~~severity, ~~our PRINT technology. If we are unable to identify off-patent drug products for which we can develop proprietary innovations using our PRINT technology~~ or ~~otherwise expand our product candidate pipeline~~prevalence, ~~whether~~of ~~through~~undesirable ~~licensed~~side effects or ~~co-development~~adverse ~~opportunities,~~events ~~and~~caused ~~obtain~~by ~~marketing~~our ~~approval for such~~ product candidates ~~within~~or ~~the~~similar ~~timeframes~~products ~~that we anticipate,~~ or atproduct ~~all, our business and prospects may be materially and adversely affected.~~candidates;

We● ~~have conducted, and may in~~ the ~~future~~existing ~~conduct,~~body ~~clinical~~of ~~trials~~safety ~~for~~and ~~our~~efficacy ~~product~~data ~~candidates~~in ~~outside~~respect ~~the~~of ~~United States and~~ the ~~FDA~~product ~~may~~candidate ~~not~~under ~~accept~~clinical ~~data from such trials.~~testing;

~~Although~~● the ~~FDA~~proximity ~~may accept data from clinical trials conducted outside the United States in support~~ of ~~safety~~patients ~~and efficacy claims for our product candidates, if not conducted under an IND, this is subject~~ to ~~certain conditions set out in 21 C.F.R. § 312.120. For example, in order for the FDA to accept data from such a foreign~~ clinical trial, the study must have been conducted in accordance with Good Clinical Practice, or GCP, including review and approval by an independent ethics committee and obtaining the informed consent from subjects of the clinical trials. The FDA must also be able to validate the data from the study through an onsite inspection if the agency deems it necessary. In addition, foreign clinical data submitted to support FDA applications should be applicable to the U.S. population and U.S. medical practice. Other factors that may affect the acceptance of foreign clinical data include differences in clinical conditions, study populations or regulatory requirements between the United States and the foreign country.sites;

	●	the number and nature of competing therapies and clinical trials; and
	●	other environmental factors such as the ongoing COVID-19 pandemic or other natural or unforeseen disasters.

WeAny ~~conducted~~negative ~~the~~results ~~early Phase 1a clinical trial of LIQ865 in Denmark, and not under an IND,~~ we ~~plan~~may toreport ~~conduct an additional clinical trial~~ in ~~Europe that explores the hemodynamic effects of LIQ861 in PAH patients when we are able to resume enrolling patients following the end of the COVID-19 pandemic, and we may, in the future, conduct~~ clinical trials of our product candidates ~~outside~~may ~~the~~also ~~United~~make ~~States.~~it ~~The~~difficult ~~FDA~~or ~~may~~impossible ~~not~~to ~~accept~~recruit ~~such~~and ~~foreign~~retain ~~clinical~~patients ~~data, and~~ in ~~such~~other ~~event, we may be required to re-conduct relevant~~ clinical trials ~~within~~of ~~the~~that ~~United~~same ~~States,~~product ~~which would be costly and time-consuming, and which could have a material and adverse effect on our ability to carry out our business plans~~candidate.

~~Even~~In ifparticular, we ~~obtain~~will ~~marketing~~be ~~approval~~required to identify and enroll a sufficient number of patients with PAH for our ~~product~~clinical ~~candidates~~trials and studies of LIQ861. PAH is a rare disease with a relatively small patient population, and our enrollment of clinical trial participants may be slow as a result. Additionally, we expect that if we initiate, as we are currently contemplating, a clinical trial of LIQ861 in pediatric patients, we may encounter difficulties enrolling patients in such a trial because of the ~~United~~limited ~~States~~number of pediatric patients with this disease. Furthermore, we are aware of a number of therapies for PAH that are being developed or ~~our~~that ~~collaborators~~are ~~may~~already ~~not~~available ~~obtain~~on ~~marketing~~the ~~approval~~market, and we expect to face competition from these investigational drugs or approved drugs for ~~the~~potential ~~same~~subjects ~~product~~in ~~candidates~~our ~~elsewhere~~clinical trials, which may delay enrollment in our planned clinical trials.

WeDelays ~~may~~or ~~enter~~failures ~~into~~in ~~strategic~~planned ~~collaboration~~patient ~~arrangements~~enrollment ~~with~~or ~~third~~retention ~~parties~~may toresult ~~commercialize~~in ~~our~~increased ~~product~~costs, ~~candidates~~program ~~outside~~delays, ofor ~~the United States~~both. InWe ~~order~~may, toas ~~market~~a ~~any~~result ~~product candidate outside~~ of ~~the~~such ~~United~~delays ~~States, we~~ or ~~our~~failures, ~~collaborators will~~ be ~~required~~unable to ~~comply~~carry ~~with~~out ~~numerous~~our ~~and~~clinical ~~varying regulatory requirements of other countries regarding safety and efficacy. Clinical~~ trials ~~conducted~~as inplanned ~~one country may not be recognized~~ or ~~accepted~~within bythe ~~regulatory~~timeframe ~~authorities in other countries, and obtaining marketing approval in one country does not mean~~ that ~~marketing~~we ~~approval~~expect ~~will~~or beat ~~obtained~~all, ~~in any other country. Approval processes vary among countries~~ and ~~additional~~our ~~product~~business ~~testing~~ and ~~validation,~~prospects ~~or additional administrative review periods,~~ may be ~~required~~materially ~~from~~and ~~one~~adversely ~~country~~affected toas ~~the~~a ~~next~~result.

~~Seeking~~Product ~~marketing~~candidates ~~approval~~that ~~in countries other than~~ the ~~United~~FDA ~~States~~deems ~~could be costly and time-consuming, especially if additional preclinical studies or clinical trials are required~~ to be ~~conducted.~~combination ~~We currently do not have any product candidates approved for sale in any jurisdiction~~products, including non-U.S. markets, and we do not have experience in obtaining marketing approval in non-U.S. markets. We currently also have not identified any collaborators to market our products outside of the United States and cannot assure you that such ~~collaborators,~~as ~~even if identified~~LIQ861, ~~will be able to successfully obtain marketing approval for our product candidates outside of the United States. If we~~ or ~~our~~that ~~collaborators~~otherwise ~~fail~~rely toon ~~obtain~~innovative ~~marketing~~drug ~~approval~~delivery ~~in non-U.S. markets~~systems, ormay ifface ~~such~~additional ~~approval is delayed~~challenges, ~~our~~risks ~~target market may be reduced,~~ and ~~our~~delays ~~ability~~in ~~to realize~~ the ~~full~~product ~~market~~development ~~potential~~and ofregulatory ~~our~~approval ~~products will be adversely affected~~process.

~~Risks~~The ~~Related~~FDA has indicated that it considers LIQ861, which is delivered by a DPI, to ~~Our~~be ~~Dependence~~a drug-device combination product and, accordingly, the DPI will be evaluated as part of our NDA filing. When evaluating products that utilize a specific drug delivery system or device, the FDA will evaluate the characteristics of that delivery system and its functionality, as well as the potential for undesirable interactions between the drug and the delivery system, including the potential to negatively impact the safety or effectiveness of the drug. The FDA review process can be more complicated for combination products, and may result in delays, particularly if novel delivery systems are involved. We rely on ~~Third~~third ~~Parties~~parties for the design and manufacture of the delivery systems for our products, including the DPI for LIQ861, and in some cases for the right to refer to their data on file with the FDA or other regulators. Quality or design concerns with the delivery system, or commercial disputes with these third parties, could delay or prevent regulatory approval and commercialization of our product candidates.

We ~~depend~~are onpursuing ~~third~~the ~~parties~~FDA 505(b)(2) pathway for ~~clinical~~all ~~and~~of ~~commercial~~our ~~supplies,~~current ~~including~~product ~~single~~candidates. ~~suppliers~~If we are unable to rely on the 505(b)(2) regulatory pathway to apply for marketing approval of our product candidates in the ~~active~~United ~~ingredient~~States, seeking approval of these product candidates through the ~~device,~~505(b)(1) ~~encapsulation~~NDA pathway would require full reports of investigations of safety and ~~packaging~~effectiveness, and the process of ~~LIQ861~~obtaining marketing approval for our product candidates would likely be significantly longer and more costly.

We ~~depend~~are currently focused on ~~third-party~~developing ~~suppliers~~drug ~~for~~products ~~clinical~~that ~~and~~can ~~commercial~~be ~~supplies~~approved ~~for~~under abbreviated regulatory pathways in the ~~supply~~United States, such as the 505(b)(2) regulatory pathway, which permits the filing of ~~materials~~an ~~and~~NDA ~~components~~where ~~necessary~~at least some of the information required for ~~clinical~~approval ~~and~~comes ~~commercial~~from ~~production~~studies ofthat ~~LIQ861,~~were ~~including~~not conducted by or for the ~~active~~applicant ~~pharmaceutical~~and ~~ingredients~~for which ~~are~~the ~~used~~applicant inhas ~~our~~not ~~product~~obtained ~~candidates.~~a ~~These~~right ~~supplies~~of ~~may~~reference. ~~not~~Section ~~always~~505(b)(2), beif ~~available~~applicable to us atfor ~~the~~a ~~standards~~particular product candidate, would allow an NDA we ~~require~~submit orto the FDA to rely in part on ~~terms~~data ~~acceptable~~in tothe ~~us,~~public domain or atthe ~~all,~~FDA’s prior conclusions regarding the safety and weeffectiveness ~~may~~of ~~not~~approved becompounds, ~~able~~which tocould ~~locate~~expedite ~~alternative~~the ~~suppliers~~development inprogram for a ~~timely~~product ~~manner,~~candidate orby atpotentially ~~all.~~decreasing Ifthe amount of clinical data that we ~~are~~would ~~unable~~need to generate in order to obtain ~~necessary~~FDA ~~clinical~~approval. orWe ~~commercial~~plan ~~supplies,~~to pursue this pathway for our ~~manufacturing~~current ~~operations~~product ~~and~~candidates, ~~clinical~~LIQ861 ~~trials~~and LIQ865, and have submitted a 505(b)(2) NDA for LIQ861. Even if the ~~clinical~~FDA ~~trials~~allows ofus ~~our~~to ~~collaborators~~rely ~~may~~on bethe ~~delayed~~505(b)(2) orregulatory ~~disrupted~~pathway, ~~and~~we ~~our~~cannot ~~business~~assure ~~and~~you ~~prospects~~that ~~may~~such bemarketing ~~materially~~approval ~~and~~will ~~adversely~~be ~~affected~~obtained asin a ~~result~~timely manner, or at all.

For example, we currently rely on a sole supplier for treprostinil, the active pharmaceutical ingredient of LIQ861, which sources treprostinil from a manufacturer in South Korea. If our supplier is unable to supply treprostinil to us in the quantities we require, or at all, or otherwise default on its supply obligations to us, or if it ceases its relationship with us, we may not be able to obtain alternative supplies of treprostinil from other suppliers on acceptable terms, in a timely manner, or at all. Furthermore, LIQ861 is administered using the RS00 Model 8 DPI, or dry powder inhaler, which is manufactured by Plastiape S.p.A., or Plastiape, which is located in Italy. We also rely on a sole supplier for encapsulation and packaging services. We purchase treprostinil, our DPI supply and encapsulation and packaging services pursuant to purchase orders and do not have long-term contracts with these suppliers. In the event of any prolonged disruption to our supply of treprostinil, the manufacture and supply of RS00 Model 8 DPI or encapsulation and packaging services, our ability to develop and commercialize, and the timeline for commercialization of, LIQ861 may be adversely affected. 58

~~Additionally,~~The inFDA ~~December~~may ~~2019,~~require aus ~~novel~~to ~~strain~~perform ofadditional ~~COVID-19,~~clinical ortrials ~~coronavirus,~~to ~~was~~support ~~reported~~any tochange ~~have~~from ~~surfaced~~the inreference ~~Wuhan~~listed drug, ~~China~~which ~~and~~could ~~has~~be ~~become~~time-consuming aand ~~global~~substantially ~~pandemic~~delay asour ofreceipt ~~the date~~ of ~~this~~marketing ~~Quarterly Report on Form 10-Q~~approval. ~~The~~Also, ~~full~~as ~~impact~~has ofbeen the ~~coronavirus~~experience isof ~~unknown~~others ~~and~~in ~~rapidly~~our ~~evolving. Both South Korea~~industry, ~~the country from which~~ our ~~supplier~~competitors ~~sources~~may ~~treprostinil,~~file ~~and~~citizens’ ~~Italy,~~petitions with the ~~country~~FDA into ~~which~~contest ~~Plastiape~~approval isof ~~headquartered~~our NDA, ~~have~~which ~~had~~may ~~significant~~delay ~~outbreaks~~or ofeven ~~this~~prevent ~~disease, which, in~~ the ~~case~~FDA offrom ~~Italy,~~approving ~~led~~any toNDA athat ~~lockdown~~we ofsubmit under the ~~entire~~505(b)(2) ~~country~~regulatory pathway. ~~The~~If ~~extent~~an toFDA ~~which~~decision ~~the~~or ~~coronavirus~~action ~~impacts~~relative ~~our ability~~ to ~~procure~~our ~~sufficient~~product ~~supplies~~candidate, ~~for~~or the ~~development~~FDA’s ~~and~~interpretation ~~commercialization~~ of ~~our~~Section ~~products~~505(b)(2) ~~and~~more ~~product~~generally, ~~candidates~~is ~~(or~~successfully ~~for pre-approval inspections~~challenged, ifit ~~required~~could result in ~~order~~delays ~~for~~or even prevent the FDA tofrom ~~obtain~~approving ~~sufficient~~a ~~assurance~~505(b)(2) orapplication ~~verification~~for ofour ~~compliance~~product ~~with~~candidates. ~~good~~Even ~~manufacturing~~if ~~practice~~we ~~regulations)~~are ~~will~~able ~~depend~~to onutilize the ~~severity~~505(b)(2) regulatory pathway, ~~location~~a ~~and~~drug ~~duration~~approved ofvia ~~the~~this ~~spread~~pathway ofmay ~~the~~be ~~coronavirus,~~subject ~~and~~to the ~~actions~~same ~~undertaken~~post-approval tolimitations, ~~contain~~conditions ~~the~~and ~~coronavirus~~requirements oras ~~treat~~any ~~its~~other ~~effects~~drug.

56 In addition, we may face Hatch-Waxman litigation in relation to our NDAs submitted under the 505(b)(2) regulatory pathway, which may further delay or prevent the approval of our product candidates. The pharmaceutical industry is highly competitive, and 505(b)(2) NDAs are subject to special requirements designed to protect the patent rights of sponsors of previously approved drugs that are referenced in a 505(b)(2) NDA. If the previously approved drugs referenced in an applicant’s 505(b)(2) NDA are protected by patent(s) listed in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations publication, or the Orange Book, the 505(b)(2) applicant is required to make a claim after filing their its NDA that each such patent is invalid, unenforceable or will not be infringed. The patent holder may thereafter bring suit for patent infringement, which will trigger a mandatory 30-month delay (or the shorter of dismissal of the lawsuit or expiration of the patent(s)) in approval of the 505(b)(2) NDA application. For example, the LIQ861 NDA was filed under the 505(b)(2) regulatory pathway with Tyvaso® as the reference listed drug. Under the Hatch-Waxman Act, as a result of the Hatch-Waxman Litigation commenced by United Therapeutics on June 4, 2020, the FDA is automatically precluded from approving the LIQ861 NDA for up to 30 months, absent an earlier judgment unfavorable to United Therapeutics by the court. It is not uncommon for a manufacturer of an approved product, such as United Therapeutics, to file a citizen petition with the FDA seeking to delay approval of, or impose additional approval requirements for, pending competing products. If successful, such petitions can significantly delay, or even prevent, the approval of the new product. However, even if the FDA ultimately denies such a petition, the FDA may substantially delay approval while it considers and responds to the petition.

WeIf ~~rely~~the onFDA ~~third~~determines ~~parties~~that our product candidates, including LIQ861, do not qualify for the 505(b)(2) regulatory pathway, we would need to ~~conduct~~reconsider our ~~preclinical~~plans ~~studies~~and might not be able to commercialize our product candidates in a cost-efficient manner, or at all. If we were to pursue approval under the 505(b)(1) NDA pathway, we would be subject to more extensive requirements and risks such as conducting additional clinical trials, providing additional data and information or meeting additional standards for marketing approval. As a result, the time and financial resources required to obtain marketing approval

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