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INDEX TO FINANCIAL STATEMENTS

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As confidentially submitted with the Securities and Exchange Commission on January 23, 2015

Registration No. 333-                

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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CATABASIS PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)

One Kendall Square
Bldg. 1400E, Suite B14202
Cambridge, Massachusetts 02139
(617) 349-1971
(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)

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Jill C. Milne, Ph.D.
President and Chief Executive Officer
Catabasis Pharmaceuticals, Inc.
One Kendall Square
Bldg. 1400E, Suite B14202
Cambridge, Massachusetts 02139
(617) 349-1971
(Name, address, including zip code, and telephone number, including area code, of agent for service)

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

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

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

           If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

           If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

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

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CALCULATION OF REGISTRATION FEE

(1)

Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.

(2)

Calculated pursuant to Rule 457(o) based on an estimate of the proposed maximum aggregate offering price.

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           The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

   

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The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting offers to buy these securities in any state or other jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED                , 2015

                Shares

Catabasis Pharmaceuticals, Inc.

Common Stock
$      per share

        This is the initial public offering of our common stock. We are selling            shares of common stock in this offering. We currently expect the initial public offering price to be between $            and $            per share of common stock.

        We have granted the underwriters an option to purchase up to            additional shares of common stock to cover over-allotments.

        We intend to list our common stock on The NASDAQ Global Market under the symbol "CATB."

        Investing in our common stock involves risks. See "Risk Factors" beginning on page 9.

        We are an "emerging growth company" under applicable Securities and Exchange Commission rules and will be eligible for reduced public company disclosure requirements. See "Summary—Implications of Being an Emerging Growth Company."

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

        The underwriters expect to deliver the shares to purchasers on or about            , 2015 through the book-entry facilities of The Depository Trust Company.

   

                , 2015

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        We are responsible for the information contained in this prospectus. We have not authorized anyone to provide you with different information, and we take no responsibility for any other information others may give you. If anyone provides you with different or inconsistent information, you should not rely on it. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should not assume that the information contained in this prospectus is accurate as of any date other than the date on the front of this prospectus.

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RISK FACTORS

        Investing in our common stock involves a high degree of risk. Before you decide to invest in our common stock, you should consider carefully the risks described below, together with the other information contained in this prospectus, including our financial statements and the related notes appearing at the end of this prospectus. We believe the risks described below are the risks that are material to us as of the date of this prospectus. If any of the following risks actually occur, our business, financial condition, results of operations and future growth prospects could be materially and adversely affected. In these circumstances, the market price of our common stock could decline, and you may lose all or part of your investment.

Risks Related to Our Financial Position and Need for Additional Capital

We have incurred significant losses since inception and expect to incur significant and increasing losses for at least the next several years. We may never achieve or maintain profitability.

        We have incurred significant annual net operating losses in every year since our inception. We expect to continue to incur significant and increasing operating losses for at least the next several years. Our net losses were $15.7 million and $18.1 million for the years ended December 31, 2012 and 2013, respectively, and $15.9 million for the nine months ended September 30, 2014. As of September 30, 2014, we had an accumulated deficit of $69.4 million. We have not generated any revenues from product sales, have not completed the development of any product candidate and may never have a product candidate approved for commercialization. We have financed our operations to date primarily through private placements of our preferred stock and a debt financing, and have devoted substantially all of our financial resources and efforts to research and development, including preclinical studies and our clinical development programs. Our net losses may fluctuate significantly from quarter to quarter and year to year. Net losses and negative cash flows have had, and will continue to have, an adverse effect on our stockholders' (deficit) equity and working capital.

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

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continue to develop and conduct clinical trials with respect to our product candidates CAT-1004, CAT-2003 and CAT-2054, including a planned Phase 1/2 clinical trial of CAT-1004 that we plan to initiate in the first half of 2015 and an ongoing Phase 1 clinical trial of CAT-2054 that we initiated in January 2015;



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initiate and continue research and preclinical and clinical development efforts for our other product candidates;



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seek to identify and develop additional product candidates;



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seek regulatory and marketing approvals for our product candidates that successfully complete clinical trials, if any;



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establish sales, marketing, distribution and other commercial infrastructure in the future to commercialize various products for which we may obtain marketing approval, if any;



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require the manufacture of larger quantities of product candidates for clinical development and potentially commercialization;



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maintain, expand and protect our intellectual property portfolio;



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hire and retain additional personnel, such as clinical, quality control and scientific personnel;



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add operational, financial and management information systems and personnel, including personnel to support our product development and help us comply with our obligations as a public company; and



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add equipment and physical infrastructure to support our research and development programs.

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        Our ability to become and remain profitable depends on our ability to generate revenue. We do not expect to generate significant revenue unless and until we are, or any future collaborator is, able to obtain marketing approval for, and successfully commercialize, one or more of our product candidates. This will require our, or any of our future collaborators', success in a range of challenging activities, including completing clinical trials of our product candidates, obtaining marketing approval for these product candidates, manufacturing, marketing and selling those products for which we, or any of our future collaborators, may obtain marketing approval, satisfying any post-marketing requirements and obtaining reimbursement for our products from private insurance or government payors. Because of the uncertainties and risks associated with these activities, we are unable to accurately predict the timing and amount of increased expenses, and if or when we might achieve profitability. We and any future collaborators may never succeed in these activities and, even if we do, or any future collaborators does, we may never generate revenues that are large enough for us to achieve profitability. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would decrease the value of our company and could impair our ability to raise capital, expand our business, maintain our research and development efforts, diversify our pipeline of product candidates or continue our operations. A decline in the value of our company could cause you to lose all or part of your investment.

We have a limited operating history and no history of commercializing pharmaceutical products, which may make it difficult to evaluate the prospects for our future viability.

        We began operations in 2008. Our operations to date have been limited to financing and staffing our company and developing our technology and conducting preclinical research and early-stage clinical trials for our product candidates. We have not yet demonstrated an ability to successfully conduct pivotal clinical trials, obtain marketing approvals, manufacture a commercial scale product, or arrange for a third-party to do so on our behalf, or conduct sales and marketing activities necessary for successful product commercialization. Accordingly, you should consider our prospects in light of the costs, uncertainties, delays and difficulties frequently encountered by companies in the early stages of development, especially clinical-stage biopharmaceutical companies such as ours. Predictions about our future success or viability may not be as accurate as they could be if we had a longer operating history or a history of successfully developing and commercializing pharmaceutical products.

We will need substantial additional funding. If we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our product development programs or commercialization efforts.

        Developing pharmaceutical products, including conducting preclinical studies and clinical trials, is a very time-consuming, expensive and uncertain process that takes years to complete. We expect our expenses to increase in connection with our ongoing activities, particularly as we initiate new clinical trials of, initiate new research and preclinical development efforts for and seek marketing approval for, our product candidates. In addition, if we obtain marketing approval for any of our product candidates, we may incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution to the extent that such sales, marketing, manufacturing and distribution are not the responsibility of a future collaborator. Furthermore, following the completion of this offering, we expect to incur significant additional costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms, we may be forced to delay, reduce or eliminate our research and development programs or any future commercialization efforts.

        We plan to use the net proceeds of this offering primarily to fund our ongoing research and development efforts. We will be required to expend significant funds in order to advance the development of CAT-1004 and our CAT-2000 series product candidates, as well as our other product candidates. In addition, while we may seek one or more collaborators for future development of our

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product candidates, and, in particular, expect that we would conduct any large Phase 3 clinical trial of CAT-2054 for the treatment of hypercholesterolemia in collaboration with one or more partners that would pay most of the associated costs, we may not be able to enter into a collaboration for any of our product candidates on suitable terms or at all. In any event, the net proceeds of this offering and our existing cash and cash equivalents will not be sufficient to fund all of the efforts that we plan to undertake or to fund the completion of development of any of our product candidates. Accordingly, we will be required to obtain further funding through public or private equity offerings, debt financings, collaborations and licensing arrangements or other sources. With the exception of our credit facility with MidCap Financial SBIC, LP, or MidCap, and Square 1 Bank, or Square 1, we do not have any committed external source of funds.

        Adequate additional financing may not be available to us on acceptable terms, or at all. Further, our ability to obtain additional debt financing may be limited by covenants we have made under our loan and security agreement with MidCap and Square 1, including our negative pledge with respect to intellectual property in favor of MidCap and Square 1, as well as our pledge to MidCap and Square 1 of substantially all of our assets, other than our intellectual property, as collateral. Our failure to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy.

        We believe that the net proceeds from this offering, together with our existing cash and cash equivalents as of September 30, 2014, will enable us to fund our operating expenses, debt service and capital expenditure requirements at least through 2016. Our estimate as to how long we expect the net proceeds from this offering, together with our existing cash and cash equivalents, to be able to fund our operations is based on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Further, changing circumstances, some of which may be beyond our control, could cause us to consume capital significantly faster than we currently anticipate, and we may need to seek additional funds sooner than planned. Our future funding requirements, both short-term and long-term, will depend on many factors, including:

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the progress, timing, costs and results of clinical trials of, and research and preclinical development efforts for, our product candidates and potential product candidates, including current and future clinical trials;



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our ability to identify a collaborator for CAT-2054 and the terms and timing of any collaboration agreement that we may establish for the development and commercialization of CAT-2054;



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our ability to enter into and the terms and timing of any additional collaborations, licensing or other arrangements that we may establish;



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the number and characteristics of future product candidates that we pursue and their development requirements;



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the outcome, timing and costs of seeking regulatory approvals;



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the costs of commercialization activities for any of our product candidates that receive marketing approval to the extent such costs are not the responsibility of any future collaborators, including the costs and timing of establishing product sales, marketing, distribution and manufacturing capabilities;



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subject to receipt of marketing approval, revenue, if any, received from commercial sales of our product candidates;



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our headcount growth and associated costs as we expand our research and development and establish a commercial infrastructure;

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the costs of preparing, filing and prosecuting patent applications, maintaining and protecting our intellectual property rights and defending against intellectual property related claims; and



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the costs of operating as a public company.

Raising additional capital may cause dilution to our stockholders, including purchasers of common stock in this offering, restrict our operations or require us to relinquish rights to our technologies or product candidates.

        We expect that significant additional capital will be needed in the future to continue our planned operations. To the extent that we raise additional capital through the sale of common stock, convertible securities or other equity securities, our existing stockholders' ownership interest may be substantially diluted, and the terms of these securities could include liquidation or other preferences and anti-dilution protections that could adversely affect your rights as a common stockholder. Additional debt financing, if available, would result in increased fixed payment obligations and may involve agreements that include restrictive covenants that limit our ability to take specific actions, such as incurring additional debt, making capital expenditures, creating liens, redeeming stock or declaring dividends, that could adversely impact our ability to conduct our business. For example, our debt facility with MidCap and Square 1 contains restrictive covenants that, among other things and subject to certain exceptions, prohibit us from transferring any of our material assets, exclusively licensing our intellectual property (subject to certain exceptions), merging with or acquiring another entity, entering into a transaction that would result in a change of control, incurring additional indebtedness, creating any lien on our property, making investments in third parties or redeeming stock or paying dividends. Future debt securities or other financing arrangements could contain similar or more restrictive negative covenants. In addition, securing additional financing could require a substantial amount of time and attention from our management and may divert a disproportionate amount of their attention away from day-to-day activities, which may adversely affect our management's ability to oversee the development of our product candidates.

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

Our existing and any future indebtedness could adversely affect our ability to operate our business.

        As of September 30, 2014, we had $5.0 million of outstanding borrowings under our loan and security agreement with MidCap and Square 1. We currently make monthly interest payments and, beginning in October 2015, will be required to repay principal and interest on these borrowings in monthly installments through October 2018. Subject to the restrictions in our existing credit facility with MidCap and Square 1, we could in the future incur additional indebtedness beyond our borrowings from MidCap and Square 1.

        Our outstanding indebtedness, including any additional indebtedness beyond our borrowings from MidCap and Square 1, combined with our other financial obligations and contractual commitments could have significant adverse consequences, including:

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requiring us to dedicate a portion of our cash resources to the payment of interest and principal, reducing money available to fund working capital, capital expenditures, product development and other general corporate purposes;

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increasing our vulnerability to adverse changes in general economic, industry and market conditions;



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subjecting us to restrictive covenants that may reduce our ability to take certain corporate actions or obtain further debt or equity financing;



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limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we compete; and



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placing us at a competitive disadvantage compared to our competitors that have less debt or better debt servicing options.

        We intend to satisfy our current and future debt service obligations with our existing cash and cash equivalents and investments. However, we may not have sufficient funds, and may be unable to arrange for additional financing, to pay the amounts due under our existing debt instruments. Failure to make payments or comply with other covenants under our existing debt instruments could result in an event of default and acceleration of amounts due. Under our loan and security agreement with MidCap and Square 1, the occurrence of an event that would reasonably be expected to have a material adverse effect on our business, operations, assets or condition is an event of default. If an event of default occurs and the lenders accelerate the amounts due, we may not be able to make accelerated payments, and the lenders could seek to enforce security interests in the collateral securing such indebtedness, which includes substantially all of our assets other than our intellectual property. In addition, the covenants under our existing debt instruments, the pledge of our assets as collateral and the negative pledge with respect to our intellectual property could limit our ability to obtain additional debt financing.

Risks Related to the Discovery, Development and Commercialization of Our Product Candidates

Our approach to the discovery and development of product candidates based on our SMART linker technology platform is unproven, and we do not know whether we will be able to develop any products of commercial value.

        We are focused on discovering and developing novel bi-functional small molecule drugs by applying our SMART linker technology platform. While we believe that applying our SMART linker technology platform may potentially enable drug research and clinical development that is more efficient than conventional small molecule drug research and development, this approach is unproven. We have not yet succeeded and may never succeed in demonstrating efficacy and safety for any of our product candidates in later stage clinical trials or in obtaining marketing approval thereafter. For example, although we have discovered and evaluated numerous compounds using our SMART linker technology platform, we have not yet advanced a compound into Phase 3 clinical development and no product created using the SMART linker technology platform has ever been approved for sale.

We are dependent on the success of our most advanced product candidate, CAT-1004, and our CAT-2000 series product candidates. If we are unable to complete the clinical development of, obtain marketing approval for or successfully commercialize at least one of these product candidates, either alone or with a collaborator, or if we experience significant delays in doing so, our business could be substantially harmed.

        We currently have no products approved for sale and are investing a significant portion of our efforts and financial resources in the development of CAT-1004 for the treatment of Duchenne muscular dystrophy, or DMD, and our CAT-2000 series product candidates for the treatment of serious lipid disorders. Our prospects are substantially dependent on our ability, or that of any future collaborator, to develop, obtain marketing approval for and successfully commercialize at least one of these product candidates.

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        The success of CAT-1004 and our CAT-2000 series product candidates will depend on several factors, including the following:

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successful completion of our ongoing clinical trials;



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initiation and successful enrollment and completion of additional clinical trials;



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safety, tolerability and efficacy profiles that are satisfactory to the U.S. Food and Drug Administration, or FDA, or any comparable foreign regulatory authority for marketing approval;



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timely receipt of marketing approvals from applicable regulatory authorities;



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the performance of our future collaborators, if any;



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the extent of any required post-marketing approval commitments to applicable regulatory authorities;



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establishment of supply arrangements with third-party raw materials suppliers and manufacturers;



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establishment of arrangements with third-party manufacturers to obtain finished drug products that are appropriately packaged for sale;



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



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protection of our rights in our intellectual property portfolio;



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successful launch of commercial sales following any marketing approval;



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a continued acceptable safety profile following any marketing approval;



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commercial acceptance by patients, the medical community and third-party payors following any marketing approval; and



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our ability to compete with other therapies, including, in the case of CAT-1004, therapies targeting dystrophin, utrophin and myostatin and inflammatory mediators.

        Many of these factors are beyond our control, including clinical development, the regulatory submission process, potential threats to our intellectual property rights and the manufacturing, marketing and sales efforts of any future collaborator. If we are unable to develop, receive marketing approval for and successfully commercialize at least one of CAT-1004 or a product candidate in the CAT-2000 series, on our own or with any future collaborator, or experience delays as a result of any of these factors or otherwise, our business could be substantially harmed.

Our SMART linker technology platform may fail to help us discover and develop additional potential product candidates.

        A significant portion of the research that we are conducting involves the development of new compounds using our SMART linker technology platform. The drug discovery that we are conducting using our SMART linker technology platform may not be successful in creating compounds that have commercial value or therapeutic utility. Our SMART linker technology platform may initially show promise in identifying potential product candidates, yet fail to yield viable product candidates for clinical development or commercialization for a number of reasons, including:

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compounds created through our SMART linker technology platform may not demonstrate improved efficacy, safety or tolerability;

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potential product candidates may, on further study, be shown to have harmful side effects or other characteristics that indicate that they are unlikely to receive marketing approval and achieve market acceptance;



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competitors may develop alternative therapies that render our potential product candidates non-competitive or less attractive; or



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a potential product candidate may not be capable of being produced at an acceptable cost.

        Our research programs to identify new product candidates will require substantial technical, financial and human resources, and we may be unsuccessful in our efforts to identify new product candidates. If we are unable to identify suitable additional compounds for preclinical and clinical development, our ability to develop product candidates and obtain product revenues in future periods could be compromised, which could result in significant harm to our financial position and adversely impact our stock price.

We have never obtained marketing approval for a product candidate and we may be unable to obtain, or may be delayed in obtaining, marketing approval for any of our product candidates.

        We have never obtained marketing approval for a product candidate. It is possible that the FDA may refuse to accept for substantive review any new drug applications, or NDAs, that we submit for our product candidates or may conclude after review of our data that our application is insufficient to obtain marketing approval of our product candidates. If the FDA does not accept or approve our NDAs for either of our most advanced product candidates, it may require that we conduct additional clinical, nonclinical or manufacturing validation studies and submit that data before it will reconsider our applications. Depending on the extent of these or any other FDA-required studies, approval of any NDA or application that we submit may be delayed by several years, or may require us to expend more resources than we have available. It is also possible that additional studies, if performed and completed, may not be considered sufficient by the FDA to approve our NDAs.

        Any delay in obtaining, or an inability to obtain, marketing approvals would prevent us from commercializing our product candidates, generating revenues and achieving and sustaining profitability. If any of these outcomes occur, we may be forced to abandon our development efforts for our product candidates, which could significantly harm our business.

Results of preclinical studies and early clinical trials may not be predictive of results of future clinical trials.

        The outcome of preclinical studies and early clinical trials may not be predictive of the success of later clinical trials, and interim results of clinical trials do not necessarily predict success in future clinical trials. Many companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late-stage clinical trials after achieving positive results in earlier development, and we cannot be certain that we will not face similar setbacks. The design of a clinical trial can determine whether its results will support approval of a product and flaws in the design of a clinical trial may not become apparent until the clinical trial is well advanced. We have limited experience in designing clinical trials and may be unable to design and execute a clinical trial to support marketing approval. In addition, preclinical and clinical data are often susceptible to varying interpretations and analyses. Many companies that believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval for the product candidates. Even if we, or any future collaborators, believe that the results of clinical trials for our product candidates warrant marketing approval, the FDA or comparable foreign regulatory authorities may disagree and may not grant marketing approval of our product candidates.

        In some instances, there can be significant variability in safety or efficacy results between different clinical trials of the same product candidate due to numerous factors, including changes in trial

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procedures set forth in protocols, differences in the size and type of the patient populations, changes in and adherence to the dosing regimen and other clinical trial protocols and the rate of dropout among clinical trial participants. If we fail to receive positive results in clinical trials of our product candidates, the development timeline and regulatory approval and commercialization prospects for our most advanced product candidates, and, correspondingly, our business and financial prospects would be negatively impacted.

Because we are developing CAT-1004 for the treatment of DMD, a disease for which regulatory authorities have not issued definitive guidance as to how to measure and demonstrate efficacy, there is increased risk that the outcome of our clinical trials will not be satisfactory for marketing approval.

        There is currently no approved therapy for DMD in the United States. In addition, there has been limited historical clinical trial experience for the development of drugs to treat the underlying cause of DMD. As a result, the design and conduct of clinical trials for this disease, particularly for drugs to address the underlying cause of this disease, is subject to increased risk. In particular, regulatory authorities in the United States and European Union have not issued definitive guidance as to how to measure and demonstrate efficacy. We anticipate that the primary endpoint in our Phase 1/2 clinical trial of CAT-1004 for the treatment of DMD will be changes in magnetic resonance imaging, or MRI, of leg muscles as a biomarker for inflammation, which is known to increase with age but is observed to decrease with initiation of steroid therapy. We intend to include as exploratory endpoints the timed function tests best suited for this age group, specifically the 10 meter walk/run, time to stand and 4-stair climb tests. However, due to the age and development stage of the patients we intend to enroll in this clinical trial, these endpoints may not be sufficiently sensitive to demonstrate efficacy over the period of the trial.

We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success.

        Because we have limited financial and managerial resources, we intend to focus on developing product candidates for specific indications that we identify as most likely to succeed, in terms of both their potential for marketing approval and commercialization. As a result, we may forego or delay pursuit of opportunities with other product candidates or for other indications that may prove to have greater commercial potential.

        Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and future research and development programs and product candidates for specific indications may not yield any commercially viable product candidates. If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to the product candidate.

Clinical drug development involves a lengthy and expensive process with an uncertain outcome.

        Clinical testing is expensive, time-consuming and uncertain as to outcome. We cannot guarantee that any clinical trials will be conducted as planned or completed on schedule, or at all. The clinical development of our product candidates is susceptible to the risk of failure at any stage of drug development, including failure to demonstrate efficacy in a clinical trial or across a broad population of patients, the occurrence of adverse events that are severe or medically or commercially unacceptable, failure to comply with protocols or applicable regulatory requirements and determination by the FDA or any comparable foreign regulatory authority that a product candidate may not continue development or is not approvable. For example, our IND for CAT-2003 was placed on partial clinical hold by the

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FDA in November 2012 because of the need for additional nonclinical work to support potential expansion of dosing and duration of our proposed Phase 1 multiple ascending dose trial. Although the partial clinical hold was removed in July 2013, it is possible that any of our development programs may be placed on full or partial clinical hold by regulatory authorities at any point, which would delay and possibly prevent further development of our product candidates. It is possible that even if one or more of our product candidates has a beneficial effect, that effect will not be detected during clinical evaluation as a result of one or more of a variety of factors, including the size, duration, design, measurements, conduct or analysis of our clinical trials. Conversely, as a result of the same factors, our clinical trials may indicate an apparent positive effect of a product candidate that is greater than the actual positive effect, if any. Similarly, in our clinical trials we may fail to detect toxicity of or intolerability caused by our product candidates, or mistakenly believe that our product candidates are toxic or not well tolerated when that is not in fact the case.

        In addition to the risk of failure inherent in drug development, certain of the compounds that we are developing and may develop in the future using our SMART linker technology platform may be particularly susceptible to failure to the extent they are based on compounds that others have previously studied or tested, but did not progress in development due to safety, tolerability or efficacy concerns or otherwise. Our failure to successfully complete clinical trials of our product candidates and to demonstrate the efficacy and safety necessary to obtain regulatory approval to market any of our product candidates would significantly harm our business.

If clinical trials of our product candidates fail to satisfactorily demonstrate safety and efficacy to the FDA and other comparable foreign regulators, we, or any future collaborators, may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of these product candidates.

        We, and any future collaborators, are not permitted to commercialize, market, promote or sell any product candidate in the United States without obtaining marketing approval from the FDA. Comparable foreign regulatory authorities, such as the European Medicines Agency, or the EMA, impose similar restrictions. We, and any future collaborators, may never receive such approvals. We, and any future collaborators, must complete extensive preclinical development and clinical trials to demonstrate the safety and efficacy of our product candidates in humans before we, or they, will be able to obtain these approvals.

        Clinical testing is expensive, difficult to design and implement, can take many years to complete and is inherently uncertain as to outcome. We have not previously submitted an NDA to the FDA or similar drug approval filings to comparable foreign regulatory authorities for any of our product candidates. Any inability to complete preclinical and clinical development successfully could result in additional costs to us, or any future collaborators, and impair our ability to generate revenues from product sales, regulatory and commercialization milestones and royalties. Moreover, if (1) we, or any future collaborators, are required to conduct additional clinical trials or other testing of our product candidates beyond the trials and testing that we, or they contemplate, (2) we, or any future collaborators, are unable to successfully complete clinical trials of our product candidates or other testing, (3) the results of these trials or tests are unfavorable, uncertain or are only modestly favorable, or (4) there are unacceptable safety concerns associated with our product candidates, we, or any future collaborators, may:

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be delayed in obtaining marketing approval for our product candidates;



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not obtain marketing approval at all;



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

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•

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



•

be subject to additional post-marketing testing or other requirements; or



•

be required to remove the product from the market after obtaining marketing approval.

Adverse events or undesirable side effects caused by, or other unexpected properties of, any of our product candidates may be identified during development that could delay or prevent their marketing approval or limit their use.

        Adverse events or undesirable side effects caused by, or other unexpected properties of, our product candidates could cause us, any future collaborators, an institutional review board or regulatory authorities to interrupt, delay or halt clinical trials of one or more of our product candidates and could result in a more restrictive label or the delay or denial of marketing approval by the FDA or comparable foreign regulatory authorities. For example, in our initial clinical trials of CAT-2003 we observed gastrointestinal tolerability issues at high doses as well as with long exposure times. As a result, we reformulated CAT-2003 in a coated capsule and conducted an additional Phase 1 clinical trial to evaluate tolerability. We are continuing to pursue clinical development with that formulation, but incidence of gastrointestinal adverse events could still occur in our ongoing or future clinical trials or following any receipt of marketing approval. If CAT-2003 or any of our other product candidates is associated with adverse events or undesirable side effects or has properties that are unexpected, we, or any future collaborators, may need to abandon development or limit development of that product candidate to certain uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective. Many compounds that initially showed promise in clinical or earlier stage testing have later been found to cause undesirable or unexpected side effects that prevented further development of the compound.

If we, or any future collaborators, experience any of a number of possible unforeseen events in connection with clinical trials of our product candidates, potential marketing approval or commercialization of our product candidates could be delayed or prevented.

        We, or any future collaborators, may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent marketing approval or commercialization of our product candidates, including:

•

clinical trials of our product candidates may produce unfavorable or inconclusive results;



•

we, or any future collaborators, may decide, or regulators may require us or them, to conduct additional clinical trials or abandon product development programs;



•

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



•

the cost of planned clinical trials of our product candidates may be greater than we anticipate;



•

our third-party contractors or those of any future collaborators, including those manufacturing our product candidates or components or ingredients thereof or conducting clinical trials on our behalf or on behalf of any future collaborators, may fail to comply with regulatory requirements or meet their contractual obligations to us or any future collaborators in a timely manner or at all;

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•

regulators or institutional review boards may not authorize us, any future collaborators or our or their investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site;



•

we, or any future collaborators, may have delays in reaching or fail to reach agreement on acceptable clinical trial contracts or clinical trial protocols with prospective trial sites;



•

patients that enroll in a clinical trial may misrepresent their eligibility to do so or may otherwise not comply with the clinical trial protocol, resulting in the need to drop the patients from the clinical trial, increase the needed enrollment size for the clinical trial or extend the clinical trial's duration;



•

we, or any future collaborators, may have to delay, suspend or terminate clinical trials of our product candidates for various reasons, including a finding that the participants are being exposed to unacceptable health risks, undesirable side effects or other unexpected characteristics of the product candidate, such as the delay we experienced in one of our Phase 2 clinical trials of CAT-2003 while we reformulated CAT-2003 in a coated capsule and evaluated its tolerability;



•

regulators or institutional review boards may require that we, or any future collaborators, or our or their investigators suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements or their standards of conduct, a finding that the participants are being exposed to unacceptable health risks, undesirable side effects or other unexpected characteristics of the product candidate or findings of undesirable effects caused by a chemically or mechanistically similar drug or drug candidate;



•

the FDA or comparable foreign regulatory authorities may disagree with our, or any future collaborators', clinical trial designs or our or their interpretation of data from preclinical studies and clinical trials;



•

the FDA or comparable foreign regulatory authorities may fail to approve or subsequently find fault with the manufacturing processes or facilities of third-party manufacturers with which we, or any future collaborators, enter into agreements for clinical and commercial supplies;



•

the supply or quality of raw materials or manufactured product candidates or other materials necessary to conduct clinical trials of our product candidates may be insufficient, inadequate or not available at an acceptable cost, or we may experience interruptions in supply; and



•

the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient to obtain marketing approval.

        Product development costs for us, or any future collaborators, will increase if we, or they, experience delays in testing or pursuing marketing approvals and we, or they, may be required to obtain additional funds to complete clinical trials and prepare for possible commercialization of our product candidates. We do not know whether any preclinical tests or clinical trials will begin as planned, will need to be restructured, or will be completed on schedule or at all. Significant preclinical or clinical trial delays also could shorten any periods during which we, or any future collaborators, may have the exclusive right to commercialize our product candidates or allow our competitors, or the competitors of any future collaborators, to bring products to market before we, or any future collaborators, do and impair our ability, or the ability of any future collaborators, to successfully commercialize our product candidates and may harm our business and results of operations. In addition, many of the factors that lead to clinical trial delays may ultimately lead to the denial of marketing approval of any of our product candidates.

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If we, or any future collaborators, experience delays or difficulties in the enrollment of patients in clinical trials, our or their receipt of necessary regulatory approvals could be delayed or prevented.

        We, or any future collaborators, may not be able to initiate or continue clinical trials for any of our product candidates if we, or they, are unable to locate and enroll a sufficient number of eligible patients to participate in clinical trials as required by the FDA or comparable foreign regulatory authorities, such as the EMA. Patient enrollment is a significant factor in the timing of clinical trials, and is affected by many factors, including:

•

the size and nature of the patient population;



•

the severity of the disease under investigation;



•

the proximity of patients to clinical sites;



•

the eligibility criteria for the trial;



•

the design of the clinical trial;



•

efforts to facilitate timely enrollment;



•

competing clinical trials; and



•

clinicians' and patients' perceptions as to the potential advantages and risks 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 particular, the successful completion of our clinical development program for CAT-1004 for the treatment of DMD is dependent upon our ability to enroll a sufficient number of patients with DMD. DMD is a rare disease with a small patient population. Further, there are only a limited number of specialist physicians that regularly treat patients with DMD and major clinical centers that support DMD treatment are concentrated in a few geographic regions. In addition, other companies are conducting clinical trials and have announced plans for future clinical trials that are seeking, or are likely to seek, to enroll patients with DMD and patients are generally only able to enroll in a single trial at a time. The small population of patients, competition for these patients and the limited trial sites may make it difficult for us to enroll enough patients to complete our clinical trials for CAT-1004 in a timely and cost-effective manner.

        The clinical trials that we conduct may also have inclusion criteria that further limit the population of patients that we are able to enroll. For example, for the Phase 1/2 clinical trial of CAT-1004 that we expect to initiate in the first half of 2015, we plan to enroll only ambulatory boys between ages four and seven who have not used steroids for at least six months prior to the trial. These inclusion criteria could present challenges to enrollment because steroid therapy for DMD is often initiated in this age range.

        Our inability, or the inability of any future collaborators, to enroll a sufficient number of patients for our, or their, clinical trials could result in significant delays or may require us or them to abandon one or more clinical trials altogether. Enrollment delays in our, or their, clinical trials may result in increased development costs for our product candidates, delay or halt the development of and approval processes for our product candidates and jeopardize our, or any future collaborators', ability to commence sales of and generate revenues from our product candidates, which could cause the value of our company to decline.

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If any of our product candidates receives marketing approval and we, or others, later discover that the drug is less effective than previously believed or causes undesirable side effects that were not previously identified, our ability, or that of any future collaborators, to market the drug could be compromised.

        Clinical trials of our product candidates are conducted in carefully defined subsets of patients who have agreed to enter into clinical trials. Consequently, it is possible that our clinical trials, or those of any future collaborator, may indicate an apparent positive effect of a product candidate that is greater than the actual positive effect, if any, or alternatively fail to identify undesirable side effects. If, following approval of a product candidate, we, or others, discover that the drug is less effective than previously believed or causes undesirable side effects that were not previously identified, any of the following adverse events could occur:

•

regulatory authorities may withdraw their approval of the drug or seize the drug;



•

we, or any future collaborators, may be required to recall the drug, change the way the drug is administered or conduct additional clinical trials;



•

additional restrictions may be imposed on the marketing of, or the manufacturing processes for, the particular drug;



•

we may be subject to fines, injunctions or the imposition of civil or criminal penalties;



•

regulatory authorities may require the addition of labeling statements, such as a "black box" warning or a contraindication;



•

we, or any future collaborators, may be required to create a Medication Guide outlining the risks of the previously unidentified side effects for distribution to patients;



•

we, or any future collaborators, could be sued and held liable for harm caused to patients;



•

the drug may become less competitive; and



•

our reputation may suffer.

        Any of these events could have a material and adverse effect on our operations and business and could adversely impact our stock price.

Even if one of our product candidates receives marketing approval, it may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success and the market opportunity for the product candidate may be smaller than we estimate.

        We have never commercialized a product. Even if one of our product candidates is approved by the appropriate regulatory authorities for marketing and sale, it may nonetheless fail to gain sufficient market acceptance by physicians, patients, third-party payors and others in the medical community. For example, physicians are often reluctant to switch their patients from existing therapies even when new and potentially more effective or convenient treatments enter the market. Further, patients often acclimate to the therapy that they are currently taking and do not want to switch unless their physicians recommend switching products or they are required to switch therapies due to lack of reimbursement for existing therapies.

        Efforts to educate the medical community and third-party payors on the benefits of our product candidates may require significant resources and may not be successful. If any of our product candidates is approved but does not achieve an adequate level of market acceptance, we may not generate significant revenues and we may not become profitable. The degree of market acceptance of our product candidates, if approved for commercial sale, will depend on a number of factors, including:

•

the efficacy and safety of the product;

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the potential advantages of the product compared to alternative treatments;



•

the prevalence and severity of any side effects;



•

the clinical indications for which the product is approved;



•

whether the product is designated under physician treatment guidelines as a first-line therapy or as a second- or third-line therapy;



•

limitations or warnings, including distribution or use restrictions, contained in the product's approved labeling;



•

our ability, or the ability of any future collaborators, to offer the product for sale at competitive prices;



•

the product's convenience and ease of administration compared to alternative treatments;



•

the willingness of the target patient population to try, and of physicians to prescribe, the product;



•

the strength of sales, marketing and distribution support;



•

the approval of other new products for the same indications;



•

changes in the standard of care for the targeted indications for the product;



•

the timing of market introduction of our approved products as well as competitive products;



•

availability and amount of reimbursement from government payors, managed care plans and other third-party payors;



•

adverse publicity about the product or favorable publicity about competitive products; and



•

potential product liability claims.

        The potential market opportunities for our product candidates are difficult to estimate precisely. 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, are inherently uncertain and the reasonableness of these assumptions has not been assessed by an independent source. If any of the assumptions proves to be inaccurate, the actual markets for our product candidates could be smaller than our estimates of the potential market opportunities.

If we are unable to establish sales, marketing and distribution capabilities or enter into sales, marketing and distribution arrangements with third parties, we may not be successful in commercializing any product candidates that we develop if and when those product candidates are approved.

        We do not have a sales, marketing or distribution infrastructure and have no experience in the sale, marketing or distribution of pharmaceutical products. To achieve commercial success for any approved product, we must either develop a sales and marketing organization or outsource these functions to third parties. We plan to use a combination of focused in-house sales and marketing capabilities and third-party collaboration, licensing and distribution arrangements to sell any of our products that receive marketing approval.

        We generally plan to seek to retain full commercialization rights in the United States and Canada for products that we can commercialize with a specialized sales force and to retain co-promotion or similar rights in the United States and Canada when feasible in indications requiring a larger commercial infrastructure. The development of sales, marketing and distribution capabilities will

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require substantial resources, will be time-consuming and could delay any product launch. If the commercial launch of a product for which we recruit a sales force and establish marketing and distribution capabilities is delayed or does not occur for any reason, we could have prematurely or unnecessarily incurred these commercialization costs. This may be costly, and our investment could be lost if we cannot retain or reposition our sales and marketing personnel. In addition, we may not be able to hire or retain a sales force in the United States or Canada that is sufficient in size or has adequate expertise in the medical markets that we plan to target. If we are unable to establish or retain a sales force and marketing and distribution capabilities, our operating results may be adversely affected. If a potential partner has development or commercialization expertise that we believe is particularly relevant to one of our products, then we may seek to collaborate with that potential partner even if we believe we could otherwise develop and commercialize the product independently.

        We plan to collaborate with third parties for commercialization in the United States and Canada of any products that require a large sales, marketing and product distribution infrastructure. We also plan to commercialize our product candidates outside the United States and Canada through collaboration, licensing and distribution arrangements with third parties. As a result of entering into arrangements with third parties to perform sales, marketing and distribution services, our product revenues or the profitability of these product revenues may be lower, perhaps substantially lower, than if we were to directly market and sell products in those markets. Furthermore, we may be unsuccessful in entering into the necessary arrangements with third parties or may be unable to do so on terms that are favorable to us. In addition, we may have little or no control over such third parties, and any of them may fail to devote the necessary resources and attention to sell and market our products effectively.

        If we do not establish sales, marketing and distribution capabilities, either on our own or in collaboration with third parties, we will not be successful in commercializing any of our product candidates that receive marketing approval.

We face substantial competition from other pharmaceutical and biotechnology companies, and our operating results may suffer if we fail to compete effectively.

        The development and commercialization of new drug products is highly competitive. We expect that we, and any future collaborators, will face significant competition from major pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies worldwide with respect to any of our product candidates that we, or they, may seek to develop or commercialize in the future. Specifically, there are a number of large pharmaceutical and biotechnology companies that currently market and sell products or are pursuing the development of product candidates for the treatment of the key indications of our most advanced programs, including DMD, severe hypertriglyceridemia and hypercholesterolemia.

        We are initially developing CAT-1004 for the treatment of DMD. While there are currently no therapies approved for the treatment of DMD in the United States, corticosteroid therapy is often prescribed to treat the inflammation underlying DMD and to delay loss of ambulation. In addition, a number of companies are developing therapies to treat DMD that are already on the market in Europe or are in the process of registration or late stage clinical development, including Eli Lilly, Prosensa (currently being acquired by Biomarin Pharmaceuticals), PTC Therapeutics, Santhera Pharmaceuticals and Sarepta Therapeutics.

        We are initially developing CAT-2003 for the treatment of multifactorial chylomicronemia syndrome, or MFC, and refractory severe hypertriglyceridemia, or rSHTG. Several pharmaceutical companies have product candidates in clinical development for severe hypertriglyceridemia which, if approved, would potentially compete with CAT-2003 in MFC or rSHTG. Companies with potentially

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competitive product candidates in Phase 2 or 3 clinical development include Arisaph Pharmaceuticals, Isis Pharmaceuticals, Novartis, Pronova BioPharma, Sancilio & Company and Trygg Pharma.

        Our competitors may succeed in developing, acquiring or licensing technologies and drug products that are more effective, have fewer or more tolerable side effects or are less costly than any product candidates that we are currently developing or that we may develop, which could render our product candidates obsolete and noncompetitive.

        Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than any products that we, or any future collaborators, may develop. Our competitors also may obtain FDA or other marketing approval for their products before we, or any future collaborators, are able to obtain approval for ours, which could result in our competitors establishing a strong market position before we, or any future collaborators, are able to enter the market.

        Many of our existing and potential future competitors have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining marketing approvals and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.

If the FDA or comparable foreign regulatory authorities approve generic versions of any of our products that receive marketing approval, or such authorities do not grant our products appropriate periods of data exclusivity before approving generic versions of our products, the sales of our products could be adversely affected.

        Once an NDA is approved, the product covered thereby becomes a "reference-listed drug" in the FDA's publication, "Approved Drug Products with Therapeutic Equivalence Evaluations." Manufacturers may seek approval of generic versions of reference-listed drugs through submission of abbreviated new drug applications, or ANDAs, in the United States. In support of an ANDA, a generic manufacturer need not conduct clinical studies. Rather, the applicant generally must show that its product has the same active ingredient(s), dosage form, strength, route of administration and conditions of use or labeling as the reference-listed drug and that the generic version is bioequivalent to the reference-listed drug, meaning it is absorbed in the body at the same rate and to the same extent. Generic products may be significantly less costly to bring to market than the reference-listed drug and companies that produce generic products are generally able to offer them at lower prices. Thus, following the introduction of a generic drug, a significant percentage of the sales of any branded product or reference-listed drug may be typically lost to the generic product.

        The FDA may not approve an ANDA for a generic product until any applicable period of non-patent exclusivity for the reference-listed drug has expired. The Federal Food, Drug, and Cosmetic Act, or FDCA, provides a period of five years of non-patent exclusivity for a new drug containing a new chemical entity, or NCE. Specifically, in cases where such exclusivity has been granted, an ANDA may not be filed with the FDA until the expiration of five years unless the submission is accompanied by a Paragraph IV certification that a patent covering the reference-listed drug is either invalid or will not be infringed by the generic product, in which case the applicant may submit its application four years following approval of the reference-listed drug. It is unclear whether the FDA will treat the active ingredients in our product candidates as NCEs and, therefore, afford them five years of NCE data

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exclusivity if they are approved. If any product we develop does not receive five years of NCE exclusivity, the FDA may approve generic versions of such product three years after its date of approval. Manufacturers may seek to launch these generic products following the expiration of the applicable marketing exclusivity period, even if we still have patent protection for our product.

        Competition that our products may face from generic versions of our products could materially and adversely impact our future revenue, profitability and cash flows and substantially limit our ability to obtain a return on the investments we have made in those product candidates.

Even if we, or any future collaborators, are able to commercialize any product candidate that we, or they, develop, the product may become subject to unfavorable pricing regulations, third-party payor reimbursement practices or healthcare reform initiatives that could harm our business.

        The commercial success of our product candidates will depend substantially, both domestically and abroad, on the extent to which the costs of our product candidates will be paid by third-party payors, including government health administration authorities and private health coverage insurers. If coverage and reimbursement is not available, or reimbursement is available only to limited levels, we, or any future collaborators, may not be able to successfully commercialize our product candidates. Even if coverage is provided, the approved reimbursement amount may not be high enough to allow us, or any future collaborators, to establish or maintain pricing sufficient to realize a sufficient return on our or their investments. In the United States, no uniform policy of coverage and reimbursement for products exists among third-party payors and coverage and reimbursement for products can differ significantly from payor to payor.

        There is significant uncertainty related to third-party payor coverage and reimbursement of newly approved drugs. Marketing approvals, pricing and reimbursement for new drug products vary widely from country to country. Some countries require approval of the sale price of a drug before it can be marketed. In many countries, the pricing review period begins after marketing or product licensing approval is granted. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. As a result, we, or any future collaborators, might obtain marketing approval for a product in a particular country, but then be subject to price regulations that delay commercial launch of the product, possibly for lengthy time periods, which may negatively impact the revenues we are able to generate from the sale of the product in that country. Adverse pricing limitations may hinder our ability or the ability of any future collaborators to recoup our or their investment in one or more product candidates, even if our product candidates obtain marketing approval.

        Patients who are provided medical treatment for their conditions generally rely on third-party payors to reimburse all or part of the costs associated with their treatment. Therefore, our ability, and the ability of any future collaborators, to commercialize any of our product candidates will depend in part on the extent to which coverage and reimbursement for these products and related treatments will be available from third-party payors. Third-party payors decide which medications they will cover and establish reimbursement levels. The healthcare industry is acutely focused on cost containment, both in the United States and elsewhere. Government authorities and other third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications, which could affect our ability or that of any future collaborators to sell our product candidates profitably. These payors may not view our products, if any, as cost-effective, and coverage and reimbursement may not be available to our customers, or those of any future collaborators, or may not be sufficient to allow our products, if any, to be marketed on a competitive basis. Cost-control initiatives could cause us, or any future collaborators, to decrease the price we, or they, might establish for products, which could result in lower than anticipated product revenues. If the prices for our products, if any, decrease or if governmental and other third-party payors do not provide coverage or adequate reimbursement, our prospects for revenue and profitability will suffer.

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

        In addition, increasingly, third-party payors are requiring higher levels of evidence of the benefits and clinical outcomes of new technologies and are challenging the prices charged. We cannot be sure that coverage will be available for any product candidate that we, or any future collaborator, commercialize and, if available, that the reimbursement rates will be adequate. Further, the net reimbursement for drug products may be subject to additional reductions if there are changes to laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the United States. An inability to promptly obtain coverage and adequate payment rates from both government-funded and private payors for any of our product candidates for which we, or any future collaborator, obtain marketing approval could significantly harm our operating results, our ability to raise capital needed to commercialize products and our overall financial condition.

Product liability lawsuits against us could divert our resources, cause us to incur substantial liabilities and limit commercialization of any products that we may develop.

        We face an inherent risk of product liability claims as a result of the clinical testing of our product candidates despite obtaining appropriate informed consents from our clinical trial participants. We will face an even greater risk if we or any future collaborators commercially sell any product that we may or they may develop. 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 acts. 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. Regardless of the merits or eventual outcome, liability claims may result in:

•

decreased demand for our product candidates or products that we may develop;



•

injury to our reputation and significant negative media attention;



•

withdrawal of clinical trial participants;



•

significant costs to defend resulting litigation;



•

substantial monetary awards to trial participants or patients;



•

loss of revenue;



•

reduced resources of our management to pursue our business strategy; and



•

the inability to commercialize any products that we may develop.

        Although we maintain general liability insurance of $2.0 million in the aggregate and clinical trial liability insurance of $3.0 million in the aggregate, this insurance may not fully cover potential liabilities that we may incur. The cost of any product liability litigation or other proceeding, even if resolved in our favor, could be substantial. We will need to increase our insurance coverage if and when we begin selling any product candidate that receives marketing approval. In addition, insurance coverage is

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becoming increasingly expensive. If we are unable to obtain or maintain sufficient insurance coverage at an acceptable cost or to otherwise protect against potential product liability claims, it could prevent or inhibit the development and commercial production and sale of our product candidates, which could adversely affect our business, financial condition, results of operations and prospects.

Risks Related to Our Dependence on Third Parties

We expect to seek to establish collaborations and, if we are not able to establish them on commercially reasonable terms, we may have to alter our development and commercialization plans.

        Our drug development programs and the potential commercialization of our product candidates will require substantial additional cash to fund expenses. We expect to seek one or more collaborators for the development and commercialization of one or more of our product candidates. For example, conducting pivotal Phase 3 clinical trials of CAT-2054 in patients with hypercholesterolemia will likely involve significant cost and we expect that we would conduct any large Phase 3 clinical trial of CAT-2054 in patients with hypercholesterolemia in collaboration with one or more partners. Likely collaborators may include large and mid-size pharmaceutical companies, regional and national pharmaceutical companies and biotechnology companies. In addition, if we are able to obtain marketing approval for CAT-1004 and other product candidates from foreign regulatory authorities, we intend to enter into strategic relationships with international biotechnology or pharmaceutical companies for the commercialization of CAT-1004 and other product candidates outside of the United States and Canada.

        We face significant competition in seeking appropriate collaborators. Whether we reach a definitive agreement for a collaboration will depend, among other things, upon our assessment of the collaborator's resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator's evaluation of a number of factors. Those factors may include the potential differentiation of our product candidate from competing product candidates, design or results of clinical trials, the likelihood of approval by the FDA or comparable foreign regulatory authorities and the regulatory pathway for any such approval, the potential market for the product candidate, the costs and complexities of manufacturing and delivering the product to patients and the potential of competing products. The collaborator may also consider alternative product candidates or technologies for similar indications that may be available for collaboration and whether such a collaboration could be more attractive than the one with us for our product candidate.

        Collaborations are complex and time-consuming to negotiate and document. In addition, there have been a significant number of recent business combinations among large pharmaceutical companies that have resulted in a reduced number of potential future collaborators. In addition, our loan and security agreement with MidCap and Square 1 contains, and any collaboration agreements that we enter into in the future may contain, restrictions on our ability to enter into potential collaborations or to otherwise develop specified compounds.

        We may not be able to negotiate collaborations on a timely basis, on acceptable terms, or at all. If we are unable to do so, we may have to curtail the development of the product candidate for which we are seeking to collaborate, reduce or delay its development program or one or more of our other development programs, delay its potential commercialization or reduce the scope of any sales or marketing activities, or increase our expenditures and undertake development or commercialization activities at our own expense. If we elect to increase our expenditures to fund development or commercialization activities on our own, we may need to obtain additional capital, which may not be available to us on acceptable terms or at all. If we do not have sufficient funds, we may not be able to further develop our product candidates or bring them to market and generate product revenue.

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If we enter into collaborations with third parties for the development and commercialization of our product candidates, our prospects with respect to those product candidates will depend in significant part on the success of those collaborations.

        We expect to enter into collaborations for the development and commercialization of certain of our product candidates. If we enter into such collaborations, we will have limited control over the amount and timing of resources that our collaborators will dedicate to the development or commercialization of our product candidates. Our ability to generate revenues from these arrangements will depend on any future collaborators' abilities to successfully perform the functions assigned to them in these arrangements. In addition, any future collaborators may have the right to abandon research or development projects and terminate applicable agreements, including funding obligations, prior to or upon the expiration of the agreed upon terms.

        Collaborations involving our product candidates pose a number of risks, including the following:

•

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



•

collaborators may not perform their obligations as expected;



•

collaborators may not pursue development and commercialization of our product candidates or may elect not to continue or renew development or commercialization programs, based on clinical trial results, changes in the collaborators' strategic focus or available funding or external factors, such as an acquisition, that divert resources or create competing priorities;



•

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



•

a collaborator with marketing and distribution rights to one or more products may not commit sufficient resources to the marketing and distribution of such product or products;



•

disagreements with collaborators, including disagreements over proprietary rights, contract interpretation or the preferred course of development, might cause delays or termination of the research, development or commercialization of product candidates, might lead to additional responsibilities for us with respect to product candidates, or might result in litigation or arbitration, any of which would be time-consuming and expensive;



•

collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as to invite litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential litigation;



•

collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability; and



•

collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable product candidates.

        Collaboration agreements may not lead to development or commercialization of product candidates in the most efficient manner or at all. If any future collaborator of ours is involved in a business combination, it could decide to delay, diminish or terminate the development or commercialization of any product candidate licensed to it by us.

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We rely on third parties to conduct our clinical trials. If they do not perform satisfactorily, our business could be significantly harmed.

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

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

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

        We also rely on other third parties to store and distribute drug supplies for our clinical trials. Any performance failure on the part of our distributors could delay clinical development or marketing approval of our product candidates or commercialization of any resulting products, producing additional losses and depriving us of potential product revenue.

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

        We currently have no manufacturing facilities and limited personnel with manufacturing experience. We rely on contract manufacturers to produce both drug substance and drug product required for our clinical trials. We plan to continue to rely upon contract manufacturers, and, potentially collaboration partners, to manufacture commercial quantities of our products, if approved. Reliance on such third-party contractors entails risks, including:

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manufacturing delays if our third-party contractors give greater priority to the supply of other products over our product candidates or otherwise do not satisfactorily perform according to the terms of the agreements between us and them;



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the possible termination or nonrenewal of agreements by our third-party contractors at a time that is costly or inconvenient for us;



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the possible breach by the third-party contractors of our agreements with them;



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the failure of third-party contractors to comply with applicable regulatory requirements;



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the possible mislabeling of clinical supplies, potentially resulting in the wrong dose amounts being supplied or active drug or placebo not being properly identified;



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the possibility of clinical supplies not being delivered to clinical sites on time, leading to clinical trial interruptions, or of drug supplies not being distributed to commercial vendors in a timely manner, resulting in lost sales; and



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the possible misappropriation of our proprietary information, including our trade secrets and know-how.

        We currently rely, and expect to continue to rely, on a small number of third-party contract manufacturers to supply the majority of our active pharmaceutical ingredient and required finished product for our preclinical studies and clinical trials. We do not have long-term agreements with any of these third parties. If any of our existing manufacturers should become unavailable to us for any reason, we may incur some delay in identifying or qualifying replacements.

        Any manufacturing problem or the loss of a contract manufacturer could be disruptive to our operations, delay our clinical trials and, if our products are approved for sale, result in lost sales. Additionally, we rely on third parties to supply the raw materials needed to manufacture our product candidates. Any reliance on suppliers may involve several risks, including a potential inability to obtain critical materials and reduced control over production costs, delivery schedules, reliability and quality. Any unanticipated disruption to future contract manufacture caused by problems at suppliers could delay shipment of our product candidates, increase our cost of goods sold and result in lost sales.

        If any of our product candidates are approved by any regulatory agency, we plan to enter into agreements with third-party contract manufacturers for the commercial production and distribution of those products. It may be difficult for us to reach agreement with a contract manufacturer on satisfactory terms or in a timely manner. In addition, we may face competition for access to manufacturing facilities as there are a limited number of contract manufacturers operating under current good manufacturing practices, or cGMPs, that are capable of manufacturing our product candidates. Consequently, we may not be able to reach agreement with third-party manufacturers on satisfactory terms, which could delay our commercialization efforts.

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        Third-party manufacturers are required to comply with cGMPs and similar regulatory requirements outside the United States. Facilities used by our third-party manufacturers must be approved by the FDA after we submit an NDA and before potential approval of the product candidate. Similar regulations apply to manufacturers of our product candidates for use or sale in foreign countries. We do not control the manufacturing process and are completely dependent on our third-party manufacturers for compliance with the applicable regulatory requirements for the manufacture of our product candidates. If our manufacturers cannot successfully manufacture material that conforms to our specifications or the strict regulatory requirements of the FDA and any applicable foreign regulatory authority, they will not be able to secure the applicable approval for their manufacturing facilities. If these facilities are not approved for commercial manufacture, we may need to find alternative manufacturing facilities, which could result in delays in obtaining approval for the applicable product candidate.

        In addition, our manufacturers are subject to ongoing periodic inspections by the FDA and corresponding state and foreign agencies for compliance with cGMPs and similar regulatory requirements both prior to and following the receipt of marketing approval for any of our product candidates. Some of these inspections may be unannounced. Failure by any of our manufacturers to comply with applicable cGMPs or other regulatory requirements could result in sanctions being imposed on us, including fines, injunctions, civil penalties, delays, suspensions or withdrawals of approvals, operating restrictions, interruptions in supply and criminal prosecutions, any of which could adversely affect supplies of our product candidates and significantly harm our business, financial condition and results of operations.

        Our current and anticipated future dependence upon others for the manufacture of our product candidates may adversely affect our future profit margins and our ability to commercialize any products that receive marketing approval on a timely and competitive basis.

Risks Related to Our Intellectual Property

If we are unable to obtain and maintain sufficient patent protection for our product candidates, or if the scope of the patent protection is not sufficiently broad, our competitors could develop and commercialize products similar or identical to ours, and our ability to commercialize our product candidates successfully may be adversely affected.

        Our success depends in large part on our ability to obtain and maintain patent protection in the United States and other countries with respect to our proprietary product candidates. If we do not adequately protect our intellectual property, competitors may be able to erode or negate any competitive advantage we may have, which could harm our business and ability to achieve profitability. To protect our proprietary position, we file patent applications in the United States and abroad related to our novel product candidates that are important to our business. The patent application and approval process is expensive and time-consuming. We may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner.

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

        Our pending patent applications cannot be enforced against third parties practicing the technology claimed in such applications unless and until a patent issues from such applications. Assuming the other requirements for patentability are met, currently, the first to file a patent application is generally

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entitled to the patent. However, prior to March 16, 2013, in the United States, the first to invent was entitled to the patent. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. Therefore, we cannot be certain that we were the first to make the inventions claimed in our patents or pending patent applications, or that we were the first to file for patent protection of such inventions.

        Moreover, because the issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, our patents or pending patent applications may be challenged in the courts or patent offices in the United States and abroad. For example, we may be subject to a third party preissuance submission of prior art to the U.S. Patent and Trademark Office, or USPTO, or become involved in post-grant review procedures, oppositions, derivations, reexaminations, inter partes review or interference proceedings, in the United States or elsewhere, challenging our patent rights or the patent rights of others. An adverse determination in any such challenges may result in loss of exclusivity or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our ability to stop others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of our technology and products. In addition, given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized.

        Our pending and future patent applications may not result in patents being issued which protect our product candidates, in whole or in part, or which effectively prevent others from commercializing competitive products. Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our patents or narrow the scope of our patent protection. In addition, the laws of foreign countries may not protect our rights to the same extent or in the same manner as the laws of the United States. For example, European patent law restricts the patentability of methods of treatment of the human body more than United States law does.

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

If we are unable to protect the confidentiality of our trade secrets, the value of our technology could be materially adversely affected and our business would be harmed.

        While we have obtained composition of matter patents with respect to our most advanced product candidates, we also rely on trade secret protection for certain aspects of technology platform, including certain aspects of our SMART linker technology platform. We seek to protect these trade secrets, in part, by entering into non-disclosure and confidentiality agreements with parties who have access to them, such as our employees, consultants, independent contractors, advisors, contract manufacturers, suppliers and other third parties. We also enter into confidentiality and invention or patent assignment

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agreements with employees and certain consultants. Any party with whom we have executed such an agreement may breach that agreement and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, if any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent such third-party, or those to whom they communicate such technology or information, from using that technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor, our business and competitive position could be harmed.

We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, time consuming and unsuccessful.

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

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

If we are sued for infringing intellectual property rights of third parties, such litigation could be costly and time consuming and could prevent or delay us from developing or commercializing our product candidates.

        Our commercial success depends, in part, on our ability to develop, manufacture, market and sell our product candidates and use our SMART linker technology platform without infringing the intellectual property and other proprietary rights of third parties. Third parties have U.S. and non-U.S.

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issued patents and pending patent applications relating to compounds and methods of use for the treatment of DMD, severe hypertriglyceridemia and hypercholesterolemia, the key indications for our priority programs. If any third-party patents or patent applications are found to cover our product candidates or their methods of use, we may not be free to manufacture or market our product candidates as planned without obtaining a license, which may not be available on commercially reasonable terms, or at all.

        There is a substantial amount of intellectual property litigation in the biotechnology and pharmaceutical industries, and we may become party to, or threatened with, litigation or other adversarial proceedings regarding intellectual property rights with respect to our products candidates, including interference proceedings before the U.S. Patent and Trademark Office. Third parties may assert infringement claims against us based on existing or future intellectual property rights. The outcome of intellectual property litigation is subject to uncertainties that cannot be adequately quantified in advance. The pharmaceutical and biotechnology industries have produced a significant number of patents, and it may not always be clear to industry participants, including us, which patents cover various types of products or methods of use. The coverage of patents is subject to interpretation by the courts, and the interpretation is not always uniform. If we were sued for patent infringement, we would need to demonstrate that our product candidates, products or methods either do not infringe the patent claims of the relevant patent or that the patent claims are invalid or unenforceable, and we may not be able to do this. Proving invalidity is difficult. For example, in the United States, proving invalidity requires a showing of clear and convincing evidence to overcome the presumption of validity enjoyed by issued patents. Even if we are successful in these proceedings, we may incur substantial costs and the time and attention of our management and scientific personnel could be diverted in pursuing these proceedings, which could significantly harm our business and operating results. In addition, we may not have sufficient resources to bring these actions to a successful conclusion.

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

Changes to the patent law in the United States and other jurisdictions could diminish the value of patents in general, thereby impairing our ability to protect our products.

        As is the case with other biopharmaceutical companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the biopharmaceutical industry involves both technological and legal complexity and is therefore costly, time consuming and inherently uncertain. Recent patent reform legislation in the United States and other countries, including the Leahy-Smith America Invents Act, or the Leahy-Smith Act, signed into law in September 2011, could increase those uncertainties and costs. The Leahy-Smith Act includes a number of significant changes to U.S. patent law. These include provisions that affect the way patent applications are prosecuted, redefine prior art and provide more efficient and cost-effective avenues for competitors to challenge the validity of patents. In addition, the Leahy-Smith Act has transformed the U.S. patent system into a "first to file" system. The first-to-file provisions, however, only became effective in March

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2013. Accordingly, it is not yet clear what, if any, impact the Leahy-Smith Act will have on the operation of our business. However, the Leahy-Smith Act and its implementation could make it more difficult to obtain patent protection for our inventions and increase the uncertainties and costs surrounding the prosecution of our or our collaboration partners' patent applications and the enforcement or defense of our or our collaboration partners' issued patents, all of which could harm our business, results of operations and financial condition.

        The U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. Additionally, there have been recent proposals for additional changes to the patent laws of the United States and other countries that, if adopted, could impact our ability to enforce our proprietary technology. Depending on future actions by the U.S. Congress, the U.S. courts, the USPTO and the relevant law-making bodies in other countries, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future.

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

        Periodic maintenance fees on any issued patent are due to be paid to the USPTO and foreign patent agencies in several stages over the lifetime of the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Non-compliance events that could result in abandonment or lapse of a patent or patent application include, but are not limited to, failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. If we fail to maintain the patents and patent applications covering our product candidates, our competitive position would be adversely affected.

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

        Filing, prosecuting and defending patents on our product candidates in all countries throughout the world would be prohibitively expensive. The requirements for patentability may differ in certain countries, particularly in developing countries. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we may obtain patent protection, but where patent enforcement is not as strong as that in the United States. These products may compete with our products in jurisdictions where we do not have any issued or licensed patents and any future patent claims or other intellectual property rights may not be effective or sufficient to prevent them from so competing.

        Moreover, our ability to protect and enforce our intellectual property rights may be adversely affected by unforeseen changes in foreign intellectual property laws. Additionally, laws of some countries outside of the United States and Europe do not afford intellectual property protection to the same extent as the laws of the United States and Europe. Many companies have encountered significant problems in protecting and defending intellectual property rights in certain foreign jurisdictions. The legal systems of some countries, including India, China and other developing countries, do not favor the enforcement of patents and other intellectual property rights. This could make it difficult for us to stop the infringement of our patents or the misappropriation of our other

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intellectual property rights. For example, many foreign countries have compulsory licensing laws under which a patent owner must grant licenses to third parties. Consequently, we may not be able to prevent third parties from practicing our inventions in certain countries outside the United States and Europe. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we have patent protection, if our ability to enforce our patents to stop infringing activities is inadequate. These products may compete with our products, and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

        Proceedings to enforce our patent rights in foreign jurisdictions, whether or not successful, could result in substantial costs and divert our efforts and resources from other aspects of our business. Furthermore, while we intend to protect our intellectual property rights in major markets for our products, we cannot ensure that we will be able to initiate or maintain similar efforts in all jurisdictions in which we may wish to market our products. Accordingly, our efforts to protect our intellectual property rights in such countries may be inadequate.

Patent term may be inadequate to protect our competitive position on our products for an adequate amount of time.

        Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. We expect to seek extensions of patent terms in the United States and, if available, in other countries where we are prosecuting patents. In the United States, the Drug Price Competition and Patent Term Restoration Act of 1984 permits a patent term extension of up to five years beyond the normal expiration of the patent, which is limited to the approved indication (or any additional indications approved during the period of extension). However, the applicable authorities, including the FDA and the USPTO in the United States, and any equivalent regulatory authority in other countries, may not agree with our assessment of whether such extensions are available, and may refuse to grant extensions to our patents, or may grant more limited extensions than we request. If this occurs, our competitors may be able to take advantage of our investment in development and clinical trials by referencing our clinical and preclinical data and launch their product earlier than might otherwise be the case.

We may be subject to claims by third parties asserting that our employees or we have misappropriated their intellectual property, or claiming ownership of what we regard as our own intellectual property.

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

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

Risks Related to Regulatory Approval and Other Legal Compliance Matters

Even if we complete the necessary preclinical and clinical studies, the marketing approval process is expensive, time consuming and uncertain and may prevent us or any future collaborators from obtaining approvals for the commercialization of some or all of our product candidates. As a result, we cannot predict when or if, and in which territories, we, or any future collaborators, will obtain marketing approval to commercialize a product candidate.

        The research, testing, manufacturing, labeling, approval, selling, marketing, promotion and distribution of drug products are subject to extensive regulation by the FDA and comparable foreign regulatory authorities, which regulations differ from country to country. We, and any future collaborators, are not permitted to market our product candidates in the United States or in other countries until we, or they, receive approval of an NDA from the FDA or marketing approval from applicable regulatory authorities outside the United States. Our product candidates are in various stages of development and are subject to the risks of failure inherent in drug development. We have not submitted an application for or received marketing approval for any of our product candidates in the United States or in any other jurisdiction. We have limited experience in conducting and managing the clinical trials necessary to obtain marketing approvals, including FDA approval of an NDA.

        The process of obtaining marketing approvals, both in the United States and abroad, is lengthy, expensive and uncertain. It may take many years, if approval is obtained at all, and can vary substantially based upon a variety of factors, including the type, complexity and novelty of the product candidates involved.

        In addition, changes in marketing approval policies during the development period, changes in or the enactment or promulgation of additional statutes, regulations or guidance or changes in regulatory review for each submitted product application, may cause delays in the approval or rejection of an application. Regulatory authorities have substantial discretion in the approval process and may refuse to accept any application or may decide that our data are insufficient for approval and require additional preclinical, clinical or other studies. In addition, varying interpretations of the data obtained from preclinical and clinical testing could delay, limit or prevent marketing approval of a product candidate. Any marketing approval we, or any future collaborators, ultimately obtain may be limited or subject to restrictions or post-approval commitments that render the approved product not commercially viable.

        Any delay in obtaining or failure to obtain required approvals could materially adversely affect our ability or that of any future collaborators to generate revenue from the particular product candidate, which likely would result in significant harm to our financial position and adversely impact our stock price.

Failure to obtain marketing approval in international jurisdictions would prevent our product candidates from being marketed abroad.

        In order to market and sell our products in the European Union and many other jurisdictions, we, and any future collaborators, must obtain separate marketing approvals and comply with numerous and varying regulatory requirements. The approval procedure varies among countries and can involve

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additional testing. The time required to obtain approval may differ substantially from that required to obtain FDA approval. The marketing approval process outside the United States generally includes all of the risks associated with obtaining FDA approval. In addition, in many countries outside the United States, it is required that the product be approved for reimbursement before the product can be approved for sale in that country. We, and any future collaborators, may not obtain approvals from regulatory authorities outside the United States on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one regulatory authority outside the United States does not ensure approval by regulatory authorities in other countries or jurisdictions or by the FDA.

We, or any future collaborators, may not be able to obtain orphan drug designation or orphan drug exclusivity for our product candidates.

        Regulatory authorities in some jurisdictions, including the United States and Europe, may designate drugs for relatively small patient populations as orphan drugs. Under the Orphan Drug Act, the FDA may designate a product as an orphan drug if it is a drug intended to treat a rare disease or condition, which is generally defined as a patient population of fewer than 200,000 individuals annually in the United States. While we have obtained orphan drug designation from the FDA for CAT-1004 for the treatment of DMD, we, or any future collaborators, may seek orphan drug designations for other product candidates or in other jurisdictions and may be unable to obtain such designations.

        Even if we, or any future collaborators, obtain orphan drug designation for a product candidate, we, or they, may not be able to obtain orphan drug exclusivity for that product candidate. Generally, a product with orphan drug designation only becomes entitled to orphan drug exclusivity if it receives the first marketing approval for the indication for which it has such designation, in which case the FDA or the EMA will be precluded from approving another marketing application for the same drug for that indication for the applicable exclusivity period. The applicable exclusivity period is seven years in the United States and ten years in Europe. The European exclusivity period can be reduced to six years if a drug no longer meets the criteria for orphan drug designation or if the drug is sufficiently profitable so that market exclusivity is no longer justified. Orphan drug exclusivity may be lost if the FDA or the EMA determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the drug to meet the needs of patients with the rare disease or condition.

        Even if we, or any future collaborators, obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugs can be approved for the same condition. Even after an orphan drug is approved, the FDA can subsequently approve the same drug for the same condition if the FDA concludes that the later drug is clinically superior in that it is shown to be safer, more effective or makes a major contribution to patient care.

Even if we, or any future collaborators, obtain marketing approvals for our product candidates, the terms of approvals and ongoing regulation of our products may limit how we, or they, manufacture and market our products, which could materially impair our ability to generate revenue.

        Once marketing approval has been granted, an approved product and its manufacturer and marketer are subject to ongoing review and extensive regulation. We, and any future collaborators, must therefore comply with requirements concerning advertising and promotion for any of our product candidates for which we or they obtain marketing approval. Promotional communications with respect to prescription drugs are subject to a variety of legal and regulatory restrictions and must be consistent with the information in the product's approved labeling. Thus, we and any future collaborators will not be able to promote any products we develop for indications or uses for which they are not approved.

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        In addition, manufacturers of approved products and those manufacturers' facilities are required to comply with extensive FDA requirements, including ensuring that quality control and manufacturing procedures conform to cGMPs, which include requirements relating to quality control and quality assurance as well as the corresponding maintenance of records and documentation and reporting requirements. We, our contract manufacturers, any future collaborators and their contract manufacturers could be subject to periodic unannounced inspections by the FDA to monitor and ensure compliance with cGMPs.

        Accordingly, assuming we, or any future collaborators, receive marketing approval for one or more of our product candidates, we, and any future collaborators, and our and their contract manufacturers will continue to expend time, money and effort in all areas of regulatory compliance, including manufacturing, production, product surveillance and quality control.

        If we, and any future collaborators, are not able to comply with post-approval regulatory requirements, we, and any future collaborators, could have the marketing approvals for our products withdrawn by regulatory authorities and our, or any future collaborators', ability to market any future products could be limited, which could adversely affect our ability to achieve or sustain profitability. Further, the cost of compliance with post-approval regulations may have a negative effect on our operating results and financial condition.

Any of our product candidates for which we, or any future collaborators, obtain marketing approval in the future could be subject to post-marketing restrictions or withdrawal from the market and we, or any future collaborators, may be subject to substantial penalties if we, or they, fail to comply with regulatory requirements or if we, or they, experience unanticipated problems with our products following approval.

        Any of our product candidates for which we, or any future collaborators, obtain marketing approval in the future, as well as the manufacturing processes, post-approval studies and measures, labeling, advertising and promotional activities for such product, among other things, will be subject to 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, 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 is granted, the approval may be subject to limitations on the indicated uses for which the product may be marketed or to the conditions of approval, including the requirement to implement a Risk Evaluation and Mitigation Strategy.

        The FDA may also impose requirements for costly post-marketing studies or clinical trials and surveillance to monitor the safety or efficacy of a product. The FDA and other agencies, including the Department of Justice, closely regulate and monitor the post-approval marketing and promotion of products to ensure that they are manufactured, marketed and distributed only for the approved indications and in accordance with the provisions of the approved labeling. The FDA imposes stringent restrictions on manufacturers' communications regarding off-label use and if we, or any future collaborators, do not market any of our product candidates for which we, or they, receive marketing approval for only their approved indications, we, or they, may be subject to warnings or enforcement action for off-label marketing. Violation of the FDCA and other statutes, including the False Claims Act, relating to the promotion and advertising of prescription drugs may lead to investigations or allegations of violations of federal and state health care fraud and abuse laws and state consumer protection laws.

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        In addition, later discovery of previously unknown adverse events or other problems with our products or their manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may yield various results, including:

•

restrictions on 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 letters or untitled letters;



•

withdrawal of the products from the market;



•

refusal to approve pending applications or supplements to approved applications that we submit;



•

recall of products;



•

restrictions on coverage by third-party payors;



•

fines, restitution or disgorgement of profits or revenues;



•

suspension or withdrawal of marketing approvals;



•

refusal to permit the import or export of products;



•

product seizure; or



•

injunctions or the imposition of civil or criminal penalties.

Recently enacted and future legislation may increase the difficulty and cost for us and any future collaborators to obtain marketing approval of and commercialize our product candidates and affect the prices we, or they, may obtain.

        In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could, among other things, prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities and affect our ability, or the ability of any future collaborators, to profitably sell any products for which we, or they, obtain marketing approval. We expect that current laws, as well as other healthcare reform measures that will be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that we, or any future collaborators, may receive for any approved products.

        The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act, or collectively the Affordable Care Act, became law in 2010 and includes the following provisions of potential importance to our product candidates:

•

an annual, non-deductible fee on any entity that manufactures or imports specified branded prescription drugs and biologic agents;



•

an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program;



•

expansion of federal healthcare fraud and abuse laws, including the False Claims Act and the Anti-Kickback Statute, new government investigative powers and enhanced penalties for noncompliance;



•

a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% point-of-sale discounts off negotiated prices;

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•

extension of manufacturers' Medicaid rebate liability;



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expansion of eligibility criteria for Medicaid programs;



•

expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program new requirements to report financial arrangements with physicians and teaching hospitals;



•

a new requirement to annually report drug samples that manufacturers and distributors provide to physicians; and



•

a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research.

        In addition, other legislative changes have been proposed and adopted since the Affordable Care Act was enacted. In August 2011, the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation's automatic reduction to several government programs. These changes included aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, which went into effect in April 2013 and will remain in effect through 2024 unless additional Congressional action is taken. The American Taxpayer Relief Act of 2012, among other things, reduced Medicare payments to several providers and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. These new laws may result in additional reductions in Medicare and other healthcare funding.

        Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products. We cannot be sure whether additional legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of our product candidates, if any, may be. In addition, increased scrutiny by the United States Congress of the FDA's approval process may significantly delay or prevent marketing approval, as well as subject us and any future collaborators to more stringent product labeling and post-marketing testing and other requirements.

Our relationships with customers and third-party payors, among others, will be subject to applicable anti-kickback, fraud and abuse and other healthcare laws and regulations, which could expose us to penalties, including criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings.

        Healthcare providers and third-party payors will play a primary role in the recommendation and prescription of any products for which we obtain marketing approval. Our arrangements with third-party payors and customers, if any, will subject us to broadly applicable fraud and abuse and other healthcare laws and regulations. The laws and regulations may constrain the business or financial arrangements and relationships through which we market, sell and distribute any products for which we obtain marketing approval. These include the following:

        Anti-Kickback Statute.    The federal healthcare Anti-Kickback Statute prohibits, among other things, persons and entities from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order or recommendation or arranging of, any good or service, for which payment may be made under a federal healthcare program such as Medicare and Medicaid;

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        False Claims Laws.    The federal false claims laws impose criminal and civil penalties against individuals or entities for, among other things, knowingly presenting, or causing to be presented false or fraudulent claims for payment by a federal healthcare program or making a false statement or record material to payment of a false claim or avoiding, decreasing or concealing an obligation to pay money to the federal government, with potential liability including mandatory treble damages and significant per-claim penalties;

        HIPAA.    The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, imposes criminal and civil liability for, among other things, executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters, and, as amended by the Health Information Technology for Economic and Clinical Health Act and its implementing regulations, also imposes obligations, including mandatory contractual terms and technical safeguards, with respect to maintaining the privacy, security and transmission of individually identifiable health information;

        Transparency Requirements.    Federal laws require applicable manufacturers of covered drugs, biologics, devices and supplies to report payments and other transfers of value to physicians and teaching hospitals and ownership and investment interests by physicians; and

        Analogous State and Foreign Laws.    Analogous state and foreign fraud and abuse laws and regulations, such as state anti-kickback and false claims laws, which may be broader in scope, can apply to our business activities, including sales or marketing arrangements, and claims involving healthcare items or services and are generally broad and are enforced by many different federal and state agencies as well as through private actions. Some state laws require pharmaceutical companies to comply with the pharmaceutical industry's voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government and require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures. State laws also govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not pre-empted by HIPAA, thus complicating compliance efforts.

        Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, imprisonment, exclusion of products from government funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations. If any of the physicians or other healthcare providers or entities with whom we expect to do business is found to be not in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.

If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could significantly harm our business.

        We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. From time to time and in the future, our operations may involve the use of hazardous and flammable materials, including chemicals and biological materials, and may also produce hazardous waste products. Although we contract with third parties for the disposal of these materials and waste products, we cannot completely eliminate the risk of contamination or injury resulting from these materials. In the event of contamination or injury resulting from the use or disposal of our

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hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties for failure to comply with such laws and regulations.

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

        In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. Current or future environmental laws and regulations may impair our research, development or production efforts, which could adversely affect our business, financial condition, results of operations or prospects. In addition, failure to comply with these laws and regulations may result in substantial fines, penalties or other sanctions.

Governments outside the United States tend to impose strict price controls, which may adversely affect our revenues, if any.

        In some countries, such as the countries of the European Union, the pricing of prescription pharmaceuticals is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product. To obtain reimbursement or pricing approval in some countries, we, or any future collaborators, may be required to conduct a clinical trial that compares the cost-effectiveness of our product to other available therapies. If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our business could be materially harmed.

Risks Related to Employee Matters and Managing Growth

Our future success depends on our ability to retain our Chief Executive Officer and other key executives and to attract, retain and motivate qualified personnel.

        We are highly dependent on the pharmaceutical research and development and business development expertise of Jill C. Milne, our President and Chief Executive Officer, as well as the other principal members of our management, scientific and development team. Although we have entered into employment agreements with our executive officers, these agreements do not prevent them from terminating their employment with us at any time.

        Our ability to compete in the highly competitive biotechnology and pharmaceuticals industries depends upon our ability to attract and retain highly qualified managerial, scientific and medical personnel. Our industry has experienced a high rate of turnover of management personnel in recent years. If we lose one or more of our executive officers or other key employees, our ability to implement our business strategy successfully could be seriously harmed. Furthermore, replacing executive officers or other key employees may be difficult and may take an extended period of time because of the limited number of individuals in our industry with the breadth of skills and experience required to develop, gain marketing approval of and commercialize products successfully. Competition to hire from this limited pool is intense, and we may be unable to hire, train, retain or motivate these additional key employees on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. We also experience competition for the hiring of scientific and clinical personnel from universities and research institutions.

        We rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and development and commercialization strategy. Our consultants and advisors may be employed by others entities and may have commitments under consulting or advisory contracts with those entities that may limit their availability to us. If we are unable to continue to

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attract and retain highly qualified personnel, our ability to develop and commercialize our product candidates will be limited.

We expect to grow our organization, and as a result, we may encounter difficulties in managing our growth, which could disrupt our operations.

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

Risks Related to Our Common Stock and This Offering

No public market for our common stock currently exists, and an active trading market for our common stock may not develop.

        Prior to this offering, there has been no public market for our common stock. The initial public offering price for our common stock will be determined through negotiations with the underwriters. This price will not necessarily reflect the price at which investors in the market will be willing to buy and sell our shares following this offering. Although we intend to list our common stock on The NASDAQ Global Market, an active trading market for our shares may never develop or, if developed, be maintained following this offering. If an active market for our common stock does not develop or is not maintained, it may be difficult for you to sell shares you purchase in this offering without depressing the market price for the shares or at all. An inactive trading market may also impair our ability to raise capital to continue to fund operations by selling shares and may impair our ability to acquire other companies or technologies by using our shares as consideration.

If you purchase shares of common stock in this offering, you will suffer immediate dilution in the book value of your investment.

        The initial public offering price of our common stock is substantially higher than the net tangible book value per share of our common stock. Therefore, if you purchase shares of our common stock in this offering, you will pay a price per share that substantially exceeds our net tangible book value per share after this offering. Based on the assumed initial public offering price of $        per share, which is the midpoint of the estimated price range set forth on the cover page of this prospectus, you will experience immediate dilution of $        per share, representing the difference between our pro forma net tangible book value per share after giving effect to this offering and the assumed initial public offering price. Purchasers of common stock in this offering will have contributed approximately    % of the aggregate price paid by all purchasers of our stock and will own approximately         % of our common stock outstanding after this offering, excluding any shares of our common stock that they may have acquired prior to this offering. Furthermore, if the underwriters exercise their over-allotment

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option or our previously issued options and warrants to acquire common stock at prices below the assumed initial public offering price are exercised, you will experience further dilution. For a further description of the dilution that you will experience immediately after this offering, see "Dilution."

The price of our common stock is likely to be highly volatile, which could result in substantial losses for purchasers of our common stock in this offering.

        Our stock price is likely to be highly volatile. The stock market in general and the market for smaller pharmaceutical and biotechnology companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, you may not be able to sell your common stock at or above the initial public offering price and you may lose some or all of your investment. The market price for our common stock may be influenced by many factors, including:

•

the success of existing or new competitive products or technologies;



•

the timing and results of clinical trials of CAT-1004, CAT-2003, CAT-2054 and any of our other product candidates;



•

commencement or termination of collaborations for our development programs;



•

failure or discontinuation of any of our development programs;



•

results of clinical trials of product candidates of our competitors;



•

regulatory or legal developments in the United States and other countries;



•

developments or disputes concerning patent applications, issued patents or other proprietary rights;



•

the recruitment or departure of key personnel;



•

the level of expenses related to any of our product candidates or clinical development programs;



•

the results of our efforts to develop additional product candidates or products;



•

actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities analysts;



•

announcement or expectation of additional financing efforts;



•

sales of our common stock by us, our insiders or other stockholders;



•

variations in our financial results or those of companies that are perceived to be similar to us;



•

changes in estimates or recommendations by securities analysts, if any, that cover our stock;



•

changes in the structure of healthcare payment systems;



•

market conditions in the pharmaceutical and biotechnology sectors;



•

general economic, industry and market conditions; and



•

the other factors described in this "Risk Factors" section.

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

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We have broad discretion in the use of the net proceeds from this offering and may not use them effectively.

        Our management will have broad discretion in the application of the net proceeds from this offering and could spend the proceeds in ways that do not improve our results of operations or enhance the value of our common stock. The failure by our management to apply these funds effectively could result in financial losses that could significantly harm our business, cause the price of our common stock to decline and delay the development of our product candidates. Pending their use, we may invest the net proceeds from this offering in a manner that does not produce income or that loses value.

We are an "emerging growth company," and the reduced disclosure requirements applicable to emerging growth companies may make our common stock less attractive to investors.

        We are an "emerging growth company," as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and may remain an emerging growth company for up to five years. For so long as we remain an emerging growth company, we are permitted and plan to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies. These exemptions include not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or SOX Section 404, not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements, reduced disclosure obligations regarding executive compensation and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. In this prospectus, we have not included all of the executive compensation related information that would be required if we were not an emerging growth company. We cannot predict whether investors will find our common stock less attractive if we rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

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

We will incur increased costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives and corporate governance practices.

        As a public company, and particularly after we are no longer an "emerging growth company," we will incur significant legal, accounting and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of The NASDAQ Global Market and other applicable securities rules and regulations impose various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. We expect that we will need to hire additional accounting, finance and other personnel in connection with our becoming, and our efforts to comply with the requirements of being, a public company and our management and other personnel will need to devote a substantial amount of time towards maintaining compliance with these requirements. These requirements will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. For example, we expect that the rules and regulations applicable to us as a public company may make it more difficult and more expensive for us to obtain director and officer liability insurance, which could make it more difficult for us to attract and retain

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qualified members of our board of directors. We are currently evaluating these rules and regulations, and cannot predict or estimate the amount of additional costs we may incur or the timing of such costs. These rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.

        Pursuant to SOX Section 404 we will be required to furnish a report by our management on our internal control over financial reporting beginning with our second filing of an Annual Report on Form 10-K with the Securities and Exchange Commission, or the SEC, after we become a public company. However, while we remain an emerging growth company, we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. To achieve compliance with SOX Section 404 within the prescribed period, we will be engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we will need to continue to dedicate internal resources, potentially engage outside consultants and adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting. Despite our efforts, there is a risk that we will not be able to conclude, within the prescribed timeframe or at all, that our internal control over financial reporting is effective as required by SOX Section 404. If we identify one or more material weaknesses, it could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.

A significant portion of our total outstanding shares is restricted from immediate resale but may be sold into the market in the near future, which could cause the market price of our common stock to decline significantly, even if our business is doing well.

        Sales of a substantial number of shares of our common stock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares of common stock intend to sell shares, could reduce the market price of our common stock. After this offering and giving effect to the conversion of all outstanding shares of our preferred stock into 102,967,274 shares of our common stock upon the closing of this offering, we will have                  shares of common stock outstanding based on the 6,337,920 shares of our common stock outstanding as of December 31, 2014. Of these shares, the                  shares sold by us in this offering may be resold in the public market immediately, unless purchased by our affiliates. The remaining 109,305,194 shares are currently restricted under securities laws or as a result of lock-up or other agreements, but will be able to be sold after this offering as described in the "Shares Eligible for Future Sale" section of this prospectus. Moreover, after this offering, holders of an aggregate of 102,967,274 shares of our common stock, along with the holders of warrants to purchase 157,844 shares of common stock, will have rights, subject to conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders. We also plan to register all                  shares of common stock that we may issue under our equity compensation plans. Once we register these shares, they can be freely sold in the public market upon issuance and once vested, subject to volume limitations applicable to affiliates and the lock-up agreements described in the "Underwriting" section of this prospectus.

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We do not anticipate paying any cash dividends on our capital stock in the foreseeable future, accordingly, stockholders must rely on capital appreciation, if any, for any return on their investment.

        We have never declared nor paid cash dividends on our capital stock. We currently plan to retain all of our future earnings, if any, to finance the operation, development and growth of our business. Furthermore, the terms of our credit facility with MidCap and Square 1 preclude us from paying dividends, and any future debt agreements may also preclude us from paying dividends. As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.

After this offering, our executive officers, directors and principal stockholders, if they choose to act together, will continue to have the ability to control all matters submitted to stockholders for approval.

        Upon the closing, our executive officers and directors, combined with our stockholders who owned more than 5% of our outstanding common stock before this offering and their affiliates will, in the aggregate, beneficially own shares representing approximately    % of our capital stock. As a result, if these stockholders were to choose to act together, they would be able to control all matters submitted to our stockholders for approval, as well as our management and affairs. For example, these persons, if they choose to act together, would control the election of directors and approval of any merger, consolidation or sale of all or substantially all of our assets. This concentration of ownership control may:

•

delay, defer or prevent a change in control;



•

entrench our management or the board of directors; or



•

impede a merger, consolidation, takeover or other business combination involving us that other stockholders may desire.

Provisions in our corporate charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.

        Provisions in our corporate charter and our bylaws that will become effective upon the closing of this offering may discourage, delay or prevent a merger, acquisition or other change in control of us that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares. These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock. In addition, because our board of directors is responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors. Among other things, these provisions:

•

establish a classified board of directors such that all members of the board are not elected at one time;



•

allow the authorized number of our directors to be changed only by resolution of our board of directors;



•

limit the manner in which stockholders can remove directors from the board;



•

establish advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted on at stockholder meetings;



•

require that stockholder actions must be effected at a duly called stockholder meeting and prohibit actions by our stockholders by written consent;

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•

limit who may call a special meeting of stockholder meetings;



•

authorize our board of directors to issue preferred stock without stockholder approval, which could be used to institute a "poison pill" that would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved by our board of directors; and



•

require the approval of the holders of at least 75% of the votes that all our stockholders would be entitled to cast to amend or repeal certain provisions of our charter or bylaws.

        Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the General Corporation Law of the State of Delaware, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner. This could discourage, delay or prevent someone from acquiring us or merging with us, whether or not it is desired by, or beneficial to, our stockholders.

Our certificate of incorporation that will become effective upon the closing of this offering designates the state courts in the State of Delaware or, if no state court located within the State of Delaware has jurisdiction, the federal court for the District of Delaware, as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could discourage lawsuits against the company and our directors and officers.

        Our certificate of incorporation that will become effective upon the closing of this offering provides that, unless our board of directors otherwise determines, the state courts in the State of Delaware or, if no state court located within the State of Delaware has jurisdiction, the federal court for the District of Delaware, will be the sole and exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a claim of breach of a fiduciary duty owed by any of our directors or officers to our company or our stockholders, any action asserting a claim against us or any of our directors or officers arising pursuant to any provision of the General Corporation Law of the State of Delaware, or any action asserting a claim against us or any of our directors or officers governed by the internal affairs doctrine. This exclusive forum provision may limit the ability of our stockholders to bring a claim in a judicial forum that such stockholders find favorable for disputes with us or our directors or officers, which may discourage such lawsuits against us and our directors and officers.

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our share price and trading volume could decline.

        The trading market for our common stock will likely depend, in part, on the research and reports that securities or industry analysts publish about us or our business. We do not have any control over these analysts. There can be no assurance that analysts will cover us, or provide favorable coverage. If one or more analysts downgrade our stock or change their opinion of our stock, our share price would likely decline. In addition, if one or more analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA

        This prospectus contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained in this prospectus, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans and objectives of management and expected market growth are forward-looking statements. The words "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "plan," "potential," "predict," "project," "should," "target," "would" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

        These forward-looking statements include, among other things, statements about:

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our plans to identify, develop and commercialize novel small molecule drugs based on our SMART linker technology platform;



•

our plans to have up to three product candidates in clinical trials in 2015;



•

ongoing and planned clinical trials for our product candidates, whether conducted by us or by any future collaborators, including the timing of initiation of these trials and of the anticipated results;



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our plans to enter into collaborations for the development and commercialization of product candidates;



•

the potential benefits of any future collaboration;



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our ability to receive research and development funding and achieve anticipated milestones under our collaborations;



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



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the rate and degree of market acceptance and clinical utility of any products for which we receive marketing approval;



•

our commercialization, marketing and manufacturing capabilities and strategy;



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our intellectual property position and strategy;



•

our ability to identify additional products or product candidates with significant commercial potential;



•

our expectations related to the use of proceeds from this offering;



•

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



•

developments relating to our competitors and our industry; and



•

the impact of government laws and regulations.

        We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this prospectus, particularly in the "Risk Factors" section, that could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, collaborations, joint ventures or investments that we may make or enter into.

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        You should read this prospectus and the documents that we have filed as exhibits to the registration statement of which this prospectus is a part completely and with the understanding that our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

        This prospectus includes statistical and other industry and market data that we obtained from industry publications and research, surveys and studies conducted by third parties. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. While we believe these industry publications and third-party research, surveys and studies are reliable, we have not independently verified such data.

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USE OF PROCEEDS

        We estimate that the net proceeds from our issuance and sale of            shares of our common stock in this offering will be approximately $       million, assuming an initial public offering price of $           per share, which is the midpoint of the estimated price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. If the underwriters exercise in full their over-allotment option, we estimate that the net proceeds from this offering will be approximately $       million.

        A $1.00 increase or decrease in the assumed initial public offering price of $           per share, which is the midpoint of the estimated price range set forth on the cover page of this prospectus, would increase or decrease our net proceeds from this offering by approximately $            , assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions payable by us. An increase or decrease of 1,000,000 shares in the number of shares offered by us, as set forth on the cover page of this prospectus, would increase or decrease our net proceeds from this offering by approximately $            , assuming no change in the assumed initial public offering price per share and after deducting estimated underwriting discounts and commissions payable by us.

        As of September 30, 2014, we had cash, cash equivalents and available-for-sale investments of approximately $20.7 million. We currently estimate that we will use the net proceeds from this offering, together with our cash, cash equivalents and available-for-sale investments, as follows:

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approximately $     million for the clinical development of CAT-1004;



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approximately $     million for the clinical development of our CAT-2000 series product candidates; and



•

the remainder for working capital and other general corporate purposes.

        This expected use of the net proceeds from this offering and our existing cash, cash equivalents and available-for-sale investments represents our intentions based upon our current plans and business conditions. The amounts and timing of our actual expenditures may vary significantly depending on numerous factors, including the progress of our development and commercialization efforts, the status of and results from clinical trials, any collaborations that we may enter into with third parties for our product candidates and any unforeseen cash needs. As a result, our management will retain broad discretion over the allocation of the net proceeds from this offering. We have no current agreements, commitments or understandings for any material acquisitions or licenses of any products, businesses or technologies.

        Based on our planned use of the net proceeds from this offering and our existing cash, cash equivalents and available-for-sale investments, we estimate that such funds will be sufficient to enable us to complete our planned Phase 1/2 clinical trial of CAT-1004, our ongoing Phase 2 clinical trial of CAT-2003 and our planned Phase 2 development of CAT-2054, and to fund our operating expenses, debt service and capital expenditure requirements at least through 2016. We have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. We do not expect that the net proceeds from this offering and our existing cash, cash equivalents and available-for-sale investments will be sufficient to enable us to fund the completion of development of any of our product candidates.

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

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DIVIDEND POLICY

        We have never declared nor paid cash dividends on our common stock. We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business. We do not intend to pay cash dividends in respect of our common stock in the foreseeable future. In addition, our ability to pay cash dividends on our common stock is prohibited by the covenants of our credit facility with MidCap Financial SBIC, LP and Square 1 Bank.

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CAPITALIZATION

        The following table sets forth our capitalization as of September 30, 2014:

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on an actual basis;



•

on a pro forma basis to give effect to the conversion of all outstanding shares of our preferred stock into 102,967,274 shares of our common stock, the conversion of our outstanding warrants to purchase 157,844 shares of preferred stock into warrants to purchase 157,844 shares of common stock, resulting in the reclassification of our warrant liability to stockholders' (deficit) equity, and the filing and effectiveness of a restated certificate of incorporation, all upon the closing of this offering; and



•

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

        Our capitalization following the closing of this offering will depend on the actual initial public offering price and other terms of this offering determined at pricing. You should read this table together with our financial statements and the related notes appearing at the end of this prospectus and the sections of this prospectus titled "Selected Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations."

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        A $1.00 increase or decrease in the assumed initial public offering price of $           per share, which is the midpoint of the estimated price range set forth on the cover page of this prospectus, would increase or decrease the pro forma as adjusted amount of total stockholders' equity by approximately $            , assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions payable by us. An increase or decrease of 1,000,000 shares in the number of shares offered by us, as set forth on the cover page of this prospectus, would increase or decrease total stockholders' equity on a pro forma as adjusted basis by $       million, assuming no change in the assumed initial public offering price per share and after deducting estimated underwriting discounts and commissions payable by us.

        The table above does not include:

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605,694 shares of our common stock issuable upon the exercise of warrants outstanding as September 30, 2014, at a weighted-average exercise price of $0.34 per share;



•

15,609,837 shares of our common stock issuable upon the exercise of stock options outstanding as of September 30, 2014, at a weighted-average exercise price of $0.30 per share;



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2,803,542 shares of our common stock available for future issuance as of September 30, 2014 under our amended and restated 2008 equity incentive plan; and



•

            additional shares of our common stock that will become available for future issuance in connection with this offering under our 2015 stock incentive plan.

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DILUTION

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

        Our historical net tangible book value (deficit) as of September 30, 2014 was $(67.3) million, or $(11.74) per share of our common stock. Our historical net tangible book value (deficit) is the amount of our total tangible assets less our total liabilities and preferred stock, which is not included within our stockholders' equity (deficit). Historical net tangible book value per share represents historical net tangible book value (deficit) divided by the 5,734,920 shares of our common stock outstanding as of September 30, 2014.

        Our pro forma net tangible book value as of September 30, 2014 was $12.9 million, or $0.12 per share of our common stock. Pro forma net tangible book value represents the amount of our total tangible assets less our total liabilities, after giving effect to the automatic conversion of all outstanding shares of our preferred stock into an aggregate of 102,967,274 shares of our common stock upon the closing of this offering and the conversion of warrants to purchase preferred stock into warrants to purchase common stock resulting in the reclassification of our warrant liability to stockholders' (deficit) equity. Pro forma net tangible book value per share represents pro forma net tangible book value divided by the total number of shares outstanding as of September 30, 2014, after giving effect to the automatic conversion of all outstanding shares of our preferred stock into an aggregate of 102,967,274 shares of our common stock upon the closing of this offering.

        After giving effect to our issuance and sale of            shares of our common stock in this offering at an assumed initial public offering price of $        per share, which is the midpoint of the estimated price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of September 30, 2014 would have been $         million, or $        per share. This represents an immediate increase in pro forma as adjusted net tangible book value per share of $        to existing stockholders and immediate dilution of $        in pro forma as adjusted net tangible book value per share to new investors purchasing common stock in this offering. Dilution per share to new investors is determined by subtracting pro forma as adjusted net tangible book value per share after this offering from the initial public offering price per share paid by new investors. The following table illustrates this dilution on a per share basis:

        A $1.00 increase or decrease in the assumed initial public offering price of $        per share, which is the midpoint of the estimated price range set forth on the cover page of this prospectus, would increase or decrease our pro forma as adjusted net tangible book value by $         million, our pro forma as adjusted net tangible book value per share after this offering by $        and dilution per share to new investors purchasing shares in this offering by $        , assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated

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underwriting discounts and commissions payable by us. An increase or decrease of 1,000,000 shares in the number of shares offered by us, as set forth on the cover page of this prospectus, would increase or decrease the pro forma as adjusted net tangible book value per share after this offering by $        and decrease or increase the dilution per share to new investors participating in this offering by $        , assuming no change in the assumed initial public offering price and after deducting estimated underwriting discounts and commissions payable by us.

        If the underwriters exercise their over-allotment option in full, the pro forma as adjusted net tangible book value will increase to $        per share, representing an immediate increase to existing stockholders of $        per share and an immediate dilution of $        per share to new investors. If any shares are issued upon exercise of outstanding options or outstanding warrants, you will experience further dilution.

        The following table summarizes, on a pro forma basis as of September 30, 2014, after giving effect to the conversion of all of our outstanding preferred stock into common stock, the differences between the number of shares of common stock purchased from us, the total consideration paid to us and the average price per share paid by existing stockholders and by new investors purchasing shares of common stock in this offering. The calculation below is based on an assumed initial public offering price of $        per share, which is the midpoint of the estimated price range set forth on the cover page of this prospectus, before deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us:

        A $1.00 increase or decrease in the assumed initial public offering price of $        per share, which is the midpoint of the estimated price range set forth on the cover page of this prospectus, would increase or decrease the total consideration paid by new investors by $         million and, in the case of an increase, would increase the percentage of total consideration paid by new investors by         percentage points and, in the case of a decrease, would decrease the percentage of total consideration paid by new investors by         percentage points, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same. An increase or decrease of 1,000,000 shares in the number of shares offered by us, as set forth on the cover page of this prospectus, would increase or decrease the total consideration paid by new investors by $         million and, in the case of an increase, would increase the percentage of total consideration paid by new investors by         percentage points and, in the case of a decrease, would decrease the percentage of total consideration paid by new investors by         percentage points, assuming no change in the assumed initial public offering price.

        The number of shares purchased from us by existing stockholders is based on 108,702,194 shares of our common stock outstanding as of September 30, 2014, after giving effect to the automatic conversion of all of our outstanding shares of preferred stock into 102,967,274 shares of common stock upon the closing of this offering, and excludes:

•

605,694 shares of our common stock issuable upon the exercise of warrants outstanding as of September 30, 2014, at a weighted-average exercise price of $0.34 per share;



•

15,609,837 shares of our common stock issuable upon the exercise of stock options outstanding as of September 30, 2014, at a weighted-average exercise price of $0.30 per share;

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•

2,803,542 additional shares of our common stock available for future issuance as of September 30, 2014 under our amended and restated 2008 equity incentive plan; and



•

            additional shares of our common stock that will become available for future issuance in connection with this offering under our 2015 stock incentive plan.

        If the underwriters exercise their over-allotment option in full, the following will occur:

•

the percentage of shares of our common stock held by existing stockholders will decrease to        % of the total number of shares of our common stock outstanding after this offering; and



•

the number of shares of our common stock held by new investors will increase to        , or        % of the total number of shares of our common stock outstanding after this offering.

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SELECTED FINANCIAL DATA

        You should read the following selected financial data together with our financial statements and the related notes appearing at the end of this prospectus and the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of this prospectus. We have derived the statement of operations data for the years ended December 31, 2012 and 2013 and the balance sheet data as of December 31, 2012 and 2013 from our audited financial statements appearing at the end of this prospectus. The statement of operations data for the nine months ended September 30, 2013 and 2014 and the balance sheet data as of September 30, 2014 have been derived from our unaudited financial statements appearing at the end of this prospectus and have been prepared on the same basis as the audited financial statements. In the opinion of management, the unaudited financial data reflects all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the financial information as of and for the periods presented. Our historical results are not necessarily indicative of results that should be expected in any future period, and our results for any interim period are not necessarily indicative of results that should be expected for any full year.

        See Note 2 in the notes to our financial statements appearing at the end of this prospectus for a description of the method used to calculate basic and diluted net loss per share and unaudited pro forma basic and diluted net loss per share.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes and other financial information included elsewhere in this prospectus. Some of the information contained in this discussion and analysis or set forth elsewhere in this prospectus, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should review the "Risk Factors" section of this prospectus for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

        We are a clinical-stage biopharmaceutical company focused on the discovery, development and commercialization of novel therapeutics based on our proprietary Safely Metabolized And Rationally Targeted, or SMART, linker technology platform. Our SMART linker technology platform is based on the concept of treating diseases by simultaneously modulating multiple targets in one or more related disease pathways. We engineer bi-functional product candidates that are conjugates of two molecules, or bioactives, each with known pharmacological activity, joined by one of our proprietary SMART linkers. Our SMART linker conjugates are designed for enhanced efficacy and improved safety and tolerability. Our initial focus is on treatments for orphan diseases, such as Duchenne muscular dystrophy, or DMD. We are also developing other product candidates for the treatment of serious lipid disorders.

        We have applied our SMART linker technology platform to build a development pipeline that includes three clinical-stage product candidates and multiple programs in preclinical development. Our drug candidates are small molecules. Our lead product candidate, CAT-1004, is an oral small molecule that we believe has the potential to be a disease-modifying therapy for the treatment of DMD, a fatal genetic disorder involving progressive muscle degeneration. CAT-2003 is in Phase 2 trials for the treatment of patients with multifactorial chylomicronemia syndrome, or MFC, and refractory severe hypertriglyceridemia, or rSHTG, diseases involving extremely elevated triglyceride levels that put patients at risk for the potentially life-threatening condition of pancreatitis. We are developing CAT-2054 for the treatment of patients with hypercholesterolemia, or elevated low density lipoprotein cholesterol, or LDL-C, levels, a disease that increases the risk of cardiovascular events. In January 2015, we initiated a Phase 1 clinical trial to assess the safety, tolerability and pharmacokinetics of CAT-2054 in healthy volunteers. CAT-4001 is in preclinical studies and is being developed for the treatment of amyotrophic lateral sclerosis and Friedreich's ataxia, two rare degenerative diseases of the central nervous system.

        Since our inception in June 2008, we have devoted substantially all of our resources to developing our proprietary platform technology, identifying potential product candidates, undertaking preclinical studies and conducting clinical trials for our three clinical-stage compounds, building our intellectual property portfolio, organizing and staffing our company, business planning, raising capital, and providing general and administrative support for these operations. To date, we have financed our operations primarily through private placements of our preferred stock and a debt financing. From our inception through September 30, 2014, we have raised an aggregate of $85.7 million, of which $80.5 million consisted of gross proceeds from private placements of preferred stock and $5.0 million consisted of gross proceeds from a secured debt financing.

        We have not generated any revenue to date. We have incurred significant annual net operating losses in every year since our inception and expect to incur a net operating loss in 2015 and continue to incur net operating losses for the foreseeable future. Our net losses were $15.7 million, $18.1 million

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and $15.9 million for the years ended December 31, 2012 and 2013, and for the nine months ended September 30, 2014, respectively. As of September 30, 2014, we had an accumulated deficit of $69.4 million. We expect to continue to incur significant expenses and increasing operating losses for the next several years. Our net losses may fluctuate significantly from quarter to quarter and year to year. We anticipate that our expenses will increase significantly if and as we continue to develop and conduct clinical trials with respect to CAT-1004 and our CAT-2000 series product candidates; initiate and continue research, preclinical and clinical development efforts for our other product candidates and potential product candidates; maintain, expand and protect our intellectual property portfolio; establish a commercial infrastructure to support the marketing and sale of certain of our product candidates; and hire additional personnel, such as clinical, regulatory, quality control and scientific personnel. In addition, upon the closing of this offering, we expect to incur additional costs associated with operating as a public company.

Financial Operations Overview

Revenue

        To date, we have not generated any revenue from product sales or any other source and do not expect to generate any revenue from the sale of products in the near future. In the future, we will seek to generate revenue primarily from a combination of product sales and collaborations with strategic partners.

Research and Development Expenses

        Research and development expenses consist primarily of costs incurred for our research activities, including our drug discovery efforts, and the development of our product candidates, which include:

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employee-related expenses including salaries, benefits and stock-based compensation expense;



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expenses incurred under agreements with third parties, including contract research organizations, or CROs, that conduct clinical trials and research and development and preclinical activities on our behalf;



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the cost of consultants;



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the cost of lab supplies and acquiring, developing and manufacturing preclinical study materials; and



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facilities and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance and other supplies.

        Research and development costs are expensed as incurred. Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are deferred and capitalized. The capitalized amounts are expensed as the related goods are delivered or the services are performed.

        The following summarizes our most advanced current research and development programs:

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CAT-1004 is an orally administered SMART linker conjugate of salicylate and the omega-3 fatty acid docosahexaenoic acid, or DHA, that we designed to enhance the activity of salicylate and DHA in modulating the NF-kB pathway at multiple points. NF-kB, or nuclear factor kappa-light-chain-enhancer of activated B cells, is a protein that coordinates cellular response to damage, stress and inflammation and plays an important role in muscle health. We plan to initiate a Phase 1/2 clinical trial of CAT-1004 for the treatment of DMD in the first half of 2015 and expect to report top-line Phase 2 data in mid-2016. If the results from our Phase 1/2 clinical

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trial are positive, we intend to conduct a single six-month Phase 3 pivotal clinical trial in order to seek marketing approval.

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CAT-2003 is an orally administered SMART linker conjugate of the omega-3 fatty acid eicosapentaenoic acid, or EPA, and nicotinic acid that we designed to modulate the SREBP pathway in the intestine. SREBP is a master regulator of lipid metabolism and controls levels of both triglycerides and LDL-C. We are currently conducting a Phase 2a clinical trial of CAT-2003 for the treatment of MFC and rSHTG and expect to report top-line data in the second quarter of 2015.



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CAT-2054 is an orally administered SMART linker conjugate of EPA and nicotinic acid, designed to modulate the SREBP pathway in the liver. We are initially developing CAT-2054 to treat patients with hypercholesterolemia for whom existing treatments are insufficient. In January 2015, we initiated a Phase 1 clinical trial to assess the safety, tolerability and pharmacokinetics of CAT-2054 in healthy volunteers. If the results of this clinical trial are positive, we intend to initiate a Phase 2 clinical trial of CAT-2054 for the treatment of hypercholesterolemia in the fourth quarter of 2015.

        Other research and development programs include our CAT-4001 development program and activities related to exploratory efforts, target validation and lead optimization for our early stage programs and our proprietary platform technology.

        We typically use our employee, consultant and infrastructure resources across our development programs. We track outsourced development costs by product candidate or development program, but we do not allocate personnel costs, other internal costs or external consultant costs to specific product candidates or development programs. We record our research and development expenses net of any research and development tax incentives we are entitled to receive from government authorities.

        The following table summarizes our research and development expenses by program:

        The successful development of our product candidates is highly uncertain. Accordingly, at this time, we cannot reasonably estimate the nature, timing and costs of the efforts that will be necessary to complete the remainder of the development of these product candidates. We are also unable to predict

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when, if ever, material net cash inflows will commence from CAT-1004, our CAT-2000 series product candidates or any of our other current or potential product candidates. This is due to the numerous risks and uncertainties associated with developing medicines, including the uncertainties of:

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establishing an appropriate safety profile with investigational new drug application, or IND, enabling toxicology studies;



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successful enrollment in, and completion of clinical trials;



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receipt of marketing approvals from applicable regulatory authorities;



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establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers;



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obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our product candidates;



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launching commercial sales of the products, if and when approved, whether alone or in collaboration with others; and



•

a continued acceptable safety profile of the products following approval.

        A change in the outcome of any of these variables with respect to the development of any of our product candidates would significantly change the costs and timing associated with the development of that product candidate.

        Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect research and development costs to increase significantly for the foreseeable future as our product candidate development programs progress. However, we do not believe that it is possible at this time to accurately project total program-specific expenses through commercialization. There are numerous factors associated with the successful commercialization of any of our product candidates, including future trial design and various regulatory requirements, many of which cannot be determined with accuracy at this time based on our stage of development. Additionally, future commercial and regulatory factors beyond our control will impact our clinical development programs and plans.

General and Administrative Expenses

        General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in executive, finance, accounting, business development and human resources functions. Other significant costs include facility costs not otherwise included in research and development expenses, legal fees relating to patent and corporate matters, and fees for accounting and consulting services.

        We anticipate that our general and administrative expenses will increase in the future to support continued research and development activities, potential commercialization of our product candidates and increased costs of operating as a public company. These increases will likely include increased costs related to the hiring of additional personnel and fees to outside consultants, lawyers and accountants, among other expenses. Additionally, we anticipate increased costs associated with being a public company including expenses related to services associated with maintaining compliance with exchange listing and Securities and Exchange Commission requirements, insurance costs and investor relations costs.

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Critical Accounting Policies and Estimates

        This discussion and analysis of our financial condition and results of operations is based on our financial statements, which we have prepared in accordance with United States generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of expenses during the reporting periods. On an ongoing basis, we evaluate our estimates and judgments, including those described in greater detail below. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

        While our significant accounting policies are described in more detail in the notes to our financial statements included elsewhere in this prospectus, 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.

Accrued Research and Development Expenses

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

        We base our expenses related to CROs on our estimates of the services received and efforts expended pursuant to quotes and contracts with CROs that conduct research and development on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our CROs will exceed the level of services provided and result in a prepayment of the research and development expense. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or prepaid expense accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, if our estimates of the status and timing of services performed differ from the actual status and timing of services performed, it could result in us reporting expense amounts that are too high or too low in any particular period. To date, there have been no material differences between our estimates of such expenses and the amounts actually incurred.

Stock-Based Compensation

        We measure stock-based awards granted to employees and members of the board of directors at fair value on the date of grant and recognize the corresponding stock-based compensation expense of those awards, net of estimated forfeitures, over the requisite service period, which is generally the

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vesting period of the respective award. We have historically granted stock options with exercise prices equivalent to the fair value of our common stock as of the date of grant.

        We measure other stock-based awards granted to non-employees at fair value as the awards vest and recognize the resulting value as expense during the period the related services are rendered. At the end of each financial reporting period prior to completion of the service, we re-measure the unvested portion of these awards.

        We estimate the fair value of each stock option grant using the Black-Scholes option-pricing model. We historically have been a private company and lack company-specific historical and implied volatility information. Therefore, we estimate our expected volatility based on the historical volatility of a representative group of publicly traded biopharmaceutical companies and expect to continue to do so until we have adequate historical data regarding the volatility of our traded stock price. We determine the expected term of our options utilizing the "simplified" method for awards that qualify as "plain-vanilla" options, while we determine the expected term of other nonemployee options based on the contractual term of the options. We determine the risk-free interest rate by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. We assume an expected dividend yield of zero because we have never paid cash dividends and do not expect to pay any cash dividends in the foreseeable future.

        We estimated the fair value of stock options granted using the Black-Scholes option-pricing model based on the assumptions noted in the following table:

        These assumptions represented our best estimates, but the estimates involve inherent uncertainties and the application of our judgment. As a result, if factors change and we use significantly different assumptions or estimates, our stock-based compensation expense could be materially different. We recognize stock-based compensation expense for only the portion of awards that are expected to vest. In developing a forfeiture rate estimate for pre-vesting forfeitures, we have considered our historical experience of actual forfeitures. If our future actual forfeiture rate is materially different from our estimate, our stock-based compensation expense could be significantly different from what we have recorded in the prior periods. However, estimates will not be necessary to determine the fair value of new awards once our common stock begins to be publicly traded.

        The following table summarizes the classification of our stock-based compensation expense recognized in our statements of operations:

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Valuations of Common Stock

        Our board of directors determines the fair value of our common stock on each date of grant, with input from management. Due to the absence of a public trading market for our common stock, our board of directors' determination of the fair value of our common stock has historically been performed using methodologies, approaches and assumptions consistent with the American Institute of Certified Public Accountants Audit and Accounting Practice Aid Series: Valuation of Privately-Held-Company Equity Securities Issued as Compensation. We performed a contemporaneous valuation, with the assistance of a third-party specialist, as of October 31, 2013. For financial reporting purposes, we also performed common stock valuations retrospectively, with the assistance of a third-party specialist, as of April 1, 2014 and August 28, 2014. Our board of directors has considered various objective and subjective factors, along with input from management, to determine its best estimate of the fair value of our common stock as of each grant date, including the following:

•

the prices at which we sold shares of preferred stock and the superior rights and preferences of the preferred stock relative to our common stock;



•

the progress of our research and development programs, including the status of clinical trials for our product candidates;



•

our stage of development and business strategy;



•

our financial condition, including cash on hand and borrowings under our credit facility;



•

our historical and forecasted performance and operating results;



•

the composition of, and changes to, our management team and board of directors;



•

the lack of an active public market for our common stock and our preferred stock;



•

the likelihood of achieving a liquidity event such as a sale of our company or an initial public offering, or IPO, given prevailing market conditions;



•

the analysis of initial public offerings and the market performance of similar companies in the biopharmaceutical industry;



•

external market conditions affecting the biopharmaceutical industry; and



•

trends within the biopharmaceutical industry.

        Historically, the dates of our contemporaneous valuations have not always coincided with the dates of our stock-based compensation grants. In determining the exercise prices of the options granted, our board of directors considered, among other things, the most recent contemporaneous or retrospective valuations of our common stock and our assessment of additional objective and subjective factors we believed were relevant as of the grant date. The additional factors considered when determining any changes in fair value between the most recent contemporaneous valuation, or if available the most recent retrospective valuation, and the grant dates included, when available, the prices paid in recent transactions involving our equity securities, as well as our stage of development, our operating and financial performance and current business conditions.

        There are significant judgments and estimates inherent in the determination of the fair value of our common stock, including the contemporaneous and retrospective valuations. These judgments and estimates include assumptions regarding our future operating performance, the time to completing an IPO or other liquidity event and the determinations of the appropriate valuation methods. If we had made different assumptions, our stock-based compensation expense, net loss and net loss per common share could have been significantly different.

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Valuation Methodologies

        Our common stock valuations were prepared using a hybrid of the option-pricing method, or OPM, and the probability-weighted expected return method, or PWERM.

        OPM.    The OPM treats each class of common stock and preferred stock as call options on the total equity value of a company, with exercise prices based on the value thresholds at which the allocation among the various holders of a company's securities changes. Under this method, the common stock has value only if the funds available for distribution to stockholders exceed the value of the preferred stock liquidation preference at the time of a liquidity event, such as a strategic sale, merger or IPO. The common stock is modeled as a call option on the underlying equity value at a predetermined exercise price. In the model, the exercise price is based on a comparison with the total equity value rather than, as in the case of a regular call option, a comparison with a per share stock price. Thus, common stock is considered to be a call option with a claim on the enterprise at an exercise price equal to the remaining value immediately after the preferred stock liquidation preference is paid.

        The OPM uses the Black-Scholes option-pricing model to price the call options. This model defines the securities' fair values as functions of the current fair value of a company and uses assumptions such as the anticipated timing of a potential liquidity event and the estimated volatility of the equity securities. The aggregate value of the common stock derived from the OPM is then divided by the number of shares of common stock outstanding to arrive at the per share value.

        We used the OPM backsolve approach to estimate enterprise value under the OPM. The OPM backsolve approach uses the OPM to calculate the implied equity value based on recent sales of the company's securities. For the OPM, we based our assumed volatility factor on the historical trading volatility of our publicly traded peer companies. At each valuation date, we determined the appropriate volatility to be used, considering such factors as our expected time to a liquidity event and our stage of development.

        To derive the fair value of our common stock using the OPM, we calculated the proceeds to the common stockholders based on the preferences and priorities of the preferred and common stock. We then applied a discount for lack of marketability to the common stock to account for the lack of access to an active public market.

        PWERM.    The PWERM is a scenario-based methodology that estimates the fair value of common stock based upon an analysis of future values for the company, assuming various outcomes. The common stock value is based on the probability-weighted present value of expected future investment returns considering each of the possible outcomes available as well as the rights of each class of stock. The future value of the common stock under each outcome is discounted back to the valuation date at an appropriate risk-adjusted discount rate and probability weighted to arrive at an indication of value for the common stock. A discount for lack of marketability is then applied to the common stock to account for the lack of access to an active public market.

        For our common stock valuations as of October 31, 2013, April 1, 2014 and August 28, 2014, we used a hybrid of the OPM and PWERM and considered two types of future event scenarios: an IPO and a sale transaction. We valued the IPO scenario using the OPM backsolve approach for the October 31, 2013 valuation. We used the guideline public company method, which includes comparisons to publicly traded companies in our industry that recently completed IPOs, for the April 1, 2014 and August 28, 2014 valuations. We valued the sale scenario using the OPM backsolve approach. Our board of directors determined the relative probability of each type of future event scenario based on an analysis of market conditions at the time, including then-current IPO valuations of similarly situated companies, and expectations as to the timing and likely prospects of the future-event scenarios.

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        To derive the fair value of the common stock for each scenario using the hybrid PWERM and OPM, we calculated the proceeds to the common stockholders based on the preferences and priorities of the preferred and common stock. We then applied a discount for lack of marketability to the common stock to account for the lack of access to an active public market.

Option Grants

        The following table summarizes by grant date the number of shares of common stock subject to options granted between January 1, 2014 and January 23, 2015, the per share exercise price of the options, the fair value of the common stock underlying the options on the date of grant and the per share estimated fair value of the options. For financial reporting purposes, the value of the April 1, 2014 valuation has been applied retrospectively to our March 19, 2014 option grants and the value of the October 28, 2014 valuation has been applied retrospectively to our August 28, 2014, October 21, 2014 and November 5, 2014 option grants.

JOBS Act

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

        We are in the process of evaluating the benefits of relying on other exemptions and reduced reporting requirements under the JOBS Act. Subject to certain conditions, as an EGC, we intend to rely on certain of these exemptions, including exemptions from the requirement to provide an auditor's attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act and from any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis. We will remain an EGC until the earlier of: the last day of the fiscal year in which we have total annual gross revenues of $1 billion or more; the last day of the fiscal year following the fifth anniversary of the date of the completion of this offering; the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; or the date on

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which we are deemed to be a large accelerated filer under the rules of the Securities and Exchange Commission.

Results of Operations

Comparison of Nine Months Ended September 30, 2013 and 2014

        The following table summarizes our results of operations for the nine months ended September 30, 2013 and 2014, together with the dollar increase or decrease in those items:

Research and Development Expenses

        Research and development expenses increased by $1.1 million to $11.4 million for the nine months ended September 30, 2014 from $10.3 million for the nine months ended September 30, 2013, an increase of 11%. The increase in research and development expenses was partially attributable to a net increase of $0.7 million in direct program costs, reflecting an increase of $2.2 million for CAT-2054 manufacturing and preclinical development costs associated with IND-enabling studies, an increase of $0.5 million in our general research and platform programs and an increase of $0.2 million for CAT-1004 manufacturing and preclinical development costs, which were partially offset by a decrease of $2.2 million in CAT-2003 clinical trial, manufacturing and preclinical development costs due to the completion of two Phase 2 clinical trials in late 2013 and early 2014. In addition, the costs related to internal research and development increased by $0.4 million, primarily attributable to stock-based compensation expense.

General and Administrative Expenses

        General and administrative expenses increased by $1.5 million to $4.4 million for the nine months ended September 30, 2014 from $3.0 million for the nine months ended September 30, 2013, an increase of 50%. The increase in general and administrative expenses was primarily attributable to increased employee costs of $0.8 million associated with hiring additional senior personnel, including an increase of $0.6 million in salaries and benefits and an increase of $0.2 million in stock-based compensation expense. Additionally, professional and consulting fees increased $0.7 million.

Other Expense

        Other expense consists of interest expense, which increased by $52,000 to $54,000 for the nine months ended September 30, 2014, from $2,000 for the nine months ended September 30, 2013, due to the interest expense on our credit facility which we entered into in August 2014.

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Comparison of Years Ended December 31, 2012 and 2013

        The following table summarizes our results of operations for the years ended December 31, 2012 and 2013, together with the dollar increase or decrease in those items:

Research and Development Expenses

        Research and development expenses increased by $1.6 million to $14.0 million in 2013 from $12.4 million in 2012, an increase of 13%. The increase in research and development expenses was primarily attributable to an increase of $1.3 million in direct program expenses, reflecting a $3.4 million increase in CAT-2003 clinical trial, manufacturing and preclinical development costs primarily due to the costs associated with a Phase 2a clinical trial in 2013, and an increase in CAT-2054 preclinical development costs of $0.7 million, which were partially offset by a reduction of $2.3 million in CAT-1004 clinical trial, manufacturing and preclinical development costs due to completion of Phase 1 clinical trials in early 2013, and a reduction of $0.5 million in our general research and platform programs. In addition, the costs related to internal research and development increased by approximately $0.3 million, which was primarily attributable to an increase in employee costs including stock-based compensation expense, partially offset by a decrease of $0.2 million in consulting and other expenses.

General and Administrative Expenses

        General and administrative expenses increased by $0.9 million to $4.1 million in 2013 from $3.3 million in 2012, an increase of 26%. The increase in general and administrative expenses was primarily attributable to increased employee costs of $0.5 million, primarily due to increased headcount, and an increase of $0.3 million in travel expenses, primarily related to fundraising activities.

Other Income

        Other income for the years ended December 31, 2013 and 2012 consisted primarily of interest income and was materially consistent in both periods.

Liquidity and Capital Resources

Sources of Liquidity

        From our inception through September 30, 2014, we have raised an aggregate of $85.7 million, of which $80.5 million consisted of gross proceeds from private placements of preferred stock and $5.0 million consisted of gross proceeds from a secured debt financing. As of September 30, 2014, we had $20.7 million in cash, cash equivalents and available-for-sale securities.

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        On August 27, 2014, we entered into a loan and security agreement, or the Credit Facility, with MidCap Financial SBIC and Square 1 Bank. The Credit Facility provides for initial borrowings of $5.0 million and additional borrowings of up to $20.0 million. Concurrently with entering into the Credit Facility, we borrowed $5.0 million under a term loan under the Credit Facility and we issued to the lenders warrants to purchase an aggregate of 157,844 shares of our Series B convertible preferred stock (157,844 shares of common stock on an as-converted basis) at an exercise price of $0.9503 per share. Of the additional $20.0 million available to us, $10.0 million is available to be drawn until March 31, 2015, subject to our issuance of warrants to purchase shares of our stock equal in value to 3% of the amount drawn. The remaining $10.0 million will be available to us subject to the completion of an initial public offering with net cash proceeds to us of at least $50.0 million until June 30, 2015, and also subject to our issuance of warrants to purchase shares of our stock equal in value to 3% of the amount drawn. All borrowings under the Credit Facility are due on October 1, 2018 and are collateralized by substantially all of our personal property, other than our intellectual property.

        There are no financial covenants associated with the Credit Facility; however, there are negative covenants that prohibit us from transferring any of our material assets, exclusively licensing our intellectual property (subject to certain exceptions), merging with or acquiring another entity, entering into a transaction that would result in a change of control, incurring additional indebtedness, creating any lien on our property, making investments in third parties or redeeming stock or paying dividends.

        The Credit Facility also includes events of default, the occurrence and continuation of any of which provides the lenders the right to exercise remedies against us and the collateral securing the loans under the Credit Facility, including cash. These events of default include, among other things, failure to pay amounts due under the Credit Facility, insolvency, the occurrence of a material adverse event, which includes a material adverse change in our business, operations or conditions (financial or otherwise) or a material impairment of the prospect of repayment of any portion of the obligations, the occurrence of any default under certain other indebtedness and a final judgment against us in an amount greater than $250,000. At September 30, 2014, we concluded that a material adverse change had not occurred.

        We are obligated to make monthly interest-only payments on any term loans borrowed under the Credit Facility until September 1, 2015 and, thereafter, to pay 36 consecutive, equal monthly installments of principal and interest from October 1, 2015 through September 1, 2018. Term loans under the Credit Facility bear interest at an annual rate of 7.49%. Following the occurrence and during the continuance of an event of default, borrowings under the Credit Facility will bear interest at an annual rate that is 5.00% above the rate that is otherwise applicable. In addition, a final payment equal to 3.48% of any amounts drawn under the Credit Facility is due upon the earlier of the maturity date, acceleration of the term loans or prepayment of all or part of the term loans.

Cash Flows

        The following table provides information regarding our cash flows for the years ended December 31, 2012 and 2013 and the nine months ended September 30, 2013 and 2014:

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Net Cash Used in Operating Activities

        Net cash used in operating activities was $14.5 million for the nine months ended September 30, 2014 and consisted primarily of a net loss of $15.9 million adjusted for non-cash items, including stock-based compensation expense of $0.6 million and depreciation and amortization expense of $0.2 million, and a net increase in operating assets of $0.6 million, which resulted primarily from a net increase in accounts payable and accrued expenses of $0.7 million partially offset by an increase in prepaid expenses and other current assets of $0.1 million.

        Net cash used in operating activities was $12.1 million for the nine months ended September 30, 2013 and consisted primarily of a net loss of $13.2 million adjusted for non-cash items, including depreciation and amortization expense of $0.2 million and stock-based compensation expense of $0.2 million, and a net increase in operating assets of $0.7 million, which resulted primarily from a net increase in accounts payable and accrued expenses of $0.8 million partially offset by an increase in prepaid expenses and other current assets of $0.1 million.

        Net cash used in operating activities was $16.4 million for the year ended December 31, 2013, and consisted primarily of a net loss of $18.1 million adjusted for non-cash items, including stock-based compensation expense of $0.3 million and depreciation and amortization expense of $0.3 million, and a net increase in operating assets of $1.1 million, which resulted primarily from a net increase in accounts payable and accrued expenses of $1.0 million and a decrease in prepaid expenses and other current assets of $0.1 million.

        Net cash used in operating activities was $15.6 million for the year ended December 31, 2012, and consisted primarily of a net loss of $15.7 million adjusted for non-cash items, including depreciation and amortization expense of $0.3 million and stock-based compensation expense of $0.2 million, and a decrease in operating assets of $0.4 million, which resulted primarily from a net decrease in accounts payable and accrued expenses of $0.5 million.

Net Cash Used in Investing Activities

        Net cash used in investing activities was $5.1 million during the nine months ended September 30, 2014 compared to $18,000 during the nine months ended September 30, 2013, primarily the result of $5.0 million invested in available-for-sale securities in the nine months ended September 30, 2014.

        Net cash used in investing activities was $43,000 during the year ended December 31, 2013 compared to $0.4 million during the year ended December 31, 2012. The cash used in investing activities for the years ended December 31, 2013 and 2012 was primarily the result of purchases of property and equipment.

Net Cash Provided by Financing Activities

        Net cash provided by financing activities was $4.8 million during the nine months ended September 30, 2014 compared to $9.2 million during the nine months ended September 30, 2013. The cash provided by financing activities for the nine months ended September 30, 2014 primarily consisted of gross proceeds of $5.0 million from our borrowings under the Credit Facility. The cash provided by financing activities for the nine months ended September 30, 2013 primarily consisted of net proceeds of $9.2 million from the issuance of 13,136,951 shares of Series A convertible preferred stock in January and June 2013.

        Net cash provided by financing activities was $41.4 million during the year ended December 31, 2013 compared to $8.7 million during the year ended December 31, 2012. The cash provided by financing activities for the year ended December 31, 2013 consisted of net proceeds of $9.2 million from the issuance of 13,136,951 shares of Series A convertible preferred stock in January and June 2013, net proceeds of $32.2 million from the issuance of 34,129,571 shares of Series B convertible

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preferred stock in October 2013 and proceeds received from stock option exercises. The cash provided by financing activities for the year ended December 31, 2012 consisted of net proceeds of $8.7 million from the issuance of 12,500,000 shares of series A convertible preferred stock in July 2012 and proceeds received from stock option exercises.

Funding Requirements

        We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the research and development of, and conduct clinical trials and seek marketing approval for, our product candidates. In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. Furthermore, upon the closing of this offering, we expect to incur additional costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts.

        We expect that the net proceeds from this offering, together with our existing cash and cash equivalents, will enable us to fund our operating expenses and capital expenditure requirements at least through 2016. We have based this estimate on assumptions that may prove to be wrong, and we may use our available capital resources sooner than we currently expect. Because of the numerous risks and uncertainties associated with the development of CAT-1004, our CAT-2000 series product candidates and our other current and potential product candidates, and because the extent to which we may enter into collaborations with third parties for the development of these product candidates is unknown, we are unable to estimate the amounts of increased capital outlays and operating expenses associated with completing the research and development of our product candidates. Our future capital requirements will depend on many factors, including:

•

the scope, progress, results and costs of drug discovery, preclinical development, laboratory testing and clinical trials for our product candidates;



•

the success of any future collaborations;



•

the extent to which we acquire or in-license other medicines and technologies;



•

the costs, timing and outcome of regulatory review of our product candidates;



•

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



•

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

        Identifying potential product candidates and conducting preclinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of medicines that we do not expect to be commercially available for many years, if at all. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all.

        Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. With the exception of the Credit Facility, we do not have any committed external source of funds. To the extent that we raise additional capital through the sale of equity or convertible debt securities, our stockholders' ownership interests will be diluted, and the terms of these

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securities may include liquidation or other preferences that adversely affect our stockholders' rights. Additional debt financing, if available, would result in increased fixed payment obligations and may involve agreements that include restrictive covenants that limit our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, that could adversely impact our ability to conduct our business.

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

Contractual Obligations

        The following table summarizes our significant contractual obligations as of payment due date by period at September 30, 2014:

        We enter into agreements in the normal course of business with CROs for clinical trials and clinical supply manufacturing and with vendors for preclinical research studies and other services and products for operating purposes. We have not included these payments in the table of contractual obligations above since the contracts are cancelable at any time by us, generally upon 30 days prior written notice to the CRO, and therefore we believe that our non-cancelable obligations under these agreements are not material.

Off-Balance Sheet Arrangements

        We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under applicable Securities and Exchange Commission rules.

Quantitative and Qualitative Disclosures About Market Risk

        We are exposed to market risk related to changes in interest rates. As of December 31, 2013, we had cash and cash equivalents of $30.5 million and, as of September 30, 2014, we had cash, cash equivalents and available-for-sale investments of $20.7 million, consisting primarily of investments in U.S. Treasury securities and U.S. Government-backed securities. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly because our investments are in short-term marketable securities. Our marketable securities are subject to interest rate risk and could fall in value if market interest rates increase. Due to the

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short-term duration of our investment portfolio and the low risk profile of our investments, an immediate 10% change in interest rates would not have a material effect on the fair market value of our investment portfolio. We have the ability to hold our marketable securities until maturity, and therefore we would not expect our operating results or cash flows to be affected to any significant degree by the effect of a change in market interest rates on our investments.

        As of December 31, 2013 and September 30, 2014, we had no liabilities denominated in foreign currencies.

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BUSINESS

Overview

        We are a clinical-stage biopharmaceutical company focused on the discovery, development and commercialization of novel therapeutics based on our proprietary Safely Metabolized And Rationally Targeted, or SMART, linker technology platform. Our SMART linker technology platform is based on the concept of treating diseases by simultaneously modulating multiple targets in one or more related disease pathways. We engineer bi-functional product candidates that are conjugates of two molecules, or bioactives, each with known pharmacological activity, joined by one of our proprietary SMART linkers. Our SMART linker conjugates are designed for enhanced efficacy and improved safety and tolerability. Our initial focus is on treatments for orphan diseases, such as Duchenne muscular dystrophy, or DMD. We are also developing other product candidates for the treatment of serious lipid disorders. We have applied our SMART linker technology platform to build a development pipeline that includes three-clinical stage product candidates and multiple programs in preclinical development.

        Our lead product candidate, CAT-1004, is an oral small molecule that we believe has the potential to be a disease-modifying therapy for the treatment of DMD, a fatal genetic disorder involving progressive muscle degeneration. CAT-1004 is a SMART linker conjugate of salicylate and the omega-3 fatty acid docosahexaenoic acid, or DHA, that we designed to enhance the activity of salicylate and DHA in modulating the NF-kB pathway at multiple points. NF-kB, or nuclear factor kappa-light-chain-enhancer of activated B cells, is a protein that coordinates cellular response to damage, stress and inflammation and plays an important role in muscle health. In skeletal muscle, activated NF-kB drives muscle degeneration and suppresses muscle regeneration. Chronic activation of NF-kB has been reported in multiple skeletal muscle disorders, including muscular dystrophies, atrophy and inflammatory myopathies. In animal models of DMD, CAT-1004 inhibited activated NF-kB, reduced muscle inflammation and degeneration and increased muscle regeneration. In Phase 1 clinical trials, CAT-1004 inhibited NF-kB and was well tolerated with no observed safety concerns. We plan to initiate a Phase 1/2 clinical trial of CAT-1004 for the treatment of DMD in the first half of 2015 and expect to report top-line Phase 2 data in mid-2016. If the results from our Phase 1/2 clinical trial are positive, we intend to conduct a single six-month Phase 3 pivotal clinical trial in order to seek marketing approval. The U.S. Food and Drug Administration, or FDA, has granted CAT-1004 orphan drug designation for the treatment of DMD. We hold worldwide rights to CAT-1004.

        Our two other clinical-stage product candidates, CAT-2003 and CAT-2054, are members of our CAT-2000 series. This series of compounds consists of oral small molecule product candidates that modulate the Sterol Regulatory Element Binding Protein, or SREBP, pathway. SREBP is a master regulator of lipid metabolism and controls the metabolism of both triglycerides and low density lipoprotein cholesterol, or LDL-C.

        CAT-2003 is an orally administered SMART linker conjugate of the omega-3 fatty acid eicosapentaenoic acid, or EPA, and nicotinic acid that we designed to modulate the SREBP pathway in the intestine. We are developing CAT-2003 for the treatment of patients with multifactorial chylomicronemia syndrome, or MFC, and refractory severe hypertriglyceridemia, or rSHTG, diseases involving extremely elevated triglyceride levels that significantly increase the risk of pancreatitis. In Phase 2 clinical trials, CAT-2003 demonstrated clinically meaningful reductions in triglyceride levels and improvement in other cardio-metabolic risk factors, including glycated hemoglobin, or HbA1c, which is a measure of glucose levels over time, and LDL-C. We are currently conducting a Phase 2a clinical trial of CAT-2003 for the treatment of MFC and rSHTG and expect to report top-line data in the second quarter of 2015. We hold worldwide rights to CAT-2003 and we may seek to commercialize CAT-2003 through one or more collaborations.

        CAT-2054, similar to CAT-2003, is an orally administered SMART linker conjugate of EPA and nicotinic acid that we have designed to modulate the SREBP pathway. However, unlike CAT-2003,

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which we designed to be active in cells in the intestine, we designed CAT-2054 to be active in cells in the liver. By modulating the SREBP pathway in the liver, CAT-2054 may inhibit production of important cholesterol metabolism proteins, such as proprotein convertase subtilisin kexin 9, or PCSK9, 3-hydroxy-3-methyl-glutaryl-CoA reductase, or HMG-CoA reductase, and adenosine triphosphate citrate lyase, or ATP citrate lyase. We are developing CAT-2054 for the treatment of hypercholesterolemia, or elevated LDL-C levels, a disease that increases the risk of cardiovascular events. In January 2015, we initiated a Phase 1 clinical trial to assess the safety, tolerability and pharmacokinetics of CAT-2054 in healthy volunteers. If the results of this clinical trial are positive, we intend to initiate a Phase 2 clinical trial for the treatment of hypercholesterolemia in the fourth quarter of 2015. We hold worldwide rights to CAT-2054 and we intend to seek to commercialize CAT-2054 through one or more collaborations.

        CAT-4001, our most advanced preclinical product candidate, is a SMART linker conjugate of monomethyl fumarate and DHA. CAT-4001 is a small molecule that activates the Nrf2 pathway and inhibits activated NF-kB. Nrf2, or Nuclear factor erythroid-derived 2-like 2, is a gene transcription factor that controls the body's response to cellular stress and oxidative damage. CAT-4001 is in preclinical studies for the treatment of amyotrophic lateral sclerosis, or ALS, and Friedreich's ataxia. ALS and Friedreich's ataxia are rare degenerative diseases of the central nervous system in which the Nrf2 and NF-kB pathways have been implicated. We plan to conduct preclinical studies of CAT-4001 in 2015, and if the results of these preclinical studies are positive we intend to advance CAT-4001 into a Phase 1 clinical trial in 2016. We hold worldwide rights to CAT-4001.

        As of December 31, 2014, we owned two issued U.S. patents relating to composition of matter and method of use claims directed to CAT-1004 and two issued U.S. patents relating to composition of matter and method of use claims directed to the CAT-2000 series. These patents are expected to expire between 2029 and 2031, without taking potential patent term extensions into account. In addition, our patent portfolio includes over 10 issued foreign patents, over 25 pending U.S. patent applications and over 100 pending foreign patent applications.

Our Strategy

        Our objective is to apply our proprietary SMART linker technology platform to discover, develop and commercialize novel bi-functional therapeutics, with an initial focus on orphan diseases. To achieve our goals, we are pursuing the following strategies:

•

Complete the development of CAT-1004 through registration for DMD.  We are devoting a significant portion of our resources to developing our lead product candidate, CAT-1004, for the treatment of DMD. We plan to initiate a Phase 1/2 clinical trial of CAT-1004 for the treatment of DMD in the first half of 2015 and expect to report top-line Phase 2 data in mid-2016. If the results from our Phase 1/2 clinical trial are positive, we intend to conduct a single six-month Phase 3 pivotal clinical trial in order to seek marketing approval. Our goal is to develop the first disease-modifying oral therapy for the treatment of DMD that promotes muscle regeneration.



•

Advance the development of our CAT-2000 series product candidates.  We have completed two Phase 2a clinical trials, and have one ongoing Phase 2a clinical trial, of CAT-2003 in patients with hypertriglyceridemia. In January 2015, we initiated a Phase 1 clinical trial of CAT-2054 to assess its safety, tolerability and pharmacokinetics in healthy volunteers. Based on the results of these clinical trials, we intend to advance the development of one or both of CAT-2003 and CAT-2054.



•

Continue to apply our SMART linker technology platform to expand our development pipeline.  We have used our SMART linker technology platform to rapidly and efficiently identify product candidates that we have been able to advance into clinical development. We are continually advancing our conjugation capabilities and exploring new applications of our technology platform to develop bi-functional therapeutics to treat diseases that we believe can be effectively

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addressed by modulating multiple targets in one or more related disease pathways. We have a goal of identifying at least one novel SMART linker conjugate per year that we can advance into preclinical development.

•

Maintain flexibility in commercializing and maximizing the value of our development programs.  We plan to build focused capabilities in the United States and Canada to commercialize development programs, such as CAT-1004 for DMD, where we believe that the medical specialists for the indications are sufficiently concentrated to allow us to effectively promote the product with a targeted sales team. We also intend to enter into strategic relationships with biotechnology and pharmaceutical companies where realizing the full value of our development programs will require access to broader geographic markets or the pursuit of broader patient populations or indications, such as with the CAT-2000 series and the commercialization of CAT-1004 outside of the United States and Canada. In addition, we intend to expand the drug development applications of our SMART linker technology platform through selective collaborations with leading biotechnology and pharmaceutical companies.

Our Scientific Approach

        Our SMART linker technology platform is based on the concept of treating diseases by simultaneously modulating multiple targets in one or more related disease pathways. The traditional model for drug discovery has focused on identifying and evaluating drug candidates with the goal of modifying a single biological target implicated in a specific disease process. This approach of selecting a single bioactive to modulate a single target has been successful for certain types of diseases. However, many diseases are caused by multiple abnormalities rather than by a single defect. In these cases, the traditional single-target approach to drug discovery and development may be less effective because a single target may not address the multiple underlying defects causing the disease.

        Multi-target therapies have in many cases been developed to provide treatment options where single-target therapies have been ineffective. These multi-target therapies have traditionally followed one of two approaches: either use of a single drug that binds to multiple biological targets or co-administration of two or more drugs that interact with different targets. While each of these approaches has well-established benefits in a variety of indications, each is also characterized by significant limitations. For example, use of a single broadly targeted drug can lead to off-target toxicities, side-effects and tolerability issues, and co-administration of two or more drugs can be confounded by differences in the pharmacokinetics and tissue distribution of the drugs, thereby reducing the likelihood of each agent being simultaneously active in the same cell.

        Our aim is to leverage the growing body of knowledge associated with disease pathways, and to rationally design orally bioavailable product candidates that simultaneously interact with multiple biological targets within one or more related disease pathways. While other technologies exist to conjugate or combine two bioactives, we believe that our SMART linker technology platform provides substantial improvements over previous approaches to bioactive conjugation.

SMART Linker Technology Platform

        We have developed our SMART linker technology platform to create molecules that simultaneously modulate multiple biological targets within one or more related disease pathways. The linkers used in our technology platform are small chemicals designed to join two separate bioactives into a single conjugate molecule. In systemic circulation, our SMART linker conjugates are stable and inactive, potentially reducing off-target toxicities and side-effects. The conjugates are designed to be cleaved by specific enzymes exclusively within cells in order to release the two bioactives inside the cells. By releasing the bioactive components of the conjugate molecule only inside cells, the SMART linker allows the bioactives to reach their targets more efficiently and have greater efficacy than if the

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bioactives were dosed independently or in combination. The stability of our SMART linker conjugates outside of cells and the release of the bioactives exclusively within cells are differentiating features of our SMART linker technology platform.

        To create a conjugate using our SMART linker technology platform, we begin by analyzing pathways that are disrupted in a disease. We then select two bioactive molecules known for their clinical safety and demonstrated effect along one or more of these biological pathways. We then design a SMART linker that will conjugate the two selected bioactives, allow the conjugate to be carried to biological tissues and, following entry into cells, be cleaved by enzymes resident in the cells to release the bioactives, as shown in the figures below.

        Our SMART linker conjugates are designed to be stable to oral dosing, as well as stable in both the lumen of the intestine and in systemic circulation. We design the SMART linker to chemically link the two bioactive molecules through their pharmacophores, the regions of the bioactive molecules that are responsible for carrying out their biological activity, resulting in inactivation of the bioactives. Once the conjugate enters a cell, the SMART linker is cleaved by specific enzymes which reside only within cells, releasing the two bioactives to interact with their biological targets. Delivery of the bioactives through the SMART linker conjugate into the cell results in the two bioactives having the same pharmacokinetics and tissue distribution. As a result, our SMART linker conjugates can simultaneously modulate two biological targets in disease pathways of interest within the same cell. In addition, release of the bioactives exclusively inside cells can potentially reduce or eliminate off-target, extracellular activity of the bioactives, which may improve safety and tolerability.

        We have observed in multiple preclinical studies that our SMART linker conjugates achieved greater efficacy than administration of the two bioactives either independently or in combination. In clinical trials, SMART linker conjugates have demonstrated significant improvements in activity on disease pathways and tolerability relative to equivalent doses of the two bioactives delivered in combination. We also have observed clinically meaningful efficacy with SMART linker conjugates at dose levels significantly lower than the prescribed doses of the two component bioactives.

        We believe our SMART linker technology platform has the potential to:

•

enhance activity on disease pathways through modulation of multiple biological targets;



•

improve efficacy by matching the pharmacokinetics and tissue distribution of the component bioactives; and



•

improve safety and tolerability by releasing the component bioactives only within cells.

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Our Product Candidates

        The following chart summarizes key information regarding our product candidates. We hold worldwide rights to all of our product candidates.

CAT-1004

        We are developing CAT-1004 for the treatment of DMD. CAT-1004 is an orally administered SMART linker conjugate of salicylate and DHA that we designed to enhance the activity of salicylate and DHA in modulating the NF-kB pathway at multiple points. Emerging data suggest that activation of NF-kB drives the loss of skeletal muscle mass in multiple diseases, including muscular dystrophies, atrophy and inflammatory myopathies. The FDA has granted CAT-1004 orphan drug designation for the treatment of DMD and we plan to submit an orphan drug designation request to the European Medicines Agency, or EMA, in the second half of 2015. In December 2014, we submitted an investigational new drug application, or IND, to the FDA for CAT-1004 for DMD. We plan to initiate a Phase 1/2 clinical trial of CAT-1004 for the treatment of DMD in the first half of 2015 and expect to report top-line Phase 2 data in mid-2016. If the results from our Phase 1/2 clinical trial are positive, we intend to conduct a single six-month Phase 3 pivotal clinical trial in order to seek marketing approval. We believe that CAT-1004 has the potential to be the first disease-modifying oral therapy for the treatment of DMD that promotes muscle regeneration.

Overview of DMD

        DMD is a rare pediatric disorder involving progressive muscle degeneration that eventually leads to death. DMD is caused by various mutations in the dystrophin gene that result in a lack of functional dystrophin in muscle fibers. Dystrophin is a protein that resides in the membrane of muscle cells and is critical to the structural and membrane stability of muscle fibers in skeletal, diaphragm and heart muscle. When muscles contract or stretch during normal use, the absence of normally functioning dystrophin results in activation of the NF-kB pathway, triggering inflammation in the muscles, resulting in muscle damage and reducing the ability of muscles to regenerate. As muscle damage progresses, connective and adipose tissues replace muscle fibers, resulting in inexorable muscle weakness.

        DMD occurs almost exclusively in males, occurring in approximately 1 in 3,500 live male births. Based on this incidence rate, we estimate that DMD affects a total of approximately 15,000 patients in the United States and approximately 19,000 patients in the European Union.

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        Children with DMD typically begin to show symptoms of disease between ages two and five, when they develop a waddling gait, frequently fall and have difficulty rising from the floor. Progressive weakness then develops in the voluntary muscles in the arms, legs and trunk. This muscle weakness results in fixations, or contractures, of joints, such as knees, hips and elbows. By age eight, most patients have difficulty ascending stairs. By their early teens, patients typically lose walking ability and are confined to wheelchairs. Patients' cardiac and respiratory muscles are also adversely affected, typically requiring use of ventilators in their late teens. Progressive weakening of cardiac and respiratory muscles eventually results in death, generally by patients' mid-twenties.

Unaddressed Market Opportunity

        There are no therapies approved for the treatment of DMD in the United States. Corticosteroid therapy is often prescribed to treat the inflammation underlying DMD and to delay loss of ambulation. Corticosteroids have demonstrated efficacy in DMD patients that are believed to be driven by reductions in activated NF-kB. However, corticosteroids also can cause significant complications due to systemic toxicities, including growth suppression, reduction in bone strength and compromise of the immune system. Over time, corticosteroids induce chronic myopathy in many diseases through induction of muscle protein breakdown, which ultimately leads to muscle damage. DMD patients treated with corticosteroids typically show an initial improvement in measures of muscle function but then resume a progressive decline. Approximately half of DMD patients treated with steroids lose the ability to walk by age eleven and almost all are in wheelchairs by age sixteen. DMD patients typically live until their mid-twenties, despite availability of corticosteroids.

        Several companies are exploring new therapies for the treatment of DMD. The three most advanced product candidates, PTC Therapeutics' ataluren, Prosensa's drisapersen and Sarepta's eteplirsen, target mechanisms to increase levels of dystrophin in muscles. Each of these product candidates compensates for a specific mutation to produce a partially functional dystrophin protein. The therapeutic goal of these product candidates is to reduce disease severity and extend survival in those DMD patients with the specific mutation. Based on the prevalence of the specific mutations that these product candidates are designed to address, they would be expected to be effective in an aggregate of approximately 26% of DMD patients. We believe that DMD patients treated with these dystrophin therapies will continue to require treatments to reduce muscle inflammation and enhance muscle regeneration. PTC Therapeutics has received conditional approval for ataluren in the European Union for DMD patients with a specific type of mutation. PTC Therapeutics and Prosensa each have begun a rolling new drug application, or NDA, submission for marketing approval in the United States while Sarepta has announced that it intends to submit an NDA in 2015. Several other product candidates in development also target either inflammation and fibrosis associated with DMD or muscle regeneration. The most advanced of these product candidates is Pfizer's monoclonal antibody targeting myostatin, which is in a Phase 2 clinical trial.

The Role of NF-kB in Duchenne Muscular Dystrophy

        NF-kB has an important role in regulating skeletal muscle health and appears to be especially important in regulating skeletal muscle mass in chronic diseases such as DMD. In addition, activated NF-kB promotes the degradation of specific muscle proteins, leads to the induction of pro-inflammatory mediators such as cytokines, chemokines, cell adhesion molecules and tissue degrading enzymes and suppresses muscle stem cell differentiation that is required for muscle regeneration. Activation of NF-kB is observed in muscle tissues of patients with DMD prior to the onset of other clinical manifestations, and activated NF-kB is persistently elevated in the immune cells and degenerating muscle fibers of patients with DMD. Moreover, mechanical stress activates NF-kB mediated inflammation, and muscles with increased damage and inflammation, such as quadriceps and hamstrings, show the greatest progression of disease.

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CAT-1004 for the Treatment of Duchenne Muscular Dystrophy

        CAT-1004 is a SMART linker conjugate of salicylate and DHA that we designed to enhance the activity of salicylate and DHA in modulating the NF-kB pathway at multiple points. Based on its mechanism of action in suppressing activated NF-kB, we believe that CAT-1004 has the potential to combine reduction of inflammation, adipose tissue infiltration and muscle degeneration with positive effects on muscle regeneration, all of which may allow patients to retain muscle function longer. In addition, we believe that CAT-1004 has the potential to be effective in all DMD patients, regardless of the underlying mutation, and provide significant benefit to patients, both as monotherapy and when used in combination with other therapies, including dystrophin-targeted therapies and agents targeting myostatin.

        In Phase 1 clinical trials in healthy volunteers, CAT-1004 was observed to be safe and well tolerated and inhibited activated NF-kB. Based on the positive effects observed in the Phase 1 trials and in animal studies, we plan to initiate a Phase 1/2 clinical trial in patients with DMD in the first half of 2015.

CAT-1004 Clinical Development

Planned Phase 1/2 Trial of CAT-1004 in Patients with DMD

        We have designed a CAT-1004 Phase 1/2 clinical trial that we plan to initiate in the first half of 2015. The planned CAT-1004 Phase 1/2 trial will enroll ambulatory boys between ages four and seven with a genetically confirmed diagnosis of DMD. The enrolled boys will be steroid naive or have not used steroids for at least six months prior to the trial. We will conduct the trial at multiple sites in the United States. We plan to conduct the Phase 1/2 trial in two sequential parts, Part A and Part B, as illustrated in the following diagram.

CAT-1004 Planned Phase 1/2 Trial Design

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        In Part A, we will assess the safety, tolerability and pharmacokinetics of CAT-1004 in patients at three dosing levels following seven days of dosing and assess NF-kB biomarker activity for each dose group. In Part B of the trial, we plan to treat patients with one of two dosing levels of CAT-1004 or placebo for 12 weeks. After 12 weeks of dosing, patients receiving placebo may be crossed over to one of two doses of CAT-1004 for an additional 12 weeks. We anticipate that the primary endpoint will be changes in magnetic resonance imaging, or MRI, of leg muscles as a biomarker for inflammation, which is known to increase with age in DMD patients but is observed to decrease with initiation of steroid therapy. We plan to include timed function tests best suited for this age group as exploratory endpoints, specifically the 10 meter walk/run, time to stand and 4-stair climb tests. In addition, assessments of muscle strength and a parent-proxy measure of functional ability will be included. We expect to report top-line Phase 2 data from this trial in the first half of 2016. If the results of this Phase 1/2 clinical trial are positive, we intend to conduct a single six-month Phase 3 pivotal clinical trial in order to seek marketing approval.

Completed Clinical Trials

        To date, we have studied CAT-1004 in three completed Phase 1 clinical trials. The design and results for these clinical trials are discussed below.

CAT-1004—Completed Phase 1 Clinical Trials

        Phase 1 Single Ascending Dose Trial (CAT-1004-101):    We conducted a randomized, double-blind, placebo-controlled, single ascending dose Phase 1 clinical trial in 52 healthy volunteers at a single site in the United States to assess the safety, tolerability and pharmacokinetics of CAT-1004 in both fasted and fed states. The participants were randomized to receive CAT-1004 or placebo. CAT-1004 was administered orally in soft gelatin capsules at doses ranging from 300 mg to 6000 mg.

        Single doses of CAT-1004, administered to subjects in both fed and fasted conditions appeared to be safe and well tolerated. Subjects in the fasted state reported few adverse events, or AEs, with the most commonly reported AEs being headache, diarrhea and dizziness. The majority of the AEs in the fasted state were mild in severity. The most common AEs in the fed state were diarrhea, headache and abdominal pain and all of the AEs in the fed state were mild in severity. Subjects in the fed state receiving single doses of CAT-1004 of 4000 mg or more reported gastrointestinal adverse events more frequently than subjects receiving lower doses. There were no observed trends in laboratory, vital signs or electrocardiogram results following CAT-1004 administration in either the fasted or fed state.

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        CAT-1004 was rapidly absorbed in plasma, with mean maximum and overall plasma exposure generally increasing with CAT-1004 dose levels. Neither component bioactive, salicylate or DHA, was detected in plasma at levels above background, consistent with intracellular cleavage of CAT-1004 and intracellular delivery of the component bioactives. Administration of a high-fat meal increased CAT-1004 mean maximum and overall exposure by approximately 3- to 8-fold.

        Phase 1 Multiple Ascending Dose Trial (CAT-1004-102):    We conducted a randomized, double-blind, placebo-controlled, multiple ascending dose Phase 1 clinical trial in 44 subjects at a single center in the United States to assess the safety, tolerability, pharmacokinetics and pharmacodynamics of CAT-1004. These subjects had Type 2 diabetes and mild background inflammation, which enabled us to assess the activity of CAT-1004 on activated NF-kB. Subjects were randomized to receive CAT-1004 or placebo. CAT-1004 was administered orally in soft gelatin capsules at total daily doses ranging from 300 mg to 4000 mg.

        CAT-1004 administered for two weeks appeared to be safe and well tolerated. The AEs reported in more than one patient were diarrhea, gastroenteritis and upper respiratory tract infection. The majority of the AEs were mild in severity.

        CAT-1004 was rapidly absorbed in plasma, with mean maximum and overall plasma exposure generally increasing with escalating single or multiple doses of CAT-1004. Neither component bioactive, salicylate or DHA, was detected in plasma at levels above background, again consistent with intracellular cleavage of CAT-1004 and intracellular delivery of the component bioactives.

        In the Phase 1 multiple ascending dose trial, we observed by two methods that CAT-1004 inhibited activated NF-kB. For the first method, we stimulated NF-kB activity ex vivo in whole blood from subjects treated with CAT-1004 or placebo, and then observed NF-kB activity in monocytes, or immune cells, that we isolated from the whole blood. NF-kB activity was reduced in a majority of subjects following two weeks of CAT-1004 treatment but not following treatment with placebo. For the second method, we performed gene expression analyses on whole blood taken from subjects prior to treatment and after two weeks of treatment with CAT-1004 or placebo. CAT-1004 significantly reduced the expression of a set of genes that are controlled by NF-kB. In contrast, treatment with placebo for two weeks did not significantly reduce expression of NF-kB regulated genes.

        Phase 1 NF-kB Biomarker Trial (CAT-1004-103):    We conducted a single-blind, crossover Phase 1 clinical trial with CAT-1004 in nine healthy volunteers at a single center in the United States to compare activity of CAT-1004 on activated NF-kB to a combination of salicylate and DHA or placebo. The salicylate and DHA were dosed at approximately equivalent amounts to those contained in the CAT-1004 conjugate. We assessed NF-kB activity in peripheral blood mononuclear cells, or PBMCs, isolated from subjects before dosing and two hours after dosing. PBMCs are circulating immune cells that can mount an NF-kB response and migrate into tissue such as muscle and drive inflammation. Prior to the determination of NF-kB activity, we stimulated whole blood with lipopolysaccharide, or LPS, to activate the NF-kB pathway. As shown in the graph below, treatment of subjects with CAT-1004 significantly reduced the level of activated NF-kB, as measured by nuclear p65, a surrogate marker for activated NF-kB. In contrast, no change in the level of activated NF-kB was observed upon treatment with the combination of salicylate and DHA, or upon treatment with placebo. We believe that this suggests that CAT-1004, which is a SMART linker conjugate of salicylate and DHA, exhibits greater activity on the NF-kB pathway than the combination of its component bioactives.

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Effect of CAT-1004 on Activated NF-kB

        These results were statistically significant, with a p-value of less than 0.005. P-value is a conventional statistical method for measuring the statistical significance of clinical results. A p-value of 0.05 or less represents statistical significance, meaning that there is a 1-in-20 or less likelihood that the observed results occurred by chance.

CAT-1004 Preclinical Development

        In preclinical studies, we have observed that CAT-1004 inhibited NF-kB activity in vitro and in vivo, and produced disease-modifying effects in two established animal models of DMD, the mdx mouse model and the Golden Retriever muscular dystrophy dog model.

In Vivo Studies in Animal Models of DMD

        We have created several SMART linker conjugates that inhibit activated NF-kB. Two of these conjugates, CAT-1004 and CAT-1041, exhibit very similar effects on NF-kB activity in cell based assays and in animal studies. CAT-1041 is a closely related analog of CAT-1004 in which the DHA component of the salicylate-DHA conjugate has been replaced with EPA. In some preclinical studies, we have used CAT-1041 as a surrogate for CAT-1004. Both CAT-1004 and CAT-1041 produced disease-modifying efficacy in established animal models of DMD. We decided to advance CAT-1004 into clinical trials rather than CAT-1041 based on scientific literature suggesting that DHA has superior anti-inflammatory activity compared to EPA.

        Mdx Mouse Model.    We examined the potential therapeutic effects of CAT-1004 using the mdx mouse model of DMD. As shown in the graphs below, we observed that four weeks of treatment with CAT-1004 or prednisolone, a steroid, reduced muscle inflammation and the number of degenerating muscle fibers in mdx mice. However, only CAT-1004-treated animals showed preservation of muscle mass and an increase in the number of regenerating fibers, suggesting that chronic treatment with CAT-1004 can protect muscle from the damage expected to occur over time in mdx mice. In this study, muscle inflammation score was based on the number of infiltrating immune cells within a fixed-size slide image, or field, and degenerating muscle fibers and regenerating muscle fibers were based on a count within the field.

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CAT-1004 Activity in the mdx Mouse Model

        In a long-term mdx mouse study, we observed that, compared to the control group of mdx mice, six months of treatment with CAT-1041 significantly improved muscle endurance as measured by mean weekly and total running distance. As shown in the graphs below, improvements in muscle endurance following CAT-1041 treatment versus control were also observed in post-mortem assessments of twitch force, tetanic force and specific force generation, each of which is an established measurement of muscle endurance, in excised diaphragm muscle.

CAT-1041 Activity on Diaphragm Function in the mdx Mouse Model

        As shown in the graphs below, we also observed in this same study that mdx mice treated with CAT-1041 showed significantly increased mass of two major leg muscles, the gastrocnemius and quadriceps, independent of changes in total body weight. CAT-1041-treated mice also had a statistically significant reduction in heart mass, suggesting that chronic treatment with CAT-1041 may have reduced the dilated cardiomyopathy typically observed in mdx mice.

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CAT-1041 Activity on Muscle Mass and Body Weight in the mdx Mouse Model

        Finally, in this study we observed a reduction in diaphragm and quadricep muscle fibrosis in mdx mice treated with CAT-1041 in comparison to control.

        Golden Retriever Dog Model.    We also evaluated the effects of CAT-1004 in the Golden Retriever muscular dystrophy, or GRMD, dog model. As shown in the graph below, a single oral dose of CAT-1004 inhibited basal, or unstimulated, NF-kB activity by 48% in GRMD dogs. CAT-1004 also inhibited LPS-stimulated NF-kB activity by 75% and LPS-stimulated plasma levels of TNFa protein, a key marker of inflammatory response, by 77%. Together, these data suggest that a single oral dose of CAT-1004 achieves sufficient exposure levels to inhibit activated NF-kB in a dog model of DMD.

Effect of CAT-1004 on NF-kB in the GRMD Dog Model

In Vitro Studies

        In an in vitro study in a mouse macrophage cell line, we observed that CAT-1004 inhibited LPS-stimulated NF-kB activity to a greater extent than either of its components, salicylate and DHA, alone or in combination. We also observed that CAT-1004 inhibited LPS-stimulated NF-kB activity in human PBMCs, which are a potential target tissue for CAT-1004. In studies performed with a mouse macrophage cell line, CAT-1004 reduced the LPS-stimulated expression of a set of genes that encode pro-inflammatory mediators and whose expression is controlled by NF-kB.

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CAT-2003

        CAT-2003 is an orally administered SMART linker conjugate of EPA and nicotinic acid that we designed to modulate the SREBP pathway in the intestine. SREBP is a master regulator of lipid metabolism and controls levels of both triglycerides and LDL-C. In particular, CAT-2003 is designed to be cleaved primarily in cells of the small intestine to target triglyceride synthesis and is being developed for the treatment of MFC and rSHTG. Both of these diseases involve extremely elevated triglyceride levels that significantly increase the risk of pancreatitis. We submitted an IND to the FDA for CAT-2003 in September 2012. We are currently conducting a Phase 2a clinical trial of CAT-2003 for the treatment of MFC and rSHTG and expect to report top-line data in the second quarter of 2015.

Hypertriglyceridemia Market Overview

        Triglycerides are an important source of energy for the body and are carried through the body as a component of two different lipoprotein particles, chylomicrons and very low density lipoprotein, or VLDL. Chylomicrons are derived from the diet and assembled in the intestine, while VLDL is synthesized in the liver. Dietary triglycerides are absorbed into intestinal cells, incorporated into chylomicrons and then enter the circulation where they are transported to muscle and adipose tissue to be metabolized by lipoprotein lipase, or LPL, to satisfy immediate energy requirements or stored for later use. LPL is the major enzyme in the body responsible for metabolizing triglycerides. Upon activation, LPL facilitates hydrolysis of triglycerides from chylomicrons and VLDL particles. Under normal conditions, where triglycerides are below 150 mg/dL, LPL is able to effectively process triglycerides. However, when triglyceride levels reach 500 mg/dL or above, the LPL enzyme becomes saturated and is not able to metabolize triglycerides as effectively. This situation can become exacerbated following the ingestion of a high fat meal where postprandial, or post-meal, triglyceride levels are naturally increased above the baseline fasting levels.

        Severely elevated levels of fasting triglycerides, defined as baseline triglycerides greater than 500 mg/dL, significantly increase the risk of acute pancreatitis, a severe inflammation of the pancreas that is associated with substantial morbidity and mortality. Pancreatitis can range in severity from a self-limited illness to life-threatening multi-organ failure requiring prolonged hospitalization. Increasing levels of fasting triglycerides are associated with an increasing risk for developing acute pancreatitis, with the lifetime prevalence of acute pancreatitis reaching 10-20% in patients with triglyceride levels in excess of 2000 mg/dL. Patients with rSHTG whose triglyceride levels remain above 500 mg/dL have an 79% increased risk of pancreatitis as compared to patients who achieve triglyceride levels below 500 mg/dL. Diabetes is a common co-morbidity in SHTG, occurring in 24-37% of patients with SHTG while occurring in only 9% of the U.S. population. This association increases to a 42-72% incidence of diabetes in patients with hypertriglyceridemia-induced acute pancreatitis.

        The National Cholesterol Education Program Expert Panel on Detection, Evaluation and Treatment of High Blood Cholesterol has recommended the use of fibrates and/or niacin to lower triglyceride levels in patients with SHTG, while the American Heart Association and the National Lipid Association have recommended pharmacological therapy, including fibrates, niacin, omega-3 fatty acids and/or statins. While the triglyceride levels of most of the estimated 4 million patients with SHTG can be reduced below 500 mg/dL with diet, exercise and currently available medications, we estimate that approximately 160,000 patients in the U.S. have rSHTG, which is defined as having fasting triglyceride levels above 500 mg/dL despite treatment with currently available therapies. Approximately 50,000 to 60,000 of these patients have MFC, or fasting triglyceride levels above 750 mg/dL despite treatment with currently available therapies, and are at even greater risk of developing pancreatitis. Both rSHTG patients and MFC patients are considered at risk of acute pancreatitis episodes and are candidates for new triglyceride management therapies. A therapy that lowers both fasting and postprandial triglycerides through the activation of LPL could provide important benefits to treatment-refractory patients with severely elevated triglycerides.

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        Statins generally are prescribed to treat moderate hypertriglyceridemia, or fasting triglyceride levels below 500 mg/dL, while fibrates, omega-3 fatty acids and niacin are used to treat more severe hypertriglyceridemia. In the 12 months ended September 2014, combined U.S. sales of fibrates, prescription omega-3 fatty acids and prescription niacin were approximately $2.7 billion, according to IMS Health. However, currently available treatments for SHTG have limitations. Fibrates and some of the omega-3 fatty acid products cause LDL-C to increase in SHTG patients and niacin causes increases in blood glucose levels. Of patients being treated for SHTG, an estimated 20% still have fasting triglycerides above 500 mg/dL despite drug therapy and therefore are considered rSHTG patients. We believe there is an attractive market opportunity for an oral therapy which effectively reduces fasting and postprandial triglyceride levels in rSHTG patients, with neutral-to-positive effects on LDL-C and blood glucose.

Our Approach to Lowering Triglycerides

        SREBPs are transcription factors that control prevailing and cellular levels of lipids including triglycerides and LDL-C. Important for triglyceride levels, SREBP controls the expression of three proteins, apoliprotein C3 or ApoC3, angiopoietin-like protein 3, or Angptl3, and angiopoietin-like protein 4, or Angptl4. Each of these proteins inhibits the activity of LPL and decreases the ability of LPL to metabolize triglycerides. CAT-2003 works by inhibiting the maturation of the SREBP protein in the cell, thereby reducing the amount of mature SREBP protein in the cell nucleus, which reduces the expression of ApoC3, Angptl3 and Angptl4. We believe that modulating SREBP activity in the intestine will lead to an increase in LPL enzyme activity, accelerated clearance of triglycerides and substantial reductions in both fasting and postprandial triglyceride levels.

CAT-2003 for the Treatment of Multifactorial Chylomicronemia and Refractory Severe Hypertriglyceridemia

        We are developing CAT-2003 for the treatment of patients with MFC and rSHTG. CAT-2003 acts primarily in the intestine due to the rapid activation of its SMART linker within intestinal cells. The bioactives then inhibit the maturation of SREBP proteins within these cells. We have observed in preclinical studies that this inhibition decreased the expression of the key negative regulator proteins of LPL: ApoC3, Angptl3 and Angptl4. By inhibiting the production of the negative regulator proteins of LPL, CAT-2003 enhances LPL enzyme activity. Based on this mechanism, we believe CAT-2003 may be efficacious in the reduction of severely elevated triglycerides that are not adequately controlled by current therapies.

        We initially formulated CAT-2003 in a non-coated soft gelatin capsule for early clinical development. We tested the non-coated capsule formulation of CAT-2003 in our initial Phase 1 and first two Phase 2a clinical trials. At higher doses of, or with longer exposure to, CAT-2003 we observed gastrointestinal tolerability issues. We reformulated CAT-2003 in a gelatin capsule with a pH-sensitive polymer coating to potentially improve tolerability by reducing stomach exposure. We then conducted a Phase 1 clinical trial with this coated formulation and we are using the coated gelatin capsule in our ongoing Phase 2a clinical trial of CAT-2003.

        We have completed two four-week Phase 2a clinical trials of CAT-2003 in patients with elevated triglycerides and two Phase 1 clinical trials in healthy volunteers. In the Phase 2a clinical trials, CAT-2003 reduced elevated triglycerides, including in patients treated with other triglyceride and lipid lowering therapies. CAT-2003 also demonstrated in Phase 2a clinical trials beneficial effects on other lipid and cardio-metabolic parameters, such as LDL-C and blood glucose. We are currently conducting a 12-week Phase 2a clinical trial in patients with rSHTG, including patients with chylomicronemia syndromes. In our clinical trials conducted to date, CAT-2003 appeared to be safe at up to 12 weeks of patient dosing and there were no observed trends in laboratory values, vital signs, electrocardiogram or physical examination. We believe CAT-2003 has the potential to provide clinically important therapeutic benefits to patients whose triglycerides are not adequately controlled by diet, exercise and existing therapies, and who remain at risk for developing pancreatitis.

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CAT-2003 Clinical Development

        To date, we have studied CAT-2003 in four completed clinical trials and one ongoing clinical trial in multiple patient populations including patients with moderate hypertriglyceridemia, patients with hypercholesterolemia, patients with SHTG, patients with familial chylomicronemia, or FCS, patients with MFC and patients with rSHTG. FCS is a rare genetic disorder where patients experience extremely elevated triglyceride levels, often in excess of 2000 mg/dL. These completed and ongoing clinical trials include three Phase 2a clinical trials and two Phase 1 clinical trials. The design and results for these clinical trials are discussed below.

CAT-2003—Completed and Ongoing Clinical Trials

Phase 1 Clinical Trial in Healthy Volunteers (CAT-2003-101)

        We conducted a Phase 1 trial in healthy volunteers at a single center in the United States to assess the safety, tolerability and pharmacokinetics of single and multiple doses of CAT-2003 in both fasting and fed states. We also measured CAT-2003 effects on post-prandial triglycerides and other lipid parameters.

        Single Ascending Dose:    41 healthy volunteers were randomized to receive CAT-2003 in soft gelatin capsules at doses ranging from 300 mg to 2000 mg or placebo. Single doses of CAT-2003, administered under fed and fasted conditions, appeared to be safe. In subjects administered CAT-2003, the most commonly reported AEs were diarrhea, nausea and abdominal distention, and the majority were mild in severity. In subjects administered CAT-2003, reports of gastrointestinal adverse events were higher in

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the fed state than in the fasted state. We observed no clinically important trends in laboratory, vital signs or electrocardiogram results following CAT-2003 administration in either the fasted or fed state and no association between administration of CAT-2003 and flushing, a frequently reported side effect of niacin.

        CAT-2003 was rapidly absorbed in plasma, with mean maximum and overall plasma exposure generally increasing with CAT-2003 dose. Nicotinic acid was not detected in plasma at levels above background, consistent with intracellular cleavage of CAT-2003 and intracellular delivery of the component bioactives. Exposure of CAT-2003 was similar in the fasted and fed states.

        We measured postprandial triglycerides in healthy volunteers after single doses of 300 mg, 1000 mg and 2000 mg CAT-2003 and placebo were administered after a standardized high-fat meal. In subjects receiving the 300 mg dose of CAT-2003, the peak postprandial increase in plasma triglycerides was reduced by approximately 50% on average compared to subjects receiving placebo, while in subjects receiving the 1000 and 2000 mg doses of CAT-2003, the peak postprandial increase in plasma triglycerides was reduced by approximately 80% on average compared to subjects receiving placebo.

        Multiple Ascending Dose:    58 healthy volunteers were administered CAT-2003 in soft gelatin capsules at doses ranging from 500 mg to 1500 mg or placebo daily for 14 days. In addition to the safety, tolerability and pharmacokinetics of CAT-2003, we assessed the activity of CAT-2003 on lipid parameters including fasting and postprandial triglycerides following 14 days of dosing.

        CAT-2003 administered for 14 days demonstrated no abnormalities in laboratory values, vital signs, electrocardiogram or physical examination that were considered to be drug-related AEs. The most common AEs were gastrointestinal, including diarrhea, nausea and vomiting, and headache. The majority of subjects at a total daily dose of 1000 mg had gastrointestinal AEs. Overall, most AEs were mild in intensity but moderate intensity gastrointestinal AEs were reported, particularly at daily doses of 1000 mg.

        CAT-2003 was rapidly absorbed in plasma, with mean maximum and overall plasma exposure generally increasing with CAT-2003 dose. Nicotinic acid was not detected in plasma at levels above background, consistent with intracellular cleavage of CAT-2003 and intracellular delivery of the component bioactives.

        We observed that postprandial triglyceride levels were reduced after two weeks of treatment with CAT-2003. The graph below shows that the 500 mg and 1000 mg total daily doses of CAT-2003 substantially suppressed the expected increase in postprandial lipids after the first meal of the day as compared to the typical increase in postprandial triglycerides observed in the placebo group. We did did not assess the statistical significance of these data and did not measure postprandial lipids after a high-fat meal in subjects receiving 1500 mg total daily doses of CAT-2003.

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Postprandial Triglycerides after a High-fat Meal on Day 14 of Treatment

Phase 2a Clinical Trial in Patients with Hyperlipidemia (CAT-2003-201)

        We conducted a Phase 2a randomized, double-blind, placebo-controlled clinical trial in 72 patients with moderate hypertriglyceridemia with baseline triglyceride levels between 200 and 500 mg/dL and in 27 patients with hypercholesterolemia, defined as LDL-C levels between 100 mg/dL and 190 mg/dL and triglycerides less than 200 mg/dL, while on a statin. We enrolled patients at 15 sites in the United States and Canada. Patients were treated for 28 days with CAT-2003 at doses of 300 mg once daily, 500 mg once daily or 300 mg twice daily, or placebo.

        We observed a median 16% reduction in fasting triglycerides in patients receiving 500 mg CAT-2003. Median triglyceride reductions in the placebo, 300 mg once daily and 300 mg twice daily dosing cohorts were less than 5%. However, in a pre-specified subgroup of patients with a baseline fasting triglyceride value greater than 350 mg/dL, we observed a median 27% decrease in fasting triglycerides from baseline in all CAT-2003-treated patients, and a median 44% decrease in fasting triglycerides in patients receiving 500 mg CAT-2003. The greater effect of CAT-2003 in patients with higher baseline triglycerides is consistent with preclinical data supporting CAT-2003's mechanism of enhancing LPL activity.

CAT-2003 Effect on Fasting Triglycerides

Baseline Triglycerides >350 mg/dL

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        In the cohort of patients with hypercholesterolemia, we observed that CAT-2003 reduced LDL-C levels by a median 11% in patients who received a 500 mg once daily dose on concomitant moderate-dose statin therapy. In the 21 patients with Type 2 diabetes enrolled in the trial and randomized to CAT-2003, we observed reductions in fasting glucose and a statistically significant reduction in HbA1c over the four weeks of treatment.

        The most common AEs reported were gastrointestinal, with nausea, diarrhea, vomiting and abdominal discomfort the most frequently reported, and most were mild or moderate in severity. Four patients discontinued treatment because of gastrointestinal AEs and several received dose reductions because of AEs. We observed no clinically important trends in laboratory, vital signs or electrocardiogram results.

Phase 2a Clinical Trial in Patients with with SHTG and rSHTG (CAT-2003-202)

        We conducted a randomized, single-blind Phase 2a trial in 14 patients with SHTG and rSHTG, defined as fasting triglycerides greater than 500 mg/dL and either treatment naïve or currently taking other triglyceride-lowering therapies, to evaluate the effect of CAT-2003 on triglyceride levels and 13 of the 14 patients enrolled completed dosing. This clinical trial enrolled patients at four sites in the United States. A placebo run-in for two weeks was followed by treatment with with 500 mg of CAT-2003 dosed once-daily for four weeks. We observed a reduction in fasting triglycerides from a median of 658 mg/dL after the placebo run-in to a median of 467 mg/dL following four weeks of CAT-2003 treatment. We observed a comparable reduction in fasting triglycerides from a median of 760 mg/dL after the placebo run-in to a median of 452 mg/dL following four weeks of CAT-2003 treatment in the four patients on concomitant fibrate or statin therapy. In the four patients with Type 2 diabetes, three of whom were also receiving metformin, we observed decreases in HbA1c, which is a measure of glucose levels over time. The most common AEs reported were gastrointestinal, with nausea and diarrhea the most frequently reported, and all were mild in severity. We observed no clinically important trends in laboratory, vital signs or electrocardiogram results.

CAT-2003 Effect on Fasting Triglycerides

Ongoing Phase 2a Clinical Trial in Patients with FCS, MFC and rSHTG (CAT-2003-203)

        We are currently conducting a 12-week single-blind Phase 2a clinical trial of CAT-2003 in patients with chylomicronemia syndromes and rSHTG. This trial is being conducted at two sites in Canada. Patients with FCS have been enrolled based on previous diagnosis, and patients with MFC and rSHTG

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have been enrolled based on history of fasting triglycerides greater than 880 mg/dL, or, if on stable dose of fibrate therapy, documented fasting triglycerides greater than 440 mg/dL. All patients enrolled in the trial are participating in a run-in period, during which patients follow a low fat diet and receive placebo, followed by a 12-week CAT-2003 treatment phase. All of the patients initially enrolled in this trial experienced gastrointestinal adverse effects at some point with the uncoated capsule formulation of CAT-2003. These AEs included nausea, vomiting or diarrhea, in some cases leading to dose reduction or discontinuation. Preliminary efficacy data from the six MFC and rSHTG patients in the trial with the uncoated capsule formulation of CAT-2003 indicate that CAT-2003 reduced fasting triglycerides by a median of 40% at a dose of 500 mg once daily. We observed no clinically important trends in laboratory, vital signs or electrocardiogram results.

CAT-2003 Effect on Fasting Triglycerides (Non-Coated Capsule)

        We have re-enrolled and are completing the CAT-2003-203 trial utilizing the coated capsule formulation of CAT-2003. We expect top-line data for the patients treated with the CAT-2003 coated capsule formulation to be available in the second quarter of 2015.

Phase 1 Clinical Trial of the CAT-2003 Coated Capsule Formulation (CAT-2003-102)

        We conducted a Phase 1 trial in healthy volunteers to examine the safety, tolerability and pharmacokinetics of seven days of treatment with the CAT-2003 coated capsule formulation. This trial enrolled 48 subjects at one site in the United States. In this trial, the coated capsule formulation of CAT-2003 substantially reduced gastrointestinal side effects, particularly nausea and vomiting, over the seven-day treatment period while retaining the desired pharmacokinetic and pharmacodynamic profile.

CAT-2003 Preclinical Development

        We have observed that CAT-2003 reduced fasting or post-prandial triglycerides in several in vivo models of hypertriglyceridemia. In some of these studies, we observed that the combination of EPA and niacin tested at doses that corresponded to the top dose of CAT-2003 tested did not reduce triglycerides significantly. In a study using a mouse model, we also observed that CAT-2003 reduced liver inflammation and liver fat content.

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        We have investigated the mechanism of action of CAT-2003 based on the abilities of EPA and niacin to modulate triglyceride and cholesterol synthesis through SREBP modulation. In human cell lines, we have observed that CAT-2003 reduced the amount of mature SREBP protein and levels of ApoC3, Angptl3 and Angptl4 to a greater extent than either EPA or niacin alone or in combination, and also increased LPL activity in cells.

CAT-2054

        Similar to CAT-2003, CAT-2054 is an orally administered SMART linker conjugate of EPA and nicotinic acid, designed to modulate the SREBP pathway. However, unlike CAT-2003, which we designed to be active in cells in the intestine, we designed CAT-2054 to be active in cells in the liver. By modulating the SREBP pathway in the liver, CAT-2054 may inhibit production of important cholesterol metabolism proteins, such as PCSK9, HMG-CoA reductase and ATP citrate lyase. We are developing CAT-2054 for the treatment of hypercholesterolemia, or elevated LDL-C. In a clinical trial and preclinical studies of CAT-2003, we observed statistically significant reductions in LDL-C, suggesting the impact of SREBP modulation on cholesterol metabolism. Because the liver is the primary site of LDL-C synthesis and clearance, we specifically designed the SMART linker in CAT-2054 to deliver more of the intact conjugate to the liver, as compared to CAT-2003, which is cleaved primarily in cells of the intestine. We believe that CAT-2054, if approved, has the potential to be the first therapy to simultaneously modulate cholesterol synthesis, clearance and absorption. We are initially developing CAT-2054 to treat patients with hypercholesterolemia for whom existing treatments are insufficient. We submitted an IND to the FDA for CAT-2054 in November 2014. In January 2015, we initiated a Phase 1 clinical trial to assess the safety, tolerability and pharmacokinetics of CAT-2054 in healthy volunteers. If the results of this clinical trial are positive, we intend to initiate a Phase 2 clinical trial for the treatment of hypercholesterolemia in the fourth quarter of 2015.

Hypercholesterolemia Market Overview

        Hypercholesterolemia is a major risk factor for cardiovascular disease, or CVD, a leading cause of mortality and morbidity in the United States. Hypercholesterolemia is a complex disease involving redundant biological pathways that are tightly regulated and have built-in feedback mechanisms. Current treatment guidelines recognize lowering of LDL-C as a primary target for reducing the risk of CVD.

        Several of the lipid-lowering therapies currently available or in development target proteins in the SREBP pathway. SREBP is a master regulator of lipid metabolism and controls the expression of proteins involved in the synthesis, clearance and absorption of LDL-C. These proteins include: HMG-CoA reductase, an enzyme that plays a central role in the synthesis of LDL-C in the liver; PCSK9, a protein that controls the clearance of LDL-C from circulation through modulation of the amount of LDL-C receptor protein on the surface of the liver; and ATP citrate lyase, an enzyme in the LDL-C synthetic pathway. Within the intestine, SREBP controls the expression of the Niemann-Pick C1-like 1, or NPC1L1, which is the critical mediator of cholesterol absorption in the gastrointestinal tract epithelial cells as well as in liver cells.

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Statins.  Statins are typically prescribed as first-line therapy for reducing LDL-C based on their efficacy, established safety and proven benefit in reducing cardiovascular event risk. Statins inhibit HMG-CoA reductase. Crestor® (rosuvastatin), the largest remaining branded prescription statin, generated worldwide sales of $5.6 billion for the 12-month period ended September 2014.



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Cholesterol Absorption Inhibitors.  Ezetimibe is a cholesterol absorption inhibitor that targets NPC1L1, reducing LDL-C by inhibiting cholesterol absorption in the small intestine. It may be used alone (marketed as Zetia® or Ezetrol), for example in statin-intolerant patients, or together with statins, such as in ezetimibe/simvastatin (marketed as Vytorin® and Inegy), when statins

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alone do not control cholesterol. Zetia and the combination product Vytorin together generated worldwide sales of $4.3 billion for the 12-month period ended September 2014.

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Monoclonal antibodies against PCSK9 and inhibitors of ATP citrate lyase.  In addition to the marketed therapies, several companies are developing other agents that target the synthesis and clearance of LDL-C. Monoclonal antibodies against PCSK9 are injectable, fully human antibodies that are being evaluated as potential therapies to lower LDL-C. ATP citrate lyase inhibitors target cholesterol synthesis in the liver but at an earlier step of the pathway than statins. To date, none of these agents has received U.S. or European marketing approval.

        Despite the availability of these classes of drugs that lower LDL-C, many patients are unable to achieve their LDL-C goals using the marketed therapies. A 2011 report of the Centers for Disease Control and Prevention estimated that, of the 34 million adults in the United States receiving treatment for high LDL-C, 11 million had uncontrolled LDL-C. The limitations of the efficacy of some existing therapies, including statins, may be partly the result of feedback mechanisms in the SREBP pathway, which ensure that cellular cholesterol levels are maintained at levels required for normal cellular function. For example, doubling the dose of a statin is accompanied by only an incremental 7% lowering of lipids. This non-linear decrease in LDL-C as the statin dose increases is due to feedback mechanisms that are triggered when HMG-CoA reductase is inhibited to a greater extent. As statin dose is increased, intracellular levels of cholesterol decrease, ultimately resulting in activation of the SREBP pathway. Activated SREBP induces the expression of PCSK9 which promotes the degradation of the LDL-C receptor, resulting in reduced clearance of LDL-C from circulation. The feedback mechanism ensures that the cell is never completely depleted of cholesterol because cholesterol is required for cellular viability. Thus, high-dose statins trigger a feedback mechanism that counteracts their beneficial effects on lipids.

        Several biotechnology and pharmaceutical companies have pursued compounds to inhibit SREBP. The goal of these programs has been to identify small molecule drugs that can block the activity of SREBP and produce beneficial effects on lipids. Directly reducing active SREBP may have a significant benefit on LDL-C levels in circulation. SREBP modulators may work synergistically with inhibitors of proteins that are downstream of SREBP such as PCSK9, HMG-CoA reductase and ATP citrate lyase. In addition, SREBP modulators may substantially reduce feedback mechanisms that are activated by other classes of LDL-C lowering drugs such as statins and ezetimibe.

CAT-2054 for the Treatment of Hypercholesterolemia

        CAT-2054 is a SMART linker conjugate designed to modulate SREBP in the liver and to reduce LDL-C levels in patients with hypercholesterolemia. We designed the SMART linker in CAT-2054 to be more stable to intracellular enzymatic cleavage than the SMART linker in CAT-2003. We have observed in preclinical studies that CAT-2054 was cleaved at a significantly slower rate than CAT-2003, and that significantly greater levels of CAT-2054 reached the liver following oral dosing than with CAT-2003. This slower rate of cleavage enables more intact CAT-2054 to pass through the portal vein and to the liver, where SREBP controls LDL-C levels. We have observed in in vitro studies that, once cleaved in human liver cells, CAT-2054 inhibited the activity of SREBP by blocking its maturation, a conversion from an inactive to an active form. This inhibition reduced the expression of downstream target genes in the SREBP pathway, including HMG-CoA reductase, PCSK9 and ATP citrate lyase. Based on this mechanism, we believe CAT-2054 may be effective in reducing elevated LDL-C and positively affect other metabolic parameters.

        We intend to pursue development and commercialization collaborations with biotechnology and pharmaceutical companies to maximize the value of CAT-2054 as a treatment for hypercholesterolemia. We intend to pursue such collaborations for CAT-2054 following the completion of Phase 2 clinical development.

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CAT-2054 Clinical Development

Ongoing Phase 1 Clinical Trial

        In January 2015, we initiated a randomized, double-blind, placebo-controlled Phase 1 trial at a single site in the United States. This clinical trial, which will assess single and multiple ascending doses of CAT-2054, will assess the safety, tolerability and pharmacokinetics of CAT-2054 in healthy volunteers. We will also assess the activity of CAT-2054 on lipid parameters including LDL-C and triglycerides following 14 days of dosing.

Planned Phase 2a Clinical Trial

        We expect to initiate a randomized, double-blind, placebo-controlled Phase 2a trial in the second half of 2015 at multiple sites in the United States in patients with hypercholesterolemia. In this clinical trial, patients will be treated for four weeks. We intend to compare multiple dose levels of CAT-2054 either as monotherapy or in combination with a statin. We expect the primary endpoint to be reduction in levels of LDL-C. We also plan to assess the activity of CAT-2054 on other lipid parameters, including triglycerides.

Preclinical Data for CAT-2054

        Based on a comprehensive program of preclinical testing of CAT-2054, including several in vitro analyses and in vivo studies in animal models, we believe that CAT-2054 may be effective in reducing elevated LDL-C and have positive effects on other metabolic parameters. Key findings from our preclinical program included the following:

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CAT-2054 reduced LDL-C in rhesus monkeys that were maintained on a high fat, high cholesterol diet. We observed no effect on food consumption or body weight. We dosed the animals with CAT-2054 at 500 mg by capsule once daily for six weeks. As shown in the graph below, at the end of the treatment period, we observed a significant reduction in LDL-C levels relative to baseline. The effect of CAT-2054 on plasma LDL-C levels was most pronounced in the monkeys with the highest baseline LDL-C levels. Additionally, we observed that LDL-C levels returned to near baseline after a washout period following the end of dosing with CAT-2054.

CAT-2054 Effect on LDL-C in
Rhesus Monkeys on a High Cholesterol Diet

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CAT-2054 significantly reduced fasting plasma LDL-C in cynomolgus macaque monkeys that had developed age-related spontaneous dyslipidemia, which were maintained on a normal diet. In this study, we dosed the animals with CAT-2054 at 100 mg/kg by oral gavage, once daily for four

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weeks. We observed no effect on body weight. The reduction in LDL-C reached a maximum effect after 14 days of treatment with a mean reduction of fasting LDL-C levels of 21%. The effect of CAT-2054 on plasma LDL-C levels was most pronounced in the monkeys with the highest baseline LDL-C levels. CAT-2054 treatment for two weeks essentially returned LDL-C to normal levels in these monkeys without significantly decreasing LDL-C below the normal threshold.

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In an in vitro study, we observed that treatment of a human liver cell line with CAT-2054 reduced the amount of mature SREBP protein and that this reduction was greater than what we observed with approximately equivalent amounts of EPA and niacin administered either alone or in combination.



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In in vitro studies, we have observed that treatment of a human liver cell line with the statin atorvastatin caused an approximately two-fold increase in the amount of mature SREBP. As shown in the graph below, in these studies, CAT-2054 inhibited the activation of SREBP2, a form of SREBP that controls the expression of genes involved in LDL-C synthesis and clearance in the liver, to the same extent in the presence or absence of atorvastatin. As expected, due to feedback mechanisms in the SREBP pathway, treatment with atorvastatin alone increased the activiation of SREBP2. These data suggest that CAT-2054 may inhibit SREBP2 maturation and subsequent SREBP2-mediated gene transcription in the presence or absence of a statin.

CAT-2054 Effect on SREBP2 Activation
in the Presence or Absence of a Statin

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In an in vitro study, we observed that treatment of a human liver cell line with CAT-2054 inhibited the expression of multiple SREBP2 target genes, including HMG-CoA reductase, PCSK9 and ATP citrate lyase, after a 24-hour incubation.



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In an in vitro study, we observed that treatment of a human liver cell line with CAT-2054 reduced the secretion of PCSK9 protein. The reduction in PCSK9 protein secretion was dependent on dose of CAT-2054 with higher doses resulting in greater reductions. We also observed the bioactive components of CAT-2054, EPA and nicotinic acid, did not have a significant effect on PCSK9 secretion when administered to cells either individually or in combination at similar concentrations.



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In an in vitro study, we observed that CAT-2054 induced a dose-dependent increase in LDL receptor protein levels on the surface of a human liver cell line. Following secretion from

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cells, PCSK9 binds to the LDL receptor and induces the receptor to be internalized and degraded. Therefore, inhibition of PCSK9 secretion leads to increases in LDL receptor levels.

CAT-4001

        CAT-4001 is a SMART linker conjugate of monomethyl fumarate and DHA designed to modulate the Nrf2 and NF-kB pathways. We are developing CAT-4001 initially for the treatment of ALS and Freidreich's ataxia, two rare neurodegenerative diseases in which both the Nrf2 and NF-kB pathways have been implicated.

        We designed CAT-4001 to combine the potentially beneficial activities of monomethyl fumarate and DHA on the Nrf2 and NF-kB pathways. Nrf2 is a transcription factor that regulates cellular response to oxidative stress. NF-kB is a transcription factor that controls cellular responses to stress and inflammation. Research suggests that oxidative stress and neuroinflammation contribute to the progression of both ALS and Friedreich's ataxia.

        We observed in preclinical studies that CAT-4001 modulated the NF-kB pathway and the Nrf2 pathway. In cellular assays and in animal models, we observed that the activity produced by CAT-4001 was greater than that produced by the individual components, monomethyl fumarate and DHA, either alone or in combination at approximately equivalent amounts to those contained in the CAT-4001 conjugate.

        Based on its mechanism of action, we believe that CAT-4001 has the potential to be used in patients with certain neurodegenerative diseases, particularly ALS or Friedreich's ataxia. We plan to conduct preclinical studies of CAT-4001 in 2015, and if the results of these preclinical studies are positive we intend to advance CAT-4001 into a Phase 1 clinical trial in 2016.

Amyotrophic Lateral Sclerosis

        ALS, sometimes called Lou Gehrig's disease or classical motor neuron disease, is a rapidly progressive, invariably fatal neurological disease that attacks the nerve cells responsible for controlling voluntary muscles. Eventually, muscle weakness and atrophy occurs. People with ALS lose the ability to stand and walk, and use their hands and arms. In later stages of the disease, individuals have difficulty breathing as the muscles of the respiratory system weaken. Although ventilation support can enable breathing and prolong survival, it does not affect the progression of ALS. Most people with ALS die from respiratory failure, usually within three to five years of diagnosis.

        According to the ALS Association, approximately 5,600 people in the United States are diagnosed with ALS each year. The incidence of ALS is two per 100,000 people, and it is estimated that as many as 30,000 Americans may have the disease at any given time. ALS occurs throughout the world and affects all racial, ethnic or socioeconomic groups.

Friedreich's Ataxia

        Friedreich's ataxia is a rare genetic disease that causes nervous system damage and movement problems. Friedreich's ataxia is caused by a defect in the frataxin gene, which regulates iron levels in the mitochondria. In the majority of cases, the genetic defect in Friedreich's ataxia causes a reduction in the production of the frataxin protein and iron levels in mitochondria become poorly regulated. In Friedreich's ataxia, iron overload in mitochondria affects metabolism, causing oxidative stress and ultimately damaging mitochondrial DNA. Progressive degeneration of central and peripheral nervous systems in Friedreich's ataxia patients causes impaired gait and coordination, muscle loss and fatigue. Disease progression varies, but generally, the patient is confined to a wheelchair within 10 to 20 years after the appearance of the first symptoms. Patients may become completely incapacitated in later stages of the disease.

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        Nrf2 regulates mitochondrial function to control cellular energy metabolism. Activation of Nrf2 increases the mitochondrial use of fatty acids and glucose, two molecules that work as cellular fuel, and increases the formation of new mitochondria. Preclinical studies indicate that genetic or pharmacologic Nrf2 activation positively regulates mitochondrial function and energy production. This activity may translate into improved physical functioning and reduced fatigue in patients with Friedreich's ataxia.

        Friedreich's ataxia affects both males and females and there are approximately 6,000 patients with Friedreich's ataxia in the United States and 20,000 in the European Union.

Sales and Marketing

        Given our stage of development, we have not yet established a commercial organization or distribution capabilities, nor have we entered into any collaboration or co-promotion arrangements. We plan to build focused capabilities in the United States and Canada to commercialize development programs, such as CAT-1004 for DMD, where we believe that the medical specialists for the indications are sufficiently concentrated to allow us to effectively promote the product with a targeted sales team. We also intend to enter into strategic relationships with biotechnology and pharmaceutical companies where realizing the full value of our development programs will require access to broader geographic markets or the pursuit of broader patient populations or indications. In addition, we intend to expand the drug development applications of our SMART linker technology platform through selective collaborations with leading biotechnology and pharmaceutical companies.

Manufacturing and Supply

        Each of our SMART linker conjugate product candidates is a small molecule compound manufactured from component raw materials, for each of the bioactives and for the linker. The omega-3 fatty acid materials that we use as bioactives are purified from natural sources by established pharmaceutical intermediate manufacturers. The other bioactive and linker raw materials that we use are readily available from established pharmaceutical intermediate manufacturers who synthesize them using well understood, conventional chemistries. The components are conjugated to form the SMART linker product candidate using well understood, conventional chemistries.

        We currently have no manufacturing facilities and limited personnel with manufacturing experience. We rely on contract manufacturers to produce both drug substance and drug product required for our clinical trials. We plan to continue to rely upon contract manufacturers and, potentially, collaborators to manufacture commercial quantities of our products, if approved.

Competition

        The development and commercialization of new drugs is highly competitive. If we successfully develop and commercialize any of our product candidates, we and any future collaborators will face competition from pharmaceutical and biotechnology companies worldwide. Many of the entities developing and marketing potentially competing products have significantly greater financial resources and expertise than we do in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing. Our commercial opportunity will be reduced or eliminated if our competitors develop and commercialize products that are more effective, have fewer side effects, are more convenient or are less expensive than any products that we may develop.

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        The key competitive factors affecting the success of our product candidates, if approved, are likely to be their efficacy, safety, convenience, price and the availability of coverage and reimbursement from government and other third-party payors.

CAT-1004 for Duchenne Muscular Dystrophy

        There are currently no therapies approved for the treatment of DMD in the United States. Although not approved for the treatment of DMD, corticosteroid therapy is often prescribed to treat the inflammation underlying DMD and to delay loss of ambulation. Marathon Pharmaceuticals has announced that it is conducting clinical trials and preclinical studies to support approval of deflazacort, a corticosteroid, in DMD and that it anticipates filing an NDA for deflazacort with the FDA in 2016.

        A number of companies are developing therapies to treat DMD in patients with specific mutations in the dystrophin gene. PTC Therapeutics has received conditional approval for Translarna™ in the European Union for DMD patients with nonsense mutations and has begun a rolling NDA submission for marketing approval in the United States. Prosensa (which has agreed to be acquired by BioMarin Pharmaceuticals) and Sarepta Therapeutics have product candidates in clinical development based on a different scientific approach, which is referred to as exon-skipping. Prosensa has begun a rolling NDA submission for approval in the United States for its lead product candidate, drisapersen, and Sarepta Therapeutics is conducting Phase 3 clinical trials of its lead product candidate eteplirsen and has announced that it intends to submit an NDA in 2015. Based on the prevalence of the specific mutations that these product candidates are designed to address, they would be expected to be effective in an aggregate of approximately 26% of DMD patients.

        Other companies have alternative therapeutic approaches to the treatment of DMD in late stage clinical development. Santhera Pharmaceuticals has announced positive effects on respiratory function in a Phase 3 clinical trial of idebenone (Raxone® in the European Union and Catena® in the United States). Santhera has announced that it plans to seek regulatory approval for the treatment of DMD in Europe and the United States. Eli Lilly is conducting a Phase 3 trial of the product tadalafil (Cialis®), which is currently approved for marketing for the treatment of erectile dysfunction, to assess whether Cialis will increase blood flow to muscles and delay the loss of ambulatory function in patients with DMD. A number of companies have products in earlier stages of clinical development for DMD, including Akashi Therapeutics, Bristol Myers Squibb, Pfizer, Phrixus Pharmaceuticals, Summit Plc and Taiho Pharmaceuticals. If successfully developed, some of these alternative therapeutic approaches may be applicable to all DMD patients.

CAT-2003 for Multifactorial Chylomicronemia and Refractory Severe Hypertriglyceridemia

        The market for lipid lowering therapeutics is large and competitive with many applicable drug classes. However, we expect that CAT-2003, if approved, will be focused, at least initially, on niche markets such as MFC and rSHTG where it can be positioned for use in combination with existing approved therapies, such as statins and fibrates, to provide incremental efficacy in currently underserved patient populations.

        Several pharmaceutical companies have product candidates in clinical development based on different scientific approaches, which, if approved, would potentially compete with CAT-2003 for the treatment of MFC or rSHTG. Product candidates in Phase 3 clinical development for the treatment of MFC or rSHTG include Isis Pharmaceuticals' APOCIIIRx, which is a biologic antisense oligonucleotide, and Trygg Pharma's AKR-963 and Sancilio & Company's SC401B, each of which is a new omega-3 fatty acid preparation. Product candidates in Phase 2 clinical development include Arisaph Pharmaceuticals' niacin analog ARI-3037 MO and Pronova BioPharma's PRC-4016, a new omega-3 fatty acid compound.

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        Alnylam Pharmaceuticals has product candidates in preclinical development which, based on their mechanism, may have effects on triglycerides. These product candidates could be competitive with CAT-2003.

        In addition, some product candidates currently in development or marketed for indications other than rSHTG or MFC could potentially be developed in the future for rSHTG or MFC or prescribed by physicians for patients with rSHTG or MFC without being labeled for those conditions. In particular, several products are in development for FCS. These products include UniQure's gene therapy product Glybera® (alipogene tiparvovec) and Novartis' LCQ908. In addition, Aegerion Pharmaceuticals has announced that it plans to develop Juxtapid® (Lojuxta in the European Union) for FCS. To our knowledge, none of these products is currently being developed for rSHTG or MFC.

CAT-2054 for Hypercholesterolemia

        There are many widely available products, including statins and cholesterol absorption inhibitors, approved for the treatment of patients with hypercholesterolemia. The market and development pipeline for cholesterol regulating therapies is especially large and competitive. If CAT-2054 is approved for the treatment of hypercholesterolemia, either as monotherapy or in combination therapies, it will face intense competition from current approved therapies as well as a number of therapeutic approaches in development, including:

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PCSK9 inhibitors.  The most advanced of these product candidates are the monoclonal antibodies alirocumab, being developed by Sanofi and Regeneron Pharmaceuticals, and evolocumab, being developed by Amgen. Both agents have completed Phase 3 clinical trials and are in the process of registration with United States and European regulatory authorities. Other PCSK9 inhibitors in clinical development include Pfizer's bococizumab, which is currently in Phase 3 clinical trials, and Eli Lilly's LY3015014, which has completed a Phase 2 clinical trial. In addition, Alnylam Pharmaceuticals has announced the filing of a Clinical Trial Application with the U.K. Medicines and Healthcare Products Regulatory Agency to initiate a Phase 1 clinical trial of ALN-PCSsc, which targets PCSK9.



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Cholesterylester transfer protein (CETP) inhibitors.  CETP inhibitors are intended to reduce the risk of atherosclerosis. There are two CETP inhibitors in Phase 3 clinical trials, Merck's MK-0859 and Eli Lilly's LY2484595. Dezima Pharma's TA-8995 has completed a Phase 2b clinical trial.

        Esperion is developing ETC-1002, an inhibitor of ATP citrate lyase that is currently in Phase 2b clinical trials, and Madrigal Pharmaceuticals' is developing MGL-3196, an inhibitor of thyroid hormone receptors that has completed Phase 1 clinical trials in healthy volunteers.

Intellectual Property

        We strive to protect the proprietary technologies that we believe are important to our business, including pursuing and maintaining patent protection intended to cover the composition of matter of our product candidates, their methods of use, related technologies and other inventions that are important to our business. In addition to patent protection, we also rely on trade secrets to protect aspects of our business that are not amenable to, or that we do not consider appropriate for, patent protection, including certain aspects of our SMART linker technology platform.

        Our commercial success depends in part upon our ability to obtain and maintain patent and other proprietary protection for commercially important technologies, inventions and know-how related to our business, defend and enforce our intellectual property rights, in particular, our patent rights, preserve the confidentiality of our trade secrets and operate without infringing valid and enforceable intellectual property rights of others.

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        The patent positions for biotechnology and pharmaceutical companies like us are generally uncertain and can involve complex legal, scientific and factual issues. In addition, the coverage claimed in a patent application can be significantly reduced before a patent is issued, and its scope can be reinterpreted and even challenged after issuance. As a result, we cannot guarantee that any of our product candidates will be protectable or remain protected by enforceable patents. We cannot predict whether the patent applications we are currently pursuing will issue as patents in any particular jurisdiction or whether the claims of any issued patents will provide sufficient proprietary protection from competitors. Any patents that we hold may be challenged, circumvented or invalidated by third parties.

        As of December 31, 2014, our patent estate included 6 issued U.S. patents and over 25 pending U.S. patent applications, 10 issued foreign patents and 100 pending foreign patent applications.

        With regard to CAT-1004, we have two issued U.S. patents and two allowed U.S. patent applications with composition of matter and method of use claims directed to CAT-1004 and its use. The issued U.S. patents and the allowed U.S. patent applications, when issued, are expected to expire in 2029, without taking a potential patent term extension into account. In addition, we have patents that have been granted in Australia, China, Mexico and New Zealand, which are expected to expire in 2029, without taking potential patent term extensions into account, and at least 20 pending patent applications in various other countries and regions in North America, South America, Europe, and Asia, which, if issued, are expected to expire in 2029, without taking potential patent term extensions into account.

        With regard to CAT-2003 and CAT-2054, we have two issued U.S. patents with composition of matter and method of use claims directed to CAT-2003 and CAT-2054 and their use. These U.S. patents are scheduled to expire in 2030 and 2031, without taking potential patent term extensions into account. In addition, we have patents that have been granted in Mexico and New Zealand, which are expected to expire in 2030, without taking potential patent term extensions into account and at least 20 pending applications in various other countries and regions including North and South America, Europe, and Asia, which, if issued, are expected to expire in 2030, without taking patent term extensions into account. In addition, we have a pending U.S. patent application directed to CAT-2054, which, if issued, is expected to expire in 2033, without taking a potential patent term extension into account. We have at least 10 counterpart patent applications pending in various countries and regions in North America, South America, Europe and Asia, which, if issued, are expected to expire in 2033, without taking potential patent term extensions into account.

        With regard to CAT-4001, we have an allowed, pending U.S. patent application with composition of matter and method of use claims directed to CAT-4001 and its use. This patent application, if issued, is expected to expire in 2031, without taking a potential patent term extension into account. We have at least 20 counterpart patent applications pending in various other countries and regions in North America, South America, Europe and Asia, which, if issued, are expected to expire in 2031, without taking potential patent term extensions into account.

        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, the term of a patent covering an FDA-approved drug may be eligible for a patent term extension under the Hatch-Waxman Act as compensation for the loss of patent term during the FDA regulatory review process. The period of extension may be up to five years beyond the expiration of the patent, but cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval. Only one patent among those eligible for an extension may be extended. Similar provisions are available in Europe and in certain other jurisdictions to extend the term of a patent that covers an approved drug. It is possible that issued U.S. patents covering

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CAT-1004, CAT-2003, CAT-2054 and CAT-4001 may be entitled to patent term extensions. If our product candidates receive FDA approval, we intend to apply for patent term extensions, if available, to extend the term of patents that cover the approved product candidates. We also intend to seek patent term extensions in any jurisdictions where they are available, however, there is no guarantee that the applicable authorities, including the FDA, will agree with our assessment of whether such extensions should be granted, and even if granted, the length of such extensions.

        In addition to patent protection, we also rely on trade secret protection for our proprietary information that is not amenable to, or that we do not consider appropriate for, patent protection, including, for example, certain aspects of our manufacturing processes and conjugate selection methodologies. However, trade secrets can be difficult to protect. Although we take steps to protect our proprietary information, including restricting access to our premises and our confidential information, as well as entering into agreements with our employees, consultants, advisors and potential collaborators, third parties may independently develop the same or similar proprietary information or may otherwise gain access to our proprietary information. As a result, we may be unable to meaningfully protect our trade secrets and proprietary information.

Government Regulation and Product Approvals

        Government authorities in the United States, at the federal, state and local level, and in other countries and jurisdictions, including the European Union, extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval, packaging, storage, recordkeeping, labeling, advertising, promotion, distribution, marketing, post-approval monitoring and reporting, and import and export of pharmaceutical products. The processes for obtaining regulatory approvals in the United States and in foreign countries and jurisdictions, along with subsequent compliance with applicable statutes and regulations and other regulatory authorities, require the expenditure of substantial time and financial resources.

Review and Approval of Drugs in the United States

        In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, or FDCA, and implementing regulations. The failure to comply with applicable U.S. requirements at any time during the product development process, approval process or after approval may subject an applicant and/or sponsor to a variety of administrative or judicial sanctions, including refusal by the FDA to approve pending applications, withdrawal of an approval, imposition of a clinical hold, issuance of warning letters and other types of letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement of profits, or civil or criminal investigations and penalties brought by the FDA and the Department of Justice or other governmental entities.

        An applicant seeking approval to market and distribute a new drug product in the United States must typically undertake the following:

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completion of preclinical laboratory tests, animal studies and formulation studies in compliance with the FDA's good laboratory practice, or GLP, regulations;



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submission to the FDA of an IND, which must take effect before human clinical trials may begin;



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approval by an independent institutional review board, or IRB, representing each clinical site before each clinical trial may be initiated;



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performance of adequate and well-controlled human clinical trials in accordance with good clinical practices, or GCP, to establish the safety and efficacy of the proposed drug product for each indication;

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preparation and submission to the FDA of an NDA;



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review of the product by an FDA advisory committee, where appropriate or if applicable;



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satisfactory completion of one or more FDA inspections of the manufacturing facility or facilities at which the product, or components thereof, are produced to assess compliance with current Good Manufacturing Practices, or cGMP, requirements and to assure that the facilities, methods and controls are adequate to preserve the product's identity, strength, quality and purity;



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satisfactory completion of FDA audits of clinical trial sites to assure compliance with GCPs and the integrity of the clinical data;



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payment of user fees and securing FDA approval of the NDA; and



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compliance with any post-approval requirements, including Risk Evaluation and Mitigation Strategies, or REMS, and post-approval studies required by the FDA.

Preclinical Studies

        Preclinical studies include laboratory evaluation of the purity and stability of the manufactured drug substance or active pharmaceutical ingredient and the formulated drug or drug product, as well as in vitro and animal studies to assess the safety and activity of the drug for initial testing in humans and to establish a rationale for therapeutic use. The conduct of preclinical studies is subject to federal regulations and requirements, including GLP regulations. The results of the preclinical tests, together with manufacturing information, analytical data, any available clinical data or literature and plans for clinical trials, among other things, are submitted to the FDA as part of an IND. Some long-term preclinical testing, such as animal tests of reproductive adverse events and carcinogenicity, may continue after the IND is submitted.

Human Clinical Trials in Support of an NDA

        Clinical trials involve the administration of the investigational product to human subjects under the supervision of qualified investigators in accordance with GCP requirements, which include, among other things, the requirement that all research subjects provide their informed consent in writing before their participation in any clinical trial. Clinical trials are conducted under written study protocols detailing, among other things, the inclusion and exclusion criteria, the objectives of the study, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. A protocol for each clinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND. An IND automatically becomes effective 30 days after receipt by the FDA, unless before that time the FDA raises concerns or questions related to a proposed clinical trial and places the trial on clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. The FDA can place an IND on clinical hold at any point in development, and depending upon the scope of the hold, clinical trial(s) may not restart until resolution of the outstanding concerns to the FDA's satisfaction.

        In addition, an IRB representing each institution participating in the clinical trial must review and approve the plan for any clinical trial before it commences at that institution, and the IRB must conduct a continuing review and reapprove the study at least annually. The IRB must review and approve, among other things, the study protocol and informed consent information to be provided to study subjects. An IRB must operate in compliance with FDA regulations. Information about certain clinical trials must be submitted within specific timeframes to the National Institutes of Health for public dissemination on their ClinicalTrials.gov website.

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        Human clinical trials are typically conducted in three sequential phases, which may overlap or be combined:

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Phase 1.  The drug is initially introduced into healthy human subjects or, in certain indications such as cancer, patients with the target disease or condition and tested for safety, dosage tolerance, absorption, metabolism, distribution, excretion and, if possible, to gain an early indication of its effectiveness and to determine optimal dosage.



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Phase 2.  The drug is administered to a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage.



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Phase 3.  The drug is administered to an expanded patient population, generally at geographically dispersed clinical trial sites, in well-controlled clinical trials to generate enough data to statistically evaluate the efficacy and safety of the product for approval, to establish the overall risk-benefit profile of the product and to provide adequate information for the labeling of the product.

        Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and more frequently if serious adverse events occur. In addition, IND safety reports must be submitted to the FDA for any of the following: serious and unexpected suspected adverse reactions; findings from other studies or animal or in vitro testing that suggest a significant risk in humans exposed to the drug; and any clinically important increase in the case of a serious suspected adverse reaction over that listed in the protocol or investigator brochure. Phase 1, Phase 2 and Phase 3 clinical trials may not be completed successfully within any specified period, or at all. Furthermore, the FDA or the sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution, or an institution it represents, if the clinical trial is not being conducted in accordance with the IRB's requirements or if the drug has been associated with unexpected serious harm to patients. The FDA will typically inspect one or more clinical sites to assure compliance with GCP and the integrity of the clinical data submitted.

Submission of an NDA to the FDA

        Assuming successful completion of required clinical testing and other requirements, the results of the preclinical studies and clinical trials, together with detailed information relating to the product's chemistry, manufacture, controls and proposed labeling, among other things, are submitted to the FDA as part of an NDA requesting approval to market the drug product for one or more indications. Under federal law, the submission of most NDAs is additionally subject to an application user fee, currently exceeding $2.1 million, and the sponsor of an approved NDA is also subject to annual product and establishment user fees, currently exceeding $104,000 per product and $554,000 per establishment. These fees are typically increased annually.

        The FDA conducts a preliminary review of an NDA within 60 days of its receipt and informs the sponsor by the 74th day after the FDA's receipt of the submission to determine whether the application is sufficiently complete to permit substantive review. The FDA may request additional information rather than accept an NDA for filing. In this event, the application must be resubmitted with the additional information. The resubmitted application is also subject to review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive review. The FDA has agreed to specified performance goals in the review process of NDAs. Most such applications are meant to be reviewed within ten months from the date of filing, and most applications for "priority review" products are meant to be reviewed within six months of filing. The review process may be extended by the FDA for three additional months to consider new information or clarification

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provided by the applicant to address an outstanding deficiency identified by the FDA following the original submission.

        Before approving an NDA, the FDA typically will inspect the facility or facilities where the product is or will be manufactured. These pre-approval inspections may cover all facilities associated with an NDA submission, including drug component manufacturing (such as active pharmaceutical ingredients), finished drug product manufacturing, and control testing laboratories. The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. Additionally, before approving an NDA, the FDA will typically inspect one or more clinical sites to assure compliance with GCP.

        In addition, as a condition of approval, the FDA may require an applicant to develop a REMS. REMS use risk minimization strategies beyond the professional labeling to ensure that the benefits of the product outweigh the potential risks. To determine whether a REMS is needed, the FDA will consider the size of the population likely to use the product, seriousness of the disease, expected benefit of the product, expected duration of treatment, seriousness of known or potential adverse events, and whether the product is a new molecular entity. REMS can include medication guides, physician communication plans for healthcare professionals, and elements to assure safe use, or ETASU. ETASU may include, but are not limited to, special training or certification for prescribing or dispensing, dispensing only under certain circumstances, special monitoring, and the use of patient registries. The FDA may require a REMS before approval or post-approval if it becomes aware of a serious risk associated with use of the product. The requirement for a REMS can materially affect the potential market and profitability of a product.

        The FDA is required to refer an application for a novel drug to an advisory committee or explain why such referral was not made. Typically, an advisory committee is a panel of independent experts, including clinicians and other scientific experts, that reviews, evaluates and provides a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.

Fast Track, Breakthrough Therapy and Priority Review Designations

        The FDA is authorized to designate certain products for expedited review if they are intended to address an unmet medical need in the treatment of a serious or life-threatening disease or condition. These programs are fast track designation, breakthrough therapy designation and priority review designation.

        Specifically, the FDA may designate a product for fast track review if it is intended, whether alone or in combination with one or more other drugs, for the treatment of a serious or life-threatening disease or condition, and it demonstrates the potential to address unmet medical needs for such a disease or condition. For fast track products, sponsors may have greater interactions with the FDA and the FDA may initiate review of sections of a fast track product's NDA before the application is complete. This rolling review may be available if the FDA determines, after preliminary evaluation of clinical data submitted by the sponsor, that a fast track product may be effective. The sponsor must also provide, and the FDA must approve, a schedule for the submission of the remaining information and the sponsor must pay applicable user fees. However, the FDA's time period goal for reviewing a fast track application does not begin until the last section of the NDA is submitted. In addition, the fast track designation may be withdrawn by the FDA if the FDA believes that the designation is no longer supported by data emerging in the clinical trial process.

        Second, in 2012, Congress enacted the Food and Drug Administration Safety and Innovation Act, or FDASIA. This law established a new regulatory scheme allowing for expedited review of products

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designated as "breakthrough therapies." A product may be designated as a breakthrough therapy if it is intended, either alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the product may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. The FDA may take certain actions with respect to breakthrough therapies, including holding meetings with the sponsor throughout the development process; providing timely advice to the product sponsor regarding development and approval; involving more senior staff in the review process; assigning a cross-disciplinary project lead for the review team; and taking other steps to design the clinical trials in an efficient manner.

        Third, the FDA may designate a product for priority review if it is a drug that treats a serious condition and, if approved, would provide a significant improvement in safety or effectiveness. The FDA determines, on a case- by-case basis, whether the proposed drug represents a significant improvement when compared with other available therapies. Significant improvement may be illustrated by evidence of increased effectiveness in the treatment of a condition, elimination or substantial reduction of a treatment-limiting drug reaction, documented enhancement of patient compliance that may lead to improvement in serious outcomes, and evidence of safety and effectiveness in a new subpopulation. A priority designation is intended to direct overall attention and resources to the evaluation of such applications, and to shorten the FDA's goal for taking action on a marketing application from ten months to six months.

Accelerated Approval Pathway

        The FDA may grant accelerated approval to a drug for a serious or life-threatening condition that provides meaningful therapeutic advantage to patients over existing treatments based upon a determination that the drug has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit. The FDA may also grant accelerated approval for such a condition when the product has an effect on an intermediate clinical endpoint that can be measured earlier than an effect on irreversible morbidity or mortality, or IMM, and that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity or prevalence of the condition and the availability or lack of alternative treatments. Drugs granted accelerated approval must meet the same statutory standards for safety and effectiveness as those granted traditional approval.

        For the purposes of accelerated approval, a surrogate endpoint is a marker, such as a laboratory measurement, radiographic image, physical sign or other measure that is thought to predict clinical benefit, but is not itself a measure of clinical benefit. Surrogate endpoints can often be measured more easily or more rapidly than clinical endpoints. An intermediate clinical endpoint is a measurement of a therapeutic effect that is considered reasonably likely to predict the clinical benefit of a drug, such as an effect on IMM. The FDA has limited experience with accelerated approvals based on intermediate clinical endpoints, but has indicated that such endpoints generally may support accelerated approval where the therapeutic effect measured by the endpoint is not itself a clinical benefit and basis for traditional approval, if there is a basis for concluding that the therapeutic effect is reasonably likely to predict the ultimate clinical benefit of a drug.

        The accelerated approval pathway is most often used in settings in which the course of a disease is long and an extended period of time is required to measure the intended clinical benefit of a drug, even if the effect on the surrogate or intermediate clinical endpoint occurs rapidly. Thus, accelerated approval has been used extensively in the development and approval of drugs for treatment of a variety of cancers in which the goal of therapy is generally to improve survival or decrease morbidity and the duration of the typical disease course requires lengthy and sometimes large trials to demonstrate a clinical or survival benefit.

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        The accelerated approval pathway is usually contingent on a sponsor's agreement to conduct, in a diligent manner, additional post-approval confirmatory studies to verify and describe the drug's clinical benefit. As a result, a drug candidate approved on this basis is subject to rigorous post-marketing compliance requirements, including the completion of Phase 4 or post-approval clinical trials to confirm the effect on the clinical endpoint. Failure to conduct required post-approval studies, or confirm a clinical benefit during post-marketing studies, would allow the FDA to withdraw the drug from the market on an expedited basis. All promotional materials for drug candidates approved under accelerated regulations are subject to prior review by the FDA.

The FDA's Decision on an NDA

        On the basis of the FDA's evaluation of the NDA and accompanying information, including the results of the inspection of the manufacturing facilities, the FDA may issue an approval letter or a complete response letter. An approval letter authorizes commercial marketing of the product with specific prescribing information for specific indications. A complete response letter generally outlines the deficien