Document


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
___________________________________
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2018
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:  001-35405
___________________________________
MELINTA THERAPEUTICS, INC.
(Exact name of registrant specified in its charter)
Delaware
2834
45-4440364
f(State or Other Jurisdiction of
Incorporation or Organization)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer
Identification No.)
44 Whippany Road
Morristown, NJ 07963
(Address of Principal Executive Offices)
(908) 617-1309
(Telephone Number, Including Area Code)
Securities Registered Pursuant to Section 12(b) of the Exchange Act:
Title of Each Class
 
Name of Exchange on which Registered
 
Common Stock, $0.001 Par Value
Nasdaq Global Market
Securities Registered Pursuant to Section 12(g) of the Act: None
___________________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes ☐    No  ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.    Yes ☐    No  ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes ☒    No  ☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
Accelerated filer
Non-accelerated filer
☐  (Do not check if a smaller reporting company)
Smaller reporting company

 
 
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided 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 Exchange Act).    Yes ☐    No  ☒
The aggregate market value of the voting stock held by non-affiliates of the registrant, as of June 30, 2018, was approximately $180.3 million. Such aggregate market value was computed by reference to the closing price of the common stock as reported on the Nasdaq Global Market on June 30, 2018. For purposes of making this calculation only, the registrant has defined affiliates as including only directors and executive officers and shareholders holding greater than 10% of the voting stock of the registrant as of June 30, 2018.
As of February 28, 2019, there were 11,229,897 shares of the registrant’s common stock, $0.001 par value, outstanding.
________________________
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the registrant’s definitive Proxy Statement for its 2018 Annual Meeting of Shareholders are incorporated herein by reference, as indicated in Part III.
 





MELINTA THERAPEUTICS, INC.
TABLE OF CONTENTS
 
 
 
Page
 
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
 
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
 
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
 
Item 15.
 

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As used in this Annual Report on Form 10-K, the terms “Melinta,” “Company,” “we,” “our” or “us” may, depending on the context, refer to Melinta Therapeutics, Inc., to one or more of its consolidated subsidiary companies, or to all of them taken as a whole.
Various statements contained in this Annual Report on Form 10-K (this “annual report” or “report”) that express a belief, expectation, or intention, or that are not statements of historical fact, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, or the Exchange Act and the Private Securities Litigation Reform Act of 1995.
Forward-looking statements may include statements about our:
 
business strategy;
pending or future acquisitions and future capital expenditures;
ability to obtain permits and governmental approvals;
timing of product introductions, sales and marketing plans, and commercialization activities;
financial plans or ability to raise additional debt or equity;
future operating results; and
plans, objectives, expectations and intentions.
All of these types of statements, other than statements of historical fact included in this annual report, are forward-looking statements. These forward-looking statements may be found in the “Business,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and other sections of this annual report. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “could,” “should,” “would,” “expect,” “plan,” “project,” “budget,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “pursue,” “target,” “seek,” “objective,” “continue,” “will be,” “will benefit,” or “will continue,” the negative of such terms or other comparable terminology.
The forward-looking statements contained in this Annual Report on Form 10-K are largely based on our expectations, which reflect estimates and assumptions made by our management. These estimates and assumptions reflect our best judgment based on currently known market conditions and other factors, which are difficult to predict and many of which are beyond our control. Although we believe such estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties that are beyond our control. In addition, our management’s assumptions about future events may prove to be inaccurate. Our management cautions all readers that the forward-looking statements contained in this annual report are not guarantees of future performance, and we cannot assure any reader that such statements will be realized or the forward-looking events and circumstances will occur. Actual results may differ materially from those anticipated or implied in the forward-looking statements due to the many factors including those described in Item 1A. “Risk Factors” and Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this annual report. All forward-looking statements speak only as of the date of this annual report. We do not intend to publicly update or revise any forward-looking statements as a result of new information, future events or otherwise. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.


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PART I
Item 1. Business
Summary
We are a commercial-stage pharmaceutical company focused on developing and commercializing differentiated anti-infectives for the hospital and select non-hospital, or community, settings that address the need for effective treatments for infections due to resistant gram-negative and gram-positive bacteria. We currently market four antibiotics to treat a variety of infections caused by these resistant bacteria.
Melinta was formed as a private company in October 2000, and operated using funds from licensing and collaboration agreements, private equity placements and debt until 2017. We received approval for our first drug, Baxdela® (delafloxacin), in June 2017. On November 3, 2017, we completed a reverse merger with Cempra, Inc., the result of which the registrant Cempra, Inc. was re-named Melinta Therapeutics, Inc. and we became a publicly-traded company. On January 5, 2018, we acquired the Infectious Disease Businesses (“IDB”) from The Medicines Company (“Medicines”), including the capital stock of certain subsidiaries of Medicines and certain assets related to its infectious disease business (the “IDB Transaction”), including the pharmaceutical products containing (i) meropenem and vaborbactam as the active pharmaceutical ingredient and distributed under the brand name Vabomere® (“Vabomere”), (ii) oritavancin as the active pharmaceutical ingredient and distributed under the brand name Orbactiv® (“Orbactiv”), and (iii) minocycline as the active pharmaceutical ingredient and distributed under the brand name Minocin® for injection and line extensions of such products (the “MDCO Products” and together with Baxdela, the "Products" or the “Product Portfolio”). See “Corporate History and information” below for further information.
We operate and manage our business as one operating segment and all of our operations are in North America. See Note 2 to the Consolidated Financial Statements for further information.
Market Opportunity
The relentless evolution of bacterial antibiotic resistance, coupled with the dearth of effective new antibiotics, has created an urgent public health threat. The integration of the acquired MDCO Products within our existing portfolio further strengthens our ability to serve the needs of providers treating patients with serious bacterial infections across the healthcare delivery continuum. We believe our combined Product Portfolio, resources and people has created a standalone entity with the ability to help address the significant need for antibiotics to treat serious infections across multiple healthcare channels, while exercising a firm commitment to antibiotic stewardship.
The combined Product Portfolio supports our multi-channel strategy of delivering antibiotics for serious gram-positive and gram-negative infections due to resistant bacteria within the hospital, emergency department, and community settings. We believe that each product has distinct value in the antibiotic marketplace, and that we are uniquely positioned to deliver this value.
Combined Antibiotic Portfolio
Melinta has a pipeline of commercial and clinical antibiotic assets across multiple approved and potential indications, and has a platform for long-term, durable growth and a strategy to expand the anti-infective portfolio over time, providing the opportunity for multiple layers of revenue growth.

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Baxdela
Baxdela is a monotherapy treatment of adult patients with acute bacterial skin or skin structure infections (“ABSSSI”) which is available in oral and intravenous (“IV”) formulations. Baxdela is a novel fluoroquinolone that exhibits activity against both gram-positive and gram-negative pathogens, is unique among quinolones in that it is effective against methicillin-resistant staphylococcus aureaus (“MRSA”), and is available to initiate therapy on either the IV or oral formulation. In clinical trials, Baxdela demonstrated a differentiated safety and tolerability profile as compared to vancomycin plus aztreonam. On June 19, 2017, the Food and Drug Administration (“FDA”) approved the use of Baxdela as a treatment of adult patients with ABSSSI. The commercial launch of Baxdela for the adult patient treatment of ABSSSI occurred in the first quarter of 2018.
The FDA also confirmed Baxdela’s status as a Qualified Infectious Disease Product (“QIDP”) under the provisions of the 2012 Generating Antibiotics Incentives Now Act (the “GAIN Act”), and extended by five years the five-year exclusivity granted to Baxdela as a new chemical entity (“NCE”), for a total of ten years in the United States. Consequently, and because we believe Baxdela has utility across many different infection types, we conducted a Phase 3 clinical trial for the treatment of patients with community acquired bacterial pneumonia (“CABP”). We believe Baxdela has the potential to address a variety of bacterial infections in the United States. In addition, we have partnered with leading multinational pharmaceutical firms for distribution of Baxdela in markets outside the United States, including with Menarini IFR SrL ("Menarini") for Europe and Asia-Pacific (excluding Japan) and with Eurofarma Laboratórios S.A. for Central and South America. We may obtain additional funds through the achievement of regulatory, commercial and sales-based milestones, as well as royalties on sales of Baxdela outside the United States.
In October 2018, we announced positive top-line results from the Phase III trial of Baxdela for the treatment of CABP. Baxdela was compared to moxifloxacin in this randomized global trial. Baxdela met all key primary and secondary endpoints in the trial, including the study’s primary FDA endpoint showing Early Clinical Response (ECR) with improvement at 96 hours (± 24 hours) after the first dose in at least two of the following symptoms: chest pain, frequency or severity of cough, amount of productive sputum, and difficulty breathing. In the intent-to-treat population (ITT), IV-to-oral Baxdela met the FDA primary endpoint of statistical non-inferiority (12.5% non-inferiority margin) for the Early Clinical Response at 96 hours (± 24 hours) after initiation of therapy (88.9% ECR in Baxdela patients) compared to IV/oral moxifloxacin (89.0%). The 95% confidence interval for the treatment difference had lower and upper bounds of -4.4% and 4.1%, respectively. Baxdela also met the FDA secondary endpoint of statistical non-inferiority (90.5%) compared to moxifloxacin (89.7%) based on the investigator’s assessment of Success at the Test of Cure visit (5-10 days after last dose) in the ITT population. Lower and upper bounds of the 95% confidence interval for the treatment difference were -3.3% and 4.8%, respectively. Data also showed that IV/oral Baxdela successfully eradicated key respiratory pathogens at rates comparable to moxifloxacin. Both intravenous (IV) and oral Baxdela were well tolerated in the study participants. Overall adverse event rates were similar between treatment arms. The most common treatment-emergent adverse events on Baxdela (≥ 2%) were diarrhea and transaminase increases, which were generally mild and did not lead routinely to treatment discontinuation. We anticipate filing a supplemental New

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Drug Approval ("sNDA") with the FDA in the second quarter of 2019 and are developing our commercial plan to address this additional indication.
Vabomere
Vabomere is an IV antibiotic that is a combination of meropenem, the leading carbapenem used in treatment of gram-negative infections, and vaborbactam, a novel beta-lactamase inhibitor that inhibits certain types of resistance mechanisms used by bacteria. Vabomere received FDA approval on August 29, 2017, for the treatment of patients 18 years of age and older with complicated urinary tract infections (“cUTI”), including pyelonephritis, caused by designated susceptible Enterobacteriaceae, and became commercially available in the fourth quarter of 2017. Vabomere was specifically developed to address gram-negative bacteria that produce beta-lactamase enzymes, particularly the Klebsiella pneumoniae carbapenemase (“KPC”) enzyme. KPC-producing bacteria are responsible for a large majority of carbapenem-resistant Enterobacteriaceae in the United States and are classified by the U.S. Centers for Disease Control (“CDC”) to be an urgent antimicrobial resistance threat. With its approval, the FDA also confirmed that Vabomere is eligible for the five-year GAIN Act extension of exclusivity under the provisions of the GAIN Act, though the question of whether Vabomere would be eligible for a five-year NCE exclusivity or three-year exclusivity was referred to the Exclusivity Board of the Center for Drug Evaluation and Research (“CDER”). And, in August 2018, we announced that the Centers for Medicare & Medicaid Services (CMS) granted a new technology add-on payment (NTAP) for Vabomere when administered in the hospital inpatient setting. The NTAP program provides hospitals with a payment, in addition to the standard-of-care Diagnostic Related Group (DRG) reimbursement, of up to 50% of the cost of Vabomere for a period of two to three years, effective in the 2019 fiscal year starting on October 1, 2018. CMS has assigned a maximum payment of $5,544.00 for a Medicare patient treated with Vabomere. Over 80% of Vabomere’s current and projected utilization among all patients is in the hospital inpatient setting.
On November 20, 2018, the European Commission (EC) approved Vabomere for use in adult patients with complicated intra-abdominal (cIAI) and urinary tract infections (cUTI), hospital-acquired pneumonia including ventilator associated pneumonia (HAP/VAP), bacteraemia that occurs in association with any of these infections, and infections due to aerobic gram-negative organisms where treatment options are limited. Marketing authorization was granted in all 28 European Union (EU) member states, as well as Norway, Iceland and Liechtenstein. We have partnered with Menarini to commercialize Vabomere in Europe and Asia-Pacific (excluding Japan).
We have continued the launch of Vabomere with a sales force that interacts primarily with infectious disease and critical care physicians, microbiologists, and hospital and infectious disease clinical pharmacists. We are leveraging our presence in the hospital setting to promote Vabomere, as well as our other products.
We believe Melinta is capable of distinguishing Vabomere’s economic value proposition through a pricing strategy that is in line with currently branded therapies used in the treatment of such serious gram-negative infections and designed to facilitate access within the hospital.
Orbactiv
Orbactiv is a long-acting IV antibiotic of the lipoglycopeptide class that allows for single infusion for the treatment of adult patients with ABSSSI caused or suspected to be caused by susceptible gram-positive bacteria, with no dose adjustment for mild/moderate renal or hepatic impairment or for age, weight, gender, or race. It provides an alternative solution to hospital admission or multiple days of therapy in the outpatient setting. In contrast to the current standard of care (6 to 10 days of IV therapy), single-dose ABSSSI therapy with Orbactiv alternative increases patient convenience, ensures patient adherence with a single dose, and allows for treatment in alternative, lower cost care settings. We are leveraging our hospital and community-based sales force infrastructure to maximize Orbactiv’s potential.
Minocin for injection
Minocin for injection is an IV antibiotic of the tetracycline class with broad-spectrum activity against gram-positive and gram-negative pathogens. A new formulation was launched in 2015, which improved tolerability and convenience in administration, owing to a smaller required infusion volume. Minocin for injection is one of the few agents approved for treatment of Acinetobacter spp. Acinetobacter infections are generally seen in the intensive care unit (“ICU”), particularly in mechanically ventilated and immunocompromised patients. We are leveraging our hospital-based sales force infrastructure to maximize Minocin for injection’s potential.
Key Business Strategies
We are focused on the commercialization of antibiotics that enable patients with serious, life-threatening bacterial infections to be successfully treated. We plan to carefully evaluate our capital allocation strategy to maximize shareholder value around the recent launches of Baxdela and Vabomere, and the marketing of Orbactiv and Minocin for injection. The critical components of our business strategy are:


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1.
Commercial Product Sales Growth
a.
Commercialize Baxdela in the United States. We launched Baxdela oral and IV in the first quarter of 2018 for the treatment of ABSSSI and continue our commercialization of the product with an efficient, targeted sales force consisting of approximately 60 sales territories, prioritizing high-value retail and hospital accounts. In addition, sales representatives target other market channels, such as the emergency department and select community settings, in an attempt to realize the full market potential of Baxdela. We are also pursuing an additional indication, CABP, for which we expect to file an sNDA in the first half of 2019.
b.
Commercialize Vabomere for cUTI in the United States. We market Vabomere in the United States with our combined sales force consisting of approximately 70 sales representatives, prioritizing high-value hospital accounts, focusing on infectious disease and critical care physicians and pharmacists.
c.
Optimize commercialization of Orbactiv and Minocin for injection within the United States. Sales representatives target emergency department and community market channels to realize the full market potential of Orbactiv in the treatment of ABSSSI. In addition, we are leveraging our sales force presence within the hospital to appropriately position Minocin for injection for the treatment of serious infections due to Acinetobacter.
2.
Stewardship of financial resources. We are focused on using the existing sources of cash for the Company, including cash on hand, revenue from product sales and licensing arrangements, and capital available under existing and permitted financing facilities, to achieve future profitability. In order to succeed with this strategy, we must successfully execute sales strategies and reduce operating spend from historical levels. We have an experienced management team and sales force to lead the Company's product sales effort. In addition, we have taken steps to reduce operating expenses, including (a) narrowing the scope of future research and development activities, which involved the natural reduction in costs for large clinical studies that are nearing completion and winding down our early-stage research programs, (b) rationalizing costs in the selling, general and administrative areas, many due to the integration of the legacy Cempra, IDB and Melinta businesses post-merger and acquisition, and (c) negotiation with various third-parties to reduce and/or extend payment for certain large commitments.

3.
Optimize partnerships to maximize the value of the Product Portfolio. We have a number of partnerships, including established partnerships for our Product Portfolio in Europe and Asia-Pacific (excluding Japan) with Menarini, and for Baxdela in Central and South America with Eurofarma Laboratórios S.A. We have a development partnership with a contract research organization (“CRO”) for our pipeline asset, radezolid, which is focused on the topical dermatology space. We plan to evaluate the potential of existing and new business development opportunities to further generate non-dilutive capital and enhance shareholder value.

These partnerships have already seen positive momentum. On November 20, 2018, the European Commission granted marketing authorization for Vabomere for use in adult patients with complicated intra-abdominal (cIAI) and urinary tract infections (cUTI), hospital-acquired pneumonia including ventilator associated pneumonia (HAP/VAP), bacteraemia that occurs in association with any of these infections, and infections due to aerobic gram-negative organisms where treatment options are limited. In South America, Eurofarma has received approval to market Baxdela in Argentina and is preparing applications to several other countries.
4.
Leverage the enterprise’s commercial organization to promote complementary internally or externally developed products upon achievement of FDA regulatory approval. With an experienced team and commercial infrastructure in place, we believe we are well positioned to add either internally or externally developed products to our portfolio while adding minimal new costs. We may selectively pursue the addition of externally developed products to our existing marketed products and pipeline, leveraging our commercial infrastructure.
Competition
Our industry is highly competitive and subject to rapid and significant technological change. Our potential competitors include large pharmaceutical and biotechnology companies, as well as specialty pharmaceutical and generic drug companies.
In many cases, however, we believe that competition often will be determined by antibiotic class and any limitations of that antibiotic class in general, and the antibiotic specifically, in treating a particular disease or population.  We believe that the key competitive factors that will affect the development and commercial success of product candidates that we develop or acquire are efficacy, safety and tolerability profile, convenience in dosing, price and reimbursement.
Intellectual Property
Due to the length of time and expense associated with bringing new products to market, biopharmaceutical companies have traditionally placed considerable importance on obtaining and maintaining patent protection for significant new

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technologies, products and processes. The term of individual patents depends upon the legal term of the patents in the countries in which they are obtained. In most countries in which we file, the patent term is 20 years from the earliest date of filing a non-provisional patent application. In the United States, a patent’s term may be lengthened by Patent Term Adjustment, which compensates a patentee for administrative delays by the U.S. Patent and Trademark Office, or USPTO, in granting a patent, or may be shortened if a patent is terminally disclaimed over another patent. In the United States, and certain other countries, the patent’s term may also be lengthened by patent term extension or restoration, which compensates a patentee for administrative delays in granting a regulatory approval by the FDA, or similar agency in other countries.
While we pursue patent protection and enforcement of all our products and product candidates, and aspects of our technologies when appropriate, we also rely on trade secrets, know-how and continuing technological advancement to develop and maintain our competitive position. To protect this competitive position, we regularly enter into confidentiality and proprietary information agreements with third parties, including employees, independent contractors and consultants, suppliers and collaborators. Our employment policy requires each new employee to enter into an agreement containing provisions generally prohibiting the disclosure of confidential information to anyone outside of our company and providing that any invention conceived by an employee within the scope of his or her employment duties is our exclusive property. We have a similar policy with respect to independent contractors and consultants, generally requiring independent contractors to enter into agreements containing provisions generally prohibiting the disclosure of confidential information to anyone outside of our company and providing that any invention conceived by an independent contractor or consultant within the scope of his or her services is our exclusive property with the exception of contracts with universities and colleges that may be unable to make such assignments. Furthermore, our know-how that is accessed by third parties through collaborations and research and development contracts and through our relationships with scientific consultants is generally protected through confidentiality agreements with the appropriate parties.
Baxdela
We have a license, both exclusive and nonexclusive, from Wakunaga Pharmaceutical Company, Ltd. to certain patents and patent applications, and to certain patents and patent applications of AbbVie. We have also licensed technology from CyDex Pharmaceuticals, Inc. (now a wholly owned subsidiary of Ligand Pharmaceuticals Incorporated) for the use of Captisol, a sulfobutylether beta-cyclodextrin excipient, in connection with the manufacture of Baxdela vials. We have developed and patented additional technology independently.  The patent portfolio for Baxdela and delafloxacin meglumine, the active pharmaceutical ingredient in Baxdela, is related to compositions of matter, pharmaceutical compositions, manufacturing methods and methods of use. In addition to the licensed and owned issued U.S. patents, the portfolio includes pending U.S. patent applications and corresponding foreign national or regional counterpart patents or applications. We expect that the patents and the patent applications in the portfolio, if issued, will expire between 2025 and 2034.
Vabomere
As a result of our acquisition of IDB, we acquired a portfolio of patents and patent applications relating to Vabomere, including the vaborbactam compound, Vabomere composition, and methods of use. We are currently prosecuting related patent applications relating to Vabomere’s pharmaceutical composition and its use in the United States and in certain foreign countries.  In addition, patent applications are pending for synthesis intermediates, manufacturing flow processes and additional methods of use, which, if issued, would expire between 2035 and 2038.
Orbactiv
As a result of our acquisition of IDB, we obtained an exclusive license from Eli Lilly to patents relating to Orbactiv, its uses, formulations and methods of manufacture. The earliest-filed patent for Orbactiv that we acquired, which relates to the active pharmaceutical ingredient in Orbactiv, will expire in the United States in November 2020. The Medicines Company also developed and patented additional technology.  We acquired from Medicines U.S. patents relating to methods of treatment expiring in 2029 and 2030, as well as a patent co-owned with AbbVie relating to high purity oritavancin that expires in 2035. Numerous foreign counterparts have been filed, including in Europe and Eurasia, for these more recent methods of treatment and compositions. We are also prosecuting a number of patent applications relating compositions, including oritavancin and a cyclodextrin, and their uses in the United States and certain foreign jurisdictions, which, if issued, would expire in 2037.
Minocin for injection
As a result of our acquisition of IDB, we acquired a patent portfolio relating to certain minocycline formulations and certain methods of administering minocycline. We have patents relating to the Minocin for injection intravenous composition and certain methods of administering minocycline, each of which is set to expire in May 2031. We are also prosecuting other patent applications relating to minocycline formulations and methods of treatment in the United States and in certain foreign countries.
Collaborations and Commercial Agreements

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See Notes 5 and 10 to the Consolidated Financial Statements for information on certain of our collaboration and commercial agreements.
Manufacturing
We do not own or operate manufacturing facilities for the production of any of the products in our product portfolio nor do we have plans to develop our own manufacturing operations in the foreseeable future. We currently depend on third-party contract manufacturers for all of our required raw materials, active pharmaceutical ingredients ("API") and finished products, and we employ internal resources and third-party consultants to manage our manufacturing contractors.
We do not have material long-term contracts for the commercial supply of the Products, except for certain contracts for the production of ingredients of vaborbactum.
Government Regulation and Product Approval
Government authorities in the United States—at the federal, state and local level—and other countries extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging, storage, record keeping, promotion, advertising, distribution, and export and import of products such as those we are marketing or developing. All of our approved products are subject to extensive regulation, and our antibiotic product candidates that we develop must be approved by the FDA through the NDA process before they may be legally marketed in the United States.
Securing approval to market a new pharmaceutical product in the United States requires substantial effort and financial resources and takes several years to complete. The applicant must complete preclinical tests and submit protocols to the FDA before commencing clinical trials. Clinical trials are conducted to establish the safety and efficacy of the pharmaceutical product and typically are conducted in sequential phases, although the phases may overlap or be combined. If the required clinical testing is successful, the results are submitted to the FDA in the form of an NDA requesting approval to market the product for one or more indications. The FDA reviews an NDA to determine whether a product is safe and effective for its intended use and whether its manufacturing is compliant with current Good Manufacturing Practices (“cGMP”).
Even if an NDA receives approval, the applicant must comply with post-approval requirements. For example, holders of an approval must report adverse reactions, provide updated safety and efficacy information and comply with requirements concerning advertising and promotional materials and activities. Also, quality control and manufacturing procedures must continue to conform to cGMP after approval, and certain changes to the manufacturing procedures and finished product must be included in the NDA, and approved by the FDA. The FDA periodically inspects manufacturing facilities to assess compliance with cGMP, which imposes extensive procedural and record keeping requirements. In addition, as a condition of approval, the FDA may require post-marketing testing and surveillance to further assess and monitor the product's safety or efficacy after commercialization, which may require additional clinical trials or patient registries, or additional work on chemistry, manufacturing and controls. Any post-approval regulatory obligations, and the cost of complying with such obligations, could expand in the future.
The manufacture, sale, promotion and distribution of our products are subject to comprehensive government regulation. Government regulation by various national, regional, federal, state and local agencies, both in the United States and other countries, addresses (among other matters) inspection of, and controls over, research and laboratory procedures, clinical investigations, product approvals and manufacturing, labeling, packaging, marketing and promotion, pricing and reimbursement, sampling, distribution, quality control, post-marketing surveillance, record keeping, storage and disposal practices. In addition, we are subject to laws and regulations pertaining to health care fraud and abuse, including state and federal anti-kickback and false claims laws in the United States. We are also subject to taxes, as well as application, product, user, establishment and other fees.
Compliance with these laws and regulations is costly and materially affects our business. Among other effects, health care regulations substantially increase the time, difficulty and costs incurred in obtaining and maintaining approval to market newly developed and existing products. We expect compliance with these regulations to continue to require significant technical expertise and capital investment to ensure compliance. Failure to comply can delay the release of a new product or result in regulatory and enforcement actions, the seizure or recall of a product, the suspension or revocation of the authority necessary for a product's production and sale and other civil or criminal sanctions, including fines and penalties.
In addition to regulatory initiatives, our business can be affected by ongoing studies of the utilization, safety, efficacy and outcomes of health care products and their components that are regularly conducted by industry participants, government agencies and others. These studies can call into question the utilization, safety and efficacy of previously marketed products. These studies may result in the discontinuance of, or limitations on, marketing of such products domestically or worldwide, and may give rise to claims for damages from persons who believe they have been injured as a result of their use.
Access to human health care products continues to be a subject of investigation and action by governmental agencies, legislative bodies and private organizations in the United States and other countries. A major focus is cost containment. Efforts

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to reduce health care costs are also being made in the private sector, notably by health care payors and providers, which have instituted various cost reduction and containment measures. We expect insurers and providers to continue attempts to reduce the cost of health care products. Budgetary pressures in the United States—and in other countries—may also heighten the scope and severity of pricing pressures on our products for the foreseeable future.
Specifically, U.S. federal laws require pharmaceutical manufacturers to pay certain statutorily-prescribed rebates to state Medicaid programs on prescription drugs reimbursed under state Medicaid plans, and the efforts by states to seek additional rebates affect our business. Similarly, the Veterans Health Care Act of 1992, as a prerequisite to participation in Medicaid and other federal health care programs, requires that manufacturers extend additional discounts on pharmaceutical products to various federal agencies, including the United States Department of Veterans Affairs, Department of Defense and Public Health Service entities and institutions. In addition, recent legislative changes would require similarly discounted prices to be offered to TRICARE program beneficiaries. The Veterans Health Care Act of 1992 also established the 340B drug discount program, which requires pharmaceutical manufacturers to provide products at reduced prices to various designated health care entities and facilities.
Most states also have generic substitution legislation requiring or permitting a dispensing pharmacist to substitute a different manufacturer's generic version of a pharmaceutical product for the one prescribed. In addition, the federal government follows a diagnosis-related group (“DRG”) payment system for certain institutional services provided under Medicare or Medicaid and has implemented a prospective payment system (“PPS”) for services delivered in hospital outpatient, nursing home and home health settings. DRG and PPS entitle a health care facility to a fixed reimbursement based on the diagnosis and/or procedure rather than actual costs incurred in patient treatment, thereby increasing the incentive for the facility to limit or control expenditures for many health care products. Medicare reimburses Part B drugs based on average sales price plus a certain percentage to account for physician administration costs, which have been reduced in the hospital outpatient setting. Medicare enters into contracts with private plans to negotiate prices for most patient-administered medicine delivered under Part D.
Under the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act (together, the “Affordable Care Act”), we pay a fee related to its pharmaceuticals sales to government programs. The Affordable Care Act also includes provisions known as the Physician Payments Sunshine Act, which require manufacturers of drugs and biologics covered under Medicare and Medicaid to record any transfers of value to physicians and teaching hospitals and to report this data to the Centers for Medicare and Medicaid Services for subsequent public disclosure. Similar reporting requirements have also been enacted on the state level in the United States. Failure to report appropriate data may result in civil or criminal fines and/or penalties.
Antibiotic Exclusivity
Under the GAIN Act, upon NDA approval, a drug product designated by FDA as a QIDP receives a five-year extension of any five-year NCE exclusivity, three-year exclusivity, or seven-year orphan drug exclusivity.  This exclusivity applies only with respect to drugs that are first approved on or after July 9, 2012.  An efficacy supplement to an approved NDA is not eligible for the five-year exclusivity extension if the application that is being supplemented has previously received the five-year GAIN exclusivity extension.  A QIDP is defined as an antibacterial or antifungal drug for human use intended to treat serious or life-threatening infections, including those caused by (1) an antibacterial or antifungal resistant pathogen, including novel or emerging infectious pathogens, or (2) qualifying pathogens, which are defined as those that have the potential to pose a serious threat to public health and that are included in a list established and maintained by FDA.
A drug sponsor may request that the FDA designate its product as a QIDP at any time prior to NDA submission. The FDA must make a QIDP determination within 60 days of receiving the designation request.  The first NDA for a specific drug product and indication for which QIDP designation was granted will automatically be granted priority review.  A subsequent application from the same sponsor for the same product and indication will receive priority review designation only if it otherwise meets the criteria for priority review.
Foreign Regulation
In addition to regulations in the United States, we are subject to a variety of foreign regulations governing clinical trials and commercial sales, manufacturing and distribution of our products to the extent we choose to sell any products outside of the United States. The approval process varies from country to country, and the time may be longer or shorter than that required to obtain FDA approval. The requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement also vary greatly from country to country. Our primary strategy is to find partners that operate in foreign countries and collaborate with them to seek approval for, and market, our products, generating royalty and licensing revenue.
Pharmaceutical Coverage, Pricing and Reimbursement
Significant uncertainty exists as to the coverage and reimbursement status of any drug products for which we obtain regulatory approval. In the United States and markets in other countries, sales of any products for which we receive regulatory

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approval for commercial sale will depend considerably on the availability of reimbursement from third-party payors. Third-party payors include government health administrative authorities, managed care providers, private health insurers and other organizations. The process for determining whether a payor will provide coverage for a drug product may be separate from the process for setting the price or reimbursement rate that the payor will pay for the drug product. Third-party payors may limit coverage to specific drug products on an approved list, or formulary, which might not include all of the FDA-approved drugs for a particular indication. Third-party payors are increasingly challenging the price and examining the medical necessity and cost-effectiveness of medical products and services, in addition to their safety and efficacy. We may need to conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of our products, in addition to the costs required to obtain FDA approvals. Our products may not be considered medically necessary or cost-effective. A payor’s decision to provide coverage for a drug product does not imply that an adequate reimbursement rate will be approved. Adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in product development.
In 2003, the U.S. government enacted legislation providing a prescription drug benefit for Medicare recipients, which became effective at the beginning of 2006. Government payment for some of the costs of prescription drugs may increase demand for any products for which we receive marketing approval. However, to obtain payments under this program, we would be required to sell products to Medicare recipients through prescription drug plans operating pursuant to this legislation. These plans will likely negotiate discounted prices for our products. In March 2010, the ACA, as amended, became law, which substantially changed the way healthcare is financed by both governmental and private insurers. We anticipate that this legislation will result in additional downward pressure on prescription drug coverage and may affect our ability to set the prices that we receive for any approved product, either directly if legislation mandates discounts or other reductions, or indirectly if limited coverage results in reduced demand. Federal, state and local governments in the United States continue to consider legislation to limit the growth of health care costs, including the cost of prescription drugs. Future legislation could limit payments for pharmaceuticals such as the drug candidates that we are developing.
Different pricing and reimbursement structures exist in other countries. In the European community, governments influence the price of pharmaceutical products through their pricing and reimbursement rules and control of national health care systems that fund a large part of the cost of those products to consumers. Some jurisdictions operate positive and negative list systems under which products may only be marketed once a reimbursement price has been agreed. To obtain reimbursement or pricing approval, some of these countries may require the completion of clinical trials that compare the cost-effectiveness of our particular drug products to currently available therapies. Other member states allow companies to set their own prices for medicines, but monitor and control company profits. The downward pressure on health care costs in general, particularly prescription drugs, has become very intense. As a result, increasingly high barriers are being erected to the entry of new products. In addition, in some countries, cross-border imports from low-priced markets exert a commercial pressure on pricing within a country.
The marketability of any products for which we receive regulatory approval for commercial sale may suffer if the government and third-party payors fail to provide adequate coverage and reimbursement. In addition, an increasing emphasis on managed care in the United States has increased and we expect will continue to increase the pressure on pharmaceutical pricing. Coverage policies and third-party reimbursement rates may change at any time. Even if favorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.
Corporate History and Information
On November 3, 2017, Cempra, Inc. merged with privately-held Melinta Therapeutics, Inc. in a reverse merger, wherein the former Melinta Therapeutics, Inc. became a subsidiary of Cempra, Inc. and was re-named Melinta Subsidiary Corp. Immediately after the merger, Cempra, Inc. was renamed Melinta Therapeutics, Inc. Our stock is traded on the Nasdaq Global Market under the symbol MLNT.
Cempra, Inc. was originally formed as Cempra Holdings, LLC, a limited liability company under the laws of the State of Delaware, on May 16, 2008. Cempra Holdings, LLC was formed in connection with a reorganization whereby the shareholders of Cempra Pharmaceuticals, Inc., a corporation formed under the laws of the State of Delaware on November 18, 2005, exchanged their shares of Cempra Pharmaceuticals, Inc. stock for shares of Cempra Holdings, LLC, pursuant to a merger of a subsidiary of Cempra Holdings, LLC with and into Cempra Pharmaceuticals, Inc., as a result of which Cempra Pharmaceuticals, Inc. became a wholly owned subsidiary of Cempra Holdings, LLC. On February 2, 2012, Cempra Holdings, LLC converted from a Delaware limited liability company to a Delaware corporation and was renamed Cempra, Inc.
Our primary executive offices are located at 44 Whippany Road, Morristown, NJ 07963, and our telephone number is (908) 617-1309. Our website address is www.melinta.com. The information contained in, or that can be accessed through, our website is not part of this report.
Available Information

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We make available, free of charge through our website, http://www.melinta.com, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports as soon as is reasonably practicable after such material is electronically filed or furnished to the SEC.  Shareholders and other interested parties may also contact us and request these documents through the Investor Relations section of our website.  
Our website also contains corporate governance information including: audit, compensation and nominating and governance committee charters, and our business ethics and conduct policy.
Employees
As of February 28, 2019, we had approximately 290 employees. None of our employees are subject to a collective bargaining agreement. We consider our relationship with our employees to be good.

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Item 1A. Risk Factors
This report contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed in this report. Factors that could cause or contribute to these differences include, but are not limited to, those discussed below and elsewhere in this report and in any documents incorporated in this report by reference.
If any of the following risks, or other risks not presently known to us or that we currently believe to not be significant, develop into actual events, then our business, financial condition, results of operations or prospects could be materially adversely affected. If that happens, the market price of our common stock could decline, and shareholders may lose all or part of their investment.
Risks Related to our Business
We have incurred significant operating losses since inception and anticipate that we will incur continued losses for the foreseeable future.
We are not currently generating revenue from operations that is sufficient to cover our operating expenses and do not anticipate generating revenue sufficient to offset operating costs in the near term. We have incurred losses from operations since our inception and had an accumulated deficit of 719.8 million as of December 31, 2018. These losses have had and will continue to have an adverse effect on shareholders’ equity and working capital.  
Our operations have consumed substantial amounts of cash since inception. If our operations do not produce the cash flow expected, our business, financial condition, cash flows and results of operations could be materially and adversely affected.
Our principal sources of liquidity are cash generated from sales of Baxdela, Vabomere, Orbactiv, and Minocin for injection; reimbursement of certain development costs by licensees of Baxdela, principally associated with our CABP Phase 3 clinical trial; fees and milestones earned under the license agreements we have entered into to distribute our products to companies in markets outside the United States, including our license agreement with Menarini; additional debt capital that may be available under our Deerfield Facility (including $50 million available until January 5, 2020 if we meet certain sales milestones by the end of 2019) and the Vatera Loan Agreement (up to $60 million available before July 10, 2019, after the initial draw of $75 million which occurred in February 2019); and the issuance of debt or equity financings, to the extent available. Our principal liquidity requirements are for working capital; our debt service requirements; operational expenses; commercialization and development activities for products and product candidates; potential non-operational payments related to the IDB acquisition and contractual obligations, including inventory and any royalty and milestone payments that will or may become due; and capital expenditures.
As of December 31, 2018, we had cash and cash equivalents of $81.8 million. For the year ended December 31, 2018, we had a net loss of approximately $157.2 million. Our net cash used in our operating activities was $171.5 million during the year ended December 31, 2018. Our ability to become profitable and/or to generate positive cash from operations depends upon, among other things, our ability to generate revenues from sales of our marketed products and prudently manage our expenses. If we do not generate sufficient product revenues, or prudently manage our expenses, our business, financial condition, cash flows and results of operations could be materially and adversely affected and we may be unable to continue as a going concern.
During 2018, we announced and/or implemented a number of cost savings initiatives designed to streamline our business, deliver profitability and extend our cash runway. These cost-savings initiatives are expected to result in between $50 and $70 million in operating expense savings in 2019, driven primarily by lower R&D and G&A expenses when compared to 2018. In addition, we are continuing to explore and evaluate other opportunities to enhance our liquidity, including further cost reductions, strategic licensing and partnership opportunities, potential capital raising activities and options to modify the terms of certain liabilities. There can be no assurances that these other initiatives will be available on reasonable terms, or at all. If we are not successful with respect to the initiatives described above, or if our future operations fail to meet current sales expectations, our projected future liquidity may be limited, which could materially and adversely affect our business, financial condition, cash flows, results of operations and ability to continue as a going concern.
We may need to obtain additional financing to fund our operations and comply with financial-related covenants under the Deerfield Facility, as amended, and the Vatera Loan Agreement, and our ability to obtain such additional financing is limited by the terms of the Deerfield Facility and the Vatera Loan Agreement.
We have substantial cash needs to support our current operating plan, including supporting the ongoing sale and promotion of Baxdela, Vabomere, Minocin for injection and Orbactiv, as well as the development and commercialization of our

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product candidates and to support sales and marketing activities. Moreover, our fixed expenses such as rent, license payments, interest expense and other contractual commitments are substantial.
Our future cash flows are dependent on key variables such as the level of sales achievement of our four marketed products, our ability to access additional debt capital under the Vatera Loan Agreement and the Deerfield Facility and, potentially, our ability to finance the Company with the issuance of new debt or equity.
Our ability to obtain additional borrowings under the Vatera Loan Agreement (up to $25 million available in a single draw after March 31, 2019, but on or prior to June 30, 2019, and up to $35 million available in a single draw after June 30, 2019, but on or prior to July 10, 2019) is subject to our satisfaction of certain customary funding conditions, such as compliance with the covenants contained in that agreement, including the covenants described below. Our ability to obtain additional borrowings under the Deerfield Facility (including $50 million available until January 5,m 2020, if we meet certain sales milestones by the end of 2019) also is subject to satisfaction of certain customary funding conditions, such as compliance with the covenants contained in that agreement, including the covenants described below. The Deerfield Facility contains certain covenants, including requirements that we (i) deliver audited financial statements for each fiscal year, together with an audit opinion that does not contain a going concern qualification for any fiscal year ending on or after December 31, 2019, (ii) maintain a minimum cash balance of $40 million through March 31, 2020, and $25 million thereafter, and (iii) achieve net revenue from product sales of at least $63.75 million for the year ending December 31, 2019, and $85 million each year thereafter.
Our operating forecasts include assumptions about our projected levels of sales growth, planned operating expenses, and other cash outflows. Revenue projections are inherently uncertain but have a higher degree of uncertainty in an early-stage commercial launch, which we have in Baxdela and Vabomere. In addition, if we are required to pay potential non-operational payments relating to the IDB acquisition, and after giving effect to net cash outflows from our operations, our cash balances may not be sufficient under the minimum cash balance covenants contained in the Deerfield credit agreement and the Vatera credit agreement described above. As a result, we may not be able to borrow additional amounts under our existing credit agreements. In addition, failure to comply with the minimum cash balance covenant would constitute a default under the Deerfield Facility and the Vatera Loan Agreement and, if not cured or waived, would allow our lenders to accelerate the related debt and, in the case of the Deerfield Facility which is secured by substantially all of our assets, would allow the lenders under that agreement to proceed against the collateral granted to them to secure that debt. In particular, recent sales trends, combined with our current projections, are likely to limit our ability to draw the additional $50 million available for borrowing under the Deerfield Facility until at least the second half of 2019 (because such borrowing is subject to our meeting certain net revenue targets by the end of 2019) and if we fail to satisfy the required sales milestones under the Deerfield Facility before January 5, 2020, we will no longer be able to draw the $50 million in additional loans. As such, we may need to raise additional funds to support our ongoing operations and to reduce our risk of default under our credit agreements.
Our future funding requirements will depend on many factors, including, but not limited to:
the costs and timing of establishing sales, marketing, reimbursement capabilities, and the acceptance of our products by the marketplace;  
our ability to forecast demand for our products, thereby enabling our ability to manage working capital effectively;
potential non-operational payments relating to the IDB acquisition;
payments of milestones and royalties to third parties;
the initiation, progress, timing, scope and costs of our clinical trials, including the ability to timely enroll patients in our ongoing, planned and potential future clinical trials;  
the time and cost necessary to obtain regulatory approvals;  
the time and cost necessary to respond to technological and market developments;  
the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights; and  
the terms of any collaborative, license and other commercial relationships that Melinta may establish.  
Moreover, changing circumstances may cause us to consume capital significantly faster than we currently anticipate, and we may need to spend more money than currently expected because of circumstances beyond our control. Securing additional financing, however, will require a substantial amount of time and attention from our management and may divert a disproportionate amount of their attention away from our day-to-day activities, which may adversely affect our management’s ability to conduct our day-to-day operations. In addition, we cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all.
Further, the terms of the Deerfield Facility and the Vatera Loan Agreement limit our ability to obtain additional financing, and the existence of the convertible loans under those agreements, including the ability to convert the convertible loans under the Vatera Loan Agreement into shares of our preferred stock, which have rights on liquidation senior to the rights of our common stockholders, may further impede our ability to obtain additional financing.

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We are subject to certain covenants under the Deerfield Facility and the Vatera Loan Agreement that restrict our ability to incur additional indebtedness, limiting access to additional debt capital to fund our operations. In addition, the Vatera Loan Agreement contains a clear market provision which restricts our ability to sell or otherwise transfer or dispose of, or file a registration statement relating to, any common stock or any securities convertible into common stock, subject to certain exceptions, without the prior written consent of the Required Lenders (as defined in the Vatera Loan Agreement). This provision is effective until 90 days after our final disbursement under the Vatera Loan Agreement, which 90-day period will expire between September 29, 2019, and October 8, 2019, assuming that the final disbursement occurs between July 1, 2019, and July 10, 2019 (unless the facility is terminated prior to such final disbursements, in which case 90 days after such termination). This clear market provision does not restrict or prohibit negotiations or discussions with respect to, or the entering into any agreement for, or the filing of a registration statement with respect to, a merger or consolidation or any other combination of the Company with, or the acquisition of the Company by, another person (including by tender or exchange offer), any sale or other transfer of all or substantially all of the consolidated assets of the Company or any other acquisition or similar transaction.
Accordingly, the ability of the Company to enter into additional forms of financing may be limited and additional funds may not be available when needed on terms that are acceptable, or at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of existing shareholders will be diluted, and the terms may include liquidation or other preferences that adversely affect the rights of existing shareholders.
If we are unable to obtain funding on a timely basis, we may be unable to fund our future operations, including the ongoing sales of our marketed products, as well as the development and commercialization of our product candidates and the support of sales and marketing activities.  As a result, our ability to generate revenues and achieve or sustain profitability may be substantially harmed, and we may be required to significantly curtail some or all of our activities. We also could be required to seek funds through arrangements with collaborative partners or otherwise that may require us to relinquish rights to our product candidates or some of our technologies or otherwise agree to terms unfavorable to us.
We have substantial indebtedness.
As of December 31, 2018, we had total indebtedness of $147.8 million and, on February 22, 2019, we incurred additional indebtedness of $80 million under the Vatera Loan Agreement. Subject to the terms and conditions set forth therein, we have the ability to borrow an additional $60 million of convertible loans. We also have the ability to borrow an additional $50 million of loans under the Deerfield Facility (available before January 5, 2020), provided that certain revenue targets are achieved and other funding conditions are satisfied before the end of 2019. Having a substantial amount of leverage may have important consequences, including:
requiring a substantial portion of cash flow from operations to be dedicated to the payment of principal and interest on indebtedness, thereby reducing our ability to use cash flow from operations to fund operations, capital expenditures, and future business opportunities;
limiting our ability to obtain additional financing for working capital, capital expenditures, product and service development, debt service requirements, acquisitions, and general corporate or other purposes, which is vital to our business;
increasing the risks of adverse consequences resulting from a breach of any indebtedness agreement, including, for example, a failure to make required payments of principal or interest due to failure of our business to perform as expected;
increasing our vulnerability to general economic and industry conditions;
restricting our ability to make strategic acquisitions or requiring non-strategic divestitures;
subjecting our operations to restrictive covenants that may limit operating flexibility; and
placing our operations at a competitive disadvantage compared to competitors that are less highly leveraged.
The Vatera Loan Agreement and the Deerfield Facility contain restrictive covenants that may restrict our current and future operations, particularly our ability to respond to changes or to take certain actions, as well as financial-related covenants.
The Vatera Loan Agreement and Deerfield Facility contain a number of restrictive covenants that impose significant operating and financial restrictions, subject in each case to customary exceptions, on us and may limit our ability to engage in acts that may be in our long term best interest, including restrictions on our ability to: incur additional debt; pay distributions or dividends, redeem subordinated debt, repurchase equity or make other restricted payments; make certain investments; grant or permit certain liens on our assets; enter into certain transactions with affiliates; merge, consolidate or transfer all or substantially all of our assets; and transfer, sell or acquire assets, including capital stock of our subsidiaries. As a result of these restrictions, we may be: limited in how we conduct our business; unable to raise additional debt or equity financing to operate during general economic or business downturns; or unable to compete effectively or take advantage of new business opportunities. These restrictions also may affect our ability to execute our business strategy, which could have a material adverse effect on our business, financial condition and results of operations.

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In addition, the Deerfield Facility contains certain financial-related covenants, including requirements that we (i) deliver audited financial statements for each fiscal year, together with an audit opinion that does not contain a going concern qualification for any fiscal year ending on or after December 31, 2019, (ii) maintain a minimum cash balance of $40 million through March 31, 2020, and $25 million thereafter, and (iii) achieve net revenue from product sales of at least $63.75 million for the year ending December 31, 2019, and $85 million each year thereafter.
A breach of the covenants under either of our credit agreements could result in an event of default, may allow our lenders to accelerate the related debt, and may result in the acceleration of any other debt to which a cross acceleration or cross default provision applies. In addition, an event of default would permit the lenders under the applicable credit agreement to terminate all commitments to extend further credit under such agreement. Furthermore, if we were unable to repay the amounts due and payable under the Deerfield Facility, the lenders under that agreement could proceed against the collateral granted to them to secure that debt. In the event our lenders accelerate the repayment of our borrowings, we and our subsidiaries would not have sufficient assets to repay that debt.
Provisions in the Vatera Loan Agreement and the Deerfield Facility may deter or prevent a business combination that may be favorable to our stockholders.
Certain provisions in the Vatera Loan Agreement and the Deerfield Facility could have an adverse impact on the possibility of a potential acquisition of the Company.
If we enter into a transaction that constitutes a “fundamental change” under the Vatera Loan Agreement and a lender elects to convert its convertible loans in connection therewith, we may be required to increase the conversion rate depending on the then applicable stock price. The substantial number of shares that are issuable upon conversion of the convertible loans under the Vatera Loan Agreement may negatively impact the per share price that a third party may be willing to pay for the Company.
Furthermore, upon the occurrence of a change of control (as defined in the Vatera Loan Agreement), the lenders under the Vatera Loan Agreement have the right to either convert their convertible loans (including at the fundamental change conversion price if the Change of Control also constitutes a fundamental change) or require payment in full at par plus accrued and unpaid interest. If the lenders, other than the Vatera-related entities, fail to timely deliver notice to us electing to convert their convertible loans under the agreement, we will be required to pay in cash to such lenders the full outstanding amount of the convertible loans held by such lenders. The Vatera-related entities may elect to continue to hold their convertible loans under the agreement instead of converting the loans or requiring payment in cash for such convertible loans, except that we may elect to prepay the convertible loans under the Vatera Loan Agreement held by the Vatera-related entities in connection with a change of control or a fundamental change in which the consideration to be paid to the holders of outstanding common stock (other than shares held by the Vatera-related entities) consists solely of cash at a per share price in excess of the then current conversion price (determined based on the common stock conversion rate).
Upon a change of control (as defined in the Deerfield Facility), the lenders under the Deerfield Facility have the right to require payment in full of the outstanding loans under the agreement par plus accrued and unpaid interest.
These and other provisions in the Deerfield Facility and the Vatera Loan Agreement could deter or prevent a third party from acquiring the Company, or adversely impact the price that an acquirer is willing to pay, even when the acquisition may otherwise be favorable to our stockholders.
Our limited operating history exposes us to significant risks.
Prior to our commercial launch of Baxdela and our acquisition of Vabomere, Orbactiv and Minocin for injection from Medicines in the first quarter of 2018, our operations were limited to financing and staffing our company, conducting discovery and product research and development activities, and engaging in commercial launch preparation activities. Given that we have had less than one year of commercial sales through December 31, 2018, the ability to predict our future performance may not be as accurate as it could be if we had a history of successfully developing and commercializing pharmaceutical products. Given our limited operating history and relatively recent product launches, it is difficult for us to predict our future revenues and working capital needs and, to the extent we encounter lower-than-expected sales or unforeseen expenses, difficulties, complications, delays, and other known and unknown factors in achieving our business objectives, we may face difficulties in addressing these issues and our liquidity requirements. Further, given our limited operating history, we may incur significant costs in maintaining our salesforce, which costs may prove unnecessary or excessive if our product sales do not meet our expectations. Our likelihood of success must be evaluated in light of such challenges and variables and we may not be successful in our sales efforts or may incur greater costs than expected, both of which would materially and adversely affect our business, results of operations or financial condition.
If we are not successful with the commercial launches of our products, our business likely would be materially harmed.

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In the first quarter of 2018, we launched Baxdela and acquired Vabomere, Orbactiv and Minocin for injection from Medicines. Medicines launched Orbactiv in the United States in the third quarter of 2014, launched the new formulation of Minocin for injection in the United States in 2015 and launched Vabomere in the United States in the fourth quarter of 2017. Commercial launches and continued commercial efforts for this number of products in such a short period of time has and will continue to require significant efforts from Melinta and the devotion of substantial resources as we continue to establish and maintain the infrastructure necessary to continue to commercialize these products, or any product line extensions, or products in development.
Our ability to successfully commercialize our Products will depend on our ability to:
train, deploy and manage a qualified sales force to market and sell our Products;
secure formulary approvals at our hospital customers;
have third parties manufacture and release the products in sufficient quantities;
implement and maintain agreements with wholesalers, distributors and group purchasing organizations;
receive adequate levels of coverage and reimbursement for these products from governments and third-party payors; and
develop and execute effective marketing and sales strategies and programs for the Products.
We expect that the revenues from these products will represent a significant portion of our revenues in the future. As a result, if we are unable to successfully commercialize these products and products in development, our business, results of operations and financial condition likely would be materially harmed.
We are continuing to build our own marketing and sales organization, but have limited experience as a company in marketing drug products. If we are unable to successfully continue to develop our own marketing and sales capabilities, we may not be able to generate product revenues.
In order to successfully commercialize our products, we must develop capabilities (or make arrangements with third parties) for the marketing, sales and distribution of our products.  We have and will need to incur significant additional expenses and commit significant additional resources to continue to grow our marketing and sales capabilities. We may not be able to successfully establish these capabilities despite these additional expenditures.  Further, whether we market and sell products on our own or rely on a third party to do so, our ability to generate revenue will be dependent in part on the effectiveness of the sales force.  We compete with other pharmaceutical and life sciences companies to recruit, hire, train and retain sales and marketing personnel. In the event we are unable to successfully market and sell our products, either through our own marketing and sales capabilities or through collaboration with a third-party, our ability to generate product revenues would be negatively impacted and our business may be harmed.
Recent changes in our executive leadership and any similar changes in the future may serve as a significant distraction for our management and employees.
On October 1, 2018, and October 22, 2018, respectively, our former Chief Financial Officer and our former Chief Executive Officer left Melinta, and Peter J. Milligan was appointed our new CFO and John H. Johnson was appointed as our interim CEO. On February 22, 2019, Mr. Johnson was appointed as our permanent CEO. Such changes, or any other future changes in our executive leadership, may disrupt our operations as we adjust to the reallocation of responsibilities and assimilate new leadership and, potentially, differing perspectives on our strategic direction. If the transition in executive leadership is not smooth, the resulting disruption could negatively affect our operations and impede our ability to execute our strategic plan.
The commercial success of our Products (including any line extension thereof) and any future product of Melinta will depend upon the degree of market acceptance of these products among physicians, patients, health care payors and the medical community.
It cannot be assured that our products (including any additional approved indications) or any of our product candidates that may be approved in the future will gain market acceptance among physicians, patients, health care payors and the medical community. Efforts to educate the medical community and third-party payors on the benefits of our products and product candidates may require significant resources and may not be successful. The degree of market acceptance for our products will depend on a number of factors, including:
the effectiveness of such products as compared to other products pertaining to their respective indications; 
the effectiveness of such products as compared to other products considered standard of care; 
prevalence and severity of adverse side effects;
acceptance by physicians and payors of each product as a safe and effective treatment;
limitations or warnings contained in a product’s FDA approved labeling;
the market price and patient out-of-pocket costs of the product relative to other treatment options, including any generics;  
relative convenience and ease of administration;  

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willingness by clinicians to stop using current treatments and adopt a new treatment;  
restriction on healthcare provider prescribing of, and patient access to, products due to a risk evaluation mitigation strategy;  
our ability to recruit and retain a sales force, if necessary;
the effectiveness of our or any third-party partner’s sales force and marketing efforts;
our ability to forecast demand and maintain sufficient supplies of our drug products;
our ability to manufacture or obtain commercial quantities of our drug products;
the strength of our sales and marketing and distribution support;
the ability of our sales organization to reach the necessary prescribers and accounts on a timely basis;
the effectiveness of our marketing and advertising campaigns;
product availability and our ability to deliver our products on a timely basis;
the extent to which bacteria develop resistance to any antibiotic product candidate that we develop, thereby limiting its efficacy in treating or managing infections;
our ability to establish and maintain pricing sufficient to realize a meaningful return on our investment;
acceptance on hospital formularies (which may limit sales activities in those hospitals);
whether the product is designated under physician treatment guidelines as a first-line therapy or as a second- or third-line therapy for particular infections;
the availability of adequate reimbursement by third parties, such as insurance companies and other health care payors, and/or by government health care programs, including Medicare and Medicaid;
adverse publicity about a product or favorable publicity about competitive products;
potential product recalls: and
potential product liability claims.
The successful commercialization of our Products will depend on the prices we receive for our products.
Our ability to successfully commercialize our products will be dependent on whether market conditions or government requirements affect our ability to receive adequate pricing for any particular product. Pricing may be substantially dependent on our ability to obtain reimbursement from third-party payors, both in the United States and in foreign countries. Outside the United States, certain countries, including a number of European Union (“E.U.”) members, set prices and reimbursement for pharmaceutical products, or medicinal products as they are commonly referred to in the E.U., with limited participation from those marketing the products. We cannot be sure that any prices and reimbursement will be acceptable to our strategic commercial partners. If the regulatory authorities in these foreign jurisdictions set prices or reimbursement that are not commercially attractive for our strategic commercial partners, our revenues from milestones and/or sales-based royalties paid by our partners, and the potential profitability of our product candidates, in those countries would be negatively affected. Further, through contractual or other arrangements, the price we may be able to obtain in foreign countries may be dependent on the price we can achieve in the United States.
If we fail to obtain and sustain an adequate level of reimbursement for our products or future approved products by third-party payors, sales would be adversely affected.
There will be no commercially viable market for our products or any future approved products without reimbursement from third-party payors. If payor coverage is restricted or the level of reimbursement is below our expectations, our revenue and gross margins will be adversely affected.
Third-party payors, such as government or private health care insurers, carefully review and increasingly question the coverage of, and challenge the prices charged for, drugs. Reimbursement rates from private health insurance companies vary depending on the company, the insurance plan and other factors. A current trend in the U.S. health care industry is toward cost containment. Large public and private payors, managed care organizations, group purchasing organizations and similar organizations are exerting increasing influence on decisions regarding the use of, and reimbursement levels for, particular treatments. Such third-party payors, including Medicare, are questioning the coverage of, and increasingly challenging the prices charged for, medical products and services, and many third-party payors limit coverage of or reimbursement for newly approved health care products. In particular, third-party payors may limit the covered indications. Cost-control initiatives that affect our commercial market could decrease the price we might establish for products, which would result in product revenues being lower than anticipated. If the prices for our products decrease or if governmental and other third-party payors do not provide adequate coverage and reimbursement levels, our revenue and prospects for profitability will suffer. Further, the availability of numerous generic antibiotics at lower prices than branded antibiotics may also substantially reduce the likelihood of reimbursement for such products.
Specifically, in both the United States and some foreign jurisdictions, there have been a number of legislative and regulatory proposals to change the health care system in ways that could affect our ability to sell our products profitably. In the United States, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, also called the Medicare Modernization Act (“MMA”), changed the way Medicare covers and pays for pharmaceutical products. The legislation

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expanded Medicare coverage for drug purchases by the elderly and introduced a new reimbursement methodology based on average sales prices for physician-administered drugs. In addition, this legislation provided authority for limiting the number of drugs that will be covered in any therapeutic class. As a result of this legislation and the expansion of federal coverage of drug products, we expect that there will be additional pressure to contain and reduce costs. These cost reduction initiatives and other provisions of this legislation could decrease the coverage and price that we receive for any approved products and could seriously harm our business. While the MMA applies only to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policies and payment limitations in setting their own reimbursement rates, and any reduction in reimbursement that results from the MMA may result in a similar reduction in payments from private payors.  In March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act (collectively, “ACA”) became law in the United States The goal of ACA is to reduce the cost of health care and substantially change the way health care is financed by both governmental and private insurers. While we cannot predict what ultimate impact on federal reimbursement policies this legislation will have in general or on our business specifically, the ACA may result in downward pressure on pharmaceutical reimbursement, which could negatively affect market acceptance of future products. Members of the U.S. Congress and some state legislatures had sought to overturn at least portions of the legislation including those on the mandatory purchase of insurance. However, on June 28, 2012, the United States Supreme Court upheld the constitutionality of these provisions. Members of the U.S. Congress have since proposed a number of legislative initiatives, including repeal of all or portions of the ACA. Additionally, the Department of Health and Human Services is considering a number of proposals that, if adopted, could dramatically change the way the government, and eventually private payors, cover and reimburse prescription drugs. We cannot predict the outcome or impact of current proposals or whether new proposals will be made or adopted, when they may be adopted or what impact they may have on us if they are adopted.
Reimbursement systems in international markets vary significantly by country and by region, and reimbursement approvals must be obtained on a country-by-country basis. Reimbursement in the European Union must be negotiated on a country-by-country basis and in many countries the product cannot be commercially launched until reimbursement is approved. The negotiation process in some countries can exceed 12 months.
Our estimates of the market for, and the commercialization potential of, our Products, additional indications or uses for our Products, or for any product candidate, may be inaccurate or vary significantly from the market size ultimately realized.
The potential market opportunities for our Products, additional indications or uses for our Products, and any product candidates are difficult to estimate. Our estimates of the potential market opportunities are predicated on many assumptions, including industry knowledge and publications, third-party research reports and other surveys. While we believe that our internal assumptions are reasonable, these assumptions involve the exercise of significant judgment on the part of our management, and are inherently uncertain. If any of the assumptions proves to be inaccurate, the actual markets for our products and candidates could be smaller than our estimates of the potential market opportunities.
In addition, our estimates regarding the timing and amount of acceptance of any product (including any line extension) or product candidate, and the pricing we are able to receive for any product or product candidate may prove incorrect. Further, our plans for commercialization of any product candidate may not materialize in the time or manner we anticipate and may be adversely impacted by any required warnings in the product labeling, any perceived safety or efficacy concerns, competitive products entering or already in the market, or the actions of our competitors. Finally, we may underestimate the demand for a product, which could lead to lack of commercial quantities when needed and result in market backlash against the product. Any of these occurrences could have a material adverse effect on our plans for commercialization of and the generation of any revenue from any product or product candidate.
A failure to maintain optimal inventory levels for any of our Products or any future approved products could have a material adverse effect on our business.
Accurate product planning is necessary to ensure that we maintain optimal inventory levels for any of our products or any future approved products. Significant differences between our estimates and judgments and future actual demand for any of our products or any future approved products and the shelf life of inventory may result in the Company maintaining significant excess inventory. This risk is particularly heightened because our manufacturing lead team varies by product (and for some products this lead time can exceed two years) and we have limited historical sales performance for our products and as such, may not successfully predict our product revenues over the near or long term. See “Our limited operating history exposes us to significant risks.” If the Company maintains excess inventory, this will harm our liquidity and we may be required to recognize significant charges for excess inventories, which could have a material adverse effect on our financial condition and results of operations. Our ability to maintain optimal inventory levels also depends on the performance of third-party contract manufacturers. If our manufacturers are unsuccessful in either obtaining raw materials, if we are unable to release inventory on a timely and consistent basis, if we fail to maintain an adequate level of product inventory, if inventory is destroyed or damaged, or if our inventory reaches its expiration date, we could have a material adverse effect on our business, financial condition, results of operations and cash flows.

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If our competitors are able to develop and market products that are preferred over our Products or any future approved products, our commercial opportunity for such products will be reduced.
We face competition from established pharmaceutical and biotechnology companies, as well as from academic institutions, government agencies and private and public research institutions, which may in the future develop products to treat ABSSSI, CABP, cUTI or other diseases or conditions that our products and product candidates target. In many cases, however, we believe that competition often will be determined by antibiotic class and any limitations of that antibiotic class in general, and the antibiotic treating a particular disease or population.
In particular, there are a variety of available therapies marketed for the treatment of ABSSSI.  Some of these products are branded and subject to patent protection, and others are available on a generic basis. Many of these approved products are well established therapies and are widely accepted by physicians, patients and hospital decision-makers.  Vancomycin, for instance, which is sold in a relatively inexpensive generic form, has been widely used for over 50 years, is the most frequently used IV antibiotic, and we believe, based on our market research, is prescribed to approximately two-thirds of all hospitalized ABSSSI patients.  Insurers and other third-party payers may encourage the use of generic products. There are also a number of products in clinical development by third parties to treat ABSSSI.
If any of these product candidates or any other products developed by our competitors are more effective, safer, more convenient or less costly than our products, or would otherwise render our products obsolete or non-competitive, our anticipated revenues from our products could be adversely affected.
We expect that our ability to compete effectively will depend upon, among other things, our ability to:
successfully and rapidly complete clinical trials and obtain all required regulatory approvals in a timely and cost-effective manner;  
maintain patent protection for and otherwise prevent the introduction of generics;  
attract and retain key personnel;
build an adequate sales and marketing infrastructure; and
obtain adequate reimbursement from third-party payors.
Our dependence upon third parties for the manufacture and supply of our marketed products and any of our product candidates that may be approved in the future, may cause delays in, or prevent us from, successfully developing, commercializing and/or marketing our products.
We do not currently have nor do we plan to build the infrastructure or capability internally to manufacture our Products or product candidates. We rely upon and expect to continue to rely upon third-parties, almost all of which are single source, for the manufacture and supply of the active pharmaceutical ingredients (“API”) contained in our products and product candidates, as well as the preparation of finished products and their packaging.
Before any of our products manufactured by contract manufacturers can be distributed, an NDA containing appropriate chemistry, manufacturing, and controls information must be approved by the FDA. In addition, our contract manufacturers must maintain a compliance status that is acceptable to the FDA and foreign regulatory authorities.  In addition, pharmaceutical manufacturing facilities are continuously subject to inspection by the FDA and foreign regulatory authorities, before and after product approval. Due to the complexity of the processes used to manufacture pharmaceutical products and product candidates, any potential third-party manufacturer may be unable to continue to pass or initially pass federal, state or international regulatory inspections in a cost-effective manner or at all.
Although we do not control the day-to-day operations of our contract manufacturers, we are responsible for ensuring that our products are manufactured in accordance with applicable regulatory requirements, including cGMPs. If a third-party manufacturer with whom we contract is unable to comply with manufacturing regulations, our product candidates may not be approved or we may be subject to fines, unanticipated compliance expenses, recall or seizure of our products, total or partial suspension of production and/or enforcement actions, including injunctions, and criminal or civil prosecution.  These possible sanctions would adversely affect our financial results and financial condition.
In addition, our reliance on foreign suppliers poses risks due to possible shipping delays, import restrictions and foreign regulatory regimes.
We also could experience manufacturing delays if our third-party manufacturers give greater priority to the supply of other products over our products or otherwise do not satisfactorily perform according to the terms of the agreement between us.  If any supplier of API or finished drug product for our products experiences any significant difficulties in its respective manufacturing processes, does not comply with the terms of the agreement between us or does not devote sufficient time, energy and care to providing our manufacturing needs, we could experience significant interruptions in the supply of API, which could prevent or delay our development, commercialization and/or sales activities. Finally, any manufacturing facility is at risk of natural or man-made disaster, which could significantly reduce our clinical and commercial supplies of drug product, particularly given the single-source nature of our manufacturing and supply model.

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The timing of the milestone and royalty payments we are required to make to third parties is uncertain and could adversely affect our cash flows and results of operations.
We are party to various agreements pursuant to which we are obligated to make milestone payments or pay royalties in connection with the development and commercialization of our product candidates or sales of our marketed products. The timing of our achievement of these milestones and the corresponding milestone payments, or the amount of our royalty payments, is subject to factors which are difficult to predict and for which many are beyond our control. We may become obligated to make a milestone or other payment at a time when we do not have sufficient funds to make such payment, or at a time that would otherwise require us to use funds needed to continue to operate our business, which could delay our clinical trials, curtail our operations, necessitate a scaling back of our sales and marketing efforts or cause us to seek funds to meet these obligations on terms unfavorable to us. If we are unable to make any payment when due or if we fail to use commercially reasonable efforts to achieve certain development and commercialization milestones within the timeframes required by certain of these agreements, the other party may have the right to terminate the agreement and all of our rights to develop and commercialize product candidates using the applicable technology.
We may not realize the benefits of our 2018 acquisition of IDB from Medicines and may be required to take write-downs or write-offs, restructuring and impairment or other charges related to the acquisition that could have a significant negative effect on our financial condition, results of operations and stock price.
Integrating the acquired operations of the infectious disease business of Medicines successfully or otherwise realizing any of the anticipated benefits of the acquisition and the MDCO Products, including additional revenue opportunities, involves a number of challenges. In addition, although Melinta conducted due diligence on the MDCO Products. there is no assurance that this diligence revealed all material issues that may be present, that it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of Melinta’s control will not later arise. As a result, we may be forced to later write down or write off assets, restructure our operations, or incur impairment or other charges that could result in losses. For example, in the fourth quarter of 2018, we wrote off goodwill associated with the IDB transaction of approximately $25.1 million. Unexpected risks may arise and previously known risks may materialize in a manner not consistent with our original due diligence. Even though these risks may be non-cash items and may not have an immediate impact on our liquidity, the fact that Melinta reports charges of this nature could contribute to negative market perceptions about Melinta or its securities. In addition, charges of this nature may cause Melinta to be unable to obtain future financing on favorable terms or at all.
We may not be successful in establishing and maintaining development and commercialization collaborations, which could adversely affect our financial condition and operating results.
Developing pharmaceutical products, conducting clinical trials, obtaining regulatory approval, establishing manufacturing capabilities, marketing approved products, and adhering to post-marketing regulatory requirements and commitments is expensive. To aid in these efforts, we have established significant commercial relationships to market Baxdela outside the United States, including with Eurofarma and Menarini, and we have entered into a commercial agreement for Vabomere, Orbactiv and Minocin for injection in Europe with Menarini. We intend to continue to enter into sales and marketing arrangements with third parties for international sales, and to develop and maintain our own sales force in the United States. We may also establish additional collaborations, licensing agreements, or alternative arrangements for the commercialization of our Products, as well as for the development and commercialization of product candidates and research programs, including funding potentially other products and indications. If we are unable to maintain our existing arrangements or enter into any new such arrangements on acceptable terms, if at all, we may be unable to effectively market and sell our products in our target markets.
If we partner with a third party for development and commercialization of a product candidate, we can expect to relinquish some or all of the control over the future success of that product candidate to the third party. Our collaboration partner may not devote sufficient resources to the commercialization of our product candidates or may otherwise fail in commercialization. The terms of any collaboration or other arrangement that we establish may not be favorable to us. In addition, any collaboration that we enter into may be unsuccessful in the development and commercialization of our product candidates. In some cases, we may be responsible for continuing clinical development of a partnered product candidate or research program, and the payment we receive from our collaboration partner may be insufficient to cover the cost of this development.
Clinical trials are a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials may not be predictive of future trial results.
Clinical testing is expensive, can take many years to complete and its outcome is highly uncertain. Failure can occur at any time during the clinical trial process due to inadequate performance of a drug or inadequate adherence by patients or investigators to clinical trial protocols. Pursuant to FDA guidelines, new antibiotic drugs generally must show non-inferiority or superiority to existing approved treatments in adequate and well-controlled clinical trials, if such approved treatments exist. 

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We face these same risks for our pre-clinical and clinical product candidates, as well as for new indications and uses for our approved products.
In addition, the results of pre-clinical studies and early clinical trials of product candidates may not be predictive of the results of later-stage clinical trials. A number of companies in the pharmaceutical and biotechnology industries, including those with greater resources and experience than us, have suffered significant setbacks in Phase 2 and Phase 3 clinical trials despite achieving successful results in earlier stage trials. The failure to obtain positive results in any of our potential Phase 2 or Phase 3 clinical trials could seriously impair the development prospects, and even prevent regulatory approval of, any of our product candidates or additional indications for our marketed products. Even with positive clinical trial results, there is risk that regulators will not accept the clinical trial findings or will require additional trials or other data. For example, our NDAs for oral and intravenous solithromycin received complete response letters from the FDA, which stated that the FDA could not approve the NDAs in their present form and noted that additional clinical safety information and the satisfactory resolution of manufacturing facility inspection deficiencies were required before the NDAs may be considered for approval. Melinta did not acquire sufficient funding to perform the clinical safety study necessary to support approval of solithromycin in the United States, and therefore, decided not to execute the clinical safety study.
Further, regulatory approvals in foreign countries are subject to risks associated with different regulatory requirements, including clinical trial guidance and varying regulatory schemes.  As a result, clinical trial results and other regulatory processes undertaken by us within the United States may not be accepted in foreign countries, which would add to the cost and time to develop our product candidates in foreign countries.
Melinta cannot be certain that its product candidates will receive regulatory approval, or that its existing products will receive regulatory approval for additional uses, or that it will receive the requested exclusivity periods.
Melinta anticipates filing a sNDA with the FDA for Baxdela for the treatment of adult patients with CABP in the first half of 2019. Beyond the potential label expansion of Baxdela, Melinta may continue to pursue other development opportunities, either itself or through third-party collaborations or alternative arrangements.
Melinta’s business is dependent in part on its ability to complete the development of, obtain regulatory approval for, and successfully commercialize such current and future product line extensions and product candidates in a timely manner. The process to develop, obtain regulatory approval for product candidates and subsequently commercialize such products is long, complex, uncertain and costly.
The development of a product candidate and issues relating to its approval and sale are subject to extensive regulation by the FDA in the United States and regulatory authorities in other countries, with regulations differing from country to country. Melinta is not permitted to commercialize, market or sell Melinta’s product candidates or additional indications or uses for marketed products in the United States until it receives approval of an NDA (or sNDA) from the FDA. An NDA must include extensive preclinical and clinical data and supporting information to establish the product candidate’s safety and effectiveness for each desired indication. The NDA must also include significant information regarding the chemistry, manufacturing and controls for the product. Melinta is currently dependent on the work conducted by contract organizations for these activities. Obtaining approval of an NDA is a lengthy, expensive and uncertain process, and ultimately may not be obtained. FDA approvals are never guaranteed. If Melinta submits an NDA or sNDA to the FDA, the FDA must decide whether to accept or reject the submission for filing. Melinta cannot be certain that any submissions will be accepted for filing and review by the FDA. Even if a product is approved, the FDA may limit the indications for which the product may be marketed, include extensive warnings on the product labeling or require expensive and time-consuming post-approval clinical trials or reporting as conditions of approval. Foreign regulatory authorities also have requirements for approval of drug candidates with which Melinta's partners must comply prior to marketing. Obtaining regulatory approval for marketing of a product candidate in one country does not ensure that Melinta or our partners will be able to obtain regulatory approval in other countries. In addition, delays in approvals or rejections of marketing applications in the United States or foreign countries may be based upon many factors, including:
Melinta’s inability to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that a product candidate is safe and effective for any indication;
the results of clinical trials may not meet the level of statistical significance required by the FDA or comparable foreign regulatory authorities for approval;  
the FDA or comparable foreign regulatory authority may make requests for additional analyses, reports, data and studies;  
the FDA’s or comparable foreign regulatory authority’s disagreement regarding Melinta’s interpretation of data and results;  
inability to demonstrate that the clinical and other benefits of a product candidate outweigh its safety risks;  
the potential for changes in regulatory policy during the period of product development that may render Melinta’s clinical data insufficient for approval;

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inability to identify and maintain a sufficient number of trial sites, many of which may already be engaged in other clinical trial programs, including some that may be for the same indication as Melinta’s product candidates; or  
the emergence of new information regarding Melinta’s product candidates or other products.  
Under the GAIN Act, the FDA may designate a product as a QIDP.  Upon approval of a drug designated by the FDA as a QIDP, five-year NCE exclusivity, three-year exclusivity, and seven-year orphan drug exclusivity are extended by an additional five years. For Baxdela, regulatory exclusivity based on NCE, plus its 5-year extension as a QIDP under the GAIN Act, extends to 2027; for Orbactiv, regulatory exclusivity under NCE, plus its extension under the GAIN Act, extends to 2024. In December 2013, the FDA designated Vabomere as a QIDP, and in a letter dated August 29, 2017, the FDA stated that the Vabomere application meets the criteria for the five-year GAIN exclusivity extension.  Currently, Vabomere’s application for five-year NCE exclusivity is pending before the CDER Exclusivity Board.  If the FDA does not grant Vabomere the requested NCE exclusivity and instead grants three-year exclusivity, we would still obtain our GAIN exclusivity, but our total exclusivity period would be eight years rather than ten years, which could adversely affect our business related to Vabomere.
Delays in clinical trials are common and have many causes, and any such delays could result in increased costs to us and jeopardize or delay our ability to obtain regulatory approval and commence product sales as currently contemplated.
We may experience delays in clinical trials of new uses, dosing, or formulations of our approved products, or potential product candidates. Our planned clinical trials might not begin on time, may be interrupted or delayed once commenced, might need to be redesigned, might not enroll a sufficient number of patients or might not be completed on schedule, if at all. Clinical trials can be delayed for a variety of reasons, including the following:
delays in obtaining regulatory approval to commence a trial;
imposition of a clinical hold following an inspection of our clinical trial operations or trial sites by the FDA or other regulatory authorities;
delays in reaching agreement on acceptable terms with prospective CROs and clinical trial sites;
delays in obtaining required institutional review board, or IRB, approval at each site;
delays in identifying, recruiting and training suitable clinical investigators;
delays in recruiting suitable patients to participate in a trial;
delays in having patients complete participation in a trial or return for post-treatment follow-up;
clinical sites dropping out of a trial to the detriment of enrollment;
time required to add new sites;
delays in obtaining sufficient supplies of clinical trial materials, including suitable active pharmaceutical ingredient, or API, whether of our product candidates or comparator drugs; or
delays resulting from negative or equivocal findings of the data safety monitoring board, or DSMB, for a trial.
Patient enrollment, a significant factor in the timing of clinical trials, is affected by many factors, including the size and nature of the patient population, the proximity of patients to clinical sites, the eligibility criteria for the trial, the design of the clinical trial, competing clinical trials and clinicians’ and patients’ perceptions as to the potential advantages of the drug being studied in relation to other available therapies, including any new drugs that may be approved for the indications we are investigating. In addition, the timing of our clinical trials may be dependent on specific disease seasonality. We could encounter delays in our ongoing and future clinical trials of products if participating physician investigators encounter unresolved ethical issues associated with enrolling patients in clinical trials of any product in lieu of prescribing approved antibiotics that have established safety and efficacy profiles. Any of these delays in completing our clinical trials could increase our costs, slow down our product development and approval process and jeopardize our ability to commence product sales and generate revenues.
Our approved Products or product candidates may have undesirable side effects which may delay or prevent marketing approval, or if approval is received, require them to be taken off the market, require them to include safety warnings, become subject to FDA required risk evaluation and mitigation strategies or other remediation activities.
If Melinta or another party identifies undesirable or unacceptable side effects caused by our approved products:
regulatory authorities may require the addition of labeling statements, specific warnings, a contraindication or field alerts to physicians and pharmacies;  
Melinta may be required to change the way the product is administered, conduct additional clinical trials or change the labeling of the product;
Melinta may be subject to limitations on how it may promote the product;
regulatory authorities may require Melinta to take its approved product off the market;
Melinta may be subject to litigation or product liability claims;
Melinta’s reputation may suffer;
relationships with Melinta’s licensing partners may be harmed; and
sales of the product may decrease significantly or fail to gain market acceptance.

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We rely on third parties to conduct our clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may be delayed in obtaining, or may ultimately not be able to obtain, regulatory approval for or commercialize line extensions of our Products or any of our product candidates.
We have relied, and plan to continue to rely, on CROs to recruit patients, monitor and manage data for our on-going clinical programs. We control only certain aspects of our CROs’ activities; nevertheless, we are responsible for ensuring that each of our studies is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards and our reliance on the CROs does not relieve us of our regulatory responsibilities. We and our CROs are required to comply with the FDA’s cGCPs which are regulations and guidelines enforced by the FDA for all of our products in clinical development. The FDA enforces these cGCPs through periodic inspections of trial sponsors, principal investigators and clinical trial sites. If we or our CROs fail to comply with applicable cGCPs, the clinical data generated in our clinical trials may be deemed unreliable, and the FDA may require us to perform additional clinical trials before deciding whether to approve our product candidates. In addition, to evaluate the safety and effectiveness of any product candidate to a statistically significant degree CROs conducting our clinical trials abroad will require an adequately large number of test subjects. Accordingly, if our CROs fail to comply with these regulations or recruit a sufficient number of patients, we may have to repeat clinical trials, which would delay the regulatory approval process.
In addition, our CROs are not our employees and we cannot control whether or not they devote sufficient time and resources to our clinical programs. Our CROs may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical studies or other drug development activities, which could impede their ability to devote appropriate time to our clinical programs. If our CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced, or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements, or for other reasons, our clinical trials may be extended, delayed or terminated, and we may not be able to obtain regulatory approval for or successfully commercialize product candidates that we seek to develop. As a result, our financial results and the commercial prospects for these product candidates that we seek to develop would be harmed, our costs could increase and our ability to generate revenues could be delayed or ended.
Whether our current Products, potential line extensions or product candidates are successful or not, our future growth may depend in part on our ability to identify, develop, acquire or in-license products and if we do not successfully identify develop, acquire or in-license additional products or product candidates or integrate them into our operations, we may have limited growth opportunities.
An important part of our business strategy has been to develop, acquire or in-license products, businesses or technologies that we believe are a strategic fit with our focus developing anti-infectives to treat infectious diseases. However, these business activities may entail numerous operational and financial risks, including:
difficulty or inability to secure financing to fund development activities for such development, acquisition or in-licensed products or technologies;
incurrence of substantial debt or dilutive issuances of securities to pay for development, acquisition or in-licensing of new products;
disruption of our business and diversion of our management’s time and attention;
higher than expected development, acquisition or in-license and integration costs;
exposure to unknown liabilities; and
difficulty and cost in combining the operations and personnel of any acquired businesses with our operations and personnel and retaining key personnel.
We may need to grow our organization if we acquire or in-license products or develop and receive approval for additional indications or uses of our Products, and we may experience difficulties in managing this growth, which could disrupt our operations.
As of February 28, 2019, we had approximately 290 employees. As our development and commercialization plans and strategies progress and develop, we may need to expand our employee base for managerial, operational, financial and other resources, including sales and marketing resources. Future growth would impose significant added responsibilities on members of management, including the need to identify, recruit, maintain, motivate and integrate additional employees. Also, our management may need to divert a disproportionate amount of its attention away from their day-to-day activities and devote a substantial amount of time to managing these growth activities. We may not be able to effectively manage the expansion of our operations which may result in weaknesses in our infrastructure, give rise to operational mistakes, loss of business opportunities, loss of employees and reduced productivity among remaining employees. Future growth could require significant capital expenditures and may divert financial resources from other projects, such as the development of additional product candidates. If our management is unable to effectively manage any future growth, our expenses may increase more than expected, our ability to generate and/or grow revenues could be reduced and we may not be able to implement our

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business strategy. Our future financial performance and our ability to commercialize our product candidates and compete effectively will depend, in part, on our ability to effectively manage any future growth in our organization.
Comprehensive tax reform legislation could adversely affect our business and financial condition.
On December 22, 2017, the US government signed into law comprehensive tax legislation, referred to as the Tax Cuts and Jobs Act (the Tax Act). The Tax Act introduced significant changes to the US tax laws.
The Tax Act, among other things, contains significant changes to corporate taxation, including (i) reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%; (ii) limitation of the tax deduction for interest expense to 30% of adjusted earnings (except for certain small businesses); (iii)  limitation of the deduction for net operating losses to 80% of current year taxable income in respect of losses arising in taxable years beginning after 2017; (iv) elimination of net operating loss carrybacks; (v) one time taxation of offshore earnings at reduced rates regardless of whether they are repatriated; (vi) immediate deductions for certain new investments instead of deductions for depreciation expense over time; and (vii) modifying or repealing many business deductions and credits (including reducing the business tax credit for certain clinical testing expenses incurred in the testing of certain drugs for rare diseases or conditions generally referred to as “orphan drugs”). Our federal net operating loss carryovers for taxable years beginning after 2017 will be carried forward indefinitely pursuant to the Tax Act.
The Tax Act did not have a material impact on our financial statements because our deferred temporary differences are fully offset by a valuation allowance and we do not have any significant offshore earnings from which to record the mandatory transition tax. However, given the significant complexity of the Tax Act, anticipated guidance from the US Treasury about implementing the Tax Act, and the potential for additional guidance from the SEC or the FASB related to the Tax Act, these estimates may be adjusted during the measurement period. We continue to examine the impact the Tax Act may have on our business. Notwithstanding the reduction in the federal corporate income tax rate, the overall impact of the Tax Act is uncertain and our business and financial condition could be adversely affected.
Risks Related to Our Industry
Bacteria might develop resistance to our Products or product candidates, which would decrease the efficacy and commercial viability of that product.
Bacteria develop resistance to antibiotics over time due to the genetic mutation of the bacteria. Many current and previous antibiotics have suffered reduced efficacy over time due to the development of resistance to such drugs. It is probable that, over time, bacteria will also develop resistance to our products and our drug candidates. If resistance were to develop rapidly to our products or our drug candidates, this would reduce the commercial potential for our business.
We are subject to existing and potential additional regulation and government inquiry, which can impose burdens on our operations and narrow the markets for our products.
We are subject, both directly and indirectly, to the adverse impact of existing and potential future government regulation of our operations and markets. Our Products are, and any future approved product candidates will be, subject to regulation by the FDA and equivalent foreign regulatory authorities. These regulations govern a wide variety of product related activities, from quality management, design and development to labeling, manufacturing, promotion, sales and distribution. If we or any of our suppliers or distributors fail to comply with the FDA and other applicable regulatory requirements, or are perceived to potentially have failed to comply, we may face, among other things, warning letters; adverse publicity affecting both us and our customers; investigations or notices of non-compliance, fines, injunctions, and civil penalties; import or export restrictions; partial suspensions or total shutdown of production facilities or the imposition of operating restrictions; increased difficulty in obtaining required FDA clearances or approvals or foreign equivalents; seizures or recalls of its products or those of its customers; or the inability to sell such products. Any such regulatory actions could disrupt our business and operations, lead to significant remedial costs and have a material adverse impact on our financial position and results of operations.
We face extensive regulatory requirements and our products may face future development and regulatory challenges.
The FDA may impose significant restrictions on a product’s indicated uses or marketing or impose ongoing requirements for potentially costly post-approval studies or post-market surveillance. In addition, the FDA and other U.S. and foreign regulatory agencies regulate our products and impose ongoing requirements governing the manufacturing, labeling, packaging, storage, distribution, safety surveillance, advertising, promotion, record keeping and reporting of safety and other post-market information. The holder of an approved NDA is subject to obligations to monitor and report adverse events and instances of the failure of a product to meet the specifications in the NDA. Application holders must submit new or supplemental applications and obtain FDA approval for certain changes to the approved product, product labeling or manufacturing process. Application holders must also submit advertising and other promotional material to the FDA and report on ongoing clinical trials. Legal requirements have also been enacted to require disclosure of clinical trial results on publicly available databases.

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Manufacturers of drug products and their facilities are subject to continual review and periodic inspections by the FDA and other regulatory authorities for compliance with cGMP regulations. In addition, manufacturers must comply with regulations promulgated by the FDA and other regulatory agencies, such as the Consumer Product Safety Commission, that govern packaging, labeling, and country of origin markings. If we or a regulatory agency discovers previously unknown issues or deficiencies with a product, such as adverse events of unanticipated severity or frequency, issues with a product's packaging or labeling, or problems with the facility where a product is manufactured, a regulatory agency may impose penalties, corrective measures, and/or implement restrictions on that product, the manufacturing facility or us, including requiring recall or withdrawal of the product from the market or suspension of manufacturing, requiring new warnings or other labeling changes to limit use of the drug, requiring that we conduct additional clinical trials, imposing new monitoring requirements, or requiring that we establish risk evaluation and mitigation strategies. Moreover, because our inputs and products cross borders, they are subject to duties, fees, and taxes that can be amended or altered by government actors, affecting the prices of our products in ways that could be material. Action, or inaction, by government authorities at or concerning border points of entry and exit also can cause supply chain delays, including the suspension or detention of goods. And deficiencies or errors by the company or its employees or agents with respect to importing and exporting obligations and declarations, including with respect to the classifications, descriptions, valuations, and origins of goods, can results in additional duties, fees, and penalties. Advertising and promotional materials must comply with FDA and other regulatory agency rules in addition to other applicable federal and state laws and regulations. The distribution of product samples to physicians must comply with the requirements of the Prescription Drug Marketing Act. the packaging of products is subject to regulations, including under the Poison Packaging and Prevention Act. Government pricing and rebate programs must comply with statutory and regulatory requirements. Our products that are made available to authorized users of the Federal Supply Schedule of the General Services Administration are subject to additional requirements, including manufacture of origin. Finally, many of our activities are also potentially subject to federal and state consumer protection, false advertising, and unfair competition laws. If we or our third-party collaborators fail to comply with applicable regulatory requirements, a regulatory agency may:
conduct an investigation into our practices and any alleged violation of law;
issue warning letters or untitled letters asserting that we are in violation of the law;
seek an injunction or impose civil or criminal penalties or monetary fines;
suspend or withdraw regulatory approval;
suspend any ongoing clinical trials;
refuse to approve pending applications or supplements to applications filed by us;
suspend or impose restrictions on operations, including costly new manufacturing requirements;
seize or detain products or refuse to permit the import or export of products;
require us to initiate a product recall; or
refuse to allow us to enter into supply contracts, including government contracts.
The occurrence or investigation of any event or penalty described above may force us to expend significant amounts of time and resources, and may significantly inhibit our ability to bring to market or continue to market our products and generate revenues. Similar regulations apply in foreign jurisdictions.
Because we may not be able to obtain necessary regulatory clearances or approvals for some of our products (including any line extensions) or product candidates, we may not generate revenue in the amounts we expect, or in the amounts necessary to continue our business.
All of our proposed and existing products are subject to regulation in the U.S. by the FDA and/or other domestic and international governmental, public health agencies, regulatory bodies or non-governmental organizations. In particular, we are subject to strict governmental controls on the development, manufacture, labeling, distribution and marketing of our products and product candidates. The process of obtaining required approvals or clearances varies according to the nature of and uses for, a specific product or product candidate. These processes can involve lengthy and detailed laboratory testing, human clinical trials, sampling activities, and other costly, time-consuming procedures. The submission of an application to a regulatory authority does not guarantee that the authority will grant an approval or clearance for a product or product candidate. Each authority may impose its own requirements and can delay or refuse to grant approval or clearance, even though a product or product candidate has been approved in another country.
The time taken to obtain approval varies depending on the nature of the application and may result in the passage of a significant period of time from the date of submission of the application. Delays in the approval or clearance processes increase the risk that we will not succeed in introducing or selling the subject products or product candidates, and we may be required to abandon a proposed product or product candidate after devoting substantial time and resources to its development.
Changes in domestic and foreign government regulations could increase our costs and could require us to undergo additional trials or procedures, or could make it impractical or impossible for us to market our products for certain uses, in certain markets, or at all.

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Changes in government regulations may adversely affect our financial condition and results of operations because we may have to incur additional expenses if we are required to change or implement new testing, manufacturing and control procedures. If we are required to devote resources to develop such new procedures, we may not have sufficient resources to devote to research and development, marketing, or other activities that are critical to our business. 
Any product candidate for which we obtain marketing approval could be subject to post-marketing restrictions or recall or withdrawal from the market, and we may therefore be subject to penalties if we fail to comply with regulatory requirements or if we experience unanticipated problems with our drug candidates, when and if any of them are approved.
As with our current marketed products, any product candidate or new indication, use or formulation of our Products for which we obtain marketing approval, along with manufacturing processes, post-approval clinical data, labeling, advertising and promotional activities for such new product or use, will be subject to continual requirements of and review by the FDA and other regulatory authorities. These requirements include submissions of safety and other post-marketing information and reports, registration and listing requirements, cGMP requirements relating to manufacturing, quality control, quality assurance and corresponding maintenance of records and documents, requirements regarding the distribution of samples to physicians and recordkeeping. Even if marketing approval of a product candidate or line extension of a marketed Product is granted, the approval may be subject to limitations on the indicated uses for which the product may be marketed or to the conditions of approval, including the requirement to implement a risk evaluation and mitigation strategy. If any of our product candidates receives marketing approval, the accompanying labeling may limit the approved use of our product, which could limit its sales.
The FDA may also impose requirements for costly post-marketing studies or clinical trials and surveillance to monitor the safety or efficacy of the product. The FDA also regulates manufacturers’ communications regarding a product candidate or new use or indication of an approved product prior to FDA approval; if we market our products before such approval, we may be subject to enforcement actions for pre-approval promotion.
In addition, later discovery of previously unknown adverse events or other problems with our products, manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may have negative consequences, including:
restrictions on such products, manufacturers or manufacturing processes;
restrictions on the labeling or marketing of a product;
restrictions on product distribution or use;
requirements to conduct post-marketing studies or clinical trials;
warning or untitled letters;
recall or withdrawal of the products from the market;
refusal to approve pending applications or supplements to approved applications that we submit;
clinical holds;
fines, restitution or disgorgement of revenue or profit;
suspension or withdrawal of marketing approvals;
refusal to permit the import or export of our products or components of our products;
product seizure; or
injunctions or the imposition of civil or criminal penalties.
We are subject to healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings.
We are subject to additional healthcare statutory and regulatory requirements and enforcement by the federal government and the states and foreign governments in which we conduct our business. Healthcare providers, including physicians, pharmacists, and allied healthcare professionals play a primary role in the recommendation and prescription of our Products. Our arrangements with healthcare providers, as well as third-party payors may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell and distribute our Products. Restrictions under applicable federal and state healthcare laws and regulations include, but are not limited to, the following:
The federal healthcare anti-kickback statute prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under federal healthcare programs such as Medicare and Medicaid. In addition, the ACA includes various provisions designed to strengthen significantly fraud and abuse enforcement, such as increased funding for enforcement efforts and the lowering of the intent requirement of the federal anti-kickback statute and criminal health care fraud statute such that a person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it.
The federal False Claims Act imposes criminal and civil penalties, including those from civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the

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federal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease, or conceal an obligation to pay money to the federal government.
The federal Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act, imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program and also imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information.
The federal false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement in connection with the delivery of or payment for healthcare benefits, items or services.
The federal transparency requirements, sometimes referred to as the "Sunshine Act," under the Patient Protection and Affordable Care Act, require manufacturers of drugs, devices, biologics and medical supplies that are reimbursable under Medicare, Medicaid, or the Children’s Health Insurance Program to report on an annual basis to the Department of Health and Human Services information related to transfers of value to certain healthcare professionals, teaching hospitals and physician ownership and investment interests.
Analogous state laws and regulations, such as state anti-kickback and false claims laws and transparency laws, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers, and some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government in addition to requiring drug manufacturers to report information related to payments to physicians and other healthcare providers or marketing expenditures and drug pricing.
In addition, under the Food Drug and Cosmetic Act (FDCA), the FDA closely regulates the post-approval marketing and promotion of prescription products such as antibiotics to ensure such products are marketed only for the approved indications, uses, and patient population and in accordance with the provisions of the approved labeling. Although, healthcare providers may choose to prescribe drugs for uses that are not described in the product’s labeling and for uses that differ from those tested in clinical studies and approved by the regulatory authorities, the FDA imposes stringent restrictions on manufacturers’ communications regarding off-label use, and if we do not market our products for their approved indications and uses, we may be subject to enforcement action for off-label marketing. Violations of the FDCA relating to the promotion of prescription products may lead to investigations alleging violations of federal and state healthcare fraud and abuse laws, as well as state consumer protection laws. Notwithstanding the regulatory restrictions on off-label promotion, the FDA and other regulatory authorities permit companies to engage in truthful, non-misleading and non-promotional scientific exchange concerning their products. In addition, recent FDA guidance suggests that there are circumstances in which the FDA would not object to the promotion of certain information that is not included in the approved labeling, provided that this information is consistent with the approved labeling and otherwise complies with applicable regulations.
Ensuring that our business arrangements with third parties and interactions with healthcare providers comply with applicable healthcare laws and regulations requires us to dedicate significant resources. Despite our efforts, it is possible that governmental authorities will conclude that our business practices do not fully comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations, including activities conducted by our sales team, were found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines and exclusion from government funded healthcare programs, such as Medicare and Medicaid, any of which could result in adverse publicity, substantially disrupt our operations an materially adversely affect our business. Moreover, if any of the physicians or other providers or entities with whom we expect to do business is found not to be in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.
Future legislation, and/or regulations and policies adopted by the FDA or other regulatory health authorities may increase the time and cost required for us to conduct and complete clinical trials for product candidates that we develop.
The FDA has established regulations, guidelines and policies to govern the drug development and approval process, as have foreign regulatory authorities. Any change in regulatory requirements due to the adoption by the FDA and/or foreign regulatory authorities of new legislation, regulations, or policies may require us to amend existing clinical trial protocols or add new clinical trials to comply with these changes. Such amendments to existing protocols and/or clinical trial applications or the need for new ones, may significantly impact the cost, timing and completion of the clinical trials.

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In addition, increased scrutiny by the U.S. Congress of the FDA’s approval process, particularly in our areas of focus, may significantly delay or prevent regulatory approval, as well as impose more stringent product labeling and post-marketing testing and other requirements.
Even if we obtain FDA approval of a given product candidate, we may fail to obtain approval for or be able to commercialize such product outside of the United States, which would limit our ability to realize their full market potential. If foreign approval is obtained, there are risks in conducting business in international markets.
In order to market a product outside of the United States, we must establish and comply with numerous and varying regulatory requirements of other countries regarding safety and efficacy. Clinical trials conducted in one country may not be accepted by regulatory authorities in other countries, and regulatory approval in one country does not mean that regulatory approval will be obtained in any other country. Approval procedures vary among countries and can involve additional product testing and validation and additional administrative review periods. Seeking foreign regulatory approvals could result in significant delays, difficulties and costs for us and require additional pre-clinical studies or clinical trials which would be costly and time consuming. Regulatory requirements can vary widely from country to country and could delay or prevent the introduction of our products in those countries. Satisfying these and other regulatory requirements is costly, time consuming, uncertain and subject to unanticipated delays.
If we fail to comply with regulatory requirements in a foreign country or to obtain and maintain required approvals, our potential market for products will be reduced and our ability to realize the full market potential of our products will be harmed.
We are exposed to a variety of risks associated with Products and product candidates that are approved outside of the United States that could materially adversely affect our business.
With respect to our Products or product candidates which are approved outside the United States, we have entered into and will likely enter into additional agreements with third parties to commercialize such product outside the United States. We are, and expect that we will be, subject to additional risks related to entering into or maintaining these international business relationships, including:
different regulatory requirements for drug approvals in foreign countries;
differing U.S. and foreign drug import and export rules;  
reduced protection for intellectual property rights in foreign countries;  
unexpected changes in tariffs, trade barriers and regulatory requirements;
different reimbursement systems;
economic weakness, including inflation, or political instability in particular foreign economies and markets;  
compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;
foreign taxes, including withholding of payroll taxes;  
foreign currency fluctuations, which could result in increased operating expenses and reduced revenues, and other obligations incident to doing business in another country;  
workforce uncertainty in countries where labor unrest is more common than in the United States;  
production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad;  
potential liability resulting from development work conducted by these distributors; and
business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters.
Failure to comply with the U.S. Foreign Corrupt Practices Act, or FCPA, as well as the anti-bribery laws of the nations in which we conduct business, could subject us to penalties and other adverse consequences.
We are subject to the FCPA, which generally prohibits U.S. companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business and requires companies to maintain accurate books and records and internal controls. The FCPA also requires public companies to make and keep books and records that accurately and fairly reflect the transactions of the corporation and to devise and maintain an adequate system of internal accounting controls. Our business is heavily regulated and therefore involves significant interaction with public officials, including officials of non-U.S. governments. Additionally, in many other countries, the healthcare providers who prescribe pharmaceuticals are employed by their government, and the purchasers of pharmaceuticals are government entities; therefore, our dealings with these prescribers and purchasers are subject to regulation under the FCPA. In addition, we are subject to other anti-bribery laws of the nations in which we conduct business that apply similar prohibitions as the FCPA, including the UK Bribery Act. Our employees, consultants, contractors or agents may engage in prohibited conduct without our knowledge, particularly given the high level of complexity of these laws ,for which we may be held responsible. Violations of these laws and regulations could result in fines, criminal sanctions against us, our officers, or our employees, implementation of compliance programs, and prohibitions on the conduct of our business. Any such violations could materially damage our reputation and our business, prospects, operating results, and financial condition.

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Europe has enacted a new data privacy regulation, the General Data Protection Regulation, with hefty enforcement penalties, a violation of which could subject us to significant fines.
In May 2018, a new privacy regime, the General Data Protection Regulation (“GDPR”), took effect and is binding across all member states of the European Economic Area (“EEA”). The GDPR increases our obligations with respect to clinical trials, the transmission of safety data and other activities conducted in the EEA by expanding the definition of personal data and requiring changes to informed consent practices and more detailed notices. The GDPR also increases our responsibility and liability in relation to personal data that we process, and we may be required to put in place additional mechanisms to ensure compliance with the new EU data protection rules.  It also imposes substantial fines for breaches of data protection requirements, which can be up to four percent of global turnover or 20 million Euros, whichever is greater, and it also confers a private right of action on data subjects for breaches of data protection requirements. Compliance with these obligations will be a rigorous and time-intensive process that may increase our cost of doing business, and the failure to comply with these laws could subject us to significant fines.
If we or our vendors fail to comply with the GDPR, or if the legal mechanisms we or our vendors rely upon to allow for the transfer of personal data from the EEA or Switzerland to the U.S. (or other countries not considered by the European Commission to provide an adequate level of data protection) are not considered adequate, we could be subject to government enforcement actions and significant penalties against us, and our business could be adversely impacted if our ability to transfer personal data outside of the EEA or Switzerland is restricted, which could adversely impact our operating results.  In addition, data protection authorities of the different EU Member States may interpret the GDPR differently, and guidance on implementation and compliance practices are often updated or otherwise revised, which adds to the complexity of processing personal data in the EU and transfer of such data outside the EEA. In addition, the privacy and data security landscape in the EU Member States continues to remain in flux as the final decision on UK’s withdrawal from the EU may require organizations to revisit the way they transfer personal data from and to the UK from the EU. 
Although there are legal mechanisms to allow for the transfer of personal data from the EEA to the US, a decision of the European Court of Justice in the Schrems case (Case C-362/14 Maximillian Schrems v. Data Protection Commissioner) that invalidated the safe harbor framework has increased uncertainty around compliance with EU privacy law requirements. As a result of the decision, it was no longer possible to rely on the safe harbor certification as a legal basis for the transfer of personal data from the EU to entities in the US. On February 29, 2016, however, the European Commission announced an agreement with the United States Department of Commerce (DOC) to replace the invalidated Safe Harbor framework with a new EU-US “Privacy Shield.” On July 12, 2016, the European Commission adopted a decision on the adequacy of the protection provided by the Privacy Shield; however, this decision has been subsequently challenged. If the Privacy Shield is ultimately invalidated, it will no longer be possible to rely on the Privacy Shield certification to support transfer of personal data from the EU to entities in the US. Adherence to the Privacy Shield is not mandatory and US-based companies are permitted to rely either on their adherence to the Privacy Shield or on the other authorized means and procedures to transfer personal data provided by the GDPR. However, a decision rendering the Privacy Shield invalid may give rise to further insecurity concerning appropriate means for US companies to comply with the GDPR and related data privacy obligations in the EU.
Product liability lawsuits could divert our resources, result in substantial liabilities and reduce the commercial potential of our products.
We face an inherent risk of product liability as a result of sales of our marketed products as well from the clinical testing of our product candidates despite obtaining appropriate informed consents from our clinical trial participants. For example, we may be sued if any product we develop allegedly causes injury or is found to be otherwise unsuitable during clinical testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability or a breach of warranties. Claims could also be asserted under state consumer protection laws. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization of our product candidates. Even successful defense would require significant financial and management resources. Regardless of the merits or eventual outcome, liability claims may result in:
decreased demand for our products or product candidates that we may develop;
loss of revenue;
injury to our reputation;
withdrawal of clinical trial participants;
initiation of investigations by regulators;
costs to defend the related litigation;
a diversion of management’s time and our resources;
substantial monetary awards to trial participants or patients;
product recalls, withdrawals or labeling, marketing or promotional restrictions;

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exhaustion of any available insurance and our capital resources;
the inability to commercialize our products or product candidates; and
a decline in our stock price.
The cost of any product liability litigation or other proceeding, even if resolved in our favor, could be substantial. In addition, inability to obtain or maintain sufficient insurance coverage at an acceptable cost or to otherwise protect against potential product liability claims could prevent or inhibit the development and commercial production and sale of our products, which could adversely affect our business, financial condition, results of operations, and prospects.
We are subject to various environmental, health and safety laws and regulations, in connection with which we could become subject to liabilities, fines, penalties or other sanctions, or incur costs, that could have a material adverse effect on the success of our business.
We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment, release and disposal of, and exposure to, hazardous materials and wastes. From time to time our operations involve and may, in the future, involve the use of hazardous and flammable materials, including chemicals and biological materials, and may also produce hazardous waste products. Even if we contract with third parties for the disposal of these materials and wastes, we cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from our handling, use, storage, treatment, release or disposal of hazardous materials, we could be held liable for any resulting damages, and any liability, which in certain cases could be joint and several, could exceed our resources. We also could incur significant costs, civil or criminal fines, penalties, or other sanctions for failure to comply with such laws and regulations. In addition, we may incur substantial costs in order to comply with current or future environmental health and safety laws and regulations, which have tended to become more stringent over time.
Although we maintain workers’ compensation insurance to cover us for costs and expenses, we may incur due to injuries to our employees resulting from hazardous materials, this insurance may not provide adequate coverage against potential liabilities. We do not maintain insurance for environmental liability or toxic tort claims.
If we are not successful in retaining or attracting as necessary highly qualified personnel, we may not be able to successfully implement our business strategy.
Our ability to compete in the highly competitive biotechnology and pharmaceuticals industries depends in large part on our ability to retain or attract as necessary highly qualified managerial, scientific, medical and sales and marketing personnel. Competition for skilled personnel is very intense and may limit our ability to hire and retain highly qualified personnel on acceptable terms or at all.  Our current levels of total compensation may be below the level of companies who seek to hire our current employees, impacting our ability to retain members of our team. Despite our efforts to retain valuable employees, members of our management, scientific and medical teams may terminate their employment with us on short notice. The loss of the services of any of our executive officers or other key employees could potentially harm our business, operating results or financial condition. Our success also depends on our ability to continue to attract, retain and motivate highly skilled scientific and medical personnel.
Other biotechnology and pharmaceutical companies with which we compete for qualified personnel have greater financial and other resources, different risk profiles and longer histories than we do. They also may provide more diverse opportunities and better chances for career advancement. Some of these characteristics may be more appealing to high quality candidates than what we offer. If we are unable to continue to attract and retain high quality personnel, our ability to discover, develop and commercialize drug candidates will be limited.
Failure to achieve and maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes Oxley Act could have a material adverse effect on our business and share price.
Section 404(a) (“Section 404”) of the Sarbanes Oxley Act of 2002 (the “Sarbanes Oxley Act”) requires that we evaluate and determine the effectiveness of our internal controls over financial reporting and provide a management report on the internal control over financial reporting. If we have a material weakness in our internal controls over financial reporting, we may not detect errors on a timely basis and our financial statements may be materially misstated. Our management believes our internal controls are effective, and our independent auditors have attested that the operation of our internal controls was effective as of December 31, 2018; however, there can be no assurance that management and our independent auditors will be able to make similar reports in the future.
If in the future we are not able to comply with the requirements of Section 404 in a timely manner, or if we or our independent registered public accounting firm identifies deficiencies in our internal controls that are deemed to be material weaknesses, we could be subject to sanctions or investigations by The Nasdaq Stock Market LLC, the SEC or other regulatory authorities, which would entail expenditure of additional financial and management resources and could materially adversely affect our stock price. Additionally, we would be unable to issue securities in the public markets through the use of a shelf

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registration if we are not in compliance with Section 404. Furthermore, failure to achieve and maintain an effective internal control environment could have a material adverse effect on our business and share price and could limit our ability to report our financial results accurately and timely.
Our employees, agents, contractors, and consultants may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could adversely affect our reputation and our business, operating results and financial conditions.
Although have adopted a Code of Conduct, it is not always possible to identify and deter misconduct by our employees, agents, contractors, and consultants, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure comply with applicable laws and regulations, including without limitation, in the areas of healthcare, trade restrictions and sanctions, environmental, competition, intellectual property, privacy, anti-bribery, fraud and abuse, pricing, insider trading and employment. In particular, sales, marketing and business arrangements in the health care industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Misconduct by our employees, agents, contractors, and consultants could also involve the improper use of information obtained in the course of clinical trials. Misconduct by employees, agents, contractors, and consultants could violate such laws or regulations and any such improper actions could subject us to civil or criminal investigations, and monetary and injunctive penalties, and could adversely impact our ability to conduct business, operating results and our reputation.
Risks Related to our Intellectual Property
Our ability to pursue the development and commercialization of certain of our products depends upon the continuation of certain licenses.
We rely on certain licenses to certain patent rights and proprietary technology from third parties that are important or necessary to the development of our technology and products.
Baxdela. Our license agreement with Wakunaga Pharmaceutical Co., Ltd. provides us with a worldwide exclusive license to develop and sell Baxdela. In particular, we obtained an exclusive license to certain patents, patent applications and proprietary information, including patents and proprietary information owned by AbbVie Inc. and licensed to Wakunaga, covering the composition of matter to Baxdela, its manufacturing process, salt forms, pharmaceutical compositions containing Baxdela, methods of using Baxdela, and other proprietary information. Our license agreement with Wakunaga further grants us non-exclusive rights to other patents and applications. The license requires us to make certain milestone and royalty payments to Wakunaga. If we are unable to make any of these required payments under the license agreement, or if we do not use commercially reasonable efforts to achieve certain development and commercialization milestones for Baxdela within the timeframes required by the license agreement, our rights to develop and commercialize Baxdela could be terminated. In addition, Wakunaga may terminate the license agreement on a product-by-product and country-by-country basis based upon our material breach of the license agreement if not cured within 90 days from written notice of breach. If our license agreement with Wakunaga were terminated, we would lose our rights to develop and commercialize Baxdela, and would have to grant Wakunaga a perpetual, non-royalty bearing, exclusive license to our proprietary information reasonably necessary to commercialize Baxdela. Loss of our license agreement would materially and adversely affect our business, results of operations and future prospects.
Orbactiv.  As a result of the IDB Transaction, we are a party to a license agreement with Eli Lilly and Company (“Eli Lilly”). Under the terms of the agreement, we have exclusive worldwide rights to patents and other intellectual property related to Orbactiv and other compounds claimed in the licensed patent rights. We are required to make payments to Eli Lilly upon reaching specified regulatory and sales milestones. In addition, we are obligated to pay royalties based on net sales of products containing Orbactiv or the other compounds in any jurisdiction in which we hold license rights to a valid patent. The royalty rate due to Eli Lilly on sales increases as annual sales of these products increase. We are obligated to use commercially reasonable efforts to maintain regulatory approval for Orbactiv in the United States and to commercialize Orbactiv in the United States. If we breach that obligation, Eli Lilly may terminate our license in the United States, license rights to Orbactiv could revert to Eli Lilly and we would lose our rights to develop and commercialize Orbactiv. The license rights under the agreement remain in force, on a country-by-country basis, until there is no valid patent in such country and our obligation to pay royalties ceases in that country. Either party may terminate the agreement upon an uncured material breach by the other party. In addition, either party may terminate the agreement upon the other party’s insolvency or bankruptcy.
In addition, disputes may arise regarding intellectual property subject to a licensing agreement, including:
the scope of rights granted under the license agreement and other interpretation-related issues;  

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the extent to which our technology and processes infringe on or misappropriate the intellectual property of the licensor that is not subject to the licensing agreement;  
the sublicensing of patent and other rights under the license agreement;  
our diligence obligations under the license agreement and what activities satisfy those diligence obligations;
the payment of royalty fees, milestones or other costs under the license agreements; and
the priority of invention of patented technology.
If disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on acceptable terms, we may be unable to successfully develop and commercialize the affected product candidates.
In addition, the agreements under which we currently license intellectual property or technology from third parties are complex, and certain provisions in such agreements may be susceptible to multiple interpretations. The resolution of any contract interpretation disagreement that may arise could narrow what we believe to be the scope of our rights to the relevant intellectual property or technology, or increase what we believe to be our financial or other obligation under the relevant agreement, either of which could have a material adverse effect on our business, financial condition, results of operations and prospects.
If our efforts to protect the proprietary nature of the intellectual property related to our products and product candidates are not adequate, we may not be able to compete effectively in our market.
Our commercial success will depend in part on our ability to obtain additional patents and protect our existing patent position as well as our ability to maintain adequate protection of other intellectual property for current and any future products in the United States and other countries. If we do not adequately protect our intellectual property, competitors may be able to use our technologies and erode or negate any competitive advantage we may have, which could harm our business and ability to achieve profitability. The patent positions of pharmaceutical companies are highly uncertain. The legal principles applicable to patents are in transition due to changing court precedent and legislative action and we cannot assure you that the historical legal standards surrounding questions of validity will continue to be applied or that current defenses relating to issued patents in these fields will be sufficient in the future. Changes in patent laws in the United States such as the America Invents Act of 2011 may affect the scope, strength and enforceability of our patent rights or the nature of proceedings which may be brought by us related to our patent rights. In addition, the laws of some foreign countries do not protect our proprietary rights to the same extent as the laws of the United States, and we may encounter significant problems in protecting our proprietary rights in these countries. We will be able to protect our proprietary rights from unauthorized use by third parties only to the extent that our proprietary technologies any future products are covered by valid and enforceable patents or are effectively maintained as trade secrets.
These risks include the possibility that:
the patent applications that we licensed or have filed on our own may fail to result in issued patents in the United States or in foreign countries;
patents issued or licensed to us or our partners may be challenged, discovered to have been issued on the basis of insufficient or incorrect information and/or held to be invalid or unenforceable;
the scope of any patent protection may be too narrow to exclude other competitors from developing or designing around these patents;
we or our licensors were not the first to make the inventions covered by each of our issued patents and pending patent applications;
we or our licensors were not the first to file patent applications for these inventions;
we may fail to comply with procedural, documentary, fee payment and other similar provisions during the patent application process, which can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights;
future product candidates may not be patentable;
others will claim rights or ownership with regard to patents and other proprietary rights which we hold or license;
delays in development, testing, clinical trials and regulatory review may reduce the period of time during which we could market our product candidates under patent protection; and
we may fail to timely apply for patents on our technologies, products or product candidates.
While we apply for patents covering both our technologies, products, and our potential products, as we deem appropriate, many biopharmaceutical companies and university and research institutions already have filed patent applications or have received patents in our areas of product development. These entities’ applications, patents and other intellectual property rights may conflict with patent applications to which we have rights and could prevent us from obtaining patents or could call into question the validity of any of our patents, if issued, or could otherwise adversely affect our ability to develop, manufacture or commercialize antibiotic candidates. In addition, if third parties file patent applications in the technologies that

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also claim technology to which we have rights, we may have to participate in interference, derivation or other proceedings with the U.S. Patent and Trademark Office (“USPTO”) or applicable foreign patent regulatory authorities, as applicable, to determine our rights in the invention, which may be time-consuming and expensive. Moreover, issued patents may be challenged during post-grant proceedings brought by a third party or the USPTO, or in foreign countries, or in the courts. These proceedings may result in loss of patent claims or adverse changes to the scope of the claims. Patent applications may also be challenged during pre-grant proceedings. If we are unsuccessful in defending any such opposition, only part of such patent would issue or the patent might not issue at all.
If we or our licensors or partners fail to obtain and maintain patent protection for our products and product candidates, or our proprietary technologies and their uses, companies may be dissuaded from collaborating with us. In such event, our ability to commercialize our products and product candidates may be threatened, we could lose our competitive advantage and the competition we face could increase, all of which could adversely affect our business, financial condition, results of operations, and prospects.
If we are sued for infringing intellectual property rights of third parties, litigation will be costly and time consuming and could prevent us or delay us from developing or commercializing our products and product candidates.
Our commercial success depends, in part, on our not infringing the patents and proprietary rights of other parties and not breaching any collaboration or other agreements we have entered into with regard to our technologies, products and product candidates. Numerous third-party U.S. and non-U.S. issued patents and pending applications exist in the areas of antibacterial treatment, including compounds, formulations, treatment methods and synthetic processes that may be applied towards the synthesis of antibiotics. Although no legal action has been commenced or threatened against us by a third party for infringing intellectual property rights, we cannot provide assurances that we or our partners will be free to manufacture or market our product candidates as planned, or that we or our licensors’ and partners’ patents will not be opposed or litigated by third parties.
There is a substantial amount of litigation involving intellectual property in the biopharmaceutical industry generally. If a third party asserts that we infringe its patents or other proprietary rights, we could face a number of risks that could adversely affect our business, financial condition, results of operations, and prospects, including:
infringement and other intellectual property claims, which would be costly and time consuming to defend, whether or not we are ultimately successful, which in turn could delay the regulatory approval process, consume our capital and divert management’s attention from our business;
substantial damages for past infringement, which we may have to pay if a court determines that our products, product candidates or technologies infringe a competitor’s patent or other proprietary rights;
a court prohibiting us from selling or licensing our technologies, products or future products unless the third party licenses its patents or other proprietary rights to us on commercially reasonable terms, which it is not required to do;
if a license is available from a third party, we may have to pay substantial royalties or lump sum payments or grant cross licenses to our patents or other proprietary rights to obtain that license; and
redesigning our products or product candidates so they do not infringe, which may not be possible or may require substantial monetary expenditures and time.
Although we are not currently party to any legal proceedings asserting infringement of third-party intellectual property, in the future, third parties may file claims asserting that our technologies, processes or products infringe on their intellectual property. We cannot predict whether third parties will assert these claims against us or our partners or against the licensors of technology licensed to us, or whether those claims will harm our business. In addition, the outcome of intellectual property litigation is subject to uncertainties that cannot be adequately quantified in advance. If we or our partners were to face infringement claims or challenges by third parties relating to our product candidates, an adverse outcome could subject us to significant liabilities to such third parties, and force us or our partners to curtail or cease the development of some or all of our products and product candidates, which could adversely affect our business, financial condition, results of operations, and prospects.
We may be required to file lawsuits or take other actions to protect or enforce our patents or the patents of our licensors, which could be expensive and time consuming.
Competitors may infringe our patents or the patents of our licensors. To counter infringement or unauthorized use, we may file infringement claims, which can be expensive and time-consuming. Moreover, there can be no assurance that we will have sufficient financial or other resources to file and pursue such infringement claims, which typically last for years before they are concluded. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection, particularly those relating to biopharmaceuticals, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally.

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In addition, in an infringement proceeding, a court may decide that a patent of ours or our licensors is not valid or is unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our patents, or those of our licensors, do not cover the technology in question. An adverse result in any litigation or defense proceedings could put one or more of our patents, or those of our licensors, at risk of being invalidated, held unenforceable or interpreted narrowly and could put our patent applications, or those of our licensors, at risk of not issuing. Moreover, we may not be able to prevent, alone or with our licensors, misappropriation of our proprietary rights, particularly in countries where the laws may not protect those rights as fully as in the United States. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. In addition, if securities analysts or investors perceive public announcements of the results of hearings, motions or other interim proceedings or developments to be negative, the price of our common stock could be adversely affected. The occurrence of any of the above could adversely affect our business, financial condition, results of operations, and prospects.
If we are unable to protect the confidentiality of certain information, the value of our products and product candidates and technology could be materially adversely affected.
We rely on trade secrets, know-how and continuing technological advancement to develop and maintain our competitive position. To protect this competitive position, we regularly enter into confidentiality and proprietary information agreements with third parties, including employees, independent contractors, suppliers and collaborators. We cannot, however, ensure that these protective arrangements will be honored by third parties, and we may not have adequate remedies if these arrangements are breached. In addition, enforcement of claims that a third party has illegally obtained and is using trade secrets, know-how and technological advancements is expensive, time consuming and uncertain. Non-U.S. courts are sometimes less willing than U.S. courts to protect this information. Moreover, our trade secrets, know-how and technological advancements may otherwise become known or be independently developed by competitors in a manner providing us with no practical recourse against the competing parties. If any such events were to occur, they could adversely affect our business, financial condition, results of operations, and prospects.
We have not yet registered our trademarks in all of our potential markets, and failure to secure those registrations could adversely affect our business.
We have obtained trademark registrations with the USPTO for our marks, including “MELINTA,” “MELINTA THERAPEUTICS,” “MELINTA THE ANTIBIOTICS COMPANY” and “BAXDELA” for use in connection with our goods and services, and have filed a U.S. application for a BAXDELA logo mark. We also have filed and anticipate filing foreign trademark applications for the same marks for goods and services outside the United States, and have obtained registrations for some trademarks in jurisdictions outside the United States.  The registrations will be subject to use and maintenance requirements. We may not register all of our trademarks in all of our potential markets, and it is also possible that there are names or symbols other than the foregoing that may be protectable marks for which we have not sought registration, and failure to secure those registrations could adversely affect our business. We cannot assure you that opposition or cancellation proceedings will not be filed against our trademarks or that our trademarks would survive such proceedings.
As a result of the IDB Transaction, we have acquired trademarks and trademark applications filed with the USPTO or other jurisdictions for additional marks, including “ORBACTIV,” “TARGANTA,” and “VABOMERE,” for use in connection with our goods and services. We have also acquired a license to the “MINOCIN” mark. The ORBACTIV and VABOMERE marks, and two VABOMERE logo marks, have matured to registration in the United States. We have also filed applications for an ORBACTIV logo mark. We also have filed and anticipate filing foreign trademark applications for the same marks for goods and services outside the United States, and have obtained registrations for some trademarks in jurisdictions outside the United States.  The registrations will be subject to use and maintenance requirements. We may not register all of our trademarks in all of our potential markets, and it is also possible that there are names or symbols other than the foregoing that may be protectable marks for which we have not sought registration, and failure to secure those registrations could adversely affect our business. We cannot assure you that opposition or cancellation proceedings will not be filed against our trademarks or that our trademarks would survive such proceedings.
Any of our existing or future trademark applications in the United States and any other jurisdictions where we may file may not be allowed for registration, and registered trademarks may not be obtained, maintained or enforced. During trademark registration proceedings, we may receive rejections. Although we are given an opportunity to respond to those rejections, we may be unable to overcome such rejections. In addition, in the USPTO and in comparable agencies in many foreign jurisdictions, third parties are given an opportunity to oppose pending trademark applications and to seek to cancel registered trademarks. Opposition or cancellation proceedings may be filed against our trademarks, and our trademarks may not survive such proceedings.
We may be subject to claims that our employees have wrongfully used or disclosed alleged trade secrets or proprietary information of their former employers.

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As is common in the biotechnology and pharmaceutical industries, we employ individuals who were previously employed at other biotechnology or pharmaceutical companies, including our competitors or potential competitors. We may be subject to claims that these employees, or we, have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers. Litigation may be necessary to defend against these claims. Such claims may lead to material costs for us, or an inability to protect or use valuable intellectual property rights, which could adversely affect our business, financial condition, results of operations, and prospects.
Melinta’s internal computer systems, or those of its CROs or other contractors or consultants, may fail or suffer security breaches, which could result in a material disruption of company operations.
Despite the implementation of security measures, Melinta’s internal computer systems and those of its CROs and other contractors and consultants are vulnerable to damage or disruption from computer viruses, software bugs, unauthorized access, natural disasters, terrorism, war, and telecommunication, equipment and electrical failures. While Melinta has not, to its knowledge, experienced any significant system failure or accident to date, if such an event were to occur and cause interruptions in its operations, it could result in a material disruption of its programs or operations. For example, the loss of clinical trial data from completed or ongoing clinical trials for any of its product candidates could result in delays in its regulatory approval efforts, expose us to liability under certain data privacy lapses, and significantly increase its costs to recover or reproduce the data. To the extent that any disruption or security breach results in a loss of or damage to its data or applications, or inappropriate disclosure or theft of confidential or proprietary information, Melinta could incur liability and its competitive position could be compromised.
We rely significantly on information technology and services that utilize the cloud computing environment and any failure, inadequacy, interruption or security lapse of that technology, including any cybersecurity incidents, could harm our ability to operate our business effectively.
We rely significantly on our information technology to effectively manage and maintain our clinical records, internal infrastructure systems and internal reports. Any failure, inadequacy or interruption of that infrastructure or security lapse of that technology, including cybersecurity incidents, could harm our ability to operate our business effectively. Cybersecurity attacks in particular are evolving and include, but are not limited to, malicious software, attempts to gain unauthorized access to data and other electronic security breaches that could lead to disruptions in systems, misappropriation of our confidential or otherwise protected information and corruption of data. While our existing insurance for cybersecurity risks will help limit our losses, a breach in security, unauthorized access resulting in misappropriation, theft, or sabotage with respect to our proprietary and confidential information, including research or clinical data, could require significant capital investments to remediate and could adversely affect our business, financial condition and results of operations.
Our agreement with BARDA includes provisions that grant rights and remedies to the U.S. government that, if incurred, may make it costlier and difficult for us to successfully market Vabomere and, in certain circumstances, may allow the government to seek title to the work performed under the BARDA agreement.
In February 2014, our subsidiary, Rempex Pharmaceuticals, Inc., entered into a cost-sharing agreement with BARDA to support the development of Vabomere, which includes provisions that reflect the U.S. government’s substantial rights and remedies, many of which are not typically found in commercial contracts.  These rights and remedies include powers of the government to claim rights to data, including intellectual property rights, developed under such contracts under certain circumstances.  The government may also impose U.S. manufacturing requirements for products that embody inventions conceived or first reduced to practice under such contracts. We may not have the right to prohibit the U.S. government from using certain technologies funded by the government and developed by us related to Vabomere, and we may not be able to prohibit third-party companies, including our competitors, from using those technologies in providing products and services to the U.S. government. The U.S. government generally takes the position that it has the right to royalty-free use of technologies that are developed under U.S. government contracts.  Failure to comply with provisions within the BARDA contract may make it costlier and difficult for us to successfully conduct our business. 
Risks Related to Ownership of Our Common Stock
Our largest shareholder owns a significant percentage of our common stock and is able to exert significant control over matters subject to shareholder approval.
As of February 22, 2019, Vatera Capital Management LLC (“VCM”) beneficially owned (as determined in accordance with Rule 13d-3 of the exchange Act) approximately 62% of our outstanding common stock, taking into account the funding of the initial $75 million of convertible loans under the Vatera Loan Agreement on an as-converted basis. In the event that Vatera acquires more than 50% of the outstanding shares of Melinta common stock through conversion of all or a portion of its convertible loans or otherwise, VCM will be able to exert control over matters requiring approval by the stockholders. For example, VCM would be able to control elections of directors, amendments of our organizational documents, or approval of

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any merger, sale of assets, or other major corporate transaction. In addition, although Vatera and its affiliates can acquire 30% or more of Melinta common stock, upon exercise of the Vatera Convertible Loans or otherwise, without it being a change of control under the Deerfield Facility and the Vatera loan Agreement, in the event that a third party acquires from Vatera or otherwise shares of Melinta common stock and, as a result, beneficially owns 30% or more of the Melinta common stock, a "change of control" would occur under the Deerfield Facility and the Vatera Loan Agreement. As a result, the lenders under the Vatera Loan Agreement would have the right to seek repayment or convert their convertible loans, and the change of control would also constitute an Event of Default under the Deerfield Facility. This may prevent or discourage certain acquisition proposals or offers for our common stock, which could limit the opportunity for Melinta’s stockholders to receive a premium for their shares and could also affect the price that some investors are willing to pay for our common stock. Accordingly, VCM's interests may not always coincide with the interests of other stockholders.
Provisions in the Vatera Loan Agreement and the Deerfield Facility may deter or prevent a business combination that may be favorable to Melinta stockholders.
Certain provisions in the Vatera Loan Agreement and the Deerfield Facility could have an adverse impact on a potential acquisition of the Company:
If Melinta enters into a transaction that constitutes a “fundamental change” under the Vatera Loan Agreement and a lender elects to convert the convertible loans thereunder in connection therewith, the Company may be required to increase the conversion rate depending on the then applicable Stock Price (as defined in the Vatera Loan Agreement). The substantial number of shares that are issuable upon conversion of the convertible loans under the Vatera Loan Agreement, in addition to the $74 million principal amount under the Deerfield Facility that is convertible into Melinta common stock, may negatively impact the per share price that a third party may be willing to pay for the Company.
Furthermore, upon the occurrence of a Change of Control (as defined in the Vatera Loan Agreement), the lenders thereunder have the right to either convert the convertible loans (including at the “fundamental change” conversion price if the Change of Control also constitutes a “fundamental change”) or require payment in full at par plus accrued and unpaid interest.
Upon a Change of Control (as defined in the Deerfield Facility), the lenders thereunder have the right to require payment in full at par plus accrued and unpaid interest.
These and other provisions in the Vatera Loan Agreement and Deerfield Facility could deter or prevent a third party from acquiring the Company, or adversely impact the price that an acquirer is willing to pay, even when the acquisition may be favorable to Melinta stockholders.
Raising additional funds by issuing securities or through licensing or lending arrangements may cause dilution to our existing stockholders, restrict our operations or require us to relinquish proprietary rights.
Because we will need to raise additional capital to fund planned operating expenses, we may in the future sell substantial amounts of common stock or securities convertible into or exchangeable for common stock. These future issuances of common stock or common stock-related securities, together with the exercise of outstanding options, restricted stock units and warrants, may result in further dilution to investors, particularly if our stock price, like that of many other companies in the anti-infectives space in recent periods, remains depressed. Further, we may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that additional capital is raised through the sale of equity or convertible debt securities, the issuance of these securities could result in further dilution to our stockholders or result in downward pressure on the price of our common stock.
We are subject to a putative securities class action and shareholder derivative lawsuits, which may require significant management time and attention and significant legal expenses and may result in unfavorable outcomes, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
As discussed in Note 14 to the consolidated financial statements, on November 3, 2017, Melinta merged with Cempra, Inc. in a business combination. Prior to the merger, on November 4, 2016, a securities class action lawsuit was commenced in the United States District Court, Middle District of North Carolina, Durham Division, naming Cempra, Inc. (now known as Melinta Therapeutics, Inc.) (for purposes of this and the following description of legal proceedings, “Cempra”) and certain of Cempra’s officers as defendants.  Two substantially similar lawsuits were filed in the United States District Court, Middle District of North Carolina on November 22, 2016 and December 30, 2016, respectively. Pursuant to the Private Securities Litigation Reform Act, on July 6, 2017, the court consolidated the three lawsuits into a single action and appointed a lead plaintiff and co-lead counsel in the consolidated case. On August 16, 2017, the plaintiff filed a consolidated amended complaint. Plaintiff alleged violations of the Exchange Act in connection with allegedly false and misleading statements made by the defendants between July 7, 2015, and November 4, 2016 (the “Class Period”). the plaintiff sought to represent a class comprised of purchasers of Cempra’s common stock during the Class Period and sought damages, costs and expenses and such

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other relief as determined by the court. On September 29, 2017, the defendants filed a motion to dismiss the consolidated amended complaint. After the motion to dismiss was fully briefed, the court heard oral arguments on July 24, 2018. On October 26, 2018, the court granted the defendants' motion to dismiss and dismissed the plaintiff's consolidated amended complaint in its entirety. On November 21, 2018, the plaintiff filed its notice of appeal to the Fourth Circuit. the appellant filed its opening brief and appendix on January 28, 2019, and the appellee filed its response brief on February 27, 2019. The appellant's reply is due on March 20, 2019. We believe that we have meritorious defenses and we intend to defend the lawsuit vigorously.
On December 21, 2016, a shareholder derivative lawsuit was commenced in the North Carolina Durham County Superior Court, naming certain of Cempra’s former and current officers and directors as defendants and Cempra as a nominal defendant, and asserting claims for breach of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement, and corporate waste (the “December 2016 Action”).  A substantially similar lawsuit was filed in the North Carolina Durham County Superior Court on February 16, 2017 (the “February 2017 Action”).  The complaints are based on similar allegations as asserted in the securities lawsuits described above, and seek unspecified damages and attorneys’ fees.  Both cases were served and transferred to the North Carolina Business Court as mandatory complex business cases.  The Business Court consolidated the February 2017 Action into the December 2016 Action and appointed counsel for the plaintiff in the December 2016 Action as lead counsel.  On July 6, 2017, the court stayed the action pending resolution of the putative securities class action.  That stay was then lifted. The plaintiff filed an amended complaint on December 29, 2017, and was required to file a further amended complaint by February 6, 2018. On February 6, 2018, the plaintiff filed his second amended complaint. On March 8, 2018, defendants filed their motion to dismiss or, in the alternative, stay plaintiff’s second amended complaint. On April 9, 2018, plaintiff filed his opposition to defendants’ motion. Defendants’ filed their reply on April 26, 2018. On June 27, 2018, the parties filed a joint stipulation and consent order to stay the case until (1) 30 days after a final order dismissing the putative securities class action appeal with prejudice is entered; or (2) the parties file a joint stipulation to terminate the stay in the event that a plaintiff in a subsequently filed derivative action makes similar allegations and does not agree to stay the proceedings on substantially the same terms. On June 29, 2018, the court entered an order staying the case pursuant to the joint stipulation, which expired by its term following entry of the court’s dismissal order in the above putative securities class action. On November 29, 2018, the parties filed a second joint stipulation to continue the stay until (1) 30 days after the putative securities class action appeal and any appeals therefrom have been resolved; or (2) the parties file a joint stipulation to terminate the stay in the event that a plaintiff in a subsequently filed derivative action makes similar allegations and does not agree to a stay of proceedings on substantially the same terms. On November 30, 2018, the court entered an order staying the case pursuant to the second joint stipulation. We believe that we have meritorious defenses and we intend to defend the lawsuit vigorously.
On January 3, 2018, the plaintiff who commenced the February 2017 Action, which was subsequently consolidated into the December 2016 Action, transmitted to the Acting Chief Executive Officer of Cempra a litigation demand (the “Demand”).  The Demand requested that Cempra’s Board of Directors (the “Board”) “commence an independent investigation into the matters raised” in the complaint filed in the February 2017 Action and the Demand, “take any and all appropriate steps for Cempra to recover, through litigation if necessary, the damages proximately caused by the directors' and officers' alleged breaches of fiduciary duty,” and “implement corporate governance enhancements to prevent recurrence of the alleged wrongdoing.”  The Board has not yet formally responded to the Demand.
On July 31, 2017, a shareholder derivative lawsuit was commenced in the Court of Chancery of the State of Delaware, naming certain of Cempra’s former and current officers and directors as defendants and Cempra as nominal defendant, and asserting claims for breach of fiduciary duty, unjust enrichment, and corporate waste. The complaint is based on similar allegations as asserted in the putative securities class action described above, and seeks unspecified damages and attorneys’ fees. On October 23, 2017, the defendants filed a motion to dismiss or, in the alternative, stay, the complaint, which was supported by an opening brief filed on November 9, 2017. On January 8, 2018, the plaintiff filed his answering brief in opposition to the defendants’ motion.  The defendants filed their reply in support of their motion on February 7, 2018. On June 18, 2018, the parties filed a joint letter (1) indicating they have agreed to stay the case until the pending motion to dismiss in the November 4, 2016 consolidated federal securities action pending in the United States District Court, Middle District of North Carolina, Durham Division is decided; and (2) requesting that the June 22, 2018 oral argument scheduled for defendants’ motion to dismiss be canceled. On June 27, 2018, the parties filed a stipulation and proposed order to stay the case. On June 28, 2018, the court granted the proposed order and stayed the case on such terms, which expired by its term following entry of the court’s dismissal order in the above putative securities class action. On November 28, 2018, the parties filed a second stipulation and proposed order to stay the case, including all discovery, until (1) 30 days after the putative securities class action appeal and any appeals therefrom are resolved, or (2) the parties file a joint stipulation to terminate the stay in the event that a plaintiff in a subsequently filed derivative action makes similar allegations and does not agree to a stay of proceedings on substantially the same terms. On November 30, 2018, the court granted the joint stipulation and proposed order and stayed the case on such terms. We believe that we have meritorious defenses and we intend to defend the lawsuit vigorously.
On September 15, 2017, a shareholder derivative lawsuit was commenced in the United States District Court for the Middle District of North Carolina, Durham Division, naming certain of Cempra’s former and current officers and directors as defendants and Cempra as nominal defendant, and asserting claims for breach of fiduciary duty, unjust enrichment, abuse of

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control, gross mismanagement, corporate waste, and violation of Section 14(a) of the Exchange Act. The complaint is based on similar allegations as asserted in the putative securities class action described above, and seeks unspecified damages and attorneys’ fees. On December 1, 2017, the parties filed a joint motion seeking to stay the shareholder derivative lawsuit pending resolution of the putative securities class action, which stipulation was ordered by the court on December 11, 2017. On December 11, 2018, the parties filed a joint status report indicating that they are in agreement that the case should remain stated pending the resolution of the putative securities class action appeal and any appeals therefrom. While we believe that we have meritorious defenses to the claims in these lawsuits and intend to vigorously defend the cases, these lawsuits could divert management’s attention from our ordinary business operations.  Further, the outcome of these proceedings is difficult to predict and quantify, and the defense against the proceedings could be costly. The ultimate resolution of these cases could result in payments of monetary damages or other costs, materially and adversely affect our business, financial condition, results of operations and cash flows, or adversely affect our reputation, and consequently, could negatively impact the trading price of our common stock.
We have various insurance policies related to the risks associated with our business, including directors’ and officers’ liability insurance policies. However, there is no assurance that our insurance coverage will be sufficient or that our insurance carriers will cover all claims in that litigation. If we are not successful in our defense of the claims asserted in these cases and those claims are not covered by insurance or exceed our insurance coverage, we may have to pay damage awards, indemnify our officers from damage awards that may be entered against them and pay the costs and expenses incurred in defense of, or in any settlement of, such claims.
In addition, it is possible that similar lawsuits may be filed in the future in the same or other courts that name the same or additional defendants, in which case we could be similarly materially and adversely affected by such additional litigation.
The trading market for our common stock may not provide our shareholders with adequate liquidity.
Our common stock has at times been thinly traded and may be so again. We cannot assure you that an active trading market for our common stock will be maintained. You may not be able to sell your shares quickly or at the market price if trading in our common stock is not active.
If securities or industry analysts do not publish research, or publish inaccurate or unfavorable research, about our business, our stock price and trading volume could decline.
The trading market for our common stock will depend, in part, on the research and reports that securities or industry analysts publish about us or our business. If one or more of the analysts who cover us downgrade our stock or publish inaccurate or unfavorable research about our business, our stock price would likely decline. In addition, if our operating results fail to meet the forecast of analysts, our stock price would likely decline. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, demand for our stock could decrease, which might cause our stock price and trading volume to decline.
The market price of our common stock is highly volatile, and you could lose all or part of your investment.
Our stock price could be subject to wide fluctuations in response to a variety of factors.  In addition, the stock market in general, and the Nasdaq Global Market and the stock of biotechnology companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors may negatively affect the market price of our common stock, regardless of our actual operating performance.
We do not intend to pay dividends on our common stock so any returns will be limited to the value of our stock.
We have never declared or paid any cash dividends on our capital shares. We currently intend to retain all available funds and any future earnings to support our operations and finance the growth and development of our business. We do not intend to pay cash dividends on our common stock for the foreseeable future. In addition, under our credit agreement with Deerfield, we are prohibited from declaring or paying any cash dividends. Any future determination related to dividend policy will be made at the discretion of our board of directors and will depend on then-existing conditions, including our financial condition, operating results, contractual restrictions, capital requirements, business prospects and other factors our board of directors may deem relevant.
Some provisions of our charter documents and Delaware law may have anti-takeover effects that could discourage an acquisition of us by others, even if an acquisition would be beneficial to our shareholders and may prevent attempts by our shareholders to replace or remove our current management.
Provisions in our certificate of incorporation and bylaws, as well as provisions of Delaware law, could make it more difficult for a third party to acquire us or increase the cost of acquiring us, even if an acquisition would benefit our shareholders, and could also make it more difficult to remove our current management. These provisions include:

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authorizing the issuance of “blank check” preferred stock, the terms of which may be established and shares of which may be issued without shareholder approval;
limiting the removal of directors by the shareholders;
creating a staggered board of directors;
prohibiting shareholder action by written consent, thereby requiring all shareholder actions to be taken at a meeting of shareholders;
eliminating the ability of shareholders to call a special meeting of shareholders; and
establishing advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon at shareholder meetings.
These provisions may frustrate or prevent any attempts by our shareholders to replace or remove our current management by making it more difficult for shareholders to replace members of our board of directors, which is responsible for appointing the members of our management. In addition, we are subject to Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with an interested shareholder for a period of three years following the date on which the shareholder became an interested shareholder, unless such transactions are approved by the board of directors. This provision could have the effect of discouraging, delaying or preventing someone from acquiring us or merging with us, whether or not it is desired by or beneficial to our shareholders. Any provision of our certificate of incorporation or bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our shareholders to receive a premium for their shares of our common stock and could also affect the price that some investors are willing to pay for our common stock.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
We lease approximately 21,681 square feet of office space in Morristown, New Jersey for our principal administrative facility, 17,031 square feet of office space in Lincolnshire, Illinois for administrative functions, approximately 27,613 square feet of office and laboratory space in New Haven, Connecticut for our principal research facility, and approximately 24,644 square feet of office space in Chapel Hill, North Carolina (of which, approximately 6,510 square feet are sub-leased). The leases expire in May 2023, June 2022, August 2021, and March 2021, respectively. We are in the process of vacating our leased facilities in New Haven and Chapel Hill.
Item 3. Legal Proceedings
The material set forth in Note 15 of the Notes to Consolidated Financial Statements in Item 10 of this Annual Report on Form 10-K is incorporated herein by reference.  
Item 4. Mine Safety Disclosures
Not applicable


38



PART II
 
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities
Our common stock is traded on the Nasdaq Global Market under the symbol “MLNT” as of November 6, 2017, the first trading date after the merger with Cempra. Between February 3, 2012, and November 6, 2017, our common stock was traded on the Nasdaq Global Market under the symbol “CEMP.”  
On February 28, 2019, the closing price for the common stock as reported on the Nasdaq Global Market was $5.33.
As of February 28, 2019, there were 47 shareholders of record, which excludes shareholders whose shares were held in nominee or street name by brokers. We believe that, when our record holders and shareholders whose shares are held in nominee or street name by brokers are combined, we have in excess of 3,200 shareholders.
Dividend Policy
We have never declared or paid any cash dividends on our common stock.  We currently do not plan to declare dividends on shares of our common stock in the foreseeable future. We expect to retain our future earnings, if any, for use in the operation and expansion of our business. The payment of cash dividends in the future, if any, will be at the discretion of our board of directors and will depend upon such factors as earnings levels, capital requirements, our overall financial condition and any other factors our board deems relevant.
Pursuant to the terms of the Deerfield loan entered into on January 5, 2018, and as amended on January 14, 2019, for as long as the Deerfield loan is outstanding, we may not pay any cash dividends on our common stock. The Deerfield loan is discussed in Note 4 of the Notes to Consolidated Financial Statements included in Item 15 of this Annual Report on Form 10-K.
Equity Compensation Plans
The information required by Item 5 of Form 10-K regarding equity compensation plans is incorporated herein by reference to “Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters” in this report.

39



Stock Performance Graph
This chart compares the cumulative total return on our common stock with that of the Nasdaq Biotechnology Index and the Nasdaq Composite Index. The chart assumes $100 was invested at the close of market on December 31, 2013, in our common stock (formerly Cempra), and the two indexes and assumes the reinvestment of any dividends. The comparisons shown in the graph and table below are based upon historical data, adjusted for stock splits. We caution that the price performance shown in the graph below is not necessarily indicative of, nor is it intended to forecast, the potential future performance of our common stock.
 
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12777424&doc=14

$100 investment in stock or index
 
Ticker
 
12/31/2013
 
12/31/2014
 
12/31/2015
 
12/31/2016
 
12/31/2017
 
12/31/2018
Melinta Therapeutics, Inc.
 
MLNT
 
$
100.00

 
$
189.75

 
$
251.25

 
$
22.60

 
$
25.50

 
$
1.28

Nasdaq
   Biotechnology Index
 
NBI
 
$
100.00

 
$
134.10

 
$
149.41

 
$
117.01

 
$
141.61

 
$
128.45

Nasdaq Composite
   Index
 
IXIC
 
$
100.00

 
$
113.40

 
$
119.89

 
$
128.89

 
$
165.29

 
$
158.87



40



Item 6. Selected Financial Data
The consolidated statement of income data set forth below with respect to the fiscal years ended December 31, 2018, 2017, 2016, and the consolidated balance sheet data at December 31, 2018 and 2017, are derived from the audited consolidated financial statements included in Item 8 of this Annual Report and should be read in conjunction with those financial statements and notes thereto. Share quantities have been adjusted to reflect the exchange ratio applied in the merger with Cempra on November 3, 2017, as well as the one-for-five reverse stock split that was effected on February 22, 2019.
 
Consolidated Statement of Operations Data
 
 
 
 
 
 
 
 
 
 
Year Ended December 31,
 
2018
 
2017
 
2016
 
2015
 
2014
 
(in thousands, except share and per share data)
Revenue:
 
 
 
 
 
 
 
 
 
Total revenue
$
96,430

 
$
33,864

 
$

 
$

 
$

Operating expenses:
 
 
 
 
 
 
 
 
 
Cost of goods sold
41,057

 

 

 

 

Research and development
55,409

 
49,475

 
49,791

 
62,788

 
53,647

Goodwill impairment
25,088

 

 

 

 

Selling, general and administrative
133,312

 
63,325

 
19,410

 
14,159

 
13,562

 
 
 
 
 
 
 
 
 
 
Total operating expenses
254,866

 
112,800

 
69,201

 
76,947

 
67,209

 
 
 
 
 
 
 
 
 
 
Loss from operations
(158,436
)
 
(78,936
)
 
(69,201
)
 
(76,947
)
 
(67,209
)
 
 
 
 
 
 
 
 
 
 
Other income (expense), net
1,244

 
20,020

 
(4,731
)
 
(1,729
)
 
(575
)
 
 
 
 
 
 
 
 
 
 
Net loss
(157,192
)
 
(58,916
)
 
(73,932
)
 
(78,676
)
 
(67,784
)
Accretion of redeemable convertible preferred stock dividends

 
(19,259
)
 
(21,117
)
 
(16,248
)
 
(9,859
)
Net loss attributable to common shareholders
(157,192
)
 
(78,175
)
 
(95,049
)
 
(94,924
)
 
(77,643
)
Basic and diluted loss per share
$
(17.12
)
 
$
(109.28
)
 
$
(20,600.13
)
 
$
(130,929.66
)
 
$
(246,485.71
)
Weighted average shares used in computation of basic and diluted loss per share
9,181,668

 
715,369

 
4,614

 
725

 
315

 
Consolidated Balance Sheet Data
 
 
 
 
 
 
 
 
 
 
As of December 31,
 
2018
 
2017
 
2016
 
2015
 
2014
 
(in thousands)
Balance sheet data:
 
 
 
 
 
 
 
 
 
Cash and equivalents
$
81,808

 
$
128,387

 
$
11,409

 
$
30,158

 
$
10,541

Working capital
$
15,876

 
$
118,034

 
$
(8,330
)
 
$
13,385

 
$
(10,800
)
Total assets
$
441,590

 
$
160,273

 
$
16,634

 
$
36,228

 
$
13,702

Total debt, net
$
110,476

 
$
39,555

 
$
68,849

 
$
28,226

 
$
17,552

Total shareholders' equity (deficit)
$
190,064

 
$
72,336

 
$
(293,451
)
 
$
(222,099
)
 
$
(145,573
)
 
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this Annual Report. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of

41



certain factors. We discuss factors that we believe could cause or contribute to these differences below and elsewhere in this report, including those set forth under “Item 1A. Risk Factors.”
Management Overview
We are a commercial-stage pharmaceutical company focused on developing and commercializing differentiated anti-infectives for the hospital and select non-hospital, or community, settings that address the need for effective treatments for infections due to resistant gram-negative and gram-positive bacteria. We currently market four antibiotics to treat a variety of infections caused by these resistant bacteria.
The following is a highlight of our 2018 activities:
On January 5, 2018, we acquired the Infectious Disease Businesses ("IDB") from Medicines, including the capital stock of certain subsidiaries of Medicines and certain assets related to its infectious disease business, including Vabomere, Orbactiv and Minocin for injection.
In connection with the acquisition of the IDB, we entered into a new financing agreement, the Deerfield Facility, with an affiliate of Deerfield Management Company, L.P. (together with certain funds managed by Deerfield Management Company, L.P. (“Deerfield”)). The Deerfield Facility provides up to $240.0 million in debt and equity financing, with a term of six years. Deerfield made an initial disbursement of $147.8 million in loan financing. The lender also purchased 3,127,846 shares of Melinta common stock for $42.2 million under the Deerfield Facility, for a total initial financing of $190.0 million.
In connection with the acquisition of IDB, Melinta received $40.0 million in additional equity financing from existing and new investors.
We raised another $115.3 million, net of issuance costs, in a public equity financing in May 2018.
In September 2018, we entered into a license agreement with Menarini which grants to Menarini the exclusive right to market Vabomere, Orbactiv and Minocin for injection in 68 countries in Europe, Asia-Pacific and the Commonwealth of Independent States. The total proceeds over the life of the agreement may exceed €100.0 million.
In November 2018, the European Commission approved Vabomere™ (meropenem and vaborbactam) for approval as a treatment for adult patients with complicated intra-abdominal (cIAI) and urinary tract infections (cUTI), hospital-acquired pneumonia including ventilator associated pneumonia (HAP/VAP), bacteraemia that occurs in association with any of these infections, and infections due to aerobic Gram-negative organisms where treatment options are limited.
On December 31, 2018, we entered into a Senior Subordinated Convertible Loan Agreement (the “Loan Agreement”) with Vatera Healthcare Partners LLC and Vatera Investment Partners LLC (together, “Vatera”) pursuant to which Vatera committed to provide $135.0 million over a period of five months, subject to the satisfaction of certain conditions (see Note 4 to the consolidated financial statements). This agreement was approved by shareholders at a Special Meeting held on February 19, 2019. We drew $75.0 million under this facility in February 2019, and we expect to draw the remaining $60.0 million by early July 2019.
On January 14, 2019, Melinta and Deerfield entered into an amendment to the Deerfield Facility (the “Deerfield Facility Amendment”). The amendments set forth in the Deerfield Facility Amendment adjust certain covenants and provides for the conversion of up to $74.0 million in principal amount of the loans under the Deerfield Facility at Deerfield’s option at any time, subject to the 4.985% Ownership Cap. See Note 4 to the consolidated financial statements for further details.
We are not currently generating revenue from operations that is sufficient to cover our operating expenses and do not anticipate generating revenue sufficient to offset operating costs in the short-term. We have incurred losses from operations since our inception and had an accumulated deficit of $719.8 million as of December 31, 2018, and we expect to incur substantial expenses and further losses in the short term for the development and commercialization of our product candidates and approved products. In addition, we have substantial commitments in connection with our acquisition of the infectious disease business of The Medicines Company that we completed in January 2018, including payments related to deferred purchase price consideration, assumed contingent liabilities and the purchase of inventory. And, there are certain financial-related covenants under our Deerfield Facility, as amended in January 2019, including requirements that we (i) file an Annual Report on Form 10-K for the year ending December 31, 2019, with an audit opinion without a going concern qualification, (ii) maintain a minimum cash balance of $40.0 million through March 2020, and thereafter, a balance of $25.0 million, and (iii) achieve net revenue from product sales of at least $63.75 million for the year ending December 31, 2019. (See Note 4 to the consolidated financial statements for further details.) Our future cash flows are dependent on key variables such as our ability to access additional capital under our Vatera and Deerfield credit facilities, our ability to secure a working capital revolver, which is allowed under the Deerfield Facility and required under the Vatera facility, and most importantly, the level of sales

42



achievement of our four marketed products. Our current operating plans include assumptions about our projected levels of product sales growth in the next 12 months in relation to our planned operating expenses. Revenue projections are inherently uncertain but have a higher degree of uncertainty in an early-stage commercial launch, which we have in Baxdela and Vabomere, where there is not yet a robust sales history. While we have a plan to achieve the current expected sales levels of our products, we are unable to conclude based on applying the requirements of FASB Accounting Standards Codification 205-40, Presentation of Financial Statements - Going Concern (“ASC 205”) that such revenue is “probable” as defined under this accounting standard. In addition, given our forecasted product sales are not deemed probable under ASC 205, our ability to draw the additional $50.0 million of capacity under the Deerfield Facility, which is conditional based on meeting certain sales-based milestones before the end of 2019, is also not considered to be probable under the accounting guidance. As such, we are not able to conclude under ASC 205 that the actions discussed below will be effectively implemented and, therefore, our current operating plans, existing cash and cash collections from existing revenue arrangements and product sales may not be sufficient to fund our operations for the next 12 months. As such, we believe there is substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of liabilities that might be necessary should we be unable to continue as a going concern.
In the fourth quarter of 2018, the Company took actions to reduce its operating spend, including a reduction to the workforce of approximately 20.0% and a decision to begin to wind down its research and discovery function. To provide additional operating capital, in December 2018, the Company entered into a Senior Subordinated Convertible Loan Agreement (the “Loan Agreement”) with Vatera Healthcare Partners LLC and Vatera Investment Partners LLC (together, “Vatera”) pursuant to which Vatera committed to provide $135.0 million over a period of five months, subject to the satisfaction of certain conditions (see Note 4 to the consolidated financial statements). We drew $75.0 million under this facility in February 2019, and we plan to draw the remaining $60.0 million by early July 2019.
 As of December 31, 2018, the Company had $81.8 million in cash and cash equivalents. In addition to drawing the additional $60.0 million available under the Vatera Facility, in the next several months, we plan to put a working capital revolver in place for up to $20.0 million, which is permitted under the Deerfield Facility (see Note 4) and required under the Vatera Loan Agreement (we must establish a working capital revolver of at least $10.0 million in order to draw the final $35.0 million tranche under the Vatera Loan Agreement in July 2019). We are also exploring options to modify the terms of certain liabilities to increase our liquidity over the next 12 to 18 months. Finally, if our cash collections from revenue arrangements, including product sales, and other financing sources are not sufficient, we plan to control spending and would take further actions to adjust the spending level for operations if required. However, there is no guarantee that we will be successful in executing any or all of these initiatives.
Financial Overview
Revenue
Our product sales, net, consist of sales of Baxdela, Vabomere, Orbactiv, and Minocin for injection, net of adjustments for discounts, chargebacks, rebates and other price adjustments. Contract research consists of reimbursement of development costs by licensees of Baxdela, principally associated with our CABP Phase 3 clinical trial, recognized over time as the underlying expense is incurred. License revenue consists of fees and milestones earned by licensing the right to market and distribute our products in territories outside the United States and is generally recognized at the point in time when the fees or milestones are earned.
Cost of Revenue
Cost of goods sold consists of direct and indirect costs—including royalties for intellectual property supporting our products—to manufacture, store and distribute the product sold, as well as amortization expense related to the intangible assets supporting our products. All of our manufacturing and distribution is performed by third parties.
Research and Development Expenses
Since our inception, we have focused much of our resources on our research and development activities, including conducting pre-clinical studies and clinical trials, manufacturing development efforts and activities related to regulatory filings for our product candidates. We recognize our research and development expenses as they are incurred. Our research and development expenses consist primarily of:
employee-related expenses, which include salaries, benefits, travel and share-based compensation expense;
fees paid to consultants and clinical research organizations (“CROs”) in connection with our pre-clinical and clinical trials, and other related clinical trial costs, such as for investigator grants, patient screening, laboratory work and statistical compilation and analysis;
costs related to acquiring and manufacturing clinical trial materials and costs for developing additional manufacturing sources for and the manufacture of pre-approval inventory of our drugs under development;
costs related to compliance with regulatory requirements;

43



consulting fees paid to third parties related to non-clinical research and development;
research and laboratory supplies and facility costs; and
license, research and milestone payments related to licensed technologies while the related drug is in development.
Selling, General and Administrative Expenses
Selling, general and administrative expenses (“SG&A”) consist primarily of salaries and benefits-related expenses for personnel, including stock-based compensation expense, in our executive, finance, sales, marketing and business development functions. SG&A costs also include facility costs for our administrative offices and professional fees relating to legal, intellectual property, human resources, information technology, accounting and consulting services.
Interest income and Expense
Our excess cash balances are invested in money market funds, which generate a minimal amount of interest income. We expect to continue this investment philosophy for excess cash as additional funds are received or generated from product sales.
Historically, we have used notes payable and convertible promissory notes as sources of funding. We record interest on the notes using the effective interest method.
In addition, in connection with the Deerfield Facility and certain deferred and contingent payments due to The Medicines Company as a result of the IDB acquisition in 2018, we initially recorded certain liabilities at fair value, which we calculated using various models and by applying discount factors. These liabilities include two, $25.0 million payments and royalty obligations (discussed in Note 14 and Note 4 to the consolidated financial statements, respectively). The fair values of these liabilities are accreted to the estimated full-cash values of the obligations through non-cash interest expense.
Critical Accounting Policies and Significant Judgments and Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we have prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses and the disclosure of contingent assets and liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to accrued expenses and stock-based compensation. We base our estimates on historical experience, known trends and events, and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Our significant accounting policies are described in more detail in Note 2 to our audited consolidated financial statements appearing elsewhere in this Annual Report. However, we believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating our financial condition and results of operations:
Revenue recognition
Stock-based compensation
Business combinations
In-process research and development
Inventory obsolescence
Impairment of long-lived assets
Revenue Recognition
On January 1, 2018, we adopted Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606). For further information regarding the adoption of Topic 606, see Note 2 to the Consolidated Financial Statements included herein.  
Beginning in the first quarter of 2018, as a result of both the acquisition of IDB and the launch of Baxdela, we distribute Baxdela, Vabomere, Orbactiv, and Minocin for injection products commercially in the United States. While we sell some of our products directly to certain hospitals and clinics, the majority of our product sales are made to wholesale customers who subsequently resell our products to hospitals or certain medical centers, specialty pharmacy providers and other retail pharmacies. The wholesaler places orders with us for sufficient quantities of our products to maintain an appropriate level of inventory based on their customers’ historical purchase volumes and demand. We recognize revenue once we have transferred physical possession of the goods and the wholesaler obtains legal title to the product and accepts responsibility for all credit and collection activities with the resale customer.
The transaction price for our product sales includes several elements of variable consideration. In addition, we enter into arrangements with certain customers, as well as health care providers and payers that purchase our products from wholesalers,

44



that provide for government mandated and/or privately negotiated rebates, chargebacks and discounts with respect to the purchase of our products. The amount of revenue that we recognize upon the sale to the wholesaler, which is our estimate of the ultimate transaction price, reflects the amount we expect to be entitled to in connection with the sale of product to the end customer. At the time of sale to the wholesaler, which is when we transfer control of the product and our performance obligation under the sales contracts are complete, we record product revenues net of applicable reserves for various types of variable consideration, most of which are subject to constraint, while also considering the likelihood and the magnitude of any revenue reversal, based on our estimates of channel mix. The types of variable consideration in our product revenue are as follows:
Prompt pay discounts
Product returns
Chargebacks and customer rebates
Fee-for-service
Government rebates
Commercial payer and other rebates
GPO administration fees
MelintAssist voluntary patient assistance programs
In determining the mix of certain allowances and accruals, we must make significant judgments and estimates. For example, in determining these amounts, we estimate hospital demand, buying patterns by hospitals and/or group purchasing organizations from wholesalers and the levels of inventory held by wholesalers and customers. Making these determinations involves analyzing third party industry data to determine whether trends in historical channel distribution patterns will predict future product sales. We receive data periodically from our wholesale customers on inventory levels and historical channel sales mix and we consider this data in when determining the amount of the allowances and accruals for variable consideration.  
Variable consideration is only included in the transaction price to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved (i.e., constraint). In assessing whether a constraint is necessary, we consider both the likelihood and the magnitude of the revenue reversal. Actual amounts of consideration ultimately received may differ from our estimates. If actual results in the future vary from our estimates, we will adjust these estimates, which will affect net product revenue and earnings in the period such variances become known. The specific considerations we use in our critical estimates and judgments related to variable consideration associated with our products are as follows:
Prompt Pay Discounts – We provide wholesale customers with certain discounts if the wholesaler pays within the payment term. Based on historical experience in the industry, we assume that all wholesale customers will take the prompt pay discount; therefore, the entire amount is reserved. Given that the prompt pay discount cannot exceed the percentage in the contract, there would be no possibility for an additional revenue reversal and thus a constraint is not required.  
Product Returns – In our assessment of the potential for the reversal of significant revenue for product sales, a significant judgment inherent in product sales relates to our estimation of future product returns. Generally, our customers have the right to return any unopened product during the 18-month period beginning six months prior to the labeled expiration date and ending 12 months after the labeled expiration date. Where historical rates of return exist, we use those rates as a basis to establish a returns reserve for product shipped to wholesalers. For our newly launched products, for which we currently do not have history of product returns, we estimate returns based on third-party industry data for comparable products in the market and our other products’ returns history. As we distribute our products and establish historical sales over a longer period of time (i.e., two years), we will be able to place more reliance on historical purchasing and return patterns of our customers when evaluating our reserves for product return. While we believe that our returns reserve is sufficient to avoid a significant reversal of revenue in future periods, if we were to increase or decrease the rate by 1%, it would have impacted revenue by $0.5 million in the year ended December 31, 2018.
At the end of each reporting period, for any of our products, we may decide to constrain revenue for product returns based on information from various sources, including channel inventory levels, product dating, sell-through data, price changes of competitive products and introductions of generic products. At December 31, 2018, after utilization of $0.3 million of the reserve for actual product returns, we maintained a reserve of $1.8 million based on our historical return rate and we increased our returns reserve by approximately $1.2 million due to risk factors that were present in connection with the initial stocking of inventory for the launch of our new products and due to product dating in the channel inventory.
Chargebacks and Rebates – Although we primarily sell products to wholesalers in the United States, we typically enter into agreements with medical centers, either directly or through GPOs acting on behalf of their hospital members, in connection with the hospitals’ purchases of products. Based on these agreements, most of our hospital customers have the right to receive a discounted price for products and volume-based rebates on product purchases. In the case of discounted pricing, we typically provide a credit to our wholesale customers (i.e., chargeback), representing the difference between the customer’s acquisition

45



list price and the discounted price. In the case of the volume-based rebates, we typically pay the rebate directly to the hospitals and medical centers.
Because of these agreements, at the time of product shipment, we estimate the likelihood that product sold to our customers might be ultimately sold to a GPO or medical center. We also estimate the contracting GPO’s or medical center’s volume of purchases. We base our estimate on industry data, hospital purchases and the historic chargeback data we receive from our customers, most of which they receive from wholesalers, which details historic buying patterns and sales mix for GPOs and medical centers, and the applicable customer chargeback rates and rebate thresholds.
Fees-for-service – We offer discounts and pay certain wholesalers service fees for sales order management, data, and distribution services which are explicitly stated at contractually determined rates in the customer’s contracts. We estimate our fee-for-service accruals and allowances based on historical sales, wholesaler and distributor inventory levels and the applicable discount rate. Our discounts are accrued at the time of sale and are typically settled within 60 days after the end of each respective quarter. There is little judgment involved or variation of outcomes for our fee-for-service accruals.
Government Rebates– There are three government rebate programs that we participate in: Medicaid, TRICARE and Medicare Part D.
Medicaid – The Medicaid Drug Rebate Program is a program that includes The Centers for Medicare and Medicaid Services, State Medicaid agencies, and participating drug manufacturers that helps to offset the federal and state costs of most outpatient prescription drugs dispensed to Medicaid patients. The program requires a drug manufacturer to enter into, and have in effect, a national rebate agreement with the Secretary of the Department of Health and Human Services (‘HHS’) in exchange for state Medicaid coverage of most of the manufacturer’s drugs. The Medicaid Drug Rebate Program is jointly funded by the states and the federal government. The program reimburses hospitals, physicians, and pharmacies for providing care to qualifying recipients who cannot finance their own medical expenses.
We enter into contracts with, and pay Medicaid rebates to, individual states; each state will establish and administer their own Medicaid programs and determine the type, amount, duration, and scope of services within broad federal guidelines. Participation in the program requires complex pricing calculations and stringent reporting and certification procedures. At the time of the sale it is not known what the Medicaid rebate rate will be, but we use historical Medicaid rates to estimate the deduction to revenue and current period accrual.
TRICARE – TRICARE is a benefit established by law as the health care program for uniformed service members, retired service members, and their families. We must pay the Department of Defense (“DOD”) rebates for our products that have entered into the normal commercial chain of transactions and are prescribed to TRICARE beneficiaries and paid for by the DOD. The rebate amount is the portion of the price of the product paid by the DOD that exceeds the federal ceiling price. TRICARE rebates have not been material to date.
Medicare Part D – We maintain contracts with Managed Care Organizations (“MCOs”) that administer prescription benefits for Medicare Part D and under which we pay rebates based on the volume of prescriptions. MCOs either own Pharmacy Benefit Managers (“PBMs”) or contract with several PBMs to fulfill prescriptions for patients enrolled under their plans. As patients obtain their prescriptions, utilization data are reported to the MCOs, who generally submit claims for rebates quarterly. We use historical prescriptions data to estimate the deduction to revenue and current period accrual.
We also estimate the number of patients in the prescription drug coverage gap for whom we will owe an additional liability under the Medicare Part D program. Our liability for these rebates consists of invoices received for claims from prior quarters that have not been paid or for which an invoice has not yet been received.
Commercial Payer and Other Rebates – We contract with certain private payer organizations, primarily insurance companies and PBMs, for the payment of rebates with respect to utilization of Baxdela and contracted formulary status. We estimate these rebates and record reserves for such estimates in the same period the related revenue is recognized. Currently, the reserve for customer payer rebates considers future utilization, based on third party studies of payer prescription data, for product that remains in the distribution and retail pharmacy channel inventories at the end of each reporting period. As we distribute our products and establish historical sales over a longer period of time (i.e., more than two years), we will be able to place more reliance on historical data related to commercial payer rebates (i.e., actual utilization units) while continuing to rely on third party data related to payer prescriptions and utilization. In addition, we offer rebates to certain customers based on the volume of product purchased over fixed periods of time.
GPO Administration Fees – We contract with GPOs and pay administration fees related to contracting and membership management services. In assessing if the consideration paid to the GPO should be recorded as a reduction in the transaction price, we determine whether the payment is for a distinct good or service or a combination of both. Since our GPO fees are not specifically identifiable, we do not consider the fees separate from the purchase of the product. Additionally, the GPO services

46



generally cannot be provided by a third party. Because of these factors, the consideration paid is considered a reduction of revenue. When assessing our reserves for GPO administration fees, we review various data including, but not limited to, product remaining in wholesaler channel inventories using third party data.
MelintAssist – We offer patient assistance programs for certain of our products that are intended to provide financial assistance to qualified commercial patients with full or partial prescription drug co-payments required by payers. The calculation of the accrual for co-pay assistance is based on an estimate of claims and the cost per claim that we expect to receive associated with product that has been recognized as revenue but remains in the distribution and pharmacy channel inventories at the end of each reporting period.  
Product Sales Sensitivity Related to Variable Consideration–In assessing whether to constrain revenue for our various discounts, product returns, chargebacks, fees-for-services and other rebate and discount programs, we considered both the likelihood and the magnitude of the revenue reversal, as discussed above. The total transaction price and consideration ultimately received may differ from our estimates. If actual results in the future vary from our estimates, we adjust these estimates, which would affect net product revenue and earnings in the period such variances become known. As a sensitivity measure, the effect of constraining all variable consideration, in a manner that would result in the highest amount of revenue reversal, would have the effect of increasing our sales allowance reserves by $1.2 million at December 31, 2018.
Stock-Based Compensation
We account for stock-based compensation using the fair value method. The fair value of awards granted is estimated at the date of grant and recognized as expense on a straight-line basis over the requisite service period with the offsetting credit to additional paid-in capital. Stock options granted typically fully vest over four years from the grant date and expire after 10 years.
Under our equity plans, stock options are granted at exercise prices not less than the estimated fair value of Melinta’s common stock at the date of grant. We use the Black-Scholes option-pricing model for determining the estimated fair value of awards. Key inputs and assumptions include the expected term of the option, stock price volatility, risk-free interest rate, dividend yield, estimated fair value of our common stock, and exercise price. Many of the assumptions require significant judgment and any changes could have a material impact in the determination of stock-based compensation expense. If a stock-based award is modified, we remeasure the fair value of the award at the modification date using the Black-Scholes model and fresh inputs, then apply that remeasured fair value to the award. We do not estimate forfeitures when recognizing compensation expense; instead, we recognize forfeitures as they occur.
We have historically granted common stock options to members of our management. Prior to the merger with Cempra on November 3, 2017, the fair value of Melinta’s common stock has historically been determined by management with input from an independent external valuation expert. The intent of management was to ensure that the exercise price of issued options is not less than fair value at the date of the grant. As of November 3, 2017, Melinta’s common stock is traded on the Nasdaq market and we no longer use the valuation expert.
The following table summarizes the weighted-average assumptions, other than the estimated fair value of our common stock, used in the Black-Scholes model to value stock option grants for the years ended December 31, 2018, 2017 and 2016.   
 
2018
 
2017
 
2016
Risk-free interest rate
2.6% - 3.1%

 
1.8% - 2.1%

 
1.5
%
Weighted-average volatility
84.8% - 88.9%

 
87.5% - 108.1%

 
67.1
%
Expected term - employee awards (in years)
1.0 - 6.1

 
3.1 - 6.1

 
6.0

Forfeiture rate

 

 

Dividend yield
0
%
 
0
%
 
0
%
Risk-Free Interest Rate—The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for zero coupon U.S. Treasury notes with maturities approximately equal to the option’s expected term.
Weighted-average Volatility—After the merger with Cempra, all outstanding options are to purchase common shares of Cempra (re-named Melinta in the merger). To measure volatility, we used the historical volatility information of our shares in addition to a peer group consisting of the average of reported volatility of selected peer companies in the pharmaceutical and biotechnology industry; the resulting analysis is weighted 90% to the performance of our shares. Prior to the merger, the Company had been privately held since inception. Accordingly, prior to the merger, we determined volatility based on a similar peer group, without the inclusion of our shares.
Expected Term—Our historical exercise behavior on previous grants does not provide a reasonable estimate for future exercise activity for employees who have been awarded stock options in the past three years. Therefore,

47



the average expected term was calculated using the simplified method, as defined by GAAP, for estimating the expected term.
Forfeiture Rate—On January 1, 2016, Melinta adopted the guidance in ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, and changed its accounting policy for stock-based compensation to recognize stock option forfeitures as they occur rather than estimating an expected amount of forfeitures.  
Expected Dividend Yield—We have never declared or paid any cash dividends and do not expect to pay any cash dividends in the foreseeable future.
Business Combinations
We account for acquired businesses using the acquisition method of accounting. This method requires that most assets acquired and liabilities assumed be recognized as of the acquisition date. On January 1, 2018, we adopted ASU 2017-01, Business Combinations (Topic 805) Clarifying the Definition of a Business, which narrows the definition of a business and requires an entity to evaluate if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets, which would not constitute the acquisition of a business. The guidance also requires a business to include at least one substantive process and narrows the definition of outputs. There is often judgment involved in assessing whether an acquisition transaction is a business combination under Topic 805 or an acquisition of assets. In our IDB acquisition, we evaluated the transaction and concluded that the IDB qualified as a “business” under Topic 805 as it has both inputs and processes with the ability to create outputs. Among IDB’s inputs are developed product rights, in-process research and development and intellectual property across multiple classes of drugs and indications, third-party contract manufacturing agreements and tangible assets from which there is potential to create value and outputs.
With respect to business combinations, we determine the purchase price, including contingent consideration, and allocate the purchase price of acquired businesses to the tangible and intangible assets acquired and liabilities assumed, based on estimated fair values. The excess of the purchase price over the identifiable assets acquired and liabilities assumed is recorded as goodwill. With respect to the purchase of assets that do not meet the definition of a business under Topic 805, goodwill is not recognized in connection with the transaction and the purchase price is allocated to the individual assets acquired or liabilities assumed based on their relative fair values.
We engage a third-party professional service provider to assist us in determining the fair values of the purchase consideration, assets acquired, and liabilities assumed. Such valuations require management to make significant estimates and assumptions, especially with respect to contingent liabilities associated with the purchase price and intangible assets, such as developed product rights and in-process research and development programs. Critical estimates that we have used in valuing these elements include, but are not limited to, future expected cash flows using valuation techniques (i.e., Monte Carlo simulation models) and discount rates. Management's estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable.
We record contingent consideration and assumed contingent liabilities resulting from a business combination at their respective fair values on the acquisition date. The purchase price of IDB included contingent consideration related to certain tiered royalty payments based on future net sales, as well as pass-through payments related to licensing and other fees that we receive for the acquired products. Assumed contingent liabilities from Medicines at the time of the acquisition include the achievement of future regulatory and sales-based milestones associated with the acquired products. Over time, increases in fair value from the passage of time are accreted and recorded as non-cash interest expense in the consolidated statements of operation.
Changes to contingent consideration obligations, other than the passage of time, may result from adjustments related, but not limited, to changes in discount rates and the number of remaining periods to which the discount rate is applied, updates in the assumed achievement or timing of any development or commercial milestone or changes in the probability of certain clinical events, changes in our forecasted sales of products acquired, and changes in the assumed probability associated with regulatory approval. At the end of each reporting period, we evaluate the need to remeasure the contingent consideration and, if appropriate, we revalue these obligations and record increases or decreases in their fair value in selling, general and administrative expenses within the accompanying consolidated statements of operations. Significant judgment is employed in determining the appropriateness of these assumptions as of the acquisition date and for each subsequent period. Accordingly, any change in the assumptions described above, could have a material impact on the amount we may be obligated to pay as well as the results of our consolidated results of operations in any given reporting period. During the quarter ended December 31, 2018, we recorded a net fair value reduction to the contingent consideration royalty liability payable to Medicines of approximately $10.3 million, which was driven by a reduction to our long-term revenue forecasts for the products on which we pay royalties. We also recorded a net fair value increase of $1.5 million related to our assumed contingent liabilities based on the achievement of a regulatory approval milestone.
In-Process Research and Development

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The cost of in-process research and development, (“IPR&D”), acquired directly in a transaction other than a business combination, is capitalized if the projects have an alternative future use; otherwise it is expensed. The fair values of IPR&D projects acquired in business combinations are recorded as intangible assets. Several methods may be used to determine the estimated fair value of the IPR&D acquired in a business combination. We utilize the income approach (multi-period excess earnings method) where we forecast future revenue and cash flow for the IPR&D assets, deduct contributory asset charges, and then discount them to present value using an appropriate discount rate. This analysis is performed for each project independently. These assets are treated as indefinite-lived intangible assets until completion or abandonment of the projects, at which time the assets are amortized over the remaining useful life or written off, as appropriate. The IPR&D assets are tested for impairment at least annually or when a triggering event occurs that could indicate a potential impairment. If circumstances indicate the IPR&D assets might be impaired, we will re-apply the income analysis to determine if we need to adjust their carrying value. During the fourth quarter of 2018, we reclassified our IPR&D asset to a definite-lived intangible asset, and we did not recognize any related impairment charges.
Inventory Obsolescence
At December 31, 2018, and December 31, 2017, we reported inventory of $41.3 million and $10.8 million, respectively (net of inventory reserves of $7.1 million and $0.0 million, respectively). Each quarter we review for excess and obsolete inventories and assess the net realizable value. There are many factors that management considers in determining whether or not the amount by which a reserve should be established. These factors include the following:
expected future usage;
expiry dating for finished goods;
whether or not a customer is obligated by contract to purchase the inventory;
historical consumption experience; and
other risks of obsolescence.
Of these factors, expected future usage and the expiry dating of finished goods are the predominant reasons for our reserves at December 31, 2018.
Impairment of Long-Lived Assets
Our long-lived assets consist of goodwill, definite-lived intangible assets which are primarily related to developed product rights and indefinite-lived assets related to in-process research and development, as well as property and equipment. For long-lived assets other than goodwill, we evaluate the recoverability of the carrying amount of our long-lived assets whenever events or circumstances indicate that the carrying amount of an asset may not be fully recoverable at the lowest level of identifiable cash flows, which is each product line. If impairment indicators are present, we assess whether the future estimated undiscounted cash flows attributable to the assets in question are greater than their carrying amounts. If these future estimated cash flows are less than carrying value, we then measure an impairment loss for the amount that carrying value exceeds fair value of the assets. During the fourth quarter of 2018, impairment indicators were present for our product rights intangible assets, so we prepared discounted cash flows attributable to each product to assess whether or not the intangible assets were impaired. The impairment indicators related to revised product sales forecasts, which were lower than those initially developed in connection of the acquisition of the assets. While we concluded that the intangible assets were not impaired because the undiscounted cash flows exceeded the carrying value, if revenue forecasts decrease again in the future, there is a risk that we may conclude that one or more of the intangible assets are impaired in a future period. For sensitivity purposes, if we were to reduce our estimates of cash flows by 10% for each of the intangible assets, we still would have concluded that the assets were not impaired.

Under ASC 350, Intangibles - Goodwill and Other (“ASC 350”), goodwill is required to be tested annually for impairment at a level of reporting referred to as a reporting unit. A reporting unit is an operating segment or one level below an operating segment (also known as a component). Melinta has a single operating segment and a single reporting unit. For the annual goodwill test, ASC 350 permits companies to skip the evaluation of potential impairment indicators and move directly to the quantitative analysis. We opted to move directly to the quantitative analysis to calculate the amount (if any) of goodwill impairment as of December 1, 2018, our annual goodwill impairment testing date.

We compared the carrying value of Melinta’s (net assets), including goodwill, at December 1, 2018 with its estimated fair value to conclude whether or not goodwill was impaired. We used the market capitalization, plus a control premium, as the key indicator of fair value of the Company’s net assets as of December 1, 2018. Given Melinta operates as one reporting unit, the market capitalization reflects the value that the public markets attribute to the Company. The market capitalization of Melinta, plus a control premium, was less than the carrying value of Melinta’s net assets at December 1, 2018; therefore, we concluded that goodwill was impaired. And, since the carrying amount of Melinta’s net assets exceeded its fair value in excess of book value goodwill, we wrote off the entire goodwill balance, resulting in impairment charges of $25.1 million in 2018.
Results of Operations (all amounts in tables in thousands)

49



Comparison of Years Ended December 31, 2018 and December 31, 2017
The results of legacy Cempra have been included in our financial results from the acquisition date, November 3, 2017, and the results of the IDB are included in our results from January 5, 2018. The following table summarizes our results of operations for the years ended December 31, 2018 and 2017: 
 
Year Ended December 31,
 
Increase (Decrease)
 
2018
 
2017
 
Dollars
 
Percent
Product sales, net
$
46,580

 
$

 
46,580

 
NA

Contract research
11,677

 
13,959

 
(2,282
)
 
(16.3
)%
License revenue
38,173

 
19,905

 
18,268

 
91.8
 %
Total revenue
$
96,430

 
$
33,864

 
62,566

 
184.8
 %
Cost of goods sold
$
41,057

 
$

 
$
41,057

 
NA

Research and development
$
55,409

 
$
49,475

 
$
5,934

 
12.0
 %
Goodwill impairment
$
25,088

 
$

 
$
25,088

 
NA

Selling, general and administrative
$
133,312

 
$
63,325

 
$
69,987

 
110.5
 %
Total other income (expense), net
$
1,244

 
$
20,020

 
$
(18,776
)
 
(93.8
)%
Revenue
We recorded product sales, net of adjustments for returns and other allowances, of $46.6 million in the year ended December 31, 2018.
For the year ended December 31, 2018, contract research revenue decreased $2.3 million, to $11.7 million, compared to the year ended December 31, 2017, due to lower expenses in the Baxdela CABP study, which is reimbursed 50% by Menarini. We completed the enrollment for the CABP study in July 2018—which will reduce expenses in future periods—and we expect a decision on FDA approval for Baxdela for the CABP indication in 2019. As such, contract research revenue from Menarini will decrease significantly beginning in 2019.
For the years ended December 31, 2018 and 2017, license revenue was $38.2 million and $19.9 million, respectively. The license revenue in the current period relates principally to the licensing of Vabomere, Orbactiv and Minocin for injection to Menarini, and the license revenue in 2017 relates to the licensing of Baxdela to Menarini.
Cost of goods sold
For the year ended December 31, 2018, cost of goods sold consisted of the cost of products sold to customers, including both direct and indirect costs, royalty expense related to our products and the amortization of intangible assets. We did not have cost of goods sold in the year ended December 31, 2017.
Research and development expenses
Our research and development expenses for the years ended December 31, 2018 and 2017, were $55.4 million and $49.5 million, respectively. The increase of $5.9 million was driven primarily by $3.4 million in employee-related expenses to support our new products, Vabomere, Orbactiv and Minocin for injection, as well as increases in spending on clinical studies of $2.5 million. Our most significant clinical study, examining the use of Baxdela to treat community-acquired bacterial pneumonia (CABP), concluded field work during the year; we incurred $18.3 million on the study during 2018. We expect to wrap up the study, publish results and apply for an sNDA in the second quarter of 2019.
In 2019, we are winding down our early-stage research programs. Accordingly, along with the winding down of the Baxdela CABP study, we expect research and development expenses to decrease materially from historical levels.
Selling, general and administrative expenses
Selling, general and administrative expenses were $133.3 million and $63.3 million for the years ended December 31, 2018 and 2017, respectively. The increase of $70.0 million was primarily driven by increases in selling and administrative personnel-related expenses of $44.0 million, professional and consulting fees of $8.8 million, marketing expenses of $7.7 million, severance expense of $5.3 million, FDA product-related fees of $1.2 million, increased insurance costs of $1.0 million, facility-related costs of $1.1 million because of the new leased facility in New Jersey, and other administrative costs of $9.7 million. These increases were partially offset by fair market value adjustments (gains) of $8.8 million related to the remeasurement of certain elements of contingent consideration from the IDB acquisition; see Note 14 to the consolidated financial statements for further discussion.

50



Goodwill impairment
We recorded goodwill of $25,088 as a component of the purchase accounting for the IDB acquisition in January 2018. In December 2018, we performed an impairment review of our goodwill and indefinite-lived assets. Our review indicated the carrying value of Melinta exceeded its fair value. Accordingly, we recorded an impairment adjustment of $25,088 in December 2018 to reduce our goodwill value to zero.
Other expense (income)
For the year ended December 31, 2018, we recognized other income, net, of $1.2 million as compared with the year ended December 31, 2017, when we recognized other expense, net, of $20.0 million, driven by the following:
Bargain purchase gain—Under the purchase accounting for the merger with Cempra, in 2017 we recognized a bargain purchase gain of $27.7 million, representing the excess of the value of Cempra’s assets acquired in the merger over the purchase price. See Note 14 to the consolidated financial statements in Item 15 of this Annual Report on Form 10-K for discussion of the merger.
Interest expense—Interest expense for the year ended December 31, 2018 and 2017, was $43.2 million and $7.6 million, respectively. Interest expense includes both cash and non-cash components of interest expense. The cash portion of interest expense was $17.5 million in 2018, an increase of $15.0 million from 2017, due to the transition from the 2017 Loan Agreement to the Deerfield Facility, which had a higher loan balance and interest rate. The non-cash portion of interest expense was $25.7 million in 2018, an increase of $20.6 million from 2017. Non-cash interest expense was due to:
Principal accretion and debt cost amortization related to the Deerfield Facility of $6.3 million;
Accretion of deferred purchase price and contingent royalty liabilities from the IDB acquisition of $15.4 million; and
Accretion of a milestone liability from the IDB acquisition of $4.0 million.
Change in fair value of warrant liability—We adjusted the carrying value of the warrant liability to the estimated fair value at each reporting period while the warrants are outstanding. Increases or decreases in the fair value of the warrant liability were recorded within other expense (income) in the statement of operations. We recognized gains of $33.2 million and $0.3 million in the years ended December 31, 2018 and 2017, respectively.
Loss on extinguishment of debt—We recognized a loss on the extinguishment of our 2017 Loan Agreement in the first quarter of 2018 of $2.6 million. See Note 4 to the consolidated financial statements for further discussion.
Gain on loss contract reversal—We recognized a gain of $5.3 million related to the extinguishment of the long-term liability associated with the Toyama long-term supply contract, which we initially recorded in connection with the reverse merger with Cempra in 2017.
Other—We recognized $7.7 million of grant income during the period.
Comparison of Years Ended December 31, 2017 and December 31, 2016
The following table summarizes our results of operations for the years ended December 31, 2017 and 2016: 
 
Year Ended December 31,
 
Increase (Decrease)
 
2017
 
2016
 
Dollars
 
Percent
Revenue
$
33,864

 
$

 
$
33,864

 
NA

Research and development
$
49,475

 
$
49,791

 
$
(316
)
 
(0.6
)%
Selling, general and administrative
$
63,325

 
$
19,410

 
$
43,915

 
226.2
 %
Total other expense, net
$
20,020

 
$
(4,731
)
 
$
24,751

 
(523.2
)%
Revenue
During the year ended December 31, 2017, we recognized revenue of $33.9 million. Of this amount, we recognized $33.0 million under the Menarini agreement, of which $19.9 million related to an upfront licensing fee and $13.1 million related to the cost-sharing arrangements for expenses incurred during 2017.
Research and development expenses
Our research and development expenses for the years ended December 31, 2017 and 2016, were $49.5 million and $49.8 million, respectively. We have focused on two primary areas in these periods. The first area of focus and the primary cost driver has been the clinical development and FDA approval of Baxdela, our lead product candidate that was approved by the FDA in June 2017 and launched commercially in January 2018. The second area of focus during the periods has been the pre-clinical

51



activity for the ESKAPE pathogen program as we work to select a lead program candidate with an optimal efficacy and safety profile.
In total, our research and development costs were relatively flat in 2017 over 2016. In 2017, incremental expense for our Phase 3 clinical study of Baxdela for CABP of $16.8 million was partially offset by reduced expense of $5.0 million due to the conclusion of our Phase 3 ABSSSI clinical study and lower expenses related to other development activities and the development of the ESKAPE pathogen program. Development expenses for our Phase 3 CABP clinical trial increased by $16.8 million in 2017 from 2016, driven by rapid patient enrollment during 2017. While the study was active for the entire year of 2016, we did not ramp up study activity until late in 2016 with our first patient enrollment in December 2016. Development expenses for our Phase 3 clinical study for ABSSSI, testing the intravenous and oral forms of Baxdela, decreased in 2017 versus 2016 by $5.0 million. The study was completed in 2016 and no costs were incurred in 2017. We do not expect to incur any additional costs related to this study.
Other development costs decreased in the year ended December 31, 2017, by $10.3 million versus 2016. This decrease was due primarily to the reduction of manufacturing expenses for Baxdela used in drug trials as we converted to production of commercial product, which is capitalized in inventory, and a reduction of costs associated with preparing to file the NDA for Baxdela, which was filed in the fourth quarter of 2016. In addition, we reduced certain research costs by approximately $3.8 million by shifting outsourced activities to lower cost vendors and internal personnel and lower milestone-related costs incurred in 2017.
Selling, general and administrative expenses
Selling, general and administrative expenses were $63.3 million and $19.4 million for the years ended December 31, 2017 and 2016, respectively. The increase of $43.9 million, or 226.2%, was primarily driven by increases in administrative personnel and facility-related costs of $5.4 million because of additional personnel from Cempra and additional hiring in preparation for becoming a public company, increases in marketing and other costs to support our commercial launch of Baxdela of $12.7 million, one-time costs of $11.7 million for preparation and execution of the merger with Cempra and the IDB acquisition, one-time merger-related personnel costs of $10.0 million, revenue-sharing payments and finders fees associated with the license of rights to Baxdela to Menarini of $2.1 million, and increases in legal expenses of $1.9 million.
Other expense (income)
For the year ended December 31, 2017, we recognized other income of $20.0 million as compared with the year ended December 31, 2016, when we recognized other expense of $4.7 million, driven by the following:
Bargain purchase gain—Under the purchase accounting for the merger with Cempra, we have recognized a bargain purchase gain of $27.7 million, representing the excess of the value of Cempra’s assets acquired in the merger over the purchase price. See Note 3 of the Notes to Consolidated Financial Statements in Item 15 of this Annual Report on Form 10-K for discussion of the merger.
Interest expense—Interest expense for the year ended December 31, 2017 and 2016, was $7.6 million and $4.4 million, respectively. Interest expense includes both cash and non-cash components of interest expense. The cash portion of interest expense was $2.5 million in 2017, an increase of $0.1 million from 2016, due to the transition from 2014 Loan Agreement to the 2017 Loan Agreement, which had a higher loan balance. The non-cash portion of interest expense was $1.1 million in 2017, an increase of $0.1 million from 2016. In addition, we had non-cash interest expense on convertible promissory notes of $4.0 million in 2017, an increase of $3.0 million from 2016, driven by $68.6 million in convertible promissory notes that we issued in the second half of 2016 and first half of 2017. This interest was categorized as non-cash because in the next round of equity financing, all outstanding principal, as well as accrued interest, was to convert into shares of Melinta’s stock.
Change in fair value of tranche assets and liabilities—We adjusted the carrying value of the Convertible Preferred Stock tranche obligations to the estimated fair value at each reporting period while they were outstanding. Increases or decreases in the fair value of tranche obligations are recorded within other income (expense) in the statement of operations. We recognized $1.3 million of expense in the year ended December 31, 2016, upon issuance of the final tranche of Series 4 preferred stock in March 2016. We have not recorded a tranche asset or liability since that date.
Change in fair value of warrant liability—We adjusted the carrying value of the warrant liability to the estimated fair value at each reporting period while the warrants were outstanding (prior to the close of the Cempra merger in November 2017). Increases or decreases in the fair value of the warrant liability were recorded within other expense (income) in the statement of operations. We recognized gains of $0.3 million and $0.8 million in the years ended December 31, 2017 and 2016, respectively.
Loss on extinguishment of debt—We recognized a loss on the extinguishment of our 2014 Loan Agreement in the second quarter of 2017. See Note 5 in Notes to the Consolidated Financial Statements for further discussion.

52



Other—We participate in a Connecticut tax credit program whereby we can claim either cash payments or future tax credits based on qualifying expenditures. We have historically chosen the cash payment incentive and expect to continue to do so in future periods as the tax code allows. This tax credit comprises the majority of the other income for both periods.
Liquidity and Capital Resources
In connection with the IDB transaction, we raised $40.0 million in equity financing and entered into the Deerfield Facility. The Deerfield Facility, as amended in January 2019, provides up to $240.0 million in debt and equity financing, with a term of six years. Under the form of the agreement, Deerfield made an initial disbursement of $147.8 million in loan financing. The lender also purchased 3,127,846 shares of Melinta common stock for $42.2 million under the Deerfield Facility, for a total initial financing of $190.0 million. The interest rate on the debt portion of this initial financing is 11.75%. An additional $50.0 million of debt financing is available, at our discretion, if we have achieved certain revenue thresholds by the end of 2019, and, if drawn, will bear an interest rate of 14.75%. Pursuant to the Deerfield Facility, Deerfield also acquired warrants (held by certain funds managed by Deerfield) for the purchase of 3,792,868 shares of Melinta common stock at a purchase price per share of $16.50. Under the terms of the Deerfield Facility, we are able to secure a revolver credit line of up to $20.0 million. Deerfield holds a first lien on all of our assets, including our intellectual property, but would hold a second lien behind a revolver for working capital accounts. The Deerfield Facility allows for prepayment beginning in January 2021, with prepayment penalties equal to 2% plus a percentage of annual interest at the time of prepayment ranging between 25% and 75%. The Deerfield Facility, while it is outstanding, will limit our ability to raise debt financing in future periods outside of the $20.0 million revolver and the $135.0 million convertible note facility with Vatera, both of which are permitted under the arrangement.
In January 2019, in association with the Vatera Loan Agreement (discussed below), the Deerfield Facility was amended, reducing certain revenue thresholds, adding a requirement that we maintain a minimum cash balance of $40 million through March 2020, and converting $74.0 million of the original loan to convertible notes. The notes are convertible to convertible preferred shares—which can then be converted to common shares—or directly to common shares, at the discretion of Deerfield.
We raised additional capital in 2018 through public common stock offerings and strategic partnerships. In May 2018, the Company completed a follow-on offering in which we raised proceeds, net of issuance costs, of $115.3 million. In September 2018, we entered into a license agreement with Menarini, under which we granted the exclusive rights to market Vabomere, Orbactiv and Minocin for injection in 68 countries in Europe, Asia-Pacific and the Commonwealth of Independent States to Menarini and received an upfront license fee of €17.0 million. In addition, Menarini paid us a milestone of €15.0 million upon achieving European marketing approval for Vabomere in the fourth quarter of 2018, and it is required to pay us potential regulatory- and sales-based milestones, and sales-based royalties.
We have incurred significant losses and negative cash flows from operating activities since our inception. As of December 31, 2018, we had an accumulated deficit of $719.8 million, and we expect to continue to incur significant losses through at least 2020. In addition, we have substantial commitments in connection with our acquisition of the infectious disease business of The Medicines Company that we completed in January 2018, including payments related to deferred purchase price consideration, assumed contingent liabilities and the purchase of inventory. And, there are certain financial-related covenants under our Deerfield Facility, as amended in January 2019, including requirements that we (i) file an Annual Report on Form 10-K for the year ending December 31, 2019, with an audit opinion without a going concern qualification, (ii) maintain a minimum cash balance of $40.0 million through March 2020, and thereafter, a balance of $25.0 million, and (iii) achieve net revenue from product sales of at least $63.8 million for the year ending December 31, 2019. (See Note 4 to the consolidated financial statements for the accounting treatment of the Deerfield Facility.). In November 2018, the Company took actions to reduce its operating spend, including a reduction to the workforce of approximately 20.0% and a decision to begin to wind down its research and discovery function. To provide additional operating capital, in December 2018, the Company entered into a Senior Subordinated Convertible Loan Agreement (the “Loan Agreement”) with Vatera Healthcare Partners LLC and Vatera Investment Partners LLC (together, “Vatera”) pursuant to which Vatera committed to provide $135.0 million over a period of five months, subject to the satisfaction of certain conditions (see Note 4). We drew $75.0 million under this facility in February 2019, and we plan to draw the remaining $60.0 million by early July 2019. We must establish a working capital revolver of at least $10.0 million in order to draw the final $35.0 million tranche under the Loan Agreement in July 2019.
As of December 31, 2018, we held cash and cash equivalents of $81.8 million to fund operations. We are focused on several initiatives to fund the future operations of the Company and reduce our risk of default under the Deerfield Facility with respect to minimum cash requirements. In addition to drawing the additional $60.0 million available under the Vatera Facility, in the next several months, we plan to put a working capital revolver in place for up to $20.0 million, which is permitted under the Deerfield Facility (see Note 4) and required under the Vatera Loan Agreement. We are also exploring options to modify the terms of certain liabilities to increase our liquidity over the next 12 to 18 months. Finally, if our cash collections from revenue arrangements, including product sales, and other financing sources are not sufficient, we plan to control spending and would

53



take further actions to adjust the spending level for operations if required. However, there is no guarantee that we will be successful in executing any or all of these initiatives.
As discussed in the Overview in Management's Discussion and Analysis, we believe there is substantial doubt about our ability to continue as a going concern. Should we be unable to adequately finance the Company, the Company’s business, result of operations, liquidity and financial condition would be materially and negatively affected, and we would be unable to continue as a going concern. Additionally, there can be no assurance that we will achieve sufficient revenue or profitable operations to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of liabilities that might be necessary should we be unable to continue as a going concern.
As an early commercial-stage company, we have not yet demonstrated the ability to successfully commercialize and launch a product candidate or market and sell products, and our marketed products have very limited sales history, with Baxdela and Vabomere launching within the last 18 months, and Orbactiv and Minocin for injection launching in 2014 and 2015, respectively. As such, even if we obtain sufficient capital to support our operating plan, it is possible that we may fail to appropriately estimate the timing and amount of our funding requirements and we may need to seek additional funding sooner, and in larger amounts, than we currently anticipate.
The following table provides a summary of our cash position as of each of the period-end dates and the cash flows for each of the periods presented below (in thousands):  
 
Year Ended December 31,
 
2018
 
2017
 
2016
Cash, cash equivalents and restricted cash as of the end of the period
$
82,008

 
$
128,587

 
$
11,409

Net cash provided by (used in):
 
 
 
 
 
Operating activities
(171,545
)
 
(75,598
)
 
(70,580
)
Investing activities
(170,072
)
 
155,061

 
(463
)
Financing activities
295,038

 
37,715

 
52,294

Net increase in cash and equivalents
$
(46,579
)
 
$
117,178

 
$
(18,749
)
Comparison of the Years ended December 31, 2018 and 2017
Operating Activities
Net cash used in operating activities for the years ended December 31, 2018 and 2017, was $171.5 million and $75.6 million, respectively. The primary use of cash during 2018 was to support our selling, general and administrative functions and fund our manufacturing and research and development activities for our products and product candidates. The primary use of cash during 2017 was to fund our research and development activities for our product candidates, prepare for the launch of Baxdela in early 2018, and to support our selling, general and administrative functions. We used $95.9 million more in operations during 2018 due primarily to higher inventory-related purchases of $47.5 million, principally from commitments assumed as part of the IDB acquisition, and higher operating expenses, excluding non-cash expenses, of $110.1 million, driven by the launch off Baxdela in 2018, the support of sales activities for Vabomere, Orbactiv and Minocin for injection, and additional headcount and acquisition-related transaction costs. These increases in the use of cash in operating activities were partially offset by an increase of $62.6 million in revenue recognized and by other changes in working capital accounts year over year totaling $0.9 million.
Investing Activities
Net cash used in investing activities was $170.1 million in the year ended December 31, 2018, compared with net cash provided of $155.1 million for the years ended December 31, 2017. The primary driver for the large decrease between years was the merger with Cempra in November 2017, in which we acquired $161.4 million in cash, and the acquisition of IDB in 2018, for which we paid $166.4 million. During the year ended December 31, 2017, we acquired $7.5 million of intangible assets—of which we paid $5.5 million during 2017 and $2.0 million in 2018—by making milestone payments in connection with the FDA approval of Baxdela. Other cash used in investing activities in both of these periods was primarily for capital expenditures for facility improvements, lab equipment, software and office furniture and equipment.
Financing Activities
Net cash provided by financing activities for the years ended December 31, 2018 and 2017, was $295.0 million and $37.7 million, respectively. During the year ended December 31, 2018, cash provided by financing activities related primarily to the Deerfield Facility, which provided $183.5 million through promissory notes, common stock, warrants and the assumption of certain liabilities; and the issuance of common stock for $155.3 million. These were partially offset by cash outflows for the

54



retirement of the 2017 Loan Agreement, including exit fees, of $42.2 million, and deferred IDB payments in the form of sales-based royalties of $1.6 million. During the year ended December 31, 2017, cash provided by financing activities was comprised primarily of the issuance of notes payable of $63.4 million, partially offset by note payments of $25.7 million.  
Comparison of the Years Ended December 31, 2017 and 2016
Operating Activities
Net cash used in operating activities for the years ended December 31, 2017 and 2016, was $75.6 million and $70.6 million, respectively. For both periods presented, the primary use of cash was to fund development and discovery research activities for our product candidates and to support our selling, general and administrative functions. We used $5.0 million more in operations during 2017 due primarily to higher operating expenses, excluding non-cash expenses, of $6.8 million, driven by the preparation of our launch of Baxdela in 2018, additional headcount and acquisition-related transaction costs, partially offset by $33.9 million of revenue recognized in 2017. This increase in cash used in operations was partially offset by changes in working capital accounts year over year totaling $1.8 million.
Investing Activities
Net cash provided in investing activities was $155.1 million in the year ended December 31, 2017, compared with net cash used of $0.5 million for the years ended December 31, 2016. The primary driver for the large increase between years was the merger with Cempra in November 2017, in which we acquired $161.4 million in cash. During the year ended December 31, 2017, we also acquired $7.5 million of intangible assets—of which we have paid $5.5 million and have accrued $2.0 million—by making milestone payments in connection with the FDA approval of Baxdela. Other cash used in investing activities in both of these periods was primarily for capital expenditures for facility improvements, lab equipment, software and office furniture and equipment.
Financing Activities
Net cash provided by financing activities for the years ended December 31, 2017 and 2016, was $37.7 million and $52.3 million, respectively. During the year ended December 31, 2017, cash provided by financing activities related primarily to the issuance of convertible promissory notes totaling $24.5 million and the refinancing of our 2014 loan agreement with Hercules Growth Technologies (the “2014 Loan Agreement”), replacing it with the 2017 Loan Agreement. During the year ended December 31, 2016, cash provided by financing activities was comprised primarily of preferred stock financing of $13.6 million and the issuance of notes payable of $44.1 million, partially offset by note payments of $5.5 million.   
Funding Sources and Requirements
Our principal operating source of funds is product sales, although we also generate significant amounts of funds through licensing our products in markets outside the U.S. and thorough grants which reimburse a portion of our research and development activities.
In February 2018, we launched Baxdela in the United States and, in January 2018, we acquired rights to three commercial antibiotics in connection with the acquisition of the Infectious Disease Business from Medicines. We do not expect to generate revenue from any other product candidates under development unless and until we successfully commercialize our products or enter into additional collaborative agreements with third parties.
In addition, we are exploring other partnerships and collaborations to assist with the funding of certain of our early-stage and clinical-stage research and development programs.
In connection with the IDB Transaction, we entered into the Deerfield Facility. The Deerfield Facility, as amended in January 2019, provides up to $240.0 million in debt and equity financing, with a term of six years. Deerfield made an initial disbursement of $147.8 million in loan financing. The lender also purchased 3,127,846 shares of Melinta common stock for $42.2 million under the Deerfield Facility, for a total initial financing of $190.0 million. The interest rate on the debt portion of this initial financing is 11.75%. The additional $50.0 million of debt financing is available if we have achieved certain revenue thresholds by the end of 2019, and, if drawn, will bear an interest rate of 14.75%. Pursuant to the Deerfield Facility, Deerfield also acquired warrants (held by certain funds managed by Deerfield) for the purchase of 3,792,868 shares of Melinta common stock at a purchase price per share of $16.50. Under the terms of the Deerfield Facility, we are able to secure a revolver credit line of up to $20.0 million. Deerfield holds a first lien on all of our assets, including our intellectual property, but would hold a second lien behind a revolver for working capital accounts. The Deerfield Facility allows for prepayment beginning in January 2021, with prepayment penalties equal to 2% plus a percentage of annual interest at the time of prepayment ranging between 25% and 75%. The Deerfield Facility, while it is outstanding, will limit our ability to raise debt financing in future periods outside of the Vatera Loan Agreement for $135 million, which was effective in the first quarter of 2019, and the $20.0 million revolver, both permitted under the arrangement.

55



To provide additional operating capital, in December 2018, the Company entered into a Senior Subordinated Convertible Loan Agreement (the “Loan Agreement”) with Vatera Healthcare Partners LLC and Vatera Investment Partners LLC (together, “Vatera”) pursuant to which Vatera committed to provide $135.0 million over a period of five months, subject to the satisfaction of certain conditions (see Note 4). We drew $75.0 million under this facility in February 2019, and we plan to draw the remaining $60.0 million by early July 2019. We must establish a working capital revolver of at least $10.0 million in order to draw the final $35.0 million tranche under the Loan Agreement in July 2019.
We expect to continue to incur significant losses into 2020, as we continue the development of, and seek regulatory approvals for, our product candidates, and commercialize our approved products. We are also subject to the risks associated with the development of new therapeutic products, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business operations. Additionally, we expect to incur additional costs associated with operating as a public company and may need substantial additional funding in connection with our continuing operations, commercial, discovery and product development activities.
As discussed above, we expect our operating expenses to continue to increase for the foreseeable future and, as a result, we will need additional capital to support the working capital requirements of commercialized products and to fund further development of Melinta’s other product candidates.
We intend to use our cash and cash equivalents as follows:
to fund the activities supporting the commercialization efforts for our marketed products;
pursue additional indications and regional approvals, leveraging our robust product portfolio and  minimum 10-year market exclusivity period in the United States, including our Phase 3 trial for Baxdela for the treatment of hospital treated CABP; and
the remainder for working capital, selling, general and administrative expenses, and other general corporate purposes.
In addition, we may also use a portion of our cash and cash equivalents for the acquisition of, or investment in, companies, technologies, products or assets that complement our business. With the Cempra and IDB transactions recently integrated, we believe we are well positioned to add both internally- and externally-developed products to our portfolio while adding minimal new costs given our infrastructure that is now in place. As such, we may selectively pursue the addition of externally-developed products to our portfolio, adding to our existing marketed products and pipeline.
Until we can generate a sufficient amount of revenue from our products and licensing agreements, we expect to finance our future cash needs through the capital available under the Vatera and Deerfield credit facilities.
Off-Balance Sheet Arrangements
During the periods presented, we did not have, nor do we currently have, any off-balance sheet arrangements as defined under the applicable rules of the SEC.
Contractual Obligations and Commitments
The following table summarizes our minimum future cash payments due under our contractual obligations as of February 28, 2019, that will affect our future liquidity (in thousands): 
Contractual Obligations(1)
2019
 
2020
 
2021
 
2022
 
2023
 
2024 &
Thereafter
 
Total
Note payable(2)
$
17,508

 
$
17,653

 
$
17,605

 
$
81,391

 
$
78,756

 
$
93,892

 
$
306,805

Purchase commitments(3)
19,145

 

 

 

 

 

 
19,145

Operating lease obligations(4)
2,348

 
2,269

 
1,827

 
1,238

 
624

 
262

 
8,568

Total contractual cash
   obligations
$
39,001

 
$
19,922

 
$
19,432

 
$
82,629

 
$
79,380

 
$
94,154

 
$
334,518

(1)
Table excludes milestones and other contingent payments that may become due under Melinta’s license and collaboration agreements because they are payable upon the occurrence of certain future events that are not currently probable. It also excludes any amounts that may become payable when we draw additional amounts under the Vatera Loan Agreement.
(2)
Represents amounts payable under the Deerfield Facility, as amended, and the Vatera Loan Agreement, to the extent we have drawn funds under either agreement (see Note 4 to the Consolidated Financial Statements).
(3)
Represents amounts that will be owed for firm commitments to purchase goods or services, principally inventory.
(4)
Includes the minimum lease rental payments for our corporate office building in Lincolnshire, Illinois, our research and administrative facility in New Haven, Connecticut, our facilities in Chapel Hill, North Carolina, office equipment leases and vehicle leases.

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Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Our primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of U.S. interest rates.  Due to the short-term duration of our investment portfolio and the low risk profile of our investments, an immediate 10.0% change in interest rates would not have a material effect on the fair market value of our portfolio.  Accordingly, we would not expect our operating results or cash flows to be affected to any significant degree by the effect of a sudden change in market interest rates on our investment portfolio.
We do not believe that our cash and equivalents have significant risk of default or illiquidity. In addition, we maintain significant amounts of cash and equivalents at one or more financial institutions that are in excess of federally insured limits.
Inflation generally affects us by increasing our cost of labor and clinical trial costs. We do not believe that inflation has had a material effect on our results of operations during 2018, 2017 or 2016.
Item 8. Financial Statements and Supplementary Data
The financial statements required to be filed pursuant to this Item 8 are appended to this report. An index of those financial statements is found in Item 15.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
 
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) are designed only to provide reasonable assurance that information to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosure. As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (our principal executive officer) and Chief Financial Officer (our principal financial officer), of the effectiveness of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(b). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report to provide the reasonable assurance discussed above.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f) and 15d-15(f). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). Our internal control over financial reporting 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 Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
There are limitations inherent in any internal control, such as the possibility of human error and the circumvention or overriding of controls. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met, and may not prevent or detect misstatements. As conditions change over time, so too may the effectiveness of internal controls. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
Management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the Company’s internal control over financial reporting as of December 31, 2018, based on the framework in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission. Based on its assessment, management has concluded that our internal control over financial reporting was effective as of December 31, 2018.
Deloitte Touche, LLP, an independent registered public accounting firm, was engaged to audit the effectiveness of our internal control over financial reporting as of December 31, 2018 and has issued an audit report regarding their assessment of

57



the effectiveness of internal control over financial reporting which is included on page F-2 in this Annual Report on Form 10-K.

Changes in Internal Control over Financial Reporting
No change to our internal control over financial reporting occurred during the last fiscal quarter ended December 31, 2018, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.


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Item 9B. Other Information
Not applicable.


59



PART III
 
Item 10. Directors, Executive Officers and Corporate Governance
 
Code of Ethics
We have adopted a written code of ethics and business conduct that applies to our directors, executive officers and all employees. We intend to disclose any amendments to, or waivers from, our code of ethics and business conduct that are required to be publicly disclosed pursuant to rules of the SEC by filing such amendment or waiver with the SEC. This code of ethics and business conduct can be found in the corporate governance section of our website, www.melinta.com.
Directors  
Name
 
Age
 
Position
Kevin T. Ferro
 
48
 
Chairman of the Board of Directors
John H. Johnson
 
61
 
Chief Executive Officer and Director
Bruce L. Downey
 
71
 
Director
Jay Galeota
 
53
 
Director
David Gill
 
64
 
Director
Thomas P. Koestler, Ph.D.
 
67
 
Director
Garheng Kong, M.D., Ph.D.
 
43
 
Director
David Zaccardelli, Pharm.D.
 
54
 
Director
Kevin T. Ferro—Mr. Ferro has served as the chairman of the Company’s board of directors since November 2017. He has served as the chief executive officer and managing member of Vatera Capital Management LLC, the manager of Vatera Healthcare Partners LLC, since January 2019. Mr. Ferro serves as chairman of the board of ImmusanT, Inc. Beginning October 2012, Mr. Ferro served as a member of the board of directors for Pearl Therapeutics, Inc., and was chairman from December 2012 until its sale to AstraZeneca in June 2013, and he served as a member of the board of directors of Kos Pharmaceuticals, Inc. from 2004 until its sale to Abbott Laboratories in 2006. Prior to forming Vatera Capital Management, Mr. Ferro served as the chief executive officer, chief investment officer and managing member of Vatera Holdings LLC, the former manager of Vatera Healthcare Partners LLC, from April 2007 through January 1, 2019. Mr. Ferro founded Ferro Capital LLC, an investment advisory firm, in 2001. Prior to that, Mr. Ferro was the Global Head of Alternative Investment Strategies for Commerzbank, one of Germany’s largest listed banks. Prior to Commerzbank, Mr. Ferro was a Vice President at D. E. Shaw & Co. LP. Mr. Ferro received an A.B. in Government from Harvard University.
John H. Johnson—Mr. Johnson has served as our interim Chief Executive Officer since October 2018 and as our chief Executive Officer since February 2019, and has served on the Company’s board of directors since June 2009. He served as president and chief executive officer of Dendreon Corp., a publicly traded biotechnology company (Nasdaq: DNDN), from February 2012, became chairman in July 2013, and served as chairman until June 2014 and president and chief executive officer until August 2014. He served as the chief executive officer and as a director of Savient Pharmaceuticals, Inc., a company that developed and commercialized specialty pharmaceuticals, from 2011 to January 2012. Mr. Johnson was senior vice president of Eli Lilly and Company (NYSE: LLY) and president of Lilly Oncology, Eli Lilly’s oncology business unit, from 2009 to 2011. From 2007 to 2009, Mr. Johnson was chief executive officer of ImClone Systems Incorporated, a biopharmaceutical development company, and was also a member of ImClone’s board of directors until it became a wholly owned subsidiary of Eli Lilly in 2008. From 2005 to 2007, Mr. Johnson served as company group chairman of Johnson & Johnson’s Worldwide Biopharmaceuticals unit. Mr. Johnson served as chairman of the board of Tranzyme, Inc. (Nasdaq: TZYM), a publicly traded biopharmaceutical company, from December 2010 until July 2013. Mr. Johnson serves as the chairman of the board of Strongbridge Biopharma PLC (Nasdaq: SBBP), a global biopharmaceutical company, and also serves as lead independent director of Portola Pharmaceuticals, Inc. (Nasdaq: PTLA), a biopharmaceutical company, and Histogenics Corporation (Nasdaq: HSGX), a regenerative medicine company. Mr. Johnson also serves on the board of directors of Aveo Pharmaceuticals, Inc. (Nasdaq: AVEO), a biopharmaceutical company. Mr. Johnson holds a B.S. in Education from East Stroudsburg University of Pennsylvania.
Bruce L. Downey—Mr. Downey has been a director since October 2018. He has served as a partner at NewSpring Capital, a venture capital firm, since April 2009. Previously, Mr. Downey was chairman and chief executive officer of Barr Pharmaceuticals, Inc., a global specialty pharmaceutical company that operated in more than 30 countries worldwide and was acquired by Teva Pharmaceutical Industries Ltd. in 2008. Mr. Downey is a member of the board of directors of Cardinal Health, Inc. (NYSE: CAH), serving on the audit committee, is Non-Executive Chairman and a member of the board of directors of Momenta Pharmaceuticals, Inc. (Nasdaq: MNTA), serving on the audit and compensation committees, as well as privately held

60



companies. Mr. Downey graduated with honors from Miami University in 1969 and received his law degree, cum laude, from The Ohio State University. Mr. Downey’s qualifications to sit on the board include his significant experience serving as a chief executive officer of a global generic pharmaceutical company that also had a substantial brand business and an active biologics research and development program, his years serving as a lawyer in private practice and his experience serving on other boards of directors in the biopharmaceutical industry.
Jay Galeota—Mr. Galeota has served as a member of the Company’s board of directors since November 2017. Mr. Galeota has served as the president and chief operating officer of G&W Laboratories since 2016. From 1988 to 2016 Mr. Galeota served in many diverse positions at Merck & Co., Inc., where he was most recently chief strategy & business development officer and president, emerging businesses. From 2011 to 2016 he was president of hospital & specialty care at Merck and from 2009 to 2011, he served as senior vice president of global human health strategy and business development. Mr. Galeota started his career in Merck’s commercial organization, where he held various US and global leadership positions and led numerous brands and key product launches across a variety of therapeutic areas. Mr. Galeota holds a Bachelor of Science degree in biology from Villanova University and is a graduate of Harvard Business School’s Advanced Management Program. He currently serves on the boards of Hackensack Meridian Health System, the New Jersey Symphony Orchestra, and the Metuchen Edison Woodbridge YMCA. In addition, he is a guest lecturer at the Wharton School of the University of Pennsylvania.
David Gill—Mr. Gill joined the Company’s board of directors in April 2012. Mr. Gill served as chief financial officer of EndoChoice Holdings, Inc. (NYSE: GI), a publicly traded medical device company from August 2014 to November 2016, and as president and chief financial officer from March 2016 to November 2016, when the company was acquired. He served as the chief financial officer of INC Research Holdings Inc., now known as Syneos Health, Inc. (Nasdaq: SYNH), a clinical research organization, from February 2011 to August 2013, after having served as a board member and its audit committee chairman from 2007 to 2010. He currently serves as a director of Histogenics Corporation (Nasdaq: HSGX), a regenerative medicine company, Evolus, Inc. (Nasdaq: EOLS), an aesthetics company, Strata Skin Sciences (SSKN), and YmAbs Therapeutics, an immuno-oncology company. Earlier in his career, Mr. Gill served in a variety of senior executive leadership roles for several medical device and information technology companies, including NxStage Medical, CTI Molecular Imaging, Inc., Interland Inc., Novoste Corporation and Dornier Medical. Mr. Gill holds a B.S. degree, cum laude, in Accounting from Wake Forest University and an M.B.A. degree, with honors, from Emory University, and was formerly a certified public accountant.
Thomas P. Koestler, Ph.D.—Dr. Koestler has served as a member of the Company’s board of directors since November 2017. He has served as a consultant to Vatera Healthcare Partners LLC since January 2019. Dr. Koestler is also a member of the boards of directors of Momenta Pharmaceuticals Inc., ImmusanT, Inc. and was a member of the board of directors of Arisaph Pharmaceuticals, Inc. From March 2011 to April 2016, Dr. Koestler served as a member of the board of directors of Novo Nordisk A/S. Dr. Koestler served as an executive director of Vatera Holdings LLC, the former manager of Vatera Healthcare Partners LLC, from February 2010 through January 1, 2019. From 2006 to 2009, Dr. Koestler served as executive vice president of Schering Corporation and president of Schering-Plough Research Institute, the pharmaceutical research and development arm of Schering-Plough Corporation, and served as executive vice president, global development, of Schering-Plough Research Institute from 2005 to 2006, and executive vice president of Schering-Plough Research Institute from 2003 to 2005. Before joining Schering-Plough, Dr. Koestler served as senior vice president and head of global regulatory affairs for Pharmacia Corporation from 2001 to 2003. Before that, Dr. Koestler was senior vice president and global head, drug regulatory affairs, compliance assurance, clinical safety and epidemiology for Novartis. Dr. Koestler received his B.S. from Daemen College and his Ph.D. in Medicine and Pathology from SUNY Buffalo, Roswell Park Memorial Institute.
Garheng Kong, M.D., Ph.D.—Dr. Kong has served on the Company’s board of directors since September 2006. Dr. Kong has been the managing partner of Sofinnova HealthQuest, a healthcare investment firm, since July 2013. He was a general partner at Sofinnova Ventures, a venture firm focused on life sciences, from September 2010 to December 2013. From 2000 to September 2010, he was at Intersouth Partners, a venture capital firm, most recently as a general partner, where he was a founding investor or board member for various life sciences ventures, several of which were acquired by large pharmaceutical companies. Dr. Kong has also served on the board of directors of Avedro, Inc (Nasdaq: AVDR), a corneal health company, since 2018, Alimera Sciences, Inc. (Nasdaq: ALIM), a biopharmaceutical company, since October 2012, has served on the board of Laboratory Corporation of America Holdings (NYSE: LH), a healthcare company, since December 2013, and has served on the board of StrongBridge BioPharma plc (Nasdaq: SBBP) since September 2015. Dr. Kong holds a B.S. from Stanford University. He holds an M.D., Ph.D. and M.B.A. from Duke University.
David Zaccardelli, Pharm.D. Dr. Zaccardelli has served on the Company’s board of directors since August 2016 and was acting chief executive officer of Cempra from December 2016 until November 2017. From 2004 until 2016, Dr. Zaccardelli served in several senior management roles at United Therapeutics Corporation (Nasdaq: UTHR), including chief operating officer, chief manufacturing officer and executive vice president, pharmaceutical development and operations. Prior to joining United Therapeutics, Dr. Zaccardelli founded and led a startup company focused on contract pharmaceutical development services, from 1997 through 2003. From 1988 to 1996, Dr. Zaccardelli worked at Burroughs Wellcome & Co. and

61



Glaxo Wellcome, Inc. in a variety of clinical research positions. He also served as director of clinical and scientific affairs for Bausch & Lomb Pharmaceuticals from 1996 to 1997. Dr. Zaccardelli currently serves on the board of directors of Evecxia, Inc. and CoreRx, Inc., both privately held companies. Dr. Zaccardelli received a Pharm.D. from the University of Michigan.
Executive Officers  
As of March 1, 2019, our executive officers are John H. Johnson, our Chief Executive Officer, Sue Cammarata, M.D., our Chief Medical Officer, Peter J. Milligan, our Chief Financial Officer, and Erin Duffy, Ph.D., our Chief Scientific Officer. Information for each is provided below. On February 25, 2019, we announced that Dr. Duffy will leave the company on March 15, 2019.
 
Name
 
Age
(as of
4/30/18)
 
Business Experience For Last Five Years
John H. Johnson
 
61
 
 
Mr. Johnson has served as our interim Chief Executive Officer since October 2018 and as our Chief Executive Officer since February 2019, and has served on the Company’s board of directors since June 2009. He became the Company's permanent CEO in February 2019. He served as president and chief executive officer of Dendreon Corp., a publicly traded biotechnology company (Nasdaq: DNDN), from February 2012, became chairman in July 2013, and served as chairman until June 2014 and president and chief executive officer until August 2014. He served as the chief executive officer and as a director of Savient Pharmaceuticals, Inc., a company that developed and commercialized specialty pharmaceuticals, from 2011 to January 2012. Mr. Johnson was senior vice president of Eli Lilly and Company (NYSE: LLY) and president of Lilly Oncology, Eli Lilly’s oncology business unit, from 2009 to 2011. From 2007 to 2009, Mr. Johnson was chief executive officer of ImClone Systems Incorporated, a biopharmaceutical development company, and was also a member of ImClone’s board of directors until it became a wholly owned subsidiary of Eli Lilly in 2008. From 2005 to 2007, Mr. Johnson served as company group chairman of Johnson & Johnson’s Worldwide Biopharmaceuticals unit. Mr. Johnson served as chairman of the board of Tranzyme, Inc. (Nasdaq: TZYM), a publicly traded biopharmaceutical company, from December 2010 until July 2013. Mr. Johnson serves as the chairman of the board of Strongbridge Biopharma PLC (Nasdaq: SBBP), a global biopharmaceutical company, and also serves as lead independent director of Portola Pharmaceuticals, Inc. (Nasdaq: PTLA), a biopharmaceutical company, and Histogenics Corporation (Nasdaq: HSGX), a regenerative medicine company. Mr. Johnson also serves on the board of directors of Aveo Pharmaceuticals, Inc. (Nasdaq: AVEO), a biopharmaceutical company. Mr. Johnson holds a B.S. in Education from East Stroudsburg University of Pennsylvania.
 
Sue Cammarata, M.D.
 
62
 
 
Dr. Cammarata, current Executive Vice President and Chief Medical Officer of Melinta, has more than 20 years of clinical experience in the development, approval and launch of pharmaceuticals, including several anti-infective brands such as Cubicin (daptomycin) in the E.U., and Zyvox (linezolid) globally. Since joining Melinta in 2014, she has led the successful Phase 3 clinical development of Baxdela, which was approved by the FDA in June, and is also responsible for medical affairs. Prior to joining Melinta, Dr. Cammarata served as vice president of clinical research at Shire HGT, where she was responsible for clinical development and post approval commitments for novel therapies in rare and orphan diseases. Earlier, she held several senior positions at Novartis, most recently as vice president and global program head for the company’s immunology and infectious disease franchises. In this role, she managed the integration of Chiron’s infectious disease portfolio after its acquisition by Novartis in 2006. In addition, she managed the E.U. approval process for Cubicin’s endocarditis and bacteremia indications. Before joining Novartis, Dr. Cammarata held several positions at Pharmacia Upjohn (later Pfizer, Inc.) where she was an integral member of the team that led the Phase 3 and subsequent global regulatory programs for Zyvox, a first-in-class antibiotic for gram-positive infections, including those resistant to vancomycin. Dr. Cammarata received her M.D. from Michigan State University, completed her residency in internal medicine and her fellowship in pulmonary and critical care medicine at Henry Ford Health Systems and was a pulmonary and critical care medicine specialist for several years in private practice before entering the pharmaceutical industry. Dr. Cammarata earned her B.S. in pharmacy from Purdue University.

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Name
 
Age
(as of
4/30/18)
 
Business Experience For Last Five Years
Peter J. Milligan
 
50
 
 
Mr. Milligan joined Melinta in 2018 as Chief Financial Officer. He is an accomplished executive and established corporate leader who brings nearly 30 years of financial leadership, with extensive experience in managing all aspects of corporate and operational financial matters, including numerous capital market transactions. Prior to joining Melinta he served as the Chief Financial Officer of G&W Laboratories, a privately held generic pharmaceutical company where he had oversight and leadership of all financial aspects of the company, including financial planning and analysis, accounting, internal control, treasury, and tax. Prior to that he was Senior Vice President and CFO of Exelis, Inc. (NYSE: XLS), a leading global defense and aerospace company effective with its 2011 spin-off from ITT through the sale of the business to Harris Corp in 2015. Prior to that he held various senior finance roles within ITT, Inc. He also spent over 10 years at AT&T in roles of increasing responsibility within their finance function. Peter holds a M.B.A. from New York University with a concentration in Finance and Economics and a B.B.A. in Accounting from Hofstra University.

 
Erin Duffy, Ph.D.
 
50
 
 
Dr. Duffy, current Executive Vice President and Chief Scientific Officer of Melinta, has more than 21 years of pharmaceutical research experience and has been responsible for translating Melinta’s Nobel Prize-winning ribosome technology platform into the discovery and early-stage development of novel antibiotic candidates. She joined the company in 2002 and has become one of the world’s leading experts on the structure and function of the bacterial ribosome and the interaction of antibiotics with their ribosomal targets. Dr. Duffy has led Melinta’s ESKAPE Pathogen Program from its infancy and has been instrumental in advancing the platform while also contributing to the development programs for other drug candidates. The ESKAPE Pathogen Program is Melinta’s most advanced preclinical initiative, focused on using a discrete, novel binding site within the bacterial ribosome to design and develop completely new classes of antibiotics to treat some of the deadliest multi-drug resistant gram-positive and gram-negative infections. Prior to joining Melinta, Dr. Duffy served as associate director of innovative discovery technologies at Achillion Pharmaceuticals, Inc. Dr. Duffy began her scientific career as a computational chemist with Pfizer Global Research and Development. Dr. Duffy trained at Yale University, where she received her Ph.D. in physical-organic chemistry and was a Howard Hughes postdoctoral fellow. She holds a B.S. in chemistry from Wheeling Jesuit University. 
Director independence
Our board of directors has undertaken a review of the independence of our directors and has determined that all directors except Mr. Johnson are independent within the meaning of Section 5605(a)(2) of the Nasdaq Marketplace Rules and the related rules applicable to the committees on which each director serves.
Audit Committee
Our board of directors has established an Audit Committee in accordance with Section 3(a)(58)(A) of the Securities Exchange Act consisting of Mr. Gill (Chair), Mr. Galeota, and Mr. Downey. Mr. Gill, Mr. Galeota, and Mr. Downey are each independent within the meaning of Section 5605(a)(2) of the Nasdaq Marketplace Rules and meet the additional test for independence for audit committee members imposed by the SEC, regulation and Section 5605(c)(2)(A) of the Nasdaq Marketplace Rules. Our board of directors has determined that Mr. Gill qualifies as a financial expert.
Section 16(a) Beneficial Ownership Reporting Compliance
Under Section 16(a) of the Exchange Act, our directors and executive officers and certain persons holding more than 10% of our outstanding common shares are required to report their initial ownership of common shares and any subsequent changes in that ownership to the SEC. Specific filing dates for these reports have been established by the SEC and we are required to disclose in this proxy statement any failure by such persons to file these reports in a timely manner during 2018. Based upon our review of copies of Forms 3, 4 and 5 furnished to us and the written representations we received from each of our directors and executive officers that no Forms 5 were required, we believe that all Section 16(a) reports were filed timely in 2018.
Item 11. Executive Compensation
The information required by this Item concerning directors and executive compensation is incorporated by reference to information included in our Proxy Statement and/or Form 10-K/A.

63



Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
The following table sets forth the indicated information as of December 31, 2018, with respect to our equity compensation plans:
 
Plan Category
 
Number of
securities to be
issued upon
exercise of
outstanding
options, warrants
and rights
 
Weighted-average
exercise price
of outstanding
options, warrants
and rights(1)
 
Number of
securities
remaining available
for future
issuance under
equity
compensation
plans(2)
Equity compensation plans approved by our shareholders(3)
 
628,590

 
$
63.18

 
813,526

Equity compensation plans not approved by our shareholders(4)
 
74,000

 
$
22.50

 

Total
 
702,590

 
 
 
813,526

 
(1)
Represents the weighted average exercise price of outstanding stock options and is calculated without taking into account the shares of common stock subject to outstanding restricted stock units that become issuable without any cash payment required for such shares.
(2)
Includes only shares remaining available for future issuance under the 2018 Stock Incentive Plan. No shares are reserved for future issuance under the 2011 Equity Incentive Plan, the Private Melinta 2011 Equity Incentive Plan or the 2006 Stock Option and Incentive Plan, other than shares issuable upon exercise of equity awards outstanding under such plans. In addition, the 2018 Stock Incentive Plan contains an “evergreen” provision pursuant to which the number of shares reserved for issuance under that plan automatically increases on January 1 of each year, continuing through January 1, 2021, by 4% of the total number of shares of common stock outstanding on December 31 of the preceding calendar year (unless our board of directors determines to increase the number of shares subject to the plan by a lesser amount). The number of shares of common stock reported in this column does not include the 175,991 shares of common stock that became available for issuance as of January 1, 2018, pursuant to the evergreen provision of our 2018 Stock Incentive Plan.
(3)
Includes the 2018 Stock Incentive Plan, 2011 Equity Incentive Plan, the 2006 Plan and the Private Melinta 2011 Equity Incentive Plan. Of these 628,590 securities outstanding, there were options to purchase 611,230 shares of common stock and 17,360 restricted stock units.
(4)
Represents the inducement grant to Peter J. Milligan, our Chief Financial Officer, of options to purchase 370,000 shares of common stock at a strike price of $22.50, which were not granted under any of the stock plans.
Principal Shareholders
The table below sets forth information as of February 28, 2019, regarding the beneficial ownership of our common stock by:
Each person known by us to beneficially own more than 5% of our outstanding common stock
Each of our directors
Each of our NEOs; and
All of our directors and executive officers as a group

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Name of Beneficial Owner
 
Total Beneficial
Ownership
 
Percentage of
Common Stock
Beneficially
Owned
5% and Greater Stockholders
 
 

 
 

Vatera Capital Management LLC(1)
 
12,696,590

 
61.6
%
Executive Officers and Directors
 
 

 
 

John H. Johnson(2)
 
23,637

 
*

Peter J. Milligan
 

 

David Gill(3)
 
8,686

 
*

Garheng Kong, M.D., Ph.D.(4)
 
9,070

 
*

Sue Cammarata, M.D.(5)
 
13,464

 
*

David Zaccardelli, Pharm.D.(6)
 
19,785

 
*

Erin Duffy, Ph.D.(7)
 
13,257

 
*

Kevin T. Ferro(1)(8)
 
12,700,076

 
61.6
%
Jay Galeota(9)
 
3,486

 
*

Bruce Downey
 

 

Thomas P. Koestler, Ph.D.(1)(10)
 
6,887

 
*

Paul Estrem(11)
 
2,000

 
*

Daniel Wechsler(12)
 
16,028

 
*

All directors and current executive officers as a group (13 persons)
 
12798,348

 
61.8
%
 
*
Indicates beneficial ownership of less than 1%.
(1)
Based on the Schedule 13D/A filed with the SEC on February 22, 2019. Vatera Healthcare Partners LLC ("VHP") directly holds, and has voting and dispositive power over, 12,576,446 shares. VHPM Holdings LLC ("VHPM") directly holds, and has voting and dispositive power over, 120,144 shares. Vatera Capital Management LLC ("VCM"), as the manager of VHP and VHPM, has voting and dispositive power over all of the shares. The address for VCM LLC is 400 Royal Palm Way, Suite 212, Palm Beach, FL 33480. Kevin Ferro presently serves on the Company’s board of directors and is Chairman of the board. Mr. Ferro is the Chief Executive Officer and managing member of VCM, the manager of VHP and VHPM, and by virtue of that position, may be deemed to have beneficial ownership of the shares held by VHP and VHPM. Other than for purposes of Rule 13d-3 of the Exchange Act, Mr. Ferro disclaims beneficial ownership of the shares held by VHP and VHPM except to the extent of his pecuniary interest therein. Mr. Koestler is a consultant to VHP.
(2)
Consists of 400 shares owned by Mr. Johnson and 23,237 shares issuable upon the exercise of options exercisable within 60 days of February 28, 2019.
(3)
Consists of 1,200 shares owned by Mr. Gill and shares issuable upon the exercise of 7,486 options exercisable within 60 days of February 28, 2019.
(4)
Consists of 113 shares owned by Dr. Kong and shares issuable upon the exercise of 8,957 options exercisable within 60 days of February 28, 2019.
(5)
Consists of 800 shares owned by Dr. Cammarata and shares issuable upon the exercise of 12,664 options exercisable within 60 days of February 28, 2019.
(6)
Consists of 9,300 shares owned by Dr. Zaccardelli and shares issuable upon the exercise of 10,485 options exercisable within 60 days of February 28, 2019.
(7)
Consists of 800 shares owned by Dr. Duffy and shares issuable upon the exercise of 12,457 options exercisable within 60 days of February 28, 2019.
(8)
Includes shares issuable upon the exercise of 3,486 options exercisable within 60 days of February 28, 2019.
(9)
Consists of shares issuable upon the exercise of 3,486 options exercisable within 60 days of February 28, 2019.
(10)
Consists of shares issuable upon the exercise of 6,887 options exercisable within 60 days of February 28, 2019.
(11)
Consists of 2,000 shares owned by Mr. Estrem.
(12)
Consists of 16,028 shares owned by Mr. Estrem.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this Item is incorporated by reference to information included in our Proxy Statement and/or Form 10-K/A.
Item 14. Principal Accounting Fees and Services

65



The information required by this Item is incorporated by reference to information included in our Proxy Statement and/or Form 10-K/A.

66



PART IV
 
Item 15. Exhibits, Financial Statement Schedules 
  
Page
(a) The following documents are filed as part of this report:
 
(1) Financial Statements:
 
(2) Financial Statement Schedules:
All financial statement schedules have been omitted because they are not applicable, not required or the information required is shown in the financial statements or the notes thereto.
(3) Exhibits. The following exhibits are included herein or incorporated herein by reference: 
Exhibit
No.
 
Description
Form   
Dated
Exhibit
Number
Filed
Herewith
1.1
 
8-K
5/6/2016
1.1
 
2.1
 
S-1
10/12/2011
2.1
 
2.2
 
8-K
8/10/2017
2.1
 
2.3
 
8-K (Filed by the Medicines Company)
1/14/2009
2.1
 
2.4
 
8-K (Filed by the Medicines Company)
12/6/2014
2.1
 
2.5
 
8-K
12/1/2017
2.1
 
3.1
 
S-1/A
1/13/2012
3.1
 
3.2
 
8-K
11/3/2017
3.1
 
3.3
 
8-K
11/3/2017
3.2
 

67



Exhibit
No.
 
Description
Form   
Dated
Exhibit
Number
Filed
Herewith
3.4
 
8-K
2/21/2019
3.1
 
3.5
 
8-K
2/25/2019
3.1
 
3.6
 
8-K
11/3/2017
3.3
 
4.1
 
S-1/A
11/22/2011
4.1
 
4.2
 
8-K
11/3/2017
10.1
 
4.3
 
8-K
1/9/2018
4.1
 
4.4
 
8-K
1/9/2018
4.2
 
4.5
 
8-K
1/9/2018
4.3
 
4.6
 
8-K
1/9/2018
4.4
 
4.7
 
8-K
1/9/2018
4.5
 
4.8
 
8-K
3/14/2018
4.1
 
4.9
 
14A
10/5/2017
Annex D-2
 
10.1
*
8-K
6/8/2018
10.17
 
10.2
 
8-K
1/9/2018
10.1
 

68



Exhibit
No.
 
Description
Form   
Dated
Exhibit
Number
Filed
Herewith
10.3
 
8-K
1/9/2018
10.2
 
10.4
 
8-K
1/16/2019
10.2
 
10.5
 
8-K
2/25/2019
10.1
 
10.6
 
8-K
1/9/2018
10.3
 
10.7
+
S-8
11/13/2017
99.1
 
10.8
+
S-8
11/13/2017
99.2
 
10.9
+
S-1/A
1/13/2012
10.2
 
10.10
+
10-Q
7/31/2013
10.3
 
10.11
+
S-1/A
1/13/2012
10.3
 
10.12
+
8-K
3/14/2018
10.1
 
10.13
+
8-K
6/14/2018
10.1
 
10.14
+
8-K
6/14/2018
10.2
 
10.15
+
8-K
2/25/2019
10.3
 
10.16
+
8-K
10/24/2018
10.1
 

69



Exhibit
No.
 
Description
Form   
Dated
Exhibit
Number
Filed
Herewith
10.17
+
8-K
2/25/2019
10.2
 
10.18
+
8-K
11/3/2017
10.5
 
10.19
+
S-8
11/13/2017
99.3
 
10.20
+
S-8
11/13/2017
99.4
 
10.21
+