PREM14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

 

Filed by the Registrant  

Filed by a Party other than the Registrant  

Check the appropriate box:

 

Preliminary Proxy Statement

 

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 

Definitive Proxy Statement

 

Definitive Additional Materials

 

Soliciting Material under §240.14a-12

Silverback Therapeutics, Inc.

(Exact name of Registrant as specified in its charter)

Payment of Filing Fee (Check the appropriate box)

 

No fee required

 

Fee paid previously with preliminary materials

 

Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11

 

 

 


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LOGO

PROPOSED MERGER

YOUR VOTE IS VERY IMPORTANT

To the Stockholders of Silverback Therapeutics, Inc.:

You are cordially invited to attend a virtual special meeting of the stockholders of Silverback Therapeutics, Inc., a Delaware corporation, which we refer to as “we”, “Silverback”, or the “Company”, which will be held exclusively online via live audio-only webcast on                     , 2022, at                  a.m. Pacific Time, unless postponed or adjourned to a later date. This is an important meeting that affects your investment in Silverback.

Silverback and ARS Pharmaceuticals, Inc. (“ARS Pharma”) have entered into an Agreement and Plan of Merger and Reorganization, dated July 21, 2022, as amended on August 11, 2022 (as it may be further amended from time to time, the “Merger Agreement”), pursuant to which a wholly owned subsidiary of Silverback will merge with and into ARS Pharma, with ARS Pharma surviving as a wholly owned subsidiary of Silverback (the “Merger”). The Merger will result in a biopharmaceutical company focused on the development and potential commercialization of a novel, potentially first-in-class product candidate, neffy, a no needle, no injection nasal delivery of epinephrine for the emergency treatment of Type I allergic reactions, including anaphylaxis.

At the effective time of the Merger (the “Effective Time”), each outstanding share of common stock of ARS Pharma, $0.01 par value per share (“ARS Pharma Common Stock”), (after giving effect to the automatic conversion of all shares of preferred stock of ARS Pharma into shares of ARS Pharma Common Stock immediately prior to the Effective Time (the “Preferred Stock Conversion”)) will be converted into the right to receive approximately 1.2441 shares of common stock of Silverback, $0.0001 par value per share (“Silverback Common Stock”) based on an assumed exchange ratio of 1.2441, which is subject to certain adjustments, including based on Silverback’s net cash at the closing of the Merger (the “Closing”) (which net cash has been assumed to be $240 million for the purposes of calculating the assumed exchange ratio). Silverback will assume outstanding and unexercised options to purchase shares of ARS Pharma Common Stock, and in connection with the Merger they will be converted into options to purchase shares of Silverback Common Stock. Each warrant to purchase ARS Pharma Common Stock outstanding and unexercised immediately prior to the Effective Time (after giving effect to the Preferred Stock Conversion) will be assumed by Silverback and will become a warrant to purchase shares of Silverback Common Stock. At the Effective Time, Silverback’s stockholders will continue to own and hold their then existing shares of Silverback Common Stock. All outstanding and unexercised options to purchase shares of Silverback Common Stock and all outstanding and unvested restricted stock units will remain outstanding to the extent they are not otherwise forfeited or, for restricted stock units, accelerated (and settled) in connection with the Merger.

Immediately after the Merger, assuming Silverback holds $240 million of net cash at Closing, the pre-Merger equity holders of ARS Pharma are expected to hold approximately 63% of the outstanding shares of Silverback Common Stock and the pre-Merger equity holders of Silverback are expected to hold approximately 37% of the outstanding shares of Silverback Common Stock, in each case, on a fully diluted basis using the treasury stock method. If Silverback holds less than $240 million of net cash at Closing, the pre-Merger equity holders of Silverback are expected to hold between 34% and 36% of the outstanding shares of Silverback Common Stock, and if Silverback holds more than $240 million of net cash at Closing, the pre-Merger equity holders of Silverback are expected to hold between 37% and 38% of the outstanding shares of Silverback Common Stock, in each case, on a fully diluted basis using the treasury stock method.

Shares of Silverback Common Stock are currently listed on The Nasdaq Global Market under the symbol “SBTX.” Silverback has filed an initial listing application with The Nasdaq Stock Market LLC (“Nasdaq”) pursuant to Nasdaq’s “reverse merger” rules for the purposes of listing the shares of Silverback Common Stock issuable pursuant to the Merger. Substantially concurrent with the completion of the Merger, Silverback will be renamed “ARS Pharmaceuticals, Inc.” and expects to trade on The Nasdaq Global Market under the symbol “SPRY”. On                 , 2022, the last trading day before the date of the attached proxy statement, the closing sale price of the Silverback Common Stock was $             per share.


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Silverback is holding a virtual special meeting of its stockholders (the “Silverback virtual special meeting”) in order to obtain the stockholder approvals necessary to complete the Merger and related matters. In light of the continuing public health concerns regarding the COVID-19 pandemic, Silverback has chosen to hold an exclusively virtual special meeting rather than an in-person meeting to minimize the health and safety risks of holding an in-person meeting and to allow for greater access to those who may want to attend. Any stockholder entitled to attend and vote at the Silverback virtual special meeting is entitled to appoint a proxy to attend and vote on such stockholder’s behalf. Such proxy need not be a holder of Silverback Common Stock. At the Silverback virtual special meeting, unless postponed or adjourned to a later date, Silverback will ask its holders of Silverback Common Stock to, among other things:

 

  1.

approve (i) the issuance of shares of Silverback Common Stock or other securities of Silverback pursuant to the Merger, which will represent (or are convertible into) more than 20% of the shares of Silverback Common Stock outstanding immediately prior to the Merger, and (ii) the change of control resulting from the Merger, pursuant to Nasdaq Listing Rules 5635(a) and 5635(b), respectively (the “Merger Proposal” or “Proposal No. 1”); and

 

  2.

approve a postponement or adjournment of the Silverback virtual special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of Proposal No. 1 (the “Adjournment Proposal” or “Proposal No. 2”).

Please refer to the attached proxy statement for further information with respect to the business to be transacted at the Silverback virtual special meeting. As described in the accompanying proxy statement, certain of Silverback’s stockholders who in the aggregate own approximately 31% of the shares of Silverback Common Stock outstanding as of immediately prior to the date of the Merger Agreement are parties to support agreements with ARS Pharma, whereby such stockholders have agreed to vote their shares in favor of the adoption or approval, among other things, of the Merger Agreement and the approval of the transactions contemplated therein, including the Merger and the Merger Proposal, subject to the terms of the support agreements.

After careful consideration, Silverback’s board of directors has unanimously (i) determined that the Merger and the other transactions and actions contemplated by the Merger Agreement (the “Contemplated Transactions”) are fair to, advisable and in the best interests of Silverback and its stockholders; (ii) approved and declared advisable the Merger Agreement and the Contemplated Transactions, including the issuance of shares of Silverback common stock to the stockholders of ARS Pharma and the change of control of Silverback; and (iii) determined to recommend, upon the terms and subject to the conditions set forth in the Merger Agreement, that the stockholders of Silverback vote “FOR” Proposal Nos. 1 and 2. More information about Silverback, ARS Pharma and the proposed transaction is contained in the accompanying proxy statement. Silverback urges you to read the accompanying proxy statement carefully and in its entirety. IN PARTICULAR, YOU SHOULD CAREFULLY CONSIDER THE MATTERS DISCUSSED UNDER “RISK FACTORS” BEGINNING ON PAGE 25.

Silverback is excited about the opportunities the Merger brings to its stockholders, and thanks you for your consideration and continued support.

Sincerely,

Laura Shawver, Ph.D.

Chief Executive Officer

Silverback Therapeutics, Inc.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved the Merger described in this proxy statement or the Silverback Common Stock to be issued in connection with the Merger or passed upon the adequacy or accuracy of this proxy statement. Any representation to the contrary is a criminal offense.

The accompanying proxy statement is dated                 , 2022, and, together with the enclosed form of proxy card, is first being mailed to Silverback stockholders on or about                 , 2022.


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LOGO

PRELIMINARY PROXY STATEMENT, SUBJECT TO COMPLETION

SILVERBACK THERAPEUTICS, INC.

500 Fairview Ave. N, Suite 600

Seattle, Washington 98109

(206) 456-2900

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON                 , 2022

Dear Stockholder of Silverback:

On behalf of the board of directors of Silverback Therapeutics, Inc., a Delaware corporation (“Silverback”), we are pleased to deliver this proxy statement for a virtual special meeting of stockholders of Silverback (the “Silverback virtual special meeting”), for the proposed merger between Silverback and ARS Pharmaceuticals, Inc., a Delaware corporation (“ARS Pharma”), pursuant to which Sabre Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Silverback, will merge with and into ARS Pharma, with ARS Pharma surviving as a wholly owned subsidiary of Silverback (the “Merger”).

Notice is hereby given that the Silverback virtual special meeting will be held on                 , 2022, at         a.m. Pacific Time. In light of the continuing public health concerns regarding the COVID-19 pandemic, to protect the health and safety of our stockholders and employees and facilitate stockholder participation in the Silverback virtual special meeting, we have determined that the Silverback virtual special meeting will be held in a virtual meeting format only, via the internet, with no physical in-person meeting. You will be able to attend and participate in the Silverback virtual special meeting online by visiting www.proxydocs.com/SBTX to register for the meeting, where you will be able to listen to the meeting live, submit questions, and vote. To participate, vote or submit questions during the Silverback virtual special meeting via live webcast, you must register in advance at www.proxydocs.com/SBTX prior to the meeting. Please note that you will not be able to attend the Silverback virtual special meeting in person. Silverback is holding the Silverback virtual special meeting to consider the following proposals:

 

  1.

approve (i) the issuance of shares of common stock of Silverback, $0.0001 par value per share (“Silverback Common Stock”), or other securities of Silverback pursuant to the Merger, which will represent (or are convertible into) more than 20% of the shares of Silverback Common Stock outstanding immediately prior to the Merger, and (ii) the change of control resulting from the Merger, pursuant to Nasdaq Listing Rules 5635(a) and 5635(b), respectively (the “Merger Proposal” or “Proposal No. 1”); and

 

  2.

approve a postponement or adjournment of the Silverback virtual special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of Proposal No. 1 (the “Adjournment Proposal” or “Proposal No. 2”).

Please refer to the attached proxy statement for further information with respect to the business to be transacted at the Silverback virtual special meeting. The board of directors of Silverback (the “Silverback Board”) has fixed                 , 2022, as the record date for the determination of stockholders entitled to notice of, and to vote at, the Silverback virtual special meeting and any adjournment or postponement thereof. Only holders of record of shares of Silverback Common Stock at the close of business on the record date are entitled to notice of, and to vote at, the Silverback virtual special


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meeting. At the close of business on the record date, Silverback had              shares of Silverback Common Stock outstanding and entitled to vote. A complete list of such stockholders entitled to vote at the Silverback virtual special meeting will be available for examination at the Silverback offices in Seattle, Washington during normal business hours for a period of ten days prior to the Silverback virtual special meeting.

Your vote is important. Approval of Proposal Nos. 1 and 2 requires the affirmative vote of a majority of the votes cast virtually or by proxy at the virtual special meeting. Proposal No. 1 is a condition to the consummation of the Merger. Therefore, the Merger cannot be consummated without the approval of Proposal No. 1.

You are cordially invited to attend the Silverback virtual special meeting. Whether or not you expect to attend the meeting, you are urged to cast your vote as soon as possible. You may vote your shares via the internet or via a toll-free telephone number by following the instructions on the enclosed proxy card. In addition, if you received paper copies of the proxy materials by mail, you can also vote by mail by following the instructions on the enclosed proxy card. Submitting a proxy card will not prevent you from attending the Silverback virtual special meeting and voting at the Silverback virtual special meeting if you so desire. Please note, however, that if your shares are held of record by a broker, bank, or other nominee and you wish to vote at the meeting, you must obtain from the record holder a proxy issued in your name.

If you own shares in street name through an account with a bank, broker or other nominee and you decide to attend the Silverback virtual special meeting, you cannot vote at the Silverback virtual special meeting unless you present a “legal proxy”, issued in your name from your bank, broker or other nominee.

THE SILVERBACK BOARD HAS UNANIMOUSLY DETERMINED AND BELIEVES THAT EACH OF THE PROPOSALS OUTLINED ABOVE IS ADVISABLE TO, AND IN THE BEST INTERESTS OF, SILVERBACK AND ITS STOCKHOLDERS AND HAS UNANIMOUSLY APPROVED EACH SUCH PROPOSAL. THE SILVERBACK BOARD UNANIMOUSLY RECOMMENDS THAT SILVERBACK’S STOCKHOLDERS VOTE “FOR” EACH SUCH PROPOSAL.

By Order of the Silverback Board of Directors,

Laura Shawver, Ph.D.

Chief Executive Officer

Seattle, Washington

                , 2022


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REFERENCES TO ADDITIONAL INFORMATION

This proxy statement incorporates information by reference that is not included in or delivered with this document. You may obtain this information without charge through the Securities and Exchange Commission website (www.sec.gov) or upon your written or oral request by contacting Silverback Therapeutics, Inc., Attention: Investor Relations, 500 Fairview Ave. N, Suite 600, Seattle, Washington 98109, by calling (206) 736-7946 or by email at IR@silverbacktx.com.

To ensure timely delivery of these documents, any request should be made no later than                 , 2022 to receive them before the Silverback virtual special meeting.

For additional details about where you can find information about Silverback, please see the section titled “Where You Can Find More Information” beginning on page 231 of this proxy statement.

ABOUT THIS DOCUMENT

Silverback Therapeutics, Inc., which we refer to herein as the “Company,” “Silverback,” “we,” “our,” or “us” (unless otherwise indicated), is providing these proxy materials in connection with the solicitation by our board of directors of proxies to be voted at our virtual special meeting to be held be held exclusively online via live audio-only webcast on                 , 2022, at                  a.m. Pacific Time, or at any adjournment or postponement thereof. This proxy statement and the enclosed proxy card will be mailed to each stockholder entitled to notice of, and to vote at, the virtual special meeting of stockholders commencing on or about                 , 2022.

You are cautioned not to rely on any information other than the information contained in or incorporated by reference into this proxy statement. No one has been authorized to provide you with information that is different from that contained in or incorporated by reference into this proxy statement. This proxy statement is dated                 , 2022. You should not assume that the information contained in this proxy statement is accurate as of any other date, nor should you assume that the information incorporated by reference into this proxy statement is accurate as of any date other than the date of such incorporated document. The mailing of this proxy statement to our stockholders will not create any implication to the contrary.

This proxy statement does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction in which or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction.


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TABLE OF CONTENTS

 

     Page  

QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER

     1  

SUMMARY

     11  

MARKET PRICE AND DIVIDEND INFORMATION

     24  

RISK FACTORS

     25  

CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS

     102  

THE VIRTUAL SPECIAL MEETING OF SILVERBACK’S STOCKHOLDERS

     104  

THE MERGER

     110  

THE MERGER AGREEMENT

     140  

AGREEMENTS RELATED TO THE MERGER

     164  

MATTERS BEING SUBMITTED TO A VOTE OF SILVERBACK’S STOCKHOLDERS

     165  

PROPOSAL NO. 1: APPROVAL OF (I)  THE ISSUANCE OF SHARES OF SILVERBACK COMMON STOCK OR OTHER SECURITIES OF SILVERBACK PURSUANT TO THE MERGER, WHICH WILL REPRESENT (OR ARE CONVERTIBLE INTO) MORE THAN 20% OF THE SHARES OF SILVERBACK COMMON STOCK OUTSTANDING IMMEDIATELY PRIOR TO THE MERGER AND (II) THE CHANGE OF CONTROL RESULTING FROM THE MERGER PURSUANT TO NASDAQ LISTING RULES 5635(A) AND 5635(B), RESPECTIVELY

     165  

PROPOSAL NO. 2: APPROVAL OF POSSIBLE ADJOURNMENT OF THE SILVERBACK VIRTUAL SPECIAL MEETING

     166  

DESCRIPTION OF SILVERBACK’S BUSINESS

     167  

DESCRIPTION OF ARS PHARMA’S BUSINESS

     169  

SILVERBACK MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     212  

ARS PHARMA MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     213  

MANAGEMENT FOLLOWING THE MERGER

     231  

RELATED PARTY TRANSACTIONS OF THE COMBINED COMPANY

     242  

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

     245  

PRINCIPAL STOCKHOLDERS OF SILVERBACK

     256  

WHERE YOU CAN FIND MORE INFORMATION

     259  

INFORMATION INCORPORATED BY REFERENCE

     259  

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF ARS PHARMACEUTICALS, INC

     F-1  

ANNEX A – AGREEMENT AND PLAN OF MERGER AND REORGANIZATION

     A-1  

ANNEX B – OPINION OF SVB SECURITIES LLC

     B-1  


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QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER

The following section provides answers to frequently asked questions about the proposed merger transaction and the Silverback Therapeutics, Inc. (“Silverback”) virtual special meeting of its stockholders (the “Silverback virtual special meeting”). This section, however, provides only summary information. For a more complete response to these questions and for additional information, please refer to the cross-referenced sections.

Q:    What is the Merger?

A: Silverback, Sabre Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Silverback (“Merger Sub”), and ARS Pharmaceuticals, Inc., a Delaware corporation (“ARS Pharma”), entered into the Agreement and Plan of Merger and Reorganization on July 21, 2022, as amended on August 11, 2022 (as it may be further amended from time to time, the “Merger Agreement”). The Merger Agreement, as it may be further amended from time to time, contains the terms and conditions of the proposed transaction among Silverback, Merger Sub and ARS Pharma. Under the Merger Agreement, Merger Sub will merge with and into ARS Pharma, with ARS Pharma surviving as a wholly owned subsidiary of Silverback (the “Merger”).

At the effective time of the Merger (the “Effective Time”): (a) each share of ARS Pharma’s common stock (the “ARS Pharma Common Stock”) outstanding immediately prior to the Effective Time, after giving effect to the automatic conversion of all shares of preferred stock of ARS Pharma (“ARS Pharma Preferred Stock” and, together with the ARS Pharma Common Stock, the “ARS Pharma Capital Stock”) into shares of ARS Pharma Common Stock immediately prior to the Effective Time (the “Preferred Stock Conversion”), excluding shares held as treasury stock by ARS Pharma or held or owned by Silverback, Merger Sub or any subsidiary of Silverback or ARS Pharma and shares held by stockholders who have exercised and perfected appraisal rights (as more fully described in the section titled “The Merger—Appraisal Rights and Dissenters’ Rights”), will automatically be converted into the right to receive a number of shares of Silverback’s common stock (“Silverback Common Stock”) calculated using an exchange ratio formula described in the Merger Agreement (the “Exchange Ratio”).

Under the Exchange Ratio formula described in the Merger Agreement and assuming the Silverback Net Cash (as defined below) at the closing of the Merger (the “Closing”) is $240 million, immediately following the Merger, the pre-Merger equity holders of ARS Pharma are expected to hold approximately 63% of the outstanding shares of Silverback Common Stock and the pre-Merger equity holders of Silverback are expected to hold approximately 37% of the outstanding shares of Silverback Common Stock, in each case, on a fully diluted basis using the treasury stock method. The Exchange Ratio formula is based upon an ARS Pharma fixed valuation of $435 million and a Silverback equity value of $255 million, which is subject to certain adjustments, including based upon the Silverback Net Cash at Closing, as more fully described in the section titled “The Merger Agreement—Merger Consideration and Exchange Ratio.” As a condition to Closing, Silverback Net Cash must be no less than $210 million nor greater than $255 million (the “Net Cash Condition”); provided that Silverback may declare a dividend to its stockholders for any amount of Silverback Net Cash that exceeds $255 million. Silverback does not anticipate that the Silverback Net Cash will exceed $255 million or that a dividend will be declared.

If the Silverback Net Cash at Closing is less than $240 million, the pre-Merger equity holders of Silverback are expected to hold between 34% and 36% of the outstanding shares of Silverback Common Stock immediately following the Merger, and if the Silverback Net Cash at Closing is more than $240 million, the pre-Merger equity holders of Silverback are expected to hold between 37% and 38% of the outstanding shares of Silverback Common Stock immediately following the Merger, in each case, on a fully diluted basis using the treasury stock method.

 

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At the Effective Time, Silverback’s stockholders will continue to own and hold their existing shares of Silverback Common Stock. All outstanding and unexercised options to purchase shares of Silverback Common Stock and all outstanding and unvested restricted stock units will remain outstanding to the extent they are not forfeited or, for restricted stock units, accelerated (and settled) in connection with the Merger. Each option to purchase shares of ARS Pharma Common Stock that is outstanding and unexercised immediately prior to the Effective Time, whether or not vested, will be assumed by Silverback and converted into an option to purchase shares of Silverback Common Stock. Each warrant to purchase ARS Pharma Common Stock outstanding immediately prior to the Effective Time (after giving effect to the Preferred Stock Conversion) will be assumed by Silverback and will become a warrant to purchase shares of Silverback Common Stock. Substantially concurrent with the completion of the Merger, Silverback will change its corporate name to “ARS Pharmaceuticals, Inc.” as required by the Merger Agreement.

Q:    When will the Exchange Ratio be final?

A: At least 10 calendar days prior to the Silverback virtual special meeting, Silverback and ARS Pharma will agree upon the anticipated date for Closing (the “Anticipated Closing Date”). At least five calendar days prior to the Anticipated Closing Date, Silverback shall deliver to ARS Pharma a schedule setting forth the estimated calculation of Silverback Net Cash as of the Anticipated Closing Date. Following the final determination of the Silverback Net Cash as of the Anticipated Closing Date, Silverback and ARS Pharma will issue a press release setting forth the anticipated Exchange Ratio, which the parties have agreed to publicly disclose as early as practicable prior to the Silverback virtual special meeting (provided that in no event shall the press release delay, or cause the postponement of, the Silverback virtual special meeting).

Q:    What will happen to Silverback if, for any reason, the Merger does not close?

A: If, for any reason, the Merger does not close, the board of directors of Silverback (the “Silverback Board”) may elect to, among other things, attempt to complete another strategic transaction similar to the Merger, attempt to sell or otherwise dispose of the various assets of Silverback, continue to operate the business of Silverback or liquidate and distribute available cash. Under certain circumstances, Silverback may be obligated to pay ARS Pharma a termination fee of $10 million or $6 million and reimburse certain expenses of ARS Pharma up to $1.5 million, as more fully described in the section titled “The Merger Agreement—Termination and Termination Fees.” If Silverback decides to dissolve and liquidate its assets, Silverback would be required to pay all of its debts and contractual obligations, and to set aside certain reserves for potential future claims. There can be no assurances as to the amount or timing of available cash left to distribute to stockholders after paying the debts and other obligations of Silverback and setting aside funds for reserves.

Q:    Why are the two companies proposing to merge?

A: The Merger will result in a biopharmaceutical company focused on the development and potential commercialization of a novel, potentially first-in-class product candidate, neffy, a no needle, no injection nasal delivery of epinephrine for the emergency treatment of Type I allergic reactions, including anaphylaxis. For a discussion of Silverback’s reasons for the Merger, please see the section titled “The Merger—Silverback Reasons for the Merger.

Q:    Why am I receiving this proxy statement?

A: You are receiving this proxy statement because you have been identified as a holder of Silverback Common Stock as of the record date, and you are entitled to vote at the Silverback virtual special meeting to approve the matters described in this proxy statement. This proxy statement

 

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contains important information about the Silverback virtual special meeting, the Merger, the Merger Agreement and the other business to be considered by Silverback stockholders at the Silverback virtual special meeting and you should read it carefully and in its entirety. The enclosed voting materials allow you to authorize a proxy to vote your shares of Silverback Common Stock without attending the Silverback virtual special meeting. As promptly as practicable, please complete, sign, date and mail your proxy card in the pre-addressed postage-paid envelope provided or call the toll-free telephone number listed on your proxy card or access the internet website described in the instructions on the enclosed proxy card.

Q:    What am I voting on?

A: Holders of Silverback Common Stock as of the record date are entitled to vote at the Silverback virtual special meeting on each of the following proposals:

 

  1.

the approval of (i) the issuance of shares of Silverback Common Stock or other securities of Silverback pursuant to the Merger, which will represent (or are convertible into) more than 20% of the shares of Silverback Common Stock outstanding immediately prior to the Merger, and (ii) the change of control resulting from the Merger, pursuant to Nasdaq Listing Rules 5635(a) and 5635(b), respectively (the “Merger Proposal” or “Proposal No. 1”); and

 

  2.

the approval of a postponement or adjournment of the Silverback virtual special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of Proposal No. 1 (the “Adjournment Proposal” or “Proposal No. 2”).

We do not expect that any matter other than Proposal Nos. 1 and 2 will be brought before the Silverback virtual special meeting.

Q:    What is required to consummate the Merger?

A:    To consummate the Merger, the holders of Silverback Common Stock must approve the Merger Proposal. Proposal No. 2 is not a closing condition for the consummation of the Merger.

Certain of Silverback’s officers, directors and stockholders who in the aggregate own approximately 31% of the shares of Silverback Common Stock outstanding as of immediately prior to the date of the Merger Agreement, are parties to Silverback Support Agreements (as defined below) with ARS Pharma, whereby such stockholders have agreed, subject to the terms of the Silverback Support Agreements, to vote all of their shares of Silverback Common Stock: (i) in favor of adopting the Merger Agreement and approving the Merger, the Merger Proposal, and the other transactions and actions contemplated by the Merger Agreement (collectively, the “Contemplated Transactions”), (ii) against any proposal made in opposition to, or in competition with, the Merger Agreement or the Merger and (iii) against any acquisition proposal involving a third party.

In addition to the requirement of obtaining stockholder approval of the Merger Proposal, each of the other closing conditions set forth in the Merger Agreement must be satisfied or, unless not waivable as a matter of law, waived. For a complete description of the closing conditions under the Merger Agreement, we urge you to read the section titled “The Merger Agreement—Conditions to the Completion of the Merger.

Q:    How can I find out the results of the voting at the Silverback virtual special meeting?

A:    Final voting results will be published in a current report on Form 8-K that we expect to file within four business days after the Silverback virtual special meeting. If final voting results are not available to us in time to file a Form 8-K within four business days after the Silverback virtual special meeting, we intend to file a Form 8-K to publish preliminary results and, within four business days after the final results are known to us, file an additional Form 8-K to publish the final results.

 

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Q:    Will Silverback monetize any of its legacy programs in connection with the Merger?

A:    Silverback is entitled, but under no obligation, to separate into a new company or sell, transfer, assign or otherwise divest its legacy programs and other preclinical assets to a third party in one or a series of transactions prior to, concurrently with, or immediately following the Closing (the “Asset Dispositions”). If the Asset Dispositions are not completed prior to, concurrently with, or immediately following the Closing, Silverback’s legacy programs and other preclinical assets will be retained by Silverback and the value of such assets will have no impact on the calculation of the Exchange Ratio. For a more complete description of the Asset Dispositions, please see the section titled “The Merger Agreement—Potential Asset Disposition.” While Silverback is currently exploring third party interest in partnering or acquiring the Silverback’s legacy programs or other preclinical assets, Silverback may be unable to partner or divest the program assets in a timely manner, or at all, and therefore may not receive any return on Silverback’s investment in the program assets. Please see the section titled “Risk Factors—Risks Related to the Merger—Silverback may not be able to divest its legacy programs within the timeframe under the Merger Agreement, on favorable terms or at all, which may result in the value of such assets not being included in the calculation of the Exchange Ratio.”

Q:    What will ARS Pharma’s stockholders, option holders and warrant holders receive in the Merger?

A:    Each outstanding share of ARS Pharma Common Stock (after giving effect to the Preferred Stock Conversion) will be converted into the right to receive a number of shares of Silverback Common Stock calculated using the Exchange Ratio. Silverback will assume outstanding and unexercised options to purchase shares of ARS Pharma Common Stock, and in connection with the Merger such options will be converted into options to purchase shares of Silverback Common Stock. Each warrant to purchase ARS Pharma Common Stock outstanding and unexercised immediately prior to the Effective Time (after giving effect to the Preferred Stock Conversion) will be assumed by Silverback and will become a warrant to purchase shares of Silverback Common Stock. For a more complete description of what ARS Pharma’s equity holders will receive in the Merger, please see the section titled “The Merger Agreement—Merger Consideration and Exchange Ratio.

Q:    Will holders of the Silverback Common Stock issued in the Merger be able to sell those shares without restriction?

A:    The shares of Silverback Common Stock issued as consideration in the Merger will be issued in transactions exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”) in reliance on Section 4(a)(2) of the Securities Act and may not be offered or sold by the holders of those shares absent registration or an applicable exemption from the registration requirements. As a general matter, holders of such shares will not be able to transfer any of their shares until at least six months after receiving shares of Silverback Common Stock, which is when the shares would first be eligible to be sold under Rule 144 promulgated under the Securities Act, assuming the conditions thereof are otherwise satisfied.

Certain officers, directors and stockholders of ARS Pharma representing approximately 84% of the outstanding shares of ARS Pharma Capital Stock immediately prior to the date of the Merger Agreement have agreed to certain transfer restrictions on the shares of common stock to be issued to them in the Merger, for a period of 180 days following the Effective Time. For a more complete description of the lock-up agreements, please see the section titled “Agreements Related to the Merger  Lock-Up Agreements.

Q:    What will Silverback’s stockholders receive in the Merger?

A:    At the Effective Time, Silverback’s stockholders will continue to own and hold their existing shares of Silverback Common Stock.

 

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Q:    What will happen to Silverback’s options and restricted stock units in the Merger?

A: Silverback stock options and Silverback restricted stock units will remain outstanding to the extent they are not forfeited or, for restricted stock units, accelerated (and settled) in connection with the Merger. For a more detailed description of the treatment of Silverback equity awards, please see the section titled “The Merger Agreement—Treatment of Silverback Stock Options and Restricted Stock Units.”

Q:    Who will be the directors of Silverback following the Merger?

A:    At the Effective Time, the combined company is expected to initially have an eleven member board of directors, comprised of (a) Richard Lowenthal, M.S., MSEL, Pratik Shah, Ph.D., Peter Kolchinsky, Ph.D., Rajeev Dadoo, Ph.D., Brenton L. Saunders, Phillip Schneider, Michael Kelly and Jonathan Leff, each as an ARS Pharma designee, and (b) Laura Shawver, Ph.D., Peter A. Thompson, M.D. and Saqib Islam, J.D., each as a Silverback designee, until their respective successors are duly elected or appointed and qualified or their earlier death, resignation or removal.

The aforementioned board of directors will have an audit committee, a compensation committee and a nominating and corporate governance committee, in accordance with the rules of The Nasdaq Stock Market LLC (“Nasdaq”). All of Silverback’s current directors other than Dr. Shawver, Dr. Thompson and Mr. Islam are expected to resign from their positions as directors of Silverback, effective upon the Effective Time.

Q:    Who will be the executive officers of Silverback following the Merger?

A:    Immediately following the Merger, the executive management team of the combined company is expected to be comprised of the following individuals with such additional officers as may be added by ARS Pharma or the combined company:

 

Name

  

Position with the Combined
Company

  

Current Position

Richard Lowenthal, M.S., MSEL

   President and Chief Executive Officer    President and Chief Executive Officer of ARS Pharma

Kathleen Scott

   Chief Financial Officer    Chief Financial Officer of ARS Pharma

Sarina Tanimoto, M.D.

   Chief Medical Officer    Chief Medical Officer of ARS Pharma

Eric Karas

   Chief Commercial Officer    Chief Commercial Officer of ARS Pharma

Justin Chakma

   Chief Business Officer    Chief Business Officer of ARS Pharma

Q:    As a stockholder of Silverback, how does the Silverback Board recommend that I vote?

A:    After careful consideration, the Silverback Board unanimously recommends that the holders of Silverback Common Stock as of the record date vote:

 

   

FOR” the Merger Proposal; and

 

   

FOR” the Adjournment Proposal.

For more information on each proposal and the Silverback Board’s recommendations, please see the section entitled “Matters Being Submitted to a Vote of Silverback’s Stockholders.

 

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Q:    How many votes are needed to approve each proposal?

A:    Approval of the proposals requires the affirmative vote of a majority of the votes cast virtually or by proxy at the Silverback virtual special meeting.

Q:    What risks should I consider in deciding whether to vote in favor of Proposal Nos. 1 and 2?

A:    You should carefully review the section of the proxy statement titled “Risk Factors,” which sets forth certain risks and uncertainties related to the Merger, risks and uncertainties to which the combined company’s business will be subject, and risks and uncertainties to which each of Silverback and ARS Pharma, as an independent company, is subject.

Q:    When do you expect the Merger to be consummated?

A:    We anticipate that the Merger will be consummated during the fourth quarter of 2022, soon after the Silverback virtual special meeting to be held on                , 2022, but we cannot predict the exact timing. For more information, please see the section titled “The Merger Agreement—Conditions to the Completion of the Merger.

Q:    What are the material U.S. federal income tax consequences of the Merger to U.S. Holders of ARS Pharma shares?

A:    Silverback and ARS Pharma intend the Merger to qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”), as described in the section titled “The Merger—Material U.S. Federal Income Tax Consequences of the Merger.

The tax consequences to each ARS Pharma stockholder will depend on that stockholder’s particular circumstances. Each ARS Pharma stockholder should consult with his, her or its tax advisor for a full understanding of the tax consequences of the Merger to that stockholder.

Q:    What do I need to do now?

A:    Silverback and ARS Pharma urge you to read this proxy statement carefully, including its annexes and information incorporated herein, and to consider how the Merger affects you.

If you are a holder of Silverback Common Stock as of the record date, please vote your shares as soon as possible so that your shares will be represented at the Silverback virtual special meeting. Please follow the instructions set forth on the enclosed proxy card or on the voting instruction form provided by the record holder of your shares if your shares are held in the name of your bank, broker or other nominee.

Q:    When and where is the Silverback virtual special meeting?

A:    The Silverback virtual special meeting will be held exclusively online via live audio-only webcast on                , 2022 at                  a.m. Pacific Time. Please note that you will not be able to attend the Silverback virtual special meeting in person.

Q:    How do I vote and what must I do to attend the Silverback virtual special meeting?

You will be able to vote your shares and submit questions during the Silverback virtual special meeting webcast by logging in to the website listed below using the control number included in your

 

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proxy card on                 , 2022. Stockholders may begin to log in 15 minutes prior to the Silverback virtual special meeting. The Silverback virtual special meeting will begin promptly at                a.m. Pacific Time.

We will have technicians ready to assist you with any technical difficulties you may have accessing the Silverback virtual special meeting. If you encounter any difficulties accessing the Silverback virtual special meeting platform, including any difficulties voting or submitting questions, you may call the technical support number that will be posted in your instructional email.

If you wish to submit a question during the Silverback virtual special meeting, log into the Silverback virtual special meeting registration platform at www.proxydocs.com/SBTX, type your question into the “Questions for Management” field, and click “Submit.” Silverback will respond to as many properly submitted questions during the relevant portion of the Silverback virtual special meeting agenda as time allows. The procedures for voting are as follows:

Shares Registered in Your Name

If you are a stockholder of record, you may vote online at the Silverback virtual special meeting, vote by proxy over the telephone, vote by proxy through the internet, or vote by proxy by mail using the enclosed proxy card. Whether or not you plan to attend the Silverback virtual special meeting, we urge you to vote by proxy to ensure your vote is counted. You may still attend the Silverback virtual special meeting and vote even if you have already voted by proxy.

 

   

To vote online during the Silverback virtual special meeting, follow the instructions posted at www.proxydocs.com/SBTX. You must register in advance at www.proxydocs.com/SBTX to be able to vote during the Silverback virtual special meeting.

 

   

To vote over the telephone, dial toll-free (866) 355-8664 using a touch-tone phone and follow the recorded instructions. You will be asked to provide the company number and control number from the enclosed proxy card.

 

   

To vote through the internet, go to www.proxypush.com/SBTX to complete an electronic proxy card. You will be asked to provide the company number and control number from the enclosed proxy card.

 

   

To vote by mail, simply complete, sign and date the enclosed proxy card and return it promptly in the envelope provided. If you return your signed proxy card to us before the Silverback virtual special meeting, we will vote your shares as you direct.

If your shares are registered in your name with Silverback’s stock registrar and transfer agent, American Stock Transfer & Trust Company, LLC, no proof of ownership is necessary because Silverback can verify your ownership.

Shares Registered in the Name of a Broker, Bank or Other Nominee

If you are a beneficial owner of shares registered in the name of your broker, bank, or other nominee, you should have received voting instructions from that organization rather than from Silverback. Simply follow the voting instructions provided by your broker, bank or other nominee to ensure that your vote is counted. Alternatively, you may vote by telephone or over the internet as instructed by your broker, bank, or other nominee. To vote online at the Silverback virtual special meeting, you must obtain a valid proxy from your broker, bank, or other nominee. Follow the instructions from your broker, bank, or other nominee included with these proxy materials, or contact that organization to request a proxy form.

 

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If you own shares in street name through an account with a bank, broker or other nominee, please send proof of your Silverback share ownership as of the Silverback record date (for example, a brokerage firm account statement or a “legal proxy” from your intermediary) along with your registration request. If you are not sure what proof to send, check with your intermediary.

We provide internet proxy voting to allow you to vote your shares online, with procedures designed to ensure the authenticity and correctness of your proxy vote instructions. However, please be aware that you must bear any costs associated with your internet access, such as usage charges from internet access providers and telephone companies.

If Silverback experiences technical difficulties during the Silverback virtual special meeting (e.g., a temporary or prolonged power outage), Silverback will determine whether the Silverback virtual special meeting can be promptly reconvened (if the technical difficulty is temporary) or whether the Silverback virtual special meeting will need to be reconvened on a later day (if the technical difficulty is more prolonged). In any situation, Silverback will promptly notify stockholders of the decision via www.proxydocs.com/SBTX. Silverback will have technicians ready to assist you with any technical difficulties you may have accessing the Silverback virtual special meeting website. If you encounter any difficulties accessing the Silverback virtual special meeting website during the check-in or meeting time, please call the technical support number that will be posted on the Silverback virtual special meeting website log-in page at www.proxydocs.com/SBTX.

Q:    How are votes counted?

A:    Votes will be counted by the inspector of elections appointed for the meeting, who will separately count votes “FOR” and “AGAINST,” abstentions and, if applicable, broker non-votes.

We do not expect that any matter other than Proposal Nos. 1 and 2 will be brought before the Silverback virtual special meeting.

Q:    What are “broker non-votes”?

A:    Brokers who hold shares in street name for customers have the authority to vote on “routine” proposals when they have not received instructions from beneficial owners. However, brokers are precluded from exercising their voting discretion with respect to approval of non-routine matters, such as Proposal No. 1, and, as a result, absent specific instructions from the beneficial owner of such shares, brokers are not empowered to vote those shares, referred to generally as “broker non-votes.” Broker non-votes, if any, will be treated as shares that are present at the virtual special meeting for purposes of determining whether a quorum exists but will not be counted or deemed present virtually or by proxy for the purpose of voting on Proposal No. 1.

Q:    What will happen if I return my proxy or voting instruction form without indicating how to vote?

A:    If you submit your proxy or voting instruction form without indicating how to vote your shares on any particular proposal, the shares of Silverback Common Stock represented by your proxy will be voted as recommended by the Silverback Board with respect to that proposal.

Q:    May I change my vote after I have submitted a proxy or voting instruction form?

A:    Silverback’s stockholders of record, other than those Silverback stockholders who are parties to Silverback Support Agreements, except as otherwise provided therein, may change their vote at any time before their proxy is voted at the Silverback virtual special meeting in one of following ways:

 

   

by sending a written notice to the Secretary of Silverback stating that you would like to revoke your proxy.

 

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by duly executing a subsequently dated proxy relating to the same shares of Silverback Common Stock and returning it in the postage-paid envelope provided, which subsequent proxy is received before the prior proxy is exercised at the Silverback virtual special meeting;

 

   

by duly submitting a subsequently dated proxy relating to the same shares of Silverback Common Stock by telephone or via the internet (i.e., your most recent duly submitted voting instructions will be followed); and/or

 

   

by attending the Silverback virtual special meeting and voting such shares of Silverback Common Stock during the Silverback virtual special meeting.

If a stockholder who owns shares of Silverback Common Stock in “street name” has instructed a broker, bank or other nominee to vote its shares of Silverback Common Stock, the stockholder must follow directions received from its broker to change those instructions.

Q:    Who is paying for this proxy solicitation?

A:    Silverback and ARS Pharma will equally share the cost of printing and filing of this proxy statement and the proxy card, including fees paid to the U.S. Securities and Exchange Commission (“SEC”) in connection with filing the proxy statement, and any amendments and supplements thereto, with the SEC. Arrangements will also be made with brokerage firms and other custodians, nominees and fiduciaries who are record holders of Silverback Common Stock for the forwarding of solicitation materials to the beneficial owners of Silverback Common Stock. Silverback will reimburse these brokers, custodians, nominees and fiduciaries for the reasonable out-of-pocket expenses they incur in connection with the forwarding of solicitation materials.

Q:    What is the quorum requirement?

A:    A quorum of stockholders is necessary to hold a valid meeting. The presence at the Silverback virtual special meeting, virtually or by proxy, of the holders of a majority of the voting power of the stock issued, outstanding and entitled to vote thereat, as of the record date, will constitute a quorum for the transaction of business at the Silverback virtual special meeting.

Your shares will be counted towards the quorum if you submit a valid proxy (or one is submitted on your behalf by your broker, bank or other nominee) or if you attend the Silverback virtual special meeting and vote your shares during the Silverback virtual special meeting. Abstentions and broker non-votes, if applicable, will also be counted towards the quorum requirement. If there is no quorum, the holders of a majority of shares present at the Silverback virtual special meeting or represented by proxy may postpone or adjourn the meeting to another date.

Q:    Am I entitled to dissenters’ rights?

A:    No, Silverback’s stockholders are not entitled to dissenters’ rights in connection with the Merger.

Q:    Have ARS Pharma’s stockholders agreed to adopt the Merger Agreement?

A:    Yes. On July 21, 2022, ARS Pharma’s stockholders adopted the Merger Agreement and approved the Merger and the other Contemplated Transactions via the ARS Pharma Stockholder Written Consent (as defined below). For more information on the matters approved by the stockholders of ARS Pharma please see the sections titled “The Merger Agreement—Conditions to the Completion of the Merger” and “The Merger Agreement—ARS Pharma Stockholder Action by Written Consent.

 

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Q:    Who can help answer my questions?

A:    If you are a holder of Silverback Common Stock as of the record date and would like additional copies, without charge, of this proxy statement or if you have questions about the Merger, including the procedures for voting your shares, you should contact                 at                 .

 

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SUMMARY

This summary highlights selected information from this proxy statement and may not contain all of the information that is important to you. To better understand the Merger, the proposals being considered at the Silverback virtual special meeting, you should read this entire proxy statement carefully, including the Merger Agreement attached as Annex A and the fairness opinion of SVB Securities LLC attached as Annex B. For more information, please see the section titled “Where You Can Find More Information” beginning on page 260 of this proxy statement.

The Companies

Silverback Therapeutics, Inc.

500 Fairview Ave N, Suite 600

Seattle, Washington 98109

(206) 456-2900

Silverback is a biopharmaceutical company focused on leveraging its proprietary ImmunoTAC technology platform to develop systemically delivered, tissue targeted therapeutics for the treatment of cancer, chronic viral infections and other serious diseases. Silverback’s platform enables it to strategically pair proprietary linker-payloads that modulate key disease-modifying pathways with monoclonal antibodies directed to specific disease sites.

In July 2020, Silverback initiated clinical development of its first ImmunoTAC product candidate, a TLR8 agonist conjugated to a HER2 antibody, SBT6050. Preclinical data suggested that Silverback would be able to demonstrate a therapeutic window and advance SBT6050 through clinical development as a monotherapy and in combination with standard-of-care agents that had a complementary mechanism-of-action. Silverback’s Phase 1/1b program was designed to measure safety and tolerability, pharmacokinetic, pharmacodynamic and anti-tumor activity as monotherapy and in combination with pembrolizumab. On March 28, 2022, Silverback made the decision to discontinue its clinical development program for SBT6050 due to limited monotherapy activity and the adverse event profile when used in combination with pembrolizumab. SBT6290, comprised of the same linker payload conjugated to a Nectin4 antibody was expected to show a similar clinical profile and, therefore, Silverback also terminated this program prior to dosing patients. Following the decision on March 28, 2022, Silverback prioritized its resources to focus on the development of SBT8230 for the treatment of chronic Hepatitis B virus (“cHBV”) infection and early-stage discovery programs.

In connection with the discontinuation of the SBT6050 and SBT6290 programs, Silverback announced a work force reduction of 27% to focus on the development of SBT8230 and early-stage discovery programs while evaluating strategic alternatives. Strategic alternatives were evaluated with a goal to identify the opportunity that would, in the opinion of the Silverback Board, create the most value for Silverback stockholders, including strategic mergers and acquisitions, asset acquisitions and sales, remaining a standalone company pursuing a limited pipeline focusing on SBT8230 and preclinical programs, and liquidation to distribute available cash. On July 21, 2022, Silverback announced that it entered into the Merger Agreement with ARS Pharma. In connection with the Merger, Silverback started to winddown its research and development activities and focus on exploring opportunities to divest its legacy programs, including SBT8230 for cHBV, next-generation linker technologies, and our preclinical GC conjugate program, and committed to reducing its workforce by approximately 75% by September 2, 2022 and the remaining 25% at Closing in order to preserve cash resources.

On August 10, 2022, the Silverback Board approved the termination of employment of Laura Shawver, Ph.D., the Chief Executive Officer of Silverback, effective as of September 2, 2022 (the

 

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“Transition Date”), to extend our cash runway and to allow Dr. Shawver to pursue other employment opportunities. Dr. Shawver has entered into a consulting agreement with Silverback effective as of the Transition Date pursuant to which she has agreed to provide, on an as-needed basis not to exceed 20 hours per week unless mutually agreed, transition services and to advise, consult and support Silverback’s management team in connection with the closing of the Merger, winddown activities related thereto, the sale of Silverback’s legacy assets and other services from the Transition Date until the earlier of (a) the Closing and (b) December 31, 2022. As consideration for her consulting services, Dr. Shawver will be paid an hourly rate of $300 and all outstanding equity awards held by Dr. Shawver as of the Transition Date will continue to vest and will remain exercisable during the consulting period. Dr. Shawver will also continue to serve as a member of the Silverback Board and is expected to serve on the combined company’s board of directors following the Closing.

Effective as of the Transition Date, Jeffrey Pepe, Ph.D., J.D., has been appointed to serve as the Interim Chief Executive Officer, General Counsel and Corporate Secretary of Silverback.

ARS Pharmaceuticals, Inc.

11682 El Camino Real, Suite 120

San Diego, CA 92130

(858) 771-9307

ARS Pharma is a biopharmaceutical company focused on the development of a novel, potentially first-in-class product candidate, neffy® (previously referred to as ARS-1) for the emergency treatment of Type I allergic reactions, including anaphylaxis. neffy is a proprietary composition of epinephrine with an innovative absorption enhancer called Intravail®, which allows neffy to provide injection-like absorption of epinephrine at a low dose, in a small, easy-to-carry, easy-to-use, rapidly administered and reliable nasal spray. Type I severe allergic reactions are serious and potentially life-threatening events that can occur within minutes of exposure to an allergen and require immediate treatment with epinephrine injection, the only U.S. Food and Drug Administration (“FDA”)-approved medication for these reactions. While epinephrine injection devices have been shown to be highly effective, there are well published limitations that result in many patients and caregivers delaying or not administering treatment in an emergency situation. These limitations include fear of the needle, lack of portability, needle-related safety concerns, lack of reliability, and complexity of the devices. Delay in treatment can allow the allergic reaction to progress in severity leading to symptoms that seriously impact patient quality of life, to potential need for emergency services and/or hospitalizations, and to life-threatening symptoms or events.

There are approximately 25 million people in the United States who experience Type I severe allergic reactions. Of those, only 3.3 million currently have an active epinephrine autoinjector prescription, and of those, only half consistently carry their prescribed autoinjector. Even if patients or caregivers carry an autoinjector, more than half either delay or do not administer the device when needed in an emergency.

ARS Pharma believes neffy’s “no needle, no injection” delivery that eliminates needle-related apprehension and safety concerns, with its small pocket size, ease of use, and high reliability will increase prescriptions for epinephrine and make it more likely for patients and caregivers to administer epinephrine sooner, achieve more rapid symptom relief and prevent the allergic reaction from progressing to a level of severity that could lead to hospitalization or even death. Data from ARS Pharma’s studies of neffy in more than 500 subjects demonstrated epinephrine was delivered at doses that are considered efficacious and comparable to those of already approved epinephrine injectable products.

 

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ARS Pharma intends to submit a New Drug Application (“NDA”) to the FDA in the third quarter of 2022 and if the NDA is approved within ARS Pharma’s expected timeframe, ARS Pharma believes neffy will be the first “no needle, no injection” marketed epinephrine product for the emergency treatment of Type I allergic reactions.

The Merger (see page 110)

On July 21, 2022, Silverback, Merger Sub, and ARS Pharma entered into the Merger Agreement, pursuant to which Merger Sub will merge with and into ARS Pharma, with ARS Pharma surviving as a wholly owned subsidiary of Silverback. Silverback Common Stock will be issued to the stockholders of ARS Pharma at the Effective Time and Silverback will assume each ARS Pharma option and warrant which will become options and warrants to purchase Silverback Common Stock at the Effective Time. In connection with the Closing, Silverback will change its name to “ARS Pharmaceuticals, Inc.,” and ARS Pharma is expected to change its name to “ARS Subsidiary, Inc.” References to the combined company in this proxy statement are references to Silverback and its consolidated subsidiaries following the Merger and references to the surviving company are to ARS Pharma following the Merger.

Silverback and ARS Pharma expect the Merger to be consummated during the fourth quarter of 2022, subject to satisfaction or waiver of certain conditions to the Closing, including, among other things, approval by Silverback’s stockholders of the Merger Proposal.

Immediately following the consummation of the Merger, the equity holders of ARS Pharma (including the holders of any outstanding and unexercised options to purchase ARS Pharma Common Stock and the holders of any outstanding and unexercised warrants to purchase ARS Pharma Common Stock) immediately prior to the Merger and after giving effect to the Preferred Stock Conversion are expected to hold approximately 63% of the shares of Silverback Common Stock outstanding immediately following the Merger and the equity holders of Silverback immediately prior to the Merger are expected to hold approximately 37% of the Silverback Common Stock outstanding immediately following the Merger, in each case, on a fully diluted basis using the treasury stock method and assuming Silverback Net Cash at Closing is $240 million. If Silverback Net Cash at Closing is less than $240 million, the pre-Merger equity holders of Silverback are expected to hold between 34% and 36% of the outstanding shares of Silverback Common Stock, and if Silverback Net Cash at Closing is more than $240 million, the pre-Merger equity holders of Silverback are expected to hold between 37% and 38% of the outstanding shares of Silverback Common Stock, in each case, on a fully diluted basis using the treasury stock method. The Net Cash Condition requires that Silverback Net Cash must be no less than $210 million nor greater than $255 million; provided that Silverback may declare a dividend to its stockholders for any amount of Silverback Net Cash that exceeds $255 million. Silverback does not anticipate that the Silverback Net Cash will exceed $255 million or that a dividend will be declared. For a more complete description of the Merger and the potential adjustments in the Exchange Ratio, please see the section titled “The Merger Agreement—Merger Consideration and Exchange Ratio.”

Reasons for the Merger (see page 120)

The Silverback Board considered various reasons for the Merger, as described later in this proxy statement under the section titled “The Merger—Reasons for the Merger.”

Opinion of Silverback’s Financial Advisor (see page 123)

Silverback retained SVB Securities LLC (“SVB Securities”) as its financial advisor in connection with the Merger and the other Contemplated Transactions. On July 20, 2022, SVB Securities rendered

 

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to the Silverback Board its oral opinion, which was subsequently confirmed by delivery of a written opinion dated July 20, 2022, that, as of such date and based upon and subject to the various assumptions made, and the qualifications and limitations upon the review undertaken by SVB Securities in preparing its opinion, the Exchange Ratio proposed to be paid by Silverback pursuant to the Merger Agreement was fair, from a financial point of view, to Silverback.

The full text of the written opinion of SVB Securities, dated July 20, 2022, which describes the assumptions made and the qualifications and limitations upon the review undertaken by SVB Securities in preparing its opinion, is attached as Annex B to this proxy statement and is incorporated herein by reference. SVB Securities’ financial advisory services and opinion were provided for the information and assistance of the Silverback Board (in their capacity as directors and not in any other capacity) in connection with and for purposes of the Silverback Board’s consideration of the Merger and the opinion of SVB Securities addressed only the fairness, from a financial point of view, as of the date thereof, to Silverback of the Exchange Ratio proposed to be paid by Silverback pursuant to the terms of the Merger Agreement. The opinion of SVB Securities did not address any other term or aspect of the Merger Agreement or the Merger and does not constitute a recommendation to any stockholder of Silverback as to whether or how such holder should vote with respect to the merger or otherwise act with respect to the Merger or any other matter.

The full text of the written opinion of SVB Securities should be read carefully in its entirety for a description of the assumptions made and limitations upon the review undertaken by SVB Securities in preparing its opinion.

Overview of the Merger Agreement and Agreements Related to the Merger Agreement

Merger Consideration and Exchange Ratio (see page 140)

Pursuant to the Merger Agreement, at the Effective Time, each share of ARS Pharma Capital Stock outstanding immediately prior to the Effective Time and after giving effect to the Preferred Stock Conversion (excluding shares held as treasury stock by ARS Pharma or held or owned by Silverback, Merger Sub or any subsidiary of Silverback or ARS Pharma and excluding dissenting shares) will be automatically converted solely into the right to receive a number of shares of Silverback Common Stock equal to the Exchange Ratio.

No fractional shares of Silverback Common Stock will be issued in connection with the Merger, and no certificates or scrip for any such fractional shares will be issued. Any fractional shares of Silverback Common Stock that a holder of ARS Pharma Capital Stock would otherwise be entitled to receive will be aggregated with all fractional shares of Silverback Common Stock issuable to such holder and any remaining fractional shares will be rounded up to the nearest whole share.

The Exchange Ratio formula is derived based upon an ARS Pharma fixed valuation of $435 million and a Silverback equity value of $255 million and is subject to certain adjustments, including based upon Silverback Net Cash at Closing. The calculation of Silverback Net Cash at Closing includes, among other things, a credit for cash proceeds Silverback receives from the sale of its pre-clinical assets prior to or substantially concurrently with the Closing and a reduction for certain liabilities, including certain short and long term liabilities accrued at Closing, including severance and change in control payments, D&O insurance premium and unpaid transaction expenses. The Net Cash Condition requires that Silverback Net Cash be no less than $210 million nor greater than $255 million; provided that Silverback may declare a dividend to its stockholders for any amount of Silverback Net Cash that exceeds $255 million. Silverback does not anticipate that the Silverback Net Cash will exceed $255 million or that a dividend will be declared.

 

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Immediately following the Merger, assuming Silverback Net Cash at Closing is $240 million, the pre-Merger equity holders of ARS Pharma are expected to hold approximately 63% of the outstanding shares of Silverback Common Stock and the pre-Merger equity holders of Silverback are expected to hold approximately 37% of the outstanding shares of Silverback Common Stock, in each case, on a fully diluted basis using the treasury stock method. As currently anticipated, the Exchange Ratio is expected to be approximately 1.2441. If Silverback Net Cash at Closing is less than $240 million, the pre-Merger equity holders of Silverback are expected to hold between 34% and 36% of the outstanding shares of Silverback Common Stock, and if Silverback Net Cash at Closing is more than $240 million, the pre-Merger equity holders of Silverback are expected to hold between 37% and 38% of the outstanding shares of Silverback Common Stock, in each case, on a fully diluted basis using the treasury stock method.

For a more complete description of the Merger, the potential adjustments in the Exchange Ratio and the calculation of Silverback Net Cash, please see the section titled “The Merger Agreement —Merger Consideration and Exchange Ratio.”

Treatment of ARS Pharma Stock Options

Under the terms of the Merger Agreement, each option to purchase shares of ARS Pharma Common Stock that is outstanding and unexercised immediately prior to the Effective Time, whether or not vested, will be converted into an option to purchase shares of Silverback Common Stock. Silverback will assume ARS Pharma’s 2018 Equity Incentive Plan (the “ARS 2018 Plan”), and all rights with respect to each outstanding option to purchase ARS Pharma Common Stock in accordance with its terms and the terms of the stock option agreement by which such option is evidenced.

Accordingly, from and after the Effective Time: (i) each outstanding ARS Pharma stock option assumed by Silverback may be exercised solely for shares of Silverback Common Stock; (ii) the number of shares of Silverback Common Stock subject to each outstanding ARS Pharma stock option assumed by Silverback will be determined by multiplying (A) the number of shares of ARS Pharma Common Stock that were subject to such ARS Pharma stock option, as in effect immediately prior to the Effective Time, by (B) the Exchange Ratio, and rounding the resulting number down to the nearest whole number of shares of Silverback Common Stock; (iii) the per share exercise price for the Silverback Common Stock issuable upon exercise of each ARS Pharma stock option assumed by Silverback will be determined by dividing (A) the per share exercise price of Silverback Common Stock subject to such ARS Pharma stock option, as in effect immediately prior to the Effective Time, by (B) the Exchange Ratio and rounding the resulting exercise price up to the nearest whole cent; and (iv) any restriction on the exercise of any ARS Pharma stock option assumed by Silverback will continue in full force and effect and the term, exercisability, vesting schedule, accelerated vesting provisions, and any other provisions of such ARS Pharma stock option will otherwise remain unchanged; provided, however, that the Silverback Board or a committee thereof will succeed to the authority and responsibility of the board of directors of ARS Pharma (the “ARS Pharma Board”) or any committee thereof with respect to each ARS Pharma stock option assumed by Silverback.

Treatment of ARS Pharma Warrants

Under the terms of the Merger Agreement, each warrant to purchase shares of ARS Pharma Common Stock that is outstanding and unexercised immediately prior to the Effective Time (after giving effect to the Preferred Stock Conversion), will be converted into and become a warrant to purchase shares of Silverback Common Stock and Silverback will assume each ARS Pharma warrant in accordance with its terms.

 

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Accordingly, from and after the Effective Time: (i) each outstanding ARS Pharma warrant assumed by Silverback may be exercised solely for shares of Silverback Common Stock; (ii) the number of shares of Silverback Common Stock subject to each outstanding ARS Pharma warrant assumed by Silverback will be determined by multiplying (A) the number of shares of ARS Pharma Common Stock that were subject to such ARS Pharma warrant, as in effect immediately prior to the Effective Time (after giving effect to the Preferred Stock Conversion), by (B) the Exchange Ratio, and rounding the resulting number up to the nearest whole number of shares of Silverback Common Stock; (iii) the per share exercise price for the Silverback Common Stock issuable upon exercise of each ARS Pharma warrant assumed by Silverback will be determined by dividing (A) the per share exercise price of Silverback Common Stock subject to such ARS Pharma warrant as in effect immediately prior to the Effective Time, by (B) the Exchange Ratio and rounding the resulting exercise price up to the nearest whole cent; and (iv) any restriction on the exercise of any ARS Pharma warrant assumed by Silverback will continue in full force and effect and the term and other provisions of such ARS Pharma warrant will otherwise remain unchanged.

Treatment of Silverback Stock Options and Restricted Stock Units

All outstanding and unexercised options to purchase shares of Silverback Common Stock and all outstanding and unvested restricted stock units will remain outstanding to the extent they are not forfeited or, for restricted stock units, accelerated (and settled) in connection with the Merger. As of June 30, 2022, there were outstanding options to purchase up to an aggregate of 8,649,255 shares of Silverback Common Stock and unvested restricted stock units covering 745,675 shares of Silverback Common Stock. As of June 30, 2022, Silverback’s executive officers and directors, including any director or executive officer who served in such capacity since the beginning of the last fiscal year, collectively owned outstanding options to purchase an aggregate of 4,692,413 shares of Silverback Common Stock and unvested restricted stock units covering 266,614 shares of Silverback Common Stock.

Conditions to the Completion of the Merger (see page 144)

The obligations to consummate the Merger and the other Contemplated Transactions are subject to the satisfaction or waiver, on or prior to the Effective Time, of the conditions set forth in the section entitled “The Merger AgreementConditions to the Completion of the Merger” below.

Non-Solicitation (see page 151)

Both Silverback and ARS Pharma are prohibited by the terms of the Merger Agreement, other than, in the case of Silverback, with respect to any Asset Disposition, from (i) soliciting, initiating or knowingly encouraging, inducing or facilitating the communication, making, submission or announcement of any Acquisition Proposal (as defined below) or Acquisition Inquiry (as defined below) or taking any action that could reasonably be expected to lead to an Acquisition Proposal or Acquisition Inquiry; (ii) furnishing any non-public information regarding such party to any person in connection with or in response to an Acquisition Proposal or Acquisition Inquiry; (iii) engaging in discussions or negotiations with any person with respect to any Acquisition Proposal or Acquisition Inquiry; (iv) approving, endorsing or recommending any Acquisition Proposal; (v) executing or entering into any letter of intent or any contract contemplating or otherwise relating to any Acquisition Transaction (as defined below) (other than, in the case of Silverback, a confidentiality agreement permitted as described below); or (vi) publicly proposing to do any of the foregoing.

 

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Subject to certain restrictions and prior to obtaining the approval of the Merger Proposal by the Required Silverback Stockholder Vote (as defined below), Silverback may furnish non-public information regarding Silverback to, and enter into discussions or negotiations with, any person in response to an unsolicited bona fide Acquisition Proposal by such person, which the Silverback Board determines in good faith, after consultation with its outside financial advisors and outside legal counsel, constitutes, or could be reasonably likely to result in, a Superior Offer (as defined below) (and is not withdrawn) if: (A) neither Silverback nor any of its representatives have breached the non-solicitation restrictions in the Merger Agreement in any material respect, (B) the Silverback Board concludes in good faith, based on the advice of outside legal counsel, that the failure to take such action could be reasonably likely to be inconsistent with the fiduciary duties of the Silverback Board under applicable law; (C) Silverback receives from such person an executed confidentiality agreement containing provisions, in the aggregate, at least as favorable to it as those contained in the confidentiality agreement entered into between Silverback and ARS Pharma in connection with the Merger; and (D) substantially contemporaneously with furnishing any such nonpublic information to such person, Silverback furnishes such nonpublic information to the ARS Pharma (to the extent such information has not been previously furnished to ARS Pharma).

For a more complete description of the non-solicitation provisions, please see the section titled “The Merger Agreement—Non-Solicitation.”

Termination and Termination Fees (see page 159)

The Merger Agreement contains certain customary termination rights, including the right of either Silverback or ARS Pharma to terminate the Merger Agreement if Silverback’s stockholders fail to adopt and approve the Merger Proposal, the right of ARS Pharma to terminate the Merger Agreement if the Silverback Board changes or withdraws its recommendation in favor of the Merger Proposal or publicly approves or enters into an agreement relating to an Acquisition Proposal and the right of Silverback to terminate the Merger Agreement to enter into an agreement relating to a Superior Offer.

Upon termination of the Merger Agreement by ARS Pharma or Silverback in certain circumstances, a termination fee of $6 million may be payable by ARS Pharma to Silverback or by Silverback to ARS Pharma. Additionally, in the event of a termination under certain circumstances by Silverback to enter into an agreement relating to a Superior Offer, a termination fee of $10 million may be payable by Silverback to ARS Pharma. Silverback has also agreed to reimburse ARS Pharma for up to $1.5 million in expenses if the Merger Agreement is terminated by either Silverback or ARS Pharma due to the failure to obtain the approval of the Merger Proposal from Silverback’s stockholders.

For a more complete description of the termination provisions and termination fees, please see the section titled “The Merger Agreement—Termination and Termination Fees.

Support Agreements (see page 164)

Concurrently with the execution of the Merger Agreement, certain executive officers, directors and stockholders of Silverback entered into support agreements (the “Silverback Support Agreements”) in favor of ARS Pharma relating to the Merger representing approximately 31% of Silverback’s outstanding shares of Silverback Common Stock as of immediately prior to the date of the Merger Agreement. The Silverback Support Agreements provide, among other things, that such officers, directors and stockholders will vote all of their shares of Silverback Common Stock: (i) in favor of adopting the Merger Agreement and approving the Merger, the Merger Proposal, and the other

 

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Contemplated Transactions, (ii) against any proposal made in opposition to, or in competition with, the Merger Agreement or the Merger and (iii) against any acquisition proposal involving a third party.

Concurrently with the execution of the Merger Agreement, certain executive officers, directors and stockholders of ARS Pharma entered into support agreements (the “ARS Pharma Support Agreements”) in favor of Silverback relating to the Merger representing approximately 83% of the outstanding shares of ARS Pharma Capital Stock immediately prior to the date of the Merger Agreement. The ARS Pharma Support Agreements provide, among other things, that such executive officers, directors and stockholders vote all of their shares of ARS Pharma Capital Stock: (i) in favor of adopting the Merger Agreement and approving the Merger, the ARS Pharma Stockholder Matters, and the other Contemplated Transactions, (ii) against any proposal made in opposition to, or in competition with, the Merger Agreement or the Merger and (iii) against any acquisition proposal involving a third party.

Lock-Up Agreements (see page 164)

Concurrently with the execution of the Merger Agreement, (i) certain executive officers, directors and stockholders of ARS Pharma representing approximately 84% of the outstanding shares of ARS Pharma Capital Stock immediately prior to the date of the Merger Agreement and (ii) certain stockholders of Silverback and each executive officer and director of Silverback expected to continue as an executive officer or director of the combined company representing approximately 31% of Silverback’s outstanding shares of Silverback Common Stock as of immediately prior to the date of the Merger Agreement, entered into lock-up agreements (the “Lock-Up Agreements”), pursuant to which such executive officers, directors and stockholders accepted certain restrictions on transfers of the shares of Silverback Common Stock held by such executive officer, director or stockholder for the 180 day period following the Effective Time.

Appraisal Rights and Dissenters’ Rights (see page 139)

Under the Delaware General Corporation Law (“DGCL”), Silverback stockholders are not entitled to appraisal rights in connection with the Merger.

ARS Pharma stockholders are entitled to statutory appraisal rights in connection with the Merger under Section 262 of the DGCL and under Chapter 13 of the California Corporations Code. One of the conditions to Silverback’s obligation to consummate the Merger is that no stockholders of ARS Pharma have exercised statutory appraisal rights pursuant to Section 262 of the DGCL or Chapter 13 of California Corporations Code with respect to their shares of ARS Pharma Capital Stock.

As of the date of the Merger Agreement, ARS Pharma stockholders representing approximately 83% of the outstanding shares of ARS Capital Stock immediately prior to the date of the Merger Agreement waived any statutory appraisal rights pursuant to Section 262 of the DGCL or Chapter 13 of California Corporations Code with respect to their shares of ARS Pharma Capital Stock.

 

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Management Following the Merger (see page 231)

Immediately following the Merger, the executive management team of the combined company is expected to be comprised of the following individuals with such additional officers as may be added by ARS Pharma or the combined company:

 

Name

  

Position with the Combined
Company

  

Current Position

Richard Lowenthal, M.S., MSEL

   President and Chief Executive Officer    President and Chief Executive Officer of ARS Pharma

Kathleen Scott

   Chief Financial Officer    Chief Financial Officer of ARS Pharma

Sarina Tanimoto, M.D., M.B.A.

   Chief Medical Officer    Chief Medical Officer of ARS Pharma

Eric Karas

   Chief Commercial Officer    Chief Commercial Officer of ARS Pharma

Justin Chakma

   Chief Business Officer    Chief Business Officer of ARS Pharma

Directors of the Combined Company Following the Merger

At the Effective Time, the combined company is expected to initially have an eleven member board of directors, comprised of (a) Richard Lowenthal, M.S., MSEL, Pratik Shah, Ph.D., Peter Kolchinsky, Ph.D., Rajeev Dadoo, Ph.D., Brenton L. Saunders, Phillip Schneider, Michael Kelly and Jonathan Leff, each as an ARS Pharma designee, and (b) Laura Shawver, Ph.D., Peter A. Thompson, M.D. and Saqib Islam, J.D., each as a Silverback designee, until their respective successors are duly elected or appointed and qualified or their earlier death, resignation or removal.

The aforementioned board of directors will have an audit committee, a compensation committee and a nominating and corporate governance committee, in accordance with the Nasdaq rules. All of Silverback’s current directors, other than Dr. Shawver, Dr. Thompson and Mr. Islam, are expected to resign from their positions as directors of Silverback, effective as of the Effective Time.

For more information about the executive officers and directors of the combined company following the Merger, please see the section titled “Management Following the Merger.”

Interests of the Silverback Directors and Executive Officers in the Merger (see page 132)

In considering the recommendation of the Silverback Board with respect to the issuance of Silverback Common Stock pursuant to the Merger Agreement and the other matters to be acted upon by Silverback’s stockholders at the Silverback virtual special meeting, Silverback’s stockholders should be aware that certain members of the Silverback Board and executive officers of Silverback have interests in the Merger that may be different from, or in addition to, interests they have as Silverback’s stockholders.

As of June 30, 2022, Silverback’s directors and executive officers (including affiliates) beneficially owned, in the aggregate approximately 30% of the outstanding shares of Silverback Common Stock.

The compensation arrangements with Silverback’s officers and directors are discussed in greater detail in the section titled “The Merger—Interests of the Silverback Directors and Executive Officers in

 

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the Merger.” Additionally, as described elsewhere in this proxy statement, including in the section captioned “Management Following the Merger,” Dr. Shawver, Dr. Thompson and Mr. Islam are expected to remain directors of the combined company.

Certain executive officers and directors of Silverback and ARS Pharma and certain of their respective affiliates have entered into the Silverback Support Agreements and the ARS Support Agreements, pursuant to which such directors, officers and certain of their affiliates, respectively, have agreed, solely in their capacity as stockholders of Silverback and ARS Pharma, respectively, to vote all of their shares of Silverback Common Stock or ARS Pharma Capital Stock, as applicable, in favor of, among other things, the adoption or approval, respectively, of the Merger Agreement and the Contemplated Transactions. The Silverback Support Agreements and ARS Support Agreements are discussed in greater detail in the section titled “Agreements Related to the Merger—Support Agreements.”

Material U.S. Federal Income Tax Consequences of the Merger (see page 136)

Silverback and ARS Pharma intend the Merger to qualify as a reorganization within the meaning of Section 368(a) of the Code, as described in the section titled “The Merger—Material U.S. Federal Income Tax Consequences of the Merger.” If the Merger qualifies as a reorganization within the meaning of Section 368(a) of the Code, ARS Pharma stockholders will not recognize gain or loss for U.S. federal income tax purposes on the receipt of shares of Silverback Common Stock issued in connection with the Merger.

Regulatory Approvals Required for the Merger

In the United States, Silverback must comply with applicable federal and state securities laws and the rules and regulations of Nasdaq in connection with the issuance of shares of Silverback Common Stock to ARS Pharma’s stockholders in connection with the Merger and the other Contemplated Transactions and the filing of this proxy statement with the SEC. Silverback does not intend to seek any regulatory approval from antitrust authorities to consummate the Merger and the other transactions and actions contemplated by the Merger Agreement, other than under the HSR Act, as described below.

Under the Merger Agreement, Silverback and ARS Pharma have agreed to use reasonable best efforts to obtain all regulatory approvals required to consummate the Merger and the other transactions contemplated by the Merger Agreement, including filing notifications required pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”) and the expiration or termination of the applicable waiting period thereunder.

On August 4, 2022, Silverback and ARS Pharma made the necessary filings required to be made under the HSR Act.

For more information, please see the section titled “The Merger—Regulatory Approvals Required for the Merger.

Risk Factors (see page 25)

 

   

Failure to complete the Merger may result in Silverback and ARS Pharma paying a termination fee to the other party and could harm the price of Silverback Common Stock and future business and operations of each company.

 

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Silverback may not be able to divest its legacy programs within the timeframe under the Merger Agreement, on favorable terms or at all, which may result in the value of such assets not being included in the calculation of the Exchange Ratio.

 

   

If the conditions to the closing of the Merger are not met, the Merger may not occur.

 

   

The Merger may be completed even though certain events occur prior to the Closing that materially and adversely affect Silverback and/or ARS Pharma.

 

   

Some executive officers and directors of Silverback have interests in the Merger that are different from the stockholders of Silverback and that may influence them to support or approve the Merger without regard to the interests of the stockholders of Silverback.

 

   

The market price of Silverback Common Stock following the Merger may decline as a result of the Merger.

 

   

Silverback and ARS Pharma securityholders will have a reduced ownership and voting interest in, and will exercise less influence over the management of, the combined company following the closing of the Merger as compared to their current ownership and voting interest in the respective companies.

 

   

During the pendency of the Merger Agreement, Silverback and ARS Pharma may not be able to enter into alternative acquisition transactions with another party at a favorable price because of restrictions in the Merger Agreement, which could adversely affect their respective businesses.

 

   

Certain provisions of the Merger Agreement may discourage third parties from submitting competing proposals, including proposals that may be superior to the arrangements contemplated by the Merger Agreement.

 

   

Because the lack of a public market for the ARS Pharma Capital Stock makes it difficult to evaluate the fairness of the Merger, the stockholders of ARS Pharma may receive consideration in the Merger that is less than the fair market value of the ARS Pharma Capital Stock and/or Silverback may pay more than the fair market value of the ARS Pharma Capital Stock.

 

   

Silverback and ARS Pharma may become involved in securities litigation or stockholder derivative litigation in connection with the Merger, and this could divert the attention of Silverback and ARS Pharma management and harm the combined company’s business, and insurance coverage may not be sufficient to cover all related costs and damages.

 

   

ARS Pharma is a clinical-stage biopharmaceutical company and has incurred significant losses since its inception. ARS Pharma anticipates that it will continue to incur significant losses for the foreseeable future.

 

   

ARS Pharma has a limited operating history and only one current product candidate, neffy, which is in the clinical stage of development and has no commercial sales, which may make it difficult to evaluate the prospects for ARS Pharma’s future viability.

 

   

ARS Pharma has never generated revenue from product sales and may never be profitable.

 

   

ARS Pharma may need additional funding, and if it is unable to raise capital when needed, it could be forced to delay, reduce or eliminate its product development activities or commercialization efforts.

 

   

ARS Pharma currently depends on the success of neffy, which is its only current product candidate. If ARS Pharma is unable to obtain regulatory approval for, and successfully

 

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commercialize, neffy, or experiences significant delays in doing so, its business will be materially harmed.

 

   

The regulatory approval processes of the FDA, the EMA and other comparable foreign authorities are lengthy, time-consuming and inherently unpredictable, and if ARS Pharma is ultimately unable to obtain regulatory approval for neffy or any future product candidates, its business will be substantially harmed.

 

   

Competitive products may reduce or eliminate the commercial opportunity for neffy for its current or future indications. If ARS Pharma’s competitors develop technologies or product candidates more rapidly than ARS Pharma, or their technologies or product candidates are more effective or safer than ARS Pharma’s, its ability to develop and successfully commercialize neffy may be adversely affected.

 

   

ARS Pharma intends to rely completely on third parties to manufacture and distribute ARS Pharma’s supply of neffy and intends to rely on third parties to manufacture and distribute any future product candidates.

 

   

ARS Pharma is dependent on international third-party licensees and assignees for the development and commercialization of neffy in several countries outside the United States. The failure of these third parties to meet their contractual, regulatory or other obligations could adversely affect ARS Pharma’s business.

 

   

ARS Pharma may seek to enter into additional collaborations, licenses and other similar arrangements for neffy or any future product candidate and may not be successful in doing so, and even if it is, it may relinquish valuable rights and may not realize the benefits of such relationships.

 

   

The market for neffy and any future product candidates ARS Pharma may develop may be smaller than it expects.

 

   

ARS Pharma’s commercial success depends on its ability to obtain and maintain sufficient intellectual property protection for its product candidates and other proprietary technologies.

 

   

A pandemic, epidemic, or outbreak of an infectious disease, such as the COVID-19 pandemic, may materially and adversely affect ARS Pharma’s business, including its nonclinical studies, clinical trials, third parties on whom ARS Pharma relies, ARS Pharma’s supply chain, its ability to raise capital, its ability to conduct regular business and its financial results.

 

   

ARS Pharma’s success is highly dependent on its ability to attract and retain highly skilled executive officers and employees.

 

   

If any of the events described under the sections titled “Risk Factors—Risks Related to the Merger” and “Risk Factors—Risks Related to ARS Pharma occur, those events could cause the potential benefits of the Merger not to be realized.

These risks and other risks are discussed in greater detail under the section titled “Risk Factors”. Silverback encourages you to read and consider all of these risks carefully.

Nasdaq Market Listing (see page 138)

Shares of Silverback Common Stock are currently listed on The Nasdaq Global Market under the symbol “SBTX.” Silverback has filed an initial listing application with Nasdaq pursuant to Nasdaq’s “reverse merger” rules for the purposes of listing the shares of Silverback Common Stock issuable

 

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pursuant to the Merger. Substantially concurrent with the completion of the Merger, Silverback will be renamed “ARS Pharmaceuticals, Inc.” and expects to trade on The Nasdaq Global Market under the symbol “SPRY.”

Anticipated Accounting Treatment (see page 139)

The Merger will be accounted for as a reverse recapitalization under U.S. generally accepted accounting principles (“GAAP”). For accounting purposes, ARS Pharma is considered to be acquiring Silverback in this transaction. This determination was primarily based on the expectations that, immediately following the Merger: (i) ARS Pharma stockholders will own a substantial majority of the voting rights; (ii) ARS Pharma will designate a majority (eight of eleven) of the initial members of the board of directors of the combined company; and (iii) ARS Pharma’s executive management team will become the management of the combined company. Accordingly, for accounting purposes, the Merger will be treated as the equivalent of ARS Pharma issuing stock to acquire the net assets of Silverback. Apart from cash and cash equivalents and other highly liquid assets, the other assets and liabilities being acquired are expected to be nominal. At the close of the Merger, the net assets of Silverback will be recorded at their acquisition-date fair value in the financial statements of ARS Pharma and the reported operating results prior to the Merger will be those of ARS Pharma.

Silverback Virtual Special Meeting (see page 104)

The Silverback virtual special meeting will be held exclusively online via audio-only webcast on                 , 2022 at                  a.m. Pacific Time, unless postponed or adjourned to a later date. The Silverback virtual special meeting can be accessed by visiting www.proxydocs.com/SBTX, where you will be able to vote your shares and submit questions during the Silverback virtual special meeting webcast by logging in to the website listed above using the control number included in your proxy card. Online check-in will begin at                  a.m. Pacific Time, and we encourage you to allow ample time for the online check-in procedures. Please note that you will not be able to attend the Silverback virtual special meeting in person. For more information on the Silverback virtual special meeting, see the section titled “The Virtual Special Meeting of Silverback’s Stockholders.”

 

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MARKET PRICE AND DIVIDEND INFORMATION

Silverback Common Stock is currently listed on The Nasdaq Global Market under the symbol “SBTX.” ARS Pharma is a private company and the shares of ARS Pharma Capital Stock are not publicly traded.

Silverback Common Stock

The closing price of Silverback Common Stock on July 20, 2022, the trading day immediately prior to the public announcement of the Merger on July 21, 2022, as reported on The Nasdaq Global Market, was $4.44 per share. The closing price of Silverback Common Stock on                 , 2022, as reported on The Nasdaq Global Market, was $                 per share.

Because the market price of Silverback Common Stock is subject to fluctuation, the market value of the shares of Silverback Common Stock that ARS Pharma stockholders will be entitled to receive in the Merger may increase or decrease.

Assuming successful application for initial listing with Nasdaq, following the consummation of the Merger, Silverback anticipates that the Silverback Common Stock will trade under Silverback’s new name “ARS Pharmaceuticals, Inc.” and the new trading symbol “SPRY” on The Nasdaq Global Market.

As of                 , 2022, the record date for the Silverback virtual special meeting, there were approximately                  holders of record of the Silverback Common Stock.

Dividends

Silverback has never declared or paid any cash dividends on the Silverback Common Stock and does not anticipate paying cash dividends on the Silverback Common Stock for the foreseeable future. Notwithstanding the foregoing, any determination to pay cash dividends subsequent to the Merger will be at the discretion of the combined company’s then-current board of directors and will depend upon a number of factors, including the combined company’s results of operations, financial condition, future prospects, contractual restrictions, restrictions imposed by applicable law and other factors the then-current board of directors deems relevant.

ARS Pharma has never declared or paid any cash dividends on shares of the ARS Pharma Capital Stock. ARS Pharma anticipates that the combined company will retain all of its future earnings to advance the development and potential commercialization of neffy, and does not anticipate paying any cash dividends on shares of its common stock in the foreseeable future. Any future determination to declare cash dividends on shares of the combined company’s common stock will be made at the discretion of its board of directors, subject to applicable law and contractual restrictions and will depend on its financial condition, results of operations, capital requirements, general business conditions and other factors that its board of directors may deem relevant.

 

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RISK FACTORS

The combined company will be faced with a market environment that cannot be predicted and that involves significant risks, many of which will be beyond its control. In addition to the other information contained in this proxy statement, you should carefully consider the material risks described below before deciding how to vote your shares of Silverback Common Stock. You should also read and consider the other information in this proxy statement. Please see the section titled “Where You Can Find More Information.”

Risks Related to the Merger

Failure to complete the Merger may result in Silverback and ARS Pharma paying a termination fee to the other party and could harm the price of Silverback Common Stock and future business and operations of each company.

If the Merger is not completed, each of Silverback and ARS Pharma is subject to the following risks:

 

   

upon termination of the Merger Agreement, ARS Pharma may be required to pay Silverback a termination fee of $6 million, under certain circumstances, or Silverback may be required to pay ARS Pharma a termination fee of $6 million or $10 million, under certain circumstances, and may be required to reimburse ARS Pharma for up to $1.5 million in expenses under certain circumstances;

 

   

the parties will have incurred significant expenses related to the Merger, such as legal and accounting fees, which must be paid even if the Merger is not completed; and

 

   

Silverback may be forced to cease its operations, dissolve and liquidate its assets.

In addition, if the Merger Agreement is terminated and the board of directors of Silverback or ARS Pharma determines to seek another business combination, there can be no assurance that either Silverback or ARS Pharma will be able to find a partner willing to provide equivalent or more attractive consideration than the consideration to be provided by each party in the Merger or any partner at all.

Silverback may not be able to divest its legacy programs within the timeframe under the Merger Agreement, on favorable terms or at all, which may result in the value of such assets not being included in the calculation of the Exchange Ratio

Silverback is currently exploring opportunities to divest its legacy programs and other preclinical assets but there can be no assurance that Silverback will be able to divest such assets of favorable terms or at all. Under the terms of the Merger Agreement, cash proceeds that Silverback receives from Asset Dispositions prior to or substantially concurrently with the Closing will be included in the calculation of Silverback Net Cash at Closing, which may decrease the expected Exchange Ratio and increase the expected ownership percentage of pre-Merger Silverback equity holders in the combined company following the Merger. In addition, Silverback will be required to seek ARS Pharma’s consent to enter into any Asset Dispositions that would create any material post-disposition liabilities for the combined company following the Closing, to the extent consistent with applicable laws, and there is no guarantee Silverback will obtain ARS Pharma’s consent in such case. If the Asset Dispositions are not completed prior to, concurrently with, or immediately following the Closing, such assets will be retained by the combined company and the value of such assets will have no impact on the calculation of the Exchange Ratio. In addition, if any Asset Disposition arrangement includes milestone or other deferred or contingent compensation, such compensation will have no impact on the Exchange Ratio. If Silverback is unable to divest its assets within the required timeframe under the Merger Agreement, on favorable terms or at all, Silverback’s stockholders may lose the benefit of the value of such assets that would otherwise be included in the calculation of the Exchange Ratio.

 

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If the conditions to the closing of the Merger are not met, the Merger may not occur.

Even if the Merger Proposal is approved by the stockholders of Silverback, specified conditions must be satisfied or waived to complete the Merger. These conditions are set forth in the Merger Agreement and described in the section titled “The Merger Agreement—Conditions to the Completion of the Merger.” Silverback and ARS Pharma cannot assure you that all of the conditions will be satisfied or waived. If the conditions are not satisfied or waived, the Merger may not occur or will be delayed, and Silverback and ARS Pharma each may lose some or all the intended benefits of the Merger.

The Merger may be completed even though certain events occur prior to the Closing that materially and adversely affect Silverback and/or ARS Pharma.

In general, either party can refuse to complete the Merger if there is a material adverse change affecting the other party between July 21, 2022, the date of the Merger Agreement, and the closing of the Merger. However, certain types of changes do not permit either party to refuse to complete the Merger, even if such change could have a material adverse effect on Silverback and/or ARS Pharma, including:

 

   

general business or economic conditions generally affecting the industry in which Silverback and ARS Pharma operate;

 

   

acts of war, the outbreak or escalation of armed hostilities, acts of terrorism, earthquakes, wildfires, hurricanes or other natural disasters, health emergencies, including pandemics (including COVID-19 and any evolutions or mutations thereof) and related or associated epidemics, disease outbreaks or quarantine restrictions;

 

   

changes in financial, banking or securities markets;

 

   

any change in the stock price or trading volume of Silverback Common Stock;

 

   

the failure of Silverback to meet internal or analysts’ expectations or projections or the results of operations of Silverback;

 

   

any change in, or any compliance with or action taken for the purpose of complying with, any law or GAAP (or interpretations of any law or GAAP);

 

   

any change resulting from the announcement of the Merger Agreement or the pendency of the Contemplated Transactions; or

 

   

any change resulting from the taking of any action required to be taken by the Merger Agreement.

If one or more material adverse changes occur and Silverback and ARS Pharma still complete the Merger, the stock price of the combined company following the closing of the Merger may suffer. This in turn may reduce the value of the Merger to the stockholders of Silverback, ARS Pharma or both.

Some executive officers and directors of Silverback have interests in the Merger that are different from the stockholders of Silverback and that may influence them to support or approve the Merger without regard to the interests of the stockholders of Silverback.

Some officers and directors of Silverback are parties to arrangements that provide them with interests in the Merger that are different from the stockholders of Silverback, including, among others, service as a director of the combined company following the closing of the Merger, severance and retention benefits, the acceleration of equity award vesting, and continued indemnification. For more

 

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information regarding the interests of Silverback’s executive officers and directors in the Merger, see the sections titled “The Merger—Interests of the Silverback Directors and Executive Officers in the Merger.”

The market price of Silverback Common Stock following the Merger may decline as a result of the Merger.

The market price of Silverback Common Stock may decline as a result of the Merger for a number of reasons, including if:

 

   

investors react negatively to the prospects of the combined company’s business and prospects following the closing of the Merger;

 

   

the effect of the Merger on the combined company’s business and prospects following the closing of the Merger is not consistent with the expectations of financial or industry analysts; or

 

   

the combined company does not achieve the perceived benefits of the Merger as rapidly or to the extent anticipated by stockholders or financial or industry analysts.

Silverback and ARS Pharma securityholders will have a reduced ownership and voting interest in, and will exercise less influence over the management of, the combined company following the closing of the Merger as compared to their current ownership and voting interest in the respective companies.

After the completion of the Merger, the current securityholders of Silverback and ARS Pharma will own a smaller percentage of the combined company than their ownership in their respective companies prior to the Merger. Immediately following the Merger, assuming Silverback Net Cash at Closing is $240 million, the pre-Merger equity holders of ARS Pharma are expected to hold approximately 63% of the outstanding shares of Silverback Common Stock and the pre-Merger equity holders of Silverback are expected to hold approximately 37% of the outstanding shares of Silverback Common Stock, in each case, on a fully diluted basis using the treasury stock method. These estimates are based on the anticipated Exchange Ratio of approximately 1.2441 and are subject to adjustment as provided in the Merger Agreement. For a more complete description of the Merger and the potential adjustments in the Exchange Ratio, please see the section titled “The Merger Agreement—Merger Consideration and Exchange Ratio.

In addition, the eleven member board of directors of the combined company will initially consist of eight individuals with prior affiliations with ARS Pharma and three individuals with prior affiliation with Silverback. Consequently, securityholders of ARS Pharma and Silverback will be able to exercise less influence over the management and policies of the combined company following the closing of the Merger than they currently exercise over the management and policies of their respective companies.

During the pendency of the Merger Agreement, Silverback and ARS Pharma may not be able to enter into alternative acquisition transactions with another party at a favorable price because of restrictions in the Merger Agreement, which could adversely affect their respective businesses.

Covenants in the Merger Agreement impede the ability of Silverback or ARS Pharma to enter into alternative acquisition transactions, subject to specified exceptions for Silverback relating to fiduciary duties of the Silverback Board, or enter into acquisition transactions or sales or other divestitures of assets, excluding, in the case of Silverback, any Asset Dispositions. As a result, if the Merger is not completed, the parties may be at a disadvantage to their competitors during that period.

 

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Certain provisions of the Merger Agreement may discourage third parties from submitting competing proposals, including proposals that may be superior to the arrangements contemplated by the Merger Agreement.

The terms of the Merger Agreement prohibit each of Silverback and ARS Pharma from soliciting competing proposals or cooperating with persons making unsolicited takeover proposals, except, in the case of Silverback, in limited circumstances when the Silverback Board determines in good faith, after consultation with its independent financial advisor, if any, and outside counsel, that an unsolicited competing proposal constitutes, or would reasonably be expected to result in, a Superior Offer and that failure to take action could be reasonably likely to be inconsistent with the fiduciary duties of the Silverback Board under applicable law. In addition, if Silverback or ARS Pharma terminate the Merger Agreement under specified circumstances, including terminating because of a decision to recommend an Acquisition Proposal, ARS Pharma may be required to pay Silverback a termination fee of $6 million or Silverback may be required to pay ARS Pharma a termination fee of $6 million or $10 million, as described under “The Merger Agreement—Termination and Termination Fees.” This termination fee may discourage third parties from submitting competing proposals to Silverback or ARS Pharma or their stockholders and may cause the ARS Pharma Board or Silverback Board, as applicable, to be less inclined to recommend a competing proposal.

Because the lack of a public market for the ARS Pharma Capital Stock makes it difficult to evaluate the fairness of the Merger, the stockholders of ARS Pharma may receive consideration in the Merger that is less than the fair market value of the ARS Pharma Capital Stock and/or Silverback may pay more than the fair market value of the ARS Pharma Capital Stock.

The outstanding shares of ARS Pharma Capital Stock are privately held and are not traded in any public market. The lack of a public market makes it extremely difficult to determine the fair market value of the ARS Pharma Capital Stock. Because the percentage of Silverback equity to be issued to ARS Pharma stockholders was determined based on negotiations between the parties, it is possible that the value of the Silverback Common Stock to be received by ARS Pharma stockholders will be less than the fair market value of the ARS Pharma Capital Stock, or Silverback may pay more than the aggregate fair market value for the ARS Pharma Capital Stock.

The fairness opinion delivered by SVB Securities to the Silverback Board prior to the entry into the Merger Agreement does not reflect changes in circumstances that may have occurred since the date of the Opinion.

The Silverback Board has not obtained an updated fairness opinion either as of the date of this proxy statement or as of any other date subsequent to the date of the Opinion from SVB Securities, Silverback’s financial advisor. Changes in circumstances, including in the operations and prospects of Silverback or ARS Pharma, stock prices, general market and economic conditions and other factors, some or all of which may be beyond the control of Silverback and ARS Pharma are not reflected in such Opinion. The Opinion does not speak as of any date other than the date of the Opinion.

Because the Merger will result in an ownership change under Section 382 of the Code for Silverback, Silverback’s pre-Merger net operating loss (“NOL”) carryforwards and certain other tax attributes will be subject to limitations. The NOL carryforwards and other tax attributes of ARS Pharma and of the combined company may also be subject to limitations as a result of ownership changes.

As of December 31, 2021, Silverback had U.S. federal NOL carryforwards of $160.3 million, and ARS Pharma had U.S. federal NOL carryforwards and state NOL carryforwards of approximately $25.6 million and $6.9 million, respectively. If a corporation undergoes an “ownership change” within

 

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the meaning of Section 382 of the Code (“Section 382”), the corporation’s NOL carryforwards and certain other tax attributes arising before the ownership change are subject to limitations on use after the ownership change. In general, an ownership change occurs if there is a cumulative change in the corporation’s equity ownership by certain stockholders that exceeds fifty percentage points over a rolling three-year period. Similar rules may apply under state tax laws. The Merger will result in an ownership change for Silverback and, accordingly, Silverback’s NOL carryforwards and certain other tax attributes will be subject to limitations (or disallowance) on their use after the Merger. ARS Pharma’s NOL carryforwards may also be subject to limitation as a result of prior shifts in equity ownership and/or the Merger. Additional ownership changes in the future could result in additional limitations on Silverback’s, ARS Pharma’s and the combined company’s NOL carryforwards. Consequently, even if the combined company achieves profitability, it may not be able to utilize a material portion of Silverback’s, ARS Pharma’s or the combined company’s NOL carryforwards and other tax attributes, which could have an adverse effect on cash flow and results of operations. For more information on limitations on NOL carryforwards and certain other tax attributes, see “Risk Factors—Risks related to the Combined Company—The combined company’s ability to use its NOL carryforwards and certain other tax attributes may be limited.”

Silverback and ARS Pharma may become involved in securities litigation or stockholder derivative litigation in connection with the Merger, and this could divert the attention of Silverback and ARS Pharma management and harm the combined company’s business, and insurance coverage may not be sufficient to cover all related costs and damages.

Securities litigation or stockholder derivative litigation frequently follows the announcement of certain significant business transactions, such as the sale of a business division or announcement of a business combination transaction. Silverback and ARS Pharma may become involved in this type of litigation in connection with the Merger, and the combined company may become involved in this type of litigation in the future. Litigation often is expensive and diverts management’s attention and resources, which could adversely affect the business of Silverback, ARS Pharma, and the combined company.

If the Merger does not qualify as a “reorganization” for U.S. federal income tax purposes, U.S. holders of ARS Pharma Capital Stock will be required to recognize gain or loss for U.S. federal income tax purposes upon the exchange of ARS Pharma Capital Stock for Silverback Common Stock in the Merger.

The U.S. federal income tax consequences of the Merger to U.S. Holders (as defined in the section titled “The Merger—Material U.S. Federal Income Tax Consequences of the Merger”) will depend on whether the Merger qualifies as a “reorganization” for U.S. federal income tax purposes. If the Merger fails to qualify as a reorganization within the meaning of Section 368(a) of the Code, a U.S. Holder would recognize gain or loss for U.S. federal income tax purposes upon the exchange of ARS Pharma Capital Stock for Silverback Common Stock in the Merger. For a more complete discussion of the material U.S. federal income tax consequences of the Merger, please review the information set forth in the section titled “The Merger—Material U.S. Federal Income Tax Consequences of the Merger” in this proxy statement.

Risks Related to Silverback

For risks related to the business of Silverback, please refer to the section entitled “Item 1A. Risk Factors” set forth in Silverback’s Form 10-K for the year ended December 31, 2021, filed with the SEC on March 31, 2022, and Silverback’s Form 10-Q for the quarterly period ended on June 30, 2022, filed with the SEC on August 11, 2022, which reports are incorporated by reference herein.

 

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Risks Related to ARS Pharma

Risks Related to ARS Pharma’s Financial Position and Need for Capital

ARS Pharma is a clinical-stage biopharmaceutical company and has incurred significant losses since its inception. ARS Pharma anticipates that it will continue to incur significant losses for the foreseeable future.

Investment in biopharmaceutical product development is highly speculative because it entails substantial upfront capital expenditures and significant risk that any potential product candidate will fail to demonstrate adequate effect or an acceptable safety profile, gain regulatory approval and become commercially viable. ARS Pharma’s only product candidate, neffy, is in the clinical stage of development. ARS Pharma has no products approved for commercial sale and has not generated any revenue from product sales to date, and ARS Pharma will continue to incur significant research and development and other expenses related to ARS Pharma’s clinical development and ongoing operations. As a result, ARS Pharma is not profitable and has incurred losses in each period since its inception. Since its inception, ARS Pharma has devoted substantially all of its efforts and financial resources to organizing and staffing ARS Pharma, business planning, raising capital, performing research and development activities, and providing general and administrative support for these operations. ARS Pharma’s financial condition and operating results, including net losses, may fluctuate significantly from quarter to quarter and year to year. Accordingly, you should not rely upon the results of any quarterly or annual periods as indications of future operating performance. Additionally, net losses and negative cash flows have had, and will continue to have, an adverse effect on ARS Pharma’s stockholders’ equity and working capital. ARS Pharma’s net losses were approximately $1.1 million and $20.2 million for the years ended December 31, 2020 and 2021, respectively. As of June 30, 2022, ARS Pharma had an accumulated deficit of $55.9 million. ARS Pharma expects to continue to incur significant losses for the foreseeable future, and ARS Pharma expects these losses to increase as ARS Pharma continues its research and development of, seeks regulatory approvals and prepares for commercialization for its product candidate, neffy, an investigational, new formulation of epinephrine, for the emergency treatment of Type I allergic reactions and potential additional indications.

ARS Pharma anticipates that its expenses will increase substantially if and as it:

 

   

continues to develop and conduct nonclinical studies and clinical trials for neffy for the emergency treatment of Type I allergic reactions and potential additional indications;

 

   

seeks regulatory approvals in the United States, the European Union (“EU”) and other geographic regions for neffy for the emergency treatment of Type I allergic reactions and other indications that successfully complete clinical development;

 

   

seeks to identify additional product candidates;

 

   

initiates and continues research, preclinical and clinical development efforts for any future product candidates;

 

   

experiences any delays or encounters any issues with any of the above, including but not limited to failed studies, negative or mixed clinical trial results, safety issues or other regulatory challenges, the risk of which in each case may be exacerbated by the ongoing COVID-19 pandemic;

 

   

adds clinical, scientific, operational, financial and management information systems and personnel, including personnel to support its product candidate development and potential future commercialization efforts and help it comply with its obligations as a public company;

 

   

maintains, expands and protects its intellectual property portfolio;

 

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establishes or expands its sales, marketing, distribution, manufacturing, supply chain and other commercial infrastructure in the future to commercialize any products for which it may obtain regulatory approval; and

 

   

acquires or in-licenses other product candidates and technologies.

ARS Pharma’s expenses could increase beyond its expectations if ARS Pharma is required by the FDA, the European Medicines Agency (“EMA”) or other regulatory authorities to perform clinical trials or conduct nonclinical studies in addition to those that ARS Pharma currently expects, or if there are any delays in completing its clinical trials or the development of neffy, or if ARS Pharma chooses to develop any future product candidates.

ARS Pharma has never generated revenue from product sales and may never be profitable.

ARS Pharma’s ability to become and remain profitable depends on its ability to generate significant revenue from product sales. ARS Pharma does not expect to generate significant revenue, if any, unless and until ARS Pharma, either alone or with a collaborator, is able to obtain regulatory approval for, and successfully commercialize, neffy for its initial indication and potential additional indications. Successful commercialization of neffy will require achievement of many key milestones, which vary by jurisdiction and may include demonstrating safety and efficacy in clinical trials, and obtaining regulatory approval for neffy. If neffy is approved, ARS Pharma, or any of its current or future licensing and collaboration partners must also comply with post-approval requirements, such as those relating to marketing and manufacturing. Finally, obtaining adequate coverage and reimbursement for neffy from private or government payors will be crucial to neffy’s commercial success. Because of the uncertainties and risks associated with these activities, ARS Pharma is unable to accurately and precisely predict the timing and amount of revenues, the extent of any further losses or if or when ARS Pharma might achieve profitability. ARS Pharma and any current and future licensing and collaboration partners may never succeed in these activities and, even if ARS Pharma does, or any current or future licensing and collaboration partners do, ARS Pharma may never generate revenues that are large enough for it to achieve profitability. Even if ARS Pharma does achieve profitability, it may not be able to sustain or increase profitability on a quarterly or annual basis.

ARS Pharma’s failure to become and remain profitable may depress the market price of the combined company’s common stock and could impair its ability to raise capital, expand its business or continue its operations.

ARS Pharma has a limited operating history and only one current product candidate, neffy, which is in the clinical stage of development and has no commercial sales, which may make it difficult to evaluate the prospects for ARS Pharma’s future viability.

ARS Pharma is a biopharmaceutical company founded in 2015, and its operations to date have been limited to organizing, staffing and financing the company, raising capital, and conducting research and development activities, including preclinical and nonclinical studies and clinical trials, for its only product candidate, neffy. ARS Pharma has not yet demonstrated an ability to generate product revenues, obtain regulatory approvals, manufacture a commercial product, or arrange for a third party to do so on its behalf, or conduct sales and marketing activities necessary for successful product commercialization. Accordingly, you should consider ARS Pharma’s prospects in light of the costs, uncertainties, delays and difficulties frequently encountered by companies in clinical development, especially clinical-stage biopharmaceutical companies such as ARS Pharma. Any predictions you make about ARS Pharma’s future success or viability may not be as accurate as they could be if ARS Pharma had a longer operating history or a history of successfully developing and commercializing pharmaceutical products.

ARS Pharma may encounter unforeseen expenses, difficulties, complications, delays and other known or unknown factors in achieving ARS Pharma’s business objectives. ARS Pharma is preparing

 

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to transition from a company with a development focus to a company capable of supporting commercial activities. ARS Pharma may not be successful in such a transition.

ARS Pharma may need additional funding, and if it is unable to raise capital when needed, it could be forced to delay, reduce or eliminate its product development activities or commercialization efforts.

ARS Pharma’s operations have consumed significant amounts of cash since inception. Based upon ARS Pharma’s current operating plan, ARS Pharma believes that its cash and cash equivalents, along with the Silverback Net Cash following the Merger, will fund the combined company’s operating and capital expenses for at least three years from Closing. ARS Pharma expects ARS Pharma’s spending levels to increase in connection with seeking regulatory approval and preparing for commercialization of neffy for the emergency treatment of Type I allergic reactions. In addition, if ARS Pharma obtains regulatory approval for the marketing of neffy, ARS Pharma expects to incur significant expenses related to commercial launch, product sales, medical affairs, marketing, manufacturing and distribution. Further, ARS Pharma expects to incur additional costs associated with operating as a public company following the Closing. Even if its nonclinical and clinical development of neffy is successful and ARS Pharma is able to gain marketing approval for neffy for the emergency treatment of Type I allergic reactions in the timeframe it anticipates, ARS Pharma may require significant additional amounts of cash in order to launch and commercialize neffy for this indication in the United States or for any additional indications for which neffy receives regulatory approval. In addition, other unanticipated costs may arise in the course of ARS Pharma’s development efforts. Because the outcome of ARS Pharma’s ongoing and anticipated clinical trials for neffy is highly uncertain, it cannot reasonably estimate the actual amounts of cash necessary to successfully complete the development and commercialization of neffy for any indication it is pursuing.

ARS Pharma’s future capital requirements depend on many factors, including:

 

   

the scope, progress, results and costs of researching and developing neffy for the emergency treatment of Type I allergic reactions and potential additional indications, as well as any future product candidates ARS Pharma may develop;

 

   

the timing of, and the costs involved in, obtaining regulatory approval for the marketing of neffy for the emergency treatment of Type I allergic reactions and potential additional indications, and any future product candidates ARS Pharma may develop and pursue;

 

   

the number of future product candidates that ARS Pharma may pursue and their development requirements, if any;

 

   

if approved, the costs of commercialization activities for neffy for any approved indications, or the similar cost of any other product candidate that receives regulatory approval to the extent such costs are not the responsibility of any current or future licensing and collaboration partners, including the costs and timing of establishing product sales, marketing, distribution and manufacturing capabilities;

 

   

subject to receipt of regulatory approval, revenue received from commercial sales of neffy for any approved indications or from future product candidates, if any;

 

   

the amount and timing of potential royalty and milestone payments to ARS Pharma’s current or future licensing and collaboration partners;

 

   

the receipt of licensing fees, royalties and potential milestone payments under ARS Pharma’s current or future out-licensing arrangements;

 

   

the extent to which ARS Pharma in-licenses or acquires rights to other products, product candidates or technologies;

 

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ARS Pharma’s headcount growth and associated costs as ARS Pharma expands its personnel, including personnel to support its product candidate development and potential future commercialization efforts and help it comply with its obligations as a public company following the Merger;

 

   

the costs of preparing, filing and prosecuting patent applications, maintaining and protecting ARS Pharma’s intellectual property rights, including enforcing and defending intellectual property related claims; and

 

   

the ongoing costs of operating as a public company following the Merger.

ARS Pharma cannot be certain that additional funding will be available on acceptable terms, or at all. As a result of the ongoing COVID-19 pandemic and actions taken to slow its spread, the global credit and financial markets have experienced extreme volatility and disruptions, including diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, and uncertainty about economic stability. If the equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult, more costly or more dilutive. In addition, the Loan and Security Agreement (the “ARS Loan and Security Agreement”), dated September 30, 2019, as amended, between ARS Pharma and Silicon Valley Bank contains restrictive covenants that prevents ARS Pharma from, among other things, incurring additional indebtedness without Silicon Valley Bank’s consent.

Following the Merger, ARS Pharma believes that the combined company’s existing cash and cash equivalents will be sufficient to fund its planned operations for at least three years following the Closing. This estimate may prove to be wrong, and ARS Pharma could use its available capital resources sooner than it currently expects. Further, changing circumstances, some of which may be beyond ARS Pharma’s control, could cause it to consume capital significantly faster than it currently anticipates, and ARS Pharma may need to seek additional funds sooner than planned.

The combined company will have no committed source of additional capital other than potential milestone payments and royalties under its collaboration and licensing agreements. If ARS Pharma is unable to raise additional capital in sufficient amounts or on terms acceptable to it, ARS Pharma may have to significantly delay, scale back or discontinue the development or potential commercialization of neffy for additional indications. ARS Pharma may need to seek licensing and collaboration partners for neffy for commercialization in additional indications on terms that are less favorable than might otherwise be available or relinquish or license on unfavorable terms its rights to neffy in markets where ARS Pharma otherwise would seek to pursue development or commercialization itself. Any of the above events could significantly harm ARS Pharma’s business, prospects, financial condition, and results of operations.

Raising additional capital may cause dilution to the combined company’s stockholders, restrict it operations or require it to relinquish rights to its technologies or product candidate.

ARS Pharma expects its expenses to increase in connection with its planned operations. Based upon ARS Pharma’s current operating plan, ARS Pharma believes that its cash and cash equivalents along with the Silverback Net Cash following the Closing will fund its operating and capital expenses for at least three years following the Closing. However, unless and until ARS Pharma can generate a substantial amount of revenue from neffy, ARS Pharma may seek to finance its future cash needs through public or private equity offerings, royalty-based or debt financings, collaborations, licensing arrangements or other sources, or any combination of the foregoing. In addition, ARS Pharma may seek additional capital due to favorable market conditions or strategic considerations, even if ARS Pharma believes that it has sufficient funds for its current or future operating plans.

 

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To the extent that ARS Pharma raises additional capital through the sale of common stock, convertible securities or other equity securities, stockholders’ interests may be diluted, and the terms of these securities could include liquidation or other preferences and anti-dilution protections that could adversely affect its stockholders’ rights. In addition, new debt financing, if available, may result in fixed payment obligations and may involve agreements that include restrictive covenants that further limit ARS Pharma’s ability to take specific actions, such as incurring additional debt, making capital expenditures, creating liens, redeeming stock or declaring dividends, that could adversely impact its ability to conduct its business. In addition, securing financing could require a substantial amount of time and attention from ARS Pharma’s management and may divert a disproportionate amount of their attention away from day-to-day activities, which may adversely affect management’s ability to oversee the development and potential future commercialization of neffy.

If ARS Pharma raises additional funds through collaborations or marketing, distribution or licensing arrangements with third parties, ARS Pharma may have to relinquish valuable rights to its technologies, future revenue streams or product candidates or grant licenses on terms that may not be favorable to ARS Pharma.

ARS Pharma’s existing indebtedness may limit its flexibility in financing and operating its business and adversely affect its business, financial condition and results of operations.

As of June 30, 2022, there was $6.7 million of principal owed under the ARS Loan and Security Agreement. The ARS Loan and Security Agreement contains customary conditions to borrowing, events of default and affirmative and negative covenants, including covenants that restrict ARS Pharma’s ability (and the ability of certain of its subsidiaries) to incur additional indebtedness, grant liens, dispose of assets, enter into certain licensing and collaboration agreements, change its business, pay dividends or make other distributions to holders of its stock, engage in mergers and acquisitions, permit or suffer any change in control, make investments or engage in transactions with its affiliates. Such restrictions could limit ARS Pharma’s ability to take certain actions or reduce its flexibility to run and manage its business which could have an adverse effect on its results of operations. The obligations under the ARS Loan and Security Agreement are also secured by liens on substantially all of ARS Pharma’s assets, excluding its intellectual property on which there is a negative pledge, subject to customary exceptions. If ARS Pharma were unable to repay amounts due under the ARS Loan and Security Agreement, Silicon Valley Bank could proceed against such assets. Any declaration by Silicon Valley Bank of an event of default could significantly harm ARS Pharma’s business and prospects and could cause the price of the combined company’s common stock to decline.

Changes in tax law could adversely affect ARS Pharma’s business and financial condition.

The rules dealing with U.S. federal, state and local income taxation are constantly under review by persons involved in the legislative process and by the Internal Revenue Service and the U.S. Treasury Department. Changes to tax laws (which changes may have retroactive application) could adversely affect ARS Pharma or holders of the combined company’s common stock. In recent years, many such changes have been made and changes are likely to continue to occur in the future. Future changes in tax laws could have a material adverse effect on ARS Pharma’s business, cash flow, financial condition or results of operations.

 

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Risks Related to the Development of neffy or Any Future Product Candidates

ARS Pharma currently depends on the success of neffy, which is its only current product candidate. If ARS Pharma is unable to obtain regulatory approval for, and successfully commercialize, neffy, or experiences significant delays in doing so, its business will be materially harmed.

ARS Pharma currently only has one product candidate, neffy, and its business and future success depends entirely on its ability to develop, obtain regulatory approval for, and then successfully commercialize, neffy, which is currently in clinical development for the emergency treatment of Type I allergic reactions in adults and children age 4 to 18 years. This may make an investment in the combined company riskier than similar companies that have multiple product candidates in active development that may be able to better sustain failure of a lead product candidate.

ARS Pharma currently has no products approved for marketing and is investing the majority of its efforts and financial resources in the development of its sole product candidate, neffy, for the emergency treatment of Type I allergic reactions and potential other indications. Successful continued development and ultimate regulatory approval of neffy for ARS Pharma’s initial indication and potential additional indications is critical to the future success of its business. ARS Pharma will need to successfully complete its clinical development of neffy for the emergency treatment of Type I allergic reactions and other indications. The future regulatory and commercial success of neffy and any future product candidates is subject to a number of risks, including the following:

 

   

successful completion of nonclinical studies and clinical trials;

 

   

successful patient enrollment in clinical trials;

 

   

successful data from ARS Pharma’s nonclinical studies and clinical trials that support an acceptable risk-benefit profile of neffy or any future product candidates in the intended populations and indications;

 

   

satisfaction of applicable regulatory requirements, including to satisfy applicable rules governing combination products;

 

   

potential unforeseen safety issues or adverse side effects;

 

   

receipt and maintenance of marketing approvals from applicable regulatory authorities;

 

   

remaining in compliance with post-marketing regulatory requirements;

 

   

obtaining and maintaining patent and trade secret protection and regulatory exclusivity for neffy or any future product candidates;

 

   

making arrangements or maintaining existing arrangements with third-party manufacturers, or establishing manufacturing capabilities, for both clinical and commercial supplies of neffy or any future product candidates;

 

   

entry into collaborations to further the development of neffy or any future product candidates;

 

   

establishing sales, marketing and distribution capabilities and launching commercial sales of any approved products, whether alone or in collaboration with others;

 

   

successfully launching commercial sales of neffy or any future product candidates, if and when approved;

 

   

acceptance of neffy or any future product candidates, if and when approved, by patients, the medical community and third-party payors;

 

   

obtaining and maintaining third-party coverage and adequate reimbursement;

 

   

products, following approval, maintaining a continued acceptable safety profile;

 

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effectively competing with other therapies;

 

   

ensuring that ARS Pharma promotes and distributes ARS Pharma’s products consistent with all applicable healthcare laws; and

 

   

enforcing and defending intellectual property rights and claims.

Many of these risks are beyond ARS Pharma’s control, including the risks related to clinical development, the regulatory submission and review process, potential threats to ARS Pharma’s intellectual property rights and the manufacturing, marketing and sales efforts of any current or future collaboration partner. If ARS Pharma is unable to develop, receive regulatory approval for, or successfully commercialize neffy for the indications ARS Pharma is developing it for, or if ARS Pharma experience delays as a result of any of these risks or otherwise, its business will be materially harmed.

In addition, of the large number of products in development in the pharmaceutical industry, only a small percentage result in the submission of an NDA to the FDA or a Market Authorization Application (“MAA”) to the EMA, and even fewer are approved for marketing and commercialization. Furthermore, even if ARS Pharma does receive regulatory approval to market neffy for any indication, any such approval may be subject to limitations on the indications or uses or the patient populations for which ARS Pharma may market the product. Accordingly, even if ARS Pharma is able to obtain the requisite financing to continue to fund ARS Pharma’s development activities, ARS Pharma cannot assure you that ARS Pharma will successfully develop or commercialize neffy for any indication. If ARS Pharma or any of its current or future licensing and collaboration partners are unable to develop, or obtain regulatory approval for, or, if approved, successfully commercialize neffy for ARS Pharma’s initial indication or potential additional indications, ARS Pharma may not be able to generate sufficient revenue to continue its business. In addition, ARS Pharma’s failure to satisfy other regulatory requirements could adversely affect its development efforts for neffy in other indications.

The denial of regulatory approval for neffy could mean that ARS Pharma needs to delay or even cease operations, and a delay in obtaining such approval would delay commercialization of neffy and adversely impact ARS Pharma’s ability to generate revenue, ARS Pharma’s business and ARS Pharma’s results of operations.

If ARS Pharma is not successful in commercializing neffy, or is significantly delayed in doing so, its business will be materially harmed, and ARS Pharma may need to curtail or cease operations. ARS Pharma currently has no pharmaceutical products approved for marketing, and ARS Pharma may never obtain regulatory approval to market and commercialize neffy for any indication. The research, testing, manufacturing, labeling, approval, sale, marketing and distribution of pharmaceutical products are subject to extensive regulation by the FDA, the EMA, and other regulatory agencies in the United States, EU and other countries, and such regulations differ from country to country. ARS Pharma is not permitted to market neffy until ARS Pharma receives approval or marketing authorization from the relevant regulatory authority. The FDA, the EMA or any other foreign regulatory agency can delay, limit or deny approval to market neffy for many reasons, including:

 

   

ARS Pharma’s inability to demonstrate to the satisfaction of the FDA, the EMA or any other applicable foreign regulatory agency that neffy is safe and effective for the requested indication;

 

   

ARS Pharma’s inability to gain agreement from applicable foreign regulatory authorities that neffy is appropriate for approval under applicable regulatory pathways;

 

   

the FDA’s, the EMA’s or any other applicable foreign regulatory agency’s disagreement with the interpretation of data from nonclinical and clinical studies and trials;

 

   

ARS Pharma’s inability to demonstrate that the clinical and other benefits of neffy outweigh any safety or other perceived risks;

 

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ARS Pharma’s ability to enroll an adequate number of patients in and successfully complete ARS Pharma’s ongoing and any future clinical trials, including ARS Pharma’s pediatric clinical study EPI-10;

 

   

the FDA’s, the EMA’s or any other applicable foreign regulatory agency’s requirement for additional nonclinical or clinical studies or trials, including studies to satisfy applicable rules governing combination products;

 

   

the FDA’s, the EMA’s or any other applicable foreign regulatory agency’s having differing requirements for the trial protocols used in ARS Pharma’s clinical trials;

 

   

the FDA’s, the EMA’s or any other applicable foreign regulatory agency’s non-approval of the formulation, labeling and/or the specifications of neffy;

 

   

the FDA’s, the EMA’s or any other applicable foreign regulatory agency’s failure to accept the manufacturing processes or third-party manufacturers with which ARS Pharma contracts; or

 

   

the potential for approval policies or regulations of the FDA, the EMA or any other applicable foreign regulatory agencies to significantly change in a manner rendering ARS Pharma’s clinical data insufficient for approval.

Of the large number of pharmaceutical products in development, only a small percentage successfully complete the FDA, the EMA or other regulatory approval processes and are commercialized.

Even if ARS Pharma eventually completes clinical testing and receives approval of an NDA, MAA or other foreign marketing authorization for neffy, the FDA, the EMA or other applicable foreign regulatory agency may grant approval contingent on the performance of costly additional clinical trials, which may be required after approval. The FDA, the EMA or other applicable foreign regulatory agency may also approve neffy for a more limited indication and/or a narrower patient population than ARS Pharma originally requests, and the FDA, the EMA or any other applicable foreign regulatory agency may not approve the labeling that ARS Pharma believes is necessary or desirable for the successful commercialization of neffy. Any delay in obtaining, or inability to obtain, applicable regulatory approvals would delay or prevent commercialization of neffy and would materially adversely impact ARS Pharma’s business and prospects.

ARS Pharma has never commercialized a product and may experience delays or unexpected costs or difficulties in obtaining regulatory approval for neffy for its initial indication or potential additional indications.

ARS Pharma has never obtained regulatory approval for, or commercialized, a pharmaceutical product. It is possible that the FDA and the EMA may refuse to accept any or all of ARS Pharma’s submitted or planned NDAs and MAAs for substantive review or may conclude after review of ARS Pharma’s data that an application is insufficient to obtain regulatory approval for neffy or any future product candidates. For example, the EMA is requiring that ARS Pharma submit its preclinical dog anaphylaxis study results prior to issuing an approval decision for its marketing applications for neffy. If the FDA and the EMA do not initially approve any of ARS Pharma’s submitted or planned NDAs or MAAs, such regulatory authorities may require that ARS Pharma conduct additional costly clinical, nonclinical or manufacturing validation studies before they will reconsider ARS Pharma’s future applications. Depending on the extent of these or any other required studies, approval of any NDA, MAA or other application that ARS Pharma submit may be significantly delayed, possibly for several years, or may require ARS Pharma to expend more resources than ARS Pharma has available. Any failure or delay in obtaining regulatory approvals would prevent ARS Pharma from commercializing neffy for any indication or any other product candidate, generating revenues and achieving and

 

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sustaining profitability. It is also possible that additional studies, if performed and completed, may not be considered sufficient by the FDA or EMA to approve any NDA, MAA or other application that ARS Pharma submits. For example, the FDA has indicated that ARS Pharma’s ongoing pediatric clinical trial, EPI-10, would be sufficient to support a submission of ARS Pharma’s NDA for pediatric approval of a 2.0 mg dose of neffy for children weighing more than 30 kg, and to support a separate submission for pediatric approval of a 1mg dose of neffy for children weighing between 15 and 30 kg; however, the FDA has not reviewed ARS Pharma’s complete clinical data, to date, and therefore there is no guarantee that the FDA will determine that any future NDA ARS Pharma submits to be sufficient for issuing a marketing approval of neffy for the emergency treatment of Type I allergic reactions in children. If any of these outcomes occur, ARS Pharma may be forced to abandon the development of neffy or any future product candidates, which would materially adversely affect ARS Pharma’s business and could potentially cause ARS Pharma to cease operations. ARS Pharma faces similar risks for its applications in other foreign jurisdictions. In addition, difficulties in obtaining approval of neffy for the emergency treatment of Type I allergic reactions, could adversely affect ARS Pharma’s efforts to seek approval from regulatory authorities for neffy for use in other potential indications.

The regulatory approval processes of the FDA, the EMA and other comparable foreign authorities are lengthy, time-consuming and inherently unpredictable, and if ARS Pharma is ultimately unable to obtain regulatory approval for neffy or any future product candidates, its business will be substantially harmed.

ARS Pharma, and any current and future licensing and collaboration partners, are not permitted to commercialize, market, promote or sell any product candidate in the United States or the EU without obtaining regulatory approval from the FDA or the EMA, respectively. Regulatory authorities in other jurisdictions may have similar requirements. The time required to obtain approval by the FDA, the EMA and other comparable foreign regulatory authorities is unpredictable, but typically takes many years following the commencement of clinical trials and depends upon numerous factors, including substantial discretion of such regulatory authorities. In addition, approval policies, regulations, or the type and amount of preclinical and clinical data necessary to gain approval may change during the course of a product candidate’s clinical development and may vary among jurisdictions. To date, ARS Pharma has not submitted any product approval submissions for neffy or any other product candidate to the FDA, EMA or other comparable foreign regulatory authorities for neffy and there can be no assurance that ARS Pharma will receive such approval from such regulatory authorities after submitting any product approval application.

Clinical testing is expensive, difficult to design and implement, can take many years to complete and is inherently uncertain as to outcome. ARS Pharma cannot guarantee that any clinical trials will be conducted as planned or completed on schedule, if at all. The clinical development of neffy or any future product candidates is susceptible to the risk of failure inherent at any stage of development, including failure to demonstrate safety or 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, the EMA or any other comparable foreign regulatory authority that a product candidate may not continue development or is not approvable. Additionally, ARS Pharma’s expenses could increase if it is required by the FDA, the EMA or any other comparable foreign regulatory authority to perform clinical trials or studies in addition to those currently expected, or if there are any delays in completing ARS Pharma’s clinical trials or the development of neffy for additional indications. It is possible that even if neffy or any future product candidate 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 ARS Pharma’s clinical trials. Conversely, as a result of the same factors, ARS Pharma’s clinical trials may indicate an apparent positive effect of neffy or any future product candidate that is greater than the actual positive effect, if any. Similarly, in its clinical trials ARS

 

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Pharma may fail to detect toxicity of or intolerability caused by neffy or any future product candidate, or mistakenly believe that neffy or any future product candidates are toxic or not well-tolerated when that is not in fact the case.

neffy and any future product candidates could fail to receive regulatory approval for many reasons, including the following:

 

   

the FDA, the EMA or other comparable foreign regulatory authorities may disagree as to the design or implementation of ARS Pharma’s clinical trials;

 

   

ARS Pharma may be unable to demonstrate to the satisfaction of the FDA, the EMA or other comparable foreign regulatory authorities that a product candidate is safe and effective for its proposed indication and, if necessary, that a product candidate and any active components thereof are safe and effective for the proposed indication;

 

   

the FDA, the EMA or other comparable foreign regulatory authorities may find deficiencies with regards to the formulation components or specifications of neffy, including, without limitation, with respect to appearance, identity, impurities, or particle size;

 

   

the results of clinical trials may not meet the level of evidence or criteria required by the FDA, the EMA or other comparable foreign regulatory authorities for approval;

 

   

ARS Pharma may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks;

 

   

the FDA, the EMA and comparable authorities in other countries may disagree with ARS Pharma’s interpretation of data from clinical trials or nonclinical studies and may require additional trials or studies to support marketing approval;

 

   

the data collected from clinical trials of neffy or any future product candidates may not be sufficient to support the submission of an NDA or other submission to the FDA or to obtain regulatory approval in the United States, the EU or elsewhere;

 

   

the FDA, the EMA or other comparable foreign regulatory authorities may find deficiencies with clinical trial sites or fail to approve the manufacturing processes or facilities of third-party manufacturers with which ARS Pharma contracts for clinical and commercial supplies; and

 

   

the approval policies or regulations of the FDA, the EMA or other comparable foreign regulatory authorities may significantly change in a manner rendering ARS Pharma’s clinical data insufficient for approval.

This lengthy approval process as well as the unpredictability of clinical trial results may result in ARS Pharma’s failing to obtain regulatory approval to market neffy or any future product candidate ARS Pharma develops, which would significantly harm its business, results of operations and prospects. Although ARS Pharma has successfully completed a pre-NDA meeting with the FDA, there is no assurance that the endpoints and trial designs used for the approval of a new formulation of epinephrine for the emergency treatment of Type I allergic reactions will be acceptable for neffy. The FDA, the EMA and other comparable foreign authorities have substantial discretion in the approval process and determining when or whether regulatory approval will be obtained for any product candidate that ARS Pharma develops. Even if ARS Pharma believes the data collected from current or future clinical trials of neffy or any future product candidates are promising, such data may not be sufficient to support approval by the FDA, the EMA or any other regulatory authority.

There can be no assurance that the FDA and other regulatory agencies, including the EMA, will not require additional clinical trials or studies to support an application for the marketing of neffy in the emergency treatment of Type I allergic reactions or any other indication. This may be the case

 

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particularly as these regulatory authorities may consult with one another or as ARS Pharma may be required to apprise the respective agencies of studies ARS Pharma is conducting of neffy in conjunction with ARS Pharma’s requests for marketing approval or in response to requests and updates from the respective agency.

In addition, disruptions caused by the COVID-19 pandemic may increase the likelihood that ARS Pharma encounters difficulties or delays in initiating, screening, enrolling, conducting, or completing its ongoing and planned nonclinical studies and clinical trials. Clinical site initiation and patient screening and enrollment may be delayed due to prioritization of hospital resources toward the COVID-19 pandemic. Investigators and patients may not be able to comply with clinical trial protocols if quarantines impede patient movement or interrupt healthcare services or ARS Pharma’s ability to conduct clinical trial site monitoring. Similarly, ARS Pharma’s ability to recruit and retain patients and principal investigators and site staff who, as healthcare providers, may have heightened exposure to COVID-19, could be limited, which in turn could adversely impact ARS Pharma’s clinical trial operations. Additionally, ARS Pharma may experience interruption of key clinical trial activities, such as clinical trial site monitoring, due to limitations on travel, quarantines or social distancing protocols imposed or recommended by federal or state governments, employers and others in connection with the ongoing COVID-19 pandemic. Completion of clinical sample bioanalysis or study reports by third-party contract research organizations could be adversely impacted due to labor shortages or staff turnover due to the ongoing COVID-19 pandemic. As a result of the COVID-19 pandemic, ARS Pharma may face delays in meeting its anticipated timelines for its ongoing and planned clinical trials.

Additionally, as of May 26, 2021, the FDA noted it is continuing to ensure timely reviews of applications for medical products during the ongoing COVID-19 pandemic in line with its user fee performance goals and conducting mission critical domestic and foreign inspections to ensure compliance of manufacturing facilities with FDA quality standards. However, the FDA may not be able to continue its current pace and approval timelines could be extended, including where a pre-approval inspection or an inspection of clinical sites is required and due to the ongoing COVID-19 pandemic and travel restrictions the FDA is unable to complete such required inspections during the review period.

Since March 2020, when foreign and domestic inspections were largely placed on hold due to the COVID-19 pandemic, the FDA has been working to resume routine surveillance, bioresearch monitoring and pre-approval inspections on a prioritized basis. Since April 2021, the FDA has conducted limited inspections and has employed remote interactive evaluations, using risk management methods, to meet user fee commitments and goal dates. Ongoing travel restrictions and other uncertainties continue to impact oversight operations both domestic and abroad and it is unclear when standard operational levels will resume. The FDA is continuing to complete mission-critical work, prioritize other higher-tiered inspectional needs (e.g., for-cause inspections), and carry out surveillance inspections using risk-based approaches for evaluating public health. Should the FDA determine that an inspection is necessary for approval and an inspection cannot be completed during the review cycle due to restrictions on travel, and the FDA does not determine a remote interactive evaluation to be adequate, the agency has stated that it generally intends to issue, depending on the circumstances, a complete response letter or defer action on the application until an inspection can be completed. Further, if there is inadequate information to make a determination on the acceptability of a facility, the FDA may defer action on the application until an inspection can be completed. In 2020 and 2021, a number of companies announced receipt of complete response letters due to the FDA’s inability to complete required inspections for their applications. Regulatory authorities outside the United States may adopt similar restrictions or other policy measures in response to the COVID-19 pandemic and may experience delays in their regulatory activities. For example, with respect to new sites or facilities in the European Economic Area (“EEA”), which have never had a current Good Manufacturing Practices (“cGMP”) inspection or authorization, the EMA has stated that a distant assessment may be conducted in order to evaluate if the site could be authorized without an on-site pre-approval

 

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inspection. If an approval is granted, it should be indicated that the certificate has been granted on the basis of a distant assessment and an on-site inspection should be conducted when circumstances permit. If a cGMP certificate cannot be granted as a result of the distant assessment, a clock-stop in the regulatory approval process will be imposed until an on-site inspection is possible. In addition, even if ARS Pharma were to obtain approval, regulatory authorities may approve neffy or any future product candidates for fewer or more limited indications than ARS request, may not approve the price ARS Pharma intends to charge for its products, may grant approval contingent on the performance of costly post-marketing clinical trials, or may approve a product candidate with a label that does not include the labeling claims necessary or desirable for the successful commercialization of that product candidate. Any of the foregoing scenarios could materially harm the commercial prospects for neffy or any future product candidates.

If the FDA does not conclude that neffy or any future product candidates satisfy the requirements for the Section 505(b)(2) regulatory approval pathway, or if the requirements for such product candidates under Section 505(b)(2) are not as ARS Pharma expects, the approval pathway for those product candidates will likely take significantly longer, cost significantly more and entail significantly greater complications and risks than anticipated, and in either case may not be successful.

While ARS Pharma believes that ARS Pharma will have the necessary supporting data to submit a marketing application under Section 505(b)(2) of the Federal Food, Drug and Cosmetic Act (“Section 505(b)(2)”) regulatory pathway to the FDA for neffy for the emergency treatment of Type I allergic reactions for adults and children greater than 30 kg in weight, and upon completion of ARS Pharma’s ongoing pediatric study, EPI-10, for children between 15 and 30 kg in weight, there can be no assurance that the FDA will agree that the Section 505(b)(2) pathway is appropriate or will approve any such application or any future application for additional indication or future product candidates.

The Drug Price Competition and Patent Term Restoration Act of 1984 (the “Hatch-Waxman Act”) added Section 505(b)(2) to the Federal Food, Drug and Cosmetic Act (“FDCA”). Section 505(b)(2) permits the filing of an NDA where at least some of the information required for approval comes from studies that were not conducted by or for the applicant and for which the applicant has not obtained a right of reference. Section 505(b)(2), if applicable to ARS Pharma under the FDCA, would allow an NDA ARS Pharma submits to the FDA to rely in part on data in the public domain or the FDA’s prior conclusions regarding the safety and effectiveness of approved compounds, which could expedite the development program for ARS Pharma’s future product candidates by potentially decreasing the amount of nonclinical and/or clinical data that ARS Pharma would need to generate in order to obtain FDA approval. This pathway does not, however, expedite the FDA review process timelines.

If the FDA does not allow ARS Pharma to pursue the Section 505(b)(2) regulatory pathway as anticipated, ARS Pharma may need to conduct additional nonclinical studies and/or clinical trials, provide additional data and information, and meet additional standards for regulatory approval. If this were to occur, the time and financial resources required to obtain FDA approval for neffy or any future product candidate, and complications and risks associated with such product candidates, would likely substantially increase. Moreover, inability to pursue the Section 505(b)(2) regulatory pathway could result in new competitive products reaching the market more quickly than any product candidates ARS Pharma develops, which could adversely impact ARS Pharma’s competitive position and prospects. Even if ARS Pharma is allowed to pursue the Section 505(b)(2) regulatory pathway, ARS Pharma cannot assure you that neffy or any future product candidates ARS Pharma develops will receive the requisite approval for commercialization.

In addition, notwithstanding the approval of a number of products by the FDA under Section 505(b)(2), certain pharmaceutical companies and others have objected to the FDA’s

 

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interpretation of Section 505(b)(2). If the FDA’s interpretation of Section 505(b)(2) is successfully challenged, the FDA may change its Section 505(b)(2) policies and practices, which could delay or even prevent the FDA from approving any NDA that ARS Pharma submits under Section 505(b)(2). In addition, the pharmaceutical industry is highly competitive, and Section 505(b)(2) NDAs are subject to certain requirements designed to protect the patent rights of sponsors of previously approved drugs that are referenced in a Section 505(b)(2) NDA. These requirements may give rise to patent litigation and mandatory delays in approval of ARS Pharma’s NDAs for up to 30 months or longer depending on the outcome of any litigation. It is not uncommon for a manufacturer of an approved product to file a citizen petition with the FDA seeking to delay approval of, or impose additional approval requirements for, pending competing products. If successful, such petitions can significantly delay, or even prevent, the approval of a new product. Even if the FDA ultimately denies such a petition, the FDA may substantially delay approval while it considers and responds to the petition. In addition, even if ARS Pharma is able to utilize the Section 505(b)(2) regulatory pathway, there is no guarantee this would ultimately lead to streamlined product development or earlier approval. Finally, a competitor might receive FDA approval before neffy and obtain non-patent market exclusivity, which could delay approval of neffy.

neffy contains a sprayer component that if not considered as packaging by the FDA is subject to additional regulatory requirements that may further delay or prevent marketing approval of neffy and substantially harm ARS Pharma’s business.

neffy is a drug product that also contains a sprayer component that ARS Pharma believes is considered packaging by the FDA, which may require coordination within the FDA and comparable regulatory agencies for review of their drug and such components. Although the FDA and comparable foreign agencies have systems in place for the review and approval of products such as neffy, ARS Pharma may experience additional delays in the development and commercialization of neffy or any future product candidates due to regulatory timing constraints and uncertainties in the product development and approval process. Moreover, although ARS Pharma anticipates based on historical precedents of other nasal spray products that the sprayer component of neffy and any future product candidates ARS Pharma develops will be packaging, reviewed in connection with the evaluation of the underlying drug marketing application, and that no separate marketing application for the sprayer components of such product candidates will be required, the FDA or comparable regulatory authorities may disagree and require that ARS Pharma obtain a separate clearance or approval of the sprayer component as a medical device, which could further delay or prevent marketing approval of such product candidates. Any such delay or inability to obtain marketing approval of neffy or any future product candidate could substantially harm ARS Pharma’s business.

ARS Pharma may incur unexpected costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of neffy or any future product candidates.

To obtain the requisite regulatory approvals to market and commercialize neffy and any future product candidates, ARS Pharma must demonstrate through extensive nonclinical studies and clinical trials that such product candidates are safe and effective for their intended use in humans. Nonclinical and clinical testing are expensive and can take many years to complete, and their outcome is inherently uncertain. Failure can occur at any time during the clinical trial process and ARS Pharma’s future clinical trial results may not be successful.

 

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ARS Pharma may experience delays in completing its clinical trials or nonclinical studies and initiating or completing additional studies or clinical trials. ARS Pharma may also experience numerous unforeseen events during its clinical trials that could delay or prevent its ability to receive marketing approval or commercialize neffy or any future product candidates ARS Pharma develops, including:

 

   

regulators, or institutional review boards (“IRBs”) or other reviewing bodies may not authorize ARS Pharma or its investigators to commence a clinical trial, or to conduct or continue a clinical trial at a prospective or specific trial site;

 

   

ARS Pharma may not reach an agreement on acceptable terms with prospective contract research organizations (“CROs”) and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;

 

   

a delay in receiving study or clinical trial material from outside the United States;

 

   

the number of subjects or patients required for clinical trials of neffy in an indication or any future product candidate may be larger than ARS Pharma anticipates, enrollment in these clinical trials may be insufficient or slower than ARS Pharma anticipates, and the number of clinical trials being conducted at any given time may be high and result in fewer available patients for any given clinical trial, or patients may drop out of these clinical trials at a higher rate than ARS Pharma anticipates;

 

   

ARS Pharma’s third-party contractors, including those manufacturing neffy or any future product candidates or conducting clinical trials on its behalf, may fail to comply with regulatory requirements or meet their contractual obligations to ARS Pharma in a timely manner, or at all;

 

   

ARS Pharma may have to amend clinical trial protocol(s) submitted to regulatory authorities or conduct additional studies to reflect changes in regulatory requirements or guidance, which ARS Pharma may be required to resubmit to an IRB and regulatory authorities for re-examination;

 

   

unforeseen safety events may occur during the course of a clinical trial and these events may result in the temporary suspension or termination of a clinical trial, or require urgent safety measures or restrictions to protect human subjects during the conduct of a clinical trial;

 

   

regulators, IRBs or other reviewing bodies may fail to approve or subsequently find fault with the manufacturing processes or facilities of third-party manufacturers with which ARS Pharma has entered and may enter into agreement for clinical and commercial supplies, or the supply or quality of neffy or any future product candidate or other materials necessary to conduct clinical trials of neffy or any future product candidates may be insufficient, inadequate or not available at an acceptable cost, or ARS Pharma may experience interruptions in supply; and

 

   

the potential for approval policies or regulations of the FDA, the EMA or any other applicable foreign regulatory agencies to significantly change in a manner rendering ARS Pharma’s clinical data insufficient for approval.

Regulators, IRBs of the institutions in which clinical trials are being conducted, or data monitoring committees may suspend or terminate a clinical trial due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or ARS Pharma’s clinical protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to appear to demonstrate a benefit from using a drug, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial.

Negative or inconclusive impressions of the results from ARS Pharma’s earlier clinical trials of neffy for the emergency treatment of Type I allergic reactions or any other clinical trial or nonclinical studies in animals that ARS Pharma has conducted, could mandate repeated or additional nonclinical studies or clinical trials and could delay marketing approvals or result in changes to or delays in

 

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nonclinical studies or clinical trials of neffy for other indications. While data from ARS Pharma’s studies of neffy demonstrated epinephrine was delivered at doses that are considered to be efficacious and comparable to those of already approved epinephrine injectable products, ARS Pharma does not know whether any future clinical trials or studies that ARS Pharma may conduct will demonstrate adequate efficacy and safety necessary to result in obtaining regulatory approval to market neffy for its initial indication or potential additional indications, or any future product candidate. If later stage clinical trials, including ARS Pharma’s ongoing pediatric clinical study, EPI-10, do not produce favorable results that meet regulatory authority criteria, ARS Pharma’s ability to obtain regulatory approval for neffy for the emergency treatment of Type I allergic reactions or potential additional indications, or any future product candidate, may be adversely impacted.

ARS Pharma’s failure to successfully initiate and complete clinical trials of neffy for the emergency treatment of Type I allergic reactions or potential additional indications and to demonstrate the efficacy and safety of neffy, necessary to obtain regulatory approval to market neffy would significantly harm ARS Pharma’s business. ARS Pharma’s product candidate development costs will also increase if ARS Pharma experiences delays in testing or regulatory approvals and ARS Pharma may be required to obtain additional funds to complete clinical trials. ARS Pharma cannot assure you that its clinical trials will begin as planned or be completed on schedule, if at all, or that ARS Pharma will not need to restructure its trials after they have begun. Significant clinical trial delays also could shorten any periods during which ARS Pharma may have the exclusive right to commercialize neffy or any future product candidates or allow its competitors to bring products to market before ARS Pharma does and impair ARS Pharma’s ability to successfully commercialize such product candidates, which may harm its business and results of operations. In addition, many of the factors that cause, or lead to, delays of clinical trials may ultimately lead to the denial of regulatory approval of neffy or any future product candidate.

Even if ARS Pharma completes the necessary nonclinical studies and clinical trials, the marketing approval process is expensive, time-consuming and uncertain and may prevent ARS Pharma or any future licensing and collaboration partners from obtaining approvals for the commercialization of neffy or maintaining any conditional authorization for ARS Pharma’s initial indication or potential additional indications as well as for any future product candidate ARS Pharma develops.

Any product candidate ARS Pharma may develop and the activities associated with its development and commercialization, including its design, testing, manufacture, safety, efficacy, recordkeeping, labeling, storage, approval, advertising, promotion, sale, and distribution, are subject to comprehensive regulation by the FDA, the EMA and other regulatory authorities in the United States and in other countries. Failure to obtain marketing approval for a product candidate will prevent ARS Pharma from commercializing that product candidate in a given jurisdiction. ARS Pharma has not received approval to market any product candidates from regulatory authorities in any jurisdiction and it is possible that none of the product candidates ARS Pharma may seek to develop in the future will ever obtain regulatory approval. ARS Pharma has no experience in filing and supporting the applications necessary to gain marketing approvals and expects to rely on third-party CROs or regulatory consultants to assist ARS Pharma in this process. Securing regulatory approval requires the submission of extensive nonclinical and clinical data and supporting information to the various regulatory authorities for each therapeutic indication to establish the product candidate’s safety, purity, efficacy and potency. Securing regulatory approval also requires the submission of information about the product’s manufacturing process, and usually requires a pre-approval inspection of manufacturing facilities by the relevant regulatory authority. Any product candidates ARS Pharma develops may not be effective, may be only moderately effective, or may prove to have undesirable or unintended side effects, toxicities or other characteristics that outweigh any benefits of the product candidate and may preclude ARS Pharma from obtaining marketing approval or otherwise prevent or limit commercial use.

 

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The process of obtaining marketing approvals, in the United States, EU and other foreign jurisdictions, is expensive, may take many years if additional preclinical or clinical trials are required, 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. Changes in marketing approval policies during the development period, changes in or the enactment of additional statutes or regulations, or changes in regulatory review for each submitted product application, may cause delays in the approval or rejection of an application. The FDA, the EMA and comparable authorities in other countries have substantial discretion in the approval process and may refuse to accept any application or may decide during the review process that ARS Pharma’s data are insufficient for approval and require additional nonclinical, clinical or other studies. For example, the EMA requested additional support for ARS Pharma’s clinical data regarding the similarities in the pharmacokinetic and pharmacodynamic profiles of intra-muscular epinephrine injectable products to 1.0 mg of neffy. In addition, varying interpretations of the data obtained from nonclinical and clinical testing could delay, limit, or prevent marketing approval of a product candidate. As such, ARS Pharma may be unable to obtain the marketing approvals ARS Pharma pursues and any marketing approvals ARS Pharma ultimately obtains, including any conditional approvals, may be limited or subject to restrictions or post-approval commitments that could render the approved product not commercially viable.

Moreover, principal investigators for ARS Pharma’s clinical trials may serve as scientific advisors or consultants to ARS Pharma from time to time and receive compensation in connection with such services. Under certain circumstances, ARS Pharma may be required to report some of these relationships to the FDA, the EMA or comparable foreign regulatory authorities. The FDA, the EMA or comparable foreign regulatory authorities may conclude that a financial relationship between ARS Pharma and a principal investigator has created a conflict of interest or otherwise affected interpretation of the study. The FDA, the EMA or comparable foreign regulatory authorities may therefore question the integrity of the data generated at the applicable clinical trial site and the utility of the clinical trial itself may be jeopardized. This could result in a delay in approval, or rejection, of ARS Pharma’s marketing applications by the FDA, the EMA or comparable foreign regulatory authorities, as the case may be, and may ultimately lead to the denial of marketing approval of neffy or any future product candidate.

If ARS Pharma experiences delays in obtaining approval or if ARS Pharma fails to obtain approval of any product candidates ARS Pharma may develop, the commercial prospects for those product candidates, including for neffy for other indications, may be harmed, and ARS Pharma’s ability to generate revenues will be materially impaired.

The results of early-stage clinical trials and preclinical studies may not be predictive of future results. Initial data in ARS Pharma’s clinical trials may not be indicative of results obtained when these trials are completed or in later stage trials.

The results of preclinical studies may not be predictive of the results of clinical trials, and the results of any early-stage clinical trials ARS Pharma commences may not be predictive of the results of the later-stage clinical trials. In addition, initial data in clinical trials may not be indicative of results obtained when such trials are completed. There can be no assurance that any of ARS Pharma’s ongoing, planned or future clinical trials will ultimately be successful or support further clinical development or regulatory approval of neffy or any future product candidates. There is a high failure rate for drugs and biologics candidates proceeding through clinical trials. A number of companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in clinical development even after achieving promising results in earlier studies, and any such setbacks in ARS Pharma’s clinical development could have a material adverse effect on its business and operating results.

 

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Interim topline and preliminary data from ARS Pharma’s clinical trials that ARS Pharma announces or publishes from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.

From time to time, ARS Pharma may publish interim topline or preliminary data from ARS Pharma’s clinical trials. Interim data from clinical trials that ARS Pharma may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available. Preliminary or topline results also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data ARS Pharma previously published. As a result, interim and preliminary data should be viewed with caution until the final data are available. Adverse differences between preliminary or interim data and final data could significantly harm ARS Pharma’s reputation and business prospects.

Enrollment and retention of patients in clinical trials is an expensive and time-consuming process and could be made more difficult or rendered impossible by multiple factors outside ARS Pharma’s control.

Patient enrollment is a significant factor in the timing of clinical trials, and the timing of ARS Pharma’s clinical trials depends, in part, on the speed at which ARS Pharma can recruit patients to participate in its trials, as well as completion of required follow-up periods. ARS Pharma may not be able to initiate or continue clinical trials for neffy or any future product candidates if it is unable to locate and enroll a sufficient number of eligible patients to participate in these trials to such trial’s conclusion as required by the FDA, the EMA or other comparable foreign regulatory authorities. Additionally, certain clinical trials for neffy and any future product candidates may be focused on specific patient populations, particularly pediatric populations, that may be difficult to enroll due to apprehension by patients or caregivers, or on indications with relatively small patient populations, which may further limit enrollment of eligible patients or may result in slower enrollment than ARS Pharma anticipates. The eligibility criteria of ARS Pharma’s clinical trials, once established, may further limit the pool of available trial participants. For example, ARS Pharma estimates that are only three million people in the United States who have experienced severe Type I allergic reactions and are at risk of anaphylaxis currently have a filled prescription for an epinephrine intra-muscular injectable device. As a result, ARS Pharma may encounter difficulties in enrolling patients in ARS Pharma’s clinical trials, thereby delaying or preventing development and approval of neffy for potential additional indications or any future product candidates. Even once enrolled, ARS Pharma may be unable to retain a sufficient number of patients to complete any of ARS Pharma’s trials, which could result in discontinuations and delays of its clinical trials and impact the integrity of data from its clinical trials.

Patient enrollment and retention in clinical trials depends on many factors, including the size of the patient population, the severity of the disease under investigation, the nature of the trial protocol, the existing body of safety and efficacy data for the product candidate, the number and nature of competing treatments and ongoing clinical trials of competing therapies for the same indication, the proximity of patients to clinical sites, the eligibility criteria for the trial, the ability to adequately monitor patients during a trial, clinicians’ and patients’ perceptions as to the potential advantages of the product candidate being studied and the risk that patients will drop out of a trial before completing all site visits. Furthermore, ARS Pharma’s efforts to build relationships with patient communities may not succeed, which could result in delays in patient enrollment in its clinical trials.

Any negative results ARS Pharma may report in clinical trials of neffy or any future product candidate may also make it difficult or impossible to recruit and retain patients in other clinical trials of that same product candidate. Delays or failures in planned patient enrollment or retention may result in increased costs, program delays or both, which could have a harmful effect on ARS Pharma’s ability to

 

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develop neffy for the emergency treatment of Type I allergic reactions and additional indications and any future product candidates, or could render further development impossible. For example, the impact of public health epidemics, such as the ongoing COVID-19 pandemic, may delay or prevent patients from enrolling or from receiving treatment in accordance with the protocol and the required timelines, which could delay ARS Pharma’s clinical trials, or prevent ARS Pharma or its partners from completing ARS Pharma’s clinical trials at all, and harm ARS Pharma’s ability to obtain approval for such product candidate. Further, if patients drop out of ARS Pharma’s clinical trials, miss follow-up visits or otherwise fail to follow clinical trial protocols, whether as a result of the COVID-19 pandemic and related illness or actions taken to slow the spread of COVID-19 or otherwise, the integrity of data from ARS Pharma’s clinical trials may be compromised or not accepted by the FDA, the EMA or other regulatory authorities, which would represent a significant setback for the applicable program. In addition, ARS Pharma may rely on CROs and clinical trial sites to ensure proper and timely conduct of ARS Pharma’s future clinical trials and, while ARS Pharma intends to enter into agreements governing their services, ARS Pharma will be limited in its ability to compel their actual performance.

neffy or any future product candidate may cause undesirable side effects, adverse events, or have other properties that could delay or prevent its regulatory approval, limit the commercial profile of an approved label, or result in significant negative consequences following regulatory approval, if obtained.

Undesirable side effects or adverse events caused by neffy, or any future product candidate, could cause ARS Pharma or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA, the EMA or comparable foreign regulatory authorities. Although ARS Pharma’s clinical studies to date have demonstrated that neffy is well-tolerated by patients with no serious treatment-related adverse events, and reported adverse events generally no more severe than grade 1 and comparable with injection products, and with no meaningful pain or irritation based on formal scoring, results of ARS Pharma’s ongoing or future clinical trials for neffy or any future product candidate could reveal a high and unacceptable severity and prevalence of side effects, adverse events, or unexpected characteristics. Many compounds that initially showed promise in clinical or earlier stage testing are later found to cause undesirable or unexpected side effects or adverse events that prevented further development of the compound.

If unacceptable side effects or adverse events arise in the development of neffy or any future product candidates, ARS Pharma, the FDA, the EMA or comparable foreign regulatory authorities, the IRBs, or independent ethics committees at the institutions in which ARS Pharma’s trials are conducted, or the independent safety monitoring committee could suspend or terminate ARS Pharma’s clinical trials or regulatory authorities could order ARS Pharma to cease clinical trials or deny approval of neffy or any future product candidates for any or all targeted indications. Treatment-emergent side effects and adverse events that are deemed to be drug-related could also affect subject recruitment or the ability of enrolled subjects to complete the trial or result in potential product liability claims. Undesirable side effects or adverse events in one of ARS Pharma’s clinical trials for neffy in one indication could adversely affect enrollment in clinical trials, regulatory approval and commercialization of neffy in other indications. Additionally, there may be negative findings regarding components of neffy or future product candidates by other parties. Any negative findings by third parties may impact the future approvability or labeling of neffy or other product candidates ARS Pharma may develop. In addition, all side effects and adverse events may not be appropriately recognized or managed by the treating medical staff. Inadequate training in recognizing or managing the potential side effects and adverse events of neffy or any future product candidates could result in patient injury or death. Any of these occurrences may harm ARS Pharma’s business, financial condition and prospects significantly.

In addition, clinical trials of neffy are conducted in carefully defined sets of patients who have agreed to enter into clinical trials. Consequently, it is possible that ARS Pharma’s clinical trials, or

 

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those of any future collaborator, may indicate an apparent positive effect of neffy or a future product candidate that is greater than the actual positive effect, if any, or alternatively fail to identify undesirable side effects.

Finally, neffy is comprised of epinephrine and Intravail® that is delivered via an intranasal device that is considered packaging. Intra-muscular injection of epinephrine has been approved by the FDA and other regulatory authorities for the emergency treatment of Type I allergic reactions. In addition, Intravail® has previously been included in the formulations of FDA approved products such as VALTOCO® and TOSYMRA® nasal sprays. The intranasal apparatus ARS Pharma uses to deliver neffy has been used to deliver several drugs approved by the FDA and other regulatory authorities, including VALTOCO®, TOSYMRA® and NARCAN®. Even if neffy were to receive marketing approval or be commercialized, ARS Pharma would continue to be subject to the risks that the FDA, EMA or similar regulatory authorities could revoke approval of intra-muscular epinephrine injection products, other drug formulations containing Intravail® or utilizing the same intranasal apparatus, or that efficacy, manufacturing or supply issues could arise with epinephrine API, Intravail® or ARS Pharma’s intranasal apparatus. This could result in ARS Pharma’s own products being removed from the market or being less commercially successful.

The increasing use of social media platforms presents new risks and challenges.

Social media is increasingly being used to communicate about ARS Pharma’s clinical development activities and the indications neffy is being developed to treat, and ARS Pharma intends to utilize appropriate social media in connection with ARS Pharma’s commercialization efforts following regulatory approval of neffy, if any. Social media practices in the biotechnology and biopharmaceutical industries continue to evolve and regulations and regulatory guidance relating to such use are evolving and not always clear. This evolution creates uncertainty and risk of noncompliance with regulations applicable to ARS Pharma’s business, resulting in potential regulatory actions against ARS Pharma, along with the potential for litigation related to off-label marketing or other prohibited activities and heightened scrutiny by the FDA, the Federal Trade Commission (“FTC”), the SEC and other regulators. For example, patients may use social media channels to comment on their experience in an ongoing clinical trial or to report an alleged side effect or adverse event. If such disclosures occur, there is a risk that trial enrollment may be adversely impacted, that ARS Pharma may fail to monitor and comply with applicable adverse event reporting obligations or that ARS Pharma may not be able to defend ARS Pharma’s business or the public’s legitimate interests in the face of the political and market pressures generated by social media due to restrictions on what ARS Pharma may say about ARS Pharma’s product candidates. There is also a risk of inappropriate disclosure of sensitive or confidential information or negative or inaccurate posts or comments about ARS Pharma on any social networking website. In addition, ARS Pharma may encounter attacks on social media regarding ARS Pharma, its management, neffy or future product candidates. If any of these events were to occur or ARS Pharma otherwise fail to comply with applicable regulations, ARS Pharma could incur liability, face regulatory actions or incur other harm to its business.

If ARS Pharma fails to develop and commercialize neffy for additional indications or fails to discover, develop and commercialize other product candidates, ARS Pharma may be unable to grow its business and its ability to achieve its strategic objectives would be impaired.

Although the development and commercialization of neffy for the emergency treatment of Type I allergic reactions is ARS Pharma’s current primary focus, as part of ARS Pharma’s longer-term growth strategy, ARS Pharma plans to evaluate neffy for use in other indications and may develop other product candidates. ARS Pharma intends to evaluate internal opportunities from neffy and may do so for other potential product candidates or choose to in-license or acquire other product candidates as well as commercial products to treat other indications like Type I allergic reactions. These other

 

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potential product candidates will require additional, time-consuming development efforts prior to commercial sale, including preclinical studies, clinical trials and approval by the FDA, the EMA and/or other applicable foreign regulatory authorities. All product candidates are prone to the risks of failure that are inherent in pharmaceutical product development, including the possibility that the product candidate will not be shown to be sufficiently safe and effective for approval by regulatory authorities. In addition, ARS Pharma cannot assure you that any such products that are approved will be manufactured or produced economically, successfully commercialized or widely accepted in the marketplace or be more effective than other commercially available alternatives.

Research activities to identify product candidates require substantial technical, financial and human resources, whether or not any product candidates are ultimately identified. ARS Pharma’s research activities may initially show promise in identifying potential product candidates, yet fail to yield product candidates for clinical development for many reasons, including the following:

 

   

the research methodology used may not be successful in identifying potential product candidates;

 

   

competitors may develop alternatives that render ARS Pharma’s potential product candidates obsolete;

 

   

product candidates that ARS Pharma develops may nevertheless be covered by third parties’ patents or other exclusive rights;

 

   

a product candidate may, on further study, be shown to have harmful side effects or other characteristics that indicate it is unlikely to be effective or otherwise does not meet applicable regulatory criteria;

 

   

a product candidate may not be capable of being produced in commercial quantities at an acceptable cost, or at all; and

 

   

a product candidate may not be accepted as safe and effective by patients, the medical community or third-party payors.

If ARS Pharma is unsuccessful in identifying and developing neffy for additional indications or other product candidates, its potential for growth and achieving its strategic objectives may be impaired.

Even if neffy is approved for the emergency treatment of Type I allergic reactions, there remains significant uncertainty as to whether neffy will be successfully developed and ultimately approved for any other indication ARS Pharma is exploring or pursuing.

As part of ARS Pharma’s longer-term growth strategy, ARS Pharma plans to evaluate and potentially develop neffy for other indications. ARS Pharma’s programs for such other indications are at a very early stage and there remains significant uncertainty as to whether neffy will be successfully developed and ultimately approved for any other indication ARS Pharma is exploring or pursuing. Even if neffy is approved for the emergency treatment of Type I allergic reactions, there will remain significant uncertainty regarding whether neffy will be successfully developed or approved for any other indication. If ARS Pharma is unable to successfully develop, or if regulatory authorities do not approve, neffy for any other indication, ARS Pharma’s potential for growth and achieving ARS Pharma’s strategic objectives may be impaired.

 

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ARS Pharma may not be successful in its efforts to expand its pipeline by identifying additional indications for which to investigate neffy in the future. ARS Pharma may expend its limited resources to pursue a particular indication or formulation for neffy and fail to capitalize on product candidates, indications or formulations that may be more profitable or for which there is a greater likelihood of success.

Because ARS Pharma has limited financial and managerial resources, ARS Pharma is focused on specific indications for neffy. As a result, ARS Pharma may fail to generate additional clinical development opportunities for neffy for a number of reasons, including, that neffy may in certain indications, on further study, be shown to have harmful side effects, limited to no efficacy or other characteristics that suggest it is unlikely to receive marketing approval and achieve market acceptance in such additional indications. In addition, ARS Pharma may forgo or delay pursuit of opportunities with other indications that could have had greater commercial potential or likelihood of success. Furthermore, research activities to identify additional indications for neffy require substantial technical, financial and human resources. ARS Pharma may not be able to develop neffy for any additional indications based on resource allocation decisions and other reasons. ARS Pharma’s resource allocation decisions may cause ARS Pharma to fail to capitalize on viable commercial products or profitable market opportunities. ARS Pharma’s spending on current and future research and development activities for specific indications may not yield any commercially viable products.

Additionally, ARS Pharma may pursue in-licenses or acquisitions of development-stage assets or programs, which entails additional risk to ARS Pharma. Identifying, selecting and acquiring promising product candidates requires substantial technical, financial and human resources expertise. Efforts to do so may not result in the actual acquisition or license of a particular product candidate, potentially resulting in a diversion of ARS Pharma’s management’s time and the expenditure of ARS Pharma’s resources with no resulting benefit.

For example, if ARS Pharma is unable to identify programs that ultimately result in approved products, ARS Pharma may spend material amounts of its capital and other resources evaluating, acquiring and developing products that ultimately do not provide a return on its investment.

Competitive products may reduce or eliminate the commercial opportunity for neffy for its current or future indications. If ARS Pharma’s competitors develop technologies or product candidates more rapidly than ARS Pharma, or their technologies or product candidates are more effective or safer than ARS Pharma’s, its ability to develop and successfully commercialize neffy may be adversely affected.

The clinical and commercial landscape for the emergency treatment of Type I allergic reactions is highly competitive and subject to significant technological change. ARS Pharma faces competition with respect to ARS Pharma’s current indications for neffy and will face competition with respect to any future indications of neffy or other product candidates that ARS Pharma may seek to develop or commercialize in the future from large pharmaceutical and biotechnology companies, specialty pharmaceutical and generic drug companies, academic institutions, government agencies and research institutions. If approved, ARS Pharma anticipates that neffy will compete primarily against epinephrine intra-muscular injectable products, for the emergency treatment of Type I allergic reactions including EpiPen® and its generics, which is marketed by Viatris, Inc. and Teva Pharmaceuticals, Inc.; Adrenaclick®, which is marketed by Amneal Pharmaceuticals, Inc.; Auvi-Q®, which is marketed by Kaleo, Inc.; and Symjepi®, which is marketed by Sandoz, Inc., a Novartis division. Several other companies are also clinically developing larger dose intranasal epinephrine product candidates that may compete with neffy, including Bryn Pharma, Nasus Pharma and Hikma Pharmaceuticals, Inc. (previously INSYS Therapeutics, Inc.), Amphastar Pharmaceuticals is developing an intranasal candidate with an undisclosed dose, and Aquestive Therapeutics is developing a sublingual candidate

 

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based on a prodrug of epinephrine. If neffy is approved for other indications, it would also compete with a range of other therapeutic treatments that are well established or in development.

Many of ARS Pharma’s potential competitors have substantially greater financial, technical, commercial and human resources than ARS Pharma does and significantly more experience in the discovery, development and regulatory approval of product candidates and the commercialization of those products. Accordingly, ARS Pharma’s competitors may be more successful than ARS Pharma may be in obtaining regulatory approval for therapies and achieving widespread market acceptance. ARS Pharma’s competitors’ products may be more effective, or more effectively marketed and sold, than any product candidate ARS Pharma may commercialize and may render neffy or any future product candidates obsolete or non-competitive before ARS Pharma can recover development and commercialization expenses. In addition, ARS Pharma’s competitors may succeed in developing, acquiring or licensing technologies and drug products that are more effective or less costly than neffy or any future product candidates that ARS Pharma may develop, which could render such product candidates obsolete and noncompetitive.

If ARS Pharma obtains approval for neffy or any other future product candidate, ARS Pharma may face competition based on many different factors, including the efficacy, safety and tolerability of ARS Pharma’s products, the ease with which ARS Pharma’s products can be administered, the timing and scope of regulatory approvals for these products, the availability and cost of manufacturing, marketing and sales capabilities, price, reimbursement coverage and patent position. Existing and future competing products could present superior treatment alternatives, including being more effective, safer, less expensive or marketed and sold more effectively than any products ARS Pharma may develop. Competitive products may make any products ARS Pharma develop obsolete or noncompetitive before ARS Pharma recovers the expense of developing and commercializing its product candidates. Such competitors could also recruit ARS Pharma’s employees, which could negatively impact ARS Pharma’s level of expertise and its ability to execute its business plan.

In addition, ARS Pharma’s competitors may obtain patent protection, regulatory exclusivities or regulatory approval and commercialize products more rapidly than it does, which may impact future approvals or sales of any of ARS Pharma’s product candidates that receive regulatory approval. If the FDA or the EMA approves the marketing and commercial sale of neffy or any future product candidate, ARS Pharma will also be competing with respect to marketing capabilities and manufacturing efficiency. ARS Pharma expects competition among products will be based on product efficacy and safety, the timing and scope of regulatory approvals, availability of supply, marketing and sales capabilities, product price, reimbursement coverage by government and private third-party payors, regulatory exclusivities and patent position. ARS Pharma’s profitability and financial position will suffer if ARS Pharma’s product candidates receive regulatory approval but cannot compete effectively in the marketplace.

Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of ARS Pharma’s competitors. Smaller and other early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These third parties compete with ARS Pharma in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites, as well as in acquiring technologies complementary to, or necessary for, ARS Pharma’s activities.

 

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If the FDA, the EMA or other comparable foreign regulatory authorities approve generic versions of neffy or any future product candidate of ours that receives regulatory approval, or such authorities do not grant ARS Pharma’s products appropriate periods of non-patent exclusivity before approving generic versions of such products, the sales of such products could be adversely affected.

In the United States, 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,” or the Orange Book. Manufacturers may seek approval of generic versions of reference listed drugs through submission of abbreviated new drug applications (“ANDAs”) in the United States. In support of an ANDA, a generic manufacturer generally must show that its product has the same active ingredient(s), dosage form, strength, route of administration, and adequate labeling as the reference listed drug and that the generic version is bioequivalent to the reference listed drug, meaning, in part, that 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. Moreover, third-party insurers require, and many states allow or require, substitution of therapeutically equivalent generic drugs at the pharmacy level even if the branded drug is prescribed. Thus, following the introduction of a generic drug, a significant percentage of the sales of any branded product or reference listed drug may be lost to the generic product.

The FDA may not finally approve an ANDA for a generic product or a Section 505(b)(2) NDA of a competitor until any applicable period of non-patent exclusivity for the reference listed drug has expired. The FDCA provides a period of five years of non-patent exclusivity for a new drug containing a new chemical entity (“NCE”). For the purposes of this provision, an NCE is a drug that contains no active moiety that has previously been approved by the FDA in any other NDA. An active moiety is the molecule or ion responsible for the physiological or pharmacological action of the drug substance. 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 listed drug is invalid, unenforceable or will not be infringed by the generic product. In that case, the applicant may submit its application four years following approval of the listed drug and seek to launch its generic product even if ARS Pharma still has patent protection for ARS Pharma’s product unless an infringement suit is timely filed by the NDA or patent holder in which case the FDA cannot approve the ANDA or a Section 505(b)(2) NDA for 30 months unless a court decision in favor of the generic manufacturer is issued earlier.

Competition that neffy or any future products, if approved, may face from competitor versions of such products could negatively impact ARS Pharma’s future revenue, profitability and cash flows and substantially limit ARS Pharma’s ability to obtain a return on ARS Pharma’s investments in those product candidates. Obtaining and maintaining regulatory approval of neffy or any future product candidates in one jurisdiction does not mean that ARS Pharma will be successful in obtaining regulatory approval of those product candidates in other jurisdictions.

Obtaining and maintaining regulatory approval of neffy and any future product candidates in one jurisdiction does not guarantee that ARS Pharma will be able to obtain or maintain regulatory approval in any other jurisdiction, while a failure or delay in obtaining regulatory approval in one jurisdiction may have a negative effect on the regulatory approval process in others. For example, even if a regulatory authority, such as the EMA, grants marketing approval of neffy, comparable regulatory authorities in the United States and other foreign jurisdictions must also approve the manufacturing, marketing and promotion of neffy in those countries. Approval procedures vary among jurisdictions and can involve requirements and administrative review periods different from, and greater than, those in the United

 

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States or the EU including additional nonclinical studies or clinical trials, as clinical trials conducted in one jurisdiction may not be accepted by regulatory authorities in other jurisdictions. In many jurisdictions outside the United States including certain jurisdictions in the EU, a product candidate must be approved for reimbursement before it can be approved for sale in that jurisdiction. In some cases, the price that ARS Pharma intends to charge for ARS Pharma’s products is also subject to approval.

ARS Pharma plans to submit marketing applications in the United States and in the EU. Regulatory authorities in jurisdictions outside of the United States have requirements for approval of product candidates with which ARS Pharma must comply prior to marketing in those jurisdictions and such regulatory requirements can vary widely from country to country. Obtaining other regulatory approvals and compliance with other regulatory requirements could result in significant delays, difficulties and costs for ARS Pharma and could require additional nonclinical studies or clinical trials, which could be costly and time-consuming and could delay or prevent the introduction of ARS Pharma’s products in certain countries. The foreign regulatory approval process involves all of the risks associated with FDA approval. ARS Pharma does not have any product candidates approved for sale in any jurisdiction, including international markets, and ARS Pharma does not have experience in obtaining regulatory approval in either domestic or international markets. If ARS Pharma fails to comply with the regulatory requirements in international markets and/or obtain and maintain applicable marketing approvals, ARS Pharma’s target market will be reduced and ARS Pharma’s ability to realize the full market potential of neffy or any future product candidates will be harmed.

ARS Pharma received Fast Track designation for neffy in the United States and may in the future pursue Fast Track designation for other product candidates that ARS Pharma may develop, but ARS Pharma might not receive such future designations, and Fast Track designations may not lead to a faster development or regulatory review or approval process.

If the FDA determines that a product candidate is intended for the treatment of a serious or life-threatening condition and preclinical or clinical data demonstrate the potential to address an unmet medical need for this condition, the FDA may grant a product candidate Fast Track designation. Fast Track designation is intended to expedite or facilitate the process for reviewing new drug products meeting the specified criteria and gives the sponsor of a Fast Track product opportunities for more frequent interactions with the applicable FDA review team during product development and, once an NDA is submitted, the product candidate may be eligible for priority review. ARS Pharma was granted Fast Track designation for neffy for the treatment of Type I allergic reactions and may in the future request Fast Track designation for additional indications for neffy or for any future product candidates, however, ARS Pharma cannot assume that any such applications will meet the criteria for that designation. The FDA has broad discretion whether or not to grant this designation, so even if ARS Pharma believes a particular product candidate is eligible for this designation, ARS Pharma cannot assure you that the FDA would decide to grant it. Even if ARS Pharma does receive Fast Track Designation, ARS Pharma may not experience a faster development process, review or approval compared to conventional FDA procedures. The FDA may rescind the Fast Track designation if it believes that the designation is no longer supported by data from ARS Pharma’s clinical development activities.

ARS Pharma may seek priority review by the FDA for neffy or a future product candidate, and ARS Pharma may be unsuccessful. If ARS Pharma is successful, the designation may not actually lead to a faster development or regulatory review or approval process.

A priority review designation means that the goal for the FDA to review an application is six months, rather than the standard review period of ten months. ARS Pharma may in the future request priority review designation for neffy and any future product candidates, however, ARS Pharma cannot

 

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assume that any application for priority review will meet the criteria for that designation. A product is eligible for priority review if it is designed to treat a serious condition, and if approved, would provide a significant improvement in the treatment, diagnosis or prevention of a serious condition compared to marketed products. The FDA has broad discretion with respect to whether or not to grant priority review status to a product candidate, so even if ARS Pharma believes a particular product candidate is eligible for such designation or status, the FDA may decide not to grant it. Moreover, a priority review designation does not necessarily mean a faster development or regulatory review or approval process or necessarily confer any advantage with respect to approval compared to standard FDA review and approval. Receiving priority review from the FDA does not guarantee approval within the six-month review cycle or at all.

Product liability lawsuits against ARS Pharma or any of its current and future licensing and collaboration partners could divert ARS Pharma’s resources and attention, cause its to incur substantial liabilities and limit commercialization of neffy or any future product candidates.

ARS Pharma is exposed to potential product liability and professional indemnity risks that are inherent in the research, development, manufacturing, marketing and use of pharmaceutical products. Currently, ARS Pharma has no products that have been approved for commercial sale; however, the use of neffy by ARS Pharma and any current and future licensing and collaboration partners in clinical trials, and the sale of neffy, if approved, in the future, may expose ARS Pharma to liability claims. Product liability claims may be brought against ARS Pharma or ARS Pharma’s partners by participants enrolled in ARS Pharma’s clinical trials, patients, health care providers, pharmaceutical companies, ARS Pharma’s current and future licensing and collaboration partners or others using, administering or selling any of ARS Pharma’s future approved products. If ARS Pharma cannot successfully defend itself against any such claims, ARS Pharma may incur substantial liabilities or be required to limit commercialization of neffy or any future product candidates. Regardless of the merits or eventual outcome, liability claims may result in:

 

   

decreased demand for any of ARS Pharma’s future approved products;

 

   

injury to ARS Pharma’s reputation;

 

   

withdrawal of clinical trial participants;

 

   

termination of clinical trial sites or entire trial programs;

 

   

significant litigation costs, including with respect to potential class action lawsuits;

 

   

substantial monetary awards to, or costly settlements with, patients or other claimants;

 

   

product recalls or a change in the indications for which they may be used;

 

   

loss of revenue;

 

   

diversion of management and scientific resources from ARS Pharma’s business operations; and

 

   

the inability to commercialize neffy or any future product candidates.

Although the clinical trial process is designed to identify and assess potential side effects and adverse events, clinical development does not always fully characterize the safety and efficacy profile of a new drug, and it is always possible that a drug, even after regulatory approval, may exhibit unforeseen side effects. If neffy was to cause adverse events or side effects during clinical trials or after approval, ARS Pharma may be exposed to substantial liabilities. Physicians and patients may not comply with any warnings that identify known potential adverse effects, side effects, and patients who should not use neffy or any of ARS Pharma’s future product candidates. If any of ARS Pharma’s current or future product candidates, including neffy, are approved for marketing and commercial sale,

 

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ARS Pharma will be highly dependent upon consumer perceptions of ARS Pharma and the safety and quality of ARS Pharma’s products. ARS Pharma could be adversely affected if it is subject to negative publicity associated with illness or other adverse effects resulting from patients’ use or misuse of its products or any similar products distributed by other companies.

Although ARS Pharma maintains product liability insurance coverage in the amount of up to $5.0 million in the aggregate, including clinical trial liability, this insurance may not fully cover potential liabilities that ARS Pharma may incur. In addition, if a judgment is entered against ARS Pharma and its product liability insurance coverage does not provide adequate coverage, ARS Pharma may suffer an event of default under the terms of the ARS Loan and Security Agreement. The cost of any product liability litigation or other proceeding, even if resolved in ARS Pharma’s favor, could be substantial. ARS Pharma will need to increase its insurance coverage if ARS Pharma commercializes neffy or any future product candidate that receives regulatory approval. In addition, insurance coverage is becoming increasingly expensive. If ARS Pharma is unable to 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 neffy or any future product candidates, which could harm ARS Pharma’s business, financial condition, results of operations and prospects.

If ARS Pharma fails to comply with environmental, health and safety laws and regulations, ARS Pharma could become subject to fines or penalties or incur costs that could harm ARS Pharma’s business.

ARS Pharma is 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, ARS Pharma’s operations may involve the use of hazardous and flammable materials, including chemicals and biological materials, and may also produce hazardous waste products. Even if ARS Pharma contracts with third parties for the disposal of these materials and waste products, ARS Pharma 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 ARS Pharma’s hazardous materials, ARS Pharma could be held liable for any resulting damages, and any liability could exceed ARS Pharma’s resources. ARS Pharma also could incur significant costs associated with civil or criminal fines and penalties for failure to comply with such laws and regulations.

ARS Pharma maintains workers’ compensation insurance to cover ARS Pharma for costs and expenses ARS Pharma may incur due to injuries to ARS Pharma’s employees, but this insurance may not provide adequate coverage against potential liabilities. However, ARS Pharma does not maintain insurance for environmental liability or toxic tort claims that may be asserted against ARS Pharma.

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

ARS Pharma’s business activities may be subject to the FCPA and similar anti-bribery and anti-corruption laws of other countries in which ARS may operate, as well as U.S. and certain foreign export controls, trade sanctions, and import laws and regulations. Compliance with these legal requirements could limit ARS Pharma’s ability to compete in foreign markets and subject ARS Pharma to liability if it violates them.

If ARS Pharma further expand ARS Pharma’s operations outside of the United States, ARS Pharma must dedicate additional resources to comply with numerous laws and regulations in each

 

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jurisdiction in which ARS Pharma plans to operate. ARS Pharma’s business activities may be subject to the Foreign Corrupt Practices Act (“FCPA”) and similar anti-bribery or anti-corruption laws, regulations or rules of other countries in which ARS Pharma operate. The FCPA generally prohibits companies and their employees and third-party intermediaries from offering, promising, giving or authorizing the provision of anything of value, either directly or indirectly, to a non-U.S. government official in order to influence official action or otherwise obtain or retain business. The FCPA also requires public companies to make and keep books and records that accurately and fairly reflect the transactions of the corporation and to devise and maintain an adequate system of internal accounting controls. ARS Pharma’s business is heavily regulated and therefore involves significant interaction with public officials, including officials of non-U.S. governments. Additionally, in many other countries, hospitals owned and operated by the government, and doctors and other hospital employees would be considered foreign officials under the FCPA. Recently the SEC and Department of Justice have increased their FCPA enforcement activities with respect to biotechnology and pharmaceutical companies. There is no certainty that all of ARS Pharma’s employees, agents or contractors, or those of ARS Pharma’s affiliates, will comply with all applicable laws and regulations, particularly given the high level of complexity of these laws. Violations of these laws and regulations could result in fines, criminal sanctions against ARS Pharma, its officers or employees, disgorgement, and other sanctions and remedial measures, and prohibitions on the conduct of ARS Pharma’s business. Any such violations could include prohibitions on ARS Pharma’s ability to offer neffy or any future product candidates in one or more countries and could materially damage its reputation, brand, international activities, ability to attract and retain employees, and business, prospects, operating results and financial condition.

In addition, neffy and any of ARS Pharma’s future product candidates and activities may be subject to U.S. and foreign export controls, trade sanctions and import laws and regulations. Governmental regulation of the import or export of neffy or any future product candidates, or ARS Pharma’s failure to obtain any required import or export authorization for neffy or any future product candidates, when applicable, could harm ARS Pharma’s international sales and adversely affect ARS Pharma’s revenue. Compliance with applicable regulatory requirements regarding the export of neffy or any future product candidates may create delays in the introduction of ARS Pharma’s product candidates in international markets or, in some cases, prevent the export of ARS Pharma’s product candidates to some countries altogether. Furthermore, U.S. export control laws and economic sanctions prohibit the shipment of certain products and services to countries, governments, and persons targeted by U.S. sanctions. If ARS Pharma fails to comply with export and import regulations and such economic sanctions, penalties could be imposed, including fines and/or denial of certain export privileges. Moreover, any new export or import restrictions, new legislation or shifting approaches in the enforcement or scope of existing regulations, or in the countries, persons, or products targeted by such regulations, could result in decreased use of neffy or any future product candidates by, or in ARS Pharma’s decreased ability to export neffy or any future product candidates to existing or potential customers with international operations. Any decreased use of neffy or any future product candidates or limitation on ARS Pharma’s ability to export or sell access to neffy or any future product candidates would likely adversely affect ARS Pharma’s business.

Cyber-attacks or other failures in ARS Pharma’s telecommunications or information technology systems, or those of ARS Pharma’s licensing and collaboration partners, CROs, third-party logistics providers, distributors or other contractors or consultants, could result in information theft, data corruption and significant disruption of ARS Pharma’s business operations.

ARS Pharma, its licensing and collaboration partners, its CROs, third-party logistics providers, distributors and other contractors and consultants utilize information technology (“IT”) systems and networks to process, transmit and store electronic information in connection with ARS’s business activities. As use of digital technologies has increased, cyber incidents, including third parties gaining

 

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access to employee accounts using stolen or inferred credentials, computer malware, viruses, spamming or other means, and deliberate attacks and attempts to gain unauthorized access to computer systems and networks, have increased in frequency and sophistication. Cyber-attacks also could include phishing attempts or e-mail fraud to cause payments or information to be transmitted to an unintended recipient. These threats pose a risk to the security of ARS Pharma’s, its licensing and collaboration partners’, its CROs’, third-party logistics providers’, distributors’ and other contractors’ and consultants’ systems and networks, and the confidentiality, availability and integrity of ARS Pharma’s data. There can be no assurance that ARS Pharma will be successful in preventing cyber-attacks or successfully mitigating their effects. Similarly, there can be no assurance that ARS Pharma’s licensing and collaboration partners, CROs, third-party logistics providers, distributors and other contractors and consultants will be successful in protecting ARS Pharma’s clinical and other data that is stored on their systems. Any cyber-attack, data breach or destruction or loss of data could result in a violation of applicable U.S. and international privacy, data protection and other laws, and subject ARS Pharma to litigation and governmental investigations and proceedings by federal, state and local regulatory entities in the United States and by international regulatory entities, resulting in exposure to material civil and/or criminal liability. Further, ARS Pharma’s general liability insurance and corporate risk program may not cover all potential claims to which ARS Pharma is exposed and may not be adequate to indemnify ARS Pharma for all liability that maybe imposed; and could have a material adverse effect on ARS Pharma’s business and prospects. For example, the loss of clinical trial data from completed, ongoing or future clinical trials for neffy or any of ARS Pharma’s future product candidates could result in delays in ARS Pharma’s development and regulatory approval efforts and significantly increase ARS Pharma’s costs to recover or reproduce the data. In addition, ARS Pharma may suffer reputational harm or face litigation or adverse regulatory action as a result of cyber-attacks or other data security breaches and may incur significant additional expense to implement further data protection measures.

Risks Related to ARS Pharma’s Dependence on Third Parties

ARS Pharma intends to rely completely on third parties to manufacture and distribute ARS Pharma’s supply of neffy and intends to rely on third parties to manufacture and distribute any future product candidates.

ARS Pharma does not currently have, nor does ARS Pharma plan to acquire, the infrastructure or capability to manufacture or distribute commercial quantities of neffy. ARS Pharma’s ability to commercially supply neffy, if approved, depends, in part, on the ability of third-party manufacturers to supply and manufacture neffy, the raw materials, API and other important components related to the manufacture of neffy, including Intravail® and ARS Pharma’s nasal sprayer apparatus. ARS Pharma also intends to rely on third parties to label and package the finished product. These third-party manufacturers may have limited experience manufacturing neffy, the raw materials and API for neffy to be supplied to patients in the United States. While ARS Pharma will work with ARS Pharma’s third-party suppliers and manufacturers to optimize the manufacturing process for neffy and any future product candidates, if approved, ARS cannot guarantee that such efforts will be successful. If ARS Pharma fails to develop and maintain supply relationships with these third parties, ARS Pharma may be unable to successfully commercialize neffy or any future product candidate, if approved.

ARS Pharma has entered into a commercial supply agreement with Renaissance Lakewood LLC (“Renaissance”), which has been actively involved in supporting the manufacture of neffy in ARS Pharma’s clinical development, and ARS Pharma intends to rely on Renaissance as the primary source for drug product manufacturing and final packaging. Unless and until ARS Pharma can secure an alternative source for drug product manufacturing and final packaging, ARS Pharma’s dependence on Renaissance will subject ARS Pharma to the possible risks of shortages, interruptions and price fluctuations if neffy is approved for commercialization.

 

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ARS Pharma may be unable to maintain or establish required agreements with third-party manufacturers or to do so on acceptable terms. Even if ARS Pharma is able to establish agreements with third-party manufacturers, reliance on third-party manufacturers entails additional risks, including:

 

   

the failure of the third party to manufacture neffy or any future product candidates according to ARS Pharma’s schedule, or at all, including if ARS Pharma’s third-party contractors give greater priority to the supply of other products over ARS Pharma’s products or product candidates or otherwise do not satisfactorily perform according to the terms of the agreements between ARS Pharma and them;

 

   

the reduction or termination of production or deliveries by suppliers, or the raising of prices or renegotiation of terms;

 

   

the termination or nonrenewal of arrangements or agreements by ARS Pharma’s third-party contractors at a time that is costly or inconvenient for ARS Pharma;

 

   

the breach by the third-party contractors of ARS Pharma’s agreements with them;

 

   

the failure of third-party contractors to comply with applicable regulatory requirements, whether related to neffy or another product;

 

   

the failure of the third party to manufacture ARS Pharma’s product candidates according to ARS Pharma’s specifications;

 

   

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

 

   

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

 

   

the misappropriation of ARS Pharma’s proprietary information, including ARS Pharma’s trade secrets and know-how.

ARS Pharma does not have complete control over all aspects of the manufacturing process of, and are dependent on, ARS Pharma’s contract manufacturing partners for compliance with cGMP regulations for manufacturing both active drug substances and finished drug products. Third-party manufacturers may not be able to comply with cGMP regulations or similar regulatory requirements outside of the United States. If ARS Pharma’s contract manufacturers cannot successfully manufacture material that conforms to ARS Pharma’s specifications and the strict regulatory requirements of the FDA and other foreign regulatory authorities, this could affect the review of the NDA submitted for neffy or post-approval sales. In addition, other than to conduct audits, ARS Pharma does not have control over the ability of ARS Pharma’s contract manufacturers to maintain adequate quality control, quality assurance and qualified personnel. If the FDA or a comparable foreign regulatory authority does not approve these facilities for the manufacture of neffy or any future product candidates or if it withdraws any such approval in the future, ARS Pharma may need to find alternative manufacturing facilities, which would significantly impact ARS Pharma’s ability to develop, obtain marketing approvals for or commercialize neffy or any future product candidate. ARS Pharma’s failure, or the failure of ARS Pharma’s third-party manufacturers, to comply with applicable regulations could result in sanctions being imposed on ARS Pharma, including fines, injunctions, civil penalties, application review delays, suspension or withdrawal of approvals, license revocation, import alerts, seizures or recalls of product candidates or drugs, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of ARS Pharma’s neffy or any future product candidates or drugs and harm ARS Pharma’s business and results of operations. ARS Pharma’s current and anticipated future dependence upon others for the manufacture of neffy or any future product candidates or drugs may adversely affect ARS Pharma’s future profit margins and ARS Pharma’s ability to commercialize neffy or any future product candidate that receives marketing approval on a timely and competitive basis.

 

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ARS Pharma relies on third parties to conduct its nonclinical studies and clinical trials. If these third parties do not successfully carry out their contractual duties, comply with applicable regulatory requirements or meet expected deadlines, ARS Pharma’s development programs and its ability to seek or obtain regulatory approval for or commercialize neffy or any future product candidates may be delayed.

ARS Pharma is dependent on third parties to conduct ARS Pharma’s nonclinical studies and any clinical trials. Specifically, ARS Pharma has used and relied on, and intend to continue to use and rely on, medical institutions, clinical investigators, CROs and consultants to conduct its nonclinical studies and past clinical trials in accordance with its clinical protocols and regulatory requirements. These CROs, investigators and other third parties play a significant role in the conduct and timing of these studies and trials. While ARS Pharma has and will have agreements governing the activities of ARS Pharma’s third-party contractors, ARS Pharma has limited influence over their actual performance. Nevertheless, ARS Pharma is responsible for ensuring that each of ARS Pharma’s clinical trials is conducted in accordance with the applicable protocol and legal, regulatory and scientific standards, and ARS Pharma’s reliance on its CROs and other third parties does not relieve it of its regulatory responsibilities. ARS Pharma and its CROs are required to comply with GCP requirements, which are regulations and guidelines enforced by the FDA and comparable foreign regulatory authorities for all of ARS Pharma’s product candidates in clinical development. Regulatory authorities enforce these GCPs through periodic inspections of trial sponsors, principal investigators and trial sites. If ARS Pharma or any of its CROs or trial sites fail to comply with applicable GCPs, the clinical data generated in ARS Pharma’s clinical trials may be deemed unreliable, and the FDA or comparable foreign regulatory authorities may require ARS Pharma to perform additional clinical trials before approving ARS Pharma’s marketing applications. In addition, ARS Pharma’s clinical trials must be conducted with products produced under cGMP regulations. ARS Pharma’s failure to comply with these regulations may require ARS Pharma to repeat clinical trials, which would delay the regulatory approval process.

There is no guarantee that any of ARS Pharma’s CROs, investigators or other third parties will devote adequate time and resources to such trials or studies or perform as contractually required. If any of these third parties fail to meet expected deadlines, adhere to ARS Pharma’s clinical protocols or meet regulatory requirements, or otherwise performs in a substandard manner, ARS Pharma’s clinical trials may be extended, delayed or terminated. In addition, many of the third parties with whom ARS Pharma contract may also have relationships with other commercial entities, including ARS Pharma’s competitors, for whom they may also be conducting clinical trials or other development activities that could harm ARS Pharma’s competitive position. In addition, principal investigators for ARS Pharma’s clinical trials are expected to serve as scientific advisors or consultants to ARS Pharma from time to time and may receive cash or equity compensation in connection with such services. If these relationships and any related compensation result in perceived or actual conflicts of interest, or the FDA concludes that the financial relationship may have affected the interpretation of the study, the integrity of the data generated at the applicable clinical trial site may be questioned and the utility of the clinical trial itself may be jeopardized, which could result in the delay or rejection by the FDA of any NDA ARS Pharma submits. Any such delay or rejection could prevent ARS Pharma from commercializing neffy or any future product candidates.

ARS Pharma’s CROs have the right to terminate their agreements with ARS Pharma in the event of an uncured material breach. In addition, some of ARS Pharma’s CROs have an ability to terminate their respective agreements with ARS Pharma if it can be reasonably demonstrated that the safety of the subjects participating in ARS Pharma’s clinical trials warrants such termination, if ARS Pharma make a general assignment for the benefit of its creditors or if ARS Pharma is liquidated. If any of ARS Pharma’s relationships with these third parties terminate, ARS Pharma may not be able to enter into arrangements with alternative third parties on commercially reasonable terms or at all. Switching or adding additional CROs, investigators and other third parties involves additional cost and requires ARS

 

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Pharma’s management’s time and focus. In addition, there is a natural transition period when a new CRO commences work. As a result, delays occur, which can materially impact ARS Pharma’s ability to meet ARS Pharma’s desired clinical development timelines. Though ARS Pharma carefully manage its relationships with its CROs, investigators and other third parties, there can be no assurance that ARS Pharma will not encounter challenges or delays in the future or that these delays or challenges will not have a material adverse impact on ARS Pharma’s business, financial condition and prospects.

ARS Pharma is dependent on international third-party licensees and assignees for the development and commercialization of neffy in several countries outside the United States. The failure of these third parties to meet their contractual, regulatory or other obligations could adversely affect ARS Pharma’s business.

ARS Pharma has entered into exclusive licensing and collaboration agreements for the development and commercialization of neffy with Recordati in the EU, United Kingdom, and certain countries in the Middle East, Africa and Eurasia, with Alfresa Pharma in Japan and Pediatrix Therapeutics in China, Macau, Hong Kong and Taiwan. As a result, ARS Pharma is dependent on these parties to achieve regulatory approval of neffy for marketing in these countries and for the commercialization of neffy, if approved. The timing and amount of any milestone and royalty payments ARS Pharma may receive under these agreements, as well as the commercial success of neffy in those regions outside of the United States, will depend on, among other things, the efforts, allocation of resources and successful commercialization of neffy by Recordati, Alfresa Pharma and Pediatrix Therapeutics. ARS Pharma also depends on such licensing and collaboration partners to comply with all applicable laws relative to the development and commercialization of neffy in those countries. They may take actions or fail to take actions that result in safety issues with neffy in their licensed territory, and such safety issues could negatively impact neffy in countries outside of the licensed territory. ARS Pharma does not control the individual efforts of its licensing and collaboration partners and have limited ability to terminate these agreements or have assigned assets returned to ARS Pharma if such licensing and collaboration partners do not perform as anticipated. The failure of ARS Pharma’s licensing and collaboration partners to devote sufficient time and effort to the development and commercialization of neffy; to meet their obligations to ARS Pharma, including for future royalty and milestone payments; to adequately deploy business continuity plans in the event of a crisis; and/or to satisfactorily resolve significant disagreements with ARS Pharma or address other factors could have an adverse impact on its financial results and operations. In addition, if these third parties violate, or are alleged to have violated, any laws or regulations during the performance of their obligations for ARS Pharma, including with respect to safety, patient and data privacy, antitrust, and bribery and corruption, it is possible that ARS Pharma could suffer financial and reputational harm or other negative outcomes, including possible legal consequences and liabilities. ARS Pharma may not be successful in enforcing the terms and conditions of its licensing and collaboration agreements in court or via agreed upon dispute resolution mechanisms, and even if ARS Pharma were to prevail in any such dispute, the remedies may not be adequate to compensate ARS Pharma for the losses. Any termination, breach or expiration of any of these licensing or collaboration agreements could have a material adverse effect on ARS Pharma’s financial position by reducing or eliminating the potential for ARS Pharma to receive license fees, milestones and royalties. In such an event, ARS Pharma may be required to devote additional efforts and to incur additional costs associated with pursuing regulatory approval and commercialization of neffy. Alternatively, ARS Pharma may attempt to identify and transact with a new assignee or licensee, but there can be no assurance that it would be able to identify a suitable partner or transact on terms that are favorable to ARS Pharma.

 

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ARS Pharma may seek to enter into additional collaborations, licenses and other similar arrangements for neffy or any future product candidate and may not be successful in doing so, and even if it is, it may relinquish valuable rights and may not realize the benefits of such relationships.

ARS Pharma may seek to enter into collaborations, joint ventures, licenses and other similar arrangements for the development or commercialization of neffy in other geographic regions or of any future product candidates, due to capital costs required to develop or commercialize neffy or any future product candidate or manufacturing constraints. Such collaborative efforts may not be profitable. ARS Pharma may not be successful in its efforts to establish or maintain such collaborations for neffy or any future product candidates because its research and development pipeline may be insufficient, its product candidates may be deemed to be at too early of a stage of development for collaborative effort or third parties may not view its product candidates as having the requisite potential to demonstrate safety and efficacy or significant commercial opportunity. In addition, ARS Pharma faces significant competition in seeking appropriate strategic partners, and the negotiation process can be time-consuming and complex. ARS Pharma may have to relinquish valuable rights to its future revenue streams, research programs or product candidates, or grant licenses on terms that may not be favorable to ARS Pharma, as part of any such arrangement, and such arrangements may restrict ARS Pharma from entering into additional agreements with other potential licensing and collaboration partners. ARS Pharma cannot be certain that, following a collaboration, license or strategic transaction, ARS Pharma will achieve an economic benefit that justifies such transaction. In addition, the terms of the ARS Loan and Security Agreement prohibit ARS Pharma from entering into certain licensing and collaboration agreements without Silicon Valley Bank’s consent, including any licensing that grant exclusive rights as to territories except as to discreet geographical areas outside of the United States.

Even if ARS Pharma is successful in its efforts to establish such collaborations, the terms that ARS Pharma agree upon may not be favorable to ARS Pharma, and it may not be able to maintain such collaborations if, for example, the development or approval of neffy or any future product candidate is delayed, the safety of neffy or any future product candidate is questioned or the sales of an approved product candidate are unsatisfactory.

In addition, any potential future collaborations may be terminable by ARS Pharma’s strategic partners, and ARS Pharma may not be able to adequately protect ARS Pharma’s rights under these agreements. Furthermore, strategic partners may negotiate for certain rights to control decisions regarding the development and commercialization of neffy or any future product candidate, if approved, and may not conduct those activities in the same manner as ARS Pharma does. Any termination of collaborations ARS Pharma enters into in the future, or any delay in entering into collaborations related to neffy or any future product candidate, could delay the development and commercialization of neffy or any future product candidate and reduce their competitiveness if they reach the market, which could have a material adverse effect on ARS Pharma’s business, financial condition and results of operations.

ARS Pharma’s reliance on third parties requires it to share its trade secrets, know-how and other proprietary information, which increases the possibility that a competitor will discover them or that ARS Pharma’s trade secrets will be misappropriated or disclosed.

Because ARS Pharma currently relies on third parties to manufacture neffy and to perform quality testing, ARS Pharma must, at times, share its proprietary information, including trade secrets and know-how, with them. ARS Pharma seeks to protect its proprietary information, in part, by entering into confidentiality agreements, and, if applicable, material transfer agreements, collaborative research agreements, consulting agreements or other similar agreements with its current and future licensing and collaboration partners, advisors, employees and consultants prior to beginning research or

 

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disclosing proprietary information. These agreements typically limit the rights of the third parties to use or disclose ARS Pharma’s proprietary information. Despite the contractual provisions employed when working with third parties, the need to share trade secrets, know-how and other proprietary information increases the risk that such proprietary information become known by ARS Pharma’s competitors, are intentionally or inadvertently incorporated into the technology of others or are disclosed or used in violation of these agreements. ARS Pharma relies, in part, on trade secrets, know-how and other proprietary information to develop and maintain its competitive position and a competitor’s discovery of its proprietary information or other unauthorized use or disclosure would impair its competitive position and may have a material adverse effect on its business, financial condition, results of operations and prospects.

Risks Related to Commercialization of neffy or Any Future Product Candidates

ARS Pharma currently has limited marketing, sales or distribution infrastructure. If ARS Pharma is unable to fully develop its sales, marketing and distribution capability on its own or through collaborations with marketing partners, it may not be successful in commercializing its product candidates.

ARS Pharma is currently building its marketing, sales or distribution capabilities. As a company ARS Pharma has not commercialized or marketed any products to date. If neffy is approved for the emergency treatment of Type I allergic reactions or other future indications or any future product candidate is approved, ARS Pharma will need to expand ARS Pharma’s sales and marketing organization, on ARS Pharma’s own and in collaboration with third parties, and add further technical expertise and supporting distribution capabilities to commercialize the approved product in key territories, which will require substantial additional resources. Some or all of these costs may be incurred in advance of any approval of neffy or any future product candidate. There are risks involved with both establishing ARS Pharma’s own sales, marketing and distribution capabilities and entering into arrangements with third parties to perform these services. For example, recruiting and training a commercial organization is expensive and time consuming and could delay any product launch. If the commercial launch of neffy or any future product candidate for which ARS Pharma recruits a sales force and establish marketing capabilities is delayed or does not occur for any reason, ARS Pharma would have prematurely or unnecessarily incurred these commercialization expenses. This may be costly and ARS Pharma’s investment would be lost if ARS Pharma cannot retain or reposition its sales and marketing personnel. Any failure or delay in the development of ARS Pharma’s or third parties’ internal sales, marketing and distribution capabilities would adversely impact the commercialization of neffy and any future product candidates.

Factors that may inhibit ARS Pharma’s efforts to commercialize neffy or any future product candidate on its own include:

 

   

ARS Pharma’s inability to recruit and retain adequate numbers of effective sales and marketing personnel;

 

   

the inability of sales personnel to obtain access to or persuade adequate numbers of allergists, pediatricians and other physicians to prescribe any future products;

 

   

the lack of complementary products to be offered by sales personnel, which may put ARS Pharma at a competitive disadvantage relative to companies with more extensive product lines;

 

   

the availability of adequate coverage by and reimbursement from third-party payors; and

 

   

unforeseen costs and expenses associated with building out an independent sales and marketing organization.

ARS Pharma has entered into exclusive licensing and collaboration agreements for the development and commercialization of neffy with Recordati in the EU, United Kingdom, and certain

 

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countries in the Middle East, Africa and Eurasia, with Alfresa Pharma in Japan and Pediatrix Therapeutics in China, Macau, Hong Kong and Taiwan. These licensing and collaboration partners have direct sales forces and established distribution systems to serve as an alternative to ARS Pharma’s own sales force and distribution systems. ARS Pharma may enter into additional licensing and collaboration agreements in other territories for the commercialization of neffy or any future product candidates, however, ARS Pharma may be unable to enter into such agreements on favorable terms, if at all. ARS Pharma’s product revenue may be lower than if ARS Pharma directly marketed or sold ARS Pharma’s products, if approved. In addition, any revenue ARS Pharma receives will depend in whole or in part upon the efforts of these third parties, which may not be successful and are generally not within ARS Pharma’s control.

ARS Pharma also competes with many companies that currently have extensive, experienced and well-funded sales, distribution and marketing operations to recruit, hire, train and retain marketing and sales personnel. ARS Pharma also faces competition in its search for third parties to assist ARS Pharma with the sales and marketing efforts of neffy and any future product candidates, if approved. Without an internal team or the support of a third-party to perform marketing and sales functions, ARS Pharma may be unable to compete successfully against these more established companies.

If ARS Pharma does not expand its sales and marketing capabilities successfully, on its own and in collaboration with third parties, ARS Pharma will not be successful in commercializing neffy or any future product candidates. If ARS Pharma is not successful in commercializing any approved products, its future product revenue will suffer and ARS Pharma may incur significant additional losses.

Furthermore, ARS Pharma’s efforts to educate patients, caregivers, allergists, pediatricians and other physicians, and payors on the benefits of neffy or any future product candidates may require more resources than ARS Pharma anticipates and may never be successful. Even if neffy or any future product candidates are approved, if ARS Pharma is unable to successfully market ARS Pharma’s products successfully, ARS Pharma will not be able to generate significant revenues from such products, if approved.

The market for neffy and any future product candidates ARS Pharma may develop may be smaller than it expects.

ARS Pharma has focused its development of neffy for the emergency treatment of Type I allergic reactions. ARS Pharma bases its market opportunity estimates on a variety of factors, including its estimates of the number of people who have experienced severe Type I allergic reactions and are at risk of anaphylaxis, the continued growth rate of ARS Pharma’s patient population, the number of those in its patient population who ARS Pharma expects will fill a prescription for neffy, including those that currently do not fill prescriptions for epinephrine intra-muscular injectable devices or whose prescriptions have lapsed, the estimated increase in per patient device acquisition of neffy as compared to epinephrine intra-muscular injectable devices and the net sales of epinephrine intra-muscular injectable devices. These estimates are based on many assumptions and may prove incorrect, and new studies or market research may reduce ARS Pharma’s estimated patient population and potential device sales. If ARS Pharma is unable to advance neffy or any future product candidates with attractive market opportunities or if ARS Pharma’s market opportunities are smaller than ARS Pharma expected, ARS Pharma’s future product revenues may be smaller than anticipated, which would adversely affect its business, financial condition, results of operations and prospects.

 

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Any of ARS Pharma’s current and future product candidates for which ARS Pharma, or any current or future licensing and collaboration partners, obtain regulatory approval in the future will be subject to ongoing obligations and continued regulatory review, which may result in significant additional expense. If approved, neffy and any future product candidates could be subject to post-marketing restrictions or withdrawal from the market and ARS Pharma, or any current or future licensing and collaboration partners, may be subject to substantial penalties if ARS Pharma, or they, fail to comply with regulatory requirements or if ARS Pharma, or they, experience unanticipated problems with ARS Pharma’s products following approval.

neffy or any future product candidates for which ARS Pharma, or any current or future licensing and collaboration partners, obtain regulatory approval, as well as the manufacturing processes, post-approval studies, labeling, post-approval pharmacovigilance monitoring, advertising and promotional activities for such product, among other things, will be subject to ongoing requirements of and review by the FDA, the EMA and other applicable 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. For certain commercial prescription drug products, manufacturers and other parties involved in the supply chain must also meet chain of distribution requirements and build electronic, interoperable systems for product tracking and tracing and for notifying the FDA of counterfeit, diverted, stolen and intentionally adulterated products or other products that are otherwise unfit for distribution in the United States. ARS Pharma and ARS Pharma’s contract manufacturers will also be subject to user fees and periodic inspection by regulatory authorities to monitor compliance with these requirements and the terms of any product approval ARS Pharma may obtain. Even if regulatory approval of a product candidate is granted, the approval may be subject to limitations on the indications or uses for which the product may be marketed or to the conditions of approval, including the requirement in the United States to implement a Risk Evaluation and Mitigation Strategy or the inclusion of a Boxed Warning, which highlights a specific life-threatening safety risk.

The FDA, the EMA and other regulatory authorities may also impose requirements for costly post-marketing studies or clinical trials and surveillance to monitor the safety or efficacy of a product. For example, 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. Regulatory authorities impose stringent restrictions on manufacturers’ communications regarding off-label use. However, companies generally may share truthful and not misleading information that is otherwise consistent with a product’s approved labeling. If ARS Pharma, or any current or future licensing and collaboration partners, do not market neffy or any of ARS Pharma’s future product candidates for which ARS Pharma, or they, receive regulatory approval for only their approved indications, ARS Pharma, or they, may be subject to warnings or enforcement action for off-label marketing if it is alleged that ARS Pharma is doing so. Violation of laws and regulations 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, including the False Claims Act and any comparable foreign laws. In the EU, the direct-to-consumer advertising of prescription-only medicinal products is prohibited. Violations of the rules governing the promotion of medicinal products in the EU could be penalized by administrative measures, fines and imprisonment. These laws may further limit or restrict the advertising and promotion of ARS Pharma’s products to the general public, and may also impose limitations on ARS Pharma’s promotional activities with health care professionals.

 

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

 

   

restrictions on the manufacturing of such products;

 

   

restrictions on the labeling or marketing of such products;

 

   

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 ARS Pharma submits;

 

   

recall of products;

 

   

restrictions on coverage by third-party payors;

 

   

fines, restitution or disgorgement of profits or revenues;

 

   

exclusion from federal health care programs such as Medicare and Medicaid;

 

   

suspension or withdrawal of regulatory approvals;

 

   

refusal to permit the import or export of products;

 

   

product seizure; or

 

   

injunctions or the imposition of civil or criminal penalties.

Even if ARS Pharma, or any current or future licensing and collaboration partners, obtains regulatory approvals for neffy or any future product candidate, the terms of approvals and ongoing regulation of ARS Pharma’s products may limit how ARS Pharma manufactures and markets its products, which could impair its ability to generate revenue.

Once regulatory approval has been granted, an approved product and its manufacturer and distributor are subject to ongoing review and extensive regulation. ARS Pharma, and any current and future licensing and collaboration partners, must therefore comply with requirements concerning advertising and promotion for neffy or any future product candidate for which ARS Pharma or they obtain regulatory 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, ARS Pharma and any current and future licensing and collaboration partners will not be able to promote any products ARS Pharma develops for indications or uses for which they are not approved.

In addition, manufacturers of approved products and those manufacturers’ facilities are required to comply with extensive FDA, EMA and other foreign regulatory 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. ARS Pharma, its contract manufacturers, any current and future licensing and collaboration partners and their contract manufacturers would be subject to periodic unannounced inspections by the FDA, the EMA and other foreign regulators to monitor and ensure compliance with cGMPs. Despite ARS Pharma’s efforts to inspect and verify regulatory compliance, one or more of ARS Pharma’s third-party manufacturing vendors may be found on

 

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regulatory inspection by the FDA, the EMA or other foreign regulators to be not in compliance with cGMP regulations, which may result in shutdown of the third-party vendor or invalidation of drug product lots or processes. In some cases, a product recall may be warranted or required, which would materially affect ARS Pharma’s ability to supply and market its drug products.

Accordingly, assuming ARS Pharma, or any current or future licensing and collaboration partners, receive regulatory approval for neffy or one or more future product candidates, ARS, and any current and future licensing and collaboration partners, and ARS Pharma’s 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 ARS Pharma, and any current and future licensing and collaboration partners, are not able to comply with post-approval regulatory requirements, ARS, and any current and future licensing and collaboration partners, could have the regulatory approvals for neffy or any future products withdrawn by regulatory authorities and ARS Pharma’s, or any current or future licensing and collaboration partners’, ability to market any future products could be limited, which could adversely affect ARS Pharma’s ability to achieve or sustain profitability. Further, the cost of compliance with post-approval regulations may have a negative effect on ARS’s operating results and financial condition.

Even if neffy or any future product candidate of ours receives regulatory approval, it may fail to achieve the degree of market acceptance by allergists, pediatricians and other physicians, patients, caregivers, third-party payors and others in the medical community necessary for commercial success, in which case ARS Pharma may not generate significant revenues or become profitable.

ARS Pharma has never commercialized a product, and even if neffy for the treatment of any indication, or any future product candidate of ours, is approved by the appropriate regulatory authorities for marketing and sale, it may nonetheless fail to gain sufficient market acceptance by allergists, pediatricians and other physicians, patients, caregivers, third-party payors and others in the medical community. Physicians may be reluctant to prescribe neffy in place of well-established epinephrine intra-muscular injectable devices. Further, patients and caregivers may be reluctant to switch unless their physicians recommend switching products or are required to switch due to lack of coverage and adequate reimbursement. In addition, even if ARS Pharma is able to demonstrate neffy’s or any future product candidate’s safety and efficacy to the FDA, the EMA and other regulators, safety or efficacy concerns in the medical community may hinder market acceptance.

Efforts to educate patients, caregivers, the medical community and third-party payors on the benefits of neffy and any future product candidates may require more resources that ARS Pharma anticipates, including management time and financial resources, and may not be successful. If neffy or any future product candidate is approved but does not achieve an adequate level of market acceptance, ARS Pharma may not generate significant revenues and ARS Pharma may not become profitable. The degree of market acceptance of neffy and any future product candidates, if approved for commercial sale, will depend on a number of factors, including:

 

   

the efficacy and safety of the product;

 

   

the potential advantages of the product compared to competitive therapies and ARS Pharma’s ability to successfully publicize these advantages or highlight them in any marketing materials;

 

   

the prevalence and severity of any side effects;

 

   

ARS Pharma’s ability, or the ability of any current or future licensing or collaboration partners, to offer the product for sale at competitive prices;

 

   

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

 

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

 

   

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

 

   

the strength of sales, marketing and distribution support;

 

   

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

 

   

availability and adequacy of coverage and reimbursement from government payors, managed care plans and other third-party payors.

Any failure by neffy or any future product candidate of ours that obtains regulatory approval to achieve market acceptance or commercial success would adversely affect ARS Pharma’s business prospects.

Recently enacted and future legislation may increase the difficulty and cost for ARS Pharma to obtain marketing approval of and commercialize neffy or any future product candidates and affect the prices ARS Pharma may obtain.

In the United States and some foreign jurisdictions, there have been, and ARS Pharma expects there will continue to be, a number of legislative and regulatory changes and proposed changes regarding the healthcare system, including cost-containment measures, that could reduce or limit coverage and reimbursement for newly approved drugs, prevent or delay marketing approval of neffy or any future product candidates, restrict or regulate post-approval activities and affect ARS Pharma’s ability to profitably sell neffy or any future product candidates for which ARS Pharma obtains marketing approval.

For example, in 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (collectively, the “ACA”), was signed into law. The ACA was intended, among other things, to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for the healthcare and health insurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms. The ACA and subsequent regulations increased the Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program for both branded and generic drugs and revised the definition of “average manufacturer price” for reporting purposes, which could further increase the amount of Medicaid drug rebates to states. However, on March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 into law, which eliminates the statutory Medicaid drug rebate cap for single source and innovator multiple source drugs, beginning January 1, 2024. Further, the ACA imposed a significant annual fee on companies that manufacture or import branded prescription drug products, increased the number of entities eligible for discounts under the 340B program and included a discount on brand name drugs for Medicare Part D beneficiaries in the coverage gap, or “donut hole.” Substantial provisions affecting compliance have also been enacted, which may require ARS Pharma to modify its business practices with healthcare practitioners.

Since its enactment, there have been judicial, executive and Congressional challenges to certain aspects of the ACA. For example, the Tax Cuts and Jobs Act of 2017 included a provision which repealed, effective January 1, 2019, the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate.” On June 17, 2021, the U.S. Supreme Court dismissed a challenge on procedural grounds that argued the ACA is unconstitutional in its entirety because the individual mandate was repealed by Congress. Thus, the ACA will remain in effect in its current form. Prior to the U.S. Supreme Court ruling on January 28, 2021, President Biden issued an

 

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executive order that initiated a special enrollment period for purposes of obtaining health insurance coverage through the ACA marketplace. The executive order also instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA. It is possible that the ACA will be subject to judicial or Congressional challenges in the future. It is unclear how any such challenges, and the healthcare reform measures of the Biden administration will impact the ACA and ARS Pharma’s business.

In addition, other legislative changes have been proposed and adopted in the United States since the ACA was enacted. These changes include aggregate reductions to Medicare payments to providers of up to two percent per fiscal year pursuant to the Budget Control Act of 2011, which went into effect on April 1, 2013, and due to subsequent legislative amendments, will remain in effect until 2031, except for a temporary suspension from May 1, 2020 through March 31, 2022 due to the COVID-19 pandemic, unless additional Congressional action is taken. Under current legislation, the actual reduction in Medicare payments will vary from 1% in 2022 to up to 4% in the final fiscal year of this sequester. In addition, the American Taxpayer Relief Act of 2012 was signed into law which, among other things, further reduced Medicare payments to several types of providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

Recently there has also been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several U.S. Presidential executive orders, congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for products. At the federal level, the Trump administration used several means to propose or implement drug pricing reform, including through federal budget proposals, executive orders and policy initiatives. However, several lawsuits have been brought against Health and Human Services (“HHS”) challenging various aspects of the rules implemented during the Trump administration. As a result, the Biden administration and HHS have delayed the implementation or published rules rescinding some of these Trump-era policies. Additionally, in July 2021, the Biden administration released an executive order, “Promoting Competition in the American Economy,” with multiple provisions aimed at prescription drugs. In response to Biden’s executive order, on September 9, 2021, HHS released a Comprehensive Plan for Addressing High Drug Prices that outlines principles for drug pricing reform and sets out a variety of potential legislative policies that Congress could pursue as well as potential administrative actions HHS can take to advance these principles. No legislation or administrative actions have been finalized to implement these principles. It is unclear whether these or similar policy initiatives will be implemented in the future.

At the state level, legislatures have become increasingly aggressive in passing legislation and implementing regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

These laws and the regulations and policies implementing them, as well as other healthcare reform measures that may be adopted in the future, may have a material adverse effect on ARS Pharma’s industry generally and on its ability to successfully develop and commercialize neffy or any future product candidates.

 

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Governments outside the United States may impose strict price controls, which may adversely affect ARS Pharma’s revenues, if any.

In some countries, including certain Member States of the EU, the pricing of prescription drugs is, in part, subject to governmental control. Additional countries may adopt similar approaches to the pricing of prescription drugs. In such countries, pricing negotiations with governmental authorities can take considerable time after receipt of regulatory approval for a product. The EU provides options for the EU Member States to restrict the range of drug products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. EU Member States may approve a specific price for a product or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the product on the market. Other EU Member States allow companies to fix their own prices for drug products, but monitor and control prescription volumes and issue guidance to physicians to limit prescriptions. In addition, there can be considerable pressure by governments and other stakeholders on prices and reimbursement levels, including as part of cost containment measures. Political, economic and regulatory developments may further complicate pricing negotiations, and pricing negotiations may continue after coverage and reimbursement have been obtained. Reference pricing used by various countries and parallel distribution, or arbitrage between low-priced and high-priced countries, can further reduce prices. In some countries, ARS Pharma may be required to conduct a clinical study or other studies that compare the cost-effectiveness of neffy or any future product candidates to other available therapies in order to obtain or maintain reimbursement or pricing approval, which is time-consuming and costly. ARS cannot be sure that such prices and reimbursement will be acceptable to ARS Pharma. Publication of discounts by third-party payors or authorities may lead to further pressure on the prices or reimbursement levels within the country of publication and other countries. If pricing is set at unsatisfactory levels or if reimbursement of ARS Pharma’s products is unavailable or limited in scope or amount, ARS Pharma’s revenues from sales by ARS Pharma or its strategic partners and the potential profitability of neffy or any future product candidates in those countries would be negatively affected.

The successful commercialization of neffy or any future product candidates, if approved, will depend in part on the extent to which governmental authorities and health insurers establish coverage, adequate reimbursement levels and favorable pricing policies. Failure to obtain or maintain coverage and adequate reimbursement for ARS Pharma’s products could limit its ability to market those products and decrease its ability to generate revenue.

The availability of coverage and the adequacy of reimbursement by governmental healthcare programs such as Medicare and Medicaid, private health insurers and other third-party payors are essential for most patients to be able to afford prescription medications such as neffy or any future product candidates, if approved. ARS Pharma’s ability to achieve coverage and acceptable levels of reimbursement for its products by third-party payors will have an effect on its ability to successfully commercialize those products. Accordingly, ARS Pharma will need to successfully implement a coverage and reimbursement strategy for any approved product candidate. Even if ARS Pharma obtains coverage for a given product by a third-party payor, the resulting reimbursement payment rates may not be adequate or may require co-payments that patients find unacceptably high. ARS Pharma cannot be sure that coverage and reimbursement in the United States, the EU or elsewhere will be available for neffy or any future product candidate that ARS Pharma may develop, and any reimbursement that may become available may be decreased or eliminated in the future.

Third-party payors increasingly are challenging prices charged for biopharmaceutical products and services, and many third-party payors may refuse to provide coverage and reimbursement for particular drugs when an equivalent generic drug or a less expensive therapy is available. It is possible that a third-party payor may consider neffy or any future product candidate as substitutable and only

 

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offer to reimburse patients for the less expensive product. Even if ARS Pharma is successful in demonstrating improved efficacy or improved convenience of administration with neffy or any future product candidates, pricing of existing drugs may limit the amount ARS Pharma will be able to charge for neffy or any future product candidates. These payors may deny or revoke the reimbursement status of a given product or establish prices for new or existing marketed products at levels that are too low to enable ARS Pharma to realize an appropriate return on its investment in product development. If reimbursement is not available or is available only at limited levels, ARS may not be able to successfully commercialize or obtain a satisfactory financial return on neffy or any future product candidates that ARS Pharma may develop.

There is significant uncertainty related to third-party payor coverage and reimbursement of newly approved products. In the United States, third-party payors, including private and governmental payors, such as the Medicare and Medicaid programs, play an important role in determining the extent to which new drugs will be covered. Some third-party payors may require pre-approval of coverage for new or innovative devices or drug therapies before they will reimburse healthcare providers who use such therapies. It is difficult to predict at this time what third-party payors will decide with respect to the coverage and reimbursement for neffy or any future product candidates.

Obtaining and maintaining reimbursement status is time consuming, costly and uncertain. The Medicare and Medicaid programs increasingly are used as models for how private payors and other governmental payors develop their coverage and reimbursement policies for drugs. However, no uniform policy for coverage and reimbursement for products exists among third-party payors in the United States. Therefore, coverage and reimbursement for products can differ significantly from payor to payor. As a result, the coverage determination process is often a time consuming and costly process that will require ARS Pharma to provide scientific and clinical support for the use of its products to each payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance. Furthermore, rules and regulations regarding reimbursement change frequently, in some cases at short notice, and ARS Pharma believes that changes in these rules and regulations are likely.

Outside the United States, international operations are generally subject to extensive governmental price controls and other market regulations, and ARS Pharma believes the increasing emphasis on cost-containment initiatives in Europe and other countries has and will continue to put pressure on the pricing and usage of neffy or any future product candidates. In many countries, the prices of medical products are subject to varying price control mechanisms as part of national health systems. Other countries allow companies to fix their own prices for medical products but monitor and control company profits. Additional foreign price controls or other changes in pricing regulation could restrict the amount that ARS Pharma is able to charge for neffy or any future product candidates. Accordingly, in markets outside the United States, the reimbursement for neffy or any future product candidates may be reduced compared with the United States and may be insufficient to generate commercially reasonable revenue and profits.

Moreover, increasing efforts by governmental and third-party payors in the United States and abroad to cap or reduce healthcare costs may cause such organizations to limit both coverage and the level of reimbursement for newly approved products and, as a result, they may not cover or provide adequate payment for neffy or any future product candidates. ARS Pharma expects to experience pricing pressures in connection with the sale of neffy or any future product candidates due to the trend toward managed healthcare, the increasing influence of health maintenance organizations and additional legislative changes. The downward pressure on healthcare costs in general, particularly prescription drugs and surgical procedures and other treatments, has become very intense. As a result, increasingly high barriers are being erected to the entry of new products.

 

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Ongoing healthcare legislative and regulatory reform measures may have a material adverse effect on ARS Pharma’s business and results of operations.

ARS Pharma’s relationships with customers, health care professionals and third-party payors may be subject to applicable healthcare laws, which could expose ARS Pharma to penalties, including administrative, civil or criminal penalties, damages, fines, imprisonment, exclusion from participation in federal healthcare programs such as Medicare and Medicaid, reputational harm, the curtailment or restructuring of ARS’s operations and diminished future profits and earnings.

Healthcare professionals and third-party payors will play a primary role in the recommendation and prescription of neffy or any future product candidates for which ARS Pharma obtains marketing approval. ARS Pharma’s current and future arrangements with customers, healthcare professionals and third-party payors may expose ARS Pharma to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which ARS Pharma conducts research, market, sell and distribute neffy or any future product candidates for which ARS Pharma obtains marketing approval. Restrictions under applicable federal and state healthcare laws and regulations include the following, among others:

 

   

the federal Anti-Kickback Statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce, or in return for, purchasing, leasing, ordering or arranging for the purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid or other federally financed healthcare programs. This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers and formulary managers on the other. Although there are several statutory exceptions and regulatory safe harbors protecting certain common activities from prosecution, the exceptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induce prescribing, purchasing or recommending may be subject to scrutiny if they do not qualify for an exception or safe harbor. Further a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;

 

   

federal civil and criminal false claims laws, including the False Claims Act, prohibit any person from knowingly presenting, or causing to be presented, a false claim for payment to the federal government or knowingly making, or causing to be made, a false statement to get a false claim paid. Over the past few years, several pharmaceutical and other healthcare companies have been prosecuted under these laws for a variety of alleged promotional and marketing activities, including: allegedly providing free items and services, sham consulting fees and grants and other monetary benefits to prescribers; reporting to pricing services inflated average wholesale prices that were then used by federal programs to set reimbursement rates; engaging in off-label promotion that caused claims to be submitted to government healthcare programs for non-covered, off-label uses; and submitting inflated best price information to the Medicaid Drug Rebate Program to reduce liability for Medicaid rebates. In addition, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal False Claims Act;

 

   

federal civil monetary penalties laws impose civil fines for, among other things, the offering or transfer of remuneration to a Medicare or state healthcare program beneficiary if the person knows or should know it is likely to influence the beneficiary’s selection of a particular provider, practitioner, or supplier of services reimbursable by Medicare or a state healthcare program, unless an exception applies;

 

   

the federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) which prohibits, among other things, knowingly and willfully executing, or attempting to execute, a

 

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scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations, or promises, of any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless or the payor (e.g., public or private), willfully obstructing a criminal investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services; like the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;

 

   

the federal Physician Payment Sunshine Act, which requires manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to report annually to the government information related to payments or other “transfers of value” made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), other healthcare professionals (such as physician assistants and nurse practitioners) and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members;

 

   

HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 (“HITECH”), and their respective implementing regulations, which impose obligations on “covered entities,” including certain healthcare providers, health plans, and healthcare clearinghouses, as well as their respective “business associates” and their covered subcontractors that create, receive, maintain or transmit individually identifiable health information for or on behalf of a covered entity, with respect to safeguarding the privacy, security and transmission of individually identifiable health information;

 

   

federal price reporting laws require manufactures to calculate and report complex pricing metrics to government programs, where such reported prices may be used in the calculation of reimbursement and/or discounts on approved products;

 

   

federal and state consumer protection and unfair competition laws broadly regulate marketplace activities and activities that potentially harm consumers; and

 

   

analogous state laws and regulations, such as state anti-kickback and false claims laws, that may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers; some state laws that require biotechnology companies to comply with the industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government and may require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; some state laws that require biotechnology companies to report information on the pricing of certain drug products; and some state and local laws require the registration or pharmaceutical sales representatives.

Because of the breadth of these laws and the narrowness of available statutory exceptions and regulatory safe harbors, it is possible that some of ARS Pharma’s business activities, particularly any sales and marketing activities after neffy or any future product candidate has been approved for marketing in the United States, could be subject to legal challenge and enforcement actions. If ARS Pharma’s operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to it, it may be subject to penalties, including administrative, civil and criminal penalties, damages, fines, exclusion from governmental health care programs, a corporate integrity agreement or other agreement to resolve allegations of non-compliance, imprisonment, and the curtailment or restructuring of ARS Pharma’s operations, any of which could

 

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adversely affect its ability to operate its business and its financial results. In addition, the incurrence of certain penalties, fines or other liabilities could result in an event of default under the terms of the ARS Loan and Security Agreement, which could significantly harm ARS Pharma’s business and prospects.

Compliance with global privacy and data security requirements could result in additional costs and liabilities to ARS Pharma or inhibit its ability to collect and process data globally, and the failure to comply with such requirements could subject ARS to significant fines and penalties, which may have a material adverse effect on its business, financial condition or results of operations.

The regulatory framework for the collection, use, safeguarding, sharing, transfer and other information processing worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future. Globally, virtually every jurisdiction in which ARS Pharma operates has established its own data security and privacy frameworks with which ARS Pharma must comply. For example, the collection, use, disclosure, transfer, or other processing of personal data regarding individuals in the EU, including personal health data, is subject to the EU General Data Protection Regulation (the “GDPR”) which took effect across all member states of the EEA in May 2018. The GDPR is wide-ranging in scope and imposes numerous requirements on companies that process personal data, including requirements relating to processing health and other sensitive data, obtaining the consent of the individuals to whom the personal data relates, providing information to individuals regarding data processing activities, implementing safeguards to protect the security and confidentiality of personal data, providing notification of data breaches, and taking certain measures when engaging third-party processors. The GDPR increases ARS Pharma’s obligations with respect to clinical trials conducted in the EEA by expanding the definition of personal data to include coded data and requiring changes to informed consent practices and more detailed notices for clinical trial subjects and investigators. In addition, the GDPR also imposes strict rules on the transfer of personal data to countries outside the EU, including the United States, and, as a result, increases the scrutiny that clinical trial sites located in the EEA should apply to transfers of personal data from such sites to countries that are considered to lack an adequate level of data protection, such as the United States. The GDPR also permits data protection authorities to require the destruction of improperly gathered or used personal information and or impose substantial fines for violations of the GDPR, which can be up to four percent of global revenues or 20 million Euros, whichever is greater and it also confers a private right of action on data subjects and consumer associations to lodge complaints with supervisory authorities, seek judicial remedies, and obtain compensation for damages resulting from violations of the GDPR. In addition, the GDPR provides that EU member states may make their own further laws and regulations limiting the processing of personal data, including genetic, biometric or health data.

Similar actions are either in place or underway in the United States. There are a broad variety of data protection laws that are applicable to ARS Pharma’s activities, and a wide range of enforcement agencies at both the state and federal levels that can review companies for privacy and data security concerns based on general consumer protection laws. The Federal Trade Commission and state Attorneys General are all aggressive in reviewing consumers’ privacy and data security protections. New laws also are being considered at both the state and federal levels. For example, the California Consumer Privacy Act—which went into effect on January 1, 2020—is creating similar risks and obligations as those created by GDPR, though the California Consumer Privacy Act does exempt certain information collected as part of a clinical trial subject to the Federal Policy for the Protection of Human Subjects. Many other states are considering similar legislation. A broad range of legislative measures also has been introduced at the federal level. Accordingly, failure to comply with federal and state laws (both those currently in effect and future legislation) regarding the privacy and security of personal information could expose ARS Pharma to fines and penalties under such laws. There also is the threat of consumer class actions related to these laws and the overall protection of personal data. Even if ARS Pharma is not determined to have violated these laws, government investigations into

 

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these issues typically require the expenditure of significant resources and generate negative publicity, which could harm its reputation and its business.

Given the breadth and depth of changes in data protection obligations, preparing for and complying with these requirements is rigorous and time-intensive and requires significant resources and a review of ARS Pharma’s technologies, systems and practices, as well as those of any third-party licensing and collaboration partners, service providers, contractors or consultants that process or transfer personal data collected in the EU. The GDPR and other changes in laws or regulations associated with the enhanced protection of certain types of sensitive data, such as healthcare data or other personal information from ARS Pharma’s clinical trials, could require it to change its business practices and put in place additional compliance mechanisms, may interrupt or delay its development, regulatory and commercialization activities and increase its cost of doing business, and could lead to government enforcement actions, private litigation and significant fines and penalties against it and could have a material adverse effect on its business, financial condition or results of operations.

Risks Related to ARS Pharma’s Intellectual Property

ARS Pharma’s commercial success depends on its ability to obtain and maintain sufficient intellectual property protection for its product candidates and other proprietary technologies.

ARS Pharma’s commercial success will depend, in part, on its ability to obtain and maintain patent protection in the United States and other countries with respect to its product candidates. If ARS Pharma is unable to obtain or maintain patent protection with respect to its product candidates, and their uses, its business, financial condition, results of operations and prospects could be materially harmed.

ARS Pharma generally seeks to protect its proprietary position by filing or in-licensing patent applications in the United States and abroad related to its product candidates that are important to its business, as appropriate. ARS Pharma’s pending and future patent applications cannot be enforced against third parties practicing the technology claimed in such applications unless, and until, patents issue from such applications, and then only to the extent the issued claims cover the technology. There can be no assurance that ARS Pharma’s patent applications will result in patents being issued or that issued patents will afford sufficient protection against competitors with similar technology, nor can there be any assurance that the patents issued will not be infringed, designed around or invalidated by third parties. Even issued patents may later be found invalid or unenforceable or may be modified or revoked in proceedings instituted by third parties before various patent offices or in courts. The degree of future protection for ARS Pharma’s proprietary rights is uncertain. Only limited protection may be available and may not adequately protect ARS Pharma’s rights or permit ARS Pharma to gain or keep any competitive advantage. This failure to obtain the intellectual property rights relating to ARS Pharma’s product candidates could have a material adverse effect on ARS Pharma’s financial condition and results of operations.

The patent application process is subject to numerous risks and uncertainties, and there can be no assurance that ARS Pharma or any of its potential future collaborators will be successful in protecting ARS Pharma’s product candidates by obtaining and defending patents. Obtaining and enforcing patents is expensive and time-consuming, and ARS Pharma may not be able to file and prosecute all necessary or desirable patent applications, or maintain and/or enforce patents that may issue based on ARS Pharma’s patent applications, at a reasonable cost or in a timely manner. It is also possible that ARS Pharma will fail to identify patentable aspects of its research and development results before it is too late to obtain patent protection.

Although ARS Pharma enters into non-disclosure and confidentiality agreements with parties who have access to patentable aspects of ARS Pharma’s research and development output, such as ARS

 

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Pharma’s employees, corporate collaborators, outside scientific collaborators, contract research organizations, contract manufacturers, consultants, independent contractors, advisors and other third parties, any of these parties may breach these agreements and disclose such results before a patent application is filed, thereby jeopardizing ARS Pharma’s ability to seek adequate patent protection.

If the scope of any patent protection ARS Pharma obtains is not sufficiently broad, or if ARS Pharma loses any of its patent protection, its ability to prevent its competitors from commercializing similar or identical product candidates would be adversely affected.

The patent position of pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions and has in recent years been the subject of much litigation, resulting in court decisions, including United States Supreme Court decisions, that have increased uncertainties as to the ability to enforce patent rights in the future. In addition, the laws of foreign countries may not protect ARS Pharma’s rights to the same extent as the laws of the United States, or vice versa.

Further, ARS Pharma may not be aware of all third-party intellectual property rights potentially relating to ARS Pharma’s research programs and product candidates, or their intended uses, and as a result the potential impact of such third-party intellectual property rights upon the patentability of ARS Pharma’s own patents and patent applications, as well as the potential impact of such third-party intellectual property upon ARS Pharma’s freedom to operate, is highly uncertain. Because patent applications are maintained as confidential for a certain period of time, until the relevant application is published, ARS Pharma may be unaware of third-party patents that may be infringed by commercialization of any of its product candidates, and ARS Pharma cannot be certain that ARS Pharma was the first to file a patent application related to a product candidate or technology. Moreover, because patent applications can take many years to issue, there may be currently pending patent applications that may later result in issued patents that ARS Pharma’s product candidates may infringe. In addition, identification of third-party patent rights that may be relevant to ARS Pharma’s technology is difficult because patent searching is imperfect due to differences in terminology among patents, incomplete databases and the difficulty in assessing the meaning of patent claims. There is also no assurance that there is not prior art of which ARS Pharma is aware, but which ARS Pharma does not believe is relevant to its business, which may, nonetheless, ultimately be found to limit its ability to make, use, sell, offer for sale or import its products that may be approved in the future, or impair its competitive position. In addition, third parties may obtain patents in the future and claim that use of ARS Pharma’s technologies infringes upon these patents. As a result, the issuance, scope, validity, enforceability, and commercial value of ARS Pharma’s patent rights are highly uncertain.

ARS Pharma’s patents or pending patent applications, or the patents or pending patent applications that ARS Pharma licenses, may be challenged in the courts or patent offices in the United States and other foreign jurisdictions. For example, ARS Pharma may be subject to a third-party pre-issuance submission of prior art to the U.S. Patent and Trademark Office (the “USPTO”) or become involved in post-grant review procedures, derivations, reexaminations, or inter parties review proceedings, in the United States or oppositions or similar proceedings in foreign jurisdictions, challenging ARS Pharma’s patent rights. The legal threshold for initiating such proceedings may be low, so that even proceedings with a low probability of success might be initiated. 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 ARS Pharma’s ability to stop others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of ARS Pharma’s technology and products.

Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, ARS Pharma’s intellectual property may not provide ARS Pharma with sufficient rights to exclude others from commercializing products similar or identical to ours.

 

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ARS Pharma may not be able to protect its intellectual property rights throughout the world, which could negatively impact its business.

Although ARS Pharma co-owns or exclusively license four issued United States patents, one granted Australia patent, one granted Japanese patent, one granted South Korea patent, and two granted United Kingdom patents for ARS Pharma’s neffy product candidate and pending patent applications in the United States, Europe, Japan, Australia, South Korea, United Kingdom and other foreign jurisdictions for ARS Pharma’s neffy product candidate, filing, prosecuting and defending patents in all countries throughout the world would be prohibitively expensive, and ARS’s intellectual property rights in some countries outside the United States can be less extensive than those in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. Consequently, ARS Pharma may not be able to prevent third parties from practicing ARS Pharma’s inventions in all countries outside the United States or from selling or importing products made using ARS Pharma’s inventions in and into the United States or other jurisdictions. Competitors may use ARS Pharma’s technologies in jurisdictions where ARS Pharma has not obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where ARS has patent protection, but enforcement is not as strong as that in the United States. These competitor products may compete with ARS’s product candidates, and its patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property protection, particularly those relating to biotechnology products, which could make it difficult for ARS Pharma to stop the infringement of its patents or marketing of competing products in violation of its proprietary rights generally. Proceedings to enforce ARS Pharma’s patent rights in foreign jurisdictions, whether or not successful, could result in substantial costs and divert its efforts and attention from other aspects of its business, could put its patents at risk of being invalidated or interpreted narrowly and its patent applications at risk of not issuing, and could provoke third parties to assert claims against ARS Pharma. ARS Pharma may not prevail in any lawsuits that ARS Pharma initiates, and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, ARS Pharma’s efforts to enforce its intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that ARS Pharma develops or licenses. Furthermore, while ARS Pharma intends to protect its intellectual property rights in its expected significant markets, ARS Pharma cannot ensure that it will be able to initiate or maintain similar efforts in all jurisdictions in which it may wish to market its product candidates. Accordingly, ARS Pharma’s efforts to protect its intellectual property rights in such countries may be inadequate, which may have an adverse effect on ARS Pharma’s ability to successfully commercialize its product candidates in all of its expected significant foreign markets.

Various countries outside the United States have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In addition, many countries limit the enforceability of patents against government agencies or government contractors. As a result, a patent owner may have limited remedies in certain circumstances, which could materially diminish the value of such patent. If ARS Pharma is forced to grant a license to third parties with respect to any patents relevant to its business, its competitive position may be impaired, and its business, financial condition, results of operations and prospects may be adversely affected. Accordingly, ARS Pharma’s efforts to protect or enforce its intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that ARS Pharma develops or licenses. Furthermore, while ARS Pharma intends to protect its intellectual property rights in its expected significant markets, ARS Pharma cannot ensure that it will be able to initiate or maintain similar efforts

 

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in all jurisdictions in which ARS Pharma may wish to market its product candidates. Accordingly, ARS Pharma’s efforts to protect its intellectual property rights in such countries may be inadequate, which may have an adverse effect on ARS Pharma’s ability to successfully commercialize its product candidates in all of its expected significant foreign markets.

Further, the standards applied by the USPTO and foreign patent offices in granting patents are not always applied uniformly or predictably. As such, ARS Pharma does not know the degree of future protection that it will have on its technologies, products and product candidates. While ARS Pharma will endeavor to try to protect its technologies, products and product candidates with intellectual property rights such as patents, as appropriate, the process of obtaining patents is time-consuming, expensive and unpredictable.

Recent patent reform legislation could increase the uncertainties and costs surrounding the prosecution of ARS Pharma’s patent applications and the enforcement or defense of its issued patents.

On September 16, 2011, the Leahy-Smith America Invents Act (the “Leahy-Smith Act”) was signed into law in the United States. The Leahy-Smith Act includes a number of significant changes to U.S. patent law. These include provisions that affect the way patent applications will be prosecuted and may also affect patent litigation. In particular, under the Leahy-Smith Act, the United States transitioned in March 2013 to a “first inventor to file” system in which, assuming that other requirements of patentability are met, the first inventor to file a patent application will be entitled to the patent regardless of whether a third party was first to invent the claimed invention. A third party that files a patent application in the USPTO after March 2013 but before ARS Pharma could therefore be awarded a patent covering any of its inventions even if ARS Pharma had made the invention before it was made by such third party. This will require ARS Pharma to be cognizant going forward of the time from invention to filing of a patent application. Furthermore, ARS Pharma’s ability to obtain and maintain valid and enforceable patents depends on whether the differences between its technology, or the technologies ARS Pharma licenses for its product candidates, and the prior art allow the technology ARS Pharma uses for its product candidates to be patentable over the prior art. Since patent applications in the United States and most other countries are confidential for a period of time after filing or until issuance, ARS Pharma cannot be certain that it was the first to either file any patent application related to its product candidates or invent any of the inventions claimed in its patents or patent applications.

The Leahy-Smith Act also includes a number of significant changes that affect the way patent applications will be prosecuted and also may affect patent litigation. These include allowing third-party submission of prior art to the USPTO during patent prosecution and additional procedures to attack the validity of a patent by USPTO administered post-grant proceedings, including Post Grant Review, Inter Partes Review, and derivation proceedings. An adverse determination in any such submission or proceeding could reduce the scope or enforceability of, or invalidate, ARS Pharma’s patent rights, which could adversely affect ARS Pharma’s competitive position. Because of a lower evidentiary standard in USPTO proceedings compared to the evidentiary standard in United States federal courts necessary to invalidate a patent claim, a third party could potentially provide evidence in a USPTO proceeding sufficient for the USPTO to hold a claim invalid even though the same evidence would be insufficient to invalidate the claim if first presented in a district court action. Accordingly, a third party may attempt to use the USPTO procedures to invalidate ARS Pharma’s patent claims that would not have been invalidated if first challenged by the third party as a defendant in a district court action. Thus, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of ARS Pharma’s patent applications and the enforcement or defense of its issued patents, all of which could have a material adverse effect on its business, financial condition, results of operations and prospects.

 

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Changes in patent law in the United States and other jurisdictions could diminish the value of patents in general, thereby impairing ARS Pharma’s ability to protect its product candidates.

As is the case with other pharmaceutical companies, ARS Pharma’s success is heavily dependent on intellectual property, particularly patents relating to its product candidates. Obtaining and enforcing patents in the pharmaceutical industry involves both technological and legal complexity and is therefore costly, time consuming and inherently uncertain. Changes in either the patent laws or interpretation of the patent laws, rules and regulations in the United States and other countries could increase the uncertainties and costs surrounding the prosecution of patent applications and the enforcement or defense of issued patents. ARS Pharma cannot predict the breadth of claims that may be allowed or enforced in the patents ARS Pharma owns, co-owns or licenses from third-parties. In addition, U.S. Congress or other foreign legislative bodies may pass patent reform legislation that is unfavorable to ARS Pharma.

Depending on decisions by the U.S. Congress, the U.S. federal courts, the USPTO, the laws and regulations governing patents could change in unpredictable ways that could weaken ARS Pharma’s ability to obtain new patents or to enforce the existing patents ARS Pharma owns, co-owns or licenses and patents ARS Pharma or its licensors might obtain in the future. For example, 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. In addition to increasing uncertainty with regard to ARS Pharma’s ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained.

Depending on future actions by the U.S. Congress, the U.S. courts, the USPTO, or similar authorities in foreign jurisdictions, the laws and regulations governing patents could change in unpredictable ways that could weaken ARS Pharma’s ability to obtain new patents or to enforce the existing patents ARS Pharma owns, co-owns or licenses and patents that ARS Pharma or its licensors might obtain in the future.

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

Periodic maintenance fees, renewal fees, annuity fees and various other governmental fees on patents and/or patent applications will be due to be paid to the USPTO and various foreign patent agencies at various stages over the lifetime of ARS Pharma’s patents and/or patent applications. ARS Pharma has systems in place to remind ARS Pharma to pay these fees, and ARS Pharma relies on its outside patent annuity service to pay these fees when due. In addition, 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. ARS Pharma employs reputable law firms and other professionals to help it comply with these provisions. In many cases, an inadvertent lapse can be cured by payment of a late fee or by other means in accordance with the applicable rules. However, there are situations in which noncompliance can result in abandonment or lapse of a patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. If such an event were to occur, it could have a material adverse effect on ARS Pharma’s business. If ARS Pharma or its licensors fail to maintain the patents and patent applications covering ARS Pharma’s product candidates, ARS Pharma’s competitors might be able to enter the market, which would have a material adverse effect on its business, financial conditions, results of operations and growth prospects.

 

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Patent terms may be inadequate to protect ARS Pharma’s competitive position on its product candidates for an adequate amount of time and may adversely affect its anticipated future revenues and operating earnings.

ARS Pharma relies on patent, trademark, trade secret and other intellectual property protection in the discovery, development, manufacturing and sale of ARS Pharma’s product candidates. In particular, patent protection is important in the development and eventual commercialization of ARS Pharma’s product candidates. Patents covering ARS Pharma’s product candidates normally provide market exclusivity, which is important in order for its product candidates to become profitable.

Patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years. In the United States, if all maintenance fees are timely paid, the natural expiration of a patent is generally 20 years from its earliest U.S. non-provisional filing date. Various extensions may be available, but the life of a patent, and the protection it affords, is limited. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such product candidates might expire before or shortly after such product candidates are commercialized. Even if patents covering ARS Pharma’s product candidates are obtained, once the patent life has expired for a product, ARS Pharma may be open to competition from generic products. As a result, ARS Pharma’s patent portfolio may not provide ARS Pharma with sufficient rights to exclude others from commercializing products similar or identical to ours.

The patents ARS Pharma currently co-owns or exclusively licenses for neffy are expected to expire as early as 2038, absent any patent term adjustments. The API in neffy is epinephrine, a generic API that is used in FDA-approved intra-muscular injectables. If neffy is approved by the FDA under the 505(b)(2) regulatory pathway, ARS Pharma’s U.S. patents for neffy will not be eligible for patent term restoration under the Drug Price Competition and Patent Term Restoration Act of 1984. While ARS Pharma is planning to seek additional patent coverage for neffy, there can be no assurances that such additional patent protection will be granted, or if granted, that these patents will not be infringed upon or otherwise held enforceable. Even if ARS Pharma is successful in obtaining a patent, patents have a limited lifespan. Without patent protection, ARS Pharma may be open to competition from generic versions of neffy.

ARS Pharma cannot ensure that patent rights relating to inventions described and claimed in its pending patent applications will issue or that patents based on its patent applications will not be challenged and rendered invalid and/or unenforceable.

ARS Pharma co-owns or exclusively licenses patent applications in ARS Pharma’s portfolio relating to its product candidates that are pending at the patent offices in the United States, Europe, Japan, and other foreign jurisdictions, however, ARS Pharma cannot predict:

 

   

if and when patents may issue based on the patent applications ARS Pharma owns, co-owns or exclusively licenses;

 

   

the scope of protection of any patent issuing based on the patent applications ARS Pharma owns, co-owns or exclusively licenses;

 

   

whether the claims of any patent issuing based on the patent applications ARS Pharma owns, co-owns or exclusively licenses will provide protection against competitors,

 

   

whether or not third parties will find ways to invalidate or circumvent ARS Pharma’s patent rights;

 

   

whether or not others will obtain patents claiming aspects similar to those covered by the patent applications ARS Pharma owns, co-owns or exclusively licenses;

 

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whether ARS Pharma will need to initiate litigation or administrative proceedings to enforce and/or defend ARS Pharma’s patent rights which will be costly whether ARS Pharma wins or loses;

 

   

whether the patent applications that ARS Pharma owns, co-owns or exclusively licenses will result in issued patents with claims that cover ARS Pharma’s product candidates or uses thereof; and/or

 

   

whether, as the COVID-19 pandemic continues to spread around the globe, ARS Pharma may experience patent office interruption or delays to ARS Pharma’s ability to timely secure patent coverage to ARS Pharma’s product candidates.

ARS Pharma cannot be certain that the claims in ARS Pharma’s pending patent applications directed to ARS Pharma’s product candidates will be considered patentable by the USPTO or by patent offices in foreign countries. One aspect of the determination of patentability of ARS Pharma’s inventions depends on the scope and content of the “prior art,” information that was or is deemed available to a person of skill in the relevant art prior to the priority date of the claimed invention. There may be prior art of which ARS Pharma is not aware that may affect the patentability of ARS Pharma’s patent claims or, if issued, affect the validity or enforceability of a patent claim relevant to ARS Pharma’s business. There is no assurance that there is not prior art of which ARS Pharma is aware, but which ARS Pharma does not believe is relevant to ARS Pharma’s business, which may, nonetheless, ultimately be found to limit ARS Pharma’s ability to make, use, sell, offer for sale or import ARS Pharma’s products that may be approved in the future, or impair its competitive position. Even if the patents do issue based on the patent applications ARS Pharma owns, co-owns or exclusively licenses, third parties may challenge the validity, enforceability or scope thereof, which may result in such patents being narrowed, invalidated or held unenforceable. Furthermore, even if they are unchallenged, patents in ARS Pharma’s portfolio may not adequately exclude third parties from practicing relevant technology or prevent others from designing around ARS Pharma’s claims. If the breadth or strength of ARS Pharma’s intellectual property position with respect to ARS Pharma’s product candidates is threatened, it could dissuade companies from collaborating with ARS Pharma to develop, and threaten ARS Pharma’s ability to commercialize, its product candidates. In the event of litigation or administrative proceedings, ARS Pharma cannot be certain that the claims in any of its issued patents will be considered valid by courts in the United States or foreign countries.

ARS Pharma may not identify relevant third-party patents or may incorrectly interpret the relevance, scope or expiration of a third-party patent which might adversely affect its ability to develop and market its products.

As the pharmaceutical industry expands and more patents are issued, the risk increases that ARS Pharma’s product candidates may be subject to claims of infringement of the patent rights of third parties. There can be no assurance that ARS’s operations do not, or will not in the future, infringe existing or future third-party patents. Identification of third-party patent rights that may be relevant to ARS Pharma’s operations is difficult because patent searching is imperfect due to differences in terminology among patents, incomplete databases and the difficulty in assessing the meaning of patent claims. ARS Pharma cannot guarantee that any of ARS Pharma’s patent searches or analyses, including the identification of relevant patents, the scope of patent claims or the expiration of relevant patents, are complete or thorough, nor can ARS Pharma be certain that it has identified each and every third-party patent and pending application in the United States and abroad that is relevant to ARS’s operations or necessary for the commercialization of its product candidates in any jurisdiction.

Numerous U.S. and foreign patents and pending patent applications exist in ARS Pharma’s market that are owned by third parties. ARS Pharma’s competitors in both the United States and abroad, many of which have substantially greater resources and have made substantial investments in

 

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patent portfolios and competing technologies, may have applied for or obtained or may in the future apply for and obtain, patents that will prevent, limit or otherwise interfere with ARS Pharma’s ability to make, use and sell its products. ARS Pharma does not always conduct independent reviews of pending patent applications and patents issued to third parties. Patent applications in the United States and elsewhere are typically published approximately 18 months after the earliest filing for which priority is claimed, with such earliest filing date being commonly referred to as the priority date. Certain U.S. patent applications that will not be filed outside the U.S. can remain confidential until patents issue. In addition, patent applications in the United States and elsewhere can be pending for many years before issuance, or unintentionally abandoned patents or applications can be revived. Furthermore, pending patent applications that have been published can, subject to certain limitations, be later amended in a manner that could cover ARS Pharma’s technologies, its products or the use of its products. As such, there may be applications of others now pending or recently revived patents of which ARS Pharma is unaware. These patent applications may later result in issued patents, or the revival of previously abandoned patents, that will prevent, limit or otherwise interfere with ARS Pharma’s ability to make, use or sell its product candidates.

The scope of a patent claim is determined by an interpretation of the law, the written disclosure in a patent and the patent’s prosecution history. ARS Pharma’s interpretation of the relevance or the scope of a patent or a pending application may be incorrect, which may negatively impact its ability to market its products. ARS Pharma may incorrectly determine that its products are not covered by a third-party patent or may incorrectly predict whether a third party’s pending application will issue with claims of relevant scope. ARS Pharma’s determination of the expiration date of any patent in the United States or abroad that ARS Pharma considers relevant may be incorrect, which may negatively impact ARS Pharma’s ability to develop and market its product candidates. ARS’s failure to identify and correctly interpret relevant patents may negatively impact its ability to develop and market its products.

ARS Pharma cannot provide any assurances that third-party patents do not exist which might be enforced against its current technology, including its research programs, product candidates, their respective methods of use, and manufacture thereof, and could result in either an injunction prohibiting ARS Pharma’s manufacture or future sales, or, with respect to its future sales, an obligation on ARS Pharma’s part to pay royalties and/or other forms of compensation to third parties, which could be significant.

If ARS Pharma is sued for infringing intellectual property rights of third parties, such litigation could be costly and time consuming and could prevent or delay ARS Pharma from developing or commercializing its product candidates.

ARS Pharma’s commercial success depends, in part, on its ability to develop, manufacture, market and sell its product candidates without infringing the intellectual property and other proprietary rights of third parties. Third parties may allege that ARS Pharma has infringed or misappropriated their intellectual property. Litigation or other legal proceedings relating to intellectual property claims, with or without merit, is unpredictable and generally expensive and time consuming and, even if resolved in ARS Pharma’s favor, is likely to divert significant resources from its core business, including distracting its technical and management personnel from their normal responsibilities. Such litigation or proceedings could substantially increase ARS Pharma’s operating losses and reduce the resources available for development activities or any future sales, marketing or distribution activities. ARS may not have sufficient financial or other resources to adequately conduct such litigation or proceedings. Some of ARS Pharma’s competitors may be able to sustain the costs of such litigation or proceedings more effectively than ARS Pharma can because of their greater financial resources and more mature and developed intellectual property portfolios. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on ARS Pharma’s ability to compete in the marketplace.

 

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There is a substantial amount of intellectual property litigation in the pharmaceutical industry, and ARS Pharma may become party to, or threatened with, litigation or other adversarial proceedings regarding intellectual property rights with respect to its products candidates. Third parties may assert infringement claims against ARS Pharma based on existing or future intellectual property rights. The pharmaceutical industry has produced a significant number of patents, and it may not always be clear to industry participants, including ARS Pharma, 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 ARS Pharma were sued for patent infringement, ARS Pharma would need to demonstrate that ARS Pharma’s product candidates, or of use either do not infringe the patent claims of the relevant patent or that the patent claims are invalid or unenforceable, and ARS Pharma may not be able to do this. Proving invalidity of third-party patents may be difficult and uncertain. Even if ARS Pharma is successful in these proceedings, ARS Pharma may incur substantial costs and the time and attention of its management and scientific personnel could be diverted in defending its rights in these proceedings, which could have a material adverse effect on its business and operations. In addition, ARS Pharma may not have sufficient resources to bring these actions to a successful conclusion.

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

ARS Pharma may become involved in lawsuits to protect or enforce its patents or other intellectual property, which could be expensive, time consuming and unsuccessful and could result in a court or administrative body finding its patents to be invalid or unenforceable.

Even if the patent applications ARS Pharma owns, co-owns or licenses are issued, third parties may challenge or infringe upon ARS Pharma’s patents. To counter infringement, ARS Pharma may be required to file infringement claims, which can be expensive and time-consuming. In patent litigation in the United States, defendant counterclaims alleging invalidity or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including novelty, non-obviousness (or inventive step), written description or enablement. In addition, patent validity challenges may, under certain circumstances, be based upon non-statutory obviousness-type double patenting, which, if successful, could result in a finding that the claims are invalid for obviousness-type double patenting or the loss of patent term if a terminal disclaimer is filed to obviate a finding of obviousness-type double patenting. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld information material to patentability from the USPTO, or made a misleading statement, during prosecution.

Third parties may raise similar claims before administrative bodies in the United States or abroad, even outside the context of litigation. Such mechanisms include re-examination, post-grant review, inter partes review, interference proceedings, derivation proceedings, and equivalent proceedings in

 

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foreign jurisdictions (e.g., opposition proceedings). Such proceedings could result in the revocation or cancellation of or amendment to ARS Pharma’s patents in such a way that they no longer cover its current or future products or provide any competitive advantage. The outcome following legal assertions of invalidity and unenforceability is unpredictable. If a third party were to prevail on a legal assertion of invalidity or unenforceability, ARS Pharma could lose part or all of the patent protection on one or more of its current or future products, which could result in its competitors and other third parties using its technology to compete with it. Such a loss of patent protection could have a material adverse impact on ARS Pharma’s business, financial condition, results of operations, cash flows and prospects.

ARS Pharma is currently a party to an inter partes review of U.S. Patent No. 10,682,414 B2 that was instituted on February 14, 2022, and may, in the future, be a party to other intellectual property litigation or administrative proceedings that are very costly and time-consuming and could interfere with ARS Pharma’s ability to sell and market its products. Some of ARS Pharma’s competitors may be able to sustain the costs of complex patent litigation more effectively than ARS can because they have substantially greater resources. In addition, any uncertainties resulting from the initiation and continuation of any litigation could have a material adverse effect on ARS Pharma’s ability to raise the funds necessary to continue its operations. In addition, patent holding companies that focus solely on extracting royalties and settlements by enforcing patent rights may target ARS Pharma, especially as ARS Pharma gains greater visibility and market exposure as a public company following the Merger.

In an infringement proceeding, even one initiated by ARS Pharma, there is a risk that a court will decide that ARS Pharma’s patents are not valid and that ARS Pharma does not have the right to stop the other party from using the inventions they describe. There is also the risk that, even if the validity of such patents is upheld, the court will refuse to stop the other party on the ground that such other party’s activities do not infringe ARS Pharma’s rights to these patents.

An adverse outcome in a litigation or proceeding involving ARS Pharma’s patents could limit ARS Pharma’s ability to assert its patents against competitors, affect its ability to receive royalties or other licensing consideration from its licensees, and may curtail or preclude its ability to exclude third parties from making, using and selling similar or competitive products. Any of these occurrences could have a material adverse effect on its business, financial condition, results of operations, cash flows and prospects.

Competitors may infringe ARS Pharma’s patents, trademarks, copyrights or other intellectual property that relate to its research programs and product candidates, their respective methods of use, manufacture and formulations thereof. To counter infringement or unauthorized use, ARS Pharma may be required to file infringement claims, which can be expensive and time consuming and divert the time and attention of ARS Pharma’s management and scientific personnel. Any claims ARS Pharma asserts against perceived infringers could provoke these parties to assert counterclaims against ARS Pharma alleging that ARS Pharma infringes their patents, in addition to counterclaims asserting that ARS Pharma’s patents are invalid or unenforceable, or both. In any patent infringement proceeding, there is a risk that a court will decide that a patent that ARS owns or has licensed is invalid or unenforceable, in whole or in part, and that ARS Pharma does 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 ARS Pharma’s patents is upheld, the court will construe the claims of its patents narrowly or decide that ARS Pharma does not have the right to stop the other party from using the invention at issue on the grounds that ARS Pharma’s patent claims do not cover the invention at issue. An adverse outcome in a litigation or proceeding involving ARS Pharma’s patents could limit its ability to assert its patents against those parties or other competitors, and may curtail or preclude its ability to exclude third parties from making and selling similar or competitive products. Any of these occurrences could adversely affect ARS Pharma’s competitive business position, business prospects and financial condition. Similarly, if ARS Pharma

 

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asserts trademark infringement claims, a court may determine that the marks ARS Pharma has asserted are invalid or unenforceable, or that the party against whom ARS Pharma has asserted trademark infringement has superior rights to the marks in question. In this case, ARS Pharma could ultimately be forced to cease use of such trademarks.

Even if ARS Pharma established infringement by competitors, a court may decide not to grant an injunction against further infringing activity by competitors 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 ARS Pharma’s confidential information could be compromised by disclosure during litigation. Moreover, ARS Pharma cannot assure you that ARS Pharma 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 ARS Pharma ultimately prevails in such infringement claims, the monetary cost of such litigation and the diversion of the attention of its management and scientific personnel could outweigh any benefit ARS Pharma receive as a result of the proceedings.

ARS Pharma’s product candidates may face competition sooner than expected, and its patents may be challenged.

ARS Pharma’s success will depend in part on its ability to obtain and maintain patent protection for its product candidates and technologies and to prevent third parties from infringing upon its proprietary rights. ARS Pharma must also operate without infringing upon patents and proprietary rights of others, including by obtaining appropriate licenses to patents or other proprietary rights held by third parties, if necessary. However, the patent applications ARS Pharma has filed or may file in the future may never yield patents that protect its inventions and intellectual property assets. Failure to obtain patents that sufficiently cover ARS Pharma’s formulations and technologies would limit its protection against generic drug manufacturers, pharmaceutical companies and other parties who may seek to copy its products, produce substantially similar products or use technologies substantially similar to those ARS Pharma owns, co-owns, or exclusively licenses.

ARS Pharma does not expect to receive non-patent regulatory exclusivity for neffy if approved by the FDA under the 505(b)(2) regulatory pathway. Without non-patent marketing exclusivity for neffy, ARS Pharma may face competition by third parties seeking to market generic versions of neffy as early as ARS Pharma’s approval by the FDA. In seeking approval for a drug product under the 505(b)(2) regulatory pathway, applicants are required to list with the FDA certain patents of the applicant or that are held by third parties whose claims cover the applicant’s product. Upon approval of an NDA, each of the patents listed in the application for the drug is then published in the Orange Book. Any subsequent applicant who files an ANDA seeking approval of a generic equivalent version of a drug product listed in the Orange Book or an NDA submitted under the 505(b)(2) regulatory pathway referencing a drug listed in the Orange Book must make one of the following certifications to the FDA concerning patents: (1) the patent information concerning the reference listed drug product has not been submitted to the FDA; (2) any such patent that was filed has expired; (3) the date on which such patent will expire; or (4) such patent is invalid or will not be infringed upon by the manufacture, use or sale of the drug product for which the application is submitted. This last certification is known as a paragraph IV certification. A notice of the paragraph IV certification must be provided to each owner of the patent that is the subject of the certification and to the holder of the approved NDA to which the ANDA or 505(b)(2) application refers. Although ARS Pharma expects that its patents will be vigorously defended from infringement by third parties, there can be no assurances that ARS Pharma will be successful with respect to such defense or any other legal proceedings which may arise in the ordinary course of its business. Such a failure may have a material impact on ARS Pharma’s business, results of operations and financial condition in the future.

 

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Because of the expense and uncertainty of litigation, ARS Pharma may not be in a position to enforce its intellectual property rights against third parties.

Because of the expense and uncertainty of litigation, ARS Pharma may conclude that even if a third party is infringing any one of its issued patents or other intellectual property rights, the risk-adjusted cost of bringing and enforcing such an infringement claim or action may be too high or not in the best interest of its company or its stockholders. In such cases, ARS Pharma may decide that the more prudent course of action is to simply monitor the situation or initiate or seek some other non-litigious action or solution.

Intellectual property litigation may lead to unfavorable publicity that harms ARS Pharma’s reputation.

During the course of any intellectual property litigation, there could be public announcements of the initiation of the litigation as well as results of hearings, rulings on motions, and other interim proceedings in the litigation. Such announcements could harm ARS Pharma’s reputation, the perceived value of ARS Pharma’s intellectual property or the market for its existing or future products, which could have a material adverse effect on its business.

ARS Pharma may become subject to claims challenging the inventorship or ownership of its patents and other intellectual property.

ARS Pharma may be subject to claims that former employees, consultants, independent contractors, collaborators or other third parties have an interest in its patents or other intellectual property as an owner, co-owner, inventor or co-inventor. The failure to name the proper inventors on a patent application can result in the patents issuing thereon being unenforceable. Inventorship disputes may arise from conflicting views regarding the contributions of different individuals named as inventors, the effects of foreign laws where foreign nationals are involved in the development of the subject matter of the patent, conflicting obligations of third parties involved in developing ARS Pharma’s product candidates or as a result of questions regarding co-ownership of potential joint inventions. Litigation may be necessary to resolve these and other claims challenging inventorship and/or ownership. Alternatively, or additionally, ARS Pharma may enter into agreements to clarify the scope of ARS Pharma’s rights in such intellectual property. If ARS Pharma fails in defending any such claims, in addition to paying monetary damages, ARS Pharma may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property. Such an outcome could have a material adverse effect on ARS Pharma’s business. Even if ARS Pharma is successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

If ARS Pharma’s trademarks and trade names are not adequately protected, then ARS Pharma may not be able to build name recognition in its markets of interest and its business may be adversely affected.

ARS Pharma has registered trademarks with the appropriate agencies in the United States, as well as in foreign jurisdictions, including the International Bureau (WIPO), United Kingdom, European Union, and Japan. ARS Pharma’s future trademarks or trade names may be challenged, infringed, circumvented or declared generic or descriptive determined to be infringing on other marks. ARS Pharma may not be able to protect its rights to these trademarks and trade names or may be forced to stop using these names, which ARS Pharma needs for name recognition by potential partners or customers in ARS Pharma’s markets of interest. During trademark registration proceedings, ARS Pharma may receive rejections. Although ARS Pharma would be given an opportunity to respond to those rejections, ARS Pharma may be unable to overcome such rejections. In addition, in the USPTO

 

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and in comparable agencies in many foreign jurisdictions, third parties are given an opportunity to oppose pending trademark applications and to seek to cancel registered trademarks. Opposition or cancellation proceedings may be filed against ARS Pharma’s trademarks, and its trademarks may not survive such proceedings. If ARS Pharma is unable to establish name recognition based on its trademarks and trade names, ARS Pharma may not be able to compete effectively and its business may be adversely affected. ARS Pharma may license its trademarks and trade names to third parties, such as distributors. Though these license agreements may provide guidelines for how ARS Pharma’s trademarks and trade names may be used, a breach of these agreements or misuse of its trademarks and tradenames by its licensees may jeopardize ARS Pharma’s rights in or diminish the goodwill associated with its trademarks and trade names.

Intellectual property rights do not necessarily address all potential threats to ARS Pharma’s competitive advantage.

Once granted, patents may remain open to opposition, interference, re-examination, post-grant review, inter partes review, nullification or derivation action in court or before patent offices or similar proceedings for a given period after allowance or grant, during which time third parties can raise objections against such grant. In the course of such proceedings, which may continue for a protracted period of time, the patent owner may be compelled to limit the scope of the allowed or granted claims thus attacked, or may lose the allowed or granted claims altogether. In addition, the degree of future protection afforded by ARS Pharma’s intellectual property rights is uncertain because even granted intellectual property rights have limitations, and may not adequately protect ARS Pharma’s business. The following examples are illustrative:

 

   

others may be able to make formulations that are similar to neffy or any of ARS Pharma’s future product candidates but that are not covered by the claims of ARS Pharma’s patent rights;

 

   

the patents of third parties may have an adverse effect on ARS Pharma’s business;

 

   

ARS Pharma or its licensors or any future strategic partners might not have been the first to conceive or reduce to practice the inventions covered by the issued patents or pending patent applications that ARS Pharma owns, co-owns or exclusively licensed;

 

   

ARS Pharma or its licensors or any future strategic partners might not have been the first to file patent applications covering certain of ARS Pharma’s inventions;

 

   

others may independently develop similar or alternative technologies or duplicate any of ARS Pharma’s technologies without infringing ARS Pharma’s intellectual property rights;

 

   

it is possible that ARS Pharma’s pending patent applications will not lead to issued patents;

 

   

issued patents that ARS Pharma may own or co-own or that ARS Pharma exclusively licenses in the future may not provide ARS Pharma with any competitive advantage, or may be held invalid or unenforceable, as a result of legal challenges by ARS Pharma’s competitors;

 

   

ARS Pharma’s competitors might conduct research and development activities in countries where ARS Pharma does not have patent rights and then use the information learned from such activities to develop competitive products for sale in ARS Pharma’s major commercial markets;

 

   

third parties performing manufacturing or testing for ARS Pharma using ARS Pharma’s product candidates or technologies could use the intellectual property of others without obtaining a proper license;

 

   

ARS Pharma may not develop additional proprietary technologies that are patentable; and

 

   

the patents of others may have an adverse effect on ARS Pharma’s business.

 

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Should any of these events occur, they could have a material adverse effect on ARS Pharma’s business, financial condition, results of operations and prospects.

If ARS Pharma is unable to protect the confidentiality of its trade secrets, its business and competitive position would be harmed.

In addition to seeking patent protection for some of ARS Pharma’s technology and product candidates, ARS Pharma also rely on trade secrets, including unpatented know-how, technology and other proprietary information, to maintain ARS Pharma’s competitive position. Elements of ARS Pharma’s product candidates, including processes for their preparation and manufacture, may involve proprietary know-how, information, or technology that is not covered by patents, and thus for these aspects ARS Pharma may consider trade secrets and know-how to be ARS Pharma’s primary intellectual property. Any disclosure, either intentional or unintentional, by ARS Pharma’s employees, the employees of third parties with whom ARS Pharma shares its facilities or third-party consultants and vendors that ARS Pharma engages to perform research, clinical trials or manufacturing activities, or misappropriation by third parties (such as through a cybersecurity breach) of ARS Pharma’s trade secrets or proprietary information could enable competitors to duplicate or surpass ARS Pharma’s technological achievements, thus eroding its competitive position in its market.

Trade secrets and unpatented know-how can be difficult to protect. ARS Pharma requires its employees to enter into written employment agreements containing provisions of confidentiality and obligations to assign to ARS any inventions generated in the course of their employment. ARS Pharma and any third parties with whom ARS Pharma shares facilities enter into written agreements that include confidentiality and intellectual property obligations to protect each party’s property, potential trade secrets, proprietary know-how and information. ARS Pharma further seeks to protect its potential trade secrets, proprietary know-how and information in part, by entering into non-disclosure and confidentiality agreements with parties who are given access to them, such as ARS Pharma’s corporate collaborators, outside scientific collaborators, contract research organizations, contract manufacturers, consultants, advisors and other third parties. With ARS Pharma’s consultants, contractors and outside scientific collaborators, these agreements typically include invention assignment obligations. Although ARS has taken steps to protect ARS Pharma’s trade secrets and unpatented know-how, ARS Pharma cannot provide any assurances that all such agreements have been duly executed, and any of these parties may breach the agreements and disclose ARS Pharma’s proprietary information, including ARS Pharma’s trade secrets, and ARS Pharma may not be able to obtain adequate remedies for such breaches. Monitoring unauthorized uses and disclosures is difficult, and ARS does not know whether the steps ARS Pharma has taken to protect ARS Pharma’s proprietary technologies will be effective. Unauthorized parties may also attempt to copy or reverse engineer certain aspects of ARS Pharma’s products that ARS Pharma considers proprietary. 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, some courts inside and outside the United States are less willing or unwilling to protect trade secrets.

Trade secrets may be independently developed by others in a manner that could prevent legal recourse by ARS Pharma. Trade secrets will over time be disseminated within the industry through independent development, the publication of journal articles and the movement of skilled personnel from company to company or academic to industry scientific positions. Though ARS Pharma’s agreements with third parties typically restrict the ability of ARS Pharma’s advisors, employees, collaborators, licensors, suppliers, third-party contractors and consultants to publish data potentially relating to ARS Pharma’s trade secrets, ARS Pharma’s agreements may contain certain limited publication rights. Because from time-to-time ARS Pharma expects to rely on third parties in the development, manufacture and distribution of ARS Pharma’s products and provision of ARS Pharma’s services, ARS Pharma must, at times, share trade secrets with them. Despite employing the

 

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contractual and other security precautions described above, the need to share trade secrets increases the risk that such trade secrets become known by ARS Pharma’s competitors, are inadvertently incorporated into the technology of others, or are disclosed or used in violation of these agreements. If any of ARS Pharma’s trade secrets were to be lawfully obtained or independently developed by a competitor or other third party, ARS Pharma would have no right to prevent them from using that technology or information to compete with ARS Pharma. If any of ARS Pharma’s trade secrets were to be disclosed to or independently developed by a competitor or other third party, ARS Pharma’s competitive position would be harmed.

ARS Pharma may be subject to claims that its employees, consultants or independent contractors have wrongfully used or disclosed confidential information of third parties.

ARS Pharma employs individuals who previously worked with other companies, including its competitors or potential competitors. ARS Pharma could in the future be subject to claims that ARS Pharma or its employees, consultants, or independent contractors have inadvertently or otherwise used or disclosed alleged trade secrets or other confidential information of current or former employers or competitors. Although ARS Pharma tries to ensure that its employees, consultants and independent contractors do not use the intellectual property, proprietary information, know-how or trade secrets of others in their work for ARS Pharma, ARS Pharma may become subject to claims that ARS Pharma caused an individual to breach the terms of his or her non-competition or non-solicitation agreement, or that ARS Pharma or these individuals have, inadvertently or otherwise, used or disclosed the alleged intellectual property, proprietary information, know-how or trade secrets of a current or former employer or competitor.

While ARS Pharma may litigate to defend against these claims, even if ARS Pharma is successful, litigation could result in substantial costs and could be a distraction to management and other employees. If ARS Pharma’s defenses to these claims fail, in addition to requiring ARS Pharma to pay monetary damages, a court could prohibit ARS Pharma from using technologies that are essential to ARS Pharma’s product candidates, if such technologies are found to incorporate or be derived from the trade secrets or other proprietary information of the current or former employers. Moreover, any such litigation or the threat thereof may adversely affect its reputation, its ability to form strategic alliances or sublicense its rights to collaborators, engage with scientific advisors or hire employees or consultants, each of which would have an adverse effect on its business, results of operations and financial condition.

In the future, ARS Pharma may need to obtain additional licenses of third-party technology that may not be available to ARS Pharma or are available only on commercially unreasonable terms, and which may cause ARS Pharma to operate its business in a more costly or otherwise adverse manner that was not anticipated.

From time to time, ARS Pharma may be required to license technologies relating to its therapeutic programs from additional third parties to further develop or commercialize ARS’s product candidates. Should ARS Pharma be required to obtain licenses to any third-party technology, including any such patents required to manufacture, use or sell ARS Pharma’s product candidates, such licenses may not be available to ARS Pharma on commercially reasonable terms, or at all. The inability to obtain any third-party license required to develop or commercialize any of ARS’s product candidates could cause ARS Pharma to abandon any related efforts, which could seriously harm its business and operations.

 

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Any collaboration arrangements that ARS Pharma may enter into in the future may not be successful, which could adversely affect its ability to develop and commercialize its products.

Any future collaborations that ARS Pharma enters into may not be successful. The success of ARS Pharma’s collaboration arrangements will depend heavily on the efforts and activities of its collaborators. Collaborations are subject to numerous risks, which may include that:

 

   

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

 

   

collaborators may not pursue development and commercialization of ARS Pharma’s products or may elect not to continue or renew development or commercialization programs based on trial or test results, changes in their strategic focus due to the acquisition of competitive products, availability of funding or other external factors, such as a business combination that diverts resources or creates competing priorities;

 

   

collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with ARS Pharma’s products or product candidates;

 

   

a collaborator with marketing, manufacturing and distribution rights to one or more products may not commit sufficient resources to or otherwise not perform satisfactorily in carrying out these activities;

 

   

ARS Pharma could grant exclusive rights to ARS Pharma’s collaborators that would prevent ARS Pharma from collaborating with others;

 

   

collaborators may not properly maintain or defend ARS Pharma’s intellectual property rights or may use ARS Pharma’s intellectual property or proprietary information in a way that gives rise to actual or threatened litigation that could jeopardize or invalidate ARS Pharma’s intellectual property or proprietary information or expose ARS Pharma to potential liability;

 

   

disputes may arise between ARS Pharma and a collaborator that causes the delay or termination of the research, development or commercialization of ARS Pharma’s current or future products or that results in costly litigation or arbitration that diverts management attention and resources;

 

   

collaborations may be terminated, and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable current or future products;

 

   

collaborators may own or co-own intellectual property covering ARS Pharma’s products that results from ARS Pharma’s collaborating with them, and in such cases, ARS Pharma would not have the exclusive right to develop or commercialize such intellectual property; and

 

   

a collaborator’s sales and marketing activities or other operations may not be in compliance with applicable laws resulting in civil or criminal proceedings.

Risks Related to ARS Pharma’s Business Operations, Employee Matters and Managing Growth

A pandemic, epidemic, or outbreak of an infectious disease, such as the COVID-19 pandemic, may materially and adversely affect ARS Pharma’s business, including its nonclinical studies, clinical trials, third parties on whom ARS Pharma relies, ARS Pharma’s supply chain, its ability to raise capital, its ability to conduct regular business and its financial results.

ARS Pharma is subject to risks related to public health crises such as the COVID-19 pandemic and the ongoing efforts to halt its spread. The pandemic and policies and regulations implemented by governments in response to the pandemic, often directing businesses and governmental agencies to cease non-essential operations at physical locations, prohibiting certain nonessential gatherings and ceasing non-essential travel have also had a significant impact, both direct and indirect, on businesses

 

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and commerce, as worker shortages have occurred, supply chains have been disrupted, facilities and production have been suspended, and demand for certain goods and services, such as medical service and supplies, has spiked, while demand for other goods and services has fallen. ARS Pharma has experienced certain impacts of the COVID-19 pandemic to date, including inability to conduct clinical trial site monitoring for certain earlier phase clinical trials and delays in completing clinical trials, bioanalytical sample analysis and study reports. There can be no guarantee ARS Pharma will not experience other impacts, such as being forced to further delay or pause enrollment, experiencing potential interruptions to its supply chain, facing difficulties or additional costs in enrolling patients in future clinical trials or being able to achieve full enrollment of its studies within the timeframes ARS Pharma anticipates, or at all.

The impact of the COVID-19 pandemic has been and may continue to be extensive in many aspects of society and could continue to result in significant disruptions to the global economy, as well as businesses and capital markets around the world. The full extent to which the COVID-19 pandemic, including efforts to halt the pandemic, could ultimately impact ARS Pharma’s business, nonclinical studies, clinical trials and financial results will depend on future developments, which are highly uncertain and cannot be accurately predicted, including the rate and success of vaccination efforts, new strains of the virus for which current vaccinations may not be effective and new information which may emerge, among others. Other global health concerns could also result in social, economic, and labor instability in the countries in which ARS Pharma or the third parties with whom ARS Pharma engage operate.

In response to the COVID-19 pandemic, ARS Pharma has continued to take precautionary measures intended to help minimize the risk of the virus to ARS Pharma’s employees, including closing or reducing access to ARS Pharma’s executive offices and temporarily requiring employees to work remotely, suspending all non-essential travel for ARS Pharma’s employees and discouraging employee attendance at industry events and in-person work-related meetings, all of which could negatively affect ARS Pharma’s business.

While ARS Pharma has been working closely with ARS Pharma’s third-party manufacturers, distributors and other partners to manage ARS Pharma’s supply chain activities and mitigate potential disruptions to the production of neffy as a result of the COVID-19 pandemic, if, despite vaccination efforts, the COVID-19 pandemic persists for an extended period of time, there could be significant and material disruptions to ARS Pharma’s supply chain and operations, and associated delays in the manufacturing and supply of neffy and any future product candidates. Any such supply disruptions, including disruptions in procuring items that are essential for ARS Pharma’s development activities and securing manufacturing slots for the products needed for such activities, could adversely impact ARS Pharma’s ability to initiate and complete nonclinical studies or clinical trials and generate sales of and revenue from ARS Pharma’s product candidates, if approved, which could have a material adverse effect on ARS Pharma’s business, financial condition, results of operations and growth prospects.

The COVID-19 pandemic has affected and may in the future affect employees of third-party CROs located in affected geographies that ARS Pharma rely upon to carry out ARS Pharma’s clinical trials. If the spread of the virus or any variant of the virus is not contained or increases, or if a new virus or pandemic emerges, ARS Pharma may experience additional disruptions that could severely impact ARS Pharma’s business and clinical trials, including:

 

   

delays or difficulties in ARS Pharma’s commercialization efforts;

 

   

delays or difficulties in enrolling patients in ARS Pharma’s clinical trials;

 

   

delays or difficulties in clinical site initiation, including difficulties in recruiting clinical site investigators and clinical site staff;

 

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diversion of healthcare resources away from the conduct of clinical trials, including the diversion of sites or facilities serving as ARS Pharma’s clinical trial sites and staff supporting the conduct of ARS Pharma’s clinical trials, including ARS Pharma’s trained therapists, or absenteeism that reduces site resources;

 

   

interruption of key clinical trial activities, such as clinical trial site monitoring, due to limitations on travel imposed or recommended by federal, state or national governments, employers and others or interruption of clinical trial subject visits and study procedures, the occurrence of which could affect the integrity of clinical trial data;

 

   

risk that participants enrolled in ARS Pharma’s clinical trials will acquire COVID-19 or another virus or illness while the clinical trial is ongoing, which could impact the results of the clinical trial, including by increasing the number of observed adverse events or patient withdrawals from ARS Pharma’s trials;

 

   

limitations in employee resources that would otherwise be focused on conducting ARS Pharma’s clinical trials, including because of sickness of employees or their families or the desire of employees to avoid contact with large groups of people;

 

   

delays in receiving authorizations from regulatory authorities to initiate ARS Pharma’s future clinical trials;

 

   

delays in clinical sites receiving the supplies and materials needed to conduct ARS Pharma’s clinical trials;

 

   

interruption in global shipping that may affect the transport of clinical trial materials, such as neffy used in ARS Pharma’s clinical trials;

 

   

changes in local regulations as part of a response to the COVID-19 pandemic or other pandemic which may require ARS to change the ways in which ARS Pharma’s clinical trials are conducted, which may result in unexpected costs, or the discontinuation of the clinical trials altogether;

 

   

interruptions or delays in nonclinical studies due to restricted or limited operations at research and development laboratory facilities;

 

   

delays in necessary interactions with local regulators, ethics committees and other important agencies and contractors due to limitations in employee resources or forced furlough of government employees; and

 

   

refusal of the FDA, the EMA or the other regulatory bodies to accept data from clinical trials in affected geographies outside the United States, the EU or other relevant local geographies.

Any negative impact the COVID-19 pandemic or any future pandemic or similar disruption has on patient enrollment or treatment, or the development of neffy and any future product candidates, could cause costly delays to clinical trial activities, which could adversely affect ARS Pharma’s ability to obtain regulatory approval for and to commercialize neffy and any future product candidates, if approved, increase ARS Pharma’s operating expenses, which could have a material adverse effect on ARS Pharma’s financial results. The COVID-19 pandemic has also in the past caused significant volatility in public equity markets and disruptions to the United States and global economies and any future pandemic or similar disruption could lead to further market dislocation. Any such increased volatility and economic dislocation may make it more difficult for ARS Pharma to raise capital on favorable terms, or at all. If ARS Pharma or any of the third parties with whom ARS Pharma engage were to experience renewed shutdowns or other business disruptions, ARS Pharma’s ability to conduct its business in the manner and on the timelines presently planned could be materially and negatively affected, which could have a material adverse impact on its business and its results of operations and financial conditions. To the extent the COVID-19 pandemic or any future pandemic or similar disruption

 

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adversely affects ARS Pharma’s business and financial results, it may also heighten many of the other risks described in this ‘‘Risk Factors—Risk Factors Related to ARS Pharma’’ section, such as those relating to the timing and completion of ARS Pharma’s clinical trials and ARS Pharma’s ability to obtain future financing.

ARS Pharma’s success is highly dependent on its ability to attract and retain highly skilled executive officers and employees.

ARS Pharma’s success depends, and will likely continue to depend, upon its ability to hire and retain the services of its current executive officers and its other highly qualified personnel. ARS Pharma has entered into employment agreements with each of ARS Pharma’s executive officers but they may terminate their employment or engagement with ARS Pharma at any time. The loss of their services might impede the achievement of ARS Pharma’s research, development and commercialization objectives.

ARS Pharma’s ability to compete in the biotechnology and pharmaceuticals industries depends upon its ability to attract and retain highly qualified managerial, scientific and medical personnel. ARS Pharma’s industry has experienced a high rate of turnover of management personnel in recent years. 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 ARS Pharma’s industry with the breadth of skills and experience required to develop, gain regulatory approval of and commercialize products successfully.

ARS Pharma’s industry has experienced a high rate of turnover in recent years. Competition to hire from this limited pool is intense, and ARS Pharma 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. ARS Pharma also experiences competition for the hiring of scientific and clinical personnel from universities and research institutions.

ARS Pharma relies on consultants and advisors, including scientific and clinical advisors, to assist ARS Pharma in formulating ARS Pharma’s research and development and commercialization strategy. ARS Pharma’s consultants and advisors, which includes entities owned by ARS Pharma’s executive officers and directors, may be employed by other entities and may have commitments under consulting or advisory contracts with those entities that may limit their availability to ARS Pharma. If ARS Pharma is unable to continue to attract and retain highly qualified personnel, ARS Pharma’s ability to develop and commercialize neffy or any future product candidates will be limited.

ARS Pharma only has a limited number of employees to manage and operate its business.

As of June 30, 2022, ARS Pharma had nine full-time employees and two part-time employees. ARS Pharma’s focus on the development of neffy requires ARS Pharma to optimize cash utilization and to manage and operate ARS Pharma’s business in a highly efficient manner. ARS Pharma cannot assure you that it will be able to hire and/or retain adequate staffing levels to develop neffy or to run ARS Pharma’s operations and/or to accomplish all of the objectives that ARS Pharma otherwise would seek to accomplish.

ARS Pharma’s employees, independent contractors, consultants, current and future licensing and collaboration partners and CROs may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements, which could cause significant liability for ARS Pharma and harm its reputation.

ARS Pharma is exposed to the risk that its employees, independent contractors, consultants, current and future licensing and collaboration partners and CROs may engage in fraudulent conduct or

 

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other illegal activity. Misconduct by those parties could include intentional, reckless and/or negligent conduct or disclosure of unauthorized activities to ARS Pharma that violates:

 

   

FDA regulations or similar regulations of comparable non-U.S. regulatory authorities, including those laws requiring the reporting of true, complete and accurate information to such authorities;

 

   

manufacturing standards;

 

   

federal and state healthcare fraud and abuse laws and regulations and similar laws and regulations established and enforced by comparable non-U.S. regulatory authorities; and

 

   

laws that require the reporting of financial information or data accurately.

Activities subject to these laws also involve the improper use or misrepresentation of information obtained in the course of clinical trials, creating fraudulent data in ARS Pharma’s nonclinical studies or clinical trials or illegal misappropriation of product materials, which could result in regulatory sanctions and serious harm to ARS Pharma’s reputation. It is not always possible to identify and deter misconduct, and the precautions ARS Pharma takes to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting ARS Pharma from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws, standards or regulations. Additionally, ARS Pharma is subject to the risk that a person or government could allege such fraud or other misconduct, even if none occurred. If any such actions are instituted against ARS Pharma, and it is not successful in defending ourselves or asserting its rights, those actions could have a significant impact on ARS Pharma’s business and results of operations, including the imposition of civil, criminal and administrative penalties, damages, monetary fines, disgorgement, integrity oversight and reporting obligations, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, and curtailment of ARS Pharma’s operations, any of which could have a material adverse effect on ARS Pharma’s ability to operate its business and its results of operations.

ARS Pharma expects to expand its organization, and as a result, it may encounter difficulties in managing its growth, which could disrupt its operations.

ARS Pharma expects to experience significant growth in the number of its employees and the scope of its operations, particularly in the areas of regulatory affairs and sales, marketing and distribution, as well as to support ARS Pharma’s public company operations. To manage these growth activities, ARS Pharma must continue to implement and improve ARS Pharma’s managerial, operational and financial systems, expand ARS Pharma’s facilities and continue to recruit and train additional qualified personnel. ARS Pharma’s management may need to devote a significant amount of its attention to managing these growth activities. Due to ARS Pharma’s limited financial resources and the limited experience of ARS Pharma’s management team in managing a company with such anticipated growth, ARS Pharma may not be able to effectively manage the expansion or relocation of its operations, retain key employees, or identify, recruit and train additional qualified personnel. ARS Pharma’s inability to manage the expansion or relocation of its operations effectively may result in weaknesses in ARS Pharma’s infrastructure, give rise to operational mistakes, loss of business opportunities, loss of employees and reduced productivity among remaining employees. ARS Pharma’s expected growth could also require significant capital expenditures and may divert financial resources from other projects, such as the development of neffy for additional indications or future product candidates. If ARS Pharma is unable to effectively manage ARS Pharma’s expected growth, its expenses may increase more than expected, its ability to generate revenues could be reduced and it may not be able to implement its business strategy, including the successful commercialization of neffy or any future product candidates.

 

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Risks Related to the Combined Company

In determining whether you should vote approve the proposals contained in this proxy statement, you should carefully read the following risk factors in addition to the risks described above.

The combined company will need to raise additional financing in the future to fund its operations, which may not be available to it on favorable terms or at all.

Although we expect that the combined company will have approximately $265 million in cash, cash equivalents and marketable securities at Closing, which we expect will provide at least three years of operating runway, following such period of time, the combined company will require additional funds to continue the development and potential commercialization of neffy and future product candidates. The combined company’s future capital requirements will depend upon a number of factors, including: the number and timing of future product candidates in the pipeline; progress with and results from preclinical testing and clinical trials; the ability to manufacture sufficient drug supplies to complete preclinical studies and clinical trials; the costs involved in preparing, filing, acquiring, prosecuting, maintaining and enforcing patent and other intellectual property claims; and the time and costs involved in obtaining regulatory approvals and favorable reimbursement or formulary acceptance.

Raising additional capital may be costly or difficult to obtain and could significantly dilute stockholders’ ownership interests or inhibit the combined company’s ability to achieve its business objectives. If the combined company raises additional funds through public or private equity offerings, the terms of these securities may include liquidation or other preferences that adversely the rights of its common stockholders. Further, to the extent that the combined company raises additional capital through the sale of common stock or securities convertible or exchangeable into common stock, its stockholder’s ownership interest in the combined company will be diluted. In addition, any debt financing may subject the combined company to fixed payment obligations and covenants limiting or restricting its ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. In addition, the terms of the ARS Loan and Security Agreement contain restrictive covenants that may prevent the combined company from incurring additional indebtedness without Silicon Valley Bank’s consent. If the combined company raises additional capital through marketing and distribution arrangements or other collaborations, strategic alliances or licensing arrangements with third parties, the combined company may have to relinquish certain valuable intellectual property or other rights to its product candidates, technologies, future revenue streams or research programs or grant licenses on terms that may not be favorable to it. Even if the combined company were to obtain sufficient funding, there can be no assurance that it will be available on terms acceptable to the combined company or its stockholders.

The market price of the combined company’s common stock is expected to be volatile, and the market price of the common stock may drop following the Merger.

The market price of the combined company’s common stock following the Merger could be subject to significant fluctuations. Market prices for securities of pre-commercial pharmaceutical, biotechnology and other life sciences companies have historically been particularly volatile. Some of the factors that may cause the market price of the combined company’s common stock to fluctuate include:

 

   

the ability of the combined company to obtain regulatory approvals for its product candidates, and delays or failures to obtain such approvals;

 

   

failure of any of the combined company’s product candidates, if approved, to achieve commercial success;

 

   

failure by the combined company to maintain its existing third-party license and supply agreements;

 

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failure by the combined company or its licensors to prosecute, maintain, or enforce its intellectual property rights;

 

   

changes in laws or regulations applicable to the combined company’s product candidates;

 

   

any inability to obtain adequate supply of the combined company’s product candidates or the inability to do so at acceptable prices;

 

   

adverse regulatory authority decisions;

 

   

introduction of new products, services or technologies by the combined company’s competitors;

 

   

failure to meet or exceed financial and development projections the combined company may provide to the public;

 

   

failure to meet or exceed the financial and development projections of the investment community;

 

   

the perception of the pharmaceutical industry by the public, legislatures, regulators and the investment community;

 

   

announcements of significant acquisitions, strategic collaborations, joint ventures or capital commitments by the combined company or its competitors;

 

   

disputes or other developments relating to proprietary rights, including patents, litigation matters, and the combined company’s ability to obtain patent protection for its product candidates;

 

   

additions or departures of key personnel;

 

   

significant lawsuits, including patent or stockholder litigation;

 

   

if securities or industry analysts do not publish research or reports about the combined company’s business, or if they issue an adverse or misleading opinion regarding its business and stock;

 

   

changes in the market valuations of similar companies;

 

   

general market or macroeconomic conditions;

 

   

sales of its common stock by the combined company or its stockholders in the future;

 

   

trading volume of the combined company’s common stock;

 

   

announcements by commercial partners or competitors of new commercial products, clinical progress or the lack thereof, significant contracts, commercial relationships or capital commitments;

 

   

adverse publicity generally, including with respect to other products and potential products in such markets;

 

   

the introduction of technological innovations or new therapies that compete with potential products of the combined company;

 

   

changes in the structure of health care payment systems; and

 

   

period-to-period fluctuations in the combined company’s financial results.

Moreover, the stock markets in general have experienced substantial volatility that has often been unrelated to the operating performance of individual companies. These broad market fluctuations may also adversely affect the trading price of the combined company’s common stock.

In the past, following periods of volatility in the market price of a company’s securities, stockholders have often instituted class action securities litigation against those companies. For

 

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example, following a decline in Silverback’s stock price, a federal securities class action complaint was filed against Silverback and certain of its officers and directors in the U.S. District for the Western District of Washington, captioned Dresner v. Silverback Therapeutics, Inc., et al., Case No. 2:21-cv-01499, which alleges violations of (i) Sections 11 and 15 of the Securities Act; and (ii) Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (the “”Exchange Act”) and SEC Rule 10b-5 promulgated thereunder. If not dismissed, settled or otherwise resolved prior to the Closing, the combined company will need to defend this action. Even if the combined company is successful in defending against this action or any similar claims that may be brought in the future, such litigation could result in substantial costs and a diversion of management’s attention and resources, which could harm the combined company’s business.

Additionally, a decrease in the stock price of the combined company may cause the combined company’s common stock to no longer satisfy the continued listing standards of Nasdaq. If the combined company is not able to maintain the requirements for listing on Nasdaq, it could be delisted, which could have a materially adverse effect on its ability to raise additional funds as well as the price and liquidity of its common stock.

The combined company will incur costs and demands upon management as a result of complying with the laws and regulations affecting public companies.

The combined company will incur significant legal, accounting and other expenses that ARS Pharma did not incur as a private company, including costs associated with public company reporting requirements. The combined company will also incur costs associated with corporate governance requirements, including requirements under the Sarbanes-Oxley Act, as well as new requirements implemented by the SEC and Nasdaq. These rules and regulations are expected to increase the combined company’s legal and financial compliance costs and to make some activities more time consuming and costly. For example, the combined company’s management team will consist of the executive officers of ARS Pharma prior to the Merger, some of whom have not previously managed and operated a public company. These executive officers and other personnel will need to devote substantial time to gaining expertise regarding operations as a public company and compliance with applicable laws and regulations. These rules and regulations also may make it difficult and expensive for the combined company to obtain directors’ and officers’ liability insurance. As a result, it may be more difficult for the combined company to attract and retain qualified individuals to serve on the combined company’s board of directors or as executive officers of the combined company, which may adversely affect investor confidence in the combined company and could cause the combined company’s business or stock price to suffer.

Delaware law and provisions in the combined company’s amended and restated certificate of incorporation and amended and restated bylaws could make a merger, tender offer or proxy contest difficult, thereby depressing the trading price of the combined company’s common stock.

The combined company’s status as a Delaware corporation and the anti-takeover provisions of the DGCL may discourage, delay or prevent a change in control by prohibiting the combined company from engaging in a business combination with an interested stockholder for a period of three years after the person becomes an interested stockholder, even if a change of control would be beneficial to the combined company’s stockholders. In addition, the combined company’s amended and restated certificate of incorporation and amended and restated bylaws will contain provisions that may make the acquisition of the combined company more difficult, including the following:

 

   

a classified board of directors with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of the combined company’s board of directors;

 

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the ability of the combined company’s board of directors to issue shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer;

 

   

the exclusive right of the combined company’s board of directors to elect a director to fill a vacancy created by the expansion of the combined company’s board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on the combined company’s board of directors;

 

   

a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of the combined company’s stockholders;

 

   

the requirement that a special meeting of stockholders may be called only by a majority vote of the entire board of directors of the combined company, the chair of the combined company’s board of directors or the combined company’s chief executive officer, which could delay the ability of the combined company’s stockholders to force consideration of a proposal or to take action, including the removal of directors;

 

   

the requirement for the affirmative vote of holders of at least 66-2/3% of the voting power of all of the then-outstanding shares of the voting stock, voting together as a single class, to amend the provisions of the combined company’s amended and restated certificate of incorporation relating to the management of its business or its amended and restated bylaws, which may inhibit the ability of an acquirer to affect such amendments to facilitate an unsolicited takeover attempt; and

 

   

advance notice procedures with which stockholders must comply to nominate candidates to the combined company’s board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of the combined company.

In addition, as a Delaware corporation, the combined company will be subject to Section 203 of the DGCL. These provisions may prohibit large stockholders, in particular those owning 15% or more of the outstanding voting stock of the combined company, from merging or combining with the combined company for a certain period of time. A Delaware corporation may opt out of this provision by express provision in its original certificate of incorporation or by amendment to its certificate of incorporation or bylaws approved by its stockholders. However, Silverback has not opted out of this provision, which will be applicable to the combined company following the Closing.

These and other provisions in the combined company’s amended and restated certificate of incorporation, amended and restated bylaws and Delaware law could make it more difficult for stockholders or potential acquirors to obtain control of the combined company’s board of directors or initiate actions that are opposed by its then-current board of directors, including delay or impede a merger, tender offer or proxy contest involving the combined company. The existence of these provisions could negatively affect the price of the combined company’s common stock and limit opportunities for its stockholders to realize value in a corporate transaction.

 

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The combined company’s amended and restated certificate of incorporation will designate the state courts 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, and the federal district courts of the United States of America to be the exclusive forums for substantially all disputes between the combined company and its stockholders, which could limit the combined company’s stockholders’ ability to obtain a favorable judicial forum for disputes with the combined company or its directors, officers and employees.

The amended and restated certificate of incorporation of the combined company provides that, to the fullest extent permitted by law, unless the combined company consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if and only if the Court of Chancery of the State of Delaware lacks subject matter jurisdiction, any state court located within the State of Delaware or, if and only if all such state courts lack subject matter jurisdiction, the federal district court for the District of Delaware) and any appellate court therefrom shall will be the sole and exclusive forum for the following types of actions or proceedings under Delaware statutory or common law: (i) any derivative action or proceeding brought on behalf of the combined company; (ii) any action or proceeding asserting a claim of breach of a fiduciary duty owed by any of the combined company’s current or former directors, officers or other employees to the combined company or its stockholders; (iii) any action or proceeding asserting a claim against the combined company or any of its current or former directors, officers or other employees, arising out of or pursuant to any provision of the DGCL, amended and restated certificate of incorporation of the combined company or the amended and restated bylaws of the combined company; (iv) any action or proceeding to interpret, apply, enforce or determine the validity of the amended and restated certificate of incorporation of the combined company or the amended and restated bylaws of the combined company; (v) any action or proceeding as to which the DGCL confers jurisdiction to the Court of Chancery of the State of Delaware; and (vi) any action asserting a claim against the combined company or any of its directors, officers or other employees, governed by the internal affairs doctrine.

This provision would not apply to suits brought to enforce a duty or liability created by the Exchange Act. Furthermore, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all such Securities Act actions. Accordingly, both state and federal courts have jurisdiction to entertain such claims. To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, the amended and restated certificate of incorporation of the combined company will further provide that the federal district courts of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act. While the Delaware courts have determined that such choice of forum provisions are facially valid and several state trial courts have enforced such provisions and required that suits asserting Securities Act claims be filed in federal court, there is no guarantee that courts of appeal will affirm the enforceability of such provisions and a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions. In such instance, the combined company would expect to vigorously assert the validity and enforceability of the exclusive forum provisions of its amended and restated certificate of incorporation. This may require significant additional costs associated with resolving such action in other jurisdictions and there can be no assurance that the provisions will be enforced by a court in those other jurisdictions. If a court were to find either exclusive forum provision in the combined company’s amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur further significant additional costs associated with litigating Securities Act claims in state court, or both state and federal court, which could seriously harm our business, financial condition, results of operations, and prospects.

These exclusive forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with the combined company or its directors, officers, or other

 

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employees, which may discourage lawsuits against the combined company and its directors, officers and other employees. If a court were to find either exclusive-forum provision in the combined company’s amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, the combined company may incur further significant additional costs associated with resolving the dispute in other jurisdictions, all of which could seriously harm our business.

Silverback and ARS Pharma do not anticipate that the combined company will pay any cash dividends in the foreseeable future.

The current expectation is that the combined company will retain its future earnings, if any, to fund the development and growth of the combined company’s business. As a result, capital appreciation, if any, of the common stock of the combined company will be its stockholders’ sole source of gain, if any, for the foreseeable future.

An active trading market for the combined company’s common stock may not develop and its stockholders may not be able to resell their shares of common stock for a profit, if at all.

Prior to the Merger, there had been no public market for ARS Pharma’s common stock. An active trading market for the combined company’s shares of common stock may never develop or be sustained. If an active market for its common stock does not develop or is not sustained, it may be difficult for its stockholders to sell their shares at an attractive price or at all.

Future sales of shares by existing stockholders could cause the combined company’s stock price to decline.

If existing stockholders of Silverback and ARS Pharma sell, or indicate an intention to sell, substantial amounts of the combined company’s common stock in the public market after legal restrictions on resale discussed in this proxy statement lapse, the trading price of the common stock of the combined company could decline. Neither Silverback nor ARS Pharma is able to predict the effect that sales may have on the prevailing market price of the combined company’s common stock.

If equity research analysts do not publish research or reports, or publish unfavorable research or reports, about the combined company, its business or its market, its stock price and trading volume could decline.

The trading market for the combined company’s common stock will be influenced by the research and reports that equity research analysts publish about it and its business. Equity research analysts may elect not to provide research coverage of the combined company’s common stock after the completion of the Merger, and such lack of research coverage may adversely affect the market price of its common stock. In the event it does have equity research analyst coverage, the combined company will not have any control over the analysts, or the content and opinions included in their reports. The price of the combined company’s common stock could decline if one or more equity research analysts downgrade its stock or issue other unfavorable commentary or research. If one or more equity research analysts ceases coverage of the combined company or fails to publish reports on it regularly, demand for its common stock could decrease, which in turn could cause its stock price or trading volume to decline.

If the combined company fails to maintain proper and effective internal controls, its ability to produce accurate financial statements on a timely basis could be impaired.

The combined company will be subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act and the rules and regulations of Nasdaq. The Sarbanes-Oxley Act requires,

 

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among other things, that the combined company maintain effective disclosure controls and procedures and internal control over financial reporting. The combined company must perform system and process evaluation and testing of its internal control over financial reporting to allow management to report on the effectiveness of its internal controls over financial reporting in its Annual Report on Form 10-K filing for that year, as required by Section 404 of the Sarbanes-Oxley Act. As a private company, ARS Pharma has never been required to test its internal controls within a specified period. This will require that the combined company incur substantial professional fees and internal costs to expand its accounting and finance functions and that it expends significant management efforts. The combined company may experience difficulty in meeting these reporting requirements in a timely manner.

The combined company may discover weaknesses in its system of internal financial and accounting controls and procedures that could result in a material misstatement of its financial statements. The combined company’s internal control over financial reporting will not prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected.

If the combined company is not able to comply with the requirements of Section 404 of the Sarbanes-Oxley Act, or if it is unable to maintain proper and effective internal controls, the combined company may not be able to produce timely and accurate financial statements. If that were to happen, the market price of its common stock could decline and it could be subject to sanctions or investigations by Nasdaq, the SEC or other regulatory authorities.

If the combined company fails to attract and retain management and other key personnel, it may be unable to continue to successfully develop or commercialize its product candidates or otherwise implement its business plan.

The combined company’s ability to compete in the highly competitive pharmaceuticals industry depends on its ability to attract and retain highly qualified managerial, scientific, medical, legal, sales and marketing and other personnel. The combined company will be highly dependent on its management and scientific personnel. The loss of the services of any of these individuals could impede, delay or prevent the successful development of the combined company’s product candidates, completion of its planned clinical trials, commercialization of its product candidates or in-licensing or acquisition of new assets and could impact negatively its ability to implement successfully its business plan. If the combined company loses the services of any of these individuals, it might not be able to find suitable replacements on a timely basis or at all, and its business could be harmed as a result. The combined company might not be able to attract or retain qualified management and other key personnel in the future due to the intense competition for qualified personnel among biotechnology, pharmaceutical and other businesses.

The combined company will be an “emerging growth company” and neither Silverback nor ARS Pharma can be certain if the reduced disclosure requirements applicable to “emerging growth companies” will make the combined company’s common stock less attractive to investors.

The combined company will be an “emerging growth company,” as defined under the Jumpstart Our Business Startups Act (the “JOBS Act”). For so long as the combined company is an “emerging growth company,” it is expected that it will take advantage of certain exemptions from reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic

 

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reports and proxy statements, 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.

Neither Silverback nor ARS Pharma can predict if investors will find the combined company’s common stock less attractive, or the combined company less comparable to certain other public companies because it will rely on these exemptions. If some investors find the combined company’s common stock less attractive as a result, there may be a less active trading market for its common stock and its stock price may be more volatile.

Under the JOBS Act, “emerging growth companies” can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The combined company will have irrevocably elected not to avail itself of this exemption from new or revised accounting standards, and, therefore, will be subject to the same new or revised accounting standards as other public companies that are not “emerging growth companies.”

The combined company’s ability to use NOL carryforwards and certain other tax attributes may be limited.

Each of Silverback and ARS Pharma has incurred substantial losses during its history. Unused losses for the tax years beginning before January 1, 2018, will carry forward to offset future taxable income, if any, until such unused losses expire. Unused federal losses generated in tax years beginning after December 31, 2017, will not expire and may be carried forward indefinitely, but the deductibility of such federal NOL carryforwards in taxable years beginning after December 31, 2020, is limited to 80% of taxable income. In addition, both current and future unused losses and other tax attributes may be subject to limitation under Sections 382 and 383 of the Code if the combined company undergoes an “ownership change,” generally defined as a greater than 50 percentage point change (by value) in our equity ownership by certain stockholders over a three-year period. The Merger will result in an ownership change for Silverback. ARS Pharma’s NOL carryforwards may also be subject to limitation as a result of prior shifts in equity ownership and/or the Merger. Additional ownership changes in the future could result in additional limitations on Silverback’s, ARS Pharma’s and the combined company’s NOL carryforwards. Similar provisions of state tax law may also apply to limit our use of accumulated state tax attributes. In addition, at the state level, there may be periods during which the use of NOLs is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed. Consequently, even if the combined company achieves profitability, it may not be able to utilize a material portion of Silverback’s, ARS Pharma’s, or the combined company’s NOL carryforwards and other tax attributes, which could adversely affect the combined company’s business, cash flow, financial condition or results of operations.

 

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CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS

This proxy statement and the documents incorporated by reference into this proxy statement contain forward-looking statements. These forward-looking statements are based on current expectations and beliefs and involve numerous risks and uncertainties that could cause actual results to differ materially from expectations. These forward-looking statements should not be relied upon as predictions of future events as it cannot be assured that the events or circumstances reflected in these statements will be achieved or will occur. You can identify forward-looking statements by the use of forward-looking terminology including “anticipates,” “believes,” “could,” “seeks,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “pro forma,” “should,” “will,” “would,” or the negative of these words and phrases or other variations of these words and phrases or comparable terminology. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. For example, forward-looking statements include, but are not limited to statements about:

 

   

expected timing, completion, effects and potential benefits of the Merger;

 

   

statements of the plans, strategies and objectives of management with respect to the approval and closing of the Merger;

 

   

Silverback’s ability to solicit a sufficient number of proxies to approve matters related to the consummation of the Merger;

 

   

the expected Exchange Ratio and relative ownership percentages of the stockholders of ARS Pharma and Silverback in the combined company following the Closing;

 

   

the expected level of Silverback Net Cash at Closing;

 

   

the expected name, ticker symbol, management team and board of directors of the combined company;

 

   

any statements regarding future economic conditions or performance;

 

   

Silverback’s plans to divest its preclinical assets;

 

   

research and development plans, including planned clinical trials, for neffy, including for additional indications;

 

   

the design and potential benefits of neffy;

 

   

ARS Pharma’s plans to submit an NDA to the FDA and MAA to the EMA for neffy and the timing thereof;

 

   

the timing of the commercial launch of neffy, if approved, and the ability of the Merger to provide sufficient capital for such launch;

 

   

the commercialization strategy for neffy;

 

   

the size of the markets for neffy and any other product candidates, and the combined company’s ability to serve those markets;

 

   

the rate and degree of market acceptance of neffy and any other product candidates;

 

   

regulatory developments in the United States and foreign countries;

 

   

the safety, efficacy, and market success of competing therapies that are or become available;

 

   

the combined company’s ability to attract and retain key scientific and management personnel;

 

   

the performance of our third-party service providers, including the combined company’s contract research organizations, suppliers, and manufacturers;

 

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the combined company’s ability to attract and retain collaborators with development, regulatory and commercialization expertise;

 

   

the combined company’s ability to develop and maintain sales and marketing capabilities, whether alone or with potential future collaborators;

 

   

estimates regarding anticipated operating losses, capital requirements and needs for additional funds;

 

   

the combined company’s ability to obtain, maintain and successfully enforce adequate patent and other intellectual property protection of neffy or any future product candidate;

 

   

the impact of the COVID-19 pandemic on the combined company’s business and operations; and

 

   

statements of belief and any statement of assumptions underlying any of the foregoing.

For a discussion of the factors that may cause Silverback, ARS Pharma or the combined company’s actual results, performance or achievements following the Closing to differ materially from any future results, performance or achievements expressed or implied in such forward-looking statements, or for a discussion of risk associated with the ability of Silverback and ARS Pharma to complete the Merger and the effect of the Merger on the business of Silverback, ARS Pharma and the combined company following the completion of the Merger, see the section titled “Risk Factors” in this proxy statement. Additional factors that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in reports filed with the SEC by Silverback. See the section titled “Where You Can Find More Information” in this proxy statement. There can be no assurance that the Merger will be completed, or if it is completed, that it will close within the anticipated time period or that the expected benefits of the Merger will be realized.

If any of these risks or uncertainties materializes or any of these assumptions proves incorrect, the results of Silverback, ARS Pharma or the combined company following completion of the Merger could differ materially from the forward-looking statements. All forward-looking statements in this proxy statement are current only as of the date on which the statements were made. Silverback and ARS Pharma do not undertake any obligation (and expressly disclaim any such obligation) to publicly update any forward-looking statement to reflect events or circumstances after the date on which any statement is made or to reflect the occurrence of unanticipated events, except as required by applicable law.

In addition, statements that “Silverback believes” or “ARS Pharma believes” and similar statements reflect Silverback’s or ARS Pharma’s beliefs and opinions on the relevant subject. These statements are based upon information available to Silverback or ARS Pharma, as the case may be, as of the date of this proxy statement, and while Silverback or ARS Pharma, as the case may be, believes such information forms a reasonable basis for such statements, such information may be limited or incomplete, and such statements should not be read to indicate that such party has conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

 

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THE VIRTUAL SPECIAL MEETING OF SILVERBACK’S STOCKHOLDERS

Date, Time and Place

The Silverback virtual special meeting will be held in a virtual meeting format only, via the internet and with no physical in-person meeting on                 , 2022, at                  a.m. Pacific Time, unless postponed or adjourned to a later date. The Silverback virtual special meeting can be accessed by visiting www.proxydocs.com/SBTX where you will be able to vote your shares and submit questions during the Silverback virtual special meeting webcast by logging in to the website listed above using the control number included in your proxy card. Online check-in will begin at                  a.m. Pacific Time, and Silverback encourages you to allow ample time for the online check-in procedures.

This proxy statement is first being furnished to stockholders of Silverback on or about                 , 2022. This proxy statement provides Silverback stockholders with information they need to know to be able to vote or instruct their vote to be cast at the Silverback virtual special meeting.

Purpose of the Silverback Virtual Special Meeting

The purpose of the Silverback virtual special meeting is to:

 

  1.

Proposal No. 1 (Merger Proposal). Approve (i) the issuance of shares of Silverback Common Stock or other securities of Silverback pursuant to the Merger, which will represent (or are convertible into) more than 20% of the shares of Silverback Common Stock outstanding immediately prior to the Merger, and (ii) the change of control resulting from the Merger, pursuant to Nasdaq Listing Rules 5635(a) and 5635(b), respectively; and

 

  3.

Proposal No. 2 (Adjournment Proposal). Approve a postponement or adjournment of the Silverback virtual special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of Proposal No. 1.

Silverback will transact no other business at the Silverback virtual special meeting except such business as may properly be brought before the Silverback virtual special meeting or any adjournment or postponement thereof.

Recommendation of the Silverback Board

The Silverback Board has unanimously determined that the Merger Proposal and the Adjournment Proposal are fair to, advisable for and in the best interests of Silverback and its stockholders. The Silverback Board recommends that Silverback’s stockholders vote “FOR” each of Proposal Nos. 1 and 2.

Record Date and Voting Power

Only holders of record of Silverback Common Stock at the close of business on the record date,                 , 2022, are entitled to notice of, and to vote at, the Silverback virtual special meeting. There were approximately                  holders of record of Silverback Common Stock at the close of business on the record date. At the close of business on the record date,                  shares of Silverback Common Stock were issued and outstanding. Each share of Silverback Common Stock entitles the holder thereof to one vote on each matter submitted for stockholder approval. See the section titled “Principal Stockholders of Silverback” in this proxy statement for information regarding persons known to Silverback’s management to be the beneficial owners of more than 5% of the outstanding shares of Silverback Common Stock.

 

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Voting and Revocation of Proxies

The proxy accompanying this proxy statement is solicited on behalf of the Silverback Board for use at the Silverback virtual special meeting.

Only holders of record of Silverback Common Stock at the close of business on the record date will be entitled to notice of, and to vote at, the Silverback virtual special meeting or any adjournments or postponements thereof.

As of the close of business on the record date, there were                  shares of Silverback Common Stock outstanding and entitled to vote at the Silverback virtual special meeting. Each share of Silverback Common Stock outstanding on the record date entitles the holder thereof to one vote on each proposal to be considered at the Silverback virtual special meeting.

Your vote is important. Silverback expects that many Silverback stockholders will not attend the Silverback virtual special meeting, and instead will be represented by proxy. Most Silverback stockholders have a choice of submitting a proxy to vote their shares via the internet by following the instructions posted at www.proxydocs.com/SBTX, by using the toll-free telephone number, or by returning a completed Silverback proxy card or voting instruction form. Please check your notice, proxy card or the information forwarded by your broker, bank or other nominee to see which options are available to you. These internet and telephone procedures have been designed to authenticate Silverback stockholders, to allow you to vote your shares, and to confirm that your instructions have been properly recorded.

You can revoke your proxy at any time before it is exercised by delivering a properly executed, later-dated proxy (including a proxy submitted by internet or telephone), by delivering a written revocation before the Silverback virtual special meeting or by voting at the Silverback virtual special meeting. Executing your proxy in advance will not limit your right to vote at the Silverback virtual special meeting if you decide to attend the Silverback virtual special meeting. However, if your shares are held in the name of a broker, bank or other nominee, you cannot vote at the Silverback virtual special meeting unless you have a legal proxy, executed in your favor, from the holder of record.

All shares entitled to vote and represented by properly executed proxies received prior to the Silverback virtual special meeting and not revoked will be voted at the Silverback virtual special meeting in accordance with your instructions. If you sign and return your proxy but do not indicate how your shares should be voted on a proposal, the shares represented by your proxy will be voted as the Silverback Board recommends for such proposal.

Subject to health concerns relating to COVID-19, which may require Silverback to implement alternative procedures to protect the health and welfare of Silverback’s employees and stockholders, a complete list of Silverback stockholders entitled to vote at the Silverback virtual special meeting will be available for examination by any Silverback stockholder in the Corporate Secretary’s Office at Silverback Therapeutics, Inc., 500 Fairview Ave. N, Suite 600, Seattle, Washington 98109, for purposes pertaining to the Silverback virtual special meeting, during ordinary business hours for a period of 10 days before the Silverback virtual special meeting, and at the Silverback virtual special meeting. A complete list of Silverback stockholders entitled to vote at the Silverback virtual special meeting will also be available for inspection during the Silverback virtual special meeting at www.proxydocs.com/SBTX, by logging in with your control number(s).

Quorum and Required Vote

The presence, virtually or by proxy, at the Silverback virtual special meeting of the holders of a majority of the shares of Silverback Common Stock outstanding and entitled to vote at the Silverback virtual special meeting is necessary to constitute a quorum at the meeting. Abstentions and broker

 

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non-votes will be counted towards a quorum. Approval of Proposals Nos. 1 and 2 requires the affirmative vote of a majority of the votes cast virtually or by proxy at the Silverback virtual special meeting.

Proposal No. 1 is a condition to the consummation of the Merger. Therefore, the Merger cannot be consummated without the approval of Proposal No. 1. Proposal No. 2 is not a condition to the consummation of the Merger. Proposal No. 1 is not conditioned on Proposal No. 2 being approved.

As of immediately prior to the date of the Merger Agreement, the directors and executive officers of Silverback and other stockholders who signed the Silverback Support Agreements beneficially owned approximately 31% of the outstanding shares of Silverback Common Stock entitled to vote at the Silverback virtual special meeting. Pursuant to the Silverback Support Agreements, each such director, executive officer and stockholder has agreed, solely in his, her or its capacity as a stockholder of Silverback, to be present (virtually or by proxy) at the Silverback virtual special meeting to vote all shares of Silverback Common Stock owned by him, her or it as of the record date in favor of Proposal Nos. 1 and 2. Additionally, each such stockholder has agreed, solely in his, her or its capacity as a stockholder of Silverback, to vote against any proposal made in opposition to, or in competition with, the Merger Agreement or the Merger and against any acquisition proposal involving a third party.

Voting by Holders of Record

If you were the record holder of your shares of Silverback Common Stock as of the record date, you may vote your shares of Silverback Common Stock at the Silverback virtual special meeting via the virtual meeting website. Any Silverback stockholder can attend the Silverback virtual special meeting by visiting www.proxydocs.com/SBTX, where stockholders may vote and submit questions during the Silverback virtual special meeting webcast. Additionally, you may submit your proxy authorizing the voting of your shares of Silverback Common Stock at the Silverback virtual special meeting by mail, by telephone or via the internet.

Voting via Proxies Submitted by the Internet or by Telephone

To vote through the internet, go to www.proxydocs.com/SBTX to complete an electronic proxy card. You will be asked to provide the company number and control number from the enclosed proxy card.

To vote over the telephone, dial toll-free (866) 355-8664 using a touch-tone phone and follow the recorded instructions. You will be asked to provide the company number and control number from the enclosed proxy card.

Voting via Proxies Submitted by Mail

As an alternative to submitting your proxy via the internet or by telephone, you may submit your proxy by mail.

To vote using the proxy card, simply complete, sign and date the enclosed proxy card and return it promptly in the envelope provided. If you return your signed proxy card to us before the Silverback virtual special meeting, we will vote your shares as you direct.

Treatment of Abstentions; Failure to Vote

For purposes of the Silverback virtual special meeting, an abstention occurs when a Silverback stockholder attends the Silverback virtual special meeting, virtually or by proxy, but abstains from voting. If a Silverback stockholder is not present at the Silverback virtual special meeting and does not

 

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respond by proxy, it will have no effect on the vote count for such proposal. Abstentions and broker non-votes (if applicable) will have no effect on the outcome of Proposal Nos. 1 and 2 but will be used to determine whether a quorum is present at the Silverback virtual special meeting.

Attendance at the Silverback Virtual Special Meeting and Voting at the Silverback Virtual Special Meeting

You or your authorized proxy may attend the Silverback virtual special meeting if you were a registered or beneficial stockholder of Silverback Common Stock as of the Silverback record date. A summary of the information you need to attend the Silverback virtual special meeting online is provided below:

 

   

To participate, vote or submit questions during the Silverback virtual special meeting via live webcast, you must register in advance at www.proxydocs.com/SBTX prior to the meeting and provide the control number as set forth in the proxy card or voting instruction form at www.proxydocs.com/SBTX. Upon completing your registration, you will receive further instructions via email, including unique links to access the Silverback virtual special meeting and to submit questions in advance of the Silverback virtual special meeting.

 

   

Any stockholder may listen to the Silverback virtual special meeting and participate live via webcast at www.proxydocs.com/SBTX. The webcast will begin at                  a.m. Pacific Time on                 , 2022.

 

   

Stockholders may vote and submit questions during the Silverback virtual special meeting via live webcast.

 

   

To enter the Silverback virtual special meeting, please have your control number which is available on your proxy card or the instructions that accompanied your proxy materials. If you do not have your control number, you will be able to listen to the meeting only and you will not be able to vote or submit questions during the meeting.

 

   

Instructions on how to connect to and participate in the Silverback virtual special meeting via the internet, including how to demonstrate proof of stock ownership, are posted at www.proxydocs.com/SBTX.

If we experience technical difficulties during the Silverback virtual special meeting (e.g., a temporary or prolonged power outage), we will determine whether the Silverback virtual special meeting can be promptly reconvened (if the technical difficulty is temporary) or whether the Silverback virtual special meeting will need to be reconvened on a later day (if the technical difficulty is more prolonged). In any situation, we will promptly notify stockholders of the decision via www.proxydocs.com/SBTX. We will have technicians ready to assist you with any technical difficulties you may have accessing the virtual meeting website. If you encounter any difficulties accessing the virtual meeting website during the check-in or meeting time, please call the technical support number that will be posted on the virtual meeting website log-in page at www.proxydocs.com/SBTX.

Please note that you will not be able to attend the Silverback virtual special meeting in person. In light of the ongoing developments relating to the ongoing COVID-19 pandemic and to protect the health of Silverback stockholders, management, employees and the community, the Silverback virtual special meeting will be held virtually conducted via live audio webcast. You will be able to attend the Silverback virtual special meeting by visiting www.proxydocs.com/SBTX and entering your control number as further explained in the accompanying proxy card. Silverback recommends that you log in at least 15 minutes before the Silverback virtual special meeting to ensure you are logged in when the meeting starts.

 

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If you own shares in street name through an account with a bank, broker or other nominee, please send proof of your Silverback share ownership as of the Silverback record date (for example, a brokerage firm account statement or a “legal proxy” from your intermediary) along with your registration request. If you are not sure what proof to send, check with your intermediary.

If your shares are registered in your name with Silverback’s stock registrar and transfer agent, American Stock Transfer & Trust Company, LLC, no proof of ownership is necessary because Silverback can verify your ownership.

Solicitation of Proxies; Expenses of Solicitation

The Silverback Board is soliciting proxies for the Silverback virtual special meeting from its stockholders. Silverback will bear a portion of the cost of the solicitation of proxies, including preparation, assembly and delivery, as applicable, of this proxy statement, the Silverback proxy card and any additional materials furnished to Silverback stockholders. Proxies may be solicited by directors, officers and a small number of Silverback’s regular employees by mail, email, in person and by telephone, but such persons will not receive any additional compensation for these activities.

Tabulation of Votes

Silverback will appoint                  to serve as the Inspector of Election for the Silverback virtual special meeting.              will independently tabulate affirmative and negative votes and abstentions.

Adjournments

Subject to certain restrictions contained in the Merger Agreement, the Silverback virtual special meeting may be adjourned to allow additional time for obtaining additional proxies. No notice of an adjourned meeting need be given if the time and place thereof are announced at the Silverback virtual special meeting at which the adjournment was taken unless: the adjournment is for more than 30 days, in which case a notice of the adjourned meeting will be given to each Silverback stockholder of record entitled to vote at the Silverback virtual special meeting; or if, after the adjournment, a new record date for determination of Silverback stockholders entitled to vote is fixed for the adjourned meeting, in which case the Silverback Board will fix as the record date for determining Silverback stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of Silverback stockholders entitled to vote at the adjourned meeting, and will give notice of the adjourned meeting to each Silverback stockholder of record as of such record date.

At any adjourned meeting, all proxies will be voted in the same manner as they would have been voted at the original convening of the Silverback virtual special meeting, except for any proxies that have been effectively revoked or withdrawn prior to the adjourned meeting.

Other Matters

As of the date of this proxy statement, the Silverback Board does not know of any business to be presented at the Silverback virtual special meeting other than as set forth in the notice accompanying this proxy statement. If any other matters should properly come before the Silverback virtual special meeting, it is intended that the shares represented by proxies will be voted with respect to such matters in accordance with the judgment of the persons voting the proxies.

Assistance and Additional Information

If you need assistance with submitting a proxy to vote your shares via the internet, by telephone or by completing your Silverback proxy card, or have questions regarding the Silverback virtual special meeting, please contact                at                .

 

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Your vote is very important regardless of the number of shares of Silverback Common Stock that you own and the matters to be considered at the Silverback virtual special meeting are of great importance to the stockholders of Silverback. Accordingly, you are urged to read and carefully consider the information contained in or incorporated by reference into this proxy statement and promptly submit your proxy via the internet or by telephone or complete, date, sign and promptly return the enclosed proxy card or voting instruction form in the enclosed postage-paid envelope. If you submit your proxy via the internet or by telephone, you do not need to return the enclosed proxy card.

Please vote your shares via the internet or by telephone, or sign, date and return the enclosed proxy card or voting instruction form promptly to ensure that your shares can be represented, even if you otherwise plan to attend the Silverback virtual special meeting.

 

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THE MERGER

This section and the section titled “The Merger Agreement” in this proxy statement describe the material aspects of the Merger, including the Merger Agreement. While Silverback believes that this description covers the material terms of the Merger and the Merger Agreement, it may not contain all of the information that is important to you. You should carefully read this entire proxy statement for a more complete understanding of the Merger and the Merger Agreement, including the Merger Agreement attached as Annex A, the fairness opinion of SVB Securities LLC attached as Annex B, and the other documents to which you are referred herein. See the section titled “Where You Can Find More Information” in this proxy statement.

Background of the Merger

As part of the ongoing consideration and evaluation of its long-term prospects and strategies, the Silverback Board frequently reviews, with Silverback’s senior management and outside advisors, strategic and financial alternatives considering developments in Silverback’s business, the sectors in which it competes, the economy generally and financial markets, all with the goal of enhancing value for its stockholders. As part of this process, from time to time, members of Silverback’s senior management and/or its advisors have engaged in business development and/or strategic discussions with industry participants, including the acquisition of strategic assets and strategic in-licensing.

On March 11, 2022, there was a regularly scheduled meeting of the Silverback Board, with representatives of management and Cooley LLP (“Cooley”), outside legal counsel to Silverback, also attending. At this meeting, the Silverback Board reviewed the clinical data observed to date for Silverback’s lead oncology programs SBT6050, together with the overall clinical development plans for the SBT6050 and SBT6290 programs. Given the limited drug activity and the level of adverse events observed in the clinical trials to date, the Silverback Board also discussed alternative clinical development strategies available to Silverback in the event that the Silverback Board determined to discontinue the two programs following receipt of additional clinical data. Following these discussions, the Silverback Board directed management to continue to evaluate potential in-licensing opportunities and alternative strategic transactions potentially available to Silverback, together with potential steps to preserve and extend cash runway.

Following the meeting of the Silverback Board held on March 11, 2022, Silverback’s senior management analyzed the benefits and drawbacks of discontinuing the SBT6050 and SBT6290 programs, and conducted a review of Silverback’s pipeline and strategic options, as well as its likely cash runway under multiple scenarios. Silverback’s senior management met with individual members of the Silverback Board and discussed management’s recommendations that Silverback proceed with a strategic reprioritization, including the discontinuation of the SBT6050 and SBT6290 programs and a reduction in force to be implemented for the purpose of extending Silverback’s cash runway.

On March 28, 2022, the Silverback Board held a special teleconference meeting, with representatives of Silverback’s senior management and Cooley attending, to discuss Silverback’s projected cash runway, preclinical and clinical pipeline, and strategic options. At the meeting, the Silverback Board approved management’s recommendation to focus resources on the development of SBT8230 for chronic hepatitis B virus and Silverback’s preclinical pipeline by discontinuing development of Silverback’s SBT6050 and SBT6290 oncology programs and by restructuring the company workforce to reduce headcount by 27%.

On March 31, 2022, Silverback issued a press release announcing the decision to focus its resources on SBT8230 and Silverback’s preclinical pipeline by discontinuing its oncology programs and by implementing a reduction in force of 27%. Silverback also reported $319.1 million in cash, cash equivalents, and investments as of December 31, 2021, which was estimated to provide runway into the second half of 2026 following the strategic reprioritization.

 

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Starting the first week of April 2022, Silverback’s senior management increased its efforts on a target list of companies for a potential strategic transaction, including a reverse merger, and to begin outreach. Silverback’s senior management focused on merger candidates meeting one or more of certain characteristics, including adjacency to Silverback’s technology, competitive differentiation, regulatory risk, potential valuation consideration relative to the opportunity, commercial potential, and meaningful near-term catalysts to achieve value appreciation within six to 18 months using Silverback’s cash on hand, in addition to the counterparty’s cash, without requiring significant post-transaction dilution to Silverback’s stockholders (the “Criteria”). In preparing the Criteria and contemplating appropriate merger candidates, Silverback sought input from SVB Securities because of its relationship and familiarity with Silverback and its business from its role as a joint book-running manager in Silverback’s initial public offering, and its qualifications, reputation, experience and expertise as a transaction advisor for reverse mergers in the biopharmaceutical industry.

On April 3, 2022, Silverback’s Chief Executive Officer, Dr. Laura Shawver, had an introductory teleconference meeting with the Chief Financial Officer of Company A, a private near-clinical company, who reached out unsolicited following the Silverback press release and was interested in the potential for a reverse merger.

On April 4, 2022, following Silverback’s senior management’s assessment that Company A potentially met most of the Criteria, Dr. Shawver and the Chief Executive Officer of Company A had a follow up teleconference meeting to discuss an overview of Company A.

On April 5, 2022, Dr. Shawver received an unsolicited call from a non-director investor in Company B, a private near-clinical company and portfolio company of a fund with a representative on the Silverback Board, who inquired about the potential for a reverse merger.

On April 8, 2022, following Silverback’s senior management’s assessment that Company B potentially met most of the Criteria, Dr. Shawver had an introductory conversation with the Chief Executive Officer of Company B who provided an overview of their pipeline and capabilities.

On April 9, 2022, Silverback entered into a mutual confidential disclosure agreement, which did not contain a standstill provision or a don’t ask, don’t waive clause, with Company A.

On April 12, 2022, Silverback’s senior management shared the formulated Criteria and a refined preliminary target list of 16 merger candidates that potentially met most of the Criteria, which included Company A and Company B, with the Chair of the Silverback Board.

On April 13, 2022, Silverback’s senior management shared with the Silverback Board the same preliminary list of reverse merger candidates. On the same day, Silverback’s senior management also had a teleconference meeting with a representative of Company A, who provided a more detailed overview of its business, pipeline, and capabilities. On the same day, Silverback also entered into a mutual confidential disclosure agreement, which did not contain a standstill provision or a don’t ask, don’t waive clause, with Company B.

Between April 13, 2022 and April 22, 2022, Dr. Shawver held four teleconference meetings with Company B’s Chief Executive Officer to discuss Company B’s pipeline, due diligence questions, and potential synergies with Silverback’s pipeline and programs.

On April 16, 2022, Silverback’s senior management were introduced, by representatives of SVB Securities, to Company C, a clinical-stage private company with a pipeline that was adjacent to Silverback’s preclinical programs.

On April 17, 2022, Dr. Shawver held a teleconference meeting with the Chief Executive Officer of Company C who provided an overview of Company C’s pipeline and capabilities.

 

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On April 19, 2022, Silverback’s senior management met with representatives of Company A in person at Silverback’s headquarters in Seattle. Representatives of Company A provided their perspective on a post-closing ownership split, verbally suggesting a split of 75% and 25% for Company A and Silverback equity holders, respectively, on a fully diluted basis. These proposed terms implied a post-deal valuation greater $950 million. Company A indicated that it had flexibility with respect to the treatment of Silverback’s legacy assets.

On April 22, 2022, there was a verbal discussion between Dr. Shawver and Company B’s Chief Executive Officer regarding terms of a potential reverse merger, including a potential post-closing ownership split of 48% and 52% for Silverback and Company B equity holders, respectively, on a fully diluted basis. The proposed terms implied a post-deal valuation of $625 million which, in the case of Silverback, included the value of certain of its legacy assets that could be retained by the combined company.

On April 22, 2022, the Silverback Board held a special teleconference meeting, with representatives of Silverback’s senior management and Cooley attending, to discuss strategic options for Silverback, including remaining as a standalone company with a limited pipeline build focusing on SBT8230 and preclinical programs, a strategic reorganization, including a strategic merger or sale of the company, and the potential to build the pipeline through asset in-licensing. Silverback’s senior management team provided an update on its ongoing outreach process, including an update on the discussions with Company A, Company B and Company C and shared an updated list of 36 potential reverse merger targets that potentially met most of the Criteria. Silverback’s senior management also reviewed detailed assessments of Company A, Company B and Company C, including each company’s pre-clinical and clinical stage programs, potential valuation consideration relative to the opportunity, commercial potential of each company, meaningful near-term catalysts to achieve value appreciation within six to 18 months using Silverback’s cash contribution, in addition to the counterparty’s cash, without requiring significant post-transaction dilution to Silverback’s stockholders, and, to the extent available, the value that each would potentially place on Silverback’s assets, and the anticipated post-closing ownership split between such company’s and Silverback’s equity holders. The Silverback Board provided guidance to Silverback’s senior management to continue its outreach to reverse merger candidates in addition to Company A, Company B and Company C and to continue its diligence efforts. The Silverback Board also approved engaging a financial advisor for a reverse merger process and requested Silverback’s senior management engage a financial advisor experienced in reverse mergers. Silverback’s senior management provided a summary of the discussions it had with four financial advisors, including SVB Securities. The Silverback Board authorized management to engage SVB Securities to act as Silverback’s financial advisor given SVB Securities’ relationship and familiarity with Silverback and its business from its role as a joint book-running manager in Silverback’s initial public offering, and its qualifications, reputation, experience and expertise as a transaction advisor for reverse mergers in the biopharmaceutical industry.

On April 23, 2022, Company B granted Silverback access to its data room and on April 26, 2022, Silverback provided Company B with a list of diligence questions related to Company B’s pipeline, clinical development plans, the competitive landscape, regulatory and commercial considerations.

On April 25, 2022, Dr. Shawver held a teleconference meeting with the Chief Executive Officer of Company A to discuss, among other things, Company A’s proposal with respect to a potential private placement alongside a reverse merger.

On April 28, 2022, Company B presented a corporate overview to Silverback’s senior management at a teleconference meeting, covering in detail, their pipeline, capabilities, and answers to Silverback’s data room diligence questions.

Between May 2, 2022 and May 10, 2022, Silverback’s senior management continued due diligence of Company B.

 

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On May 2, 2022, Silverback executed a mutual confidential disclosure agreement, which did not contain a standstill provision or a don’t ask, don’t waive clause, with Company C.

On May 5, 2022, Silverback’s senior management had a teleconference with representatives of Company C who presented a corporate overview, covering in detail, its pipeline and capabilities. That same day, SVB Securities sent Silverback a draft engagement letter to engage SVB Securities as Silverback’s financial advisor in connection with a potential reverse merger transaction.

On May 8, 2022 and May 10, 2022, Dr. Shawver had introductory calls with a director from ARS Pharma who provided an overview of ARS Pharma. ARS Pharma was first introduced to Dr. Shawver in November of 2021 by a member of the ARS Board at an industry conference. ARS Pharma was subsequently reintroduced to Silverback by SVB Securities.

On May 9, 2022, after Silverback’s senior management assessed ARS Pharma as potentially meeting most of its Criteria, including near term value inflection points and the potential for the Silverback stockholders to have minimal near-term dilution, Silverback executed a mutual confidential disclosure agreement, which did not contain a standstill provision or a don’t ask, don’t waive clause, with ARS Pharma.

On May 10, 2022, Dr. Shawver had an introductory call with the Chief Executive Officer of Company D following an unsolicited e-mail on May 9th from its Chief Executive Officer and a follow-up e-mail from one of its directors. After Silverback’s senior management assessed Company D, a clinical stage company, as meeting most of the Criteria, a mutual confidential disclosure agreement, which did not contain a standstill provision or a don’t ask, don’t waive clause, was executed with Company D on the same date.

On May 11, 2022, Company B sent a non-binding proposal for a reverse merger that reflected a 57.5% and 43.5% post-closing ownership split for Company B and Silverback equity holders, respectively, on a fully diluted basis based on respective valuations of $325 million and $245 million and assuming Silverback’s cash balance at closing is $240 million, which would be adjusted for Silverback’s actual net cash at closing. The proposal allowed for the sale, spinoff or other separation of Silverback’s two preclinical programs (SBT8230 for cHBV and CD40-GC) prior to the closing of the proposed merger.

On May 12, 2022, Company D’s management team met with Silverback’s senior management team via teleconference to provide an overview of their pipeline and capabilities, and Silverback was subsequently granted access to Company D’s data room, and following review of its contents, Silverback provided a list of follow-up due diligence questions to Company D on May 19, 2022.

Between May 13 and May 24, 2022 Silverback’s senior management had several discussions with representatives of Company C, including with respect to follow-up questions to their corporate overview presentation and Company C expressed that it would expect a post-closing ownership split for Company C equity holders in excess of 50%.

On May 16, 2022, Company D sent Silverback a non-binding term sheet for a reverse merger that reflected a 57% and 43% post-closing ownership split for Company D and Silverback equity holders, respectively, on a fully diluted basis based on respective valuations of $350 million and $265 million and assuming Silverback’s net cash at closing is $250 million, which would be adjusted for Silverback’s actual net cash at closing. The term sheet allowed Silverback to monetize certain of its legacy assets, technology and intellectual property.

On May 17, 2022, Silverback’s senior management had a teleconference with ARS Pharma where a detailed review of ARS Pharma’s business and its near-term commercial asset was provided to Silverback’s senior management. Later that day, Silverback received a non-binding letter of interest

 

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from ARS Pharma for a reverse merger that reflected a 65.4% and 34.6% post-closing ownership split for ARS Pharma and Silverback equity holders, respectively, on a fully diluted basis based on respective valuations of $472.5 million and $250 million and assuming Silverback’s net cash at closing is $235 million, which would be adjusted based on Silverback’s actual net cash at closing. The proposal did not include any plans for Silverback’s legacy assets other than stating that the combined company would not include any of Silverback’s legacy assets.

Later that same day, at a special teleconference meeting, the Silverback Board met, with representatives of Silverback’s senior management, Cooley and SVB Securities also attending, to review the status of the strategic process. Representatives of SVB Securities presented an overview of the proposals received from Company B, Company D and ARS Pharma, and Silverback’s senior management provided a detailed analysis of such companies and their proposals. Following an extensive discussion, the Silverback Board directed SVB Securities to continue to introduce Silverback to additional promising reverse merger targets.

On May 18, 2022, a member of Silverback’s senior management team had an in-person meeting with representatives of Company D and discussed Company D’s scientific approach, pipeline, and potential synergies between the two companies.

On May 19, 2022, the Silverback Board discussed the formation of a Transaction Committee comprised of Saqib Islam and Jonathan Root (the “Transaction Committee”), each of whom is a non-executive, independent director, and has transactional experience, to assist Silverback’s senior management in the strategic review, which was formally authorized and ratified by unanimous written consent on May 26, 2022. The Silverback Board tasked the Transaction Committee and Silverback’s senior management with recommending a strategic path following review of all potential strategic options, including strategic mergers and acquisitions, asset acquisitions and sales, remaining a standalone company pursuing a limited pipeline focusing on SBT8230 and preclinical programs, and liquidation to distribute available cash.

That same day, Silverback hosted Company D in person at its headquarters for a presentation to discuss pipeline, capabilities, and potential synergies between Silverback and Company D.

Later that day, Dr. Shawver had a phone call with a director of ARS Pharma as a follow-up to the corporate overview and Dr. Shawver informed the director of ARS Pharma of Silverback’s intent to hire a commercial consultant to conduct further diligence. On the same day SVB Securities also sent out process letters or verbally communicated to 12 potential reverse merger targets, all of which were identified as having potential to meet most of the Criteria, including ARS Pharma, Company A and Company C, requesting initial proposals by May 27, 2022.

On May 21, 2022, Silverback executed the engagement letter with SVB Securities.

On May 23, 2022, at a special teleconference meeting, the Transaction Committee met, with representatives of Silverback’s senior management, Cooley and SVB Securities also attending, to discuss the status of the strategic process, the potential targets and make a decision regarding next steps. Silverback’s senior management presented an overview and analysis of a potential liquidation and dissolution of Silverback and SVB Securities provided an overview of various considerations the Transaction Committee should take into account in considering various strategic transactions, including acquisitions by larger public companies and reverse merger transactions with private companies, and also provided an overview of ARS Pharma, Company B and Company D, which were viewed by Silverback’s senior management as the most attractive reverse merger candidates based upon the Criteria, and the potential relative valuations for Silverback and such potential targets based upon the

 

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proposals received to date. Following an extensive discussion, the Transaction Committee directed SVB Securities to reach out to ARS Pharma, Company B and Company D to continue discussions and diligence.

Between May 23, 2022 and June 6, 2022, Silverback and ARS Pharma conducted additional diligence on each other.

On May 24, 2022, Company A submitted a non-binding indication of interest for a reverse merger that reflected a post-closing ownership split ranging between 62-66% and 34-38% for Company A and Silverback stockholders, respectively, based on a valuation for Company A between $410-$475 million and assuming Silverback’s net cash at closing is $250 million and excluding any shares issued in a private placement which would be additionally dilutive to Silverback stockholders. The proposal contemplated a concurrent private placement and allowed Silverback to spin-off its technology, assets and employees to a new entity and fund it with a portion of Silverback’s cash on hand. On the same day, Company C submitted a non-binding indication of interest for a reverse merger that reflected a 39.2% and 60.8% post-closing ownership split for Company C and Silverback stockholders, respectively, based on relative valuations of $185 million and $287.5 million and assuming Silverback’s net cash at closing is $250 million and included a proposed value of Silverback’s preclinical programs. The proposal contemplated the possibility of using available funds to advance Silverback’s pipeline programs following the merger.    

On May 30, 2022, Dr. Shawver had a teleconference meeting with the Chief Executive Officer and a director of Company D to discuss the development and business plans for Company D.

Between May 18, 2022 and June 2, 2022, Silverback’s senior management engaged in detailed due diligence of ARS Pharma’s clinical, regulatory and CMC data and plans. Silverback hired an experienced commercial advisor to assess the market opportunity and commercial launch plan feasibility of ARS Pharma’s lead product candidate, neffy. Silverback also conducted informational calls with commercial and regulatory key opinion leaders.

On June 2, 2022, ARS Pharma and Company B each presented a corporate overview to the Transaction Committee and Silverback’s senior management.

On June 3, 2022, Dr. Shawver had a teleconference meeting with the Chief Executive Officer of Company D indicating concerns with certain fundamental aspects of its programs and to discuss the planned follow-up due diligence regarding the same.

During the week of June 6, 2022, Silverback conducted additional due diligence calls with independent key opinion leaders within indications being pursued by Company D. Following this scientific due diligence, Silverback’s senior management made the decision not to move forward with Company D in the process due to it meeting fewer Criteria than the other reverse merger targets Silverback continued to advance, and communicated this decision to Company D.

On June 6, 2022, at a special teleconference meeting, the Transaction Committee met, with representatives of Silverback’s senior management, Cooley and SVB Securities also attending, to review strategic options including a reverse merger, based on proposals received to date, an updated analysis on remaining a standalone company pursuing a limited pipeline focusing on SBT8230 and preclinical programs, and an updated liquidation analysis. Silverback’s senior management provided its assessment based on extensive diligence, including input from key opinion leaders and consultants that were knowledgeable in disease areas, regulatory strategies, and commercial market opportunities presented. Representatives from SVB Securities provided a preliminary financial assessment of the proposals made by ARS Pharma and Company B. At this meeting, the Transaction Committee, in

 

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consultation with Silverback’s senior management, determined, based upon as assessment of the Criteria, that ARS Pharma was the most promising reverse merger candidate and discussed proposed amendments to the ARS Pharma proposal including adding a provision that would allow Silverback to divest its legacy assets, board representation on the combined company’s board of directors roughly reflective of the post-closing equity split, proposing lock-up agreements for certain ARS Pharma and Silverback stockholders, an exclusivity provision, a more detailed definition of Silverback net cash, excluding out-of-the money Silverback options in the fully diluted share count for purposes of the post-closing ownership calculation and requiring a high percentage of ARS Pharma stockholders to sign support agreements. Following the discussion of the revised proposal, the Transaction Committee unanimously recommended that Silverback proceed with ARS Pharma, with Company B as the backup candidate and directed Silverback’s senior management to seek best and final offers from ARS Pharma and Company B. Following the meeting, Silverback’s senior management and SVB Securities contacted ARS Pharma and Company B with a request to provide their best and final offer and provided related guidance.

On June 8, 2022, ARS Pharma submitted an updated letter of intent with improved terms that reflected an approximately 62.1% to 63% and 37.0% to 37.9% post-closing ownership split for ARS Pharma and Silverback equity holders, respectively, on a fully diluted basis, reflecting relative valuations of $435 million and $255-$265 million and assuming Silverback’s net cash at closing was between $240 million to $250 million, the ability for Silverback to sell its preclinical assets prior to the closing and any cash proceeds received prior to closing being added on a dollar-for-dollar basis to Silverback’s net cash at closing, proposing a nine member board of directors with six designees from ARS Pharma and three designees from Silverback, proposing that Silverback stockholders representing no less than 51% of the voting securities of Silverback and certain to be identified major investors of ARS Pharma and the continuing executive officers and directors of the combined company enter into lock-up agreements for a period of 180 days following the closing of the proposed merger, a binding 45 day exclusivity provision, a detailed definition of Silverback net cash, requiring stockholders representing no less than 51% of the voting securities of Silverback to enter into support agreements to vote in favor of the proposed merger, proposing that the definitive agreement include customary deal protections such as no-shop provisions and fiduciary outs for both parties, and adding a condition to ARS Pharma’s obligation to consummate the proposed merger that Silverback net cash at closing be between $240 million and $250 million. The revised letter of intent was shared with the Transaction Committee and the Transaction Committee directed Silverback’s senior management to further negotiate the letter of intent to improve the terms.

On June 9, 2022, Company B submitted a revised non-binding proposal with improved terms that reflected a 52.5% and 47.5% post-closing ownership split for Company B and Silverback equity holders, respectively, on a fully diluted basis reflecting relative valuations of $271 million and $250 million and assuming Silverback’s net cash at closing is $240 million. Company C, in response to guidance from Dr. Shawver that their proposal was not competitive, also submitted a revised non-binding indication of interest with improved terms that reflected a 33.7% and 66.3% post-closing ownership split for Company C and Silverback equity holders, respectively, on a fully diluted basis reflecting relative valuations of $146.3 million and $287.5 million.

On June 10, 2022, SVB Securities delivered to ARS Pharma a revised draft of the ARS Pharma letter of intent which included the terms approved by the Transaction Committee, including a 63.5% and 36.5% post-closing ownership split for ARS Pharma and Silverback equity holders, respectively, on a fully diluted basis using the treasury stock method and excluding out-of-the-money options of Silverback and assuming Silverback’s net cash at closing is $235 million, which was subject to adjustment based on Silverback’s actual net cash at closing, clarifying Silverback’s ability to divest its legacy assets includes assignments, licenses or other transfers in one or more transactions prior to or concurrently with the closing and any proceeds received or due from such asset sales being credited to

 

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Silverback’s net cash at closing, reducing the number of Silverback stockholders that would execute support agreements and lock-up agreements to 25% of the outstanding voting securities of Silverback and requiring that ARS Pharma stockholders representing at least 75% of the outstanding voting securities of ARS Pharma deliver support agreements, reducing the exclusivity period to 30 days, with an option to extend for 15 days by mutual agreement, and a more detailed definition of Silverback net cash, limiting the availability of a fiduciary out to Silverback, and removing the minimum Silverback net cash condition.

On June 10, 2022, Inceptive Law (“Inceptiv”), outside legal counsel to ARS Pharma, sent a revised draft of the ARS Pharma letter of intent to Cooley, which added a condition to ARS Pharma’s obligation to consummate the proposed merger that Silverback net cash at closing be between $210 million and $255 million.

Between April 5, 2022, and June 10, 2022, Silverback’s senior management and SVB Securities developed a list of 54 clinical and near-clinical stage publicly traded and private biopharmaceutical companies to be targeted for evaluation and proactive outreach. Of the 54 private and public companies evaluated during this process, 13 companies executed mutual confidential disclosure agreements with Silverback, none of which contained a standstill provision or a don’t ask, don’t waive clause, 12 companies were selected to receive process letters or verbally asked to submit proposals. Of these 12 companies, nine companies submitted a proposal.

On June 10, 2022, the Silverback Board held a regularly scheduled meeting by teleconference, with representatives from Silverback’s senior management, Cooley, and SVB Securities also attending. Silverback’s senior management provided an overview of the strategic process undertaken to date and representatives from Cooley advised the Silverback Board as to its fiduciary duties. The Transaction Committee recommended to the Silverback Board that Silverback pursue a reverse merger with ARS Pharma based on scientific evaluation, competitive differentiation, regulatory risk, potential valuation consideration relative to the opportunity, commercial potential and commercial launch plan feasibility, meaningful near-term catalysts to achieve value appreciation using Silverback’s cash contribution, in addition to ARS Pharma’s own cash, estimated to be approximately $40 million as of May 17, 2022, including based on input from an experienced commercial advisor engaged to assess the market opportunity. Representatives from SVB Securities advised the Silverback Board regarding the key terms of the revised ARS Pharma proposal and a preliminary discounted cash flow analysis for the transaction with ARS Pharma, including the notational value per share to the Silverback stockholders and various assumptions and qualifications to such analysis. Silverback’s senior management also presented the alternative strategic options available to Silverback, including a liquidation and distribution of available cash and remaining a standalone entity. The Silverback Board reviewed the potential reverse merger with ARS Pharma versus other strategic options available to Silverback, including continuing as a standalone entity or liquidation and distribution of available cash. At the meeting, representatives of SVB Securities provided disclosure that SVB Securities had previously served as an advisor to ARS Pharma in a potential transaction unrelated to the current transaction, but did not receive any fees relating to such relationship. Following discussion, the Silverback Board unanimously approved the Transaction Committee’s recommendation to proceed with advancing a reverse merger with ARS Pharma. Silverback and ARS Pharma finalized and executed the letter of intent on June 10, 2022, which included a binding exclusivity provision for 30 days, with the option to extend for 15 days upon mutual agreement.

Following such execution, Company A, Company B and Company C were contacted by Silverback’s senior management and were informed that Silverback would not be moving forward with them in the process.

On June 17, 2022, Cooley shared an initial draft of the merger agreement with Inceptiv, which included a proposed termination fee payable by Silverback to ARS Pharma of $6 million if ARS

 

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Pharma terminated the merger agreement under certain circumstances. That same day, Dr. Shawver and a director from ARS Pharma met to discuss, among other topics, the potential composition of the combined company’s board of directors.

On June 22, 2022, Cooley shared initial drafts of the form of lock-up agreement, Silverback support agreement and ARS Pharma support agreement.

On June 24, 2022, Silverback’s senior management team identified 21 potential purchasers for its preclinical asset CD40-GC and began outreach with certain of these identified parties.

On June 27, 2022, Inceptiv sent revised drafts of the form of lock-up agreement, Silverback support agreement and ARS Pharma support agreement and the agreements were subsequently negotiated and finalized.

On June 28, 2022, Inceptiv sent Cooley a revised draft of the merger agreement, which included, among other things, expanding the circumstances in which a termination fee would by payable by Silverback to ARS Pharma, increasing the termination fee payable by Silverback to ARS Pharma to $20 million and requiring Silverback to reimburse ARS Pharma for up to $2.5 million in expenses if the merger agreement is terminated under certain circumstances. That same day, Silverback and ARS Pharma along with each of their respective independent auditors and legal counsel held a teleconference meeting to discuss diligence, ARS Pharma’s audited financial statements and other deliverables and a proposed signing timeline.

On June 29, 2022, Silverback was granted access to ARS Pharma’s virtual data room.

On July 1, 2022, ARS Pharma was granted access to Silverback’s virtual data room. That same day, Dr. Shawver and Richard Lowenthal, the Chief Executive Officer, of ARS Pharma held a telephonic meeting to discuss the open issues in the merger agreement.

On July 6, 2022, Silverback’s senior management provided a summary of the primary open issues in ARS Pharma’s revised merger agreement to the Transaction Committee and sought guidance on how to respond to ARS Pharma. On July 7, 2022, Cooley sent a revised draft of the merger agreement to Inceptiv which included the guidance of the Transaction Committee. The revised draft proposed a bifurcated termination fee of $6 million or $10 million payable to ARS Pharma by Silverback if the merger agreement was terminated under certain circumstances and removed the requirement of Silverback to reimburse ARS Pharma for up to $2.5 million in expenses if the merger agreement was terminated under certain circumstances.

On July 9, 2022, Inceptiv sent Cooley a revised draft of the merger agreement, which included, among other things, a note that Silverback’s proposal regarding the bifurcated termination fees was an open discussion point and reinserting the requirement of Silverback to reimburse ARS Pharma for up to $2.5 million in transaction fees if the merger agreement was terminated under certain circumstances.

On July 11, 2022, representatives from Cooley, Silverback’s senior management, outside litigation counsel to ARS Pharma and ARS Pharma’s management held a teleconference meeting to discuss due diligence matters related to Silverback’s outstanding stockholder litigation. That same day, Dr. Shawver and Mr. Lowenthal held a telephonic meeting to discuss the major outstanding issues in the merger agreement. On that call, the parties agreed, subject to approval from their respective boards of directors, to, among other things, Silverback’s proposal regarding the bifurcated termination fee payable to ARS Pharma and that Silverback would reimburse ARS Pharma for up to $1.5 million in limited circumstances. Following approval from the Transaction Committee, Cooley sent a revised draft of the merger agreement to Inceptiv.

 

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On July 13, 2022, representatives from Cooley, Silverback’s senior management, outside intellectual property counsel to ARS Pharma and ARS Pharma’s senior management held a teleconference meeting to discuss due diligence matters related to ARS Pharma’s intellectual property portfolio.

From July 11 to July 20, 2022, the parties continued to work through open due diligence requests, exchanged drafts of each party’s disclosure schedules and drafts of the merger agreement and engaged in related discussions to finalize the transaction documents.

On July 20, 2022, at a special teleconference meeting of the Silverback Board, with representatives of Silverback’s senior management, Cooley and SVB Securities also attending, the Silverback Board reviewed the strategic process and ARS Pharma’s proposal. At this meeting, representatives of SVB Securities reviewed its financial analysis of the consideration proposed to be paid by Silverback in the Merger. Following this review, SVB Securities rendered to the Silverback Board its oral opinion that, as of July 20, 2022, and based upon and subject to the various assumptions made, and the qualifications and limitations upon the review undertaken by SVB Securities in preparing its opinion, the Exchange Ratio proposed to be paid by Silverback pursuant to the terms of the Merger Agreement was fair, from a financial point of view, to Silverback. SVB Securities subsequently confirmed its oral opinion by delivery of a written opinion dated July 20, 2022. Also, at this meeting, representatives of Cooley advised the Silverback Board regarding its fiduciary duties in connection with approving the Merger, reviewed the key terms of the Merger Agreement and the Contemplated Transactions and the lock-up agreements, Silverback Support Agreement and ARS Pharma Support Agreement. Silverback’s senior management also presented an updated analysis of the liquidation and distribution of available cash scenario. The Silverback Board engaged in discussions relating to ARS Pharma, its business, the terms of the Merger Agreement and the Contemplated Transactions and the other strategic options available to Silverback.

Following discussion of the Merger Agreement and the Contemplated Transactions, including the factors described in the section titled “The Merger—Reasons for the Merger,” the Silverback Board unanimously (i) determined that the Merger and the other Contemplated Transactions are fair to, advisable and in the best interests of Silverback and its stockholders, (ii) approved and declared advisable the Merger Agreement and the Contemplated Transactions including the issuance of shares of Silverback common stock to the stockholders of ARS Pharma and the change of control of Silverback, and (iii) determined to recommend, upon the terms and subject to the conditions set forth in the Merger Agreement, that the stockholders of Silverback vote to approve Proposal Nos. 1 and 2.

On July 21, 2022, representatives of Silverback, Merger Sub and ARS Pharma executed the definitive Merger Agreement. Concurrently with the execution of the Merger Agreement, certain executive officers, directors and stockholders of Silverback and ARS Pharma delivered the Silverback Support Agreements and ARS Pharma Support Agreements, respectively. Immediately following the execution of the Merger Agreement, ARS Pharma delivered the unanimous written consent of the ARS Pharma Board approving the Merger Agreement, the Merger and the Contemplated Transactions and the ARS Pharma Stockholder Written Consent approving the ARS Pharma Stockholder Matters. Later that afternoon, the execution of the Merger Agreement was publicly announced and representatives from Silverback and ARS Pharma held a conference call with investors.

On July 25, 2022, Silverback’s senior management team identified 12 potential purchasers for SBT8230 and began outreach. As of the date of this proxy statement, discussions regarding the potential divestiture of SBT8230 and CD40-GC remain preliminary in nature and Silverback has not received a proposal from any potential purchaser.

Following an analysis of the independence of each proposed member of the combined company’s board of directors, Silverback, Merger Sub and ARS Pharma executed the First Amendment to the

 

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Merger Agreement, dated August 11, 2022, pursuant to which the size of the combined company’s board of directors was increased to eleven members, with eight designees of ARS Pharma and three designees of Silverback, in order meet the board of director independence requirements under the Nasdaq listing rules.

Silverback Reasons for the Merger

At a meeting held on July 20, 2022, among other things, the Silverback Board unanimously (i) determined that the Merger and the other Contemplated Transactions are fair to, advisable and in the best interests of Silverback and its stockholders, (ii) approved and declared advisable the Merger Agreement and the Contemplated Transactions, including the issuance of shares of Silverback common stock to the stockholders of ARS Pharma and the change of control of Silverback, and (iii) determined to recommend, upon the terms and subject to the conditions set forth in the Merger Agreement, that the stockholders of Silverback vote to approve Proposal Nos. 1 and 2.

The Silverback Board considered the following reasons in reaching its conclusion to approve the Merger Agreement and the Merger, all of which the Silverback Board viewed as supporting its decision to approve the Merger with ARS Pharma:

 

   

the Silverback Board, with the assistance of its advisors, undertook a comprehensive and thorough process of reviewing and analyzing potential strategic options, including strategic mergers and acquisitions, asset acquisitions, in-licensing and sales, remaining a standalone company pursuing a limited pipeline focusing on SBT8230 and preclinical programs, and a liquidation to distribute available cash, to identify the opportunity that would, in the Board’s opinion, create the most value for Silverback’s stockholders;

 

   

the Silverback Board’s belief, after a thorough review of strategic alternatives and discussions with Silverback senior management, financial advisors and legal counsel, that the Merger is more favorable to Silverback’s stockholders than the potential value that might have resulted from other strategic options available to Silverback;

 

   

the Silverback Board’s belief, based in part on scientific, regulatory and commercial diligence and an analysis process conducted over several weeks by Silverback’s management and reviewed with the Silverback Board, that neffy is a near-term commercial asset with a sizable potential market and efficient commercialization plan and may create value for the stockholders of the combined company and an opportunity for Silverback’s stockholders to participate in the potential growth of the combined company;

 

   

based on review with the management of Silverback, the current plans of ARS Pharma for developing and potentially commercializing neffy outside the U.S., expanding ARS Pharma’s pediatric labeling with neffy and examining and potentially developing neffy to target other conditions beyond Type I allergic reactions, to confirm the likelihood that the combined company would possess sufficient financial resources to allow the management team to focus on such plans;

 

   

the possibility that the combined company would be able to take advantage of the potential benefits resulting from the combination of Silverback’s public company structure with ARS Pharma’s business to raise additional funds in the future;

 

   

the strength of the balance sheet of the combined company, which includes the cash that ARS Pharma currently holds in addition to the cash that Silverback is expected to have in connection with the consummation of the Merger, which would give the combined company an estimated operating runway of at least three years and, assuming neffy is approved by the FDA within ARS Pharma’s expected timeframe, is expected to provide funding through the commercial launch of neffy in the United States;

 

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the fact that the combined company will be led by an experienced industry chief executive officer and a team many of whom have first-hand experience leading the development and commercial efforts for approved nasal spray products, as well as extensive drug development, research and development, business, and regulatory expertise, and a board of directors with representation from the current Silverback Board and ARS Pharma Board; and

 

   

the Silverback Board’s belief that, as a result of arm’s length negotiations with ARS Pharma, Silverback and its representatives negotiated the most favorable Exchange Ratio for Silverback stockholders that ARS Pharma was willing to agree to, and that the terms of the Merger Agreement include the most favorable terms to Silverback in the aggregate to which ARS Pharma was willing to agree;

 

   

the opinion of SVB Securities, rendered orally to the Silverback Board on July 20, 2022 (and subsequently confirmed in writing as of July 20, 2022), that, as of such date and based upon and subject to the various assumptions made, and the qualifications and limitations upon the review undertaken by SVB Securities in preparing its opinion, the Exchange Ratio proposed to be paid by Silverback pursuant to the terms of the Merger Agreement was fair, from a financial point of view, to Silverback, as more fully described below under the caption “The Merger—Opinion of Silverback’s Financial Advisor.”

The Silverback Board also reviewed various reasons impacting the financial condition, results of operations and prospects of Silverback, including:

 

   

the risks associated with Silverback remaining a standalone company pursuing a limited pipeline focusing on SBT8230 and preclinical programs including liquidity needs and cash-burn related to, among other things, funding Silverback’s development pipeline.

 

   

the risks associated with SBT8230 becoming a commercially viable program due to the nature of development in HBV requiring combination treatment, the competitive landscape among HBV therapies, and the inherent technical risks of early-stage programs;

 

   

the risks associated with early preclinical assets and the timelines for beginning clinical development and demonstrating clinical proof-of-concept and potentially demonstrating activity.

 

   

the risks associated with building Silverback’s pipeline with more near-term clinical assets through asset in-licensing;

 

   

the risks associated with out-licensing assets, the risk that the programs may be too early for licensing or if they could be licensed, not achieving milestones with Silverback’s partnered programs due to technical challenges, Silverback’s partner’s shift in strategic priorities, or other reasons;

 

   

the risks and delays associated with, and uncertain value and costs to Silverback’s stockholders of, liquidating Silverback, including, without limitation, the uncertainties of continuing cash burn while contingent liabilities are resolved and uncertainty of timing of release of cash until contingent liabilities are resolved; and

 

   

the fact that the estimated return to stockholders of Silverback in a potential liquidation of Silverback would result in a payment of approximately $5.47 per share of Silverback Common Stock assuming, among other things, a liquidation date of November 30, 2022.

 

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The Silverback Board also reviewed the terms and conditions of the Merger Agreement and the Contemplated Transactions, as well as the safeguards and protective provisions included therein intended to mitigate risks, including:

 

   

the initial estimated Exchange Ratio used to establish the number of shares of Silverback Common Stock to be issued to ARS Pharma’s stockholders in the Merger was determined based on the relative valuations of Silverback and ARS Pharma, and thus the relative percentage ownership of Silverback’s stockholders and ARS Pharma’s stockholders immediately following the completion of the Merger is subject to change based on the amount of Silverback Net Cash at Closing to the extent it is greater than or less than $240 million, subject to a floor of $210 million and a ceiling of $255 million;

 

   

a dollar-for-dollar adjustment to Silverback Net Cash for amounts received by Silverback for the timely sale of its legacy assets if successful;

 

   

the limited number and nature of the conditions to ARS Pharma’s obligation to consummate the Merger and the limited risk of non-satisfaction of such conditions as well as the likelihood that the Merger will be consummated on a timely basis;

 

   

the requirement that ARS Pharma provide Silverback with FDA confirmation of the submission for an NDA for neffy 2.0 mg as a condition to Silverback’s obligation to consummate the Merger;

 

   

the respective right of, and limitation on, Silverback under the Merger Agreement to consider certain unsolicited Acquisition Proposals under certain circumstances should Silverback receive a Superior Offer;

 

   

the reasonableness of the potential termination fee of $6 million or $10 million, and related reimbursement of certain transaction expenses capped at $1.5 million, which could become payable by Silverback to ARS Pharma if the Merger Agreement is terminated in certain circumstances;

 

   

the support agreements, pursuant to which certain directors, officers and stockholders of Silverback and ARS Pharmaceuticals have agreed, solely in their capacity as stockholders of Silverback and ARS Pharma, respectively, to vote all of their shares of Silverback Common Stock or ARS Pharmaceuticals Capital Stock in favor of the approval or adoption, respectively, of the Merger Agreement and the Contemplated Transactions;

 

   

the agreement of ARS Pharma to provide the written consent of ARS Pharma’s stockholders necessary to adopt the Merger Agreement thereby approving the Merger and the other Contemplated Transactions within one business day of the date of the Merger Agreement and the actual receipt of such written consent; and

 

   

the belief that the terms of the Merger Agreement, including the parties’ representations, warranties and covenants, and the conditions to their respective obligations, are reasonable under the circumstances.

In the course of its deliberations, the Silverback Board also considered a variety of risks and other countervailing factors related to entering into the Merger, including:

 

   

the $6 million or $10 million termination fee payable by Silverback to ARS Pharma upon the termination of the Merger Agreement in certain circumstances, the $6 million termination fee payable by ARS Pharma to Silverback upon the termination of the Merger Agreement in certain circumstances, up to $1.5 million in expense reimbursement payable by Silverback to ARS Pharma in the event of a termination of the Merger Agreement due to the failure of Silverback’s stockholders to approve the Merger Proposal, and the potential effect of the fees in deterring other potential acquirers from proposing an alternative transaction that may be more advantageous to Silverback’s stockholders;

 

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the substantial expenses to be incurred in connection with the Merger, including the costs associated with any related litigation;

 

   

the likelihood of disruptive stockholder litigation following announcement of the Merger;

 

   

the possible volatility, at least in the short term, of the trading price of Silverback Common Stock resulting from the announcement of the Merger;

 

   

the risk that the Merger might not be consummated in a timely manner or at all and the potential adverse effect of the public announcement of the Merger or delay or failure to complete the Merger on the reputation of Silverback;

 

   

the likely detrimental effect on Silverback’s cash position, stock price and ability to initiate another process and to successfully complete an alternative transaction should the Merger not be completed;

 

   

the risk to Silverback’s business, operations and financial results in the event that the Merger is not consummated, including the diminution of Silverback’s cash and the significant challenges associated with the need to raise additional capital through the public or private sale of equity securities;

 

   

the strategic direction of the combined company following the completion of the Merger, which will be determined by a board of directors initially comprised of a majority of the directors designated by ARS Pharma; and

 

   

various other risks associated with the combined company and the Merger, including those described in the section titled “Risk Factors.”

In view of the wide variety of reasons considered in connection with its evaluation of the Merger and the complexity of these matters, the Silverback Board did not find it useful to attempt, and did not attempt, to quantify, rank or otherwise assign relative weights to these reasons. In considering the reasons described above, individual members of the Silverback Board may have given different weight to different reasons. The Silverback Board conducted an overall analysis of the factors described above, including thorough discussions with, and questioning of, Silverback’s management team and the legal and financial advisors of Silverback, and considered the reasons overall to be favorable to, and to support, its determination.

Opinion of Silverback’s Financial Advisor

Introduction

Silverback retained SVB Securities as its financial advisor in connection with the Merger and the other Contemplated Transactions. In connection with this engagement, the Silverback Board requested that SVB Securities evaluate the fairness, from a financial point of view, to Silverback of the Exchange Ratio proposed to be paid by Silverback pursuant to the terms of the Merger Agreement. On July 20, 2022, SVB Securities rendered to the Silverback Board its oral opinion, which was subsequently confirmed by delivery of a written opinion dated July 20, 2022 that, as of such date and based upon and subject to the various assumptions made, and the qualifications and limitations and upon the review undertaken by SVB Securities in preparing its opinion, the Exchange Ratio proposed to be paid by Silverback pursuant to the terms of the Merger Agreement was fair, from a financial point of view, to Silverback. In providing its opinion, SVB Securities noted that the Exchange Ratio is subject to certain adjustments set forth in the Merger Agreement, and SVB Securities expressed no opinion as to any such adjustments.

The full text of the written opinion of SVB Securities, dated July 20, 2022, which describes the assumptions made and the qualifications and limitations upon the review undertaken by SVB

 

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Securities in preparing its opinion, is attached as Annex B to this proxy statement and is incorporated herein by reference. The summary of the written opinion of SVB Securities set forth below is qualified in its entirety by the full text of the written opinion attached hereto as Annex B to this proxy statement. SVB Securities’ financial advisory services and opinion were provided for the information and assistance of the Silverback Board (in their capacity as directors and not in any other capacity) in connection with and for purposes of the Silverback Board’s consideration of the Merger and the opinion of SVB Securities addressed only the fairness, from a financial point of view, as of the date thereof, to Silverback of the Exchange Ratio proposed to be paid by Silverback pursuant to the terms of the Merger Agreement. The opinion of SVB Securities did not address any other term or aspect of the Merger Agreement or the Merger and does not constitute a recommendation to any stockholder of Silverback as to whether or how such holder should vote with respect to the merger or otherwise act with respect to the Merger or any other matter.

The full text of the written opinion of SVB Securities should be read carefully in its entirety for a description of the assumptions made and limitations upon the review undertaken by SVB Securities in preparing its opinion.

In connection with rendering the opinion described above and performing its related financial analyses, SVB Securities reviewed, among other things:

 

   

a draft of the Merger Agreement, dated July 20, 2022;

 

   

Silverback’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, as filed by Silverback with the SEC on March 31, 2022;

 

   

Silverback’s Quarterly Report on form 10-Q for the quarterly period ended March 31, 2022, as filed by Silverback with the SEC;

 

   

certain Current Reports on Form 8-K, as filed by Silverback with, or furnished by Silverback to, the SEC;

 

   

certain internal information, primarily related to expense forecasts, relating to the business, operations, earnings, cash flow, assets, liabilities and prospects of Silverback, as furnished to SVB Securities by the management of Silverback; and

 

   

certain internal information relating to the business, operations, earnings, cash flow, assets, liabilities and prospects of the Company, including the Financial Projections (as defined below), and as modified furnished to SVB Securities, by the management of Silverback for purposes of SVB Securities’ analysis, as described below below under “The MergerCertain Unaudited Financial Projections, which are referred to in this summary of the opinion of SVB Securities as the “Financial Projections”, and which are collectively referred to in this summary of the opinion of SVB Securities as the “Internal Data”.

SVB Securities also conducted discussions with members of the senior management of Silverback and ARS Pharma and their respective advisors and representatives regarding their assessment of the Internal Data as well as the past and current business, operations, financial condition and prospects of each of Silverback and ARS Pharma. In addition, SVB Securities reviewed the historical trading prices and trading activity for the Silverback common stock. Furthermore, SVB Securities reviewed certain financial data for ARS Pharma and compared that data to similar publicly available market, financial and other data for certain other companies, the securities of which are publicly traded, that SVB Securities believed to be comparable in certain respects to ARS Pharma. SVB Securities also conducted such other financial studies and analyses and took into account such other information as SVB Securities deemed appropriate.

 

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SVB Securities assumed, without independent verification or any responsibility therefor, the accuracy and completeness of the financial, legal, regulatory, tax, accounting and other information supplied to, discussed with, or reviewed by SVB Securities for purposes of its opinion and, with Silverback’s consent, SVB Securities relied upon such information as being complete and accurate. In that regard, SVB Securities was advised by Silverback, and assumed, at Silverback’s direction, that the Internal Data (including, without limitation, the Financial Projections) were reasonably prepared on bases reflecting the best currently available estimates and judgments of the management of Silverback and ARS Pharma as to the matters covered thereby and SVB Securities relied, at Silverback’s direction, on the Internal Data for purposes of SVB Securities’ analysis and its opinion. SVB Securities expressed no view or opinion as to the Internal Data (including, without limitation, the Financial Projections) or the assumptions on which they were based. In addition, at Silverback’s direction, SVB Securities did not make any independent evaluation or appraisal of any of the assets or liabilities (contingent, derivative, off-balance-sheet or otherwise) of Silverback or ARS Pharma, nor was SVB Securities furnished with any such evaluation or appraisal, and SVB Securities was not asked to conduct, and did not conduct, a physical inspection of the properties or assets of Silverback or ARS Pharma.

SVB Securities assumed, at Silverback’s direction, that the final executed Merger Agreement would not differ in any respect material to SVB Securities’ analysis or its opinion from the last draft of the merger agreement reviewed by SVB Securities. SVB Securities also assumed, at Silverback’s direction, that the representations and warranties made by ARS Pharma and Silverback and Merger Sub in the Merger Agreement and the related agreements were and would be true and correct in all respects material to SVB Securities’ analysis. SVB Securities also assumed, at Silverback’s direction, that the Merger would be consummated on the terms set forth in the Merger Agreement and in accordance with all applicable laws and other relevant documents or requirements, without delay or the waiver, modification or amendment of any term, condition or agreement, the effect of which would be material to SVB Securities’ analysis or SVB Securities’ opinion and that, in the course of obtaining the necessary governmental, regulatory and other approvals, consents, releases and waivers for the Merger, no delay, limitation, restriction, condition or other change would be imposed, the effect of which would be material to SVB Securities’ analysis or SVB Securities’ opinion. SVB Securities did not evaluate and did not express any opinion as to the solvency or fair value of Silverback or ARS Pharma, or their respective abilities to pay their obligations when they come due, or as to the impact of the Merger on such matters, under any state, federal or other laws relating to bankruptcy, insolvency, or similar matters. SVB Securities is not a legal, regulatory, tax or accounting advisor, and SVB Securities expressed no opinion as to any legal, regulatory tax or accounting matters.

The opinion of SVB Securities expressed no view as to, and did not address, Silverback’s underlying business decision to proceed with or effect the Merger, or the relative merits of the Merger as compared to any alternative business strategies or transactions that might be available to Silverback or in which Silverback might engage. The opinion of SVB Securities was limited to and addressed only the fairness, from a financial point of view, as of the date of its opinion, to Silverback of the Exchange Ratio proposed to be paid by Silverback pursuant to the terms of the Merger Agreement. SVB Securities was not asked to, nor did it express any view on, and its opinion did not address, any other term or aspect of the Merger Agreement or the other Contemplated Transactions, including, without limitation, the structure or form of the Merger or the other Contemplated Transactions, or any other agreements or arrangements contemplated by the Merger Agreement or entered into in connection with or otherwise contemplated by the Merger or the other Contemplated Transactions, including, without limitation, the fairness of the Merger or any other term or aspect of the Merger to, or any consideration to be received in connection therewith by, or the impact of the Merger on, the holders of any other class of securities, creditors or other constituencies of Silverback or any other party. In addition, SVB Securities expressed no view or opinion as to the fairness (financial or otherwise) of the amount, nature or any other aspect of any compensation to be paid or payable to any

 

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of the officers, directors or employees of Silverback or any other party, or class of such persons in connection with the Merger or the other Contemplated Transactions, whether relative to the Exchange Ratio to be paid by Silverback pursuant to the terms of the Merger Agreement or otherwise. The opinion of SVB Securities was necessarily based on financial, economic, monetary, currency, market and other conditions and circumstances as in effect on, and the information made available to SVB Securities as of, the date of its written opinion, and SVB Securities does not have any obligation or responsibility to update, revise or reaffirm its opinion based on circumstances, developments or events occurring after the date of its opinion. SVB Securities’ opinion does not constitute a recommendation to any stockholder of Silverback as to whether or how such stockholder should vote with respect to the merger or otherwise act with respect to the transaction or any other matter.

SVB Securities’ financial advisory services and its opinion were provided for the information and assistance of the Silverback Board (in their capacity as directors and not in any other capacity) in connection with and for purposes of its consideration of the Merger and the other Contemplated Transactions. SVB Securities’ opinion was approved by the SVB Securities LLC Fairness Opinion Review Committee.

Summary of Financial Analyses

The following is a summary of the material financial analyses prepared by SVB Securities and reviewed with the Silverback Board in connection its opinion, which was delivered orally to the Silverback Board on July 20, 2022 and subsequently confirmed in its written opinion, dated July 20, 2022. For purposes of the analyses described below, SVB Securities was directed to rely upon the Internal Data, including the Financial Projections. The summary set forth below does not purport to be a complete description of the financial analyses performed or factors considered by, and underlying the opinion of, SVB Securities, nor does the order of the analyses described below represent the relative importance or weight given to those analyses by SVB Securities. The preparation of a fairness opinion is a complex analytical process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, a fairness opinion is not readily susceptible to summary description. In arriving at its opinion, SVB Securities did not draw, in isolation, conclusions from or with regard to any factor or analysis that it considered. Accordingly, SVB Securities believes that its analyses must be considered as a whole and that selecting portions of such analyses and factors without considering all analyses and factors, could create a misleading or incomplete view of the processes underlying SVB Securities’ financial analyses and its opinion.

SVB Securities may have deemed various assumptions more or less probable than other assumptions, so the reference ranges resulting from any particular portion of the analyses summarized below should not be taken to be the view of SVB Securities as to the actual value of Silverback. Some of the summaries of the financial analyses set forth below include information presented in tabular format. In order to fully understand the financial analyses, the tables must be read together with the text of each summary, as the tables alone do not constitute a complete description of the financial analyses performed by SVB Securities. In its analyses, SVB Securities made numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond the control of Silverback or any other parties to the Merger and the other Contemplated Transactions. None of Silverback, ARS Pharma, Merger Sub, SVB Securities or any other person assumes responsibility if future results are materially different from those discussed. Any estimates contained in these analyses are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than as set forth below. In addition, analyses relating to the value of Silverback or ARS Pharma do not purport to be appraisals or reflect the prices at which these companies may actually be sold. Accordingly, the assumptions and estimates used in, and the results derived from, the financial analyses are inherently subject to

 

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substantial uncertainty. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before July 20, 2022 and is not necessarily indicative of current market conditions.

SVB Securities’ financial analyses and opinion were only one of many factors taken into consideration by the Silverback Board in its evaluation of the Merger, as described under “The Merger—Silverback Reasons for the Merger.” Consequently, the analyses described above should not be viewed as determinative of the views of the Silverback Board or management of Silverback with respect to the Exchange Ratio or as to whether the Silverback Board would have been willing to determine that a different Exchange Ratio was fair. The Exchange Ratio, as well as the type of consideration payable in the Merger, was determined through arm’s-length negotiations between Silverback and ARS Pharma and was approved by the Silverback Board. SVB Securities provided advice to Silverback during these negotiations. However, SVB Securities did not recommend any specific Exchange Ratio or other financial terms to Silverback or the Silverback Board or that any specific Exchange Ratio or other financial terms constituted the only appropriate consideration for the Merger.

In preparing its analysis, SVB Securities took into account that the Exchange Ratio contained in the Merger Agreement is calculated by attributing equity values of $255,000,000 and $435,000,000 to Silverback and ARS Pharma, respectively, subject to certain adjustments set forth in the Merger Agreement. SVB Securities expressed no opinion as to any such adjustments.

Valuation Analysis – Discounted Cash Flow

A discounted cash flow analysis is a traditional valuation methodology used to derive a valuation of an asset or set of assets by calculating the “present value” of estimated future cash flows of the asset or set of assets. “Present value” refers to the current value of future cash flows or amounts and is obtained by discounting those future cash flows or amounts by a discount rate that takes into account assumptions and estimates of risk, the opportunity cost of capital, expected returns and other appropriate factors, and then adding the present value equivalent of the terminal value of the business at the end of the applicable projection period. SVB Securities performed a discounted cash flow analysis to calculate the estimated present value of the stand-alone, unlevered, after-tax free cash flows that ARS Pharma was forecasted to generate from January 1, 2023 through December 31, 2038, which unlevered, after-tax free cash flows were derived from the Financial Projections on which SVB Securities relied. SVB Securities estimated the net present value of unlevered, after-tax free flows after fiscal year 2038 by assuming an annual decline of 30% of such cash flows in perpetuity. These cash flows were discounted to present value as of January 1, 2023, using a discount rate ranging from 11% to 13%, determined based on SVB Securities’ professional judgment and experience. In performing its discounted cash flow analysis, SVB Securities adjusted for cash balances, and relied on the Financial Projections at the direction of Silverback management. At the direction of Silverback management, SVB Securities did not account for the estimated cash flow impact of any net operating loss carryforwards or other tax attributes that may be available to ARS Pharma nor any cash flows for the period of the Financial Projections for sales of products outside of the United States.

This analysis resulted in an implied equity value for ARS Pharma of approximately $845 million to $1.045 billion and a corresponding implied exchange ratio of approximately 2.3985x to 2.9617x.

 

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Additional Factors Observed by SVB Securities – ARS Pharma Valuation Analysis – Selected Public Companies

As additional factors not part of its financial analyses but noted for reference purposes, SVB Securities reviewed publicly available information relating to the market capitalization of certain U.S.-listed publicly-traded companies whose lead product is being marketed or is in regulatory development, selected based on SVB Securities’ professional judgment and experience. These companies, which are referred to as the Selected Companies, were:

 

Company

  Lead Relevant
Program
 

Indication

  Equity
Value
(in millions)
    Enterprise
Value
(in millions)
    EV/Rev
Multiples
2023
    EV/Rev
Multiples

2024
 

Biohaven Pharmaceutical Holding Company Ltd

  Nurtec ODT   Acute Treatment of Migraine   $ 6,340  (1)    $ 6,441       5.4x       3.8x  

Intra-Cellular Therapies, Inc.

  Caplyta   Schizophrenia     5,530       4,758       10.9       6.9  

Harmony Biosciences Holdings, Inc.

  Wakix

 

  Excessive daytime sleepiness associated with narcolepsy    

 

3,276

 

 

 

   

 

3,243

 

 

 

   

 

5.5

 

 

 

   

 

4.2

 

 

 

Axsome Therapeutics, Inc.

  Sunosi; AXS-05   EDS associated with narcolepsy or OSA; Major depressive disorder     1,840       1,853       8.6       4.2  

Revance Therapeutics, Inc.

  Daxibotulinumtoxin
A
  Glabellar (frown) lines     1,241       1,340       6.1       3.4  

Aurinia Pharmaceuticals Inc.

  Lupkynis   Active lupus nephritis     1,439       1,020       4.3       2.5  

 

(1) 

Equity value disregards impact of pending transaction with Pfizer Inc., announced on May 10, 2022.

SVB Securities noted that although such companies had certain financial and operating characteristics that could be considered similar to those of ARS Pharma, none of the companies had the same management, make-up, technology, size or mix of businesses as ARS Pharma and, accordingly, there were inherent limitations on the applicability of such companies to the valuation analysis of ARS Pharma.

SVB Securities calculated the aggregate enterprise value of each of the Selected Companies based upon the closing price of the common stock of each Selected Company on July 19, 2022 and the fully-diluted number of shares outstanding, using the treasury stock method. SVB Securities then calculated the enterprise values as multiples of estimated revenues for the years 2023 and 2024, based on publicly available information. SVB Securities then applied the Financial Forecasts for the years 2025 and 2026, discounted to 2023 and 2024, respectively, assuming a 12% discount rate based on an estimate of ARS Pharma’s weighted-average cost of capital. SVB Securities then added ARS Pharma’s estimated net cash at closing of $30.0 million and applied a 20% illiquidity discount to reach an adjusted equity value for ARS Pharma. SVB Securities compared these adjusted equity valuations to the proposed ARS Pharma valuation of $435 million based on the proposed valuation and ownership ratio in the Merger Agreement and also compared the resulting implied exchange ratio range of 1.3567x to 1.9480x to the Exchange Ratio. The results of this analysis are summarized as follows:

 

     Adj. Equity Value 2023
(in millions)
     Adj. Equity Value 2024
(in millions)
 

25th Percentile

   $ 473      $ 558  

75th Percentile

     687        666  

General

SVB Securities LLC is a full-service securities firm engaged in securities trading and brokerage activities as well as investment banking and financial advisory services. SVB Securities has provided

 

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certain investment banking services to Silverback from time to time, for which it has received compensation. In the past two years, SVB Securities served as a joint book-running manager for Silverback’s December 2020 initial public offering, for which it received fees of approximately $6.1 million, and SVB Securities and its affiliates have not engaged in any investment banking activities with ARS Pharma. In the ordinary course of business, SVB Securities and its affiliates have in the past provided, currently are providing and may in the future provide investment banking and commercial banking services to Silverback, ARS Pharma or their respective affiliates and would expect to receive customary fees for the rendering of such services. In the ordinary course of their trading and brokerage activities, SVB Securities or its affiliates have in the past and may in the future hold positions, for their own account or the accounts of their customers, in equity, debt or other securities of Silverback, ARS Pharma or their respective affiliates.

Consistent with applicable legal and regulatory requirements, SVB Securities has adopted policies and procedures to establish and maintain the independence of its research department and personnel. As a result, SVB Securities’ research analysts may hold views, make statements or investment recommendations and/or publish research reports with respect to Silverback and the Merger and other participants in the Merger that differ from the views of SVB Securities’ investment banking personnel.

The Silverback Board selected SVB Securities to act as Silverback’s financial advisor in connection with the Merger based on SVB Securities’ qualifications, reputation, experience and expertise in the biopharmaceutical industry, its knowledge of and involvement in recent transactions in the biopharmaceutical industry and its relationship and familiarity with Silverback and its business. SVB Securities is an internationally recognized investment banking firm that has substantial experience in transactions similar to the Merger and the other transactions contemplated by the Merger Agreement.

In connection with SVB Securities’ services as financial advisor to Silverback, Silverback has agreed to pay SVB Securities an aggregate fee of $2.75 million, $1.0 million of which became payable upon the rendering by SVB Securities of the opinion on July 20, 2022 and the remainder of which is

payable contingent upon consummation of the Merger. In addition, Silverback has agreed to reimburse certain of SVB Securities’ expenses arising, and to indemnify SVB Securities against certain liabilities that may arise, out of SVB Securities’ engagement. The terms of the fee arrangement between SVB Securities and Silverback, which are customary in transactions of this nature, were negotiated at arm’s length between SVB Securities and Silverback, and the Silverback Board was aware of the arrangement, including the fact that a significant portion of the fee payable to SVB Securities is contingent upon the completion of the Merger and the other transactions contemplated by the Merger Agreement.

Certain Unaudited Financial Projections

As a matter of course, Silverback does not publicly disclose long-term projections of future financial results due to the inherent unpredictability and subjectivity of underlying assumptions and estimates. However, in connection with the Silverback Board’s evaluation of the Merger, preliminary internal financial projections for ARS Pharma were prepared by the management of ARS Pharma and provided to the management of Silverback, and then adjusted by the management of Silverback (such adjusted projections, the “Financial Projections”) solely for use by SVB Securities in connection with the rendering of its fairness opinion and performing its related financial analyses, as described below under “The Merger—Opinion of the Silverback Financial Advisor.” A summary of the Financial Projections is set forth below.

The inclusion of the Financial Projections should not be deemed an admission or representation by Silverback, SVB Securities, ARS Pharma or any of their respective officers, directors, affiliates, advisors, or other representatives with respect to such Financial Projections. The Financial Projections

 

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are not included to influence your views on the Merger and are summarized in this proxy statement solely to provide stockholders access to certain non-public information considered by the Silverback Board in connection with its evaluation of the Merger and provided to Silverback’s financial advisor, SVB Securities, to assist with its financial analyses as described in the section titled “The Merger—Opinion of the Silverback Financial Advisor.” The information from the Financial Projections should be evaluated, if at all, in conjunction with the historical financial statements and other information regarding ARS Pharma in this proxy statement.

The Financial Projections were not prepared with a view toward public disclosure, nor were they prepared with a view toward compliance with published guidelines of the SEC, the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information, or GAAP. Neither the independent registered public accounting firm of Silverback nor ARS Pharma nor any other independent accountant has audited, reviewed, compiled, examined or performed any procedures with respect to the accompanying unaudited prospective financial information for the purpose of its inclusion herein, and accordingly, neither the independent registered public accounting firm of Silverback nor ARS Pharma nor any other independent accountant expresses an opinion or provides any form of assurance with respect thereto for the purpose of this proxy statement. The Ernst & Young LLP reports included and incorporated by reference in this proxy statement relate to the previously issued financial statements of Silverback. The reports do not extend to the Financial Projections and should not be read to do so.

The Financial Projections include unlevered free cash flow, total adjusted revenue and earnings before interest and taxes (“EBIT”), which are “non-GAAP financial measures” which are financial performance measures that are not calculated in accordance with GAAP. Non-GAAP financial measures should not be viewed as a substitute for GAAP financial measures and may be different from non-GAAP financial measures used by other companies. Furthermore, there are limitations inherent in non-GAAP financial measures because they exclude charges and credits that are required to be included in a GAAP presentation. Accordingly, non-GAAP financial measures should be considered together with, and not as an alternative to, financial measures prepared in accordance with GAAP. The SEC rules, which otherwise would require a reconciliation of a non-GAAP financial measure to a GAAP financial measure, do not apply to non-GAAP financial measures provided to a board of directors or financial advisors in connection with a proposed business combination transaction such as the Merger if the disclosure is included in a document such as this proxy statement to comply with requirements under state laws, including case law. The Financial Projections were provided to SVB Securities in order for it to render its Opinion and to the Silverback Board in connection with its consideration of the Contemplated Transactions and other strategic alternatives, and we believe we have an obligation to disclose such projections under Delaware law, including applicable case law, in order to provide a fair summary of certain of the financial analyses and substantive work of SVB Securities and because the Financial Projections were relied upon by the Silverback Board in connection with its consideration of the Contemplated Transactions and other strategic alternatives. In addition, reconciliations of non-GAAP financial measures to a GAAP financial measure were not provided to or relied upon by the SVB Securities in connection with rendering its Opinion with respect to the Merger, as further described in the section titled “The Merger—Opinion of the Silverback Financial Advisor.” Accordingly, Silverback has not provided a reconciliation of the financial measures included in the Financial Projections to the relevant GAAP financial measures.

The financial projections prepared by ARS Pharma and supplied to Silverback were prepared solely for internal use as part of ARS Pharma’s ongoing strategic planning processes and are subjective in many respects. As a result, the Financial Projections, are susceptible to multiple interpretations and periodic revisions based on actual experience and business developments. Although ARS Pharma and Silverback believe their respective assumptions to be reasonable, all financial projections are inherently uncertain, and ARS Pharma and Silverback expect that differences will exist between actual and projected results. Although presented with numerical specificity, the

 

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Financial Projections reflect numerous variables, estimates, and assumptions made by ARS Pharma’s and Silverback’s respective management at the time the initial financial projections were prepared by ARS Pharma and adjusted by Silverback, and also reflect general business, economic, market, and financial conditions and other matters, all of which are difficult to predict and many of which are beyond ARS Pharma’s and Silverback’s control. In addition, the Financial Projections cover multiple years, and this information by its nature becomes subject to greater uncertainty with each successive year. Accordingly, there can be no assurance that the estimates and assumptions made in preparing the Financial Projections will prove accurate or that any of the Financial Projections will be realized.

The Financial Projections included certain assumptions relating to, among others things, ARS Pharma’s and Silverback’s respective expectations, which may not prove to be accurate, relating to the business, earnings, cash flow, assets, liabilities and prospects of ARS Pharma, industry metrics and the regulatory and commercial probability of success and expenses adjusted on the basis thereof.

The Financial Projections assume, among other things, (i) that neffy will only be available to the United States market, (ii) that neffy will launch in the third quarter of 2023 for the emergency treatment of Type I allergic reactions, and (iii) the potential benefit from net operating loss generation and usage are excluded from the discounted cash flow analysis.

The Financial Projections are subject to many risks and uncertainties and you are urged to review the section titled “Risk Factors” for a description of risk factors relating to the Merger and ARS Pharma’s business. You should also read the section titled “Cautionary Note Concerning Forward-Looking Statements” for additional information regarding the risks inherent in forward-looking information such as the Financial Projections.

The inclusion of the Financial Projections herein should not be regarded as an indication that Silverback, SVB Securities, ARS Pharma or any of their respective affiliates or representatives considered or consider the Financial Projections to be necessarily indicative of actual future events, and the Financial Projections should not be relied upon as such. The Financial Projections do not take into account any circumstances or events occurring after the date they were prepared. Silverback and the combined company do not intend to, and disclaim any obligation to, update, correct, or otherwise revise the Financial Projections to reflect circumstances existing or arising after the date the Financial Projections were generated or to reflect the occurrence of future events, even in the event that any or all of the assumptions or other information underlying the Financial Projections are shown to be in error. Furthermore, the Financial Projections do not take into account the effect of any failure of the Merger to be consummated and should not be viewed as accurate or continuing in that context.

In light of the foregoing factors and the uncertainties inherent in financial projections, stockholders are cautioned not to place undue reliance, if any, on the Financial Projections.

The following table, which is subject to the financial projection statements above, presents (in millions) a summary of the Financial Projections, which represent the preliminary internal financial projections for ARS Pharma as such financial projections were adjusted by the management of Silverback solely for use by SVB Securities in connection with the rendering of its Opinion and performing related financial analysis and made available to the Silverback Board.

 

Years

  2023     2024     2025     2026     2027     2028     2029     2030     2031     2032     2033     2034     2035     2036     2037     2038  

Total Adjusted Revenue

  $ 14     $ 57     $ 133     $ 240     $ 396     $ 513     $ 571     $ 633     $ 699     $ 769     $ 846     $ 910     $ 956     $ 1,003     $ 1,054     $ 1,106  

EBIT(1)

  ($ 81   ($ 100   ($ 54   $ 118     $ 175     $ 236     $ 263     $ 291     $ 321     $ 354     $ 389     $ 419     $ 440     $ 462     $ 485     $ 509  

Unlevered Free
Cash Flow(2)

  ($ 81   ($ 104   ($ 62   $ 76     $ 114     $ 163     $ 189     $ 209     $ 231     $ 255     $ 280     $ 303     $ 321     $ 337     $ 354     $ 371  

 

(1) 

Equal to total adjusted revenue less cost of goods sold, research and development expenses, sales and marketing expense, and general and administrative expense.

(2) 

Unlevered free cash flow is defined as EBIT, less taxes and less changes in net working capital. Unlevered free cash flow did not include the potential benefit from net operating loss generation and usage.

 

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Interests of the Silverback Directors and Executive Officers in the Merger

In considering the recommendation of the Silverback Board with respect to the approval of the Merger Agreement, the Merger and the issuance of shares of Silverback Common Stock as contemplated by the Merger Agreement, and the other matters to be acted upon by the Silverback stockholders at the Silverback virtual special meeting, the Silverback stockholders should be aware that certain current and former members of the Silverback Board and current and former executive officers of Silverback have interests in the Merger that may be different from, or in addition to, the interests of the Silverback stockholders. These interests relate to or arise from, among other things, change in control and severance benefits to which each of Silverback’s named executive officers would become entitled to in the event of termination of their employment under certain circumstances, as specified below under “—Merger-Related Compensation of Executive Officers.”

The Silverback Board was aware of these potential conflicts of interest and considered them, among other matters, in reaching their respective decisions to approve the Merger Agreement and the Merger, and to recommend, as applicable, that Silverback’s stockholders approve the proposals to be presented to Silverback’s stockholders for consideration at the Silverback virtual special meeting as contemplated by this proxy statement.

Ownership Interests

As of June 30, 2022, Silverback’s directors and executive officers (including affiliates) beneficially owned, in the aggregate approximately 30% of the outstanding shares of Silverback Common Stock. Approval of Proposals Nos. 1 and 2 requires the affirmative vote of a majority of the votes cast virtually or by proxy at the Silverback virtual special meeting. Certain officers and directors of Silverback, and their affiliates, have also entered into support agreements in connection with the Merger. For a more detailed discussion of the support agreements, please see the section titled “Agreements Related to the Merger.

Silverback Options and Restricted Stock Units

As of June 30, 2022, Silverback’s directors and executive officers, including any director or executive officer who served in such capacity since the beginning of the last fiscal year, collectively held unvested stock options to purchase 2,993,191 shares of Silverback Common Stock, vested stock options to purchase 1,699,222 shares of Silverback Common Stock and unvested restricted stock units covering 266,614 shares of Silverback Common Stock. All outstanding and unexercised options to purchase shares of Silverback Common Stock and all outstanding and unvested restricted stock units will remain effective and outstanding to the extent they are not forfeited or, for restricted stock units, accelerated (and settled) in connection with the Merger.

Under the terms of Silverback’s non-employee director compensation policy and each of the non-employee director stock option agreements, any unvested stock options held by a non-employee director will accelerate and vest in full upon the Closing. Under the terms of Silverback’s Change in Control and Severance Benefit Plan (the “Severance Plan”), Silverback stock options and restricted stock units held by Silverback’s executive officers are subject to accelerated vesting, which is described in the section below titled “—Merger-Related Compensation of Executive Officers.”

 

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The following table presents certain information concerning the outstanding Silverback stock options and restricted stock units held by each of Silverback’s directors and executive officers as of June 30, 2022, including any director or executive officer who served in such capacity since the beginning of the last fiscal year:

 

Name

   Number
of Vested
Options
Held
     Weighted
Average
Exercise
Price of
Vested
Options ($)
     Number of
Unvested
Options
Held
     Weighted
Average
Exercise
Price of
Unvested
Options ($)
     Number of
Unvested
Restricted
Stock
Units
 

Executive Officers

              

Laura Shawver, Ph.D.

     640,595        8.66        1,251,532        8.29        95,607  

Valerie Odegard, Ph.D.

     344,846        9.69        572,372        10.63        61,639  

Jonathan Piazza

     148,664        12.07        414,281        8.60        54,941  

Naomi Hunder, M.D.(1)

     201,611        10.69        422,932        9.81        54,427  

Non-Employee Directors

              

Peter Thompson, M.D.

     34,135        24.44        37,135      12.85         

Vickie L. Capps

     34,202      24.43        37,203        12.86         

Robert Hershberg, M.D., Ph.D.

     111,867        11.78        67,258        12.79         

Saqib Islam, J.D.

     84,347      14.33        69,101      11.99         

Maria Koehler, M.D., Ph.D.

     10,416      55.51        32,584      27.15         

Andrew Powell, J.D.

     54,404      17.45        51,658      10.32         

Jonathan Root, M.D.

     34,135      24.44        37,135      12.85         

Thilo Schroeder, Ph.D.(2)

                                  

 

(1) 

Dr. Hunder is no longer serving as an executive officer of Silverback.

(2) 

Dr. Schroeder did not stand for reelection on the Silverback Board and his term ended at the 2022 Annual Meeting of Silverback’s stockholders.

Merger-Related Compensation of Executive Officers

In November 2020, the Silverback Board approved the Severance Plan, which became effective on December 3, 2020. The Severance Plan and the individual agreement with each participant in the Severance Plan (the “Participation Agreements”) provide for severance benefits, including in connection with a “change in control” (as defined in the Severance Plan), for certain of our employees, including our executive officers, subject to execution and effectiveness of a release of claims.

The Severance Plan and the Participation Agreements with our executive officers provide that, in the event of an involuntary termination, which is either a termination without “cause” (not including death or “disability”) or a resignation for “good reason” (each, as defined in the Severance Plan), that occurs during the time period commencing three months prior to the to the closing of a change in control and ending 12 months following the closing of such change in control (which will occur at Closing) (such a termination, a “Change in Control Termination” and such period, the “Change in Control Period”): (i) Dr. Shawver will be entitled to a lump sum cash payment equal to 24 months of her base salary, a lump sum cash payment equal 200% of her annual target cash bonus for the year in which her termination occurs, a lump sum cash payment equal to a prorated portion of her target annual cash bonus for the year in which her termination occurs, up to 18 months of continued group health plan benefits, and a lump sum payment in an amount equal to the premiums required to continue her group health plan benefits for an additional six months; and (ii) our other executive officers will each be entitled to a lump sum cash payment equal to 18 months of the executive officer’s base salary, 150% of the executive officer’s annual target cash bonus for the year in which the executive officer’s termination occurs, a lump sum cash payment equal to a prorated portion of the executive officer’s target annual cash bonus for the year in which the executive officer’s termination occurs, up to 18 months of continued group health plan benefits, and, other than for Mr. Piazza, 100%

 

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accelerated vesting of all outstanding stock options and other stock awards held by the executive officer. Additionally, pursuant to the terms of the Severance Plan and their participation agreements, all stock options and other stock awards held by Dr. Shawver and Mr. Piazza will automatically vest in full upon the closing of a change in control (whether or not Dr. Shawver or Mr. Piazza experience an involuntary termination in connection with such change in control).

Effective upon the signing of the Merger Agreement, the Silverback Board approved certain amendments to the compensation arrangement of certain employees (the “Severance Amendments”), including Silverback’s executive officers, pursuant to which (i) certain employees, including any named executive officer of Silverback who experiences, or is deemed to experience, a Change in Control Termination, will be eligible to receive an extension of the post-termination exercise period of the applicable employee’s stock options from three months to 12 months following a qualifying termination of service; and (ii) the executive officers of Silverback will be eligible to receive severance benefits under the Severance Plan as if they each experience a Change in Control Termination, regardless of whether such executive officer’s actual termination date occurs during the Change in Control Period, subject to such executive officer’s execution and delivery of an effective general release of claims in favor of Silverback and satisfaction of all other requirements set forth in the Severance Plan.

The amount of severance payable to our executive officers may be reduced under applicable agreements or otherwise in light of adverse tax consequences under Sections 280G and 4999 of the Code.

Indemnification and Insurance

For a discussion of the indemnification and insurance provisions related to the Silverback directors and officers under the Merger Agreement, please see the section titled “The Merger Agreement—Other Agreements—Director Indemnification and Insurance.”

Structure

Under the Merger Agreement, Merger Sub, a wholly owned subsidiary of Silverback formed in connection with the Merger, will merge with and into ARS Pharma, with ARS Pharma surviving as a wholly owned subsidiary of Silverback. Substantially concurrent with the completion of the Merger, Silverback will be renamed “ARS Pharmaceuticals, Inc.” and expects to trade on The Nasdaq Global Market under the symbol “SPRY.”

Executive Officers of the Combined Company Following the Merger

Immediately following the Merger, the executive management team of the combined company is expected to be comprised of the following individuals with such additional officers as may be added by ARS Pharma or the combined company:

 

Name

  

Position with the Combined
Company

  

Current Position

Richard Lowenthal, M.S., MSEL

   President and Chief Executive Officer    President and Chief Executive Officer of ARS Pharma

Kathleen Scott

   Chief Financial Officer    Chief Financial Officer of ARS Pharma

Sarina Tanimoto, M.D., M.B.A.

   Chief Medical Officer    Chief Medical Officer of ARS Pharma

Eric Karas

   Chief Commercial Officer    Chief Commercial Officer of ARS Pharma

Justin Chakma

   Chief Business Officer    Chief Business Officer of ARS Pharma

 

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Directors of the Combined Company Following the Merger

At the Effective Time, the combined company is expected to initially have an eleven member board of directors, comprised of (a) Richard Lowenthal, M.S., MSEL, Pratik Shah, Ph.D., Peter Kolchinsky, Ph.D., Rajeev Dadoo, Ph.D., Brenton L. Saunders, Phillip Schneider, Michael Kelly and Jonathan Leff, each as an ARS Pharma designee, and (b) Laura Shawver, Ph.D., Peter A. Thompson, M.D. and Saqib Islam, J.D., each as a Silverback designee, until their respective successors are duly elected or appointed and qualified or their earlier death, resignation or removal.

The aforementioned board of directors will have an audit committee, a compensation committee and a nominating and corporate governance committee, in accordance with the Nasdaq rules. All of Silverback’s current directors, other than Dr. Shawver, Dr. Thompson and Mr. Islam, are expected to resign from their positions as directors of Silverback, effective as of the Effective Time.

Merger Consideration and Exchange Ratio

For a discussion of the merger consideration and the Exchange Ratio, please see the section titled “The Merger Agreement—Merger Consideration and Exchange Ratio.

Effective Time of the Merger

The Merger will be completed as promptly as practicable (but no later than the second business day) after all of the conditions to Closing are satisfied or waived, including the approval of the stockholders of Silverback, unless earlier terminated in accordance with the terms of the Merger Agreement. For more information on termination rights, see the section titled “The Merger Agreement—Termination and Termination Fees.” The Merger is anticipated to occur after the Silverback virtual special meeting, which is further described in the section titled “The Virtual Special Meeting of Silverback’s Stockholders.” Silverback and ARS Pharma cannot predict the exact timing of the Closing because it is subject to various conditions.

Regulatory Approvals Required for the Merger

Under the Merger Agreement, Silverback and ARS Pharma have agreed to use reasonable best efforts to obtain all regulatory approvals required to consummate the Merger and the other Contemplated Transactions.

Under the HSR Act and the rules promulgated thereunder, certain acquisitions may not be completed until information has been furnished to the Antitrust Division of the U.S. Department of Justice (“DOJ”) and the Federal Trade Commission (“FTC”), and the applicable HSR Act waiting period has expired or been terminated. The waiting period under the HSR Act for the Merger is 30 calendar days following the parties’ filings of their respective HSR Act notification and report forms, unless the waiting period is terminated earlier or extended through the issuance of a request for additional information. The Merger is subject to the provisions of the HSR Act and therefore cannot be completed until each of Silverback and ARS Pharma file a notification and report form with the DOJ and the FTC under the HSR Act and the applicable waiting period has expired or been terminated. Silverback and ARS Pharma made the necessary filings with the DOJ and the FTC on August 4, 2022. The waiting period with respect to the notification and report forms filed under the HSR Act will expire at 11:59 p.m., Eastern Time, on September 6, 2022.

At any time before or after consummation of the Merger, notwithstanding the termination or expiration of the waiting period under the HSR Act, the DOJ or the FTC could take such action under the antitrust laws as either deems necessary or desirable in the public interest, including seeking to enjoin the completion of the Merger, seeking divestiture of substantial assets of the parties, or requiring

 

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the parties to license or hold separate assets or modify or terminate existing relationships and contractual rights, or to impose a restriction, requirement, or limitation on the operation of the business. At any time before or after the completion of the Merger, and notwithstanding the termination or expiration of the waiting period under the HSR Act, state or foreign jurisdictions could also take such action under antitrust law as they deems necessary or desirable. Such action could include seeking to enjoin the completion of the Merger or seeking divestiture of substantial assets of the parties. Private parties may also seek to take legal action under the antitrust laws under certain circumstances. We cannot be certain that a challenge to the Merger will not be made or that, if a challenge is made, we will prevail.

Material U.S. Federal Income Tax Consequences of the Merger

This summary is based upon current provisions of the Code, existing Treasury regulations, judicial decisions, and published rulings and administrative pronouncements of the IRS, all in effect as of the date hereof and all of which are subject to differing interpretations or change. Any such change or differing interpretation, which may be retroactive, could alter the tax consequences to ARS Pharma stockholders as described in this summary.

This discussion applies only to ARS Pharma stockholders who hold their ARS Pharma Capital Stock as a “capital asset” within the meaning of Section 1221 of the Code, and does not address all U.S. federal income tax consequences relevant to an ARS Pharma stockholder. In addition, it does not address consequences relevant to ARS Pharma stockholders that are subject to particular U.S. or non-U.S. tax rules, including, without limitation to ARS Pharma stockholders that are:

 

   

brokers, dealers or traders in securities; banks; insurance companies; other financial institutions; mutual funds;

 

   

real estate investment trusts; regulated investment companies; tax-exempt organizations or governmental organizations;

 

   

pass-through entities such as partnerships, S corporations, disregarded entities for federal income tax purposes and limited liability companies (and investors therein);

 

   

persons who are not U.S. holders (as defined below);

 

   

subject to the alternative minimum tax provisions of the Code;

 

   

persons who hold their shares as part of a hedge, wash sale, synthetic security, conversion transaction, or other integrated transaction;

 

   

persons that have a functional currency other than the U.S. dollar;

 

   

traders in securities who elect to apply a mark-to-market method of accounting;

 

   

persons who hold shares of ARS Pharma Capital Stock that may constitute “qualified small business stock” under Section 1202 of the Code or as “Section 1244 stock” for purposes of Section 1244 of the Code;

 

   

persons who elect to apply the provisions of Section 1400Z-2 to any gains realized in the Merger;

 

   

persons who acquired their shares of ARS Capital Stock in a transaction subject to the gain rollover provisions of Section 1045 of the Code;

 

   

persons subject to special tax accounting rules as a result of any item of gross income with respect to ARS Pharma Capital Stock being taken into account in an “applicable financial statement” (as defined in the Code);

 

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persons deemed to sell ARS Pharma Capital Stock under the constructive sale provisions of the Code;

 

   

persons who acquired their shares of ARS Pharma Capital Stock pursuant to the exercise of options or otherwise as compensation or through a tax-qualified retirement plan or through the exercise of a warrant or conversion rights under convertible instruments; and

 

   

certain expatriates or former citizens or long-term residents of the United States.

ARS Pharma stockholders subject to particular U.S. or non-U.S. tax rules that are described in this paragraph are urged to consult their own tax advisors regarding the consequences to them of the Merger.

If an entity that is treated as a partnership for U.S. federal income tax purposes holds ARS Pharma Capital Stock, the U.S. federal income tax treatment of a partner in the partnership will depend upon the status of the partner, the activities of the partnership and certain determinations made at the partner level. If you are a partnership or a partner of a partnership holding ARS Pharma Capital Stock or any other person not addressed by this discussion, you should consult your tax advisors regarding the tax consequences of the Merger.

In addition, the following discussion does not address: (a) the tax consequences of transactions effectuated before, after or at the same time as the Merger, whether or not they are in connection with the Merger, including, without limitation, transactions in which shares of ARS Pharma Capital Stock are acquired or disposed of other than in exchange for shares of Silverback Common Stock in the Merger; (b) the tax consequences to holders of options or warrants issued by ARS Pharma which are assumed in connection with the Merger; (c) the tax consequences of the ownership of shares of Silverback Common Stock following the Merger; (d) any U.S. federal non-income tax consequences of the Merger, including estate, gift or other tax consequences; (e) any state, local or non-U.S. tax consequences of the Merger; or (f) the Medicare contribution tax on net investment income.

Definition of “U.S. Holder”

For purposes of this discussion, a “U.S. holder” is a beneficial owner of ARS Pharma Capital Stock that is, for U.S. federal income tax purposes:

 

   

an individual who is a citizen or resident of the United States;

 

   

a corporation or any other entity taxable as a corporation created or organized in or under the laws of the United States, any state thereof, or the District of Columbia;

 

   

a trust if either (i) a court within the United States is able to exercise primary supervision over the administration of such trust, and one or more United States persons (within the meaning of Section 7701(a)(30) of the Code) are authorized or have the authority to control all substantial decisions of such trust, or (ii) the trust was in existence on August 20, 1996 and has a valid election in effect under applicable Treasury Regulations to be treated as a United States person for U.S. federal income tax purposes; or

 

   

an estate, the income of which is subject to U.S. federal income tax regardless of its source.

Treatment of U.S. Holders in the Merger

If the Merger qualifies as a reorganization under Section 368(a) of the Code, ARS Pharma stockholders will not recognize gain or loss upon the exchange of their ARS Pharma Capital Stock for Silverback Common Stock. ARS Pharma stockholders will obtain a basis in the Silverback Common Stock they receive in the Merger equal to their basis in the ARS Pharma Capital Stock exchanged

 

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therefor. The holding period of the shares of Silverback Common Stock received by an ARS Pharma stockholder in the Merger will include the holding period of the shares of ARS Pharma Capital Stock surrendered in exchange therefor.

If the Merger does not qualify as a reorganization within the meaning of Section 368(a) of the Code, then each U.S. holder will be treated as exchanging its ARS Pharma Capital Stock in a fully taxable transaction in exchange for Silverback Common Stock. U.S. holders of ARS Pharma Capital Stock generally will recognize capital gain or loss in such exchange equal to the difference between (i) the sum of the fair market value of the Silverback Common Stock received in the Merger and (ii) such holder’s tax basis in the ARS Pharma Capital Stock surrendered in the Merger. The aggregate tax basis of a U.S. holder in the Silverback Common Stock received in the Merger will equal its fair market value at the Effective Time, and the holding period of Silverback Common Stock received in the Merger will begin on the day after the Effective Time of the Merger.

For purposes of the above discussion of the bases and holding periods for shares of ARS Pharma Capital Stock acquired by ARS Pharma stockholders at different times for different prices, such ARS Pharma stockholders must calculate their gains and losses and holding periods separately for each identifiable block of such ARS Pharma Capital Stock exchanged in the Merger.

Information Reporting

Each U.S. holder who receives shares of Silverback Common Stock in the Merger is required to retain permanent records pertaining to the Merger, and make such records available to any authorized IRS officers and employees. Such records should specifically include information regarding the amount, basis, and fair market value of all transferred property, and relevant facts regarding any liabilities assumed or extinguished as part of such reorganization. U.S. holders who owned immediately before the Merger at least one percent (by vote or value) of the total outstanding stock of ARS Pharma or securities of ARS Pharma with a basis of $1,000,000 or more are required to attach a statement to their tax returns for the year in which the Merger is consummated that contains the information listed in Treasury Regulation Section 1.368-3(b). Such statement must include the U.S. holder’s tax basis in such holder’s ARS Pharma Capital Stock surrendered in the Merger, the fair market value of such stock, the date of the Merger and the name and employer identification number of each of ARS Pharma and Silverback. U.S. holders are urged to consult with their tax advisors to comply with these rules.

Holders of ARS Pharma Capital Stock are urged to consult their tax advisors regarding the U.S. federal income tax consequences of the Merger in light of their personal circumstances and the consequences to them under state, local and non-U.S. tax laws and other federal tax laws.

Nasdaq Stock Market Listing

Silverback Common Stock currently is listed on The Nasdaq Global Market under the symbol “SBTX.” Silverback has agreed to use commercially reasonable efforts (i) to maintain its existing listing on Nasdaq until the Effective Time and obtain approval of the listing of the combined company on Nasdaq, (ii) to the extent required by the rules and regulations of Nasdaq, to prepare and submit to Nasdaq a notification form for the listing of the shares of Silverback Common Stock to be issued in connection with the Contemplated Transactions, and to cause such shares to be approved for listing (subject to official notice of issuance), and (iii) to the extent required by Nasdaq Marketplace Rule 5110, to file an initial Nasdaq Listing Application for the Silverback Common Stock on Nasdaq and to cause such listing application to be conditionally approved prior to the Effective Time.

 

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In addition, under the Merger Agreement, each of ARS Pharma’s and Silverback’s obligation to complete the Merger is subject to the satisfaction or waiver by each of the parties, at or prior to the Closing, of various conditions, including that the shares of Silverback Common Stock to be issued in the Merger have been approved for listing (subject to official notice of issuance) on Nasdaq as of the Closing.

If the Nasdaq Listing Application is accepted, Silverback anticipates that the common stock of the combined company will be listed on the Nasdaq Global Market following the Closing under the trading symbol “SPRY.”

Anticipated Accounting Treatment

The Merger will be accounted for as a reverse recapitalization under GAAP. For accounting purposes, ARS Pharma is considered to be acquiring Silverback in this transaction. This determination was primarily based on the expectations that, immediately following the Merger: (i) ARS Pharma stockholders will own a substantial majority of the voting rights; (ii) ARS Pharma will designate a majority (eight of eleven) of the initial members of the board of directors of the combined organization; and (iii) ARS Pharma’s executive management team will become the management of the combined company. Accordingly, for accounting purposes, the Merger will be treated as the equivalent of ARS Pharma issuing stock to acquire the net assets of Silverback. Apart from cash and cash equivalents and other highly liquid assets, the other assets and liabilities being acquired are expected to be nominal. At the close of the Merger, the net assets of Silverback will be recorded at their acquisition-date fair value in the financial statements of ARS Pharma and the reported operating results prior to the Merger will be those of ARS Pharma.

Appraisal Rights and Dissenters’ Rights

Under the DGCL, Silverback stockholders are not entitled to appraisal rights in connection with the Merger.

ARS Pharma stockholders are entitled to statutory appraisal rights in connection with the Merger under Section 262 of the DGCL and under Chapter 13 of the California Corporations Code. One of the conditions to Silverback’s obligation to consummate the Merger is that no stockholders of ARS Pharma shall have exercised statutory appraisal rights pursuant to Section 262 of the DGCL or Chapter 13 of California Corporations Code with respect to their shares of ARS Pharma Capital Stock.

As of the date of the Merger Agreement, ARS Pharma stockholders representing approximately 83% of the outstanding shares of ARS Capital Stock immediately prior to the date of the Merger Agreement waived any statutory appraisal rights pursuant to Section 262 of the DGCL or Chapter 13 of California Corporations Code with respect to their shares of ARS Pharma Capital Stock.

 

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THE MERGER AGREEMENT

The following is a summary of the material terms of the Merger Agreement. A copy of the Merger Agreement is attached as Annex A to this proxy statement and is incorporated by reference. The Merger Agreement has been attached to this proxy statement to provide you with information regarding its terms. It is not intended to provide any other factual information about Silverback, ARS Pharma or Merger Sub. The following description does not purport to be complete and is qualified in its entirety by reference to the Merger Agreement. You should refer to the full text of the Merger Agreement for details of the Merger and the terms and conditions of the Merger Agreement.

The Merger Agreement contains representations and warranties that Silverback and Merger Sub, on the one hand, and ARS Pharma, on the other hand, have made to one another as of specific dates. These representations and warranties have been made for the benefit of the other parties to the Merger Agreement and may be intended not as statements of fact but rather as a way of allocating the risk to one of the parties if such statements made in the representations and warranties prove to be incorrect. In addition, the assertions made in the representations and warranties are qualified by the information in confidential disclosure schedules exchanged by the parties in connection with the signing of the Merger Agreement. While Silverback and ARS Pharma do not believe that these disclosure schedules contain information required to be publicly disclosed under the applicable securities laws, other than information that has already been so disclosed, the disclosure schedules contain information that modifies, qualifies and creates exceptions to the representations and warranties set forth in the Merger Agreement. Accordingly, you should not rely on the representations and warranties as current characterizations of factual information about Silverback, ARS Pharma or Merger Sub, because they were made as of specific dates, may be intended merely as a risk allocation mechanism between Silverback and Merger Sub on the one hand, and ARS Pharma on the other hand, and are modified by the disclosure schedules.

Structure

Under the Merger Agreement, Merger Sub, a wholly owned subsidiary of Silverback formed in connection with the Merger, will merge with and into ARS Pharma, with ARS Pharma surviving as a wholly owned subsidiary of Silverback. Substantially concurrent with the completion of the Merger, Silverback will be renamed “ARS Pharmaceuticals, Inc.” and expects to trade on The Nasdaq Global Market under the symbol “SPRY.”

Completion and Effectiveness of the Merger

The Merger will be completed as promptly as practicable (but no later than the second business day) after all of the conditions to Closing are satisfied or waived, including the approval of the stockholders of Silverback, unless earlier terminated in accordance with the terms of the Merger Agreement. For more information on termination rights, see the section titled “The Merger Agreement—Termination and Termination Fees.” The Merger is anticipated to occur after the Silverback virtual special meeting, which is further described in the section titled “The Virtual Special Meeting of Silverback’s Stockholders.” Silverback and ARS Pharma cannot predict the exact timing of the Closing because it is subject to various conditions.

Merger Consideration and Exchange Ratio

Merger Consideration

At the Effective Time, each share of ARS Pharma Capital Stock outstanding immediately prior to the Effective Time and after giving effect to the Preferred Stock Conversion (excluding shares held as

 

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treasury stock by ARS Pharma or held or owned by Silverback, Merger Sub or any subsidiary of Silverback or ARS Pharma and dissenting shares) will be automatically converted solely into the right to receive a number of validly issued, fully paid and nonassessable shares of Silverback Common Stock equal to the Exchange Ratio.

No fractional shares of Silverback Common Stock will be issued in connection with the Merger, and no certificates or scrip for any such fractional shares will be issued. Any fractional shares of Silverback Common Stock that a holder of ARS Pharma Capital Stock would otherwise be entitled to receive will be aggregated with all fractional shares of Silverback Common Stock issuable to such holder and any remaining fractional shares will be rounded up to the nearest whole share.

Exchange Ratio

The Exchange Ratio formula is derived based upon an ARS Pharma fixed valuation of $435 million and a Silverback Equity Value of $255 million and is subject to certain adjustments, including based upon Silverback Net Cash at Closing.

Immediately following the Merger, assuming Silverback Net Cash at Closing is $240 million, the pre-Merger equity holders of ARS Pharma are expected to hold approximately 63% of the outstanding shares of Silverback Common Stock and the pre-Merger equity holders of Silverback are expected to hold approximately 37% of the outstanding shares of Silverback Common Stock, in each case, on a fully diluted basis using the treasury stock method. As currently anticipated, the Exchange Ratio is expected to be approximately 1.2441. The “Exchange Ratio” is the quotient obtained by dividing (a) (i) the ARS Pharma Valuation divided by (ii) the ARS Pharma Outstanding Shares by (b) (i) the Silverback Valuation divided by (ii) the Silverback Outstanding Shares, in which:

 

   

“ARS Pharma Valuation” means $435 million.

 

   

“ARS Pharma Outstanding Shares” means the total number of shares of ARS Pharma Capital Stock outstanding immediately prior to the Effective Time after giving effect to the Preferred Stock Conversion, expressed on a fully-diluted basis and using the treasury stock method, but assuming, without limitation or duplication, (i) the exercise of all ARS Pharma stock options and ARS Pharma warrants, in each case outstanding as of immediately prior to the Effective Time, and (ii) the issuance of shares of ARS Pharma Capital Stock in respect of all other outstanding options, restricted stock awards, warrants or rights to receive such shares, whether conditional or unconditional and including any outstanding options, warrants or rights triggered by or associated with the consummation of the Merger (but excluding any shares of ARS Pharma Capital Stock reserved for issuance other than with respect to outstanding ARS Pharma warrants or ARS Pharma stock options under the ARS 2018 Plan as of immediately prior to the Effective Time).

 

   

“Silverback Equity Value” means $255 million.

 

   

“Silverback Outstanding Shares” means, subject to, among other things, certain stock dividends, subdivisions, reclassifications, recapitalizations, splits, combinations or exchanges of shares or other like changes occurring prior to the Effective Time and the exclusion of out-of-the money Silverback stock options, the total number of shares of Silverback Common Stock outstanding immediately prior to the Effective Time expressed on a fully-diluted basis and using the treasury stock method, but assuming, without limitation or duplication, the issuance of shares of Silverback Common Stock in respect of all Silverback stock options, Silverback restricted stock units, and other outstanding options, warrants or rights to receive such shares, in each case, outstanding as of immediately prior to the Effective Time (assuming cashless exercise using the volume weighted average closing trading price of the Silverback Common Stock on Nasdaq for the five consecutive trading days ending five trading days

 

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immediately prior to the date upon which the Merger becomes effective), whether conditional or unconditional and including any outstanding options, warrants or rights triggered by or associated with the consummation of the Merger, (but excluding any shares of Silverback Common Stock reserved for issuance other than with respect to outstanding Silverback stock options and Silverback restricted stock units as of immediately prior to the Effective Time and as set forth above). No out-of-the-money Silverback stock options will be included in the total number of shares of Silverback Common Stock outstanding for purposes of determining the Silverback Outstanding Shares.

 

   

“Silverback Valuation” means (i) if Silverback Net Cash is greater than $240 million, the sum of (x) the Silverback Equity Value plus (y) the amount by which, up to $15 million, Silverback Net Cash exceeds $240 million, (ii) if Silverback Net Cash is equal to $240 million, the Silverback Equity Value, or (iii) if Silverback Net Cash is less than $240 million, the sum of (x) the Silverback Equity Value, minus (y) the amount by which $240 million exceeds Silverback Net Cash.

 

   

“Silverback Net Cash” means, without duplication, (a) the sum of Silverback’s cash and cash equivalents, marketable securities, accounts, interest and other receivables, deposits and short and long term investments, in each case as of the Anticipated Closing Date, determined in a manner consistent with the manner in which such items were historically determined and in accordance with the financial statements (including any related notes) contained or incorporated by reference in the unaudited balance sheet of Silverback as of March 31, 2022 included in Silverback’s Report on Form 10-Q for the quarterly period ended March 31, 2022, as filed with the SEC (the “Silverback Balance Sheet”), minus (b) the sum of Silverback’s short and long term liabilities accrued at Closing, in each case as of the Anticipated Closing Date and determined in a manner consistent with the manner in which such items were historically determined and in accordance with the financial statements (including any related notes) contained or incorporated by reference in the Silverback Balance Sheet (including the Transaction Expenses payable by Silverback to the extent unpaid as of the Closing but excluding any lease liabilities to the extent they are contractually mitigated through a commercially reasonable sub-leasing arrangement), minus (c) the cash cost of any unpaid change of control payments or severance, termination or similar payments pursuant to a contract that are or become due to any current or former employee, director or independent contractor of Silverback in connection with the Closing, minus (d) to the extent unpaid at Closing, the cost of the D&O Tail Policy (as defined below) purchased pursuant to Section 5.7(d) of the Merger Agreement, plus (e) prepaid expenses and receivables that will be utilized by Silverback and/or the surviving company on and following the Closing, plus (f) expenses paid, or liabilities incurred, prior to the Closing, that will be covered by Silverback’s D&O insurance in excess of the deductible, and plus (g) any net cash proceeds due to Silverback substantially concurrently with the Closing from any Asset Dispositions (as defined below) or, as mutually agreed in good faith, otherwise in connection with any Asset Disposition.

 

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The following table illustrates how the Exchange Ratio and post-Merger equity ownership of ARS Pharma’s pre-Merger equity holders and Silverback’s pre-Merger equity holders may change if Silverback Net Cash is between $225 million and $210 million at Closing, in each case calculated as of July 20, 2022.

 

Silverback Net
Cash at
Closing ($ in millions)

  

Exchange
Ratio

   Post-Merger Ownership
   ARS Pharma Equity
Holders
   Silverback
Equity Holders
$210    1.4015    66%    34%
$215    1.3725    65%    35%
$220    1.3447    65%    35%
$225    1.3181    64%    36%
$230    1.2924    64%    36%
$235    1.2678    64%    36%
$240    1.2441    63%    37%
$245    1.2216    63%    37%
$250    1.1998    62%    38%
$255    1.1788    62%    38%

Treatment of ARS Pharma Stock Options

Under the terms of the Merger Agreement, each option to purchase shares of ARS Pharma Common Stock that is outstanding and unexercised immediately prior to the Effective Time, whether or not vested, will be converted into and become an option to purchase shares of Silverback Common Stock. Silverback will assume the ARS 2018 Plan and all such ARS Pharma stock options in accordance with the terms of the ARS 2018 Plan and the terms of the stock option agreement by which such option is evidenced.

Accordingly, from and after the Effective Time: (i) each outstanding ARS Pharma stock option assumed by Silverback may be exercised solely for shares of Silverback Common Stock; (ii) the number of shares of Silverback Common Stock subject to each outstanding ARS Pharma stock option assumed by Silverback will be determined by multiplying (A) the number of shares of ARS Pharma Common Stock that were subject to such ARS Pharma stock option, as in effect immediately prior to the Effective Time, by (B) the Exchange Ratio, and rounding the resulting number down to the nearest whole number of shares of Silverback Common Stock; (iii) the per share exercise price for the Silverback Common Stock issuable upon exercise of each ARS Pharma stock option assumed by Silverback will be determined by dividing (A) the per share exercise price of Silverback Common Stock subject to such ARS Pharma stock option, as in effect immediately prior to the Effective Time, by (B) the Exchange Ratio and rounding the resulting exercise price up to the nearest whole cent; and (iv) any restriction on the exercise of any ARS Pharma stock option assumed by Silverback will continue in full force and effect and the term, exercisability, vesting schedule, accelerated vesting provisions, and any other provisions of such ARS Pharma stock option will otherwise remain unchanged; provided, however, that the Silverback Board or a committee thereof will succeed to the authority and responsibility of the ARS Pharma Board or any committee thereof with respect to each ARS Pharma stock option assumed by Silverback.

Treatment of ARS Pharma Warrants

Under the terms of the Merger Agreement, each warrant to purchase shares of ARS Pharma Common Stock that is outstanding and unexercised immediately prior to the Effective Time (after giving effect to the Preferred Stock Conversion), will be converted into and become a warrant to purchase shares of Silverback Common Stock and Silverback will assume each ARS Pharma warrant in accordance with its terms.

Accordingly, from and after the Effective Time: (i) each outstanding ARS Pharma warrant assumed by Silverback may be exercised solely for shares of Silverback Common Stock; (ii) the

 

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number of shares of Silverback Common Stock subject to each outstanding ARS Pharma warrant assumed by Silverback will be determined by multiplying (A) the number of shares of ARS Pharma Common Stock that were subject to such ARS Pharma warrant, as in effect immediately prior to the Effective Time (after giving effect to the Preferred Stock Conversion), by (B) the Exchange Ratio, and rounding the resulting number up to the nearest whole number of shares of Silverback Common Stock; (iii) the per share exercise price for the Silverback Common Stock issuable upon exercise of each ARS Pharma warrant assumed by Silverback will be determined by dividing (A) the per share exercise price of Silverback Common Stock subject to such ARS Pharma warrant as in effect immediately prior to the Effective Time, by (B) the Exchange Ratio and rounding the resulting exercise price up to the nearest whole cent; and (iv) any restriction on the exercise of any ARS Pharma warrant assumed by Silverback will continue in full force and effect and the term and other provisions of such ARS Pharma warrant will otherwise remain unchanged.

Treatment of Silverback Stock Options and Restricted Stock Units

All outstanding and unexercised options to purchase shares of Silverback Common Stock and all outstanding and unvested restricted stock units will remain effective and outstanding to the extent they are not forfeit or, for restricted stock units, accelerated (and settled) in connection with the Merger. As of June 30, 2022, there were outstanding options to purchase up to an aggregate of 8,649,255 shares of Silverback Common Stock and unvested restricted stock units covering 745,675 shares of Silverback Common Stock. As of June 30, 2022, Silverback’s current executive officers and directors collectively owned outstanding options to purchase an aggregate of 4,692,413 shares of Silverback Common Stock and unvested restricted stock units covering 266,614 shares of Silverback Common Stock.

Directors and Executive Officers of the Combined Company Following the Merger

The Merger Agreement provides that the parties will use reasonable best efforts and take all necessary action so that immediately after the Effective Time, the Silverback Board is comprised of eleven members, with eight such members designated by ARS Pharma and three such members designated by Silverback. Mr. Lowenthal will serve as the President and Chief Executive Officer of the combined company. For more information about the directors and executive officers of the combined company following the Merger, please see the sections titled “The Merger—Executive Officers of the Combined Company Following the Merger” and “The Merger—Directors of the Combined Company Following the Merger.

Conditions to the Completion of the Merger

The obligations of each party to consummate the Merger and the Contemplated Transactions are subject to the satisfaction or, to the extent permitted by applicable law, the written waiver by each of the parties, at or prior to the Closing, of the following conditions:

 

   

there must not have been any temporary restraining order, preliminary or permanent injunction or other order preventing the consummation of the Contemplated Transactions issued by any court of competent jurisdiction or other governmental body of competent jurisdiction and that remains in effect, and no law may have made the consummation of the Contemplated Transactions illegal;

 

   

the Silverback stockholders must have approved the issuance of Silverback Common Stock or other securities of Silverback that represent (or are convertible into) more than 20% of the shares of Silverback Common Stock outstanding immediately prior to the Merger to the holders of ARS Pharma Capital Stock, ARS Pharma stock options and ARS Pharma warrants in connection with the Contemplated Transactions and the change of control of Silverback resulting from the Contemplated Transactions, in each case pursuant to the Nasdaq rules;